Registration No. 33-51299
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Amendment No. 1
Smith Barney Shearson Equity Funds
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 720-9281
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Francis J. McNamara, III
Senior Vice President and General Counsel
The Boston Company Advisors, Inc.
One Boston Place
Boston, MA 02108
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended; accordingly, no
fee is payable herewith. Registrant's Rule 24f-2 Notice for the fiscal year
ended January 31, 1993 was filed with the Securities and Exchange Commission
on March 31, 1993.
SMITH BARNEY SHEARSON EQUITY FUNDS
CONTENTS
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part C - Other Information
Signature Page
Exhibit
SMITH BARNEY SHEARSON EQUITY FUNDS
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Part A Item No. and Caption
Prospectus/Proxy
Statement Caption
Item
1.
Beginning of
Registration
Statement and Outside
Front Cover Page of
Prospectus
Cover Page; Cross Reference
Sheet
Item
2.
Beginning and Outside
Back Cover Page of
Prospectus
Table of Contents
Item
3.
Synopsis Information
and
Risk Factors
Overview; Comparison of
Investment Objectives and
Policies
Item
4.
Information About the
Transaction
Summary; Reasons for the
Reorganization; Information About
the Reorganization; Comparative
Information on Shareholder
Rights; Exhibit A (Agreement and
Plan of Reorganization)
Item
5.
Information About the
Registrant
Cover Page; Summary; Information
About the Reorganization;
Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders Rights; Additional
Information About the Acquiring
Fund and the Acquired Fund;
Prospectus of Smith Barney
Shearson Growth and Income Fund
dated June 1, 1993, as revised
August 1, 1993
Item
6.
Information About the
Company Being Acquired
Summary; Information About the
Reorganization; Comparison of
Investment Objectives and
Policies; Comparative Information
on Shareholder Rights; Additional
Information About the Acquiring
Fund and the Acquired Fund
Item
7.
Voting Information
Summary; Information About the
Reorganization; Comparative
Information on Shareholder
Rights; Voting Information
Item
8.
Interest of Certain
Persons and Experts
Financial Statements and Experts;
Legal Matters
Item
9.
Additional Information
Required for Reoffering
By Persons Deemed to be
Underwriters
Not Applicable
Part B Item No. and Caption
Statement of Additional
Information Caption
Item 10.
Cover Page
Cover Page
Item 11.
Table of Contents
Cover Page
Item 12.
Additional Information
About the Registrant
Cover Page; Statement of
Additional Information of
Smith Barney Shearson Equity
Funds dated June 1, 1993
Item 13.
Additional Information
About the Company Being
Acquired
Not Applicable
Item 14.
Financial Statements
Annual Report of Smith
Barney Shearson Growth and
Income Fund; Annual Report
of Smith Barney Shearson
Directions Value Fund; Pro
Forma Financial Statements
Part C Item No. and Caption
Other Information Caption
Item
15.
Indemnification
Incorporated by reference to
Part A caption "Comparative
Information on Shareholder
Rights--Liability of
Trustees/Directors
Item
16.
Exhibits
Item 16. Exhibits
Item
17.
Undertakings
Item 17. Undertakings
<PAGE>
SMITH BARNEY SHEARSON
DIRECTIONS VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
January 3,
1994
Dear Shareholder:
The Board of Directors of Smith Barney Shearson Investment Funds Inc.
(the
"Company") has recently reviewed and unanimously endorsed a proposal for
a
reorganization of the Smith Barney Shearson Directions Value Fund
("Directions
Value Fund"), a series of the Company, which it judges to be in the
best
interests of Directions Value Fund shareholders.
UNDER THE TERMS OF THE PROPOSAL, SMITH BARNEY SHEARSON GROWTH AND
INCOME
FUND ("GROWTH AND INCOME FUND"), A SUBTRUST OF SMITH BARNEY SHEARSON
EQUITY
FUNDS (THE "TRUST"), WOULD ACQUIRE SUBSTANTIALLY ALL OF THE ASSETS AND
CERTAIN
LIABILITIES OF DIRECTIONS VALUE FUND. After the transaction, Directions
Value
Fund would be dissolved and you would become a shareholder of Growth and
Income
Fund, having received shares with an aggregate value equivalent to the
aggregate
net asset value of your Directions Value Fund investment at the time of
the
transaction. The transaction would, in the opinion of counsel, be free
from
Federal income taxes to you and the Directions Value Fund.
SPECIAL MEETING OF SHAREHOLDERS: YOUR VOTE IS IMPORTANT
The Board of Directors of the Company has determined that the
proposed
reorganization should provide benefits to shareholders due, in part, to
savings
in expenses borne by shareholders. Accordingly, we have called a Special
Meeting
of Shareholders to be held March 2, 1994 to consider this transaction.
WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND
RETURN
YOUR PROXY NO LATER THAN MARCH 2, 1994.
Detailed information about the proposed transaction is described in
the
enclosed proxy statement. On behalf of the Board, I thank you for
your
participation as a shareholder and urge you to please exercise your right
to
vote by completing, dating and signing the enclosed proxy card. A
self-
addressed, postage-paid envelope has been enclosed for your convenience.
If you have any questions regarding the proposed transaction, please
feel
free to call your investment representative.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN
MARCH 2, 1994.
Sincerely,
Heath B. McLendon
CHAIRMAN OF THE BOARD
<PAGE>
SMITH BARNEY SHEARSON
DIRECTIONS VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
-------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 2, 1994
-------------------
Notice is hereby given that a Special Meeting of Shareholders
(the
"Meeting") of Smith Barney Shearson Directions Value Fund ("Directions
Value
Fund"), a series of Smith Barney Shearson Investment Funds Inc. (the
"Company"),
will be held at the office of the Company, Two World Trade Center, 100th
Floor,
New York, New York on March 2, 1994 at 2:00 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization
(the
"Plan") dated as of January 3, 1994 providing for (i) the acquisition
of
substantially all of the assets of Directions Value Fund by Smith
Barney
Shearson Growth and Income Fund ("Growth and Income Fund"), a
subtrust
of Smith Barney Shearson Equity Funds (the "Trust"), in exchange
for
shares of Growth and Income Fund and the assumption by Growth and
Income
Fund of certain liabilities of Directions Value Fund, (ii)
the
distribution of such shares of Growth and Income Fund to shareholders
of
Directions Value Fund in liquidation of Directions Value Fund and
(iii)
the subsequent termination of Directions Value Fund.
2. To transact any other business which may properly come before
the
Meeting or any adjournment or adjournments thereof.
The Directors of the Company have fixed the close of business on
December
31, 1993 as the record date for the determination of shareholders of
Directions
Value Fund entitled to notice of and to vote at this Meeting or any
adjournment
thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT
EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN AND RETURN WITHOUT DELAY
THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO
THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE
PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE FOLLOWING PAGE.
By order of the Board of Directors
FRANCIS J. MCNAMARA, III
SECRETARY
January 3, 1994
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE
EXPENSE
OF FURTHER SOLICITATION.
<PAGE>
INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for executing proxy cards may be of
assistance
to you and avoid the time and expense involved in validating your vote if
you
fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in
the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing
should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS: Should show the capacity of the individual
signing.
This can be shown either in the form of the registration itself or
by
the individual executing the proxy card. For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
--------- ---------------------------
CORPORATE ACCOUNTS
-----------------------------------------
<S> <C> <C> <C>
(1) ABC Corp. .....................
A ABC Corp.
(2) ABC Corp. ..................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe Treasurer ...... John Doe
(4) ABC Corp. Profit Sharing
Plan ........................ John Doe, Trustee
TRUST ACCOUNTS
-----------------------------------------
(1) ABC Trust .....................
B Jane Doe, Trustee
(2) Jane Doe, Trustee
u/t/d 12/38/78 .............. Jane Doe
CUSTODIAL OR ESTATE ACCOUNTS
-----------------------------------------
(1) John B. Smith
C f/b/o John B. Smith ......... John B. Smith
(2) John B. Smith ................. Estate of John B. Smith,
John B. Smith, Jr. Executor
</TABLE>
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JANUARY 3, 1994
ACQUISITION OF THE ASSETS OF
SMITH BARNEY SHEARSON
DIRECTIONS VALUE FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 720-9218
BY AND IN EXCHANGE FOR SHARES OF
SMITH BARNEY SHEARSON
GROWTH AND INCOME FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 720-9218
This Prospectus/Proxy Statement is being furnished to shareholders of
Smith
Barney Shearson Directions Value Fund ("Directions Value Fund"), a
separate
series of Smith Barney Shearson Investment Funds Inc. (the "Company"),
in
connection with a proposed plan of reorganization, to be submitted
to
shareholders of Directions Value Fund for consideration at a Special Meeting
of
Shareholders to be held on March 2, 1994 at 2:00 p.m., New York time, at
the
offices of the Company, Two World Trade Center, 100th Floor, New York, New
York,
and any adjournments thereof (collectively, the "Meeting"). The Plan
provides
for all of the assets of Directions Value Fund to be acquired by Smith
Barney
Shearson Growth and Income Fund ("Growth and Income Fund" and collectively
with
Directions Value Fund, the "Funds"), a subtrust of Smith Barney Shearson
Equity
Funds (the "Trust"), in exchange for shares of Growth and Income Fund and
the
assumption by Growth and Income Fund of certain liabilities of Directions
Value
Fund (hereinafter referred to as the "Reorganization"). Following
the
Reorganization, shares of Growth and Income Fund will be distributed
to
shareholders of Directions Value Fund in liquidation of Directions Value
Fund
which then would be terminated. As a result of the proposed Reorganization,
each
shareholder of Directions Value Fund will receive that number of shares
of
Growth and Income Fund having an aggregate net asset value equal to
the
aggregate net asset value of such shareholder's shares of Directions Value
Fund.
This transaction is being structured as a tax-free reorganization.
Growth and Income Fund is an open-end, diversified management
investment
company whose principal investment objective is to seek income and long-
term
capital growth. The investment objective of Directions
Value
1
<PAGE>
Fund is long-term growth of capital. The investment objectives and policies
of
Growth and Income Fund are generally similar to those of Directions Value
Fund.
However, certain differences in the Funds' investment policies are
described
under "Comparison of Investment Objectives and Policies" in
this
Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for
future
reference, sets forth concisely the information about Growth and Income
Fund
that a prospective investor should know before investing. Certain
relevant
documents listed below, which have been filed with the Securities and
Exchange
Commission ("SEC"), are incorporated in whole or in part by reference.
A
Statement of Additional Information dated January 3, 1994, relating to
this
Prospectus/Proxy Statement and the Reorganization, has been filed with the
SEC
and is incorporated by reference into this Prospectus/Proxy Statement. A copy
of
such Statement of Additional Information is available upon request and
without
charge by writing to Directions Value Fund at the address listed on the
cover
page of this Prospectus/Proxy Statement or by calling toll-free 1-800-451-
2010.
1. The Prospectus of Growth and Income Fund dated June 1, 1993,
as
supplemented, is incorporated in its entirety by reference and a copy
is
included herein.
2. The Prospectus of Directions Value Fund dated May 1, 1993,
as
supplemented on August 1, 1993, is incorporated in its entirety
by
reference.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a copy
of
the Agreement and Plan of Reorganization (the "Plan") for the
proposed
transaction.
2
<PAGE>
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/ PROXY STATEMENT. ANY REPRESENTATION
TO
THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary........................................................ 4
Reasons for the Reorganization................................. 9
Information About the Reorganization........................... 10
Comparison of Investment Objectives and Policies............... 14
Comparative Information on Shareholders' Rights................ 16
Additional Information About Directions Value Fund and Growth
and Income Fund............................................... 19
Other Business................................................. 19
Voting Information............................................. 19
Financial Statements and Experts............................... 21
Legal Matters.................................................. 21
Exhibit A: Agreement and Plan of Reorganization................ A-1
</TABLE>
ADDITIONAL MATERIALS
Statement of Additional Information for Prospectus/Proxy Statement.
3
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT,
THE
PROSPECTUS OF GROWTH AND INCOME FUND DATED JUNE 1, 1993, AS SUPPLEMENTED,
THE
PROSPECTUS OF DIRECTIONS VALUE FUND DATED MAY 1, 1993, AS SUPPLEMENTED, AND
THE
PLAN, A COPY OF WHICH IS ATTACHED TO THIS PROSPECTUS/PROXY STATEMENT AS
EXHIBIT
A.
PROPOSED REORGANIZATION. The Plan provides for the transfer of all of
the
assets of Directions Value Fund in exchange for shares of Growth and Income
Fund
and the assumption by Growth and Income Fund of certain liabilities
of
Directions Value Fund. The Plan also calls for the distribution of shares
of
Growth and Income Fund to Directions Value Fund shareholders in liquidation
of
Directions Value Fund. As a result of the Reorganization, each shareholder
of
Directions Value Fund will become the owner of that number of full
and
fractional shares of Growth and Income Fund having an aggregate net asset
value
equal to the aggregate net asset value of the shareholder's shares of
Directions
Value Fund as of the close of business on the date that Directions Value
Fund's
assets are exchanged for shares of Growth and Income Fund. (Shareholders
of
Class A, Class B and Class D shares of Directions Value Fund will receive
Class
A, Class B and Class D shares, respectively, of Growth and Income Fund.)
See
"Information About the Reorganization."
For the reasons set forth below under "Reasons for the Reorganization,"
the
Board of Directors of the Company, including all of the "non-
interested"
Directors, as that term is defined in the Investment Company Act of 1940,
as
amended (the "1940 Act"), has unanimously concluded that the
Reorganization
would be in the best interests of the shareholders of Directions Value Fund
and
that the interests of Directions Value Fund's existing shareholders would not
be
diluted as a result of the transaction contemplated by the Reorganization,
and
therefore has submitted the Plan for approval by Directions Value
Fund's
shareholders. The Board of Directors of the Company recommends approval of
the
Plan effecting the Reorganization. The Board of Trustees of the Trust has
also
approved the Reorganization.
Shareholders of record of Directions Value Fund at the close of business
on
December 31, 1993 (the "Record Date") will be entitled to vote at the Meeting
or
any adjournments thereof. Approval of the Plan will require the affirmative
vote
of the holders of at least a majority of the outstanding shares of
Directions
Value Fund entitled to vote on the matter. See "Voting Information."
4
<PAGE>
TAX CONSEQUENCES. Prior to completion of the Reorganization,
Directions
Value Fund will have received from counsel an opinion that, upon
the
Reorganization and the transfer of the assets of Directions Value Fund, no
gain
or loss will be recognized by Directions Value Fund or its shareholders
for
Federal income tax purposes. The holding period and aggregate tax basis
of
shares of Growth and Income Fund that are received by each Directions Value
Fund
shareholder will be the same as the holding period and aggregate tax basis
of
the shares of Directions Value Fund previously held by such shareholder.
In
addition, the holding period and tax basis of the assets of Directions
Value
Fund in the hands of Growth and Income Fund as a result of the
Reorganization
will be the same as in the hands of Directions Value Fund immediately prior
to
the Reorganization.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. Directions Value Fund
and
Growth and Income Fund have generally similar investment objectives,
policies
and restrictions. Both Growth and Income Fund and Directions Value Fund
seek
long-term capital growth by investing in common stocks. Growth and Income
Fund
attempts to achieve its objective by investing primarily in income-
producing
equity securities, including dividend-paying common stocks and securities
that
are convertible into common stocks and warrants. Directions Value Fund
seeks
long-term growth of capital by investing in common stocks or
securities
convertible into or exchangeable for common stocks which are believed by
the
Fund's investment adviser to be undervalued.
Although the respective investment objectives and policies of Growth
and
Income Fund and Directions Value Fund are generally similar, shareholders
of
Directions Value Fund should consider certain differences in such objectives
and
policies. Most notably, Growth and Income Fund has as investment objectives
both
achieving income as well as long-term capital appreciation whereas,
for
Directions Value Fund, dividend income is of secondary importance. The
Funds
also differ with respect to the types of investments in which they are
permitted
to invest. For example, Growth and Income Fund has the ability to invest
in
corporate bonds and mortgage related securities and may enter into interest
rate
and stock index futures which may involve different and, in some cases,
greater
risks than techniques currently used by Directions Value Fund. See
"Comparison
of Investment Objectives and Policies."
FEES AND EXPENSES. Growth and Income Fund pays its investment
adviser,
Greenwich Street Advisors, a division of Mutual Management Corp.
("Greenwich
Street Advisors"), a fee computed at an annual rate of 0.45% of the value of
the
Fund's average daily net assets and pays The Boston Company Advisors,
Inc.
("Boston Advisors") an administration fee computed at
5
<PAGE>
the annual rate of 0.20% of the value of the Fund's average daily net
assets.
Directions Value Fund pays an investment advisory fee of 0.35% of the value
of
the Fund's average daily net assets and pays an administration fee to
Boston
Advisors of 0.20% of the value of the Fund's average daily net assets.
Although both Funds are subject to the same transfer agency fees, the
Funds'
transfer agent, The Shareholders Services Group, has agreed to limit its
fees
with respect to Class A shares of Growth and Income Fund, after
the
Reorganization, to 0.10% of the average daily net assets of that Class.
