Registration No.
33-2627
811-4061
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No 26 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 27 X
SMITH BARNEY SHEARSON EQUITY FUNDS
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 720-9218
Francis J. McNamara, III, Esq.
Secretary
Smith Barney Shearson Equity Funds
One Boston Place
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
on pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
X on April 1, 1994 pursuant to Rule 485(a)
The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended. Registrant's Rule 24f-2 Notice for the fiscal year ended
January 31, 1994 will be filed on or before March 31, 1994.
SMITH BARNEY SHEARSON EQUITY FUNDS
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial
Highlights;
The Funds' Performance
4. General Description of Registrant Cover Page; Prospectus
Summary;
Variable Pricing System; Investment
Objective and Management
Policies; Distributor;
Additional Information
5. Management of the Fund The Fund's Expenses;
Management
of the Trust and the Fund;
Distributor; Additional
Information; Annual Report
6. Capital Stock and Other Securities Variable Pricing System;
Investment
Objective and Management Policies;
Additional Information; Dividends,
Distributions and Taxes
7. Purchase of Securities Being Offered Variable Pricing System;
Purchase of Shares;
Redemption of Shares; Valuation of
Shares;
Exchange Privilege
8. Redemption or Repurchase Variable Pricing System;
Purchase of
Shares; Redemption of Shares;
Exchange Privilege
9. Legal Proceedings Not Applicable
Part B
Item No. Statement of Additional Information
Caption
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History Management of the
Trust and the Funds;
13. Investment Objectives and Policies Investment Objectives
and Management
Policies
14. Management of the Fund Management of the Trust
and the Funds;
Distributor
15. Control Persons and Principal Holders of Management of the Trust
and the Funds
Securities
16. Investment Advisory and Other Services Management of the Trust
and the Funds; Distributor;
Custodian and Transfer Agent
17. Brokerage Allocation Investment Objectives and
Management Policies
18. Capital Stock and Other Securities Purchase of Shares;
Redemption of Shares;
Taxes
19. Purchase, Redemption and Pricing of Purchase of Shares;
Redemption of Shares
Securities Being Offered Valuation of Shares;
Exchange Privilege
20. Tax Status Taxes
21. Underwriters Purchase of Shares
22. Calculation of Performance Data Performance Data
23. Financial Statements Financial Statements
<PAGE>
- ------------------------------------------------------------------------------
- --
April 1, 1994
SMITH BARNEY SHEARSON
Growth and Income Fund
Prospectus begins
on page one.
(LOGO OF SMITH BARNEY SHEARSON
APPEARS HERE)
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS April 1, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Growth and Income Fund (the "Fund") seeks long-term
capital growth and income by investing in income producing equity securities,
including dividend-paying common stocks, securities that are convertible into
common stocks and warrants.
The Fund is one of a number of funds, each having distinct investment objec-
tives and policies, making up Smith Barney Shearson Equity Funds (the
"Trust").
The Trust is an open-end management investment company commonly referred to as
a "mutual fund."
This Prospectus sets forth concisely certain information about the Fund and
the Trust, including sales charges, distribution and service fees and
expenses,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. Shares of the other funds offered by the Trust are described
in separate prospectuses that may be obtained by calling the Trust at the
tele-
phone number set forth above or by contacting your Smith Barney Shearson
Finan-
cial Consultant.
Additional information about the Fund and the Trust is contained in a State-
ment of Additional Information dated April 1, 1994, as amended or supplemented
from time to time, that is available upon request and without charge by
calling
or writing the Trust at the telephone number or address set forth above or by
contacting your Smith Barney Shearson Financial Consultant. The Statement of
Additional Information has been filed with the Securities and Exchange Commis-
sion (the "SEC") and is incorporated by reference into this Prospectus in its
entirety.
SMITH BARNEY SHEARSON INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
THE BOSTON COMPANY ADVISORS, INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
-------------------------------------------------
FINANCIAL HIGHLIGHTS 9
-------------------------------------------------
VARIABLE PRICING SYSTEM 11
-------------------------------------------------
THE FUND'S PERFORMANCE 12
-------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 14
-------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 15
-------------------------------------------------
PURCHASE OF SHARES 25
-------------------------------------------------
REDEMPTION OF SHARES 32
-------------------------------------------------
VALUATION OF SHARES 36
-------------------------------------------------
EXCHANGE PRIVILEGE 38
-------------------------------------------------
DISTRIBUTOR 44
-------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 45
-------------------------------------------------
ADDITIONAL INFORMATION 47
-------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Prospec-
tus. See "Table of Contents."
BENEFITS TO INVESTORS The Fund offers investors several important benefits:
. Ownership of a professionally managed diversified portfolio of equity
securities having the potential for income and long-term capital growth.
. Investment liquidity through convenient purchase and redemption proce-
dures.
. A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
. Different methods for purchasing shares that allow investment flexibility
and a wider range of investment alternatives.
. Automatic dividend reinvestment feature, plus exchange privilege within
the same class of shares of most other funds in the Smith Barney Shearson
Group of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, diversified, management
investment
company that seeks long-term capital growth and income by investing in income
producing equity securities, including dividend-paying common stocks, securi-
ties that are convertible into common stocks and warrants. See "Investment
Objective and Management Policies."
VARIABLE PRICING SYSTEM The Fund offers several classes of shares ("Classes")
designed to provide investors with the flexibility of selecting an investment
best suited to their needs. The general public is offered two Classes of
shares: Class A shares and Class B shares, which differ principally in terms
of
the sales charges and rates of expense to which they are subject. A third
class--Class D shares-- is offered only to plans participating in the Smith
Barney Shearsons 401(k) Program (the "401(k) Program"). See "Variable Pricing
System" and "Purchase of Shares--Smith Barney Shearson 401(k) Program."
CLASS A SHARES These shares are offered at net asset value per share plus a
max-
imum initial sales charge of 5%. The Fund pays an annual service fee of
3
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY (CONTINUED)
.25% of the value of average daily net assets attributable to this Class. See
"Purchase of Shares."
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 5% of redemption pro-
ceeds, declining by 1% each year after the date of purchase to zero. The Fund
pays an annual service fee of .25% and an annual distribution fee of .50% of
the value of average daily net assets attributable to this Class. See
"Purchase
of Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
origi-
nal purchase. Upon conversion, these shares will no longer be subject to an
annual distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System--Class B Shares."
SMITH BARNEY SHEARSON 401(K) PROGRAM Investors may be eligible to participate
in
the 401(k) Program, which is generally designed to assist employers or plan
sponsors in the creation or operation of retirement plans under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
other
types of participant directed, tax-qualified employee benefit plans (collec-
tively, "Participating Plans"). Class A, Class B and Class D shares may be
available as investment alternatives for Participating Plans. Class A and
Class
B shares acquired through the 401(k) Program are subject to the same service
and/or distribution fees as, but different sales charge and CDSC schedules
than, the Class A and Class B shares acquired by other investors. Class D
shares acquired by Participating Plans are offered at net asset value per
share
without any sales charge or CDSC. The Fund pays annual service and
distribution
fees based on the value of the average daily net assets attributable to this
Class. See "Purchase of Shares--Smith Barney Shearson 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith
Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securi-
ties transactions through Smith Barney Shearson on a fully disclosed basis (an
"Introducing Broker"). Direct purchases by certain retirement plans may be
made
through the Trust's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation. Smith Barney Shearson recom-
mends that, in most cases, single investments of $250,000 or more should be in
Class A. See "Purchase of Shares."
4
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY (CONTINUED)
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
However, for Individual Retirement Accounts ("IRAs") and Self-Employed Retire-
ment Plans, the minimum initial investment requirement is $250 and the minimum
subsequent investment requirement is $100 and for certain qualified retirement
plans, the minimum initial and subsequent investment requirements are both
$25.
See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount not less than $100. See
"Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND Greenwich Street Advisors, a division of Mutual Manage-
ment Corp. ("Greenwich Street Advisors") serves as the Fund's investment
advis-
er. Mutual Management Corp. provides investment advisory and management serv-
ices to investment companies affiliated with Smith Barney Shearson. Smith Bar-
ney Shearson is a wholly owned subsidiary of Smith Barney Shearson Holdings
Inc., which is in turn a wholly owned subsidiary of The Travelers, Inc.
("Trav-
elers") (formerly Primerica Corporation), a diversified financial services
holding company principally engaged in the businesses of providing investment,
consumer finance and insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors"), serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston Com-
pany, Inc. ("TBC"), which is in turn a wholly owned subsidiary of Mellon Bank
Corporation. See "Management of the Trust and the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds. Cer-
tain exchanges may be subject to a sales charge differential. See "Exchange
Privilege."
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
finan-
cial section of most newspapers and is also available from your Smith Barney
Shearson Financial Consultant. See "Valuation of Shares."
5
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS Dividends are paid quarterly from net investment
income and distributions are paid annually from net realized capital gains.
See
"Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically unless otherwise specified by an investor in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
rein-
vestments will become eligible for conversion to Class A shares on a pro-rata
basis. See "Dividends, Distributions and Taxes" and "Variable Pricing System."
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund may not achieve its
investment
objective. The market value of fixed income securities, which may constitute a
part of the investments of the Fund, varies inversely in response to changes
in
prevailing interest rates. The mortgage related securities in which the Fund
may invest are sensitive to changes in interest rates and to prepayment of
mortgages. The Fund may make certain investments and employ certain investment
techniques that involve other risks, including entering into repurchase agree-
ments, lending portfolio securities and entering into futures contracts and
related options as hedges. These risks and those associated with when-issued
and delayed delivery transactions and covered option writing are described
under "Investment Objective and Management Policies."
6
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and the Fund's current operating expenses:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
- -------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% -- --
Maximum CDSC
(as a percentage of redemption proceeds) -- 5.00% --
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .65% .65% .65%
12b-1 fees* .25 .75 .75
Other expenses**
- -------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
</TABLE>
* Upon conversion, Class B shares will no longer be subject to a distribution
fee. Class D shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee.
** All expenses are based on data for the Fund's fiscal year ended January 31,
1994.
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors may
pay actual charges of less than 5% depending on the amount purchased and, in
the case of Class B shares, the length of time the shares are held and whether
the shares are held through the 401(k) Program. See "Purchase of Shares" and
"Redemption of Shares." Management fees paid by the Fund include investment
advisory fees paid to Greenwich Street Advisors in an amount equal to .45% of
the value of the Fund's average daily net assets, and administration fees paid
to Boston Advisors in an amount equal to .20% of the value of the Fund's aver-
age daily net assets. The nature of the services for which the Fund pays man-
agement fees is described under "Management of the Trust and the Fund." Smith
Barney Shearson receives an annual 12b-1 service fee of .25% of the value of
average daily net assets of Class A shares. Smith Barney Shearson also
receives
with respect to Class B shares and Class D shares an annual 12b-1 fee of .75%
of the value of average daily net assets of Class B shares and
7
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PROSPECTUS SUMMARY (CONTINUED)
Class D shares, consisting of a .50% distribution fee and a .25% service fee.
"Other expenses" in the above table include fees for shareholder services,
cus-
todial fees, legal and accounting fees, printing costs and registration fees.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumu-
lative expenses that would be incurred over various periods with respect to a
hypothetical $1,000 investment in the Fund assuming a 5% total return. The
example assumes payment by the Fund of operating expenses at the levels set
forth in the above table. The example should not be considered a
representation
of past or future expenses and actual expenses may be greater or less than
those shown. Moreover, while the example assumes a 5% annual return, the
Fund's
actual performance will vary and may result in an actual return greater or
less
than 5%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- -------------------------------------------------------------------------
<S> <C> <C>
Class A shares* $ $
Class B shares:
Assumes complete redemption at end of each time period** $ $
Assumes no redemption $ $
Class D shares $ $
- -------------------------------------------------------------------------
</TABLE>
* Assumes deduction at the time of purchase of the maximum 5% sales charge.
** Assumes deduction at the time of redemption of the maximum CDSC applicable
for that time period.
8
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, independent
accountants, whose report thereon appears in the Fund's Annual Report dated
January 31, 1994. The information set forth below should be read in
conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report, which is incorporated by reference into the Statement of Addi-
tional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
1/31/94* 1/31/93*
<S> <C> <C>
</TABLE>
* The Fund commenced selling Class A shares on November 6, 1992.
9
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
1/31/94 1/31/93*
<S> <C> <C>
</TABLE>
FOR A CLASS D SHARE OUTSTANDING THROUGHOUT THE PERIOD:
10
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares, thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment. A third class--Class D--
is offered only to Participating Plans.
Class A Shares. Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 5% imposed at the time of purchase. The
initial
sales charge may be reduced or waived for certain purchases. Class A shares
are
subject to an annual service fee of .25% of the value of the Fund's average
daily net assets attributable to the Class. The annual service fee is used by
Smith Barney Shearson to compensate its Financial Consultants for ongoing
serv-
ices provided to shareholders. The sales charge is used to compensate Smith
Barney Shearson for expenses incurred in selling Class A shares. See "Purchase
of Shares."
Class B Shares. Class B shares are sold at net asset value per share subject
to a maximum 5% CDSC, which is assessed only if the shareholder redeems shares
within the first five years of investment. This results in 100% of the invest-
or's assets being used to acquire shares of the Fund. For each year of invest-
ment within this five-year time frame, the applicable CDSC declines by 1%; in
year six, the applicable CDSC is reduced to 0%. See "Purchase of Shares" and
"Redemption of Shares."
Class B shares are subject to an annual service fee of .25% and an annual
distribution fee of .50% of the value of the Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearson's branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales literature, advertising and printing and distributing prospectuses,
statements of additional information and other materials to prospective
invest-
ors in Class B shares. A Financial Consultant may receive different levels of
compensation for selling different Classes. Class B shares are subject to a
distribution fee and higher transfer agency fees than Class A shares which, in
turn, will cause Class B shares to have a higher expense ratio and pay lower
dividends than Class A shares.
11
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
VARIABLE PRICING SYSTEM (CONTINUED)
Eight years after the date of purchase, Class B shares will convert
automati-
cally 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. In addition,
a
certain portion of Class B shares that have been acquired through the
reinvest-
ment of dividends and distributions ("Class B Dividend Shares") will be con-
verted at that time. That portion will be a percentage of the total number of
outstanding Class B Dividend Shares owned by the shareholder equal to the
ratio
of the total number of Class B shares converting at the time to the total num-
ber of outstanding Class B shares (other than Class B Dividend Shares owned by
the Shareholder). The first of these conversions will commence on or about
Sep-
tember 30, 1994. The conversion of Class B shares into Class A shares is sub-
ject to the continuing availability of an opinion of counsel to the effect
that
such conversions will not constitute taxable events for Federal tax purposes.
Class D Shares. Class D shares of the Fund are sold to Participating Plans
at
net asset value per share and are not subject to an initial sales charge or
CDSC. This Class of shares is subject to an annual service fee of .25% and an
annual distribution fee of .50% of the value of the Fund's average daily net
assets attributable to Class D shares. The distribution fee is used by Smith
Barney Shearson for expenses incurred in selling Class D shares, and the serv-
ice fee is used to compensate Smith Barney Shearson Financial Consultants for
ongoing services provided to Class D shareholders. Class D shares are subject
to a distribution fee which will cause Class D shareholders to have a higher
expense ratio and pay lower dividends than Class A shares.
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total return"
over various periods of time for each Class. Total return figures show the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These figures reflect changes in the price of the shares and assume that any
income dividends and/or capital gains distributions made by the Fund during
the
period were reinvested in shares of the same Class. Class A total return fig-
ures include the maximum initial 5% sales charge and Class B total return fig-
ures include
12
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
THE FUND'S PERFORMANCE (CONTINUED)
any applicable CDSC. These figures also take into account the service and dis-
tribution fees, if any, payable with respect to the Classes.
Total return figures will be given for the recent one-, five- and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well, such as on a
year-by-year basis. When considering average annual total return figures for
periods longer than one year, it is important to note that the Class' total
return for any one year in the period might have been greater or less than the
average for the entire period. "Aggregate total return" figures may be used
for
various periods, representing the cumulative change in value of an investment
in a Class for the specific period (again reflecting changes in share prices
and assuming reinvestment of dividends and distributions). Aggregate total
return may be calculated either with or without the effect of the maximum 5%
sales charge for the Class A shares or any applicable CDSC for Class B shares
and may be shown by means of schedules, charts or graphs, and may indicate
sub-
totals of the various components of total return (that is, changes in value of
initial investment, income dividends and capital gains distributions). Because
of the differences in sales charges and distribution fees, the performance of
each of the Classes will differ.
In reports or other communications to shareholders or in advertising materi-
al, performance of the Classes may be compared with that of other mutual funds
or classes of shares of other funds as listed in the rankings prepared by
Lipper Analytical Services, Inc. or similar independent services that monitor
the performance of mutual funds, or other industry or financial publications
such as Barron's, Business Week, CDA Investment Technologies, Inc., Forbes,
Fortune, Institutional Investor, Investors Daily, Kiplinger's Personal
Finance,
Money, Morningstar Mutual Fund Values, Money, The New York Times, USA Today
and
The Wall Street Journal. Performance figures are based on historical earnings
and are not intended to indicate future performance. To the extent any adver-
tisement or sales literature of the Fund describes the expenses or performance
of a Class it will also disclose such information for the other Classes. The
Statement of Additional Information contains a description of the methods used
to determine performance. Performance figures may be obtained from your Smith
Barney Shearson Financial Consultant.
13
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
MANAGEMENT OF THE TRUST AND THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Trust and the
Fund rests with the Trust's Board of Trustees. The Trustees approve all
signif-
icant agreements between the Trust and the companies that furnish services to
the Fund, including agreements with the Trust's distributor, custodian and
transfer agent and the Fund's investment adviser and administrator. The day-
to-
day operations of the Fund are delegated to the Fund's investment adviser and
administrator. The Statement of Additional Information contains background
information regarding each Trustee of the Trust and the executive officers of
the Trust.
INVESTMENT ADVISER--GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through predecessor entities) has been in the investment counseling business
since 1934 and is a division of Mutual Management Corp. which was incorporated
in 1978. Greenwich Street Advisors renders investment advice to a wide variety
of individuals and institutional clients that had aggregate assets under man-
agement, as of March 1, 1994, in excess of $ billion.
Subject to the supervision and direction of the Trust's Board of Trustees,
Greenwich Street Advisors manages the securities held by the Fund in
accordance
with the Fund's stated investment objective and policies, makes investment
decisions for the Fund, places orders to purchase and sell securities on
behalf
of the Fund and employs professional portfolio managers.
PORTFOLIO MANAGEMENT
R. Jay Gerken and George Novello, Managing Directors' of Greenwich Street
Advisors, have served as Investment Officers of the Fund since it commenced
operations and manage the day-to-day operations of the Fund, including making
all investment decisions.
Mr. Gerken's and Mr. Novello's management discussion and analysis, and addi-
tional performance information regarding the Fund during the fiscal year ended
January 31, 1994 is included in the Annual Report dated January 31, 1994. A
copy of the Annual Report may be obtained upon request and without charge from
your Smith Barney Shearson Financial Consultant or by writing or
14
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
calling the Fund at the address or phone number listed on page one of this
Pro-
spectus.
ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors calculates the net asset
value of the Fund's shares and generally assists in all aspects of the Fund's
administration and operation. Boston Advisors provides investment management,
investment advisory and/or administrative services to investment companies
which had aggregate assets under management as of , , in excess of $
billion.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek income and long-term capital
growth. The Fund's investment objective may be changed only with the approval
of a majority of the Fund's outstanding shares. There can be no assurance the
Fund's investment objective will be achieved.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective by investing in income
producing equity securities, including dividend-paying common stocks, securi-
ties that are convertible into common stocks and warrants. Greenwich Street
Advisors has developed quantitative investment criteria against which prospec-
tive investments will be evaluated and will make buy and sell decisions based
on those criteria. Those criteria establish parameters for suitable
investments
and deal with such matters as market capitalization, credit quality, dividend
growth, historic earnings, current yield and industry concentration. The
crite-
ria, which may be changed by Greenwich Street Advisors in light of its experi-
ence in managing the Fund or in response to changing market or economic condi-
tions, are designed to identify companies with consistent dividend paying his-
tories, relatively high levels of dividends, the capacity to raise dividends
in
the future and the potential for capital appreciation. Consistent with the
data
used in developing and maintaining the quantitative investment criteria, the
Fund expects to invest primarily in domestic companies of varying sizes,
gener-
ally
15
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
with capitalizations exceeding $250 million in a wide range of industries. To
the extent the Fund invests in foreign companies, it expects to hold such
secu-
rities in the form of American Depositary Receipts or European Depositary
Receipts. Under normal market conditions, the Fund will invest substantially
all--but not less than 65%--of its assets in equity securities. The Fund may
invest the remainder of its assets in high grade money market instruments in
order to develop income, as well as in corporate bonds and mortgage related
securities that are rated investment grade or are deemed by the Fund's invest-
ment adviser to be of comparable quality and in United States government
securities, in furtherance of its objective of income and long-term capital
growth. The Fund also may enter into repurchase agreements, lend portfolio
securities, enter into interest rate and stock index futures and related
options, purchase or sell securities on a when-issued or delayed-delivery
basis
and write covered options.
INVESTMENT TECHNIQUES AND STRATEGIES
The Fund is authorized to engage in any one or more of the specialized
investment techniques and strategies described below:
Money Market Instruments. The Fund may, as a cash management tool, hold up
to
20% of the value of its assets in cash and invest in short-term instruments
and, when Greenwich Street Advisors believes that market conditions warrant,
the Fund may adopt a temporary defensive posture and may hold cash and invest
in short-term instruments without limitation. Short-term instruments in which
the Fund may invest include securities issued or guaranteed by the United
States government, its agencies or instrumentalities ("U.S. government securi-
ties"); obligations of banks having at least $1 billion in assets (including
certificates of deposit, time deposits and bankers' acceptances of domestic or
foreign banks, domestic savings and loan associations and similar institu-
tions); commercial paper rated no lower than A-2 by Standard & Poor's Corpora-
tion ("S&P") or Prime-2 by Moody's Investors Service, Inc. ("Moody's") or the
equivalent from another nationally recognized statistical rating organization
("NRSRO") or, if unrated, of an issuer having an outstanding, unsecured debt
issue then rated within the two highest rating categories; and repurchase
agreements with respect to any of the foregoing entered into with banks and
non-bank dealers approved by the Trust's Board of Trustees. The NRSROs cur-
rently designated as such by the SEC are S&P, Moody's, Fitch Investors
Service,
Inc., Duff & Phelps, Inc., IBCA Limited and its affiliate, IBCA, Inc. and
Thomson BankWatch. A more detailed discussion of the ratings of NRSROs is con-
tained in the Statement of Additional Information.
16
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
U.S. Government Securities. The U.S. government securities in which the Fund
may invest include: direct obligations of the Uinted States Treasury (such as
Treasury Bills, Treasury Notes and Treasury Bonds), and U.S. government
securi-
ties, including securities that are supported by the full faith and credit of
the United States (such as certificates issued by the Government National
Mort-
gage Association); securities that are supported by the right of the issuer to
borrow from the United States Treasury (such as securities of Federal Home
Loan
Banks); and securities that are supported only by the credit of the instrumen-
tality (such as bonds issued by Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation). Treasury Bills have maturities of
less
than one year, Treasury Notes have maturities of one to ten years and Treasury
Bonds generally have maturities of greater than ten years at the date of issu-
ance.
Convertible Securities. Convertible securities are fixed-income securities
that may be converted at either a stated price or stated rate into underlying
shares of common stock and therefore are deemed to be equity securities for
purposes of the Fund's investment objective and techniques. Convertible
securi-
ties have general characteristics similar to both fixed-income and equity
secu-
rities. Although to a lesser extent than with fixed-income securities general-
ly, the market value of convertible securities tends to decline as interest
rates increase and, conversely, tends to increase as interest rates decline.
In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the under-
lying common stocks and, therefore, also will react to variations in the gen-
eral market for equity securities. A unique feature of convertible securities
is that as the market price of the underlying common stock declines, convert-
ible securities tend to trade increasingly on a yield basis and so may not
experience market value declines to the same extent as the underlying common
stock. When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of the value
of the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk than
investments in common stocks of the same issuer.
As fixed-income securities, convertible securities provide for a stable
stream of income with generally higher yields than common stocks. Of course,
like all fixed-income securities, convertible securities offer no assurance of
current income because the issuers of the securities may default on their
obli-
gations. Convertible securities, however, generally offer lower interest or
dividend yields than non-convertible securities of similar quality because of
the potential for cap-
17
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ital appreciation. A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the market
price
of the underlying common stock. There can be no assurance of capital apprecia-
tion, however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer, although convertible bonds, as cor-
porate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securi-
ties typically have lower ratings than similar non-convertible securities.
Repurchase Agreements. The Fund may enter into repurchase agreements on
port-
folio securities with banks which are the issuers of instruments acceptable
for
purchase by the Fund and with certain dealers on the Federal Reserve Bank of
New York's list of reporting dealers. Under the terms of a typical repurchase
agreement, the Fund would acquire an underlying debt obligation for a rela-
tively short period (usually not more than one week) subject to an obligation
of the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. The value of
the underlying securities will be monitored by Greenwich Street Advisors to
ensure that it at least equals at all times the total amount of the repurchase
obligation, including interest. The Fund bears a risk of loss in the event
that
thestributions that
were received from the Fund during the Fund's prior taxab
e year.
Shareholders are urged to consult their tax advisors regarding th
applica-
tion of Federal, state and local tax laws to their specific situat
on before
investing in the Fund.
ADDITIONAL INFORMATION
The Tru
t was organized on January 8, 1986 under the laws of The Commonwealth
of Mas
achusetts and is a business entity commonly known as a "Massachusetts
busines
trust." The Trust commenced operations onhiness of those banks and dealers
with which the Fund enters into repurchase agreements to evaluate potential
risks.
Lending of Securities. The Fund may lend its portfolio securities to
brokers,
dealers and other financial organizations. By lending its securities, the Fund
can increase its income by continuing to receive interest on the loaned
securi-
ties as well as by either investing the cash collateral in short-term instru-
ments or obtaining yield in the form of interest paid by the borrower when
U.S.
govern-
18
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ment securities are used as collateral. Loans of portfolio securities, if and
when made, by the Fund may not exceed 33 1/3% of the Fund's total assets,
taken
at value. Loans of portfolio securities will 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. Any gain
or loss in the market price of the securities loaned that might occur during
the term of the loan would be for the account of the Fund. The risks in
lending
portfolio securities, as with other extensions of secured credit, consist of
possible delay in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
fail financially. Loans will be made to firms deemed by Greenwich Street Advi-
sors to be of good standing and will not be made unless, in the judgment of
Greenwich Street Advisors the consideration to be earned from such loans would
justify the risk.
Futures and Options on Futures. When deemed advisable by Greenwich Street
Advisors, the 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
hedg-
ing 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. All futures and options contracts will be entered into
only
when the transactions are economically appropriate to the reduction of risks
inherent in the management of the Fund.
An interest rate futures contract provides for the future sale by one party
and the purchase by the other party of a specified amount of a particular
financial instrument (debt security) at a specified price, date, time and
place. Similarly, a foreign currency futures contract provides for the future
sale by one party and the purchase by another party of a certain amount of a
particular currency at a specified price, date, time and place. Stock index
futures contracts are based on indexes that reflect the market value of common
stock of the firms included in the indexes. An index futures contract is an
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally entered into. An option on an interest rate, stock
index or currency futures contract gives the purchaser the right, in return
for
the premium paid, to assume a position in a futures contract (a long position
if the option is a call and a short
19
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
position if the option is a put) at a specified exercise price at any time
prior to the expiration date of the option.
The use of futures contracts and options on futures contracts as a hedging
device involves several risks. There can be no assurance that there will be a
correlation between price movements in the underlying securities, index or
cur-
rency, on the one hand, and price movements in the securities that are the
sub-
ject of the hedge, on the other hand. Positions in futures contracts and
options on futures contracts may be closed out only on the exchange or board
of
trade on which they were entered into, and there can be no assurance that an
active market will exist for a particular contract or option at any particular
time.
The Fund may not enter into futures and options contracts for which
aggregate
initial margin deposits and premiums paid for unexpired options exceed 5% of
the fair market value of the Fund's assets, after taking into account
unrealized profits and unrealized losses on futures contracts into which it
has
entered. With respect to long positions in futures or options on futures, the
Fund will set aside cash, short-term U.S. debt obligations or other U.S.
dollar
denominated high quality short-term money market instruments in an amount
equal
to the underlying commodity value of those positions.
When-Issued Securities and Delayed-Delivery Transactions. The Fund may pur-
chase and sell securities on a when-issued basis, which calls for the purchase
(or sale) of securities at an agreed-upon price on a specified future date.
The
Fund will enter into a when-issued transaction for the purpose of acquiring
portfolio securities and not for the purpose of leverage. In such
transactions,
delivery of the securities occurs beyond the normal settlement periods, but no
payment or delivery is made by, and no interest accrues to, the Fund prior to
the actual delivery or payment by the other party to the transaction. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the returns obtained on such securities may be higher
or lower than the returns available in the market on the dates when the
invest-
ments are actually delivered to the buyers. The Fund will establish a segre-
gated account consisting of cash, U.S. government securities or other high-
grade debt obligations in an amount equal to the amount of its when-issued and
delayed-delivery commitments. Placing securities rather than cash in the
segre-
gated account may have a leveraging effect on the Fund's net assets. The Fund
will not accrue income with respect to a when-issued security prior to its
stated delivery date.
20
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Covered Option Writing. The Fund may write put and call options on
securities.
The Fund realizes fees (referred to as "premiums") for granting the rights
evi-
denced by the options. A put option embodies the right of its purchaser to
com-
pel the writer of the option to purchase from the option holder an underlying
security at a specified price at any time during the option period. In con-
trast, a call option embodies the right of its purchaser to compel the writer
of the option to sell to the option holder an underlying security at a speci-
fied price at any time during the option period. Thus, the purchaser of a put
option written by the Fund has the right to compel the Fund to purchase from
it
the underlying security at the agreed-upon price for a specified time period,
while the purchaser of a call option written by the Fund has the right to pur-
chase from the Fund the underlying security owned by the Fund at the agreed-
upon price for a specified time period.
Upon the exercise of a put option written by the Fund, the Fund may suffer a
loss equal to the difference between the price at which the Fund is required
to
purchase the underlying security plus the premium received for writing the
option and its market value at the time of the option exercise. Upon the exer-
cise of a call option written by the Fund, the Fund may suffer a loss equal to
the difference between the security's market value at the time of the option
exercise less the premium received for writing the option and the Fund's
acqui-
sition cost of the security.
The Fund will write only covered options. Accordingly, whenever the Fund
writes a call option, it will continue to own or have the present right to
acquire the underlying security for as long as it remains obligated as the
writer of the option. To support its obligation to purchase the underlying
security if a put option is exercised, the Fund will either (a) deposit with
Boston Safe Deposit and Trust Company ("Boston Safe"), the Trust's custodian,
in a segregated account cash, U.S. government securities or other high grade
debt obligations having a value at least equal to the exercise price of the
underlying securities or (b) continue to own an equivalent number of puts of
the same "series" (that is, puts on the same underlying security having the
same exercise prices and expiration dates as those written by the Fund) or an
equivalent number of puts of the same "class" (that is, puts on the same
under-
lying security) with exercise prices greater than those that it has written
(or, if the exercise prices of the puts that it holds are less than the exer-
cise prices of those that it has written, it will deposit the difference with
Boston Safe in a segregated account).
21
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund may engage in a closing purchase transaction to realize a profit,
to
prevent an underlying security from being called or put or, in the case of a
call option, to unfreeze an underlying security (thereby permitting its sale
or
the writing of a new option on the security prior to the outstanding option's
expiration). To effect a closing purchase transaction, the Fund would purchase
prior to the holder's exercise of an option that the Fund has written, an
option of the same series as that on which the Fund desires to terminate its
obligation. The obligation of the Fund under an option that it has written
would be terminated by a closing purchase transaction, but the Fund would not
be deemed to own an option as the result of the transaction. There can be no
assurance that the Fund will be able to effect closing purchase transactions
at
a time when it wishes to do so. To facilitate closing purchase transactions,
however, the Fund ordinarily will write options only if a secondary market for
the options exists on a domestic securities exchange or in the over-the-
counter
market.
The staff of the SEC considers most over-the-counter options to be illiquid.
The ability to terminate options positions established in the over-the-counter
market may be more limited than in the case of exchange-traded options and may
also involve the risk that securities dealers participating in such transac-
tions would fail to meet their obligations to the Fund.
Reverse Repurchase Agreements. In order to generate additional income, the
Fund may engage in reverse repurchase agreement transactions with banks, bro-
ker-dealers and other financial intermediaries. Reverse repurchase agreements
are the same as repurchase agreements except that, in this instance, the Fund
would assume the role of seller/borrower in the transaction. The Fund will
maintain segregated accounts with Boston Safe consisting of U.S. government
securities, cash or money market instruments that at all time are in an amount
equal to their obligations under reverse repurchase agreements. The Fund will
invest the proceeds in other money market instruments or repurchase agreements
maturing not later than the expiration of the reverse repurchase agreement.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Fund may decline below the repurchase price of the
secu-
rities.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves special considerations, such as those
described below:
22
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Fixed-Income Securities. The market value of the Fund's fixed-income obliga-
tions can be expected to vary inversely in relation to changes in prevailing
interest rates and also may be affected by other market and credit factors.
Investors also should recognize that in periods of declining interest rates
the
yield of an income-oriented fund such as the Fund may be somewhat higher than
prevailing market rates, and in periods of rising interest rates the Fund's
yield may be somewhat lower. In addition, when interest rates are falling, the
inflow of net new money to the Fund from the continuous sale of their shares
probably will be invested in instruments producing lower yields than the bal-
ance of its holdings, thereby reducing the Fund's current yield. In periods of
rising interest rates the opposite can be expected to occur. In addition,
fixed-income securities in which the Fund may invest may not yield as high a
level of current income as might be achieved by investing in securities with
less liquidity and safety and longer maturities.
To the extent the Fund purchases mortgage related securities at a premium,
mortgage foreclosures and prepayments of principal by mortgagors (which may be
made at any time without penalty) may result in some loss of the Fund's
princi-
pal investment to the extent of the premium paid. The yield of a fund that
invests in mortgage related securities may be affected by reinvestment of pre-
payments at higher or lower rates than the original investment. In addition,
like those of other debt securities, the values of mortgage related
securities,
including government and government-related mortgage pools, generally will
fluctuate in relation to interest rates.
CERTAIN INVESTMENT GUIDELINES
Up to 15% of the assets of the Fund may be invested in securities and other
instruments that are illiquid ("illiquid securities"), although the Fund has
no
present intention to invest more than 10% of its assets in the aggregate in
illiquid securities, including (a) repurchase agreements with maturities
greater than seven days, (b) futures contracts and options thereon for which a
liquid secondary market does not exist, (c) time deposits maturing in more
than
seven calendar days and (d) securities of new and early stage companies whose
securities are not publicly traded. In addition, the Fund may invest up to 5%
of its assets in the securities of issuers that have been in continuous opera-
tion for less than three years.
23
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT RESTRICTIONS
The Trust has adopted certain fundamental investment restrictions with
respect to the Fund that may not be changed without approval of a majority of
the Fund's outstanding voting securities, as defined in the Investment Company
Act of 1940, as amended, ("1940") Act. Included among those fundamental
restrictions are the following that prohibit the Fund from:
1. With respect to 75% of the value of its total assets, investing more than
5% of its total assets in securities of any one issuer, except securities
issued or guaranteed by the United States government, or purchase more
than 10% of the outstanding voting securities of such issuer.
2. Borrowing money, except that (a) the Fund may borrow from banks for tem-
porary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount not exceeding 10% of the value of the Fund's
total assets (including the amount borrowed) valued at market less lia-
bilities (not including the amount borrowed) at the time the borrowing is
made and (b) the Fund may enter into reverse repurchase agreements. When-
ever borrowings, including reverse repurchase agreements, exceed 5% of
the value of the total assets of the Fund, the Fund will not make any
additional investments.
3. Making loans of its funds or securities. This restriction does not apply
to: (a) the purchase of debt obligations in which the Fund may invest
consistent with its investment objective, (b) the entering into repur-
chase agreements, and (c) the making of loans of its portfolio securi-
ties.
4. Investing more than 25% of its total assets in securities, the issuers of
which are in the same industry. For purposes of this limitation, U.S.
government securities and securities of state or municipal governments
and their political subdivisions are not considered members of any indus-
try.
A complete list of investment restrictions that the Trust has adopted with
respect to the Fund identifying additional restrictions that cannot be changed
without the approval of the majority of the Fund's outstanding shares is con-
tained in the Statement of Additional Information.
24
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
PORTFOLIO TRANSACTIONS AND TURNOVER
Securities held by the Fund ordinarily are purchased from and sold to
parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the
best
price or execution will be obtained. Usually no brokerage commissions, as
such,
are paid by the Fund for purchases and sales undertaken through principal
transactions, although the price paid usually includes an undisclosed
compensa-
tion to the dealer acting as principal. The prices paid to underwriters of
new-
ly-issued securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers ordinarily
are executed at a price between the bid and asked price.
Transactions on behalf of the Fund are allocated to various brokers and
deal-
ers by Greenwich Street Advisors in its best judgment. The primary considera-
tion is prompt and effective execution of orders at the most favorable price.
Subject to that primary consideration, brokers and dealers may be selected for
research, statistical or other services to enable Greenwich Street Advisors to
supplement its own research and analysis with the views and information of
other securities firms. The Fund may, from time to time, in accordance with an
exemptive order granted by the SEC, enter into principal transactions
involving
certain money market instruments with Smith Barney Shearson and certain Smith
Barney Shearson-affiliated dealers.
The Fund cannot accurately predict its portfolio turnover rate, but antici-
pates that its annual turnover will not exceed 50%. An annual turnover rate of
50% would occur if half of the securities held by the Fund are replaced once
during a period of one year. Smith Barney Advisors will not consider turnover
rate a limiting factor in making investment decisions consistent with the
Fund's investment objective and policies.
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained with
Smith Barney Shearson or with an Introducing Broker, except that investors
pur-
chasing shares of the Fund through qualified retirement plans may do so
directly through the Trust's transfer agent. When purchasing shares of the
Fund, investors must specify whether the purchase is for Class A, Class B
25
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
or, in the case of Participating Plans in the 401(k) Program, Class D shares.
No maintenance fee will be charged in connection with a brokerage account
through which an investor purchases or holds shares. Purchases are effected at
the public offering price next determined after a purchase order is received
by
Smith Barney Shearson or an Introducing Broker (the "trade date"). Payment is
generally due to Smith Barney Shearson or an Introducing Broker on the fifth
business day (the "settlement date") after the trade date. Investors who make
payment prior to the settlement date may permit the payment to be held in
their
brokerage accounts or may designate a temporary investment (such as a money
market fund in the Smith Barney Shearson Group of Funds) for such payment
until
the settlement date. The Trust reserves the right to reject any purchase order
and to suspend the offering of shares of the Fund for a period of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York time, on any day on which the Fund's net asset value is calculated, are
priced according to the net asset value determined on that day. Purchase
orders
received after the close of regular trading on the NYSE are priced as of the
time the net asset value per share is next determined. See "Valuation of
Shares."
Systematic Investment Plan. The Fund offers shareholders a Systematic
Invest-
ment Plan under which shareholders may authorize Smith Barney Shearson or an
Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid automati-
cally from cash held in the shareholder's Smith Barney Shearson brokerage
account or through the automatic redemption of the shareholder's shares of a
Smith Barney Shearson money market fund. For further information regarding the
Systematic Investment Plan, shareholders should contact their Smith Barney
Shearson Financial Consultants.
Minimum Investments. The minimum initial investment in the Fund is $1,000
and
the minimum subsequent investment is $200, except that for purchases through
(a) IRAs and Self-Employed Retirement Plans, the minimum initial and
subsequent
investments are $250 and $100, respectively, (b) retirement plans qualified
under Section 403(b)(7) or Section 401(a) of the Code, the minimum and subse-
quent investments are both $25 and (c) the Fund's Systematic Investment Plan,
the minimum initial and subsequent investments are both $100. There are no
min-
imum investment requirements for employees of Travelers and its subsidiaries,
including Smith Barney Shearson. The Trust reserves the
26
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
right at any time to vary the initial and subsequent investment minimums. Cer-
tificates for Fund shares are issued upon request to the Trust's transfer
agent.
CLASS A SHARES
The public offering price for Class A shares is the per share net asset
value
of that Class plus a sales charge, which is imposed in accordance with the
fol-
lowing schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET ASSET VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.00% 5.26%
$25,000 but under $100,000 4.00% 4.17%
$100,000 but under $250,000 3.25% 3.36%
$250,000 but under $500,000 2.50% 2.56%
$500,000 but under $1,000,000 2.00% 2.04%
$1,000,000 or more** 0.00% .00%
- ----------------------------------------------------------------------
</TABLE>
* Smith Barney Shearson has adopted guidelines directing its Financial
Consultants and Introducing Brokers that single investments of $250,000 or
more should be made in Class A Shares.
** No sales charge is imposed on purchases of Class A shares of $1 million;
however, a CDSC of .75% is imposed for the first year after purchase. The
CDSC on Class A shares is payable to Smith Barney Shearson which, with
Boston Advisors, will compensate Smith Barney Shearson Financial
Consultants
upon the sale of these shares. The CDSC is waived in the same circumstances
in which the CDSC applicable to Class B shares is waived. See "Redemption
of
Shares--Contingent Deferred Sales Charge--Class B Shares--Waivers of CDSC."
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are available to investors who are eligible to combine
their purchases of Class A shares to receive volume discounts. Investors
eligi-
ble to receive volume discounts include individuals and their immediate fami-
lies, tax-qualified employee benefit plans and trustees or other professional
fiduciaries (including a bank, or an investment adviser registered with the
SEC
under the Investment Advisers Act of 1940, as amended) purchasing shares for
one or more trust estates or fiduciary accounts even though more than one
bene-
ficiary is involved. The initial sales charge is also reduced to 1% for Smith
Barney Shearson Personal Living Trust program participants for whom Smith Bar-
ney Shearson acts as trustee. Reduced sales charges on Class A shares are also
available under a combined right of accumulation, under which an investor may
combine the value of Class A shares already held in the Fund and in any of the
27
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
funds in the Smith Barney Shearson Group of Funds listed below (except those
sold without a sales charge), along with the value of the Fund's Class A
shares
being purchased, to qualify for a reduced sales charge. For example, if an
investor owns Class A shares of the Fund and other funds in the Smith Barney
Shearson Group of Funds that have an aggregate value of $22,000, and makes an
additional investment in Class A shares of the Fund of $4,000, the sales
charge
applicable to the additional investment would be 4%, rather than the 5% nor-
mally charged on a $4,000 purchase. Investors interested in further
information
regarding reduced sales charges should contact their Smith Barney Shearson
Financial Consultants.
Class A shares of the Fund may be offered without any applicable sales
charges to: (a) employees of Travelers and its subsidiaries, including Smith
Barney Shearson, employee benefit plans for such employees and their immediate
families when orders on their behalf are placed by such employees; (b)
accounts
managed by registered investment advisory subsidiaries of Travelers; (c)
direc-
tors, trustees or general partners of any investment company for which Smith
Barney Shearson serves as distributor; (d) any other investment company in
con-
nection with the combination of such company with the Fund by merger, acquisi-
tion of assets or otherwise; (e) shareholders who have redeemed Class A shares
in the Fund (or Class A shares of another fund in the Smith Barney Shearson
Group of Funds that are sold with a maximum 5% sales charge) and who wish to
reinvest their redemption proceeds in the Fund, provided the reinvestment is
made within 30 days of the redemption; and (f) any client of a newly-employed
Smith Barney Shearson Financial Consultant (for a period up to 90 days from
the
commencement of the Financial Consultant's employment with Smith Barney
Shearson), on the condition that the purchase is made with the proceeds of the
redemption of shares of a mutual fund which (i) was sponsored by the Financial
Consultant's prior employer, (ii) was sold to a client by the Financial
Consul-
tant, and (iii) when purchased, such shares were sold with a sales charge or
are subject to a charge upon redemption.
CLASS B SHARES
The public offering price for Class B shares is the per share net asset
value
of that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares. See "Re-
demption of Shares" which describes the CDSC in greater detail.
28
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
Smith Barney Shearson has adopted guidelines, in view of the relative sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be in Class A. Smith Barney Shearson reserves the right to vary
these guidelines at any time.
SMITH BARNEY SHEARSON 401(K) PROGRAM
Investors may be eligible to participate in the 401(k) Program, which is
gen-
erally designed to assist employers or plan sponsors in the creation and
opera-
tion of retirement plans under Section 401(a) of the Code. To the extent
appli-
cable, the same terms and conditions are offered to all Participating Plans in
the 401(k) Program, which include both 401(k) plans and other types of
partici-
pant directed, tax-qualified employee benefit plans.
The Fund offers to Participating Plans three classes of shares, Class A,
Class B and Class D shares, as investment alternatives under the 401(k) Pro-
gram. Class A shares are available to all Participating Plans and are the only
investment alternative for Participating Plans that are eligible to purchase
Class A shares at net asset value without a sales charge. In addition, Class B
shares are offered only to Participating Plans satisfying certain criteria
with
respect to the amount of the initial investment and number of employees eligi-
ble to participate in the Plan at that time. Alternatively, Class D shares are
offered only to Participating Plans that meet other criteria relating to the
amount of initial investment and number of employees eligible to participate
in
the Plan at that time, as described below. See "Prospectus Summary--Smith Bar-
ney Shearson 401(k) Program."
The Class A and Class B shares acquired through the 401(k) Program are sub-
ject to the same service and/or distribution fees as, but different sales
charge and CDSC schedules than, the Class A and Class B shares acquired by
other investors. Class D shares acquired by Participating Plans are offered at
net asset value per share without any sales charges or CDSC. The Fund pays
annual service and distribution fees based on the value of the average daily
net assets attributable to this Class.
Once a Participating Plan has made an initial investment in the Fund, all of
its subsequent investments in the Fund must be in the same Class of shares,
except as otherwise described below.
29
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
Class A Shares.The sales charges for Class A shares acquired by
Participating
Plans are as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS %
AMOUNT OF INVESTMENT OF OFFERING PRICE OF NET ASSET VALUE
- ----------------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.00% 5.26%
$25,000 up to $100,000 4.00% 4.17%
$100,000 up to $250,000 3.25% 3.36%
$250,000 up to $500,000 2.50% 2.56%
$500,000 up to $750,000 2.00% 2.04%
$750,000 and over .00% .00%
- ----------------------------------------------------------------
</TABLE>
A Participating Plan will have a combined right of accumulation under which,
to qualify for a reduced sales charge, it may combine the value of Class A
shares being purchased with the value of Class A shares already held in the
Fund and in any of the funds listed below under "Exchange Privilege" that are
sold with a sales charge.
Class A shares of the Fund may be offered without any sales charge to any
Participating Plan that: (a) purchases $750,000 or more of Class A shares of
one or more funds in the Smith Barney Shearson Group of Funds under the com-
bined right of accumulation described above; (b) has 250 or more employees
eli-
gible to participate in the Participating Plan at the time of initial invest-
ment in the Fund; or (c) currently holds Class A shares in the Fund that were
received as a result of an exchange of Class B or Class D shares of the Fund
as
described below.
Class A shares acquired through the 401(k) Program will not be subject to a
CDSC.
Class B Shares. Under the 401(k) Program, Class B shares are offered to Par-
ticipating Plans that: (a) purchase less than $250,000 of Class B shares of
one
or more funds in the Smith Barney Shearson Group of Funds that are sold
subject
to a CDSC; and (b) have less than 100 employees eligible to participate in the
Participating Plan at the time of initial investment in the Fund. Class B
shares acquired by such Plans will be subject to a CDSC of 3% of redemption
proceeds, if redeemed within eight years of the date the Participating Plan
first purchases Class B shares. No CDSC is imposed to the extent that the net
asset value of the Class B shares redeemed does not exceed (a) the current net
asset value of Class B shares purchased through reinvestment of dividends or
capital
30
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
gains distributions, plus (b) the current net asset value of Class B shares
purchased more than eight years prior to the redemption, plus (c) increases in
the net asset value of the shareholder's Class B shares above the purchase
pay-
ments made during the preceding eight years. The CDSC applicable to a Partici-
pating Plan depends on the number of years since the Participating Plan first
became a holder of Class B shares, unlike the CDSC applicable to other Class B
shareholders, which depends on the number of years since those shareholders
made the purchase payment from which the amount is being redeemed.
The CDSC will be waived on redemptions of Class B shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a) the retirement of an employee in the Participating Plan; (b) the termina-
tion of employment of an employee in the Participating Plan; (c) the death or
disability of an employee in the Participating Plan; (d) the attainment of age
59 1/2 by an employee in the Participating Plan; (e) hardship of an employee
in
the Participating Plan to the extent permitted under Section 401(k) of the
Code; or (f) redemptions of Class B shares in connection with a loan made by
the Participating Plan to an employee.
Eight years after the date a Participating Plan acquired its first Class B
share, it will be offered the opportunity to exchange all of its Class B
shares
for Class A shares of the Fund. Such Plans will be notified of the pending
exchange in writing approximately 60 days before the eighth anniversary of the
purchase date and, unless the exchange has been rejected in writing, the
exchange will occur on or about the eighth anniversary date. Once the exchange
has occurred, a Participating Plan will not be eligible to acquire additional
Class B shares of the Fund but instead may acquire Class A shares of the Fund.
If the Participating Plan elects not to exchange all of its Class B shares at
that time, each Class B share held by the Participating Plan will have the
same
conversion feature as Class B shares held by other investors. See "Variable
Pricing System--Class B Shares."
Class D Shares. Class D shares are offered to Participating Plans that: (a)
purchase less than $750,000 but more than $250,000 of Class D shares of one or
more funds in the Smith Barney Shearson Group of Funds that offer one or more
classes of shares subject to a sales charge and/or CDSC; or (b) have at least
100 but no more than 250 employees eligible to participate in the
Participating
Plan at the time of initial investment in the Fund.
31
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
PURCHASE OF SHARES (CONTINUED)
Class D shares acquired by Participating Plans are offered at net asset
value
per share without any sales charge or CDSC. The Fund pays annual service and
distribution fees based on the value of the average daily net assets attribut-
able to this Class. Class D shares are not subject to an automatic conversion
feature as are the Class B shares. Participating Plans which hold Class D
shares valued at $750,000 or more in any fund or funds in the Smith Barney
Shearson Group of Funds that offer one or more Classes of shares subject to a
sales charge and/or CDSC will be offered the opportunity to exchange all of
their Class D shares for Class A shares. Such Plans will be notified of the
pending exchange in writing within 30 days after the last business day of the
calendar year, and unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of March in the
following
calendar year. Once the exchange has occurred, a Participating Plan will not
be
eligible to acquire Class D shares of the Fund but instead may acquire Class A
shares of the Fund. Any Class D shares not converted will continue to be sub-
ject to the distribution fee.
Participating Plans wishing to acquire shares of the Fund through the 401(k)
Program must purchase such shares directly from the Trust's transfer agent.
For
further information regarding the 401(k) Program, investors should contact
their Smith Barney Shearson Financial Consultants.
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day that the Fund calculates its
net asset value. See "Valuation of Shares." Redemption requests received in
proper form prior to the close of regular trading on the NYSE are priced at
the
net asset value per share determined on that day. Redemption requests received
after the close of regular trading on the NYSE are priced at the net asset
value next determined. If a shareholder holds shares in more than one Class,
any request for redemption must specify the Class being redeemed. In the event
of a failure to specify which Class or if the investor owns fewer shares of
the
Class than specified, the redemption request will be delayed until the Trust's
transfer agent receives further instructions from Smith Barney Shearson, or if
the shareholder's account is not with Smith Barney Shearson, from the share-
holder directly.
32
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
REDEMPTION OF SHARES (CONTINUED)
The Fund normally transmits redemption proceeds for credit to the sharehold-
er's account at Smith Barney Shearson or the Introducing Broker at no charge
(other than any applicable CDSC) within seven days after receipt of a redemp-
tion request. Generally, these funds will not be invested for the
shareholder's
benefit without specific instruction and Smith Barney Shearson will benefit
from the use of temporarily uninvested funds. A shareholder who pays for Fund
shares by personal check will be credited with the proceeds of a redemption of
those shares only after the purchase check has been collected, which may take
up to 10 days or more. A shareholder who anticipates the need for more immedi-
ate access to his or her investment should purchase shares with Federal funds,
by bank wire or by a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may be subject to redemption by the Trust, but only after the shareholder has
been given at least 30 days in which to increase the account balance to more
than $500.
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introduc-
ing Broker. A shareholder desiring to redeem shares represented by
certificates
must also present the certificates to Smith Barney Shearson or the Introducing
Broker endorsed for transfer (or accompanied by an endorsed stock power),
signed exactly as the shares are registered. Redemption requests involving
shares represented by certificates will not be deemed received until the cer-
tificates are received by the Trust's transfer agent in proper form.
