Registration No. 33-2627
811-4551
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No 29 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 30 X
SMITH BARNEY EQUITY FUNDS
(Formerly known as Smith Barney Shearson Equity Funds)
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 723-9218
Christina T. Sydor
Secretary
Smith Barney Equity Funds
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
X on November 7, 1994 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
on pursuant to Rule 485(a)
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for the
fiscal year ended January 31, 1995 will be filed on or about March 31,
1995.
SMITH BARNEY EQUITY FUNDS
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(b)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page;
Prospectus Summary;
Investment Objective and
Management Policies;
Additional Information
5. Management of the Fund Management of the Trust
and the Fund; Distributor, The
Fund's Expenses;
Additional Information; Annual
Report
6. Capital Stock and Other Securities Investment Objective
and Management Policies;
Dividends ,Distributions and
Taxes;
Additional Information
7. Purchase of Securities Being Offered Purchase of
Shares; Valuation of Shares;
Exchange Privilege; Redemption of Shares;
Distributor; Additional Information; Minimum
Account Size
8. Redemption or Repurchase Purchase of Shares;
Redemption of Shares;
Exchange Privilege
9. Legal Proceedings Not Applicable
Part B
Item No. Statement of Additional
Information Caption
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History Distributor;
Additional Information
13. Investment Objectives and Policies Investment Objectives
and Management
Policies
14. Management of the Fund Management of the Trust and
the Funds;
Distributor
15. Control Persons and Principal Holders of Management of the
Trust and the Funds
Securities
16. Investment Advisory and Other Services Management of the
Trust and the Funds;
Distributor
17. Brokerage Allocation Investment Objectives and
Management Policies;
Distributor
18. Capital Stock and Other Securities Investment
Objective and Management Policies;
Purchase of Shares;
Redemption of Shares;
Taxes
19. Purchase, Redemption and Pricing of Purchase of Shares;
Redemption of Shares;
Securities Being Offered Distributor
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
<PAGE>
___________________________________________________________________________
____
PROSPECTUS
SMITH
BARNEY
STRATEGIC
INVESTORS
FUND
NOVEMBER 7,
1994
PROSPECTUS BEGINS ON PAGE
ONE
<LOGO>SMITH BARNEY MUTUAL FUNDS
INVESTING FOR YOUR FUTURE.
EVERYDAY.
___________________________________________________________________________
____
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS November 7, 1994
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Strategic Investors Fund (the "Fund") seeks high total
return
consisting of current income and capital appreciation by investing in a
combination of equity, fixed-income and money market instruments and "Gold
Securities."
The Fund is one of a number of funds, each having distinct investment
objectives and policies, making up Smith Barney Equity Funds (the "Trust").
The
Trust is an open-end management investment company commonly referred to as
a
"mutual fund."
This Prospectus sets forth concisely certain information about the
Fund and
the Trust, including sales charges, distribution and service fees and
expenses,
that prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it
for
future reference. Shares of the other funds offered by the Trust are
described
in separate prospectuses that may be obtained by calling the Trust at the
telephone number set forth above or by contacting a Smith Barney Financial
Consultant.
Additional information about the Fund and the Trust is contained in a
Statement of Additional Information dated November 7, 1994, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Trust at the telephone number or address
set
forth above or by contacting a Smith Barney Financial Consultant. The
Statement
of Additional Information has been filed with the Securities and Exchange
Commission (the "SEC") and is incorporated by reference into this
Prospectus in
its entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY STRATEGY ADVISERS INC.
Investment Adviser
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS 10
------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 13
------------------------------------------------------------------------
- --
VALUATION OF SHARES 20
------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES 20
------------------------------------------------------------------------
- --
PURCHASE OF SHARES 22
------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE 32
------------------------------------------------------------------------
- --
REDEMPTION OF SHARES 36
------------------------------------------------------------------------
- --
MINIMUM ACCOUNT SIZE 38
------------------------------------------------------------------------
- --
PERFORMANCE 38
------------------------------------------------------------------------
- --
MANAGEMENT OF THE TRUST AND THE FUND 39
------------------------------------------------------------------------
- --
DISTRIBUTOR 41
------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION 42
------------------------------------------------------------------------
- --
</TABLE>
2
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus.
See "Table of Contents."
INVESTMENT OBJECTIVE The Fund is an open end, diversified management
investment
company that seeks high total return consisting of current income and
capital
appreciation by investing in a combination of equity, fixed-income and
money
market investments and "Gold Securities." See "Investment Objective and
Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of
shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of
expenses
to which they are subject. A fourth Class of shares, Class Y shares, is
offered
only to investors meeting an initial investment minimum of $5,000,000. In
addition, a fifth Class, Class Z shares, which is offered pursuant to a
separate
prospectus, is offered exclusively to (a) tax-exempt employee benefit and
retirement plans of Smith Barney Inc. ("Smith Barney") and its affiliates
and
(b) unit investment trusts ("UITs") sponsored by Smith Barney and its
affiliates. See "Purchase of Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.00% imposed at the time of purchase and are subject
to
an annual service fee of 0.25% of the average daily net assets of the
Class. The
initial sales charge may be reduced or waived for certain purchases.
Purchases
of Class A shares, which when combined with current holdings of Class A
shares
offered with a sales charge equal or exceed $500,000 in the aggregate, will
be
made at net asset value with no sales charge, but will be subject to a
contingent deferred sales charge ("CDSC") of 1.00% on redemptions made
within 12
months of purchase. See "Prospectus Summary--Reduced or No Initial Sales
Charge."
Class B Shares. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after
the date of purchase to zero. This CDSC may be waived for certain
redemptions.
Class B shares are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class. The
3
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
Class B shares' distribution fee may cause that Class to have higher
expenses
and pay lower dividends than Class A shares.
Class B Shares Conversion Feature. Class B shares will convert
automatically to
Class A shares, based on relative net asset value, eight years after the
date of
the original purchase. Upon conversion, these shares will no longer be
subject
to an annual distribution fee. In addition, a certain portion of Class B
shares
that have been acquired through the reinvestment of dividends and
distributions
("Class B Dividend Shares") will be converted at that time. See "Purchase
of
Shares--Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge. They are subject to an annual service fee of 0.25% and an
annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12
months of
purchase. The CDSC may be waived for certain redemptions. The Class C
shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Class C shares, which when
combined
with current holdings of Class C shares of the Fund equal or exceed
$500,000 in
the aggregate, should be made in Class A shares at net asset value with no
sales
charge, and will be subject to a CDSC of 1.00% on redemptions made within
12
months of purchase.
Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net
asset
value with no initial sales charge or CDSC. They are not subject to any
service
or distribution fees.
In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:
Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended length of his
or
her investment. Shareholders who are planning to establish a program of
regular
investment may wish to consider Class A shares; as the investment
accumulates
shareholders may qualify for reduced sales charges and the shares are
subject to
lower ongoing expenses over the term of the investment. As an investment
alternative, Class B and Class C shares are sold without any initial sales
charge so the entire purchase price is immediately invested in the Fund.
Any
investment return on these additional invested amounts may partially or
wholly
offset the
4
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
higher annual expenses of these Class. Because the Fund's future return
cannot
be predicted, however, there can be no assurance that this would be the
case.
Finally, investors should consider the effect of the CDSC period and
any
conversion rights of the Classes in the context of their own investment
time
frame. For example, while Class C shares have a shorter CDSC period than
Class B
shares, they do not have a conversion feature, and therefore, are subject
to an
ongoing distribution fee. Thus, Class B shares may be more attractive Class
C
shares to investors with longer term investment outlooks.
Investors investing a minimum of $5,000,000 must purchase Class Y
shares,
which are not subject to an initial sales charge, CDSC or service or
distribution fee. The maximum purchase amount for Class A shares is
$4,999,999,
Class B shares is $249,999 and Class C shares is $499,999. There is no
maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares
may be waived for certain eligible purchasers, and the entire purchase
price
will be immediately invested in the Fund. In addition, Class A share
purchases,
which when combined with current holdings of Class A shares offered with a
sales
charge equal or exceed $500,000 in the aggregate, will be made at net asset
value with no initial sales charge, but will be subject to a CDSC of 1.00%
on
redemptions made within 12 months of purchase. The $500,000 aggregate
investment
will be met by adding the purchase to the net asset value of all Class A
shares
offered with a sales charge held in funds sponsored by Smith Barney Inc.
("Smith
Barney") listed under "Exchange Privilege." Other Class A share purchases
may
also be eligible for a reduced initial sales charge. See "Purchase of
Shares."
Because the ongoing expenses of Class A shares will be lower than those for
Class B and Class C shares, purchasers eligible to purchase Class A shares
at
net asset value or at a reduced sales charge should consider doing so.
Smith Barney Financial Consultants may receive different compensation
for
selling each Class of shares. Investors should understand that the purpose
of
the CDSC on the Class B and Class C shares is the same as that of the
initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Fund" for a complete
description of the sales charges and service and distribution fees for each
Class of shares and "Valuation of Shares," "Dividends, Distributions and
Taxes"
and "Exchange Privilege" for other differences between the Classes of
shares.
5
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
SMITH BARNEY 401(K) PROGRAM Investors may be eligible to participate in
the
Smith Barney 401(k) Program, which is generally designed to assist plan
sponsors
in the creation and operation of retirement plans under Section 401(a) of
the
Internal Revenue Code of 1986, as amended (the "Code"), as well as other
types
of participant directed, tax-qualified employee benefit plans
(collectively,
"Participating Plans"). Class A, Class B, Class C and Class Y shares are
available as investment alternatives for Participating Plans. See "Purchase
of
Shares--Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith Barney, a broker that clears securities transactions through Smith
Barney
on a fully disclosed basis (an "Introducing Broker") or an investment
dealer in
the selling group. Direct purchases by certain retirement plans may be made
through the Fund's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may
open
an account by making an initial investment of at least $1,000 for each
account,
or $250 for an individual retirement account ("IRA") or a Self-Employed
Retirement Plan. Investors in Class Y shares may open an account for an
initial
investment of $5,000,000. Subsequent investments of at least $50 may be
made for
all Classes. For participants in retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Code, the minimum initial investment
requirement for Class A, Class B, and Class C shares and the subsequent
investment requirement for all Classes is $25. The minimum initial
investment
requirement for Class A, Class B, and Class C shares and the subsequent
investment through the Systematic Investment Plan described below is $100.
See
"Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount of at least $100. See
"Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Redemption of Shares."
MANAGEMENT OF THE FUND Smith Barney Strategy Advisers ("Strategy
Advisers")
serves as the Fund's investment adviser and is a wholly owned subsidiary of
Smith Barney Mutual Funds Management Inc. ("SBMFM"). SBMFM which
6
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
also serves as the Fund's administrator, is a wholly owned subsidiary of
Smith
Barney Holdings Inc. ("Holdings"), which is in turn a wholly owned
subsidiary of
The Travelers Inc. ("Travelers"), a diversified financial services company
engaged through its subsidiaries principally in four business segments:
Investment Services, Consumer Finance Services, Life Insurance Services,
and
Property & Casualty Insurance Services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the
Fund's
sub-investment adviser and sub-administrator. Boston Advisors is a wholly
owned
subsidiary of The Boston Company Inc. ("TBC"), which is in turn a wholly
owned
subsidiary of Mellon Bank Corporation ("Mellon"). See "Management of the
Trust
and the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the
same
Class of certain other funds of the Smith Barney Mutual Funds at the
respective
net asset values next determined, plus any applicable sales charge
differential.
See "Exchange Privilege Services."
VALUATION OF SHARES Net asset value of the Fund for the prior day is
generally
quoted daily in the financial section of most newspapers and is also
available
from any Smith Barney Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are paid
quarterly. Distributions of net realized capital gains, if any, are
declared and
paid annually. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically, unless otherwise specified by an
investor, in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a
pro
rata basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund's investment objective will be achieved. The foreign securities in
which
the Fund may invest may be subject to certain risks in addition to those
inherent in domestic investments. The Fund may make certain investments and
employ certain investment techniques that involve other risks and special
considerations. The techniques presenting the Fund with risks or special
considerations are investing in restricted securities, warrants,
convertible
securities, securities of unseasoned issuers, options, Gold Securities and
securities of
7
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
developing countries, entering into repurchase agreements and lending
portfolio
securities. These risks and those associated with when-issued and delayed-
delivery transactions and covered option writing are described under
"Investment
Objective and Management Policies--Risk Factors and Special
Considerations."
THE FUND'S EXPENSES The following expense table lists the costs and
expenses an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at
the
time of purchase or redemption and, unless otherwise noted, the Fund's
operating
expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
CLASS C CLASS Y
<S> <C> <C> <C>
<C>
- ---------------------------------------------------------------------------
- ---------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
None None
Maximum CDSC
(as a percentage of original cost or
redemption proceeds, whichever is lower) None* 5.00%
1.00% None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.75% 0.75%
0.75% 0.75%
12b-1 fees** 0.25% 1.00%
1.00% None
Other expenses*** 0.25% 0.23%
0.18% 0.25%
- ---------------------------------------------------------------------------
- ---------------
TOTAL FUND OPERATING EXPENSES 1.25% 1.98%
1.93% 1.00%
- ---------------------------------------------------------------------------
- ---------------
</TABLE>
* Purchases of Class A shares, which when combined with current
holdings of
Class A shares offered with a sales charge equal or exceed $500,000
in the
aggregate, will be made at net asset value with no sales charge, but
will
be subject to a CDSC of 1% on redemptions made within 12 months.
** Upon conversion of Class B shares to Class A shares, such shares will
no
longer be subject to a distribution fee. Class C shares do not have a
conversion feature and, therefore, are subject to an ongoing
distribution
fee. As a result, long-term shareholders of Class C shares may pay
more
than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** For Class Y shares, "Other expenses" have been estimated based on
expenses
incurred by the Class A shares because Class Y shares were not
available
for purchase prior to November 7, 1994.
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors
may
actually pay lower or no charges, depending on the amount purchased and, in
the
case of Class B, Class C and certain Class A shares, the length of time the
shares are held and whether the shares are held through the Smith Barney
401(k)
Program. See "Purchase of Shares" and "Redemption of Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value of average daily
net
8
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PROSPECTUS SUMMARY (CONTINUED)
assets of Class A shares. Smith Barney also receives an annual 12b-1 fee of
1.00% of the value of average daily net assets of Class B and Class C
shares,
consisting of a 0.75% distribution fee and a 0.25% service fee. "Other
expenses"
in the above table include fees for shareholder services, custodial fees,
legal
and accounting fees, printing costs and registration fees.
EXAMPLE
The following example is intended to assist an investor in
understanding
the various costs that an investor in the Fund will bear directly or
indirectly.
The example assumes payment by the Fund of operating expenses at the levels
set
forth in the table above. See "Purchase of Shares," "Redemption of Shares"
and
"Management of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5
YEARS 10 YEARS*
<S> <C> <C> <C>
<C>
- ---------------------------------------------------------------------------
- ------------
An investor would pay the following expenses on a
$1,000 investment, assuming (1) 5.00% annual
return and (2) redemption at the end of each time
period:
Class A $ 62 $ 88 $115
$ 194
Class B 70 92 117
212
Class C 30 61 104
225
Class Y 10 32 55
122
An investor would pay the following expenses on the
same investment, assuming the same annual return
and
no redemption:
Class A 62 88 115
194
Class B 20 62 107
212
Class C 20 61 104
225
Class Y 10 32 55
122
- ---------------------------------------------------------------------------
- ------------
</TABLE>
* Ten-year figures assume conversion of Class B shares to Class A shares
at the
end of the eighth year following the date of purchase.
The example also provides a means for the investor to compare expense
levels of funds with different fee structures over varying investment
periods.
To facilitate such comparison, all funds are required to utilize a 5.00%
annual
return assumption. However, the Fund's actual return will vary and may
result in
an actual return greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY
BE GREATER OR LESS THAN THOSE SHOWN.
9
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
FINANCIAL HIGHLIGHTS
Except where otherwise noted, the following information has been
audited by
Coopers & Lybrand, independent accountants, whose report thereon appears in
the
Fund's Annual Report dated January 31, 1994. The information set out below
should be read in conjunction with the financial statements and related
notes
that also appear in the Fund's Annual Report which is incorporated by
reference
into the Statement of Additional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
PERIOD
ENDED ENDED
ENDED
7/31/94# 1/31/94+
1/31/93*
<S> <C> <C>
<C>
(UNAUDITED)
Net Asset Value, beginning of period $ 17.72 $ 16.85
$ 16.80
- ---------------------------------------------------------------------------
- ----------
Income from investment operations:
Net investment income 0.25 0.52
0.13
Net realized and unrealized gain/(loss) on
investments (0.99) 2.37
0.88
- ---------------------------------------------------------------------------
- ----------
Total from investment operations (0.74) 2.89
1.01
- ---------------------------------------------------------------------------
- ----------
Less distributions:
Distributions from net investment income (0.26) (0.56)
(0.11)
Distributions from net realized capital gains (0.47) (1.46)
(0.85)
- ---------------------------------------------------------------------------
- ----------
Total distributions (0.73) (2.02)
(0.96)
- ---------------------------------------------------------------------------
- ----------
Net asset value, end of period $ 16.25 $ 17.72
$ 16.85
- ---------------------------------------------------------------------------
- ----------
Total return++ (4.15)% 17.80%
6.12%
- ---------------------------------------------------------------------------
- ----------
Ratios to average net assets/Supplemental
Data:
Net assets, end of period (000's) $8,548 $ 6,216
$693
Ratio of expenses to average net assets 1.32%** 1.25%
1.25%**
Ratio of net investment income to average net
assets 2.63%** 2.85%
3.61%**
Portfolio turnover rate 49% 131%
93%
- ---------------------------------------------------------------------------
- ----------
</TABLE>
* The Fund commenced selling Class A shares on November 6, 1992.
** Annualized.
+ The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for
this
year since use of the undistributed net investment income method does
not
accord with results of operations.
++ Total return represents aggregate total return for the periods
indicated
and does not reflect any applicable sales charges.
# As of July 15, 1994, the Fund changed its investment adviser from the
Boston Company Advisors, Inc. to its current investment adviser, Smith
Barney Strategy Advisers, Inc. The Boston Company Advisors, Inc. is
currently the sub-investment adviser to the Fund.
10
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR
YEAR YEAR PERIOD
7/31/94# ENDED ENDED ENDED ENDED
ENDED ENDED ENDED
(UNAUDITED) 1/31/94+ 1/31/93 1/31/92 1/31/91
1/31/90 1/31/89 1/31/88*
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Net asset value,
beginning of period $17.79 $16.84 $17.26 $15.61 $15.57
$15.03 $13.62 $14.00
- ---------------------------------------------------------------------------
- ------------------------------------
Income from
investment
operations:
Net investment
income 0.16 0.38 0.51 0.52 0.54
0.53 0.52 0.36 ***
Net realized and
unrealized
gain/(loss) on
investments (0.96) 2.37 1.06 2.56 0.47
1.10 1.48 (0.44)
- ---------------------------------------------------------------------------
- ------------------------------------
Total from
investment
operations (0.80) 2.75 1.57 3.08 1.01
1.63 2.00 (0.08)
- ---------------------------------------------------------------------------
- ------------------------------------
Less distributions:
Distributions from
net investment
income (0.19) (0.34) (0.50) (0.55) (0.51)
(0.69) (0.48) (0.23)
Distributions from
net realized
capital gains (0.47) (1.46) (1.49) (0.88) (0.46)
(0.38) (0.11) (0.07)
Distributions from
capital (Note 1) -- -- -- -- --
(0.02) -- --
- ---------------------------------------------------------------------------
- ------------------------------------
Total distributions (0.66) (1.80) (1.99) (1.43) (0.97)
(1.09) (0.59) (0.30)
- ---------------------------------------------------------------------------
- ------------------------------------
Net asset value, end
of period $16.33 $17.79 $16.84 $17.26 $15.61
$15.57 $15.03 $13.62
- ---------------------------------------------------------------------------
- ------------------------------------
Total return++ (4.48)% 16.88% 9.68% 19.96% 6.80%
10.76% 15.10% (0.57)%
- ---------------------------------------------------------------------------
- ------------------------------------
Ratios to average
net
assets/Supplemental
Data:
Net assets, end of
period (000's) $406,578 $334,408 $287,983 $234,321 $197,170
$206,385 $146,987 $151,223
Ratio of expenses to
average net assets 2.02%+++ 1.98% 2.02% 2.06% 2.09%
2.24% 2.29% 2.14% **+++
Ratio of net
investment income
to average net
assets 1.93%+++ 2.11% 2.84% 3.02% 3.43%
3.46% 3.59% 2.83% +++
Portfolio turnover
rate 49% 131% 93% 76% 56%
61% 42% 56%
- ---------------------------------------------------------------------------
- ------------------------------------
</TABLE>
* The Fund commenced operations on February 2, 1987. On November 6,
1992, the
Fund commenced selling Class A shares. On January 29, 1993, the Fund
commenced selling Class C shares. Any shares outstanding prior to
November
6, 1992 were designated as Class B shares.
** Annualized expense ratio before waiver by investment adviser for the
period
ended January 31, 1988 was 2.18%.
*** Net investment income before waiver by investment adviser for the
period
ended January 31, 1988 was $0.37.
+ The per share amounts have been calculated using the monthly average
shares
method, which more appropriately presents per share data for this year
since use of the undistributed net investment income method does not
accord
with results of operations.
++ Total return represents aggregate total return for the periods
indicated
and does not reflect any applicable sales charge.
+++ Annualized.
# As of July 15, 1994, the Fund changed its investment adviser from The
Boston Company Advisors, Inc. to its current investment adviser, Smith
Barney Strategy Advisers, Inc. The Boston Company Advisors, Inc. is
currently the sub-investment adviser to the Fund.
11
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
PERIOD
7/31/94#
ENDED
(UNAUDITED)
1/31/94*+
<S> <C>
<C>
Net asset value, beginning of period $ 17.79
$ 17.54
- ---------------------------------------------------------------------------
- -----------
Income from investment operations:
Net investment income 0.17
0.32
Net realized and unrealized gain (loss) on investments (0.97)
1.67
- ---------------------------------------------------------------------------
- -----------
Total from investment operations (0.80)
1.99
- ---------------------------------------------------------------------------
- -----------
Less distributions:
Distributions from net investment income (0.19)
(0.28)
Distributions from net realized capital gains (0.47)
(1.46)
- ---------------------------------------------------------------------------
- -----------
Total distributions (0.66)
(1.74)
- ---------------------------------------------------------------------------
- -----------
Net asset value, end of period $ 16.33
$ 17.79
- ---------------------------------------------------------------------------
- -----------
Total return++ (4.48)%
11.83%
- ---------------------------------------------------------------------------
- -----------
Ratios to average net assets/Supplemental Data:
Net assets, end of period (000's) $ 1,116
$399
Ratio of operating expenses to average net assets 2.09%**
1.93%**
Ratio of net investment income to average net assets 1.86%**
2.16%**
Portfolio turnover rate 49%
131%
- ---------------------------------------------------------------------------
- -----------
</TABLE>
* The Fund commenced selling Class C shares (previously designated as
Class D
shares) on January 29, 1993. These shares commenced operations on May
5,
1993.
** Annualized
+ The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for
this
year since use of the undistributed net investment income method does
not
accord with results of operations.
++ Total return represents aggregate total return for the periods
indicated.
# As of July 15, 1994, the Fund changed its investment adviser from The
Boston Company Advisors, Inc. to its current investment adviser, Smith
Barney Strategy Advisers, Inc. The Boston Company Advisors, Inc. is
currently the sub-investment adviser to the Fund.
Prior to November 7, 1994, the Fund did not offer Class Y shares and
accordingly, no comparable financial information is available at this time
for
that Class.
12
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is high total return consisting
of
capital appreciation and current income. The Fund's investment objective
may be
changed only with the approval of a majority of the Fund's outstanding
voting
securities. There can be no assurance the Fund's investment objective will
be
achieved.
The Fund seeks to achieve its objective by investing in a variable
combination of equity, fixed-income and money market instruments and "Gold
Securities." The percentages of the Fund's assets invested in each of these
four
types of securities are adjusted from time to time to conform to the asset
allocation percentages most recently determined by the Investment Policy
Group
of Smith Barney, the Fund's asset allocation consultant. These percentages
represent Smith Barney's conclusions concerning the portions of a model
portfolio that should be invested in equity, fixed-income and money market
securities and gold in light of current economic and market conditions.
Although
the asset allocation may call for an investment in gold, the Fund will not
hold
gold bullion or coins but will seek to comply with Smith Barney's asset
allocation to gold by investing in Gold Securities. Gold Securities in
which the
Fund may invest consist of equity and debt securities of companies
principally
engaged in businesses relating to the exploration, mining, processing or
distribution of gold and companies principally engaged in financing,
managing,
controlling or operating such companies. As of March 1, 1994, the Fund's
asset
allocation approach resulted in 55% of the Fund's assets being invested in
equity securities, 30% in fixed-income securities and 15% in cash. The mix
of
the Fund's investments will vary from time to time in the future, and at
any
given time the Fund may be substantially or entirely invested in equity,
fixed-income or money market securities. The Fund's investments in Gold
Securities may represent up to 25% of its total assets.