The expense ratio of Growth and Income Fund subsequent to the
Reorganization
is expected to be lower than that of Directions Value Fund with respect to
Class
B shares and the same with respect to Class A shares. See "Reasons
for
Reorganization." Total operating expenses stated as a percentage of average
net
assets as of September 30, 1993 for Growth and Income Fund's Class B shares
were
1.86% on an annualized basis and for Directions Value Fund's Class B shares
were
1.87%. Upon the Reorganization, it is expected that the expense ratio of
Growth
and Income Fund Class B shares will be 1.70%. On November 6, 1992, both
Funds
began offering an additional class of shares, Class A shares, subject to
a
front-end sales load and shareholder services fee, but no ongoing
distribution
fee (discussed below). Accordingly, the expense ratio for a Class A
shareholder
is somewhat lower than for a Class B shareholder. Annualized expense ratios
as
of September 30, 1993 for a Class A shareholder of Growth and Income Fund
were
1.13% and of Directions Value were 1.43%. It is expected that,
upon
Reorganization, the expense ratio of Class A shares will be 1.13%.
Shares of Growth and Income Fund and Directions Value Fund are both
sold
subject to distribution plans adopted pursuant to Rule 12b-1 under the 1940
Act.
Under their respective plans, Smith Barney Shearson is paid a
shareholder
services fee calculated at the annual rate of 0.25% of the value of each
Fund's
average daily net assets attributable to the respective Fund's Class A and
Class
B shares. In addition, each Fund's Class B shares pay a distribution
fee
primarily intended to compensate Smith Barney Shearson for its initial
expense
of paying financial consultants a commission upon sales of the
respective
shares. The distribution fee for Directions Value Fund's Class B shares
is
calculated at the annual rate of 0.75% of the value of the Fund's average
net
assets attributable to the shares of the Class. The distribution fee for
Growth
and Income Fund's Class B shares is calculated at an annual rate of only
0.50%
of the value of the Fund's average net assets attributable to shares of
that
Class. Eight years after the date of purchase, the Class B shares of
the
respective Funds will convert automatically to Class A shares, based on
the
relative net asset values of shares of each Class, and will no longer be
subject
to a distribution fee. Directions Value Fund's Class B
6
<PAGE>
shareholders who receive Class B shares of Growth and Income Fund will
begin
their eight year period as of the date they first purchased Class B shares
of
Directions Value Fund. See "Distributor" in the accompanying prospectus
of
Growth and Income Fund.
PURCHASE AND REDEMPTION PROCEDURES. Purchases of shares of Growth
and
Income Fund and Directions Value Fund must be made through a brokerage
account
maintained with Smith Barney Shearson or with a broker that clears
securities
transactions through Smith Barney Shearson on a fully disclosed basis
(an
"Introducing Broker"). Class A shares of Growth and Income Fund and
Directions
Value Fund are both sold subject to a maximum initial sales charge of up
to
5.00% of the public offering price. Class B shares of both Growth and
Income
Fund and Directions Value Fund are sold without an initial sales charge but
are
subject to contingent deferred sales charges ("CDSC") and certain
higher
expenses.
Class A shares of both Growth and Income Fund and Directions Value Fund
may
be redeemed at their net asset value per share without charge and Class B
shares
of both Funds may be redeemed at their net asset value per share, subject to
a
maximum CDSC of 5.00%. Redemptions may be made by submitting a
redemption
request through Smith Barney Shearson or an Introducing Broker or the
Funds'
transfer agent. See "Redemption of Shares" in the accompanying Prospectus
of
Growth and Income Fund.
Growth and Income Fund and Directions Value Fund also offer Class D
shares.
Class D shares are available to participants in the Smith Barney Shearson
401(k)
Program and are sold at net asset value per share. Class D shares of both
Funds
are not subject to an initial sales charge or CDSC; however, they are
both
subject to an annual service fee of 0.25% of the value of average daily
net
assets attributable to such Class. In addition, Directions Value Fund's Class
D
shares are subject to an annual distribution fee of 0.75% of the value
of
average daily net assets attributable to such Class, and Growth and
Income
Fund's Class D shares are subject to an annual distribution fee of 0.50% of
the
value of average daily net assets attributable to such Class. See "Purchase
of
Shares" in the accompanying Prospectus of Growth and Income Fund.
EXCHANGE PRIVILEGES. Shareholders of both Directions Value Fund and
Growth
and Income Fund may exchange shares of each Class for shares of the same
Class
in certain funds in the Smith Barney Shearson Group of Funds ("Group of
Funds")
to the extent shares are offered for sale in the shareholder's state
of
residence. As a result of the Reorganization, each shareholder of Class A,
Class
B and Class D shares of Directions Value Fund who becomes the owner of
the
respective class of shares of Growth and Income Fund will be entitled to
the
exchange privileges offered by that Class
7
<PAGE>
of shares. Any exchange will be a taxable event for which a shareholder may
have
to recognize a gain or loss under Federal income tax provisions. For
the
purposes of any exchange of shares acquired through the
Reorganization,
Directions Value Fund shareholders will be deemed to have paid the maximum
sales
charge currently applicable for shares of Growth and Income Fund. A
"sales
charge differential" will be imposed on all Growth and Income Fund
shareholders
if they choose to exchange their shares of Growth and Income Fund for shares
of
another fund in the Group of Funds which imposes a higher sales charge than
that
imposed on Growth and Income Fund shares. Growth and Income Fund reserves
the
right to amend or terminate the exchange privilege after providing notice
to
shareholders. See "Exchange Privilege" in the accompanying prospectus of
Growth
and Income Fund.
DIVIDENDS. The policies of each Fund with regard to dividends
and
distributions are generally the same. Each Fund's policy is to
distribute
investment income quarterly and 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. Unless a shareholder instructs that dividends and capital
gains
distributions be paid in cash and credited to the shareholder's account at
Smith
Barney Shearson, dividends and capital gains distributions will be
reinvested
automatically in additional shares of the Fund at net asset value, without
a
sales charge or CDSC. Directions Value Fund shareholders that have elected
to
receive dividends and distributions in cash will continue to
receive
distributions in such manner from Growth and Income Fund. Subsequent to
the
Reorganization, Directions Value Fund shareholders may elect at any time to
have
their dividends and distributions reinvested automatically in additional
shares
of Growth and Income Fund by contacting their Smith Barney Shearson
Financial
Consultant. See "Dividends, Distributions and Taxes" in the
accompanying
prospectus of Growth and Income Fund.
SHAREHOLDER VOTING RIGHTS. The Company, as a Maryland corporation, and
the
Trust, as a Massachusetts business trust, generally do not hold an
annual
meeting of shareholders unless required by applicable law or the 1940 Act.
The
1940 Act requires that a meeting of the shareholders of the Company or Trust,
as
the case may be, be called for the purpose of electing Board Members at
such
time as fewer than a majority of Board Members holding office have been
elected
by shareholders. Board Members of the Company and of the Trust hold office
until
a successor is elected and qualified. Shareholder meetings of either Fund
will
be held for any purpose upon the written request of shareholders entitled
to
cast at least 10% of all votes at the meeting. See "Comparative Information
on
Shareholder Rights -- Shareholders' Voting Rights."
8
<PAGE>
APPRAISAL RIGHTS. Under the laws of the Commonwealth of Massachusetts
and
the Master Trust Agreement of Growth and Income Fund, shareholders of Growth
and
Income Fund do not have appraisal rights in connection with a combination
or
acquisition of the assets of another fund. Under the laws of the State
of
Maryland, shareholders of Directions Value Fund do not have appraisal rights
in
connection with a combination or acquisition of the assets of Directions
Value
Fund by another entity.
RISK FACTORS. Due to the similarities of investment objectives and
policies
of Growth and Income Fund and Directions Value Fund, the investment risks
are
also generally similar. Such risks are generally those typically associated
with
investing in common stocks of U.S. companies. Such risks, and
certain
differences in the risks associated with investing in the Funds, are
discussed
under the caption "Comparison of Investment Objectives and Policies" and in
the
accompanying prospectus of Growth and Income Fund under the captions
"Investment
Objective and Management Policies."
REASONS FOR THE REORGANIZATION
The Board Members of the Company have determined that it is advantageous
to
combine Directions Value Fund with Growth and Income Fund. The Funds
have
generally similar investment objectives and policies and the same
adviser,
administrator, custodian and transfer agent.
The Board Members of the Company have determined that the
Reorganization
should provide certain benefits to shareholders. In making such
determination,
the Board Members considered, among other things, the savings in expenses
borne
by shareholders expected to be realized by the Reorganization, the
comparative
investment performance of the Funds and the advantages of
eliminating
duplication inherent in marketing two funds with similar investment
objectives.
In light of the foregoing, the Board Members of the Company, including
the
non-interested Board Members, have decided that it is in the best interests
of
Directions Value Fund and its shareholders to combine with Growth and
Income
Fund. The Board Members of the Company have also determined that a
combination
of Directions Value Fund and Growth and Income Fund would not result in
a
dilution of Directions Value Fund's shareholders' interest.
The Board Members of the Trust considered various factors in approving
the
Reorganization and have determined that it is advantageous to acquire the
assets
of Directions Value Fund. Among other reasons, the Board Members of the
Trust
believe that: (1) the impact of the Reorganization on the current expenses
of
Growth and Income Fund will be beneficial, due in
9
<PAGE>
part to increased economies of scale; and (2) the Reorganization will
be
effected as a tax-free reorganization. Accordingly, the Board Members of
the
Trust, including a majority of the non-interested Board Members, have
determined
that the Reorganization is in the best interests of Growth and Income
Fund's
shareholders and that the interests of Growth and Income Fund's
shareholders
will not be diluted as a result of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
PLAN OF REORGANIZATION. The following summary of the Plan is qualified
in
its entirety by reference to the Plan (Exhibit A hereto). The Plan provides
that
Growth and Income Fund will acquire substantially all of the assets
of
Directions Value Fund in exchange for shares of Growth and Income Fund and
the
assumption by Growth and Income Fund of certain liabilities of Directions
Value
Fund on March 4, 1994 or such later date as may be agreed upon by the
parties
(the "Closing Date"). Prior to the Closing Date, Directions Value Fund
will
endeavor to discharge all of its known liabilities and obligations. Growth
and
Income Fund will not assume any liabilities or obligations of Directions
Value
Fund other than those reflected in an unaudited statement of assets
and
liabilities of Directions Value Fund prepared as of the close of regular
trading
on the New York Stock Exchange, Inc. (the "NYSE"), currently 4:00 p.m. New
York
time, on the Closing Date. The number of full and fractional Class A, Class
B
and Class D shares of Growth and Income Fund to be issued to Directions
Value
Fund shareholders will be determined on the basis of Growth and Income
Fund's
and Directions Value Fund's relative net asset values per Class A, Class B
and
Class D shares, respectively, computed as of the close of regular trading on
the
NYSE on the Closing Date. The net asset value per share of each Class will
be
determined by dividing assets, less liabilities, by the total number
of
outstanding shares.
Both Directions Value Fund and Growth and Income Fund will utilize
Boston
Advisors as agent to determine the value of their respective
portfolio
securities. Directions Value Fund and Growth and Income Fund also will use
the
same independent pricing service to determine the value of each security so
that
Boston Advisors, as agent, can determine the aggregate value of each
Fund's
portfolio. The method of valuation employed will be consistent with Rule
22c-1
under the 1940 Act, and with the interpretation of such rule by the
SEC's
Division of Investment Management.
At or prior to the Closing Date, both Funds shall have declared a
dividend
or dividends which, together with all previous such dividends, shall have
the
effect of distributing to each Fund's shareholders all taxable income for
the
taxable year ending on or prior to the Closing Date
(computed
10
<PAGE>
without regard to any deduction for dividends paid) and all of its net
capital
gains realized in the taxable year ending on or prior to the Closing Date
(after
reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, Directions
Value
Fund will liquidate and distribute pro rata to shareholders of record as of
the
close of business on the Closing Date the full and fractional shares of
Growth
and Income Fund received by Directions Value Fund. Such liquidation
and
distribution will be accomplished by the establishment of accounts in the
names
of Directions Value Fund's shareholders on the share records of Growth
and
Income Fund's transfer agent. Each account will represent the respective
pro
rata number of full and fractional shares of Growth and Income Fund due to
each
of Directions Value Fund's shareholders. After such distribution and the
winding
up of its affairs, Directions Value Fund will be terminated.
The consummation of the Reorganization is subject to the conditions
set
forth in the Plan. Notwithstanding approval of Directions Value
Fund's
shareholders, the Plan may be terminated at any time at or prior to the
Closing
Date (1) by mutual agreement of Directions Value Fund and Growth and
Income
Fund, or (2) upon a material breach by either party to the Plan of
any
representation, warranty, or agreement contained therein.
Growth and Income Fund and Directions Value Fund shall each be liable
for
its respective expenses incurred in connection with entering into and
carrying
out the Plan, whether or not the Reorganization is consummated.
Approval of the Plan will require the affirmative vote of the holders of
at
least a majority of the outstanding shares of Directions Value Fund entitled
to
vote on the matter. If the Reorganization is not approved by shareholders
of
Directions Value Fund, the Board Members of the Company will consider
other
possible courses of action.
DESCRIPTION OF GROWTH AND INCOME FUND'S SHARES. Full and fractional
shares
of the respective Class of shares of common stock of Growth and Income Fund
will
be issued to Directions Value Fund in accordance with the procedures detailed
in
the Plan and as described in Growth and Income Fund's Prospectus.
Generally,
Growth and Income Fund does not issue share certificates to shareholders
unless
a specific request is submitted to its transfer agent. The shares of Growth
and
Income Fund to be issued to Directions Value Fund shareholders and registered
on
the shareholder records of the transfer agent will have no pre-emptive
or
conversion rights. However, eight years after the date of purchase, Class
B
shares of Growth and Income Fund convert automatically to Class A shares,
based
on the relative net asset values
11
<PAGE>
of shares of each Class, and are no longer subject to a distribution
fee.
Directions Value Fund Class B shareholders who receive Class B shares of
Growth
and Income Fund will begin their eight year period as of the date they
first
purchased Class B shares of Directions Value Fund. See "Comparative
Information
on Shareholder Rights" and Growth and Income Fund's Prospectus for
additional
information with respect to the shares of Growth and Income Fund.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of assets for shares
of
Growth and Income Fund is intended to qualify for Federal income tax purposes
as
a tax-free reorganization under Section 368 of the Internal Revenue Code
of
1986, as amended (the "Code"). As a condition to the closing of
the
Reorganization, Directions Value Fund will receive an opinion from the law
firm
of Willkie Farr & Gallagher to the effect that, on the basis of the
existing
provisions of the Code, U.S. Treasury regulations issued thereunder,
current
administrative rules, pronouncements and court decisions, for Federal income
tax
purposes, upon consummation of the Reorganization:
(1) the transfer of substantially all of Directions Value Fund's
assets
in exchange for Growth and Income Fund's shares and the assumption by
Growth
and Income Fund of certain identified liabilities of Directions Value
Fund
will constitute a "reorganization" within the meaning of
Section
368(a)(1)(C) of the Code, and Growth and Income Fund and Directions
Value
Fund are each a "party to a reorganization" within the meaning of
Section
368(b) of the Code;
(2) no gain or loss will be recognized by Growth and Income Fund
upon
the receipt of the assets of Directions Value Fund solely in exchange
for
Growth and Income Fund's shares and the assumption of certain
identified
liabilities of Directions Value Fund;
(3) no gain or loss will be recognized by Directions Value Fund
upon
the transfer of Directions Value Fund's assets to Growth and Income Fund
in
exchange for Growth and Income Fund's shares and the assumption of
certain
identified liabilities of Directions Value Fund or upon the
distribution
(whether actual or constructive) of Growth and Income Fund's shares
to
Directions Value Fund's shareholders;
(4) no gain or loss will be recognized by shareholders of
Directions
Value Fund upon the exchange of their Directions Value Fund's shares
for
Growth and Income Fund shares and the assumption by Growth and Income
Fund
of certain identified liabilities of Directions Value Fund;
12
<PAGE>
(5) the aggregate tax basis for Growth and Income Fund shares
received
by each Directions Value Fund shareholder pursuant to the
Reorganization
will be the same as the aggregate tax basis of Directions Value Fund
shares
held by that shareholder immediately prior to the Reorganization, and
the
holding period of Growth and Income Fund shares to be received by
each
Directions Value Fund shareholder will include the period during
which
Directions Value Fund shares exchanged therefor were held by
such
shareholder (provided the Directions Value Fund shares were held as
capital
assets on the date of the Reorganization); and
(6) the tax basis of Directions Value Fund's assets acquired by
Growth
and Income Fund will be the same as the tax basis of such assets
to
Directions Value Fund immediately prior to the Reorganization, and
the
holding period of the assets of Directions Value Fund in the hands of
Growth
and Income Fund will include the period during which those assets were
held
by Directions Value Fund.
Shareholders of Directions Value Fund should consult their tax
advisors
regarding the effect, if any, of the proposed Reorganization in light of
their
individual circumstances. Since the foregoing discussion only relates to
the
Federal income tax consequences of the Reorganization, shareholders
of
Directions Value Fund should also consult their tax advisors as to state
and
local tax consequences, if any, of the Reorganization.
