As filed with the Securities and Exchange Commission on April 1,
1999
- ------------------------------------------------------------------
- -----------
Registration No. 33-2627
811-4551
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 46
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940,
as amended Amendment No. 46
SMITH BARNEY EQUITY FUNDS
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(212) 816-6474
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013, 22nd Floor
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ X ] 60 days after filing pursuant to paragraph (a) (1)
[ ] On May 31, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a) (2)
[ ] On (date) pursuant to paragraph (a) (2)of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new
effective date for a previously filed post-effective amendment.
Part A - Prospectus
- -------------------
[Logo]
Smith Barney Mutual
Funds
Investing for your
future.
Every day.
- -------------------
PROSPECTUS SMITH BARNEY
MUTUAL FUNDS
- --------------------------------------------------------------------------------
May 31, 1999 Concert Social Awareness Fund
Class A, B, L and Y Shares
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
- --------------------------------------------------------------------------------
Contents
- --------------------------------------------------------------------------------
Fund goal and strategies..............................4
Risks, performance and expenses.......................5
More on the fund's investments........................8
Management............................................9
Choosing a class of shares to buy....................10
Comparing the fund's classes.........................11
Sales charges........................................12
More about deferred sales charges....................15
Buying shares........................................16
Exchanging shares....................................17
Redeeming shares.....................................18
Other things to know about
share transactions.................................20
Smith Barney 401(k) and
ExecChoice(TM) programs............................22
Dividends, distributions and
taxes..............................................23
Share price..........................................24
Financial highlights.................................24
You should know:
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.
Concert Social Awareness Fund -3-
<PAGE>
- --------------------------------------------------------------------------------
Fund goal and strategies
- --------------------------------------------------------------------------------
Investment objective
The fund seeks high total return consisting of capital appreciation and current
income.
Key investments
The fund invests primarily in common stocks and other equity securities of U.S.
companies. Equity securities include exchange traded and over-the-counter common
stocks and preferred shares, debt securities convertible into equity securities,
and warrants and rights relating to equity securities. The fund also normally
invests between 15% and 35% of its assets in fixed income securities. The fixed
income securities in which the fund invests are primarily investment grade, and
may be of any maturity. The fund also may invest a portion of its assets in
equity and debt securities of foreign issuers. As described below, the fund
emphasizes companies that both offer attractive investment opportunities and
demonstrate a positive awareness of their impact on the society in which they
operate, relative to other companies in their industry.
Selection process
Equity Securities. The fund invests in a broad range of companies, industries
and sectors, without regard to market capitalization. The manager uses a "value"
approach to selecting equity securities. In selecting individual equity
securities, the manager looks for companies it believes are undervalued.
Specifically, the manager looks for:
o Attractive risk-adjusted price/earnings ratio, relative to growth
o Positive earnings trends
o Favorable financial condition
Fixed Income securities. In selecting fixed income investments, the manager: o
Determines sector and maturity weightings based on intermediate and long-term
assessments of the economic environment and interest rate outlook
o Uses fundamental credit analysis to determine the relative value of bond
issues
o Identifies undervalued bonds and attempts to avoid bonds that may be
subject to credit downgrades
Social Awareness Criteria. As a component of the selection process, the manager
considers whether, relative to other companies in an industry, a company that
meets these investment criteria also is sensitive to social issues related to
its products, services, or methods of doing business.
- -4-
<PAGE>
Social factors considered include:
o Fairness of employment policies and labor relations
o Involvement in community causes
o Efforts and strategies to minimize the negative impact of business
activities and products and to embrace alternatives to unsafe polluting
and wasteful activities or products
o Responsibility and fairness of advertising and marketing practices
In addition, the fund seeks to avoid investing in a company if the manager has
significant reason to believe it is engaged in:
o Tobacco production
o Production of weapons
o Ownership or design of nuclear facilities
- --------------------------------------------------------------------------------
Risks, performance and expenses
- --------------------------------------------------------------------------------
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if any of the following occurs:
o Stock prices decline generally
o Socially aware companies fall out of favor with investors or fail to
perform as well as companies that do not fit the fund's social criteria
o Interest rates rise, causing the value of fixed income securities in the
fund's portfolio to decline
o The issuer of a fixed income security owned by the fund defaults on its
obligation to pay principal and/or interest or the security's credit
rating is downgraded
o The manager's judgment about the attractiveness, value or appreciation of
a particular security, or the creditworthiness of a company in which the
fund invests, proves to be incorrect
Because the manager uses social awareness criteria as a component of its
selection process, the fund's universe of investments may be smaller than that
of other funds. In some circumstances, this could cause the fund's return to be
lower than that of a fund that may invest in other issuers with strong earnings
and growth potential, but that do not meet the fund's social awareness criteria.
Who may want to invest
The fund may be an appropriate investment if you:
o Are seeking to invest in a portfolio with a socially aware component
o Are seeking a combination of capital appreciation and current income
o Are willing to accept the risks of the stock and bond markets
Concert Social Awareness Fund -5-
<PAGE>
Total return
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future.
[GRAPHIC OMITTED]
The bar chart shows the performance of the fund's Class B shares for each of the
past 10 years. Class A, L and Y shares would have different performance because
of their different expenses. The performance information in the chart does not
reflect sales charges, which would reduce your return.
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___ quarter
199X
Comparative performance
This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the
Standard & Poor's 500 ("S&P 500") Index, an unmanaged index of widely held
common stocks and the Lehman Government/Corporate Bond ("Lehman Gov/Corp")
Index, an unmanaged combination of government and bond indexes, including U.S.
treasury and agency securities and yankee bonds. This table assumes imposition
of the maximum sales charge applicable to the class, redemption of shares at the
end of the period, and reinvestment of distributions and dividends.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Average Annual Total Returns
Calendar Years Ended December 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class 1 year 5 years 10 years Since Inception Inception Date
A n/a 11/06/92
B [xx/xx/xx]
L n/a 05/05/93
Y n/a n/a 03/28/96
S&P 500 *
Lehman Gov/Corp Index *
</TABLE>
*Index comparisons begin on __________.
- -6-
<PAGE>
Fees and expenses
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Shareholder fees
(paid directly from your investment) Class A Class B Class L Class Y
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge on purchases (as a % of 5.00% None 1.00% None
offering price)
Maximum deferred sales charge on redemptions (as a None* 5.00% 1.00% None
% of the lower of net asset value at purchase
or redemption)
Annual fund operating expenses (paid by the
fund as a % of net assets)
Management fee 0.75% 0.75% 0.75% 0.75%
---- ---- ---- ----
Distribution and service (12b-1) fee 0.25% 1.00% 1.00% None
==== ==== ==== ====
Other expenses
Total annual fund operating expenses
</TABLE>
* You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial charge) but if you redeem those shares within 12 months of
their purchase, you will pay a deferred sales charge of 1.00%.
Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
o You invest $10,000 in the fund for the
period shown
o Your investment has a 5% return each
year
o You reinvest all distributions and
dividends without a sales charge
o The fund's operating expenses remain
the same
- --------------------------------------------------------------------------------
Number of years you own your 1 year 3 5 10
shares years years years
- --------------------------------------------------------------------------------
Class A (with or without redemption) $ $ $ $
Class B (redemption at end of period) $ $ $ $
Class B (no redemption) $ $ $ $
Class L (redemption at end of period) $ $ $ $
Class L (no redemption) $ $ $ $
Class Y (with or without redemption) $ $ $ $
Concert Social Awareness Fund -7-
<PAGE>
- --------------------------------------------------------------------------------
More on the fund's investments
- --------------------------------------------------------------------------------
Derivative contracts. The fund may, but need not, use derivative contracts, such
as futures and options on securities or securities indices, options on these
futures, and interest rate futures, for any of the following purposes:
o To hedge against the economic impact of adverse changes in the market
value of portfolio securities, because of changes in interest rates or
stock prices
o As a substitute for buying or selling securities
A derivative contract will obligate or entitle a fund to deliver or receive an
asset or cash payment based on the change in value of one or more securities or
indices. Even a small investment in derivative contracts can have a big impact
on a fund's interest rate or stock market exposure. Therefore, using derivatives
can disproportionately increase losses and reduce opportunities for gains. The
fund may not fully benefit from or may lose money on derivatives if changes in
their value do not correspond accurately to changes in the value of the fund's
holdings. The other parties to certain derivative contracts present the same
types of default risk as issuers of fixed income securities. Derivatives can
also make a fund less liquid and harder to value, especially in declining
markets.
Foreign securities. The fund may invest a portion of its assets, generally under
15% (but not more than 25%), in securities of foreign issuers. These securities
generally include American Depositary Receipts (ADRs), Yankee Bonds and other
securities quoted in U.S. dollars, but may also include non-U.S. dollar
denominated securities. Because the fund may invest in securities of foreign
issuers, the fund carries additional risks. The value of your investment may
decline if the U.S. and/or foreign stock markets decline, currency rates
adversely affect the value of foreign currencies relative to the U.S. dollar, or
an adverse event, such as an unfavorable earnings report, depresses the value of
a particular company's stock. Prices of foreign securities may go down because
of foreign government actions, political instability or the more limited
availability of accurate information about foreign companies. These risks are
greater for issuers in emerging markets.
Defensive investing. The fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short-term
debt securities. If the fund takes a temporary defensive position, it may be
unable to achieve its investment goal.
- -8-
<PAGE>
- --------------------------------------------------------------------------------
More on the fund's social awareness criteria
- --------------------------------------------------------------------------------
The manager believes that there is a direct correlation between companies that
demonstrate an acute awareness of their impact on the society within which they
operate and companies which offer attractive long-term investment potential. The
manager believes that addressing social issues in a positive manner can
translate into sound business. For example, by ensuring a product or service
does not negatively impact the environment, a company can avoid costly
litigation and clean-up costs; and by maintaining positive standards for the
workplace and a diverse employee population, a company can better ensure access
to quality management talent and improved productivity; or by becoming more
involved in the community, a company can enhance its consumer franchise. The
manager also believes that top quality management teams who successfully balance
their companies' business interest with their social influences can gain
significant competitive advantages over the long run, which may result in
increased shareholder values and, therefore, make the company's shares a better
investment. The fund is designed to combine both financial and social criteria
in all of its investment decisions.
The manager will use its best efforts to assess a company's social performance.
This analysis will be based on present activities, and will not preclude
securities solely because of past activities. The manager will monitor the
social progress or deterioration of each company in which the fund invests.
Concert Social Awareness Fund -9-
<PAGE>
- --------------------------------------------------------------------------------
Management
- --------------------------------------------------------------------------------
Manager. The fund's investment manager is SSBC Fund Management Inc., an
affiliate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New York, New York 10013. The manager selects the fund's investments and
oversees its operations. The manager and Salomon Smith Barney are subsidiaries
of Citigroup Inc. Citigroup businesses produce a broad range of financial
services -- asset management, banking and consumer finance, credit and charge
cards, insurance, investments, investment banking and trading -- and use diverse
channels to make them available to consumer and corporate customers around the
world.
Robert J. Brady and Ellen S. Cammer, each an investment officer of the manager
and a managing director of Salomon Smith Barney, have been responsible for the
day-to-day management of the fund's portfolio since 1995.
Management fee. For its services, the manager received a fee during the fund's
last fiscal year equal to 0.55% of the fund's average daily net assets. In
addition, the manager received a fee for its administrative services to the fund
equal to 0.20% of the fund's average daily net assets.
Distributor. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans. The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and service
fees. These fees are an ongoing expense and, over time, may cost you more than
other types of sales charges.
Year 2000 issue. Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are addressing
the Year 2000 issue for their systems. The fund has been informed by other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guarantee
the efforts of the fund (limited to requesting and receiving reports from its
service providers) or its service providers to correct the problem will be
successful.
- -10-
<PAGE>
- --------------------------------------------------------------------------------
Choosing a class of shares to buy
- --------------------------------------------------------------------------------
You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
o If you plan to invest regularly or in large amounts, buying Class A shares
may help you reduce sales charges and ongoing expenses.
o For Class B shares, all of your purchase price and, for Class L shares,
more of your purchase amount (compared to Class A shares) will be
immediately invested. This may help offset the higher expenses of Class B
and Class L shares, but only if the fund performs well.
o Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and
Class L shares do not, Class B shares may be more attractive to long-term
investors.
You may buy shares from:
o A Salomon Smith Barney Financial Consultant
o An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
o The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums. Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Initial Additional
-------------------------------------------
Classes A, B, L Class Y All
Classes
<S> <C> <C> <C>
General $1,000 $15 million $50
- -----------------------------------------------------------------------------------------
IRAs, Self Employed Retirement Plans, $250 $15 million $50
Uniform Gift to Minor Accounts
- -----------------------------------------------------------------------------------------
Qualified Retirement Plans $25 $15 million $25
- -----------------------------------------------------------------------------------------
Simple IRAs $1 n/a $1
- -----------------------------------------------------------------------------------------
Monthly Systematic Investment Plans $25 n/a $25
- -----------------------------------------------------------------------------------------
Quarterly Systematic Investment Plans $50 n/a $50
- -----------------------------------------------------------------------------------------
</TABLE>
Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k) plans
Concert Social Awareness Fund -11-
<PAGE>
- --------------------------------------------------------------------------------
Comparing the fund's classes
- --------------------------------------------------------------------------------
Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different compensation
depending upon which class you choose.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Class A Class B Class L Class Y
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Key features o Initial sales o No initial sales o Initial sales o No initial or
charge charge charge is lower deferred sales
o You may qualify o Deferred sales than Class A charge
for reduction or charge declines o Deferred sales o Must invest at
waiver of initial over time charge for only least $15 million
sales charge o Converts to 1 year o Lower annual
o Lower annual Class A after 8 o Does not expenses than the
expenses than years convert to other classes
Class B and Class o Higher annual Class A
L expenses than o Higher annual
Class A expenses than
Class A
Initial sales Up to 5.00%; None 1.00% None
charge reduced or waived
for large purchases
and certain
investors. No
charge for
purchases of
$500,000 or more
Deferred 1% on purchases Up to 5.00% 1% if you None
sales charge of $500,000 or charged when redeem within 1
more if you you redeem year of purchase
redeem within 1 shares. The
year of purchase charge is reduced
over time and
there is no
deferred sales
charge after 6
years
Annual 0.25% of average 1% of average 1% of average None
distribution daily net assets daily net assets daily net assets
and service
fees
Exchange- Class A shares of Class B shares of Class L shares of Class Y shares
of able into* most Smith Barney most Smith most Smith most Smith Barney
funds Barney funds Barney funds funds
- -----------------------------------------------------------------------------------------------
</TABLE>
*Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.
- -12-
<PAGE>
- --------------------------------------------------------------------------------
Sales charge: Class A shares
- --------------------------------------------------------------------------------
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge on
the fund's distributions or dividends you reinvest in additional Class A shares.
- --------------------------------------------------------------------
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
- --------------------------------------------------------------------
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more -0- -0-
- --------------------------------------------------------------------
Investments of $500,000 or more. You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge. There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
Accumulation privilege - lets you combine the current value of Class A shares
owned
o by you, or
o by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
Concert Social Awareness Fund -13-
<PAGE>
Letter of intent - lets you purchase Class A shares of the fund and other Smith
Barney funds over a 13-month period and pay the same sales charge, if any, as if
all shares had been purchased at once. You may include purchases on which you
paid a sales charge within 90 days before you sign the letter.
Waivers for certain Class A investors. Class A initial sales charges are waived
for certain types of investors, including:
o Employees of members of the NASD
o 403(b) or 401(k) retirement plans, if certain conditions are met
o Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met
o Investors who redeemed Class A shares of a Smith Barney fund in the past
60 days, if the investor's Salomon Smith Barney Financial Consultant or
dealer representative is notified
If you want to learn more about the requirements for reductions or waivers of
Class A initial sales charges, contact your Salomon Smith Barney Financial
Consultant or dealer representative or consult the Statement of Additional
Information ("SAI").
- -14-
<PAGE>
- --------------------------------------------------------------------------------
Sales charge: Class B shares
- --------------------------------------------------------------------------------
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of purchase,
you will pay a deferred sales charge. The deferred sales charge decreases as the
number of years since your purchase increases.
- --------------------------------------------------------------------------------
6th and
Year after purchase 1st 2nd 3rd 4th 5th over
- --------------------------------------------------------------------------------
Deferred sales charge 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
Class B conversion. After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
- --------------------------------------------------------------------------------
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon exchange from
purchase dividends and another Smith Barney
distributions fund
- --------------------------------------------------------------------------------
Eight years after the In same proportion as the On the date the shares
date of purchase number of Class B shares originally acquired would
converting is to total have converted into Class A
Class B shares you own shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sales charge: Class L shares
- --------------------------------------------------------------------------------
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998, you
will not pay an initial sales charge on Class L shares you buy before June 22,
2001.
- --------------------------------------------------------------------------------
Sales charge: Class Y shares
- --------------------------------------------------------------------------------
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 6-month period. To qualify, you must
initially invest $5,000,000.
Concert Social Awareness Fund -15-
<PAGE>
- --------------------------------------------------------------------------------
More about deferred sales charges
- --------------------------------------------------------------------------------
The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
o Shares exchanged for shares of another Smith Barney fund
o Shares representing reinvested distributions and dividends
o Shares no longer subject to the deferred sales charge
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
Salomon Smith Barney receives deferred sales charges as partial compensation for
its expenses in selling shares, including the payment of compensation to your
Salomon Smith Barney Financial Consultant or dealer representative.
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
o On payments made through certain systematic withdrawal plans
o On certain distributions from a retirement plan
o For involuntary redemptions of small account balances
o For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
- -16-
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Through a You should contact your Salomon Smith Barney Financial
Salomon Consultant or dealer representative to open a brokerage
Smith account and make arrangements to buy shares.
Barney
Financial If you do not provide the following information, your order
Consultant will be rejected:
or dealer
represen- o Class of shares being bought
tative o Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through Qualified retirement plans and certain other investors who are
the fund's clients of the selling group are eligible to buy shares
transfer directly from the fund.
agent
o Write the transfer agent at the following address:
Smith Barney Equity Funds
Concert Social Awareness Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
o Enclose a check to pay for the shares. For initial
purchases, complete and send an account application.
o For more information, call the transfer agent at
1-800-451-2010.
- --------------------------------------------------------------------------------
Through a You may authorize Salomon Smith Barney, your dealer
systematic representative or the transfer agent to transfer funds
investment automatically from a regular bank account, cash held in a
plan Salomon Smith Barney brokerage account or Smith Barney money
market fund to buy shares on a regular basis.
o Amounts transferred should be at least: $25 monthly or $50
quarterly
o If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer
representative or the transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the SAI.
Concert Social Awareness Fund -17-
<PAGE>
- --------------------------------------------------------------------------------
Exchanging shares
- --------------------------------------------------------------------------------
Smith You should contact your Salomon Smith Barney Financial
Barney Consultant or dealer representative to exchange into other
offers a Smith Barney funds. Be sure to read the prospectus of the
distinctive Smith Barney fund you are exchanging into. An exchange
family of is a taxable transaction.
funds
tailored to o You may exchange shares only for shares of the same class
help meet of another Smith Barney fund. Not all Smith Barney funds
the offer all classes.
varying
needs of o Not all Smith Barney funds may be offered in your state of
both large residence. Contact your Smith Barney Financial Consultant,
and small dealer representative or the transfer agent.
investors.
o You must meet the minimum investment amount for each fund.
o If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers (documents transferring ownership of
certificates) before the exchange is effective.
o The fund may suspend or terminate your exchange privilege
if you engage in an excessive pattern of exchanges.
- --------------------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial sales charge
additional at the time of the exchange.
sales
charges Your deferred sales charge (if any) will continue to be
measured from the date of your original purchase. If the fund
you exchange into has a higher deferred sales charge, you will
be subject to that charge. If you exchange at any time into a
fund with a lower charge, the sales charge will not be
reduced.
