SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by
Rule 14-a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SMITH BARNEY EQUITY FUNDS
(Name of Registrant as Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2), or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14-a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
..........................................................................
2) Aggregate number of securities to which transaction applies:
..........................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
..........................................................................
4) Proposed maximum aggregate value of transaction:
..........................................................................
5) Total fee paid:
..........................................................................
[x] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
..........................................................................
2) Form, Schedule or Registration Statement No.:
..........................................................................
3) Filing Party:
..........................................................................
4) Date Filed:
..........................................................................
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SMITH BARNEY [LOGO] Smith Barney Mutual Funds
Investing for your future.
Every day.
A Member of Travelers Group [LOGO]
July 5, 1995
Dear Shareholder:
An Important Notice About Smith Barney Strategic Investors Fund
We would like to inform you of a proposal concerning Smith Barney Strategic
Investors Fund, a separate investment portfolio of Smith Barney Equity Funds.
The Board of Trustees has recently unanimously endorsed this proposal.
The Fund's investment adviser is Smith Barney Strategy Advisers Inc.
(SBSA), a wholly owned subsidiary of Smith Barney Mutual Funds Management Inc.
The Fund's current sub-investment adviser is The Boston Company Advisors, Inc.
(Boston Advisors).
Due to the resignation in April 1995 of the Fund's portfolio manager,
William W. Carter, from Boston Advisors, the Board has determined to terminate
the Fund's sub-advisory agreement with Boston Advisors. In conjunction with the
proposed termination of the Fund's sub-advisory agreement, the Board has also
determined to submit to shareholders a new advisory agreement with SBSA. Under
the new advisory agreement, SBSA would serve as the Fund's sole investment
adviser.
If the new advisory agreement is approved, SBSA would provide full advisory
services to the Fund and would retain its entire advisory fee. Since Smith
Barney Inc. is already serving as asset allocation consultant to the Fund, the
Board believes that having all investment functions performed by a single entity
would simplify the Fund's management and permit it to operate more efficiently.
The Fund would be managed by a new management team headed by Robert J. Brady,
CFA, and Ellen S. Cammer. Together, the new team has nearly 50 years of
investment experience, the majority of it at Smith Barney or its predecessor
firms. IT IS IMPORTANT TO NOTE THAT THE AGGREGATE COST TO THE FUND FOR ADVISORY
SERVICES UNDER THE NEW AGREEMENT WOULD BE THE SAME AS THE FEES CURRENTLY PAID BY
THE FUND.
We will hold a special meeting of shareholders of the Fund on August 10,
1995 to consider this proposal and to transact other Fund business. WE STRONGLY
URGE YOU TO PARTICIPATE BY REVIEWING, COMPLETING AND RETURNING YOUR PROXY BY
AUGUST 9, 1995 IN THE POSTAGE-PAID ENVELOPE PROVIDED. For more details about the
proposed transaction, please refer to the enclosed proxy statement.
We thank you for your timely participation and look forward to serving your
investment needs with Smith Barney Mutual Funds. If you have any questions,
please call your Financial Consultant who will be pleased to assist you.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board
Smith Barney Equity Funds
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SMITH BARNEY STRATEGIC INVESTORS FUND
A SUB-TRUST OF SMITH BARNEY EQUITY FUNDS
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on August 10, 1995
To the Shareholders of Smith Barney Strategic
Investors Fund:
Notice is hereby given that a special meeting of shareholders of Smith
Barney Strategic Investors Fund (the "Fund"), a mutual fund organized as a
sub-trust of Smith Barney Equity Funds (the "Trust"), will be held at 388
Greenwich Street, 26th Floor, New York, New York on August 10, 1995 commencing
at 10:00 a.m. for the following purposes:
1. To approve or disapprove a new investment advisory agreement between
the Trust, on behalf of the Fund, and Smith Barney Strategy Advisers
Inc. (Proposal 1).
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These items are discussed in greater detail in the attached Proxy
Statement. The close of business on June 20, 1995 has been fixed as the record
date for the determination of shareholders of the Fund entitled to notice of and
to vote at the meeting and any adjournment thereof.
By Order of the Board of Trustees
Christina T. Sydor
July 5, 1995 Secretary
- --------------------------------------------------------------------------------
SHAREHOLDERS OF THE FUND WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES.
INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE
FOLLOWING PAGE. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
- --------------------------------------------------------------------------------
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INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration
on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signature
- ------------ ---------------
Corporate Accounts
(1) ABC Corp. ........................................ ABC Corp.
(2) ABC Corp. ........................................ John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer ........................ John Doe
(4) ABC Corp. Profit Sharing Plan .................... John Doe, Trustee
Trust Accounts
(1) ABC Trust ........................................ Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 ................................. Jane B. Doe
Custodian or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.
UGMA ......................................... John B. Smith
(2) John B. Smith .................................... John B. Smith, Executor
<PAGE>
SMITH BARNEY STRATEGIC INVESTORS FUND
A SUB-TRUST OF SMITH BARNEY EQUITY FUNDS
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
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SPECIAL MEETING OF SHAREHOLDERS
To Be Held on August 10, 1995
PROXY STATEMENT
This Proxy Statement is being solicited by the Board of Trustees (the
"Board") of Smith Barney Equity Funds (the "Trust"), for use at the Special
Meeting of Shareholders (the "Meeting") of its sub-trust, Smith Barney Strategic
Investors Fund (the "Fund"), to be held on August 10, 1995 or any adjournment or
adjournments thereof. The Meeting will be held at 388 Greenwich Street, 26th
Floor, New York, New York at the time specified in the Notice of Special Meeting
of Shareholders and proxy card that accompany this Proxy Statement. Proxy
solicitations will be made primarily by mail, but proxy solicitations also may
be made by telephone, telegraph or personal interviews conducted by officers and
employees of: the Trust; Smith Barney Inc. ("Smith Barney"), the distributor of
shares of the Fund; and/or The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation and the transfer agent of the Fund. The
Fund has retained Applied Mailing Systems, Inc. to assist in the solicitation of
proxies, at an estimated cost in the range of $50,000 to $75,000 (depending on
the extent of the services provided). The costs of the proxy solicitation and
expenses incurred in connection with the preparation of this Proxy Statement and
its enclosures will be paid by the Fund.
Applied Mailing Systems, Inc. may call shareholders to ask if they would be
willing to have their votes recorded by telephone. The telephonic voting
procedure is designed to authenticate the shareholder's identity by asking the
shareholder to provide his social security number, in the case of an individual,
or a taxpayer identification number, in the case of an entity. The shareholder's
telephone vote will be recorded and a confirmation will be sent to the
shareholder to ensure that the vote has been taken in accordance with the
shareholder's instructions. Although a shareholder's vote may be taken by
telephone, each shareholder will receive a copy of this Proxy Statement and may
vote by mail using the enclosed proxy card. The Fund believes that this
telephonic voting system will comply with Massachusetts state law and will
obtain an opinion of counsel to that effect prior to implementing such
procedures.
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The Trust currently issues four classes of shares of beneficial interest
("Shares") in respect of the Fund, but for purposes of the matters to be
considered at the Meeting, all Shares will be voted as a single class. Each
Share is entitled to one vote and any fractional Share is entitled to a
fractional vote. If the enclosed proxy is properly executed and returned in time
to be voted at the Meeting, the Shares represented thereby will be voted in
accordance with the instructions marked thereon. Unless instructions to the
contrary are marked on the proxy, it will be voted FOR approval of the matters
listed in the accompanying Notice of Special Meeting of Shareholders. Any
shareholder who has given a proxy has the right to revoke it at any time prior
to its exercise either by attending the Meeting and voting his or her Shares in
person or by submitting a letter of revocation or a later-dated proxy to the
Trust at the above address prior to the date of the Meeting. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote Shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as Shares that are present but which have not been voted. For this
reason, abstentions and broker "non-votes" will have the effect of a "no" vote
for purposes of obtaining the requisite approval of the proposals.
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present but sufficient votes to approve any of the proposals
are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the nature of the proposals that are the subject of the Meeting, the
percentage of votes actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information to be provided
to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those Shares
represented at the Meeting in person or by proxy. Under the Trust's Master Trust
Agreement, a quorum is constituted by the presence in person or by proxy of the
holders of a majority of the outstanding Shares of the Fund entitled to vote at
the Meeting.