CAPITALIZATION. The following table shows the capitalization of Growth
and
Income Fund and Directions Value Fund as of dates shown, and on a pro
forma
basis as of that date, giving effect to the proposed acquisition of assets
at
net asset value:
<TABLE>
<CAPTION>
GROWTH AND DIRECTIONS
AS OF JULY 31, 1993 INCOME VALUE PRO FORMA
FOR
CLASS A SHARES FUND FUND
REORGANIZATION
- ---------------------------------- ------------ ------------ -----------
- ---
<S> <C> <C> <C>
Net Assets........................ $ 3,775,567 $ 3,177,754 $
6,953,321
Net asset value per share......... $ 9.71 $ 13.44 $
9.71
Shares outstanding................ 388,755 236,516
716,021
<CAPTION>
GROWTH AND DIRECTIONS
AS OF JULY 31, 1993 INCOME VALUE PRO FORMA
FOR
CLASS B SHARES FUND FUND
REORGANIZATION
- ---------------------------------- ------------ ------------ -----------
- ---
<S> <C> <C> <C>
Net Assets........................ $ 55,922,073 $166,377,287 $
222,299,360
Net asset value per share......... $ 9.70 $ 13.44 $
9.70
Shares outstanding................ 5,765,319 12,381,770
22,917,617
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND DIRECTIONS
AS OF JULY 31, 1993 INCOME VALUE PRO FORMA
FOR
CLASS D SHARES FUND FUND
REORGANIZATION
- ---------------------------------- ------------ ------------ -----------
- ---
<S> <C> <C> <C>
Net Assets........................ $ 10 $ 13 $
23
Net asset value per share......... $ 9.70 $ 13.44 $
9.70
Shares outstanding................ 1 1
2
</TABLE>
As of the Record Date, December 31, 1993, there were 230,445.226
outstanding
Class A shares, 11,611,903.540 outstanding Class B shares and 1.00
outstanding
Class D share of the Directions Value Fund and 430,443.292 outstanding Class
A
shares, 6,301,735.654 outstanding Class B shares and 1.00 outstanding Class
D
shares of Growth and Income Fund. As of the Record Date, the officers
and
Directors of Directions Value Fund beneficially owned as a group less than 1%
of
the outstanding shares of Directions Value Fund. To the best knowledge of
the
Directors of the Company, as of the Record Date, no other shareholder or
"group"
(as that term is used in Section 13(d) of the Securities Exchange Act of
1934,
the "Exchange Act") beneficially owned more than 5% of Directions Value Fund.
As
of the Record Date, the officers and Trustees of Growth and Income
Fund
beneficially owned as a group less than 1% of the outstanding shares of
Growth
and Income Fund. To the best knowledge of the Trustees of Growth and
Income
Fund, as of the Record Date, no other shareholder or "group" (as that term
is
used in Section 13(d) of the Exchange Act) beneficially owned more than 5%
of
Growth and Income Fund.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies
and
restrictions of Growth and Income Fund and Directions Value Fund is based
upon
and qualified in its entirety by the respective investment objectives,
policies
and restrictions sections of the prospectuses of Growth and Income Fund
and
Directions Value Fund. For a full discussion of the investment
objectives,
policies and restrictions of Growth and Income Fund, refer to Growth and
Income
Fund's Prospectus, which accompanies this Prospectus/ Proxy Statement, under
the
caption "Investment Objective and Management Policies," and for a discussion
of
these issues as they apply to Directions Value Fund, refer to Directions
Value
Fund's Prospectus under the caption "Investment Objective and
Management
Policies."
INVESTMENT OBJECTIVE. A principal investment objective of both Growth
and
Income Fund and Directions Value Fund is long-term capital growth.
Current
income is another objective of Growth and Income Fund and a
secondary
consideration of Directions Value Fund. Accordingly, the investment
objectives
of the Funds are generally similar. Both Growth and
Income
14
<PAGE>
Fund's and Directions Value Fund's investment objectives are
considered
fundamental policies which cannot be changed without shareholder
approval.
However, the policies described below in this Comparison of
Investment
Objectives and Policies section can be changed without shareholder approval.
PRIMARY INVESTMENTS. Growth and Income Fund invests primarily
in
income-producing equity securities, including dividend-paying common
stocks,
securities that are convertible into common stocks and warrants. The
Fund's
investment emphasis at this time is on securities of domestic companies
of
varying sizes, generally with capitalizations exceeding $250 million, in a
wide
range of industries. The criteria used by Greenwich Street Advisors may
be
changed in light of the adviser's experience in managing the Fund or in
response
to changing market conditions.
Directions Value Fund invests principally in common stocks and
other
securities convertible into or exchangeable for common stocks. Emphasis
is
placed on securities which, in the judgment of Greenwich Street Advisors,
are
undervalued. Greenwich Street Advisors utilizes its "Directions"
proprietary
valuation program to assist in the selection of securities for purchase
or
disposition by Directions Value Fund. Directions provides monthly ranking
of
industries and issuers according to undervaluation by the market; however,
the
investment adviser is not obligated to conform Directions Value
Fund's
investments to the Directions rankings in any particular manner.
Directions
compares certain historical data with future earning expectations and
current
stock market price for approximately 600 U.S. and foreign companies listed
on
U.S. stock exchanges in about 60 industry groups, in an attempt to
identify
currently undervalued issuers and industries.
Although Growth and Income Fund and Directions Value Fund invest
primarily
in common stocks, both Funds may invest, to a limited extent, in
government
securities and money market instruments. Additionally, both Funds may invest
in
American Depository Receipts ("ADRs"). For a discussion of the risks involved
in
investing in foreign securities, refer to "Investment Objective and
Management
Policies -- Investment Policies and Strategies" in the accompanying
Prospectus
of Growth and Income Fund.
INVESTMENT TECHNIQUES. From time to time, each Fund may lend its
portfolio
securities to brokers, dealers and other financial organizations. These
loans
will not exceed 33 1/3% of each Fund's total assets taken at value. Loans
of
portfolio securities by Directions Value Fund must be collateralized by
cash,
cash equivalents or United States government securities which are maintained
at
all times in an amount equal to at least 100% of the current market value of
the
loaned securities. Loans of portfolio securities by
15
<PAGE>
Growth and Income Fund must be collateralized by cash, letters of credit or
U.S.
government securities, which are maintained at all times in an amount equal
to
the current market value of the loaned securities.
Each Fund may also enter into repurchase agreements with certain
member
banks of the Federal Reserve System and with certain dealers on the
Federal
Reserve Bank of New York's list of reporting dealers.
Growth and Income Fund may enter into interest rate futures contracts,
stock
index futures contracts and related options that are traded on a
domestic
exchange or board of trade. These transactions will be made solely for
the
purpose of hedging against the effects of changes in the value of
portfolio
securities due to anticipated changes in interest rates, market conditions
and
currency values, as the case may be.
Successful use of futures contracts as a hedging device is subject to
the
ability of Greenwich Street Advisors to predict correctly movements in the
stock
market and the direction of interest rates. Additionally, there can be
no
assurance that there will be a perfect correlation between movements in
the
price of securities underlying the futures contracts and movements in
the
securities that are the subject of the hedge. Accordingly, Growth and
Income
Fund's use of such instruments will involve some risk.
Growth and Income Fund may write covered call options on its
portfolio
securities and enter into closing transactions with respect to such
options.
Growth and Income Fund may also purchase put options on its portfolio
securities
and enter into closing transactions with respect to the same.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL. The Company and the Trust are open-end management
investment
companies registered under the 1940 Act which continuously offer to sell
shares
at their current net asset value. Growth and Income Fund is a separate
subtrust
of the Trust, which is organized as a business trust under the laws of
the
Commonwealth of Massachusetts and is governed by a Master Trust
Agreement,
By-Laws and Board of Trustees. Directions Value Fund is a separate series of
the
Company, which is organized as a Maryland corporation and is governed by
its
Articles of Incorporation, By-Laws and Board of Directors. Both Funds are
also
governed by applicable state and Federal law. Certain differences
and
similarities between the two Funds are summarized below.
TRUSTEES AND DIRECTORS. Under the Master Trust Agreement of the
Trust,
persons serving as Trustees will continue as Trustees for the duration of
the
Fund's existence until they resign, die or are removed by a written
instrument,
signed by at least two-thirds of the Trustees or by vote of
the
16
<PAGE>
shareholders holding not less than two-thirds of the shares then
outstanding,
cast in person or by proxy at any meeting called for that purpose or by
a
written declaration signed by the shareholders holding not less than two-
thirds
of the shares then outstanding and filed with the Fund's custodian. The By-
Laws
of the Company provide that the term of office of each Director shall be
from
the time of his election and qualification until the election of Directors
next
succeeding his election and until his successor shall have been elected
and
shall have qualified, or until the earlier of his death, resignation or
removal.
Any Director may be removed by the shareholders by a majority of the
votes
entitled to be cast for the election of Directors. Vacancies on the Boards
of
either the Company or the Trust may be filled by the Directors or
Trustees,
respectively, remaining in office. A meeting of shareholders will be
required
for the purpose of electing additional Trustees or Directors whenever fewer
than
a majority of the Trustees or Directors then in office were elected
by
shareholders.
SHAREHOLDER LIABILITY. Under Massachusetts law, shareholders of the
Trust
may, under certain circumstances, be held personally liable for the
obligations
of the Trust. However, the Trust's Master Trust Agreement disclaims
shareholder
liability for acts or obligations of the Trust and requires that notice of
such
disclaimer be given in each agreement, obligation or instrument entered into
or
executed by the Trust. The Trust's Master Trust Agreement provides
for
indemnification out of the Trust's property for all losses and expenses of
any
shareholder held personally liable for the obligations of the Trust. Thus,
the
risk of a shareholder incurring financial loss on account of
shareholder
liability is considered remote since it is limited to circumstances in which
a
disclaimer is inoperative and the Trust itself would be unable to meet
its
obligations. A substantial number of mutual funds in the United States
are
organized as Massachusetts business trusts. Under Maryland law, the
Acquired
Fund's shareholders do not have personal liability for the Fund's corporate
acts
and obligations.
VOTING RIGHTS. Neither the Trust nor the Company holds annual meetings
of
shareholders. Special meetings of shareholders of each Fund must be called
upon
the written request of holders of not less than 10% of the then
outstanding
voting securities of that Fund. On each matter submitted to a vote of
the
shareholders of either Fund, each shareholder is entitled to one vote for
each
whole share owned and a proportionate fractional vote for any fractional
share
outstanding in the shareholder's name on the Fund's books.
LIQUIDATION OR DISSOLUTION. In the event of the liquidation or
dissolution
of Directions Value Fund or Growth and Income Fund, the shareholders of
the
Funds are entitled to receive, when, and as declared by the Directors
or
Trustees, the excess of the assets belonging to the Funds over the
liabilities
17
<PAGE>
belonging to the Funds. In either case, the assets so distributed
to
shareholders of the Fund will be distributed among the shareholders
in
proportion to the number of shares of the Fund held by them and recorded on
the
books of the Fund.
LIABILITY OF TRUSTEES/DIRECTORS. Under the Master Trust Agreement of
the
Trust, a Trustee will be personally liable only for his or her own
willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties
involved in the conduct of the office of Trustee. The Master Trust
Agreement
further provides that Trustees and officers will be indemnified for the
expenses
of litigation against them unless it is determined that the person did not
act
in good faith in the reasonable belief that the person's actions were in or
not
opposed to the best interests of the Fund or the person's conduct is
determined
to constitute willful misfeasance, bad faith, gross negligence or
reckless
disregard of the person's duties. The Articles of Incorporation and By-Laws
of
the Company provide that the Company will indemnify Directors and officers
of
Directions Value Fund against liabilities and expenses incurred in
connection
with litigation in which they may be involved because of their positions
with
the Fund to the fullest extent permitted by Maryland law. However, nothing
in
the Articles of Incorporation or By-Laws of the Company protects or
indemnifies
a Director or officer against any liability to which such person would
otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence
or
reckless disregard of the duties involved in the conduct of such
person's
office.
RIGHTS OF INSPECTION. Shareholders of Growth and Income Fund have the
same
inspection rights as are permitted shareholders of a Massachusetts
corporation
under Massachusetts corporate law. Currently, each shareholder of
a
Massachusetts corporation is permitted to inspect the records, accounts
and
books of a corporation for any legitimate business purpose. Maryland law
permits
any shareholder of the Company or his or her agent to inspect and copy
during
the Fund's usual business hours the Company's By-Laws, minutes of
shareholder
proceedings, annual statements of the Company's affairs and voting
trust
agreements on file at its principal office.
The foregoing is only a summary of certain characteristics of the
operations
of Directions Value Fund and Growth and Income Fund, the Trust's Master
Trust
Agreement and By-laws, the Company's Articles of Incorporation and By-laws,
and
Massachusetts and Maryland law. The foregoing is not a complete description
of
the documents cited. Shareholders should refer to the provisions of
the
corporate documents and state laws governing each Fund for a more
thorough
description.
18
<PAGE>
ADDITIONAL INFORMATION ABOUT
DIRECTIONS VALUE FUND
AND GROWTH AND INCOME FUND
DIRECTIONS VALUE FUND. Information about Directions Value Fund is
included
in its current prospectus dated May 1, 1993, as supplemented on August 1,
1993,
and in the statement of additional information that has been filed with the
SEC
and which are both incorporated herein by reference. A copy of the
prospectus
and the statement of additional information is available upon request
and
without charge by writing Directions Value Fund at the address listed on
the
cover page of this Prospectus/Proxy Statement or by calling toll-
free
1-800-451-2010.
GROWTH AND INCOME FUND. Information concerning the operation and
management
of Growth and Income Fund is incorporated herein by reference from
the
prospectus dated June 1, 1993, as supplemented on August 1, 1993, and
statement
of additional information dated June 1, 1993. A copy of such statement
of
additional information is available upon request and without charge by
writing
Growth and Income Fund at Two World Trade Center, New York, New York 10048 or
by
calling toll-free 1-800-451-2010.
Both Directions Value Fund and Growth and Income Fund are subject to
the
informational requirements of the Exchange Act and in accordance therewith
file
reports and other information including proxy material, reports and
charter
documents with the SEC. These reports can be inspected and copies obtained
at
the Public Reference Facilities maintained by the SEC at 450 Fifth Street,
N.W.,
Washington, D.C. 20549 and at the New York Regional Office of the SEC, 75
Park
Place, New York, New York 10007. Copies of such material can also be
obtained
from the Public Reference Branch, Office of Consumer Affairs and
Information
Services, SEC, Washington, D.C. 20549 at prescribed rates.
OTHER BUSINESS
The Directors of the Company do not intend to present any other business
at
the Meeting. If, however, any other matters are properly brought before
the
Meeting, the persons named in the accompanying form of proxy will vote
thereon
in accordance with their judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with
a
solicitation of proxies by the Board of Directors of the Company to be used
at
the Special Meeting of Shareholders of the Directions Value Fund portfolio
of
the Company to be held at 2:00 p.m. on March 2, 1994, at Two World
Trade
19
<PAGE>
Center, 100th Floor, New York, New York 10048-0002 and at any
adjournments
thereof. This Prospectus/Proxy Statement, along with a Notice of the Meeting
and
a proxy card, is first being mailed to shareholders of Directions Value Fund
on
or about January 4, 1994. Only shareholders of record as of the close
of
business on the Record Date will be entitled to notice of, and to vote at,
the
Meeting or any adjournment thereof. The holders of a majority of the shares
of
Directions Value Fund outstanding at the close of business on the Record
Date
present in person or represented by proxy will constitute a quorum for
the
Meeting. If the enclosed form of proxy is properly executed and returned in
time
to be voted at the Meeting, the proxies named therein will vote the
shares
represented by the proxy in accordance with the instructions marked
thereon.
Unmarked proxies will be voted FOR the proposed Reorganization and FOR any
other
matters deemed appropriate for purposes of determining the presence of a
quorum
for transacting business at the meeting, abstentions and broker "non-
votes"
(that is proxies from brokers or nominees indicating that such persons have
not
received instructions from the beneficial owner or other persons entitled
to
vote shares on a particular matter with respect to which the brokers or
nominees
do not have discretionary power) will be treated as shares that are present
but
which have not been voted. A proxy may be revoked at any time on or before
the
Meeting by written notice to the Secretary of the Company, Francis J.
McNamara,
III, Exchange Place, Boston, Massachusetts 02109. Unless revoked, all
valid
proxies will be voted in accordance with the specifications thereon or, in
the
absence of such specifications, for approval of the Plan and the
Reorganization
contemplated thereby.
Approval of the Plan will require the affirmative vote of the holders of
at
least a majority of the outstanding shares of Directions Value Fund entitled
to
vote on the matter. Shareholders of Directions Value Fund are entitled to
one
vote for each share. Fractional shares are entitled to proportional
voting
rights.
Proxies are solicited by mail. Additional solicitations may be made
by
telephone, telegraph or personal contact by officers or employees of
Smith
Barney Shearson and its affiliates or by proxy soliciting firms retained
by
Smith Barney Shearson. Smith Barney Shearson has retained Management
Information
Systems to provide proxy solicitation services in connection with the Meeting
at
an estimated cost of $4,660.00. The cost of solicitation will be borne
equally
by the Funds.
Directions Value Fund and Growth and Income Fund will each be liable for
its
respective expenses incurred in connection with entering into and carrying
out
the Reorganization, whether or not the Reorganization is consummated.
20
<PAGE>
In the event that sufficient votes to approve the Reorganization are
not
received by March 2, 1994, the persons named as proxies may propose one or
more
adjournments of the Meeting to permit further solicitation of proxies.
In
determining whether to adjourn the Meeting, the following factors may
be
considered: the percentage of votes actually cast, the percentage of
negative
votes actually cast, the nature of any further solicitation and the
information
to be provided to shareholders with respect to the reasons for the
solicitation.