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible to
exchange shares through the transfer agent. You must complete
an authorization form to authorize telephone transfers. If
eligible, you may make telephone exchanges on any day the New
York Stock Exchange is open. Call the transfer agent at
1-800-451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern time).
Requests received after the close of regular trading on the
Exchange are priced at the net asset value next determined.
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on the opposite page.
- -18-
<PAGE>
- --------------------------------------------------------------------------------
Redeeming shares
- --------------------------------------------------------------------------------
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must receive
the certificates endorsed for transfer or with signed stock
powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However, if
you recently purchased your shares by check, your redemption
proceeds will not be sent to you until your original check
clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written
requests to the transfer agent at the following address:
Smith Barney Equity Funds
Concert Social Awareness Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
o Your account number
o The class of shares and the dollar amount or number of
shares to be redeemed
o Signatures of each owner exactly as the account is
registered
Concert Social Awareness Fund -19-
<PAGE>
By If you do not have a brokerage account, you may be eligible
telephone to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by
telephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset
value next determined.
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank account designated on
your authorization form. You may be charged a fee for wire
transfers. You must submit a new authorization form to change
the bank account designated to receive wire transfers and you
may be asked to provide certain other documents.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans and each automatic redemption must be at least $50. If your
shares are subject to a deferred sales charge, the sales charge
will be waived if your automatic payments do not exceed 1% per
month of the value of your shares subject to a deferred sales
charge.
The following conditions apply:
o Your shares must not be represented by certificates
o All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
- -20-
<PAGE>
- --------------------------------------------------------------------------------
Other things to know about share transactions
- --------------------------------------------------------------------------------
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
o Name of the fund
o Account number
o Class of shares being bought, exchanged or redeemed
o Dollar amount or number of shares being bought, exchanged or
redeemed
o Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees. To be in good order, your redemption request must include
a signature guarantee if you:
o Are redeeming (together with other requests submitted in the previous 10
days) over $10,000 of shares
o Are sending signed share certificates or stock powers to the transfer
agent
o Instruct the transfer agent to mail the check to an address different from
the one on your account
o Changed your account registration
o Want the check paid to someone other than the account owner(s)
o Are transferring the redemption proceeds to an account with a different
registration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
Concert Social Awareness Fund -21-
<PAGE>
The fund has the right to:
o Suspend the offering of shares
o Waive or change minimum and additional investment amounts
o Reject any purchase or exchange order
o Change, revoke or suspend the exchange privilege
o Suspend telephone transactions
o Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securities
and Exchange Commission
o Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
Small account balances. If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions. The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges by
the shareholder.
Share certificates. The fund does not issue share certificates unless a written
request is made to the transfer agent. If you hold share certificates it will
take longer to exchange or redeem shares.
- -22-
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney 401(k) and ExecChoice(TM) programs
- --------------------------------------------------------------------------------
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's investments
in any of the Smith Barney mutual funds.
There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of that class.
o Class A shares may be purchased by plans investing at least $1 million.
o Class L shares may be purchased by plans investing less than $1 million. Class
L shares are eligible to exchange into Class A shares not later than 8 years
after the plan joined the program. They are eligible for exchange sooner:
If the account was opened on or after June 21, 1996 and an aggregate of $1
million is invested in Smith Barney Funds Class L shares (other than money
market funds), all Class L shares are eligible for exchange after the plan
is in the program 5 years.
If the account was opened before June 21, 1996 and $500,000 in the
aggregate is invested in Smith Barney Funds Class L shares (other than
money market funds), all Class L shares are eligible for exchange on each
December 31 and the exchange will occur no later than March 31 of the
following year.
For more information, call your Salomon Smith Barney Financial Consultant or the
transfer agent, or consult the SAI.
Concert Social Awareness Fund -23-
<PAGE>
- --------------------------------------------------------------------------------
Dividends, distributions and taxes
- --------------------------------------------------------------------------------
Dividends. The fund generally makes capital gain distributions and pays
dividends, if any, once a year, typically in December. The fund may pay
additional distributions and dividends at other times if necessary for the fund
to avoid a federal tax. Capital gain distributions and dividends are reinvested
in additional fund shares of the same class you hold. The fund expects
distributions to be primarily from capital gain. You do not pay a sales charge
on reinvested distributions or dividends. Alternatively, you can instruct your
Salomon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
Taxes. In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.
- --------------------------------------------------------------------------------
Transaction Federal tax status
- --------------------------------------------------------------------------------
Redemption or exchange of shares Usually capital gain or loss; long-term
only if shares owned more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
- --------------------------------------------------------------------------------
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a capital gain distribution or a
dividend, because it will be taxable to you even though it may actually be a
return of a portion of your investment.
After the end of each year, the fund will provide you with information about the
distributions and dividends you received and any redemptions of shares during
the previous year. If you do not provide the fund with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special tax
rules may apply, you should consult your tax adviser about your investment in
the fund.
- -24-
<PAGE>
- --------------------------------------------------------------------------------
Share price
- --------------------------------------------------------------------------------
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).
The fund generally values its fund securities based on market prices or
quotations. When reliable market prices are not readily available, or when the
value of a security has been materially affected by events occurring after a
foreign exchange closes, the fund may price those securities at fair value. Fair
value is determined in accordance with procedures approved by the fund's board.
A fund that uses fair value to price securities may value those securities
higher or lower than another fund using market quotations to price the same
securities.
International markets may be open on days when U.S. markets are closed, and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the New York Stock
Exchange closes early, you must place your order prior to the actual closing
time. Otherwise, you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.
- --------------------------------------------------------------------------------
Financial highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the
performance of each class for the past 5 years (or since inception if less than
5 years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables for the fiscal years 1996 through 1999 was
audited by KPMG LLP, independent accountants, whose report, along with the
fund's financial statements, are included in the annual report (available upon
request). The 1995 fiscal year was audited by other independent accountants.
Concert Social Awareness Fund -25-
<PAGE>
For a Class A share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $19.36 $19.00 $15.91 $17.72
- -----------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) 0.48 0.57 0.61 0.57
Net realized and unrealized
gain (loss) 3.27 1.71 3.52 (1.25)
- -----------------------------------------------------------------------------------
Total income (loss) from operations 3.75 2.28 4.13 (0.68)
- -----------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.55) (0.60) (0.52) (0.47)
Net realized gain (1.99) (1.32) (0.52)) (0.66)
- -----------------------------------------------------------------------------------
Total distributions (2.54) (1.92) (1.04) (1.13)
- -----------------------------------------------------------------------------------
Net asset value, end of year $20.57 $19.36 $19.00 $15.91
- -----------------------------------------------------------------------------------
Total return 19.89% 12.41% 26.47% (3.82%)
- -----------------------------------------------------------------------------------
Net assets, end of year (000)'s $202 $178 $175 $159
- -----------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.19% 1.28% 1.21% 1.33%
Net investment income 2.34 2.98 3.10 2.89
- -----------------------------------------------------------------------------------
Portfolio turnover rate 62% 68% 81% 103%
- -----------------------------------------------------------------------------------
</TABLE>
- -26-
<PAGE>
For a Class B share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of $ $19.42 $19.05 $15.97 $17.79
year
- ------------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) 0.33 0.43 0.49 0.39
Net realized and unrealized
gain (loss) 3.27 1.71 3.53 (1.20)
- ------------------------------------------------------------------------------------------
Total income (loss) from 3.60 2.14 4.02 (0.81)
operations
- ------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.40) (0.45) (0.42) (0.35)
Net realized gain (1.99) (1.32) (0.52) (0.66)
Capital -- -- -- -- --
- ------------------------------------------------------------------------------------------
Total distributions (2.39) (1.77) (0.94) (1.01)
- ------------------------------------------------------------------------------------------
Net asset value, end of year $20.63 $19.42 $19.05 $15.97
- ------------------------------------------------------------------------------------------
Total return 18.95% 11.60% 25.58% (4.54)%
- ------------------------------------------------------------------------------------------
Net assets, end of year (000)'s $172 $203 $226 $216
- ------------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.95% 2.03% 1.94% 2.00%
Net investment income 1.62 2.23 2.37 2.21
- ------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 68% 81% 103%
- ------------------------------------------------------------------------------------------
</TABLE>
Concert Social Awareness Fund -27-
<PAGE>
For a Class L share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $19.46 $19.08 $15.97 $17.79
- -----------------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss)
Net realized and unrealized gain 0.34 0.44 0.45 0.38
(loss) 3.27 1.71 3.60 (1.19)
- -----------------------------------------------------------------------------------------------
Total income (loss) from operations 3.61 2.15 4.05 (0.81)
- -----------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.40) (0.45) (0.42) (0.35)
Net realized gain (1.99) (1.32) (0.52) (0.66)
- -----------------------------------------------------------------------------------------------
Total distributions (2.39) (1.77) (0.94) (1.01)
- -----------------------------------------------------------------------------------------------
Net assets value, end of year $20.68 $19.46 $19.08 $15.97
- -----------------------------------------------------------------------------------------------
Total return 18.97% 11.65% 25.77% (4.54)%
- -----------------------------------------------------------------------------------------------
Net assets, end of year (000)'s $7,173 $4,000 $3,396 $1,972
- -----------------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.93% 2.01% 1.94% 1.98%
Net investment income (loss) 1.54 2.25 2.31 2.24
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 68% 81% 103%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) On November 7, 1994, the former Class D shares were renamed Class C shares.
- -28-
<PAGE>
For a Class Y share of capital stock outstanding throughout each year ended
January 31:
- ---------------------------------------------------------------------------
1999 1998 1997(1)
- ---------------------------------------------------------------------------
Net asset value, beginning of year $ $19.39 $19.00
- ---------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.56 0.51
Net realized and unrealized gain (loss) 3.27 1.69
- ---------------------------------------------------------------------------
Total income (loss) from operations 3.83 2.20
- ---------------------------------------------------------------------------
Less distributions from:
Net investment income (0.61) (0.49)
Net realized gain (1.99) (1.32)
- ---------------------------------------------------------------------------
Total distributions (2.60) (1.81)
- ---------------------------------------------------------------------------
Net asset value, end of year $20.62 $19.39
- ---------------------------------------------------------------------------
Total return 20.31% 11.94%(2)
- ---------------------------------------------------------------------------
Net assets, end of year (000)'s $220 $143
- ---------------------------------------------------------------------------
Ratio to average net assets:
Expenses 0.84% 0.90%(3)
Net investment income (loss) 2.64% 3.31(3)
- ---------------------------------------------------------------------------
Portfolio turnover rate 62% 68%
- ---------------------------------------------------------------------------
(1) For the period from March 28, 1996 (inception date) to January 31, 1997.
(2) Not annualized.
(3) Annualized.
Concert Social Awareness Fund -29-
<PAGE>
SALOMON SMITH BARNEY(SM)
a member of citigroup [Symbol]
Concert Social Awareness Fund
Shareholder reports. Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information. The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review the fund's shareholder reports, prospectus and statement of
additional information at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. You can get copies of these materials for a
fee by writing to the Public Reference Section of the Commission, Washington,
D.C. 20549-6009. Information about the public reference room may be obtained by
calling 1-800-SEC-0330. You can get the same information free from the
Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.
(SM) Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file no. 811-04551)
FD0225 5/99
- -------------------
[Logo]
Smith Barney Mutual
Funds
Investing for your
future.
Every day.
- -------------------
PROSPECTUS SMITH BARNEY
MUTUAL FUNDS
- --------------------------------------------------------------------------------
May 31, 1999 Large Cap Blend Fund
Class A, B, L and Y Shares
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
- --------------------------------------------------------------------------------
Contents
- --------------------------------------------------------------------------------
Fund goal and strategies......................................4
Risks, performance and expenses...............................5
More on the fund's investments................................8
Management....................................................9
Choosing a class of shares to buy............................10
Comparing the fund's classes.................................11
Sales charges................................................12
More about deferred sales charges............................15
Buying shares................................................16
Exchanging shares............................................17
Redeeming shares.............................................18
Other things to know about
share transactions.........................................20
Smith Barney 401(k) and
ExecChoice(TM) programs....................................22
Dividends, distributions and
taxes......................................................23
Share price..................................................24
Financial highlights.........................................24
You should know:
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.
Large Cap Blend Fund -3-
<PAGE>
- --------------------------------------------------------------------------------
Fund goal and strategies
- --------------------------------------------------------------------------------
Investment objective
The fund seeks long-term capital growth.
Key investments
The fund invests primarily in common stocks and other equity securities of U.S.
companies with market capitalizations in excess of $5 billion at the time of
investment. Equity securities include exchange traded and over-the-counter
common stocks and preferred shares, debt securities convertible into equity
securities and warrants and rights relating to equity securities.
Selection process
The manager emphasizes individual security selection while spreading the fund's
investments among industries and sectors. The manager uses a blend of growth and
value oriented investment styles as the basis for its selection process. This
approach is commonly described as seeking "growth at a reasonable price."
The manager uses quantitative analysis to find stocks with strong growth
potential and to determine whether these stocks are relatively undervalued or
overvalued. The manager looks for:
o Favorable growth characteristics, such as high historic growth rates and
high current or forecasted growth
o Favorable value characteristics, such as low price/earnings ratios and
other statistics indicating that a security is undervalued
The manager also uses fundamental qualitative research to further evaluate a
security's growth potential. The manager looks for:
o Management with established track records, or favorable changes in current
management
o Improvement in a company's competitive position
o Positive changes in corporate strategy
In addition to determining stock selection, these quantitative and qualitative
factors influence the timing of the fund's purchases and sales of stocks.
- -4-
<PAGE>
- --------------------------------------------------------------------------------
Risks, performance and expenses
- --------------------------------------------------------------------------------
Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
o Stock prices decline generally
o Large capitalization companies fall out of favor with investors
o Companies in which the fund invests suffer unexpected losses or lower than
expected earnings
o The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
Who may want to invest
The fund may be an appropriate investment if you:
o Are seeking to invest for long-term capital appreciation
o Currently have exposure to fixed income investments and wish to broaden
your investment portfolio
o Are willing to accept the risks of the stock market
Large Cap Blend Fund -5-
<PAGE>
Total return
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future.
[GRAPHIC OMITTED]
The bar chart shows the performance of the fund's Class A shares for each of the
past 6 years. Class B, L and Y shares would have different performance because
of their different expenses. The performance information in the chart does not
reflect sales charges, which would reduce your return.
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___ quarter
199X
Comparative performance
This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the
Standard & Poor's 500 Index ("S&P 500"), an unmanaged index of common stocks of
larger capitalization companies. This table assumes imposition of the maximum
sales charge applicable to the class, redemption of shares at the end of the
period, and reinvestment of distributions and dividends.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Average Annual Total Returns
Calendar Years Ended December 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class 1 year 5 years 10 years Since Inception Inception Date
A n/a 11/06/92
B n/a 11/06/92
L n/a 08/15/94
Y n/a n/a 01/31/96
S&P 500 Index *
</TABLE>
*Index comparison begins on
- -6-
<PAGE>
Fees and expenses
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Shareholder fees
(paid directly from your investment) Class A Class B Class L Class Y
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum sales charge on purchases (as a % of
offering price) 5.00% None 1.00% None
Maximum deferred sales charge on redemptions (as a
% of the lower of net asset value at purchase or
redemption) None* 5.00% 1.00% None
Annual fund operating expenses
(paid by the fund as a % of net assets)
Management fee 0.65% 0.65% 0.65% 0.65%
Distribution and service (12b-1) fee 0.25% 1.00% 1.00% None
Other expenses
----- ----- ----- ----
Total annual fund operating expenses
===== ===== ===== ====
</TABLE>
* You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial charge) but if you redeem those shares within 12 months of
their purchase, you will pay a deferred sales charge of 1.00%.
Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
o You invest $10,000 in the fund for the period shown
o Your investment has a 5% return each year
o You reinvest all distributions and dividends without a sales charge
o The fund's operating expenses remain the same
- --------------------------------------------------------------------------------
Number of years you own your 1 year 3 5 10
shares years years years
- --------------------------------------------------------------------------------
Class A (with or without redemption) $ $ $ $
Class B (redemption at end of period) $ $ $ $
Class B (no redemption) $ $ $ $
Class L (redemption at end of period) $ $ $ $
Class L (no redemption) $ $ $ $
Class Y (with or without redemption) $ $ $ $
Large Cap Blend Fund -7-
<PAGE>
- --------------------------------------------------------------------------------
More on the fund's investments
- --------------------------------------------------------------------------------
Derivative contracts. The fund may, but need not, use derivative contracts, such
as futures and options on securities or securities indices, or options on these
futures for any of the following purposes:
o To hedge against the economic impact of adverse changes in the market value of
portfolio securities, because of changes in stock market prices
o As a substitute for buying or selling securities A derivative contract will
obligate or entitle a fund to deliver or receive an asset or cash payment based
on the change in value of one or more securities or indices. Even a small
investment in derivative contracts can have a big impact on a fund's stock
exposure. Therefore, using derivatives can disproportionately increase losses
and reduce opportunities for gains. The fund may not fully benefit from or may
lose money on derivatives if changes in their value do not correspond accurately
to changes in the value of the fund's holdings. The other parties to certain
derivative contracts present the same types of default risk as issuers of fixed
income securities. Derivatives can also make a fund less liquid and harder to
value, especially in declining markets.
Defensive investing. The fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short-term
debt securities. If the fund takes a temporary defensive position, it may be
unable to achieve its investment goal.
- -8-
<PAGE>
- --------------------------------------------------------------------------------
Management
- --------------------------------------------------------------------------------
Manager. The fund's investment manager is SSBC Fund Management Inc., an
affiliate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New York, New York 10013. The manager selects the fund's investments and
oversees its operations. The manager and Salomon Smith Barney are subsidiaries
of Citigroup Inc. Citigroup businesses produce a broad range of financial
services -- asset management, banking and consumer finance, credit and charge
cards, insurance, investments, investment banking and trading -- and use diverse
channels to make them available to consumer and corporate customers around the
world.
R. Jay Gerken, investment officer of the manager and managing director of
Salomon Smith Barney, has been responsible for the day-to-day management of the
fund's portfolio since inception.
Management fee. For its services, the manager received a fee during the fund's
last fiscal year equal to 0.45% of the fund's average daily net assets. In
addition, the manager received a fee for its administrative services to the fund
equal to 0.20% of the fund's average daily net assets.
Distributor. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans. The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and service
fees. These fees are an ongoing expense and, over time, may cost you more than
other types of sales charges.
Year 2000 issue. Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are addressing
the Year 2000 issue for their systems. The fund has been informed by other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guarantee
the efforts of the fund (limited to requesting and receiving reports from its
service providers) or its service providers to correct the problem will be
successful.
Large Cap Blend Fund -9-
<PAGE>
- --------------------------------------------------------------------------------
Choosing a class of shares to buy
- --------------------------------------------------------------------------------
You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
o If you plan to invest regularly or in large amounts, buying Class A shares may
help you reduce sales charges and ongoing expenses.
o For Class B shares, all of your purchase price and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.
o Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and Class L
shares do not, Class B shares may be more attractive to long-term investors.