Strategy Advisers and Boston Advisors (the "Managers") have
responsibility
for the selection of specific securities on behalf of the Fund. See
"Management
of the Trust and the Fund." As soon as practicable after Smith Barney's
asset
allocations become available, except as described below, Strategy Advisers
enters into purchase and sale transactions that will result in the Fund's
holding assets in appropriate percentages. Boston Advisors may diverge from
the
allocations determined by Smith Barney when Boston Advisors believes that a
higher cash position is necessary in order to meet anticipated redemption
requests or that strict adherence to designated allocations might affect
the
Fund's
13
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ability to qualify as a regulated investment company or cause the Fund to
violate an applicable investment restriction. Boston Advisors adjusts the
Fund's
assets to coincide with the immediately preceding allocation to each
category of
investments when the percentage of assets invested in a category varies by
more
than 10% from Smith Barney's designated percentage. For example, if
Smith Barney had assigned an allocation of 60% to equity securities, Boston
Advisors would adjust the Fund's assets to conform to the 60% allocation if
the
percentage of the Fund's assets invested in equity securities increased or
decreased by more than 6%. Following this asset allocation strategy may
involve
frequent shifts among classes of investments and result in the Fund's
having a
relatively high portfolio turnover rate.
The equity portion of the assets of the Fund will consist generally of
common stocks of established companies traded on exchanges or over the
counter
that represent an opportunity for total return on a long-term basis. In
evaluating companies for investment, Boston Advisors selects securities of
companies that it believes are undervalued based on relevant indicators
such as
price/earnings ratios, return on assets and ratios of market value to book
value, or that are trading at depressed prices because of perceived current
problems or industry conditions. Equity investments may be made without
regard
to the size of companies and generally will be made in a broad spectrum of
industries. The Fund also may invest in preferred stock, securities
convertible
into or exchangeable for common stock and warrants. The fixed-income
portion of
the Fund's assets will be composed primarily of investment-grade corporate
bonds, debentures and notes and obligations of the United States government
or
its agencies or instrumentalities ("U.S. government securities"). The
Fund's
fixed-income assets may be short-, medium-or long-term, as determined at
the
discretion of Boston Advisors based upon an evaluation of economic and
market
trends. The money market securities in which the Fund may invest include
commercial paper, bank obligations and short-term U.S. government
securities. Up
to 10% of the Fund's assets may be invested in equity and debt securities
of
foreign issuers. The Fund also may write covered call options and lend its
portfolio securities. Risk factors and special considerations associated
with
the Fund's investments are described under "Investment Strategies and
Techniques" and "Risk Factors and Special Considerations" below.
14
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT STRATEGIES AND TECHNIQUES
In attempting to achieve its investment objective, the Fund may
employ,
among others, one or more of the strategies and techniques set forth below.
The
Fund is under no obligation to use any of the strategies or techniques at
any
given time or under any particular economic condition. More detailed
information
concerning these strategies and techniques and their related risks is
contained
in the Statement of Additional Information.
Repurchase Agreements. The Fund may enter into repurchase agreements
with
banks which are the issuers of instruments acceptable for purchase by the
Fund
and certain dealers on the Federal Reserve Bank of New York's list of
reporting
dealers. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt obligation for a relatively short period of time
(usually not more than seven days), subject to an obligation of the seller
to
repurchase, and the Fund to resell, the obligation at an agreed-upon price
and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will be monitored on an ongoing basis by Boston Advisors to
ensure
that the value is at least equal at all times to the total amount of the
repurchase obligation, including interest. Boston Advisors, acting under
the
supervision of the Trust's Board of Trustees, reviews on an ongoing basis
the
value of the collateral and the creditworthiness of those banks and dealers
with
which the Fund enters into repurchase agreements to evaluate potential
risks.
Lending of Portfolio Securities. The Fund has the ability to lend
portfolio securities to brokers, dealers and other financial organizations.
Loans, if and when made, may not exceed 20% of the Fund's net asset value.
Loans
of portfolio securities by the Fund will be collateralized by cash, letters
of
credit or U.S. government securities that are maintained at all times in a
segregated account in an amount at least equal to the current market value
of
the loaned securities.
Covered Option Writing. The Fund may write covered call options on
portfolio securities and will realize fees (referred to as "premiums") for
granting the rights evidenced by the options. In return for a premium, the
Fund
will forfeit the right to any appreciation in the value of the underlying
security for the life of the option (or until a closing purchase
transaction can
be effected). The purchaser of a call option written by the Fund has the
right
to purchase
15
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
from the Fund an underlying security owned by the Fund at an agreed-upon
price
for a specified time period. Upon the exercise of a call option written by
the
Fund, the Fund may suffer a loss equal to the underlying security's market
value
at the time of the option's exercise over the exercise price plus the
premium
received for writing the option. Whenever the Fund writes a call option, it
will
(a) continue to own or have the absolute and immediate right to acquire the
underlying security without additional cash consideration or (b) hold a
call
option at the same or a lower exercise price for the same exercise period
on the
same underlying security as the call option written, for as long as it
remains
obligated as the writer of the option.
The Fund may engage in a closing purchase transaction to realize a
profit,
to prevent an underlying security from being called or to unfreeze an
underlying
security (thereby permitting its sale or the writing of a new option on the
security prior to the outstanding option's expiration). To effect a closing
purchase transaction, the Fund would purchase, prior to the holder's
exercise of
an option the Fund has written, an option of the same series as that on
which
the Fund desires to terminate its obligation. The obligation of the Fund
under
an option it has written would be terminated by a closing purchase
transaction,
but the Fund would not be deemed to own an option as the result of the
transaction. There can be no assurance that the Fund will be able to effect
closing purchase transactions at a time when it wishes to do so. To
facilitate
closing purchase transactions, however, the Fund will ordinarily write
options
only if a secondary market for the options exists on a domestic securities
exchange or in the over-the-counter market.
ADDITIONAL INVESTMENTS
Money Market Instruments. The Fund may hold cash and invest in money
market instruments without limitation when deemed advantageous by Boston
Advisors and SBMFM. Short-term instruments in which the Fund may invest
include:
U.S. government securities; bank obligations (including certificates of
deposit,
time deposits and bankers' acceptances of domestic or foreign banks,
domestic
savings and loan associations and other banking institutions having total
assets
in excess of $500 million); commercial paper rated no lower than A-2 by
Standard
& Poor's Corporation ("S&P") or Prime-2 by Moody's Investors Service, Inc.
("Moody's") or the equivalent from another nationally recognized rating
service
or, if unrated, of an issuer having an outstanding, unsecured debt issue
then
rated within the three highest rating categories. A
16
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
description of the commercial paper rating categories of Moody's and S&P is
contained in the Appendix to the Statement of Additional Information.
U.S. Government Securities. The U.S. government securities in which
the
Fund may invest include: direct obligations of the United States Treasury
and
obligations issued or guaranteed by U.S. government agencies and
instrumentalities, including instruments supported by the full faith and
credit
of the United States; securities supported by the right of the issuer to
borrow
from the United States Treasury; and securities supported solely by the
credit
of the instrumentality.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves special considerations, such as those
described below:
Restricted Securities. The Fund may not be able to dispose of
restricted
securities at a time when, or at a price which, it desires to do so and may
have
to bear expenses associated with registering the securities.
Warrants. Because a warrant does not carry with it the right to
dividends
or voting rights with respect to the securities that the warrant holder is
entitled to purchase, and because a warrant does not represent any rights
to the
assets of the issuer, a warrant may be considered more speculative than
certain
other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying security and a warrant
ceases to have value if it is not exercised prior to its expiration date.
The
investment in warrants, valued at the lower of cost or market, may not
exceed 5%
of the value of the Fund's net assets. Included within that amount, but not
to
exceed 2% of the value of the Fund's net assets, may be warrants that are
not
listed on the NYSE or the American Stock Exchange. Warrants acquired by the
Fund
in units or attached to securities may be deemed to be without value.
Securities of Unseasoned Issuers. Securities in which the Fund may
invest
may have limited marketability and, therefore, may be subject to wide
fluctuations in market value. In addition, certain securities may be issued
by
companies that lack a significant operating history and are dependent on
products or services without an established market share.
Options. Option writing for the Fund may be limited by position and
exercise limits established by national securities exchanges and by
requirements
17
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
of the Code for qualification as a regulated investment company. See
"Dividends,
Distributions and Taxes." In addition to writing covered call options to
generate current income, the Fund may enter into options transactions as
hedges
to reduce investment risk, generally by making an investment expected to
move in
the opposite direction of a portfolio position. A hedge is designed to
offset a
loss on a portfolio position with a gain on the hedge position; at the same
time, however, a properly correlated hedge will result in a gain on the
portfolio position being offset by a loss on the hedge position. The Fund
bears
the risk that the prices of the securities being hedged will not move in
the
same amount as the hedge. The Fund will engage in hedging transactions only
when
deemed advisable by Strategy Advisers. Successful use by the Fund of
options
will be subject to Strategy Advisers' ability to predict correctly
movements in
the direction of the stock or index underlying the option used as a hedge.
Losses incurred in hedging transactions and the costs of these transactions
will
affect the Fund's performance.
The ability of the Fund to engage in closing transactions with respect
to
options depends on the existence of a liquid secondary market. While the
Fund
generally will write options only if a liquid secondary market appears to
exist
for the options purchased or sold, for some options no such secondary
market may
exist or the market may cease to exist. If the Fund cannot enter into a
closing
purchase transaction with respect to a call option it has written, the Fund
will
continue to be subject to the risk that its potential loss upon exercise of
the
option will increase as a result of any increase in the value of the
underlying
security. The Fund could also face higher transaction costs, including
brokerage
commissions, as a result of its options transactions.
Repurchase Agreements. The Fund bears a risk of loss in the event
that the
other party to a repurchase agreement defaults on its obligations and the
Fund
is delayed or prevented from exercising its rights to dispose of the
underlying
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert
its
rights to them, the risk of incurring expenses associated with asserting
those
rights and the risk of losing all or a part of the income from the
agreement.
Foreign Securities. Certain risks are involved in investing in the
securities of companies and governments of foreign nations that go beyond
the
usual risks inherent in U.S. investments. These risks include those
resulting
from revaluation of currencies, future adverse political and economic
developments, the possible imposition of restrictions on the repatriation
of
currencies or other
18
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers and the lack of uniform accounting, auditing
and
financial reporting standards or of other regulatory practices and
requirements
comparable to those applicable to domestic companies. The value of the
assets of
the Fund invested in foreign securities may be adversely affected by
fluctuations in value of one or more foreign currencies relative to the
dollar.
Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable domestic
companies.
In addition, the possibility exists in certain foreign countries of
expropriation, nationalization, confiscatory taxation and limitations on
the use
or removal of funds or other assets of the Fund, including the withholding
of
dividends. Foreign securities may be subject to foreign government taxes
that
could reduce the yield on such securities. Because the Fund will invest in
securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates may adversely affect the value
of
portfolio securities and the appreciation or depreciation of investments.
Investment in foreign securities may also result in higher expenses due to
the
cost of converting foreign currency to U.S. dollars, the payment of fixed
brokerage commissions on foreign exchanges, which generally are higher than
commissions on domestic exchanges, and the expense of maintaining
securities
with foreign custodians.
Securities of Developing Countries. A developing country generally is
considered to be a country that is in the initial stages of its
industrialization cycle. Investing in the equity and fixed-income markets
of
developing countries involves exposure to economic structures that are
generally
less diverse and mature, and to political systems that can be expected to
have
less stability than those of developed countries. Historical experience
indicates the markets of developing countries have been more volatile than
the
markets of the more mature economies of developed countries; however, such
markets often have higher rates of return to investors.
Gold Securities. Historically, stock prices of companies involved in
gold-
related industries have been volatile. Economic and political conditions
prevailing in the countries that are the largest producers of gold,
particularly
the Republic of South Africa and the former Soviet Union, may adversely
affect
the value of the Gold Securities held by the Fund. In addition, issuers of
securities in gold-related industries are often located outside the United
States, which presents risks described above that are not present in
domestic
investments.
19
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for transactions in securities or options on behalf of the
Fund
are placed by Boston Advisors with broker-dealers that the Managers select,
including Smith Barney and other affiliated brokers. The Fund may utilize
Smith
Barney or a broker that is affiliated with Smith Barney in connection with
a
purchase or sale of securities when the Managers believe that the charges
for
the transaction do not exceed usual and customary levels.
Short-term gains realized from portfolio transactions are taxable to
shareholders as ordinary income. In addition, higher portfolio turnover
rates
can result in corresponding increases in brokerage commissions. The Fund
will
not consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its objective and policies.
- ---------------------------------------------------------------------------
- -----
VALUATION OF SHARES
The Fund's net asset value per share is determined as of the close of
regular trading on the NYSE on each day that the NYSE is open, by dividing
the
value of the Fund's net assets attributable to each Class by the total
number of
shares of the Class outstanding.
Generally, the Fund's investments are valued at market value or, in
the
absence of a market value with respect to any securities, at fair value as
determined by or under the direction of the Fund's Board of Trustees.
Short-term
investments that mature in 60 days or less are valued at amortized cost
whenever
the Directors determine that amortized cost is fair value. Further
information
regarding the Fund's valuation policies is contained in the Statement of
Additional Information.
- ---------------------------------------------------------------------------
- -----
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute its investment income (that is, its
income other than its net realized capital gains) quarterly, and to declare
and
pay its net realized capital gains, if any, once a year, normally at the
end of
the year in which earned or at the beginning of the next year.
20
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
If a shareholder does not otherwise instruct, dividends and capital
gains
distributions will be reinvested automatically in additional shares of the
same
Class at net asset value, subject to no sales charge or CDSC. In order to
avoid
the application of a 4% nondeductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Fund may make an
additional
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to pay any other dividends and
distributions necessary to avoid the application of this tax.
The per share dividends on Class B and Class C shares of the Fund may
be
lower than the per share dividends on Class A and Class Y shares
principally as
a result of the distribution fee applicable with respect to Class B and
Class C
shares. The per share dividends on Class A shares of the Fund may be lower
than
the per share dividends on Class Y shares principally as a result of the
service
fee applicable to Class A shares. Distributions of capital gains, if any,
will
be in the same amount for Class A, Class B, Class C and Class Y shares.
TAXES
The Fund has qualified and intends to continue to qualify each year as
a
regulated investment company under the Code. Dividends paid from net
investment
income and distributions of net realized short-term capital gains are
taxable to
shareholders as ordinary income, regardless of how long shareholders have
held
their Fund shares and whether such dividends and distributions are received
in
cash or reinvested in additional Fund shares. Distributions of net realized
long-term capital gains will be taxable to shareholders as long-term
capital
gains, regardless of how long shareholders have held Fund shares and
whether
such distributions are received in cash or are reinvested in additional
Fund
shares. Furthermore, as a general rule, a shareholder's gain or loss on a
sale
or redemption of Fund shares will be a long-term capital gain or loss if
the
shareholder has held the shares for more than one year and will be a short-
term
capital gain or loss if the shareholder has held the shares for one year or
less. Some of the Fund's dividends declared from net investment income may
qualify for the Federal dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder also will receive, if
appropriate, various written notices after the close of the Fund's prior
taxable
year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during the Fund's prior
taxable
year. Shareholders
21
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
should consult their tax advisors about the status of the Fund's dividends
and
distributions for state and local tax liabilities.
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES
GENERAL
The Fund offers five Classes of shares. Class A shares are sold to
investors with an initial sales charge and Class B and Class C shares are
sold
without an initial sales charge but are subject to a CDSC payable upon
certain
redemptions. Class Y shares are sold without an initial sales charge or
CDSC and
are available only to investors investing a minimum of $5,000,000. Class Z
shares are offered without a sales charge, CDSC, or service or distribution
fee,
exclusively to: (a) tax-exempt employee benefit and retirement plans of
Smith
Barney and its affiliates and (b) certain UITs sponsored by Smith Barney
and its
affiliates. Investors meeting either of these criteria who are interested
in
acquiring Class Z shares should contact a Smith Barney Financial Consultant
for
a Class Z Prospectus. See "Prospectus Summary--Alternative Purchase
Arrangements" for a discussion of factors to consider in selecting which
Class
of shares to purchase.
Purchases of Fund shares must be made through a brokerage account
maintained with Smith Barney, an Introducing Broker or an investment dealer
in
the selling group, except for investors purchasing shares of the Fund
through a
qualified retirement plan who may do so directly through TSSG. When
purchasing
shares of the Fund, investors must specify whether the purchase is for
Class A,
Class B, Class C or Class Y shares. No maintenance fee will be charged by
the
Fund in connection with a brokerage account through which an investor
purchases
or holds shares.
Investors in Class A, Class B and Class C shares may open an account
by
making an initial investment of at least $1,000 for each account, or $250
for an
IRA or a Self-Employed Retirement Plan in the Fund. Investors in Class Y
shares
may open an account by making an initial investment of $5,000,000.
Subsequent
investments of at least $50 may be made for all Classes. For participants
in
retirement plans qualified under Section 403(b)(7) or Section 401(a) of the
Code, the minimum initial investment requirement for Class A, Class B and
Class
C shares and the subsequent investment requirement for all Classes in the
Fund
is $25. For the Fund's Systematic Investment Plan, the minimum initial
22
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
investment requirement for Class A, Class B and Class C shares and the
subsequent investment is $100. There are no minimum investment requirements
for
Class A shares for employees of Travelers and its subsidiaries, including
Smith
Barney, and Trustees of the Trust and their spouses and children. The Fund
reserves the right to waive or change minimums, to decline any order to
purchase
its shares and to suspend the offering of shares from time to time. Shares
purchased will be held in the shareholder's account by the Fund's transfer
agent, TSSG. Share certificates are issued only upon a shareholder's
written
request to TSSG.
Purchase orders received by Smith Barney prior to the close of regular
trading on the NYSE, on any day the Fund calculates its net asset value,
are
priced according to the net asset value determined on that day. Orders
received
by dealers or Introducing Brokers prior to the close of regular trading on
the
NYSE on any day the Fund calculates its net asset value, are priced
according to
the net asset value determined on that day, provided the order is received
by
Smith Barney prior to Smith Barney's close of business (the "trade date").
Currently, payment for Fund shares is due on the fifth business day (the
"settlement date") after the trade date. The Fund anticipates that, in
accordance with regulatory changes, beginning on or about June 1, 1995, the
settlement date will be the third business day after the trade date.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by
purchasing shares through a service known as the Systematic Investment
Plan.
Under the Systematic Investment Plan, Smith Barney or TSSG is authorized
through
preauthorized transfers of $100 or more to charge the regular bank account
or
other financial institution indicated by the shareholder on a monthly or
quarterly basis to provide systematic additions to the shareholder's Fund
account. A shareholder who has insufficient funds to complete the transfer
will
be charged a fee of up to $25 by Smith Barney or TSSG. The Systematic
Investment
Plan also authorizes Smith Barney to apply cash held in the shareholder's
Smith
Barney brokerage account or redeem the shareholder's shares of a Smith
Barney
money market fund to make additions to the account. Additional information
is
available from the Fund or a Smith Barney Financial Consultant.
23
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the
Fund are
as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
DEALERS
% OF % OF AMOUNT
REALLOWANCE AS
AMOUNT OF INVESTMENT OFFERING PRICE INVESTED
% OF OFFERING PRICE
--------------------------------------------------------------------------
- ------------------------
<S> <C> <C>
<C>
Less than $25,000 5.00% 5.26%
4.50%
$25,000-$49,999 4.00% 4.17%
3.60%
$50,000-$99,999 3.50% 3.63%
3.15%
$100,000-$249,999 3.00% 3.09%
2.70%
$250,000-$499,999 2.00% 2.04%
1.80%
$500,000 and more * *
*
--------------------------------------------------------------------------
- ------------------------
</TABLE>
* Purchases of Class A shares, which when combined with current holdings
of
Class A shares offered with a sales charge equal or exceed $500,000 in
the
aggregate, will be made at net asset value without any initial sales
charge,
but will be subject to a CDSC of 1.00% on redemptions made within 12
months
of purchase. The CDSC on Class A shares is payable to Smith Barney,
which
compensates Smith Barney Financial Consultants and other dealers whose
clients make purchases of $500,000 or more. The CDSC is waived in the
same
circumstances in which the CDSC applicable to Class B and Class C
shares is
waived. See "Deferred Sales Charge Alternatives" and "Waivers of CDSC."
Members of the selling group may receive up to 90% of the sales charge
and
may be deemed to be underwriters of the Fund as defined in the Securities
Act of
1933, as amended.
The reduced sales charges shown above apply to the aggregate of
purchases
of Class A shares of the Fund made at one time by "any person," which
includes
an individual, his or her spouse and children, or a trustee or other
fiduciary
of a single trust estate or single fiduciary account. The reduced sales
charge
minimums may also be met by aggregating the purchase with the net asset
value of
all Class A shares offered with a sales charge held in funds sponsored by
Smith
Barney listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a
sales
charge in the following circumstances: (a) sales of Class A shares to
Trustees
of the Trust and employees of Travelers and its subsidiaries, or the
spouses and
children of such persons (including the surviving spouse of a deceased
Trustee
or employee, and retired Trustees or employees), or sales to any trust,
pension,
profit-sharing or other benefit plan for such persons provided such sales
are
24
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
made upon the assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be re-sold except
through
redemption or repurchase; (b) offers of Class A shares to any other
investment
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (c) purchases of Class A shares
by
any client of a newly employed Smith Barney Financial Consultant (for a
period
up to 90 days from the commencement of the Financial Consultant's
employment
with Smith Barney), on the condition the purchase of Class A shares is made
with
the proceeds of the redemption of shares of a mutual fund which (i) was
sponsored by the Financial Consultant's prior employer, (ii) was sold to
the
client by the Financial Consultant and (iii) was subject to a sales charge;
(d)
shareholders who have redeemed Class A shares in the Fund (or Class A
shares of
another fund of the Smith Barney Mutual Funds that are offered with a sales
charge equal to or greater than the maximum sales charge of the Fund) and
who
wish to reinvest their redemption proceeds in the Fund, provided the
reinvestment is made within 60 calendar days of the redemption; and (e)
accounts
managed by registered investment advisory subsidiaries of Travelers. In
order to
obtain such discounts, the purchaser must provide sufficient information at
the
time of purchase to permit verification that the purchase would qualify for
the
elimination of the sales charge.
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any person" (as
defined
above) at a reduced sales charge or at net asset value determined by
aggregating
the dollar amount of the new purchase and the total net asset value of all
Class
A shares of the Fund and of funds sponsored by Smith Barney that are
offered
with a sales charge listed under "Exchange Privilege" then held by such
person
and applying the sales charge applicable to such aggregate. In order to
obtain
such discount, the purchaser must provide sufficient information at the
time of
purchase to permit verification that the purchase qualifies for the reduced
sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced sales charge
or
purchase at net asset value will also be available to employees (and
partners)
of the same employer purchasing as a group, provided each participant makes
the
minimum initial investment required. The sales charge applicable to
purchases by
25
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
each member of such a group will be determined by the table set forth above
under "Initial Sales Charge Alternative--Class A Shares," and will be based
upon
the aggregate sales of Class A shares of Smith Barney Mutual Funds offered
with
a sales charge to, and share holdings of, all members of the group. To be
eligible for such reduced sales charges or to purchase at net asset value,
all
purchases must be pursuant to an employer-or partnership-sanctioned plan
meeting
certain requirements. One such requirement is that the plan must be open to
specified partners or employees of the employer and its subsidiaries, if
any.
Such plan may, but is not required to, provide for payroll deductions, IRAs
or
investments pursuant to retirement plans under Sections 401 or 408 of the
Code.
Smith Barney may also offer a reduced sales charge or net asset value
purchase
for aggregating related fiduciary accounts under such conditions that Smith
Barney will realize economies of sales efforts and sales related expenses.
An
individual who is a member of a qualified group may also purchase Class A
shares
of the Fund at the reduced sales charge applicable to the group as a whole.
The
sales charge is based upon the aggregate dollar value of Class A shares
offered
with a sales charge that have been previously purchased and are still owned
by
the group, plus the amount of the current purchase. A "qualified group" is
one
which (a) has been in existence for more than six months, (b) has a purpose
other than acquiring Fund shares at a discount and (c) satisfies uniform
criteria which enable Smith Barney to realize economies of scale in its
costs of
distributing shares. A qualified group must have more than 10 members, must
be
available to arrange for group meetings between representatives of the Fund
and
the members, and must agree to include sales and other materials related to
the
Fund in its publications and mailings to members at no cost to Smith
Barney. In
order to obtain such reduced sales charge or to purchase at net asset
value, the
purchaser must provide sufficient information at the time of purchase to
permit
verification that the purchase qualifies for the reduced sales charge.
Approval
of group purchase reduced sales charge plans is subject to the discretion
of
Smith Barney.