Any such adjournment will require an affirmative vote by the holders of
a
majority of the shares present in person or by proxy and entitled to vote at
the
Meeting. The persons named as proxies will vote upon such adjournment
after
consideration of all circumstances which may bear upon a decision to adjourn
the
Meeting.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of Directions Value Fund as of December
31,
1992 and of Growth and Income Fund as of January 31, 1993, respectively, and
the
respective statements of operations for the fiscal periods then ended
and
changes in net assets for the two years then ended and condensed
financial
information, have been incorporated by reference into this
Prospectus/Proxy
Statement in reliance on the reports of Coopers & Lybrand,
independent
accountants for the Funds, given on the authority of such firm as an expert
in
accounting and auditing. In addition, the unaudited financial statements
for
Growth and Income Fund for the semi-annual period ended July 31, 1993
are
incorporated by reference.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Growth and
Income
Fund will be passed upon by Willkie Farr & Gallagher, One Citicorp Center,
153
East 53rd Street, New York, New York 10022.
THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING THE "NON-
INTERESTED"
DIRECTORS, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN, AND ANY UNMARKED
PROXIES
WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF
THE
PLAN.
21
<PAGE>
EXHIBIT
A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of
this 3rd day of January, 1994, by and between Smith Barney Shearson Equity
Funds
(the "Trust"), a Massachusetts business trust, on behalf of Smith
Barney
Shearson Growth and Income Fund (a subtrust of the Trust, the "Acquiring
Fund"),
with its principal place of business at Two World Trade Center, 100th Floor,
New
York, New York 10048, and Smith Barney Shearson Investment Funds Inc.
(the
"Company"), a Maryland corporation, on behalf of Smith Barney
Shearson
Directions Value Fund (a separate series of the Company, the "Acquired
Fund"),
with its principal place of business at Two World Trade Center, 100th Floor,
New
York, New York 10048.
This Agreement is intended to be and is adopted as a plan of
reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United
States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization
(the
"Reorganization") will consist of the transfer of substantially all of
the
assets of the Acquired Fund in exchange solely for Class A, Class B and Class
D
shares of beneficial interest (the "Shares") of the Acquiring Fund and
the
assumption by the Acquiring Fund of certain liabilities of the Acquired Fund
and
the distribution, after the Closing Date hereinafter referred to, of
Acquiring
Fund Shares to the shareholders of the Acquired Fund in liquidation of
the
Acquired Fund as provided herein, all upon the terms and conditions
hereinafter
set forth in this Agreement.
WHEREAS, the Company and the Trust are registered investment companies
of
the management type and the Acquired Fund owns securities that generally
are
assets of the character in which the Acquiring Fund is permitted to invest;
and
WHEREAS, both the Company and the Trust are authorized to issue shares
of
common stock and beneficial interest, respectively; and
WHEREAS, the Board of Directors of the Company has determined that
the
exchange of all of the assets and certain of the liabilities of the
Acquired
Fund for Acquiring Fund Shares and the assumption of such liabilities by
the
Acquiring Fund is in the best interests of the Acquired Fund's shareholders
and
that the interests of the existing shareholders of the Acquired Fund would
not
be diluted as a result of this transaction; and
WHEREAS, the Board of Trustees of the Trust has determined that the
exchange
of all of the assets of the Acquired Fund for Acquiring Fund
Shares
A-1
<PAGE>
is in the best interests of the Acquiring Fund shareholders and that
the
interests of the existing shareholders of the Acquiring Fund would not
be
diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants
and
agreements hereinafter set forth, the parties hereto covenant and agree
as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND
SHARES AND ASSUMPTION OF THE STATED LIABILITIES AND LIQUIDATION OF THE
ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth and on the basis
of
the representations and warranties contained herein, the Acquired Fund agrees
to
transfer the Acquired Fund's assets as set forth in paragraph 1.2 to
the
Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i)
to
deliver to the Acquired Fund the number of Class A Acquiring Fund
Shares,
including fractional Class A Acquiring Fund Shares, determined by dividing
the
value of the Acquired Fund's net assets attributable to its Class A
shares,
computed in the manner and as of the time and date set forth in paragraph
2.1,
by the net asset value of one Acquiring Fund Class A Share computed in
the
manner and as of the time and date set forth in paragraph 2.2; and (ii)
to
deliver to the Acquired Fund the number of Class B Acquiring Fund
Shares,
including fractional Class B Acquiring Fund Shares, determined by dividing
the
value of the Acquired Fund's net assets attributable to its Class B
Shares,
computed in the manner and as of the time and date set forth in paragraph
2.1,
by the net asset value of one Acquiring Fund Class B Share, computed in
the
manner and as of the time and date set forth in paragraph 2.2; (iii) to
deliver
to the Acquired Fund the number of Class D Acquiring Fund Shares,
including
fractional Class D Acquiring Fund Shares, determined by dividing the value
of
the Acquired Fund's net assets attributable to its Class D shares, computed
in
the manner and as of the time and date set forth in paragraph 2.1, by the
net
asset value of one Acquiring Fund Class D share, computed in the manner and
as
of the time and date set forth in paragraph 2.2; and (iv) to assume
certain
liabilities of the Acquired Fund, as set forth in paragraph 1.3.
Such
transactions shall take place at the closing provided for in paragraph 3.1
(the
"Closing").
1.2 (a) The assets of the Acquired Fund to be acquired by the Acquiring
Fund
shall consist of all property including, without limitation, all
cash,
securities, and dividend or interest receivables which are owned by the
Acquired
Fund and any deferred or prepaid expenses shown as an asset on the books of
the
Acquired Fund on the closing date provided in paragraph 3.1 (the
"Closing
Date").
A-2
<PAGE>
(b) The Acquired Fund has provided the Acquiring Fund with a list of all
of
the Acquired Fund's assets as of the date of execution of this Agreement.
The
Acquired Fund reserves the right to sell any of these securities but will
not,
without the prior approval of the Acquiring Fund, acquire any
additional
securities other than securities of the type in which the Acquiring Fund
is
permitted to invest. The Acquiring Fund will, within a reasonable time prior
to
the Closing Date, furnish the Acquired Fund with a statement of the
Acquiring
Fund's investment objectives, policies and restrictions and a list of
the
securities, if any, on the Acquired Fund's list referred to in the
first
sentence of this paragraph which do not conform to the Acquiring
Fund's
investment objectives, policies and restrictions. In the event that the
Acquired
Fund holds any investments which the Acquiring Fund may not hold, the
Acquired
Fund will dispose of such securities prior to the Closing Date. In addition,
if
it is determined that the portfolios of the Acquired Fund and the
Acquiring
Fund, when aggregated, would contain investments exceeding certain
percentage
limitations imposed upon the Acquiring Fund with respect to such
investments,
the Acquired Fund, if requested by the Acquiring Fund, will dispose of
and/or
reinvest a sufficient amount of such investments as may be necessary to
avoid
violating such limitations as of the Closing Date.
1.3 The Acquired Fund will endeavor to discharge all the Acquired
Fund's
known liabilities and obligations prior to the Closing Date. The Acquiring
Fund
shall assume all liabilities, expenses, costs, charges and reserves reflected
on
an unaudited statement of assets and liabilities of the Acquired Fund
prepared
by The Boston Company Advisors, Inc. ("Boston Advisors"), as administrator
of
the Acquiring Fund and the Acquired Fund, as of the Valuation Date (as
defined
in paragraph 2.1), in accordance with generally accepted accounting
principles
consistently applied from the prior audited period. The Acquiring Fund
shall
assume only those liabilities of the Acquired Fund reflected in that
unaudited
statement of assets and liabilities and shall not assume any other
liabilities,
whether absolute or contingent, not reflected thereon.
1.4 As provided in paragraph 3.4, as soon after the Closing Date as
is
conveniently practicable (the "Liquidation Date"), the Acquired Fund
will
liquidate and distribute pro rata to the Acquired Fund's shareholders of
record
determined as of the close of business on the Closing Date (the "Acquired
Fund
Shareholders") the Acquiring Fund Shares it receives pursuant to paragraph
1.1.
Such liquidation and distribution will be accomplished by the transfer of
the
Acquiring Fund Shares then credited to the account of the Acquired Fund on
the
books of the Acquiring Fund to open accounts on the share records of
the
Acquiring Fund in the name of the Acquired Fund's shareholders and
representing
the respective pro rata number of the Acquiring Fund Shares due
such
shareholders. All issued and outstanding shares of
A-3
<PAGE>
the Acquired Fund will simultaneously be cancelled on the books of the
Acquired
Fund, although share certificates representing interests in the Acquired
Fund
will represent a number of Acquiring Fund Shares after the Closing Date
as
determined in accordance with Section 2.3. The Acquiring Fund shall not
issue
certificates representing the Acquiring Fund Shares in connection with
such
exchange.
1.5 Ownership of Acquiring Fund Shares will be shown on the books of
the
Acquiring Fund's transfer agent. Shares of the Acquiring Fund will be issued
in
the manner described in the Acquiring Fund's current prospectus and statement
of
additional information.
1.6 Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in
a name other than the registered holder of the Acquired Fund Shares on the
books
of the Acquired Fund as of that time shall, as a condition of such issuance
and
transfer, be paid by the person to whom such Acquiring Fund Shares are to
be
issued and transferred.
1.7 Any reporting responsibility of the Acquired Fund is and shall
remain
the responsibility of the Acquired Fund up to and including the Closing Date
and
such later dates on which the Acquired Fund is terminated.
2. VALUATION
2.1 The value of the Acquired Fund's assets to be acquired by the
Acquiring
Fund hereunder shall be the value of such assets computed as of the close
of
regular trading on the New York Stock Exchange, Inc. (the "NYSE") on the
Closing
Date (such time and date being hereinafter called the "Valuation Date"),
using
the valuation procedures set forth in the Acquiring Fund's then
current
prospectus or statement of additional information.
2.2 The net asset value of an Acquiring Fund Share shall be the net
asset
value per share computed as of the close of regular trading on the NYSE on
the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's
then current prospectus or statement of additional information.
2.3 The number of the Acquiring Fund Shares to be issued
(including
fractional shares, if any) in exchange for the Acquired Fund's net assets
shall
be determined by dividing the value of the net assets of the Acquired
Fund
determined using the same valuation procedures referred to in paragraph 2.1
by
the net asset value per share of an Acquiring Fund share determined
in
accordance with paragraph 2.2.
2.4 All computations of value shall be made by Boston Advisors in
accordance
with its regular practice as pricing agent for the Acquiring Fund.
A-4
<PAGE>
2.5 In carrying out the valuations and calculations required in
this
section, Class A shares of the Acquiring Fund shall be issued only to the
extent
of the value of the assets of the Acquired Fund representing the pro
rata
interest of Class A shares of the Acquired Fund. Class B shares of the
Acquiring
Fund shall be issued only to the extent of the value of the assets of
the
Acquired Fund representing the pro rata interest of Class B shares of
the
Acquired Fund. Class D shares of the Acquiring Fund shall be issued only to
the
extent of the value of the assets of the Acquired Fund representing the pro
rata
interest of Class D shares of the Acquired Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be March 4, 1994, or such later date as
the
parties may agree to in writing. All acts taking place at the Closing shall
be
deemed to take place simultaneously as of the close of business on the
Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m.,
at
the offices of Boston Advisors; One Boston Place; Boston, Massachusetts
02108,
or at such other time and/or place as the parties may agree.
3.2 Boston Safe Deposit and Trust Company, as custodian for the
Acquiring
Fund (the "Custodian"), shall deliver at the Closing a certificate of
an
authorized officer stating that: (a) the Acquired Fund's portfolio
securities,
cash and any other assets shall have been delivered in proper form to
the
Acquiring Fund within two business days prior to or on the Closing Date and
(b)
all necessary taxes including all applicable federal and state stock
transfer
stamps, if any, shall have been paid, or provision for payment shall have
been
made, in conjunction with the delivery of portfolio securities.
3.3 In the event that on the Valuation Date (a) the NYSE or another
primary
trading market for portfolio securities of the Acquiring Fund or the
Acquired
Fund shall be closed to trading or trading thereon shall be restricted or
(b)
trading or the reporting of trading on the NYSE or elsewhere shall be
disrupted
so that accurate appraisal of the value of the net assets of the Acquiring
Fund
or the Acquired Fund is impracticable, the Closing Date shall be postponed
until
the first business day after the day when trading shall have been fully
resumed
and reporting shall have been restored.
3.4 The Acquired Fund shall deliver at the Closing a list of the names
and
addresses of the Acquired Fund's shareholders and the number and
percentage
ownership of outstanding Shares owned by each such shareholder immediately
prior
to the Closing, certified on behalf of the Company by its President.
The
Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring
Fund Shares to be credited on the Closing Date to the Secretary of the
Acquired
Fund or provide evidence satisfactory to the
A-5
<PAGE>
Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each
party
shall deliver to the other such bills of sale, checks, assignments,
share
certificates, if any, receipts or other documents as such other party or
its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company and the Acquired Fund represent and warrant to the Trust
and
the Acquiring Fund as follows:
(a) The Company is a Maryland corporation, duly organized,
validly
existing and in good standing under the laws of the State of Maryland;
(b) The Company is a registered investment company classified as
a
management company of the open-end type and its registration with
the
Securities and Exchange Commission (the "Commission") as an
investment
company under the Investment Company Act of 1940 (the "1940 Act") is in
full
force and effect;
(c) The Company is not, and the execution, delivery and performance
of
this Agreement will not result, in a material violation of its Articles
of
Incorporation or By-Laws or of any agreement, indenture,
instrument,
contract, lease or other undertaking to which the Company or the
Acquired
Fund is a party or by which it is bound;
(d) The Company and the Acquired Fund have no material contracts
or
other commitments (other than this Agreement) which will be terminated
with
liability prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by
the
Trust and the Acquiring Fund, no litigation or administrative proceeding
or
investigation of or before any court or governmental body is
presently
pending or to its knowledge threatened against the Company, the
Acquired
Fund or any of their properties or assets (other than that
previously
disclosed to the other party to the Agreement) which, if
adversely
determined, would materially and adversely affect their financial
condition
or the conduct of their business. The Company and the Acquired Fund know
of
no facts which might form the basis for the institution of such
proceedings
and are not parties to or subject to the provisions of any order, decree
or
judgment of any court or governmental body which materially and
adversely
affects their business or their ability to consummate the
transactions
herein contemplated;
(f) The statements of assets and liabilities of the Acquired Fund
for
the fiscal years ended December 31, 1989 through December
31,
A-6
<PAGE>
1992 have been audited by Coopers & Lybrand, certified public
accountants,
and are in accordance with generally accepted accounting
principles
consistently applied, and such statements (copies of which have
been
furnished to the Acquiring Fund) fairly reflect the financial condition
of
the Acquired Fund as of such dates, and there are no known
contingent
liabilities of the Acquired Fund as of such dates not disclosed therein;
(g) Since December 31, 1992, there has not been any material
adverse
change in the Acquired Fund's financial condition, assets, liabilities
or
business other than changes occurring in the ordinary course of business,
or
any incurrence by the Acquired Fund of indebtedness maturing more than
one
year from the date that such indebtedness was incurred, except as
otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of
this
subparagraph (g), a decline in net asset value per share of the
Acquired
Fund Shares shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports
of the Acquired Fund required by law to have been filed by such dates
shall
have been filed, and all federal and other taxes shall have been paid so
far
as due, or provision shall have been made for the payment thereof and,
to
the best of the Acquired Fund's knowledge, no such return is currently
under
audit and no assessment has been asserted with respect to such returns;
(i) For the most recent fiscal year of its operation, the Acquired
Fund
has met the requirements of Subchapter M of the Code for qualification
and
treatment as a regulated investment company;
(j) All issued and outstanding Shares of the Acquired Fund are, and
at
the Closing Date will be, duly and validly issued and outstanding,
fully
paid and non-assessable. All of the issued and outstanding Shares of
the
Acquired Fund will, at the time of Closing, be held by the persons and
in
the amounts set forth in the records of the transfer agent as provided
in
paragraph 3.4. The Acquired Fund does not have outstanding any
options,
warrants or other rights to subscribe for or purchase any of the
Acquired
Fund's Shares, nor is there outstanding any security convertible into any
of
the Acquired Fund's Shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable
title to its assets to be transferred to the Acquiring Fund pursuant
to
paragraph 1.2 and full right, power and authority to sell, assign,
transfer
and deliver such assets hereunder and, upon delivery and payment for
such
assets, the Acquiring Fund will acquire good and
A-7
<PAGE>
marketable title thereto, subject to no restrictions on the full
transfer
thereof, including such restrictions as might arise under the Securities
Act
of 1933, as amended (the "1933 Act"), other than as disclosed to
the
Acquiring Fund;
(l) The execution, delivery and performance of this Agreement will
have
been duly authorized prior to the Closing Date by all necessary actions
on
the part of the Company's Board of Directors, and subject to the approval
of
the Acquired Fund's shareholders, this Agreement will constitute a valid
and
binding obligation of the Company and the Acquired Fund, enforceable
in
accordance with its terms, subject as to enforcement, to
bankruptcy,
insolvency, reorganization, moratorium and other laws relating to
or
affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the Company and the Acquired
Fund
for use in no-action letters, applications for exemptive
orders,
registration statements, proxy materials and other documents which may
be
necessary in connection with the transactions contemplated hereby shall
be
accurate and complete in all material respects and shall comply in
all
material respects with federal securities and other laws and
regulations
thereunder applicable thereto;
(n) The proxy statement of the Acquired Fund (the "Proxy Statement")
to
be included in the registration statement (the "Registration
Statement")
referred to in paragraph 5.7 (other than information therein that relates
to
the Acquiring Fund) will, on the effective date of the
Registration
Statement and on the Closing Date, not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated
therein
or necessary to make the statements therein, in light of the
circumstances
under which such statements were made, not materially misleading.