You may buy shares from:
o A Salomon Smith Barney Financial Consultant
o An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
o The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums. Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Initial Additional
----------------------------- -----------
Classes A, B, L Class Y All
Classes
<S> <C> <C> <C>
General $1,000 $15 million $50
- -----------------------------------------------------------------------------------------
IRAs, Self Employed Retirement Plans, $250 $15 million $50
Uniform Gift to Minor Accounts
- -----------------------------------------------------------------------------------------
Qualified Retirement Plans $25 $15 million $25
- -----------------------------------------------------------------------------------------
Simple IRAs $1 n/a $1
- -----------------------------------------------------------------------------------------
Monthly Systematic Investment Plans $25 n/a $25
- -----------------------------------------------------------------------------------------
Quarterly Systematic Investment Plans $50 n/a $50
- -----------------------------------------------------------------------------------------
</TABLE>
Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k) plans
- -10-
<PAGE>
- --------------------------------------------------------------------------------
Comparing the fund's classes
- --------------------------------------------------------------------------------
Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different compensation
depending upon which class you choose.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Class A Class B Class L Class Y
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Key features o Initial sales o No initial sales o Initial sales o No initial or
charge charge charge is lower deferred sales
o You may qualify o Deferred sales than Class A charge
for reduction or charge declines o Deferred sales o Must invest at
waiver of initial over time charge for only least $15 million
sales charge o Converts to 1 year o Lower annual
o Lower annual Class A after 8 o Does not expenses than the
expenses than years convert to other classes
Class B and Class o Higher annual Class A
L expenses than o Higher annual
Class A expenses than
Class A
Initial sales Up to 5.00%; None 1.00% None
charge reduced or waived
for large purchases
and certain
investors. No
charge for
purchases of
$500,000 or more
Deferred 1% on purchases Up to 5.00% 1% if you None
sales charge of $500,000 or charged when redeem within 1
more if you you redeem year of purchase
redeem within 1 shares. The
year of purchase charge is reduced
over time and
there is no
deferred sales
charge after 6
years
Annual 0.25% of average 1% of average 1% of average None
distribution daily net assets daily net assets daily net assets
and service
fees
Exchange- Class A shares of Class B shares of Class L shares of Class Y shares of
able into* most Smith Barney most Smith most Smith most Smith Barney
funds Barney funds Barney funds funds
- -----------------------------------------------------------------------------------------------
</TABLE>
* Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.
Large Cap Blend Fund -11-
<PAGE>
- --------------------------------------------------------------------------------
Sales charge: Class A shares
- --------------------------------------------------------------------------------
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge on
the fund's distributions or dividends you reinvest in additional Class A shares.
- --------------------------------------------------------------------
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
- --------------------------------------------------------------------
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more -0- -0-
- --------------------------------------------------------------------
Investments of $500,000 or more. You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge. There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
Accumulation privilege - lets you combine the current value of Class A shares
owned
o by you, or
o by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
- -12-
<PAGE>
Letter of intent - lets you purchase Class A shares of the fund and other Smith
Barney funds over a 13-month period and pay the same sales charge, if any, as if
all shares had been purchased at once. You may include purchases on which you
paid a sales charge within 90 days before you sign the letter.
Waivers for certain Class A investors. Class A initial sales charges are waived
for certain types of investors, including:
o Employees of members of the NASD
o 403(b) or 401(k) retirement plans, if certain conditions are met
o Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met
o Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified
If you want to learn more about the requirements for reductions or waivers of
Class A initial sales charges, contact your Salomon Smith Barney Financial
Consultant or dealer representative or consult the Statement of Additional
Information ("SAI").
Large Cap Blend Fund -13-
<PAGE>
- --------------------------------------------------------------------------------
Sales charge: Class B shares
- --------------------------------------------------------------------------------
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of purchase,
you will pay a deferred sales charge. The deferred sales charge decreases as the
number of years since your purchase increases.
- --------------------------------------------------------------------------------
6th and
Year after purchase 1st 2nd 3rd 4th 5th over
- --------------------------------------------------------------------------------
Deferred sales charge 5% 4% 3% 2% 1% 0%
- --------------------------------------------------------------------------------
Class B conversion. After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
- --------------------------------------------------------------------------------
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon exchange from
purchase dividends and another Smith Barney
distributions fund
- --------------------------------------------------------------------------------
Eight years after the In same proportion as the On the date the shares
date of purchase number of Class B shares originally acquired would
converting is to total have converted into Class A
Class B shares you own shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sales charge: Class L shares
- --------------------------------------------------------------------------------
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998, you
will not pay an initial sales charge on Class L shares you buy before June 22,
2001.
- --------------------------------------------------------------------------------
Sales charge: Class Y shares
- --------------------------------------------------------------------------------
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 6-month period. To qualify, you must
initially invest $5,000,000.
- -14-
<PAGE>
- --------------------------------------------------------------------------------
More about deferred sales charges
- --------------------------------------------------------------------------------
The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
o Shares exchanged for shares of another Smith Barney fund
o Shares representing reinvested distributions and dividends
o Shares no longer subject to the deferred sales charge
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
Salomon Smith Barney receives deferred sales charges as partial compensation for
its expenses in selling shares, including the payment of compensation to your
Salomon Smith Barney Financial Consultant or dealer representative.
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
o On payments made through certain systematic withdrawal plans
o On certain distributions from a retirement plan
o For involuntary redemptions of small account balances
o For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
Large Cap Blend Fund -15-
<PAGE>
- --------------------------------------------------------------------------------
Buying shares
- --------------------------------------------------------------------------------
Through a You should contact your Salomon Smith Barney Financial
Salomon Consultant or dealer representative to open a brokerage
Smith account and make arrangements to buy shares.
Barney
Financial If you do not provide the following information, your order
Consultant will be rejected:
or dealer
represen- o Class of shares being bought
tative o Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through Qualified retirement plans and certain other investors who are
the fund's clients of the selling group are eligible to buy shares
transfer directly from the fund.
agent
o Write the transfer agent at the following address:
Smith Barney Equity Funds
Smith Barney Large Cap Blend Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
o Enclose a check to pay for the shares. For initial
purchases, complete and send an account application.
o For more information, call the transfer agent at
1-800-451-2010.
- --------------------------------------------------------------------------------
Through a You may authorize Salomon Smith Barney, your dealer
systematic representative or the transfer agent to transfer funds
investment automatically from a regular bank account, cash held in a
plan Salomon Smith Barney brokerage account or Smith Barney money
market fund to buy shares on a regular basis.
o Amounts transferred should be at least: $25 monthly or $50
quarterly
o If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer
representative or the transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the SAI.
- -16-
<PAGE>
- --------------------------------------------------------------------------------
Exchanging shares
- --------------------------------------------------------------------------------
Smith You should contact your Salomon Smith Barney Financial
Barney Consultant or dealer representative to exchange into other
offers a Smith Barney funds. Be sure to read the prospectus of the
distinctive Smith Barney fund you are exchanging into. An exchange
family of is a taxable transaction.
funds
tailored to o You may exchange shares only for shares of the same class
help meet of another Smith Barney fund. Not all Smith Barney funds
the offer all classes.
varying
needs of o Not all Smith Barney funds may be offered in your state of
both large residence. Contact your Smith Barney Financial Consultant,
and small dealer representative or the transfer agent.
investors.
o You must meet the minimum investment amount for each fund.
o If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers (documents transferring ownership of
certificates) before the exchange is effective.
o The fund may suspend or terminate your exchange privilege if
you engage in an excessive pattern of exchanges.
- --------------------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial sales charge
additional at the time of the exchange.
sales
charges Your deferred sales charge (if any) will continue to be
measured from the date of your original purchase. If the fund
you exchange into has a higher deferred sales charge, you will
be subject to that charge. If you exchange at any time into a
fund with a lower charge, the sales charge will not be
reduced.
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible to
exchange shares through the transfer agent. You must complete
an authorization form to authorize telephone transfers. If
eligible, you may make telephone exchanges on any day the New
York Stock Exchange is open. Call the transfer agent at
1-800-451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern time).
Requests received after the close of regular trading on the
Exchange are priced at the net asset value next determined.
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on the opposite page.
Large Cap Blend Fund -17-
<PAGE>
- --------------------------------------------------------------------------------
Redeeming shares
- --------------------------------------------------------------------------------
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must receive
the certificates endorsed for transfer or with signed stock
powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However, if
you recently purchased your shares by check, your redemption
proceeds will not be sent to you until your original check
clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written
requests to the transfer agent at the following address:
Smith Barney Equity Funds
Smith Barney Large Cap Blend Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
o Your account number
o The class of shares and the dollar amount or number of
shares to be redeemed
o Signatures of each owner exactly as the account is registered
- -18-
<PAGE>
By If you do not have a brokerage account, you may be eligible
telephone to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by
telephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset
value next determined.
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank account designated on
your authorization form. You may be charged a fee for wire
transfers. You must submit a new authorization form to change
the bank account designated to receive wire transfers and you
may be asked to provide certain other documents.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans and each automatic redemption must be at least $50. If your
shares are subject to a deferred sales charge, the sales charge
will be waived if your automatic payments do not exceed 1% per
month of the value of your shares subject to a deferred sales
charge.
The following conditions apply:
o Your shares must not be represented by certificates
o All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
Large Cap Blend Fund -19-
<PAGE>
- --------------------------------------------------------------------------------
Other things to know about share transactions
- --------------------------------------------------------------------------------
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
o Name of the fund
o Account number
o Class of shares being bought, exchanged or redeemed
o Dollar amount or number of shares being bought, exchanged or
redeemed
o Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees. To be in good order, your redemption request must include
a signature guarantee if you:
o Are redeeming (together with other requests submitted in the previous 10 days)
over $10,000 of shares
o Are sending signed share certificates or stock powers to the transfer agent
o Instruct the transfer agent to mail the check to an address different from the
one on your account
o Changed your account registration
o Want the check paid to someone other than the account owner(s)
o Are transferring the redemption proceeds to an account with a different
registration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
- -20-
<PAGE>
The fund has the right to:
o Suspend the offering of shares
o Waive or change minimum and additional investment amounts
o Reject any purchase or exchange order
o Change, revoke or suspend the exchange privilege
o Suspend telephone transactions
o Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securities
and Exchange Commission
o Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
Small account balances. If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions. The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges by
the shareholder.
Share certificates. The fund does not issue share certificates unless a written
request is made to the transfer agent. If you hold share certificates it will
take longer to exchange or redeem shares.
Large Cap Blend Fund -21-
<PAGE>
- --------------------------------------------------------------------------------
Smith Barney 401(k) and ExecChoice(TM) programs
- --------------------------------------------------------------------------------
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A and Class L shares
to participating plans as investment alternatives under the programs. You can
meet minimum investment and exchange amounts by combining the plan's investments
in any of the Smith Barney mutual funds.
There are no sales charges when you buy or sell shares and the class of shares
you may purchase depends on the amount of your initial investment. Once a class
of shares is chosen, all additional purchases must be of that class.
o Class A shares may be purchased by plans investing at least $1 million.
o Class L shares may be purchased by plans investing less than $1 million. Class
L shares are eligible to exchange into Class A shares not later than 8 years
after the plan joined the program. They are eligible for exchange sooner:
If the account was opened on or after June 21, 1996 and an aggregate of $1
million is invested in Smith Barney Funds Class L shares (other than money
market funds), all Class L shares are eligible for exchange after the plan
is in the program 5 years.
If the account was opened before June 21, 1996 and $500,000 in the
aggregate is invested in Smith Barney Funds Class L shares (other than
money market funds), all Class L shares are eligible for exchange on each
December 31 and the exchange will occur no later than March 31 of the
following year.
For more information, call your Salomon Smith Barney Financial Consultant or the
transfer agent, or consult the SAI.
- -22-
<PAGE>
- --------------------------------------------------------------------------------
Dividends, distributions and taxes
- --------------------------------------------------------------------------------
Dividends. The fund generally makes capital gain distributions and pays
dividends, if any, once a year, typically in December. The fund may pay
additional distributions and dividends at other times if necessary for the fund
to avoid a federal tax. Capital gain distributions and dividends are reinvested
in additional fund shares of the same class you hold. The fund expects
distributions to be primarily from capital gain. You do not pay a sales charge
on reinvested distributions or dividends. Alternatively, you can instruct your
Salomon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
Taxes. In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.
- --------------------------------------------------------------------------------
Transaction Federal tax status
- --------------------------------------------------------------------------------
Redemption or exchange of shares Usually capital gain or loss; long-term
only if shares owned more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
- --------------------------------------------------------------------------------
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a capital gain distribution or a
dividend, because it will be taxable to you even though it may actually be a
return of a portion of your investment.
After the end of each year, the fund will provide you with information about the
distributions and dividends you received and any redemptions of shares during
the previous year. If you do not provide the fund with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special tax
rules may apply, you should consult your tax adviser about your investment in
the fund.
Large Cap Blend Fund -23-
<PAGE>
- --------------------------------------------------------------------------------
Share price
- --------------------------------------------------------------------------------
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).
The fund generally values its fund securities based on market prices or
quotations. When reliable market prices are not readily available, or when the
value of a security has been materially affected by events occurring after a
foreign exchange closes, the fund may price those securities at fair value. Fair
value is determined in accordance with procedures approved by the fund's board.
A fund that uses fair value to price securities may value those securities
higher or lower than another fund using market quotations to price the same
securities.
International markets may be open on days when U.S. markets are closed, and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the New York Stock
Exchange closes early, you must place your order prior to the actual closing
time. Otherwise, you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.
- --------------------------------------------------------------------------------
Financial highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the
performance of each class for the past 5 years (or since inception if less than
5 years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables for the fiscal years 1996 through 1999 was
audited by KPMG LLP, independent accountants, whose report, along with the
fund's financial statements, are included in the annual report (available upon
request).
- -24-
<PAGE>
For a Class A share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $14.30 $12.16 $9.62 $10.36
- -----------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) 0.21 0.19 0.20 0.20
Net realized and unrealized
gain (loss) 2.10 2.33 2.74 (0.61)
- -----------------------------------------------------------------------------------------
Total income (loss) from operations 2.31 2.52 2.94 (0.41)
- -----------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.19) (0.20) (0.20) (0.19)
Net realized gain (0.70) (0.18) (0.20) (0.14)
- -----------------------------------------------------------------------------------------
Total distributions (0.89) (0.38) (0.40) (0.33)
- -----------------------------------------------------------------------------------------
Net asset value, end of year $15.72 $14.30 $12.16 9.62
- -----------------------------------------------------------------------------------------
Total return 16.30% 20.97% 30.97% (3.93%)
- -----------------------------------------------------------------------------------------
Net assets, end of year (000)'s $152 $133 $110 $95
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.09% 1.12% 1.16% 1.41%
Net investment income 1.35 1.48 1.77 1.86
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 17% 9% 15% 127%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
Large Cap Blend Fund -25-
<PAGE>
For a Class B share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996(1) 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $14.33 $12.19 $9.65 $10.38
- --------------------------------------------------------------------------------------------
Income (loss) from operations:
- --------------------------------------------------------------------------------------------
Net investment income (loss) 0.13 0.13 0.14 0.17
Net realized and unrealized
gain (loss) 2.10 2.34 2.75 (0.62)
- --------------------------------------------------------------------------------------------
Total income (loss) from operations 2.23 2.47 2.89 (0.45)
- --------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.14) (0.15) (0.15) (0.14)
Net realized gain (0.70) (0.18) (0.20) (0.14)
- --------------------------------------------------------------------------------------------
Total distributions (0.84) (0.33) (0.35) (0.28)
- --------------------------------------------------------------------------------------------
Net asset value, end of year $15.72 $14.33 $12.19 $9.65
- --------------------------------------------------------------------------------------------
Total return 15.65% 20.43% 30.23% (4.33)%
- --------------------------------------------------------------------------------------------
Net assets, end of year (000)'s $154 $137 $112 $92
- --------------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.59% 1.62% 1.65% 1.90%
Net investment income 0.86 0.98 1.27 1.38
- --------------------------------------------------------------------------------------------
Portfolio turnover rate 17% 9% 15% 127%
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
- -26-
<PAGE>
For a Class L share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996(1) 1995(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ $14.33 $12.19 $9.65 $9.91
- -------------------------------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) 0.13 0.14 0.13 0.07
Net realized and unrealized 2.10 2.33 2.76 (0.13)
gain (loss)
- -------------------------------------------------------------------------------------------------------------
Total income (loss) from operations 2.23 2.47 2.89 (0.06)
- -------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.14) (0.15) (0.15) (0.06)
Net realized gain (0.70) (0.18) (0.20) (0.14)
- -------------------------------------------------------------------------------------------------------------
Total distributions (0.84) (0.33) (0.35) (0.20)
- -------------------------------------------------------------------------------------------------------------
Net assets value, end of year $15.72 $14.33 $12.19 $9.65
- -------------------------------------------------------------------------------------------------------------
Total return 15.65% 20.43% 30.23% (0.58)%(3)
- -------------------------------------------------------------------------------------------------------------
Net assets, end of year (000)'s $5,007 $2,958 $961 $85
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.57% 1.61% 1.62% 1.83%(4)
Net investment income (loss) 0.86 0.94 1.11 1.44(4)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 17% 9% 15% 127%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) For the period from August 15, 1994 (inception date) to January 31, 1995.
(3) Not Annualized.
(4) Annualized.
Large Cap Blend Fund -27-
<PAGE>
For a Class Y share of capital stock outstanding throughout each year ended
January 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1999 1998 1997 1996(1)(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ $14.34 $12.16 $12.08
- -----------------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.27 0.22 --
Net realized and unrealized gain (loss) 2.10 2.36 0.08
- -----------------------------------------------------------------------------------------------
Total income (loss) from operations 2.37 2.58 0.08
- -----------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.28) (0.22) --
Net realized gain (0.70) (0.18) --
- -----------------------------------------------------------------------------------------------
Total distributions (0.98) (0.40) --
- -----------------------------------------------------------------------------------------------
Net asset value, end of year $15.73 $14.34 $12.16
- -----------------------------------------------------------------------------------------------
Total return 16.76% 21.48% N/A(3)
- -----------------------------------------------------------------------------------------------
Net assets, end of year (000)'s $9,258 $78,192 $5
- -----------------------------------------------------------------------------------------------
Ratio to average net assets:
Expenses 0.69% 0.73% N/A(3)
Net investment income (loss) 1.73 1.73 N/A(3)
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 17% 9% 15%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Per share amounts calculated using the monthly average shares method.
(2) Inception date is January 31, 1996.
(3) Information is not meaningful since the class only was open for 1 day.
Large Cap Blend Fund -28-
<PAGE>
SALOMON SMITH BARNEY(SM)
a member of citigroup [Symbol]
Large Cap Blend Fund
Shareholder reports. Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information. The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review the fund's shareholder reports, prospectus and statement of
additional information at the Securities and Exchange Commission's Public
Reference Room in Washington, D.C. You can get copies of these materials for a
fee by writing to the Public Reference Section of the Commission, Washington,
D.C. 20549-6009. Information about the public reference room may be obtained by
calling 1-800-SEC-0330. You can get the same information free from the
Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.
(SM) Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file no. 811-4551)
FD0250 5/99
Part B - Statement of Additional Information
Smith Barney
EQUITY FUNDS
388 Greenwich Street
New York, New York 10013
800-451-2010
STATEMENT OF ADDITIONAL INFORMATION May 31, 1999
This statement of additional information expands upon and
supplements the information contained in the current prospectuses,
each dated May 31, 1999, as amended or supplemented from time to
time, of Smith Barney Large Cap Blend Fund ("Large Cap Blend
Fund") (formerly Smith Barney Growth and Income Fund) and Concert
Social Awareness Fund ("Social Awareness Fund"). Each fund is a
series of Smith Barney Equity Funds (the "trust"). This statement
of additional information should be read in conjunction with the
funds' prospectuses, which may be obtained from a Salomon Smith
Barney Financial Consultant, a PFS Investments Inc. Registered
Representative or by writing or calling the trust at the address
or telephone number set forth above. This statement of additional
information, although not in itself a prospectus, is incorporated
by reference into each fund's prospectus in its entirety.
CONTENTS
Management of the Trust
2
Investment Objectives and Policies
5
Purchase, Exchange and Redemption of Shares
23
Distributor
31
Valuation of Shares
33
Performance Data
34
Dividends and Distributions
37
Taxes
38
Additional Information
40
Financial Statements
41
Appendix
A-
1
MANAGEMENT OF THE TRUST
The executive officers of the trust are employees of the following
organizations, which are among the organizations providing
services to the trust:
Name
Service
CFBDS, Inc.