REDEMPTION BY MAIL
Shares held by Smith Barney Shearson as custodian must be redeemed by
submit-
ting a written request to your Smith Barney Shearson Financial Consultant. All
other shares may be redeemed by submitting a written request for redemption
to:
Smith Barney Shearson Growth and Income Fund
Class A, B or D (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
33
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
REDEMPTION OF SHARES (CONTINUED)
A written redemption request to The Shareholder Services Group, Inc. or your
Smith Barney Shearson Financial Consultant must (a) state the Class and number
or dollar amount of shares to be redeemed, (b) identify the shareholder's
account number and (c) be signed by each registered owner exactly as the
shares
are registered. If the shares to be redeemed were issued in certificate form,
the certificates must be endorsed for transfer (or be accompanied by an
endorsed stock power) and must be submitted to TSSG together with the redemp-
tion request. Any signature appearing on a redemption request, share certifi-
cate or stock power must be guaranteed by a domestic bank, savings and loan
institution, domestic credit union, member bank of the Federal Reserve System
or member firm of a national securities exchange. TSSG may require additional
supporting documents for redemptions made by corporations, executors, adminis-
trators, trustees or guardians. A redemption request will not be deemed prop-
erly received until TSSG receives all required documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only where the
share-
holder is eligible to receive qualified distributions and has an account value
of at least $5,000. Any applicable CDSC will be waived on amounts withdrawn by
a shareholder that do not exceed 2% per month of the value of the
shareholder's
shares subject to the CDSC at the time the withdrawal plan commences. For fur-
ther information regarding the automatic cash withdrawal plan, shareholders
should contact their Smith Barney Shearson Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class
B shares, however effected, that causes the current value of a shareholder's
account to fall below the dollar amount of all payments by the shareholder for
the purchase of Class B shares ("purchase payments") during the preceding five
years, except in the case of purchases by Participating Plans as described
above. See "Purchase of Shares--Smith Barney Shearson 401(k) Program." No
charge is imposed to the extent the net asset value of the Class B shares
redeemed does not exceed (a) the current net asset value of Class B shares
pur-
chased through reinvestment of dividends or capital gains distributions, plus
34
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
REDEMPTION OF SHARES (CONTINUED)
(b) the current net asset value of Class B shares purchased more than five
years prior to the redemption, plus (c) increases in the net asset value of
the
shareholder's Class B shares above the purchase payments made during the pre-
ceding five years.
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed, except in the case of purchases
through Participating Plans, which are subject to a different CDSC. See "Pur-
chase of Shares--Smith Barney Shearson 401(k) Program." Solely for purposes of
determining the number of years since a purchase payment, all purchase
payments
made during a month will be aggregated and deemed to have been made on the
last
day of the preceding Smith Barney Shearson statement month. The following
table
sets forth the rates of the charge for redemptions of Class B shares by share-
holders other than Participating Plans in the 401(k) Program:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- ------------------------------------------------------------------------------
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%
Seventh 0.00%
Eighth 0.00%
- ------------------------------------------------------------------------------
</TABLE>
Class B shares will automatically convert to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. The first of the conversions will commence on or
about
September 30, 1994. See "Variable Pricing System--Class B Shares."
The purchase payment from which a redemption of Class B shares is made is
assumed to be the earliest purchase payment from which a full redemption has
not already been effected. In the case of redemptions of Class B shares of
other funds in the Smith Barney Shearson Group of Funds issued in exchange for
Class B shares of the Fund, the term "purchase payments" refers to the
purchase
payments for the shares given in exchange. In the event of an exchange of
35
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
REDEMPTION OF SHARES (CONTINUED)
Class B shares of funds with differing CDSC schedules, the shares will be, in
all cases, subject to the higher CDSC schedule. See "Exchange Privilege."
Waivers of CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholder's shares at the time the withdrawal
plan commences (see above); (c) redemptions of shares in connection with cer-
tain post-retirement distributions and withdrawals from retirement plans or
IRAs or following the death or disability of the shareholder; (d) redemptions
of shares following the death or disability of a shareholder; (e) involuntary
redemptions; (f) redemption proceeds from other funds in the Smith Barney
Shearson Group of Funds that are reinvested within 30 days of the redemption;
(g) redemptions of shares in connection with a combination of any investment
company with the Fund by merger, acquisition of assets or otherwise; and (h)
certain redemptions of shares of the Fund in connection with lump-sum or other
distributions made by a Participating Plan. See "Purchase of Shares--Smith
Bar-
ney Shearson 401(k) Program."
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday, Memo-
rial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net assets attributable to that Class by the total number of shares of that
Class outstanding. In general, the Fund's investments will be valued at market
value or, in the absence of a market value, at fair value as determined by or
under the direction of the Trust's Board of Trustees. Securities that are pri-
marily traded on foreign exchanges are generally valued at the preceding clos-
ing values of the securities on their respective exchanges, except that when
an
occurrence subsequent to the time a value was so established is likely to have
changed that value, then the fair value of those securities will be determined
by consideration of other factors by or under the direction of the Trustees or
its delegates. A
36
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
VALUATION OF SHARES (CONTINUED)
security that is traded primarily on a domestic, or foreign stock exchange is
valued at the last sale price on that exchange or, if there were no sales dur-
ing the day, at the current quoted bid price. Debt securities (other than U.S.
government securities and short-term obligations) are valued by Boston
Advisors
after consultation with independent pricing services approved by the Trustees.
Investments in U.S. government securities (other than short-term securities)
are valued at the average of the quoted bid and asked prices in the over-the-
counter market. Short-term investments that mature in 60 days or less are val-
ued at amortized cost (which involves valuing an investment instrument at its
cost and, thereafter, assuming a constant amortization to maturity of any dis-
count or premium, regardless of the effect of fluctuating interest rates on
the
market value of the instrument) whenever the Trust's Board of Trustees deter-
mines that amortized cost reflects fair value of those investments. An option
written by the Fund is generally valued at the last sale price or, in the
absence of the last sale price, the last offer price. An option purchased by
the Fund is generally valued at the last sale price or, in the absence of the
last sale price, the last bid price. Short sales of securities, which are not
traded on a national securities exchange, are valued at the last asked price.
Alternatively, long positions are valued at the last bid price. The value of a
futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract. A settlement price may
not be used if the market makes a limit move with respect to a particular
futures contract or if the securities underlying the futures contract experi-
ence significant price fluctuations after the determination of the settlement
price. When a settlement price cannot be used, futures contracts will be
valued
at their fair market value as determined by or under the direction of the
Trust's Board of Trustees. Further information regarding the Fund's valuation
policies is contained in the Statement of Additional Information.
37
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence.
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
- ------------------------------------------------------------------------------
- ------
<C> <S>
Municipal Bond Funds
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND, an
intermediate-term municipal bond fund investing in investment-
grade
obligations.
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate-
and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an intermediate-
and
long-term municipal bond fund investing in medium- and lower
rated
securities.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate-
and long-term municipal bond fund designed for Arizona
investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS
FUND, an intermediate-term municipal bond fund designed for
California
investors.
A, B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
California investors.
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an intermediate-
and
long-term municipal bond fund designed for Florida investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate-
and long-term municipal bond fund designed for Massachusetts
investors.
</TABLE>
38
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
- ------------------------------------------------------------------------------
- -----
<C> <S>
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for New
Jersey investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK MUNICIPALS
FUND,
an intermediate-term municipal bond fund designed for New York
investors.
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate-
and long-term municipal bond fund designed for New York
investors.
Income Funds
A, B, D* SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME FUND,
seeks
high current income while limiting the degree of fluctuation in
net
asset value resulting from movement in interest rates.
A, B SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND, invests in a
portfolio of high quality debt securities that may be
denominated in
U.S. dollars or selected foreign currencies and that have
remaining
maturities of not more than one year.
A, B SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND, invests in
high
quality, short-term debt securities denominated in U.S. dollars
as
well as a range of foreign currencies.
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND, invests
exclusively in securities issued by the United States Treasury
and
other United States government securities.
A, B, D* SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND, seeks
high
current income primarily by allocating and reallocating its
assets
among various types of fixed-income securities.
</TABLE>
39
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
- ------------------------------------------------------------------------------
- ------
<C> <S>
A, B, D* SMITH BARNEY SHEARSON MANAGED GOVERNMENTS FUND INC., invests in
obligations issued or guaranteed by the United States government
and
its agencies and instrumentalities with emphasis on mortgage-
backed
government securities.
A, B, D* SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a high
current
return by investing in U.S. government securities.
A, B, D* SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks maximum
current income consistent with prudent investment management and
preservation of capital by investing in corporate bonds.
A, B, D* SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high current
income by
investing in high-yielding corporate bonds, debentures and
notes.
A, B, D* SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current income and
capital appreciation by investing in bonds, debentures and notes
of
foreign and domestic issuers.
Growth and Income Funds
A, B, D* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current income and
capital appreciation by investing in convertible securities.
A, B, D* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing
in equity and debt securities of utilities companies.
A, B, D* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high total
return consisting of current income and capital appreciation by
investing in a combination of equity, fixed-income and money
market
securities.
A, B, D* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks total
return by
investing in dividend-paying common stocks.
</TABLE>
40
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
- ------------------------------------------------------------------------------
- ------
<C> <S>
Growth Funds
A, B, D* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-term
appreciation of capital.
A, B, D* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks long-
term
capital growth with current income as a secondary objective.
A, B, D* SMITH BARNEY SHEARSON SECTOR ANALYSIS FUND, seeks capital
appreciation
by following a sector strategy.
A, B SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital
appreciation, with income as a secondary consideration.
A, B, D* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks above-
average
capital growth.
A, B, D* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-term
capital
appreciation by investing in equity securities primarily of
emerging
growth companies.
A, B, D* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks long-term
capital growth by investing principally in the common stocks of
foreign and domestic issuers.
A, B, D* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term capital
appreciation by investing primarily in securities of issuers
based in
European countries.
A, B, D* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND INC.,
seeks
long-term capital appreciation by investing primarily in
precious
metal- and mineral-related companies and gold bullion.
Money Market Funds
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified
portfolio of high quality money market instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
diversified Portfolio of high quality money market instruments.
</TABLE>
41
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
- ------------------------------------------------------------------------------
- ------
<C> <S>
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC., invests
in
short-term U.S. government and agency securities.
+ SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC., invests
in
short-term, high quality municipal obligations.
+ SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET FUND,
invests
in short-term, high quality California municipal obligations.
+ SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET FUND,
invests in
short-term, high quality New York municipal obligations.
- ------------------------------------------------------------------------------
- ------
</TABLE>
* Class D shares of this Fund may be acquired only by Participating Plans.
** Shares of this money market fund may be exchanged for Class B shares of
the Fund.
*** Shares of this money market fund may be exchanged for Class A and Class D
shares of the Fund.
+ Shares of this money market fund may be exchanged for Class A shares of
the Fund.
Tax Effect.The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
Class A Exchanges.Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 5% will be subject to the appropriate "sales charge
differ-
ential" upon the exchange of their shares for Class A shares of the Fund or
other funds sold with a higher sales charge. The "sales charge differential"
is
limited to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being acquired in
the
exchange over the sales charge rates actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For pur-
poses of the exchange privilege, shares obtained through automatic
reinvestment
of dividends, as described below, are treated as having paid the same sales
charges applicable to the shares on which the dividends were paid. However,
except in the case of the 401(k) Program, if no sales charge was imposed upon
the initial purchase of the shares, any shares obtained through automatic
rein-
vestment will be subject to a sales charge differential upon exchange.
42
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
EXCHANGE PRIVILEGE (CONTINUED)
Class B Exchanges.Smith Barney Shearson receives an annual service fee and
an
annual distribution fee with respect to Class B shares of the Fund. Class B
shareholders of the Fund who wish to exchange all or a portion of their Class
B
shares for Class B shares of any of the funds identified above may do so with-
out imposition of an exchange fee. Upon an exchange, the new Class B shares
will be deemed to have been purchased on the same date as the Class B shares
of
the Fund that have been exchanged. In the event Class B shareholders wishes to
exchange all or a portion of their shares for shares in any of these funds
imposing a CDSC higher than that imposed by the Fund, the exchanged Class B
shares will be subject to the higher applicable CDSC.
Class D Exchanges. Smith Barney Shearson receives an annual service fee and
an annual distribution fee with respect to Class D shares of the Fund.
Partici-
pating Plans may exchange Class D shares of the Fund for Class D shares in any
of the funds listed above without charge.
Additional Information Regarding the Exchange Privilege.Shareholders
exercis-
ing the exchange privilege with any of the other funds in the Smith Barney
Shearson Group of Funds should review the prospectus of that fund carefully
prior to making an exchange. Smith Barney Shearson reserves the right to
reject
any exchange request. The exchange privilege may be modified or terminated at
any time after written notice to shareholders. Although the exchange privilege
is an important benefit, excessive exchange transactions can be detrimental to
the Fund's performance and its shareholders. The Fund's investment adviser may
determine that a pattern of frequent exchanges is excessive and contrary to
the
best interests of the Fund's other shareholders. In this event, the Fund's
investment adviser will notify Smith Barney Shearson, and Smith Barney
Shearson
may, at its discretion, decide to limit additional purchases and/or exchanges
by the shareholder. Upon such a determination, Smith Barney Shearson will pro-
vide notice in writing or by telephone to the shareholder at least 15 days
prior to suspending the exchange privilege and during the 15-day period the
shareholder will be required to (a) redeem his or her shares in the Fund or
(b)
remain invested in the Fund or exchange into any of the funds in the Smith
Bar-
ney Shearson Group of Funds ordinarily available, which position the share-
holder would expect to maintain for a significant period of time. All relevant
factors will be considered in determining what constitutes an abusive pattern
of exchanges. For further information regarding the exchange privilege or to
obtain the current prospectuses for members of the Smith Barney Shearson Group
of Funds, investors should contact their Smith Barney Shearson Financial Con-
sultants.
43
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013 and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual service fee with respect to Class A, Class B and Class D shares
of the Fund at the rate of .25% of the value of the average daily net assets
of
the respective Class. Smith Barney Shearson is also paid an annual
distribution
fee with respect to Class B and Class D shares at the rate of .50% of the
value
of the average daily net assets attributable to the Class. The fees are autho-
rized pursuant to a services and distribution plan (the "Plan") adopted by the
Trust pursuant to Rule 12b-1 under the 1940 Act and are used by Smith Barney
Shearson to pay its Financial Consultants for servicing shareholder accounts
and, in the case of the Class B and Class D shares, also to cover expenses
pri-
marily intended to result in the sale of those shares. These expenses include:
costs of printing and distributing the Fund's Prospectus, Statement of Addi-
tional Information and sales literature to prospective investors; an
allocation
of overhead and other Smith Barney Shearson's branch office distribution-
related expenses; payments to and expenses of Smith Barney Shearson Financial
Consultants and other persons who provide support services in connection with
the distribution of the shares; and accruals for interest on the amount of the
foregoing expenses that exceed distribution fees and, in the case of Class B
shares, the CDSC received by Smith Barney Shearson. The payments to Smith Bar-
ney Shearson Financial Consultants for selling shares of a Class include a
com-
mission paid at the time of sale and a continuing fee for servicing
shareholder
accounts for as long as a shareholder remains a holder of that Class. The
serv-
ice fee is credited at the rate of .25% of the value of the average daily net
assets of the Class that remain invested in the Fund. Smith Barney Shearson
Financial Consultants may receive different levels of compensation for selling
one Class of shares over another.
Although it is anticipated that some promotional activities will be
conducted
on a Trust-wide basis, payments made by a fund of the Trust under the Plan
gen-
erally will be used to finance the distribution of shares of that fund.
Expenses incurred in connection with Trust-wide activities may be allocated on
a pro-rata basis among all funds of the Trust on the basis of their relative
net assets.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson, and
the payments may exceed distribution expenses actually incurred. The Trust's
Board of Trustees will evaluate the appropriateness of the Plan and its
payment
terms on
44
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
DISTRIBUTOR (CONTINUED)
a continuing basis and in so doing will consider all relevant factors, includ-
ing expenses borne by Smith Barney Shearson, amounts received under the Plan
and proceeds of the CDSC.
The Trust anticipates that, for the foreseeable future, distribution
expenses
incurred by Smith Barney Shearson will be greater than amounts payable by the
Trust's funds under the Plan. During the period from March 3, 1986 (the
Trust's
commencement of operations) through the fiscal year ended January 31, 1994,
Smith Barney Shearson incurred, with respect to the Class B shares of the
Trust's existing funds, total distribution expenses of approximately $
while receiving approximately $ pursuant to the Plan and approximately
$ from the CDSC. The excess of such distribution expenses incurred by
Smith
Barney Shearson over such distribution fees and CDSC, or approximately $ ,
was equivalent to approximately % of the Trust's net assets on January 31,
1994.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund will be treated separately from the Trust's other funds in
determin-
ing the amount of dividends from net investment income and distributions of
capital gains payable to shareholders of the Fund. Dividends from net invest-
ment income (that is, income other than net realized capital gains) of the
Fund
will be declared and distributed quarterly. Distributions of the Fund's net
realized capital gains, if any, will be declared and distributed annually,
nor-
mally at the end of the calendar year in which earned or at the beginning of
the subsequent year. Unless a shareholder instructs that dividends and capital
gains distributions on shares of a Class be paid in cash and credited to the
shareholder's account at Smith Barney Shearson, dividends and capital gains
distributions will automatically be reinvested in additional shares of the
Class at net asset value subject to no sales charge or CDSC. The Fund is sub-
ject to a 4% nondeductible excise tax on certain undistributed amounts of
ordi-
nary income and capital gains. The Trust expects to make any additional
distri-
butions necessary to avoid the application of this tax.
45
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
TAXES
The Fund will be treated as a separate taxpayer with the result that, for
Federal income tax purposes, the amount of its net investment income and capi-
tal gains earned will be determined without regard to the earnings on
distribu-
tions of the other funds of the Trust. The Trust intends for the Fund to qual-
ify each year as a regulated investment company under the Code. Dividends paid
from the Fund's net investment income and distributions of the Fund's net
real-
ized short-term capital gains are taxable to shareholders (other than IRAs,
self-employed retirement plans and other tax-exempt investors) as ordinary
income, regardless of how long shareholders have held their Fund shares and
whether the dividends or distributions are received in cash or reinvested in
additional Fund shares. Distributions of the Fund's net realized long-term
cap-
ital gains will be taxable to shareholders as long-term capital gains, regard-
less of how long shareholders have held Fund shares and whether the distribu-
tions are received in cash or reinvested in additional Fund shares. In addi-
tion, as a general rule, a shareholder's gain or loss on a sale or redemption
of shares of the Fund will be a long-term capital gain or loss if the share-
holder has held the shares for more than one year and will be a short-term
cap-
ital gain or loss if the shareholder has held the shares for one year or less.
Some of the Fund's dividends declared from net investment income may qualify
for the Federal dividends-received deduction for corporations. The per share
dividends and distributions on Class A shares will be higher than those on
Class B and Class D shares as a result of lower distribution and transfer
agency fees applicable to the Class A shares. See "Variable Pricing System."
Income received by the Fund from sources within foreign countries may be
sub-
ject to withholding and other foreign taxes. The payment of such taxes will
reduce the amount of dividends and distributions paid to the Fund's sharehold-
ers. If (a) the Fund qualifies as a regulated investment company, (b) certain
distribution requirements are satisfied and (c) more than 50% of the value of
the Fund's assets at the close of the taxable year consists of securities of
foreign corporations, the Trust may elect, for Federal income tax purposes, to
treat foreign income taxes paid by the Fund that can be treated as income
taxes
under Federal income tax principles as paid by the Fund's shareholders. The
Fund may qualify for, and the Trust may make, this election in some, but not
necessarily all, of the Fund's taxable years. If the Trust were to make an
election, an amount equal to the foreign income taxes paid by the Fund would
be
included in the income of its shareholders and the shareholders would be enti-
tled to credit their portions of this amount against their Federal tax
liabili-
ties, if any,
46
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
or to deduct such portions from their Federal taxable income, if any. Shortly
after any year for which the Trust makes such an election, the Trust will
report to the Fund's shareholders, in writing, the amount per share of such
foreign tax that must be included in each shareholder's gross income and the
amount that will be available for deduction or credit. No deduction for
foreign
taxes may be claimed by a shareholder who does not itemize deductions. Certain
limitations will be imposed on the extent to which the credit (but not the
deduction) for foreign taxes may be claimed.
Statements as to the tax status of the dividends and distributions received
by shareholders of the Fund are mailed annually. Each shareholder also will
receive, if applicable, various written notices after the close of the Fund's
prior taxable year with respect to certain dividends and distributions that
were received from the Fund during the Fund's prior taxable year.
Shareholders are urged to consult their tax advisors regarding the applica-
tion of Federal, state and local tax laws to their specific situation before
investing in the Fund.
ADDITIONAL INFORMATION
The Trust was organized on January 8, 1986 under the laws of The
Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." The Trust commenced operations on March 3, 1986, under the
name Shearson Lehman Special Equity Portfolios. The Trust changed its name to
its current name in October, 1992. On July 30, 1993 the Fund changed its name
from Growth and Income Fund to Smith Barney Shearson Growth and Income Fund.
The Trust offers shares of beneficial interest of separate funds with a par
value of $.001 per share. The Fund offers shares of beneficial interest cur-
rently classified into three Classes--A, B and D.
Each Class represents an identical interest in the Fund's investment portfo-
lio. As a result, the Classes have the same rights, privileges and
preferences,
except with respect to: (a) the designation of each Class; (b) the effect of
the respective sales charges, if any, for each Class; (c) the distribution
and/or service fees borne by each Class; (d) the expenses allocable
exclusively
to each Class; (e) voting rights on matters exclusively affecting a single
Class; (f) the exchange privilege of each Class; and (g) the conversion
feature
of the Class B shares. The Trust's Board of Trustees does not anticipate that
there will be any conflicts
47
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
ADDITIONAL INFORMATION (CONTINUED)
among the interests of the holders of the different Classes. The Trustees, on
an ongoing basis, will consider whether any such conflict exists and, if so,
take appropriate action.
The Trust does not hold annual shareholder meetings. There normally will be
no meeting of shareholders for the purpose of electing Trustees unless and
until such time as less than a majority of the Trustees holding office have
been elected by shareholders. The Trustees will call a meeting for any purpose
upon written request of shareholders holding at least 10% of the Fund's out-
standing shares. Shareholders of record owning no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
pur-
pose. When matters are submitted for shareholder vote, shareholders of each
Class will have one vote for each full share owned and a proportionate, frac-
tional vote for any fractional share held of that Class. Generally, shares of
the Trust vote by individual fund on all matters except (a) matters affecting
only the interests of one or more of the funds, in which case only shares of
the affected fund or funds would be entitled to vote or (b) when the 1940 Act
requires that shares of the funds be voted in the aggregate. Similarly, shares
of the Fund will be voted generally on a Fund-wide basis except matters
affect-
ing the interests of one Class of shares.
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as custodian of the Fund's
investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as
the Trust's transfer agent.
The Trust sends shareholders of the Fund semi-annual report and an audited
annual report, which include listings of the investment securities held by the
Fund at the end of the reporting period. In an effort to reduce the Fund's
printing and mailing costs, the Trust plans to consolidate the mailing of its
semi-annual and annual reports by household. This consolidation means that a
household having multiple accounts with the identical address of record will
receive a single copy of each report. In addition, the Trust also plans to
con-
solidate the mailing of the Fund's Prospectus so that a shareholder having
mul-
tiple accounts (that is, individual, IRA and/or Self-Employed Retirement Plan
accounts) will receive a single Prospectus annually. Any shareholder of the
Fund who does not
48
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
ADDITIONAL INFORMATION (CONTINUED)
want this consolidation to apply to his or her account should contact his or
her Financial Consultant or the Trust's transfer agent.
Shareholders may seek information regarding the Fund from their Smith Barney
Shearson Financial Consultants.
-----------------------
No person has been authorized to give any information or to make any repre-
sentations other than those contained in this Prospectus, the Statement of
Additional Information and/or the official sales literature in connection with
the offering of the Fund's shares, and, if given or made, such other informa-
tion or representations must not be relied upon as having been authorized by
the Trust. This Prospectus does not constitute an offer in any state in which,
or to any person to whom, such offer may not lawfully be made.
49
<PAGE>
SMITH BARNEY SHEARSON
Growth and Income Fund
TRUSTEES DISTRIBUTOR
Allan J. Bloostein Smith Barney Shearson Inc.
Robert B. Clark Two World Trade Center
Richard E. Hanson, Jr. New York, New York 10048
Heath B. McLendon
Madelon DeVoc Talley INVESTMENT ADVISER
Lee Abraham
Antoinette C. Bentley Greenwich Street Advisors
Two World Trade Center
OFFICERS New York, New York 10048
Heath B. McLendon ADMINISTRATOR
Chairman of the Board and
Investment Officer The Boston Company Advisors, Inc.
One Boston Place
Stephen J. Treadway Boston, Massachusetts 02108
President
AUDITORS AND COUNSEL
Richard P. Roelofs
Executive Vice President Coopers & Lybrand
One Post Office Square
George Novello Boston, Massachusetts 02109
Investment Officer
Willkie Farr & Gallagher
Jay Gerken 153 East 53rd Street
Investment Officer New York, New York 10022
Vincent Nave TRANSFER AGENT
Treasurer
The Shareholder Services Group, Inc.
Francis J. McNamara, III Exchange Place
Secretary Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and Trust
Company
One Boston Place
Boston, Massachusetts 02108
50
<PAGE>
- ------------------------------------------------------------------------------
- --
SMITH BARNEY SHEARSON
Growth and Income Fund
Two World Trade Center
New York, New York 10048
Fund 228, 229, 230
FD0250 D4
<PAGE>
- ------------------------------------------------------------------------------
- --
- ------------------------------------------------------------------------------
- --
April 1, 1994
SMITH BARNEY SHEARSON
Sector
Analysis
Fund
Prospectus begins
on page one.
-------------------------------------------
- --
[SMITH BARNEY SHEARSON LOGO]
-------------------------------------------
- --
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS April 1,
1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Sector Analysis Fund (the "Fund") seeks capital appreciation by investing
broadly in equity securities of companies within sectors, or industry groups,
of
the U.S. economy.
The Fund is one of a number of funds, each having distinct investment
objectives and policies, making up Smith Barney Shearson Equity Funds (the
"Trust"). The Trust is an open-end management investment company commonly
referred to as a "mutual fund."
This Prospectus sets forth concisely certain information about the Fund and
the Trust, including sales charges, distribution and service fees and
expenses,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. Shares of the other funds offered by the Trust are described
in separate prospectuses that may be obtained by calling the Trust at the
telephone number set forth above or by contacting your Smith Barney Shearson
Financial Consultant.
Additional information about the Fund and the Trust is contained in a
Statement of Additional Information dated April 1, 1994, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Trust at the telephone number or address set
forth above or by contacting any Smith Barney Shearson Financial Consultant.
The
Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety.
SMITH BARNEY SHEARSON INC. -- Distributor
SMITH BARNEY SHEARSON STRATEGY ADVISERS INC. --
Investment Adviser
PANAGORA ASSET MANAGEMENT, INC. -- Sub-Investment Adviser
LEHMAN BROTHERS INC. -- Sub-Investment Adviser
THE BOSTON COMPANY ADVISORS, INC. -- Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
PROSPECTUS SUMMARY 3
---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9
---------------------------------------------------------------------------
VARIABLE PRICING SYSTEM 12
---------------------------------------------------------------------------
THE FUND'S PERFORMANCE 13
---------------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 15
---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 16
---------------------------------------------------------------------------
PURCHASE OF SHARES 31
---------------------------------------------------------------------------
REDEMPTION OF SHARES 38
---------------------------------------------------------------------------
VALUATION OF SHARES 42
---------------------------------------------------------------------------
EXCHANGE PRIVILEGE 43
---------------------------------------------------------------------------
DISTRIBUTOR 49
---------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 51
---------------------------------------------------------------------------
ADDITIONAL INFORMATION 52
---------------------------------------------------------------------------
APPENDIX 55
---------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus.
See "Table of Contents."
BENEFITS TO INVESTORS The Fund offers investors several important benefits:
- - Ownership of a professionally managed diversified portfolio of equity,
fixed
income and money market securities having the potential for capital
appreciation.
- - Investment liquidity through convenient purchase and redemption
procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
- - Different methods for purchasing shares that allow investment flexibility
and a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within
the
same class of shares of most other funds in the Smith Barney Shearson
Group
of Funds.
INVESTMENT OBJECTIVE The Fund is a diversified fund that seeks capital
appreciation by investing broadly in equity securities of companies within
sectors, or industry groups of the U.S. economy. See "Investment Objective and
Management Policies."
VARIABLE PRICING SYSTEM The Fund offers several classes of shares ("Classes")
designed to provide investors with the flexibility of selecting an investment
best suited to their needs. The general public is offered two classes of
shares:
Class A shares and Class B shares, which differ principally in terms of the
sales charges and rates of expense to which they are subject. A third class --
Class D shares -- is offered only to plans participating in the Smith Barney
Shearson 401(k) Program (the "401(k) Program"). See "Variable Pricing System"
and "Purchase of Shares -- Smith Barney Shearson 401(k) Program."
CLASS A SHARES These shares are offered at net asset value per share plus a
maximum initial sales charge of 5%. The Fund pays an annual service fee of
.25%
of the value of average daily net assets attributable to this Class. See
"Purchase of Shares."
3
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 5% of redemption
proceeds, declining by 1% each year after the date of purchase to zero. The
Fund
pays an annual service fee of .25% and an annual distribution fee of .75% of
the
value of average daily net assets attributable to this Class. See "Purchase of
Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
original purchase. Upon conversion, these shares will no longer be subject to
an
annual distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System--Class B Shares."
SMITH BARNEY SHEARSON 401(K) PROGRAM Investors may be eligible to participate
in the 401(k) Program, which is generally designed to assist employers or plan
sponsors in the creation or operation of retirement plans under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
other
types of participant directed, tax-qualified employee benefit plans
(collectively, "Participating Plans"). Class A, Class B and Class D shares
maybe
available as investment alternatives for Participating Plans. Class A and
Class
B shares acquired through the 401(k) Program are subject to the same service
and/or distribution fees as, but different sales charge and CDSC schedules
than,
the Class A and Class B shares acquired by other investors. Class D shares
acquired by Participating Plans are offered at net asset value per share
without
any sales charge or CDSC. The Fund pays annual service and distribution fees
based on the value of the average daily net assets attributable to this Class.
See "Purchase of Shares--Smith Barney Shearson 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Trust's distributor,
Smith Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed
basis
(an "Introducing Broker"). Direct purchases by certain retirement plans may be
made through the Trust's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation. Smith Barney Shearson
recommends that, in most cases, single investments of $250,000 or more should
be
made in Class A shares. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
However, for Individual Retirement Accounts ("IRAs") and Self-Em-
4
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
ployed Retirement Plans, the minimum initial investment requirement is $250
and
the minimum subsequent investment requirement is $100, and for certain
qualified
retirement plans, the minimum initial and subsequent investment requirements
are
both $25. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter shares in an amount not less than $100. See "Purchase of
Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND Smith Barney Shearson Strategy Advisers Inc.
("Strategy
Advisers") serves as the Fund's investment adviser. Strategy Advisers is a
wholly owned subsidiary of Smith, Barney Advisers, Inc. Smith, Barney
Advisers,
Inc. is a wholly owned subsidiary of Smith Barney Shearson Holdings Inc.
("Holdings"). Holdings is a wholly owned subsidiary of The Travelers Inc.
("Travelers") (formerly Primerica Corporation). Travelers is a diversified
financial services holding company principally engaged in the businesses of
providing investment, consumer finance and insurance services.
PanAgora Asset Management, Inc. ("PanAgora Management") serves as
sub-investment adviser to the Fund. Fifty percent of the outstanding voting
stock of PanAgora Management is owned by Nippon Life Insurance Company and
fifty
percent is owned by Lehman Brothers Inc.
Lehman Brothers Inc. serves as sub-investment adviser to the Fund.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which is in turn a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Trust and the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds.
Certain exchanges may be subject to a sales charge differential. See "Exchange
Privilege."
5
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from any Smith
Barney
Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends are paid quarterly from net investment
income. Distributions of net realized capital gains are paid annually. See
"Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically, unless otherwise specified by an investor,
in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a
pro-rata basis. See "Dividends, Distributions and Taxes" and "Variable Pricing
System."
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund may not achieve its
investment
objective. The foreign securities in which the Fund may invest may be subject
to
certain risks in addition to those inherent in domestic investments. The Fund
may make certain investments and employ certain investment techniques that
involve other risks and special considerations. The techniques presenting the
Fund with risks or special considerations are investing in warrants, investing
in options on securities and stock indexes, entering into repurchase
agreements,
lending portfolio securities, entering into futures contracts and related
options as hedges and engaging in short sales of securities. See "Investment
Objective and Management Policies -- Risk Factors and Special Considerations."
6
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
<TABLE>
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and of the Fund's current operating expenses:
<CAPTION>
CLASS A CLASS B
CLASS D
<S> <C> <C>
<C>
- ------------------------------------------------------------------------------
- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% --
- --
Maximum CDSC
(as a percentage of redemption proceeds) -- 5.00%
- --
- ------------------------------------------------------------------------------
- -------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .80% .80%
.80%
12b-1 fees* .25 1.00
1.00
Other expenses**
- ------------------------------------------------------------------------------
- -------
TOTAL FUND OPERATING EXPENSES % %
%
- ------------------------------------------------------------------------------
- -------
<FN>
* Upon conversion Class B shares will no longer be subject to a
distribution
fee. Class D shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee.
** All expenses for the Fund's fiscal year ended January 31, 1994.
</TABLE>
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares. Investors may pay
actual charges of less than 5% depending on the amount purchased and, in the
case of Class B shares, the length of time the shares are held and whether the
shares are held through the 401(k) Program. See "Purchase of Shares" and
"Redemption of Shares." Management fees payable by the Fund include investment
advisory fees paid to Strategy Advisers in an amount equal to .40% of the
value
of the Fund's average daily net assets, sub-investment advisory fees payable
to
PanAgora Management in an amount equal to .20% of the value of the Fund's
average daily net assets and administration fees paid to Boston Advisors in an
amount equal to .20% of the value of the Fund's average daily net assets. The
nature of the services for which the Fund pays management fees is described
under "Management of the Trust and the Fund." Smith Barney
Shearson receives an annual 12b-1 service fee of .25% of the value of average
daily net assets of Class A shares. Smith Barney Shearson also receives with
7
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
respect to Class B and Class D shares an annual 12b-1 fee of 1.00% of the
value
of average daily net assets of the respective classes, consisting of a .75%
distribution fee and a .25% service fee. "Other expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
EXAMPLE
<TABLE>
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to
a hypothetical $1,000 investment in the Fund assuming a 5% total return. The
example assumes payment by the Fund of operating expenses at the levels set
forth in the above table. The example should not be considered a
representation
of past or future expenses and actual expenses may be greater or less than
those
shown. Moreover, while the example assumes a 5% annual return, the Fund's
actual
performance will vary and may result in an actual return greater or less than
5%.
<CAPTION>
1 YEAR 3 YEARS 5
YEARS 10 YEARS*
<S> <C> <C> <C>
<C>
- ------------------------------------------------------------------------------
- --------------
Class A shares** $ 63 $92 $ 122
$209
Class B shares:
Assumes complete redemption at end of each time
period*** $ 72 $98 $ 126
$230
Assumes no redemption $ 22 $68 $ 116
$230
Class D shares $ 22 $68 $ 116
$230
- ------------------------------------------------------------------------------
- --------------
<FN>
* Ten-year figures assume conversion of Class B shares to Class A shares
at
the end of the eighth year following the date of purchase.
** Assumes deduction at the time of purchase of the maximum 5% sales
charge.
*** Assumes deduction at the time of redemption of the maximum CDSC
applicable
for that time period.
</TABLE>
8
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, independent
accountants, whose report thereon appears in the Fund's Annual Report dated
January 31, 1994. The information set forth below should be read in
conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report, which is incorporated by reference into the Statement of
Additional Information.
<TABLE>
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<CAPTION>
PERIOD
ENDED
1/31/94*
<S>
<C>
- ------------------------------------------------------------------------------
- --------
<FN>
* .
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<CAPTION>
PERIOD
YEAR ENDED JANUARY 31,
ENDED
1993 1992 1991 1990 1989
1/31/88*
<S> <C> <C> <C> <C> <C>
<C>
- ------------------------------------------------------------------------------
- ------------
<FN>
* The Fund commenced operations on August 28, 1987. Those shares in
existence
prior to November 6, 1992 were designated as Class B shares.
** Annualized.
</TABLE>
10
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
FOR A CLASS D SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<CAPTION>
PERIOD
YEAR ENDED JANUARY 31,
ENDED
1993 1992 1991 1990 1989
1/31/88*
<S> <C> <C> <C> <C> <C>
<C>
- ------------------------------------------------------------------------------
- -----------
<FN>
* The Fund commenced operations on August 28, 1987. Those shares in
existence
prior to November 6, 1992 were designated as Class B shares.
** Annualized.
</TABLE>
11
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares,
thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment. A third class -- Class D
- -- is offered only to Participating Plans.
Class A Shares. Class A shares are sold at net asset value per share plus
a
maximum initial sales charge of 5% imposed at the time of purchase. The
initial
sales charge may be reduced or waived for certain purchases. Class A shares
are
subject to an annual service fee of .25% of the value of the Fund's average
daily net assets attributable to the Class. The annual service fee is used by
Smith Barney Shearson to compensate its Financial Consultants for ongoing
services provided to shareholders. The sales charge is used to compensate
Smith
Barney Shearson for expenses incurred in selling Class A shares. See "Purchase
of Shares."
Class B Shares. Class B shares are sold at net asset value per share
subject to a maximum 5% CDSC, which is assessed only if the shareholder
redeems
shares within the first five years of investment. This results in 100% of the
investor's assets' being used to acquire shares of the Fund. For each year of
investment within this five-year time frame, the applicable CDSC declines by
1%;
in year six, the CDSC is reduced to 0%. See "Purchase of Shares" and
"Redemption
of Shares."
Class B shares are subject to an annual service fee of .25% and an annual
distribution fee of .75% of the value of the Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearson's branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales
literature, advertising and printing and distributing prospectuses, statements
of additional information and other materials to prospective investors in
Class
B shares. A Financial Consultant may receive different levels of compensation
for selling different Classes. Class B shares are subject to a distribution
fee
and higher transfer agency fees than Class A shares which, in turn, will cause
Class B shares to have a higher expense ratio and pay lower dividends than
Class
A shares.
12
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM (CONTINUED)
Eight years after the date of purchase, Class B shares 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. In
addition, a certain portion of Class B shares that have been acquired through
the reinvestment of dividends and distributions ("Class B Dividend Shares")
will
be converted at that time. That portion will be a percentage of the total
number
of outstanding Class B Dividend Shares, owned by the shareholder equal to the
ratio of the total number of Class B shares converting at the time to the
total
number of outstanding Class B shares (other than Class B Dividend Shares)
owned
by the shareholder. The first of these conversions will commence on or about
September 30, 1994. The conversion of Class B shares into Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that such conversions will not constitute taxable events for Federal tax
purposes.
Class D Shares. Class D shares of the Fund are sold to Participating
Plans
at net asset value per share and are not subject to an initial sales charge or
CDSC. This Class of shares is subject to an annual service fee of .25% and an
annual distribution fee of .75% of the value of the Fund's average daily net
assets attributable to Class D shares. The distribution fee is used by Smith
Barney Shearson for expenses incurred in selling Class D shares, and the
service
fee is used to compensate Smith Barney Shearson Financial Consultants for
ongoing services provided to Class D shareholders. Class D shares are subject
to
a distribution fee which will cause Class D shareholders to have a higher
expense ratio and pay lower dividends than Class A shares.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total
return"
over various periods of time for each Class. Total return figures show the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
period
were reinvested in shares of the same Class. Class A total return figures
include the maximum initial 5% sales charge and Class B total return figures
13
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
include any applicable CDSC. These figures also take into account the service
and distribution fees, if any, payable with respect to each Class.
Total return figures will be given for the recent one-, five-and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well, such as on a
year-by-year basis. When considering average annual total return figures for
periods longer than one year, it is important to note that the total return
for
any one year in the period might have been greater or less than the average
for
the entire period. "Aggregate total return" figures may be used for various
periods, representing the cumulative change in value of an investment in a
Class
for the specific period (again reflecting changes in share prices and assuming
reinvestment of dividends and distributions). Aggregate total return may be
calculated either with or without the effect of the maximum 5% sales charge
for
the Class A shares or any applicable CDSC for Class B shares and may be shown
by
means of schedules, charts or graphs, and may indicate subtotals of the
various
components of total return (that is, changes in value of initial investment,
income dividends and capital gains distributions). Because of the differences
in
sales charge and distribution fees, the performance of each Class will differ.
In reports or other communications to shareholders or in advertising
material, performance of the Classes may be compared with that of other mutual
funds or classes of shares of other funds as listed in rankings prepared by
Lipper Analytical Services, Inc. or similar independent services that monitor
the performance of mutual funds, or other industry or financial publications
such as Barron's, Business Week, CDA Investment Technologies, Inc., Forbes,
Fortune, Institutional Investor, Investors Daily, Kiplinger's Personal
Finance,
Money, Morningstar Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal. Performance figures are based on historical earnings and
are not intended to indicate future performance. To the extent any
advertisement
or sales literature of the Fund describes the expenses or performance of one
Class, it will also disclose such information for the other Classes. The
Statement of Additional Information contains a description of the methods used
to determine performance. Performance figures may be obtained from your Smith
Barney Shearson Financial Consultant.
14
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE TRUST AND THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Trust and the
Fund rests with the Trust's Board of Trustees. The Trustees approve all
significant agreements between the Trust and the companies that furnish
services
to the Fund, including agreements with the Trust's distributor, custodian and
transfer agent and the Fund's investment adviser, sub-investment adviser and
administrator. The day-to-day operations of the Fund are delegated to the
Fund's
investment adviser, sub-investment adviser and administrator. The Statement of
Additional Information contains background information regarding each Trustee
of
the Trust and the executive officers of the Trust.
INVESTMENT ADVISER--STRATEGY ADVISERS
Strategy Advisers, located at Two World Trade Center, New York, New York
10048, serves as the Fund's investment adviser. Strategy Advisors (through its
predecessors) has been in the investment counselling business since 1986 and
renders investment advice to a wide variety of individual, institutional and
investment company clients which had aggregate assets under management as of
April 1, 1994, in excess of $ billion.
Subject to the supervision and direction of the Trust's Board of Trustees,
Strategy Advisers determines the sectors in which the Fund will invest, the
extent to which the Fund's assets will be invested in a particular sector and,
together with PanAgora Management, the particular companies included in a
particular sector.
SUB-INVESTMENT ADVISER--PANAGORA MANAGEMENT
As sub-investment adviser to the Fund, PanAgora Management provides
investment advisory assistance and portfolio management advice to Strategy
Advisers. PanAgora Management is located at 260 Franklin Street, Boston,
Massachusetts 02110, and provides a full range of investment advisory services
to individuals, institutional and investment company clients with total assets
under management as of April 10, 1994, in excess of $ billion. Fifty percent
of
the outstanding voting stock of PanAgora Management is owned by Nippon Life
Insurance Company and fifty percent is owned by Lehman Brothers Inc. Lehman
Brothers Inc. is a wholly owned subsidiary of Lehman Brothers Holdings Inc.
("Holdings"). American Express owns 100% of Holdings' issued and outstanding
common stock, which represents approximately 92% of Hold-
15
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
ings' issued and outstanding voting stock. The remainder of Holdings' voting
stock is owned by Nippon Life Insurance Company.
Elaine Garzarelli, of Lehman Brothers Inc., has served as Vice
President and Investment Officer of the Fund since it commenced operations and
manages the day-to-day operations of the Fund, including making all investment
decisions.
Ms. Garzarelli's management discussion and analysis, and additional
performance information regarding the Fund during the fiscal year ended
January
31, 1994 is included in the Annual Report dated January 31, 1994. A copy of
the
Annual Report may be obtained upon request and without charge from your Smith
Barney Shearson Financial Consultant or by writing or calling the Fund at the
address or phone number listed on page one of this Prospectus.
ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies which had aggregate assets under management as of April 1, 1994 in
excess of $ billion. Boston Advisors calculates the net asset value of
the
Fund's shares and generally assists in all aspects of the Fund's
administration
and operation.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek capital appreciation by
investing broadly in equity securities of companies within sectors of the U.S.
economy (that is, industry groups) selected by Strategy Advisers. Although the
Fund may receive current income from dividends, interest and other sources,
income is only an incidental consideration of the Fund. The Fund's investment
objective may be changed only with the approval of a majority of the Fund's
outstanding voting securities. There can be no assurance that the Fund will
achieve its investment objective.
16
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT POLICIES
Strategy Advisers believes that certain sectors within the U.S. economy it
designates as attractive will outperform other sectors on average both in
earnings growth and in price/earnings valuation, and that the common stocks of
companies within these high-performing, generally undervalued sectors will
outperform other common stocks. The Fund offers investors an attractive
alternative to sector mutual funds that limit their investments to one
particular sector. Investors in those funds are encouraged to research and
follow a number of sectors before investing in a particular sector fund or
before exchanging shares of one fund in a family of sector funds for shares of
another. The Fund, on the other hand, offers investors the benefits of sector
investment without requiring individual investors to engage in sector
analysis.
The Fund's sector analysis is performed under the direction of Elaine M.
Garzarelli, Managing Director of the Lehman Brothers and Lehman Brothers'
chief
sector analyst.
In seeking capital appreciation, the Fund follows a sector strategy
developed by Strategy Advisers. The sector strategy initially involves Lehman
Brothers dividing the U.S. equity market into the 90 sectors that are listed
in
the Appendix to this Prospectus. The sectors are then assigned one of three
designations by Lehman Brothers "attractive," "neutral" or "unattractive."
Designations generally are assigned on the basis of Lehman Brothers'
evaluation
of a sector's price/earnings ratio and earnings prospects. To be categorized
as
"attractive," a sector must be determined by Lehman Brothers to be undervalued
and to have potential earnings per share growth equal to, or better than, the
Standard & Poor's Daily Price Index of 500 Common Stocks (the "S&P 500"). For
a
sector to be classified as "neutral," its value and earnings per share growth
must be determined to be in line with the S&P 500. A sector is categorized as
"unattractive" when Lehman Brothers determines that it is overvalued and that
its earnings per share growth potential is below the S&P 500. In making these
determinations, Lehman Brothers uses econometric models linking various
industries to the general economic outlook. Those models are reviewed and
revised regularly on the basis of, among other things, meetings held between
Ms.
Garzarelli and her staff and economists and analysts who follow particular
industries. Lehman Brothers will assign designations to particular sectors and
re-evaluate those designations on an ongoing basis at least monthly.
Under normal circumstances, except as described below under "Investment
Strategies and Techniques" and under "Additional Investments," the Fund's
17
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
assets will be invested in equity securities issued by companies in sectors
designated "attractive" by Lehman Brothers. Should a sector in which the Fund
has invested be determined by Lehman Brothers to be no longer attractive, the
Fund will seek to sell all of its holdings of companies in that sector as soon
as practicable after Lehman Brothers has made its determination, regardless of
whether these sales will result in realized gains or realized losses. The Fund
may not follow this policy, however, in cases in which the sale of the Fund's
securities might affect adversely the Fund's ability to qualify as a regulated
investment company. See "Dividends, Distributions and Taxes." In addition, to
the extent the Fund follows this policy, the Fund may not participate in the
continued appreciation of the securities of a particular company in the
sector.
Lehman Brothers will determine the extent to which the Fund's assets are
invested in a particular sector in a manner consistent with the Fund's policy
on
industry concentration that is set out below under "Investment Restrictions."
Lehman Brothers, together with PanAgora Management, will select the companies
coming within the various sectors. PanAgora Management will be responsible for
implementing the investments for the Fund consistent with Lehman Brothers'
sector determinations and for selecting the brokers and dealers that execute
the
Fund's securities transactions. In implementing the Fund's sector strategy,
PanAgora Management will seek to invest in a broad cross-section of those
companies coming within the sector that reflect the sector's performance as a
whole. As a result of the use of a sector strategy, the Fund generally will
have
a high portfolio turnover rate.
In seeking its investment objective, the Fund will invest primarily in
common stocks. The Fund also may purchase, in seeking capital appreciation,
convertible bonds, convertible preferred stock and long-term U.S. Treasury
bonds.
The equity securities in which the Fund will invest will be limited to
those
of U.S. issuers. In investing in these issuers, the Fund is not limited as to
the types of issuers (by operating history, capitalization, size or otherwise)
so long as the issuers come within the sectors listed in the Appendix to this
Prospectus and their equity securities are listed on securities exchanges or
are
unlisted securities that are quoted as National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market System
Securities.
Under normal circumstances, the Fund's investments in equity securities will
represent no less than 65% of its assets.
18
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Each month, Lehman Brothers, under the direction of Ms. Garzarelli,
prepares
and publishes a report entitled "Sector Analysis (Quantitative Industry
Analysis): Monthly Monitor" (the "Report"). The Report, among other things,
delineates various sectors in the U.S. equity markets, designates those
sectors
as "attractive," "neutral" or "unattractive" and makes various recommendations
as to investing in particular sectors. The sector analysis used by Lehman
Brothers in publishing the Report is generally similar to that used in
advising
the Fund. Because shares of the Fund are purchased and sold by shareholders on
an ongoing basis, and because the Fund is subject to various limitations on
its
operations, including, for example, those imposed under the Code the Fund may
not invest in all sectors designated as "attractive" in the Report. See
"Dividends, Distributions and Taxes."
INVESTMENT STRATEGIES AND TECHNIQUES
In attempting to achieve its investment objective, the Fund may employ,
among others, one or more of the strategies or techniques set forth below. The
Fund is under no obligation to use any of the strategies or techniques at any
given time or under any particular economic condition. More detailed
information
concerning these strategies and their related risks is contained in the
Statement of Additional Information.
Repurchase Agreements. The Fund may enter into repurchase agreements with
banks which are the issuers of instruments acceptable for purchase by the Fund
and with certain dealers on the Federal Reserve Bank of New York's list of
reporting dealers. Under the terms of a typical repurchase agreement, the Fund
would acquire an underlying debt obligation for a relatively short period
(usually not more than seven days) subject to an obligation of the seller to
repurchase, and the Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the underlying
securities will be monitored on an ongoing basis by Strategy Advisors,
PanAgora
Management or Boston Advisors to ensure that the value is at least equal at
all
times to the total amount of the repurchase obligation, including interest.
Strategy Advisors, PanAgora Management or Boston Advisors, acting under the
supervision of the Trust's Board of Trustees, reviews on an ongoing basis the
value of the collateral and the creditworthiness of those banks and dealers
with
which the Fund enters into repurchase agreements to evaluate potential risks.
19
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Lending of Portfolio Securities. The Fund has the ability to lend
portfolio
securities to brokers, dealers and other financial organizations. Loans, if
and
when made, may not exceed 20% of the Fund's assets taken at value. Loans of
portfolio securities by the Fund will be collateralized by cash, letters of
credit or instruments issued by the United States government or its agencies
or
instrumentalities ("U.S. government securities") that are maintained at all
times in a segregated account in an amount at least equal to the current
market
value of the loaned securities.
Purchasing Put Options on Securities. The Fund will purchase put options
only on securities that are not held by the Fund and that are issued by
companies in sectors designated as "unattractive" by Strategy Advisers. In
addition, the Fund will only purchase put options listed on national
securities
exchanges and will not purchase put options traded over the counter. In
purchasing put options on securities, the Fund is subject to the limitation
set
forth below under "Stock Index Options."
By buying a put option, the Fund seeks to limit its risk of loss from a
decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be reduced by the amount of the premium paid for the
put
option and any related transaction costs. Prior to their expirations, put
options may be sold in closing sale transactions (that is, sales by the Fund,
prior to the exercise of options it has purchased, of options of the same
series), and profit or loss from the sale will depend on whether the amount
received is more or less than the premium paid for the option plus the related
transaction costs.
In purchasing a put option, the Fund will seek to benefit from a decline
in
the market price of the underlying security. If the put option is not sold or
exercised when it has remaining value, or if the market price of the
underlying
security remains equal to or greater than the exercise price during the life
of
the put option, the Fund will lose its investment in the put. For the purchase
of a put option to be profitable, the market price of the underlying security
must decline sufficiently below the exercise price to cover the premium and
transaction costs.
Because option premiums paid by the Fund are small in relation to the
market
value of the investments underlying the options, buying put options can result
in large amounts of leverage. The leverage offered by trading in options
20
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
could cause the Fund's net asset value to be subject to more frequent and
wider
fluctuation than would be the case if the Fund did not invest in options.
Stock Index Options. The Fund may purchase put and call options on stock
indexes listed on national securities exchanges. A stock index measures the
movement of a certain group of stocks by assigning relative values to the
common
stocks included in the index. Options on stock indexes are similar to options
on
securities. However, because options on stock indexes do not involve the
delivery of any underlying security, the option represents the holder's right
to
obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of
a
call) the closing value of the underlying index on the exercise date.
In purchasing put options on a stock index, the Fund will seek to benefit
from a decline in value of the stocks underlying the index or will seek to
hedge
against the risk of loss on securities it holds. In purchasing call options on
a
stock index, the Fund will seek to participate in an advancing market in
anticipation of becoming more fully invested in equity securities.
The advisability of using stock index options to hedge against the risk of
market-wide movements will depend on the extent of diversification of the
stock
investments of the Fund and the sensitivity of its stock investments to
factors
influencing the underlying index. The effectiveness of purchasing or writing
stock index options as a hedging technique will depend upon the extent to
which
price movements in the Fund's securities investments correlate with price
movements in the stock index selected.
The Fund may invest only up to 2% of its assets, represented by premiums
paid, in the purchase of put options on securities and put and call options on
stock indexes.
Selling Call Options on Securities and Stock Indexes. The Fund may sell
call options on securities and on stock indexes. In selling call options on
securities or on a stock index, the Fund will seek to benefit from the receipt
of premiums during periods when a decline in the value of the underlying
securities or index is expected. The Fund will sell call options only on
securities that are not held by the Fund and are issued by companies in
sectors
designated as "unattractive" by Strategy Advisors. In addition, the Fund will
sell only call options that are listed on national securities exchanges and
will
not sell call options that are traded over the counter.
21
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund will write call options only if (a) the Fund holds a call option
at
the same or a lower exercise price for the same exercise period on the same
securities or index as the call written or (b) the Fund establishes with the
Trust's custodian at the time the call is written, and maintains for the term
of
the option, a segregated account that will consist of cash, U.S. government
securities or other high-grade debt securities in an amount equal to the
fluctuating market value of the optioned securities. The segregated account
will
be adjusted at least daily to reflect changes in the market value of the
optioned securities. In the case of a call option written on a stock index,
the
segregated account will be maintained in an amount equal to the amount the
Fund
would have to pay if the option were exercised on any given day prior to its
expiration. Prior to the expiration of a call option which it has written, the
Fund may enter into a "closing purchase transaction" to terminate its
obligations with respect to the option by buying an option of the same series
and exercise price as the option previously written.