4.2 The Trust and the Acquiring Fund represent and warrant to the
Company
and the Acquired Fund as follows:
(a) The Trust is a Massachusetts business trust, duly organized,
validly
existing and in good standing under the laws of the Commonwealth
of
Massachusetts;
(b) The Trust is a registered investment company classified as
a
management company of the open-end type and its registration with
the
Commission as an investment company under the 1940 Act is in full force
and
effect;
A-8
<PAGE>
(c) The current prospectus and statement of additional information
of
the Acquiring Fund conform in all material respects to the
applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations
of the Commission thereunder and do not include any untrue statement of
a
material fact or omit to state any material fact required to be
stated
therein or necessary to make the statements therein, in light of
the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good
and
marketable title to the Acquiring Fund's assets;
(e) The Trust is not, and the execution, delivery and performance
of
this Agreement will not result, in a material violation of its Master
Trust
Agreement or By-Laws or of any agreement, indenture, instrument,
contract,
lease or other undertaking to which the Trust or the Acquiring Fund is
a
party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation
of or before any court or governmental body is presently pending
or
threatened against the Trust or the Acquiring Fund or any of its
properties
or assets, except as previously disclosed in writing to the Acquired
Fund.
The Trust and the Acquiring Fund know of no facts which might form the
basis
for the institution of such proceedings and neither is a party to or
subject
to the provisions of any order, decree or judgment of any court
or
governmental body which materially and adversely affects its business or
its
ability to consummate the transactions contemplated herein;
(g) The statement of assets and liabilities of the Acquiring Fund
for
the period from November 6, 1992 to January 31, 1993 have been audited
by
Coopers & Lybrand, certified public accountants, and are in accordance
with
generally accepted accounting principles, and such statements (copies
of
which have been furnished to the Acquired Fund) fairly reflect the
financial
condition of the Acquiring Fund as of such date, and there are no
known
contingent liabilities of the Acquiring Fund as of such dates not
disclosed
therein;
(h) Since January 31, 1993, there has not been any material
adverse
change in the Acquiring Fund's financial condition, assets, liabilities
or
business other than changes occurring in the ordinary course of business,
or
any incurrence by the Acquiring Fund of indebtedness maturing more than
one
year from the date that such indebtedness was
A-9
<PAGE>
incurred. For the purposes of this subparagraph (h), a decline in net
asset
value per share of the Acquiring Fund Shares shall not constitute a
material
adverse change;
(i) At the Closing Date, all federal and other tax returns and
reports
of the Acquiring Fund required by law then to be filed shall have
been
filed, and all federal and other taxes shown as due on said returns
and
reports shall have been paid or provision shall have been made for
the
payment thereof and, to the best of the Acquiring Fund's knowledge, no
such
return is currently under audit and no assessment has been asserted
with
respect to such returns;
(j) For the most recent fiscal year of its operation the Acquiring
Fund
has met the requirements of Subchapter M of the Code for qualification
and
treatment as a regulated investment company and the Acquiring Fund
intends
to do so in the future;
(k) At the date hereof, all issued and outstanding Acquiring Fund
Shares
are, and at the Closing Date will be, duly and validly issued
and
outstanding, fully paid and non-assessable, with no personal
liability
attaching to the ownership thereof. The Acquiring Fund does not
have
outstanding any options, warrants or other rights to subscribe for
or
purchase any Acquiring Fund Shares, nor is there outstanding any
security
convertible into any Acquiring Fund Shares;
(l) The execution, delivery and performance of this Agreement will
have
been duly authorized prior to the Closing Date by all necessary actions,
if
any, on the part of the Trust's Board of Trustees and the Acquiring
Fund's
shareholders, and this Agreement will constitute a valid and
binding
obligation of the Trust and the Acquiring Fund enforceable in
accordance
with its terms, subject as to enforcement, to bankruptcy,
insolvency,
reorganization, moratorium and other laws relating to or
affecting
creditors' rights and to general equity principles;
(m) The Acquiring Fund Shares to be issued and delivered to the
Acquired
Fund, for the account of the Acquired Fund's shareholders, pursuant to
the
terms of this Agreement, will at the Closing Date have been duly
authorized
and, when so issued and delivered, will be duly and validly issued
Acquiring
Fund Shares, and will be fully paid and non-assessable with no
personal
liability attaching to the ownership thereof;
(n) The information to be furnished by the Acquiring Fund for use
in
no-action letters, applications for exemptive orders,
registration
statements, proxy materials and other documents which may be necessary
in
connection with the transactions contemplated hereby shall be
accurate
A-10
<PAGE>
and complete in all material respects and shall comply in all
material
respects with federal securities and other laws and regulations
applicable
thereto;
(o) The Proxy Statement to be included in the Registration
Statement
(only insofar as it relates to the Acquiring Fund) will, on the
effective
date of the Registration Statement and on the Closing Date, not contain
any
untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements
therein,
in light of the circumstances under which such statements were made,
not
materially misleading; and
(p) The Acquiring Fund agrees to use all reasonable efforts to
obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act
and
such of the state Blue Sky or securities laws as it may deem appropriate
in
order to continue its operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND, THE TRUST, THE ACQUIRED FUND AND THE
COMPANY
5.1 The Acquiring Fund and the Acquired Fund each will operate its
business
in the ordinary course between the date hereof and the Closing Date, except
that
the Acquired Fund expects to cease offering its shares for sale to the public
as
of December 23, 1993. It is understood that such ordinary course of
business
will include the declaration and payment of customary dividends
and
distributions and any other dividends and distributions deemed advisable.
5.2 The Company will call a meeting of the Acquired Fund's shareholders
to
consider and act upon this Agreement and to take all other actions necessary
to
obtain approval of the transactions contemplated herein.
5.3 The Acquired Fund covenants that the Acquiring Fund Shares to be
issued
hereunder are not being acquired for the purpose of making any
distribution
thereof other than in accordance with the terms of this Agreement.
5.4 The Company and the Acquired Fund will assist the Acquiring Fund
in
obtaining such information as the Acquiring Fund reasonably requests
concerning
the beneficial ownership of the Acquired Fund's Shares.
5.5 Subject to the provisions of this Agreement, the Trust, the
Acquiring
Fund, the Company and the Acquired Fund each will take, or cause to be
taken,
all action, and do or cause to be done, all things reasonably necessary,
proper
or advisable to consummate and make effective the transactions contemplated
by
this Agreement.
A-11
<PAGE>
5.6 As promptly as practicable, but in any case within sixty days after
the
Closing Date, the Acquired Fund shall furnish the Acquiring Fund, in such
form
as is reasonably satisfactory to the Acquiring Fund, a statement of the
earnings
and profits of the Acquired Fund for federal income tax purposes which will
be
carried over to the Acquiring Fund as a result of Section 381 of the Code,
and
which will be certified by the Acquired Fund's President or Executive
Vice
President and its Treasurer.
5.7 The Acquired Fund will provide the Acquiring Fund with
information
reasonably necessary for the preparation of a prospectus (the
"Prospectus")
which will include the Proxy Statement referred to in paragraph 4.1(n), all
to
be included in a registration statement on Form N-14 of the Acquiring Fund
(the
"Registration Statement"), in compliance with the 1933 Act, the
Securities
Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection with
the
meeting of the Acquired Fund's shareholders to consider approval of
this
Agreement and the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE ACQUIRED FUND
The obligations of the Company and the Acquired Fund to consummate
the
transactions provided for herein shall be subject, at its election, to
the
performance by the Trust and the Acquiring Fund of all of the obligations to
be
performed by them hereunder on or before the Closing Date and, in
addition
thereto, the following further conditions:
6.1 All representations and warranties of the Trust and the Acquiring
Fund
contained in this Agreement shall be true and correct in all material
respects
as of the date hereof and, except as they may be affected by the
transactions
contemplated by this Agreement, as of the Closing Date with the same force
and
effect as if made on and as of the Closing Date;
6.2 The Acquiring Fund shall have delivered to the Acquired Fund
a
certificate executed in its name by its President or Executive Vice
President
and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory
to
the Acquired Fund and dated as of the Closing Date, to the effect that
the
representations and warranties of the Trust and the Acquiring Fund made in
this
Agreement are true and correct at and as of the Closing Date, except as they
may
be affected by the transactions contemplated by this Agreement and as to
such
other matters as the Acquired Fund shall reasonably request; and
6.3 The Company shall have received on the Closing Date a favorable
opinion
from Willkie Farr & Gallagher, counsel to the Trust and
the
A-12
<PAGE>
Acquiring Fund, dated as of the Closing Date, in a form reasonably
satisfactory
to Francis J. McNamara III, Esq., General Counsel of Boston Advisors
as
administrator to the Acquired Fund, covering the following points:
That (a) the Acquiring Fund is a subtrust of the Trust which is
a
Massachusetts business trust, validly existing and in good standing under
the
laws of the Commonwealth of Massachusetts and has the statutory power to own
all
of its properties and assets and to carry on its business as
presently
conducted; (b) the Agreement has been duly authorized, executed and delivered
by
the Trust on behalf of the Acquiring Fund and, assuming that the
Prospectus,
Registration Statement and Proxy Statement comply with the 1933 Act, the
1934
Act and the 1940 Act and the rules and regulations thereunder and, assuming
due
authorization, execution and delivery of the Agreement by the Trust on behalf
of
the Acquiring Fund, is a valid and binding obligation of the Trust
enforceable
against the Trust and the Acquiring Fund in accordance with its terms,
subject
as to enforcement, to bankruptcy, insolvency, reorganization, moratorium
and
other laws relating to or affecting creditors' rights generally and to
general
equity principles; (c) the Acquiring Fund Shares to be issued to the
Acquired
Fund's shareholders as provided by this Agreement are, to the extent of
the
number of shares of Class A, Class B or Class D beneficial interest
authorized
to be issued by the Acquiring Fund in its Master Trust Agreement less the
number
of the then outstanding shares of Class A, Class B or Class D
beneficial
interest, respectively, duly authorized and upon such delivery will be
validly
issued and outstanding and are fully paid and non-assessable, and no
shareholder
of the Acquiring Fund has any preemptive rights to subscription or purchase
in
respect thereof; (d) the execution and delivery of this Agreement did not,
and
the consummation of the transactions contemplated hereby will not, result in
a
material violation of the Trust's Master Trust Agreement or By-Laws or
any
provision of any agreement (known to such counsel) to which the Trust or
the
Acquiring Fund is a party or by which it is bound or, to the knowledge of
such
counsel, result in the acceleration of any obligation or the imposition of
any
penalty, under any agreement, judgment or decree to which the Acquiring Fund
is
a party or by which it is bound; (e) to the knowledge of such counsel,
no
consent, approval, authorization or order of any court or governmental
authority
of the United States, the State of New York or Commonwealth of Massachusetts
is
required for the consummation by the Trust and the Acquiring Fund of
the
transactions contemplated herein, except such as have been obtained under
the
1933 Act, the 1934 Act and the 1940 Act, and such as may be required under
state
securities law; (f) only insofar as they relate to the Acquiring Fund,
the
descriptions in the Proxy Statement of statutes, legal and
governmental
proceedings and contracts and other documents, if any, are accurate and
fairly
present the information required to be shown; (g) such
A-13
<PAGE>
counsel does not know of any legal or governmental proceedings, only insofar
as
they relate to the Acquiring Fund, existing on or before the effective date
of
the Registration Statement or the Closing Date required to be described in
the
Registration Statement or to be filed as exhibits to the Registration
Statement
which are not described as required; (h) the Trust is registered as
an
investment company under the 1940 Act and its registration with the
Commission
as an investment company under the 1940 Act is in full force and effect; and
(i)
to the best knowledge of such counsel, no litigation or
administrative
proceeding or investigation of or before any court or governmental body
is
presently pending or threatened as to the Trust or the Acquiring Fund or any
of
their properties or assets and neither the Trust nor the Acquiring Fund is
a
party to or subject to the provisions of any order, decree or judgment of
any
court or governmental body, which materially and adversely affects its
business,
other than as previously disclosed in the Registration Statement. In
addition,
such counsel also shall state that they have participated in conferences
with
officers and other representatives of the Trust and the Acquiring Fund at
which
the contents of the Proxy Statement and related matters were discussed
and,
although they are not passing upon and do not assume any responsibility for
the
accuracy, completeness or fairness of the statements contained in the
Proxy
Statement (except to the extent indicated in paragraph (f) of their
above
opinion), on the basis of the foregoing (relying as to materiality to a
large
extent upon the opinions of officers and other representatives of the Trust
and
the Acquiring Fund), no facts have come to their attention that lead them
to
believe that the Proxy Statement as of its date, as of the date of the
Acquired
Fund shareholders' meeting and as of the Closing Date, contained an
untrue
statement of a material fact or omitted to state a material fact required to
be
stated therein regarding the Acquiring Fund or necessary to make the
statements
therein regarding the Acquiring Fund, in the light of the circumstances
under
which they were made, not misleading. Such opinion may state that such
counsel
does not express any opinion or belief as to the financial statements or
other
financial data or as to the information relating to the Company and the
Acquired
Fund, contained in the Proxy Statement or Registration Statement, and that
such
opinion is solely for the benefit of the Company, the Acquired Fund,
its
Directors and its officers. (Such counsel may rely as to matters governed by
the
laws of the Commonwealth of Massachusetts on an opinion of
Massachusetts
counsel.) Such opinion also shall include such other matters incident to
the
transaction contemplated hereby as the Acquired Fund may reasonably
request.
Finally, such opinion need not opine with respect to the applicability
of
Section 17(a) under the 1940 Act and Rule 17a-8 thereunder.
A-14
<PAGE>
In this paragraph 6.3, references to the Proxy Statement include and
relate
only to the text of such Proxy Statement and not to any exhibits or
attachments
thereto or to any documents incorporated by reference therein.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE ACQUIRING FUND
The obligations of the Trust and the Acquiring Fund to complete
the
transactions provided for herein shall be subject, at their election, to
the
performance by the Company and the Acquired Fund of all the obligations to
be
performed by them hereunder on or before the Closing Date and, in
addition
thereto, the following conditions:
7.1 All representations and warranties of the Company and the Acquired
Fund
contained in this Agreement shall be true and correct in all material
respects
as of the date hereof and, except as they may be affected by the
transactions
contemplated by this Agreement, as of the Closing Date with the same force
and
effect as if made on and as of the Closing Date;
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement
of the Acquired Fund's assets and liabilities, together with a list of
the
Acquired Fund's portfolio securities showing the tax costs of such securities
by
lot and the holding periods of such securities, as of the Closing
Date,
certified by the Treasurer or Assistant Treasurer of the Acquired Fund;
7.3 The Company shall have delivered to the Acquiring Fund on the
Closing
Date a certificate executed in its name and on behalf of the Acquired Fund
by
its President or Executive Vice President and its Treasurer or
Assistant
Treasurer, in form and substance satisfactory to the Trust and the
Acquiring
Fund and dated as of the Closing Date, to the effect that the
representations
and warranties of the Company and the Acquired Fund made in this Agreement
are
true and correct at and as of the Closing Date, except as they may be
affected
by the transactions contemplated by this Agreement, and as to such other
matters
as the Acquiring Fund shall reasonably request; and
7.4 The Trust shall have received on the Closing Date a favorable opinion
of
Dechert Price & Rhoads, counsel to the Acquired Fund, in a form satisfactory
to
Francis J. McNamara III, Esq., General Counsel to Boston Advisors
as
administrator to the Acquiring Fund, covering the following points:
That (a) the Acquired Fund is a series of the Company which is a
corporation
duly organized, validly existing and in good standing under the laws of
the
State of Maryland and has the corporate power to own all of its properties
and
assets and to carry on its business as presently conducted;
A-15
<PAGE>
(b) the Agreement has been duly authorized, executed and delivered by
the
Company on behalf of the Acquired Fund and, assuming that the Prospectus,
the
Registration Statement and the Proxy Statement comply with the 1933 Act,
the
1934 Act and the 1940 Act and the rules and regulations thereunder and,
assuming
due authorization, execution and delivery of the Agreement by the Company, is
a
valid and binding obligation of the Company and the Acquired Fund
enforceable
against the Company and the Acquired Fund in accordance with its terms,
subject
as to enforcement to bankruptcy, insolvency, reorganization, moratorium
and
other laws relating to or affecting creditors' rights generally and to
general
equity principles; (c) the execution and delivery of the Agreement did not,
and
the consummation of the transactions contemplated hereby will not, result in
a
material violation of the Company's Articles of Incorporation or By-Laws or
any
provision of any agreement (known to such counsel) to which the Company or
the
Acquired Fund is a party or by which it is bound or, to the knowledge of
such
counsel, result in the acceleration of any obligation or the imposition of
any
penalty, under any agreement, judgment or decree to which the Company or
the
Acquired Fund is a party or by which it is bound; (d) to the knowledge of
such
counsel, no consent, approval, authorization or order of any court
or
governmental authority of the United States or the State of New York or State
of
Maryland is required for the consummation by the Company and the Acquired
Fund
of the transactions contemplated herein, except such as have been obtained
under
the 1933 Act, the 1934 Act and the 1940 Act, and such as may be required
under
state securities laws; (e) only insofar as they relate to the Company and
the
Acquired Fund, the descriptions in the Proxy Statement of statutes, legal
and
governmental proceedings and contracts and other documents, if any, are
accurate
and fairly present the information required to be shown; (f) such counsel
does
not know of any legal or governmental proceedings, only insofar as they
relate
to the Company and the Acquired Fund existing on or before the effective date
of
the Registration Statement or the Closing Date, required to be described in
the
Proxy Statement or to be filed as exhibits to the Registration Statement
which
are not described and filed as required; (g) the Company is registered as
an
investment company under the 1940 Act and its registration with the
Commission
as an investment company under the 1940 Act is in full force and effect; and
(h)
to the best knowledge of such counsel, no litigation or
administrative
proceeding or investigation of or before any court or governmental body
is
presently pending or threatened as to the Company or the Acquired Fund or any
of
its respective properties or assets and neither the Company nor the
Acquired
Fund is a party to or subject to the provisions of any order, decree or
judgment
of any court or governmental body, which materially and adversely affects
its
business other than as previously disclosed in the Proxy
A-16
<PAGE>
Statement. Such counsel also shall state that they have participated
in
conferences with officers and other representatives of the Company and
the
Acquired Fund at which the contents of the Proxy Statement and related
matters
were discussed and, although they are not passing upon and do not assume
any
responsibility for the accuracy, completeness or fairness of the
statements
contained in the Proxy Statement (except to the extent indicated in
paragraph
(e) of their above opinion), on the basis of the foregoing (relying as
to
materiality to a large extent upon the opinions of officers and
other
representatives of the Company and the Acquired Fund), no facts have come
to
their attention that lead them to believe that the Proxy Statement as of
its
date, as of the date of the Acquired Fund's shareholder meeting, and as of
the
Closing Date, contained an untrue statement of a material fact or omitted
to
state a material fact required to be stated therein regarding the Company or
the
Acquired Fund or necessary in the light of the circumstances under which
they
were made, to make the statements therein regarding the Company or the
Acquired
Fund not misleading. Such counsel may rely as to matters governed by the
State
of Maryland, on an opinion of Maryland counsel. Such opinion may state that
such
counsel does not express any opinion or belief as to the financial statements
or
other financial data, or as to the information relating to the Acquiring
Fund,
contained in the Proxy Statement or Registration Statement, and that
such
opinion is solely for the benefit of the Trust, its Trustees and its
officers.