("CFBDS")
Distributor of each fund
SSBC Fund Management Inc. ("SSBC")
(formerly Mutual Management Corp.)
Investment Adviser and
Administrator of each fund
PNC Bank, National Association
("PNC")
Custodian
First Data Investor Services Group,
Inc.
("First Data")
Transfer Agent
These organizations and the services they perform for the trust
and the funds are discussed in the prospectuses and in this
statement of additional information.
Trustees and Executive Officers of The Trust
The names of the trustees and the executive officers of the trust,
together with information as to their principal business
occupations, are set forth below. Each trustee who is an
"interested person" of the trust, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), is indicated by
an asterisk. The address of the "non-interested" trustees and the
executive officers of the trust is 388 Greenwich Street, New York,
New York 10013.
Lee Abraham, Trustee (Age 71). Retired; formerly Chairman and
Chief Executive Officer of Associated Merchandising Corporation, a
major retail merchandising and sourcing organization; Director of
Galey & Lord, an apparel manufacturer, Liz Claiborne, a specialty
retailer, R.G. Barry Corp., a footwear manufacturer and Signet
Group plc, a specialty retailer. His address is 106 Barnes Road,
Stamford, Connecticut 06902.
Allan J. Bloostein, Trustee (Age 69). President of Allan J.
Bloostein Associates, a consulting firm; Retired Vice Chairman and
Director of The May Department Stores Company; Director of CVS
Corporation, a drug store chain, and Taubman Centers Inc., a real
estate development company. His address is 27 West 67th Street,
New York, New York 10023.
Jane Dasher, Trustee (Age 49). Investment Officer of Korsant
Partners, a family investment company; Prior to 1997, an
Independent Financial Consultant.
Richard E. Hanson, Jr., Trustee (Age 57). Head of School, New
Atlanta Jewish Community High School, Atlanta Georgia since
September 1996; formerly Headmaster, The Peck School, Morristown,
New Jersey; prior to July 1, 1994, Headmaster, Lawrence County Day
School-Woodmere Academy, Woodmere, New York; His address is 58 Ivy
Chase, Atlanta, GA 30342.
*Heath B. McLendon, Chairman of the Board and Investment Officer
(Age 66). Managing Director of Salomon Smith Barney ("Salomon
Smith Barney"), Chairman of the Board and President of SSBC and
Travelers Investment Advisers, Inc. ("TIA"); and former Chairman
of the Board of Smith Barney Strategy Advisers Inc.
R. Jay Gerken, Investment Officer (Age 48). Managing Director of
Salomon Smith Barney.
Robert J. Brady, Investment Officer (Age 59). Managing Director
of Salomon Smith Barney; previously Director of Investment
Strategy at EF Hutton and Special Situations Analyst for Forbes
Inc.
Ellen S. Cammer, Investment Officer (Age 45). Managing Director of
Salomon Smith Barney.
Lewis E. Daidone, Senior Vice President and Treasurer (Age 41).
Managing Director of Salomon Smith Barney; Chief Financial Officer
of the Smith Barney Mutual Funds; Director and Senior Vice
President of SSBC and TIA.
Christina T. Sydor, Secretary (Age 48). Managing Director of
Salomon Smith Barney; General Counsel and Secretary of SSBC and
TIA.
As of May _____, 1999, the trust's trustees and officers of the
funds as a group owned less than 1.00% of the outstanding shares
of the trust.
As of May _____, 1999 to the knowledge of the funds and the board
of trustees, no single shareholder or group (as the term is used
in Section 13(d) of the Securities Act of 1934) beneficially owned
more than 5% of the outstanding shares of the fund with the
exception of the following:
FUND
CLASS
PERCENT
NAME
ADDRESS
[Large Cap
Blend Fund]
[Y]
[Smith Barney
Concert Series,
Inc.
Growth Portfolio,
PNC Bank NA
ATTN: Beverly
Timson]
[200 Stevens
Drive Suite 440
Lester PA
19113]
[Large Cap
Blend Fund]
[Y]
[Smith Barney
Concert Series,
Inc.
High Growth Port,
PNC Bank NA
ATTN: Beverly
Timson]
[200 Stevens
Drive Suite 440
Lester PA
19113]
[Large Cap
Blend Fund]
[Y]
[Smith Barney
Concert Series,
Inc.
Balanced Portfolio,
PNC Bank NA
ATTN: Beverly
Timson]
[200 Stevens
Drive Suite 440
Lester PA
19113]
No officer, director or employee of Salomon Smith Barney, or of
any parent or subsidiary receives any compensation from the trust
for serving as an officer or trustee of the trust. The trust pays
each trustee who is not an officer, director or employee of
Salomon Smith Barney or any of its affiliates a fee of [$6,000]
per annum plus [$1,000] per meeting attended and reimburses each
trustee for travel and out-of-pocket expenses. For the fiscal year
ended January 31, 1999, such expenses totaled $_____.
For the fiscal year ended January 31, 1999, the trustees of the
trust were paid the following compensation: [
Director(*)
Aggregate
Compensation from
the Fund for
Fiscal Year Ended
1/31/99
Pension Or
Retirement
Benefits Accrued
As Part of the
Fund Expenses
Aggregate
Compensation
From the
Smith Barney
Mutual Funds
Complex for
Calendar Year
Ended
12/31/98
Lee Abraham (3)
$
$0
$
Allan Bloostein
(10)
0
Jane Dasher (1)
0
Richard Hanson
Jr. (3)
0
Heath B.
McLendon (59)
- ---
0
- ---
* Total number of funds for which trustee serves within fund
complex.
Upon attainment of age 80, trustees are required to change to
emeritus status. Trustees Emeritus are entitled to serve in
emeritus status for a maximum of 10 years during which time they
are paid 50% of the annual retainer fee and meeting fees otherwise
applicable to the trust's trustees together with reasonable out-
of-pocket expenses for each meeting attended.
Investment Adviser and Administrator
SSBC serves as investment adviser to Large Cap Blend Fund pursuant
to a transfer of the fund's investment advisory agreement
effective November 7, 1994, and serves as investment adviser to
Social Awareness Fund pursuant to an investment advisory agreement
dated August 14, 1995. SSBC is an affiliate of Salomon Smith
Barney and a wholly owned subsidiary of Citigroup. The board of
trustees most recently approved the funds' advisory agreements on
August 5, 1998.
SSBC bears all expenses in connection with the performance of its
services and pays the salary of any officer and employee who is
employed by both it and the trust. As compensation for investment
advisory services rendered, Large Cap Blend Fund and Social
Awareness Fund each pays a fee computed daily and paid monthly at
the annual rate of 0.45% and 0.55%, respectively, of the fund's
average daily net assets.
SSBC also serves as administrator to the funds pursuant to written
administration agreements dated August 31, 1996, which were most
recently approved on August 5, 1998. For administration services
rendered, the funds pay SSBC a fee at the annual rate of 0.20% of
the value of the respective funds' average daily net assets.
SSBC pays the salaries of all officers and employees who are
employed by SSBC and the fund, 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 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. SSBC bears all expenses in connection with the
performance of its services. 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, 1997, 1998 and 1999, the
funds paid investment advisory and/or administration fees to SSBC
(or its predecessor) as follows:
Large Cap Blend Fund
1997
1998
1999
Investment Advisory fees
$1,256,354
$1,796,1
97
Administration fees
558,380
798,309
Social Awareness Fund
1997
1998
1999
Investment Advisory fees
$2,146,284
$2,036,3
65
Administration fees
780,467
740,496
Auditors
KPMG LLP, 345 Park Avenue, New York, New York 10154, has been
selected as the trust's independent auditor to examine and report
on the trust's financial statements and financial highlights for
the fiscal year ending January 31, 1999.
INVESTMENT OBJECTIVES AND 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.
Social Awareness Fund
The investment objective of the Social Awareness 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 and fixed-income securities. The
percentages of the fund's assets invested in each of these types
of securities are adjusted from time to time to conform to the
asset allocation percentages most recently determined by Strategy
Advisers. Under normal market conditions, the fund will have
between 65% and 85% of its assets invested in equity securities
and between 15% and 35% in fixed-income securities. The mix of
the fund's investments may vary from time to time.
SSBC is responsible for the selection of specific securities on
behalf of the fund and for determining the allocation of the
fund's assets. Following the variable asset allocation strategy
may involve frequent shifts among classes of investments and
result in a relatively high portfolio turnover rate.
The equity portion of the assets of the fund will consist
primarily 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, SSBC selects securities of companies that it believes
are undervalued based on relevant indicators such as
price/earnings ratios, forecast growth, as well as balance sheet,
profitability and risk analysis. 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 may also 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, asset-backed and mortgage-backed securities 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 SSBC based upon an evaluation of
economic and market trends. When SSBC believes that a defensive
investment posture is warranted or when attractive investment
opportunities do not exist, the fund may temporarily invest all or
a portion of its assets in short-term money market instruments.
The money market securities in which the fund may invest include
commercial paper, bank obligations (possibly including community
investments) and short-term U.S. government securities.
Up to 25% of the fund's assets may be invested in equity and debt
securities of foreign issuers. The fund also may write covered
call options, lend its portfolio securities and invest in real
estate investment trusts. Risk factors and special considerations
associated with the fund's investments are described below.
SSBC believes that there is a direct correlation between companies
that demonstrate an acute awareness of their impact on the society
within which they operate and companies which offer attractive
long-term investment potential. SSBC believes that addressing
social issues in a positive manner can translate into sound
business. For example, by ensuring a product or service does not
negatively impact the environment, a company can avoid costly
litigation and clean-up costs; and by maintaining positive
standards for the workplace and a diverse employee population, a
company can better ensure access to quality management talent and
improved productivity; or by becoming more involved in the
community, a company can enhance its consumer franchise. Top
quality management teams who successfully balance their companies'
business interest with their social influences can gain
significant competitive advantages over the long run, which may
result in increased shareholder values and, therefore, better
investments. The fund is designed to incorporate both social and
financial criteria in all of its investment decisions.
SSBC will attempt to emphasize companies that meet the fund's
investment criteria and, relative to other companies in their
industry, demonstrate a positive awareness of the environment in
which they operate. In addition, SSBC has identified specific
areas of social and financial concern and, thus, the fund will not
purchase the debt or equity securities of any company that SSBC
has significant reason to believe is engaged at the time of
investment by the fund in any of the following:
? Tobacco production;
? Production of weapons;
? Ownership or design of nuclear facilities.
These portfolio restrictions are based on the belief that a
company will benefit from its social awareness by enabling it to
better position itself in developing business opportunities while
avoiding liabilities that may be incurred when a product or
service is determined to have a negative social impact. These
companies should be better prepared to respond to external demands
and ensure that over the longer term they will be viable to
provide a positive return to both investors and society as a
whole.
SSBC will use its best efforts to assess a company's social
performance. This analysis will be based on present activities,
and will not preclude securities solely because of past
activities. The fund's trustees will monitor the social awareness
criteria used by the fund and SSBC may, upon approval of the
trustees, change the criteria used to rate the social performance
of an issuer without prior notice or shareholder approval.
While the application of the fund's social awareness criteria may
preclude some securities with strong earnings and growth
potential, SSBC believes that there are sufficient investment
opportunities among those companies that satisfy the social
awareness criteria to meet the fund's investment objectives.
Large Cap Blend Fund
The investment objective of Large Cap Blend Fund is to seek 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 that the fund's
investment objective will be achieved.
The fund attempts to achieve its investment objective by
investing, under normal market conditions, substantially all of
its assets in equity securities and at least 65% of its total
assets in equity securities of large capitalization companies with
market capitalizations greater than $5 billion at the time of
investment. In selecting the fund's equity investments, SSBC
seeks to identify companies that exhibit growth and/or value
characteristics. When selecting stocks with growth potential,
SSBC will evaluate the specific financial characteristics of the
issuer such as historical and forecasted earnings growth, sales
growth, profitability and return on equity. When selecting stocks
with value characteristics, SSBC will typically be looking at
companies that are perhaps growing more slowly but whose valuation
may be below average relative to earnings and/or assets.
The fund will normally invest in all types of equity securities,
including common stocks, preferred stocks, securities that are
convertible into common or preferred stocks, such as warrants and
convertible bonds and depository receipts for those securities.
The fund may maintain a portion of its assets, which will usually
not exceed 10%, in U.S. government securities, money market
obligations and in cash to provide for payment of the fund's
expenses and to meet redemption requests. It is the policy of the
fund to be as fully invested in equity securities as practicable
at all times. The fund reserves the right, as a defensive
measure, to hold money market securities, including repurchase
agreements or cash, in such proportions as, in the opinion of
management, prevailing market or economic conditions warrant.
Consistent with its investment objective and policies described
above, the fund may invest 20% of its assets in the securities of
foreign issuers, including direct investments and investments made
through American Depositary Receipts or European Depositary
Receipts. The fund may also invest in real estate investment
trusts, 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.
Additional Investment Strategies and Techniques
In attempting to achieve its investment objective, the funds may
employ, among others, one or more of the strategies and techniques
set forth below. The funds are under no obligation to use any of
the strategies or techniques at any given time or under any
particular economic condition.
Equity Investments
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 convertible securities
tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk,
investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments
that provide for a stable stream of income with generally higher
yields than common stocks. Of course, like all fixed-income
securities, there can be no assurance of current income because
the issuers of the convertible securities may default on their
obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities
of similar quality because of the potential for capital
appreciation. A convertible security, in addition to providing
fixed income, offers the potential for capital appreciation
through the conversion feature, which enables the holder to
benefit from increases in the market price of the underlying
common stock. There can be no assurance of capital appreciation,
however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority
in right of payment to all equity securities, and convertible
preferred stock is senior to common stock, of the same issuer.
Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-
convertible securities.
Preferred Stock. The funds may invest in preferred stocks.
Preferred stocks, like debt obligations, are generally fixed-
income securities. Shareholders of preferred stocks normally have
the right to receive dividends at a fixed rate when and as
declared by the issuer's board of directors, but do not
participate in other amounts available for distribution by the
issuing corporation. Dividends on the preferred stock may be
cumulative, and all cumulative dividends usually must be paid
prior to common stockholders receiving any dividends. Preferred
stock dividends must be paid before common stock dividends and for
that reason preferred stocks generally entail less risk than
common stocks. Upon liquidation, preferred stocks are entitled to
a specified liquidation preference, which is generally the same as
the par or stated value, and are senior in right of payment to
common stock. Preferred stocks are, however, equity securities in
the sense that they do not represent a liability of the issuer and
therefore do not offer as great a degree of protection of capital
or assurance of continued income as investments in corporate debt
securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the
issuer, and convertible preferred stocks may be subordinated to
other preferred stock of the same issuer.
Warrants. The funds may invest in warrants, which entitle the
funds to buy common stock at a specified date and price. Some of
the risks associated with warrants are described below and under
"Risk Factors."
Fixed Income Investments
Mortgage and Asset-Backed Securities (Social Awareness Fund). The
fund may purchase fixed or adjustable rate mortgage-backed
securities issued by the Government National Mortgage Association,
Federal National Mortgage Association or the Federal Home Loan
Mortgage Corporation, and other asset-backed securities, including
securities backed by automobile loans, equipment leases or credit
card receivables. These securities directly or indirectly
represent a participation in, or are secured by and payable from,
fixed or adjustable rate mortgage or other loans which may be
secured by real estate or other assets. Unlike traditional debt
instruments, payments on these securities include both interest
and a partial payment of principal. Prepayments of the principal
of underlying loans may shorten the effective maturities of these
securities and may result in the fund having to reinvest proceeds
at a lower interest rate. The fund may also purchase
collateralized mortgage obligations which are a type of bond
secured by an underlying pool of mortgages or mortgage pass-
through certificates that are structured to direct payments on
underlying collateral to different series or classes of the
obligations.
When-Issued Securities and Delayed-Delivery Transactions. In
order to secure yields or prices deemed advantageous at the time,
the funds may purchase or sell securities on a when-issued or
delayed-delivery basis. A 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 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 yields obtained on
those securities may be higher or lower than the yields available
in the market on the dates when the investments are actually
delivered to the buyers. Each fund will establish a segregated
account consisting of cash or liquid securities in an amount equal
to the amount of its when-issued and delayed-delivery commitments.
Placing securities rather than cash in the segregated account may
have a leveraging effect on a fund's net assets.
Zero Coupon Securities (Social Awareness Fund). A zero coupon
bond pays no interest in cash to its holder during its life,
although interest is accrued during that period. Its value to an
investor consists of the difference between its face value at the
time of maturity and the price for which it was acquired, which is
generally an amount significantly less than its face value
(sometimes referred to as a "deep discount" price). Because such
securities usually trade at a deep discount, they will be subject
to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities
which make periodic distributions of interest. On the other hand,
because there are no periodic interest payments to be reinvested
prior to maturity, zero coupon securities eliminate reinvestment
risk and lock in a rate of return to maturity.
United States Government Securities. Each fund may invest in
United States government securities. These include debt
obligations of varying maturities issued or guaranteed by the
United States government or its agencies or instrumentalities
("U.S. government securities"). Direct obligations of the United
States Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance.
U.S. government securities include not only direct obligations of
the United States Treasury, but also include securities issued or
guaranteed by the Federal Housing Administration, Federal
Financing Bank, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association,
General Services Administration, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal National Mortgage
Association, Maritime Administration, Resolution Trust
Corporation, Tennessee Valley Authority, District of Columbia
Armory Board, Student Loan Marketing Association and various
institutions that previously were or currently are part of the
Farm Credit System (which has been undergoing a reorganization
since 1987). Because the United States government is not obligated
by law to provide support to an instrumentality that it sponsors,
a fund will invest in obligations issued by such an
instrumentality only if the fund's adviser determines the credit
risk with respect to the instrumentality does not make its
securities unsuitable for investment by the fund.
Repurchase Agreements. The funds 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, a fund acquires
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 SSBC to ensure
that the value is at least equal at all times to the total amount
of the repurchase obligation, including interest. Each fund bears
a risk of loss if the other party to a repurchase agreement
defaults on its obligations and the fund is delayed in or
prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value
of the underlying securities while the fund seeks to assert these
rights. SSBC, 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 banks and dealers with
which the funds enter into repurchase agreements to evaluate
potential risks.
Money Market Instruments. 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 other
banking institutions having total assets in excess of $1 billion
for Large Cap Blend Fund (or, in excess of $500 million for Social
Awareness Fund); 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 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, SSBC 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 Ratings Group ("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.
Variable Rate Demand Notes (VRDNs). 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. SSBC 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.
Other Derivative Contracts
Options on Securities. The funds may write covered call options
and enter into closing transactions with respect thereto. The
principal reason for writing covered call options on securities is
to attempt to realize, through the receipt of premiums, a greater
return than would be realized on the securities alone. In return
for a premium, the writer of a covered call option forfeits the
right to any appreciation in the value of the underlying security
above the strike price for the life of the option (or until a
closing purchase transaction can be effected). Nevertheless, the
call writer retains the risk of a decline in the price of the
underlying security. The size of the premiums a fund may receive
may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their
option-writing activities.
Options written by the funds normally will have expiration dates
between one and nine months from the date they are written. The
exercise price of the options may be below ("in-the-money"), equal
to ("at-the-money"), or above ("out-of-the-money") the market
values of the underlying securities at the times the options are
written. A fund may write (a) in-the-money call options when SSBC
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 SSBC 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 SSBC expects
that the price of the underlying security may increase but not
above a price equal to the sum of the exercise price plus the
premiums received from writing the call option. In any of the
preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price,
the amount of any realized loss will be offset wholly or in part
by the premium received.