The value of the securities underlying call options on securities written
by
the Fund and the aggregate amount of the Fund's obligations with respect to
call
options on stock indexes written by the Fund may not exceed 25% of the Fund's
net assets.
Short Sales. The Fund may engage in short sales of securities, which are
transactions in which the Fund sells securities it does not own in
anticipation
of a decline in the market price of the securities. The Fund will engage in
short sales only of securities of companies in sectors designated as
"unattractive" by Strategy Advisors.
To complete a short sale, the Fund must arrange through a broker to borrow
the securities to be delivered to the buyer. The proceeds received by the Fund
from the short sale are retained by the broker until the Fund replaces the
borrowed securities. In borrowing the securities to be delivered to the buyer,
the Fund becomes obligated to replace the securities borrowed at their market
price at the time of replacement, whatever that price may be. The Fund may
have
to pay a premium to borrow the securities and must pay any dividends or
interest
payable on the securities until they are replaced.
The Fund's obligation to replace the securities borrowed in connection
with
a short sale will be secured by collateral deposited with the broker that
consists of cash or U.S. government securities. In addition, the Fund will
place
in a segregated account with the Trust's custodian an amount of cash or U.S.
22
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
government securities equal to the difference, if any, between (a) the market
value of the securities sold at the time they were sold short and (b) any cash
or U.S. government securities deposited as collateral with the broker in
connection with the short sale (not including the proceeds of the short sale).
Until it replaces the borrowed securities, the Fund will maintain the
segregated
account daily at a level so the amount deposited in the account plus the
amount
deposited with the broker (not including the proceeds from the short sale) (a)
will equal the current market value of the securities sold short and (b) will
not be less than the market value of the securities at the time they were sold
short.
The Fund will not enter into a short sale of securities if, as a result of
the sale, the total market value of all securities sold short by the Fund
would
exceed 25% of the value of the Fund's assets. In addition, the Fund may not
(a)
sell short the securities of any single issuer listed on a national securities
exchange to the extent of more than 2% of the value of the Fund's net assets
and
(b) sell short the securities of any class of an issuer to the extent of more
than 2% of the outstanding securities of the class at the time of the
transaction. The extent to which the Fund may engage in short sales may be
further limited by the Fund's meeting the requirements for qualification as a
regulated investment company imposed under the Code. See "Dividends,
Distributions and Taxes."
Warrants. The Fund may invest in warrants, which are securities
permitting,
but not obligating, their holder to subscribe for other securities. The Fund's
investment in warrants, valued at the lower of cost or market, may not exceed
5%
of the Fund's net assets. Under no circumstances may the Fund invest more than
2% of its net assets in warrants that are not listed on the NYSE or American
Stock Exchange.
Futures Contracts and Options on Futures Contracts. The Fund may enter
into
stock index futures contracts and interest rate futures contracts and purchase
and write options on interest rate futures contracts solely for the purpose of
hedging against fluctuations in the value of the securities it holds due to
anticipated changes in interest rates or market conditions. The Fund will not
enter into futures and options contracts for which aggregate initial margin
deposits and premiums exceed 5% of the fair market value of the Fund's assets
after taking into account unrealized profits and unrealized losses on futures
contracts into which it has entered.
23
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
In entering into transactions involving futures contracts and options on
futures contracts, the Fund will comply with applicable requirements of the
Commodity Futures Trading Commission. When the Fund enters into a long
position
in a futures contract or an option on a futures contract, an amount of cash,
U.S. government securities or other high-grade debt securities, equal to the
market value of the underlying contract, will be deposited in a segregated
account with the Trust's custodian to collateralize the position, thereby
insuring that the use of the contract is unleveraged. The Fund will not enter
into futures contracts for speculation and will only enter into futures
contracts that are traded on national futures exchanges. Entering into a
contract to buy a stock index or a debt security is commonly referred to as
buying or purchasing a contract or holding a "long" position in the index or
security. Entering into a contract to sell an index or security is commonly
referred to as selling a contract or holding a "short" position. All of the
Fund's transactions involving futures contracts will be undertaken under the
direction of PanAgora Management.
Stock Index Futures Contracts. A stock index futures contract is a
contract
to buy or sell units of a stock index at a specified future date at a price
agreed upon when the contract is made. The value of a unit is the current
value
of the stock index.
During a period of anticipated market decline, the Fund may limit its
exposure to the decline by entering into short stock index futures contracts.
If
the market is expected to advance, the Fund may hedge a price rise in stocks
it
intends to purchase by entering into long stock index futures contracts. At
any
time prior to the expiration of a futures contract, the Fund may elect to
close
the position by taking an opposite position, which will operate to terminate
the
Fund's existing position in the contract.
Interest Rate Futures Contracts and Related Options. An interest rate
futures contract provides for the future sale by one party and the purchase by
the other party of a certain amount of a specified debt security at a
specified
price, date, time and place. The Fund may enter into interest rate futures
contracts to sell debt securities when PanAgora Management believes the value
of
U.S. Treasury bonds will decrease. The Fund may enter into interest rate
futures
contracts to purchase debt securities when PanAgora Management anticipates
purchasing U.S. Treasury bonds and believes prices will rise before the
purchases will be made.
24
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
An option on an interest rate futures contract, as contrasted with the
direct investment in a futures contract, gives the purchaser the right, in
return for the premium paid, to assume a position in an interest rate futures
contract at a specified exercise price at any time prior to the expiration
date
of the option. A call option gives the purchaser of the option the right to
buy
and obligates the writer to sell the underlying futures contract. A put option
gives the purchaser the right to sell and obliges the writer to buy the
underlying contract.
The Fund may purchase put options on interest rate futures contracts to
hedge its U.S. Treasury bonds against the risk of rising interest rates, and
may
purchase call options on interest rate futures contracts to hedge against a
decline in interest rates. The Fund will write put or call options on interest
rate futures contracts as part of closing purchase transactions to terminate
its
option positions, although no assurance can be given that such closing
transactions can be effected. The Fund may write put and call options on
interest rate futures contracts, other than as part of closing sale
transactions, in order to increase its ability to hedge against changes in
interest rates. The Fund would write put and call options only on interest
rate
futures contracts which are traded on a domestic exchange or board of trade.
ADDITIONAL INVESTMENTS
Money Market Instruments. The Fund may hold, at any time, up to 20% of
the
value of its assets in cash and short-term instruments. In addition, when
Strategy Advisers believes that market conditions warrant the adoption of a
temporary defensive posture, the Fund may invest in cash and short-term
instruments without limitation. To the extent the Fund holds cash or invests
in
short-term instruments, it will not achieve its investment objective. Short-
term
instruments in which the Fund may invest include: U.S. government securities;
bank obligations (including certificates of deposit, time deposits and
bankers'
acceptances of domestic or foreign banks, domestic savings and loan
associations
and other banking institutions having total assets in excess of $500 million);
commercial paper rated no lower than A-2 by Standard & Poor's Corporation
("S&P") or Prime-2 by Moody's Investors Service, Inc. ("Moody's") or the
equivalent from another nationally recognized statistical rating service or,
if
unrated, of an issuer having an outstanding, unsecured debt issue then rated
within the three highest rating categories; and repurchase agreements with
respect to the investments that may be held by the Fund. A description of the
commercial paper rating categories of Moody's and S&P is
25
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
contained in the Appendix to the Statement of Additional Information. At no
time
will the Fund's investments in bank obligations, including time deposits,
exceed
25% of its assets.
U.S. Government Securities. The U.S. government securities in which the
Fund may invest include: direct obligations of the United States Treasury and
obligations issued or guaranteed by U.S. government agencies and
instrumentalities, including instruments supported by the full faith and
credit
of the United States; securities supported by the right of the issuer to
borrow
from the U.S. Treasury; and securities supported solely by the credit of the
instrumentality.
Long-Term Treasury Bonds. The Fund may invest up to 35% of its assets in
U.S. Treasury Bonds, which generally have maturities of greater than 10 years
and may have maturities of up to 30 years at the time of issuance. Consistent
with the Fund's investment objective, the Fund may purchase U.S. Treasury
bonds
only for the purpose of seeking capital appreciation. The market value of
fixed-income obligations may vary inversely in response to changes in
prevailing
interest rates, and these variations may be greater for long-term, fixed-
income
obligations such as U.S. Treasury Bonds than for shorter term fixed-income
obligations.
CERTAIN INVESTMENT GUIDELINES
Up to 10% of the assets of the Fund may be invested in securities with
contractual or other restrictions on resale ("restricted securities") and
other
instruments that are not readily marketable ("illiquid securities"), including
in the aggregate (a) repurchase agreements with maturities greater than seven
days, (b) futures contracts and options thereon for which a liquid secondary
market does not exist and (c) time deposits maturing in more than seven
calendar
days. In addition, the Fund may invest up to 5% of its assets in the
securities
of issuers that have been in continuous operation for less than three years.
26
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT RESTRICTIONS
The Trust has adopted certain fundamental investment restrictions with
respect to the Fund that may not be changed without approval of a majority of
the Fund's outstanding voting securities, as defined in the 1940 Act. Included
among those fundamental restrictions are the following that prohibit the Fund
from:
1. Purchasing the securities of any issuer (other than U.S. government
securities) if as a result more than 5% of the value of the Fund's total
assets would be invested in the securities of the issuer, except that up
to
25% of the value of the Fund's total assets may be invested without regard
to this 5% limitation.
2. Purchasing more than 10% of the voting securities of any one issuer,
or
more than 10% of the securities of any class of any one issuer; provided
that this limitation will not apply to investments in U.S. government
securities.
3. Borrowing money, except that the Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of
securities, in any amount not to exceed 10% of the value of the Fund's
total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the total assets of the
Fund,
the Fund will not make any additional investments.
4. Making loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities and the entry into repurchase
agreements.
5. Purchasing any securities (other than U.S. government securities) that
would cause more than 25% of the value of the Fund's total assets at the
time of purchase to be invested in the securities of issuers conducting
their principal business activities in the same industry.
A complete list of investment restrictions the Trust has adopted with
respect to the Fund, identifying additional restrictions that cannot be
changed
without the approval of the majority of the Fund's outstanding shares, is
contained in the Statement of Additional Information.
27
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves special considerations, such as those
described below:
General. Lehman Brothers will manage the Fund aggressively in following
the
sector strategy and, as a result, the Fund should not be considered to be a
complete investment program. Investment in the Fund may involve above-average
risk of loss because of, among other things, the Fund's use of strategies and
techniques that may be considered to be speculative. The sector strategy
followed by the Fund and certain of the strategies and techniques used by the
Fund depend on forecasts made by Lehman Brothers that may or may not prove to
be
correct. The selection by PanAgora Management of securities of companies
within
a particular sector may not achieve the maximum performance available from
investing in the sector. In addition, to the extent there is appreciation in a
sector not included among the 90 sectors listed in the Appendix to this
Prospectus, the Fund will not participate in its appreciation.
Warrants. Because a warrant does not carry with it the right to dividends
or voting rights with respect to the securities that the warrant holder is
entitled to purchase, and because a warrant does not represent any rights to
the
assets of the issuer, a warrant may be considered more speculative than
certain
other types of investments. Also, the value of a warrant does not necessarily
change with the value of the underlying security and a warrant ceases to have
value if it is not exercised prior to its expiration date.
Options. Option writing for the Fund may be limited by position and
exercise limits established by national securities exchanges and the National
Association of Securities Dealers, Inc., and by requirements in the Code for
qualification as a regulated investment company. See "Dividends, Distributions
and Taxes." In addition to writing covered put and call options to generate
current income, the Fund may enter into options transactions as hedges to
reduce
investment risk, generally by making an investment expected to move in the
opposite direction of a portfolio position. A hedge is designed to offset a
loss
on a portfolio position with a gain on the hedge position; at the same time,
however, a properly correlated hedge will result in a gain on the portfolio
position being offset by a loss on the hedge position. The Fund bears the risk
that the prices of the securities being hedged will not move in the same
amount
as the hedge. The Fund will engage in hedging transactions only when deemed
advisable by Strategy Advisers. Successful use by the Fund of options will be
28
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
subject to Strategy Advisers' ability to predict correctly movements in the
direction of the stock or index underlying the option used as a hedge. Losses
incurred in hedging transactions and the costs of these transactions will
affect
the Fund's performance.
The ability of the Fund to engage in closing transactions with respect to
options depends on the existence of a liquid secondary market. While the Fund
generally will purchase or write stock options and options on stock indexes
only
if a liquid secondary market appears to exist for the options purchased or
sold,
for some options no such secondary market may exist or the market may cease to
exist. If the Fund cannot enter into a closing sale transaction with respect
to
a put or call option purchased by it, the Fund will continue to be subject to
the risk that the option it has purchased will decline in value or become
worthless as a result of any increase or decrease, respectively, in the value
of
the underlying security. If the Fund cannot enter into a closing purchase
transaction with respect to a call option written by it, the Fund will
continue
to be subject to the risk that its potential loss upon exercise of the option
will increase as a result of any increase in the value of the underlying
security. The Fund could also face higher transaction costs, including
brokerage
commissions, as a result of its options transactions.
Short Sales. Possible losses from short sales differ from losses that
could
be incurred from a purchase of a security, because losses from short sales may
be unlimited, whereas losses from purchases can equal only the total amount
invested.
Futures Contracts and Options on Futures Contracts. The use of futures
contracts and related options as a hedging device involves several risks. No
assurance can be given that a correlation will exist between price movements
in
the stock index or debt securities underlying the futures contract or option
thereon, on the one hand, and price movements in the securities that are the
subject of the hedge, on the other hand. The risk of imperfect correlation
increases as the composition of the securities held by the Fund diverges from
the securities included in the applicable stock index or underlying the
applicable interest rate futures contract or option thereon. Positions in
futures contracts may be closed out only on the exchange on which they were
entered into (or through a linked exchange) and no secondary market exists for
those contracts. In addition, although the Fund intends to enter into futures
contracts only if an active market exists for the contracts, no assurance
29
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
can be given that an active market will exist for the contracts at any
particular time. Certain exchanges do not permit trading in particular
contracts
at prices that represent a fluctuation in price during a single day's trading
beyond a certain set limit. If prices fluctuate during a single day's trading
beyond those limits, the Fund could be prevented from promptly liquidating
unfavorable positions and thus be subjected to losses. The potential loss
related to the purchase of an option on an interest rate futures contract is
limited to the price paid for the option. The ability of the Fund to establish
and close out positions on such options will be subject to the maintenance of
a
liquid market and there can be no assurance that such a market will be
maintained or that closing transactions will be effected. Losses incurred in
hedging transactions and the costs of these transactions will affect the
Fund's
performance. Successful use of futures contracts and options on futures
contracts by the Fund for hedging purposes is subject to the ability of
PanAgora
Management to predict correctly movements in the direction of the stock
market.
Repurchase Agreements. The Fund bears a risk of loss in the event that
the
other party to a repurchase agreement defaults on its obligations and the Fund
is delayed or prevented from exercising its rights to dispose of the
underlying
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert its
rights to them, the risk of incurring expenses associated with asserting those
rights and the risk of losing all or a part of the income from the agreement.
PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for transactions in securities or options on behalf of the Fund
are placed by Strategy Advisers, Lehman Brothers or PanAgora Management with
broker-dealers that those advisers select, including Smith Barney Shearson and
other affiliated brokers. The Fund may utilize Smith Barney Shearson or a
broker
that is affiliated with Smith Barney Shearson in connection with a purchase or
sale of securities when Strategy Advisors or PanAgora Management believes that
the broker's charge for the transaction does not exceed usual and customary
levels. The Fund also may use Smith Barney Shearson as a commodities broker in
connection with entering into futures contracts and commodity options. Smith
Barney Shearson has agreed to charge the Fund commodity commissions
30
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
at rates comparable to those charged by Smith Barney Shearson to its most
favored clients for comparable trades in comparable accounts.
While securities are purchased for the Fund on the basis of potential for
capital growth and not for short-term trading, the Fund's sector strategy and
investment techniques may result in frequent shifts among the Fund's
investments
and in its experiencing turnover and transaction costs significantly higher
than
those of more conventional equity mutual funds. Short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary income. In
addition, higher portfolio turnover rates can result in corresponding
increases
in brokerage commissions. The Fund will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with its objective
and
policies.
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- --
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained
with
Smith Barney Shearson or with an Introducing Broker, except that investors
purchasing shares of the Fund through a qualified retirement plan may do so
directly through the Trust's transfer agent. When purchasing shares of the
Fund,
investors must specify whether the purchase is for Class A, Class B shares or,
in the case of Participating Plans in the 401(k) Program, Class D shares. No
maintenance fee will be charged in connection with a brokerage account through
which an investor purchases or holds shares. Purchases are effected at the
public offering price next determined after a purchase order is received by
Smith Barney Shearson or an Introducing Broker (the "trade date"). Payment is
generally due to Smith Barney Shearson or an Introducing Broker on the fifth
business day (the settlement date") after the trade date. Investors who make
payment prior to the settlement date may permit the payment to be held in
their
brokerage accounts or may designate a temporary investment (such as a money
market fund in the Smith Barney Shearson Group of Funds) for the payment until
the settlement date. The Trust reserves the right to reject any purchase order
and to suspend the offering of shares of the Fund for a period of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York time, on any day on which the Fund's net asset value is calculated, are
priced according to the net asset value determined on that day. Purchase
orders
31
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SMITH BARNEY SHEARSON
Sector Analysis Fund
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- --
PURCHASE OF SHARES (CONTINUED)
received after the close of regular trading on the NYSE are priced as of the
time the net asset value per share is next determined. See "Valuation of
Shares."
Systematic Investment Plan. The Fund offers shareholders a Systematic
Investment Plan under which shareholders may authorize Smith Barney Shearson
or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid
automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the shareholder's shares of a Smith Barney
Shearson money market fund. For further information regarding the Systematic
Investment Plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
Minimum Investments. The minimum initial investment in the Fund is $1,000
and the minimum subsequent investment is $200, except that for purchases
through
(a) IRAs and Self-Employed Retirement Plans, the minimum initial and
subsequent
investment is $250 and $100, respectively, (b) retirement plans qualified
under
Section 403(b)(7) or Section 401(a) of the Code, the minimum initial and
subsequent investments are both $25 and (c) the Fund's Systematic Investment
Plan, the minimum initial and subsequent investments are $100. There are no
minimum investment requirements for Travelers and its subsidiaries, including
Smith Barney Shearson. The Trust reserves the right at any time to vary the
initial and subsequent investment minimums. Certificates for Fund shares are
issued upon request to the Trust's transfer agent.
CLASS A SHARES
<TABLE>
The public offering price for Class A shares is the per share net asset
value of that Class plus a sales charge, which is imposed in accordance with
the
following schedule:
<CAPTION>
SALES CHARGE AS % SALES
CHARGE AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET
ASSET VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
- ---------
Less than $25,000 5.00%
5.26%
$25,000 but under $100,000 4.00%
4.17%
$100,000 but under $250,000 3.25%
3.36%
$250,000 but under $500,000 2.50%
2.56%
$500,000 but under $1,000,000 2.00%
2.04%
$1,000,000 or more** .00%
.00%
- ------------------------------------------------------------------------------
- ---------
</TABLE>
32
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
* Smith Barney Shearson has adopted guidelines directing its financial
consultants and Introducing Brokers that single investments of $250,000
or
more should be made in Class A shares.
** No sales charge is imposed on purchases of $1 million; however, a CDSC of
.75% is imposed for the first year after purchase. The CDSC on Class A
shares is payable to Smith Barney Shearson which, with Boston Advisors,
compensates Smith Barney Shearson Financial Consultants upon the sale of
these shares. The CDSC is waived in the same circumstances in which the
CDSC applicable to Class B shares is waived. See "Redemption of
Shares--Contingent Deferred Sales Charge--Class B Shares--Waivers of
CDSC."
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are available to investors who are eligible to
combine
their purchases of Class A shares to receive volume discounts. Investors
eligible to receive volume discounts include individuals and their immediate
families, tax-qualified employee benefit plans and trustees or other
professional fiduciaries (including a bank, or an investment adviser
registered
with the SEC under the Advisers Act) purchasing shares for one or more trust
estates or fiduciary accounts even though more than one beneficiary is
involved.
The initial sales charge is also reduced to 1% for Smith Barney Shearson
Personal Living Trust program participants for whom Smith Barney Shearson acts
as trustee. Reduced sales charges on Class A shares are also available under a
combined right of accumulation, under which an investor may combine the value
of
Class A shares already held in the Fund and in any of the funds in the Smith
Barney Shearson Group of Funds listed below (except those sold without a sales
charge), along with the value of the Fund's Class A shares being purchased, to
qualify for a reduced sales charge. For example, if an investor owns Class A
shares of the Fund and other funds in the Smith Barney Shearson Group of Funds
that have an aggregate value of $22,000, and makes an additional investment in
Class A shares of the Fund of $4,000, the sales charge applicable to the
additional investment would be 4%, rather than the 5% normally charged on a
$4,000 purchase. Investors interested in further information regarding reduced
sales charges should contact their Smith Barney Shearson Financial
Consultants.
Class A shares of the Fund may be offered without any applicable sales
charges to: (a) employees of Travelers and its subsidiaries, including Smith
Barney Shearson, employee benefit plans for such employees and their immediate
families when orders on their behalf are placed by such employees; (b)
accounts
managed by registered investment advisory subsidiaries of Travelers; (c)
directors, trustees or general partners of any investment company for which
Smith Barney Shearson serves as distributor; (d) any other investment
33
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (e) shareholders who have redeemed
Class A shares in the Fund (or Class A shares of another fund in the Smith
Barney Shearson Group of Funds that are sold with a maximum 5% sales charge)
and
who wish to reinvest their redemption proceeds in the Fund, provided the
reinvestment is made within 30 days of the redemption; and (f) any client of a
newly employed Smith Barney Shearson Financial Consultant (for a period up to
90
days from the commencement of the Financial Consultant's employment with Smith
Barney Shearson), on the condition that the purchase is made with the proceeds
of the redemption of shares of a mutual fund that (i) was sponsored by the
Financial Consultant's prior employer, (ii) was sold to a client by the
Financial Consultant, and (iii) when purchased, such shares were sold with a
sales charge.
CLASS B SHARES
The public offering price for Class B shares is the per share net asset
value of that Class. No initial sales charge is imposed at the time of
purchase.
A CDSC is imposed, however, on certain redemptions of Class B shares. See
"Redemption of Shares," which describes the CDSC in greater detail.
Smith Barney Shearson has adopted guidelines, in view of the relative
sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be for Class A shares. Smith Barney Shearson reserves the right to
vary these guidelines at any time.
SMITH BARNEY SHEARSON 401(K) PROGRAM
Investors may be eligible to participate in the Smith Barney Shearson
401(k)
Program, which is generally designed to assist employers or plan sponsors in
the
creation and operation of retirement plans under Section 401(a) of the Code.
To
the extent applicable, the same terms and conditions are offered to all
Participating Plans in the 401(k) Program, which includes both 401(k) plans
and
other types of participant directed, tax-qualified employee benefit plans.
The Fund offers to Participating Plans three classes of shares, Class A,
Class B and Class D shares, as investment alternatives under the 401(k)
Program.
Class A shares are available to all Participating Plans and are the only
investment alternative for Participating Plans that are eligible to purchase
Class A shares at
34
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
net asset value without a sales charge. In addition, Class B shares are
offered
only to Participating Plans satisfying certain criteria with respect to the
amount of the initial investment and the number of employees eligible to
participate in the Plan at that time. Alternatively, Class D shares are
offered
only to Participating Plans that meet other criteria relating to the amount of
initial investment and number of employees eligible to participate in the Plan
at that time, as described below.
The Class A and Class B shares acquired through the 401(k) Program are
subject to the same service and/or distribution fees as, but different sales
charge and CDSC schedules than, the Class A and Class B shares acquired by
other
investors. Class D shares acquired by Participating Plans are offered at net
asset value per share without any sales charge or CDSC. The Fund pays annual
service and distribution fees based on the value of the average daily net
assets
attributable to this Class.
Once a Participating Plan has made an initial investment in the Fund, all
of
its subsequent investments in the Fund must be in the same Class of shares,
except as otherwise described below.
<TABLE>
Class A Shares. The sales charges for Class A shares acquired by
Participating Plans are as follows:
<CAPTION>
SALES CHARGE AS % SALES
CHARGE AS %
AMOUNT OF INVESTMENT OF OFFERING PRICE OF NET
ASSET VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
- ----------
Less than $25,000 5.00%
5.26%
$25,000 up to $100,000 4.00%
4.17%
$100,000 up to $250,000 3.25%
3.36%
$250,000 up to $500,000 2.50%
2.56%
$500,000 up to $750,000 2.00%
2.04%
$750,000 and over .00%
.00%
- ------------------------------------------------------------------------------
- ---------
</TABLE>
A Participating Plan will have a combined right of accumulation under
which,
to qualify for a reduced sales charge, it may combine the value of Class A
shares being purchased with the value of Class A shares already held in the
Fund
and in any of the funds listed below under "Exchange Privilege" that are sold
with a sales charge.
Class A shares of the Fund may be offered without any sales charge to any
Participating Plan that: (a) purchases $750,000 or more of Class A shares of
one
or more funds in the Smith Barney Shearson Group of Funds under the
35
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
combined right of accumulation described above; (b) has 250 or more employees
eligible to participate in the Participating Plan at the time of initial
investment in the Fund; or (c) currently holds Class A shares in the Fund that
were received as a result of an exchange of Class B or Class D shares of the
Fund as described below.
Class A shares acquired through the 401(k) Program will not be subject to
a
CDSC.
Class B Shares. Under the 401(k) Program, Class B shares are offered to
Participating Plans that: (a) purchase less than $250,000 of Class B shares of
one or more funds in the Smith Barney Shearson Group of Funds that are sold
subject to a CDSC; and (b) that have less than 100 employees eligible to
participate in the Participating Plan at the time of initial investment in the
Fund. Class B shares acquired by such Plans will be subject to a CDSC of 3% of
redemption proceeds, if redeemed within eight years of the date the
Participating Plan first purchases Class B shares. No CDSC is imposed to the
extent that the net asset value of Class B shares redeemed does not exceed (a)
the current net asset value of the Class B shares purchased through
reinvestment
of dividends or capital gains distributions, plus (b) the current net asset
value of Class B shares purchased more than eight years prior to the
redemption,
plus (c) increases in the net asset value of the shareholder's Class B shares
above the purchase payments made during the preceding eight years. The CDSC
applicable to a Participating Plan depends on the number of years since the
Participating Plan first became a holder of Class B shares, unlike the CDSC
applicable to other Class B shareholders, which depends on the number of years
since those shareholders made the purchase payment from which the amount is
being redeemed.
The CDSC will be waived on redemptions of Class B shares in connection
with
lump-sum or other distributions made by a Participating Plan as a result of:
(a)
the retirement of an employee in the Participating Plan; (b) the termination
of
employment of an employee in the Participating Plan; (c) the death or
disability
of an employee in the Participating Plan; (d) the attainment of age 59 1/2 by
an
employee in the Participating Plan; (e) hardship of an employee in the
Participating Plan to the extent permitted under Section 401(k) of the Code;
or
(f) redemptions of Class B shares in connection with a loan made by the
Participating Plan to an employee.
Eight years after the date a Participating Plan acquired its first Class B
share, it will be offered the opportunity to exchange all of its Class B
shares
for Class A
36
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
shares of the Fund. Such Plans will be notified of the pending exchange in
writing approximately 60 days before the eighth anniversary of the purchase
date
and, unless the exchange has been rejected in writing, the exchange will occur
on or about the eighth anniversary date. Once the exchange has occurred, a
Participating Plan will not be eligible to acquire additional Class B shares
of
the Fund but instead may acquire Class A shares of the Fund. If the
Participating Plan elects not to exchange all of its Class B shares at that
time, each Class B share held by the Participating Plan will have the same
conversion feature as Class B shares held by other investors. See "Variable
Pricing System--Class B Shares."
Class D Shares. Class D shares are offered to Participating Plans that:
(a)
purchase less than $750,000 but more than $250,000 of Class D shares of one or
more funds in the Smith Barney Shearson Group of Funds that offer one or more
Classes of shares subject to a sales charge and/or CDSC; or (b) have at least
100 but no more than 250 employees eligible to participate in the
Participating
Plan at the time of initial investment in the Fund.
Class D shares acquired by Participating Plans are offered at net asset
value per share without any sales charge or CDSC. The Fund pays annual service
and distribution fees based on the value of the average daily net assets
attributable to the Class. Class D shares are not subject to an automatic
conversion feature as are the Class B shares. However, Participating Plans
which
hold Class D shares valued at $750,000 or more in any fund or funds in the
Smith
Barney Shearson Group of Funds that offer one or more Classes of shares
subject
to a sales charge and/or CDSC will be offered the opportunity to exchange all
of
their Class D shares for Class A shares. Such Plans will be notified of the
exchange offer in writing within 30 days after the last business day of the
calendar year, and unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of March in the
following
calendar year. Once the exchange has occurred, a Participating Plan will not
be
eligible to acquire Class D shares of the Fund but instead may acquire Class A
shares of the Fund. Any Class D shares not converted will continue to be
subject
to the distribution fee.
Participating Plans wishing to acquire shares of the Fund through the
401(k)
Program must purchase such shares directly from the Trust's transfer agent.
For
further information regarding the 401(k) Program, investors should contact
their
Smith Barney Shearson Financial Consultants.
37
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day on which the Fund's net
asset value is calculated. See "Valuation of Shares." Redemption requests
received in proper form prior to the close of regular trading on the NYSE are
priced at the net asset value per share determined on that day. Redemption
requests received after the close of regular trading on the NYSE are priced at
the net asset value next determined. If a shareholder holds shares in more
than
one Class, any request for redemption must specify the Class being redeemed.
In
the event of a failure to specify which Class, or if the investor owns fewer
shares of the Class than specified, the redemption request will be delayed
until
the Trust's transfer agent receives further instructions from Smith Barney
Shearson, or if the shareholder's account is not with Smith Barney Shearson,
from the shareholder directly.
The Fund normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or the Introducing Broker at no
charge (other than any applicable CDSC) within seven days after receipt of a
redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. A shareholder who anticipates the need
for
more immediate access to his or her investment should purchase shares with
Federal funds, by bank wire or by a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may be subject to redemption by the Trust, but only after the shareholder has
been given at least 30 days in which to increase the account balance to more
than $500.
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem shares represented by
certificates must also present the certificates to Smith Barney Shearson or
the
Introducing Broker endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
38
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
involving shares represented by certificates will not be deemed received until
the certificates are received by the Trust's transfer agent in proper form.
REDEMPTION BY MAIL
Shares held by Smith Barney Shearson as custodian must be redeemed by
submitting a written request to your Smith Barney Shearson Financial
Consultant.
All other shares may be redeemed by submitting a written request for
redemption
to:
Smith Barney Shearson Sector Analysis Fund
Class A, B or D (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to The Shareholder Services Group, Inc. or
your
Smith Barney Shearson Financial Consultant must (a) state the Class and number
or dollar amount of shares to be redeemed, (b) identify the shareholder's
account number and (c) be signed by each registered owner exactly as the
shares
are registered. If the shares to be redeemed were issued in certificate form,
the certificates must be endorsed for transfer (or be accompanied by an
endorsed
stock power) and must be submitted to TSSG together with the redemption
request.
Any signature appearing on a redemption request, share certificate or stock
power must be guaranteed by a domestic bank, savings and loan institution,
domestic credit union, member bank of the Federal Reserve System, or member
firm
of a national securities exchange. TSSG may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees or guardians. A redemption request will not be deemed properly
received
until TSSG receives all required documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under
which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. Retirement plan
accounts
are eligible for automatic cash withdrawal plans only where the shareholder is
eligible to receive qualified distributions and has an account value of at
least
$5,000. Any applicable CDSC will not be waived on amounts withdrawn by a
shareholder that exceed 2% per month of the value of the
39
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
shareholder's shares subject to the CDSC at the time the withdrawal plan
commences. For further information regarding the automatic cash withdrawal
plan,
shareholders should contact their Smith Barney Shearson Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class B shares, however effected, that causes the current value of a
shareholder's account to fall below the dollar amount of all payments by the
shareholder for the purchase of Class B shares ("purchase payments") during
the
preceding five years, except in the case of purchases by Participating Plans
as
described above. See "Purchase of Shares--Smith Barney Shearson 401(k)
Program."
No charge is imposed to the extent the net asset value of the Class B shares
redeemed does not exceed (a) the current net asset value of Class B shares
purchased through reinvestment of dividends or capital gains distributions,
plus
(b) the current net asset value of Class B shares purchased more than five
years
prior to the redemption, plus (c) increases in the net asset value of the
shareholder's Class B shares above the purchase payments made during the
preceding five years.
In circumstances in which the CDSC is imposed, the amount of the charge
will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed, except in the case of purchases
through
Participating Plans which are subject to a different CDSC. See "Purchase of
Shares--Smith Barney Shearson 401(k) Program." Solely for purposes of
determining the number of years since a purchase payment, all purchase
payments
during a month will be aggregated and deemed to have been made on the last day
of the preceding Smith Barney Shearson statement month.
40
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
The following table sets forth the rates of the charge for redemptions of
Class
B shares:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT WAS MADE
CDSC
<S>
<C>
- ------------------------------------------------------------------------------
- -----
First
5.00%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ------------------------------------------------------------------------------
- -----
</TABLE>
Class B shares will automatically convert to Class A shares eight years
after the date on which they were purchased and thereafter will no longer be
subject to any distribution fee. The first of the conversions will commence on
or about September 30, 1994. See "Variable Pricing System--Class B Shares."
The purchase payment from which a redemption of Class B shares is made is
assumed to be the earliest purchase payment from which a full redemption has
not
already been effected. In the case of redemptions of Class B shares of other
funds in the Smith Barney Shearson Group of Funds issued in exchange for Class
B
shares of the Fund, the term "purchase payments" refers to the purchase
payments
for the shares given in exchange. In the event of an exchange of Class B
shares
of funds with differing CDSC schedules, the shares will be, in all cases,
subject to the higher CDSC schedule. See "Exchange Privilege."
Waivers of CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholder's shares at the time the withdrawal
plan commences (see above); (c) redemptions of shares in connection with
certain
post-retirement distributions and withdrawals from retirement plans or IRAs or
following the death or disability of the shareholder; (d) involuntary
redemptions; (e) redemption proceeds from other funds in the Smith Barney
Shearson Group of Funds that are reinvested within 30 days of the redemption;
(f) redemptions of shares in connection with a combination of any investment
company with the Fund by merger, acquisition of assets or otherwise; and (h)
certain redemption of shares of the Fund in connection with
41
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
lump-sum or other distributions made by a Participating Plan. See "Purchase of
Shares--Smith Barney Shearson 401(k) Program."
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net assets attributable to that Class by the total number of shares of that
Class outstanding. In general, the Fund's investments will be valued at market
value or, in the absence of a market value, at fair value as determined by or
under the direction of the Trust's Board of Trustees. A security that is
primarily traded on a domestic stock exchange is valued at the last sale price
on that exchange or, if there were no sales during the day, at the current
quoted bid price. Debt securities (other than U.S. government securities and
short-term obligations) are valued by Boston Advisors after consultation with
independent pricing services approved by the Trustees. Investment in U.S.
government securities (other than short-term securities) are valued at the
average of the quoted bid and asked prices in the over-the-counter market.
Short-term investments that mature in 60 days or less are valued at amortized
cost (which involves valuing an investment instrument at its cost and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest rates on the market
value of the instrument) whenever the Board of Trustees determines that
amortized cost reflects fair value of those investments. An option written by
the Fund is generally valued at the last sale price or, in the absence of the
last sale price, the last offer price. An option purchased by the Fund is
generally valued at the last sale price or, in the absence of the last sale
price, the last bid price. Short sales of securities, which are not traded on
a
national securities exchange, are valued at the last asked price.
Alternatively,
long positions are valued at the last bid price. The value of a futures
contract
equals the unrealized gain or loss on the contract that is determined by
marking
the
42
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES (CONTINUED)
contract to the current settlement price for a like contract on the valuation
date of the futures contract. A settlement price may not be used if the market
makes a limit move with respect to a particular futures contract or if the
securities underlying the futures contract experience significant price
fluctuations after the determination of the settlement price. When a
settlement
price cannot be used, futures contracts will be valued at their fair market
value as determined by or under the direction of the Board of Trustees.
Further
information regarding the Fund's valuation policies is contained in the
Statement of Additional Information.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE
<TABLE>
Shares of each Class may be exchanged for shares of the same class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence.
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
Municipal Bond Funds
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND,
an intermediate-term municipal bond fund investing in
investment grade obligations.
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an
intermediate-and long-term municipal bond fund investing
in medium and lower-rated securities.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for Arizona investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for California investors.
</TABLE>
43
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ----------------------------------------------------------------------
A, B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for California investors.
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed
for Florida investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed
for Massachusetts investors.
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for New Jersey investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for New York investors.
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for New York investors.
Income Funds
A, B, D* SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME
FUND, seeks high current income while limiting the degree
of fluctuation in net asset value resulting from movement
in interest rates.
A, B SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND,
invests in a portfolio of high quality debt securities
that may be denominated in U.S. dollars or selected
foreign currencies and that have remaining maturities of
not more than one year.
A, B SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND,
invests in high quality, short-term debt securities
denominated in U.S. dollars as well as a range of foreign
currencies.
</TABLE>
44
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ----------------------------------------------------------------------
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND,
invests exclusively in securities issued by the United
States Treasury and other U.S. government securities.
A, B, D* SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND,
seeks high current income primarily by allocating and
reallocating its assets among various types of
fixed-income securities.
A, B, D* SMITH BARNEY SHEARSON MANAGED GOVERNMENTS FUND INC.,
invests in obligations issued or guaranteed by the United
States government and its agencies and instrumentalities
with emphasis on mortgage-backed government securities.
A, B, D* SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a
high current return by investing in U.S. government
securities.
A, B, D* SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks
maximum current income consistent with prudent investment
management and preservation of capital by investing in
corporate bonds.
A, B, D* SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high
current income by investing in high-yielding corporate
bonds, debentures and notes.
A, B, D* SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current
income and capital appreciation by investing in bonds,
debentures and notes of foreign and domestic issuers.
Growth and Income Funds
A, B, D* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current
income and capital appreciation by investing in
convertible securities.
</TABLE>
45
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ----------------------------------------------------------------------
A, B, D* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return
by investing in equity and debt securities of utilities
companies.
A, B, D* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks
high total return consisting of current income and
capital appreciation by investing in a combination of
equity, fixed-income and money market securities.
A, B, D* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks
total return by investing in dividend-paying common
stocks.
A, B, D* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks
income and long-term capital growth by investing in
income producing equity securities.
Growth Funds
A, B, D* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-
term appreciation of capital.
A, B, D* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a
secondary objective.
A, B SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND,
seeks capital appreciation, with income as a secondary
consideration.
A, B, D* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A, B, D* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-
term capital appreciation by investing in equity
securities primarily of emerging growth companies.
A, B, D* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks
long-term capital growth by investing principally in the
common stocks of foreign and domestic issuers.
</TABLE>
46
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ----------------------------------------------------------------------
A, B, D* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term
capital appreciation by investing primarily in securities
of issuers based in European countries.
A, B, D* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND
INC., seeks long-term capital appreciation by investing
primarily in precious metal-and mineral-related companies
and gold bullion.
Money Market Funds
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests
in a diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests in short-term U.S. government and agency
securities.
+ SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC.,
invests in short-term high quality municipal obligations.
+ SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET
FUND, invests in short-term, high quality California
municipal obligations.
+ SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET
FUND, invests in short-term, high quality New York
municipal obligations.
<FN>
- ---------------
* Class D shares of this fund may be acquired only by Participating Plans in
the Smith Barney Shearson 401(k) Program.
** Shares of this money market fund may be exchanged for Class B shares of
the
Fund.
*** Shares of this money market fund may be exchanged for Class A and Class D
shares of the Fund.
+ Shares of this money market fund may be exchanged for Class A shares of
the
Fund.
</TABLE>
Tax Effect.The exchange of shares of one fund for shares of another fund
is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
47
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
Class A Exchanges.Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 5% will be subject to the appropriate "sales charge
differential" upon the exchange of their shares for Class A shares of the Fund
or other funds sold with a higher sales charge. The "sales charge
differential"
is limited to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being acquired in
the
exchange over the sales charge rates actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends, as described below, are treated as having paid the
same sales charges applicable to the shares on which the dividends were paid.
However, except in the case of the 401(k) Program, if no sales charge was
imposed upon the initial purchase of the shares, any shares obtained through
automatic reinvestment will be subject to a sales charge differential upon
exchange.
Class B Exchanges. Class B shareholders of the Fund who wish to exchange
all or a portion of their Class B shares for Class B shares of any of the
funds
identified above may do so without imposition of an exchange fee. Upon an
exchange, the new Class B shares will be deemed to have been purchased on the
same date as the Class B shares of the Fund that have been exchanged. In the
event Class B shareholders wish to exchange all or a portion of their shares
for
shares in any of the funds imposing a CDSC higher than that imposed by the
Fund,
the exchanged Class B shares will be subject to the higher applicable CDSC.
Class D Exchanges. Smith Barney Shearson receives an annual service fee
and
an annual distribution fee with respect to Class D shares of the Fund.
Participating Plans may exchange Class D shares of the Fund for Class D shares
in any of the funds listed above without charge. Class D shares may be
acquired
only by Participating Plans.
Additional Information Regarding the Exchange Privilege. Shareholders
exercising the exchange privilege with any of the other funds in the Smith
Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Shearson Lehman Brothers reserves the
right to reject any exchange request. The exchange privilege may be modified
or
terminated at any time after notice to shareholders. Although the exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Fund's performance and its shareholders. The Fund's
investment
48
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
adviser may determine that a pattern of frequent exchanges is excessive and
contrary to the best interests of the Fund's other shareholders. In this
event,
the Fund's investment adviser will notify Smith Barney Shearson, and Smith
Barney Shearson may, at its discretion, decide to limit additional purchases
and/or exchanges by the shareholder. Upon such a determination, Smith Barney
Shearson will provide notice in writing or by telephone to the shareholder at
least 15 days prior to suspending the exchange privilege and during the 15-day
period the shareholder will be required to (a) redeem his or her shares in the
Fund or (b) remain invested in the Fund or exchange into any of the funds in
the
Smith Barney Shearson Group of Funds ordinarily available, which position the
shareholder would expect to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges. For further information regarding the exchange privilege
or to obtain the current prospectuses for members of the Smith Barney Shearson
Group of Funds, investors should contact their Smith Barney Shearson Financial
Consultants.
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New
York
10013 and serves as distributor of the Fund's shares. Shearson Lehman Brothers
is paid an annual service fee with respect to Class A, Class B and Class D
shares of the Fund at the rate of .25% of the value of the average daily net
assets of the respective Class. Smith Barney Shearson is also paid an annual
distribution fee with respect to Class B and Class D shares at the rate of
.75%
of the value of the average daily net assets attributable to those shares. The
fees are authorized pursuant to a services and distribution plan (the "Plan")
adopted by the Trust pursuant to Rule 12b-1 under the 1940 Act, and are used
by
Smith Barney Shearson to pay its Financial Consultants for servicing
shareholder
accounts and, in the case of the Class B and Class D shares, also to cover
expenses primarily intended to result in the sale of those shares. These
expenses include: costs of printing and distributing the Fund's Prospectus,
Statement of Additional Information and sales literature to prospective
investors; an allocation of overhead and other Smith Barney Shearson's branch
office distribution-related expenses; payments to and expenses of Smith Barney
Shearson Financial Consultants and other persons who provide support services
in
connection with the distribution of the shares; and accruals for interest on
the
amount of the
49
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR (CONTINUED)
foregoing expenses that exceed distribution fees and, in the case of Class B
shares, the CDSC received by Smith Barney Shearson. The payments to Smith
Barney
Shearson Financial Consultants for selling shares of a Class include a
commission paid at the time of sale and a continuing fee for servicing
shareholder accounts for as long as a shareholder remains a holder of that
Class. The service fee is credited at the rate of .25% of the value of the
average daily net assets of the Class that remain invested in the Fund. Smith
Barney Shearson Financial Consultants may receive different levels of
compensation for selling one Class of shares over the other.
Although it is anticipated that some promotional activities will be
conducted on a Trust-wide basis, payments made by a fund of the Trust under
the
Plan generally will be used to finance the distribution of shares of that
fund.
Expenses incurred in connection with Trust-wide activities may be allocated on
a
pro-rata basis among all funds of the Trust on the basis of their relative net
assets.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson and
the
payments may exceed distribution expenses actually incurred. The Trust's Board
of Trustees will evaluate the appropriateness of the Plan and its payment
terms
on a continuing basis and in so doing will consider all relevant factors,
including expenses borne by Smith Barney Shearson, amounts received under the
Plan and proceeds of the CDSC.
The Trust anticipates that, for the foreseeable future, distribution
expenses incurred by Smith Barney Shearson will be greater than amounts
payable
by the Trust's funds under the Plan. During the period from March 3, 1986 (the
Trust's commencement of operations) through the fiscal year ended January 31,
1994, Smith Barney Shearson incurred, with respect to the Class B shares of
the
Trust's existing funds, total distribution expenses of approximately $
while receiving approximately $ pursuant to the Plan and
approximately
$ from the CDSC. The excess of such distribution expenses incurred by
Smith Barney Shearson over such distribution fees and CDSC, or approximately
$ , was equivalent to approximately % of the Trust's net assets
on
January 31, 1993. The Trust's Board of Trustees will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis and in
so doing will consider all relevant factors, including expenses borne by Smith
Barney Shearson and the amount received under the Plan.
50
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund will be treated separately from the Trust's other funds in
determining the amount of dividends from investment income and distributions
of
capital gains payable to shareholders of the Fund. Dividends from net
investment
income (that is, income other than net realized capital gains) of the Fund
will
be declared and distributed quarterly. Distributions of the Fund's net
realized
capital gains, if any, will be declared and distributed annually, normally at
the end of the calendar year in which earned or at the beginning of the
subsequent year. Unless a shareholder instructs that dividends and capital
gains
distributions on shares of any Class be paid in cash and credited to the
shareholders' account at Smith Barney Shearson, dividends and capital gains
distributions will automatically be reinvested in additional shares of the
Class
at net asset value subject to no sales charge or CDSC. The Fund is subject to
a
4% nondeductible excise tax on certain undistributed amounts of ordinary
income
and capital gains. The Fund expects to make any additional distributions as
may
be necessary to avoid the application of this tax.
TAXES
The Fund will be treated as a separate taxpayer with the result that, for
Federal income tax purposes, the amount of its net investment income and
capital
gains earned will be determined without regard to the earnings or
distributions
of the other funds of the Trust. The Trust intends for the Fund to qualify
each
year as a regulated investment company under the Code. Dividends paid from the
Fund's net investment income and distributions of the Fund's net realized
short-term capital gains are taxable to shareholders (other than IRAs,
Self-Employed Retirement Plans and other tax-exempt investors) as ordinary
income, regardless of how long shareholders have held Fund shares and whether
the dividends or distributions are received in cash or reinvested in
additional
Fund shares. Distributions of the Fund's net realized long-term capital gains
will be taxable to shareholders as long-term capital gains, regardless of how
long shareholders have held Fund shares and whether the distributions are
received in cash or reinvested in additional Fund shares. In addition, as a
general rule, a shareholder's gain or loss on a sale or redemption of shares
of
the Fund will be a long-term capital gain or loss if the shareholder has held
the shares for more than one year and will be a short-term capital gain or
loss
if the shareholder has held the shares for one year or less. Some of the
Fund's
dividends declared from net investment income may qualify for the Federal
51
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
dividends-received deduction for corporations. The per share dividends on
Class
A shares will be higher than those on Class B and Class D shares as a result
of
lower distribution and transfer agency fees applicable to the Class A shares.
See "Variable Pricing System."
Statements as to the tax status of the dividends and distributions
received
by shareholders of the Fund are mailed annually. Each shareholder also will
receive, if applicable, various written notices after the close of the Fund's
prior taxable year with respect to certain dividends and distributions that
were
received from the Fund during the Fund's prior taxable year.
Shareholders are urged to consult their tax advisers regarding the
application of Federal, state and local tax laws to their specific situation
before investing in the Fund.
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION
The Trust was organized on January 8, 1986 under the laws of The
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts business trust." The Trust commenced operations on March 3,
1986,
under the name Shearson Lehman Special Equity Portfolios. The Fund changed its
name from Sector Analysis Portfolio to Sector Analysis Fund on November 5,
1992
and on July 30, 1993 to its current name, Smith Barney Shearson Sector
Analysis
Fund to its current name on July 30, 1993. The Trust offers shares of
beneficial
interest of separate funds with a par value of $.001 per share. The Fund
offers
shares of beneficial interest currently classified into three Classes -- A, B
and D.
Each Class represents an identical interest in the Fund's investment
portfolio. As a result, the Classes have the same rights, privileges and
preferences, except with respect to: (a) the designation of each Class; (b)
the
effect of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees borne by each Class; (d) the expenses
allocable
exclusively to each Class; (e) voting rights on matters exclusively affecting
a
single Class; (f) the exchange privilege of each Class; and (g) the conversion
feature of the Class B shares. The Trust's Board of Trustees does not
anticipate
that there will be any conflicts among the interests of the holders of the
different Classes. The Trustees, on an ongoing basis, will consider whether
any
such conflict exists and, if so, take appropriate action.
52
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION (CONTINUED)
The Trust does not hold annual shareholder meetings. There normally will
be
no meeting of shareholders for the purpose of electing Trustees unless and
until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Trust's
outstanding
shares. Shareholders of record owning no less than two-thirds of the
outstanding
shares of the Trust may remove a Trustee through a declaration in writing or
by
vote cast in person or by proxy at a meeting called for that purpose. When
matters are submitted for shareholder vote, shareholders of each Class will
have
one vote for each full share owned and a proportionate, fractional vote for
any
fractional share held of that Class. Generally, shares of the Trust vote by
individual fund on all matters except (a) matters affecting only the interests
of one or more of the funds, in which case only shares of the affected fund or
funds would be entitled to vote or (b) when the 1940 Act requires that shares
of
the funds be voted in the aggregate. Similarly, shares of the Fund will be
voted
generally on a Fund-wide basis except with respect to matters affecting the
interests of one Class of shares.
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as custodian of the Fund's
investments.
TSSG, a subsidiary of First Data Corporation ("FDC"), which is in turn a
partially owned subsidiary of American Express, is located at Exchange Place,
Boston, Massachusetts 02109, and serves as the Trust's transfer agent.
The Trust sends shareholders of the Fund a semi-annual report and an
audited
annual report, which include listings of the investment securities held by the
Fund at the end of the reporting period. In an effort to reduce the Fund's
printing and mailing costs, the Trust plans to consolidate the mailing of the
Fund's semi-annual and annual reports by household. This consolidation means
that a household having multiple accounts with the identical address of record
will receive a single copy of each report. In addition, the Trust also plans
to
consolidate the mailing of the Fund's Prospectus so that a shareholder having
multiple accounts (that is, individual, IRA and/or Self-Employed Retirement
Plan
accounts) will receive a single Prospectus annually. Any shareholder of the
Fund
who does not want this consolidation to apply to his or her account should
contact his or her Financial Consultant or the Trust's transfer agent.
53
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION (CONTINUED)
Shareholders may seek information regarding the Fund from their Smith
Barney
Shearson Financial Consultants.
------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement
of
Additional Information and/or the official sales literature in connection with
the offering of the Fund's shares, and, if given or made, such other
information
or representations must not be relied upon as having been authorized by the
Trust. This Prospectus does not constitute an offer in any state in which, or
to
any person to whom, such offer may not lawfully be made.
54
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
- ------------------------------------------------------------------------------
- --
APPENDIX
Strategy Advisors has divided the U.S. equity market into the following
sectors:
Aerospace/Defense
Airlines
Aluminum
Automobiles
Auto Parts -- After Market
Basic Industries
Beverages -- Alcoholic
Beverages -- Soft Drinks
Broadcast Media
Building Materials
Capital Goods
Chemicals
Coal
Commercial Services
Communication Equipment
Computer Software and Service
Computer Systems Conglomerates
Consumer Durables
Consumer Non-Durables
Consumer Services
Containers -- Metal and Glass
Containers -- Paper
Cosmetics
Data Processing
Distribution -- Commercial Products
Drugs
Electrical Utilities
Electrical Equipment
Electronic -- Defense
Electronic -- Instrumentation
Electronic -- Semiconductors
Energy
Entertainment
Financial -- Miscellaneous
Foods
Food Wholesalers
Gold
Hardware and Tools
Health Care -- Diversified
Health Care -- Miscellaneous
Heavy Duty Trucks and Parts
Homebuilding
Hospital Management
Hotel/Motel
Household Furnishings/Appliances
Household Products
Insurance
Insurance Brokers
Leisure Time
Life Insurance
Machine Tools
Machinery -- Diversified
Major Regional Banks
Manufactured Housing
Manufacturing -- Diversified
Medical Products
Metals -- Miscellaneous
Miscellaneous
Money Center Banks
Multiline Insurance
Natural Gas
Office Equipment and Supplies
Oil and Gas
Oil -- Domestic Integrated
Oil -- International Integrated
Oil Well Equipment and Services
Other Major Banks
Paper and Forest Products
Personal Loans
Plastics
Pollution Control
Property -- Casualty Insurance
Publishing -- Newspaper
Railroads
Restaurants
Retail -- Department Stores
Retail -- Drug Stores
Retail -- Food Chains
Retail -- General Merchandise
Retail -- Specialty
Savings and Loans
Shoes
Steel
Technology
Telephone
Textile -- Apparel Manufacturing
Tobacco
Toys
Transportation -- Miscellaneous
Truckers
55
<PAGE>
SMITH BARNEY SHEARSON
Sector Analysis Fund
TRUSTEES
Lee Abraham
Antoinette C. Bentley
Allan J. Bloostein
Richard E. Hanson, Jr.