Such opinion also shall include such other matters incident to the
transaction
contemplated hereby as the Trust or the Acquiring Fund may reasonably
request.
Finally, the opinion need not opine upon any issues arising from
the
applicability of Section 17(a) under the 1940 Act and Rule 17a-8 thereunder.
In this paragraph 7.4, references to the Proxy Statement include and
relate
to only the text of such Proxy Statement and not to any exhibits or
attachments
thereto or to any documents incorporated by reference therein.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST, THE ACQUIRING
FUND, THE COMPANY AND THE ACQUIRED FUND
If any of the conditions set forth below do not exist on or before
the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other
party to this Agreement shall, at its option, not be required to consummate
the
transactions contemplated by this Agreement:
8.1 The Agreement and the transactions contemplated herein shall have
been
approved by the requisite vote of the holders of the outstanding Shares of
the
Acquired Fund in accordance with the provisions of the Company's Articles
of
Incorporation and By-Laws and certified copies of the votes evidencing
such
approval shall have been delivered to the Trust and
the
A-17
<PAGE>
Acquiring Fund. Notwithstanding anything herein to the contrary, neither
the
Acquiring Fund nor the Acquired Fund may waive the conditions set forth in
this
paragraph 8.1;
8.2 On the Closing Date, no action, suit or other proceeding shall
be
pending before any court or governmental agency in which it is sought
to
restrain or prohibit, or obtain damages or other relief in connection with,
this
Agreement or the transactions contemplated herein;
8.3 All consents of other parties and all other consents, orders and
permits
of federal, state and local regulatory authorities (including those of
the
Commission and of state Blue Sky and securities authorities,
including
"no-action" positions of and exemptive orders from such federal and
state
authorities) deemed necessary by the Acquiring Fund or the Acquired Fund
to
permit consummation, in all material respects, of the transactions
contemplated
hereby shall have been obtained, except where failure to obtain any
such
consent, order or permit would not involve a risk of a material adverse
effect
on the assets or properties of the Acquiring Fund or the Acquired Fund,
provided
that either party hereto may for itself waive any of such conditions;
8.4 The Registration Statement shall have become effective under the
1933
Act and no stop orders suspending the effectiveness thereof shall have
been
issued and, to the best knowledge of the parties hereto, no investigation
or
proceeding for that purpose shall have been instituted or be pending,
threatened
or contemplated under the 1933 Act;
8.5 The Acquired Fund and the Acquiring Fund shall have declared a
dividend
or dividends which, together with all previous such dividends, shall have
the
effect of distributing to the Acquired Fund and the Acquiring
Fund's
shareholders all of each of the fund's investment company taxable income for
all
taxable years ending on or prior to the Closing Date (computed without regard
to
any deduction for dividends paid) and all of its net capital gain realized
in
all taxable years ending on or prior to the Closing Date (after reduction
for
any capital loss carryforward);
8.6 The parties shall have received a favorable opinion of Willkie Farr
&
Gallagher, addressed to the Acquiring Fund and the Acquired Fund
and
satisfactory to Francis J. McNamara III, Esq., General Counsel to
Boston
Advisors as administrator of the Funds, substantially to the effect that
for
federal income tax purposes:
(a) The transfer of all or substantially all of the Acquired
Fund's
assets in exchange for the Acquiring Fund Shares and the assumption by
the
Acquiring Fund of certain identified liabilities of the Acquired Fund
will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C)
of
the Code and the Acquiring Fund and the Acquired
A-18
<PAGE>
Fund are each a "party to a reorganization" within the meaning of
Section
368(b) of the Code; (b) no gain or loss will be recognized by the
Acquiring
Fund upon the receipt of the assets of the Acquired Fund solely in
exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of
certain identified liabilities of the Acquired Fund; (c) no gain or
loss
will be recognized by the Acquired Fund upon the transfer of the
Acquired
Fund's assets to the Acquiring Fund in exchange for the Acquiring
Fund
Shares and the assumption by the Acquiring Fund of certain
identified
liabilities of the Acquired Fund or upon the distribution (whether actual
or
constructive) of the Acquiring Fund Shares to the Acquired
Fund's
shareholders in exchange for their Shares of the Acquired Fund; (d) no
gain
or loss will be recognized by shareholders of the Acquired Fund upon
the
exchange of their Acquired Fund Shares for the Acquiring Fund Shares and
the
assumption by the Acquiring Fund of certain identified liabilities of
the
Acquired Fund; (e) the aggregate tax basis for the Acquiring Fund
Shares
received by each of the Acquired Fund's shareholders pursuant to
the
Reorganization will be the same as the aggregate tax basis of the
Acquired
Fund Shares held by such shareholder immediately prior to
the
Reorganization, and the holding period of the Acquiring Fund Shares to
be
received by each Acquired Fund shareholder will include the period
during
which the Acquired Fund Shares exchanged therefor were held by
such
shareholder (provided that the Acquired Fund Shares were held as
capital
assets on the date of the Reorganization); and (f) the tax basis of
the
Acquired Fund's assets acquired by the Acquiring Fund will be the same
as
the tax basis of such assets to the Acquired Fund immediately prior to
the
Reorganization, and the holding period of the assets of the Acquired Fund
in
the hands of the Acquiring Fund will include the period during which
those
assets were held by the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring
Fund
nor the Acquired Fund may waive the conditions set forth in this paragraph
8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Fund and the Acquired Fund each represents and warrants
to
the other that there are no brokers or finders entitled to receive any
payments
in connection with the transactions provided for herein.
9.2 (a) Except as may be otherwise provided herein, the Acquired Fund
and
the Acquiring Fund shall each be liable for its expenses incurred in
connection
with entering into and carrying out the provisions of this Agreement, whether
or
not the transactions contemplated hereby are consummated. The expenses
payable
by the Acquired Fund hereunder shall include the expenses of: (i) its
counsel
and independent accountants associated with
A-19
<PAGE>
Reorganization; (ii) printing and mailing the Prospectus/Proxy Statement
and
soliciting proxies in connection with the meeting of shareholders of
the
Acquired Fund referred to in paragraph 5.2 hereof; (iii) all fees and
expenses
related to the liquidation of the Acquired Fund; (iv) fees and expenses of
the
Acquired Fund's custodian and transfer agent incurred in connection with
the
Reorganization; and (v) any special pricing fees associated with the
valuation
of the Acquired Fund's portfolio on the Closing Date. The expenses payable
by
the Acquiring Fund hereunder shall include: (i) fees and expenses of its
counsel
and independent accountants associated with the Reorganization; (ii)
expenses
associated with preparing this Agreement and preparing and filing
the
Registration Statement under the 1933 Act covering the Acquiring Fund Shares
to
be issued in the Reorganization; (iii) registration or qualification fees
and
expenses of preparing and filing such forms, if any, necessary under
applicable
state securities laws to qualify the Acquiring Fund Shares to be issued
in
connection with the Reorganization; (iv) any fees and expenses of the
Acquiring
Fund's custodian and transfer agent incurred in connection with
the
Reorganization; and (v) any special pricing fees associated with the
valuation
of the Acquiring Fund's portfolio on the Closing Date.
(b) Consistent with the provisions of paragraph 1.3, the Acquired
Fund,
prior to the Closing, shall pay for or include in the unaudited statement
of
assets and liabilities prepared pursuant to paragraph 1.3 all of its known
and
reasonably estimated expenses associated with the transactions contemplated
by
this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust, the Acquiring Fund, the Company and the Acquired Fund
agree
that no party has made any representation, warranty or covenant not set
forth
herein and that this Agreement constitutes the entire agreement between
the
parties.
10.2 The representations, warranties and covenants contained in
this
Agreement or in any document delivered pursuant hereto or in connection
herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1 This Agreement may be terminated at any time at or prior to
the
Closing Date: (1) by mutual agreement of Acquired Fund and Acquiring Fund;
(2)
by the Acquired Fund in the event the Acquiring Fund or the Trust shall, or
by
the Acquiring Fund in the event the Acquired Fund or the Company
shall,
materially breach any representation, warranty or agreement contained herein
to
be performed at or prior to the Closing Date; or (3) if
a
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<PAGE>
condition herein expressed to be precedent to the obligations of the
terminating
party has not been met and it reasonably appears that it will not or cannot
be
met.
11.2 In the event of any such termination, there shall be no liability
for
damages on the part of either the Trust or the Company, or their
respective
Trustees or Directors, or officers, to the other party, but each shall bear
the
expenses incurred by it incidental to the preparation and carrying out of
this
Agreement as provided in paragraph 9.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as
may be mutually agreed upon in writing by the authorized officers of the
Company
and the Trust; provided, however, that following the meeting of the
Acquired
Fund's shareholders called by the Company pursuant to paragraph 5.2 of
this
Agreement, no such amendment may have the effect of changing the provisions
for
determining the number of the Acquiring Fund Shares to be issued to the
Acquired
Fund's shareholders under this Agreement to the detriment of such
shareholders
without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by
any
provisions of this Agreement shall be in writing and shall be given by
prepaid
telegraph, telecopy or certified mail addressed to the Acquiring Fund, Two
World
Trade Center, Floor 100, New York, New York 10048, Attention: Heath B.
McLendon;
or to the Acquired Fund, Two World Trade Center, Floor 100, New York, New
York
10048, Attention: Heath B. McLendon.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The article and paragraph headings contained in this Agreement are
for
reference purposes only and shall not affect in any way the meaning
or
interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each
of
which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance
with
the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties
hereto and their respective successors and assigns, but no assignment
or
transfer hereof or of any rights or obligations hereunder shall be made by
any
party without the written consent of the other parties. Nothing herein
expressed
or implied is intended or shall be construed to confer upon or
give
A-21
<PAGE>
any person, firm or corporation, other than the parties hereto and
their
respective successors and assigns, any rights or remedies under or by reason
of
this Agreement.
14.5 It is expressly stated that the obligations of the Acquiring
Fund
shall not be binding upon any of the trustees, shareholders, nominees,
officers,
agents or employees of the Acquired Fund personally, but bind only the
trust
property of the Trust and the Acquired Fund, as provided in the Master
Trust
Agreement. The execution and delivery of this Agreement have been authorized
by
officers of the Acquired Fund, acting as such, and neither such authorization
by
such trustees nor such execution and delivery by such officers shall be
deemed
to have been made by any of them individually or to impose any liability on
any
of them personally, but shall bind only the trust property of the Trust and
the
Acquired Fund as provided in the Master Trust Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to
be executed by its Chairman of the Board, President or Vice President and its
seal to be affixed hereto and attested by its Secretary or Assistant
Secretary.
SMITH BARNEY SHEARSON
EQUITY FUNDS,
on behalf of Smith Barney
Shearson Growth and Income Fund
By:
____________________________________________
Attest:
________________________________________
SMITH BARNEY SHEARSON
INVESTMENT FUNDS INC.,
on behalf of Smith Barney
Shearson Directions Value Fund
By:
____________________________________________
Attest:
________________________________________
A-22
<PAGE>
SMITH BARNEY SHEARSON GROWTH AND INCOME FUND
PRO FORMA COMBINING PORTFOLIO OF INVESTMENTS (Unaudited)
July 31, 1993
<TABLE>
<CAPTION>
SHARES
VALUE (NOTE 2)
- -------------------------------
- ----------------------------------------
SBS SBS PRO FORMA
SBS SBS PRO FORMA
GROWTH & DIRECTIONS COMBINED
GROWTH & DIRECTIONS COMBINED
INCOME VALUE (NOTE 1) SECURITY
INCOME VALUE (NOTE 1)
- -------- ---------- ---------
- ----------- ------------- ------------
<C> <C> <C> <S>
<C> <C> <C>
COMMON STOCKS - 87.8%
FOOD AND BEVERAGE PRODUCTS - 14.6%
0 315,000 315,000 Archer-Daniels-Midland Company............
0 7,402,500 7,402,500
30,000 0 30,000 Campbell Soup Company.....................
1,076,250 0 1,076,250
18,000 0 18,000 General Mills, Inc........................
1,093,500 0 1,093,500
0 75,000 75,000 Loews Corp................................
0 6,740,625 6,740,625
0 150,000 150,000 MAPCO, Inc................................
0 8,831,250 8,831,250
0 275,000 275,000 Pioneer Hi-Bred International.............
0 8,112,500 8,112,500
- ----------- ------------ ------------
2,169,750 31,086,875 33,256,625
- ----------- ------------ ------------
CONSUMER NON-DURABLES - 12.1%
0 75,000 75,000 Bausch & Lomb, Inc........................
0 3,356,250 3,356,250
0 325,000 325,000 K Mart Corp...............................
0 6,703,125 6,703,125
0 200,000 200,000 Liz Claiborne, Inc........................
0 4,625,000 4,625,000
25,000 0 25,000 May Department Stores Company.............
1,015,625 0 1,015,625
0 100,000 100,000 Melville Corporation......................
0 4,625,000 4,625,000
0 25,000 25,000 Nike, Inc., Class B.......................
0 1,406,250 1,406,250
35,000 0 35,000 Penney (J.C.).............................
1,588,125 0 1,588,125
15,000 0 15,000 Procter & Gamble Company..................
731,250 0 731,250
0 250,000 250,000 Ross Stores, Inc..........................
0 3,437,500 3,437,500
- ----------- ------------ ------------
3,335,000 24,153,125 27,488,125
- ----------- ------------ ------------
TECHNOLOGY - 7.7%
20,000 0 20,000 AMP Inc...................................
1,280,000 0 1,280,000
35,000 220,000 255,000 Honeywell Inc.............................
1,238,125 7,782,500 9,020,625
0 125,000 125,000 Raytheon Company..........................
0 7,343,750 7,343,750
- ----------- ------------ ------------
2,518,125 15,126,250 17,644,375
- ----------- ------------ ------------
HEALTH CARE - 6.9%
15,000 100,000 115,000 American Home Products Corp...............
945,000 6,300,000 7,245,000
0 250,000 250,000 Galen Health Care Inc.....................
0 5,125,000 5,125,000
0 250,000 250,000 Humana, Inc...............................
0 2,843,750 2,843,750
12,200 0 12,200 Rhone-Poulenc Rorer.......................
587,125 0 587,125
- ----------- ------------ -----------
1,532,125 14,268,750 15,800,875
- ----------- ------------ -----------
FINANCIAL SERVICES - 6.7%
50,000 0 50,000 Holly Residential Properties Inc..........
1,156,250 0 1,156,250
0 80,000 80,000 First Fidelity Bancorporation.............
0 3,780,000 3,780,000
17,000 0 17,000 Morgan (J.P.) & Company, Inc..............
1,241,000 0 1,241,000
0 75,000 75,000 NationsBank Corporation...................
0 3,778,125 3,778,125
40,000 55,000 95,000 Society Corporation.......................
1,310,000 1,801,250 3,111,250
20,000 0 20,000 U.S. Trust Corp...........................
1,100,000 0 1,100,000
30,000 0 30,000 Wachovia Corp.............................