So long as the obligation of a fund as the writer of an option
continues, the fund may be assigned an exercise notice by the
broker-dealer through which the option was sold requiring the fund
to deliver the underlying security against payment of the exercise
price. This obligation terminates when the option expires or the
fund effects a closing purchase transaction. A fund can no longer
effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure its
obligation to deliver the underlying security when it writes a
call option, a fund will be required to deposit in escrow the
underlying security or other assets in accordance with the rules
of the Options Clearing Corporation (the "Clearing Corporation")
and of the domestic securities exchange on which the option is
written.
An option position may be closed out only where there exists a
secondary market for an option of the same series on a securities
exchange or in the over-the-counter market. Social Awareness Fund
expects to write options only on domestic securities exchanges. A
fund may realize a profit or loss upon entering into a closing
transaction. In cases in which a fund has written an option, it
will realize a profit if the cost of the closing purchase
transaction is less than the premium received upon writing the
original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the
original option.
Although Social Awareness Fund generally will write only those
options for which SSBC believes there is an active secondary
market so as to facilitate closing transactions, there is no
assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options
no such secondary market may exist. A liquid secondary market in
an option may cease to exist for a variety of reasons. In the
past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, have at times rendered
certain of the facilities of the Clearing Corporation and the
domestic securities exchanges inadequate and resulted in the
institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that
similar events, or events that otherwise may interfere with the
timely execution of customers' orders, will not recur. In such
event, it might not be possible to effect closing transactions in
particular options. If, as a covered call option writer, a fund is
unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon
exercise.
Securities exchanges have established limitations governing the
maximum number of calls and puts of each class that may be held or
written, or exercised within certain time periods, by an investor
or group of investors acting in concert (regardless of whether the
options are written on the same or different national securities
exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the
funds and other clients of SSBC and certain of its 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.
Futures and Options on Futures. When deemed advisable by SSBC,
each fund may enter into interest rate futures contracts, stock
index futures contracts and related options that are traded on a
domestic exchange or board of trade. These transactions will be
made solely for the purpose of hedging against the effects of
changes in the value of portfolio securities due to anticipated
changes in interest rates and market conditions, as the case may
be. All futures and options contracts will be entered into only
when the transactions are economically appropriate for the
reduction of risks inherent in the management of the fund.
An interest rate futures contract provides for the future sale by
the 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. A stock 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. Stock index futures contracts are based
on indexes that reflect the market value of common stock of the
companies included in the indexes. An option on an interest rate
or stock index 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 position if
the option is a put) at a specified exercise price at any time
prior to the expiration date of the option.
In entering into transactions involving futures contracts and
options on futures contracts, the funds will comply with
applicable requirements of the Commodities Futures Trading
Commission (the "CFTC") which require that transactions in futures
and options be engaged in for "bona fide hedging" purposes or
other permitted purposes, provided that aggregate initial margin
deposits and premiums required to establish positions, other than
those considered by the CFTC to be a "bona fide hedging," will not
exceed 5% of the fund's net asset value, after taking into account
unrealized profits and unrealized losses on any such contracts.
In addition, with respect to long positions in futures or options
on futures, each 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.
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 or index on the one hand, and price
movements in the securities that are the subject 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.
Other Investments
Foreign Securities. As described above, each fund may invest a
portion of its assets in securities of foreign issuers, including
securities denominated in foreign currencies. These investments
involve certain risks not ordinarily associated with investments
in securities of domestic issuers. These risks are described in
"Risk Factors" below.
American, European, Global and Continental Depositary Receipts.
Each fund may invest in securities of foreign issuers in the form
of American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs") and Global Depositary Receipts ("GDRs"). 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.
ADRs are publicly traded on exchanges or over-the-counter in the
United States and are
issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the
obligation to pay some or all of the depositary's transaction
fees, whereas under an unsponsored arrangement, the foreign issuer
assumes no obligation and the depositary's transaction fees are
paid by the ADR holders. In addition, less information is
available in the United States about an unsponsored ADR than about
a sponsored ADR, and the financial information about a company may
not be as reliable for an unsponsored ADR as it is for a sponsored
ADR. The funds may invest in ADRs through both sponsored and
unsponsored arrangements.
Eurodollar or Yankee Obligations. Each fund may invest in
Eurodollar and Yankee obligations. Eurodollar bank obligations
are dollar denominated debt obligations issued outside the U.S.
capital markets by foreign branches of U.S. banks and by foreign
banks. Yankee obligations are dollar denominated obligations
issued in the U.S. capital markets by foreign issuers. Eurodollar
(and to a limited extent, Yankee) obligations are subject to
certain sovereign risks. One such risk is the possibility that a
foreign government might prevent dollar denominated funds from
flowing across its borders. Other risks include: adverse
political and economic developments in a foreign country; the
extent and quality of government regulation of financial markets
and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
Lending of Portfolio Securities. Consistent with applicable
regulatory requirements each fund has the ability to lend
portfolio securities to brokers, dealers and other financial
organizations. A fund will not lend portfolio securities to
Salomon Smith Barney unless it has applied for and received
specific authority to do so from the SEC. Loans of portfolio
securities will be collateralized by cash, letters of credit or
U.S. government securities that are maintained at all times in a
segregated account in an amount equal to 100% of the current
market value of the loaned securities. From time to time, a fund
may pay a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the fund and that is acting
as a "finder."
By lending its securities, a fund can increase its income by
continuing to receive interest or dividends 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
distributions on the loaned securities, and any increase in market
value; (e) the fund may pay only reasonable custodian fees in
connection with the loan; and (f) voting rights on the loaned
securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment in the loaned
securities occurs, the trust's Board of trustees must terminate
the loan and regain the right to vote the securities. The risks in
lending portfolio securities, as with other extensions of secured
credit, consist of a possible delay in receiving additional
collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
Loans will be made to firms deemed by SSBC 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.
Reverse Repurchase Agreements (Large Cap Blend Fund). In order to
generate additional income, the fund may engage in reverse
repurchase agreement transactions with banks, broker-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
consisting of cash or liquid securities that at all time are in an
amount equal to its 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 securities.
Illiquid Securities. Up to 15% of the assets of each fund may be
invested 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 Social Awareness Fund has
no present intention to invest more than 10% of its assets in the
aggregate in illiquid securities.
Venture Capital Investments (Social Awareness Fund). Social
Awareness 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.
Risk Factors
The following risk factors are intended to supplement the risks
described above and those in the funds' prospectuses.
General. Investors should realize that risk of loss is inherent
in the ownership of any securities and that each fund's net asset
value will fluctuate, reflecting fluctuations in the market value
of its portfolio positions.
Warrants. Because a warrant does not carry with it the right to
dividends or voting rights with respect to the securities 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 funds
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.
Fixed Income Securities. Investments in fixed income securities
may subject the funds to risks, including the following.
Interest Rate Risk. When interest rates decline, the market
value of fixed income securities tends to increase. Conversely,
when interest rates increase, the market value of fixed income
securities tends to decline. The volatility of a security's
market value will differ depending upon the security's duration,
the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income
securities are subject to the risk that the issuer of the security
could default on its obligations, causing a fund to sustain losses
on such investments. A default could impact both interest and
principal payments.
Call Risk and Extension Risk. Fixed income securities may
be subject to both call risk and extension risk. Call risk exists
when the issuer may exercise its right to pay principal on an
obligation earlier than scheduled, which would cause cash flows to
be returned earlier than expected. This typically results when
interest rates have declined and a fund will suffer from having to
reinvest in lower yielding securities. Extension risk exists when
the issuer may exercise its right to pay principal on an
obligation later than scheduled, which would cause cash flows to
be returned later than expected. This typically results when
interest rates have increased, and a fund will suffer from the
inability to invest in higher yield securities.
Lower Rated Fixed Income Securities. Securities which are rated
BBB by S&P or Baa by Moody's are generally regarded as having
adequate capacity to pay interest and repay principal, but may
have some speculative characteristics. Securities rated below Baa
by Moody's or BBB by S&P may have speculative characteristics,
including the possibility of default or bankruptcy of the issuers
of such securities, market price volatility based upon interest
rate sensitivity, questionable creditworthiness and relative
liquidity of the secondary trading market. Because high yield
bonds have been found to be more sensitive to adverse economic
changes or individual corporate developments and less sensitive to
interest rate changes than higher-rated investments, an economic
downturn could disrupt the market for high yield bonds and
adversely affect the value of outstanding bonds and the ability of
issuers to repay principal and interest. In addition, in a
declining interest rate market, issuers of high yield bonds may
exercise redemption or call provisions, which may force a fund, to
the extent it owns such securities, to replace those securities
with lower yielding securities. This could result in a decreased
return.
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 in 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. Investments in securities of foreign issuers
involve certain risks not ordinarily associated with investments
in securities of domestic issuers. Such risks include
fluctuations in foreign exchange rates, future political and
economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
Since each fund will invest heavily in securities denominated or
quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates will, to the extent the fund does
not adequately hedge against such fluctuations, affect the value
of securities in its portfolio and the unrealized appreciation or
depreciation of investments so far as U.S. investors are
concerned. In addition, with respect to certain countries, there
is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic
developments which could adversely affect investments in those
countries.
There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not
be subject to accounting, auditing, and financial reporting
standards and requirements comparable to or as uniform as those of
U.S. companies. Foreign securities markets, while growing in
volume, have, for the most part, substantially less volume than
U.S. markets, and securities of many foreign companies are less
liquid and their price more volatile than securities of comparable
U.S. companies. Transaction costs on foreign securities markets
are generally higher than in the U.S. There is generally less
government supervision and regulation of exchanges, brokers and
issuers than there is in the U.S. A fund might have greater
difficulty taking appropriate legal action in foreign courts.
Dividend and interest income from foreign securities will
generally be subject to withholding taxes by the country in which
the issuer is located and may not be recoverable by the fund or
the investors. Capital gains are also subject to taxation in some
foreign countries.
Currency Risks. The U.S. dollar value of securities denominated
in a foreign currency will vary with changes in currency exchange
rates, which can be volatile. Accordingly, changes in the value
of the currency in which a fund's investments are denominated
relative to the U.S. dollar will affect the fund's net asset
value. Exchange rates are generally affected by the forces of
supply and demand in the international currency markets, the
relative merits of investing in different countries and the
intervention or failure to intervene of U.S. or foreign
governments and central banks. However, currency exchange rates
may fluctuate based on factors intrinsic to a country's economy.
Some emerging market countries also may have managed currencies,
which are not free floating against the U.S. dollar. In addition,
emerging markets are subject to the risk of restrictions upon the
free conversion of their currencies into other currencies. Any
devaluations relative to the U.S. dollar in the currencies in
which a fund's securities are quoted would reduce the fund's net
asset value per share.
Special Risks of Countries in the Asia Pacific Region. Certain
of the risks associated with international investments are
heightened for investments in these countries. For example, some
of the currencies of these countries have experienced devaluations
relative to the U.S. dollar, and adjustments have been made
periodically in certain of such currencies. Certain countries,
such as Indonesia, face serious exchange constraints.
Jurisdictional disputes also exist, for example, between South
Korea and North Korea. In addition, Hong Kong reverted to Chinese
administration on July 1, 1997. The long-term effects of this
reversion are not known at this time.
Securities of Developing/Emerging Markets Countries. A
developing or emerging markets country generally is considered to
be a country that is in the initial stages of its
industrialization cycle. Investing in the equity 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 that 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 provided higher rates of return
to investors.
One or more of the risks discussed above could affect adversely
the economy of a developing market or a fund's investments in such
a market. In Eastern Europe, for example, upon the accession to
power of Communist regimes in the past, the governments of a
number of Eastern European countries expropriated a large amount
of property. The claims of many property owners against those of
governments may remain unsettled. There can be no assurance that
any investments that a fund might make in such emerging markets
would not be expropriated, nationalized or otherwise confiscated
at some time in the future. In such an event, the fund could lose
its entire investment in the market involved. Moreover, changes
in the leadership or policies of such markets could halt the
expansion or reverse the liberalization of foreign investment
policies now occurring in certain of these markets and adversely
affect existing investment opportunities.
Many of a fund's investments in the securities of emerging markets
may be unrated or rated below investment grade. Securities rated
below investment grade (and comparable unrated securities) are the
equivalent of high yield, high risk bonds, commonly known as "junk
bonds." Such securities are regarded as predominantly speculative
with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and
involve major risk exposure to adverse business, financial,
economic, or political conditions.
Derivative Instruments. In accordance with its investment
policies, each fund may invest in certain derivative instruments
which are securities or contracts that provide for payments based
on or "derived" from the performance of an underlying asset, index
or other economic benchmark. Essentially, a derivative instrument
is a financial arrangement or a contract between two parties (and
not a true security like a stock or a bond). Transactions in
derivative instruments can be, but are not necessarily, riskier
than investments in conventional stocks, bonds and money market
instruments. A derivative instrument is more accurately viewed as
a way of reallocating risk among different parties or substituting
one type of risk for another. Every investment by a fund,
including an investment in conventional securities, reflects an
implicit prediction about future changes in the value of that
investment. Every fund investment also involves a risk that the
portfolio manager's expectations will be wrong. Transactions in
derivative instruments often enable a fund to take investment
positions that more precisely reflect the portfolio manager's
expectations concerning the future performance of the various
investments available to the fund. Derivative instruments can be
a legitimate and often cost-effective method of accomplishing the
same investment goals as could be achieved through other
investment in conventional securities.
Derivative contracts include options, futures contracts, forward
contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and
interest rate, mortgage and currency transactions. The following
are the principal risks associated with derivative instruments.
Market risk: The instrument will decline in value or that
an alternative investment would have appreciated more, but this is
no different from the risk of investing in conventional
securities.
Leverage and associated price volatility: Leverage causes
increased volatility in the price and magnifies the impact of
adverse market changes, but this risk may be consistent with the
investment objective of even a conservative fund in order to
achieve an average portfolio volatility that is within the
expected range for that type of fund.
Credit risk: The issuer of the instrument may default on
its obligation to pay interest and principal.
Liquidity and valuation risk: Many derivative instruments
are traded in institutional markets rather than on an exchange.
Nevertheless, many derivative instruments are actively traded and
can be priced with as much accuracy as conventional securities.
Derivative instruments that are custom designed to meet the
specialized investment needs of a relatively narrow group of
institutional investors such as the funds are not readily
marketable and are subject to a fund's restrictions on illiquid
investments.
Correlation risk: There may be imperfect correlation
between the price of the derivative and the underlying asset. For
example, there may be price disparities between the trading
markets for the derivative contract and the underlying asset.
Each derivative instrument purchased for a fund's portfolio is
reviewed and analyzed by the fund's portfolio manager to assess
the risk and reward of such instrument in relation the fund's
portfolio investment strategy. The decision to invest in
derivative instruments or conventional securities is made by
measuring the respective instrument's ability to provide value to
the fund and its shareholders.
Special Risks of Writing 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. In addition to
writing covered call options to generate current income, the fund
may enter into options transactions as hedges to reduce investment
risk, generally by making an investment expected to move in the
opposite direction of a portfolio position. A hedge is designed
to offset a loss on a portfolio position with a gain on the hedge
position; at the same time, however, a properly correlated hedge
will result in a gain on the portfolio position being offset by a
loss on the hedge position. The fund bears the risk that the
prices of the securities being hedged will not move in the same
amount as the hedge. The fund will engage in hedging transactions
only when deemed advisable by SSBC. Successful use by the fund of
options will be subject to SSBC's 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.
Special Risks of Using Futures Contracts. The prices of Futures
Contracts are volatile and are influenced by, among other things,
actual and anticipated changes in interest rates, which in turn
are affected by fiscal and monetary policies and national and
international political and economic events.
At best, the correlation between changes in prices of Futures
Contracts and of the securities or currencies being hedged can be
only approximate. The degree of imperfection of correlation
depends upon circumstances such as: variations in speculative
market demand for Futures and for debt securities or currencies,
including technical influences in Futures trading; and differences
between the financial instruments being hedged and the instruments
underlying the standard Futures Contracts available for trading,
with respect to interest rate levels, maturities, and
creditworthiness of issuers. A decision of whether, when, and how
to hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.
Because of the low margin deposits required, Futures trading
involves an extremely high degree of leverage. As a result, a
relatively small price movement in a Futures Contract may result
in immediate and substantial loss, as well as gain, to the
investor. For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a subsequent
10% decrease in the value of the Futures Contract would result in
a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original
margin deposit, if the Futures Contract were closed out. Thus, a
purchase or sale of a Futures Contract may result in losses in
excess of the amount invested in the Futures Contract. A fund,
however, would presumably have sustained comparable losses if,
instead of the Futures Contract, it had invested in the underlying
financial instrument and sold it after the decline. Where a fund
enters into Futures transactions for non-hedging purposes, it will
be subject to greater risks and could sustain losses which are not
offset by gains on other fund assets.
Furthermore, in the case of a Futures Contract purchase, in order
to be certain that each fund has sufficient assets to satisfy its
obligations under a Futures Contract, the fund segregates and
commits to back the Futures Contract an amount of cash and liquid
securities equal in value to the current value of the underlying
instrument less the margin deposit.
Most U.S. Futures exchanges limit the amount of fluctuation
permitted in Futures Contract prices during a single trading day.
The daily limit establishes the maximum amount the price of a
Futures Contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular type of Futures
Contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential
losses, because the limit may prevent the liquidation of
unfavorable positions. Futures Contract prices have occasionally
moved 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.
Year 2000. The investment management services provided to each
fund by SSBC depend on the smooth functioning of its computer
systems and those of its service providers. Many computer software
systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were
encoded and calculated. That failure could have a negative impact
on each fund's operations, including the handling of securities
trades, pricing and account services. SSBC has advised each fund
that it has been reviewing all of its computer systems and
actively working on necessary changes to its systems to prepare
for the year 2000 and expect that its systems will be compliant
before that date. In addition, SSBC has been advised by each
fund's custodian, distributor, transfer agent sub-transfer agent
and accounting service agent that they are also in the process of
modifying their systems with the same goal. There can, however, be
no assurance that SSBC or any other service provider will be
successful, or that interaction with other non-complying computer
systems will not impair fund services at that time.
Portfolio Turnover. Each fund may purchase or sell securities
without regard to the length of time the security has been held
and thus may experience a high rate of portfolio turnover. A 100%
turnover rate would occur, for example, if all the securities in a
portfolio were replaced in a period of one year. A fund may
experience a high rate of portfolio turnover if, for example, it
writes a substantial number of covered call options and the market
prices of the underlying securities appreciate. The rate of
portfolio turnover is not a limiting factor when SSBC deems it
desirable to purchase or sell securities or to engage in options
transactions. High portfolio turnover involves correspondingly
greater transaction costs, including any brokerage commissions,
which are borne directly by the respective fund and may increase
the recognition of short-term, rather than long-term, capital
gains if securities are held for one year or less and may
therefore increase shareholders' liability for applicable income
taxes on resulting distributions.
Investment Restrictions
The trust has adopted the following investment restrictions for
the protection of shareholders. Restrictions 1 through 6 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
fund's outstanding voting securities, 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 7 through 14 may be changed by vote of a majority of
the trust's board of trustees at any time.
Under the investment policies adopted by the trust a fund may not:
1. Invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder.
2. Invest more than 25% of its total assets in securities, the
issuers of which conduct their principal business activities
in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies
and instrumentalities) and securities of state or municipal
governments and their political subdivisions are not
considered to be issued by members of any industry.
3. Borrow money, except that (a) the fund may borrow from banks
for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might
otherwise require the untimely disposition of securities,
and (b) the fund may, to the extent consistent with its
investment policies, enter into reverse repurchase
agreements, forward roll transactions and similar investment
strategies and techniques. To the extent that it engages in
transactions described in (a) and (b), the fund will be
limited so that no more than 331/3% of the value of its
total assets (including the amount borrowed), valued at the
lesser of cost or market, less liabilities (not including
the amount borrowed) valued at the time the borrowing is
made, is derived from such transactions.
4. Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the fund may invest
consistent with its investment objectives and policies; (b)
repurchase agreements; and (c) loans of its portfolio
securities, to the fullest extent permitted under the 1940
Act.
5. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction
shall not prevent the fund from (a) investing in securities
of issuers engaged in the real estate business or the
business of investing in real estate (including interests in
limited partnerships owning or otherwise engaging in the
real estate business or the business of investing in real
estate) and securities which are secured by real estate or
interests therein; (b) holding or selling real estate
received in connection with securities it holds or held; (c)
trading in futures contracts and options on futures
contracts (including options on currencies to the extent
consistent with the funds' investment objective and
policies); or (d) investing in real estate investment trust
securities.
6. Engage in the business of underwriting securities issued by
other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in disposing of
portfolio securities.
7. Purchasing securities on margin. For purposes of this
restriction, the deposit or payment of initial or variation
margin in connection with futures contracts or related
options will not be deemed to be a purchase of securities on
margin by any fund permitted to engage in transactions in
futures contracts or related options.
8. Making short sales of securities or maintaining a short
position.
9. 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 indices and (ii)
initial or variation margin for futures contracts, will not
be deemed to be pledges of a fund's assets.
10. 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.
11. Writing or selling puts, calls, straddles, spreads or
combinations thereof, except that Social Awareness Fund may
write covered call options.
12. Purchasing illiquid securities (such as repurchase
agreements with maturities in excess of seven days) or other
securities that are not readily marketable if more than 15%
of the total assets of the fund would be invested in such
securities.
13. Making investments for the purpose of exercising control or
management.
14. 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 the fund's
adviser individually owns more than 1/2 of 1% of the
outstanding securities of such company and together they own
beneficially more than 5% of such securities.
The trust may make commitments more restrictive than the
restrictions listed above with respect to a fund so as to permit
the sale of shares of the fund in certain states. Should the trust
determine that any such commitment is no longer in the best
interests of a fund and its shareholders, the trust will revoke
the commitment by terminating the sale of shares of the fund in
the relevant state. The percentage limitations contained in the
restrictions listed above apply at the time of purchases of
securities.
Portfolio Turnover
The funds do not intend to seek profits through short-term
trading. Nevertheless, the funds will not consider turnover rate a
limiting factor in making investment decisions.
Under certain market conditions, a fund may experience increased
portfolio turnover as a result of its options activities. For
instance, the exercise of a substantial number of options written
by a fund (because of 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, Social Awareness Fund may
experience increased portfolio turnover as a result of the asset
allocation strategy it employs and the Large Cap Blend Fund's
disciplined sell strategy may result in an increased portfolio
turnover. 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, 1998 and 1999, the
portfolio turnover rates of the funds were as follows:
Fund
1997
1998
1999
Social Awareness
Fund
68%
62%
%
Large Cap Blend Fund
9%
17%
%
Portfolio Transactions
Most of the purchases and sales of securities for a fund, whether
transacted on a securities exchange or in the over-the-counter
market, 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 SSBC, 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 SSBC, 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
SSBC 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 SSBC to be equitable to each. In
some cases, this procedure may adversely affect the price paid or
received by a fund or the size of the position obtained or
disposed of by the fund.
Transactions on domestic stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. On most foreign
exchanges, commissions are generally fixed. There is generally no
stated commission in the case of securities traded in domestic or
foreign over-the-counter markets, but the prices of those
securities include undisclosed commissions or mark-ups. The cost
of securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or
mark-down. U.S. government securities are generally purchased from
underwriters or dealers, although certain newly issued U.S.
government securities may be purchased directly from the United
States Treasury or from the issuing agency or instrumentality,
respectively.
The following table sets forth certain information regarding the
payment of brokerage commissions by the Social Awareness Fund and
the Large Cap Blend Fund:
Fiscal Year
Ended January
31
Social
Awareness
Fund
Large Cap
Blend Fund
Total Brokerage
Commissions
1997
$215,689
$130,854
1998
218,633
$169,715
1999
Commissions paid to
Salomon Smith Barney
1997
$6,276
$8,046
1998
7,578
1,500
1999
% of Total Brokerage
Commissions paid to
Salomon Smith Barney
1999
%
%
% of Total Transactions
involving Commissions
paid to Salomon Smith
Barney
1999
%
%
The total brokerage commissions paid by the funds for each fiscal
year vary primarily because of 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, SSBC seeks the best overall terms available.
In assessing the best overall terms available for any transaction,
SSBC will consider the factors SSBC 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 SSBC relating to a
fund authorizes SSBC, 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 SSBC or its affiliates exercise
investment discretion. The fees under the advisory agreements
relating to the funds between the trust and SSBC are not reduced
by reason of their receiving such brokerage and research services.
The trust's board of trustees periodically will review the
commissions paid by the funds to determine if the commissions paid
over representative periods of time were reasonable in relation to
the benefits inuring to the funds.
To the extent consistent with applicable provisions of the 1940
Act and the rules and exemptions adopted by the SEC thereunder,
the board of trustees has determined that transactions (including
commodities transactions) for a fund may be executed through
Salomon Smith Barney and other affiliated broker-dealers if, in
the judgment of SSBC, 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.
Salomon Smith Barney may directly execute such transactions for
the funds on the floor of any national securities exchange,
provided (a) the board of trustees has expressly authorized
Salomon Smith Barney to effect such transactions, and (b) Salomon
Smith Barney annually advises the trust of the aggregate
compensation it earned on such transactions. Over-the-counter
purchases and sales are transacted directly with principal market
makers except when better prices and executions may be obtained
elsewhere. The funds 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
Salomon Smith Barney and certain Salomon Smith Barney affiliated
dealers.
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 Salomon Smith Barney is a
member, except to the extent permitted by the SEC.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Purchase of Shares
General. Each of the fund offers four Classes of shares. Class A
and Class L shares are sold to investors with an initial sales
charge. Class B shares are sold without an initial sales charge
but are subject to a deferred sales charge payable upon certain
redemptions. Class L shares are also subject to a deferred sales
charge payable upon certain redemptions. Class Y shares are sold
without an initial sales charge or a deferred sales charge and are
available only to investors investing a minimum of $15,000,000.
See the prospectuses for a discussion of factors to consider in
selecting which Class of shares to purchase.
Purchases of shares of the funds must be made through a brokerage
account maintained with Salomon Smith Barney, an introducing
broker or an investment dealer in the selling group. In addition,
certain investors, including qualified retirement plans and
certain other institutional investors, may purchase shares
directly from the funds through the transfer agent. When
purchasing shares of a fund, investors must specify whether the
purchase is for Class A, Class B, Class L or Class Y shares.
Salomon Smith Barney and other broker/dealers may charge their
customers an annual account maintenance fee in connection with a
brokerage account through which an investor purchases or holds
shares. Accounts held directly at the transfer agent are not
subject to a maintenance fee.
Investors in Class A, Class B and Class L shares may open an
account by making an initial investment in the fund of at least
$1,000 for each account, or $250 for an IRA or a Self-Employed
Retirement Plan. Investors in Class Y shares may open an account
by making an initial investment of $15,000,000. Subsequent
investments of at least $50 may be made for all classes. For
participants in retirement plans qualified under Section 403(b)(7)
or Section 401(a) of the Code, the minimum initial and subsequent
investment requirement for Class A, Class B and Class L shares and
the subsequent investment requirement for all Classes in the fund
is $25. For shareholders purchasing shares of the fund through
the Systematic Investment Plan on a monthly basis, the minimum
initial investment requirement for Class A, Class B and Class L
shares and the subsequent investment requirement for all Classes
is $25. For shareholders purchasing shares of the fund through
the Systematic Investment Plan on a quarterly basis, the minimum
initial investment requirement for Class A, Class B and Class L
shares and the subsequent investment requirement for all Classes
is $50. There are no minimum investment requirements in Class A
shares for employees of Travelers and its subsidiaries, including
Salomon Smith Barney, directors or trustees of any of the Smith
Barney Mutual Funds, and their spouses and children. The funds
reserve the right to waive or change minimums, to decline any
order to purchase their shares and to suspend the offering of
shares from time to time. Shares purchased will be held in the
shareholder's account by the transfer agent. Share certificates
are issued only upon a shareholder's written request to the
transfer agent.
Purchase orders received by a fund or Salomon Smith Barney prior
to the close of regular trading on the NYSE, on any day the fund
calculates its net asset value, are priced according to the net
asset value determined on that day (the "trade date"). Orders
received by dealers or introducing brokers prior to the close of
regular trading on the NYSE on any day the fund calculate its net
asset value, are priced according to the net asset value
determined on that day, provided the order is received by the
fund's agent prior to the agent's close of business. For shares
purchased through Salomon Smith Barney and introducing brokers
purchasing through Salomon Smith Barney, payment for shares of the
fund is due on the third business day after the trade date. In all
other cases, payment must be made with the purchase order.
Systematic Investment Plan. Shareholders may make additions to
their accounts at any time by purchasing shares through a service
known as the Systematic Investment Plan. Under the Systematic
Investment Plan, Salomon Smith Barney or the transfer agent is
authorized through preauthorized transfers of at least $25 on a
monthly basis or at least $50 on a quarterly basis to charge the
regular bank account or other financial institution indicated by
the shareholder, to provide systematic additions to the
shareholder's fund account. A shareholder who has insufficient
funds to complete the transfer will be charged a fee of up to $25
by Salomon Smith Barney or the transfer agent. The Systematic
Investment Plan also authorizes Salomon Smith Barney to apply cash
held in the shareholder's Salomon Smith Barney brokerage account
or redeem the shareholder's shares of a Smith Barney money market
fund to make additions to the account. Additional information is
available from the Fund or a Salomon Smith Barney Financial
Consultant.
Initial Sales Charge Alternative - Class A Shares. The sales
charges applicable to purchases of Class A shares of the funds are
as follows:
Amount of
Investment
Sales Charge
as % of
Offering
Price
Sales Charge as
% of Amount Invested
Less than $25,000
5.00%
5.26%
$ 25,000 -
49,999
4.00
4.17
50,000 -
99,999
3.50
3.63
100,000 -
249,999
3.00
3.09
250,000 -
499,999
2.00
2.04
500,000 and
over
- -0-
- -0-
* Purchases of Class A shares of $500,000 or more will be made at
net asset value without any initial sales charge, but will be
subject to a deferred sales charge of 1.00% on redemptions made
within 12 months of purchase. The deferred sales charge on
Class A shares is payable to Salomon Smith Barney, which
compensates Salomon Smith Barney Financial Consultants and
other dealers whose clients make purchases of $500,000 or more.
The deferred sales charge is waived in the same circumstances
in which the deferred sales charge applicable to Class B and
Class L shares is waived. See "Deferred Sales Charge
Alternatives" and "Waivers of deferred sales charge.
Members of the selling group may receive up to 90% of the sales
charge and may be deemed to be underwriters of a fund as defined
in the 1933 Act.
The reduced sales charges shown above apply to the aggregate of
purchases of Class A shares of a fund made at one time by any
person, which includes an individual and his or her immediate
family, or a trustee or other fiduciary of a single trust estate
or single fiduciary account.
Initial Sales Charge Alternative - Class L Shares. For purchases
of Class L shares, there is a sales charge of 1% of the offering
price (1.01% of the net amount invested).
Initial Sales Charge Waivers for Class A Shares. Purchases of
Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to (i) board
members and employees of Travelers and its subsidiaries and any of
the Smith Barney Mutual Funds (including retired board members and
employees); the immediate families of such persons (including the
surviving spouse of a deceased board member or employee); and to a
pension, profit-sharing or other benefit plan for such persons and
(ii) employees of members of the National Association of
Securities Dealers, Inc., provided such sales are made upon the
assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of Class A
shares to any other investment company to effect the combination
of such company with the fund by merger, acquisition of assets or
otherwise; (c) purchases of Class A shares by any client of a
newly employed Salomon Smith Barney Financial Consultant (for a
period up to 90 days from the commencement of the Financial
Consultant's employment with Salomon Smith Barney), on the
condition the purchase of Class A shares is made with the proceeds
of the redemption of shares of a mutual fund which (i) was
sponsored by the Financial Consultant's prior employer, (ii) was
sold to the client by the Financial Consultant and (iii) was
subject to a sales charge; (d) purchases by shareholders who have
redeemed Class A shares in the fund (or Class A shares of another
fund of the Smith Barney Mutual Funds that are offered with a
sales charge) and who wish to reinvest their redemption proceeds
in the same fund, provided the reinvestment is made within 60
calendar days of the redemption; (e) purchases by accounts managed
by registered investment advisory subsidiaries of Citigroup; (f)
direct rollovers by plan participants of distributions from a
401(k) plan offered to employees of Citigroup or its subsidiaries
or a 401(k) plan enrolled in the Salomon Smith Barney 401(k)
Program (Note: subsequent investments will be subject to the
applicable sales charge); (g) purchases by separate accounts used
to fund certain unregistered variable annuity contracts; and (h)
purchases by investors participating in a Salomon Smith Barney
fee-based arrangement. In order to obtain such discounts, the
purchaser must provide sufficient information at the time of
purchase to permit verification that the purchase would qualify
for the elimination of the sales charge.
Right of Accumulation. Class A shares of the funds may be
purchased by "any person"' (as defined above) at a reduced sales
charge or at net asset value determined by aggregating the dollar
amount of the new purchase and the total net asset value of all
Class A shares of the fund and of funds sponsored by Salomon Smith
Barney, which are offered with a sales charge, listed under
"Exchange Privilege" then held by such person and applying the
sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information
at the time of purchase to permit verification that the purchase
qualifies for the reduced sales charge. The right of accumulation
is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.
Letter of Intent. A Letter of Intent for amounts of $50,000 or
more provides an opportunity for an investor to obtain a reduced
sales charge by aggregating investments over a 13 month period,
provided that the investor refers to such Letter when placing
orders. For purposes of a Letter of Intent, the Amount of
Investment as referred to in the preceding sales charge table
includes purchases of all Class A shares of the funds and other
funds of the Smith Barney Mutual Funds offered with a sales charge
over the 13 month period based on the total amount of intended
purchases plus the value of all Class A shares previously
purchased and still owned. An alternative is to compute the 13
month period starting up to 90 days before the date of execution
of a Letter of Intent. Each investment made during the period
receives the reduced sales charge applicable to the total amount
of the investment goal. If the goal is not achieved within the
period, the investor must pay the difference between the sales
charges applicable to the purchases made and the charges
previously paid, or an appropriate number of escrowed shares will
be redeemed. Please contact a Salomon Smith Barney Financial
Consultant or the transfer agent to obtain a Letter of Intent
application.
A Letter of Intent may also be used as a way for investors to meet
the minimum investment requirement for Class Y shares. The
investor must make an initial minimum purchase of $5,000,000 in
Class Y shares of the fund and agree to purchase a total of
$15,000,000 of Class Y shares of the same fund within 13 months
from the date of the Letter. If a total investment of $15,000,000
is not made within the 13-month period, all Class Y shares
purchased to date will be transferred to Class A shares, where
they will be subject to all fees (including a service fee of
0.25%) and expenses applicable to the fund's Class A shares, which
may include a deferred sales charge of 1.00%. Please contact a
Salomon Smith Barney Financial Consultant or the transfer agent
for further information.
Deferred Sales Charge Alternatives. Deferred sales charge shares
are sold at net asset value next determined without an initial
sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the funds. A deferred sales
charge, however, may be imposed on certain redemptions of these
shares. "deferred sales charge shares" are: (a) Class B shares;
(b) Class L shares; and (c) Class A shares that were purchased
without an initial sales charge but subject to a deferred sales
charge.
Any applicable deferred sales charge will be assessed on an amount
equal to the lesser of the original cost of the shares being
redeemed or their net asset value at the time of redemption.
deferred sales charge shares that are redeemed will not be subject
to a deferred sales charge to the extent that the value of such
shares represents: (a) capital appreciation of fund assets; (b)
reinvestment of dividends or capital gain distributions; (c) with
respect to Class B shares, shares redeemed more than five years
after their purchase; or (d) with respect to Class L shares and
Class A shares that are deferred sales charge shares, shares
redeemed more than 12 months after their purchase.
Class L shares and Class A shares that are deferred sales charge
shares are subject to a 1.00% deferred sales charge if redeemed
within 12 months of purchase. In circumstances in which the
deferred sales charge is imposed on Class B shares, the amount of
the charge will depend on the number of years since the
shareholder made the purchase payment from which the amount is
being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during
a month will be aggregated and deemed to have been made on the
last day of the preceding Salomon Smith Barney statement month.
The following table sets forth the rates of the charge for
redemptions of Class B shares by shareholders, except in the case
of Class B shares held under the Salomon Smith Barney 401(k)
Program, as described below. See "Purchase of Shares-Smith Barney
401(k) and ExecChoiceTM Programs."
Year Since Purchase
Payment Was Made
Deferred Sales
Charge
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A shares eight
years after the date on which they were purchased and thereafter
will no longer be subject to any distribution fees. There will
also be converted at that time such proportion of Class B dividend
shares owned by the shareholder as the total number of his or her
Class B shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B dividend shares)
owned by the shareholder.
In determining the applicability of any deferred sales charge, it
will be assumed that a redemption is made first of shares
representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gain distributions and
finally of other shares held by the shareholder for the longest
period of time. The length of time that deferred sales charge
shares acquired through an exchange have been held will be
calculated from the date that the shares exchanged were initially
acquired in one of the other Smith Barney Mutual Funds, and fund
shares being redeemed will be considered to represent, as
applicable, capital appreciation or dividend and capital gain
distribution reinvestments in such other funds. For federal income
tax purposes, the amount of the deferred sales charge will reduce
the gain or increase the loss, as the case may be, on the
redemption. The amount of any deferred sales charge will be paid
to Salomon Smith Barney.
To provide an example, assume an investor purchased 100 Class B
shares of a fund at $10 per share for a cost of $1,000.
Subsequently, the investor acquired 5 additional shares of the
fund through dividend reinvestment. During the fifteenth month
after the purchase, the investor decided to redeem $500 of his or
her investment. Assuming at the time of the redemption the net
asset value had appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105 shares at $12 per share).
The deferred sales charge would not be applied to the amount which
represents appreciation ($200) and the value of the reinvested
dividend shares ($60). Therefore, $240 of the $500 redemption
proceeds ($500 minus $260) would be charged at a rate of 4.00%
(the applicable rate for Class B shares) for a total deferred
sales charge of $9.60.
Waivers of Deferred Sales Charge. The deferred sales charge will
be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00%
per month of the value of the shareholder's shares at the time the
withdrawal plan commences (see "Automatic Cash Withdrawal Plan")
(automatic cash withdrawals in amounts equal to or less than 2.00%
per month of the value of the shareholder's shares will be
permitted for withdrawal plans that were established prior to
November 7, 1994); (c) redemptions of shares within twelve months
following the death or disability of the shareholder; (d)
redemptions of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of
age 591/2; (e) involuntary redemptions; and (f) redemptions of
shares to effect the combination of the fund with any other
investment company by merger, acquisition of assets or otherwise.
In addition, a shareholder who has redeemed shares from other
funds of the Smith Barney Mutual Funds may, under certain
circumstances, reinvest all or part of the redemption proceeds
within 60 days and receive pro rata credit for any deferred sales
charge imposed on the prior redemption.
Deferred sales charge waivers will be granted subject to
confirmation (by Salomon Smith Barney in the case of shareholders
who are also Salomon Smith Barney clients or by the transfer agent
in the case of all other shareholders) of the shareholder's status
or holdings, as the case may be.
Smith Barney 401(k) and ExecChoiceTM Programs. Investors may be
eligible to participate in the Smith Barney 401(k) Program or the
Smith Barney ExecChoiceTM Program. To the extent applicable, the
same terms and conditions, which are outlined below, are offered
to all plans participating ("participating plans") in these
programs.