LETTER OF INTENT
A Letter of Intent for amounts of $50,000 or more provides an
opportunity
for an investor to obtain a reduced sales charge by aggregating investments
over
a 13-month period, provided that the investor refers to such Letter when
placing
orders. For purposes of a Letter of Intent, the "Amount of Investment" as
referred to in the preceding sales charge table includes purchases of all
Class
A shares of the Fund and other funds of the Smith Barney Mutual Funds
offered
26
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
with a sales charge over the 13-month period based on the total amount of
intended purchases plus the value of all Class A shares previously
purchased and
still owned. An alternative is to compute the 13-month period starting up
to 90
days before the date of execution of a Letter of Intent. Each investment
made
during the period receives the reduced sales charge applicable to the total
amount of the investment goal. If the goal is not achieved within the
period,
the investor must pay the difference between the sales charges applicable
to the
purchases made and the charges previously paid, or an appropriate number of
escrowed shares will be redeemed. New Letters of Intent will be accepted
beginning January 1, 1995. Please contact a Smith Barney Financial
Consultant or
TSSG to obtain a Letter of Intent application.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase
payment
may be immediately invested in the Fund. A CDSC, however, may be imposed on
certain redemptions of these shares. "CDSC Shares" are: (a) Class B shares;
(b)
Class C shares; and (c) Class A shares which when combined with Class A
shares
offered with a sales charge currently held by an investor equal or exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser
of
the cost of the shares being redeemed or their net asset value at the time
of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to
the
extent that the value of such shares represents: (a) capital appreciation
of
Fund assets; (b) reinvestment of dividends or capital gain distributions;
(c)
with respect to Class B shares, shares redeemed more than five years after
their
purchase; or (d) with respect to Class C shares and Class A shares that are
CDSC
Shares redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC shares are subject to
a
1.00% CDSC if redeemed within 12 months of purchase. In circumstances in
which
the CDSC is imposed on Class B shares, the amount of the charge will depend
on
the number of years since the shareholder made the purchase payment from
which
the amount is being redeemed. Solely for purposes of determining the number
of
years since a purchase payment, all purchase payments made during a month
will
be aggregated and deemed to have been made on the last day of the preceding
Smith Barney statement month. The following table sets forth the rates of
the
charge for redemptions of Class B shares by
27
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
shareholders, except in the case of purchases by Participating Plans, as
described below. See "Purchase of Shares--Smith Barney 401(k) Program."
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- ---------------------------------------------------------------------------
- ----------
<S> <C> <C>
First
5.00%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ---------------------------------------------------------------------------
- ----------
</TABLE>
Class B shares automatically will convert to Class A shares eight
years
after the date on which they were purchased and thereafter will no longer
be
subject to any distribution fees. There also will be converted at that time
such
proportion of Class B Dividend Shares owned by the shareholder as the total
number of his or her Class B shares converting at the time bears to the
total
number of outstanding Class B shares (other than Class B Dividend Shares)
owned
by the shareholder. Shareholders who held Class B shares of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term World Income Fund")
that
were held on July 15, 1994 and who subsequently exchange those shares for
Class
B shares of the Fund will be offered the opportunity to exchange all such
Class
B shares for Class A shares of the Fund four years after the date on which
those
shares were deemed to have been purchased. Holders of such Class B shares
will
be notified of the pending exchange in writing approximately 30 days before
the
fourth anniversary of the purchase date and, unless the exchange has been
rejected in writing, the exchange will occur on or about the fourth
anniversary
date. See "Prospectus Summary--Alternative Purchase Arrangements--Class B
Shares
Conversion Feature."
The length of time that CDSC Shares acquired through an exchange have
been
held will be calculated from the date that the shares exchanged were
initially
acquired in one of the other Smith Barney Mutual Funds, and Fund shares
being
redeemed will be considered to represent, as applicable, capital
appreciation or
dividend and capital gain distribution reinvestments in such other funds.
For
Federal income tax purposes, the amount of the CDSC will reduce
28
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
the gain or increase the loss, as the case may be, on the amount realized
on
redemption. The amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares
at
$10 per share for a cost of $1,000. Subsequently, the investor acquired 5
additional shares through dividend reinvestment. During the fifteenth month
after the purchase, the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value had
appreciated to $12 per share, the value of the investor's shares would be
$1,260
(105 shares at $12 per share). The CDSC would not be applied to the amount
which
represents appreciation ($200) and the value of the reinvested dividend
shares
($60). Therefore, $240 of the $500 redemption proceeds ($500 minus $260)
would
be charged at a rate of 4.00% (the applicable rate for Class B shares) for
a
total deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege");
(b)
automatic cash withdrawals in amounts equal to or less than 1% per month of
the
value of the shareholder's shares at the time the withdrawal plan commences
(see
below) (provided, however, that automatic cash withdrawals in amounts equal
to
or less than 2% per month of the value of the shareholder's shares will be
permitted for withdrawal plans that were established prior to November 7,
1994);
(c) redemptions of shares within twelve months following the death or
disability
of the shareholder; (d) redemption of shares made in connection with
qualified
distributions from retirement plans or IRAs upon the attainment of age 59
1/2;
(e) involuntary redemptions; and (f) redemptions of shares in connection
with a
combination of the Fund with any investment company by merger, acquisition
of
assets or otherwise. In addition, a shareholder who has redeemed shares
from
other funds of the Smith Barney Mutual Funds may, under certain
circumstances,
reinvest all or part of the redemption proceeds within 60 days and receive
pro
rata credit for any CDSC imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney
in
the case of shareholders who are also Smith Barney clients or by TSSG in
the
case of all other shareholders) of the shareholder's status or holdings, as
the
case may be.
29
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in the Smith Barney 401(k)
Program, which is generally designed to assist plan sponsors in the
creation and
operation of retirement plans under Section 401(a) of the Code. To the
extent
applicable, the same terms and conditions are offered to all Participating
Plans
in the Smith Barney 401(k) Program.
The Fund offers to Participating Plans Class A, Class B, Class C and
Class
Y shares, as investment alternatives under the Smith Barney 401(k) Program.
Class A, Class B and Class C shares acquired through the Smith Barney
401(k)
Program are subject to the same service and/or distribution fees as, but
different sales charge and CDSC schedules than, the Class A, Class B and
Class C
shares acquired by other investors. Similar to those available to other
investors, Class Y shares acquired through the Smith Barney 401(k) Program
are
not subject to any initial sales charge, CDSC or service or distribution
fees.
Once a Participating Plan has made an initial investment in the Fund, all
of its
subsequent investments in the Fund must be in the same Class of shares,
except
as otherwise described below.
Class A Shares. Class A shares of the Fund are offered without any
initial
sales charge to any Participating Plan that purchases from $500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney
Mutual
Funds. Class A shares acquired through the Smith Barney 401(k) Program
after
November 7, 1994 are subject to a CDSC of 1.00% of redemption proceeds, if
the
Participating Plan terminates within four years of the date the
Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Class B Shares. Class B shares of the Fund are offered to any
Participating Plan that purchases less than $250,000 of one or more funds
of the
Smith Barney Mutual Funds. Class B shares acquired through the Smith Barney
401(k) Program are subject to a CDSC of 3.00% of redemption proceeds, if
the
Participating Plan terminates within eight years of the date the
Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan enrolled in the
Smith
Barney 401(k) Program, it will be offered the opportunity to exchange all
of its
Class B shares for Class A shares of the Fund. Such Plans will be notified
of
the pending exchange in writing approximately 60 days before the eighth
anniversary of the enrollment date and, unless the exchange has been
rejected in
writing, the exchange will occur on or about the eighth anniversary date.
Once
the exchange
30
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
has occurred, a Participating Plan will not be eligible to acquire
additional
Class B shares of the Fund but instead may acquire Class A shares of the
Fund.
If the Participating Plan elects not to exchange all of its Class B shares
at
that time, each Class B share held by the Participating Plan will have the
same
conversion feature as Class B shares held by other investors. See "Purchase
of
Shares--Deferred Sales Charge Alternatives."
Class C Shares. Class C shares of the Fund are offered to any
Participating Plan that purchases from $250,000 to $499,999 of one or more
funds
of the Smith Barney Mutual Funds. Class C shares acquired through the Smith
Barney 401(k) Program after November 7, 1994 are subject to a CDSC of 1.00%
of
redemption proceeds, if the Participating Plan terminates within four years
of
the date the Participating Plan first enrolled in the Smith Barney 401(k)
Program. In any year after the date a Participating Plan enrolled in the
Smith
Barney 401(k) Program if its total Class C holdings equal at least $500,000
as
of the calendar year-end, the Participating Plan will be offered the
opportunity
to exchange all of its Class C shares for Class A shares of the Fund. Such
Plans
will be notified in writing within 30 days after the last business day of
the
calendar year, and unless the exchange offer has been rejected in writing,
the
exchange will occur on or about the last business day of the following
March.
Once the exchange has occurred, a Participating Plan will not be eligible
to
acquire Class C shares of the Fund but instead may acquire Class A shares
of the
Fund. Class C shares not converted will continue to be subject to the
distribution fee.
Class Y Shares. Class Y shares of the Fund are offered without any
service
or distribution fees, sales charge or CDSC to any Participating Plan that
purchases $5,000,000 or more of Class Y shares of one or more funds of the
Smith
Barney Mutual Funds.
No CDSC is imposed on redemptions of CDSC Shares to the extent that
the net
asset value of the shares redeemed does not exceed the current net asset
value
of the shares purchased through reinvestment of dividends or capital gain
distributions, plus (a) with respect to Class A and Class C shares, the
current
net asset value of such shares purchased more than one year prior to
redemption
and, with respect to Class B shares, the current net asset value of Class B
shares purchased more than eight years prior to the redemption, plus (b)
with
respect to Class A and Class C shares, increases in the net asset value of
the
shareholder's Class A or Class C shares above the purchase payments made
during
the preceding year and, with respect to Class B shares, increases in the
net
asset value of the shareholder's Class B shares above the purchase payments
made
31
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PURCHASE OF SHARES (CONTINUED)
during the preceding eight years. Whether or not the CDSC applies to a
Participating Plan depends on the number of years since the Participating
Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the
applicability of the CDSC to other shareholders, which depends on the
number of
years since those shareholders made the purchase payment from which the
amount
is being redeemed.
The CDSC will be waived on redemptions of CDSC Shares in connection
with
lump-sum or other distributions made by a Participating Plan as a result
of: (a)
the retirement of an employee in the Participating Plan; (b) the
termination of
employment of an employee in the Participating Plan; (c) the death or
disability
of an employee in the Participating Plan; (d) the attainment of age 59 1/2
by an
employee in the Participating Plan; (e) hardship of an employee in the
Participating Plan to the extent permitted under Section 401(k) of the
Code; or
(f) redemptions of shares in connection with a loan made by the
Participating
Plan to an employee.
Participating Plans wishing to acquire shares of the Fund through the
Smith
Barney 401(k) Program must purchase such shares directly from TSSG. For
further
information regarding the Smith Barney 401(k) Program, investors should
contact
a Smith Barney Financial Consultant.
- ---------------------------------------------------------------------------
- -----
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be exchanged
at
the net asset value next determined for shares of the same Class in the
following funds of the Smith Barney Mutual Funds, to the extent shares are
offered for sale in the shareholder's state of residence. Exchanges of
Class A,
Class B and Class C shares are subject to minimum investment requirements
and
all shares are subject to the other requirements of the fund into which
exchanges are made and a sales charge differential may apply.
FUND NAME
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney European Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.--Capital Appreciation Portfolio
32
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney Global Opportunities Fund
Smith Barney Precious Metals and Minerals Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Smith Barney World Funds, Inc.--European Portfolio
Smith Barney World Funds, Inc.--International Equity Portfolio
Smith Barney World Funds, Inc.--Pacific Portfolio
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc.--Income and Growth Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Utilities Fund
Smith Barney World Funds, Inc.--International Balanced Portfolio
Income Funds
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc.--Income Return Account Portfolio
Smith Barney Funds, Inc.--Monthly Payment Government Portfolio
+++ Smith Barney Funds, Inc.--Short-Term U.S. Treasury Securities
Portfolio
Smith Barney Funds, Inc.--U.S. Government Securities Portfolio
Smith Barney Funds, Inc.--Utility Portfolio
Smith Barney Global Bond Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
* Smith Barney Limited Maturity Treasury Fund
Smith Barney Managed Governments Fund Inc.
Smith Barney World Funds, Inc.--Global Government Bond Portfolio
Municipal Bond Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Florida Municipals Fund
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
* Smith Barney Limited Maturity Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds--California Limited Term Portfolio
Smith Barney Muni Funds--California Portfolio
* Smith Barney Muni Funds--Florida Limited Term Portfolio
Smith Barney Muni Funds--Florida Portfolio
Smith Barney Muni Funds--Georgia Portfolio
33
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
EXCHANGE PRIVILEGE (CONTINUED)
* Smith Barney Muni Funds--Limited Term Portfolio
Smith Barney Muni Funds--National Portfolio
Smith Barney Muni Funds--New Jersey Portfolio
Smith Barney Muni Funds--New York Portfolio
Smith Barney Muni Funds--Ohio Portfolio
Smith Barney Muni Funds--Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney New York Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
Money Market Funds
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc.--Cash Portfolio
++ Smith Barney Money Funds, Inc.--Government Portfolio
*** Smith Barney Money Funds, Inc.--Retirement Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
+++ Smith Barney Muni Funds--California Money Market Portfolio
+++ Smith Barney Muni Funds--New York Money Market Portfolio
- ---------------------------------------------------------------------------
- -----
* Available for exchange with Class A, Class C and Class Y shares of
the
Fund.
** Available for exchange with Class A, Class B and Class Y shares of
the
Fund. In addition, shareholders who own Class C shares of the Fund
through
the Smith Barney 401(k) Program may exchange those shares for Class C
shares of this fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the Fund.
In
addition, shareholders who own Class C shares of the Fund through the
Smith Barney 401(k) Program may exchange those shares for Class C
shares
of this fund.
+++ Available for exchange with Class A and Class Y shares of the Fund.
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold
without a sales charge or with a maximum sales charge of less than the
maximum
charged by other Smith Barney Mutual Funds will be subject to the
appropriate
"sales charge differential" upon the exchange of such shares for Class A
shares
of a fund sold with a higher sales charge. The "sales charge differential"
is
limited to a percentage rate no greater than the excess of the sales charge
rate
applicable to purchases of shares of the mutual fund being acquired in the
exchange over the sales charge rate(s) actually paid on the mutual fund
shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends and capital gain distributions are treated as
having
paid the same sales charges applicable to the shares on which the dividends
or
distribu-
34
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
EXCHANGE PRIVILEGE (CONTINUED)
tions were paid; however, except in the case of the Smith Barney 401(k)
Program,
if no sales charge was imposed upon the initial purchase of the shares, any
shares obtained through automatic reinvestment will be subject to a sales
charge
differential upon exchange.
Class B Exchanges. In the event a Class B shareholder (unless such
shareholder was a Class B shareholder of the Short-Term World Income Fund
on
July 15, 1994) wishes to exchange all or a portion of his or her shares in
any
of the funds imposing a higher CDSC than that imposed by the Fund, the
exchanged
Class B shares will be subject to the higher applicable CDSC. Upon an
exchange,
the new Class B shares will be deemed to have been purchased on the same
date as
the Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C shares will be
deemed
to have been purchased on the same date as the Class C shares of the Fund
that
have been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund who wish to
exchange
all or a portion of their Class Y shares for Class Y shares in any of the
funds
identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can
be detrimental to the Fund's performance and its shareholders. The Managers
may
determine that a pattern of frequent exchanges is excessive and contrary to
the
best interests of the Fund's other shareholders. In this event, the
Managers
will notify Smith Barney and Smith Barney may, at its discretion, decide to
limit additional purchases and/or exchanges by a shareholder. Upon such a
determination, Smith Barney will provide notice in writing or by telephone
to
the shareholder at least 15 days prior to suspending the exchange privilege
and
during the 15-day period the shareholder will be required to (a) redeem his
or
her shares in the Fund or (b) remain invested in the Fund or exchange into
any
of the funds of the Smith Barney Mutual Funds ordinarily available, which
position the shareholder would be expected to maintain for a significant
period
of time. All relevant factors will be considered in determining what
constitutes
an abusive pattern of exchanges.
Exchanges will be processed at the net asset value next determined
after
the redemption proceeds are available. Redemption procedures discussed
below are
also applicable for exchanging shares, and exchanges will be made upon
receipt
of all supporting documents in proper form. If the account registration of
the
35
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
EXCHANGE PRIVILEGE (CONTINUED)
shares of the fund being acquired is identical to the registration of the
shares
of the fund exchanged, no signature guarantee is required. A capital gain
or
loss for tax purposes will be realized upon the exchange, depending upon
the
cost or other basis of shares redeemed. Before exchanging shares, investors
should read the current prospectus describing the shares to be acquired.
The
Fund reserves the right to modify or discontinue exchange privileges upon
60
days' prior notice to shareholders.
- ---------------------------------------------------------------------------
- -----
REDEMPTION OF SHARES
The Fund is required to redeem the shares of the Fund tendered to it,
as
described below, at a redemption price equal to their net asset value per
share
next determined after receipt of a written request in proper form at no
charge
other than any applicable CDSC. Redemption requests received after the
close of
regular trading on the NYSE are priced at the net asset value next
determined.
If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a failure
to
specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Fund's transfer
agent receives further instructions from Smith Barney, or if the
shareholder's
account is not with Smith Barney, from the shareholder directly. The
redemption
proceeds will be remitted on or before the seventh day following receipt of
proper tender, except on any days on which the NYSE is closed or as
permitted
under the Investment Company Act of 1940 (the "1940 Act") in extraordinary
circumstances. The Fund anticipates that, in accordance with regulatory
changes,
beginning on or about June 1, 1995, payment will be made on the third
business
day after receipt of proper tender. Generally, if the redemption proceeds
are
remitted to a Smith Barney brokerage account, these funds will not be
invested
for the shareholder's benefit without specific instruction and Smith Barney
will
benefit from the use of temporarily uninvested funds. Redemption proceeds
for
shares purchased by check, other than a certified or official bank check,
will
be remitted upon clearance of the check, which may take up to ten days or
more.
36
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
REDEMPTION OF SHARES (CONTINUED)
Shares held by Smith Barney as custodian must be redeemed by
submitting a
written request to a Smith Barney Financial Consultant. Shares other than
those
held by Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, Introducing Broker or dealer in the selling group or
by
submitting a written request for redemption to:
Smith Barney Strategic Investors Fund
Class A, B, C or Y (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and number or
dollar
amount of shares to be redeemed, (b) identify the shareholder's account
number
and (c) be signed by each registered owner exactly as the shares are
registered.
If the shares to be redeemed were issued in certificate form, the
certificates
must be endorsed for transfer (or be accompanied by an endorsed stock
power) and
must be submitted to TSSG together with the redemption request. Any
signature
appearing on a redemption request, share certificate or stock power must be
guaranteed by an eligible guarantor institution such as a domestic bank,
savings
and loan institution, domestic credit union, member bank of the Federal
Reserve
System or member firm of a national securities exchange. TSSG may require
additional supporting documents for redemptions made by corporations,
executors,
administrators, trustees or guardians. A redemption request will not be
deemed
properly received until TSSG receives all required documents in proper
form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under
which
shareholders who own shares with a value of at least $10,000 may elect to
receive cash payments of at least $100 monthly or quarterly. Retirement
plan
accounts are eligible for automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified distributions and has an
account
value of at least $5,000. The withdrawal plan will be carried over on
exchanges
between funds or Classes of the Fund. Any applicable CDSC will not be
waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of the value
of
the shareholder's shares subject to the CDSC at the time the withdrawal
plan
commences. (With respect to withdrawal plans in effect prior to November 7,
1994, any applicable CDSC will be waived on amounts withdrawn that
37
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
REDEMPTION OF SHARES (CONTINUED)
do not exceed 2.00% per month of the value of the shareholder's shares
subject
to the CDSC.) For further information regarding the automatic cash
withdrawal
plan, shareholders should contact a Smith Barney Financial Consultant.
- ---------------------------------------------------------------------------
- -----
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any
shareholder's
account in the Fund if the aggregate net asset value of the shares held in
the
Fund account is less than $500. (If a shareholder has more than one account
in
this Fund, each account must satisfy the minimum account size.) The Fund,
however, will not redeem shares based solely on market reductions in net
asset
value. Before the Fund exercises such right, shareholders will receive
written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid automatic redemption.
- ---------------------------------------------------------------------------
- -----
PERFORMANCE
TOTAL RETURN
From time to time, the Fund may include its total return, average
annual
total return and current dividend return in advertisements and/or other
types of
sales literature. These figures are computed separately for Class A, Class
B,
Class C and Class Y shares of the Fund. These figures are based on
historical
earnings and are not intended to indicate future performance. Total return
is
computed for a specified period of time assuming deduction of the maximum
sales
charge, if any, from the initial amount invested and reinvestment of all
income
dividends and capital gains distributions on the reinvestment dates at
prices
calculated as stated in this Prospectus, then dividing the value of the
investment at the end of the period so calculated by the initial amount
invested
and subtracting 100%. The standard average annual total return, as
prescribed by
the SEC, is derived from this total return, which provides the ending
redeemable
value. Such standard total return information may also be accompanied with
nonstandard total return information for differing periods computed in the
same
manner but without annualizing the total return or taking sales charges
into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and dividing by the net
asset
value or the maximum public offering price (including sales charge) on the
38
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
PERFORMANCE (CONTINUED)
last day of the period for which current dividend return is presented. The
current dividend return for each Class may vary from time to time depending
on
market conditions, the composition of its investment portfolio and
operating
expenses. These factors and possible differences in the methods used in
calculating current dividend return should be considered when comparing a
Class'
current return to yields published for other investment companies and other
investment vehicles. The Fund may also include comparative performance
information in advertising or marketing its shares. Such performance
information
may include data from Lipper Analytical Services, Inc. and other financial
publications. The Fund will include performance data for Class A, Class B,
Class
C and Class Y shares in any advertisement or information including
performance
data of the Fund.
- ---------------------------------------------------------------------------
- -----
MANAGEMENT OF THE TRUST AND THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Trust and
the
Fund rests with the Trust's Board of Trustees. The Trustees approve all
significant agreements between the Trust and the companies that furnish
services
to the Fund, including agreements with the Trust's distributor, custodian
and
transfer agent and the Fund's investment adviser, sub-investment adviser,
administrator and sub-administrator. The day-to-day operations of the Fund
are
delegated to the Fund's investment adviser, sub-investment adviser,
administrator and sub-administrator. The Statement of Additional
Information
contains background information regarding each Trustee of the Trust and
executive officer of the Trust.
INVESTMENT ADVISER--STRATEGY ADVISERS
Strategy Advisers, located at 388 Greenwich Street, New York, New York
10013, serves as the Fund's investment adviser. As investment adviser,
Strategy
Advisers, subject to the supervision and direction of the Fund's Board of
Trustees, is generally responsible for furnishing, or causing to be
furnished to
the Fund, investment management services. Included among the specific
services
provided by Strategy Advisers as investment adviser are: the selection and
compensation of a sub-investment adviser to the Fund; the review of all
purchases and sales of portfolio instruments made by the Fund to assess
compliance with its stated investment objectives and policies; the
monitoring of
39
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
the selection of brokers and dealers effecting investment transactions on
behalf
of the Fund; and the payment of reasonable salaries and expenses of those
of the
Fund's officers and employees, and the fees and expenses of those members
of the
Fund's Board of Trustees, who are directors, officers or employees of
Strategy
Advisers. Strategy Advisers provides investment management, investment
advisory
and/or administrative services to individual, institutional and investment
company clients that had aggregate assets under management, as of September
30,
1994, in excess of $3 billion. For advisory services rendered to the Fund,
under
an Advisory Agreement dated July 15, 1994, the Fund pays Strategy Advisers
a fee
at the annual rate of 0.55% of the value of the Fund's average daily net
assets.
From its fee, Strategy Advisers pays Boston Advisors a fee of 0.275% of the
value of the Fund's average daily net assets for its services as sub-
investment
adviser.
ADMINISTRATOR--SBMFM
SBMFM serves as the Fund's administrator and generally assists in all
aspects of the Fund's administration and operation. SBMFM provides
investment
management and administration services to a wide variety of individual,
institutional and investment companies that had aggregate assets under
management, as of September 30, 1994, in excess of $52.4 billion. For
administration services rendered, the Fund pays SBMFM a fee at the annual
rate
of 0.20% of the Fund's average daily net assets.
SUB-INVESTMENT ADVISER AND SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts
02108,
serves as the Fund's sub-investment adviser and sub-administrator. Boston
Advisors provides investment management, investment advisory and/or
administrative services to investment companies that had aggregate assets
under
management, as of September 30, 1994, in excess of $48.6 billion.
Subject to the supervision and direction of the Trust's Board of
Trustees
and Strategy Advisers, Boston Advisors manages the Fund's portfolio in
accordance with the Fund's investment objective and policies, makes
investment
decisions for the Fund, places orders to purchase and sell securities and
employs professional portfolio managers and securities analysts who provide
research services to the Fund. Boston Advisors also calculates the net
asset
value of the Fund's shares and generally assists SBMFM in all aspects of
the
Fund's administration
40
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
and operation. Under a sub-administration agreement dated May 4, 1994,
Boston
Advisors is paid a portion of the fee paid by the Fund to SBMFM at a rate
agreed
upon from time to time between Boston Advisors and SBMFM.
PORTFOLIO MANAGEMENT
William W. Carter, Vice President of Boston Advisors, has served as
Investment Administrator of the Fund since February 2, 1987, and manages
the
day-to-day operations of the Fund, including making all investment
decisions.
Mr. Carter's management discussion and analysis and additional performance
information regarding the Fund during the fiscal year ended January 31,
1994 is
included in the Annual Report dated January 31, 1994. A copy of the Annual
Report may be obtained upon request and without charge from a Smith Barney
Financial Consultant or by writing or calling the Fund at the address or
phone
number listed on page one of this prospectus.