1,053,750 0 1,053,750
- ----------- ------------ ------------
5,861,000 9,359,375 15,220,375
- ----------- ------------ ------------
INDUSTRIAL PRODUCTS - 5.6%
0 75,000 75,000 Northrop Corp.............................
0 3,009,375 3,009,375
0 75,000 75,000 Trinity Industry, Inc.....................
0 3,778,125 3,778,125
0 150,000 150,000 Tyco Laboratories, Inc....................
0 5,925,000 5,925,000
- ----------- ------------ ------------
0 12,712,500 12,712,500
- ---------- ------------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <S>
<C> <C> <C>
MANUFACTURING - 4.9%
20,000 0 20,000 Emerson Electric Company..................
1,160,000 0 1,160,000
12,500 0 12,500 General Electric Company..................
1,231,250 0 1,231,250
0 112,000 112,000 General Motors............................
0 5,432,000 5,432,000
20,000 0 20,000 Hubbell, Inc., Class B....................
1,052,500 0 1,052,500
35,000 0 35,000 Ingersoll-Rand Company....................
1,155,000 0 1,155,000
10,000 0 10,000 Minnesota Mining & Manufacturing Co.......
1,050,000 0 1,050,000
- ----------- ------------ ------------
5,648,750 5,432,000 11,080,750
- ----------- ------------ ------------
COMMUNICATIONS -3.5%
0 150,000 150,000 Ericsson (L M) Telephone Company, Cl B....
0 6,731,250 6,731,250
20,000 0 20,000 British Telecommunications, ADR...........
1,250,000 0 1,250,000
1,250,000 6,731,250 7,981,750
- ----------- ------------ ------------
MACHINERY - 3.3%
0 65,000 65,000 Caterpillar, Inc..........................
0 4,996,875 4,996,875
0 125,000 125,000 Harnischfeger Industries, Inc.............
0 2,546,875 2,546,875
- ----------- ------------ -----------
0 7,543,750 7,543,750
- ----------- ------------ -----------
COMPUTERS - 2.8%
0 100,000 100,000 COMPAQ Computer Corp......................
0 4,700,000 4,700,000
- ----------- ------------ ------------
0 50,000 50,000 Digital Equipment Corp....................
0 1,775,000 1,775,000
0 6,475,000 6,475,000
- ----------- ------------ ------------
CONSUMER SERVICES - 2.7%
35,000 0 35,000 Block (H&R), Inc..........................
1,260,000 0 1,260,000
20,000 0 20,000 Dun & Bradstreet Corp.....................
1,185,000 0 1,185,000
25,000 0 25,000 Gannett Company...........................
1,225,000 0 1,225,000
20,000 0 20,000 McGraw-Hill, Inc..........................
1,307,500 0 1,307,500
- ----------- ------------ ------------
27,000 0 27,000 Pitney Bowes, Inc.........................
1,123,875 0 1,123,875
- ----------- ------------ ------------
ELECTRIC AND UTILITY - 2.5%
40,000 0 40,000 Central & South West Corp.................
1,340,000 0 1,340,000
35,000 0 35,000 Consolidated Edison Company...............
1,273,125 0 1,273,125
25,000 0 25,000 DQE Inc...................................
906,250 0 906,250
30,000 0 30,000 Duke Power Company........................
1,275,000 0 1,275,000
40,000 0 40,000
Wisconsin Energy Corp.....................
1,105,000 0 1,105,000
- ----------- ------------ ------------
7,149,375 0 7,149,375
- ----------- ------------ ------------
CONSUMER DURABLES - 2.2%
50,000 0 50,000 Bemis Inc.................................
1,025,000 0 1,025,000
0 125,000 125,000 Stanhome, Inc.............................
0 3,562,500 3,562,500
10,000 0 10,000 Stanley Works.............................
412,500 0 412,500
- ----------- ------------ ------------
1,437,500 3,562,500 5,000,000
- ----------- ------------ ------------
ENERGY - 2.0%
10,000 0 10,000 Atlantic Richfield Company................
1,157,500 0 1,157,500
50,000 0 50,000 Dresser Industry, Inc.....................
1,206,250 0 1,206,250
15,000 0 15,000 Exxon Corporation.........................
984,375 0 984,375
15,000 0 15,000 Mobil Corporation.........................
1,134,375 0 1,134,375
- ----------- ------------ ------------
4,482,500 0 4,482,500
- ----------- ------------ ------------
TRANSPORTATION - 1.7%
24,000 0 24,000 British Airways PLC ADR...................
1,191,000 0 1,191,000
25,000 0 25,000 Conrail Inc...............................
1,409,375 0 1,409,375
20,000 0 20,000 Union Pacific Corporation.................
1,272,500 0 1,272,500
3,872,875 0 3,872,875
- ----------- ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <S>
<C> <C> <C>
CHEMICALS - 1.0%
40,000 0 40,000 Hanna (M.A.) Company......................
1,060,000 0 1,060,000
20,000 0 20,000 Monsanto Company..........................
1,142,500 0 1,142,500
- ----------- ------------ ------------
2,202,500 0 2,202,500
- ----------- ------------ ------------
OTHER - 7.6%
0 100,000 100,000 King World Productions, Inc...............
0 3,675,000 3,675,000
0 200,000 200,000 Polaroid Corp.............................
0 7,400,000 7,400,000
- ----------- ------------ ------------
0 100,000 100,000 Roadway Services, Inc.....................
0 6,150,000 6,150,000
- ----------- ------------ ------------
0 17,225,000 17,225,000
- ----------- ------------ ------------
TOTAL COMMON STOCKS
46,310,875 153,676,375 199,987,250
- ----------- ------------ ------------
PRINCIPAL
- --------------------------------
CORPORATE BONDS AND NOTES - 3.2%
$2,000,000 $0 2,000,000 Dean Witter, Discover & Company,
6.875% due 3/1/2003.......................
2,042,500 0 2,042,500
2,000,000 0 2,000,000 General Motors Acceptance Corporation,
7.000% due 9/15/2002......................
2,017,500 0 2,017,500
2,000,000 0 2,000,000 Limited, Inc.,
7.800% due 5/15/2002......................
2,197,500 0 2,197,500
1,000,000 0 1,000,000 Merrill Lynch & Company,
Equity Participation security due
6/30/1999................. 1,000,000 0 1,000,000
- ----------- ------------ ------------
TOTAL CORPORATE BONDS
AND NOTES
7,257,500 0 7,257,500
- ----------- ------------ ------------
SHARES
- -------------------------------
PREFERRED CONVERTIBLE STOCKS - 0.8%
12,000 0 12,000 General Motors Corporation, Pfd. Conv.,
Series A, Exch............................
582,000 0 582,000
20,000 0 20,000 National City Corporation, Depositary Shares,
representing 1/5 share, Pfd. Conv.........
1,392,500 0 1,392,500
TOTAL PREFERRED
- ----------- ------------ ------------
CONVERTIBLE STOCKS
1,974,500 0 1,974,500
- ----------- ------------ ------------
PREFERRED STOCKS - 0.3%
15,000 0 15,000 Tenneco, Inc., Depositary Shares,
Preferred, Series A.......................
618,750 0 618,750
- ----------- ------------ ------------
TOTAL PREFERRED STOCKS
618,750 0 618,750
- ----------- ------------ ------------
PRINCIPAL
- -----------------------------
2,248,000 15,747,700 17,995,000 REPURCHASE
AGREEMENTS - 7.9%
2,248,000 15,747,000 17,995,000
Citibank
3.050% due 8/2/1993.......................
2,248,000 15,747,000 17,995,000
collateralized by $2,295,000 U.S. Treasury
Note, 2.625% due 8/15/1994 and $14,995,000
U.S. Treasury Note, 8.250% due 11/15/94,
respectively
TOTAL REPURCHASE
- ----------- ------------ ------------
AGREEMENTS
2,248,000 15,747,000 17,995,000
- ----------- ------------ ------------
---------------------------------------------
- --------------------------------------------------
TOTAL INVESTMENTS
$58,409,625 $169,423,375 $227,833,000
---------------------------------------------
- --------------------------------------------------
</TABLE>
<PAGE>
SMITH BARNEY SHEARSON
GROWTH AND INCOME FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
July 31, 1993
<TABLE>
<CAPTION>
Pro
SBS SBS Forma
Growth and Directions Combined
Income Fund Value Adjustments (Note 1)
-----
- ------- ------------ ----------- ------------
<S> <C>
<C> <C> <C>
ASSETS:
Investments, at value (Cost $56,848,829
$152,010,965 and $208,859,794 respectively)
(Note 2) See accompanying schedule........................ $
58,409,625 $169,423,375 $227,833,000
Dividends and interest receivable..........................
196,704 237,418 431,122
Receivable for investment securities sold..................
807,573 0 809,743
Receivable for Fund shares sold............................
361,505 184,639 546,144
Unamortized organization costs.............................
163,495 0 163,495
Prepaid expenses...........................................
24,299 36,000 60,299
-----
- ------- ------------ ----------- ------------
Total Assets.........................................
59,963,201 169,881,432 0 229,844,633
-----
- ------- ------------ ----------- ------------
LIABILITIES:
Payable for fund shares redeemed...........................
38,427 63,419 101,846
Investment advisory fee payable............................
142,691 50,402 193,093
Administration fee payable.................................
21,155 28,801 49,956
Custodian fee payable......................................
7,500 7,000 14,500
Distribution fees payable..................................
26,024 105,980 132,004
Service fees payable ......................................
13,986 36,001 49,987
Shareholder servicing agent fees payable...................
9,920 28,000 37,920
Miscellaneous fees payable.................................
5,848 6,775 12,623
-----
- ------- ------------ ----------- ------------
Total Liabilities....................................
265,551 326,378 0 591,929
-----
- ------- ------------ ----------- ------------
NET ASSETS........................................................
$59,697,650 $169,555,054 $0 $229,252,704
-----
- ------- ------------ ----------- ------------
-----
- ------- ------------ ----------- ------------
NET ASSET VALUE:
CLASS A SHARES:
Net Asset Value and redemption price per share
($3,775,567 divided by 388,755, $3,177,754
divided by 236,516, and $6,953,321
divided by 716,021 shares of common stock
outstanding)
$9.71 $13.44 $9.71
Maximum offering price per share (based on
Maximum sales charge of 5% of offering price
on July 31, 1993)
$10.22 $14.15 $10.22
CLASS B SHARES:
Net Asset Value and offering price per share
($55,922,073 divided by 5,765,319, $166,377,287 divided
by 12,381,770 and $222,299,360 divided by 22,917,617
shares of common stock outstanding)
$9.70 $13.44 $9.70
CLASS D SHARES:
Net Asset Value, offering price and redemption
price per share ($9.70 divided by 1, $13.44 divided
by 1, and $23.14 divided by 2.386 shares of common
stock outstanding)
$9.70 $13.44 $9.70
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
SMITH BARNEY SHEARSON
GROWTH AND INCOME FUND
PRO FORMA COMBINING STATEMENT OF NET INVESTMENT INCOME (Unaudited)
For the Year Ended July 31, 1993
<TABLE>
<CAPTION>
Pro
SBS
SBS Forma
Growth and
Directions Combined
Income Fund
Value Fund Adjustments (Note 1)
----------- -----
- ------ ----------- -----------
<S> <C> <C>
<C> <C>
INCOME:
Dividends ............................................ $1,321,402
$2,702,666 $4,024,068
Interest ............................................. 498,372
942,949 1,441,321
----------- -----
- ------ ----------- -----------
TOTAL INCOME............................................ 1,819,774
3,645,615 0 5,465,389
----------- -----
- ------ ----------- -----------
EXPENSES:
Investment advisory fee............................... 268,639
593,443 169,555 (a) 1,031,637
Administration fee.................................... 119,395
339,110 458,505
Shareholder servicing agent fees...................... 83,640
365,730 449,370
Directors' fees and expenses.......................... 15,480
24,918 (24,918)(b) 15,480
Custodian fees........................................ 39,204
43,058 (24,044)(b) 58,218
Distribution fees..................................... 279,610
1,247,830 (415,943)(a) 1,111,497
Service fees ......................................... 149,244
423,888 573,132
Audit and legal fees.................................. 58,526
39,076 (39,076)(b) 58,526
Other................................................. 42,674
79,184 (71,858)(b) 50,000
----------- -----
- ------ ----------- -----------
TOTAL EXPENSES.......................................... 1,056,412
3,156,237 (406,284) 3,806,365
----------- -----
- ------ ----------- -----------
NET INVESTMENT INCOME (LOSS)............................ 763,362
489,378 406,284 1,659,024
----------- -----
- ------ ----------- -----------
<FN>
(a) Adjustment to reflect SBS Growth and Income Fund's currently effective
fee schedule.
(b) Reductions reflect expected savings when the two funds become one.
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
SMITH BARNEY SHEARSON
GROWTH AND INCOME FUND
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF COMBINATION
The unaudited Pro Forma Combining Portfolio of
Investments, the Pro Forma Combining Statement of Assets and
Liabilities and the Pro Forma Combining Statement of Net
Investment Income reflect the accounts of Smith Barney
Shearson Growth and Income Fund ("Growth") and Smith Barney
Shearson Directions Value Fund ("Directions") at and for the
year ended July 31, 1993. These statements have been
derived from the funds' books and records utilized in
calculating daily net asset value at July 31, 1993.
The pro forma statements give effect to the proposed
transfer of the assets and stated liabilities of Directions
to Growth in exchange for shares of Growth under generally
accepted accounting principles. The historical cost of
investment securities will be carried forward to the
surviving entity and the results of operations of Growth for
pre-combination periods will not be restated. The pro forma
statements do not reflect the expenses of either fund in
carrying out its obligations under the Agreement and Plan of
Reorganization.
The Pro Forma Combining Portfolio of Investments, the
Pro Forma Combining Statement of Assets and Liabilities and
the Pro Forma Combining Statement of Net Investment Income
should be read in conjunction with the historical financial
statements of the funds included or incorporated by
reference in the Statement of Additional Information.
2. PORTFOLIO VALUATION
Securities of both Growth and Directions are valued at
market value, or in the absence of a market value with
respect to any portfolio securities, at fair value as
determined by or under the direction of the funds' Board of
Trustees. Portfolio securities that are primarily traded on
an exchange are valued at the last sale price on that
exchange or, if there were no sales during the day, at the
current quoted bid price. Short-term investments that
mature in 60 days or less are valued at amortized cost.
3. CAPITAL SHARES
The pro forma net asset value per share assumes the
issuance of additional shares of Growth which would have
been issued at July 31, 1993 in connection with the proposed
reorganization. The pro forma number of Class A and B
shares outstanding of 716,021 and 22,917,617, respectively,
consists of 327,266 and 17,152,298 additional Class A and B
shares, respectively, assumed issued in the reorganization
plus 388,755 and 5,765,319 shares of Growth outstanding at
July 31, 1993.
SMITH BARNEY SHEARSON GROWTH AND INCOME FUND
PART C
OTHER INFORMATION
Item
15.
Indemnification
The response to this item is incorporated by reference to
"Liability of Trustees/Directors" under the caption
"Comparative Information on Shareholder Rights" in Part A of
this Registration Statement.
Item
16.
Exhibits
All References are to Registrant's Registration Statement on
Form N-1A (the "Registration Statement") as filed with the
Securities and Exchange Commission on January 9, 1986 (File
Nos. 33-2627 and 811-4551)
(1) (a)
Registrant's Agreement and Declaration of Trust (the "Master
Trust Agreement") is incorporated by reference to the
Registrant's Registration Statement.
(b)
Amendments No. 1 and 2 to Registrant's Master Trust Agreement
are incorporated by reference to Post-Effective Amendment No. 2
to the Registration Statement filed on November 19, 1986 ("Post-
Effective Amendment No. 2").
(c)
Amendment No. 3 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 3 to
the Registration Statement filed on May 12, 1987 ("Post-
Effective Amendment No. 3").
(d)
Amendments No. 4 and 5 to Registrant's Master Trust Agreement
are incorporated by reference to Post-Effective Amendment No. 4
to the Registration Statement filed on June 1, 1987 ("Post-
Effective Amendment No. 4").
(e)
Amendment No. 6 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 6 to
the Registration Statement filed on August 28, 1987 ("Post-
Effective Amendment No. 6").
(f)
Amendment No. 7 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 11 to
the Registration Statement filed on September 19, 1988 ("Post-
Effective Amendment No. 11").
(g)
Amendment No. 8 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 13 to
the Registration Statement filed on January 13, 1989 ("Post-
Effective Amendment No. 13).
(h)
Amendment No. 9 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 14 to
the Registration Statement filed on January 13, 1989 ("Post-
Effective Amendment No. 14").
(i)
Amendment No. 10 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 15 to
the Registration Statement filed on May 30, 1989 ("Post-
Effective Amendment No. 6").
(j)
Amendment No. 11 to Registrant's Master Trust Agreement is
incorporated by reference to Post-Effective Amendment No. 19 to
the Registration Statement filed on March 10, 1992 ("Post-
Effective Amendment No. 19").
(k)
Amended and Restated Master Trust Agreement dated November 5,
1992, is incorporated by reference to Post-Effective Amendment
No. 25 to the Registration Statement filed on June 1, 1993
("Post-Effective Amendment No. 25").
(2)
Registrant's By-laws are incorporated by reference to
Registrant's Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A filed on February 25, 1986 ("Pre-
Effective Amendment No. 1").