The Board has fixed the close of business on June 20, 1995 as the record
date (the "Record Date") for the determination of shareholders of the Fund
entitled to notice of and to vote at the Meeting. On the Record Date,
21,943,121.884 Shares of the Fund were outstanding. Except as set forth in
Exhibit A, to the knowledge of the Trust and the Board, no single shareholder or
"group" (as that term is used in Section 13(d) of the Securities Exchange Act of
1934), beneficially owned, as of the Record Date, more than 5% of any class of
the outstanding Shares of the Fund. As of the Record Date, the officers and
Board members of the Trust beneficially owned less than 1% of each class of
Shares of the Fund.
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As of the Record Date, no shares of Smith Barney Strategy Advisers Inc.
("SBSA") or its ultimate parent corporation, Travelers Group Inc. ("Travelers"),
were held by Board members who are not interested persons of the Trust (as that
term is used in the Investment Company Act of 1940, as amended (the "1940
Act")).
In order that your Shares may be represented at the Meeting, you are
requested to:
-- indicate your instructions on the enclosed proxy card;
-- date and sign the proxy card;
-- mail the proxy card promptly in the enclosed envelope, which requires
no postage if mailed in the continental United States; and
-- allow sufficient time for the proxy card to be received on or before
5:00 p.m., August 9, 1995.
As a business trust formed under the laws of the Commonwealth of
Massachusetts, the Trust is not required to hold annual shareholder meetings but
may hold special meetings as required or deemed desirable. As indicated above,
the Meeting is being called to consider a new advisory contract for the Fund.
The Board recommends affirmative votes on Proposal 1.
PROPOSAL 1
TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN SMITH
BARNEY STRATEGY ADVISERS INC. AND THE TRUST, ON BEHALF OF THE FUND.
The Fund currently is advised by SBSA under an agreement dated July 15,
1994 (the "Current Advisory Agreement"). The Boston Company Advisors, Inc.
("Boston Advisors") currently acts as sub-adviser to the Fund pursuant to an
agreement with the Fund and SBSA dated July 15, 1994 (the "Current Sub-Advisory
Agreement," and together with the Current Advisory Agreement, the "Current
Agreements"). For the reasons described below under the caption "Evaluation by
the Board and Reasons for the Proposal," the Board has unanimously determined to
terminate the Current Sub-Advisory Agreement with Boston Advisors. In
conjunction with the termination of Boston Advisors as sub-adviser, the Board
has unanimously determined, subject to approval by the shareholders of the Fund,
to enter into a new investment advisory agreement between the Fund and SBSA (the
"New Advisory Agreement"). SBSA and the Trust have agreed to terminate the
Current Advisory Agreement, waiving any applicable notice provisions, upon the
shareholders' approval of the New Advisory Agreement. Under the New Advisory
Agreement, the Fund would pay advisory fees in an amount equal, in the
aggregate, to the fees paid under the Current Agreements. It is contemplated,
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<PAGE>
however, that under the new arrangements (1) SBSA, as the Fund's sole investment
adviser, will render increased services to the Fund in the areas of setting
overall strategy, security selection and trading and will retain the entire
advisory fee paid by the Fund and (2) no payment of a sub-advisory fee will be
paid to Boston Advisors. In addition, the New Advisory Agreement provides for a
term different from that of the Current Advisory Agreement.
Under the Current Advisory Agreement, the Fund pays SBSA a monthly fee at
the annual rate of 0.55 of 1.00% of the Fund's average daily net assets. In
turn, under the Current Sub-Advisory Agreement, SBSA pays Boston Advisors a
monthly fee at the annual rate of 0.275 of 1.00% of the Fund's average daily net
assets. The Fund pays no fee to Boston Advisors directly. Under the proposed fee
arrangements, the Fund would continue to pay SBSA a monthly fee at the annual
rate of 0.55 of 1.00% of the Fund's average daily net assets, however, SBSA
would retain the entire fee since no sub-advisory fee will be paid. THE
AGGREGATE COST TO THE FUND FOR ADVISORY SERVICES UNDER THE NEW ADVISORY
AGREEMENT WOULD BE THE SAME AS THE FEES CURRENTLY PAID UNDER THE CURRENT
AGREEMENTS.