ASSET ALLOCATION CONSULTANT
Smith Barney, located at 388 Greenwich Street, New York, New York
10013,
serves without compensation as asset allocation consultant to the Fund. As
asset
allocation consultant, Smith Barney provides the asset allocation mix that
may
be a primary determinant of the Fund's investment performance. Smith Barney
is a
wholly owned subsidiary of Holdings, which is in turn a wholly owned
subsidiary
of Travelers.
- ---------------------------------------------------------------------------
- -----
DISTRIBUTOR
Smith Barney is located at 388 Greenwich Street, New York, New York
10013.
Smith Barney distributes shares of the Fund as principal underwriter and as
such
conducts a continuous offering pursuant to a "best efforts" arrangement
requiring Smith Barney to take and pay for only such securities as may be
sold
to the public. Pursuant to a plan of distribution adopted by the Fund under
Rule
12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a service fee
with
respect to Class A, Class B and Class C shares of the Fund at the annual
rate of
0.25% of the average daily net assets of the respective Class. Smith Barney
is
also paid an annual distribution fee with respect to Class B and Class C
shares
at the annual rate of 0.75% of the average daily net assets attributable to
those Classes. Class B shares which automatically convert to Class A shares
eight years after the date of original purchase will no longer be subject
to
distribution fees. The
41
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
DISTRIBUTOR (CONTINUED)
fees are used by Smith Barney to pay its Financial Consultants for
servicing
shareholder accounts and, in the case of Class B and Class C shares, to
cover
expenses primarily intended to result in the sale of those shares. These
expenses include: advertising expenses; the cost of printing and mailing
prospectuses to potential investors; payments to and expenses of Smith
Barney
Financial Consultants and other persons who provide support services in
connection with the distribution of shares; interest and/or carrying
charges;
and indirect and overhead costs of Smith Barney associated with the sale of
Fund
shares, including lease, utility, communications and sales promotion
expenses.
The payments to Smith Barney Financial Consultants for selling shares
of a
Class include a commission or fee paid by the investor or Smith Barney at
the
time of sale and, with respect to Class A, Class B and Class C shares, a
continuing fee for servicing shareholder accounts for as long as a
shareholder
remains a holder of that Class. Smith Barney Financial Consultants may
receive
different levels of compensation for selling different Classes of shares.
Payments under the Plan are not tied exclusively to the distribution
and
shareholder service expenses actually incurred by Smith Barney and the
payments
may exceed distribution expenses actually incurred. The Trust's Board of
Trustees will evaluate the appropriateness of the Plan and its payment
terms on
a continuing basis and in so doing will consider all relevant factors,
including
expenses borne by Smith Barney, amounts received under the Plan and
proceeds of
the CDSC.
- ---------------------------------------------------------------------------
- -----
ADDITIONAL INFORMATION
The Trust was organized on January 8, 1986 under the laws of the
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts business trust." The Trust offers shares of beneficial
interest
of separate funds with a par value of $.001 per share. The Fund offers
shares of
beneficial interest currently classified into five Classes -- A, B, C, Y
and Z.
Each Class represents an identical interest in the Fund's investment
portfolio.
As a result, the Classes have the same rights, privileges and preferences,
except with respect to: (a) the designation of each Class; (b) the effect
of the
respective sales charges, if any, for each Class; (c) the distribution
and/or
service fees borne by each Class; (d) the expenses allocable exclusively to
each
Class; (e) voting rights on matters exclusively affecting a single Class;
(f)
the exchange privilege
42
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
ADDITIONAL INFORMATION (CONTINUED)
of each Class; and (g) the conversion feature of the Class B shares. The
Trust's
Board of Trustees does not anticipate that there will be any conflicts
among the
interests of the holders of the different Classes. The Trustees, on an
ongoing
basis, will consider whether any such conflict exists and, if so, take
appropriate action.
The Trust does not hold annual shareholder meetings. There normally
will be
no meeting of shareholders for the purpose of electing Trustees unless and
until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose
upon
written request of shareholders holding at least 10% of the Trust's
outstanding
shares and the Fund will assist shareholders in calling such a meeting as
required by the 1940 Act. Shareholders of record owning no less than two-
thirds
of the outstanding shares of the Trust may remove a Trustee through a
declaration in writing or by vote cast in person or by proxy at a meeting
called
for that purpose.
When matters are submitted for shareholder vote, shareholders of each
Class
will have one vote for each full share owned and a proportionate,
fractional
vote for any fractional share held of that Class. Generally, shares of the
Trust
vote by individual fund on all matters except (a) matters affecting only
the
interests of one or more of the funds, in which case only shares of the
affected
fund or funds would be entitled to vote or (b) when the 1940 Act requires
that
shares of the funds be voted in the aggregate. Similarly, shares of the
Fund
will be voted generally on a Fund-wide basis except with respect to matters
affecting the interests of one Class of shares.
Boston Safe is an indirect wholly owned subsidiary of Mellon and is
located
at One Boston Place, Boston, Massachusetts 02108, and serves as custodian
of the
Fund's investments.
TSSG, is located at Exchange Place, Boston, Massachusetts 02109, and
serves
as the Trust's transfer agent.
The Trust sends shareholders of the Fund a semi-annual report and an
audited annual report, which include listings of the investment securities
held
by the Fund at the end of the reporting period. In an effort to reduce the
Fund's printing and mailing costs, the Trust plans to consolidate the
mailing of
the Fund's semi-annual and annual reports by household. This consolidation
means
that a household having multiple accounts with the identical address of
record
will receive a single copy of each report. In addition, the Trust also
plans to
43
<PAGE>
SMITH BARNEY
Strategic Investors Fund
- ---------------------------------------------------------------------------
- -----
ADDITIONAL INFORMATION (CONTINUED)
consolidate the mailing of the Fund's Prospectus so that a shareholder
having
multiple accounts (that is, individual, IRA and/or Self-Employed Retirement
Plan
accounts) will receive a single Prospectus annually. Shareholders who do
not
want this consolidation to apply to their accounts should contact a Smith
Barney
Financial Consultant or the Trust's transfer agent.
------------------------
No person has been authorized to give any information or to make
any
representations in connection with this offering other than those contained
in
this Prospectus and, if given or made, such other information or
representations
must not be relied upon as having been authorized by the Trust or the
distributor. This Prospectus does not constitute an offer by the Fund or
the
distributor to sell or a solicitation of an offer to buy any of the
securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make
such offer or solicitation in such jurisdiction.
44
<PAGE>
___________________________________________________________________________
_
PROSPECTUS
<LOGO>
______
A Member of Travelers
Group<LOGO>
SMITH
BARNEY
STRATEGIC
INVESTORS
FUND
388 Greenwich
Street
New York, New York
10013
<LOGO>Recycled Fund
38,233,246
Recyclable
FD0225J4
___________________________________________________________________________
_
Part A
Smith Barney Shearson Growth and Income Fund
Prospectus dated April 1, 1994
Incorporated by Reference to Post-Effective Amendment No. 27
<PAGE> 1
Smith Barney
EQUITY FUNDS
388 Greenwich Street
New York, New York 10013
(212) 723-9218
- ---------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION NOVEMBER 7,
1994
- ---------------------------------------------------------
This Statement of Additional Information expands upon and supplements
the
information contained in the current Prospectuses, each dated November 7,
1994,
as amended or supplemented from time to time, of Smith Barney Equity Funds
(the
"Trust") relating to Smith Barney Strategic Investors Fund and Smith Barney
Growth and Income Fund (each, a "Fund" and collectively, the "Funds"), each
a
series of the Trust, and should be read in conjunction with the
Prospectuses.
The Prospectuses may be obtained from a Smith Barney Financial Consultant
or by
writing or calling the Trust at the address or telephone number set forth
above.
This Statement of Additional Information, although not in itself a
prospectus,
is incorporated by reference into the Prospectuses in its entirety.
<TABLE>
TABLE OF CONTENTS
For ease of reference, the same section headings are used in the
Prospectuses
and in this Statement of Additional Information, except where shown below:
<S>
<C>
Management of the
Trust................................................................ 2
Investment Objectives and Management
Policies.......................................... 6
Purchase of
Shares.....................................................................
16
Redemption of
Shares...................................................................
17
Distributor................................................................
............ 18
Valuation of
Shares....................................................................
19
Exchange
Privilege..................................................................
... 20
Performance Data (See in each Prospectus
"Performance")................................ 20
Taxes (See in each Prospectus "Dividends, Distributions and
Taxes").................... 23
Additional
Information................................................................
. 27
Financial
Statements.................................................................
.. 27
Appendix...................................................................
............ 28
</TABLE>
<PAGE> 2
<TABLE>
MANAGEMENT OF THE TRUST
The executive officers of the Trust are employees of certain of the
organizations that provide services to the Trust. These organizations are
the
following:
<CAPTION>
NAME SERVICE
----------------------------------------- --------------------------
- --------------
<S> <C>
Smith Barney Inc.
("Smith Barney")....................... Distributor
Smith Barney Mutual Funds Management Inc. Investment Adviser (Growth
and Income
("SBMFM").............................. Fund) and Administrator
Smith Barney Strategy Advisers Inc. Investment Adviser
(Strategic Investors
("Strategy Advisers").................. Fund)
The Boston Company Advisors, Inc. Sub-Investment Adviser
(Strategic
("Boston Advisors").................... Investors Fund) and Sub-
Administrator
Boston Safe Deposit and Trust Company
("Boston Safe")........................ Custodian
The Shareholder Services Group, Inc.
("TSSG), a subsidiary of First Data
Corporation............................ Transfer Agent
</TABLE>
These organizations and the services they perform for the Trust and
the
Funds are discussed in the Prospectuses and in this Statement of Additional
Information.
The names of the Trustees and the executive officers of the Trust,
together
with information as to their principal business occupations, are set forth
below. Each Trustee who is an "interested person" of the Trust, as defined
in
the Investment Company Act of 1940, as amended (the "1940 Act"), is
indicated by
an asterisk.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
Lee Abraham, Trustee. Chairman and Chief Executive Officer of
Associated
Merchandising Corporation, a major retail merchandising and sourcing
organization. His address is 1440 Broadway, Suite 1001, New York, New York
10018.
Antoinette C. Bentley, Trustee. Retired; formerly Senior Vice
President and
Associate General Counsel of Crum and Foster, Inc., an insurance holding
company. Her address is 24 Fowler Road, Far Hills, New Jersey 07931.
Allan J. Bloostein, Trustee. Consultant; formerly Vice Chairman of the
Board of and Consultant to The May Department Stores Company; Director of
Crystal Brands, Inc., Melville Corp. and R.G. Barry Corp. His address is
Anderson Road, Sherman, Connecticut 06784.
Richard E. Hanson, Jr., Trustee. Headmaster, The Peck School,
Morristown,
NJ; prior to July 1, 1994 Headmaster, Lawrence Country Day School--Woodmere
Academy, Woodmere, New York; prior to July 1, 1990, Headmaster of Woodmere
Academy. His address is 247 South Street, Morristown, NJ 07960.
Heath B. McLendon, Chairman of the Board and Investment Officer.
Executive
Vice President of Smith Barney and Chairman of Strategy Advisers; prior to
July
1993, Senior Executive Vice President of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"); Vice Chairman of Shearson Asset Management, a
2
<PAGE> 3
member of the Asset Management Group of Shearson Lehman Brothers; a
Director of
PanAgora Asset Management, Inc. and PanAgora Asset Management Limited. His
address is 388 Greenwich Street, New York, New York 10013.
Madelon DeVoe Talley, Trustee. Author; Governor at Large of the
National
Association of Securities Dealers, Inc.; prior to 1985, Chairman of
Rothschild
Asset Management Inc., a money management firm. Her address is 876 Park
Avenue,
New York, New York 10021.
Stephen J. Treadway, President. Executive Vice President and Director
of
Smith Barney; Director and President of SBMFM; and Trustee of Corporate
Realty
Income Trust I. His address is 388 Greenwich Street, New York, New York
10013.
Richard P. Roelofs, Executive Vice President. Managing Director of
Smith
Barney; President of Strategic Advisers; prior to July 1993, Senior Vice
President of Shearson Lehman Brothers Inc., President of Shearson Lehman
Investment Strategy Advisors Inc. His address is 388 Greenwich Street, New
York,
New York 10013.
R. Jay Gerken, Vice President and Investment Officer. Managing
Director of
SBMFM; prior to July 1993 Managing Director of Shearson Lehman Advisors.
His
address is 388 Greenwich Street, New York, New York 10013.
George V. Novello, Investment Officer. Managing Director of SBMFM;
prior to
July 1993, Managing Director of Shearson Lehman Advisors. His address is
388
Greenwich Street, New York, New York 10013.
Lewis E. Daidone, Treasurer. Managing Director and Chief Financial
Officer
of Smith Barney; Director and Senior Vice President of SBMFM. His address
is 388
Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary. Managing Director of Smith Barney;
General
Counsel and Secretary of SBMFM. Her address is 388 Greenwich Street, New
York,
New York 10013.
William W. Carter, Jr., Investment Administrator. Vice President of
Boston
Advisors; Executive Vice President of III; President of The Boston Company
of
Southern California. His address is 300 S. Grand, Suite 1200, Los Angeles,
California 90071.
Stephen Thalasinos, Investment Administrator. Vice President of Boston
Advisors; Vice President of The Boston Company of Southern California; Vice
President of The Boston Company Asset Management, Inc. His address is 300
S.
Grand, Los Angeles, California 90071.
Each Trustee also serves as a trustee, director and/or general partner
of
other mutual funds for which Smith Barney serves as distributor. As of
October
31, 1994, the Trust's Trustees and officers of the Funds as a group owned
less
than 1.00% of the outstanding shares of the Trust.
No officer, director or employee of Smith Barney, or of any affiliate
of
Smith Barney will receive any compensation from the Trust for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not an
officer, director or employee of Smith Barney or any of its affiliates a
fee of
$6,000 per annum plus $1,500 per meeting attended and reimburses them for
travel
and out-of-pocket expenses. For the fiscal year ended January 31, 1994,
such
fees and expenses totalled $62,177.
3
<PAGE> 4
INVESTMENT ADVISERS, SUB-INVESTMENT ADVISER, ADMINISTRATOR AND SUB-
ADMINISTRATOR
SBMFM serves as investment adviser to Growth and Income Fund pursuant
to a
written agreement (the "Advisory Agreement"), which was first approved by
the
Trust's Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust or SBMFM ("Independent Trustees") on
April 6,
1993. The services provided by SBMFM under the Advisory Agreement are
described
in the Prospectus under "Management of the Trust and the Fund." SBMFM bears
all
expenses in connection with the performance of its services and pays the
salary
of any officer and employee who is employed by both it and the Trust. SBMFM
is a
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings").
Holdings is
a wholly owned subsidiary of The Travelers Inc. ("Travelers").
As compensation for SBMFM's services rendered to Growth and Income
Fund,
the Fund pays a fee computed daily and paid monthly at the annual rate of
0.45%
of the value of the average daily net assets of the Fund.
SBMFM also serves as administrator to the Funds pursuant to a written
agreement (the "Administration Agreement") dated May 4, 1994, which was
most
recently approved by the Trust's Board of Trustees, including a majority of
Trustees who are Independent Trustees, on July 20, 1994.
Prior to May 4, 1994, Boston Advisors served as administrator to the
Funds.
Boston Advisors currently serves as sub-administrator to the Funds under a
written agreement (the "Sub-Administration Agreement") dated April 20,
1994,
which was most recently approved by the Trust's Board of Trustees,
including a
majority of Trustees who are not "interested persons" of the Fund or Boston
Advisors on April 20, 1994. Prior to the close of business on May 21, 1993,
Boston Advisors acted in the capacity as the Fund's sub-investment adviser
and
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc., a financial services holding company, which is in turn a
wholly
owned subsidiary of Mellon Bank Corporation ("Mellon").
Certain of the services provided to the Funds by SBMFM and Boston
Advisors
are described in the Prospectuses under "Management of the Trust and the
Fund."
In addition to those services, SBMFM and Boston Advisors pay the salaries
of all
officers and employees who are employed by both SBMFM and Boston Advisors
and
the Fund, maintain office facilities for each Fund, furnish each Fund with
statistical and research data, clerical help and accounting, data
processing,
bookkeeping, internal auditing and legal services and certain other
services
required by the Funds, prepare reports to the Funds' shareholders and
prepare
tax returns, reports to and filings with the Securities and Exchange
Commission
(the "SEC") and state Blue Sky authorities. SBMFM and Boston Advisors bear
all
expenses in connection with the performance of their services.
As compensation for Boston Advisors' services rendered to the Funds,
the
Trust paid a fee computed daily and paid monthly at the annual rates of:
0.75%
of the value of the average daily net assets of Strategic Investors Fund;
and
0.20% of the value of the average daily net assets of Growth and Income
Fund.
Strategy Advisers serves as investment adviser to Strategic Investors
Fund
pursuant to a written agreement (the "Strategy Advisory Agreement"), which
was
approved most recently by the Trust's Board of Trustees, including a
majority of
the Independent Trustees, on August 10, 1994. Strategy Advisers is a wholly
owned subsidiary of Holdings. Certain of the services provided by Strategy
Advisers under the Strategy Advisory Agreement are described in the
Prospectus
under "Management of the Trust and the Fund."
4
<PAGE> 5
As compensation for Strategy Advisers' services rendered to Strategic
Investors Fund, the Fund pays a fee computed daily and paid monthly at the
annual rate of .55% of the value of the Fund's average daily net assets.
Boston Advisers serves as sub-investment adviser to Strategic
Investors
Fund pursuant to a written agreement (the "TBCA Sub-Advisory Agreement"),
which
was most recently approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, on August 10, 1994. Boston Advisers
is an
indirect wholly owned subsidiary of Mellon.
As compensation for Boston Advisers services rendered to Strategic
Investors Fund, the Fund pays a fee computed daily and paid monthly at the
annual rate of 0.275% of the value of the Fund's average daily net assets.
Each of SBMFM, Strategy Advisers, and Boston Advisers (each, an
"Adviser"
and collectively, the "Advisers") pays the salaries of all officers and
employees who are employed by both it and the Trust, and maintains office
facilities for the Funds. Each of the service providers also bears all
expenses
in connection with the performance of its services under its agreement
relating
to a Fund.
For the fiscal years ended January 31, 1994, 1993 and 1992, the Funds
paid
investment advisory and sub-investment advisory and/or administration fees
to
their respective Advisers, sub-investment advisers and administrator as
follows:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
FISCAL YEAR ENDED
JANUARY 31,
- ----------------------
1994 1993
- -------- --------
<S>
<C> <C>
Investment Advisory
fees...................................................... $264,363
$ 25,070
Administration
fees...........................................................
117,495 11,142
</TABLE>
<TABLE>
<CAPTION>
STRATEGIC INVESTORS FUND
FISCAL YEAR ENDED JANUARY 31,
-------
- ---------------------------------
1994
1993 1992
-------
- --- ---------- ----------
<S> <C>
<C> <C>
Investment Advisory fees.........................................
$1,702,756 $1,466,635 $1,180,350
Administration fees..............................................
609,031 532,668 429,218
</TABLE>
Each Adviser, sub-investment adviser and/or administrator has agreed
that
if in any fiscal year the aggregate expenses of the Fund it serves
(including
fees payable pursuant to its agreement with respect to the Fund, but
excluding
interest, taxes, brokerage, fees paid pursuant to the Trust's services and
distribution plan, and, if permitted by the relevant state securities
commissions, extraordinary expenses) exceed the expense limitation of any
state
having jurisdiction over the Fund, the Adviser and administrator, to the
extent
required by state law, will reduce their fees to the Fund by the amount of
such
excess expense, such amount to be allocated between or among them in the
same
proportion as their respective fees bear to the combined fees for
investment
advice and administration. Such fee reduction, if any, will be estimated
and
reconciled on a monthly basis. The most restrictive state expense
limitation
currently applicable to any Fund requires a reduction of fees in any year
that
such expenses exceed 2.50% of the Fund's first $30 million of average net
assets, 2.00% of the next $70 million of average net assets and 1.50% of
the
remaining average net assets.
Smith Barney serves as asset allocation consultant to Strategic
Investors
Fund pursuant to a written agreement with the Trust, under which Smith
Barney
provides the Fund with its conclusions concerning the
5
<PAGE> 6
portion of a model portfolio's assets that should be invested in equity,
fixed-income and money market instruments and gold securities in light of
current economic and market conditions. Strategic Investors Fund does not
pay
any fee to Smith Barney for performing this service, and Smith Barney bears
all
expenses in connection with providing this service.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Trust. Stroock & Stroock
&
Lavan serves as counsel to the Trust's Independent Trustees.
Coopers & Lybrand L.L.P., independent accountants, One Post Office
Square,
Boston, Massachusetts 02109, serve as auditors of the Trust and render an
opinion on each Fund's financial statements annually.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objectives of the Funds and the
policies
employed to achieve those objectives. This section contains supplemental
information concerning the types of securities and other instruments in
which
the Funds may invest, the investment policies and portfolio strategies the
Funds
may utilize and certain risks attendant to such investments, policies and
strategies. There can be no assurance that the respective investment
objectives
of the Funds will be achieved.
United States Government Securities. United States government
securities
include debt obligations of varying maturities issued or guaranteed by the
United States government or its agencies or instrumentalities ("U.S.
government
securities"). Direct obligations of the United States Treasury include a
variety
of securities that differ in their interest rates, maturities and dates of
issuance.
U.S. government securities include not only direct obligations of the
United States Treasury, but also include securities issued or guaranteed by
the
Federal Housing Administration, Federal Financing Bank, Export-Import Bank
of
the United States, Small Business Administration, Government National
Mortgage
Association, General Services Administration, Federal Home Loan Banks,
Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association,
Maritime
Administration, Resolution Trust Corporation, Tennessee Valley Authority,
District of Columbia Armory Board, Student Loan Marketing Association and
various institutions that previously were or currently are part of the Farm
Credit System (which has been undergoing a reorganization since 1987).
Because
the United States government is not obligated by law to provide support to
an
instrumentality that it sponsors, a Fund will invest in obligations issued
by
such an instrumentality only if the Fund's Adviser determines that the
credit
risk with respect to the instrumentality does not make its securities
unsuitable
for investment by the Fund.
Venture Capital Investments (Strategic Investors Fund). Strategic
Investors Fund may invest up to 5% of its total assets in venture capital
investments, that is, new and early stage companies whose securities are
not
publicly traded. Venture capital investments may present significant
opportunities for capital appreciation but involve a high degree of
business and
financial risk that can result in substantial losses. The disposition of
U.S.
venture capital investments, which may include limited partnership
interests,
normally would be restricted under Federal securities laws. Generally,
restricted securities may be sold only in privately negotiated transactions
or
in public offerings registered under the Securities Act of 1933, as
amended. The
Fund also may be subject to restrictions contained in the securities laws
of
other countries in disposing of portfolio securities. As a result of these
restrictions, the Fund may be unable to dispose of such investments at
times
when disposal is deemed appropriate due to investment or liquidity
considerations;
6
<PAGE> 7
alternatively, the Fund may be forced to dispose of such investments at
less
than fair market value. Where registration is required, the Fund may be
obligated to pay part or all of the expenses of such registration.
Lending of Portfolio Securities. Each Fund has the ability to lend
portfolio securities to brokers, dealers and other financial organizations.
These loans, if and when made, may not exceed 20% of a Fund's total assets
taken
at value. A Fund will not lend portfolio securities to Smith Barney unless
it
has applied for and received specific authority to do so from the SEC.
Loans of
portfolio securities will be collateralized by cash, letters of credit or
U.S.
government securities that are maintained at all times in a segregated
account
in an amount equal to 100% of the current market value of the loaned
securities.
From time to time, a Fund may pay a part of the interest earned from the
investment of collateral received for securities loaned to the borrower
and/or a
third party that is unaffiliated with the Fund and that is acting as a
"finder."
By lending its securities, a Fund can increase its income by
continuing to
receive interest on the loaned securities as well as by either investing
the
cash collateral in short-term instruments or obtaining yield in the form of
interest paid by the borrower when U.S. government securities are used as
collateral. A Fund will comply with the following conditions whenever its
portfolio securities are loaned: (a) the Fund must receive at least 100%
cash
collateral or equivalent securities from the borrower; (b) the borrower
must
increase such collateral whenever the market value of the securities loaned
rises above the level of such collateral; (c) the Fund must be able to
terminate
the loan at any time; (d) the Fund must receive reasonable interest on the
loan,
as well as any dividends, interest or other distribution on the loaned
securities, and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting
rights on
the loaned securities may pass to the borrower, provided, however, that if
a
material event adversely affecting the investment in the loaned securities
occurs, the Trust's Board of Trustees must terminate the loan and regain
the
right to vote the securities. The risks in lending portfolio securities, as
with
other extensions of secured credit, consist of a possible delay in
receiving
additional collateral or in the recovery of the securities or possible loss
of
rights in the collateral should the borrower fail financially. Loans will
be
made to firms deemed by each Fund's Adviser to be of good standing and will
not
be made unless, in its judgment, the consideration to be earned from such
loans
would justify the risk.
Options on Securities. The Funds may write covered call options and
enter
into closing transactions with respect thereto.