The fund offers to participating plans Class A and Class L shares
as investment alternatives under the Smith Barney 401(k) and
ExecChoiceTM Programs. Class A and Class L shares acquired through
the participating plans are subject to the same service and/or
distribution fees as the Class A and Class L shares acquired by
other investors; however, they are not subject to any initial
sales charge or deferred sales charge. Once a participating plan
has made an initial investment in the fund, all of its subsequent
investments in the fund must be in the same Class of shares,
except as otherwise described below.
Class A Shares. Class A shares of the funds are offered without
any sales charge or deferred sales charge to any participating
plan that purchases $1,000,000 or more of Class A shares of one or
more funds of the Smith Barney Mutual Funds.
Class L Shares. Class L shares of the funds are offered without
any sales charge or deferred sales charge to any participating
plan that purchases less than $1,000,000 of Class L shares of one
or more funds of the Smith Barney Mutual Funds.
401(k) and ExecChoiceTM Plans Opened On or After June 21, 1996.
If, at the end of the fifth year after the date the participating
plan enrolled in the Smith Barney 401(k) Program or ExecChoiceTM
Program, a participating plan's total Class L holdings in all non-
money market Smith Barney Mutual Funds equal at least $1,000,000,
the participating plan will be offered the opportunity to exchange
all of its Class L shares for Class A shares of the fund. (For
participating plans that were originally established through a
Salomon Smith Barney retail brokerage account, the five-year
period will be calculated from the date the retail brokerage
account was opened.) Such participating plans will be notified of
the pending exchange in writing within 30 days after the fifth
anniversary of the enrollment date and, unless the exchange offer
has been rejected in writing, the exchange will occur on or about
the 90th day after the fifth anniversary date. If the
participating plan does not qualify for the five-year exchange to
Class A shares, a review of the participating plan's holdings will
be performed each quarter until either the participating plan
qualifies or the end of the eighth year.
401(k) Plans Opened Prior to June 21, 1996. In any year after
the date a participating plan enrolled in the Smith Barney 401(k)
Program, if its total Class L holdings in all non-money market
Smith Barney Mutual Funds equal at least $500,000 as of the
calendar year-end, the participating plan will be offered the
opportunity to exchange all of its Class L shares for Class A
shares of the same fund. Such Plans will be notified in writing
within 30 days after the last business day of the calendar year
and, unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of the
following March.
Any participating plan in the Smith Barney 401(k) or ExecChoiceTM
Program, whether opened before or after June 21, 1996, that has
not previously qualified for an exchange into Class A shares will
be offered the opportunity to exchange all of its Class L shares
for Class A shares of the same fund regardless of asset size, at
the end of the eighth year after the date the participating plan
enrolled in the Smith Barney 401(k) or ExecChoiceTM Program. Such
plans will be notified of the pending exchange in writing
approximately 60 days before the eighth anniversary of the
enrollment date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the eighth
anniversary date. Once an exchange has occurred, a participating
plan will not be eligible to acquire additional Class L shares,
but instead may acquire Class A shares of the same fund. Any Class
L shares not converted will continue to be subject to the
distribution fee.
Participating plans wishing to acquire shares of the fund through
the Smith Barney 401(k) Program or the Smith Barney ExecChoiceTM
Program must purchase such shares directly from the transfer
agent. For further information regarding these Programs, investors
should contact a Salomon Smith Barney Financial Consultant.
Existing 401(k) Plans Investing in Class B Shares: Class B
shares of a fund are not available for purchase by participating
plans opened on or after June 21, 1996, but may continue to be
purchased by any participating plan in the Smith Barney 401(k)
Program opened prior to such date and originally investing in such
Class. Class B shares acquired are subject to a deferred sales
charge of 3.00% of redemption proceeds if the participating plan
terminates within eight years of the date the participating plan
first enrolled in the Smith Barney 401(k) Program.
At the end of the eighth year after the date the participating
plan enrolled in the Smith Barney 401(k) Program, the
participating plan will be offered the opportunity to exchange all
of its Class B shares for Class A shares of the same fund. Such
participating plan will be notified of the pending exchange in
writing approximately 60 days before the eighth anniversary of the
enrollment date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the eighth
anniversary date. Once the exchange has occurred, a participating
plan will not be eligible to acquire additional Class B shares,
but instead may acquire Class A shares of the same fund. If the
participating plan elects not to exchange all of its Class B
shares at that time, each Class B share held by the participating
plan will have the same conversion feature as Class B shares held
by other investors. See "Purchase of Shares-Deferred Sales Charge
Alternatives."
No deferred sales charge is imposed on redemptions of Class B
shares to the extent that the net asset value of the shares
redeemed does not exceed the current net asset value of the shares
purchased through reinvestment of dividends or capital gain
distributions, plus the current net asset value of Class B shares
purchased more than eight years prior to the redemption, plus
increases in the net asset value of the shareholder's Class B
shares above the purchase payments made during the preceding eight
years. Whether or not the deferred sales charge applies to the
redemption by a participating plan depends on the number of years
since the participating plan first became enrolled in the Smith
Barney 401(k) Program, unlike the applicability of the deferred
sales charge to redemptions by other shareholders, which depends
on the number of years since those shareholders made the purchase
payment from which the amount is being redeemed.
The deferred sales charge 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 591/2 by an employee in the participating plan;
(e) hardship of an employee in the participating plan to the
extent permitted under Section 401(k) of the Code; or (f)
redemptions of shares in connection with a loan made by the
participating plan to an employee.
Exchange Privilege
As your needs change, you may wish to reposition your investments.
With Smith Barney Mutual Funds, you have the ability to exchange
your shares of most Smith Barney mutual funds for those of others
within the family.
Except as otherwise noted below, shares of each Class of the fund
may be exchanged for shares of the same Class of certain Smith
Barney Mutual Funds, to the extent shares are offered for sale in
the shareholder's state of residence. Exchanges of Class A, Class
B and Class L shares are subject to minimum investment
requirements and all shares are subject to the other requirements
of the fund into which exchanges are made.
Class B Exchanges. In the event a Class B shareholder wishes to
exchange all or a portion of his or her shares in any fund
imposing a higher deferred sales charge than that imposed by the
fund, the exchanged Class B shares will be subject to the higher
applicable deferred sales charge. Upon an exchange, the new Class
B shares will be deemed to have been purchased on the same date as
the Class B shares of the fund that have been exchanged.
Class L Exchanges. Upon an exchange, the new Class L shares will
be deemed to have been purchased on the same date as the Class L
shares of the fund that have been exchanged.
Class A and Class Y Exchanges. Class A and Class Y shareholders
of the fund who wish to exchange all or a portion of their shares
for shares of the respective Class in any of the funds identified
above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege.
Although the exchange privilege is an important benefit, excessive
exchange transactions can be detrimental to a fund's performance
and its shareholders. SSBC may determine that a pattern of
frequent exchanges is excessive and contrary to the best interests
of a fund's other shareholders. In this event, each fund may, at
its discretion, decide to limit additional purchases and/or
exchanges by the shareholder. Upon such a determination, the fund
will provide notice in writing or by telephone to the shareholder
at least 15 days prior to suspending the exchange privilege and
during the 15 day period the shareholder will be required to (a)
redeem his or her shares in the fund or (b) remain invested in the
fund or exchange into any of the funds of the Smith Barney Mutual
Funds ordinarily available, which position the shareholder would
be expected to maintain for a significant period of time. All
relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by telephone.
See "Redemption of Shares-Telephone Redemptions and Exchange
Program." Exchanges will be processed at the net asset value next
determined. Redemption procedures discussed below are also
applicable for exchanging shares, and exchanges will be made upon
receipt of all supporting documents in proper form. If the
account registration of the shares of the fund being acquired is
identical to the registration of the shares of the fund exchanged,
no signature guarantee is required. An exchange involves a
taxable redemption of shares, subject to the tax treatment
described in " TAXES" below, followed by a purchase of shares of a
different fund. Before exchanging shares, investors should read
the current prospectus describing the shares to be acquired. The
funds reserve the right to modify or discontinue exchange
privileges upon 60 days' prior notice to shareholders.
Redemption of Shares
Each fund is required to redeem the shares of the fund tendered to
it, as described below, at a redemption price equal to their net
asset value per share next determined after receipt of a written
request in proper form at no charge other than any applicable
deferred sales charge. 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 transfer agent receives further
instructions from Salomon Smith Barney, or if the shareholder's
account is not with Salomon Smith Barney, from the shareholder
directly. The redemption proceeds will be remitted on or before
the third business day following receipt of proper tender, except
on any days on which the NYSE is closed or as permitted under the
1940 Act in extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Salomon Smith Barney
brokerage account, these funds will not be invested for the
shareholder's benefit without specific instruction and Salomon
Smith Barney will benefit from the use of temporarily uninvested
funds. Redemption proceeds for shares purchased by check, other
than a certified or official bank check, will be remitted upon
clearance of the check, which may take up to ten days or more.
Shares held by Salomon Smith Barney as custodian must be redeemed
by submitting a written request to a Salomon Smith Barney
Financial Consultant. Shares other than those held by Salomon
Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, introducing broker or dealer in the selling
group or by submitting a written request for redemption to:
Smith Barney Equity Funds
(Name of fund)
Class A, B, L or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
A written redemption request must (a) state the class and number
or dollar amount of shares to be redeemed, (b) identify the
shareholder's account number and (c) be signed by each registered
owner exactly as the shares are registered. If the shares to be
redeemed were issued in certificate form, the certificates must be
endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to the transfer agent together with
the redemption request. Any signature appearing on a share
certificate, stock power or written redemption request in excess
of $2,000 must be guaranteed by an eligible guarantor institution,
such as a domestic bank, savings and loan institution, domestic
credit union, member bank of the Federal Reserve System or member
firm of a national securities exchange. Written redemption
requests of $2,000 or less do not require a signature guarantee
unless more than one such redemption request is made in any 10-day
period. Redemption proceeds will be mailed to an investor's
address of record. The transfer agent 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 the transfer
agent receives all required documents in proper form.
Automatic Cash Withdrawal Plan. Each fund offers shareholders an
automatic cash withdrawal plan, under which shareholders who own
shares with a value of at least $10,000 may elect to receive cash
payments of at least $50 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only
where the shareholder is eligible to receive qualified
distributions and has an account value of at least $5,000. The
withdrawal plan will be carried over on exchanges between funds or
classes of the fund. Any applicable deferred sales charge will
not be waived on amounts withdrawn by a shareholder that exceed
1.00% per month of the value of the shareholder's shares subject
to the deferred sales charge at the time the withdrawal plan
commences. (With respect to withdrawal plans in effect prior to
November 7, 1994, any applicable deferred sales charge will be
waived on amounts withdrawn that do not exceed 2.00% per month of
the value of the shareholder's shares subject to the deferred
sales charge.) For further information regarding the automatic
cash withdrawal plan, shareholders should contact a Salomon Smith
Barney Financial Consultant.
Telephone Redemption and Exchange Program. Shareholders who do
not have a brokerage account may be eligible to redeem and
exchange shares by telephone. To determine if a shareholder is
entitled to participate in this program, he or she should contact
the transfer agent at 1-800-451-2010. Once eligibility is
confirmed, the shareholder must complete and return a
Telephone/Wire Authorization Form, along with a signature
guarantee, that will be provided by the transfer agent upon
request. (Alternatively, an investor may authorize telephone
redemptions on the new account application with the applicant's
signature guarantee when making his/her initial investment in the
fund.)
Redemptions. Redemption requests of up to $10,000 of any class
or classes of shares of the fund may be made by eligible
shareholders by calling the transfer agent at 1-800-451-2010. Such
requests may be made between 9:00 a.m. and 5:00 p.m. (New York
City time) on any day the NYSE is open. Redemptions of shares (i)
by retirement plans or (ii) for which certificates have been
issued are not permitted under this program.
A shareholder will have the option of having the redemption
proceeds mailed to his/her address of record or wired to a bank
account predesignated by the shareholder. Generally, redemption
proceeds will be mailed or wired, as the case may be, on the next
business day following the redemption request. In order to use
the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or have a correspondent
relationship with a member bank. The funds reserve the right to
charge shareholders a nominal fee for each wire redemption. Such
charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change the
bank account designated to receive redemption proceeds, a
shareholder must complete a new Telephone/Wire Authorization Form
and, for the protection of the shareholder's assets, will be
required to provide a signature guarantee and certain other
documentation.
Exchanges. Eligible shareholders may make exchanges by telephone
if the account registration of the shares of the fund being
acquired is identical to the registration of the shares of the
fund exchanged. Such exchange requests may be made by calling the
transfer agent at 1-800-451-2010 between 9:00 a.m. and 5:00 p.m.
(New York City time) on any day on which the NYSE is open.
Additional Information regarding Telephone Redemption and Exchange
Program. Neither the funds nor any of their agents will be
liable for following instructions communicated by telephone that
are reasonably believed to be genuine. The funds and their agents
will employ procedures designed to verify the identity of the
caller and legitimacy of instructions (for example, a
shareholder's name and account number will be required and phone
calls may be recorded). The funds reserve the right to suspend,
modify or discontinue the telephone redemption and exchange
program or to impose a charge for this service at any time
following at least seven (7) days prior notice to shareholders.
Redemptions in Kind. In conformity with applicable rules of the
SEC, redemptions may be paid in portfolio securities, in cash or
any combination of both, as the board of directors may deem
advisable; however, payments shall be made wholly in cash unless
the board of directors believes that economic conditions exist
that would make such a practice detrimental to the best interests
of a fund and its remaining shareholders. If a redemption is paid
in portfolio securities, such securities will be valued in
accordance with the procedures described in the prospectuses and a
shareholder would incur brokerage expenses if these securities
were then converted to cash.
DISTRIBUTOR
CFBDS, Inc., located at 20 Milk Street, Boston, Massachusetts
02109-5408, serves as the fund's distributor on a best efforts
basis pursuant to a written agreement dated October 8, 1998 (the
"CFBDS Distribution Agreement") which was approved by the trust's
board of trustees, including the independent directors, on July
13, 1998. Prior to the merger of Travelers Group Inc. and
Citicorp Inc. on October 8, 1998, Salomon Smith Barney served as
the trust's distributor. Also prior to the merger, PFS served as
one of the trust's distributors with respect to the Social
Awareness Fund. The fund offers its shares on a continuous basis.
When payment is made by the investor before settlement date,
unless otherwise noted by the investor, the funds will be held as
a free credit balance in the investor's brokerage account and
Salomon Smith Barney may benefit from the temporary use of the
funds. The investor may designate another use for the funds prior
to settlement date, such as an investment in a money market fund
(other than Smith Barney Exchange Reserve fund) of the Smith
Barney Mutual Funds. If the investor instructs the distributor to
invest the funds in a Smith Barney money market fund, the amount
of the investment will be included as part of the average daily
net assets of both the fund and the Smith Barney money market
fund, and affiliates of Salomon Smith Barney that serve the funds
in an investment advisory or administrative capacity will benefit
from the fact they are receiving investment management fees from
both such investment companies for managing these assets computed
on the basis of their average daily net assets. The trust's board
of trustees has been advised of the benefits to Salomon Smith
Barney resulting from these settlement procedures and will take
such benefits into consideration when reviewing the Advisory,
Administration and Distribution Agreements for continuance.
Sales Charges (paid to Salomon Smith Barney)
Aggregate Underwriting Commission
Paid To Salomon Smith Barney (for
the fiscal years ended January 31,)
1997
1998
1999
Social Awareness Fund
Sales charges from Class A
shares
-- Amount reallowed to dealers
Sales charges from Class B
shares
-- Amount reallowed to dealers
Sales charges from Class L
shares
--Amount reallowed to dealers
Large Cap Blend Fund
Sales charges from Class A
shares
-- Amount reallowed to dealers
Sales charges from Class B
shares
-- Amount reallowed to dealers
Sales charges from Class L
shares
--Amount reallowed to dealers
Distribution Arrangements
To compensate Salomon Smith Barney or PFS, as the case may be, for
the services they provide and for the expenses they bear 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 Salomon Smith Barney and,
with respect to Class A and Class B shares of the Social Awareness
Fund, PFS, a service fee, accrued daily and paid monthly,
calculated at the annual rate of 0.25% of the value of the fund's
average daily net assets attributable to the fund's Class A, Class
B and Class L shares. In addition, the trust pays Salomon Smith
Barney and with respect to Class B shares of Social Awareness
Fund, PFS, a distribution fee with respect to each fund's Class B
and Class L shares primarily intended to compensate Salomon Smith
Barney and/or PFS for its initial expense of paying its Financial
Consultants and/or PFS Investments Registered Representatives a
commission upon sales of those shares. The Class B and Class L
distribution fees are calculated at the annual rate of 0.75% for
the Social Awareness Fund and 0.50% for the Large Cap Blend Fund
of the value of a fund's average daily net assets attributable to
the shares of that class.
The following expenses were incurred during the periods indicated:
Class A
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$49,000
$241,000
Large Cap Blend Fund
105,014
117,000
Deferred Sales Charge (paid to Salomon Smith Barney)
Class B
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$261,000
$281,000
Large Cap Blend Fund (1)
165,000
45,000
(1) Class A shares paid a deferred sales charge of $ 1,000 for the
year ended January 31, 1998
Class L
(formerly Class C shares)
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$2,000
0
Large Cap Blend Fund
1,000
0
Distribution and Service Fees (paid to Smith Barney/CFBDS)
Class A
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$440,493
$467,786
Large Cap Blend Fund
296,444
360,865
Class B
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$2,626,546
$1,779,212
Large Cap Blend Fund
913,828
1,100,095
Class L
(formerly Class C shares)
Name of Fund
Fiscal Year
Ended
1/31/97
Fiscal Year
Ended 1/31/98
Fiscal Year
Ended 1/31/99
Social Awareness Fund
$48,013
$52,820
Large Cap Blend Fund
13,719
30,280
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 Agreements. The Plan may not be
amended to increase the amount of the service and distribution
fees without shareholder approval, and all material amendments to
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, Salomon
Smith Barney and PFS will provide the trust's board of trustees
with periodic reports of amounts expended under the Plan and the
purpose for which such expenditures were made.
VALUATION OF SHARES
Each class' net asset value per share is calculated on each day,
Monday through Friday, except days on which the NYSE is closed.
The NYSE currently is scheduled to be closed on New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and
on the preceding Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively. Because of
the differences in distribution fees and class-specific expenses,
the per share net asset value of each class may differ. The
following is a description of the procedures used by the trust in
valuing assets of the funds.
A security that is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the
primary market for such security. All assets and liabilities
initially expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the bid and offered
quotations of such currencies against U.S. dollars as last quoted
by any recognized dealer. If such quotations are not available,
the rate of exchange will be determined in good faith by the
trust's board of trustees. In carrying out the board's valuation
policies, SSBC, as administrator, may consult with an independent
pricing service (the "Pricing Service") retained by the trust.
Short-term investments that mature in 60 days or less are valued
at amortized cost whenever the trustees determine that amortized
cost is fair value.
Debt securities of domestic issuers (other than U.S. government
securities and short-term investments) are valued by SSBC, 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.
An option written by a 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 a fund is generally valued at the
last sale price or, in the absence of the last sale price, the
last bid price. The value of a futures contracts 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 experience significant price
fluctuations after the determination of the settlement price. In
such event, the futures contract will be valued at a fair market
price as determined by or under the direction of the board of
trustees.