Heath B. McLendon
Madelon DeVoe Talley
OFFICERS
Heath B. McLendon
Chairman of the Board and
Investment Officer
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President
Elaine M. Garzarelli
Vice President and
Investment Officer
Seth Strickland
Vice President and
Investment Officer
Vincent Nave
Treasurer
Francis J. McNamara, III
Secretary
DISTRIBUTOR
Smith Barney Shearson Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Smith Barney Shearson Strategy
Advisers, Inc.
Two World Trade Center
New York, New York 10048
SUB-INVESTMENT ADVISER
Lehman Brothers Inc.
American Express Tower
World Financial Center
New York, New York 10285
SUB-INVESTMENT ADVISER
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
56
<PAGE>
- ------------------------------------------------------------------------------
- --
- ------------------------------------------------------------------------------
- --
SMITH BARNEY SHEARSON
Sector
Analysis
Fund
Two World Trade Center
New York, New York 10048
Fund 55
FD2200 E3
<PAGE>
==============================================================================
=
April 1, 1994
SMITH BARNEY SHEARSON
Strategic
Investors
Fund
Prospectus begins
on page one.
-------------------------------------------
- --
-------------------------------------------
- --
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS April 1, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Strategic Investors Fund (the "Fund") seeks high
total
return consisting of current income and capital appreciation by investing in a
combination of equity, fixed-income and money market instruments and "Gold
Securities."
The Fund is one of a number of funds, each having distinct investment
objectives and policies, making up Smith Barney Shearson Equity Funds (the
"Trust"). The Trust is an open-end management investment company commonly
referred to as a "mutual fund."
This Prospectus sets forth concisely certain information about the Fund and
the Trust, including sales charges, distribution and service fees and
expenses,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. Shares of the other funds offered by the Trust are described
in separate prospectuses that may be obtained by calling the Trust at the
telephone number set forth above or by contacting your Smith Barney Shearson
Financial Consultant.
Additional information about the Fund and the Trust is contained in a
Statement of Additional Information dated April 1, 1994, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Trust at the telephone number or address set
forth above or by contacting your Smith Barney Shearson Financial Consultant.
The Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
THE BOSTON COMPANY ADVISORS, INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
TABLE OF CONTENTS
<S> <C>
PROSPECTUS SUMMARY 3
---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 8
---------------------------------------------------------------------------
VARIABLE PRICING SYSTEM 11
---------------------------------------------------------------------------
THE FUND'S PERFORMANCE 12
---------------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 14
---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 15
---------------------------------------------------------------------------
PURCHASE OF SHARES 24
---------------------------------------------------------------------------
REDEMPTION OF SHARES 31
---------------------------------------------------------------------------
VALUATION OF SHARES 34
---------------------------------------------------------------------------
EXCHANGE PRIVILEGE 36
---------------------------------------------------------------------------
DISTRIBUTOR 42
---------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 43
---------------------------------------------------------------------------
ADDITIONAL INFORMATION 45
---------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus.
See "Table of Contents."
BENEFITS TO INVESTORS The Fund offers investors several important benefits:
- - Ownership in a professionally managed diversified portfolio of equity,
fixed
income and money market securities having the potential for current income
and capital appreciation.
- - Investment liquidity through convenient purchase and redemption
procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
- - Different methods for purchasing shares that allow investment flexibility
and a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within
the
same class of shares of most other funds in the Smith Barney Shearson
Group
of Funds.
INVESTMENT OBJECTIVE The Fund is an open end, diversified management
investment
company that seeks high total return consisting of current income and capital
appreciation by investing in a combination of equity, fixed-income and money
market investments and "Gold Securities." See "Investment Objective and
Management Policies."
VARIABLE PRICING SYSTEM The Fund offers several classes of shares
("Classes") designed to provide investors with the flexibility of selecting an
investment best suited to their needs. The general public is offered two
classes
of shares: Class A shares and Class B shares which differ principally in terms
of the sales charges and rate of expenses to which they are subject. A third
class--Class D shares--is offered only to plans participating in the Smith
Barney Shearson 401(k) Program (the "401(k) Program"). See "Variable Pricing
System" and "Purchase of Shares--Smith Barney Shearson 401(k) Program."
CLASS A SHARES These shares are offered at net asset value per share plus a
maximum initial sales charge of 5%. The Fund pays an annual service fee of
.25%
of the value of average daily net assets attributable to this Class. See
"Purchase of Shares."
3
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 5% of redemption
proceeds, declining by 1% each year after the date of purchase to zero. The
Fund
pays an annual service fee of .25% and an annual distribution fee of .75% of
the
value of average daily net assets attributable to this Class. See "Purchase of
Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
original purchase. Upon conversion, these shares will no longer be subject to
an
annual distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System--Class B Shares."
SMITH BARNEY SHEARSON 401(K) PROGRAM Investors may be eligible to participate
in the 401(k) Program, which is generally designed to assist employers or plan
sponsors in the creation or operation of retirement plans under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), as well as
other
types of participant directed, tax-qualified employee benefit plans
(collectively, "Participating Plans"). Class A, Class B and Class D shares may
be available as investment alternatives for Participating Plans. Class A and
Class B shares acquired through the 401(k) Program are subject to the same
service and/or distribution fees as, but different sales charge and CDSC
schedules than, the Class A and Class B shares acquired by other investors.
Class D shares acquired by Participating Plans are offered at net asset value
per share without any sales charge or CDSC. The Fund pays annual service and
distribution fees based on the value of the average daily net assets
attributable to this Class. See "Purchase of Shares--Smith Barney Shearson
401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Trust's distributor,
Smith Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed
basis
(an "Introducing Broker"). Direct purchases by certain retirement plans may be
made through the Trust's transfer agent, The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation. Smith Barney Shearson
recommends that, in most cases, single investments of $250,000 or more should
be
made in Class A shares. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
However, for Individual Retirement Accounts ("IRAs") and Self-Employed
Retirement Plans, the minimum initial investment requirement is $250
4
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
and the minimum subsequent investment requirement is $100, and for certain
qualified retirement plans, the minimum initial and subsequent investment
requirements are both $25. See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Trust offers shareholders a Systematic
Investment Plan under which they may authorize the automatic placement of a
purchase order each month or quarter for Fund shares in an amount not less
than
$100. See "Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND The Boston Company Advisors, Inc. ("Boston Advisors")
serves as the Fund's investment adviser and administrator. Boston Advisors is
a
wholly owned subsidiary of The Boston Company, Inc. ("TBC"). See "Management
of
the Trust and the Fund."
Smith Barney Shearson serves without compensation as asset allocation
consultant
to the Fund. See "Management of the Trust and the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds.
Certain exchanges may be subject to a sales charge differential. See "Exchange
Privilege."
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from your Smith
Barney Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends are paid quarterly from net investment
income. Distributions of net realized capital gains are paid annually. See
"Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically unless otherwise specified by an investor in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a
pro-rata basis. See "Dividends, Distributions and Taxes" and "Variable Pricing
System."
RISK FACTORS AND SPECIAL CONSIDERATIONS The Fund may not achieve its
investment
objective. The foreign securities in which the Fund may invest
5
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
may be subject to certain risks in addition to those inherent in domestic
investments. The Fund may make certain investments and employ certain
investment
techniques that involve other risks and special considerations. The techniques
presenting the Fund with risks or special considerations are investing in
restricted securities, warrants, convertible securities, securities of
unseasoned issuers, options, Gold Securities and securities of developing
countries, entering into repurchase agreements and lending portfolio
securities.
These risks and those associated with when-issued and delayed delivery
transactions and covered option writing are described under "Investment
Objective and Management Policies--Risk Factors and Special Considerations."
<TABLE>
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and the Fund's current operating expenses:
<CAPTION>
CLASS A CLASS B
CLASS D
<S> <C> <C>
<C>
- ------------------------------------------------------------------------------
- -----------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% --
- --
Maximum CDSC
(as a percentage of redemption proceeds) -- 5.00%
- --
- ------------------------------------------------------------------------------
- -----------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .75 .75
.75%
12b-1 fees* .25 1.00
1.00
Other expenses**
- ------------------------------------------------------------------------------
- -----------
TOTAL FUND OPERATING EXPENSES
- ------------------------------------------------------------------------------
- -----------
<FN>
* Upon conversion, Class B shares will no longer be subject to a
distribution
fee. Class D shares do not have a conversion feature and, therefore, are
subject to an ongoing distribution fee.
** All expenses are based on data for the Fund's fiscal year ended January
31,
1994.
</TABLE>
The sales charge and CDSC set forth in the above table are the maximum
charges imposed on purchases or redemptions of Fund shares and investors may
pay
actual charges of less than 5% depending on the amount purchased and, in the
case of Class B shares, the length of time the shares are held and whether the
shares are held through the 401(k) Program. See "Purchase of Shares" and
"Redemption of Shares." Management fees paid by the Fund include invest-
6
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
ment advisory fees paid to Boston Advisors in an amount equal to .55% of the
value of the Fund's average daily net assets, and administration fees payable
to
Boston Advisors in an amount equal to .20% of the value of the Fund's average
daily net assets. The nature of the services for which the Fund pays
management
fees is described under "Management of the Trust and the Fund." Smith Barney
Shearson receives an annual 12b-1 service fee of .25% of the value of average
daily net assets of Class A shares. Smith Barney Shearson also receives with
respect to Class B shares and Class D shares an annual 12b-1 fee of 1.00% of
the
value of average daily net assets of Class B shares and Class D shares,
consisting of a .75% distribution fee and a .25% service fee. "Other expenses"
in the above table include fees for shareholder services, custodial fees,
legal
and accounting fees, printing costs and registration fees.
<TABLE>
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to
a hypothetical $1,000 investment in the Fund assuming a 5% total return. The
example assumes payment by the Fund of operating expenses at the levels set
forth in the above table. The example should not be considered a
representation
of past or future expenses and actual expenses may be greater or less than
those
shown. Moreover, while the example assumes a 5% annual return, the Fund's
actual
performance will vary and may result in an actual return greater or less than
5%.
<CAPTION>
1 YEAR 3 YEARS 5 YEARS
10 YEARS*
<S> <C> <C> <C>
<C>
- ------------------------------------------------------------------------------
- -------
Class A shares**
Class B shares:
Assumes complete redemption at end
of each time period***
Assumes no redemption
Class D shares
- ------------------------------------------------------------------------------
- -------
<FN>
* Ten-year figures assume conversion of Class B shares to Class A shares
at
the end of the eighth year following the date of purchase.
** Assumes deduction at the time of purchase of the maximum 5% sales
charge.
*** Assumes deduction at the time of redemption of the maximum CDSC
applicable
for that time period.
</TABLE>
7
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, independent
accountants, whose report thereon appears in the Fund's Annual Report dated
January 31, 1994. The information set forth below should be read in
conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report which is incorporated by reference into the Statement of
Additional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<CAPTION>
PERIOD
PERIOD
ENDED
ENDED
01/31/94*
01/31/93*
-------- -
- -------
<S> <C>
<C>
- ------------------------------------------------------------------------------
- -------
- ------------------------------------------------------------------------------
- -------
- ------------------------------------------------------------------------------
- -------
- ------------------------------------------------------------------------------
- -------
- ------------------------------------------------------------------------------
- -------
<FN>
* The Fund commenced selling Class A shares on November 6, 1992.
</TABLE>
8
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<CAPTION>
PERIOD
YEAR ENDED JANUARY 31,
ENDED
1994 1993 1992 1991 1990
1989 1/31/88*
------- ------- ------- ------- ------- --
- ----- --------
<S> <C> <C> <C> <C> <C>
<C> <C>
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS D SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<CAPTION>
PERIOD
YEAR ENDED JANUARY 31,
ENDED
1994 1993 1992 1991 1990
1989 1/31/88*
------- ------- ------- ------- ------- --
- ----- --------
<S> <C> <C> <C> <C> <C>
<C> <C>
</TABLE>
10
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM
The Fund offers individual investors two methods of purchasing shares,
thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment. A third class--Class D--
is
offered only to Participating Plans.
Class A Shares. Class A shares are sold at net asset value per share plus
a
maximum initial sales charge of 5% imposed at the time of purchase. The
initial
sales charge may be reduced or waived for certain purchases. Class A shares
are
subject to an annual service fee of .25% of the value of the Fund's average
daily net assets attributable to the Class. The annual service fee is used by
Smith Barney Shearson to compensate its Financial Consultants for ongoing
services provided to shareholders. The sales charge is used to compensate
Smith
Barney Shearson for expenses incurred in selling Class A shares. See "Purchase
of Shares."
Class B Shares. Class B shares are sold at net asset value per share
subject to a maximum 5% CDSC, which is assessed only if the shareholder
redeems
shares within the first five years of investment. This results in 100% of the
investor's assets being used to acquire shares of the Fund. For each year of
investment within this five-year time frame, the applicable CDSC declines by
1%;
in year six, the applicable CDSC is reduced to 0%. See "Purchase of Shares"
and
"Redemption of Shares."
Class B shares are subject to an annual service fee of .25% and an annual
distribution fee of .75% of the value of a Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearson's branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales
literature, advertising and printing and distributing prospectuses, statements
of additional information and other materials to prospective investors in
Class
B shares. A Financial Consultant may receive different levels of compensation
for selling different Classes. Class B shares are subject to a distribution
fee
and higher transfer agency fees than Class A shares which, in turn, will cause
Class B shares to have a higher expense ratio and pay lower dividends than
Class
A shares.
11
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM (CONTINUED)
Eight years after the date of purchase, Class B shares 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. In
addition, a certain portion of Class B shares that have been acquired through
the reinvestment of dividends and distributions ("Class B Dividend Shares")
will
be converted at that time. That portion will be a percentage of the total
number
of Class B Dividend Shares owned by the shareholder equal to the ratio of the
total number of Class B shares owned by the shareholder converting at the time
to the total number of outstanding Class B shares (other than Class B Dividend
Shares) owned by the shareholder. The first of these conversions will commence
on or about September 30, 1994. The conversion of Class B shares into Class A
shares is subject to the continuing availability of an opinion of counsel to
the
effect that such conversions will not constitute taxable events for Federal
tax
purposes.
Class D Shares. Class D shares of the Fund are sold to Participating
Plans
at net asset value per share and are not subject to an initial sales charge or
CDSC. This Class of shares is subject to an annual service fee of .25% and an
annual distribution fee of .75% of the value of the Fund's average daily net
assets attributable to Class D shares. The distribution fee is used by Smith
Barney Shearson for expenses incurred in selling Class D shares, and the
service
fee is used to compensate Smith Barney Shearson Financial Consultants for
ongoing services provided to Class D shareholders. Class D shares are subject
to
a distribution fee which will cause Class D shareholders to have a higher
expense ratio and pay lower dividends than Class A shares.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total
return"
over various periods of time for each Class. Such total return figures show
the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
period
were reinvested in shares of the same Class. Class A total return figures
include the maximum initial 5% sales charge and Class B total return figures
12
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
include any applicable CDSC. These figures also take into account the service
and distribution fees, if any, payable with respect to each Class.
Total return figures will be given for the recent one-, five-and ten-year
periods, or for the life of a Class to the extent it has not been in existence
for any such periods, and may be given for other periods as well, such as on a
year-by-year basis. When considering average annual total return figures for
periods longer than one year, it is important to note that the total return
for
any one year in the period might have been greater or less than the average
for
the entire period. "Aggregate total return" figures may be used for various
periods, representing the cumulative change in value of an investment in a
Class
for the specific period (again reflecting changes in share prices and assuming
reinvestment of dividends and distributions). Aggregate total return may be
calculated either with or without the effect of the maximum 5% sales charge
for
the Class A shares or any applicable CDSC for Class B shares and may be shown
by
means of schedules, charts, or graphs, and indicate subtotals of the various
components of total return (that is, changes in value of initial investment,
income dividends, and capital gains distributions). Because of the differences
in sales charges and distribution fees, the performance of each Class will
differ.
In reports or other communications to shareholders or in advertising
material, performance of the Classes may be compared with that of other mutual
funds or classes of shares of other funds as listed in rankings prepared by
Lipper Analytical Services, Inc. or similar independent services that monitor
the performance of mutual funds, or other industry or financial publications
such as Barron's, Business Week, CDA Investment Technologies, Inc., Forbes,
Fortune, Institutional Investor, Investors Daily, Kiplinger's Personal
Finance,
Money, Morningstar Mutual Fund Values, The New York Times, USA Today and The
Wall Street Journal. Performance figures are based on historical earnings and
are not intended to indicate future performance. To the extent any
advertisement
or sales literature of the Fund describes the expenses or performance of one
Class it will also disclose such information for the other Classes. The
Statement of Additional Information contains a description of the methods used
to determine performance. Performance figures may be obtained from your Smith
Barney Shearson Financial Consultant.
13
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE TRUST AND THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Trust and the
Fund rests with the Trust's Board of Trustees. The Trustees approve all
significant agreements between the Trust and the companies that furnish
services
to the Fund, including agreements with the Trust's distributor, custodian and
transfer agent and the Fund's investment adviser and administrator. The day-
to-
day operations of the Fund are delegated to the Fund's investment adviser and
administrator. The Statement of Additional Information contains background
information regarding each Trustee of the Trust and the executive officers of
the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's investment adviser and administrator. Boston Advisors is
a
wholly owned subsidiary of TBC, a financial services holding company, which is
an indirect wholly owned subsidiary of Mellon Bank Corporation ("Mellon").
Mellon is a publicly-owned multibank holding company registered under the
Federal Bank Holding Company Act of 1956 and through its subsidiaries Mellon
provides a comprehensive range of financial products and services in domestic
and selected international markets. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of March 1, 1994, in
excess of $ billion.
Subject to the supervision and direction of the Trust's Board of Trustees,
Boston Advisors manages the securities held by the Fund in accordance with the
Fund's stated investment objective and policies, makes investment decisions
for
the Fund, places orders to purchase and sell securities on behalf of the Fund
and employs professional portfolio managers. In addition, Boston Advisors
calculates the net asset value of the Fund's shares and generally assists in
all
aspects of the Fund's administration and operation.
PORTFOLIO MANAGEMENT
William W. Carter, Vice President of Boston Advisors, has served as
Investment Administrator of the Fund since February 2, 1987, and manages the
day-to-day operations of the Fund, including making all investment decisions.
Mr. Carter's management discussion and analysis and additional performance
information regarding the Fund during the fiscal year ended January 31, 1994
is
14
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
included in the Annual Report dated January 31, 1994. A copy of the Annual
Report may be obtained upon request and without charge from your Smith Barney
Shearson Financial Consultant or by writing or calling the Fund at the address
or phone number listed on page one of this prospectus.
ASSET ALLOCATION CONSULTANT
Smith Barney Shearson, located at Two World Trade Center, New York, New
York
10048, serves without compensation as asset allocation consultant to the Fund.
As asset allocation consultant, Smith Barney Shearson provides the asset
allocation mix that may be a primary determinant of the Fund's investment
performance.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney Shearson
Holdings Inc. ("Holdings"), which is in turn a wholly owned subsidiary of The
Travelers Inc. ("Travelers") (formerly Primerica Corporation). Travelers, a
diversified financial services holding company is principally engaged in the
business of providing investment services, consumer financial services and
insurance services.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is high total return consisting of
capital appreciation and current income. The Fund's investment objective may
be
changed only with the approval of a majority of the Fund's outstanding voting
securities. There can be no assurance the Fund's investment objective will be
achieved.
The Fund seeks to achieve its objective by investing in a variable
combination of equity, fixed-income and money market instruments and "Gold
Securities." The percentages of the Fund's assets invested in each of these
four
types of securities are adjusted from time to time to conform to the asset
allocation percentages most recently determined by the Investment Policy Group
of Smith Barney Shearson, the Fund's asset allocation consultant. These
percentages represent Smith Barney Shearson's conclusions concerning the
portions of a model portfolio that should be invested in equity, fixed-income
and money market securities and gold in light of current economic and market
conditions.
15
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Although the asset allocation may call for an investment in gold, the Fund
will
not hold gold bullion or coins and will seek to comply with Smith Barney
Shearson's asset allocation to gold by investing in Gold Securities. Gold
Securities in which the Fund may invest consist of equity and debt securities
of
companies principally engaged in businesses relating to the exploration,
mining,
processing or distribution of gold and companies principally engaged in
financing, managing, controlling or operating such companies. As of March 1,
1994, the Fund's asset allocation approach resulted in % of the Fund's
assets
being invested in equity securities, % in fixed-income securities and % in
cash. The mix of the Fund's investments will vary from time to time in the
future, and at any given time the Fund may be substantially or entirely
invested
in equity, fixed-income or money market securities. The Fund's investments in
Gold Securities may represent up to 25% of its total assets.
Boston Advisors has sole responsibility for the selection of specific
securities on behalf of the Fund. As soon as practicable after Smith Barney
Shearson asset allocations become available, except as described below, Boston
Advisors enters into purchase and sale transactions that will result in the
Fund's holding assets in appropriate percentages. Boston Advisors may diverge
from the allocations determined by Smith Barney Shearson when Boston Advisors
believes that a higher cash position is necessary in order to meet anticipated
redemption requests or that strict adherence to designated allocations might
affect the Fund's ability to qualify as a regulated investment company or
cause
the Fund to violate an applicable investment restriction. Boston Advisors
adjusts the Fund's assets to coincide with the immediately preceding
allocation
to each category of investments when the percentage of assets invested in a
category varies by more than 10% from Smith Barney Shearson's designated
percentage. For example, if Smith Barney Shearson had assigned an allocation
of
60% to equity securities, Boston Advisors would adjust the Fund's assets to
conform to the 60% allocation if the percentage of the Fund's assets invested
in
equity securities increased or decreased by more than 6%. Following this asset
allocation strategy may involve frequent shifts among classes of investments
and
result in the Fund's having a relatively high portfolio turnover rate.
The equity portion of the assets of the Fund will consist generally of
common
stocks of established companies traded on exchanges or over the counter that
represent an opportunity for total return on a long-term basis. In evaluating
companies for investment, Boston Advisors selects securities of companies that
it believes are undervalued based on relevant indicators such as
price/earnings
16
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ratios, return on assets and ratios of market value to book value, or that are
trading at depressed prices because of perceived current problems or industry
conditions. Equity investments may be made without regard to the size of
companies and generally will be made in a broad spectrum of industries. The
Fund
also may invest in preferred stock, securities convertible into or
exchangeable
for common stock and warrants. The fixed-income portion of the Fund's assets
will be composed primarily of investment-grade corporate bonds, debentures and
notes and obligations of the United States government or its agencies or
instrumentalities ("U.S. government securities"). The Fund's fixed-income
assets
may be short-, medium-or long-term, as determined at the discretion of Boston
Advisors based upon an evaluation of economic and market trends. The money
market securities in which the Fund may invest include commercial paper, bank
obligations and short-term U.S. government securities. Up to 10% of the Fund's
assets may be invested in equity and debt securities of foreign issuers. The
Fund also may write covered call options and lend its portfolio securities.
Risk
factors and special considerations associated with the Fund's investments are
described under "Investment Strategies and Techniques" and "Risk Factors and
Special Considerations" below.
INVESTMENT STRATEGIES AND TECHNIQUES
In attempting to achieve its investment objective, the Fund may employ,
among
others, one or more of the strategies and techniques set forth below. The Fund
is under no obligation to use any of the strategies or techniques at any given
time or under any particular economic condition. More detailed information
concerning these strategies and techniques and their related risks is
contained
in the Statement of Additional Information.
Repurchase Agreements. The Fund may enter into repurchase agreements with
banks which are the issuers of instruments acceptable for purchase by the Fund
and certain dealers on the Federal Reserve Bank of New York's list of
reporting
dealers. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt obligation for a relatively short period (usually
not
more than seven days), subject to an obligation of the seller to repurchase,
and
the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement
results
in a fixed rate of return that is not subject to market fluctuations during
the
Fund's holding period. The value of the underlying securities will be
monitored
on an ongoing basis by Boston Advisors to ensure
17
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
that the value is at least equal at all times to the total amount of the
repurchase obligation, including interest. Boston Advisors, acting under the
supervision of the Trust's Board of Trustees, reviews on an ongoing basis the
value of the collateral and the creditworthiness of those banks and dealers
with
which the Fund enters into repurchase agreements to evaluate potential risks.
Lending of Portfolio Securities. The Fund has the ability to lend
portfolio
securities to brokers, dealers and other financial organizations. Loans, if
and
when made, may not exceed 20% of the Fund's assets taken at value. Loans of
portfolio securities by the Fund will be collateralized by cash, letters of
credit or U.S. government securities that are maintained at all times in a
segregated account in an amount at least equal to the current market value of
the loaned securities.
Covered Option Writing. The Fund may write covered call options on
portfolio
securities and will realize fees (referred to as "premiums") for granting the
rights evidenced by the options. In return for a premium, the Fund will
forfeit
the right to any appreciation in the value of the underlying security for the
life of the option (or until a closing purchase transaction can be effected).
The purchaser of a call option written by the Fund has the right to purchase
from the Fund an underlying security owned by the Fund at an agreed-upon price
for a specified time period. Upon the exercise of a call option written by the
Fund, the Fund may suffer a loss equal to the underlying security's market
value
at the time of the option's exercise over the exercise price plus the premium
received for writing the option. Whenever the Fund writes a call option, it
will
(a) continue to own or have the absolute and immediate right to acquire the
underlying security without additional cash consideration or (b) hold a call
option at the same or a lower exercise price for the same exercise period on
the
same underlying security as the call option written, for as long as it remains
obligated as the writer of the option.
The Fund may engage in a closing purchase transaction to realize a profit,
to
prevent an underlying security from being called or to unfreeze an underlying
security (thereby permitting its sale or the writing of a new option on the
security prior to the outstanding option's expiration). To effect a closing
purchase transaction, the Fund would purchase, prior to the holder's exercise
of
an option the Fund has written, an option of the same series as that on which
the Fund desires to terminate its obligation. The obligation of the Fund under
an option it has written would be terminated by a closing purchase
transaction,
but the Fund would not be deemed to own an option as the result of the
18
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
transaction. There can be no assurance that the Fund will be able to effect
closing purchase transactions at a time when it wishes to do so. To facilitate
closing purchase transactions, however, the Fund will ordinarily write options
only if a secondary market for the options exists on a domestic securities
exchange or in the over-the-counter market.
ADDITIONAL INVESTMENTS
Money Market Instruments. The Fund may hold cash and invest in money
market
instruments without limitation when deemed advantageous by Boston Advisors and
Smith Barney Shearson. Short-term instruments in which the Fund may invest
include: U.S. government securities; bank obligations (including certificates
of
deposit, time deposits and bankers' acceptances of domestic or foreign banks,
domestic savings and loan associations and other banking institutions having
total assets in excess of $500 million); commercial paper rated no lower than
A-2 by Standard & Poor's Corporation ("S&P") or Prime-2 by Moody's Investors
Service, Inc. ("Moody's") or the equivalent from another nationally recognized
rating service or, if unrated, of an issuer having an outstanding, unsecured
debt issue then rated within the three highest rating categories. A
description
of the commercial paper rating categories of Moody's and S&P is contained in
the
Appendix to the Statement of Additional Information.
U.S. Government Securities. The U.S. government securities in which the
Fund
may invest include: direct obligations of the United States Treasury and
obligations issued or guaranteed by U.S. government agencies and
instrumentalities, including instruments supported by the full faith and
credit
of the United States; securities supported by the right of the issuer to
borrow
from the United States Treasury; and securities supported solely by the credit
of the instrumentality.
CERTAIN INVESTMENT GUIDELINES
Up to 10% of the assets of the Fund may be invested in securities with
contractual or other restrictions on resale ("restricted securities") and
other
instruments that are not readily marketable ("illiquid securities"), including
in the aggregate (a) repurchase agreements with maturities greater than seven
days, (b) futures contracts and options thereon for which a liquid secondary
market does not exist, (c) time deposits maturing in more than seven calendar
days and (d) securities of new and early stage companies whose securities are
19
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
not publicly traded. In addition, the Fund may invest up to 10% of its assets
in
the securities of issuers that have been in continuous operation for less than
three years.
INVESTMENT RESTRICTIONS
The Trust has adopted certain fundamental investment restrictions with
respect to the Fund that may not be changed without approval of a majority of
the Fund's outstanding voting securities, as defined in the Investment Company
Act of 1940, as amended ("1940 Act"). Included among those fundamental
restrictions are the following that prohibit the Fund from:
1. Purchasing the securities of any issuer (other than U.S. government
securities) if as a result more than 5% of the value of the Fund's total
assets would be invested in the securities of the issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard
to
this 5% limitation.
2. Purchasing more than 10% of the voting securities of any one issuer, or
more than 10% of the securities of any class of any one issuer; provided
that
this limitation will not apply to investments in U.S. government
securities.
(For purposes of the above-described investment limitation, issuers include
predecessors, sponsors, controlling persons, general partners, guarantors
and
originators of underlying assets which have less than three years of
continuous operation or relevant business experience.)
3. Borrowing money, except that the Fund may borrow from banks for
temporary
or emergency (not leveraging) purposes, including the meeting of redemption
requests that might otherwise require the untimely disposition of
securities,
in any amount not to exceed 10% of the value of the Fund's total assets
(including the amount borrowed) valued at market less liabilities (not
including the amount borrowed) at the time the borrowing is made. Whenever
borrowings exceed 5% of the value of the total assets of the Fund, the Fund
will not make any additional investments.
4. Making loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities and the entry into repurchase
agreements.
5. Purchasing any securities (other than U.S. government securities) that
would cause more than 25% of the value of the Fund's total assets at the
time
20
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
of purchase to be invested in the securities of issuers conducting their
principal business activities in the same industry.
A complete list of investment restrictions that the Trust has adopted with
respect to the Fund, identifying additional restrictions that cannot be
changed
without the approval of the majority of the Fund's outstanding shares, is
contained in the Statement of Additional Information.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves special considerations, such as those
described below:
Restricted Securities. The Fund may not be able to dispose of restricted
securities at a time when, or at a price which, it desires to do so and may
have
to bear expenses associated with registering the securities.
Warrants. Because a warrant does not carry with it the right to dividends
or
voting rights with respect to the securities that the warrant holder is
entitled
to purchase, and because a warrant does not represent any rights to the assets
of the issuer, a warrant may be considered more speculative than certain other
types of investments. In addition, the value of a warrant does not necessarily
change with the value of the underlying security and a warrant ceases to have
value if it is not exercised prior to its expiration date. The investment in
warrants, valued at the lower of cost or market, may not exceed 5% of the
value
of the Fund's net assets. Included within that amount, but not to exceed 2% of
the value of the Fund's net assets, may be warrants that are not listed on the
NYSE or the American Stock Exchange. Warrants acquired by the Fund in units or
attached to securities may be deemed to be without value.
Securities of Unseasoned Issuers. Securities in which the Fund may invest
may have limited marketability and, therefore, may be subject to wide
fluctuations in market value. In addition, certain securities may be issued by
companies that lack a significant operating history and are dependent on
products or services without an established market share.
Options. Option writing for the Fund may be limited by position and
exercise
limits established by national securities exchanges and by requirements of the
Code for qualification as a regulated investment company. See "Dividends,
Distributions and Taxes." In addition to writing covered call options to
generate current income, the Fund may enter into options transactions as
21
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
hedges to reduce investment risk, generally by making an investment expected
to
move in the opposite direction of a portfolio position. A hedge is designed to
offset a loss on a portfolio position with a gain on the hedge position; at
the
same time, however, a properly correlated hedge will result in a gain on the
portfolio position being offset by a loss on the hedge position. The Fund
bears
the risk that the prices of the securities being hedged will not move in the
same amount as the hedge. The Fund will engage in hedging transactions only
when
deemed advisable by Boston Advisors. Successful use by the Fund of options
will
be subject to Boston Advisors' ability to predict correctly movements in the
direction of the stock or index underlying the option used as a hedge. Losses
incurred in hedging transactions and the costs of these transactions will
affect
the Fund's performance.
The ability of the Fund to engage in closing transactions with respect to
options depends on the existence of a liquid secondary market. While the Fund
generally will write options only if a liquid secondary market appears to
exist
for the options purchased or sold, for some options no such secondary market
may
exist or the market may cease to exist. If the Fund cannot enter into a
closing
purchase transaction with respect to a call option it has written, the Fund
will
continue to be subject to the risk that its potential loss upon exercise of
the
option will increase as a result of any increase in the value of the
underlying
security. The Fund could also face higher transaction costs, including
brokerage
commissions, as a result of its options transactions.
Repurchase Agreements. The Fund bears a risk of loss in the event that the
other party to a repurchase agreement defaults on its obligations and the Fund
is delayed or prevented from exercising its rights to dispose of the
underlying
securities, including the risk of a possible decline in the value of the
underlying securities during the period in which the Fund seeks to assert its
rights to them, the risk of incurring expenses associated with asserting those
rights and the risk of losing all or a part of the income from the agreement.
Foreign Securities. Certain risks are involved in investing in the
securities of companies and governments of foreign nations that go beyond the
usual risks inherent in U.S. investments. These risks include those resulting
from revaluation of currencies, future adverse political and economic
developments, the possible imposition of restrictions on the repatriation of
currencies or other foreign governmental laws or restrictions, reduced
availability of public information concerning issuers and the lack of uniform
accounting, auditing and financial reporting standards or of other regulatory
practices and requirements compara-
22
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ble to those applicable to domestic companies. The value of the assets of the
Fund invested in foreign securities may be adversely affected by fluctuations
in
value of one or more foreign currencies relative to the dollar. Moreover,
securities of many foreign companies may be less liquid and their prices more
volatile than those of securities of comparable domestic companies. In
addition,
the possibility exists in certain foreign countries of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal
of
funds or other assets of the Fund, including the withholding of dividends.
Foreign securities may be subject to foreign government taxes that could
reduce
the yield on such securities. Because the Fund will invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates may adversely affect the value of portfolio
securities and the appreciation or depreciation of investments. Investment in
foreign securities may also result in higher expenses due to the cost of
converting foreign currency to U.S. dollars, the payment of fixed brokerage
commissions on foreign exchanges, which generally are higher than commissions
on
domestic exchanges, and the expense of maintaining securities with foreign
custodians.
Securities of Developing Countries. A developing country generally is
considered to be a country that is in the initial stages of its
industrialization cycle. Investing in the equity and fixed-income markets of
developing countries involves exposure to economic structures that are
generally
less diverse and mature, and to political systems that can be expected to have
less stability than those of developed countries. Historical experience
indicates the markets of developing countries have been more volatile than the
markets of the more mature economies of developed countries; however, such
markets often have higher rates of return to investors.
Gold Securities. Historically, stock prices of companies involved in gold-
related industries have been volatile. Economic and political conditions
prevailing in the countries that are the largest producers of gold,
particularly
the Republic of South Africa, may adversely affect the value of the Gold
Securities held by the Fund. In addition, issuers of securities in gold-
related
industries are often located outside the United States, which presents risks
described above that are not present in domestic investments.
23
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
PORTFOLIO TRANSACTIONS AND TURNOVER
All orders for transactions in securities or options on behalf of the Fund
are placed by Boston Advisors with broker-dealers that Boston Advisors
selects,
including Smith Barney Shearson and other affiliated brokers. The Fund may
utilize Smith Barney Shearson or a broker that is affiliated with Smith Barney
Shearson in connection with a purchase or sale of securities when Boston
Advisors believes that the broker's charge for the transaction does not exceed
usual and customary levels.
Short-term gains realized from portfolio transactions are taxable to
shareholders as ordinary income. In addition, higher portfolio turnover rates
can result in corresponding increases in brokerage commissions. The Fund will
not consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its objective and policies.
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained
with
Smith Barney Shearson or with an Introducing Broker, except that investors
purchasing shares of the Fund through a qualified retirement plan may do so
directly through the Trust's transfer agent. When purchasing shares of the
Fund,
investors must specify whether the purchase is for Class A shares, Class B
shares or, in the case of Participating Plans, Class D shares. No maintenance
fee will be charged in connection with a brokerage account through which an
investor purchases or holds shares. Purchases are effected at the public
offering price next determined after a purchase order is received by Smith
Barney Shearson or an Introducing Broker (the "trade date"). Payment is
generally due to Smith Barney Shearson or an Introducing Broker on the fifth
business day (the "settlement date") after the trade date. Investors who make
payment prior to the settlement date may permit the payment to be held in
their
brokerage accounts or may designate a temporary investment (such as a money
market fund in the Smith Barney Shearson Group of Funds) for such payment
until
settlement date. The Trust reserves the right to reject any purchase order and
to suspend the offering of shares of the Fund for a period of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York
time, on any day on which the Fund's net asset value is calculated, are
24
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
priced according to the net asset value determined on that day. Purchase
orders
received after the close of regular trading on the NYSE are priced as of the
time the net asset value per share is next determined. See "Valuation of
Shares."
Systematic Investment Plan. The Fund offers shareholders a Systematic
Investment Plan, under which shareholders may authorize Smith Barney Shearson
or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid
automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the shareholder's shares of a Smith Barney
Shearson money market fund. For further information regarding the Systematic
Investment Plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
Minimum Investments. The minimum initial investment in the Fund is $1,000
and the minimum subsequent investment is $200, except that for purchases
through
(a) IRAs and Self-Employed Retirement Plans, the minimum initial and
subsequent
investments are $250 and $100, respectively, (b) retirement plans qualified
under Section 403(b)(7) or Section 401(a) of the Code, the minimum initial and
subsequent investments are $25 and (c) the Fund's Systematic Investment Plan,
the minimum initial and subsequent investments are both $100. There are no
minimum investment requirements for employees of Travelers and its
subsidiaries,
including Smith Barney Shearson. The Trust reserves the right at any time to
vary the initial and subsequent investment minimums. Certificates for Fund
shares are issued upon request to the Trust's transfer agent.
<TABLE>
CLASS A SHARES
The public offering price for Class A shares is the per share net asset
value
of that Class plus a sales charge, which is imposed in accordance with the
following schedule:
<CAPTION>
SALES CHARGE AS %
SALES CHARGE AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF
NET ASSET VALUE
<S> <C>
<C>
- ------------------------------------------------------------------------------
- --------------
Less than $25,000 5.00%
5.26%
$25,000 but under $100,000 4.00%
4.17%
$100,000 but under $250,000 3.25%
3.36%
$250,000 but under $500,000 2.50%
2.56%
$500,000 but under $1,000,000 2.00%
2.04%
$1,000,000 or more** .00%
.00%
- ------------------------------------------------------------------------------
- --------------
</TABLE>
25
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
* Smith Barney Shearson has adopted guidelines directing its Financial
Consultants and Introducing Brokers that single investments of $250,000
or
more should be made in Class A shares.
** No sales charge is imposed on purchases of Class A shares of $1 million
or
more; however, a CDSC of .75% is imposed for the first year after
purchase.
The CDSC on Class A shares is payable to Smith Barney Shearson which,
with
Boston Advisors, compensates Smith Barney Shearson Financial Consultants
upon the sale of these shares. The CDSC is waived in the same
circumstances
in which the CDSC applicable to Class B shares is waived. See "Redemption
of Shares--Contingent Deferred Sales Charge--Class B Shares--Waivers of
CDSC."
REDUCED SALES CHARGES--CLASS A SHARES
Reduced sales charges are available to investors who are eligible to
combine
their purchases of Class A shares to receive volume discounts. Investors
eligible to receive volume discounts include individuals and their immediate
families, tax-qualified employee benefit plans and trustees or other
professional fiduciaries (including a bank, or an investment adviser
registered
with the SEC under the Investment Advisers Act of 1940, as amended) purchasing
shares for one or more trust estates or fiduciary accounts even though more
than
one beneficiary is involved. The initial sales charge is also reduced to 1%
for
Smith Barney Personal Living Trust program participants for whom Smith Barney
Shearson acts as trustee. Reduced sales charges on Class A shares are also
available under a combined right of accumulation, under which an investor may
combine the value of Class A shares already held in the Fund and in any of the
funds in the Smith Barney Shearson Group of Funds listed below (except those
sold without a sales charge), along with the value of the Fund's Class A
shares
being purchased, to qualify for a reduced sales charge. For example, if an
investor owns Class A shares of the Fund and other funds in the Smith Barney
Shearson Group of Funds that have an aggregate value of $22,000, and makes an
additional investment in Class A shares of the Fund of $4,000, the sales
charge
applicable to the additional investment would be 4%, rather than the 5%
normally
charged on a $4,000 purchase. Investors interested in further information
regarding reduced sales charges should contact their Smith Barney Shearson
Financial Consultants.
Class A shares of the Fund may be offered without any applicable sales
charges to: (a) employees of Travelers and its subsidiaries, including Smith
Barney Shearson, employee benefit plans for such employees and their immediate
families when orders on their behalf are placed by such employees; (b)
accounts
managed by registered investment advisory subsidiaries of Travelers; (c)
directors, trustees or general partners of any investment company for
26
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
which Smith Barney Shearson serves as distributor; (d) any other investment
company in connection with the combination of such company with the Fund by
merger, acquisition of assets or otherwise; (e) shareholders who have redeemed
Class A shares in the Fund (or Class A shares of another fund in the Smith
Barney Shearson Group of Funds that are sold with a maximum 5% sales charge)
and
who wish to reinvest their redemption proceeds in the Fund, provided the
reinvestment is made within 30 days of the redemption; and (f) any client of a
newly-employed Smith Barney Shearson Financial Consultant (for a period up to
90
days from the commencement of the Financial Consultant's employment with Smith
Barney Shearson), on the condition that the purchase is made with the proceeds
of the redemption of shares of a mutual fund which (i) was sponsored by the
Financial Consultant's prior employer, (ii) was sold to a client by the
Financial Consultant, and (iii) when purchased, such shares were sold with a
sales charge.
CLASS B SHARES
The public offering price for Class B shares is the per share net asset
value
of that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares. See
"Redemption of Shares," which describes the CDSC in greater detail.
Smith Barney Shearson has adopted guidelines, in view of the relative sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be for Class A shares. Smith Barney Shearson reserves the right to
vary these guidelines at any time.
SMITH BARNEY SHEARSON 401(K) PROGRAM
Investors may be eligible to participate in the Smith Barney Shearson
401(k)
Program, which is generally designed to assist employers or plan sponsors in
the
creation and operation of retirement plans under Section 401(a) of the Code.
To
the extent applicable, the same terms and conditions are offered to all
Participating Plans in the 401(k) Program, which includes both 401(k) plans
and
other types of participant directed, tax-qualified employee benefit plans.
The Fund offers to Participating Plans three classes of shares, Class A,
Class B and Class D shares, as investment alternatives under the 401(k)
Program.
Class A shares are available to all Participating Plans and are the only
investment
27
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
alternative for Participating Plans that are eligible to purchase Class A
shares
at net asset value without a sales charge. In addition, Class B shares are
offered only to Participating Plans satisfying certain criteria with respect
to
the amount of the initial investment and the number of employees eligible to
participate in the Plan at that time. Alternatively, Class D shares are
offered
only to Participating Plans that meet other criteria relating to the amount of
initial investment and number of employees eligible to participate in the Plan
at that time, as described below.
The Class A and Class B shares acquired through the 401(k) Program are
subject to the same service and/or distribution fees as, but different sales
charge and CDSC schedules than, the Class A and Class B shares acquired by
other
investors. Class D shares acquired by Participating Plans are offered at net
asset value per share without any sales charge or CDSC. The Fund pays annual
service and distribution fees based on the value of the average daily net
assets
attributable to this Class.
Once a Participating Plan has made an initial investment in the Fund, all
of
its subsequent investments in the Fund must be in the same Class of shares,
except as otherwise described below.
<TABLE>
Class A Shares. The sales charges for Class A shares acquired by
Participating Plans are as follows:
<CAPTION>
SALES CHARGE AS
%
SALES CHARGE AS % OF
NET ASSET
AMOUNT OF INVESTMENT OF OFFERING PRICE
VALUE
<S> <C>
<C>
- ------------------------------------------------------------------------------
- -------
Less than $25,000 5.00%
5.26%
$25,000 up to $100,000 4.00%
4.17%
$100,000 up to $250,000 3.25%
3.36%
$250,000 up to $500,000 2.50%
2.56%
$500,000 up to $750,000 2.00%
2.04%
$750,000 and over .00%
.00%
- ------------------------------------------------------------------------------
- -------
</TABLE>
A Participating Plan will have a combined right of accumulation under
which,
to qualify for a reduced sales charge, it may combine the value of Class A
shares being purchased with the value of Class A shares already held in the
Fund
and in any of the funds listed below under "Exchange Privilege" that are sold
with a sales charge.
Class A shares of the Fund may be offered without any sales charge to any
Participating Plan that: (a) purchases $750,000 or more of Class A shares of
one
or more funds in the Smith Barney Shearson Group of Funds under the
28
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
combined right of accumulation described above; (b) has 250 or more employees
eligible to participate in the Participating Plan at the time of initial
investment in the Fund; or (c) currently holds Class A shares in the Fund that
were received as a result of an exchange of Class B shares or Class D shares
of
the Fund as described below.
Class A shares acquired through the 401(k) Program will not be subject to a
CDSC.
Class B Shares. Under the 401(k) Program, Class B shares are offered to
Participating Plans that: (a) purchase less than $250,000 of Class B shares of
one or more funds in the Smith Barney Shearson Group of Funds that are sold
subject to a CDSC; and (b) that have less than 100 employees eligible to
participate in the Participating Plan at the time of initial investment in the
Fund. Class B shares acquired by such Plans will be subject to a CDSC of 3% of
redemption proceeds, if redeemed within eight years of the date the
Participating Plan first purchases Class B shares. No CDSC is imposed to the
extent that the net asset value of the Class B shares redeemed does not exceed
(a) the current net asset value of Class B shares purchased through
reinvestment
of dividends or capital gains distributions, plus (b) the current net asset
value of Class B shares purchased more than eight years prior to the
redemption,
plus (c) increases in the net asset value of the shareholder's Class B shares
above the purchase payments made during the preceding eight years. The CDSC
applicable to a Participating Plan depends on the number of years since the
Participating Plan first became a holder of Class B shares, unlike the CDSC
applicable to other Class B shareholders, which depends on the number of years
since those shareholders made the purchase payment from which the amount is
being redeemed.
The CDSC will be waived on redemptions of Class B shares in connection with
lump-sum or other distributions made by a Participating Plan as a result of:
(a)
the retirement of an employee in the Participating Plan; (b) the termination
of
employment of an employee in the Participating Plan; (c) the death or
disability
of an employee in the Participating Plan; (d) the attainment of age 59 1/2 by
an
employee in the Participating Plan; (e) hardship of an employee in the
Participating Plan to the extent permitted under Section 401(k) of the Code;
or
(f) redemptions of Class B shares in connection with a loan made by the
Participating Plan to an employee.
29
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
Eight years after the date a Participating Plan acquired its first Class B
share, it will be offered the opportunity to exchange all of its Class B
shares
for Class A of the Fund. Such Plans will be notified of the pending exchange
in
writing approximately 60 days before the eighth anniversary of the purchase
date
and, unless the exchange has been rejected in writing, the exchange will occur
on or about the eighth anniversary date. Once the exchange has occurred, a
Participating Plan will not be eligible to acquire additional Class B shares
of
the Fund but instead may acquire Class A shares of the Fund. If the
Participating Plan elects not to exchange all of its Class B shares at that
time, each Class B share held by the Participating Plan will have the same
conversion feature as Class B shares held by other investors. See "Variable
Pricing System--Class B Shares."
Class D Shares. Class D shares are offered to Participating Plans that:
(a)
purchase less than $750,000 but more than $250,000 of Class D shares of one or
more funds in the Smith Barney Shearson Group of Funds that offer one or more
Classes of shares subject to a sales charge and/or CDSC; or (b) have at least
100 but no more than 250 employees eligible to participate in the
Participating
Plan at the time of initial investment in the Fund.
Class D shares acquired by Participating Plans are offered at net asset
value
per share without any sales charge or CDSC. The Fund pays annual service and
distribution fees based on the value of the average daily net assets
attributable to this Class. Class D shares are not subject to an automatic
conversion feature as are the Class B shares. Participating Plans which hold
Class D shares valued at $750,000 or more in any fund or funds in the Smith
Barney Shearson Group of Funds that offer one or more Classes of shares
subject
to a sales charge and/or CDSC will be offered the opportunity to exchange all
of
their Class D shares for Class A shares. Such Plans will be notified of the
pending exchange in writing within 30 days after the last business day of the
calendar year, and unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of March in the
following
calendar year. Once the exchange has occurred, a Participating Plan will not
be
eligible to acquire Class D shares of the Fund but instead may acquire Class A
shares of the Fund. Any Class D shares not converted will continue to be
subject
to the distribution fee.
Participating Plans wishing to acquire shares of the Fund through the
401(k)
Program must purchase such shares directly from the Trust's transfer agent.
For
further information regarding the 401(k) Program, investors should contact
their
Smith Barney Shearson Financial Consultants.
30
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day on which the Fund's net
asset
value is calculated. See "Valuation of Shares." Redemption requests received
in
proper form prior to the close of regular trading on the NYSE are priced at
the
net asset value per share determined on that day. Redemption requests received
after the close of regular trading on the NYSE are priced at the net asset
value
next determined. If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class being redeemed. In the event of
a
failure to specify which Class, or if the investor owns fewer shares of the
Class than specified, the redemption request will be delayed until the Trust's
transfer agent receives further instructions from Smith Barney Shearson, or if
the shareholder's account is not with Smith Barney Shearson, from the
shareholder directly.
The Trust normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or the Introducing Broker at no
charge (other than any applicable CDSC) within seven days after receipt of a
redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. A shareholder who anticipates the need
for
more immediate access to his or her investment should purchase shares with
Federal funds, by bank wire or by a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may be subject to redemption by the Fund, but only after the shareholder has
been given at least 30 days in which to increase the account balance to more
than $500.
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem shares represented by
certificates must also present the certificates to Smith Barney Shearson or
the
Introducing Broker endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
31
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
involving shares represented by certificates will not be deemed received until
the certificates are received by the Trust's transfer agent in proper form.
REDEMPTION BY MAIL
Shares held by Smith Barney Shearson as custodian must be redeemed by
submitting a written request to your Smith Barney Shearson Financial
Consultant.
All other shares may be redeemed by submitting a written request for
redemption
to:
Smith Barney Shearson
Strategic Investors Fund
Class A, B or D (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to TSSG or your Smith Barney Shearson
Financial
Consultant must (a) state the Class and number or dollar amount of shares to
be
redeemed, (b) identify the shareholder's account number and (c) be signed by
each registered owner exactly as the shares are registered. If the shares to
be
redeemed were issued in certificate form, the certificates must be endorsed
for
transfer (or be accompanied by an endorsed stock power) and must be submitted
to
TSSG together with the redemption request. Any signature appearing on a
redemption request, share certificate or stock power must be guaranteed by a
domestic bank, savings and loan institution, domestic credit union, member
bank
of the Federal Reserve System or member firm of a national securities
exchange.
TSSG may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or guardians. A redemption
request will not be deemed properly received until TSSG receives all required
documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. Retirement plan
accounts
are eligible for automatic cash withdrawal plans only where the shareholder is
eligible to receive qualified distributions and has an account value of at
least
$5,000. Any applicable CDSC will not be waived on amounts withdrawn by a
shareholder that exceed 2% per month of the value of the shareholder's shares
subject to the CDSC at the time the withdrawal plan
32
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
commences. For further information regarding the automatic cash withdrawal
plan,
shareholders should contact their Smith Barney Shearson Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class
B shares, however effected, that causes the current value of a shareholder's
account to fall below the dollar amount of all payments by the shareholder for
the purchase of Class B shares ("purchase payments") during the preceding five
years, except in the case of purchases by Participating Plans, as described
above. See "Purchase of Shares--Smith Barney Shearson 401(k) Program." No
charge
is imposed to the extent the net asset value of the Class B shares redeemed
does
not exceed (a) the current net asset value of Class B shares purchased through
reinvestment of dividends or capital gains distributions, plus (b) the current
net asset value of Class B shares purchased more than five years prior to the
redemption, plus (c) increases in the net asset value of the shareholder's
Class
B shares above the purchase payments made during the preceding five years.
<TABLE>
In circumstances in which the CDSC is imposed, the amount of the charge
will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed, except in the case of purchases
through
Participating Plans which are subject to a different CDSC. See "Purchase of
Shares--Smith Barney Shearson 401(k) Program." Solely for purposes of
determining the number of years since a purchase payment, all purchase
payments
during a month will be aggregated and deemed to have been made on the last day
of the preceding Smith Barney Shearson statement month. The following table
sets
forth the rates of the charge for redemptions of Class B shares:
<CAPTION>
YEAR SINCE PURCHASE PAYMENT WAS MADE
CDSC
<S>
<C>
- ------------------------------------------------------------------------------
- -----
First
5.00%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ------------------------------------------------------------------------------
- -----
</TABLE>
33
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
Class B shares will automatically convert to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. The first of the conversions will commence on or
about
September 30, 1994. See "Variable Pricing System--Class B Shares."
The purchase payment from which a redemption of Class B shares is made is
assumed to be the earliest purchase payment from which a full redemption has
not
already been effected. In the case of redemptions of Class B shares of other
funds in the Smith Barney Shearson Group of Funds issued in exchange for Class
B
shares of the Fund, the term "purchase payments" refers to the purchase
payments
for the shares given in exchange. In the event of an exchange of Class B
shares
of funds with differing CDSC schedules, the shares will be, in all cases,
subject to the higher CDSC schedule. See "Exchange Privilege."
Waivers of CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholder's shares at the time the withdrawal
plan commences (see above); (c) redemptions of shares in connection with
certain
post-retirement distributions and withdrawals from retirement plans or IRAs or
following the death or disability of the shareholder; (d) involuntary
redemptions; (e) redemption proceeds from other funds in the Smith Barney
Shearson Group of Funds that are reinvested within 30 days of the redemption;
(f) redemptions of shares in connection with a combination of any investment
company with the Fund by merger, acquisition of assets or otherwise; and (h)
certain redemptions of shares of the Fund in connection with lump-sum or other
distributions made by a Participating Plan. See "Purchase of Shares--Smith
Barney Shearson 401(k) Program."