(3)
Not Applicable
(4)
Agreement and Plan of Reorganization is filed herein as Exhibit
A to Registrant's Prospectus/Proxy Statement contained in Part A
of this Amendment No. 1 to the Registrant's Registration
Statement on Form N-14.
(5)
Forms of share certificates for Class A, B and D shares of
beneficial interest for Smith Barney Shearson Growth and Income
Fund, a sub-trust of the Registrant, are incorporated by
reference to Post-Effective Amendment No. 22 to the Registration
Statement filed on June 1, 1993.
(6) (a)
Investment Advisory Agreement between the Registrant and
Greenwich Street Advisors, a division of Mutual Management Corp.
Inc., dated July 30, 1993, is incorporated by reference to the
Registrant's Registration Statement on Form N-14 ("N-14
Registration Statement") filed on December 6, 1993.
(b)
Administration Agreement between the Registrant and The Boston
Company Advisors, Inc., dated May 21, 1993, is incorporated by
reference to the Registrant's N-14 Registration Statement filed
on December 6, 1993.
(7)
Distribution Agreement between the Registrant and Smith Barney
Shearson Inc., dated July 30, 1993, is incorporated by reference
to the Registrant's N-14 Registration Statement filed on
December 6, 1993.
(8)
Not Applicable
(9) (a)
Supplement to Custody Agreement between the Registrant and
Boston Safe Deposit and Trust Company (relating to Smith Barney
Shearson Growth and Income Fund) is incorporated by reference to
Post-Effective Amendment No. 19.
(b)
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.
(c)
Form of Supplement to Transfer Agency Agreement between the
Registrant and The Shareholder Services Group, Inc. (relating to
Smith Barney Shearson Growth and Income Fund) is incorporated by
reference to Post-Effective Amendment No. 19.
(d)
Amendment to Transfer Agency Agreement between the Registrant
and The Shareholder Services Group, Inc. (relating to Smith
Barney Shearson Growth and Income Fund) is filed herein.
(10)
Services and Distribution Plan pursuant to Rule 12b-1, dated
July 30, 1993, is incorporated by reference to the Registrant's
N-14 Registration Statement filed on December 6, 1993.
(11)
Opinion and Consent of Willkie Farr & Gallagher with respect to
legality is filed herein.
(12)
Opinion and Consent of Willkie Farr & Gallagher with respect to
tax matters is filed herein.
(13)
Not Applicable
(14)
Consent of Cooper's & Lybrand is filed herein.
(15)
Not Applicable
(16)
Power of Attorney was previously filed on the signature page to
N-14 Registration Statement filed on December 6, 1993.
(17) (a)
Form of Proxy Card and Instruction is incorporated by reference
to the Registrant's N-14 Registration Statement filed on
December 6, 1993.
(b)
Registrant's Declaration pursuant to Rule 24f-2 is incorporated
by reference to its initial Registration Statement.
Item
17.
Undertakings
(1)
The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through the
use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will
contain the information called for by the applicable
registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2)
The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a
part of an amendment to the Registration Statement and
will not be used until the amendment is effective, and
that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to
be a new registration statement for the securities offered
therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of
them.
EXHIBIT INDEX
Exhibit Number
Description
(9) (d)
Amendment to Transfer Agency Agreement
between the Registrant and The
Shareholder Services Group, Inc.
(relating to Smith Barney Shearson Growth
and Income Fund)
(11)
Opinion and Consent of Willkie Farr &
Gallagher with respect to legality
(12)
Opinion and Consent of Willkie Farr &
Gallagher with respect to tax matters
(14)
Consent of Cooper's & Lybrand
SIGNATURES
As required by the Securities Act of 1933, this Pre-effective
Amendment No. 1 to the Registration Statement on Form N-14 has been
signed on behalf of the registrant, in the City of New York and State of
New York on the 14th day of January, 1993.
Smith Barney Shearson
Growth and Income Fund,
a subtrust of
Smith Barney Shearson
Equity Funds
By: /s/ Heath B.
McLendon*
Heath B. McLendon
Chief Executive
Officer
As required by the Securities Act of 1933, this Amendment to the
Registration Statement on Form N-14 has been signed by the following
persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Heath B. McLendon*
Chairman of the Board
1/14/94
Heath B. McLendon
Chief Executive Officer
/s/ Vincent Nave*
Vincent Nave
Treasurer (Chief Financial
and Accounting Officer
1/14/94
/s/ Lee Abraham*
Lee Abraham
Trustee
1/14/94
/s/ Antoinette C. Bentley*
Antoinette C. Bentley
Trustee
1/14/94
/s/ Allan J. Bloostein*
Allan J. Bloostein
Trustee
1/14/94
/s/ Richard E. Hanson*
Richard E. Hanson
Trustee
1/14/94
/s/ Madelon DeVoe Talley*
Madelon DeVoe Talley
Trustee
1/14/94
* By: /s/ Lee D. Augsburger
Lee D. Augsburger
Attorney-in-Fact
Pursuant to power of attorney dated 6/30/93, incorporated by
reference to the
Registration Statement on Form N-14 filed December 6, 1993.
shared\domestic\clients\GRIPN14.doc
[FORM OF]
SUPPLEMENT TO TRANSFER AGENCY AGREEMENT
January , 1994
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
Smith Barney Shearson Equity Funds, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), hereby supplements
its agreement with THE SHAREHOLDER SERVICES GROUP, INC. (MS), a Massachusetts
corporation (the "Transfer Agent"), as follows:
1. Compensation. Pursuant to Section 3 of the Transfer Agent
Agreement dated as of August 4, 1993 (the "Agreement"), the Trust and Transfer
Agent hereby agree that, notwithstanding any provision of the Agreement or
any attachment thereto to the contrary, in no event shall the fee with
respect to Class A shares of Smith Barney Shearson Growth and Income Fund
("Fund"), a subtrust of the Trust, exceed 0.10% of the average daily net
assets of that Class of the Fund.
If the foregoing is acceptable to you, kindly indicate your acceptance
by signing and returning the enclosed copy of this Supplement.
Very truly yours,
SMITH BARNEY SHEARSON EQUITY
FUNDS
By: ______________________________
Chairman of the Board
Accepted and Agreed to:
THE SHAREHOLDER SERVICES GROUP, INC.
By: ________________________________
[Title
January 12, 1994
HAND DELIVERY
Mr. Michael McCarthy
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
Re: Proposed Merger of Smith Barney Shearson Directions Value
and Smith Barney Shearson Growth and Income Fund
Dear Mike:
Enclosed please find a proposed form of Supplement to Transfer Agent
Agreement to be filed with the Securities and Exchange Commission in
connection with the above matter. As you can see, it is a very
straightforward modification, consistent in form with past supplements to the
agreement, and reflects TSSG's agreement with Smith Barney Shearson, Inc.
regarding the transfer agent fees for the Growth and Income Fund - Class A
shares.
Would you please review this document and let me know of any revisions
or questions you may have. We just received comments from the Commission and
intend to make our final filing as soon as possible.
Thank you for your assistance in this matter.
Sincerely yours,
Caren Cunningham
Enclosures
CAC\TAAMEND.DOC
<PAGE>1
January 13, 1994
Smith Barney Shearson
Equity Funds
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
We have acted as counsel for Smith Barney Shearson Equity Funds, a
business trust organized under the laws of The Commonwealth of Massachusetts
(the "Trust"), in connection with the proposed acquisition by Smith Barney
Shearson Growth and Income Fund (the "Fund"), a subtrust of the Trust, of
substantially all of the assets and certain scheduled liabilities of Smith
Barney Shearson Directions Value Fund ("Directions Value Fund"), a series of
Smith Barney Shearson Investment Funds Inc., a Maryland corporation (the
"Company"), in exchange for Class A, Class B and Class D shares of beneficial
interest of the Fund (collectively, the "Shares"), pursuant to an Agreement
and Plan of Reorganization dated as of January 3, 1994 between the Trust, on
behalf of the Fund, and the Company, on behalf of Directions Value Fund (the
"Agreement").
As counsel for the Trust, we have examined the Trust's Registration
Statement on Form N-14 substantially in the form in which it is to become
effective (the "Registration Statement"), the Trust's Master Trust Agreement
and By-laws, and all amendments thereto, and the Agreement.
We have also examined and relied upon such corporate records of the
Trust and other documents and certificates with respect to factual matters as
we have deemed necessary to render the opinions expressed
<PAGE>2
herein. We have assumed without independent verification the genuineness of
all signatures, the authenticity of all documents submitted to us as originals
and the conformity with originals of all documents submitted to us as copies.
As to matters of Massachusetts law, we have relied solely on the opinion of
Francis J. McNamara III, General Counsel of The Boston Company Advisors, Inc.,
which serves as administrator to the Fund, with respect to the matters
addressed therein, which is satisfactory to us in form and scope and a copy of
which is annexed hereto.
Based upon the foregoing, we are of the opinion that all necessary
Trust action precedent to the issue of the Shares pursuant to the Agreement
has been duly taken. We are further of the opinion that the Shares when
issued pursuant to the Agreement will be legally and validly issued, fully
paid and nonassessable by the Trust. In rendering the opinion expressed in
the preceding sentence, we assume that the sale of the Shares will be effected
in compliance with the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, and applicable state laws regulating the sale
of securities. We further assume that there will be no material changes in
the facts and conditions on which we base this opinion between the date hereof
and the time of issuance of the Shares.
As indicated above, the Trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of a business trust may, under certain circumstances, be held
personally liable for the obligations of the Trust. The Trust's Master Trust
Agreement provides, however, that if a shareholder of the Trust is charged or
held personally liable solely by reason of being or having been a shareholder,
the shareholder shall be entitled out of the assets of the Trust to be held
harmless from and indemnified against all loss and expense arising from such
liability. Thus, the risk of a shareholder incurring financial loss on
account of shareholders liability is limited to circumstances in which the
Trust itself would be unable to meet its obligations.
<PAGE>3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the references to us in the Prospectus/Proxy
Statement included as part of the Registration Statement and to the filing of
this opinion as an exhibit to any application made by or on behalf of the
Trust or any distributor or dealer in connection with the registration or
qualification of the Trust or the Shares under the securities laws of any
state or other jurisdiction.
This opinion is furnished by us as counsel to the Trust, is solely
for the benefit of the Trust and its governing board in connection with the
above described acquisition of assets and liabilities and may not be relied
upon for any other purpose or by any other person.
Very truly yours,
WILLKIE FARR & GALLAGHER
86160108
<PAGE>1
January 12, 1994
Smith Barney Shearson Growth
and Income Fund
Two World Trade Center
New York, New York 10048
Smith Barney Shearson Directions
Value Fund
Two World Trade Center
New York, New York 10048
Ladies and Gentlemen:
You have asked us for our opinion concerning certain federal income tax
consequences to the Smith Barney Shearson Growth and Income Fund, a subtrust
of Smith Barney Shearson Equity Funds, (the "Growth and Income Fund") and its
shareholders ("Growth and Income Fund Shareholders") and to the Smith Barney
Shearson Directions Value Fund, a series of Smith Barney Shearson Investment
Funds Inc., (the "Directions Value Fund") when the Directions Value Fund
Shareholders receive shares (including fractional shares) of common stock of
the Growth and Income Fund ("Growth and Income Fund Shares") in liquidation of
their interests in the Directions Value Fund pursuant to an acquisition by the
Growth and Income Fund of all or substantially all of the assets of the
Directions Value Fund in exchange for Growth and Income Fund Shares and the
assumption by the Growth and Income Fund of certain identified liabilities of
the Directions Value Fund, the liquidation of the Directions Value Fund and
the distribution in liquidation of the Growth and Income Fund Shares to the
Directions Value Fund Shareholders.
We have reviewed such documents and materials as we have considered necessary
for the purpose of rendering this opinion. In rendering this opinion, we
assume that such documents as yet unexecuted will, when executed, conform in
all material respects to the proposed forms of such documents that we have
examined. In addition, we assume the genuineness of all signatures, the
capacity of each party executing a document so to execute that document, the
<PAGE>2
authenticity of all documents submitted to us as originals and the conformity
to original documents of all documents submitted to us as certified or
photostatic copies. We have made inquiry as to the underlying facts which we
considered to be relevant to the conclusions set forth in this letter. The
opinions expressed in this letter are based upon certain factual statements
relating to the Growth and Income Fund and the Directions Value Fund set forth
in the Registration Statement on Form N-14 (the "Registration Statement")
filed by Smith Barney Shearson Equity Funds, on behalf of its subtrust, Smith
Barney Shearson Growth and Income Fund, with the Securities and Exchange
Commission and representations to be made in letters from the Growth and
Income Fund and the Directions Value Fund addressed to us for our use in
rendering this opinion. Based on information received from the Growth and
Income Fund and the Directions Value Fund, we have no reason to believe that
we will not be able to render this opinion as a final opinion at the Closing.
We have no reason to believe that these representations and facts will not be
valid, but we have not attempted and will not attempt to verify independently
any of these representations and facts, and this opinion is based upon the
assumption that each of them is accurate. Capitalized terms used herein and
not otherwise defined shall have the meaning given them in the Registration
Statement.
The conclusions expressed herein are based upon the Internal Revenue Code of
1986 (the "Code"), Treasury regulations issued thereunder, published rulings
and procedures of the Internal Revenue Service and judicial decisions, all as
in effect on the date of this letter.
Based upon the foregoing, it is our opinion that:
(1) the transfer of all or substantially all of the Directions Value
Fund's assets in exchange for Growth and Income Fund Shares and the assumption
by the Growth and Income Fund of certain identified liabilities of the
Directions Value Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1)(C) of the Code, and the Growth and Income Fund and the
Directions Value Fund are each a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
<PAGE>3
(2) no gain or loss will be recognized by the Growth and Income Fund
upon the receipt of the assets of the Directions Value Fund in exchange for
Growth and Income Fund Shares and the assumption by the Growth and Income Fund
of certain identified liabilities of the Directions Value Fund;
(3) no gain or loss will be recognized by the Directions Value Fund upon
the transfer of the Directions Value Fund's assets to the Growth and Income
Fund in exchange for Growth and Income Fund Shares and the assumption by the
Growth and Income Fund of certain identified liabilities of the Directions
Value Fund or upon the distribution (whether actual or constructive) of Growth
and Income Fund Shares to Directions Value Fund Shareholders;
(4) no gain or loss will be recognized by Directions Value Fund
Shareholders upon the exchange of their shares of the Directions Value Fund
for Growth and Income Fund Shares and the assumption by the Growth and Income
Fund of certain identified liabilities of the Directions Value Fund;
(5) the aggregate tax basis for Growth and Income Fund Shares received
by each Directions Value Fund Shareholder pursuant to the Reorganization will
be the same as the aggregate tax basis of the shares of the Directions Value
Fund held by that Shareholder immediately prior to the Reorganization, and the
holding period of the Growth and Income Fund Shares to be received by each
Directions Value Fund Shareholder will include the period during which the
shares of the Directions Value Fund exchanged therefor were held by such
Directions Value Fund Shareholder (provided the shares of the Directions Value
Fund were held as capital assets on the date of the Reorganization); and
(6) the tax basis of the Directions Value Fund's assets acquired by the
Growth and Income Fund will be the same as the tax basis of such assets to the
Directions Value Fund immediately prior to the Reorganization, and the holding
period of the assets of the Directions Value Fund in the hands of the Growth
and Income Fund will include the period during which those assets were held by
<PAGE>4
the Directions Value Fund.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our
firm in the Registration Statement or in the Prospectus/Proxy Statement
constituting a part thereof.
Very truly yours,
WILLKIE FARR & GALLAGHER
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of
Smith Barney Shearson Growth and Income Fund of Smith Barney Shearson
Equity Funds:
We hereby consent to the following with respect to the
Registration Statement on Form N-14 (File No. 33-2627) under the
Securities Act of 1933, as amended, of Smith Barney Shearson Growth
and Income Fund of Smith Barney Shearson Equity Funds:
1. The incorporation by reference of our report dated
March 12, 1993 of Smith Barney Shearson Growth and
Income Fund (formerly Shearson Lehman Brothers Growth
and Income Fund) which is included in the Annual Report
dated January 31, 1993.
2. The incorporation by reference of our report dated
February 7, 1993 of Smith Barney Shearson Directions
Value Fund (formerly Shearson Lehman Brothers
Directions Value Fund) of Smith Barney Shearson
Investment Funds, which is included in the Annual
Report dated December 31, 1992.
3. The reference to our firm under the heading "Financial
Statements and Experts" in the Registration Statement.
4. The reference to our firm under the heading "Condensed
Financial Information" in the Prospectus dated April 1,
1993 of Smith Barney Shearson Growth and Income Fund,
which is incorporated by reference in the Registration
Statement.
5. The reference to our firm under the heading "Counsel
and Auditors" in the Statement of Additional
Information dated April 1, 1993 of Smith Barney
Shearson Growth and Income Fund, which is incorporated
by reference in the Registration Statement.
6. The reference to our firm under the heading "Condensed
Financial Information" in the Prospectus dated May 1,
1993 of Smith Barney Shearson Directions Value Fund,
which is incorporated by reference in the Registration
Statement.
7. The reference to our firm under the heading "Counsel
and Auditors" in the Statement of Additional
Information dated May 1 , 1993 of Smith Barney Shearson
Directions Value Fund, which is incorporated by
reference in the Registration Statement.
COOPERS & LYBRAND
Boston, Massachusetts
December 29, 1993