If approved by shareholders, the New Advisory Agreement will commence upon
obtaining shareholder approval and continue for a two-year period and
automatically thereafter for successive annual periods, provided such
continuance is approved at least annually by (a) a majority of the Board who are
not interested persons of the Trust (as the term is used in the 1940 Act) and
(b) a majority of the full Board of Trustees or a majority of the outstanding
voting securities of the Fund, as defined in the 1940 Act.
SMITH BARNEY STRATEGY ADVISERS INC.
SBSA is a wholly owned subsidiary of Smith Barney Mutual Funds Management
Inc. ("SBMFM"). SBMFM is a wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings") which in turn is a wholly owned subsidiary of Travelers. SBMFM
serves as the Fund's administrator and Smith Barney serves as the Fund's
distributor. SBSA, SBMFM, Smith Barney and Travelers are located at 388
Greenwich Street, New York, New York 10013. Exhibit B to this Proxy Statement
provides information regarding other investment companies or series thereof
currently advised by either SBSA or SBMFM that have investment objectives
similar to, although their policies, strategies and specific investments may
differ from, those of the Fund.
During the period from February 1, 1994 to July 14, 1994, Boston Advisors
acted as investment adviser for the Fund and received $912,500 in advisory fees
from the Fund during that period. For the period from July 15, 1994 to January
31, 1995, the aggregate amount of advisory fees paid to SBSA by the Fund was
$1,100,580, of which $550,290 was paid to Boston Advisors by SBSA. If the
proposed fee structure had been in effect during that period, SBSA would have
retained aggregate advisory fees equal to $1,100,580 (100% more than the actual
advisory fees retained).
4
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During the period from February 1, 1994 to May 8, 1994, Boston Advisors
acted as administrator for the Fund and received $212,828 in administration fees
from the Fund during that period. For the period from May 9, 1994 to January 31,
1995, the Fund paid administration fees to SBMFM in the aggregate amount of
$519,201, of which sub-administration fees in the amount of $395,890 were paid
to Boston Advisors by SBMFM. In addition, for the Fund's fiscal year ended
January 31, 1995, the Fund paid service and distribution fees to Smith Barney in
the aggregate amount of $3,215,966.
The name, address, position with SBSA and principal occupation of each
executive officer and director of SBSA are set forth in the following table.
Name and Address* Position with SBSA Principal Occupation
- ----------------- ------------------ --------------------
Heath B. McLendon** Chairman of the Managing Director of Smith
Board of Directors Barney; Chairman of the funds
and President of the Smith Barney Group of
Funds
Lewis E. Daidone** Director and Senior Managing Director of Smith
Vice President Barney; Senior Vice President
and Treasurer of the funds of
the Smith Barney Group of
Funds
Michael J. Day Treasurer Managing Director of Smith
Barney
Christina T. Sydor** Secretary Managing Director of Smith
Barney; Secretary of the
funds of the Smith Barney
Group of Funds
- ----------
* The business address of each person listed above is 388 Greenwich Street,
New York, New York 10013.
** Also an officer of the Fund.
5
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EVALUATION BY THE BOARD AND REASONS FOR THE
PROPOSAL
In April 1995, the Board was informed that fourteen members of the
professional staff of Boston Advisors, including the Fund's former Portfolio
Manager and Investment Officer, William W. Carter, who was responsible for
managing the equity portion of the Fund's portfolio, resigned from Boston
Advisors and formed a new investment management firm, Boston Partners Asset
Management, L.P. In light of these events and as soon thereafter as practicable,
the Board held a meeting via telephone conference on April 28, 1995 to discuss
the status of the Fund's management. At that time, the Board was informed that,
on the next business day, several executive personnel of SBSA would meet with
Boston Advisors in Boston to discuss the future management of the Fund and that,
in the interim, SBSA would closely supervise all portfolio transactions made by
Boston Advisors on behalf of the Fund. Shortly thereafter at a Board meeting
held on May 9, 1995, SBSA reported its findings to the Board for its
consideration.
On June 15, 1995, the Board met in person at a meeting called for the
purpose of considering, among other things, (1) the termination of the Current
Advisory Agreement and the approval of the New Advisory Agreement with SBSA and
(2) termination of the Current Sub-Advisory Agreement with Boston Advisors.