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net
34
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES (CONTINUED)
assets attributable to that Class by the total number of shares of that Class
outstanding. In general, the Fund's investments will be valued at market value
or, in the absence of a market value, at fair value as determined by or under
the direction of the Trust's Board of Trustees. Securities that are primarily
traded on foreign exchanges are generally valued at the preceding closing
values
of the securities on their respective exchanges, except that when an
occurrence
subsequent to the time a value was so established is likely to have changed
that
value, then the fair market value of those securities will be determined by
consideration of other factors by or under the direction of the Board of
Trustees or its delegates. A security that is primarily traded on a domestic
or
foreign stock exchange is valued at the last sale price on that exchange or,
if
there were no sales during the day, at the current quoted bid price. Debt
securities (other than U.S. government securities and short-term obligations)
are valued by Boston Advisors after consultation with independent pricing
services approved by the Trustees. Investments in U.S. government securities
(other than short-term securities) are valued at the average of the quoted bid
and asked prices in the over-the-counter market. Short-term investments that
mature in 60 days or less are valued at amortized cost (which involves valuing
an investment instrument at its cost and, thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the effect
of
fluctuating interest rates on the market value of the instrument) whenever the
Board of Trustees determines that amortized cost reflects fair value of those
investments. An option written by the Fund is generally valued at the last
sale
price or, in the absence of the last sale price, the last offer price. Further
information regarding the Fund's valuation policies is contained in the
Statement of Additional Information.
35
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence.
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
Municipal Bond Funds
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND,
an intermediate-term municipal bond fund investing in
investment-grade obligations.
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an
intermediate-and long-term municipal bond fund investing
in medium-and lower-rated securities.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for Arizona investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for California investors.
A, B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for California investors.
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed
for Florida investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed
for Massachusetts investors.
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for New Jersey investors.
</TABLE>
36
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND, an intermediate-term bond fund designed
for New York investors.
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed
for New York investors.
Income Funds
A, B, D* SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME
FUND, seeks high current income while limiting the degree
of fluctuation in net asset value resulting from movement
in interest rates.
A, B SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND,
invests in a portfolio of high quality debt securities
that may be denominated in U.S. dollars or selected
foreign currencies and that have remaining maturities of
not more than one year.
A, B SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND,
invests in high quality, short-term debt securities
denominated in U.S. dollars as well as a range of foreign
currencies.
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND,
invests exclusively in securities issued by the United
States Treasury and other U.S. government securities.
A, B, D* SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND,
seeks high current income primarily by allocating and
reallocating its assets among various types of
fixed-income securities.
A, B, D* SMITH BARNEY SHEARSON MANAGED GOVERNMENTS FUND INC.,
invests in obligations issued or guaranteed by the United
States government and its agencies and instrumentalities
with emphasis on mortgage-backed government securities.
A, B, D* SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a
high current return by investing in U.S. government
securities.
</TABLE>
37
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
A, B, D* SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks
maximum current income consistent with prudent investment
management and preservation of capital by investing in
corporate bonds.
A, B, D* SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high
current income by investing in high-yielding corporate
bonds, debentures and notes.
A, B, D* SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks current
income and capital appreciation by investing in bonds,
debentures and notes of foreign and domestic issuers.
Growth and Income Funds
A, B, D* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current
income and capital appreciation by investing in
convertible securities.
A, B, D* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return
by investing in equity and debt securities of utilities
companies.
A, B, D* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks
total return by investing in dividend-paying common
stocks.
A, B, D* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks
income and long-term capital growth by investing in
income-producing equity securities.
Growth Funds
A, B, D* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks
long-term appreciation of capital.
A, B, D* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a
secondary objective.
A, B, D* SMITH BARNEY SHEARSON SECTOR ANALYSIS FUND, seeks capital
appreciation by following a sector strategy.
</TABLE>
38
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
A, B SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND,
seeks capital appreciation, with income as a secondary
consideration.
A, B, D* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A, B, D* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-
term capital appreciation by investing in equity
securities primarily of emerging growth companies.
A, B, D* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks
long-term capital growth by investing principally in the
common stocks of foreign and domestic issuers.
A, B, D* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term
capital appreciation by investing primarily in securities
of issuers based in European countries.
A, B, D* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND
INC., seeks long-term capital appreciation by investing
primarily in precious metal-and mineral-related companies
and gold bullion.
Money Market Funds
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests
in a diversified portfolio of high quality money market
instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests in short-term U.S. government and agency
securities.
+ SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC.,
invests in short-term high quality municipal obligations.
</TABLE>
39
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
<TABLE>
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -----------------------------------------------------------------------
+ SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET
FUND, invests in short-term, high quality California
municipal obligations.
* SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET
FUND, invests in short-term, high quality New York
municipal obligations.
<FN>
- ---------------
* Class D shares of this fund may be acquired only by Participating Plans
in
the Smith Barney Shearson 401(k) Program.
** Shares of this money market fund may be exchanged for Class B shares of
the
Fund.
*** Shares of this money market fund may be exchanged for Class A and Class D
shares of the Fund.
+ Shares of this money market fund may be exchanged for Class A shares of
the
Fund.
</TABLE>
Tax Effect. The exchange of shares of one fund for shares of another fund
is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
Class A Exchanges. Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 5% will be subject to the appropriate "sales charge
differential" upon the exchange of their shares for Class A shares of the Fund
or other funds sold with a higher sales charge. The "sales charge
differential"
is limited to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being acquired in
the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends, as described below, are treated as having paid the
same sales charges applicable to the shares on which the dividends were paid.
However, except in the case of the 401(k) Program, if no sales charge was
imposed upon the initial purchase of the shares, any shares obtained through
automatic reinvestment will be subject to a sales charge differential upon
exchange.
40
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
Class B Exchanges. Class B shareholders of the Fund who wish to exchange
all
or a portion of their Class B shares for Class B shares of any of the funds
identified above may do so without imposition of an exchange fee. Upon an
exchange, the new Class B shares will be deemed to have been purchased on the
same date as the Class B shares of the Fund that have been exchanged. In the
event Class B shareholders of the Fund wish to exchange all or a portion of
their shares for shares in any of the funds imposing a CDSC higher than that
imposed by the Fund, the exchanged Class B shares will be subject to the
higher
applicable CDSC.
Class D Exchanges. Smith Barney Shearson receives an annual service fee
and
an annual distribution fee with respect to Class D shares of the Fund.
Participating Plans may exchange Class D shares of the Fund for Class D shares
in any of the funds listed above without charge. Class D shares may be
acquired
only by Participating Plans.
Additional Information Regarding the Exchange Privilege. Shareholders
exercising the exchange privilege with any of the other funds in the Smith
Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the
right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders. Although the
exchange privilege is an important benefit, excessive exchange transactions
can
be detrimental to the Fund's performance and its shareholders. The Fund's
investment adviser may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other shareholders.
In this event, the Fund's investment adviser will notify Smith Barney
Shearson,
and Smith Barney Shearson may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination,
Smith
Barney Shearson will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege and
during the 15-day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds in the Smith Barney Shearson Group of Funds ordinarily available,
which position the shareholder would expect to maintain for a significant
period
of time. All relevant factors will be considered in determining what
constitutes
an abusive pattern of exchanges. For further information regarding the
exchange
privilege or to obtain the current prospectuses for members of the Smith
Barney
Shearson
41
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
Group of Funds, investors should contact their Smith Barney Shearson Financial
Consultants.
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New
York
10013 and serves as distributor of the Fund's shares.
Smith Barney Shearson is paid an annual service fee with respect to Class
A,
Class B and Class D shares of the Fund at the rate of .25% of the value of the
average daily net assets of the respective Class. Smith Barney Shearson is
also
paid an annual distribution fee with respect to Class B and Class D shares at
the rate of .75% of the value of the average daily net assets attributable to
those shares. The fees are authorized pursuant to a services and distribution
plan (the "Plan") adopted by the Trust pursuant to Rule 12b-1 under the 1940
Act, and are used by Smith Barney Shearson to pay its Financial Consultants
for
servicing shareholder accounts and, in the case of the Class B and Class D
shares, to cover expenses primarily intended to result in the sale of those
shares. These expenses include: costs of printing and distributing the Fund's
Prospectus, Statement of Additional Information and sales literature to
prospective investors; an allocation of overhead and other Smith Barney
Shearson's branch office distribution-related expenses; payments to and
expenses
of Smith Barney Shearson Financial Consultants and other persons who provide
support services in connection with the distribution of the shares; and
accruals
for interest on the amount of the foregoing expenses that exceed distribution
fees and, in the case of Class B shares, the CDSC received by Smith Barney
Shearson. The payments to Smith Barney Shearson Financial Consultants for
selling shares of a Class include a commission paid at the time of sale and a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. The service fee is credited at the rate of
.25%
of the value of the average daily net assets of the Class that remain invested
in the Fund. Smith Barney Shearson Financial Consultants may receive different
levels of compensation for selling one Class of shares over the other.
Although it is anticipated that some promotional activities will be
conducted
on a Trust-wide basis, payments made by a fund of the Trust under the Plan
generally will be used to finance the distribution of shares of that fund.
Expenses
42
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR (CONTINUED)
incurred in connection with Trust-wide activities may be allocated on a pro-
rata
basis among all funds of the Trust on the basis of their relative net assets.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson and
the
payments may exceed distribution expenses actually incurred. The Trust's Board
of Trustees will evaluate the appropriateness of the Plan and its payment
terms
on a continuing basis and in so doing will consider all relevant factors,
including expenses borne by Smith Barney Shearson, amounts received under the
Plan and proceeds of the CDSC.
The Trust anticipates that, for the foreseeable future, distribution
expenses
incurred by Smith Barney Shearson will be greater than amounts payable by the
Trust's funds under the Plan. During the period from March 3, 1986 (the
Trust's
commencement of operations) through the fiscal year ended January 31, 1994,
Smith Barney Shearson incurred with respect to the Class B shares of the
Trust's
existing funds, total distribution expenses of approximately $ while
receiving approximately $ pursuant to the Plan and approximately
$ from the CDSC. The excess of such distribution expenses incurred
by
Smith Barney Shearson over such distribution fees and CDSC, or approximately
$ , was equivalent to approximately % of the Trust's net assets
on January 31, 1994. The Trust's Board of Trustees will evaluate the
appropriateness of the Plan and its payment terms on a continuing basis and in
doing so will consider all relevant factors, including expenses borne by Smith
Barney Shearson and the amount received under the Plan.
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund will be treated separately from the Trust's other funds in
determining the amount of dividends from net investment income and
distributions
of capital gains payable to shareholders of the Fund. Dividends from net
investment income (that is, income other than net realized capital gains) of
the
Fund will be declared and distributed quarterly. Distribution of the Fund's
net
realized capital gains, if any, will be declared and distributed annually,
normally at the end of the calendar year in which earned or at the beginning
of
the subsequent year. Unless a shareholder instructs that dividends and capital
gains distributions on shares of a Class be paid in cash and credited to the
shareholder's account at
43
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Smith Barney Shearson, dividends and capital gains distributions will
automatically be reinvested in additional shares of the Class at net asset
value
subject to no sales charge or CDSC. The Fund is subject to a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains. The Trust expects to make any additional distributions necessary to
avoid
the application of this tax. Dividends and interest received by the Fund may
give rise to withholding and other taxes imposed on the Fund by foreign
countries. Shareholders of the Fund will not be allowed a deduction or credit
for foreign taxes incurred by the Fund, and certain limitations may be imposed
on the extent to which the credit (but not the deduction) for foreign taxes
may
be claimed.
TAXES
The Fund will be treated as a separate taxpayer with the result that, for
Federal income tax purposes, the amount of its net investment income and
capital
gains earned will be determined without regard to the earnings on
distributions
of the other funds of the Trust. The Trust intends for the Fund to qualify
each
year as a regulated investment company under the Code. Dividends paid from the
Fund's net investment income and distributions of the Fund's net realized
short-term capital gains are taxable to shareholders (other than IRAs,
Self-Employed Retirement Plans and other tax-exempt investors) as ordinary
income, regardless of how long shareholders have held Fund shares and whether
the dividends or distributions are received in cash or reinvested in
additional
Fund shares. Distributions of the Fund's net realized long-term capital gains
will be taxable to shareholders as long-term capital gains, regardless of how
long shareholders have held Fund shares and whether the distributions are
received in cash or reinvested in additional Fund shares. In addition, as a
general rule, a shareholder's gain or loss on a sale or redemption of shares
of
the Fund will be a long-term capital gain or loss if the shareholder has held
the shares for more than one year and will be a short-term capital gain or
loss
if the shareholder has held the shares for one year or less. Some of the
Fund's
dividends declared from net investment income may qualify for the Federal
dividends-received deduction for corporations. The per share dividends on
Class
A shares will be higher than those on Class B and Class D shares as a result
of
lower distribution and transfer agency fees applicable to the Class A shares.
Income received by the Fund from sources within foreign countries may be
subject to withholding and other foreign taxes. The payment of such taxes will
44
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
reduce the amount of dividends and distributions paid to the Fund's
shareholders. If (a) the Fund qualifies as a regulated investment company, (b)
certain distribution requirements are satisfied and (c) more than 50% of the
value of the Fund's assets at the close of the taxable year consists of
securities of foreign corporations, the Trust may elect, for Federal income
tax
purposes, to treat foreign income taxes paid by the Fund that can be treated
as
income taxes under Federal income tax principles as paid by the Fund's
shareholders. The Fund may qualify for, and the Trust may make, this election
in
some, but not necessarily all, of the Fund's taxable years. If the Trust were
to
make an election, an amount equal to the foreign income taxes paid by the Fund
would be included in the income of its shareholders and the shareholders would
be entitled to credit their portions of this amount against their Federal tax
liabilities, if any, or to deduct such portions from their Federal taxable
income, if any. Shortly after any year for which the Trust makes such an
election, the Trust will report to the Fund's shareholders, in writing, the
amount per share of such foreign tax that must be included in each
shareholder's
gross income and the amount that will be available for deduction or credit. No
deduction for foreign taxes may be claimed by a shareholder who does not
itemize
deductions. Certain limitations will be imposed on the extent to which the
credit (but not the deduction) for foreign taxes may be claimed.
Statements as to the tax status of the dividends and distributions received
by shareholders of the Fund are mailed annually. Each shareholder also will
receive, if applicable, various written notices after the close of the Fund's
prior taxable year with respect to certain dividends and distributions that
were
received from the Fund during the Fund's prior taxable year.
Shareholders are urged to consult their tax advisors regarding the
application of Federal, state and local tax laws to their specific situation
before investing in the Fund.
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION
The Trust was organized on January 8, 1986 under the laws of The
Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." The Trust commenced operations on March 3, 1986, under the
name
Shearson Lehman Special Equity Portfolios. The Fund changed its name from
Strategic Investors Portfolio to Strategic Investors Fund
45
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION (CONTINUED)
on November 5, 1992 and on July 30, 1993 to its current name, Smith Barney
Shearson Strategic Investors Fund. The Trust offers shares of beneficial
interest of separate funds with a par value of $.001 per share. The Fund
offers
shares of beneficial interest currently classified into three Classes -- A, B
and D.
Each Class represents an identical interest in the Fund's investment
portfolio. As a result, the Classes have the same rights, privileges and
preferences, except with respect to: (a) the designation of each Class; (b)
the
effect of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees borne by each Class; (d) the expenses
allocable
exclusively to each Class; (e) voting rights on matters exclusively affecting
a
single Class; (f) the exchange privilege of each Class; and (g) the conversion
feature of the Class B shares. The Trust's Board of Trustees does not
anticipate
that there will be any conflicts among the interests of the holders of the
different Classes. The Trustees, on an ongoing basis, will consider whether
any
such conflict exists and, if so, take appropriate action.
The Trust does not hold annual shareholder meetings. There normally will be
no meeting of shareholders for the purpose of electing Trustees unless and
until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose upon
written request of shareholders holding at least 10% of the Trust's
outstanding
shares. Shareholders of record owning no less than two-thirds of the
outstanding
shares of the Trust may remove a Trustee through a declaration in writing or
by
vote cast in person or by proxy at a meeting called for that purpose. When
matters are submitted for shareholder vote, shareholders of each Class will
have
one vote for each full share owned and a proportionate, fractional vote for
any
fractional share held of that Class. Generally, shares of the Trust vote by
individual fund on all matters except (a) matters affecting only the interests
of one or more of the funds, in which case only shares of the affected fund or
funds would be entitled to vote or (b) when the 1940 Act requires that shares
of
the funds be voted in the aggregate. Similarly, shares of the Fund will be
voted
generally on a Fund-wide basis except with respect to matters affecting the
interests of one Class of shares.
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as custodian of the Fund's
investments.
46
<PAGE>
SMITH BARNEY SHEARSON
Strategic Investors Fund
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION (CONTINUED)
TSSG, is located at Exchange Place, Boston, Massachusetts 02109, and serves
as the Trust's transfer agent.
The Trust sends shareholders of the Fund a semi-annual report and an
audited
annual report, which include listings of the investment securities held by the
Fund at the end of the reporting period. In an effort to reduce the Fund's
printing and mailing costs, the Trust plans to consolidate the mailing of the
Fund's semi-annual and annual reports by household. This consolidation means
that a household having multiple accounts with the identical address of record
will receive a single copy of each report. In addition, the Trust also plans
to
consolidate the mailing of the Fund's Prospectus so that a shareholder having
multiple accounts (that is, individual, IRA and/or Self-Employed Retirement
Plan
accounts) will receive a single Prospectus annually. Any shareholder of the
Fund
who does not want this consolidation to apply to his or her account should
contact his or her Financial Consultant or the Trust's transfer agent.
Shareholders may seek information regarding the Fund from their Smith
Barney
Shearson Financial Consultants.
------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement
of
Additional Information and/or the official sales literature in connection with
the offering of the Fund's shares, and, if given or made, such other
information
or representations must not be relied upon as having been authorized by the
Trust. This Prospectus does not constitute an offer in any state in which, or
to
any person to whom, such offer may not lawfully be made.
47
<PAGE>
==============================================================================
=
SMITH BARNEY SHEARSON
Strategic
Investors
Fund
Two World Trade Center
New York, New York 10048
Fund 38
FD0225 D4
<PAGE>
Smith Barney Shearson
EQUITY FUNDS
Two World Trade Center
New York, New York 10048
(212) 720-9218
- ---------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION APRIL 1,
1994
- ---------------------------------------------------------
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectuses, each dated April 1, 1994,
as
amended or supplemented from time to time, of Smith Barney Shearson Equity
Funds
(the "Trust") relating to Smith Barney Shearson Strategic Investors Fund,
Smith
Barney Shearson Sector Analysis Fund and Smith Barney Shearson Growth and
Income
Fund (each, a "Fund" and collectively, the "Funds"), each a series of the
Trust,
and should be read in conjunction with the Prospectuses. The Prospectuses may
be
obtained by contacting any Smith Barney Shearson Financial Consultant or by
writing or calling the Trust at the address or telephone number listed above.
This Statement of Additional Information, although not in itself a prospectus,
is incorporated by reference into the Prospectuses in its entirety.
CONTENTS
For ease of reference, the same section headings are used in the Prospectuses
and in this Statement of Additional Information, except where shown below:
<TABLE>
<S>
<C>
Management of the
Trust................................................................ 2
(See in each Prospectus "Management of the Trust and the Fund")
Investment Objectives and Management
Policies.......................................... 7
(See in each Prospectus "Investment Objective and Management Policies")
Purchase of
Shares.....................................................................
21
Redemption of
Shares...................................................................
22
Distributor...................................................................
......... 23
Valuation of
Shares....................................................................
24
Exchange
Privilege.....................................................................
25
Performance
Data.......................................................................
27
(See in each Prospectus "The Fund's Performance")
Taxes.........................................................................
......... 28
(See in each Prospectus "Dividends, Distributions and Taxes")
Organization of the
Trust.............................................................. 32
(See in each Prospectus "Additional Information")
Custodian and Transfer
Agent........................................................... 33
(See in each Prospectus "Additional Information")
Financial
Statements...................................................................
33
Appendix......................................................................
......... 34
</TABLE>
MANAGEMENT OF THE TRUST
The names of the Trust's Trustees and the executive officers of the Funds,
together with information as to their principal business occupations, are set
forth below. The executive officers of the Funds are employees of
organizations
that provide services to the Funds. Each Trustee who is an "interested person"
of the Trust,
<PAGE>
as defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
is indicated by an asterisk. As of March 1, 1994, the Trust's Trustees and
officers of the Funds as a group owned less than 1% of the outstanding shares
of
the Trust.
THE TRUST'S TRUSTEES:
Lee Abraham, Trustee. Chairman and Chief Executive Officer of Associated
Merchandising Corporation, a major retail merchandising and sourcing
organization. His address is 1440 Broadway, Suite 1001, New York, New York
10018.
Antoinette C. Bentley, Trustee. Retired; formerly Senior Vice President
and
Associate General Counsel of Crum and Foster, Inc., an insurance holding
company. Her address is 24 Fowler Road, Far Hills, New Jersey 07931.
Allan J. Bloostein, Trustee. Consultant; formerly Vice Chairman of the
Board of and Consultant to The May Department Stores Company; Director of
Crystal Brands, Inc., Melville Corp. and R.G. Barry Corp. His address is
Anderson Road, Sherman, Connecticut 06784.
Robert B. Clark, Trustee. Retired; formerly Director, President and Chief
Executive Officer of Hoffmann-La Roche, Inc., a major pharmaceutical company.
His address is 8 Highview Terrace, Madison, New Jersey 07940.
Richard E. Hanson, Jr., Trustee. Headmaster, Lawrence Country Day
School--Woodmere Academy, Woodmere, New York; prior to July 1, 1990,
Headmaster
of Woodmere Academy. His address is 336 Woodmere Boulevard, Woodmere, New York
11598.
Heath B. McLendon, Chairman of the Board and Investment Officer.
Executive
Vice President of Smith Barney Shearson and Chairman of Smith Barney Strategy
Advisers Inc.; prior to July 1993. Senior Executive Vice President of Shearson
Lehman Brothers Inc. ("Shearson Lehman Brothers"); Vice Chairman of Shearson
Asset Management, a member of the Asset Management Group of Shearson Lehman
Brothers; a Director of PanAgora Asset Management, Inc. and PanAgora Asset
Management Limited. His address is Two World Trade Center, New York, New York
10048.
Stephen J. Treadway, President, Executive Vice President and Director of
Smith Barney Shearson; Director and President of Mutual Management Corp. and
Smith, Barney Advisers, Inc.; and Trustee of Corporate Realty Income Trust I.
His address is 1345 Avenue of the Americas, New York, New York 10105.
Madelon DeVoe Talley, Trustee. Author; Governor at Large of the National
Association of Securities Dealers, Inc.; prior to 1985, Chairman of Rothschild
Asset Management Inc., a money management firm. Her address is 876 Park
Avenue,
New York, New York 10021.
EXECUTIVE OFFICERS OF ALL FUNDS EXCEPT STRATEGIC INVESTORS FUND:
Richard P. Roelofs, Executive Vice President. Managing Director of Smith
Barney Shearson; President of Smith Barney Strategic Advisers Inc. ("Strategy
Advisers"); prior to July 1993 Senior Vice President of
2
<PAGE>
Shearson Lehman Brothers; Vice President of Shearson Lehman Investment
Strategy
Advisors Inc. His address is Two World Trade Center, New York, New York 10048.
Frank V. Caruso, Investment Officer prior to July 1993, Managing Director
of Shearson Lehman Advisors. His address is Two World Trade Center, New York,
New York 10048.
Richard A. Crowell, Vice President and Investment Officer. President and
Managing Director of PanAgora Management; Senior Vice President, Boston Safe
Deposit and Trust Company ("Boston Safe"); prior to June 1991, Senior Vice
President, The Boston Company Advisors, Inc. ("Boston Advisors"), The Boston
Company Institutional Investors, Inc. ("III") and The Boston Company, Inc.
("TBC"). His address is 260 Franklin Street, Boston, Massachusetts 02110.
Elaine M. Garzarelli, Vice President and Investment Officer. Managing
Director of Lehman Brothers Inc. ("Lehman Brothers"). Her address is American
Express Tower, World Financial Center, New York, New York 10285.
R. Jay Gerken, Investment Officer prior to July 1993 Managing Director of
Shearson Lehman Advisors. His address is Two World Trade Center, New York, New
York 10048.
Richard T. Wilk, Vice President and Investment Officer. Senior Manager of
Equity Investments of PanAgora Management; prior to June 1991, Vice President
of
Boston Safe, Boston Advisors and Institutional Investors. His address is 260
Franklin Street, Boston, Massachusetts 02110.
Vincent Nave, Treasurer. Senior Vice President of Boston Advisors and
Boston Safe. His address is One Boston Place, Boston, Massachusetts 02108.
Francis J. McNamara, III, Secretary. Senior Vice President and General
Counsel of Boston Advisors; prior to June 1989, Vice President and Associate
Counsel of Boston Advisors. His address is One Boston Place, Boston,
Massachusetts 02108.
EXECUTIVE OFFICERS AND ADMINISTRATIVE PERSONNEL OF STRATEGIC INVESTORS FUND:
Richard P. Roelofs, President, Treasurer and Secretary.
Vincent Nave, Financial Administrator.
Francis J. McNamara, III, Legal Administrator.
William W. Carter, Jr., Investment Administrator. Vice President of
Boston
Advisors; Executive Vice President of III; President of The Boston Company of
Southern California. His address is 300 S. Grand, Suite 1200, Los Angeles,
California 90071.
John B. Fullerton, Investment Administrator. Vice President of Boston
Advisors; Senior Vice President of III, The Boston Company of Southern
California and The Boston Company Income Securities Advisors. His address is
100
Drake's Landing Road, Suite 330, Greenbrae, California 94904.
Guy R. Scott, Vice President and Investment Officer. Vice President of
Boston Advisors; Senior Vice President of III; prior to December 1990, Vice
President of III and a Portfolio Manager. His address is One Boston Place,
Boston, Massachusetts 02108.
3
<PAGE>
Patricia A. Zuch, Vice President and Investment Officer. Vice President
and
Assistant Portfolio Manager of III; Vice President of The Boston Company of
Southern California. Her address is 100 Drake's Landing Road, Suite 330,
Greenbrae, California 94904.
Each Trustee also serves as a trustee, director and/or general partner of
certain other mutual funds for which Smith Barney Shearson serves as
distributor. Salomon Management, Strategy Advisors and PanAgora Management
(collectively referred to as the "Advisers" and individually referred to as an
"Adviser") are "affiliated persons" of the Trust as defined in the 1940 Act by
virtue of their positions as advisers and/or sub-investment advisers to the
Funds.
Remuneration. No director, officer or employee of Smith Barney Shearson,
or any affiliate of Smith Barney Shearson or the Advisers will receive any
compensation from the Trust for serving as an officer of a Fund or Trustee of
the Trust. The Trust pays each Trustee who is not a director, officer or
employee of Smith Barney Shearson, the Advisers or any of their affiliates a
fee
of $6,000 per annum plus $1,500 per meeting attended and reimburses them for
travel and out-of-pocket expenses. For the fiscal year ended January 31, 1994,
such fees and expenses totalled $ .
INVESTMENT ADVISERS AND ADMINISTRATOR
Greenwich Street Advisors serves as investment adviser to Growth and
Income
Fund pursuant to a written agreement (the "Advisory Agreement"), which was
first
approved by the Trust's Board of Trustees, including a majority of the
Trustees
who are not "interested persons" of the Trust or Greenwich Street Advisors
("Independent Trustees") on August 4, 1993. Greenwich Street Advisors pays the
salary of any officer and employee who is employed by both it and the Trust.
Greenwich Street Advisors bears all expenses in connection with the
performance
of its services. Certain of the services provided by Greenwich Street Advisors
under the Advisory Agreement are described in the Prospectus under "Management
of the Trust and the Fund." Greenwich Street Advisors is a division of Mutual
Management Corp., which is controlled by Smith Barney Shearson Holdings Inc.
("Holdings"). Holdings is a wholly owned subsidiary of The Travelers Inc.
("Travelers").
As compensation for Greenwich Street Advisors services rendered to Growth
and Income Fund, the Fund pays a fee computed daily and paid monthly at the
annual rate of .45% of the value of the average daily net assets of the Fund.
Boston Advisors serves as investment adviser and administrator to
Strategic
Investors Fund pursuant to separate written agreements dated May 22, 1993,
which
were most recently approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, on October , 1993. Boston Advisors
serves as administrator to Sector Analysis Fund and Growth and Income Fund
pursuant to separate written agreements (the "Administration Agreements"),
which
was most recently approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, on October , 1993. Prior to May 22,
1993, Boston Advisors served as sub-investment adviser to Growth and Income
Fund. Boston Advisors is a wholly owned subsidiary of TBC, a financial
services
holding company, which is a wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Certain of the services provided to the Funds by Boston Advisors
are
described in the Prospectuses under "Management of the Trust and the Fund." In
addition to those services, Boston Advisors maintains office facilities for
each
Fund, furnishes each Fund with statistical and research data, clerical help
and
accounting, data processing, bookkeeping, internal auditing and legal
4
<PAGE>
services and certain other services required by the Funds, prepares reports to
the Funds' shareholders and prepares tax returns, reports to and filings with
the Securities and Exchange Commission (the "SEC") and state Blue Sky
authorities. Boston Advisors bears all expenses in connection with the
performance of its services.
As compensation for Boston Advisors' services rendered to the Funds, the
Trust pays a fee computed daily and paid monthly at the annual rates of: .75%
of
the value of the average daily net assets of Strategic Investors Fund; .20% of
the value of the average daily net assets of Sector Analysis Fund; and .20% of
the value of the average daily net assets of Growth and Income Fund.
Strategy Advisers serves as investment adviser to Sector Analysis Fund
pursuant to a written agreement (the "Strategy Advisery Agreement"), which was
most recently approved by the Trust's Board of Trustees, including a majority
of
the Independent Trustees, on . Strategy Advisers is a
wholly
owned subsidiary of Holdings. Certain of the services provided by Strategy
Advisors under the Strategy Advisory Agreement are described in the Prospectus
under "Management of the Trust and the Fund."
As compensation for Strategy Advisers' services rendered to Sector
Analysis
Fund, the Fund pays a fee computed daily and paid monthly at the annual rate
of
.40% of the value of the Fund's average daily net assets.
PanAgora Management serves as sub-investment adviser to Sector Analysis
Fund pursuant to a written agreement (the "PanAgora Sub-Advisory Agreement"),
which was most recently approved by the Trust's Board of Trustees, including a
majority of the Independent Trustees, on . Fifty percent
of
the outstanding voting stock of PanAgora Management is owned by Nippon Life
Insurance Company and fifty percent is owned by Lehman Brothers. Lehman
Brothers
is a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Lehman
Holdings"). American Express Company owns 100% of Lehman Holdings issued and
outstanding common stock, which represents approximately 92% of Holdings'
voting
stock. The remainder of Holdings voting stock is owned by Nippon Life
Insurance
Company. Certain of the services provided by PanAgora Management under the
PanAgora Sub-Advisory Agreement are described in Sector Analysis Fund's
Prospectus under "Management of the Trust and Fund."
As compensation for PanAgora Management's services rendered to Sector
Analysis Fund, the Fund pays a fee computed daily and paid monthly at the
annual
rate of .20% of the value of the Fund's average daily net assets.
Each of the Funds' Advisers pays the salaries of all officers and
employees
who are employed by both it and the Trust, and maintains office facilities for
the Funds. Each of the service providers also bears all expenses in connection
with the performance of its services under its agreement relating to a Fund.
For the fiscal years ended January 31, 1994, 1993 and 1992, the Funds
paid
investment advisory and sub-investment advisory and/or administration fees to
their respective Advisers, sub-investment advisers and administrator as
follows:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
FISCAL YEAR ENDED
JANUARY 31,
- ----------------------
1994 1993
- ---- ----
<S>
<C> <C>
Investment Advisory fees......................................................
$ $ 25,070
Sub-Investment Advisory and/or
Administration fees.........................................................
11,142
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STRATEGIC INVESTORS FUND
SECTOR ANALYSIS FUND
FISCAL YEAR ENDED JANUARY 31,
FISCAL YEAR ENDED JANUARY 31,
----------------------------------
- ------------------------------
1994 1993 1992
1994 1993 1992
---- ---- ----
- ---- ---- ----
<S> <C> <C> <C>
<C> <C> <C>
Investment Advisory fees....... $ $1,466,635 $1,180,350
$ $755,175 $ 706,308
Sub-Investment Advisory and/or
Administration fees.......... -- -- --
- -- -- --
Sub-Investment Advisory fees... -- --
- -- 377,588 353,153
Administration fees............ 532,668 429,218
377,588 353,153
</TABLE>
Each Adviser, sub-investment adviser and/or administrator has agreed that
if in any fiscal year the aggregate expenses of the Fund it serves (including
fees payable pursuant to its agreement with respect to the Fund, but excluding
interest, taxes, brokerage, fees paid pursuant to the Trust's services and
distribution plan, and, if permitted by the relevant state securities
commissions, extraordinary expenses) exceed the expense limitation of any
state
having jurisdiction over the Fund, the Adviser and administrator, to the
extent
required by state law, will reduce their fees to the Fund by the amount of
such
excess expense, such amount to be allocated between or among them in the same
proportion as their respective fees bear to the combined fees for investment
advice and administration. Such fee reduction, if any, will be estimated and
reconciled on a monthly basis. The most restrictive state expense limitation
currently applicable to any Fund requires a reduction of fees in any year that
such expenses exceed 2.5% of the Fund's first $30 million of average net
assets,
2% of the next $70 million of average net assets and 1.5% of the remaining
average net assets.
Smith Barney Shearson serves as asset allocation consultant to Strategic
Investors Fund pursuant to a written agreement with the Trust, under which
Smith
Barney Shearson provides the Fund with its conclusions concerning the portion
of
a model portfolio's assets that should be invested in equity, fixed-income and
money market instruments and gold securities in light of current economic and
market conditions. Strategic Investors Fund does not pay any fee to Smith
Barney
Shearson for performing this service, and Smith Barney Shearson bears all
expenses in connection with providing this service.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Trust: Stroock & Stroock &
Lavan serves as counsel to the Trust's Independent Trustees.
Coopers & Lybrand, independent accountants, One Post Office Square,
Boston,
Massachusetts 02109, serve as auditors of the Funds and render an opinion on
each Fund's financial statements annually.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objectives of the Funds and the
policies
employed to achieve those objectives. This section contains supplemental
information concerning the types of securities and other instruments in which
the Funds may invest, the investment policies and portfolio strategies the
Funds
may utilize and certain risks attendant to such investments, policies and
strategies. There can be no assurance that the respective investment
objectives
of the Funds will be achieved.
United States Government Securities (All Funds). United States
government
securities include debt obligations of varying maturities issued or guaranteed
by the United States government or its agencies or
6
<PAGE>
instrumentalities ("U.S. government securities"). Direct obligations of the
United States Treasury include a variety of securities that differ in their
interest rates, maturities and dates of issuance.
U.S. government securities include not only direct obligations of the
United States Treasury, but also include securities issued or guaranteed by
the
Federal Housing Administration, Federal Financing Bank, Export-Import Bank of
the United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association,
Maritime
Administration, Resolution Trust Corporation, Tennessee Valley Authority,
District of Columbia Armory Board, Student Loan Marketing Association and
various institutions that previously were or currently are part of the Farm
Credit System (which has been undergoing a reorganization since 1987). Because
the United States government is not obligated by law to provide support to an
instrumentality that it sponsors, a Fund will invest in obligations issued by
such an instrumentality only if the Fund's Adviser determines that the credit
risk with respect to the instrumentality does not make its securities
unsuitable
for investment by the Fund.
Venture Capital Investments (Strategic Investors Funds). Strategic
Investors Fund may invest up to 5% of its total assets in venture capital
investments, that is, new and early stage companies whose securities are not
publicly traded. Venture capital investments may present significant
opportunities for capital appreciation but involve a high degree of business
and
financial risk that can result in substantial losses. The disposition of U.S.
venture capital investments, which may include limited partnership interests,
normally would be restricted under Federal securities laws. Generally,
restricted securities may be sold only in privately negotiated transactions or
in public offerings registered under the Securities Act of 1933, as amended.
The
Fund also may be subject to restrictions contained in the securities laws of
other countries in disposing of portfolio securities. As a result of these
restrictions, the Fund may be unable to dispose of such investments at times
when disposal is deemed appropriate due to investment or liquidity
considerations; alternatively, the Fund may be forced to dispose of such
investments at less than fair market value. Where registration is required,
the
Fund may be obligated to pay part or all of the expenses of such registration.
Lending of Portfolio Securities. Each Fund has the ability to lend
portfolio securities to brokers, dealers and other financial organizations.
These loans, if and when made, may not exceed 20% of a Fund's total assets
taken
at value. A Fund will not lend portfolio securities to Smith Barney Shearson
unless it has applied for and received specific authority to do so from the
SEC.
Loans of portfolio securities will be collateralized by cash, letters of
credit
or U.S. government securities that are maintained at all times in a segregated
account in an amount equal to 100% of the current market value of the loaned
securities. From time to time, a Fund may pay a part of the interest earned
from
the investment of collateral received for securities loaned to the borrower
and/or a third party that is unaffiliated with the Fund and that is acting as
a
"finder."
By lending its securities, a Fund can increase its income by continuing
to
receive interest on the loaned securities as well as by either investing the
cash collateral in short-term instruments or obtaining yield in the form of
interest paid by the borrower when U.S. government securities are used as
collateral. A Fund will comply with the following conditions whenever its
portfolio securities are loaned: (a) the Fund must receive at least 100% cash
collateral or equivalent securities from the borrower; (b) the borrower must
increase such collateral whenever the market value of the securities loaned
rises above the level of such collateral; (c) the Fund must be able to
terminate
the loan at any time; (d) the Fund must receive reasonable interest on the
loan,
as well as any dividends, interest or other distribution on the loaned
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securities, and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting rights
on
the loaned securities may pass to the borrower, provided, however, that if a
material event adversely affecting the investment in the loaned securities
occurs, the Trust's Board of Trustees must terminate the loan and regain the
right to vote the securities. The risks in lending portfolio securities, as
with
other extensions of secured credit, consist of a possible delay in receiving
additional collateral or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially. Loans will be
made to firms deemed by each Fund's Adviser to be of good standing and will
not
be made unless, in its judgment, the consideration to be earned from such
loans
would justify the risk.
Options on Securities (All Funds). Strategic Investors Fund may write
covered call options and enter into closing transactions with respect thereto.
Sector Analysis Fund may purchase put and write call options on securities
that
are not held by the Fund and that are issued by companies in sectors
designated
as "unattractive" by its Adviser. In addition, Sector Analysis Fund only will
purchase put and write call options listed on national securities exchanges
and
will not purchase put or write call options traded over the counter.
The principal reason for writing covered call options on securities is to
attempt to realize, through the receipt of premiums, a greater return than
would
be realized on the securities alone. In return for a premium, the writer of a
covered call option forfeits the right to any appreciation in the value of the
underlying security above the strike price for the life of the option (or
until
a closing purchase transaction can be effected). Nevertheless, the call writer
retains the risk of a decline in the price of the underlying security. The
size
of the premiums a Fund may receive may be adversely affected as new or
existing
institutions, including other investment companies, engage in or increase
their
option-writing activities.
Options written by the Funds normally will have expiration dates between
one and nine months from the date they are written. The exercise price of the
options may be below ("in-the-money"), equal to ("at-the-money"), or above
("out-of-the-money"), the market values of the underlying securities at the
times the options are written. A Fund may write (a) in-the-money call options
when its Adviser expects that the price of the underlying security will remain
flat or decline moderately during the option period, (b) at-the-money call
options when its Adviser expects that the price of the underlying security
will
remain flat or advance moderately during the option period and (c)
out-of-the-money call options when its Adviser expects that the price of the
underlying security may increase but not above a price equal to the sum of the
exercise price plus the premiums received from writing the call option. In any
of the preceding situations, if the market price of the underlying security
declines and the security is sold at this lower price, the amount of any
realized loss will be offset wholly or in part by the premium received.
So long as the obligation of a Fund as the writer of an option continues,
the Fund may be assigned an exercise notice by the broker-dealer through which
the option was sold requiring the Fund to deliver the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. A Fund can
no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice. To secure its obligation to deliver the
underlying security when it writes a call option, a Fund will be required to
deposit in escrow the underlying security or other assets in accordance with
the
rules of the Options Clearing Corporation (the "Clearing Corporation") and of
the domestic securities exchange on which the option is written.
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<PAGE>
An option position may be closed out only where there exists a secondary
market for an option of the same series on a securities exchange or in the
over-the-counter market. Strategic Investors Fund expects to write options
only
on domestic securities exchanges.
A Fund may realize a profit or loss upon entering into a closing
transaction. In cases in which a Fund has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the
premium
received upon writing the original option and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when Sector Analysis Fund has purchased an option
and engage in a closing sale transaction, whether the Fund realizes a profit
or
loss will depend upon whether the amount received in the closing sale
transaction is more or less than the premium the Fund initially paid for the
original option plus the related transaction costs.
Although Sector Analysis Fund generally will purchase or write, and
Strategic Investors Fund generally will write, only those options for which
their respective Advisers believe there is an active secondary market so as to
facilitate closing transactions, there is no assurance that sufficient trading
interest to create a liquid secondary market on a securities exchange will
exist
for any particular option or at any particular time, and for some options no
such secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, have
at
times rendered certain of the facilities of the Clearing Corporation and the
domestic securities exchanges inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types
of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that otherwise may interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, a Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.
Securities exchanges have established limitations governing the maximum
number of calls and puts of each class that may be held or written, or
exercised
within certain time periods, by an investor or group of investors acting in
concert (regardless of whether the options are written on the same or
different
national securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Funds and
other clients of their respective Advisers and certain of their affiliates may
be considered to be such a group. A securities exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose certain other sanctions.
In the case of options written by a Fund that are deemed covered by
virtue
of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stocks with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in
accordance with an exercise notice. In these instances, a Fund may purchase or
temporarily borrow the underlying securities for purposes of physical
delivery.
By so doing, the Fund will not bear any market risk because the Fund will have
the absolute right to receive from the issuer of the underlying securities an
equal number of shares to replace the borrowed stock, but the Fund may incur
additional transaction costs or interest expense in connection with any such
purchase or borrowing.
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<PAGE>
Stock Index Options (Sector Analysis Fund). Sector Analysis Fund may
purchase put and call options and write call options on domestic stock indexes
listed on domestic exchanges in order to realize its investment objective of
capital appreciation or for the purpose of hedging its portfolio. A stock
index
fluctuates with changes in the market values of the stocks included in the
index. Some stock index options are based on a broad market index such as the
New York Stock Exchange Composite Index or the Canadian Market Portfolio
Index,
or a narrower market index such as the Standard & Poor's 100. Indexes also are
based on an industry or market segment such as the American Stock Exchange Oil
and Gas Index or the Computer and Business Equipment Index.
Options on stock indexes are generally similar to options on stock except
that the delivery requirements are different. Instead of giving the right to
take or make delivery of stock at a specified price, an option on a stock
index
gives the holder the right to receive a cash "exercise settlement amount"
equal
to (a) the amount, if any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of exercise, multiplied by
(b)
a fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be equal to such
difference between the closing price of the index and the exercise price of
the
option expressed in dollars or a foreign currency, as the case may be, times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging
technique will depend upon the extent to which price movements in the portion
of
the securities portfolio of Sector Analysis Fund correlate with price
movements
of the stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular
stock,
whether Sector Analysis Fund will realize a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by Sector Analysis Fund of options on stock
indexes will be subject to its Adviser's ability to predict correctly
movements
in the direction of the stock market generally or of a particular industry.
This
requires different skills and techniques than predicting changes in the price
of
individual stocks.
Futures Contracts and Related Options (Sector Analysis Fund). Sector
Analysis Fund may invest in stock index and interest rate futures contracts
and
options on interest rate futures contracts that are traded on a domestic
exchange or board of trade. These investments may be made by Sector Analysis
Fund solely for the purpose of hedging against changes in the value of its
portfolio securities due to anticipated changes in interest rates and market
conditions and not for purposes of speculation. Sector Analysis Fund is not
permitted to enter into futures and options contracts for which aggregate
initial margin deposits and premiums exceed 5% of the fair market value of its
assets, after taking into account unrealized profits and unrealized losses on
futures contracts into which it has entered.
The purpose of entering into a futures contract by Sector Analysis Fund
is
to protect the Fund from fluctuations in the value of securities or in
interest
rates without actually buying or selling the securities. For example, in the
case of stock index futures contracts, if Sector Analysis Fund anticipates an
increase in the
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<PAGE>
price of stocks that it intends to purchase at a later time, the Fund could
enter into contracts to purchase the stock index (known as taking a "long"
position) as a temporary substitute for the purchase of stocks. If an increase
in the market occurs that influences the stock index as anticipated, the value
of the futures contracts increases and thereby serves as a hedge against
Sector
Analysis Fund's not participating in a market advance. Sector Analysis Fund
then
may close out the futures contracts by entering into offsetting futures
contracts to sell the stock index (known as taking a "short" position) as it
purchases individual stocks. Or, in the case of interest rate futures
contracts,
if Sector Analysis Fund owns long-term U.S. Treasury bonds and interest rates
are expected to increase, the Fund may take a short position in interest rate
futures contracts. Taking such a position would have much the same effect as
Sector Analysis Fund's selling some of the long-term bonds in its portfolio.
If
interest rates increase as anticipated, the value of the long-term U.S.
Treasury
bonds would decline, but the value of Sector Analysis Fund's futures contracts
will increase at approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it may have otherwise. Of course,
because the value of portfolio securities will far exceed the value of the
futures contracts entered into by Sector Analysis Fund, an increase in the
value
of the futures contracts can only mitigate--but not totally offset--the
decline
in value of the portfolio. If, on the other hand, Sector Analysis Fund held
cash
reserves and interest rates are expected to decline, the Fund may enter into
futures contracts for the purchase of long-term U.S. Treasury bonds in
anticipation of later closing out the futures position and purchasing the
bonds.
Sector Analysis Fund can accomplish similar results by buying securities with
long maturities and selling securities with short maturities. But by using
futures contracts as an investment tool to reduce risk, given the greater
liquidity in the futures market than in the cash market, it may be possible to
accomplish the same result more easily and more quickly.
No consideration will be paid or received by Sector Analysis Fund upon
the
purchase or sale of a futures contract. Initially, Sector Analysis Fund will
be
required to deposit with the broker an amount of cash or cash equivalents
equal
to approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the contract is traded and
brokers or members of such board of trade may charge a higher amount). This
amount is known as "initial margin" and is in the nature of a performance bond
or good faith deposit on the contract which is returned to Sector Analysis
Fund,
upon termination of the futures contract, assuming all contractual obligations
have been satisfied. Subsequent payments, known as "variation margin," to and
from the broker, will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short
positions
in the futures contract more or less valuable, a process known as
"marking-to-market." In addition, when Sector Analysis Fund enters into a long
position in a futures contract or an option on a futures contract, it must
deposit into a segregated account with the Trust's custodian an amount of cash
or cash equivalents equal to the total market value of the underlying futures
contract, less amounts held in the Fund's commodity brokerage account at its
broker. At any time prior to the expiration of a futures contract, Sector
Analysis Fund may elect to close the position by taking an opposite position,
which will operate to terminate the Fund's existing position in the contract.
There are several risks in connection with the use of futures contracts
as
a hedging device. Successful use of futures contracts by Sector Analysis Fund
is
subject to the ability of PanAgora Management, its sub-investment adviser, to
predict correctly movements in the stock market or in the direction of
interest
rates. These predictions involve skills and techniques that may be different
from those involved in the management of investments in securities. In
addition,
there can be no assurance that there will be a perfect correlation between
movements in the price of the securities underlying the futures contract and
movements
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<PAGE>
in the price of the securities that are the subject of the hedge. A decision
of
whether, when and how to hedge involves the exercise of skill and judgment,
and
even a well-conceived hedge may be unsuccessful to some degree because of
market
behavior or unexpected trends in market behavior or interest rates.
Positions in futures contracts may be closed out only on the exchange on
which they were entered into (or through a linked exchange) and no secondary
market exists for those contracts. In addition, although Sector Analysis Fund
intends to enter into futures contracts only if there is an active market for
the contracts, there is no assurance that an active market will exist for the
contracts at any particular time. Most futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit. It is
possible that futures contract prices could move to the daily limit for
several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, and in the event of adverse price
movements,
Sector Analysis Fund would be required to make daily cash payments of
variation
margin; in such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may partially or completely offset losses on
the
futures contract. As described above, however, no assurance can be given that
the price of the securities being hedged will correlate with the price
movements
in a futures contract and thus provide an offset to losses on the futures
contract.
If Sector Analysis Fund has hedged against the possibility of an increase
in interest rates adversely affecting the value of securities held in its
portfolio and rates decrease instead, the Fund will lose part or all of the
benefit of the increased value of securities which it has hedged because it
will
have offsetting losses in its futures positions. In addition, in such
situations, if Sector Analysis Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements at a time when it may
be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest
rates.
An option on an interest rate futures contract, as contrasted with the
direct investment in such a contract, gives the purchaser the right, in return
for the premium paid, to assume a position in an interest rate futures
contract
at a specified exercise price at any time prior to the expiration date of the
option. Upon exercise of an option, the delivery of the futures position by
the
writer of the option to the holder of the option will be accompanied by
delivery
of the accumulated balance in the writer's futures margin account, which
represents the amount by which the market price of the futures contract
exceeds,
in the case of a call, or is less than, in the case of a put, the exercise
price
of the option on the futures contract. The potential loss related to the
purchase of an option on futures contracts is limited to the premium paid for
the option (plus transaction costs). Because the value of the option purchased
is fixed at the point of sale, there are no daily cash payments by the
purchaser
to reflect changes in the value of the underlying contract; however, the value
of the option does change daily and that change would be reflected in the net
asset value of Sector Analysis Fund.
In addition to the risks that apply to all options transactions, there
are
several special risks relating to options on interest rate futures contracts.
These risks include the lack of assurance of perfect correlation between the
price movements in the options on interest rate futures, on the one hand, and
price movements in the portfolio securities that are the subject to the hedge,
on the other hand. In addition, Sector Analysis Fund's writing of put and call
options on interest rate futures will be based upon predictions as to
anticipated interest rate trends, which predictions could prove to be
inaccurate. The ability to establish and
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<PAGE>
close out positions on such options will be subject to the maintenance of a
liquid market, and there can be no assurance that such a market will be
maintained or that closing transactions will be effected. In addition, there
are
risks specific to writing (as compared to purchasing) such options. While
Sector
Analysis Fund's risk of loss with respect to purchased put and call options on
interest rate futures contracts is limited to the premium paid for the option
(plus transaction costs), when the Fund writes such an option it is obligated
to
a broker for the payment of initial and variation margin.
Money Market Instruments. (All Funds). Subject to the restrictions noted
in the Prospectuses, the money market instruments in which the Funds may
invest
are: U.S. government securities; certificates of deposit ("CDs"), time
deposits
("TDs") and bankers' acceptances issued by domestic banks (including their
branches located outside the United States and subsidiaries located in
Canada),
domestic branches of foreign banks, savings and loan associations and similar
institutions; high grade commercial paper; and repurchase agreements with
respect to the foregoing types of instruments. The following is a more
detailed
description of such money market instruments.
Bank Obligations. CDs are short-term, negotiable obligations of
commercial
banks; TDs are non-negotiable deposits maintained in banking institutions for
specified periods of time at stated interest rates; and bankers' acceptances
are
time drafts drawn on commercial banks by borrowers usually in connection with
international transactions.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to be insured by the Federal Deposit Insurance
Corporation (the "FDIC"). Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state banks are
insured
by the FDIC (although such insurance may not be of material benefit to a Fund,
depending upon the principal amount of CDs of each bank held by the Fund) and
are subject to federal examination and to a substantial body of Federal law
and
regulation. As a result of governmental regulations, domestic branches of
domestic banks, among other things, generally are required to maintain
specified
levels of reserves, and are subject to other supervision and regulation
designed
to promote financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may
be general obligations of the parent bank in addition to the issuing branch,
or
may be limited by the terms of a specific obligation and governmental
regulations. Such obligations are subject to different risks than are those of
domestic banks or domestic branches of foreign banks. These risks include
foreign economic and political developments, foreign governmental restrictions
that may adversely affect payment of principal and interest on the
obligations,
foreign exchange controls and foreign withholding and other taxes on interest
income. Foreign branches of domestic banks are not necessarily subject to the
same or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank than about a
domestic bank. CDs issued by wholly owned Canadian subsidiaries of domestic
banks are guaranteed as to repayment of principal and interest (but not as to
sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by Federal and
13
<PAGE>
state regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may or may not be subject to reserve
requirements
imposed by the Federal Reserve System or by the state in which the branch is
located if the branch is licensed in that state. In addition, branches
licensed
by the Comptroller of the Currency and branches licensed by certain states
("State Branches") may or may not be required to: (a) pledge to the regulator
by
depositing assets with a designated bank within the state, an amount of its
assets equal to 5% of its total liabilities; and (b) maintain assets within
the
state in an amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies or
branches within the state. The deposits of State Branches may not necessarily
be
insured by the FDIC. In addition, there may be less publicly available
information about a domestic branch of a foreign bank than about a domestic
bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches of
foreign banks, each Fund's Adviser will carefully evaluate such investments on
a
case-by-case basis.
Savings and loan associations, the CDs of which may be purchased by the
Funds, are supervised by the Office of Thrift Supervision and are insured by
the
Savings Association and Insurance Fund. As a result, such savings and loan
associations are subject to regulation and examination.