The principal reason for writing covered call options on securities is
to
attempt to realize, through the receipt of premiums, a greater return than
would
be realized on the securities alone. In return for a premium, the writer of
a
covered call option forfeits the right to any appreciation in the value of
the
underlying security above the strike price for the life of the option (or
until
a closing purchase transaction can be effected). Nevertheless, the call
writer
retains the risk of a decline in the price of the underlying security. The
size
of the premiums a Fund may receive may be adversely affected as new or
existing
institutions, including other investment companies, engage in or increase
their
option-writing activities.
Options written by the Funds normally will have expiration dates
between
one and nine months from the date they are written. The exercise price of
the
options may be below ("in-the-money"), equal to ("at-the-money"), or above
("out-of-the-money"), the market values of the underlying securities at the
times the options are written. A Fund may write (a) in-the-money call
options
when its Adviser expects that the price of the underlying security will
remain
flat or decline moderately during the option period, (b) at-the-money call
options when its Adviser expects that the price of the underlying security
will
remain flat or
7
<PAGE> 8
advance moderately during the option period and (c) out-of-the-money call
options when its Adviser expects that the price of the underlying security
may
increase but not above a price equal to the sum of the exercise price plus
the
premiums received from writing the call option. In any of the preceding
situations, if the market price of the underlying security declines and the
security is sold at this lower price, the amount of any realized loss will
be
offset wholly or in part by the premium received.
So long as the obligation of a Fund as the writer of an option
continues,
the Fund may be assigned an exercise notice by the broker-dealer through
which
the option was sold requiring the Fund to deliver the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. A Fund
can no
longer effect a closing purchase transaction with respect to an option once
it
has been assigned an exercise notice. To secure its obligation to deliver
the
underlying security when it writes a call option, a Fund will be required
to
deposit in escrow the underlying security or other assets in accordance
with the
rules of the Options Clearing Corporation (the "Clearing Corporation") and
of
the domestic securities exchange on which the option is written.
An option position may be closed out only where there exists a
secondary
market for an option of the same series on a securities exchange or in the
over-the-counter market. Strategic Investors Fund expects to write options
only
on domestic securities exchanges.
A Fund may realize a profit or loss upon entering into a closing
transaction. In cases in which a Fund has written an option, it will
realize a
profit if the cost of the closing purchase transaction is less than the
premium
received upon writing the original option and will incur a loss if the cost
of
the closing purchase transaction exceeds the premium received upon writing
the
original option.
Although Strategic Investors Fund generally will write only those
options
for which the Fund's Adviser believes there is an active secondary market
so as
to facilitate closing transactions, there is no assurance that sufficient
trading interest to create a liquid secondary market on a securities
exchange
will exist for any particular option or at any particular time, and for
some
options no such secondary market may exist. A liquid secondary market in an
option may cease to exist for a variety of reasons. In the past, for
example,
higher than anticipated trading activity or order flow, or other unforeseen
events, have at times rendered certain of the facilities of the Clearing
Corporation and the domestic securities exchanges inadequate and resulted
in the
institution of special procedures, such as trading rotations, restrictions
on
certain types of orders or trading halts or suspensions in one or more
options.
There can be no assurance that similar events, or events that otherwise may
interfere with the timely execution of customers' orders, will not recur.
In
such event, it might not be possible to effect closing transactions in
particular options. If, as a covered call option writer, a Fund is unable
to
effect a closing purchase transaction in a secondary market, it will not be
able
to sell the underlying security until the option expires or it delivers the
underlying security upon exercise.
Securities exchanges have established limitations governing the
maximum
number of calls and puts of each class that may be held or written, or
exercised
within certain time periods, by an investor or group of investors acting in
concert (regardless of whether the options are written on the same or
different
national securities exchanges or are held, written or exercised in one or
more
accounts or through one or more brokers). It is possible that the Funds and
other clients of their respective Advisers and certain of their affiliates
may
be considered to be such a group. A securities exchange may order the
liquidation of positions found to be in violation of these limits and it
may
impose certain other sanctions.
8
<PAGE> 9
In the case of options written by a Fund that are deemed covered by
virtue
of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which the Fund has
written options may exceed the time within which the Fund must make
delivery in
accordance with an exercise notice. In these instances, a Fund may purchase
or
temporarily borrow the underlying securities for purposes of physical
delivery.
By so doing, the Fund will not bear any market risk because the Fund will
have
the absolute right to receive from the issuer of the underlying securities
an
equal number of shares to replace the borrowed stock, but the Fund may
incur
additional transaction costs or interest expense in connection with any
such
purchase or borrowing.
Money Market Instruments. Subject to the restrictions noted in the
Prospectuses, the money market instruments in which the Funds may invest
are:
U.S. government securities; certificates of deposit ("CDs"), time deposits
("TDs") and bankers' acceptances issued by domestic banks (including their
branches located outside the United States and subsidiaries located in
Canada),
domestic branches of foreign banks, savings and loan associations and
similar
institutions; high grade commercial paper; and repurchase agreements with
respect to the foregoing types of instruments. The following is a more
detailed
description of such money market instruments.
Bank Obligations. CDs are short-term, negotiable obligations of
commercial
banks; TDs are non-negotiable deposits maintained in banking institutions
for
specified periods of time at stated interest rates; and bankers'
acceptances are
time drafts drawn on commercial banks by borrowers usually in connection
with
international transactions.
Domestic commercial banks organized under Federal law are supervised
and
examined by the Comptroller of the Currency and are required to be members
of
the Federal Reserve System and to be insured by the Federal Deposit
Insurance
Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state banks are
insured
by the FDIC (although such insurance may not be of material benefit to a
Fund,
depending upon the principal amount of CDs of each bank held by the Fund)
and
are subject to federal examination and to a substantial body of Federal law
and
regulation. As a result of governmental regulations, domestic branches of
domestic banks, among other things, generally are required to maintain
specified
levels of reserves, and are subject to other supervision and regulation
designed
to promote financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and
TDs, may
be general obligations of the parent bank in addition to the issuing
branch, or
may be limited by the terms of a specific obligation and governmental
regulations. Such obligations are subject to different risks than are those
of
domestic banks or domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign governmental
restrictions
that may adversely affect payment of principal and interest on the
obligations,
foreign exchange controls and foreign withholding and other taxes on
interest
income. Foreign branches of domestic banks are not necessarily subject to
the
same or similar regulatory requirements that apply to domestic banks, such
as
mandatory reserve requirements, loan limitations, and accounting, auditing
and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of domestic
banks are guaranteed as to repayment of principal and interest (but not as
to
sovereign risk) by the domestic parent bank.
9
<PAGE> 10
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and state
regulation as well as governmental action in the country in which the
foreign
bank has its head office. A domestic branch of a foreign bank with assets
in
excess of $1 billion may or may not be subject to reserve requirements
imposed
by the Federal Reserve System or by the state in which the branch is
located if
the branch is licensed in that state. In addition, branches licensed by the
Comptroller of the Currency and branches licensed by certain states ("State
Branches") may or may not be required to: (a) pledge to the regulator by
depositing assets with a designated bank within the state, an amount of its
assets equal to 5% of its total liabilities; and (b) maintain assets within
the
state in an amount equal to a specified percentage of the aggregate amount
of
liabilities of the foreign bank payable at or through all of its agencies
or
branches within the state. The deposits of State Branches may not
necessarily be
insured by the FDIC. In addition, there may be less publicly available
information about a domestic branch of a foreign bank than about a domestic
bank.
In view of the foregoing factors associated with the purchase of CDs
and
TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, each Fund's Adviser will carefully evaluate such investments
on a
case-by-case basis.
Savings and loan associations, the CDs of which may be purchased by
the
Funds, are supervised by the Office of Thrift Supervision and are insured
by the
Savings Association and Insurance Fund. As a result, such savings and loan
associations are subject to regulation and examination.
Commercial Paper. Commercial paper is a short-term, unsecured
negotiable
promissory note of a domestic or foreign company. A Fund may invest in
short-term debt obligations of issuers that at the time of purchase are
rated
A-2, A-1 or A-1+ by Standard & Poor's Corporation ("S&P") or Prime-2 or
Prime-1
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are issued
by
companies having an outstanding unsecured debt issue currently rated within
the
two highest ratings of S&P or Moody's. A discussion of S&P and Moody's
rating
categories appears in the Appendix to this Statement of Additional
Information.
A Fund also may invest in variable rate master demand notes, which
typically are
issued by large corporate borrowers providing for variable amounts of
principal
indebtedness and periodic adjustments in the interest rate according to the
terms of the instrument. Demand notes are direct lending arrangements
between
the Fund and an issuer, and are not normally traded in a secondary market.
A
Fund, however, may demand payment of principal and accrued interest at any
time.
In addition, while demand notes generally are not rated, their issuers must
satisfy the same criteria as those set forth above for issuers of
commercial
paper. Each Fund's Adviser will consider the earning power, cash flow and
other
liquidity ratios of issuers of demand notes and continually will monitor
their
financial ability to meet payment on demand.
Convertible Securities. The Funds may invest in convertible
securities.
Convertible securities are fixed-income securities that may be converted at
either a stated price or stated rate into underlying shares of common
stock.
Convertible securities have general characteristics similar to both fixed-
income
and equity securities. Although to a lesser extent than with fixed-income
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in
the
market value of the underlying common stocks and, therefore, also will
react to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly
10
<PAGE> 11
on a yield basis, and thus may not experience market value declines to the
same
extent as the underlying common stock. When the market price of the
underlying
common stock increases, the prices of the convertible securities tend to
rise as
a reflection of the value of the underlying common stock. While no
securities
investments are without risk, investments in convertible securities
generally
entail less risk than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments
that
provide for a stable stream of income with generally higher yields than
common
stocks. Of course, like all fixed-income securities, there can be no
assurance
of current income because the issuers of the convertible securities may
default
on their obligations. Convertible securities, however, generally offer
lower
interest or dividend yields than non-convertible securities of similar
quality
because of the potential for capital appreciation. A convertible security,
in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to
benefit
from increases in the market price of the underlying common stock. There
can be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds,
as
corporate debt obligations, enjoy seniority in right of payment to all
equity
securities, and convertible preferred stock is senior to common stock, of
the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible
securities.
Preferred Stock. The Funds may invest in preferred stocks. Preferred
stocks, like debt obligations, are generally fixed-income securities.
Shareholders of preferred stocks normally have the right to receive
dividends at
a fixed rate when and as declared by the issuer's board of directors, but
do not
participate in other amounts available for distribution by the issuing
corporation. Dividends on the preferred stock may be cumulative, and all
cumulative dividends usually must be paid prior to common stockholders
receiving
any dividends. Preferred stock dividends must be paid before common stock
dividends and for that reason preferred stocks generally entail less risk
than
common stocks. Upon liquidation, preferred stocks are entitled to a
specified
liquidation preference, which is generally the same as the par or stated
value,
and are senior in right of payment to common stock. Preferred stocks are,
however, equity securities in the sense that they do not represent a
liability
of the issuer and therefore do not offer as great a degree of protection of
capital or assurance of continued income as investments in corporate debt
securities. In addition, preferred stocks are subordinated in right of
payment
to all debt obligations and creditors of the issuer, and convertible
preferred
stocks may be subordinated to other preferred stock of the same issuer.
American, European and Continental Depositary Receipts. The assets of
Strategic Investors Fund may be invested in the securities of foreign
issuers in
the form of American Depositary Receipts ("ADRs") and European Depositary
Receipts ("EDRs"). These securities may not necessarily be denominated in
the
same currency as the securities into which they may be converted. ADRs are
U.S.
dollar-denominated receipts typically issued by a domestic bank or trust
company
that evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental
Depositary
Receipts ("CDRs"), are receipts issued in Europe typically by non-U.S.
banks and
trust companies that evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and CDRs in bearer form are designed for use in
European securities markets.
11
<PAGE> 12
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions for the
protection
of shareholders. Restrictions 1 through 8 below have been adopted by the
Trust
with respect to each Fund as fundamental policies. Under the 1940 Act, a
fundamental policy of a Fund may not be changed without the vote of a
majority
of the outstanding voting securities of the Fund, as defined in the 1940
Act.
Such majority is defined as the lesser of (a) 67% or more of the shares
present
at the meeting, if the holders of more than 50% of the outstanding shares
of the
Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares. Investment restrictions 9 through 18 may be changed by
vote
of a majority of the Trust's Board of Trustees at any time.
The investment policies adopted by the Trust prohibit a Fund from:
1. Purchasing the securities of any issuer (other than U.S.
government securities) if as a result more than 5% of the value of the
Fund's total assets would be invested in the securities of the issuer,
except that up to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Purchasing more than 10% of the voting securities of any one
issuer, or more than 10% of the securities of any class of any one
issuer;
provided that this limitation shall not apply to investments in U.S.
government securities.
3. Borrowing money, except that a Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the
meeting of
redemption requests that might otherwise require the untimely
disposition
of securities, in an amount not to exceed 10% of the value of the
Fund's
total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing
is made. Whenever borrowings exceed 5% of the value of the total
assets of
a Fund, the Fund will not make any additional investments.
4. Underwriting the securities of other issuers, except insofar
as
the Fund may be deemed an underwriter under the Securities Act of
1933, as
amended, by virtue of disposing of portfolio securities.
5. Purchasing or selling real estate or interests in real
estate,
except that the Fund may purchase and sell securities that are secured
by
real estate and may purchase securities issued by companies that
invest or
deal in real estate.
6. Investing in commodities, except that upon 60 days' notice
given
to its shareholders, Strategic Investors Fund may engage in hedging
transactions involving futures contracts and related options,
including
foreign and domestic stock index futures contracts and financial
futures
contracts.
7. Making loans to others, except through the purchase of
qualified
debt obligations, loans of portfolio securities and the entry into
repurchase agreements.
8. Purchasing any securities (other than U.S. government
securities)
which would cause more than 25% of the value of the Fund's total
assets at
the time of purchase to be invested in the securities of issuers
conducting
their principal business activities in the same industry.
9. Purchasing securities on margin. For purposes of this
restriction,
the deposit or payment of initial or variation margin in connection
with
futures contracts or related options will not be deemed to
12
<PAGE> 13
be a purchase of securities on margin by any Fund permitted to engage
in
transactions in futures contracts or related options.
10. Making short sales of securities or maintaining a short
position.
11. Pledging, hypothecating, mortgaging or otherwise encumbering
more
than 10% of the value of the Fund's total assets. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with
the
writing of covered call options and (b) collateral arrangements with
respect to (i) the purchase and sale of options on stock indexes and
(ii)
initial or variation margin for futures contracts, will not be deemed
to be
pledges of a Fund's assets.
12. Investing in oil, gas or other mineral exploration or
development
programs, except that the Fund may invest in the securities of
companies
that invest in or sponsor those programs.
13. Investing in securities of other investment companies
registered
or required to be registered under the 1940 Act, except as they may be
acquired as part of a merger, consolidation, reorganization,
acquisition of
assets or an offer of exchange.
14. Writing or selling puts, calls, straddles, spreads or
combinations thereof, except that (a) Strategic Investors Fund may
write
covered call options.
15. Purchasing restricted securities, illiquid securities (such
as
repurchase agreements with maturities in excess of seven days) or
other
securities that are not readily marketable if more than 10% of the
total
assets of the Fund would be invested in such securities.
16. Purchasing any security if as a result the Fund would then
have
more than 10% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
fewer
than three years.
17. Making investments for the purpose of exercising control or
management.
18. Purchasing or retaining securities of any company if, to the
knowledge of the Trust, any of a Fund's officers or Trustees of the
Trust
or any officer or director of an Adviser individually owns more than
1/2 of
1% of the outstanding securities of such company and together they own
beneficially more than 5% of such securities.
The Trust may make commitments more restrictive than the restrictions
listed above with respect to a Fund so as to permit the sale of shares of
the
Fund in certain states. Should the Trust determine that any such commitment
is
no longer in the best interests of a Fund and its shareholders, the Trust
will
revoke the commitment by terminating the sale of shares of the Fund in the
relevant state. The percentage limitations contained in the restrictions
listed
above apply at the time of purchases of securities.
PORTFOLIO TURNOVER
The Funds do not intend to seek profits through short-term trading.
Nevertheless, the Funds will not consider turnover rate a limiting factor
in
making investment decisions.
Under certain market conditions, a Fund may experience increased
portfolio
turnover as a result of its options activities. For instance, the exercise
of a
substantial number of options written by a Fund (due to appreciation of the
underlying security in the case of call options or depreciation of the
underlying security in the case of put options) could result in a turnover
rate
in excess of 100%. In addition, Strategic Investors Fund may experience
increased portfolio turnover as a result of the asset allocation strategy
that
it employs.
13
<PAGE> 14
The portfolio turnover rate of a Fund is calculated by dividing the lesser
of
purchases or sales of portfolio securities for the year by the monthly
average
value of portfolio securities. Securities with remaining maturities of one
year
or less on the date of acquisition are excluded from the calculation.
<TABLE>
For the fiscal years ended January 31, 1994 and 1993, the portfolio
turnover rates of the Funds were as follows:
<CAPTION>
1994
1993
----
- ----
<S> <C>
<C>
Strategic Investors Fund 131%
93%
Growth and Income Fund 79%
1%
</TABLE>
PORTFOLIO TRANSACTIONS
Most of the purchases and sales of securities for a Fund, whether
transacted on
a securities exchange or over the counter, will be effected in the primary
trading market for the securities. The primary trading market for a given
security generally is located in the country in which the issuer has its
principal office. Decisions to buy and sell securities for a Fund are made
by
its Adviser or sub-investment adviser, which also is responsible for
placing
these transactions, subject to the overall review of the Trust's Trustees.
Although investment decisions for each Fund are made independently from
those of
the other accounts managed by its Adviser, investments of the type the Fund
may
make also may be made by those other accounts. When a Fund and one or more
other
accounts managed by its Adviser are prepared to invest in, or desire to
dispose
of, the same security, available investments or opportunities for sales
will be
allocated in a manner believed by the Adviser to be equitable to each. In
some
cases, this procedure may adversely affect the price paid or received by a
Fund
or the size of the position obtained or disposed of by the Fund.
Transactions on domestic stock exchanges and some foreign stock
exchanges
involve the payment of negotiated brokerage commissions. On exchanges on
which
commissions are negotiated, the cost of transactions may vary among
different
brokers. On most foreign exchanges, commissions are generally fixed. There
is
generally no stated commission in the case of securities traded in domestic
or
foreign over-the-counter markets, but the prices of those securities
include
undisclosed commissions or mark-ups. The cost of securities purchased from
underwriters includes an underwriting commission or concession, and the
prices
at which securities are purchased from and sold to dealers include a
dealer's
mark-up or mark-down. U.S. government securities are generally purchased
from
underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the United States Treasury or
from the
issuing agency or instrumentality, respectively.
14
<PAGE> 15
<TABLE>
The following table sets forth certain information regarding each
Fund's
payment of brokerage commissions:
<CAPTION>
FISCAL YEAR
STRATEGIC
ENDED
INVESTORS GROWTH AND
JANUARY 31
FUND INCOME FUND
------------ -----
- ---- -----------
<S> <C>
<C> <C>
Total Brokerage Commissions 1992
$217,936 *
1993
258,626 30,915
1994
467,989 143,865
Commissions paid to 1992
62,521 *
Smith Barney or 1993
57,354 2,733
Shearson Lehman Brothers 1994
106,879 19,650
% of Total Brokerage
Commissions paid to
Smith Barney 1994
22.84% 13.66%
% of Total Transactions
involving Commissions paid
to Smith Barney 1994
25.99% 12.35%
<FN>
- ---------------
* The Fund commenced operations on November 6, 1992.
</TABLE>
The total brokerage commissions paid by the Funds for each fiscal year
vary
primarily due to increases or decreases in the Funds' volume of securities
transactions on which brokerage commissions are charged.
In selecting brokers or dealers to execute portfolio transactions on
behalf
of a Fund, the Fund's Adviser or sub-investment adviser seeks the best
overall
terms available. In assessing the best overall terms available for any
transaction, each Adviser or sub-investment adviser will consider the
factors
the Adviser or sub-investment adviser deems relevant, including the breadth
of
the market in the security, the price of the security, the financial
condition
and the execution capability of the broker or dealer and the reasonableness
of
the commission, if any, for the specific transaction and on a continuing
basis.
In addition, each advisory agreement between the Trust and an Adviser
relating
to a Fund authorizes the Adviser, in selecting brokers or dealers to
execute a
particular transaction and in evaluating the best overall terms available,
to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund,
the
other Funds and/or other accounts over which the Adviser or its affiliates
exercise investment discretion. The fees under the advisory agreements and
the
sub-investment advisory agreements relating to the Funds between the Trust
and
the Advisers and the sub-investment advisers, respectively, are not reduced
by
reason of their receiving such brokerage and research services. The Trust's
Board of Trustees periodically will review the commissions paid by the
Funds to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits inuring to the Funds.
To the extent consistent with applicable provisions of the 1940 Act
and the
rules and exemptions adopted by the SEC thereunder, the Board of Trustees
has
determined that transactions for a Fund may be
15
<PAGE> 16
executed through Smith Barney and other affiliated broker-dealers if, in
the
judgment of the Fund's Adviser, the use of such broker-dealer is likely to
result in price and execution at least as favorable as those of other
qualified
broker-dealers, and if, in the transaction, such broker-dealer charges the
Fund
a rate consistent with that charged to comparable unaffiliated customers in
similar transactions. In addition, under rules recently adopted by the SEC,
Smith Barney may directly execute such transactions for the Funds on the
floor
of any national securities exchange, provided (a) the Board of Trustees has
expressly authorized Smith Barney to effect such transactions, and (b)
Smith
Barney annually advises the Trust of the aggregate compensation it earned
on
such transactions. Over-the-counter purchases and sales are transacted
directly
with principal market makers except in those cases in which better prices
and
executions may be obtained elsewhere.
The Funds will not purchase any security, including U.S. government
securities, during the existence of any underwriting or selling group
relating
thereto of which Smith Barney is a member, except to the extent permitted
by the
SEC.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the
Prospectuses
applies to purchases made by any "purchaser," which is defined to include
the
following: (a) an individual; (b) an individual's spouse and his or her
children
purchasing shares for his or her own account; (c) a trustee or other
fiduciary
purchasing shares for a single trust estate or single fiduciary account;
(d) a
pension, profit-sharing or other employee benefit plan qualified under
Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and
qualified employee benefit plans of employers who are "affiliated persons"
of
each other within the meaning of the 1940 Act; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Code; and (f) a trustee or
other
professional fiduciary (including a bank, or an investment adviser
registered
with the SEC under the Investment Advisers Act of 1940, as amended)
purchasing
shares of a Fund for one or more trust estates or fiduciary accounts.
Purchasers
who wish to combine purchase orders to take advantage of volume discounts
on
Class A shares should contact a Smith Barney Financial Consultant.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedules in the
Prospectuses,
apply to any purchase of Class A shares if the aggregate investment in
Class A
shares of any Fund and in Class A shares of other funds of the Smith Barney
Mutual Funds that are offered with an initial sales charge, including the
purchase being made, of any purchaser is $25,000 or more. The reduced sales
charge is subject to confirmation of the shareholder's holdings through a
check
of appropriate records. The Trust reserves the right to terminate or amend
the
combined right of accumulation at any time after notice to shareholders.
For
further information regarding the right of accumulation, shareholders
should
contact a Smith Barney Financial Consultant.
DETERMINATION OF PUBLIC OFFERING PRICE
The Trust offers shares of the Funds to the public on a continuous basis.
The
public offering price for Class A shares of the Funds is equal to the net
asset
value per share at the time of purchase, plus for Class A shares
16
<PAGE> 17
a sales charge based on the aggregate amount of the investment. The public
offering price for Class B,
Class C, Class Y and Class Z shares of a Fund (and Class A share purchases,
including applicable right of accumulation, equalling or exceeding
$500,000), is
equal to the net asset value per share at the time of purchase and no sales
charge is imposed at the time of purchase. A contingent deferred sales
charge
("CDSC"), however, is imposed on certain redemptions of Class B and Class C
shares, and Class A shares when purchased in amounts equalling or exceeding
$500,000. The method of computation of the public offering price is shown
in the
Funds' financial statements, which are incorporated by reference in their
entirety into this Statement of Additional Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed
(a)
for any period during which the New York Stock Exchange, Inc. ("NYSE") is
closed
(other than for customary weekend and holiday closings), (b) when trading
in
markets the Fund normally utilizes is restricted, or an emergency exists,
as
determined by the SEC, so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable or (c)
for
such other periods as the SEC by order may permit for protection of the
Fund's
shareholders.
DISTRIBUTIONS IN KIND
If the Trust's Board of Trustees determines that it would be detrimental to
the
best interests of the remaining shareholders of a Fund to make a redemption
payment wholly in cash, the Fund may pay, in accordance with rules adopted
by
the SEC, any portion of a redemption in excess of the lesser of $250,000 or
1.00% of its net assets by distribution in kind of portfolio securities in
lieu
of cash. Portfolio securities issued in a distribution in kind will be
readily
marketable, although shareholders receiving distributions in kind may incur
brokerage commissions when subsequently disposing of those securities.