Although SBSA recommended that the Board approve these proposals, the Board also
considered various other possible alternatives, including (1) continuation of
the Current Sub-Advisory Agreement with Boston Advisors and (2) solicitation of
interest by other possible sub-advisers. The Board received and reviewed
materials or discussed various matters regarding one or both of SBSA and Boston
Advisors, including their personnel, portfolio managers, analysts, economists
and others, methods of operation, past performance and profitability. After
reviewing different options, the Board has determined that the termination of
the Current Agreements and the approval of the New Advisory Agreement, pursuant
to which SBSA would act as sole investment adviser for the Fund, are appropriate
courses of action at this time in order to provide the Fund with management by
investment professionals who are well suited to address the Fund's particular
needs and to implement its asset allocation strategy.
The Board considered, among other factors, that SBSA currently oversees
Boston Advisors' management of the Fund's portfolio. The Board further
considered that Smith Barney, an affiliate of SBSA, serves without compensation
as asset allocation consultant to the Fund. The Board was advised that the asset
allocation mix has been a primary determinant of the Fund's investment
performance. The Board concluded that having all of the investment functions
performed by a single entity would significantly simplify the Fund's management
and permit it to operate more efficiently.
6
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The Board considered the fact that, although the aggregate cost to the Fund
for advisory services under the proposed New Advisory Agreement would be the
same as the fees paid under the Current Agreements, SBSA would be retaining the
entire amount of its advisory fee. The Board determined that the additional fees
retained by SBSA would compensate SBSA for assuming responsibility for all of
the investment management functions of the Fund. The Board concluded that the
New Advisory Agreement and the increased involvement of SBSA should provide
investment management which will be beneficial to the overall performance of the
Fund, while not affecting the investment advisory fee currently charged to the
Fund.
After a meeting of the full Board, and a meeting of the non-interested
Trustees with their counsel, at which the Trustees carefully evaluated the
foregoing issues, the Trustees of the Trust who were not interested persons of
the Trust approved, and the Board as a whole, approved (i) the termination of
the Current Agreements and (ii) subject to shareholder approval, the New
Advisory Agreement with SBSA substantially in the form of Exhibit C to this
Proxy Statement.
BROKERAGE ARRANGEMENTS
In selecting brokers or dealers to execute portfolio transactions on behalf
of the Fund, SBSA seeks the best overall terms available. In assessing the best
overall terms available for any transaction, SBSA will consider the factors it
deems relevant, including 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 addition, SBSA is authorized, 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
and Exchange Act of 1934) provided to the Fund and/or other accounts over which
SBSA or its affiliates exercise investment discretion. The fees under the Fund's
investment advisory agreement will not be reduced by reason of the Fund's or
SBSA's receiving brokerage and research services. Research and investment
services are those which brokerage houses customarily provide to institutional
investors and include statistical and economic data and research reports on
particular issues and industries. These services are used by SBSA in connection
with all of its investment activities, and some of the services obtained in
connection with the execution of transactions for the Fund may be used in
managing other investment accounts. Conversely, brokers furnishing these
services may be selected for the execution of transactions for these other
accounts, whose aggregate assets may exceed those of the Fund, and the services
furnished by the brokers may be used by SBSA in providing investment management
for the Fund. The Board periodically will review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits inuring to the Fund.
Over-the-counter purchases and sales by the Fund are transacted directly with
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principal market makers except in those cases in which better prices and
executions may be obtained elsewhere.
During the fiscal year ended January 31, 1995, the Fund incurred $541,403
in brokerage commissions, of which $117,328 (representing 21.70% of the total of
all brokerage commissions paid) was paid to Smith Barney. Such commissions were
paid with respect to 24.67% of the total dollar value of all transactions
involving the payment of brokerage commissions effected during the year.
CURRENT AND PROPOSED ADVISORY AGREEMENTS WITH SBSA
Current Advisory Agreement
SBSA currently serves as investment adviser to the Fund pursuant to an
advisory agreement dated July 15, 1994 between the Trust, on behalf of the Fund,
and SBSA. The Current Advisory Agreement was last submitted to a vote of
shareholders of the Fund on July 5, 1994 in connection with terminating the then
existing investment advisory agreement with Boston Advisors and approving the
Current Advisory Agreement with SBSA (at the same time, the Current Sub-Advisory
Agreement with Boston Advisors was approved). Under its terms, SBSA, subject to
the supervision of the Trust's Board of Trustees, manages the Fund's investments
in accordance with the investment objectives and policies stated in the Fund's
Prospectus and the Trust's Statement of Additional Information. Under the
Current Advisory Agreement, SBSA supervises the sub-investment advisory services
currently rendered by Boston Advisors, determines the asset allocation of the
Fund, evaluates and makes final determinations with respect to investment
strategies for the Fund, provides the Fund with the benefits of research
capabilities of the Smith Barney organization and provides executive management
for the Fund. SBSA receives a fee that is computed daily and paid monthly at the
annual rate of 0.55 of 1.00% of the value of the Fund's average daily net
assets.