Commercial Paper. Commercial paper is a short-term, unsecured negotiable
promissory note of a domestic or foreign company. A Fund may invest in
short-term debt obligations of issuers that at the time of purchase are rated
A-2, A-1 or A-1+ by Standard & Poor's Corporation ("S&P") or Prime-2 or Prime-
1
by Moody's Investors Service, Inc. ("Moody's") or, if unrated, are issued by
companies having an outstanding unsecured debt issue currently rated within
the
two highest ratings of S&P or Moody's. A discussion of S&P and Moody's rating
categories appears in the Appendix to this Statement of Additional
Information.
A Fund also may invest in variable rate master demand notes, which typically
are
issued by large corporate borrowers providing for variable amounts of
principal
indebtedness and periodic adjustments in the interest rate according to the
terms of the instrument. Demand notes are direct lending arrangements between
the Fund and an issuer, and are not normally traded in a secondary market. A
Fund, however, may demand payment of principal and accrued interest at any
time.
In addition, while demand notes generally are not rated, their issuers must
satisfy the same criteria as those set forth above for issuers of commercial
paper. Each Fund's Adviser will consider the earning power, cash flow and
other
liquidity ratios of issuers of demand notes and continually will monitor their
financial ability to meet payment on demand.
Convertible Securities. The Funds may invest in convertible securities.
Convertible securities are fixed-income securities that may be converted at
either a stated price or stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar to both fixed-
income
and equity securities. Although to a lesser extent than with fixed-income
securities generally, the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion feature, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stocks and, therefore, also will react
to
variations in the general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis, and thus may not experience market value declines to the same extent as
the underlying common stock. When the market price of the underlying common
stock increases, the prices of the
14
<PAGE>
convertible securities tend to rise as a reflection of the value of the
underlying common stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk than
investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may
default
on their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to
benefit
from increases in the market price of the underlying common stock. There can
be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible
securities.
Preferred Stock. Strategic Investors and Sector Analysis Funds may
invest
in preferred stocks. Preferred stocks, like debt obligations, are generally
fixed-income securities. Shareholders of preferred stocks normally have the
right to receive dividends at a fixed rate when and as declared by the
issuer's
board of directors, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on the preferred stock may
be
cumulative, and all cumulative dividends usually must be paid prior to common
stockholders receiving any dividends. Preferred stock dividends must be paid
before common stock dividends and for that reason preferred stocks generally
entail less risk than common stocks. Upon liquidation, preferred stocks are
entitled to a specified liquidation preference, which is generally the same as
the par or stated value, and are senior in right of payment to common stock.
Preferred stocks are, however, equity securities in the sense that they do not
represent a liability of the issuer and therefore do not offer as great a
degree
of protection of capital or assurance of continued income as investments in
corporate debt securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of
the
same issuer.
American, European and Continental Depositary Receipts (Strategic
Investors
Fund). The assets of Strategic Investors Fund may be invested in the
securities
of foreign issuers in the form of American Depositary Receipts ("ADRs") and
European Depositary Receipts ("EDRs"). These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are U.S. dollar-denominated receipts typically issued by a
domestic bank or trust company that evidence ownership of underlying
securities
issued by a foreign corporation. EDRs, which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-U.S. banks and trust companies that evidence ownership of
either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets and EDRs and CDRs in bearer form
are
designed for use in European securities markets.
15
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INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 8 below have been adopted by
the
Trust with respect to each Fund as fundamental policies. Under the 1940 Act, a
fundamental policy of a Fund may not be changed without the vote of a majority
of the outstanding voting securities of the Fund, as defined in the 1940 Act.
Such majority is defined as the lesser of (a) 67% or more of the shares
present
at the meeting, if the holders of more than 50% of the outstanding shares of
the
Fund are present or represented by proxy, or (b) more than 50% of the
outstanding shares. Investment restrictions 9 through 18 may be changed by
vote
of a majority of the Trust's Board of Trustees at any time.
The investment policies adopted by the Trust prohibit a Fund from:
1. Purchasing the securities of any issuer (other than U.S.
government securities) if as a result more than 5% of the value of the
Fund's total assets would be invested in the securities of the issuer,
except that up to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.
2. Purchasing more than 10% of the voting securities of any one
issuer, or more than 10% of the securities of any class of any one
issuer;
provided that this limitation shall not apply to investments in U.S.
government securities.
3. Borrowing money, except that a Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the meeting
of
redemption requests that might otherwise require the untimely disposition
of securities, in an amount not to exceed 10% of the value of the Fund's
total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing
is made. Whenever borrowings exceed 5% of the value of the total assets
of
a Fund, the Fund will not make any additional investments.
4. Underwriting the securities of other issuers, except insofar as
the Fund may be deemed an underwriter under the Securities Act of 1933,
as
amended, by virtue of disposing of portfolio securities.
5. Purchasing or selling real estate or interests in real estate,
except that the Fund may purchase and sell securities that are secured by
real estate and may purchase securities issued by companies that invest
or
deal in real estate.
6. Investing in commodities, except that (a) Sector Analysis Fund
may
invest in futures contracts and options on futures contracts as described
in the Fund's Prospectus and this Statement of Additional Information,
and
(b) upon 60 days' notice given to its shareholders, Strategic Investors
Fund may engage in hedging transactions involving futures contracts and
related options, including foreign and domestic stock index futures
contracts and financial futures contracts.
7. Making loans to others, except through the purchase of qualified
debt obligations, loans of portfolio securities and the entry into
repurchase agreements.
8. Purchasing any securities (other than U.S. government
securities)
which would cause more than 25% of the value of the Fund's total assets
at
the time of purchase to be invested in the securities of issuers
conducting
their principal business activities in the same industry.
16
<PAGE>
9. Purchasing securities on margin, except that Sector Analysis
Fund
may sell securities short and any Fund may obtain any short-term credits
necessary for the clearance of purchases and sales of securities. For
purposes of this restriction, the deposit or payment of initial or
variation margin in connection with futures contracts or related options
will not be deemed to be a purchase of securities on margin by any Fund
permitted to engage in transactions in futures contracts or related
options.
10. Making short sales of securities or maintaining a short
position
except that Sector Analysis Fund may sell securities short and obtain any
short-term credits necessary for the clearance of purchases and sales of
securities.
11. Pledging, hypothecating, mortgaging or otherwise encumbering
more
than 10% of the value of the Fund's total assets. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with the
writing of covered call options and (b) collateral arrangements with
respect to (i) the purchase and sale of options on stock indexes and (ii)
initial or variation margin for futures contracts, will not be deemed to
be
pledges of a Fund's assets.
12. Investing in oil, gas or other mineral exploration or
development
programs, except that the Fund may invest in the securities of companies
that invest in or sponsor those programs.
13. Investing in securities of other investment companies
registered
or required to be registered under the 1940 Act, except as they may be
acquired as part of a merger, consolidation, reorganization, acquisition
of
assets or an offer of exchange.
14. Writing or selling puts, calls, straddles, spreads or
combinations thereof, except that (a) Strategic Investors Fund may write
covered call options, and (b) Sector Analysis Fund will not write or sell
puts, calls, straddles or combinations thereof, except as described in
the
Prospectus and this Statement of Additional Information.
15. Purchasing restricted securities, illiquid securities (such as
repurchase agreements with maturities in excess of seven days) or other
securities that are not readily marketable if more than 10% of the total
assets of the Fund would be invested in such securities. Sector Analysis
Fund will not invest in time deposits maturing in more than seven days
if,
as a result, the Fund's holdings of such time deposits exceed 10% of its
net assets.
16. Purchasing any security if as a result the Fund would then have
more than 10% of its total assets (5% for Sector Analysis Fund) invested
in
securities of companies (including predecessors) that have been in
continuous operation for fewer than three years.
17. Making investments for the purpose of exercising control or
management.
18. Purchasing or retaining securities of any company if, to the
knowledge of the Trust, any of a Fund's officers or Trustees of the Trust
or any officer or director of an Adviser individually owns more than 1/2
of
1% of the outstanding securities of such company and together they own
beneficially more than 5% of such securities.
The Trust may make commitments more restrictive than the restrictions
listed above with respect to a Fund so as to permit the sale of shares of the
Fund in certain states. Should the Trust determine that any such commitment is
no longer in the best interests of a Fund and its shareholders, the Trust will
revoke the commitment by terminating the sale of shares of the Fund in the
relevant state. The percentage limitations contained in the restrictions
listed
above apply at the time of purchases of securities.
17
<PAGE>
PORTFOLIO TURNOVER
The Funds do not intend to seek profits through short-term trading.
Nevertheless, the Funds will not consider turnover rate a limiting factor in
making investment decisions.
Under certain market conditions, a Fund may experience increased
portfolio
turnover as a result of its options activities. For instance, the exercise of
a
substantial number of options written by a Fund (due to appreciation of the
underlying security in the case of call options or depreciation of the
underlying security in the case of put options) could result in a turnover
rate
in excess of 100%. In addition, Strategic Investors Fund may experience
increased portfolio turnover as a result of the asset allocation strategy that
it employs. Sector Analysis Fund's sector strategy and other investment
policies
followed by the Fund may result in frequent shifts among its investments and
in
its experiencing turnover and transaction costs significantly higher than
those
of more conventional mutual funds. The portfolio turnover rate of a Fund is
calculated by dividing the lesser of purchases or sales of portfolio
securities
for the year by the monthly average value of portfolio securities. Securities
with remaining maturities of one year or less on the date of acquisition are
excluded from the calculation.
For the fiscal years ended January 31, 1994 and 1993, the portfolio
turnover rates of the Funds were as follows:
<TABLE>
<CAPTION>
1994
1993
----
- ----
<S> <C>
<C>
Growth and Opportunity Fund
21 %
Strategic Investors Fund
93
Sector Analysis Fund
155
Growth and Income Fund
1
</TABLE>
The portfolio turnover rate of Sector Analysis Fund was higher for the
1993
fiscal year than for the 1994 fiscal year due to economic uncertainty that led
to volatility in the U.S. equity markets and a restructuring of the Fund
consistent with the Fund's sector strategy.
PORTFOLIO TRANSACTIONS
Most of the purchases and sales of securities for a Fund, whether transacted
on
a securities exchange or over the counter, will be effected in the primary
trading market for the securities. The primary trading market for a given
security generally is located in the country in which the issuer has its
principal office. Decisions to buy and sell securities for a Fund are made by
its Adviser or sub-investment adviser, which also is responsible for placing
these transactions, subject to the overall review of the Trust's Trustees.
Although investment decisions for each Fund are made independently from those
of
the other accounts managed by its Adviser, investments of the type the Fund
may
make also may be made by those other accounts. When a Fund and one or more
other
accounts managed by its Adviser are prepared to invest in, or desire to
dispose
of, the same security, available investments or opportunities for sales will
be
allocated in a manner believed by the Adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by a
Fund
or the size of the position obtained or disposed of by the Fund.
Transactions on domestic stock exchanges and some foreign stock exchanges
involve the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. There is
generally no stated commission in the case of securities traded in domestic or
foreign over-the-
18
<PAGE>
counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. The cost of securities purchased from underwriters
includes an underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up
or
mark-down. U.S. government securities are generally purchased from
underwriters
or dealers, although certain newly issued U.S. government securities may be
purchased directly from the United States Treasury or from the issuing agency
or
instrumentality, respectively.
The following table sets forth certain information regarding each Fund's
payment of brokerage commissions:
<TABLE>
<CAPTION>
FISCAL YEAR STRATEGIC
SECTOR
ENDED INVESTORS
ANALYSIS GROWTH AND
JANUARY 31 FUND
FUND INCOME FUND
------------ --------- -----
- --- -----------
<S> <C> <C> <C>
<C>
Total Brokerage Commissions 1992 $217,936
$877,575 *
1993 258,626
639,185 30,915
1994
Commissions paid to 1992 62,521
454,124 *
Smith Barney or 1993 57,354
190,765 2,733
Shearson Lehman Brothers 1994
% of Total Brokerage
Commissions paid to
Smith Barney Shearson 1994
% of Total Transactions
involving Commissions paid
to Shearson Lehman Brothers 1994
<FN>
- ---------------
* The Fund commenced operations on November 6, 1992.
</TABLE>
The total brokerage commissions paid by the Funds for each fiscal year
vary
primarily due to increases or decreases in the Funds' volume of securities
transactions on which brokerage commissions are charged.
In selecting brokers or dealers to execute portfolio transactions on
behalf
of a Fund, the Fund's Adviser or sub-investment adviser seeks the best overall
terms available. In assessing the best overall terms available for any
transaction, each Adviser or sub-investment adviser will consider the factors
the Adviser or sub-investment adviser deems relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and the execution capability of the broker or dealer and the reasonableness of
the commission, if any, for the specific transaction and on a continuing
basis.
In addition, each advisory agreement between the Trust and an Adviser relating
to a Fund authorizes the Adviser, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund,
the
other Funds and/or other accounts over which the Adviser or its affiliates
exercise investment discretion. The fees under the advisory agreements and the
sub-investment advisory agreements relating to the Funds between the Trust and
the Advisers and the sub-investment advisers, respectively, are not reduced by
reason of their receiving such brokerage and research services. The Trust's
Board of Trustees periodically will review the commissions paid by the Funds
to
determine if the
19
<PAGE>
commissions paid over representative periods of time were reasonable in
relation
to the benefits inuring to the Funds.
To the extent consistent with applicable provisions of the 1940 Act and
the
rules and regulations adopted by the SEC thereunder, the Trust's Board of
Trustees has determined that transactions for a Fund may be executed through
Smith Barney Shearson and other affiliated broker-dealers if, in the judgment
of
the Fund's Adviser or sub-investment adviser, the use of such broker-dealer is
likely to result in price and execution at least as favorable as those of
other
qualified broker-dealers, and if, in the transactions, such broker-dealer
charges the Fund a rate consistent with that charged to comparable
unaffiliated
customers in similar transactions. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those cases in
which
better prices and executions may be obtained elsewhere.
To the extent consistent with applicable provisions of the 1940 Act and
the
rules and exemptions adopted by the SEC thereunder, the Board of Trustees has
determined that transactions for a Fund may be executed through Smith Barney
Shearson and other affiliated broker-dealers if, in the judgment of the Fund's
Adviser, the use of such broker-dealer is likely to result in price and
execution at least as favorable as those of other qualified broker-dealers,
and
if, in the transaction, such broker-dealer charges the Fund a rate consistent
with that charged to comparable unaffiliated customers in similar
transactions.
In addition, under rules recently adopted by the SEC, Smith Barney Shearson
may
directly execute such transactions for the Funds on the floor of any national
securities exchange, provided (a) the Board of Trustees has expressly
authorized
Smith Barney Shearson to effect such transactions, and (b) Smith Barney
Shearson
annually advises the Trust of the aggregate compensation it earned on such
transactions. Over-the-counter purchases and sales are transacted directly
with
principal market makers except in those cases in which better prices and
executions may be obtained elsewhere.
The Funds will not purchase any security, including U.S. government
securities, during the existence of any underwriting or selling group relating
thereto of which Smith Barney Shearson is a member, except to the extent
permitted by the SEC. Sector Analysis Fund may use Smith Barney Shearson as a
commodities broker in connection with entering into futures contracts and
commodity options. Smith Barney Shearson has agreed to charge Sector Analysis
Fund commodity commissions at rates comparable to those charged by Smith
Barney
Shearson to its most favored clients for comparable trades in comparable
accounts.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the Prospectuses
applies to purchases made by any "purchaser," which is defined to include the
following: (a) an individual; (b) an individual, his or her spouse and their
children under the age of 21 purchasing shares for his or her own account; (c)
a
trustee or other fiduciary purchasing shares for a single trust estate or
single
fiduciary account; (d) a pension, profit-sharing or other employee benefit
plan
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended
(the "Code"), and qualified employee benefit plans of employers who are
"affiliated persons" of each other within the meaning of the 1940 Act; (e)
tax-exempt organizations enumerated in Section 501(c)(3) or (13) of the Code;
(f) any other organized group of persons, provided that the organization has
been in existence for at least six months and was organized for a purpose
other
than the purchase of investment company securities at a discount; or (g) a
trustee or other professional fiduciary
20
<PAGE>
(including a bank, or an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, as amended) purchasing shares of a Fund for
one
or more trust estates or fiduciary accounts. Purchasers who wish to combine
purchase orders to take advantage of volume discounts on Class A shares should
contact their Smith Barney Shearson Financial Consultants.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedule in the Prospectuses,
apply to any purchase of Class A shares if the aggregate investment in Class A
shares of any Fund and in Class A shares of other funds in the Smith Barney
Shearson Group of Funds that are sold with a sales charge, including the
purchase being made, of any "purchaser" (as defined above) is $25,000 or more.
The reduced sales charge is subject to confirmation of the shareholder's
holdings through a check of appropriate records. The Trust reserves the right
to
terminate or amend the combined right of accumulation at any time after notice
to shareholders. For further information regarding the right of accumulation,
shareholders should contact their Smith Barney Shearson Financial Consultants.
DETERMINATION OF PUBLIC OFFERING PRICE
The Trust offers shares of the Funds to the public on a continuous basis. The
public offering price per Class A share of the Funds is equal to the net asset
value per share at the time of purchase plus a sales charge based on the
aggregate amount of the investment. The public offering price per Class B and
Class D share of a Fund (and Class A share purchases, including applicable
right
of accumulation, equalling or exceeding $1 million), is equal to the net asset
value per share at the time of purchase and no sales charge is imposed at the
time of purchase. A contingent deferred sales charge ("CDSC"), however, is
imposed on certain redemptions of Class B shares, and Class A shares when
purchased in amounts equalling or exceeding $1 million. The method of
computation of the public offering price is shown in the Funds' financial
statements incorporated by reference in their entirety into this Statement of
Additional Information.
REDEMPTION OF SHARES
The right of redemption of shares of a Fund may be suspended or the date of
payment postponed (a) for any period during which the New York Stock Exchange,
Inc. is closed (other than for customary weekend and holiday closings), (b)
when
trading in markets the Fund normally utilizes is restricted, or an emergency
exists, as determined by the SEC, so that disposal of the Fund's investments
or
determination of its net asset value is not reasonably practicable or (c) for
such other periods as the SEC by order may permit for protection of the Fund's
shareholders.
DISTRIBUTIONS IN KIND
If the Trust's Board of Trustees determines that it would be detrimental to
the
best interests of the remaining shareholders of a Fund to make a redemption
payment wholly in cash, the Fund may pay, in accordance with rules adopted by
the SEC, any portion of a redemption in excess of the lesser of $250,000 or 1%
of its net assets by distribution in kind of portfolio securities in lieu of
cash. Portfolio securities issued in a distribution in kind will be readily
marketable, although shareholders receiving distributions in kind may incur
brokerage commissions when subsequently disposing of those securities.
21
<PAGE>
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares with a value of at least $10,000 ($5,000 for
retirement plan accounts) and who wish to receive specific amounts of cash
periodically. Withdrawals of at least $50 monthly may be made under the
Withdrawal Plan by redeeming as many shares of the Funds as may be necessary
to
cover the stipulated withdrawal payment. Any applicable CDSC will not be
waived
on amounts withdrawn by shareholders that exceed 2% per month of the value of
a
shareholder's shares at the time the Withdrawal Plan commences. To the extent
withdrawals exceed dividends, distributions and appreciation of the
shareholder's investment in a Fund, there will be a reduction in the value of
the shareholder's investment and continued withdrawal payments will reduce the
shareholder's investment and may ultimately exhaust it. Withdrawal payments
should not be considered as income from investment in a Fund. Furthermore, as
it
would not generally be advantageous to a shareholder to make additional
investments in a Fund at the same time that he or she is participating in the
Withdrawal Plan, purchases by such shareholders in amounts of less than $5,000
will not ordinarily be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates with
The
Shareholder Services Group, Inc. ("TSSG") as agent for Withdrawal Plan
members.
All dividends and distributions on shares in the Withdrawal Plan are
automatically reinvested at net asset value in additional shares of a Fund.
All
applications for participation in the Withdrawal Plan must be received by TSSG
as Withdrawal Plan agent no later than the eighth day of the month to be
eligible for participation beginning with that month's withdrawal. The
Withdrawal Plan will not be carried over on exchanges between Funds or Classes
of the Funds. A new Withdrawal Plan application is required to establish the
Withdrawal Plan in a new Fund or Class. For additional information,
shareholders
should contact their Smith Barney Shearson Financial Consultants.
DISTRIBUTOR
DISTRIBUTION ARRANGEMENTS
Shares of the Trust are distributed on a best efforts basis by Smith Barney
Shearson as exclusive sales agent of the Trust pursuant to a written agreement
(the "Distribution Agreement"). To compensate Smith Barney Shearson for the
services it provides and for the expense it bears under the Distribution
Agreement, the Trust has adopted a services and distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Trust pays
Smith
Barney Shearson with respect to each Fund a service fee, accrued daily and
paid
monthly, calculated at the annual rate of .25% of the value of the Fund's
average daily net assets attributable to the Fund's Class A, Class B and Class
D
shares. In addition, the Trust pays Smith Barney Shearson a distribution fee
with respect to each Fund's Class B and Class D shares primarily intended to
compensate Smith Barney Shearson for its initial expense of paying Financial
Consultants a commission upon sales of Class B shares. The Class B and Class D
distribution fee is calculated at the annual rate of .75% of the value of a
Fund's average net assets attributable to the shares of that Class. During the
fiscal years ended January 31, 1992, 1993 and 1994, Smith Barney Shearson
received $5,898,000, $5,808,234 and $ , respectively, in Class B
shares from the Trust under the Plan. From the period from November 6, 1992
through January 31, 1994 Smith Barney Shearson received $ under
the Plan from Class D shares. For the 1990, 1991, 1992, 1993 and 1994 fiscal
years, Smith Barney Shearson received $3,464,162, $1,554,000, $851,000,
$ and $ , respectively, representing a
22
<PAGE>
CDSC on redemptions of Class B shares of the Trust. For the 1993 and 1994
fiscal
years, the distribution expenses incurred by Smith Barney Shearson with
respect
to the Class B shares of the Trust, totalled approximately $ and
$ consisting of $ and $ for support services
and
$ and $ to Smith Barney Shearson Financial
Consultants.
Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the Trust's Board of Trustees,
including a majority of the Independent Trustees who have no direct or
indirect
financial interest in the operation of the Plan or in the Distribution
Agreement. The Plan may not be amended to increase the amount of the service
and
distribution fees without shareholder approval, and all material amendments of
the Plan also must be approved by the Trustees and such Independent Trustees
in
the manner described above. The Plan may be terminated with respect to a Class
at any time, without penalty, by vote of a majority of such Independent
Trustees
or by a vote of a majority of the outstanding voting securities of the Class
(as
defined in the 1940 Act). Pursuant to the Plan, Smith Barney Shearson will
provide the Trust's Board of Trustees with periodic reports of amounts
expended
under the Plan and the purpose for which such expenditures were made.
SETTLEMENT OF PURCHASES
Smith Barney Shearson forwards investors' funds for the purchase of shares of
the Funds five business days after placement of purchase orders (the
"settlement
date"). When an investor makes payment before the settlement date, unless
otherwise directed by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Smith Barney Shearson will
benefit from the temporary use of the funds. The investor may designate
another
use for the funds prior to the settlement date such as an investment in a
money
market fund (other than Smith Barney Shearson Money Market Fund) in the Smith
Barney Shearson Group of Funds. If the investor instructs Smith Barney
Shearson
Lehman Brothers to invest the funds in a money market fund in the Smith Barney
Shearson Group of Funds, the amount of the investment will be included as part
of the average daily net assets of both the Fund involved and the Smith Barney
Shearson money market fund. Affiliates of Smith Barney Shearson that serve
these
funds in an investment advisory or administrative capacity will benefit by
receiving fees from both such funds, computed on the basis of their average
daily net assets. The Trust's Board of Trustees has been advised of the
benefits
to Smith Barney Shearson resulting from five-day settlement procedures and
will
take such benefits into consideration when reviewing for continuance the Plan
and the various agreements relating to the Funds.
VALUATION OF SHARES
The Prospectuses discuss the time at which the net asset value of shares of
each
Class is determined for purposes of sales and redemptions. Because of the
differences in distribution fees and Class-specific expenses, the per share
net
asset value of each Class will differ. The following is a description of the
procedures used by the Trust in valuing assets of the Funds.
A security that is listed or traded on more than one exchange is valued
at
the quotation on the exchange determined to be the primary market for such
security. All assets and liabilities initially expressed in foreign currency
values will be converted into U.S. dollar values at the mean between the bid
and
offered quotations of such currencies against U.S. dollars as last quoted by
any
recognized dealer. If such quotations are not available, the rate of exchange
will be determined in good faith by the Trust's Board of Trustees. In
23
<PAGE>
carrying out the Board's valuation policies, Boston Advisors may consult with
an
independent pricing service (the "Pricing Service") retained by the Trust.
Debt securities of domestic issuers (other than U.S. government
securities
and short-term investments) are valued by Boston Advisors, as administrator,
after consultation with the Pricing Service approved by the Trust's Board of
Trustees. When, in the judgment of the Pricing Service, quoted bid prices for
investments are readily available and are representative of the bid side of
the
market, these investments are valued at the mean between the quoted bid prices
and asked prices. Investments for which, in the judgment of the Pricing
Service,
there are no readily obtainable market quotations are carried at fair value as
determined by the Pricing Service. The procedures of the Pricing Service are
reviewed periodically by the officers of the Funds under the general
supervision
and responsibility of the Trust's Board of Trustees.
EXCHANGE PRIVILEGE
Class A, Class B and Class D shares of a Fund may be exchanged for shares of
the
respective Class of many of the funds in the Smith Barney Shearson Group of
Funds, as indicated in the Prospectuses, to the extent such shares are offered
for sale in the shareholder's state of residence. Except as noted below,
shareholders of any fund in the Smith Barney Shearson Group of Funds may
exchange all or part of their shares for shares of the same class of other
funds
in the Smith Barney Shearson Group of Funds, as listed in the Prospectuses, on
the basis of relative net asset value per share at the time of exchange as
follows:
A. Class A shares of any fund purchased with a sales charge may be
exchanged for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied. Class A shares of any fund
may be exchanged without a sales charge for shares of the funds that are
offered without a sales charge. Class A shares of any fund purchased
without a sales charge may be exchanged for shares sold with a sales
charge, and the appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of
shares purchased with a sales charge may be exchanged for Class A shares
of
any of the other funds, and the sales charge differential, if any, will
be
applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of a Fund exchanged for Class B shares of another
fund will be subject to the higher applicable CDSC of the two funds and,
for purposes of calculating CDSC rates and conversion periods, will be
deemed to have been held since the date the shares being exchanged were
purchased.
Dealers other than Smith Barney Shearson must notify TSSG of the
investor's
prior ownership of Class A shares of Smith Barney Shearson High Income Fund
and
the account number in order to accomplish an exchange of shares of High Income
Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the same
class in a fund with different investment objectives when they believe that a
shift between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the fund shares being
acquired may legally be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each fund into which an
exchange is being considered. Prospectuses may be obtained from any Smith
Barney
Shearson Financial Consultant.
24
<PAGE>
Upon receipt of proper instructions and all necessary supporting
documents,
shares submitted for exchange are redeemed at the then-current net asset value
and, subject to any applicable CDSC, the proceeds immediately invested, at a
price as described above, in shares of the fund being acquired. Smith Barney
Shearson reserves the right to reject any exchange request. The exchange
privilege may be modified or terminated at any time after notice to
shareholders.
PERFORMANCE DATA
From time to time, the Trust may quote total return of the Classes of the
various Funds in advertisements or in reports and other communications to
shareholders. To the extent any advertisement or sales literature of the Funds
describes the expenses or performance of a Class of a Fund, it will also
disclose such information for the other Classes.
AVERAGE ANNUAL TOTAL RETURN
The "average annual total return" figures for a Class of a Fund, as described
in
the Fund's Prospectus and shown below, is computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
<TABLE>
<S> <C> <C> <C>
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000 payment
made at the beginning of the 1-, 5-or 10-
year period at the
end of the
1-, 5-or 10-year period (or fractional
portion thereof),
assuming reinvestment of all dividends
and distributions.
</TABLE>
The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period, and assumes that the maximum 5% sales charge or
maximum CDSC, as the case may be, has been deducted from the hypothetical
$1,000
initial investment. A Fund's net investment income changes in response to
fluctuations in interest rates and the expenses of the Fund.
From time to time, the Trust may quote the performance of a Fund's
Classes
in terms of total return in reports or other communications to shareholders or
in advertising material. Total return combines principal changes and income
dividends and capital gains distributions reinvested for the periods shown.
Principal changes are based on the difference between the beginning and
closing
net asset values for the period. The period selected will depend upon the
purpose of reporting the performance.
25
<PAGE>
The average annual total returns of the Class B shares of the Funds were
as
follows for the periods indicated:
<TABLE>
<CAPTION>
PER ANNUM FOR PERIOD
ONE YEAR FIVE YEARS
FROM COMMENCEMENT
PERIOD ENDED ENDED
OF OPERATIONS THROUGH
NAME OF FUND 1/31/94 1/31/94
1/31/94
------------ ------------ ---------
- ---------------------
<S> <C> <C>
<C>
Strategic Investors Fund(1)...............
Sector Analysis Fund(2)...................
Growth and Income Fund(3).................
<FN>
- -------------
(1) Fund commenced operations on February 2, 1987.
(2) Fund commenced operations on August 28, 1987.
(3) Fund commenced operations on November 6, 1992.
</TABLE>
These total return figures reflect the deduction of the sales charge or
applicable CDSC in the amount that would have been deducted upon a redemption
of
shares at the end of the periods indicated.
AGGREGATE TOTAL RETURN
The "aggregate total return" figure of a Class of a Fund, as described in the
Fund's Prospectus and shown below, represents the cumulative change in the
value
of an investment in the Class for the specified period and is computed by the
following formula:
<TABLE>
<S> <C> <C>
ERV-P
-----
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000
investment made at the
beginning of the 1-, 5-or 10-year period at the end of the
1-, 5-or
10-year period (or fractional portion thereof), assuming
reinvestment of
all dividends and distributions.
</TABLE>
The aggregate total returns for the Funds' Class B shares were as follows
for the periods indicated:
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM
COMMENCEMENT
FIVE COMMENCEMENT
ONE YEAR FIVE YEAR OF ONE YEAR
YEAR OF
PERIOD PERIOD OPERATIONS PERIOD
PERIOD OPERATIONS
ENDED ENDED THROUGH ENDED
ENDED THROUGH
NAME OF PORTFOLIO 1/31/94* 1/31/94* 1/31/94* 1/31/94**
1/31/94** 1/31/94**
----------------- ---------- --------- ------------ ----------
- --------- ------------
<S> <C> <C> <C> <C>
<C> <C>
Strategic Investors
Fund(1).................
Sector Analysis Fund(2)...
Growth and Income
Fund(3).................
<FN>
- ---------------
* Figures do not include the effect of the CDSC. If the applicable CDSC
(maximum 5%) had been included, it would have had the effect of lowering
the
returns shown.
** Figures include the effect of the applicable CDSC (maximum 5%).
(1) Fund commenced operations on February 2, 1987.
(2) Fund commenced operations on August 28, 1987.
(3) Fund commenced operations on November 6, 1992.
</TABLE>
Performance will vary from time to time depending upon market conditions,
the composition of portfolio securities and operating expenses of each Class.
It
is important to note that the total return figures set forth above are based
on
historical earnings and are not intended to indicate future performance. In
addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in a
26
<PAGE>
Fund's Classes with certain bank deposits or other investments that pay a
fixed
yield for a stated period of time.
TAXES
Set forth below is a summary of certain Federal income tax considerations
generally affecting the Funds and their shareholders. The summary is not
intended as a substitute for individual tax planning, and investors are urged
to
consult their tax advisors with specific reference to their own Federal, state
or local tax situations.
TAX STATUS OF THE FUNDS
Each Fund will be treated as a separate taxable entity for Federal income tax
purposes with the result that: (a) each Fund must meet separately the income
and
distribution requirements for qualification as a regulated investment company
and (b) the amounts of investment income and capital gains earned will be
determined on a Fund-by-Fund (rather than on a Trust-wide) basis.
TAXATION OF SHAREHOLDERS
Dividends paid by a Fund from investment income and distributions of short-
term
capital gains will be taxable to shareholders as ordinary income for Federal
income tax purposes, whether received in cash or reinvested in additional
shares. Distributions of long-term capital gains will be taxable to
shareholders
as long-term capital gains, whether paid in cash or reinvested in additional
shares, and regardless of the length of time the investor has held his or her
shares of the Fund.
Dividends of investment income (but not capital gains) from any Fund
generally will qualify for the Federal dividends-received deduction for
corporate shareholders to the extent such dividends do not exceed the
aggregate
amount of dividends received by the Fund from domestic corporations. If
securities held by a Fund are considered to be "debt-financed" (generally,
acquired with borrowed funds), are held by the Fund for less than 46 days (91
days in the case of certain preferred stock), or are subject to certain forms
of
hedges or short sales, the portion of the dividends paid by the Fund that
corresponds to the dividends paid with respect to such securities will not be
eligible for the corporate dividends-received deduction.
If a shareholder (a) incurs a sales charge in acquiring shares of a Fund,
(b) disposes of those shares within 90 days and (c) acquires shares in a
mutual
fund for which the otherwise applicable sales charge is reduced by reason of a
reinvestment right (that is, an exchange privilege), the sales charge
increases
the shareholder's tax basis in the original shares only to the extent the
otherwise applicable sales charge for the second acquisition is not reduced.
The
portion of the original sales charge that does not increase the shareholder's
tax basis in the original shares would be treated as incurred with respect to
the second acquisition and, as a general rule, would increase the
shareholder's
tax basis in the newly acquired shares. Furthermore, the same rule also
applies
to a disposition of the newly acquired or redeemed shares made within 90 days
of
the second acquisition. This provision prevents a shareholder from immediately
deducting the sales charge by shifting his or her investment in a family of
mutual funds.
Capital Gains Distribution. In general, a shareholder who redeems or
exchanges his or her shares will recognize long-term capital gain or loss if
the
shares have been held for more than one year, and will recognize short-term
capital gain or loss if the shares have been held for one year or less. If a
shareholder receives a distribution taxable as long-term capital gain with
respect to shares of a Fund and redeems or
27
<PAGE>
exchanges the shares before he or she has held them for more than six months,
any loss on such redemption or exchange that is less than or equal to the
amount
of the distribution will be treated as long-term capital loss.
Backup Withholding. If a shareholder fails to furnish a correct taxpayer
identification number, fails to fully report dividend and interest income, or
fails to certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to withholding, then the shareholder
may be subject to a 31% Federal backup withholding tax with respect to (a) any
dividends and distributions and (b) any proceeds of any redemptions or
exchanges. An individual's taxpayer identification number is his or her social
security number. The backup withholding tax is not an additional tax and may
be
credited against a shareholder's regular Federal income tax liability.
REGULATED INVESTMENT COMPANY STATUS
Each Fund intends to continue to qualify in subsequent years as a regulated
investment company within the meaning of Section 851 of the Code. The Trust
will
monitor each Fund's investments so as to meet the requirements for
qualification
on a continuing basis.
As a regulated investment company, a Fund will not be subject to Federal
income tax on the net investment income and net capital gains, if any, that it
distributes to its shareholders, provided that at least 90% of the sum of
investment income and short-term capital gains is distributed to its
shareholders. All net investment income and net capital gains earned by a Fund
will be reinvested automatically in additional shares of the Fund, unless the
shareholder elects to receive dividends and distributions in cash. Amounts
reinvested in additional shares will be considered to have been distributed to
shareholders.
To qualify as a regulated investment company, each Fund must meet certain
requirements set forth in the Code. One requirement is that each Fund must
earn
at least 90% of its gross income from (a) interest, (b) dividends, (c)
payments
with respect to securities loans, (d) gains from the sale or other disposition
of stock or securities or foreign currencies and (e) other income (including
but
not limited to gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies
(the "90% Test"). An additional requirement is that each Fund must earn less
than 30% of its gross income from the sale or other disposition of stock or
securities held for less than three months (the "30% Test"). Legislation
currently pending before the U.S. Congress would repeal the 30% Test. However,
it is impractical at this time to predict whether this legislation will become
law and, if it is so enacted, what form it will eventually take.
Generally, each Fund will invest in a combination of common stock,
preferred stock, notes and bonds and will earn interest and dividend income,
gains from the sale of such securities, and income from repurchase agreements
entered into with respect to such securities, all of which generally would be
considered to be qualified income under the 90% Test. Each Fund generally will
hold its investments longer than three months and therefore should not risk
disqualification under the 30% Test. Depending upon the circumstances,
however,
a Fund may be limited in the extent to which it may: (a) sell securities held
for less than three months; (b) effect short sales of securities that are
identical (or substantially identical) to securities held by it for less than
three months; (c) write options that expire in less than three months; and (d)
effect closing transactions with respect to call or put options that have been
written or purchased within the preceding three months. A Fund's gain or loss
from the sale (including open short sales) or other
28
<PAGE>
dispositions of stock or securities (with the term "securities" defined to
include put and call options) held for less than three months will be netted
against its gain or loss on positions that are part of a "designated hedge"
with
respect to such three-month investments.
TAXATION OF FUND INVESTMENTS
Gain or loss on the sale of a security by a Fund generally will be long-term
capital gain or loss if the Fund has held the security for more than one year.
Gain or loss on the sale of a security held for not more than one year
generally
will be short-term capital gain or loss. If a Fund acquires a debt security at
a
substantial discount, a portion of any gain upon sale or redemption of such
debt
security will be taxed as ordinary income rather than capital gain to the
extent
it reflects accrued market discount.
Options Transactions. The tax consequences of options transactions
entered
into by a Fund will vary depending on whether the underlying security is held
as
a capital asset, whether the Fund is writing or purchasing the option and
whether the "straddle" rules, discussed separately below, apply to the
transaction.
A Fund may write a call option on an equity or convertible debt security.
If the option expires unexercised or if the Fund enters into a closing
purchase
transaction, the Fund will realize a gain or loss without regard to any
unrealized gain or loss on the underlying security. Generally, any such gain
or
loss will be short-term capital gain or loss, except that any loss on certain
covered call stock options will be treated as long-term capital loss. If a
call
option written by a Fund is exercised, the Fund will treat the premium
received
for writing such call option as additional sales proceeds and will recognize a
capital gain or loss from the sale of the underlying security. Whether the
gain
or loss will be long-term or short-term will depend on the Fund's holding
period
for the underlying security.
If a Fund purchases a put option on an equity or convertible debt
security
and it expires unexercised, the Fund will realize a capital loss equal to the
cost of the option. If a Fund enters into a closing sale transaction with
respect to the option, it will realize a capital gain or loss and such gain or
loss will be short-term or long-term depending on the Fund's holding period
for
the option. If a Fund exercises such a put option, it will realize a short-
term
or long-term capital gain or loss (depending on the Fund's holding period for
the underlying security) from the sale of the underlying security. The amount
realized on such sale will be the sales proceeds reduced by the premium paid.
Mark-to-Market. The Code imposes a special "mark-to-market" system for
taxing "Section 1256 contracts" including options on nonconvertible debt
securities (including U.S. government securities), options on certain stock
indexes and certain foreign currency contracts. In general, gain or loss on
Section 1256 contracts will be taken into account for tax purposes when
actually
realized (by a closing transaction, by exercise, by taking delivery or by
other
termination). In addition, any Section 1256 contracts held at the end of the
taxable year will be treated as though they were sold at their year-end fair
market value (that is, "marked to market"), and the resulting gain or loss
will
be recognized for tax purposes. Provided that a Fund holds its Section 1256
contracts as capital assets and they are not part of a straddle, both the
realized and the unrealized year-end gains or losses from these investment
positions (including premiums on options that expire unexercised) will be
treated as 60% long-term and 40% short-term capital gain or loss, regardless
of
the period of time particular positions have actually been held by a Fund.
29
<PAGE>
A portion of the mark-to-market gain on instruments held for less than
three months at the close of a Fund's taxable year may represent a gain on
securities held for less than three months for purposes of the 30% Test
discussed above. Accordingly, the Funds may restrict their fourth-quarter
transactions in Section 1256 contracts.
Straddles. The Code contains rules applicable to "straddles," which are
"offsetting positions in actively traded personal property," including equity
securities and options of the type in which a Fund may invest. If applicable,
the "straddle" rules generally override the other provisions of the Code. In
general, investment positions will be offsetting if there is a substantial
diminution in the risk of loss from holding one position by reason of holding
one or more other positions. The Funds generally are authorized to enter into
put, call, and covered put and call positions. Depending on what other
investments are held by a Fund at the time it enters into one of the above
transactions, a Fund may create a straddle for Federal income tax purposes.
If two (or more) positions constitute a straddle, recognition of a
realized
loss from one position (including a mark-to-market loss) must be deferred to
the
extent of unrecognized gain in an offsetting position. Interest and other
carrying charges allocable to personal property that is part of a straddle
must
be capitalized. In addition, "wash sale" rules apply to straddle transactions
to
prevent the recognition of loss from the sale of a position at a loss when a
new
offsetting position is or has been acquired within a prescribed period. To the
extent the straddle rules apply to positions established by a Fund, losses
realized by the Fund may be deferred or recharacterized as long-term losses,
and
long-term gains realized by the Fund may be converted to short-term gains.
If a Fund chooses to identify a particular offsetting position as being
one
component of a straddle, a realized loss on any component of that straddle
will
be recognized no earlier than upon the liquidation of all components of that
straddle. Special rules apply to "mixed" straddles (that is, straddles
consisting of a Section 1256 contract and an offsetting position that is not a
Section 1256 contract). If the Trust makes certain elections, all or a portion
of the Section 1256 contract components of such mixed straddles of a Fund will
not be subject to the 60%/40% mark-to-market rules. If any such election is
made, the amount, the nature (as long-term or short-term) and the timing of
the
recognition of the Fund's gains or losses from the effected straddle positions
will be determined under rules that will vary according to the type of
election
made.
ORGANIZATION OF THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
The Commonwealth of Massachusetts pursuant to a Master Trust Agreement dated
January 8, 1986, as amended from time to time (the "Trust Agreement"). The
Trust
commenced business as an investment company on March 3, 1986, under the name
Shearson Lehman Special Equity Portfolios. On December 6, 1988, August 27,
1990,
November 5, 1992 and July 30, 1993, the Trust changed its name to SLH Equity
Portfolios, Shearson Lehman Brothers Equity Portfolios, Shearson Lehman
Brothers
Equity Funds and Smith Barney Shearson Equity Funds, respectively.
In the interest of economy and convenience, certificates representing
shares in the Funds are not physically issued except upon specific request
made
by a shareholder to TSSG. TSSG maintains a record of each shareholder's
ownership of shares of the Funds. Shares do not have cumulative voting rights,
which
30
<PAGE>
means that holders of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable but have no
preemptive,
conversion or subscription rights. Shareholders generally vote by Fund, except
with respect to the election of Trustees and the selection of independent
public
accountants.
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Trust Agreement disclaims shareholder liability for acts or obligations of the
Trust, however, and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee of the Trust. The Trust Agreement provides for indemnification from
the
property of a Fund for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet its
obligations, a possibility the Trust's management believes is remote. Upon
payment of any liability incurred by a Fund, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Fund.
The Trustees intend to conduct the operations of the Trust and the Funds in
such
a way so as to avoid, as far as possible, ultimate liability of the
shareholders
for liabilities of the Funds.
CUSTODIAN AND TRANSFER AGENT
Boston Safe, a wholly owned subsidiary of the Boston Company, Inc., is located
at One Boston Place, Boston, Massachusetts 02108, and serves as custodian for
the Funds. Under its custodial agreement with the Trust, Boston Safe is
authorized to appoint one or more foreign or domestic banking institutions as
sub-custodians of assets owned by a Fund. For its custody services, Boston
Safe
receives monthly fees charged to each Fund based upon the month-end, aggregate
net asset value of the Fund, plus certain charges for securities transactions.
The assets of the Trust are held under bank custodianship in accordance with
the
1940 Act.
TSSG, a subsidiary of First Data Corporation, which is in turn, a
partially
owned subsidiary of American Express Company located at Exchange Place,
Boston,
Massachusetts 02109, serves as the Trust's transfer agent. For its services as
transfer agent, TSSG receives fees charged to the Funds at an annual rate
based
upon the number of shareholder accounts maintained during the year. TSSG also
is
reimbursed by the Funds for its out-of-pocket expenses.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended January 31, 1994 are
incorporated into this Statement of Additional Information by reference in
their
entirety.
31
<PAGE>
APPENDIX
DESCRIPTION OF S&P AND MOODY'S RATINGS
DESCRIPTION OF S&P CORPORATE BOND RATINGS:
AAA--Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A--Bonds rated A have a strong capacity to pay interest and repay
principal
although they are somewhat more susceptible to the adverse effects of changes
in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB, B AND CCC--Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a
lower
degree of speculation than B and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS:
AAA--Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are
likely to change, such changes as can be visualized are most unlikely to
impair
the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and
are to be considered as upper medium grade obligations. Factors giving
security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade
obligations,
that is, they are neither highly protected nor poorly secured. Interest
payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
32
<PAGE>
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are rated Ba are judged to have speculative elements;
their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds that are rated Caa are of poor standing. These issues may be
in
default or present elements of danger may exist with respect to principal or
interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2
indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding
timely payment is either overwhelming or very strong. Those issues determined
to
possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative
degree
of safety is not as high as for issues designated A-1.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations.
This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
33
<PAGE>
<TABLE>
<S> <C>
Smith Barney Shearson
EQUITY FUNDS
--
- ---------------------------
STRATEGIC INVESTORS FUND
--
- ---------------------------
--
- ---------------------------
SECTOR ANALYSIS FUND
--
- ---------------------------
--
- ---------------------------
GROWTH AND INCOME FUND
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
--
- ---------------------------
STATEMENT OF
ADDITIONAL INFORMATION
APRIL 1, 1994
</TABLE>
SMITH BARNEY SHEARSON
EQUITY FUNDS [Logo
Bottom]
Two World Trade Center
New York, New York 10048
SMITH BARNEY SHEARSON EQUITY FUNDS
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A
To be filed by Amendment
Included in Part B:
To be filed by Amendment
Included in Part C:
To be filed by Amendment
(b) Exhibits
All references are to the Registrant's registration statement on
Form N-1A as filed with the Securities and Exchange Commission on January 9,
1986. File Nos. 33-2627 and 811-4551 (the "Registration Statement").
1 Amended and Restated Master Trust Agreement and all Amendments
are filed herein.
2 Registrant's By-Laws are incorporated by reference to Pre-
Effective Amendment No. 1.
3 Not applicable.
4 Form of share certificate for Class A, B and D shares of
beneficial interest for each sub-trust of the Registrant are incorporated by
reference to Post-Effective Amendment No. 22.
5(a) Investment Advisory Agreement between Registrant and The
Boston Company Advisors, Inc. (relating to the Strategic Investors Fund) dated
May 22, 1993 is filed herein.
(b) Investment Advisory Agreement between Registrant and Smith
Barney Shearson Strategy Advisers Inc. (relating to the Sector Analysis Fund)
dated May 22, 1993 is filed herein.
(c) Investment Advisory Agreement between Registrant and Greenwich
Street Advisors (relating to the Growth and Income Fund) dated May 22, 1993 is
filed herein.
(d) Sub-Investment Advisory Agreement between Registrant and
Lehman Brothers Global Asset Management, Inc. (relating to the Sector Analysis
Fund) dated July 30, 1993 is filed herein.
(e) Administration Agreement between Registrant and The Boston
Company Advisors, Inc. (relating to the Sector Analysis Fund) dated May 21,
1993 is filed herein.
(f) Asset Allocation Consulting Agreement between Registrant and
Shearson Lehman Hutton Inc. (relating to the Strategic Investors Portfolio) is
incorporated by reference to Post-Effective Amendment No. 4.
6 Distribution Agreement between Registrant and Smith Barney
Shearson dated July 30, 1993 is filed herein.
7 Not applicable.
8(a) Form of Supplement to Custody Agreement between Registrant and
Boston Safe Deposit and Trust Company (relating to the Strategic Investors
Portfolio) is incorporated by reference to Post-Effective Amendment No. 2.
(b) Supplement to Custody Agreement between Registrant and Boston Safe
Deposit and Trust Company (relating to the Sector Analysis Portfolio) is
incorporated by reference to Post-Effective Amendment No. 6.
(c) Supplement to Custody Agreement between Registrant and Boston Safe
Deposit and Trust Company (relating to the Growth and Income Portfolio) is
incorporated by reference to Post-Effective Amendment No. 19.
(d) Sub-Custodian Agreement among Registrant, Morgan Guaranty Trust
company of New York and Boston Safe Deposit and Trust Company is incorporated
by reference to Post-Effective Amendment No. 6.
9 Transfer Agency Agreement between Registrant and The
Shareholder Services Group, Inc. dated August 5, 1993 is filed herein.
10 Not applicable.
11(a) Consent of Independent Accountants will be filed by Amendment.
(b) Consent of Morningstar Mutual Fund Values is incorporated by
reference to Post-Effective Amendment No. 22.
12 Not applicable.
13(a) Purchase Agreement between Registrant and Shearson Lehman Hutton
Inc. (relating to the Strategic Investors Portfolios) is incorporated by
reference to Post-Effective Amendment No. 2.
(b) Purchase Agreement between Registrant and Shearson Lehman
Hutton Inc. (relating to the Sector Analysis Portfolio) is incorporated by
reference to Post-Effective Amendment No. 4.
(c) Form of Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. (relating to the Growth and Income Portfolio) is
incorporated by reference to Post-Effective Amendment No. 19.
14 Not applicable.
15 Amended and Restated Services and Distribution Plan pursuant
to Rule 12b-1 dated July 30, 1993 is filed herein.
16 Performance information is incorporated by reference to Post-
Effective Amendments No. 9 and 10.
Item 25. Persons Controlled by or Under
Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Series Holders as of
December 31, 1993
Class A Class B
Class D
Strategic Investors Fund 687 30,846
4
Sector Analysis Fund 541 16,899
1
Growth and Income Fund 582 5,972 1
Item 27. Indemnification
The response to this item is incorporated by reference to
Registrant's Pre-
Effective Amendment No. 1.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Greenwich Street Advisors
Greenwich Street Advisors, through its predecessors, has been in the
investment counseling business since 1934 and is a division of Mutual
Management Corp. ("MMC"). MMC was incorporated in 1978 and is a wholly owned
subsidiary of Smith Barney Shearson Holdings Inc. ("Holdings"), which is in
turn a wholly owned subsidiary of The Travelers Inc., formerly known as
Primerica Corporation.
The list required by this Item 28 of officers and directors of MMC and
Greenwich Street Advisors, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by MMC on behalf of Greenwich
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Advisors, a member of the Asset Management Group of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Primerica Corporation and Smith Barney,
Harris Upham & Co. Incorporated acquired the domestic retail brokerage and
asset management business of Shearson Lehman Brothers, which included the
business of the Registrant's prior investment adviser. Shearson Lehman
Brothers was a wholly owned subsidiary of Shearson Lehman Brothers Holdings
Inc. ("Shearson Holdings"). All of the issued and outstanding common stock of
Shearson Holdings (representing 92% of the voting stock) was held by American
Express Company. Information as to any past business vocation or employment
of a substantial nature engaged in by officers and directors of Shearson
Lehman Advisors can be located in Schedules A and D of FORM ADV filed by
Shearson Lehman Brothers on behalf of Shearson Lehman Advisors prior to July
30, 1993. (SEC FILE NO. 801-3701)
1/27/94
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser -- The Boston Company Advisors, Inc.
The Boston Company Advisors, Inc. ("Boston Advisors") is a wholly owned
subsidiary of The Boston Company, Inc., which is in turn a wholly owned
subsidiary of Mellon Bank Corporation ("Mellon"). Mellon is a publicly owned
multibank holding company registered under the Federal Holding Company Act of
1956 and through its subsidiaries Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Boston Advisors is an investment adviser registered under the
Investment Advisers Act of 1940 (the "Advisers Act") and serves as investment
counsel for individuals with substantial capital, executors, trustees and
institutions. It also serves as investment adviser, sub-investment adviser,
administrator or sub-administrator to numerous investment companies.
The list required by this Item 28 of officers and directors of Boston
Advisors, together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of FORM ADV filed by Boston Advisors pursuant to the Advisers Act (SEC
File No. 801-14158).
8/23/93
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Shearson Strategy Advisers Inc.
Smith Barney Shearson Strategy Advisers Inc. ("Strategy Advisers") was
incorporated on October 22, 1986 under the laws of the State of Delaware.
Strategy Advisers is a wholly owned subsidiary of Smith, Barney Advisers, Inc.
("SBA"), which was incorporated under the laws of the state of Delaware in
1968. SBA is a wholly owned subsidiary of Smith Barney Shearson Holdings
Inc., which in turn is a wholly owned subsidiary of Primerica Corporation.
Strategy Advisers is registered as an investment adviser under the Investment
Adviser Act of 1940 (the "Advisers Act"). Strategy Advisers is also
registered with the Commodity Futures Trading Commission (the "CFTC") as a
commodity pool operator under the Commodity Exchange Act (the "CEA"), and is a
member of the National Futures Association (the "NFA").
The list required by this Item 28 of officers and directors of SBA and
Strategy Advisers, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of FORM ADV filed by SBA on behalf of Strategy Advisers
pursuant to the Advisers Act (SEC File No. 801-8314).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Investment Strategy Advisors Inc. ("Shearson Lehman Strategy
Advisors"), was a wholly owned subsidiary of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"), and served as the Registrant's investment
adviser. On the Closing, Primerica Corporation and Smith Barney, Harris Upham
& Co. Incorporated acquired the domestic retail brokerage and asset management
business of Shearson Lehman Brothers which included the business of the
Registrant's prior investment adviser. Shearson Lehman Brothers was a wholly
owned subsidiary of Shearson Lehman Brothers Holdings Inc. ("Shearson
Holdings"). All of the issued and outstanding common stock of Shearson
Holdings (representing 92% of the voting stock) was held by American Express
Company. Information as to any past business vocation or employment of a
substantial nature engaged in by officers and directors of Shearson Lehman
Investment Strategy Advisors can be located in Schedules A and D of FORM ADV
filed by Shearson Lehman Investment Strategy Advisors prior to July 30, 1993.