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares with a value of at least $10,000 and who wish
to
receive specific amounts of cash monthly or quarterly. Withdrawals of at
least
$100 monthly may be made under the Withdrawal Plan by redeeming as many
shares
of the Funds as may be necessary to cover the stipulated withdrawal
payment. Any
applicable CDSC will not be waived on amounts withdrawn by shareholders
that
exceed 1.00% per month of the value of a shareholder's shares at the time
the
Withdrawal Plan commences. (With respect to Withdrawal Plans in effect
prior to
November 7, 1994, any applicable CDSC waived on amounts withdrawn that do
not
exceed 2.00% per month of the value of a shareholder's shares at the time
the
Withdrawal Plan commences.) To the extent withdrawals exceed dividends,
distributions and appreciation of the shareholder's investment in a Fund,
there
will be a reduction in the value of the shareholder's investment, and
continued
withdrawal payments will reduce the shareholder's investment and may
ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in a Fund. Furthermore, as it would not generally be
advantageous to
a shareholder to make additional investments in a Fund at the same time
that he
or she is participating in the Withdrawal Plan, purchases by such
shareholders
in amounts of less than $5,000 ordinarily will not be permitted.
17
<PAGE> 18
Shareholders who wish to participate in the Withdrawal Plan and who
hold
their shares in certificate form must deposit their share certificates with
The
Shareholder Services Group, Inc. ("TSSG") as agent for Withdrawal Plan
members.
All dividends and distributions on shares in the Withdrawal Plan are
automatically reinvested at net asset value in additional shares of a Fund.
Effective November 7, 1994, Withdrawal Plans should be set up with any
Smith
Barney Financial Consultant. A shareholder who purchases shares directly
through
TSSG may continue to do so and applications for participation in the
Withdrawal
Plan must be received by TSSG no later than the eighth day of the month to
be
eligible for participation beginning with that month's withdrawal. For
additional information, shareholders should contact a Smith Barney
Financial
Consultant.
DISTRIBUTOR
Shares of the Trust are distributed on a best efforts basis by Smith
Barney
as exclusive sales agent of the Trust pursuant to a written agreement (the
"Distribution Agreement").
When payment is made by the investor before settlement date, unless
otherwise noted by the investor, the funds will be held as a free credit
balance
in the investor's brokerage account and Smith Barney may benefit from the
temporary use of the Funds. The investor may designate another use for the
funds
prior to settlement date, such as an investment in a money market fund
(other
than Smith Barney Exchange Reserve Fund) of the Smith Barney Mutual Funds.
If
the investor instructs Smith Barney to invest the funds in a Fund of the
Smith
Barney Mutual Funds, the amount of the investment will be included as part
of
the average daily net assets of both the Fund and the Smith Barney money
market
fund, and affiliates of Smith Barney that serve the funds in an investment
advisory or administrative capacity will benefit by receiving investment
management fees from both such investment companies, computed on the basis
of
their average daily net assets. The Trust's Board of Trustees has been
advised
of the benefits to Smith Barney resulting from these settlement procedures
and
will take such benefits into consideration when reviewing the Advisory,
Administration and Distribution Agreements for continuance.
DISTRIBUTIONS ARRANGEMENTS
To compensate Smith Barney for the services it provides and for the expense
it
bears under the Distribution Agreement, the Trust has adopted a services
and
distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act.
Under
the Plan, the Trust pays Smith Barney with respect to each Fund a service
fee,
accrued daily and paid monthly, calculated at the annual rate of 0.25% of
the
value of the Fund's average daily net assets attributable to the Fund's
Class A,
Class B and Class C shares. In addition, the Trust pays Smith Barney a
distribution fee with respect to each Fund's Class B and Class C shares
primarily intended to compensate Smith Barney for its initial expense of
paying
its Financial Consultants a commission upon sales of those shares. The
Class B
and Class C distribution fee is calculated at the annual rate of .75% of
the
value of a Fund's average net assets attributable to the shares of that
Class.
During the fiscal years ended January 31, 1992, 1993 and 1994, the
Trust
incurred $5,898,000, $5,808,234 and $6,380,987, respectively, in
distribution
fees from Class B shares of the Trust under the Plan. For the fiscal year
ended
January 31, 1994, the Trust incurred $2,015 in distribution fees under the
Plan
from Class C shares. For the 1992, 1993 and 1994 fiscal years, the Trust
incurred $762,855, $838,080 and $868,000, respectively, representing a CDSC
on
redemptions of Class B shares of the Trust. For the fiscal year ended
January
31, 1994, the distribution expenses incurred by Smith Barney and its
predecessor,
18
<PAGE> 19
Shearson Lehman Brothers on Class B and Class C shares totaled
approximately
$10,075,000, consisting of approximately $54,000 for advertising, $72,000
for
printing and mailing of Prospectuses, $718,000 for support services,
$3,789,000
to Smith Barney Financial Consultants and $5,442,000 in accruals for
interest on
the excess of Smith Barney Shearson's expenses incurred in distributing the
Trust's shares over the sum of the distribution fees and CDSC received by
Smith
Barney from the Trust.
Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the Trust's Board of Trustees,
including a majority of the Independent Trustees who have no direct or
indirect
financial interest in the operation of the Plan or in the Distribution
Agreement. The Plan may not be amended to increase the amount of the
service and
distribution fees without shareholder approval, and all material amendments
of
the Plan also must be approved by the Trustees and such Independent
Trustees in
the manner described above. The Plan may be terminated with respect to a
Class
at any time, without penalty, by vote of a majority of such Independent
Trustees
or by a vote of a majority of the outstanding voting securities of the
Class (as
defined in the 1940 Act). Pursuant to the Plan, Smith Barney will provide
the
Trust's Board of Trustees with periodic reports of amounts expended under
the
Plan and the purpose for which such expenditures were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through
Friday, except days on which the NYSE is closed. The NYSE currently is
scheduled
to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding
Friday or subsequent Monday when one of these holidays falls on a Saturday
or
Sunday, respectively. Because of the differences in distribution fees and
Class-specific expenses, the per share net asset value of each Class may
differ.
The following is a description of the procedures used by the Trust in
valuing
assets of the Funds.
A security that is listed or traded on more than one exchange is
valued at
the quotation on the exchange determined to be the primary market for such
security. All assets and liabilities initially expressed in foreign
currency
values will be converted into U.S. dollar values at the mean between the
bid and
offered quotations of such currencies against U.S. dollars as last quoted
by any
recognized dealer. If such quotations are not available, the rate of
exchange
will be determined in good faith by the Trust's Board of Trustees. In
carrying
out the Board's valuation policies, SBMFM, as administrator, may consult
with an
independent pricing service (the "Pricing Service") retained by the Trust.
Debt securities of domestic issuers (other than U.S. government
securities
and short-term investments) are valued by SBMFM, as administrator, after
consultation with the Pricing Service approved by the Trust's Board of
Trustees.
When, in the judgment of the Pricing Service, quoted bid prices for
investments
are readily available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid prices and
asked
prices. Investments for which, in the judgment of the Pricing Service,
there are
no readily obtainable market quotations are carried at fair value as
determined
by the Pricing Service. The procedures of the Pricing Service are reviewed
periodically by the officers of the Funds under the general supervision and
responsibility of the Trust's Board of Trustees.
19
<PAGE> 20
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund of the Smith Barney Mutual
Funds
may exchange all or part of their shares for shares of the same class of
other
funds of the Smith Barney Mutual Funds, to the extent such shares are
offered
for sale in the shareholder's state of residence, on the basis of relative
net
asset value per share at the time of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may
be
exchanged for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied. Class A shares of any
fund
may be exchanged without a sales charge for shares of the funds that
are
offered without a sales charge. Class A shares of any fund purchased
without a sales charge may be exchanged for shares sold with a sales
charge, and the appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of
shares purchased with a sales charge may be exchanged for Class A
shares of
any of the other funds, and the sales charge differential, if any,
will be
applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of a Fund exchanged for Class B shares of
another
fund will be subject to the higher applicable CDSC of the two funds
and,
for purposes of calculating CDSC rates and conversion periods, will be
deemed to have been held since the date the shares being exchanged
were
deemed to be purchased.
Dealers other than Smith Barney must notify TSSG of the investor's
prior
ownership of Class A shares of Smith Barney High Income Fund and the
account
number in order to accomplish an exchange of shares of High Income Fund
under
paragraph B above.
The exchange privilege enables shareholders to acquire shares of the
same
Class in a fund with different investment objectives when they believe that
a
shift between funds is an appropriate investment decision. This privilege
is
available to shareholders residing in any state in which the fund shares
being
acquired may legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund into which
an
exchange is being considered. Prospectuses may be obtained from a Smith
Barney
Financial Consultant.
Upon receipt of proper instructions and all necessary supporting
documents,
shares submitted for exchange are redeemed at the then-current net asset
value
and, subject to any applicable CDSC, the proceeds immediately invested, at
a
price as described above, in shares of the fund being acquired. Smith
Barney
reserves the right to reject any exchange request. The exchange privilege
may be
modified or terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Trust may quote total return of the Classes of the
various Funds in advertisements or in reports and other communications to
shareholders. The Fund may include comparative performance information in
advertising or marketing the Fund's shares. Such performance information
may
include the following industry and financial publications: Barron's,
Business
Week, CDA Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money, Morningstar Mutual Fund
Values,
The New York Times, USA Today and The Wall Street Journal. To the extent
any
20
<PAGE> 21
advertisement or sales literature of the Funds describes the expenses or
performance of Class A, Class B, Class C or Class Y, it will also disclose
such
information for the other Classes.
<TABLE>
AVERAGE ANNUAL TOTAL RETURN
"Average annual total return" figures are computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
<S> <C> <C> <C>
P(1+T)n = ERV
Where: P = a hypothetical initial payment of
$1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000 payment
made at the beginning of the 1-, 5-or
10-year period at the
end of the 1-, 5- or 10-year period
(or fractional portion thereof),
assuming reinvestment of all dividends
and distributions.
</TABLE>
<TABLE>
The average annual total returns of the Funds' Class A shares were as
follows for the periods indicated:
Class A Shares:
<CAPTION>
PER ANNUM
FOR THE PERIOD
FROM COMMENCEMENT OF
ONE YEAR PERIOD
OPERATIONS* THROUGH
NAME OF FUND ENDED 1/31/94
1/31/94
- ------------------------------------------------------ ---------------
- ---------------------
<S> <C>
<C>
Strategic Investors................................... 11.91%
14.95%
Growth and Income..................................... 5.16
4.88
<FN>
- ---------------
*The Funds commenced selling Class A shares on November 6, 1992.
</TABLE>
<TABLE>
The average annual total returns of the Funds' Class B shares were as
follows for the periods indicated:
Class B Shares:
<CAPTION>
PER ANNUM
FOR THE
PER ANNUM
FIVE YEAR
FOR THE PERIOD
ONE YEAR PERIOD
FROM COMMENCEMENT
PERIOD ENDED ENDED
OF OPERATIONS THROUGH
NAME OF FUND 1/31/94 1/31/94
1/31/94
- ------------------------------------------ ---------------- ----------
- ---------------------
<S> <C> <C>
<C>
Strategic Investors(1).................... 11.88% 12.59%
11.05%
Growth and Income(2)...................... 5.01 --
5.59
<FN>
- ---------------
(1) Fund commenced operations on February 2, 1987.
(2) Fund commenced operations on November 6, 1992.
</TABLE>
21
<PAGE> 22
<TABLE>
The average annual total return of the Class C shares of the Strategic
Investors Fund was as follows for the period indicated:
Class C Shares:
<CAPTION>
ONE YEAR
PERIOD* ENDED
NAME OF FUND
1/31/94
- ---------------------------------------------------------------------------
- ---- -------------
<S>
<C>
Strategic
Investors............................................................
11.83%
<FN>
- ---------------
* The Fund commenced selling Class C shares (previously designated as Class
D shares) on January 29, 1993.
Average annual total return figures calculated in accordance with the
above
formula assume that the maximum 5% sales charge or maximum CDSC, as the
case may
be, has been deducted from the hypothetical investment. A Fund's net
investment
income changes in response to fluctuations in interest rates and the
expenses of the Fund.
</TABLE>
<TABLE>
AGGREGATE TOTAL RETURN
"Aggregate total return" figures represent the cumulative change in the
value of
an investment in the Class for the specified period and are computed by the
following formula:
<S> <C> <C>
ERV-P
------
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000
investment made at the
beginning of the 1-, 5-or 10-year period at the end of
the 1-, 5-or
10-year period (or fractional portion thereof),
assuming reinvestment of
all dividends and distributions.
</TABLE>
<TABLE>
The aggregate total returns (with fees waived) of the Class B shares
were
as follows for the periods indicated:
<CAPTION> NO LOAD
LOAD
-------------------------------------------------
- --------------------
PERIOD FROM
PERIOD FROM
COMMENCEMENT
FIVE COMMENCEMENT
ONE YEAR FIVE YEAR OF ONE YEAR
YEAR OF
PERIOD PERIOD OPERATIONS PERIOD
PERIOD OPERATIONS
ENDED ENDED THROUGH ENDED
ENDED THROUGH
7/31/94* 1/31/94* 1/31/94* 7/31/94**
1/31/94** 1/31/94**
<S> <C> <C> <C> <C>
<C> <C>
NAME OF FUND
- --------------------------
Strategic Investors(1).... 16.88% 81.89% 108.18% 11.88%
80.89% 108.18%
Growth and Income(2)...... 10.01 -- 10.94 5.01
- -- 6.94\
<FN>
- ---------------
* Figures do not include the effect of the maximum sales charge or
maximum
applicable CDSC. If they had been included, it would have had the
effect of
lowering the returns shown.
** Figures include the effect of the maximum sales charge or maximum
applicable
CDSC.
(1) The Fund commenced operations on February 2, 1987.
(2) The Fund commenced operations on November 6, 1992.
</TABLE>
22
<PAGE> 23
<TABLE>
The aggregate total returns (with fees waived) of the Class A and
Class C
shares of the Funds were as follows for the periods indicated:
<CAPTION>
NO
LOAD
------
- - LOAD
PERIOD
FROM ----
NO LOAD LOAD
COMMENCEMENT PERIOD FROM
------- ---- OF
COMMENCEMENT
ONE YEAR ONE YEAR
OPERATIONS* OF OPERATIONS*
PERIOD ENDED PERIOD ENDED
THROUGH THROUGH
1/31/94* 1/31/94**
1/31/94* 1/31/94**
<S> <C> <C> <C>
<C>
NAME OF FUND
- ------------------------------
Strategic Investors
Class A+................. 17.80% 11.91%
25.00% 18.75%
Class C++................ 11.83 10.83 --
- --
Growth and Income
Class A+................. 10.70 5.16
11.63 6.05
<FN>
- ---------------
* Figures do not include the effect of the maximum sales charge or maximum
applicable CDSC. If they had been included, it would have had the effect
of
lowering the returns shown.
** Figures include the effect of the maximum sales charge or maximum
applicable
CDSC.
+ The Fund commenced selling Class A shares on November 6, 1992.
++ The Fund commenced selling Class C shares (previously designated as
Class D
shares) on January 29, 1993.
</TABLE>
It is important to note that the total return figures set forth above
are
based on historical earnings and are not intended to indicate future
performance.
A Class' performance will vary from time to time depending on market
conditions, the composition of the relevant Fund's portfolio and operating
expenses and the expenses exclusively attributable to that Class.
Consequently,
any given performance quotation should not be considered representative of
the
Class' performance for any specified period in the future. Because
performance
will vary, it may not provide a basis for comparing an investment in the
Class
with certain bank deposits or other investments that pay a fixed yield for
a
stated period of time. Investors comparing the Class' performance with that
of
other mutual funds should give consideration to the quality and maturity of
the
respective investment companies' portfolio securities.
TAXES
Set forth below is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders. The summary is not
intended as a substitute for individual tax advice, and investors are urged
to
consult their tax advisors with specific reference to their own Federal,
state
or local tax situations.
TAX STATUS OF THE FUNDS
Each Fund will be treated as a separate taxable entity for Federal income
tax
purposes with the result that: (a) each Fund must meet separately the
income and
distribution requirements for qualification as a regulated investment
company
and (b) the amounts of investment income and capital gains earned will be
determined on a Fund-by-Fund (rather than on a Trust-wide) basis.
TAXATION OF SHAREHOLDERS
Dividends paid by a Fund from investment income and distributions of short-
term
capital gains will be taxable to shareholders as ordinary income for
Federal
income tax purposes, whether received in cash or
23
<PAGE> 24
reinvested in additional shares. Distributions of long-term capital gains
will
be taxable to shareholders as long-term capital gains, whether paid in cash
or
reinvested in additional shares, and regardless of the length of time the
investor has held his or her shares of the Fund.
Dividends of investment income (but not capital gains) from any Fund
generally will qualify for the Federal dividends-received deduction for
corporate shareholders to the extent such dividends do not exceed the
aggregate
amount of dividends received by the Fund from domestic corporations. If
securities held by a Fund are considered to be "debt-financed" (generally,
acquired with borrowed funds), are held by the Fund for less than 46 days
(91
days in the case of certain preferred stock), or are subject to certain
forms of
hedges or short sales, the portion of the dividends paid by the Fund that
corresponds to the dividends paid with respect to such securities will not
be
eligible for the corporate dividends-received deduction.
If a shareholder (a) incurs a sales charge in acquiring shares of a
Fund,
(b) disposes of those shares within 90 days and (c) acquires shares in a
mutual
fund for which the otherwise applicable sales charge is reduced by reason
of a
reinvestment right (that is, an exchange privilege), the sales charge
increases
the shareholder's tax basis in the original shares only to the extent the
otherwise applicable sales charge for the second acquisition is not
reduced. The
portion of the original sales charge that does not increase the
shareholder's
tax basis in the original shares would be treated as incurred with respect
to
the second acquisition and, as a general rule, would increase the
shareholder's
tax basis in the newly acquired shares. Furthermore, the same rule also
applies
to a disposition of the newly acquired or redeemed shares made within 90
days of
the second acquisition. This provision prevents a shareholder from
immediately
deducting the sales charge by shifting his or her investment in a family of
mutual funds.
Capital Gains Distribution. In general, a shareholder who redeems or
exchanges his or her shares will recognize long-term capital gain or loss
if the
shares have been held for more than one year, and will recognize short-term
capital gain or loss if the shares have been held for one year or less. If
a
shareholder receives a distribution taxable as long-term capital gain with
respect to shares of a Fund and redeems or exchanges the shares before he
or she
has held them for more than six months, any loss on such redemption or
exchange
that is less than or equal to the amount of the distribution will be
treated as
long-term capital loss.
Backup Withholding. If a shareholder fails to furnish a correct
taxpayer
identification number, fails to fully report dividend and interest income,
or
fails to certify that he or she has provided a correct taxpayer
identification
number and that he or she is not subject to withholding, then the
shareholder
may be subject to a 31% Federal backup withholding tax with respect to (a)
any
dividends and distributions and (b) any proceeds of any redemptions or
exchanges. An individual's taxpayer identification number is his or her
social
security number. The backup withholding tax is not an additional tax and
may be
credited against a shareholder's regular Federal income tax liability.
REGULATED INVESTMENT COMPANY STATUS
Each Fund intends to continue to qualify in subsequent years as a regulated
investment company within the meaning of Section 851 of the Code. The Trust
will
monitor each Fund's investments so as to meet the requirements for
qualification
on a continuing basis.
As a regulated investment company, a Fund will not be subject to
Federal
income tax on the net investment income and net capital gains, if any, that
it
distributes to its shareholders, provided that at least
24
<PAGE> 25
90% of the sum of investment income and short-term capital gains is
distributed
to its shareholders. All net investment income and net capital gains earned
by a
Fund will be reinvested automatically in additional shares of the Fund,
unless
the shareholder elects to receive dividends and distributions in cash.
Amounts
reinvested in additional shares will be considered to have been distributed
to
shareholders.
To qualify as a regulated investment company, each Fund must meet
certain
requirements set forth in the Code. One requirement is that each Fund must
earn
at least 90% of its gross income from (a) interest, (b) dividends, (c)
payments
with respect to securities loans, (d) gains from the sale or other
disposition
of stock or securities or foreign currencies and (e) other income
(including but
not limited to gains from options, futures, or forward contracts) derived
with
respect to its business of investing in such stock, securities, or
currencies
(the "90% Test"). An additional requirement is that each Fund must earn
less
than 30% of its gross income from the sale or other disposition of stock or
securities held for less than three months (the "30% Test"). Legislation
currently pending before the U.S. Congress would repeal the 30% Test.
However,
it is impractical at this time to predict whether this legislation will
become
law and, if it is so enacted, what form it will eventually take.
Each Fund will invest in a combination of common stock, preferred
stock,
notes and bonds and will earn interest and dividend income, gains from the
sale
of such securities, and income from repurchase agreements entered into with
respect to such securities, all of which generally would be considered to
be
qualified income under the 90% Test. Each Fund generally will hold its
investments longer than three months and therefore should not risk
disqualification under the 30% Test. Depending upon the circumstances,
however,
a Fund may be limited in the extent to which it may: (a) sell securities
held
for less than three months; (b) effect short sales of securities that are
identical (or substantially identical) to securities held by it for less
than
three months; (c) write options that expire in less than three months; and
(d)
effect closing transactions with respect to call or put options that have
been
written or purchased within the preceding three months. A Fund's gain or
loss
from the sale (including open short sales) or other dispositions of stock
or
securities (with the term "securities" defined to include put and call
options)
held for less than three months will be netted against its gain or loss on
positions that are part of a "designated hedge" with respect to such three-
month
investments.
TAXATION OF FUND INVESTMENTS
Gain or loss on the sale of a security by a Fund generally will be long-
term
capital gain or loss if the Fund has held the security for more than one
year.
Gain or loss on the sale of a security held for not more than one year
generally
will be short-term capital gain or loss. If a Fund acquires a debt security
at a
substantial discount, a portion of any gain upon sale or redemption of such
debt
security will be taxed as ordinary income rather than capital gain to the
extent
it reflects accrued market discount.
Options Transactions. The tax consequences of options transactions
entered
into by a Fund will vary depending on whether the underlying security is
held as
a capital asset, whether the Fund is writing or purchasing the option and
whether the "straddle" rules, discussed separately below, apply to the
transaction.
A Fund may write a call option on an equity or convertible debt
security.
If the option expires unexercised or if the Fund enters into a closing
purchase
transaction, the Fund will realize a gain or loss without regard to any
unrealized gain or loss on the underlying security. Generally, any such
gain or
loss will be short-term capital gain or loss, except that any loss on
certain
covered call stock options will be treated
25
<PAGE> 26
as long-term capital loss. If a call option written by a Fund is exercised,
the
Fund will treat the premium received for writing such call option as
additional
sales proceeds and will recognize a capital gain or loss from the sale of
the
underlying security. Whether the gain or loss will be long-term or short-
term
will depend on the Fund's holding period for the underlying security.
If a Fund purchases a put option on an equity or convertible debt
security
and it expires unexercised, the Fund will realize a capital loss equal to
the
cost of the option. If a Fund enters into a closing sale transaction with
respect to the option, it will realize a capital gain or loss and such gain
or
loss will be short-term or long-term depending on the Fund's holding period
for
the option. If a Fund exercises such a put option, it will realize a short-
term
or long-term capital gain or loss (depending on the Fund's holding period
for
the underlying security) from the sale of the underlying security. The
amount
realized on such sale will be the sales proceeds reduced by the premium
paid.
Mark-to-Market. The Code imposes a special "mark-to-market" system
for
taxing "Section 1256 contracts" including options on nonconvertible debt
securities (including U.S. government securities), options on certain stock
indexes and certain foreign currency contracts. In general, gain or loss on
Section 1256 contracts will be taken into account for tax purposes when
actually
realized (by a closing transaction, by exercise, by taking delivery or by
other
termination). In addition, any Section 1256 contracts held at the end of
the
taxable year will be treated as though they were sold at their year-end
fair
market value (that is, "marked to market"), and the resulting gain or loss
will
be recognized for tax purposes. Provided that a Fund holds its Section 1256
contracts as capital assets and they are not part of a straddle, both the
realized and the unrealized year-end gains or losses from these investment
positions (including premiums on options that expire unexercised) will be
treated as 60% long-term and 40% short-term capital gain or loss,
regardless of
the period of time particular positions have actually been held by a Fund.
A portion of the mark-to-market gain on instruments held for less than
three months at the close of a Fund's taxable year may represent a gain on
securities held for less than three months for purposes of the 30% Test
discussed above. Accordingly, the Funds may restrict their fourth-quarter
transactions in Section 1256 contracts.
Straddles. The Code contains rules applicable to "straddles," which
are
"offsetting positions in actively traded personal property," including
equity
securities and options of the type in which a Fund may invest. If
applicable,
the "straddle" rules generally override the other provisions of the Code.
In
general, investment positions will be offsetting if there is a substantial
diminution in the risk of loss from holding one position by reason of
holding
one or more other positions. The Funds generally are authorized to enter
into
put, call, and covered put and call positions. Depending on what other
investments are held by a Fund at the time it enters into one of the above
transactions, a Fund may create a straddle for Federal income tax purposes.
If two (or more) positions constitute a straddle, recognition of a
realized
loss from one position (including a mark-to-market loss) must be deferred
to the
extent of unrecognized gain in an offsetting position. Interest and other
carrying charges allocable to personal property that is part of a straddle
must
be capitalized. In addition, "wash sale" rules apply to straddle
transactions to
prevent the recognition of loss from the sale of a position at a loss when
a new
offsetting position is or has been acquired within a prescribed period. To
the
extent the straddle rules apply to positions established by a Fund, losses
realized by the Fund may be deferred or recharacterized as long-term
losses, and
long-term gains realized by the Fund may be converted to short-term gains.