Under the terms of the Current Advisory Agreement, SBSA bears all expenses
in connection with its performance, including the sub-investment advisory fee
payable to Boston Advisors under the Current Sub-Advisory Agreement. Other
expenses incurred in the operation of the Fund are borne by the Fund, including:
taxes, interest, brokerage fees and commissions, if any; distribution and
shareholder service fees; fees of the Board members who are not officers,
directors, shareholders or employees of Smith Barney, or any of its affiliates;
SEC fees and state blue sky qualification fees; charges of custodian and
transfer and dividend disbursing agents; certain insurance premiums; outside
auditing and legal expenses; costs of investor services (including allocable
telephone and personnel expenses); costs of preparation and printing of
prospectuses and statements of additional information for regulatory purposes
and for distribution to shareholders; costs of preparation and printing of
shareholders' reports; costs incurred in connection with meetings of the
shareholders of the Fund and of the officers or Board of the Trust; and any
extraordinary expenses.
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If in any fiscal year the aggregate expenses of the Fund (including fees
pursuant to the Current Advisory Agreement and the Current Sub-Advisory
Agreement but excluding interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense limitation of
any state having jurisdiction over the Fund, SBSA will reduce its advisory fee
to the Fund by the proportion of such excess equal to the proportion that the
advisory fees bear to the Fund's aggregate fees for investment advice and
administration. This expense reimbursement, if any, is estimated, reconciled and
paid on a monthly basis.
The Current Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the investment adviser shall not be liable for any act
or omission in the course of or in connection with the rendering of its services
thereunder.
The Current Advisory Agreement will remain in effect pursuant to its terms
for an initial term of two years from its date of execution and thereafter with
respect to the Fund for successive annual periods if and so long as such
continuance is specifically approved annually by (a) the Trust's Board or (b) a
majority vote of the outstanding voting securities of the Fund, provided that in
either event the continuance also is approved by a majority of the Board members
who are not "interested persons" (as defined in the 1940 Act) of any party to
the Agreement, by vote cast in person at a meeting called for the purpose of
voting on approval. The Agreement is terminable, without penalty, on 60 days'
written notice by the Board or by a majority vote of the outstanding voting
securities of the Fund or on 90 days' written notice by SBSA. The Agreement
would terminate automatically in the event of its assignment (as defined in the
1940 Act).
Under the terms of the Current Sub-Advisory Agreement, Boston Advisors,
subject to the supervision of the Board and SBSA as investment adviser, makes
investment decisions for the Fund, places purchase and sale orders for portfolio
transactions and provides analytical and research services to the Fund. Pursuant
to the Current Sub-Advisory Agreement, SBSA pays Boston Advisors a
sub-investment advisory fee of 0.275 of 1.00% of the value of the Fund's average
daily net assets. Pursuant to the New Advisory Agreement, subject to approval by
the shareholders of the Fund, SBSA would assume the investment management
responsibilities currently provided to the Fund by Boston Advisors and would
retain this additional portion of its advisory fee. By letter dated June 15,
1995, the Board has notified Boston Advisors of its decision to terminate the
Current Sub-Advisory Agreement, effective August 14, 1995.
Proposed New Advisory Agreement
The New Advisory Agreement contains the same advisory fee as the Current
Advisory Agreement and is identical in all other material respects other than
that it provides for a term different from that of the Current Advisory
Agreement. It is contemplated under the new arrangements that (1) SBSA will
render increased services to the Fund as the sole investment adviser for the
9
<PAGE>
Fund and will retain the entire advisory fee paid by the Fund and (2) no
sub-advisory fee will be paid to Boston Advisors.