(SEC FILE NO. 801-28715)
8/23/93
Item 29. Principal Underwriters
Smith Barney Shearson Inc. ("Smith Barney Shearson") currently acts as
distributor for Smith Barney Shearson Managed Municipals Fund Inc., Smith
Barney Shearson New York Municipals Fund Inc., Smith Barney Shearson
California Municipals Fund Inc., Smith Barney Shearson Massachusetts
Municipals Fund, Smith Barney Shearson Global Opportunities Fund, Smith Barney
Shearson Aggressive Growth Fund Inc., Smith Barney Shearson Appreciation Fund
Inc., Smith Barney Shearson Small Capitalization Fund, Smith Barney Shearson
Worldwide Prime Assets Fund, Smith Barney Shearson Short-Term World Income
Fund, Smith Barney Shearson Principal Return Fund, Smith Barney Shearson
Municipal Money Market Fund Inc., Smith Barney Shearson Daily Dividend Fund
Inc., Smith Barney Shearson Government and Agencies Fund Inc., Smith Barney
Shearson Managed Governments Fund Inc., Smith Barney Shearson New York
Municipal Money Market Fund, Smith Barney Shearson California Municipal Money
Market Fund, Smith Barney Shearson Income Funds, Smith Barney Shearson Equity
Funds, Smith Barney Shearson Investment Funds Inc., Smith Barney Shearson
Precious Metals and Minerals Fund Inc., Smith Barney Shearson
Telecommunications Trust, Smith Barney Shearson Arizona Municipals Fund Inc.,
Smith Barney Shearson New Jersey Municipals Fund Inc., The USA High Yield Fund
N.V., Garzarelli Sector Analysis Portfolio N.V., The Advisors Fund L.P., Smith
Barney Shearson Fundamental Value Fund Inc., Smith Barney Shearson Series
Fund, The Trust for TRAK Investments, Smith Barney Shearson Income Trust,
Smith Barney Shearson FMA R Trust, Smith Barney Shearson Adjustable Rate
Government Income Fund, Smith Barney Shearson Florida Municipals Fund, Smith
Barney Funds, Inc., Smith Barney Equity Funds, Inc., Smith Barney Muni Funds,
Smith Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney
Tax Free Money Fund, Inc., Smith Barney Variable Account Funds, Smith Barney
U.S. Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), and various series of unit investment trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of The
Travelers Inc. The information required by this Item 29 with respect to each
director, officer and partner of Smith Barney Shearson is incorporated by
reference to Schedule A of FORM BD filed by Smith Barney Shearson pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-8510).
1/27/94
Item 30. Location of Accounts and Records
(1) Smith Barney Shearson Equity Funds
Two World Trade Center
New York, New York 10048
(2) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(3) Salomon Brothers Asset Management Inc
Seven World Trade Center
New York, New York 10048
(4) Smith Barney Shearson Strategy Advisers Inc.
Two World Trade Center
New York, New York 10048
(5) Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
(6) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(7) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
None
Item 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a trustee or trustees of
Registrant when requested in writing to do so by the holders of at least 10%
of Registrant's outstanding shares. Registrant hereby undertakes further, in
connection with the meeting to comply with the provisions of Section 16 (c) of
the Investment Company Act of 1940, as amended, relating to communications
with shareholders of certain common-law trusts.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY SHEARSON EQUITY FUNDS, has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Boston, Commonwealth of
Massachusetts on the 30th day of January, 1994.
SHEARSON LEHMAN BROTHERS
EQUITY FUNDS
By:/s/ Heath B. McLendon*
Heath B. McLendon, Chief Executive Officer
Pursuant to the requirements of the 1933 Act, this Amendment to the
Registration Statement and the above Power of Attorney has been signed below
by the following persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Heath B. McLendon* Chairman of the Board and Trustee
1/28/94
Heath B. McLendon (Chief Executive Officer)
/s/ Vincent Nave* Treasurer (Chief Financial
1/28/94
Vincent Nave and Accounting Officer)
/s/ Allan J. Bloostein* Trustee
1/28/94
Allan J. Bloostein
Trustee
1/28/94
Lee Abraham
Trustee
1/28/94
Antoinette C. Bentley
Signature Title Date
/s/ Richard E. Hanson* Trustee
1/28/94
Richard Hanson
/s/ Madelon DeVoe Talley* Trustee
1/28/94
Madelon DeVoe Talley
* Signed by Lee D. Augsburger, their
duly authorized attorney-in-fact, pursuant
to power of attorney dated October 27, 1992.
/s/ Lee D. Augsburger
Lee D. Augsburger
g:\shared\domestic\clients\funds\slep\pea#26
SHEARSON LEHMAN BROTHERS EQUITY FUNDS
(Formerly Shearson Lehman Brothers Equity Portolios)
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
NOVEMBER 5, 1992
SHEARSON LEHMAN BROTHERS EQUITY FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
Page
ARTICLE I NAME AND DEFINITIONS. 1
Section 1.1 Name 1
Section 1.2 Definitions 1
a) "Trust" 2
b) "Class" 2
c) "Trustees" 2
d) "Shares" 2
e) "Series" 2
f) "Shareholder" 2
g) "1940 Act" 2
h) "Commission" 2
i) "Declaration of Trust" 2
j) "By-Laws" 2
ARTICLE II. PURPOSE OFTRUST 2
ARTICLE III. THE TRUSTEES 3
Secion 3.1 Number, Designation, Election, Term, etc 3
a) Trustees 3
b) Number 3
c) Election and Term 3
d) Resignation and Retirement 3
e) Removal 3
f) Vacancies 4
g) Effect of Death, Resignation, etc 4
h) No Accounting 4
Section 3.2 Powers of Trustees 5
a) Investments 6
b) Disposition of Assets 6
c) Ownership Powers 6
d) Subscription 7
e) Form of Holding 7
f) Reorganization, etc 7
g) Voting Trusts, etc 7
h) Compromise 7
i) Partnerships, etc 7
j) Borrowing and Security 7
h) Guarantees, etc 8
l) Insurance 8
m) Pensions, etc 8
Section 3.3 Certain Contracts 8
a) Advisory 9
b) Administration 9
c) Distribution 9
d) Custodian and Depository 9
e) Transfer and Dividend Disbursing Agency 9
f) Shareholder Servicing 10
g) Accounting 10
Section 3.4 Payment of Trust Expenses and
Compensation of Trustees 11
Section 3.5 Ownership of Assets of the Trust 11
ARTICLE IV. SHARES 11
Section 4.1 Description of Shares 11
Section 4.2 Establishment and Designation of
Sub-Trusts 13
a) Assets Belonging to Sub-Trusts 14
b) Liabilities Belonging to Sub-Trusts 14
c) Dividends 15
d) Liquidation 16
e) Voting 16
f) Redemption by Shareholder 16
g) Redemption by Trust 17
h) Net Asset Value 17
i) Transfer 18
j) Equality 18
k) Fractions 18
l) Conversion Rights 19
m) Class Differences 19
Section 4.3 Ownership of Shares 19
Section 4.4 Investments in the Trust 19
Section 4.5 No Pre-emptive Rights 19
Section 4.6 Status of Shares and Limitation of
Personal Liability 20
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS 20
Section 5.1 Voting Powers 20
Section 5.2 Meetings 21
Section 5.3 Record Dates 21
Section 5.4 Quorum and Required Vote 22
Section 5.5 Action by Written Consent 22
Section 5.6 Inspection of Records 22
Section 5.7 Additional Provisions 22
Section 5.8 Shareholder Communications 22
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION 23
Section 6.1 Trustees, Shareholders, etc.
Not Personally Liable; Notice 23
Section 6.2 Trustee's Good Faith Action; Expert
Advice; No Bond or Surety 24
Section 6.3 Indemnification of Shareholders 24
Page
Section 6.4 Indemnification of Trustees, Officers,
etc 25
Section 6.5 Compromise Payment 26
Section 6.6 Indemnification Not Exclusive, etc 26
Section 6.7 Liability of Third Persons Dealing with
Trustees 27
ARTICLE VII. MISCELLANEOUS 27
Section 7.1 Duration and Termination of Trust 27
Section 7.2 Reorganization 27
Section 7.3 Amendments 28
Section 7.4 Filing of Copies; References; Headings 28
Section 7.5 Applicable Law 29
SHEARSON LEHMAN BROTHERS EQUITY FUNDS
(Formerly, Shearson Lehman Brothers Equity Portfolios)
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT made at Boston,
Massachusetts as of this 5th day of November, 1992, by the Trustees
hereunder, and by the holders of shares of beneficial interest to be issued
hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust
hereunder, and to issue classes of Shares of any Sub-Trust or divide Shares
of any Sub-Trust into two or more classes, all in accordance with the
provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance with
the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire
in any manner as Trustees hereunder IN TRUST to manage and dispose of the
same upon the following terms and conditions for the benefit of the holders
from time to time of shares of beneficial interest in this Trust or Sub-
Trusts created hereunder as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. The Trust shall be known as the "Shearson Lehman
Brothers Equity Funds" and the Trustees shall conduct the business of the
Trust under that name or any other name or names as they may from time to
time determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Trust Agreement, as amended from time to time, inclusive
of each and every Sub-Trust established hereunder;
(b) "Class" refers to any class of Shares of any Series or
Sub-Trust established and designated under or in accordance with the
provisions of Article IV;
(c) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III;
(d) "Shares" refers to the transferable units of interest into
which the beneficial interest in the Trust and each Sub-Trust of the Trust
and/or any class of any Sub-Trust (as the context may require) shall be
divided from time to time;
(e) "Series" refers to Series of Shares established and
designated under or in accordance with the provisions of Article IV, each of
which Series shall be a Sub-Trust of the Trust;
(f) "Shareholder" means a record owner of Shares;
(g) The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as amended from time to
time;
(h) The term "Commission" shall have the meaning given it in
the 1940 Act;
(i) "Declaration of Trust" shall mean this First Amended and
Restated Master Trust Agreement, as amended or restated from time to time;
and
(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust and each Sub-Trust of the Trust one or more
investment programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number, Designation, Election, Term, etc.
(a) Trustees. The Trustees hereof and of each Sub-Trust
hereunder are Allan J. Bloostein, Robert B. Clark, Richard E. Hanson, Jr.,
Madelon DeVoe Talley, Peter H. Galary, and Heath B. McLendon
(b) Number. The Trustees serving as such, whether named above
or hereafter becoming a Trustee, may increase or decrease (to not less than
two) the number of Trustees to a number other than the number theretofore
determined. No decrease in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term, but
the number of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders following the
initial public offering of shares of the Trust. Each Trustee, whether named
above or hereafter becoming a Trustee, shall serve as a Trustee of the Trust
and of each Sub-Trust hereunder during the lifetime of this Trust and until
its termination as hereinafter provided except as such Trustee sooner dies,
resigns or is removed. Subject to Section 16(a) of the 1940 Act, the
Trustees may elect their own successors and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon such
later date as is specified in such instrument and shall be effective as to
the Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least two-thirds of
the number of Trustees prior to such removal, specifying the date upon which
such removal shall become effective; or (ii) by vote of Shareholders holding
not less than two-thirds of the Shares then outstanding, cast in person or
by proxy at any meeting called for the purpose; or (iii) by a written
declaration signed by Shareholders holding not less than two-thirds of the
Shares then outstanding and filed with the Trust's Custodian. Any such
removal shall be effective as to the Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting
from any reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting from
an increase in the number of Trustees by the other Trustees may (but so long
as there are at least two remaining Trustees, need not unless required by
the 1940 Act) be filled by a majority of the remaining Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine and such appointment shall be effective upon the written
acceptance of the person named therein to serve as a Trustee and agreement
by such person to be bound by the provisions of this Declaration of Trust,
except that any such appointment in anticipation of a vacancy to occur by
reason of retirement, resignation, or increase in number of Trustees to be
effective at a later date shall become effective only at or after the
effective date of said retirement, resignation, or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this Declaration
of Trust and the appointment is effective, the Trust estate shall vest in
the new Trustee, together with the continuing Trustees, without any further
act or conveyance.
(g) Effect of Death, Resignation, etc. The death,
resignation, retirement, removal, or incapacity of the Trustees, or any one
of them, shall not operate to annul or terminate the Trust or any Sub-Trust
hereunder or to revoke or terminate any existing agency or contract created
or entered into pursuant to the terms of this Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940
Act or under circumstances which would justify his removal for cause, no
person ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall
be required to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
Section 3.2 Powers of Trustees. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry
out that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs
of the Trust and may amend and repeal them to the extent that such By-Laws
do not reserve that right to the Shareholders; they may from time to time in
accordance with the provisions of Section 4.1 hereof establish Sub-Trusts,
each such Sub-Trust to operate as a separate and distinct investment medium
and with separately defined investment objectives and policies and distinct
investment purpose; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish classes of Shares of any Series
or Sub-Trust or divide the Shares of any Series or Sub-Trust into classes;
they may as they consider appropriate elect and remove officers and appoint
and terminate agents and consultants and hire and terminate employees, any
one or more of the foregoing of whom may be a Trustee, and may provide for
the compensation of all of the foregoing; they may appoint from their own
number, and terminate, any one or more committees consisting of two or more
Trustees, including without implied limitation an executive committee, which
may, when the Trustees are not in session and subject to the 1940 Act,
exercise some or all of the power and authority of the Trustees as the
Trustees may determine; in accordance with Section 3.3 they may employ one
or more Advisers, Administrators, Depositories and Custodians and may
authorize any Depository or Custodian to employ subcustodians or agents and
to deposit all or any part of such assets in a system or systems for the
central handling of securities and debt instruments, retain transfer,
dividend, accounting or Shareholder servicing agents or any of the
foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, set record dates
or times for the determination of Shareholders or various of them with
respect to various matters; they may compensate or provide for the
compensation of the Trustees, officers, advisers, administrators,
custodians, other agents, consultants and employees of the Trust or the
Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and
to any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of
the Trust such authority, powers, functions and duties as they consider
desirable or appropriate for the conduct of the business and affairs of the
Trust, including without implied limitation the power and authority to act
in the name of the Trust and of the Trustees, to sign documents and to act
as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder:
(a) Investments. To invest and reinvest cash and other
property, and to hold cash or other property uninvested without in any event
being bound or limited by any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of the assets
of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any
rights of ownership, with respect to stock or other securities, debt
instruments or property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation
to securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
securities or debt instruments;
(e) Form of Holding. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered
or other negotiable form, or in the name of the Trustees or of the Trust or
of any Sub-Trust or in the name of a custodian, subcustodian or other
depository or a nominee or nominees or otherwise;
(f) Reorganization, etc. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or sale of
property by such corporation or issuer, and to pay calls or subscriptions
with respect to any security or debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any
securities or debt instruments in acting through a committee, depositary,
voting trustee or otherwise, and in that connection to deposit any security
or debt instrument with, or transfer any security or debt instrument to, any
such committee, depositary or trustee, and to delegate to them such power
and authority with relation to any security or debt instrument (whether or
not so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation of
such committee, depositary or trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any Sub-Trust or any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general
or limited partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage
and pledge the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of
any notes or other obligations of any person; to make contracts of guaranty
or suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure any of
or all such obligations;
(l) Insurance. To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and principal
on its portfolio investments,' and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith),
of the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or omitted
by any such person in any such capacity, including any action taken or
omitted that may be determined to constitute negligence, whether or not the
Trust would have the power to indemnify such person against such liability;
and
(m) Pensions, etc. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trust and provisions,
including the purchasing of life insurance and annuity contracts as a means
of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the
Trustees on behalf of the Trust or any Sub-Trust may be taken by a majority
of the Trustees present at a meeting of Trustees (a quorum, consisting of at
least a majority of the Trustees then in office, being present), within or
without Massachusetts, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a
meeting, or by written consents of a majority of the Trustees then in office
(or such larger or different number as may be required by the 1940 Act or
other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present
and future law or custom in regard to delegation of powers by trustees
generally, the Trustees may, at any time and from time to time and without
limiting the generality of their powers and authority otherwise set forth
herein, enter into one or more contracts with any one or more corporations,
trusts, associations, partnerships, limited partnerships, other types of
organizations, or individuals ("Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties
and responsibilities to, for or on behalf of the Trust and/or any Sub-Trust,
and/or the Trustees, and to provide for the performance and assumption of
such other services, duties and responsibilities in addition to those set
forth below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the
Trustees and in conformity with the stated policy of the Trustees with
respect to the investments of the Trust or of the assets belonging to any
Sub-Trust of the Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders for
portfolio transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the
Trustees and in conformity with any policies of the Trustees with respect to
the operations of the Trust and each Sub-Trust (including each class
thereof), to supervise all or any part of the operations of the Trust and
each Sub-Trust, and to provide all or any part of the administrative and
clerical personnel, office space and office equipment and services
appropriate for the efficient administration and operations of the Trust and
each Sub-Trust;
(c) Distribution. To distribute the Shares of the Trust and
each Sub-Trust (including any classes thereof), to be principal underwriter
of such Shares, and/or to act as agent of the Trust and each Sub-Trust in
the sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) Custodian and Depository. To act as depository for and to
maintain custody of the property of the Trust and each Sub-Trust and
accounting records in connection therewith;
(e) Transfer and Dividend Disbursing Agency. To maintain
records of the ownership of outstanding Shares, the issuance and redemption
and the transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to
the relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties
and responsibilities provided for, including provisions that are not
inconsistent with the 1940 Act relating to the standard of duty of and the
rights to indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit the
Trust or a Contracting Party from entering into sub-contractual arrangements
relative to any of the matters referred to in Sections 3.3(a) through (g)
hereof.
The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or
have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
or any Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee
or officer of the Trust from voting upon or executing the same or create any
liability or accountability to the Trust, any Sub-Trust or its Shareholders,
provided that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee or officer of the Trust
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship
or interest and the contract involved is approved in good faith by a
majority of such Trustees not having any such relationship or interest (even
though such unrelated or disinterested Trustees are less than a quorum of
all of the Trustees), (y) the material facts as to such relationship or
interest and as to the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved is
specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees.
The Trustees are authorized to pay or to cause to be paid out of the
principal or income of the Trust or any Sub-Trust, or partly out of
principal and partly out of income, and to charge or allocate the same to,
between or among such one or more of the Sub-Trusts and/or one or more
classes of Shares thereof that may be established and designated pursuant to
Article IV, as the Trustees deem fair, all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust, any Sub-
Trust and/or any class of Shares thereof, or in connection with the
management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, investment adviser, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer
agent, dividend disbursing agent, accounting agent, Shareholder servicing
agent, and such other agents, consultants, and independent contractors and
such other expenses and charges as the Trustees may deem necessary or proper
to incur. Without limiting the generality of any other provision hereof,
the Trustee shall be entitled to reasonable compensation from the Trust for
their services as Trustees and may fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the
Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the
Trust shall be divided into Shares, all with $.001 par value, but the
Trustees shall have the authority from time to time to issue Shares in one
or more Series (each of which Series of Shares shall represent the
beneficial interest in a separate and distinct Sub-Trust of the Trust,
including without limitation each Sub-Trust specifically established and
designated in Section 4.2), as they deem necessary or desirable. For all
purposes under this Declaration of Trust or otherwise, including, without
implied limitation, (i) with respect to the rights of creditors and (ii) for
purposes of interpreting the relevant rights of each Sub-Trust and the
Shareholders of each Sub-Trust, each Sub-Trust established hereunder shall
be deemed to be a separate trust. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate
such separate and distinct Sub-Trusts, and to fix and determine the relative
rights and preferences as between the shares of the separate Sub-Trusts as
to right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Sub-Trusts shall have separate voting
rights or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder approval, to issue classes of Shares of any Sub-
Trust or divide the Shares of any Sub-Trust into classes, each class having
such different dividend, liquidation, voting and other rights as the
Trustees may determine, and may establish and designate the specific classes
of Shares of each Sub-Trust. The fact that a Sub-Trust shall have initially
been established and designated without any specific establishment or
designation of classes (i.e., that all Shares of such Sub-Trust are
initially of a single class), or that a Sub-Trust shall have more than one
established and designated class, shall not limit the authority of the
Trustees to establish and designate separate classes, or one or more further
classes, of said Sub-Trust without approval of the holders of the initial
class thereof, or previously established and designated class or classes
thereof, provided that the establishment and designation of such further
separate classes would not adversely affect the rights of the holders of the
initial or previously established and designated class or classes (within
the meaning of section 77 of the Massachusetts General Laws Chapter 156B).
The number of authorized Shares and the number of Shares of each Sub-
Trust or class thereof that may be issued is unlimited, and the Trustees may
issue Shares of any Sub-Trust or class thereof for such consideration and on
such terms as they may determine (or for no consideration if pursuant to a
Share dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h) of
Section 4.2). The Trustees may classify or reclassify any unissued Shares
or any Shares previously issued and reacquired of any Sub-Trust or class
thereof into one or more Sub-Trusts or classes thereof that may be
established and designated from time to time. The Trustees may hold as
treasury Shares, reissue for such consideration and on such terms as they
may determine, or cancel, at their discretion from time to time, any Shares
of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the holders
of Shares entitled to be treated as such, to the extent provided or referred
to in Section 5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective (i) upon the execution by a majority of the
then Trustees of an instrument setting forth such establishment and
designation of the relative rights and preferences of the Shares of such
Sub-Trust or class, (ii) upon the execution of an instrument in writing by
an officer of the Trust pursuant to the vote of a majority of the Trustees,
or (iii) as otherwise provided in either such instrument. At any time that
there are no Shares outstanding of any particular Sub-Trust or class
previously established and designated, the Trustees may by an instrument
executed by a majority of their number (or by an instrument executed by an
officer of the Trust pursuant to the vote of a majority of the Trustees)
abolish that Sub-Trust or class and the establishment and designation
thereof. Each instrument establishing and designating any Sub-Trust shall
have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested may acquire, own, hold and dispose of
Shares of any Sub-Trust (including any classes thereof) of the Trust to the
same extent as if such person were not a Trustee, officer or other agent of
the Trust; and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares of any Sub-Trust (including any classes thereof)
from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or
purchase of Shares of such Sub-Trust (including any classes thereof)
generally.
Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Sub-Trusts and classes, the Trustees hereby
establish and designate the following Sub-Trusts and classes thereof:
"Growth and Income Fund," "Growth and Opportunity Fund," "Sector Analysis
Fund"
and "Strategic Investors Fund," each of which shall consist of Classes A, B,
C and D. The Shares of such Sub-Trusts and classes thereof and any Shares
of any further Sub-Trusts or classes that may from time to time be
established and designated by the Trustees shall (unless the Trustees
otherwise determine with respect to some further Sub-Trust or class at the
time of establishing and designating the same) have the following relative
rights and preferences:
(a) Assets Belonging to Sub-Trusts. All consideration
received by the Trust for the issue or sale of Shares of a particular Sub-
Trust or any classes thereof, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of
that Sub-Trust or class thereof and shall irrevocably belong to that Sub-
Trust (and be allocable to any classes thereof) for all purposes, and shall
be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of such proceeds, in
whatever form the same may be, together with any General Items allocated to
that Sub-Trust as provided in the following sentence, are herein referred to
as "assets belonging to" that Sub-Trust (and allocable to any classes
thereof). In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Sub-Trust (collectively "General
Items"), the Trustees shall allocate such General Items to and among any one
or more of the Sub-Trusts established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to a particular Sub-Trust
shall belong to that Sub-Trust (and be allocable to any classes thereof).
Each such allocation by the Trustees shall be conclusive and binding upon
the Shareholders of all Sub-Trusts (including any classes thereof) for all
purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging
to each particular Sub-Trust shall be charged with the liabilities in
respect of that Sub-Trust and all expenses, costs, charges and reserves
attributable to that Sub-Trust, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily identifiable
as belonging to any particular Sub-Trust shall be allocated and charged by
the Trustees to and among any one or more of the Sub-Trusts established and
designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. In addition, the
liabilities in respect of a particular class of Shares of a particular Sub-
Trust and all expenses, costs, charges and reserves belonging to that class
of Shares, and any general liabilities, expenses, costs, charges or reserves
of that particular Sub-Trust which are not readily identifiable as belonging
to any particular class of Shares of that Sub-Trust shall be allocated and
charged by the Trustees to and among any one or more of the classes of
Shares of that Sub-Trust established and designated from time to time in
such manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Sub-Trust or class thereof are herein referred
to as "liabilities belonging to" that Sub-Trust or class thereof. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders, creditors
and any other persons dealing with the Trust or any Sub-Trust (including any
classes thereof) for all purposes. Any creditor of any Sub-Trust may look
only to the assets of that Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders.
(c) Dividends. Dividends and distributions on Shares of a
particular Sub-Trust or any class thereof may be paid with such frequency as
the Trustees may determine, which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency
as the Trustees may determine, to the holders of Shares of that Sub-Trust or
class, from such of the income and capital gains, accrued or realized, from
the assets belonging to that Sub-Trust, or in the case of a class, belonging
to that Sub-Trust and allocable to that class, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to
that Sub-Trust or class. All dividends and distributions on Shares of a
particular Sub-Trust or class thereof shall be distributed pro rata to the
holders of Shares of that Sub-Trust or class in proportion to the number of
Shares of that Sub-Trust or class held by such holders at the date and time
of record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution shall
be payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established
by the Trustees under such program or procedure. Such dividends and
distributions may be made in cash or Shares of that Sub-Trust or class or a
combination thereof as determined by the Trustees or pursuant to any program
that the Trustees may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to
that Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Sub-Trust or any class
thereof that has been established and designated shall be entitled to
receive, when and as declared by the Trustees, the excess of the assets
belonging to that Sub-Trust, or in the case of a class, belonging to that
Sub-Trust and allocable to that class, over the liabilities belonging to
that Sub-Trust or class. The assets so distributable to the Shareholders of
any particular Sub-Trust or class thereof shall be distributed among such
Shareholders in proportion to the number of Shares of that Sub-Trust or
class thereof held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust or class thereof may be authorized
by vote of a majority of the Trustees then in office subject to the approval
of a majority of the outstanding voting Shares of that Sub-Trust, as defined
in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the
Shareholders, each holder of a Share of each Sub-Trust or class thereof
shall be entitled to one vote for each whole Share and to a proportionate
fractional vote for each fractional Share standing in his name on the books
of the Trust and all Shares of each Sub-Trust shall vote as a separate class
except as to voting for Trustees and as otherwise required by the 1940 Act.
As to any matter which does not affect the interest of a particular Sub-
Trust or class thereof, only the holders of Shares of the one or more
affected Sub-Trusts or classes thereof shall be entitled to vote.
(f) Redemption by Shareholder. Each holder of Shares of a
particular Sub-Trust or any class thereof shall have the right at such times
as may be permitted by the Trust, but no less frequently than once each
week, to require the Trust to redeem all or any part of his Shares of that
Sub-Trust or class thereof at a redemption price equal to the net asset
value per Share of that Sub-Trust or class thereof next determined in
accordance with subsection (h) of this Section 4.2 after the Shares are
properly tendered for redemption. Payment of the redemption price shall be
in cash; provided, however, that if the Trustees determine, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash unwise or undesirable, the Trust may make payment wholly or
partly in securities or other assets belonging to the Sub-Trust of which the
Shares being redeemed are part at the value of such securities or assets
used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent
permissible under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust or
class thereof that has been established and designated is subject to
redemption by the Trust at the redemption price which would be applicable if
such Share was then being redeemed by the Shareholder pursuant to subsection
(f) of this Section 4.2: (a) at any time, if the Trustees determine in
their sole discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or any Sub-Trust
thereof or class thereof, or (b) upon such other conditions as may from time
to time be determined by the Trustees and set forth in the then current
Prospectus of the Trust with respect to maintenance of Shareholder accounts
of a minimum amount. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any
Sub-Trust shall be (i) in the case of a Sub-Trust whose Shares are not
divided into classes, the quotient obtained by dividing the value of the net
assets of that Sub-Trust (being the value of the assets belonging to that
Sub-Trust less the liabilities belonging to that Sub-Trust) by the total
number of Shares of that Sub-Trust outstanding, and (ii) in the case of a
class of Shares of a Sub-Trust whose Shares are divided into classes, the
quotient obtained by dividing the value of the net assets of that Sub-Trust
allocable to such class (being the value of the assets belonging to that
Sub-Trust allocable to such class less the liabilities belonging to such
class) by the total number of Shares of such class outstanding; all
determined in accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the Trustees from
time to time.
The Trustees may determine to maintain the net asset value per Share
of any Sub-Trust at a designated constant dollar amount and in connection
therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declarations of income
attributable to that Sub-Trust as dividends payable in additional Shares of
that Sub-Trust at the designated constant dollar amount and for the handling
of any losses attributable to that Sub-Trust. Such procedures may provide
that in the event of any loss each Shareholder shall be deemed to have
contributed to the capital of the Trust attributable to that Sub-Trust his
pro rata portion of the total number of Shares required to be cancelled in
order to permit the net asset value per Share of that Sub-Trust to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have agreed, by
his investment in any Sub-Trust with respect to which the Trustees shall
have adopted any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust or
class thereof shall be transferable, but transfers of Shares of a particular
Sub-Trust or class thereof will be recorded on the Share transfer records of
the Trust applicable to that Sub-Trust or class only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
that Sub-Trust or class and at such other times as may be permitted by the
Trustees.
(j) Equality. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all
Shares of each particular Sub-Trust or class thereof shall represent an
equal proportionate interest in the assets belonging to that Sub-Trust, or
in the case of a class, belonging to that Sub-Trust and allocable to that
class, subject to the liabilities belonging to that Sub-Trust or class, and
each Share of any particular Sub-Trust or class shall be equal to each other
Share of that Sub-Trust or class; but the provisions of this sentence shall
not restrict any distinctions permissible under subsection (c) of this
Section 4.2 that may exist with respect to dividends and distributions on
Shares of the same Sub-Trust or class. The Trustees may from time to time
divide or combine the Shares of any particular Sub-Trust or class into a
greater or lesser number of Shares of that Sub-Trust or class without
thereby changing the proportionate beneficial interest in the assets
belonging to that Sub-Trust or class or in any way affecting the rights of
Shares of any other Sub-Trust or class.
(k) Fractions. Any fractional Share of any Sub-Trust or
class, if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole Share of that Sub-
Trust or class, including rights and obligations with respect to voting,
receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust.
(l) Conversion Rights. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Sub-Trust or class thereof shall have
the right to convert said Shares into Shares of one or more other Sub-Trust
or class thereof in accordance with such requirements and procedures as may
be established by the Trustees.
(m) Class Differences. The relative rights and preferences of
the classes of any Sub-Trust may differ in such other respects as the
Trustees may determine to be appropriate in their sole discretion, provided
that such differences are set forth in the instrument establishing and
designating such classes and executed by a majority of the Trustees (or by
an instrument executed by an officer of the Trust pursuant to a vote of a
majority of the Trustees).
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Sub-Trust and each class thereof that has been established and designated.
No certificates certifying the ownership of Shares need be issued except as
the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Shares
certificates, the use of facsimile signatures, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who
are the Shareholders and as to the number of Shares of each Sub-Trust and
class thereof held from time to time by each such Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept
investments in the Trust and each Sub-Trust thereof from such persons and on
such terms and for such consideration, not inconsistent with the provisions
of the 1940 Act, as they from time to time authorize. The Trustees may
authorize any distributor, principal underwriter, custodian, transfer agent
or other person to accept orders for the purchase of Shares that conform to
such authorized terms and to reject any purchase orders for Shares whether
or not conforming to such authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-
emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the Trust or any
Sub-Trust thereof nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the
Trust or the Trustees, but only to the rights of said decedent under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust shall have
any power to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section 3.1,
(ii) with respect to any contract with a Contracting Party as provided in
Section 3.3 as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust or any
Sub-Trust to the extent and as provided in Sections 7.1 and 7.2, (iv) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 7.3, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any Sub-Trust
thereof or the Shareholders (provided, however, that a shareholder of a
particular Sub-Trust shall not be entitled to a derivative or class action
on behalf of any other Sub-Trust (or shareholder of any other Sub-Trust) of
the Trust) and (vi) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, this Declaration of Trust, the By-
Laws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares
held in the name of two or more persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued,
the Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Section 5.2 Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided or
upon any other matter deemed by the Trustees to be necessary or desirable.
Written notice of any meeting of Shareholders shall be given or caused to be
given by the Trustees by mailing such notice at least seven days before such
meeting, postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it appears on
the records of the Trust. The Trustees shall promptly call and give notice
of a meeting of Shareholders for the purpose of voting upon removal of any
Trustee of the Trust when requested to do so in writing by Shareholders
holding not less than 10% of the Shares then outstanding. If the Trustees
fail to call or give notice of any meeting of Shareholders for a period of
30 days after written application by Shareholders holding at least 10% of
the Shares then outstanding requesting a meeting be called for any other
purpose requiring action by the Shareholders as provided herein or in the
By-Laws, then Shareholders holding at least 10% of the Shares then
outstanding may call and give notice of such meeting, and thereupon the
meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to participate in any dividend or
distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days
(except at or in connection with the termination of the Trust), as the
Trustees may determine; or without closing the transfer books the Trustees
may fix a date and time not more than 60 days prior to the date of any
meeting of Shareholders or other action as the date and time of record for
the determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes
of such other action, and any shareholder who was a Shareholder at the date
and time so fixed shall be entitled to vote at such meeting or any
adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action, even though he has since that date and time disposed
of his Shares, and no Shareholder becoming such after that date and time
shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
Section 5.4 Quorum and Required Vote. A majority of the Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held, within a
reasonable time after the date set for the original meeting without the
necessity of further notice. A majority of the Shares voted, at a meeting
of which a quorum is present shall decide any questions and a plurality
shall elect a Trustee, except when a different vote is required or permitted
by any provision of the 1940 Act or other applicable law or by this
Declaration of Trust or the By-Laws.
Section 5.5 Action by Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders may
be taken without a meeting if a majority of Shareholders entitled to vote on
the matter (or such larger proportion thereof as shall be required by the
1940 Act or by any express provision of this Declaration of Trust or the By-
Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more
Shareholders of record who have been such for at least six months preceding
the date of application, and who hold in the aggregate either Shares having
a net asset value of at least $25,000 or at least 1% of the outstanding
Shares, whichever is less, shall apply to the Trustees in writing, stating
that they wish to communicate with other Shareholders with a view to
obtaining signatures to a request for a Shareholder meeting and accompanied
by a form of communication and request which they wish to transmit, the
Trustees shall within five business days after receipt of such application
either (i) afford to such applicants access to a list of the names and
addresses of all Shareholders as recorded on the books of the Trust, or
(ii) inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed
communication and form of request.
If the Trustees elect to follow the course specified in item
(ii) above, the Trustees, upon the written request of such applicants,
accompanied by a tender of the material to be mailed and of the reasonable
expense of mailing, shall, with reasonable promptness, mail such material to
all Shareholders of record at their addresses as recorded on the books,
unless within five business days after such tender the Trustees shall mail
to such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority of
the Trustees to the effect that in their opinion either such material
contains untrue statements of fact or omits to state facts necessary to make
the statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. The Trustees
shall thereafter comply with the requirements of the 1940 Act.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice. All persons extending credit to, contracting with or having any
claim against the Trust shall look only to the assets of the Sub-Trust with
which such person dealt for payment under such credit, contract or claim;
and neither the Shareholders of any Sub-Trust nor the Trustees nor any of
the Trust's officers, employees or agents, whether past, present or future,
nor any other Sub-Trust shall be personally liable therefor. Every note,
bond, contract, instrument, certificate or undertaking and every other act
or thing whatsoever executed or done by or on behalf of the Trust, any Sub-
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only by or for the Trust
(or the Sub-Trust) or the Trustees and not personally. Nothing in this
Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
the office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall give
notice that this Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite to the effect that the same
was executed or made by or on behalf of the Trust or by them as Trustees or
Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property
of the Trust, or the particular Sub-Trust in question, as the case may be,
but the omission thereof shall not operate to bind any Trustees or Trustee
or officers or officer or Shareholders or Shareholder individually.
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall be
liable for his own wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (a) the
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser,
administrator, distributor or principal underwriter, custodian or transfer,
dividend disbursing, Shareholder servicing or accounting agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission
in accordance with such advice or for failing to follow such advice; and (c)
in discharging their duties, the Trustees, when acting in good faith, shall
be entitled to rely upon the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of
the contract involved) any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section 3.3. The
Trustees as such shall not be required to give any bond or surety or any
other security for the performance of their duties.
Section 6.3 Indemnification of Shareholders. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged or
held to be personally liable for any obligation or liability of the Trust
solely by reason of being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other reason, said
Sub-Trust (upon proper and timely request by the Shareholder) shall assume
the defense against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or his heirs, executors, administrators
or other legal representatives or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled out of
the assets of said Sub-Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees, Officers, etc. The Trust
shall indemnify (from the assets of the Sub-Trust or Sub-Trusts in question)
each of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another organization
in which the Trust has any interest as a shareholder, creditor or otherwise
[hereinafter referred to as a "Covered Person"]) against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or legislative
body, in which such Covered Person may be or may have been involved as a
party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person (i) did
not act in good faith in the reasonable belief that such Covered Person's
action was in or not opposed to the best interests of the Trust or (ii) had
acted with wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's
office (either and both of the conduct described in (i) and (ii) being
referred to hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the proceeding
was brought that the person to be indemnified was not liable by reason of
Disabling Conduct, (ii) dismissal of a court action or an administrative
proceeding against a Covered Person for insufficiency of evidence of
Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling
Conduct by (a) a vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in section 2(a)(19) of the 1940
Act nor parties to the proceeding, or (b) an independent legal counsel in a
written opinion. Expenses, including accountants' and counsel fees so
incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be
paid from time to time by the Sub-Trust in question in advance of the final
disposition of any such action, suit or proceeding, provided that the
Covered Person shall have undertaken to repay the amounts so paid to the
Sub-Trust in question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the Covered
Person shall have provided security for such undertaking, (ii) the Trust
shall be insured against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested Trustees who are not a
party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe
that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either
for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not a party to the proceeding or (b) by an independent
legal counsel in a written opinion. Approval by the Trustees pursuant to
clause (a) or by independent legal counsel pursuant to clause (b) shall not
prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with any of such clauses as indemnification if
such Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that
such Covered Person's action was in or not opposed to the best interests of
the Trust or to have been liable to the Trust or its Shareholders by reason
of wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VI shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled.
As used in this Article VI, "Covered Person" shall include such person's
heirs, executors and administrators, an "interested Covered Person" is one
against whom the action, suit or other proceeding in question or another
action, suit or other proceeding on the same or similar grounds is then or
has been pending or threatened, and a "disinterested" person is a person
against whom none of such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar grounds is then or
has
been pending or threatened. Nothing contained in this article shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority
of the Trustees then in office subject to a favorable vote of a majority of
the outstanding voting securities, as defined in the 1940 Act, Shares of
each Sub-Trust voting separately by Sub-Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as
may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets
to distributable form in cash, securities or other property, or any
combination thereof, and distribute the proceeds to the Shareholders, in
conformity with the provisions of subsection (d) of Section 4.2.
Section 7.2 Reorganization. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the Trust
to be held as assets belonging to another Sub-Trust, in exchange for cash,
shares or other securities (including, in the case of a transfer to another
Sub-Trust of the Trust, Shares of such other Sub-Trust or any class thereof)
with such transfer being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Sub-Trust the assets of
which are so transferred; provided, however, that no assets belonging to any
particular Sub-Trust shall be so transferred unless the terms of such
transfer shall have first been approved at a meeting called for the purpose
by the affirmative vote of the holders of a majority of the outstanding
voting Shares, as defined in the 1940 Act, of that Sub-Trust. Following
such transfer, the Trustees shall distribute such cash, shares or other
securities (taking into account the differences among the classes of Shares
thereof, if any, and giving due effect to the assets and liabilities
belonging to and any other differences among the various Sub-Trusts the
assets belonging to which have so been transferred) among the Shareholders
of the Sub-Trust the assets belonging to which have been so transferred; and
if all of the assets of the Trust have been so transferred, the Trust shall
be terminated.
Section 7.3 Amendments. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any
Shareholder or Trustee or repeal the prohibition of assessment upon the
Shareholders without the express consent of each Shareholder or Trustee
involved. Subject to the foregoing, the provisions of this Declaration of
Trust (whether or not related to the rights of Shareholders) may be amended
at any time, so long as such amendment does not adversely affect the rights
of any Shareholder with respect to which such amendment is or purports to be
applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument in writing signed
by a majority of the then Trustees (or by an officer of the Trust pursuant
to the vote of a majority of such Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of Shareholders may
be adopted at any time by an instrument in writing signed by a majority of
the then Trustees (or by an officer of the Trust pursuant to the vote of a
majority of such Trustees) when authorized to do so by the vote in
accordance with subsection (e) of Section 4.2 of Shareholders holding a
majority of the Shares entitled to vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the
terms of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate
(which may be a part of such instrument) executed by a Trustee or officer of
the Trust to the effect that such amendment has been duly adopted.
Section 7.4 Filing of Copies; References; Headings. The original or
a copy of this instrument and of each amendment hereto shall be kept at the
office of the Trust where it may be inspected by any Shareholder. A copy of
this instrument and of each amendment hereto shall be filed by the Trust
with the Secretary of The Commonwealth of Massachusetts and with the Boston
City Clerk, as well as any other governmental office where such filing may
from time to time be required, but the failure to make any such filing shall
not impair the effectiveness of this instrument or any such amendment.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all expressions
like "herein", "hereof" and "hereunder" shall be deemed to refer to this
instrument as a whole as the same may be amended or affected by any such
amendments. The masculine gender shall include the feminine and neuter
genders. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed
in any number of counterparts each of which shall be deemed an original.
Section 7.5 Applicable Law. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed
by and construed and administered according to the laws of said
Commonwealth, including the Massachusetts Business Corporation Law as the
same may be amended from time to time, to which reference is made with the
intention that matters not specifically covered herein or as to which an
ambiguity may exist shall be resolved as if the Trust were a business
corporation organized in Massachusetts, but the reference to said Business
Corporation Law is not intended to give the Trust, the Trustees, the
Shareholders or any other person any right, power, authority or
responsibility available only to or in connection with an entity organized
in corporate form. The Trust shall be of the type referred to in Section 1
of Chapter 182 of the Massachusetts General Laws and of the type commonly
called a Massachusetts business trust, and without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily exercised by
such a trust.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of New York, New York for themselves and their assigns, as
of the day and year first above written.
Allan J. Bloostein
Robert B. Clark
Richard E. Hanson, Jr.
Madelon DeVoe Talley
Peter H. Gallary
Heath B. McLendon
g/shared/domestic/clients/shearson/funds/slep/mastr
SHEARSON LEHMAN BROTHERS EQUITY FUNDS
AMENDMENT NO. 1 TO THE FIRST AMENDED AND RESTATED MASTER
TRUST AGREEMENT
(Change of Name of the Fund and Change of Names of Existing Sub-Trusts)
The undersigned, Secretary of Shearson Lehman Brothers Equity Funds (the
"Fund"), does hereby certify that pursuant to Article I, Section 1.1 and
Article VII, Section 7.3 of the First Amended and Restated Master Trust
Agreement dated November 5, 1992 ("Master Trust Agreement"), which amended
and restated the Master Trust Agreement dated January 6, 1986, the following
votes were duly adopted by the Board of Trustees at a Special Meeting of the
Board held on April 6, 1993:
VOTED: That the name of the Fund previously established and designated
pursuant to the Fund's Master Trust Agreement be modified and amended as set
forth below:
Current Name: Name as Amended:
Shearson Lehman Brothers Smith Barney Shearson
Equity Funds Equity Funds
; and further
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set forth
below:
Current Name: Name as Amended:
Strategic Investors Fund Smith Barney Shearson
Strategic Investors Fund
; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's Master
Trust Agreement and By-Laws reflecting the foregoing change; and to execute
and file all requisite certificates, documents and instruments and to take
such other actions required to cause said amendment to become effective and
to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
_____ day of July, 1993.
Richard P. Roelofs
Secretary
SHEARSON LEHMAN BROTHERS EQUITY FUNDS
AMENDMENT NO. 1 TO THE FIRST AMENDED AND RESTATED MASTER
TRUST AGREEMENT
(Change of Name of the Fund and Change of Names of Existing Sub-Trusts)
The undersigned, Secretary of Shearson Lehman Brothers Equity Funds (the
"Fund"), does hereby certify that pursuant to Article I, Section 1.1 and
Article VII, Section 7.3 of the First Amended and Restated Master Trust
Agreement dated November 5, 1992 ("Master Trust Agreement"), which amended
and restated the Master Trust Agreement dated January 6, 1986, the following
votes were duly adopted by the Board of Trustees at a Special Meeting of the
Board held on April 6, 1993:
VOTED: That the name of the Fund previously established and designated
pursuant to the Fund's Master Trust Agreement be modified and amended as set
forth below:
Current Name: Name as Amended:
Shearson Lehman Brothers Smith Barney Shearson
Equity Funds Equity Funds
; and further
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set forth
below:
Current Name: Name as Amended:
Growth and Income Fund Smith Barney Shearson
Growth and Income Fund
Growth and Opportunity Fund Smith Barney Shearson
Growth and Opportunity Fund
Sector Analysis Fund Smith Barney Shearson
Sector Analysis Fund
; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's Master
Trust Agreement and By-Laws reflecting the foregoing change; and to execute
and file all requisite certificates, documents and instruments and to take
such other actions required to cause said amendment to become effective and
to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
_____ day of July, 1993.
Lee D. Augsburger
Assistant Secretary
INVESTMENT ADVISORY AGREEMENT
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108 May 22, 1993
Dear Sirs:
Shearson Lehman Brothers Equity Funds (the "Trust"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
herewith confirms its agreement with The Boston Company Advisors, Inc. (the
"Adviser") as follows:
1. Investment Description; Appointment
The Trust desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in
its Amended and Restated Master Trust Agreement (the "Master Trust Agreement
"), and in its Prospectus and Statement of Additional Information as from time
to time in effect, and in such manner and to such extent as may from time to
time be approved by the Board of Trustees of the Trust. Copies of the Fund's
Prospectus, Statement of Additional Information and the Trust's Master Trust
Agreement, as amended, have been submitted to the Adviser. The Trust desires
to employ and hereby appoints the Adviser to act as investment adviser to its
Strategic Investors Fund (the "Fund"). The Adviser accepts the appointment
and agrees to furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Trustees of the
Trust, the Adviser will (a) act in strict conformity with the Trust's Master
Trust Agreement, the Investment Company Act of 1940, as amended (the "1940
Act") and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (b) manage the Fund in accordance with the Fund's investment
objectives and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make investment
decisions for the Fund and (d) place purchase and sale orders on behalf of the
Fund; provided however, that in performing the services described in (b) and
(c), the Adviser agrees to act in accordance with the asset allocation
strategy for determining the portions of the Fund's assets invested from time
to time in equity, fixed-income and money market securities as described in
the Fund's Prospectus and Statement of Additional Information as from time to
time in effect. In providing those services, the Adviser will provide
investment research and supervision of the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Adviser will furnish the
Fund with whatever statistical information the Fund may reasonably request
with respect to the securities that the Fund may hold or contemplate
purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or dealers,
the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any Fund
transaction, the Adviser will consider all factors it deems relevant,
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, the Adviser may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) provided to the Fund and/or other accounts over which the Adviser or an
affiliate exercises investment discretion.
4. Information Provided to the Trust
The Adviser will keep the Trust informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Trust from
time to time with whatever information the Adviser believes is appropriate for
this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraph 2 above. The Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which this Agreement relates, provided that nothing herein
shall be deemed to protect or purport to protect the Adviser against any
liability to the Trust or to shareholders of the Fund to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Trust will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .55 of 1.00% of the Fund's
average daily net assets. Upon any termination of this Agreement before the
end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to the Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in the
Fund's Prospectus or Statement of Additional Information as from time to time
in effect.
7. Expenses
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of directors of the Trust who are not officers,
directors, or employees of the Adviser, Shearson Lehman Brothers Inc.,
Shearson Lehman Investment Strategy Advisors Inc., Salomon Brothers Asset
Management Inc and PanAgora Asset Management Inc. ; Securities and Exchange
Commission fees and state Blue Sky qualification fees; charges of custodians
and transfer and dividend disbursing agents; the Trust's proportionate share
of insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Trust's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders; costs
of shareholders' reports and meetings of the shareholders of the Fund and of
the officers or Board of Trustees of the Trust; and any extraordinary
expenses.
8. Reimbursement to the Trust
If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to this Agreement and the Fund's administration agreement, but
excluding distribution fees, interest, taxes, brokerage and, if permitted by
state securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Fund, the Adviser will
reimburse the Fund for that excess expense to the extent required by state law
in the same proportion as its respective fees bear to the combined fees for
investment advice and administration. The Adviser's expense reimbursement
obligation will be limited to the amount of its fees received pursuant to this
Agreement. Such expense reimbursement, if any, will be estimated, reconciled
and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Trust understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser or sub-investment adviser
and/or administrator to fiduciary and other managed accounts and as investment
adviser or sub-investment adviser and/or administrator to one or more other
investment companies or portfolios of investment companies, and the Trust has
no objection to the Adviser's so acting, provided that whenever the Fund and
one or more other accounts or investment companies advised by the Adviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in accordance with a formula believed to be equitable to
each entity. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the Fund. In
addition, the Trust understands that the persons employed by the Adviser to
assist in the performance of the Adviser's duties hereunder will not devote
their full time to such service and nothing contained herein shall be deemed
to limit or restrict the right of the Adviser or any affiliate of the Adviser
to engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
10. Term of Agreement
This Agreement shall continue for one year from the date above and
thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (a)
the Board of Trustees of the Trust or (b) a vote of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" ( as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Trust or
by vote of holders of a majority of the Fund's shares, or upon 90 days'
written notice, by the Adviser. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
11. Representation by the Trust
The Trust represents that a copy of its Amended and Restated Master
Trust Agreement, dated November 5, 1992, together with all amendments thereto,
is on file in the office of the Secretary of The Commonwealth of
Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Trust by the
undersigned officer in his capacity as an officer of the Trust. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and not upon the assets and property of any other portfolio of
the Trust and shall not be binding upon any Trustee, officer or shareholder of
the Fund and/or the Trust individually.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
Very truly yours,
Shearson Lehman Brothers
Equity Funds
By:
Title:
Accepted:
The Boston Company Advisors, Inc.
By: ________________________________
Title:
g/shared/domestic/clients/shearson/funds/slep/stag/advisory
ADVISORY AGREEMENT
SMITH BARNEY SHEARSON EQUITY FUNDS
(Smith Barney Shearson Sector Analysis Fund)
May 22, 1993
Smith Barney Shearson Strategy Advisers Inc.
Two World Trade Center
New York, New York 10048
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Company"), a trust organized
under the laws of the Commonwealth of Massachusetts, confirms its agreement
with Smith Barney Shearson Strategy Advisers Inc. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the investment objective(s),
policies and limitations specified in its Master Trust Agreement, as amended
from time to time (the "Master Trust Agreement"), in the prospectus (the
"Prospectus") and the statement of additional information (the "Statement")
filed with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in the
manner and to the extent as may from time to time be approved by the Board of
Trustees of the Company (the "Board"). Copies of the Prospectus, the
Statement and the Master Trust Agreement have been or will be submitted to the
Adviser. The Company agrees to provide copies of all amendments to the
Prospectus, the Statement and the Master Trust Agreement to the Adviser on an
on-going basis. The Company desires to employ and hereby appoints the Adviser
to act as the investment adviser to the Smith Barney Shearson Sector Analysis
Fund (the "Portfolio"). The Adviser accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of the
Company, the Adviser will (a) manage the Company's holdings in accordance with
the Portfolio's investment objective(s) and policies as stated in the Master
Trust Agreement, the Prospectus and the Statement; (b) make investment
decisions for the Portfolio; (c) place purchase and sale orders for portfolio
transactions for the Portfolio; and (d) employ professional portfolio managers
and securities analysts who provide research services to the Portfolio. In
providing those services, the Adviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Portfolio's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Portfolio, the Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934), provided
to the Portfolio and/or other accounts over which the Adviser or its
affiliates exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Portfolio's holdings, and will, on its own initiative, furnish
the Company from time to time with whatever information the Adviser believes
is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Company or to its shareholders of the
Portfolio to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .40 of 1.00% of the Portfolio's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Portfolio's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement and will pay (a) to Lehman Brothers Global
Asset Management, Inc. ("LBGAMI"), as sub-investment adviser to the Portfolio
under the Sub-Investment Advisory Agreement dated June 1, 1993 among the
Company, the Adviser and LBGAMI, as amended from time to time, and (b) to any
additional or substitute sub-investment adviser or advisers retained by the
Adviser to provide advisory services to the Portfolio (together with LBGAMI,
each a "Sub-Adviser"), the fees required to be paid to each Sub-Adviser. The
Company will bear certain other expenses to be incurred in its operation,
including, but not limited to, investment advisory, sub-advisory and
administration fees, other than those payable to a Sub-Adviser or any
additional or substitute investment adviser; fees for necessary professional
and brokerage services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Portfolio (including
fees pursuant to this Agreement and the Portfolio's administration agreements,
but excluding interest, taxes, brokerage and extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the Portfolio,
the Adviser will reduce its fee to the Portfolio by the proportion of such
excess expense equal to the proportion that its fee thereunder bears to the
aggregate of fees paid by the Portfolio for investment advice and
administration in that year, to the extent required by state law. A fee
reduction pursuant to this paragraph 8, if any, will be estimated, reconciled
and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Company has no objection to the Adviser's so acting, provided that whenever
the Portfolio and one or more other investment companies advised by the
Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed
to be equitable to each company. The Portfolio recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for
the Portfolio. In addition, the Portfolio understands that the persons
employed by the Adviser to assist in the performance of the Adviser's duties
under this Agreement will not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of the Adviser or any affiliate of the Adviser to engage in and devote
time and attention to other businesses or to render services of whatever kind
or nature.