26
<PAGE> 27
If a Fund chooses to identify a particular offsetting position as
being one
component of a straddle, a realized loss on any component of that straddle
will
be recognized no earlier than upon the liquidation of all components of
that
straddle. Special rules apply to "mixed" straddles (that is, straddles
consisting of a Section 1256 contract and an offsetting position that is
not a
Section 1256 contract). If the Trust makes certain elections, all or a
portion
of the Section 1256 contract components of such mixed straddles of a Fund
will
not be subject to the 60%/40% mark-to-market rules. If any such election is
made, the amount, the nature (as long-term or short-term) and the timing of
the
recognition of the Fund's gains or losses from the effected straddle
positions
will be determined under rules that will vary according to the type of
election
made.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust under the laws
of
The Commonwealth of Massachusetts pursuant to a Master Trust Agreement
dated
January 8, 1986, as amended from time to time (the "Trust Agreement"). The
Trust
commenced business as an investment company on March 3, 1986, under the
name
Shearson Lehman Special Equity Portfolios. On December 6, 1988, August 27,
1990,
November 5, 1992, July 30, 1993 and October 14, 1994, the Trust changed its
name
to SLH Equity Portfolios, Shearson Lehman Brothers Equity Portfolios,
Shearson
Lehman Brothers Equity Funds, Smith Barney Shearson Equity Funds and Smith
Barney Equity Funds, respectively.
Boston Safe Deposit and Trust Company ("Boston Safe"), an indirect
wholly
owned subsidiary of Mellon, is located at One Boston Place, Boston,
Massachusetts 02108, and serves as custodian for the Funds. Under its
custodial
agreement with the Trust, Boston Safe is authorized to appoint one or more
foreign or domestic banking institutions as sub-custodians of assets owned
by a
Fund. For its custody services, Boston Safe receives monthly fees charged
to
each Fund based upon the month-end, aggregate net asset value of the Fund,
plus
certain charges for securities transactions. The assets of the Trust are
held
under bank custodianship in accordance with the 1940 Act.
TSSG, a subsidiary of First Data Corporation, is located at Exchange
Place,
Boston, Massachusetts 02109, and serves as the Trust's transfer agent. For
its
services as transfer agent, TSSG receives fees charged to the Funds at an
annual
rate based upon the number of shareholder accounts maintained during the
year.
TSSG also is reimbursed by the Funds for its out-of-pocket expenses.
FINANCIAL STATEMENTS
The Funds' Semi-Annual and Annual Reports for the semi-annual period ended
July
31, 1994 and the fiscal year ended January 31, 1994 are incorporated into
this
Statement of Additional Information by reference in their entirety.
27
<PAGE> 28
APPENDIX
DESCRIPTION OF S&P AND MOODY'S RATINGS
DESCRIPTION OF S&P CORPORATE BOND RATINGS:
AAA--Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely
strong.
AA--Bonds rated AA have a very strong capacity to pay interest and
repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal
although they are somewhat more susceptible to the adverse effects of
changes in
circumstances and economic conditions than bonds in higher rated
categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to
pay
interest and repay principal. Whereas they normally exhibit adequate
protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for
bonds in this category than for bonds in higher rated categories.
BB, B AND CCC--Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay
principal in accordance with the terms of the obligation. BB represents a
lower
degree of speculation than B and CCC the highest degree of speculation.
While
such bonds will likely have some quality and protective characteristics,
these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to
as
"gilt-edge." Interest payments are protected by a large or by an
exceptionally
stable margin and principal is secure. While the various protective
elements are
likely to change, such changes as can be visualized are most unlikely to
impair
the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as
high grade bonds. They are rated lower than the best bonds because margins
of
protection may not be as large as in Aaa securities or fluctuation of
protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment
attributes and
are to be considered as upper medium grade obligations. Factors giving
security
to principal and interest are considered adequate but elements may be
present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade
obligations,
that is, they are neither highly protected nor poorly secured. Interest
payments
and principal security appear adequate for the present but certain
protective
elements may be lacking or may be characteristically unreliable over any
great
28
<PAGE> 29
length of time. Such bonds lack outstanding investment characteristics and
in
fact have speculative characteristics as well.
BA--Bonds which are rated Ba are judged to have speculative elements;
their
future cannot be considered as well assured. Often the protection of
interest
and principal payments may be very moderate and thereby not well
safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a
desirable
investment. Assurance of interest and principal payments or of maintenance
of
other terms of the contract over any long period of time may be small.
CAA--Bonds that are rated Caa are of poor standing. These issues may
be in
default or present elements of danger may exist with respect to principal
or
interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic
rating
classification from Aa through B. The modifier 1 indicates that the
security
ranks in the higher end of its generic rating category; the modifier 2
indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in
the
lower end of its generic rating category.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding
timely payment is either overwhelming or very strong. Those issues
determined to
possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative
degree
of safety is not as high as for issues designated A-1.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered
to
have a superior capacity for repayment of short-term promissory
obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered
to
have a strong capacity for repayment of short-term promissory obligations.
This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
29
<PAGE> 30
Smith Barney
EQUITY FUNDS
<TABLE>
<S> <C>
---------------------------
- --
STRATEGIC INVESTORS FUND
---------------------------
- --
---------------------------
- --
GROWTH AND INCOME FUND
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
---------------------------
- --
STATEMENT OF
ADDITIONAL INFORMATION
NOVEMBER 7, 1994
SMITH BARNEY
EQUITY FUNDS
LOGO
388 Greenwich Street
New York, New York 10013
</TABLE>
SMITH BARNEY EQUITY FUNDS
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
Financial Highlights
Included in Part B:
The Registrant's Annual Report for the fiscal year ended January 31,
1994 and the Report of Independent Accountants dated March 15, 1994 are
incorporated by reference to the Definitive 30b2-1 filed on March 31, 1994
as Accession # 0000053798-94-000154.
The Registrant's Semi-Annual Report for the period year ended July
31, 1994 is incorporated by reference to the Definitive 30b2-1 filed on
September 30, 1994 as Accession # 0000053798-94-000483.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's registration statement on Form
N-1A as filed with the Securities and Exchange Commission on January 9,
1986. File Nos. 33-2627 and 811-4551 (the "Registration Statement").
1(a) Amended and Restated Master Trust Agreement and all Amendments
are incorporated by reference to Post-Effective Amendment No. 26 to the
Registration Statement filed on January 31, 1994 ("Post-Effective Amendment
No. 26").
(b) Amendment dated October 14, 1994 and Form of Amendment to
Amended and Restated Master Trust Agreement are filed herein.
2 Registrant's By-Laws are incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration Statement filed on February
25, 1986 ("Pre-Effective Amendment No. 1").
3 Not applicable.
4 Form of share certificate for Class A, B, C and Y shares will
be filed by amendment.
5(a) Investment Advisory Agreement between Registrant and The Boston
Company Advisors, Inc. (relating to the Strategic Investors Fund) dated May
22, 1993 > is incorporated by reference to Post-Effective Amendment No. 26.
(b) Investment Advisory Agreement between Registrant and Smith
Barney Shearson Strategy Advisers Inc. (relating to the Sector Analysis
Fund) dated May 22, 1993 is incorporated by reference to Post-Effective
Amendment No. 26.
(c) Investment Advisory Agreement between Registrant and Greenwich
Street Advisors (relating to the Growth and Income Fund) dated May 22, 1993
is incorporated by reference to Post-Effective Amendment No. 26.
(d) Sub-Investment Advisory Agreement between Registrant and
Lehman Brothers Global Asset Management, Inc. (relating to the Sector
Analysis Fund) dated July 30, 1993 is incorporated by reference to Post-
Effective Amendment No. 26.
(e) Asset Allocation Consulting Agreement between Registrant
and Shearson Lehman Hutton Inc. (relating to the Strategic Investors
Portfolio) is incorporated by reference to Post-Effective Amendment No. 4.
6 Distribution Agreement between Registrant and Smith Barney
Shearson dated July 30, 1993 is incorporated by reference to Post-Effective
Amendment No. 26.
7 Not applicable.
8(a) Form of Supplement to Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company (relating to the Strategic Investors
Portfolio) is incorporated by reference to Post-Effective Amendment No. 2.
(b) Supplement to Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company (relating to the Sector Analysis Portfolio)
is incorporated by reference to Post-Effective Amendment No. 6.
(c) Supplement to Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company (relating to the Growth and Income
Portfolio) is incorporated by reference to Post-Effective Amendment No. 19
to the Registration Statement filed on March 10, 1992 ("Post-Effective
Amendment No. 19").
(d) Sub-Custodian Agreement among Registrant, Morgan Guaranty Trust
company of New York and Boston Safe Deposit and Trust Company is
incorporated by reference to Post-Effective Amendment No. 6.
9(a) Administration Agreements between Registrant and Smith, Barney
Advisers, Inc. (relating to the Growth and Income Fund and Strategic
Investors Fund) dated May 4, 1994 are filed herein.
(b) Sub-Administration Agreements between Registrant and The Boston
Company Advisors, Inc. (relating to the Growth and Income Fund and
Strategic Investors Fund) dated May 4, 1994 are filed herein.
(c) Transfer Agency Agreement between Registrant and The
Shareholder Services Group, Inc. dated August 5, 1993 is incorporated by
reference to Post-Effective Amendment No. 26.
10 Not applicable.
11(a) Consent of Independent Accountants
(b) Consent of Morningstar Mutual Fund Values is incorporated
by reference to Post-Effective Amendment No. 22.
12 Not applicable.
13(a) Not Applicable .
(b) Not Applicable
(c) Not Applicable
14 Not applicable.
15 Amended Services and Distribution Plans pursuant to Rule
12b-1 between the Registrant on behalf of Smith Barney Growth and Income
Fund and Smith Barney Strategic Investors Fund are filed herein.
16 Performance information is incorporated by reference to Post-
Effective Amendments No. 9 and 10.
Item 25. Persons Controlled by or Under
Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Series Holders as of
September 23, 1994
Class A Class B
Class D
Smith Barney Shearson Strategic Investors Fund 1182
42,795 19
Smith Barney Shearson Growth and Income Fund 14,873
12,718 2
Item 27. Indemnification
The response to this item is incorporated by reference to
Registrant's Pre-
Effective Amendment No. 1.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Strategy Advisers Inc.
Smith Barney Strategy Advisers Inc. ("Strategy Advisers") was incorporated
on October 22, 1986 under the laws of the State of Delaware. Strategy
Advisers is a wholly owned subsidiary of Smith, Barney Advisers, Inc.
("SBA"), which was incorporated under the laws of the state of Delaware in
1968. SBA is a wholly owned subsidiary of Smith Barney Holdings Inc.,
which in turn is a wholly owned subsidiary of Primerica Corporation.
Strategy Advisers is registered as an investment adviser under the
Investment Adviser Act of 1940 (the "Advisers Act"). Strategy Advisers is
also registered with the Commodity Futures Trading Commission (the "CFTC")
as a commodity pool operator under the Commodity Exchange Act (the "CEA"),
and is a member of the National Futures Association (the "NFA").
The list required by this Item 28 of officers and directors of SBA and
Strategy Advisers, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SBA on behalf of
Strategy Advisers pursuant to the Advisers Act (SEC File No. 801-8314).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Investment Strategy Advisors Inc. ("Shearson Lehman Strategy
Advisors"), was a wholly owned subsidiary of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"), and served as the Registrant's investment
adviser. On the Closing, Primerica Corporation and Smith Barney, Harris
Upham & Co. Incorporated acquired the domestic retail brokerage and asset
management business of Shearson Lehman Brothers which included the business
of the Registrant's prior investment adviser. Shearson Lehman Brothers was
a wholly owned subsidiary of Shearson Lehman Brothers Holdings Inc.
("Shearson Holdings"). All of the issued and outstanding common stock of
Shearson Holdings (representing 92% of the voting stock) was held by
American Express Company. Information as to any past business vocation or
employment of a substantial nature engaged in by officers and directors of
Shearson Lehman Investment Strategy Advisors can be located in Schedules A
and D of FORM ADV filed by Shearson Lehman Investment Strategy Advisors
prior to July 30, 1993. (SEC FILE NO. 801-28715)
8/23/93
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc., formerly
known as Smith, Barney Advisers, Inc. ("SBMFM")
SBFMF was incorporated in December 1968 under the laws of the State of
Delaware. SBFMF is a wholly owned subsidiary of Smith Barney Holdings Inc.
(formerly known as Smith Barney Shearson Holdings Inc.), which in turn is a
wholly owned subsidiary of The Travelers Inc. (formerly known as Primerica
Corporation) ("Travelers"). SBMFM is registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 28 of officers and directors of SBMFM
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to
Schedules A and D of FORM ADV filed by SBMFM pursuant to the Advisers Act
(SEC File No. 801-8314).
Prior to the close of business on November 7, 1994, Greenwich Street
Advisors served as investment adviser. Greenwich Street Advisors, through
its predecessors, has been in the investment counseling business since 1934
and is a division of Mutual Management Corp. ("MMC"). MMC was incorporated
in 1978 and is a wholly owned subsidiary of Smith Barney Holdings Inc.
(formerly known as Smith Barney Shearson Holdings Inc.) ("Holdings"), which
is in turn a wholly owned subsidiary of The Travelers Inc. (formerly known
as Primerica Corporation) ("Travelers"). The list required by this Item 28
of officers and directors of MMC and Greenwich Street Advisors, together
with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two fiscal years, is incorporated by reference to
Schedules A and D of FORM ADV filed by MMC on behalf of Greenwich Street
Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Advisors, a member of the Asset Management Group of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Travelers and Smith Barney Inc.
(formerly known as Smith Barney Shearson Inc.) acquired the domestic retail
brokerage and asset management business of Shearson Lehman Brothers, which
included the business of the Registrant's prior investment adviser.
Shearson Lehman Brothers was a wholly owned subsidiary of Shearson Lehman
Brothers Holdings Inc. ("Shearson Holdings"). All of the issued and
outstanding common stock of Shearson Holdings (representing 92% of the
voting stock) was held by American Express Company. Information as to any
past business vocation or employment of a substantial nature engaged in by
officers and directors of Shearson Lehman Advisors can be located in
Schedules A and D of FORM ADV filed by Shearson Lehman Brothers on behalf
of Shearson Lehman Advisors prior to July 30, 1993. (SEC FILE NO. 801-
3701)
11/3/94
Item 28(b). Business and Other Connections of Sub-Investment Adviser
Investment Adviser -- The Boston Company Advisors, Inc.
The Boston Company Advisors, Inc. ("Boston Advisors") is a wholly owned
subsidiary of The Boston Company, Inc., which is in turn a wholly owned
subsidiary of Mellon Bank Corporation ("Mellon"). Mellon is a publicly
owned multibank holding company registered under the Federal Bank Holding
Company Act of 1956 and through its subsidiaries Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Boston Advisors is an investment adviser
registered under the Investment Advisers Act of 1940 (the "Advisers Act")
and serves as investment counsel for individuals with substantial capital,
executors, trustees and institutions. It also serves as investment
adviser, sub-investment adviser, administrator or sub-administrator to
numerous investment companies.
The list required by this Item 28 of officers and directors of Boston
Advisors, together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such officers
and directors during the past two years, is incorporated by reference to
Schedules A and D of FORM ADV filed by Boston Advisors pursuant to the
Advisers Act (SEC File No. 801-14158).
11/01/94
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts as distributor for Smith
Barney Managed Municipals Fund Inc., Smith Barney New York Municipals Fund
Inc., Smith Barney California Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Global Opportunities Fund,
Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Principal Return Fund, Smith Barney Shearson Municipal
Money Market Fund Inc., Smith Barney Daily Dividend Fund Inc., Smith Barney
Government and Agencies Fund Inc., Smith Barney Managed Governments Fund
Inc., Smith Barney New York Municipal Money Market Fund, Smith Barney
California Municipal Money Market Fund, Smith Barney Income Funds, Smith
Barney Equity Funds, Smith Barney Investment Funds Inc., Smith Barney
Precious Metals and Minerals Fund Inc., Smith Barney Telecommunications
Trust, Smith Barney Arizona Municipals Fund Inc., Smith Barney New Jersey
Municipals Fund Inc., The USA High Yield Fund N.V., Garzarelli Sector
Analysis Portfolio N.V., The Advisors Fund L.P., Smith Barney Fundamental
Value Fund Inc., Smith Barney Series Fund, Consulting Group Capital Markets
Funds, Smith Barney Income Trust, Smith Barney Adjustable Rate Government
Income Fund, Smith Barney Florida Municipals Fund, Smith Barney Oregon
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Muni Funds, Smith
Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney Tax
Free Money Fund, Inc., Smith Barney Variable Account Funds, Smith Barney
U.S. Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), Smith Barney International Fund (Luxembourg)
and various series of unit investment trusts.
Smith Barney is a wholly owned subsidiary of Smith Barney Holdings
Inc. (formerly known as Smith Barney Holdings Inc.), which in turn is a
wholly owned subsidiary of The Travelers Inc. (formerly known as Primerica
Corporation) ("Travelers"). On June 1, 1994, Smith Barney changed its
name from Smith Barney Inc. to its current name. The information required
by this Item 29 with respect to each director, officer and partner of Smith
Barney is incorporated by reference to Schedule A of FORM BD filed by Smith
Barney pursuant to the Securities Exchange Act of 1934 (SEC File No. 812-
8510).
11/4/94
Item 30. Location of Accounts and Records
(1) Smith Barney
Equity Funds
Two World Trade Center
New York, New York 10048
(2) Smith Barney Mutual Funds Management Inc..
388 Greenwich Street
New York, New York 10013
(3) Lehman Brothers Global Asset Management Inc.
American Express Tower
New York, New York 10285
(4) Smith Barney Shearson Strategy Advisers Inc.
Two World Trade Center
New York, New York 10048
(5) The Boston Company Advisors, Inc.
One Boston Place
Boston, MA 02108
(6) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(7) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
None
Item 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares. Registrant
hereby undertakes further, in connection with the meeting to comply with
the provisions of Section 16 (c) of the Investment Company Act of 1940, as
amended, relating to communications with shareholders of certain common-law
trusts.
485(b) Certification
The Registrant hereby certifies that it meets all requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of
1933, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as
amended, the Registrant, SMITH BARNEY EQUITY FUNDS, has duly
caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
New York, State of New York on the 3rd day of November, 1994.
SMITH BARNEY
EQUITY FUNDS
By:/s/ Heath B. McLendon
Heath B. McLendon, Chief Executive Officer
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement and the above Power of Attorney has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title
Date
/s/ Heath B. McLendon Chairman of the Board and Trustee
11/03/94
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Treasurer (Chief Financial
11/03/94
Lewis E. Daidone and Accounting Officer)
/s/ Allan J. Bloostein Trustee
11/03/94
Allan J. Bloostein
/s/ Lee Abraham Trustee
11/03/94
Lee Abraham
/s/ Antoinette C. Bentley Trustee
11/03/94
Antoinette C. Bentley
Signature Title
Date
/s/ Richard E. Hanson Trustee
11/03/94
Richard Hanson
/s/ Madelon DeVoe Talley Trustee
11/03/94
Madelon DeVoe Talley
g:\shared\domestic\clients\funds\slep\pea#29
SMITH BARNEY SHEARSON EQUITY FUNDS
AMENDMENT NO. 2 TO THE FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
(Change of Name of the Trust, Change of Names of Existing Sub-Trusts and
Change of Emeritus Policy )
The undersigned, Assistant Secretary of Smith Barney Shearson Equity
Funds (the "Trust"), does hereby certify that pursuant to Article I,
Section 1.1 and Article VII, Section 7.3 of the First Amended and Restated
Master Trust Agreement dated November 5, 1992 ("Master Trust Agreement"),
which amended and restated the Master Trust Agreement dated January 6,
1986, the following votes were duly adopted by the Board of Trustees at a
Regular Meeting of the Board held on August 10, 1994:
(Change of Name of the Trust)
VOTED: That the name of the Trust previously established and
designated pursuant to the Trust's Master Trust Agreement be modified and
amended as set forth below:
Current Name: Name as Amended:
Smith Barney Shearson Smith Barney
Equity Funds ` Equity Funds
; and further
(Change of Names of Existing Sub-Trusts)
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set forth
below:
Current Name: Name as Amended:
Growth and Income Fund Smith Barney
Growth and Income Fund
Strategic Investors Fund Smith Barney
Strategic Investors Fund
; and further
(Change of Emeritus Policy)
VOTED: That Article III, Section 3.1(c) of the Trust's Master Trust
Agreement be and is amended by adding the following new provision:
Section 3.1(c)
A Trustee who has reached the age of seventy two (72) years may elect
the status of Trustee Emeritus provided that the Trustee has served for ten
(10) years as a member of the Board of the Trust or of the Board of
Trustees of another investment company distributed, advised or administered
by an entity under common control with the Trust's distributor, investment
adviser or administrator. Upon reaching eighty (80) years of age, a
Trustee must elect status as a Trustee Emeritus. (The foregoing provisions
shall not be deemed to restrict a Trustee's ability to resign.)
A Board Member designated as a Trustee Emeritus may attend meetings
of the Board of Trustees, however, he or she shall have no voting rights
and shall not be under a duty to manage or direct the business and affairs
of the Trust. A Trustee Emeritus shall not be deemed to stand in a
fiduciary relation to the Trust and shall not be responsible to discharge
the duties of a Trustee or to exercise that diligence, care or skill which
a Trustee would ordinarily be required to exercise under applicable laws.
In addition, a Trustee Emeritus shall be indemnified to the full extent
that an officer or Trustee of the Trustee may be indemnified under the
Trust's governing documents and applicable state and federal laws.
As long as a Board Member is a Trustee Emeritus, but in no event for
more than a period of ten (10) years, provided the Trust has net assets in
excess of $100 million, a Trustee Emeritus will receive 50% of the annual
retainer and annual meeting fees paid to active Board Members. In any
event, a Trustee Emeritus shall be entitled to reasonable out-of-pocket
expenses for each meeting attended; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's
Master Trust Agreement and By-Laws reflecting the foregoing change; and to
execute and file all requisite certificates, documents and instruments and
to take such other actions required to cause said amendment to become
effective and to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this _____ day of October, 1994.
/s/ Lee D. Augsburger_________
Lee D. Augsburger
Assistant Secretary
SMITH BARNEY SHEARSON EQUITY FUNDS
GROWTH AND INCOME FUND
ADMINISTRATION AGREEMENT
May 4, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, on behalf of
its sub-trust Growth and Income Fund (the "Fund"), confirms its agreement
with Smith, Barney Advisers, Inc. ("SBA") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in the Trust's Amended and Restated Master Trust
Agreement dated November 5, 1992 as amended from time to time (the "Master
Trust Agreement"), in its Prospectus and Statement of Additional
Information as from time to time in effect and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Trust (the "Board"). Copies of the Fund's Prospectus, Statement of
Additional Information and Master Trust Agreement have been or will be
submitted to SBA. Greenwich Street Advisors ("Greenwich Street"), a
division of Mutual Management Corp., serves as the Fund's investment
adviser; and the Fund desires to employ and hereby appoints SBA to act as
its administrator. SBA accepts this appointment and agrees to furnish the
services to the Fund for the compensation set forth below. SBA is hereby
authorized to retain third parties and is hereby authorized to delegate
some or all of its duties and obligations hereunder to such persons
provided that such persons shall remain under the general supervision of
SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA
will: (a) assist in supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under its investment
advisory agreement; (b) supply the Fund with office facilities (which may
be in SBA's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of shares of the
Fund, (ii) applicable contingent deferred sales charges and similar fees
and charges and (iii) distribution fees, internal auditing and legal
services, internal executive and administrative services, and stationary
and office supplies; and (c) prepare reports to shareholders of the Fund,
tax returns and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBA on the first business day of each month a
fee for the previous month at an annual rate of .20 of 1.00% of the Fund's
average daily net assets. The fee for the period from the date the Fund's
initial registration statement is declared effective by the SEC to the end
of the month during which the initial registration statement is declared
effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to SBA, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
SBA will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the members of the Board of
the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc. or its affiliates or any person who is an affiliate of any
person to whom duties may be delegated hereunder; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement (s), but excluding distribution fees, interest, taxes,
brokerage and, if permitted by state securities commissions, extraordinary
expenses) exceed the expense limitations of any state having jurisdiction
over the Fund, SBA will reimburse the Fund for that excess expense to the
extent required by state law in the same proportion as its respective fees
bear to the combined fees for investment advice and administration. The
expense reimbursement obligation of SBA will be limited to the amount of
its fees hereunder. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect SBA against
liability to the Fund or to its shareholders to which SBA would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of SBA's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act
and may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBA so acting. In addition,
the Fund understands that the persons employed by SBA or its affiliates to
assist in the performance of its duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of SBA or its affiliates to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to
whom responsibilities are delegated hereunder) ("indemnitees") against any
loss, claim, expense or cost of any kind (including reasonable attorney's
fees) resulting or arising in connection with this Agreement or from the
performance or failure to perform any act hereunder, provided that no such
indemnification shall be available if the indemnitee violated the standard
of care in paragraph 6 above. This indemnification shall be limited by the
1940 Act, and relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the requirements of the 1940
Act and the rules, regulations and interpretations thereof as in effect
from time to time.
