FORM OF
AMENDED AND RESTATED
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
This Amended and Restated Shareholder Services and Distribution
Plan (the "Plan") is adopted in accordance with Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by Smith Barney Income Funds, a business trust organized
under the laws of the Commonwealth of Massachusetts (the "Trust"),
subject to the following terms and conditions:
Section 1. Annual Fee.
(a) Service Fee for Class A shares. The Trust will pay to
[the Distributor], (the "Distributor"), a service fee under the Plan at
an annual rate of [ %] of the average daily net assets of the Fund
attributable to the Class A shares sold and not redeemed (the "Class A
Service Fee").
(b) Service Fee for Class B shares. The Trust will pay to
the Distributor a service fee under the Plan at the
annual rate of [ %] of the average daily net assets of
the Fund attributable to the Class B shares sold and not
redeemed (the "Class B Service Fee").
(c) Distribution Fee for Class B shares. In addition to the
Class B Service Fee, the Trust will pay the Distributor
a distribution fee under the Plan at the annual rate of [ %] of the
average daily net assets of the Fund attributable
to the Class B shares sold and not redeemed (the "Class B
Distribution Fee").
(d) Service Fee for Class L shares. The Trust will pay to
the Distributor a service fee under the plan at the
annual rate of [ %] of the average daily net assets of
the Fund attributable to the Class L shares sold and not
redeemed (the "Class L Service Fee").
(e) Distribution Fee for Class L shares. In addition to the
Class L Service Fee, the Trust will pay the Distributor
a distribution fee under the Plan at the annual rate of [
%] of the average daily net assets of the Fund attributable
to the Class L shares sold and not redeemed (the "Class L
Distribution Fee").
(f) Payment of Fees. The Service Fees and Distribution Fees will
be calculated daily and paid monthly by the Trust with
respect to the foregoing classes of the Fund's shares (each
a "Class" and together, the "Classes") at the annual rates
indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its respective
Service Fee and/or Distribution Fee may be used by the Distributor
for: (a) costs of printing and distributing the
[Trust's/Fund's] prospectuses, statements of additional information
and reports to prospective investors in the Trust; (b) costs involved
in preparing, printing and distributing sales literature pertaining
to the Trust; (c) an allocation of overhead and other branch office
distribution-related expenses of the Distributor; (d) payments
made to, and expenses of, the Distributor's financial
consultants and other persons who provide support services to Trust
shareholders in connection with the distribution of the
[Trust's/Fund's] shares, including but not limited to, office space
and equipment, telephone facilities, answering routine inquires
regarding the Trust and its operation, processing shareholder
transactions, forwarding and collecting proxy material, changing
dividend payment elections and providing any other shareholder
services not otherwise provided by the [Trust's/Fund's] transfer
agent; and (e) accruals for interest on the amount of the foregoing
expenses that exceed the Distribution Fee for that Class and, in the
case of Class B and Class L shares, any contingent deferred sales
charges received by The Distributor; provided, however, that (i)
the Distribution Fee for a particular Class may be used by the
Distributor only to cover expenses primarily intended to result in
the sale of shares of that Class, including, without limitation,
payments to the financial consultants of The Distributor and
other persons as compensation for the sale of the shares, and (ii)
the Service Fees are intended to be used by the Distributor
primarily to pay its financial consultants for servicing shareholder
accounts, including a continuing fee to each such financial
consultant, which fee shall begin to accrue immediately after the
sale of such shares.
Section 3. Approval by Shareholders
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of
the Plan, with respect to a Class until the Plan has been approved by
a vote of at least a majority
of the outstanding voting securities of the Class. The Plan will be
deemed to have been approved
with respect to a Class so long as a majority of the outstanding
voting securities of the Class votes
for the approval of the Plan, notwithstanding that: (a) the Plan has
not been approved by a majority of the outstanding voting securities
of any other Class, or (b) the Plan has not been
approved by a majority of the outstanding voting securities of the
Trust.
Section 4. Approval by [Trustees/Directors.]
Neither the Plan nor any related agreements will take effect until
approved by a majority vote of both (a) the Board of
[Trustees/Directors] and (b) those [Trustees/Directors] who are not
interested persons of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements
related to it (the "Qualified [Trustees/Directors]"), cast in person
at a meeting called for the purpose of voting on the Plan and the
related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class until
[ , 1999] and thereafter for successive twelve-month periods with
respect to each Class; provided, however, that such continuance is
specifically approved at least annually by the [Trustees/Directors]
of the Trust and by a majority of the Qualified [Trustees/Directors].
Section 6. Termination.
The Plan may be terminated at any time with respect to a Class (i)
by the Trust without the payment of any penalty, by the vote of a
majority of the outstanding voting securities of such Class or (ii)
by a majority vote of the Qualified [Trustees/Directors]. The Plan
may remain in effect with respect to a particular Class even if the
Plan has been terminated in accordance with this Section 6 with
respect to any other Class.
Section 7. Amendments.
The Plan may not be amended with respect to any Class so as to
increase materially the amounts of the fees described in Section 1
above, unless the amendment is approved by a vote of holders of at
least a majority of the outstanding voting securities of that Class.
No material amendment to the Plan may be made unless approved by the
[Trust's/Fund's] Board of [Trustees/Directors] in the manner
described in Section 4 above.
Section 8. Selection of Certain [Trustees/Directors].
While the Plan is in effect, the selection and nomination of the
[Trust's/Fund's] [Trustees/Directors] who are not interested persons
of the Trust will be committed to the discretion of the
[Trustees/Directors] then in office who are not interested persons of
the Trust.
Section 9. Written Reports
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the
Fund pursuant to the Plan or any related agreement will prepare and
furnish to the [Trust's/Fund's] Board of [Trustees/Directors] and the
Board will review, at least quarterly, written reports complying with
the requirements of the Rule, which set out the amounts expended
under the Plan and the purposes for which those expenditures were
made.
Section 10. Preservation of Materials.
The Trust will preserve copies of the Plan, any agreement relating
to the Plan and any report made pursuant to Section 9 above, for a
period of not less than six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority
of the outstanding voting securities" will be deemed to have the same
meaning that those terms have under the rules and regulations under
the 1940 Act, subject to any exemption that may be granted to the
Trust under the 1940 Act, by the Securities and Exchange Commission.
Section 12. Limitation of Liability. (Massachusetts business
trusts only)
The obligations of the Trust under this Agreement shall not be
binding upon any of the Trustees, shareholders, nominees, officers,
employees or agents, whether past, present or future, of the Trust,
individually, but are binding only upon the assets and property of
the Trust, as provided in the Master Trust Agreement. The execution
of this Plan has been authorized by the Trustees and signed by an
authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution by such officer
shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only
the trust property of the Trust as provided in its Master Trust
Agreement.
IN WITNESS WHEREOF, the Fund has executed the Plan as of July
_____, 1998.
[NAME OF TRUST/FUND]
On behalf of
By:
____________________________________
Heath B. McLendon
Chairman of the Board