10. Term of Agreement
This Agreement shall become effective as of the "Closing Date" as that
term is defined in that certain Asset Purchase Agreement executed among Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc., dated March 12, 1993 (the "Effective Date") and shall
continue for an initial two-year term and shall continue thereafter so long as
such continuance is specifically approved at least annually by (i) the Board
of the Company or (ii) a vote of a "majority" (as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the
Portfolio's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Board of the Company or by vote of holders of a
majority of the Portfolio's shares, or upon 90 days' written notice, by the
Adviser. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is on
file with the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
The Company and the Adviser agree that the obligations of the Company
under this Agreement shall not be binding upon any of the members of the
Board, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon the
assets and property of the Company, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement have been authorized by the Board
and a majority of the holders of the Portfolio's outstanding voting
securities, and signed by an authorized officer of the Company, acting as
such, and neither such authorization by such members of the Board and
shareholders nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the assets and property of the
Company as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON EQUITY FUNDS
By:___________________________________
Name:
Title:
Accepted:
SMITH BARNEY SHEARSON STRATEGY ADVISERS INC.
By:__________________________________
Name:
Title:
ADVISORY AGREEMENT
SMITH BARNEY SHEARSON EQUITY FUNDS
(Smith Barney Shearson Growth and Income Fund)
May 22, 1993
The Greenwich Street Advisors Division of
Mutual Management Corp.
Two World Trade Center
New York, New York 10048
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Company"), a trust organized
under the laws of the Commonwealth of Massachusetts, confirms its agreement
with the Greenwich Street Advisors Division of Mutual Management Corp. (the
"Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the investment objective(s),
policies and limitations specified in its Master Trust Agreement, as amended
from time to time (the "Master Trust Agreement"), in the prospectus (the
"Prospectus") and the statement of additional information (the "Statement")
filed with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in the
manner and to the extent as may from time to time be approved by the Board of
Trustees of the Company (the "Board"). Copies of the Prospectus, the
Statement and the Master Trust Agreement have been or will be submitted to the
Adviser. The Company agrees to provide copies of all amendments to the
Prospectus, the Statement and the Master Trust Agreement to the Adviser on an
on-going basis. The Company desires to employ and hereby appoints the Adviser
to act as the investment adviser to the Smith Barney Shearson Growth and
Income Fund (the "Portfolio"). The Adviser accepts the appointment and agrees
to furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of the
Company, the Adviser will (a) manage the Company's holdings in accordance with
the Portfolio's investment objective(s) and policies as stated in the Master
Trust Agreement, the Prospectus and the Statement; (b) make investment
decisions for the Portfolio; (c) place purchase and sale orders for portfolio
transactions for the Portfolio; and (d) employ professional portfolio managers
and securities analysts who provide research services to the Portfolio. In
providing those services, the Adviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Portfolio's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Portfolio, the Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934), provided
to the Portfolio and/or other accounts over which the Adviser or its
affiliates exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Portfolio's holdings, and will, on its own initiative, furnish
the Company from time to time with whatever information the Adviser believes
is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Company or to its shareholders of the
Portfolio to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .45 of 1.00% of the Portfolio's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Portfolio's net assets shall be computed at the times and in the
manner specified in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement. The Company will bear certain other
expenses to be incurred in its operation, including, but not limited to,
investment advisory and administration fees; fees for necessary professional
and brokerage services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Portfolio (including
fees pursuant to this Agreement and the Portfolio's administration agreements,
but excluding interest, taxes, brokerage and extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the Portfolio,
the Adviser will reduce its fee to the Portfolio by the proportion of such
excess expense equal to the proportion that its fee thereunder bears to the
aggregate of fees paid by the Portfolio for investment advice and
administration in that year, to the extent required by state law. A fee
reduction pursuant to this paragraph 8, if any, will be estimated, reconciled
and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Company has no objection to the Adviser's so acting, provided that whenever
the Portfolio and one or more other investment companies advised by the
Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed
to be equitable to each company. The Portfolio recognizes that in some cases
this procedure may adversely affect the size of the position obtainable for
the Portfolio. In addition, the Portfolio understands that the persons
employed by the Adviser to assist in the performance of the Adviser's duties
under this Agreement will not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of the Adviser or any affiliate of the Adviser to engage in and devote
time and attention to other businesses or to render services of whatever kind
or nature.
10. Term of Agreement
This Agreement shall become effective as of the "Closing Date" as that
term is defined in that certain Asset Purchase Agreement executed among Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc., dated March 12, 1993 (the "Effective Date") and shall
continue for an initial two-year term and shall continue thereafter so long as
such continuance is specifically approved at least annually by (i) the Board
of the Company or (ii) a vote of a "majority" (as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the
Portfolio's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board who are not
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Board of the Company or by vote of holders of a
majority of the Portfolio's shares, or upon 90 days' written notice, by the
Adviser. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is on
file with the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
The Company and the Adviser agree that the obligations of the Company
under this Agreement shall not be binding upon any of the members of the
Board, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon the
assets and property of the Company, as provided in the Master Trust Agreement.
The execution and delivery of this Agreement have been authorized by the Board
and a majority of the holders of the Portfolio's outstanding voting
securities, and signed by an authorized officer of the Company, acting as
such, and neither such authorization by such members of the Board and
shareholders nor such execution and delivery by such officer shall be deemed
to have been made by any of them individually or to impose any liability on
any of them personally, but shall bind only the assets and property of the
Company as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON EQUITY FUNDS
By:___________________________________
Name:
Title:
Accepted:
THE GREENWICH STREET ADVISORS
DIVISION OF MUTUAL MANAGEMENT CORP.
By:__________________________________
Name:
Title:
g\shared\domestic\clients\shearson\funds\slep\sect\admnagmt
Shearson Lehman Brothers Equity Funds--
Sector Analysis Fund
ADMINISTRATION AGREEMENT
May 21, 1993
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs:
Shearson Lehman Brothers Equity Funds (the "Trust") a business trust
organized under the laws of the Commonwealth of Massachusetts, confirms its
agreement with The Boston Company Advisors, Inc. ("Boston Advisors") and its
sub-trust Sector Analysis Fund (the "Fund") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in
the Trust's Amended and Restated Master Trust Agreement (the "Master Trust
Agreement"), as amended from time to time, in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect, and in
such manner and to the extent as may from time to time be approved by the
Board of Trustees of the Trust. Copies of the Fund's Prospectus, Statement of
Additional Information and the Master Trust Agreement have been submitted to
Boston Advisors. The Trust employs Shearson Lehman Investment Strategy
Advisors Inc. (the "Adviser") as its investment adviser and desires to employ
and hereby appoints Boston Advisors as its administrator. Boston Advisors
accepts this appointment and agrees to furnish services for the compensation
set forth below.
2. Services as Administrator
Subject to the supervision and direction of the Board of Trustees of the
Trust, Boston Advisors will (a) assist in supervising all aspects of the
Fund's operations except those performed by the Fund's Adviser under its
investment advisory agreement; (b) assist in the execution of cash management
decisions made by the Fund's Adviser(s) pursuant to instructions from Fund's
Adviser(s); (c) furnish such statistical or other factual information, advice
regarding economic factors and trends and advice as to occasional transactions
in specific securities (but without generally furnishing advice or making
recommendations regarding the purchase or sale of securities) as may be
requested by the Fund's Adviser(s) in connection with the selection of cash
equivalent investments as may be requested from time to time by the Fund's
Adviser(s); (d) supply the Fund with office facilities (which may be Boston
Advisors' own offices) statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including but not
limited to, the calculation of net asset value of shares of the Fund, internal
auditing and legal services, internal executive and administrative services,
and stationary and office supplies; and (e) prepare reports to the
shareholders of the Fund, tax returns and reports to and filings with the
Securities and Exchange Commission and state Blue Sky authorities.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Fund will pay Boston Advisors on the first business day of each month a fee
for the previous month at the annual rates of .20% of the Fund's average daily
net assets. Upon any termination of this Agreement before the end of any
month, the fee for such part of the month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Boston Advisors, the value of the Fund's net
assets shall be computed at the times and in the manner specified in the
Prospectus and Statement of Additional Information as from time to time in
effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of Trustees of the Trust who are
not officers, directors, or employees of the Adviser or Boston Advisors;
Securities and Exchange Commission fees and state Blue Sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; certain
insurance premiums; outside auditing and legal expenses, costs of maintenance
of corporate existence; costs attributable to investor services, including
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statement of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings, and meetings of the officers or Board of Trustees of the
Trust; and any extraordinary expenses.
5. Reimbursement to the Fund
If in any fiscal year, the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's investment advisory agreement,
but excluding interest, taxes, brokerage and, if permitted by state securities
commissions, extraordinary expenses) exceed the expense limitations of any
state having jurisdiction over the Fund, Boston Advisors will reimburse the
Fund for that excess expense to the extent required by state law in the same
proportion as its respective fees bear to the combined fees for investment
advice and administration. The expense reimbursement obligation of Boston
Advisors will be limited to the amount of fees hereunder. Such expense
reimbursement, if any, will be estimated, reconciled and paid on a monthly
basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Boston Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates provided that
nothing in this Agreement shall be deemed to protect or purport to protect
Boston Advisors against liability to the Fund or to its shareholders to which
Boston Advisors would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
by reason of Boston Advisors' reckless disregard of its obligations and duties
under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically (unless terminated as
provided herein) for successive annual periods provided that such continuance
is specifically approved at least annually by the Board of Trustees of the
Trust including a majority of the Board of Trustees who are not "interested
persons" (as defined in the Investment Company Act of 1940, as amended) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Trust or
by vote of holders of a majority of the Fund's shares, or upon 90 days'
written notice, by Boston Advisors.
8. Service to Other Companies or Accounts
The Trust understands that Boston Advisors now acts, will continue to
act and may act in the future as administrator to one or more other investment
companies, and the Trust has no objection to Boston Advisors' so acting. The
Trust understands that the persons employed by Boston Advisors to assist in
the performance of Boston Advisors' duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of Boston Advisors or any affiliate of Boston
Advisors to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
9. Filing of Trust Agreement
The Trust represents that a copy of its Amended and Restated Master
Trust Agreement, dated November 5, 1992, together with all amendments thereto,
is on file with the Secretary of the Commonwealth of Massachusetts and with
the Boston City Clerk.
10. Limitation of Liability
This Trust and Boston Advisors agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past, present
or future, of the Trust individually, but are binding only upon the assets and
property of the Fund, as provided in the Master Trust Agreement. The
execution and delivery of this Agreement have been authorized by the Trustees
and the sole shareholder of the Trust, and signed by an authorized officer of
the Fund, acting as such, and neither such authorization by such Trustees and
shareholder nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the assets and property of the Fund as
provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Shearson Lehman Brothers Equity Funds--
Sector Analysis Fund
By:
Title:
Accepted:
The Boston Company Advisors, Inc.
By:
Title:
g\shared\domestic\clients\shearson\funds\slep\sect\admnagmt
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON EQUITY FUNDS
(Smith Barney Shearson Sector Analysis Fund)
July 30, 1993
Lehman Brothers Global Asset Management Inc.
American Express Tower
World Financial Center
New York, New York 10285
Dear Sirs:
Smith Barney Shearson Equity Funds (the "Fund"), an unincorporated
business trust organized under the laws of The Commonwealth of Massachusetts,
and Smith Barney Shearson Strategy Advisers Inc. (the "Investment Adviser")
confirm their agreement with Lehman Brothers Global Asset Management, Inc.
("LBGAMI") with respect to sub-investment advisory services to be provided by
LBGAMI in connection with the Fund's Smith Barney Shearson Sector Analysis
Portfolio (the "Portfolio") as set forth below:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in
its Master Trust Agreement, as amended, and in the Prospectus and the
Statement of Additional Information relating to the Portfolio as from time to
time in effect, and in such manner and to such extent as may from time to time
be approved by the Board of Trustees of the Fund. Copies of the Prospectus
and Statement of Additional Information relating to the Portfolio and the
Master Trust Agreement, as amended, have been or will be submitted to LBGAMI.
The Fund also employs the Investment Adviser as investment adviser to the
Portfolio and desires to employ and appoints LBGAMI to act as sub-investment
adviser to the Portfolio. LBGAMI accepts this appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Sub-Investment Adviser
Subject to the supervision and direction of the Board of Trustees of the
Fund and the Investment Adviser, LBGAMI will provide investment advisory
assistance and portfolio management advice with respect to the Portfolio's
holdings in accordance with the Fund's Master Trust Agreement, as amended from
time to time, the Investment Company Act of 1940, as amended (the "1940 Act"),
and the Investment Advisers Act of 1940, as amended, and with the Portfolio's
investment objective and policies as stated in its Prospectus and Statement of
Additional Information as from time to time in effect. In connection
therewith, LBGAMI will (a) determine, in accordance with the sector strategy
described in the Portfolio's Prospectus, as from time to time in effect, the
sectors in which the Portfolio will invest; (b) determine the extent to which
the Portfolio's assets will be invested in a particular sector; and (c)
furnish to the Investment Adviser and/or the Fund whatever statistical
information with respect to the securities the Portfolio may hold or
contemplate purchasing as the Investment Adviser and/or the Fund may
reasonably request. In addition, LBGAMI will keep the Investment Adviser and
the Fund informed of developments materially affecting the Portfolio and
shall, on its own initiative, furnish to the Investment Adviser and the Fund
from time to time whatever information LBGAMI believes appropriate for this
purpose.
3. Compensation
In consideration of services rendered pursuant to this Agreement, the
Investment Adviser will pay LBGAMI on the first business day of each month a
fee for the previous month at an annual rate of .15 of 1.00% of the value of
the Portfolio's average daily net assets. The fee for the period from the
date set forth in this Agreement to the end of that month shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of any month, the fee
for such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to LBGAMI, the value of the Portfolio's net assets shall be computed
at the times and in the manner specified in the Prospectus and Statement of
Additional Information relating to the Portfolio as from time to time in
effect.
4. Expenses
LBGAMI will bear all expenses in connection with the performance of its
services under this Agreement. The Portfolio will bear certain other expenses
to be incurred in its operation, including: investment advisory fees and
administration fees; taxes, interest, brokerage fees and commissions, if any;
fees of Trustees of the Fund who are not officers, directors or employees of
the Investment Adviser, LBGAMI or any of their affiliates; fees of any pricing
service employed to value securities held by the Portfolio; Securities and
Exchange Commission fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; the Portfolio's
proportionate share of the Fund's insurance premiums and professional
association dues and assessments; outside auditing and legal expenses; costs
of maintenance of the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses;
costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings and meetings of the
officers or Board of Trustees of the Fund; and any extraordinary expenses. In
addition, the Portfolio will pay distribution fees pursuant to a Distribution
Plan adopted by the Fund under Rule 12b-1 of the 1940 Act.
The Portfolio will be responsible for non-recurring expenses of the Fund
that may arise from time to time, including costs of litigation to which the
Fund is a party, costs of indemnifying officers and Trustees of the Fund with
respect to such litigation, and other expenses as determined by the Trustees.
The allocation of general Fund expenses among the portfolios offered by the
Fund will be made on a basis that the Trustees deem fair and equitable,
including on the basis of the relative net assets of the portfolios or the
nature of the services performed and relative applicability to each of the
portfolios.
5. Reduction of Fees
If in any fiscal year the aggregate expenses of the Portfolio (including
fees pursuant to this Agreement and the Portfolio's investment advisory and
administration agreements, but excluding interest, taxes, brokerage,
distribution fees and, if permitted by state securities commissions,
extraordinary expenses) exceed the expense limitations of any state having
jurisdiction over the Portfolio, LBGAMI will reduce its fees to the Portfolio
for that excess expense to the extent required by state law in the same
proportion as its sub-investment advisory fee bears to the total investment
advisory, sub-investment advisory and administration fees paid by the Fund on
behalf of the Portfolio. The fee reduction obligation of LBGAMI will be
limited to the amount of its fees received pursuant to this Agreement. Such
fee reduction, if any, will be estimated, reconciled and paid on a monthly
basis.
6. Standard of Care
LBGAMI shall exercise its best judgment in rendering the services listed
in paragraph 2. LBGAMI shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing herein shall be
deemed to protect or purport to protect LBGAMI against liability to the Fund
or to shareholders of the Portfolio to which LBGAMI would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of LBGAMI's reckless disregard of
its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall become effective on the "Closing Date" as that term
is defined in that certain Asset Purchase Agreement executed among Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc., dated March 12, 1993 (the "Effective Date"), will remain
in effect for a period of two years from the date of its effectiveness, and
thereafter shall continue automatically for successive annual periods provided
that such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Fund or (ii) a vote of a "majority" (as defined in
the 1940 Act) of the Portfolio's outstanding voting securities, provided that
in either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Fund or
by vote of holders of a majority of the Portfolio's shares, or upon 90 days'
written notice by LBGAMI. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
8. Service to Other Companies or Accounts
The Fund understands that LBGAMI now acts, will continue to act and may
act in the future as investment adviser to fiduciary and other managed
accounts and as investment adviser and/or sub-investment adviser to one or
more other investment companies, and the Fund has no objection to LBGAMI's so
acting, provided that whenever the Portfolio and one or more other accounts,
investment companies or portfolios advised by LBGAMI have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio. In addition, the Fund understands
that the persons employed by LBGAMI to assist in the performance of LBGAMI's
duties under this Agreement will not devote their full time to such service
and nothing contained herein shall be deemed to limit or restrict the right of
LBGAMI or any affiliate of LBGAMI to engage in and devote time and attention
to other businesses or to render services of whatever kind or nature.
9. Representation by the Fund
The Fund represents that a copy of its Master Trust Agreement, dated
January 8, 1986, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts.
10. Limitation of Liability
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund.
The obligations of this Agreement shall be binding upon the assets and
property of the Portfolio only and not upon the assets and property of any
other portfolio of the Fund and shall not be binding upon any Trustee, officer
or shareholder of the Portfolio and/or the Fund individually.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us the
enclosed copy hereof.
Very truly yours,
SMITH BARNEY SHEARSON EQUITY FUNDS
By:_____________________________________
Name:
Title:
SMITH BARNEY SHEARSON STRATEGY
ADVISERS INC.
By:__________________________________
Name:
Title:
Accepted:
LEHMAN BROTHERS GLOBAL
ASSET MANAGEMENT, INC.
By:_________________________________
Name:
Title:
g\shared\domestic\clients\shearson\funds\slep\sect\admnagmt
DISTRIBUTION AGREEMENT
SMITH BARNEY SHEARSON EQUITY FUNDS
July 30, 1993
Smith Barney Shearson Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Smith Barney Shearson Equity Funds a business
trust.organized under the laws of the Commonwealth of Massachusetts has agreed
that Smith Barney Shearson Inc.("SBS") shall be, for the period of this
Agreement, the distributor of shares (the "Shares") of the Fund.
1. Services as Distributor
1.1 SBS will act as agent for the distribution of Shares covered
by the registration statement, prospectus and statement of additional
information then in effect under the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended (the "1940
Act").
1.2 SBS agrees to use its best efforts to solicit orders for the
sale of Shares and will undertake such advertising and promotion as it
believes is reasonable in connection with such solicitation.
1.3 All activities by SBS as distributor of the Shares shall
comply with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934.
1.4 SBS will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
1.5 SBS will transmit any orders received by it for purchase or
redemption of Shares to The Shareholder Services Group, Inc. ("TSSG"), the
Fund's transfer and dividend agent, or any successor to TSSG of which the Fund
has notified SBS in writing.
1.6 Whenever in their judgment such action is warranted for any
reason, including, without limitation, market, economic or political
conditions, the Fund's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable
to accept such orders and to make such sales.
1.7 SBS will act only on its own behalf as principal should it
choose to enter into selling agreements with selected dealers or others.
1.8 The Fund will pay to SBS an annual fee in connection with the
offering and sale of the Shares under this Agreement. The annual fee paid to
SBS, will be calculated daily and paid monthly by the Fund at an annual rate
set forth in the Services and Distribution Plan (the "Plan") based on the
average daily net assets of each series of the Fund; provided that payment
shall be made in any month only to the extent that such payment shall not
exceed the sales charge limitations established by the National Association of
Securities Dealers, Inc.
The annual fee paid to SBS under this Section 1.8 maybe used by SBS to
cover any expenses primarily intended to result in the sale of Shares,
including, but not limited to, the following:
(a) cost of payments made to SBS Financial Consultants and other
employees of SBS or other broker-dealers that engage in the distribution of
the Fund's Shares;
(b) payments made to, and expenses of, persons who provide
support services in connection with the distribution of the Fund's Shares,
including, but not limited to, office space and equipment, telephone
facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services;
(c) costs relating to the formulation and implementation of
marketing and promotional activities, including, but not limited to, direct
mail promotions and television, radio, newspaper, magazine and other mass
media advertising;
(d) costs of printing and distributing prospectuses and reports
of the Fund to prospective shareholders of the Fund;
(e) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund; and
(f) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional activities that the Fund
may, from time to time, deem advisable;
except that distribution expenses shall not include any expenditures in
connection with services which SBS, any of its affiliates, or any other person
have agreed to bear without reimbursement.
1.9 SBS shall prepare and deliver reports to the Treasurer of the Fund
and to the sub-investment advisor and/or administrator of the Fund on a
regular, at least quarterly, basis, showing the distribution expenses incurred
pursuant to this Agreement and the Plan and the purposes therefor, as well as
any supplemental reports as the Trustees, from time to time, may reasonably
request.
2. Duties of the Fund
2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that SBS may designate.
2.2 The Fund shall furnish from time to time for use in
connection with the sale of the Shares, such information reports with respect
to the Fund and its Shares as SBS may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such reports, when so signed by
the Fund's officers, shall be true and correct. The Fund shall also furnish
SBS upon request with (a) annual audits of the Fund's books and accounts made
by independent certified public accountants regularly retained by the Fund;
(b) semi-annual unaudited financial statements pertaining to the Fund; (c)
quarterly earnings statements prepared by the Fund; (d) a monthly itemized
list of the securities in the Fund's portfolio; (e) monthly balance sheets as
soon as practicable after the end of each month; and (f) from time to time
such additional information regarding the Fund's financial condition as SBS
may reasonably request.
3. Representations and Warranties
The Fund represents to SBS that all registration statements,
prospectuses and statements of additional information filed by the Fund with
the SEC under the 1933 Act and the 1940 Act with respect to the Shares have
been carefully prepared in conformity with the requirements of the 1933 Act,
the 1940 Act and the rules and regulations of the SEC thereunder. As used in
this Agreement, the terms "registration statement", "prospectus" and
"statement of additional information" shall mean any registration statement,
prospectus and statement of additional information filed by the Fund with the
SEC and any amendments and supplements thereto which at any time shall have
been field with the SEC. The Fund represents and warrants to SBS that any
registration statement, prospectus and statement of additional information,
when such registration statement becomes effective, will include all
statements required to be contained therein in conformance with the 1933 Act,
the 1940 Act and the rules and regulations of the SEC; that all statements of
fact contained in any registration statement, prospectus or statement of
additional information will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor
any prospectus or statement of additional information when such registration
statement becomes effective will include an 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 not misleading to a purchaser of the
Fund's Shares. The Fund may, but shall not be obligated to, propose from time
to time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from SBS to do so, SBS
may, at its option, terminate this Agreement. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving SBS reasonable notice
thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any time such
amendments to any registration statement and/or supplements to any prospectus
or statement of additional information, of whatever character, as the Fund may
deem advisable, such right being in all respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes SBS and dealers to use any prospectus or
statement of additional information furnished by the Fund from time to time,
in connection with the sale of the Shares. The Fund agrees to indemnify,
defend and hold SBS, its several officers and directors, and any person who
controls SBS within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any such counsel fees incurred in connection
therewith) which SBS, its officers and directors, or any such controlling
person, may incur under the 1933 Act or under common law or otherwise, arising
out of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement, any prospectus or any
statement of additional information or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated
in any registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any thereof not misleading;
provided, however, that the Fund's agreement to indemnify SBS, its officers or
directors, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations made by SBS or its representatives or agents other than such
statements and representations as are contained in any prospectus or statement
of additional information and in such financial and other statements as are
furnished to SBS pursuant to paragraph 2.2 of this Agreement; and further
provided that the Fund's agreement to indemnify SBS and the Fund's
representations and warranties herein before set forth in paragraph 3 of this
Agreement shall not be deemed to cover any liability to the Fund or its
shareholders to which SBS would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of SBS's reckless disregard of its obligations and duties under
this Agreement. The Fund's agreement to indemnify SBS, its officers and
directors, and any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action brought against SBS,
its officers or directors, or any such controlling person, such notification
to be given by letter or by telegram addressed to the Fund at its principal
office in New York, New York and sent to the Fund by the person against whom
such action is brought, within ten days after the summons or other first legal
process shall have been served. The failure so to notify the Fund of any such
action shall not relieve the Fund from any liability that the Fund may have to
the person against whom such action is brought by reason of any such untrue,
or alleged untrue, statement or omission, or alleged omission, otherwise than
on account of the Fund's indemnity agreement contained in this paragraph 4.1.
The Fund will be entitled to assume the defense of any suit brought to enforce
any such claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Fund and approved by SBS.
In the event the Fund elects to assume the defense of any such suit and
retains counsel of
good standing approved by SBS, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of them;
but if the Fund does not elect to assume the defense of any such suit, or if
SBS does not approve of counsel chosen by the Fund, the Fund will reimburse
SBS, its officers and directors, or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses of any counsel
retained by SBS or them. The Fund's indemnification agreement contained in
this paragraph 4.1 and the Fund's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of SBS, its officers and directors, or
any controlling person, and shall survive the delivery of any of the Fund's
Shares. This agreement of indemnity will inure exclusively to SBS's benefit,
to the benefit of its several officers and directors, and their respective
estates, and to the benefit of the controlling persons and their successors.
The Fund agrees to notify SBS promptly of the commencement of any litigation
or proceedings against the Fund or any of its officers or trustees in
connection with the issuance and sale of any of the Fund's Shares.
4.2 SBS agrees to indemnify, defend and hold the Fund, its
several officers and Trustees, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or Trustees
or any such controlling person may incur under the 1933 Act, or under common
law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Trustees, or such controlling person
resulting from such claims or demands shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by SBS to the Fund and used in the answers to
any of the items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional information, or
shall arise out of or be based upon any omission, or alleged omission, to
state a material fact in connection with such information furnished in writing
by SBS to the Fund and required to be stated in such answers or necessary to
make such information not misleading. SBS's agreement to indemnify the Fund,
its officers or Trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon SBS being notified of any action brought against
the Fund, its officers or Trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to SBS at its
principal office in New York, New York and sent to SBS by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have been served. SBS shall have the right to control the
defense of such action, with counsel of its own choosing, satisfactory to the
Fund, if such action is based solely upon such alleged misstatement or
omission on SBS's part, and in any other event the Fund, its officers or
Trustees or such controlling person shall each have the right to participate
in the defense or preparation of the defense of any such action. The failure
to so notify SBS of any such action shall not relieve SBS from any liability
that SBS may have to the Fund, its officers or Trustees, or to such
controlling person by reason of any such untrue, or alleged untrue, statement
or omission, or alleged omission, otherwise than on account of SBS's indemnity
agreement contained in this paragraph 4.2. SBS agrees to notify the Fund
promptly of the commencement of any litigation or proceedings against SBS or
any of its officers or directors in connection with the issuance and sale of
any of the Fund's Shares.
4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party
and the indemnified party shall have agreed to the retention of such counsel
or (ii) the indemnified party shall have concluded reasonably that
representation of the indemnifying party and the indemnified party by the same
counsel would be inappropriate due to actual or potential differing interests
between them in the conduct of the defense of such action.
5. Effectiveness of Registration
None of the Fund's Shares shall be offered by either SBS or the Fund
under any of the provisions of this Agreement and no orders for the purchase
or sale of the Shares under this Agreement shall be accepted by the Fund if
and so long as the effectiveness of the registration statement then in effect
or any necessary amendments thereto shall be suspended under any of the
provision of the 1933 Act or if and so long as a current prospectus as
required by Section 5(b) (2) of the 1933 Act is not on file with the SEC;
provided, that nothing contained in this paragraph 5 shall in any way restrict
or have an application to or bearing upon the Fund's obligation to repurchase
its Shares from any shareholder in accordance with the provisions of the
Fund's prospectus, statement of additional information or the Amended and
Restated Master Trust Agreement dated November 5, 1992, as amended from time
to time.
6. Notice to SBS
The Fund agrees to advise SBS immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect or
for additional information;
(b) In the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
or a material fact made in the registration statement, prospectus or statement
of additional information then in effect or that requires the making of a
change in such registration statement, prospectus or statement of additional
information in order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to
any registration statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
7. Term of the Agreement
This Agreement shall become effective as of the "Closing Date" as that
term is defined in that certain Asset Purchase Agreement executed among SBS,
Primerica Corporation and Shearson Lehman Brothers Inc., dated March 12, 1993
and continues for successive annual periods thereafter so long as such
continuance is specifically approved at least annually by (a) the Fund's Board
of Trustees or (b) by a vote of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Trustees of the Fund who are
not interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' notice by the Fund's Board of Trustees, by vote of the holders of a
majority of the Fund's Shares, or on 90 days' notice by SBS. This Agreement
will also terminate automatically in the event of its assignment (as defined
in the 1940 Act).
8. Miscellaneous
The Fund recognizes that directors, officers and employees of SBS may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies) and
that such other corporations and trusts may include the name "Smith Barney
Shearson" as part of their name, and that SBS or its affiliates may enter into
distribution or other agreements with such other corporations and trusts. If
SBS ceases to act as the distributor of the Shares, the Fund agrees that, at
SBS's request, the Fund's license to use the word ""Smith Barney Shearson""
will terminate and that the Fund will take all necessary action to change the
name of the Fund to a name not including the words "Smith Barney Shearson."
9. Limitation of Liability
The Fund and SBS agree that the obligations of the Fund under this
Agreement shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future, of
the Fund, individually, but are binding only upon the assets and property of
the Fund, as provided in the Master Trust Agreement. The execution and
delivery of this Agreement have been authorized by the Trustees and signed by
an authorized officer of the Fund, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Fund as provided in its Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance
of this Agreement by signing and returning to us the enclosed copy of this
Agreement.
Very truly yours,
SMITH BARNEY SHEARSON EQUITY FUNDS
By: _____________________
Title:
Accepted:
SMITH BARNEY SHEARSON INC.
By: __________________________
Authorized Officer
shared\domestic\clients\shearson\funds\slep\distrib
Page: 3
8
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of August 5, 1993 between Smith Barney Shearson
Equity Funds, (the "Fund"), a business trust organized under the laws of
Massachusetts and having its principal place of business at Two World Trade
Center, New York, NY 10048, and THE SHAREHOLDER SERVICES GROUP, INC. (MA) (the
"Transfer Agent"), a Massachusetts corporation with principal offices at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109.
W I T N E S S E T H
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement, or similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent pursuant to
Section 4(c) hereof as may be received by the Transfer Agent from time to
time.
(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "Fund" shall mean the entity executing this Agreement, and if
it is a series fund, as such term is used in the 1940 Act, such term shall
mean each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each such
series.
(g) "1940 Act" shall mean the Investment Company Act of 1940.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of 1933
and the 1940 Act.
(j) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be, of
the Fund as may be issued from time to time and, if the Fund is a closed-end
or a series fund, as such terms are used in the 1940 Act any other classes or
series of stock, shares of beneficial interest or limited partnership
interests that may be issued from time to time.
(k) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to partners
of limited partnerships.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent for
the Fund. The Transfer Agent accepts such appointments and agrees to perform
the duties hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the Transfer Agent to be
compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written schedule of fees annexed hereto as
Schedule A and incorporated herein. The Transfer Agent will transmit an
invoice to the Fund as soon as practicable after the end of each calendar
month which will be detailed in accordance with Schedule A, and the Fund will
pay to the Transfer Agent the amount of such invoice within thirty (30) days
after the Fund's receipt of the invoice.
In addition, the Fund agrees to pay, and will be billed
separately for, reasonable out-of-pocket expenses incurred by the Transfer
Agent in the performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule B and
incorporated herein. Unspecified out-of-pocket expenses shall be limited to
those out-of-pocket expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the Fund for
expenses incurred by the Transfer Agent in any month shall be made as soon as
practicable but no later than 15 days after the receipt of an itemized bill
from the Transfer Agent.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A, a revised fee schedule executed and
dated by the parties hereto.
4. Documents. In connection with the appointment of the Transfer Agent
the Fund shall deliver or caused to be delivered to the Transfer Agent the
following documents on or before the date this Agreement goes into effect, but
in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares of
the Fund;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;
(c) A signature card bearing the signatures of any officer of the
Fund or other Authorized Person who will sign Written Instructions or is
authorized to give Oral Instructions.
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the Securities Act
of 1933, as amended.
5. Further Documentation. The Fund will also furnish the Transfer
Agent with copies of the following documents promptly after the same shall
become available:
(a) each resolution of the Board of Directors authorizing the
issuance of Shares;
(b) any registration statements filed on behalf of the Fund and
all pre-effective and post-effective amendments thereto filed with the
Commission;
(c) a certified copy of each amendment to the Articles of
Incorporation or the By-laws of the Fund;
(d) certified copies of each resolution of the Board of Directors
or other authorization designating Authorized Persons; and
(e) such other certificates, documents or opinions as the
Transfer Agent may reasonably request in connection with the performance of
its duties hereunder.
6. Representations of the Fund. The Fund represents to the Transfer
Agent that all outstanding Shares are validly issued, fully paid and
non-assessable. When Shares are hereafter issued in accordance with the terms
of the Fund's Articles of Incorporation and its Prospectus, such Shares shall
be validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the Fund
shall deliver or cause to be delivered to the Transfer Agent written notice of
such declaration signed on behalf of the Fund by an officer thereof, upon
which the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the identity of the Shares involved, (ii) the number of Shares
involved, and (iii) that all appropriate action has been taken.
8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible for administering and/or performing those functions typically
performed by a transfer agent; for acting as service agent in connection with
dividend and distribution functions; and for performing shareholder account
and administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares in accordance with the terms of the Prospectus and applicable law. The
operating standards and procedures to be followed shall be determined from
time to time by agreement between the Fund and the Transfer Agent and shall
initially be as described in Schedule C attached hereto. In addition, the
Fund shall deliver to the Transfer Agent all notices issued by the Fund with
respect to the Shares in accordance with and pursuant to the Articles of
Incorporation or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
9. Record Keeping and Other Information. The Transfer Agent shall
create and maintain all records required of it pursuant to its duties
hereunder and as set forth in Schedule C in accordance with all applicable
laws, rules and regulations, including records required by Section 31(a) of
the 1940 Act. All records shall be available during regular business hours
for inspection and use by the Fund. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth in Schedule C,
the Transfer Agent shall perform such other duties and functions, and shall be
paid such amounts therefor, as may from time to time be agreed upon in writing
between the Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an amendment to
Schedule C, both dated and signed by authorized persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions
(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice
of any change of authority of any person until receipt of a Written
Instruction thereof from the Fund pursuant to Section 4(c). The Transfer
Agent will also have no liability when processing Share certificates which it
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for the Transfer Agent. Written Instructions requested by the
Transfer Agent will be provided by the Fund within a reasonable period of
time. In addition, the Transfer Agent, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Fund only if said
representative is an Authorized Person. The Fund agrees that all Oral
Instructions shall be followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm shall not impair in
any respect the Transfer Agent's right to rely on Oral Instructions. The
Transfer Agent shall have no duty or obligation to inquire into, nor shall the
Transfer Agent be responsible for, the legality of any act done by it upon the
request or direction of a person reasonably believed by the Transfer Agent to
be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares, or the propriety of the amount
to be paid therefor; (iii) the legality of the declaration of any dividend by
the Board of Directors, or the legality of the issuance of any Shares in
payment of any dividend; or (iv) the legality of any recapitalization or
readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be liable or
responsible for delays or errors by acts of God or by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties, mechanical breakdown, insurrection, war,
riots, or failure or unavailability of transportation, communication or power
supply, fire, flood or other catastrophe.
13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party') will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit or other
proceeding (a "Claim") unless such Claim has resulted from a negligent failure
to act or omission to act or bad faith of the Indemnified Party in the
performance of its duties hereunder. In addition, the Fund will indemnify the
Transfer Agent against and hold it harmless from any Claim, damages,
liabilities or expenses (including reasonable counsel fees) that is a result
of: (i) any action taken in accordance with Written or Oral Instructions, or
any other instructions, or share certificates reasonably believed by the
Transfer Agent to be genuine and to be signed, countersigned or executed, or
orally communicated by an Authorized Person; (ii) any action taken in
accordance with written or oral advice reasonably believed by the Transfer
Agent to have been given by counsel for the Fund or its own counsel; or (iii)
any action taken as a result of any error or omission in any record (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) delivered, or caused to be delivered by the Fund to the
Transfer Agent in connection with this Agreement.
In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party. The Indemnifying Party
shall have the option to defend the Indemnified Party against any Claim which
may be the subject of this indemnification, and, in the event that the
Indemnifying Party so elects, such defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified Party,
and thereupon the Indemnifying Party shall take over complete defense of the
Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will
be asked to provide indemnification, except with the Indemnifying Party's
prior written consent. The obligations of the parties hereto under this
Section shall survive the termination of this Agreement.
14. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other party for
indirect loss of profits, reputation or business or any other special damages
under any provision of this Agreement or for any act or failure to act
hereunder.
15. Term and Termination.
(a) This Agreement shall be effective on the date first written
above and shall continue until August 4, 1994, and thereafter shall
automatically continue for successive annual periods ending on the anniversary
of the date first written above, provided that it may be terminated by either
party upon written notice given at least 60 days prior to termination.
(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors, certified by
the Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, the Transfer
Agent will deliver to such successor a certified list of shareholders of the
Fund (with names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession of the
Transfer Agent, and the Transfer Agent will cooperate with the Fund and any
successor transfer agent or agents in the substitution process.
16. Confidentiality. Both parties hereto agree that any non public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of the
Commission or other governmental agency. The parties further agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this
provision.
17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.
18. Subcontracting. The Fund agrees that the Transfer Agent may, in
its discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
Transfer Agent shall not relieve the Transfer Agent of its responsibilities
hereunder.
19. Miscellaneous.
(a) Notices. Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or the Transfer
Agent, shall be sufficiently given if addressed to that party and received by
it at its office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
Smith Barney Shearson Equity Funds
Two World Trade Center, Floor 100
New York, NY 10048
Attention:Richard Roelofs
To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Robert F. Radin, President
with a copy to TSSG Counsel
(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the assignor without the written consent of the other party, which consent
shall not be unreasonably withheld.
(c) Governing Law. This Agreement shall be governed exclusively
by the laws of the State of New York without reference to the choice of law
provisions thereof. Each party hereto hereby agrees that (i) the Supreme
Court of New York sitting in New York County shall have exclusive jurisdiction
over any and all disputes arising hereunder; (ii) hereby consents to the
personal jurisdiction of such court over the parties hereto, hereby waiving
any defense of lack of personal jurisdiction; and (iii) appoints the person to
whom notices hereunder are to be sent as agent for service of process.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall not use the
name of the Transfer Agent in any Prospectus, Statement of Additional
Information, shareholders' report, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing; provided, that
the Transfer Agent need only receive notice of all reasonable uses of its name
which merely refer in accurate terms to its appointment hereunder or which are
required by any government agency or applicable law or rule. Notwithstanding
the foregoing, any reference to the Transfer Agent shall include a statement
to the effect that it is a wholly owned subsidiary of First Data Corporation.
(g) Use of Fund's Name. The Transfer Agent shall not use the
name of the Fund or material relating to the Fund on any documents or forms
for other than internal use in a manner not approved prior thereto in writing;
provided, that the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of the Transfer
Agent or which are required by any government agency or applicable law or
rule.
(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto relating to the matters covered hereby and supersede any previous
agreements. If any provision is held to be illegal, unenforceable or invalid
for any reason, the remaining provisions shall not be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written.
SMITH BARNEY SHEARSON
EQUITY FUNDS
By: /s/Richard P. Roelofs
Title: President
THE SHAREHOLDER SERVICES
GROUP, INC.
By: /s/Michael G. McCarthy
Title: Vice President
A-1
Transfer Agent Fee
Schedule A
Class A shares
The Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class B shares
The Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
Class C shares
The Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
A-2
Class D shares
The Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee shall be
billed by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of
the annualized fee for all accounts that are open during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per closed
account per month applicable to those shareholder accounts which close in a
given month and remain closed through the following month-end billing cycle.
Such fee shall be billed by the Transfer Agent monthly in arrears.
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes,
checks and stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class)
direct pass through
to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including
all lease, maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other
equipment and any expenses incurred in
connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs,
including, but not limited to exit fees charged by third
party
record keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably incurred by
the
Transfer Agent in performing its duties and
responsibilities under this
Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with the Transfer Agent. In addition,
the Fund will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer
Agent whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as part of its
duties and obligations under the Agreement.
C-1
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or its agent
shall maintain a record of the number of Shares held by each holder of record
which shall include name, address, taxpayer identification and which shall
indicate whether such Shares are held in certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder accounts and will respond to all communications from Shareholders
and others relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between the Transfer Agent and
the Fund. The Transfer Agent shall provide the Fund with reports concerning
shareholder inquires and the responses thereto by the Transfer Agent, in such
form and at such times as are agreed to by the Fund and the Transfer Agent.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply the Transfer
Agent or its agent with an adequate supply of blank share certificates to meet
the Transfer Agent or its agent's requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund agrees that,
notwithstanding the death, resignation, or removal of any officer of the Fund
whose signature appears on such certificates, the Transfer Agent or its agent
may continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and lost certificate bonds, in form satisfactory to the
Transfer Agent or its agent, with the Fund and the Transfer Agent or its agent
as obligees under the bond.
(c) The Transfer Agent or its agent shall also maintain a record
of each certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with respect thereto,
the Transfer Agent or its agent shall maintain comparable records of the
record holders thereof, including their names, addresses and taxpayer
identification. The Transfer Agent or its agent shall further maintain a stop
transfer record on lost and/or replaced certificates.
C-2
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail to Shareholders of the Fund,
all reports to Shareholders, dividend and distribution notices and proxy
material for the Fund's meetings of Shareholders. In connection with meetings
of Shareholders, the Transfer Agent or its Agent will prepare Shareholder
lists, mail and certify as to the mailing of proxy materials, process and
tabulate returned proxy cards, report on proxies voted prior to meetings, act
as inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) Suspension of Sale of Shares. The Transfer Agent or its
agent shall not be required to issue any Shares of the Fund where it has
received a Written Instruction from the Fund or official notice from any
appropriate authority that the sale of the Shares of the Fund has been
suspended or discontinued. The existence of such Written Instructions or such
official notice shall be conclusive evidence of the right of the Transfer
Agent or its agent to rely on such Written Instructions or official notice.
(b) Returned Checks. In the event that any check or other order
for the payment of money is returned unpaid for any reason, the Transfer Agent
or its agent will: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued as a
result of such check or order; and (iii) take such actions as the Transfer
Agent may from time to time deem appropriate.
6. Transfer and Repurchase
(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
The Transfer Agent or its agent will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent or its agent
reasonably may deem necessary.
The Transfer Agent or its agent reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on
the instructions is valid and genuine. The Transfer Agent or its agent also
reserves the right to refuse to transfer or repurchase Shares until it is
satisfied that the requested transfer or repurchase is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers
or repurchases which the Transfer Agent or its agent, in its good judgement,
deems improper or unauthorized, or until it is reasonably satisfied that there
is no basis to any claims adverse to such transfer or repurchase.
C-3
(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent or its agent shall, upon receipt of the instructions and
documents in proper form, deliver to the Custodian and the Fund or its
designee a notification setting forth the number of Shares to be repurchased.
Such repurchased shares shall be reflected on appropriate accounts maintained
by the Transfer Agent or its agent reflecting outstanding Shares of the Fund
and Shares attributed to individual accounts.
(c) Payment of Repurchase Proceeds. The Transfer Agent or its
agent shall, upon receipt of the moneys paid to it by the Custodian for the
repurchase of Shares, pay such moneys as are received from the Custodian, all
in accordance with the procedures described in the written instruction
received by the Transfer Agent or its agent from the Fund.
The Transfer Agent or its agent shall not process or effect any
repurchase with respect to Shares of the Fund after receipt by the Transfer
Agent or its agent of notification of the suspension of the determination of
the net asset value of the Fund.
7. Dividends
(a) Notice to Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors of the
Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be
furnished to the Transfer Agent or its agent a copy of a resolution of the
Fund's Board of Directors certified by the Secretary of the Fund setting forth
the date of the declaration of such dividend or distribution, the ex-dividend
date, the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per Share to the
shareholders of record as of that date, the total amount payable to the
Transfer Agent or its agent on the payment date and whether such dividend or
distribution is to be paid in Shares of such class at net asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Custodian of the Fund will pay to the Transfer Agent
sufficient cash to make payment to the shareholders of record as of such
payment date.
(b) Insufficient Funds for Payments. If the Transfer Agent or
its agent does not receive sufficient cash from the Custodian to make total
dividend and/or distribution payments to all shareholders of the Fund as of
the record date, the Transfer Agent or its agent will, upon notifying the
Fund, withhold payment to all Shareholders of record as of the record date
until sufficient cash is provided to the Transfer Agent or its agent.
C-4
Exhibit 1
to
Schedule C
Summary of Services
The services to be performed by the Transfer Agent or its agent shall be
as follows:
A. DAILY RECORDS
Maintain daily the following information with respect to each
Shareholder account as received:
o Name and Address (Zip Code)
o Class of Shares
o Taxpayer Identification Number
o Balance of Shares held by Agent
o Beneficial owner code: i.e., male, female, joint tenant,
etc.
o Dividend code (reinvestment)
o Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
o Answer written inquiries relating to Shareholder accounts
(matters relating to portfolio management, distribution of Shares and other
management policy questions will be referred to the Fund).
o Process additional payments into established Shareholder
accounts in accordance with Written Instruction from the Agent.
o Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
o Identify redemption requests made with respect to accounts
in which Shares have been purchased within an agreed-upon period of time for
determining whether good funds have been collected with respect to such
purchase and process as agreed by the Agent in accordance with written
instructions set forth by the Fund.
o Examine and process all transfers of Shares, ensuring that
all transfer requirements and legal documents have been supplied.
C-5
o Issue and mail replacement checks.
o Open new accounts and maintain records of exchanges between
accounts
C. DIVIDEND ACTIVITY
o Calculate and process Share dividends and distributions as
instructed by the Fund.
o Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the Fund. Report to the
Fund reinvestment plan share purchases and determination of the reinvestment
price.
D. MEETINGS OF SHAREHOLDERS
o Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies (proxies must be
adaptable to mechanical equipment of the Agent or its agents) and supply daily
reports when sufficient proxies have been received.
o Prepare and submit to the Fund an Affidavit of Mailing.
o At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if requested by the
Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
o Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (material must be adaptable to mechanical equipment of
Agent or its agents).
o Receive all notices issued by the Fund with respect to the
Preferred Shares in accordance with and pursuant to the Articles of
Incorporation and the Indenture and perform such other specific duties as are
set forth in the Articles of Incorporation including a giving of notice of a
special meeting and notice of redemption in the circumstances and otherwise in
accordance with all relevant provisions of the Articles of Incorporation.
g/shared/domestic/clients/shearson/funds/slep/tranag
9
SERVICES AND DISTRIBUTION PLAN
Smith Barney Shearson Equity Funds
This Services and Distribution Plan dated July 30, 1993 (the "Plan"), is
adopted in accordance with Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), by Smith
Barney Shearson Equity Funds, a business trust organized under the laws
of the Commonwealth of Massachusetts
(the "Trust"), on behalf of each of its series ("Series"), as set forth
in Appendix A, as amended from time
to time, subject to the following terms and conditions:
Section 1. Annual Fee.
(a) Class A Service Fee. The Trust will pay to the distributor of
its shares, Smith Barney Shearson Inc., a corporation organized under
the laws of the State of Delaware ("Distributor"), a service
the Plan at the annual rate of [see Appendix A] of the average daily
net assets of the respective Series
attributable to Class A shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Trust will pay to the
Distributor a service fee under the Plan at the annual rate
of [see Appendix A] of the average daily net
assets of the respective Series attributable to Class B
shares (the "Class B Service Fee").
(c) Service Fee for Class D shares. The Trust will pay to the
Distributor a service fee under the
Plan at the annual rate of [see Appendix A] of the average daily
net assets of the respective Series
attributable to Class D shares (the "Class D Service Fee," and
collectively with the Class A Service Fee and
the Class B Service Fee, the "Service Fees").
(d) Distribution Fee for Class B shares. In addition to the Class B Service
Fee, the Trust will pay
the Distributor a distribution fee under the Plan at the annual rate of
[see Appendix A] of the average
daily net assets of the respective Series attributable to Class B
shares (the "Class B Distribution Fee").
(e) Distribution Fee for Class D shares. In addition to the Class
D Service Fee, the Trust will pay
the Distributor a distribution fee under the Plan at the annual rate
of [see Appendix A] of the average
daily net assets of the respective Series attributable to Class D
shares (the "Class D Distribution Fee,"
and collectively with the Class B Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution Fees will
be calculated daily and paid
monthly by the Trust with respect to the foregoing classes of each
Series' shares (each a "Class" and
together the "Classes") at the annual rates indicated above [see Appendix A].
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its respective
Service Fees and/or Distribution
Fees may be used for: (a) costs of printing and distributing
the Series' prospectus, statement of
additional information and reports to prospective investors in the Series;
(b) costs involved in preparing,
printing and distributing sales literature pertaining to the Series;
(c) an allocation of overhead and other
branch office distribution-related expenses of the Distributor;
(d) payments made to, and expenses of, Smith
Barney Shearson Financial Consultants and other persons who provide
support services in connection with the
distribution of the Series' shares, including but not limited to,
office space and equipment, telephone
facilities, answering routine inquires regarding the Series,
processing shareholder transactions and
providing any other shareholder services not otherwise provided
by the Series' transfer agent; and (e)
accruals for interest on the amount of the foregoing expenses
that exceed the Distribution Fee and, in the
case of Class B shares, the contingent deferred sales charge
received by the Distributor; provided, however,
that the Distribution Fees may be used by the Distributor only to
cover expenses primarily intended to
result in the sale of the Series' Class B and D shares,
including without limitation, payments to
Distributor's financial consultants at the time of the sale of
Class B and D shares. In addition, Service
Fees are intended to be used by the Distributor primarily to pay
its financial consultants for servicing
shareholder accounts, including a continuing fee to each such
financial consultant, which fee shall begin to
accrue immediately after the sale of such shares.
Section 3. Approval of Shareholders.
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of the Plan,
with respect to a Class of a Series until the Plan has been
approved by a vote of at least a majority of the
outstanding voting securities of the Class of that Series. The
Plan will be deemed to have been approved
with respect to a Class of a Series so long as a majority of
the outstanding voting securities of the Class
of that Series votes for the approval of the Plan, notwithstanding
that: (a) the Plan has not been approved
by a majority of the outstanding voting securities of any other
Class of that Series, or (b) the Plan has
not been approved by a majority of the outstanding voting
securities of the Series.
Section 4. Approval of Trustees.
Neither the Plan nor any related agreements will take effect
until approved by a majority of both (a)
the full Board of Trustees of the Trust and (b) those Trustees
who are not interested persons of the Trust
and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements
related to it (the "Qualified Trustees"), cast in person at a
meeting called for the purpose of voting on
the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class
until July 31, 1994, and thereafter for
successive twelve-month periods with respect to each Class;
provided, however, that such continuance is
specifically approved at least annually by the Trustees of the
Trust and by a majority of the Qualified
Trustees.
Section 6. Termination.
The Plan may be terminated at any time with respect to a Class of
a Series (i) by the Series without
the payment of any penalty, by the vote of a majority of the
outstanding voting securities of such Class of
the Series or (ii) by a vote of the Qualified Trustees. The
Plan may remain in effect with respect to a
particular Class of a Series even if the Plan has been terminated
in accordance with this Section 6 with
respect to any other Class of that Series.
Section 7. Amendments.
The Plan may not be amended with respect to any Class of a
Series so as to increase materially the
manner described in Section 1 above, unless the amendment
is approved by a vote of the holders of at least a
majority of the outstanding voting securities of that Class
of that Series. No material amendment to the
Plan may be made unless approved by the Board of Trustees in
the manner described in Section 4 above.
Section 8. Selection of Certain Trustees.
While the Plan is in effect, the selection and nomination of
the Trust's Trustees who are not
interested persons of the Trust will be committed to the
discretion of the Trustees then in office who are
not interested persons of the Trust.
Section 9. Written Reports.
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of
monies paid or payable by the Trust pursuant to the Plan or any
related agreement will prepare and furnish
to the Board of Trustees and the Board will review, at least
quarterly, written reports, complying with the
requirements of the Rule, which sets out the amounts expended
under the Plan and the purposes for which
those expenditures were made.
Section 10. Preservation of Materials.
The Trust will preserve copies of the Plan, any agreement
relating to the Plan and any report made
pursuant to Section 9 above, for a period of not less than
six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority
of the outstanding voting securities"
will be deemed to have the same meaning that those terms have under
the 1940 Act by the Securities and
Exchange Commission.
Section 12. Limitation of Liability.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of
the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the
Trust, individually, but are binding only upon the assets and property
of the Trust, as provided in the
Master Trust Agreement of the Trust. The execution and delivery
of this Plan has been authorized by the
Trustees and by shareholders of each Series thereof holding at least
a majority of the outstanding voting
securities and signed by an authorized officer of the Series, acting
as such, and neither such authorization
by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind
only the trust property of each Series as provided in the Trust's
Master Trust Agreement.
IN WITNESS WHEREOF, the Trust, on behalf of each Series, executed
the Plan as of July 30, 1993.
SMITH BARNEY SHEARSON EQUITY
FUNDS
By: __________________________
Heath B. McLendon
Chairman of the Board
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