10. Limitation of Liability
The Fund and SBA agree that the obligations of the Fund under
this Agreement shall not be binding upon any of the Board members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon the
assets and property of the Fund, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement has been duly authorized by
the Fund and SBA, and signed by an authorized officer of each, acting as
such. Neither the authorization by the Board members of the Fund, nor the
execution and delivery by the officer of the Fund 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 assets and property of the Fund as
provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by singing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson Equity
Funds -
Growth and Income Fund
By: /s/ Heath B McLendon________
Name: Heath B. McLendon
Title: Chairman
Accepted:
Smith, Barney Advisers, Inc.
By: /s/ Christina T. Sydor_____
Name: Christina T. Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide a Treasurer and Assistant Treasurer for the
Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor mark-to-market comparisons for money market
funds;
Recommend valuation to be used for securities which
are not readily saleable;
Function as a liaison with the Fund's outside auditors
and arrange for audits;
Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
Prepare and file forms with the Internal Revenue
Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the
Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder
meetings;
Maintain Masater Trust Agreement and By-Laws of the
Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
SMITH BARNEY SHEARSON EQUITY FUNDS
STRATEGIC INVESTORS FUND
ADMINISTRATION AGREEMENT
May 4, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts, on behalf
of its sub-trust Strategic Investors Fund (the "Fund"), confirms its
agreement with Smith, Barney Advisers, Inc. ("SBA") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in the Trust's Amended and Restated Master Trust
Agreement dated November 5, 1992 as amended from time to time (the
"Master Trust Agreement"), in its Prospectus and Statement of Additional
Information as from time to time in effect and in such manner and to
such extent as may from time to time be approved by the Board of
Trustees of the Trust (the "Board"). Copies of the Fund's Prospectus,
Statement of Additional Information and Master Trust Agreement have been
or will be submitted to SBA. Smith Barney Shearson Strategy Advisors
Inc., serves as the Fund's investment adviser; and the Fund desires to
employ and hereby appoints SBA to act as its administrator. SBA accepts
this appointment and agrees to furnish the services to the Fund for the
compensation set forth below. SBA is hereby authorized to retain third
parties and is hereby authorized to delegate some or all of its duties
and obligations hereunder to such persons provided that such persons
shall remain under the general supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA
will: (a) assist in supervising all aspects of the Fund's operations
except those performed by the Fund's investment adviser under its
investment advisory agreement; (b) supply the Fund with office
facilities (which may be in SBA's own offices), statistical and research
data, data processing services, clerical, accounting and bookkeeping
services, including, but not limited to, the calculation of (i) the net
asset value of shares of the Fund, (ii) applicable contingent deferred
sales charges and similar fees and charges and (iii) distribution fees,
internal auditing and legal services, internal executive and
administrative services, and stationary and office supplies; and (c)
prepare reports to shareholders of the Fund, tax returns and reports to
and filings with the Securities and Exchange Commission (the "SEC") and
state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBA on the first business day of each month
a fee for the previous month at an annual rate of .20 of 1.00% of the
Fund's average daily net assets. The fee for the period from the date
the Fund's initial registration statement is declared effective by the
SEC to the end of the month during which the initial registration
statement is declared effective shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of any month, the fee for
such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon
the date of termination of this Agreement. For the purpose of
determining fees payable to SBA, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Fund's
Prospectus and Statement of Additional Information as from time to time
in effect.
4. Expenses
SBA will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including:
taxes, interest, brokerage fees and commissions, if any; fees of the
members of the Board of the Fund who are not officers, directors or
employees of Smith Barney Shearson Inc. or its affiliates or any person
who is an affiliate of any person to whom duties may be delegated
hereunder; SEC fees and state blue sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; the Fund's and
Board members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal
expenses; costs of maintaining the Fund's existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports
and meetings of the officers or Board and any extraordinary expenses.
In addition, the Fund will pay all distribution fees pursuant to a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement (s), but excluding distribution fees, interest,
taxes, brokerage and, if permitted by state securities commissions,
extraordinary expenses) exceed the expense limitations of any state
having jurisdiction over the Fund, SBA will reimburse the Fund for that
excess expense to the extent required by state law in the same
proportion as its respective fees bear to the combined fees for
investment advice and administration. The expense reimbursement
obligation of SBA will be limited to the amount of its fees hereunder.
Such expense reimbursement, if any, will be estimated, reconciled and
paid on a monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the
services listed in paragraph 2 above, and SBA shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to
protect SBA against liability to the Fund or to its shareholders to
which SBA would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its
duties or by reason of SBA's reckless disregard of its obligations and
duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided such continuance is specifically approved at
least annually by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act
and may act in the future as administrator to one or more other
investment companies, and the Fund has no objection to SBA so acting.
In addition, the Fund understands that the persons employed by SBA or
its affiliates to assist in the performance of its duties hereunder will
not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of SBA or its affiliates
to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers,
directors, employees, affiliates, controlling persons, agents (including
persons to whom responsibilities are delegated hereunder)
("indemnitees") against any loss, claim, expense or cost of any kind
(including reasonable attorney's fees) resulting or arising in
connection with this Agreement or from the performance or failure to
perform any act hereunder, provided that no such indemnification shall
be available if the indemnitee violated the standard of care in
paragraph 6 above. This indemnification shall be limited by the 1940
Act, and relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the requirements of the
1940 Act and the rules, regulations and interpretations thereof as in
effect from time to time.
10. Limitation of Liability
The Fund and SBA agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Board members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon
the assets and property of the Fund, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement has been duly
authorized by the Fund and SBA, and signed by an authorized officer of
each, acting as such. Neither the authorization by the Board members of
the Fund, nor the execution and delivery by the officer of the Fund
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
assets and property of the Fund as provided in the Master Trust
Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by singing and returning to us the
enclosed copy hereof.
Very truly yours,
Smith Barney Shearson Equity
Funds -
Growth and Income Fund
By: /s/ Heath B McLendon______
Name: Heath B. McLendon
Title: Chairman
Accepted:
Smith, Barney Advisers, Inc.
By: /s/ Christina T. Sydor_____
Name: Christina T. Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide a Treasurer and Assistant Treasurer for the
Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor mark-to-market comparisons for money market
funds;
Recommend valuation to be used for securities which
are not readily saleable;
Function as a liaison with the Fund's outside auditors
and arrange for audits;
Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
Prepare and file forms with the Internal Revenue
Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the
Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder
meetings;
Maintain Masater Trust Agreement and By-Laws of the
Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
A-5
B-1
SMITH BARNEY SHEARSON EQUITY FUNDS
GROWTH AND INCOME FUND
SUB-ADMINISTRATION AGREEMENT
May 4, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02210
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Trust"), a business
trust organized under the laws of the Commonwealth of Massachusetts, on
behalf of its sub-trust Growth and Income Fund (the "Fund"), and Smith,
Barney Advisers, Inc. ("SBA") confirm their agreement with The Boston
Company Advisors, Inc. ("Boston Advisors") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Amended and Restated Master Trust Agreement
dated November 5, 1992 as amended from time to time (the "Master Trust
Agreement"), in its Prospectus and Statement of Additional Information
as from time to time in effect, and in such manner and to such extent as
may from time to time be approved by the Board of Trustees of the Trust
(the "Board"). Copies of the Fund's Prospectus, Statement of Additional
Information and Master Trust Agreement have been or will be submitted to
you. The Fund employs SBA as its administrator, and the Fund and SBA
desire to employ and hereby appoint Boston Advisors as the Fund's sub-
administrator. Boston Advisors accepts this appointment and agrees to
furnish the services to the Fund, for the compensation set forth below,
under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and
SBA, Boston Advisors will: (a) assist in supervising all aspects of the
Fund's operations except those performed by the Fund's investment
adviser under the Fund's investment advisory agreement; (b) supply the
Fund with office facilities (which may be in Boston Advisor's own
offices), statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of shares of the
Fund, (ii) applicable contingent deferred sales charges and similar fees
and changes and (iii) distribution fees, internal auditing and legal
services, internal executive and administrative services, and stationery
and office supplies; and (c) prepare reports to shareholders of the
Fund, tax returns and reports to and filings with the Securities and
Exchange Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of
each month a fee for the previous month calculated in accordance with
the terms set forth in Appendix B, and as agreed to from time to time
by the Fund, SBA and Boston Advisors. Upon any termination of this
Agreement before the end of any month, the fee for such part of a month
shall be prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees
payable to Boston Advisors, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's
Prospectus and Statement of Additional Information as from time to time
in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with
the performance of its services under this Agreement. The Fund will
bear certain other expenses to be incurred in its operation, including:
taxes, interest, brokerage fees and commissions, if any; fees of the
Board members of the Fund who are not officers, directors or employees
of Smith Barney Shearson Inc., Boston Advisors of their affiliates; SEC
fees and state blue sky qualification fees; charges of custodians and
transfer and dividend disbursing agents; the Fund's and its Board
members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal
expenses; costs of maintaining the Fund's existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports
and meetings of the officers or Board and any extraordinary expenses.
In addition, the Fund will pay all distribution fees pursuant to a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston
Advisors will reimburse the Fund for that excess expense to the extent
required by state law in the same proportion as its respective fees bear
to the combined fees for investment advice and administration. The
expense reimbursement obligation of Boston Advisors will be limited to
the amount of its fees hereunder. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in
rendering the services listed in paragraph 2 above. Boston Advisors
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing herein shall be deemed to
protect or purport to protect Boston Advisors against liability to the
Fund or to its shareholders to which Boston Advisors would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of Boston
Advisors' reckless disregard of its obligations and duties under this
Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without
the written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or
more other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right
of Boston Advisors or its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind of
nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including
reasonable attorney's fees) resulting or arising in connection with this
Agreement or from the performance or failure to perform any act
hereunder, provided that not such indemnification shall be available if
the indemnitee violated the standard of care in paragraph 6 above. This
indemnification shall be limited by the 1940 Act, and relevant state
law. Each indemnitee shall be entitled to advancement of its expenses
in accordance with the requirements of the 1940 Act and the rules,
regulations and interpretations thereof as in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations
of the Fund under this Agreement shall not be binding upon any of the
Board members, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund individually, but are
binding only upon the assets and property of the Fund, as provided in
the Master Trust Agreement and Bylaws. The execution and delivery of
this Agreement has been duly authorized by the Fund, SBA and Boston
Advisors, and signed by an authorized officer of each, acting as such.
Neither the authorization by the Board Members of the Trust, nor the
execution and delivery by the officer of the Trust 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 assets and property of
the Fund as provided in the Mastser Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us
the enclosed copy hereof.
Very truly yours,
Smith Barney Shearson Equity Funds -
Growth and Income Fund
By: _/s/ Heath B. McLendon______________
Name: Heath B. McLendon
Title: Chairman
Smith, Barney Advisers, Inc.
By: _/s/ Christina T. Sydor_____________
Name: Christina T. Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: _____________________________
Name:
Title:
Appendix A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
- Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
- Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
- Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
- Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
- Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
- Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
- Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
- Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
- Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
- Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
- Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
- System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
- Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
- Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
- Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
- Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
- Total return reporting;
- SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
- Prepare dividend summary;
- Prepare quarter-end reports;
- Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
- Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
- Provide an Assistant Treasurer for the Fund;
- Authorize payment of bills for expenses of the Fund;
- Establish and monitor the rate of expense accruals;
- Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
- Monitor mark-to-market comparisons for money market funds;
- Recommend valuations to be used for securities which are not
readily saleable;
- Function as a liaison with the Fund's outside auditors and
arrange for audits;
- Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
- Prepare and file forms with the Internal Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
- File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
- File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
- Prepare and file proxy statements;
- Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
- Provide an Assistant Secretary for the Fund;
- Maintain general corporate calendar;
- Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
- Organize, attend and keep minutes of shareholder meetings;
- Maintain Articles of Incorporation or Master Trust
Agreements and By-Laws of the Fund.
Legal Consultation and Business Planning
- Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
- Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
- Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
- Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
SMITH BARNEY SHEARSON EQUITY FUNDS
STRATEGIC INVESTORS FUND
SUB-ADMINISTRATION AGREEMENT
May 4, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02210
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Trust"), a business
trust organized under the laws of the Commonwealth of Massachusetts, on
behalf of its sub-trust Strategic Investors Fund (the "Fund"), and
Smith, Barney Advisers, Inc. ("SBA") confirm their agreement with The
Boston Company Advisors, Inc. ("Boston Advisors") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Amended and Restated Master Trust Agreement
dated November 5, 1992 as amended from time to time (the "Master Trust
Agreement"), in its Prospectus and Statement of Additional Information
as from time to time in effect, and in such manner and to such extent as
may from time to time be approved by the Board of Trustees of the Trust
(the "Board"). Copies of the Fund's Prospectus, Statement of Additional
Information and Master Trust Agreement have been or will be submitted to
you. The Fund employs SBA as its administrator, and the Fund and SBA
desire to employ and hereby appoint Boston Advisors as the Fund's sub-
administrator. Boston Advisors accepts this appointment and agrees to
furnish the services to the Fund, for the compensation set forth below,
under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and
SBA, Boston Advisors will: (a) assist in supervising all aspects of the
Fund's operations except those performed by the Fund's investment
adviser under the Fund's investment advisory agreement; (b) supply the
Fund with office facilities (which may be in Boston Advisor's own
offices), statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of shares of the
Fund, (ii) applicable contingent deferred sales charges and similar fees
and changes and (iii) distribution fees, internal auditing and legal
services, internal executive and administrative services, and stationery
and office supplies; and (c) prepare reports to shareholders of the
Fund, tax returns and reports to and filings with the Securities and
Exchange Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of
each month a fee for the previous month calculated in accordance with
the terms set forth in Appendix B, and as agreed to from time to time
by the Fund, SBA and Boston Advisors. Upon any termination of this
Agreement before the end of any month, the fee for such part of a month
shall be prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees
payable to Boston Advisors, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's
Prospectus and Statement of Additional Information as from time to time
in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with
the performance of its services under this Agreement. The Fund will
bear certain other expenses to be incurred in its operation, including:
taxes, interest, brokerage fees and commissions, if any; fees of the
Board members of the Fund who are not officers, directors or employees
of Smith Barney Shearson Inc., Boston Advisors of their affiliates; SEC
fees and state blue sky qualification fees; charges of custodians and
transfer and dividend disbursing agents; the Fund's and its Board
members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal
expenses; costs of maintaining the Fund's existence; costs attributable
to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports
and meetings of the officers or Board and any extraordinary expenses.
In addition, the Fund will pay all distribution fees pursuant to a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act
of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston
Advisors will reimburse the Fund for that excess expense to the extent
required by state law in the same proportion as its respective fees bear
to the combined fees for investment advice and administration. The
expense reimbursement obligation of Boston Advisors will be limited to
the amount of its fees hereunder. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in
rendering the services listed in paragraph 2 above. Boston Advisors
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing herein shall be deemed to
protect or purport to protect Boston Advisors against liability to the
Fund or to its shareholders to which Boston Advisors would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of Boston
Advisors' reckless disregard of its obligations and duties under this
Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without
the written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or
more other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right
of Boston Advisors or its affiliates to engage in and devote time and
attention to other businesses or to render services of whatever kind of
nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including
reasonable attorney's fees) resulting or arising in connection with this
Agreement or from the performance or failure to perform any act
hereunder, provided that not such indemnification shall be available if
the indemnitee violated the standard of care in paragraph 6 above. This
indemnification shall be limited by the 1940 Act, and relevant state
law. Each indemnitee shall be entitled to advancement of its expenses
in accordance with the requirements of the 1940 Act and the rules,
regulations and interpretations thereof as in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations
of the Fund under this Agreement shall not be binding upon any of the
Board members, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund individually, but are
binding only upon the assets and property of the Fund, as provided in
the Master Trust Agreement and Bylaws. The execution and delivery of
this Agreement has been duly authorized by the Fund, SBA and Boston
Advisors, and signed by an authorized officer of each, acting as such.
Neither the authorization by the Board Members of the Trust, nor the
execution and delivery by the officer of the Trust 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 assets and property of
the Fund as provided in the Mastser Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us
the enclosed copy hereof.
Very truly yours,
Smith Barney Shearson Equity Funds -
Growth and Income Fund
By: _/s/ Heath B. McLendon______________
Name: Heath B. McLendon
Title: Chairman
Smith, Barney Advisers, Inc.
By: _/s/ Christina T. Sydor_____________
Name: Christina T. Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: _____________________________
Name:
Title:
Appendix A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
- Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
- Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
- Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
- Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
- Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
- Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
- Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
- Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
- Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
- Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
- Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
- System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
- Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
- Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
- Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
- Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
- Total return reporting;
- SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
- Prepare dividend summary;
- Prepare quarter-end reports;
- Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
- Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
- Provide an Assistant Treasurer for the Fund;
- Authorize payment of bills for expenses of the Fund;
- Establish and monitor the rate of expense accruals;
- Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
- Monitor mark-to-market comparisons for money market funds;
- Recommend valuations to be used for securities which are not
readily saleable;
- Function as a liaison with the Fund's outside auditors and
arrange for audits;
- Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
- Prepare and file forms with the Internal Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
- File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
- File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
- Prepare and file proxy statements;
- Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
- Provide an Assistant Secretary for the Fund;
- Maintain general corporate calendar;
- Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
- Organize, attend and keep minutes of shareholder meetings;
- Maintain Articles of Incorporation or Master Trust
Agreements and By-Laws of the Fund.
Legal Consultation and Business Planning
- Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
- Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
- Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
- Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
The Boston Company Advisors, Inc.
May 4, 1994
Page 4
shearson2\incequit\agrmts\adcon
The Boston Company Advisors, Inc.
May 4, 1994
Page 8
shearson2\incequit\agrmts\adcon
A-4
shearson2\incequit\agrmts\adstag
B-1
shearson2\incequit\agrmts\adgrinc
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Smith Barney Equity Funds:
We hereby consent to the following with respect to
Post-Effective Amendment No. 29 to the Registration Statement on
Form N-1A (File No. 33-2627) under the Securities Act of 1933,
as amended, of Smith Barney Equity Funds (formerly Smith Barney
Shearson Equity Funds) (consisting of Smith Barney Strategic
Investors Fund and Smith Barney Growth and Income Fund):
1. The incorporation by reference of our reports dated March
15, 1994 accompanying the respective Annual Reports dated
January 31, 1994 of the Smith Barney Strategic Investors Fund,
and Smith Barney Growth and Income Fund, in the Statement of
Additional Information.
2. The reference to our firm under the heading "Financial
Highlights" in the Prospectuses of the Smith Barney Strategic
Investors Fund, and Smith Barney Growth and Income Fund.
3. The reference to our firm under the heading "Counsel and
Auditors" in the aforementioned Statement of Additional
Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 2, 1994
EXHIBIT 15
AMENDED SERVICES AND DISTRIBUTION PLAN
SMITH BARNEY GROWTH AND INCOME FUND
This 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 Growth and Income Fund,
a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), subject to the following terms and conditions:
Section 1. Annual Fee
(a) Class A Service Fee. The Fund will pay to the distributor of its
shares, Smith Barney Inc., a corporation organized under the laws of the
State of Delaware ("Distributor"), a service fee under the Plan at the
annual rate of .25% of the average daily net assets of the Fund
attributable to the Class A shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class B shares
(the "Class B Service Fee").
(c) Service Fee for Class C shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class C shares
(the "Class C Service Fee," and collectively with the Class A Service Fee
and the Class B Service Fee, the "Service Fees").
(d) Distribution Fee for Class B shares. In addition to the Class B
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the fund
attributable to the Class B Distribution Fee, the "Distribution Fees").
(e) Distribution Fee for Class C shares. In addition to the Class C
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the Fund
attributable to the Class C shares (the "Class C Distribution Fee," and
collectively with the Class B Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution Fees will be
calculated daily and paid monthly by the Fund 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 Fees and/or Distribution Fees may be used for; (a) costs of
printing and distributing the Fund's prospectus, statement of additional
information and reports to prospective investors in the Fund; (b) costs
involved in preparing, printing and distributing sales literature
pertaining o the Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of the Distributor; (d) payments made
to, and expenses of Smith Barney Financial Consultants and other persons
who provide support services in connection with the distribution of the
Fund's shares, including but not limited to, office space and equipment,
telephone
facilities, answering routine inquires regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Fund's Transfer agent; and (e) accruals for
interest on the amount of the foregoing expenses that exceed the
Distribution Fee and, in the case of Class B shares, the contingent
deferred sales charge received by the Distributor; provided, however, that
the Distribution Fees may be used by the Distributor only to cover expenses
primarily intended to result in the sale of the Fund's Class B and C
shares, including without limitation, payments to Distributor's financial
consultants ant the time of the sale of Class B and C shares. In addition,
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 of 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 a 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 longer 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 major 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
Fund.
Section 4. Approval of Trustees
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Trustees of the Fund
and (b) those Trustees who are not interested persons of the Fund and who
have not direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Trustees"), 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
November 7, 1995, 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 of the Fund and by
a majority of the Qualified Trustees.
Section 6. Termination
The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority of
the outstanding voting securities of such Class or (ii) by a vote of the
Qualified Trustees. 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 to 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 the 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 Fund's Board of
Trustees in the manner described in Section 4 above.
Section 8. Selection of Certain Trustees
While the Plan is in effect, the selection and nomination of the
Fund's Trustees who are not interested persons of the Fund will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Fund.
Section 9. Written Reports
In each year during which the Plan remains in effect, a 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 Fund's Board of Trustees and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule, which sets out
the amounts expended under the Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials
The Fund 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 1940 Act by the Securities and Exchange
Commission.
Section 12. Limitation of Liability
It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the
Fund, individually, but are binding only upon the assets and property of
the Fund, as provided, as provided in the Master Trust Agreement of the
Fund. The execution and delivery of this Plan has been authorized by the
Trustees and by shareholders of the Fund holding at least a majority of the
outstanding voting securities and signed by an authorized officer of the
Fund, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officer be deemed to
have made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property or the Fund as
provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the Fund execute the Plan as of November 7, 1994.
SMITH BARNEY
GROWTH AND INCOME FUND
By:_/s/ Heath B. McLendon___________
Heath B. McLendon
Chairman of the Board
AMENDED SERVICES AND DISTRIBUTION PLAN
SMITH BARNEY STRATEGIC INVESTORS FUND
This 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 Strategic Investors
Fund, a business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), subject to the following terms and conditions:
Section 1. Annual Fee
(a) Class A Service Fee. The Fund will pay to the distributor of its
shares, Smith Barney Inc., a corporation organized under the laws of the
State of Delaware ("Distributor"), a service fee under the Plan at the
annual rate of .25% of the average daily net assets of the Fund
attributable to the Class A shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class B shares
(the "Class B Service Fee").
(c) Service Fee for Class C shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class C shares
(the "Class C Service Fee," and collectively with the Class A Service Fee
and the Class B Service Fee, the "Service Fees").
(d) Distribution Fee for Class B shares. In addition to the Class B
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the fund
attributable to the Class B Distribution Fee, the "Distribution Fees").
(e) Distribution Fee for Class C shares. In addition to the Class C
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the Fund
attributable to the Class C shares (the "Class C Distribution Fee," and
collectively with the Class B Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution Fees will be
calculated daily and paid monthly by the Fund 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 Fees and/or Distribution Fees may be used for; (a) costs of
printing and distributing the Fund's prospectus, statement of additional
information and reports to prospective investors in the Fund; (b) costs
involved in preparing, printing and distributing sales literature
pertaining o the Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of the Distributor; (d) payments made
to, and expenses of Smith Barney Financial Consultants and other persons
who provide support services in connection with the distribution of the
Fund's shares, including but not limited to, office space and equipment,
telephone
facilities, answering routine inquires regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Fund's Transfer agent; and (e) accruals for
interest on the amount of the foregoing expenses that exceed the
Distribution Fee and, in the case of Class B shares, the contingent
deferred sales charge received by the Distributor; provided, however, that
the Distribution Fees may be used by the Distributor only to cover expenses
primarily intended to result in the sale of the Fund's Class B and C
shares, including without limitation, payments to Distributor's financial
consultants ant the time of the sale of Class B and C shares. In addition,
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 of 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 a 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 longer 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 major 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
Fund.
Section 4. Approval of Trustees
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Trustees of the Fund
and (b) those Trustees who are not interested persons of the Fund and who
have not direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Trustees"), 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
November 7, 1995, 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 of the Fund and by
a majority of the Qualified Trustees.
Section 6. Termination
The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority of
the outstanding voting securities of such Class or (ii) by a vote of the
Qualified Trustees. 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 to 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 the 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 Fund's Board of
Trustees in the manner described in Section 4 above.
Section 8. Selection of Certain Trustees
While the Plan is in effect, the selection and nomination of the
Fund's Trustees who are not interested persons of the Fund will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Fund.
Section 9. Written Reports
In each year during which the Plan remains in effect, a 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 Fund's Board of Trustees and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule, which sets out
the amounts expended under the Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials
The Fund 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 1940 Act by the Securities and Exchange
Commission.
Section 12. Limitation of Liability
It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the
Fund, individually, but are binding only upon the assets and property of
the Fund, as provided, as provided in the Master Trust Agreement of the
Fund. The execution and delivery of this Plan has been authorized by the
Trustees and by shareholders of the Fund holding at least a majority of the
outstanding voting securities and signed by an authorized officer of the
Fund, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officer be deemed to
have made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property or the Fund as
provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the Fund execute the Plan as of November 7, 1994.
SMITH BARNEY
STRATEGIC INVESTORS FUND
By:_/s/ Heath B. McLendon__________
Heath B. McLendon
Chairman of the Board
g\shared\domestic\clients\shearson\funds\slep\grip\12b1pln2.doc09:52 AM
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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