REQUIRED VOTE
Approval of the Agreement requires the affirmative vote of a "majority of
the outstanding voting securities" of the Fund. The term "majority of the
outstanding voting securities" of the Fund, as used in this Proxy Statement and
defined in the 1940 Act, means the affirmative vote of the lesser of: (1) 67% of
the voting securities of the Fund present at the Meeting if more than 50% of the
outstanding Shares are present in person or by proxy at the Meeting; or (2) more
than 50% of the outstanding securities of the Fund.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is not generally required to hold annual or special shareholders'
meetings. Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholders' meeting should send their written
proposals to the Secretary of the Trust at the address set forth on the cover of
this proxy statement. Shareholder proposals for inclusion in the Trust's proxy
statement for any subsequent meeting must be received by the Trust a reasonable
period of time prior to any such meeting.
ANNUAL REPORT
The Fund will furnish, without charge, a copy of its most recent Annual
Report dated January 31, 1995 and its most recent Semi-Annual Report dated July
31, 1994, upon request to the Fund at 388 Greenwich Street, New York, New York
10013, (800) 224-7523, or by contacting a Smith Barney Financial Consultant.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board does not intend to present any other business at the Meeting nor
is it aware that any shareholder intends to do so. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying proxy card(s) will vote thereon in accordance with their judgment.
July 5, 1995
----------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PAID ENVELOPE.
10
<PAGE>
EXHIBIT A
BENEFICIAL OWNERSHIP OF CLASS C SHARES
as of the Record Date
Number of Shares Percentage of Class C
Name and Address Beneficially Owned Shares Outstanding
- ---------------- ------------------ ------------------
Frontier Trust Company as TTEE 13,111.577 10.28
MBS/Multimode Inc.
Attn: Camille Petrizzo
7 Horden Lane
Huntington Station, NY 11746
Frontier Trust Company as TTEE 10,962.770 8.59
Reynolds Brothers Inc.
Attn: Ed Snyder
1000 Airport Road
Lakewood, NJ 08701
Landmark Contract 10,723.887 8.40
Management Inc. 401K
Attn: Diane McGinis
930 Roosevelt Pkwy Ste 200
St. Louis, MO 63017-2053
Frontier Trust Company as TTEE 8,829.733 6.92
Southern Micrographix Inc.
Attn: Dale Herring
112 Walter Davis Drive
Birmingham, AL 35209
Frontier Trust Company as TTEE 8,067.839 6.32
Weldon Machine Tool Inc.
c/o The Barclay Group
Springhouse Corporate Center
323 Norristown Road
Ambler, PA 19002
A-1
<PAGE>
EXHIBIT B
Names of Investment Companies Serviced by SBSA or SBMFM
With Investment Objectives Similar to Those of the Fund
-------------------------------------------------------
<TABLE>
<CAPTION>
Annual Rate of Advisory Fee
Expressed as a Percentage
Net Assets of Average Daily
Fund as of 5/31/95 Net Assets
- ---- ------------- ---------------------------
<S> <C> <C>
Smith Barney Fundamental Value Fund $ 831,038,000 .55%
Smith Barney Convertible Fund $ 80,320,000 .50%
Smith Barney Growth and Income Fund $ 195,850,000 .45%
Smith Barney Telecommunications
Trust Income Fund $ 64,498,482 .55%
Smith Barney Utilities Fund $1,840,159,000 .45%
Smith Barney Funds --
Utility Portfolio $ 82,684,000 .60%*
</TABLE>
- ----------
* Includes compensation for administrative services provided to the Fund.
B-1
<PAGE>
EXHIBIT C
FORM OF
ADVISORY AGREEMENT
SMITH BARNEY EQUITY FUNDS
(Smith Barney Strategic Investors Fund)
_____________, 1995
Smith Barney Strategy Advisers Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Smith Barney Equity Funds (the "Company"), a trust organized under the laws
of the Commonwealth of Massachusetts, on behalf of Smith Barney Strategic
Investors Fund (the "Fund"), confirms its agreement with Smith Barney Strategy
Advisers Inc. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to the Fund 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
relating to the Fund (the "Prospectus") and the statement of additional
information relating to the Company (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 ongoing basis. The Company desires to employ and
hereby appoints the Adviser to act as the Fund's investment adviser. 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 Fund's portfolio in accordance with
C-1
<PAGE>
the Fund's investment objective(s) and policies as stated in the Master Trust
Agreement, the Prospectus and the Statement; (b) make investment decisions for
the Fund; (c) place purchase and sale orders for portfolio transactions for the
Fund; and (d) employ professional portfolio managers and securities analysts who
provide research services to the Fund. In providing those services, the Adviser
will conduct a continual program of investment, evaluation and, if appropriate,
sale and reinvestment of the Fund's assets. The Adviser may, with the approval
of the Board and the shareholders of the Fund (to the extent required by
applicable law), from time to time, sub-contract with one or more sub-investment
advisers to provide some or all of the services required under this agreement.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Fund, 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 Fund
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 Fund's portfolio, 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 the 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.
C-2
<PAGE>
6. Compensation
In consideration of the services rendered pursuant to this Agreement, the
Fund will pay the Adviser on the first business day of each month a fee for the
previous month at the annual rate of 0.55 of 1.00% of the Fund'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 Fund'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 to any sub-investment adviser or
advisers retained by the Adviser to provide advisory services to the Fund (a
"Sub-Adviser") the fees required to be paid to each Sub-Adviser. The Fund will
bear certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory and administration fees, other than those
payable to a Sub-Adviser or any additional or substitute sub-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 Fund (including fees
pursuant to this Agreement and the Fund's sub-investment advisory and
administration agreements, but excluding interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Adviser will reduce its fee to the Fund by the
proportion of such excess expense equal to the proportion that its fee
thereunder bears to the aggregate of fees paid by the Fund 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
C-3
<PAGE>
Company has no objection to the Adviser's so acting, provided that whenever the
Fund 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 Fund recognizes that in some cases this procedure may adversely
affect the size of the position obtainable or disposable for the Fund. In
addition, the Fund 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 ___________, 1995 (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 Fund'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 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 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 and with the Boston City
Clerk.
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 Fund's outstanding voting securities, are signed
by an authorized officer of the Company, acting as such, and neither such
C-4
<PAGE>
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 EQUITY FUNDS
on behalf of
SMITH BARNEY
STRATEGIC INVESTORS FUND
By: ________________________
Name:
Title:
Accepted:
SMITH BARNEY STRATEGY ADVISERS INC.
- ----------------------------------
Name:
Title:
C-5
<PAGE>
VOTE THIS PROXY CARD TODAY!
------
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................................
SMITH BARNEY STRATEGIC INVESTORS FUND PROXY SOLICITED BY THE BOARD OF TRUSTEES
(A SUB-TRUST OF SMITH BARNEY EQUITY FUNDS)
The undersigned holder of shares of Smith Barney Strategic Investors Fund (the
"Fund"), hereby appoints Heath B. McLendon, Christina T. Sydor and Robert A.
Vegliante, attorneys and proxies for the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of the Fund that the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at the
offices of the Fund, 388 Greenwich Street, New York, New York on August 10, 1995
at 10:00 A.M. and any adjournment or adjournments thereof. The undersigned
hereby acknowledges receipt of the Notice of Special Meeting and Proxy Statement
dated July 5, 1995 and hereby instructs said attorneys and proxies to vote said
shares as indicated herein. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the Special Meeting. A
majority of the proxies present and voting at the Special Meeting in person or
by substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder. The
undersigned hereby revokes any proxy previously given.
(CONTINUED ON THE REVERSE SIDE)
PLEASE DO NOT FORGET TO SIGN THE REVERSE SIDE OF CARD.
<PAGE>
VOTE THIS PROXY CARD TODAY!
------
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
................................................................................
This proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE PROPOSAL. Please indicate your vote by filling in the appropriate box
below, as shown, using blue or black ink or dark pencil, do not use red ink. / /
/FOR/ /AGAINST/ /ABSTAIN/
1. To approve a new Investment Advisory / / / / / /
Agreement between Smith Barney Equity
Funds, on behalf of Smith Barney
Strategic Investors Fund, and Smith
Barney Strategy Advisers Inc.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
DATE:____________________________ , 1995
NOTE: Please sign exactly as your name
appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing
as attorney, executor, administrator,
trustee, guardian or corporate officer,
please give your full title.
----------------------------------------
----------------------------------------
Signature(s) (Title(s), if applicable)