PERFORMANCE DATA
From time to time, the funds may include their total return,
average annual total return and current dividend return in
advertisements and/or other types of sales literature. These
figures are computed separately for Class A, Class B, Class L and
Class Y shares of the funds. These figures are based on
historical earnings and are not intended to indicate future
performance. Total return is computed for a specified period of
time assuming deduction of the maximum sales charge, if any, from
the initial amount invested and reinvestment of all income
dividends and capital gains distributions on the applicable
reinvestment dates and prices, then dividing the value of the
investment at the end of the period so calculated by the initial
amount invested and subtracting 100%. The standard average annual
total return, as prescribed by the SEC, is derived from this total
return, which provides the ending redeemable value. Such standard
total return information may also be accompanied by nonstandard
total return information for differing periods computed in the
same manner but without annualizing the total return or taking
sales charges into account. The funds calculate current dividend
return for each Class by annualizing the most recent monthly
distribution and dividing by the net asset value or the maximum
public offering price (including sales charge) on the last day of
the period for which current dividend return is presented. The
current dividend return for each Class of a fund may vary from
time to time depending on market conditions, the composition of
its investment portfolio and operating expenses. These factors
and possible differences in the methods used in calculating
current dividend return should be considered when comparing a
Class' current return to yields published for other investment
companies and other investment vehicles.
The funds may also include comparative performance information in
advertising or marketing their shares. Such performance
information may include data from Lipper Analytical Services, Inc.
and other financial publications. Such performance information
also may include the following industry and financial
publications: Barron's, Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual Fund Values,
The New York Times, USA Today and The Wall Street Journal. To the
extent any advertisement or sales literature of the funds
describes the expenses or performance of Class A, Class B, Class L
or Class Y, it will also disclose such information for the other
Classes.
Average Annual Total Return
"Average annual total return" figures are computed according to a
formula prescribed by the SEC. The formula can be expressed as
follows:
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.
The average annual total returns of the funds' Class A shares were
as follows for the periods indicated:
Class A average annual total returns were as follows for the
periods indicated:
Name of Fund
Year Ended
January 31
1999
Five Years
Ended
January 31
1999
Inception*
Through
January 31
1999
Social Awareness Fund
%
%
%
Large Cap Blend Fund
*The funds commenced selling Class A shares on November 6, 1992.
The average annual total returns of the funds' Class B shares were
as follows for the periods indicated:
Name of Fund
Year Ended
January
31, 1999
Five Years
Ended
January
31, 1999
Ten
Years
Ended
January
31,
1999
Inceptio
n
Through
January
31, 1999
Social Awareness Fund(1)
%
%
%
%
Large Cap Blend Fund(2)
(1) The fund commenced selling Class B shares February 2, 1987.
(2) The fund commenced selling Class B shares on November 6, 1992.
The average annual total returns of the funds' Class L shares were
as follows for the periods indicated:
Name of Fund
Year Ended
January 31,
1999
Inception
Through January 31,
1999
Social Awareness Fund (1)
%
%
Large Cap Blend Fund (2)
(1) The fund commenced selling Class L shares on May 5, 1993.
(2) The fund commenced selling Class L shares on August 15, 1994.
The average annual total returns of the funds' Class Y shares were
as follows for the periods indicated:
Name of Fund
Year Ended
January 31, 1999
Inception
Through January 31,
1999
Social Awareness Fund (1)
%
%
Large Cap Blend Fund (2)
(1) The fund commenced selling Class Y shares on March 28, 1996.
(2) The fund commenced selling Class Y shares on January 31, 1996.
Average annual total return figures calculated in accordance with
the above formula assume that the maximum 5% sales charge or
maximum deferred sales charge, as the case may be, has been
deducted from the hypothetical investment. A fund's net investment
income changes in response to fluctuations in interest rates and
the expenses of the fund.
Aggregate Total Return
"Aggregate total return" figures represent the cumulative change
in the value of an investment in the Class for the specified
period and are computed by the following formula:
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.
The aggregate total returns (with fees waived) for the following
classes, were as follows for the periods indicated:
Class A Shares
Name of Fund
One
Year
Period
Ended
Jan.
31,
1999*
Five
Year
Period
Ended
Jan.
31,
1999*
Incepti
on
through
Jan.
31,
1999*
One Year
Period
Ended
Jan. 31,
1999**
Five
Year
Period
Ended
Jan. 31,
1999**
Inception
Through
Jan. 31,
1999**
Social
Awareness
Fund (1)
%
%
%
%
%
%
Large Cap
Blend Fund
(2)
(1) The fund commenced selling Class A shares on November 6, 1992.
(2) The fund commenced selling Class A shares on November 6, 1992.
* Figures do not include the effect of the maximum sales charge.
** Figures include the maximum applicable deferred sales charge, if any.
Class B Shares
Name of
Fund
One
Year
Period
Ended
Jan.
31,
1999*
Five
Year
Period
Ended
Jan.
31,
1999*
Ten
Year
Period
Ended
Jan.
31,
1999*
One Year
Period
Ended
Jan. 31,
1999**
Five
Year
Period
Ended
Jan. 31,
1999**
Ten Year
Period
Ended
Jan. 31,
1999**
Period
from
Inception
Through
Jan. 31,
1999**
Social
Awareness
Fund (1)
%
%
%
%
%
%
%
Large Cap
Blend Fund
(2)
(1) The fund commenced selling Class B shares on February 2, 1997.
(2) The fund commenced selling Class B shares on November 6, 1992.
* Figures do not include the effect of the maximum sales charge.
** Figures include the maximum applicable deferred sales charge, if any.
+ Since inception.
Class L Shares
Name of
Fund
One Year
Period
Ended
Jan. 31,
1999*
Period
from
Incepti
on
Through
Jan.
31,
1999*
One Year
Period
Ended
Jan. 31,
1999**
Period
from
Inception
Through
Jan. 31,
1999**
Social
Awareness
Fund (1)
%
%
%
%
Large Cap
Blend Fund
(2)
(1) The fund commenced selling Class L shares on May 5, 1993.
(2) The fund commenced selling Class L shares on August 15, 1994.
* Figures do not include the effect of the maximum sales charge.
** Figures include the maximum applicable deferred sales charge, if any.
Class Y Shares
Name of
Fund
One Year
Period
Ended
Jan. 31,
1999*
Period
from
Incepti
on
Through
Jan.
31,
1999*
One Year
Period
Ended
Jan. 31,
1999**
Period
from
Inception
Through
Jan. 31,
1999**
Social
Awareness
Fund (1)
%
%
%
%
Large Cap
Blend Fund
(2)
(1) The fund commenced selling Class Y shares on March 28, 1996.
(2) The fund commenced selling Class Y shares on January 31, 1996.
* Figures do not include the effect of the maximum sales charge.
** Figures include the maximum applicable deferred sales charge, if any.
It is important to note that the total return figures set forth
above are based on historical earnings and are not intended to
indicate future performance.
A Class' performance will vary from time to time depending on
market conditions, the composition of the relevant fund's
portfolio and operating expenses and the expenses exclusively
attributable to that Class. Consequently, any given performance
quotation should not be considered representative of the Class'
performance for any specified period in the future. Because
performance will vary, it may not provide a basis for comparing an
investment in the Class with certain bank deposits or other
investments that pay a fixed yield for a stated period of time.
Investors comparing the Class' performance with that of other
mutual funds should give consideration to the quality and maturity
of the respective investment companies' portfolio securities.
DIVIDENDS AND DISTRIBUTIONS
Each fund's policy is to declare and pay quarterly dividends from
its net investment income. Dividends from net realized capital
gains, if any, will be distributed annually. The funds may also
pay additional dividends shortly before December 31, from certain
amounts of undistributed ordinary income and realized capital
gains, in order to avoid federal excise tax liability. If a
shareholder does not otherwise instruct, dividends and capital
gain distributions will be automatically reinvested in additional
same class shares at the net asset value, with no additional sales
charge or deferred sales charge. A shareholder may change the
option at any time by notifying his or her Salomon Smith Barney
Financial Consultant. Shareholders whose accounts are held
directly by First Data should notify First Data in writing,
requesting a change to this reinvest option.
The per share amount of dividends from net investment income on
Class B and L may be lower than that of Classes A and Y, mainly as
a result of the distribution fees applicable to Class B and L
shares. Similarly, the per share amounts of dividends from net
investment income on Class A shares may be lower than that of
Class Y, as a result of the service fee attributable to Class A
shares. Capital gain distributions, if any, will be the same
amount across all Classes of a fund's shares (A, B, L and Y).
TAXES
The following is a summary of certain federal income tax
considerations that may affect the funds and their shareholders.
This summary is not intended as a substitute for individual tax
advice, and investors are urged to consult their own tax advisors
as to the tax consequences of an investment in either fund of the
trust.
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, diversification 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 gain will be taxable to shareholders as long-term
capital gain, 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. Certain dividends and
distributions received in January may be taxable as if received on
the prior December 31.
Dividends of investment income (but not capital gain) 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) during a prescribed
period, or are subject to certain forms of hedges or short sales,
call or a 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. These holding period requirements and debt financing
limitations also apply to the shareholders.
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 (for example, 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
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 Gain Distributions. In general, a shareholder who redeems
or exchanges his or her shares will recognize long-term capital
gain or loss if the shares have been held for more than one year,
and will recognize short-term capital gain or loss if the shares
have been held for one year or less. If a shareholder receives a
distribution taxable as long-term capital gain with respect to
shares of a fund and redeems or exchanges the shares before he or
she has held them for more than six months, any loss on such
redemption or exchange will be treated as long-term capital loss
to the extent of the amount of the distribution.
Backup Withholding. If a shareholder fails to furnish a correct
taxpayer identification number, fails to fully report dividend or
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 Federal income tax liability.
Regulated Investment Company Status
Each fund intends to qualify each year 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 realized
capital gains, if any, that it distributes to its shareholders,
provided that at least 90% of the sum of net investment income and
net short-term capital gain in excess of net long-term capital
loss is distributed to its shareholders. All net investment income
and net realized 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.
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 after its
original issuance at a discount, a portion of any gain upon sale
or redemption of such debt security generally 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 listed
options on nonconvertible debt securities (including U.S.
government securities), listed 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)
generally 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.
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 or
acquired by a fund while it is a party to 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 re-characterized 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 a fund 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 affected straddle positions
will be determined under rules that will vary according to the
type of election made.
ADDITIONAL INFORMATION
The trust was organized as an unincorporated business trust under
the laws of The Commonwealth of Massachusetts pursuant to a Master
Trust Agreement dated January 8, 1986, as amended from time to
time. As such, the trust is a business entity commonly known as a
"Massachusetts business trust." The trust offers shares of
beneficial interest of separate funds with a par value of $.001
per share. The trust commenced business as an investment company
on March 3, 1986, under the name Shearson Lehman Special Equity
Portfolios. On December 6, 1988, August 27, 1990, November 5,
1992, July 30, 1993 and October 14, 1994, the trust changed its
name to SLH Equity Portfolios, Shearson Lehman Brothers Equity
Portfolios, Shearson Lehman Brothers Equity Funds, Smith Barney
Shearson Equity Funds and Smith Barney Equity Funds, respectively.
Each fund offers shares of beneficial interest currently
classified into four classes - A, B, L and Y. 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 and the fund will assist shareholders
in calling such a meeting as required by the 1940 Act.
Shareholders of record owning no less than two-thirds of the
outstanding shares of the trust may remove a trustee through a
declaration in writing or by vote cast in person or by proxy at a
meeting called for that purpose.
When matters are submitted for shareholder vote, shareholders of
each class will have one vote for each full share owned and a
proportionate, fractional vote for any fractional share held of
that class. Generally, shares of the trust will be voted on a
trust-wide basis on all matters except matters affecting only the
interests of one or more funds or classes.
PNC Bank, National Association, is located at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103, and serves as custodian
for the funds. Under its custodial agreement with the trust, PNC
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, PNC 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.
First Data is located at Exchange Place, Boston, Massachusetts
02109, and serves as the trust's transfer agent. For its services
as transfer agent, First Data receives fees charged to the funds
at an annual rate based upon the number of shareholder accounts
maintained during the year. First Data also is reimbursed by the
funds for its out-of-pocket expenses.
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 nailing costs, the
trust consolidates the mailing of each 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 consolidates the mailing of each fund's Prospectus so
that a shareholder having multiple accounts (that is, individual,
IRA and/or Self-Employed Retirement Plan accounts) will receive a
single prospectus annually. Shareholders who do not want this
consolidation to apply to their accounts should contact a Salomon
Smith Barney Financial Consultant or First Data.
FINANCIAL STATEMENTS
The Annual Reports of the Social Awareness Fund and the Large Cap
Blend Fund for the fiscal year ended January 31, 1999 are
incorporated into this statement of additional information by
reference in their entirety.
APPENDIX
Description of 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 degrees 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 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 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, i.e., 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 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 desirable
investments. 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 modifier 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 Municipal Bond Ratings
AAA
Prime -- These are obligations of the highest quality. They have
the strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress, the
issuers will suffer the smallest declines in income and will be
least susceptible to autonomous decline. Debt burden is moderate. A
strong revenue structure appears more than adequate to meet future
expenditure requirements. Quality of management appears superior.
Revenue Bonds -- Debt service coverage has been, and is expected to
remain, substantial. Stability of the pledged revenues is also
exceptionally strong due to the competitive position of the
municipal enterprise or to the nature of the revenues. Basic
security provisions (including rate covenant, earnings test for
issuance of additional bonds, debt service reserve requirements)
are rigorous. There is evidence of superior management.
AA
High Grade -- The investment characteristics of bonds in this group
are only slightly less marked than those of the prime quality
issues. Bonds rated AA have the second strongest capacity for
payment of debt service.
A
Good Grade -- Principal and interest payments on bonds in this
category are regarded as safe although the bonds are somewhat more
susceptible to the adverse affects of changes in circumstances and
economic conditions than bonds in higher rated categories. This
rating describes the third strongest capacity for payment of debt
service. Regarding municipal bonds, the ratings differ from the two
higher ratings because:
General Obligation Bonds -- There is some weakness, either in the
local economic base, in debt burden, in the balance between
revenues and expenditures, or in quality of management. Under
certain adverse circumstances, any one such weakness might impair
the ability of the issuer to meet debt obligations at some future
date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some
variations because of increased competition or economic influences
on revenues. Basic security provisions, while satisfactory, are
less stringent. Management performance appears adequate.
BBB
Medium Grade -- Of the investment grade ratings, this is the
lowest. Bonds in this group 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.
General Obligation Bonds -- Under certain adverse conditions,
several of the above factors could contribute to a lesser capacity
for payment of debt service. The difference between A and BBB
ratings is that the latter shows more than one fundamental
weakness, or one very substantial fundamental weakness, whereas the
former shows only one deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations, with the
revenue flow possibly being subject to erosion over time. Basic
security provisions are no more than adequate. Management
performance could be stronger.
BB, B, CCC and CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominately speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB includes the lowest degree of speculation and CC 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.
C
The rating C is reserved for income bonds on which no interest is
being paid.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the
major rating categories, except in the AAA-Prime Grade category.
Description of S&P Municipal Note Ratings
Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1, -2 or -3) to distinguish more
clearly the credit quality of notes as compared to bonds. Notes
rated SP-1 have a very strong or strong capacity to pay principal
and interest. Those issues determined to possess overwhelming
safety characteristics are given the designation of SP-1+. Notes
rated SP-2 have satisfactory capacity to pay principal and
interest.
Description of Moody's Municipal 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, i.e., 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 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 characterize bonds in this
class.
B
Bonds which are rated B generally lack characteristics of the
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 which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca
Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates
that the security ranks in the higher end of its generic ratings
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 ratings category.
Description of Moody's Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for
variable rate demand obligations are designated Variable Moody's
Investment Grade (VMIG). This distinction recognizes the
differences between short- and long-term credit risk. Loans bearing
the designation MIG 1/VMIG 1 are the best quality, enjoying strong
protection from established cash flows of funds for their servicing
or from established and broad-based access to the market for
refinancing, or both. Loans bearing the designation MIG 2/VMIG 2
are of high quality, with margins of protection ample, although not
as large as the preceding group. Loans bearing the designation MIG
3/VMIG 3 are of favorable quality, with all security elements
accounted for but lacking the undeniable strength of the preceding
grades. Market access for refinancing, in particular, is likely to
be less well established. Loans bearing the designation MIG 4/VMIG
4 are of adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
Description of Commercial Paper Ratings
The rating A-1+ is the highest, and A-1 the second highest,
commercial paper rating assigned by S&P. Paper rated A-1+ must have
either the direct credit support of an issuer or guarantor that
possesses excellent long-term operating and financial strength
combined with strong liquidity characteristics (typically, such
issuers or guarantors would display credit quality characteristics
which would warrant a senior bond rating of A\- or higher) or the
direct credit support of an issuer or guarantor that possesses
above average long-term fundamental operating and financing
capabilities combined with ongoing excellent liquidity
characteristics. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated A or better; the
issuer has access to at least two additional channels of borrowing;
basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances; typically, the issuer's industry is
well established and the issuer has a strong position within the
industry; and the reliability and quality of management are
unquestioned.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (a) evaluation of the management of the
issuer; (b) economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks which may be
inherent in certain areas; (c) evaluation of the issuer's products
in relation to competition and customer acceptance; (d) liquidity;
(e) amount and quality of long-term debt; (f) trend of earnings
over a period of ten years; (g) financial strength of parent
company and the relationships which exist with the issue; and (h)
recognition by the management of obligations which may be present
or may arise as a result of public interest questions and
preparations to meet such obligations.
Short-Term obligations, including commercial paper, rated A-1+ by
IBCA Limited or its affiliate IBCA Inc. are obligations supported
by the highest capacity for timely repayment. Obligations rated A-1
have a very strong capacity for timely repayment. Obligations rated
A-2 have a strong capacity for timely repayment, although such
capacity may be susceptible to adverse changes in business,
economic and financial conditions.
Thomson BankWatch employs the rating "TBW-1" as its highest
category, which indicates that the degree of safety regarding
timely repayment of principal and interest is very strong. "TBW-2"
is its second highest rating category. While the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-
1".
Fitch Investors Services, Inc. employs the rating F-1+ to indicate
issues regarded as having the strongest degree of assurance of
timely payment. The rating F-1 reflects an assurance of timely
payment only slightly less in degree than issues rated F-1+, while
the rating F-2 indicates a satisfactory degree of assurance of
timely payment although the margin of safety is not as great as
indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with respect
to top grade commercial paper and bank money instruments. Duff 1+
indicates the highest certainty of timely payment: short-term
liquidity is clearly outstanding and safety is just below risk-free
U.S. Treasury short-term obligations. Duff 1 - indicates high
certainty of timely payment. Duff 2 indicates good certainty of
timely payment: liquidity factors and company fundamentals are
sound.
Various NRSROs utilize rankings within ratings categories indicated
by a + or -. The funds, in accordance with industry practice,
recognize such ratings within categories as gradations, viewing for
example S&P's rating of A-1+ and A-1 as being in S&P's highest
rating category.
Smith Barney Equity Funds
Smith Barney Large Cap
Blend Fund
Concert Social Awareness
Fund
Statement of
Additional
Information
May 31, 1999
Smith BarneyEquity Funds
388 Greenwich Street
New York, New York 10013
SALOMON SMITH BARNEY
A Member of CitiGroup
g:\legal\funds\slep\1999\secdocs\SAI599 A-6
Part C - Other Information
Item 23. Exhibits
All references are to the Registrant's registration statement on
Form N-1A (the "Registration
Statement") as filed with the Securities and Exchange Commission
(the "SEC") on
January 9, 1986 (File Nos. 33-2627 and 811-4551).
(a) (1) Amended and Restated Master Trust
Agreement and all Amendments are incorporated by
reference to Post-Effective Amendment No. 26 to the
Registration Statement filed on January 31, 1994
("Post-Effective Amendment No. 26").
(a) (2) Amendment dated October 14, 1994 and
Form of Amendment to Amended and Restated Master Trust
Agreement are incorporated by reference to Post-
Effective Amendment No. 29 to the Registration
Statement filed on November 7, 1994 ("Post-Effective
Amendment No. 29").
(a) (3) Amendment to Master Trust Agreement dated June 12, 1998 is
filed herewith.
(b) Registrant's By-Laws are incorporated by
reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed on February 25, 1986
("Pre-Effective Amendment No. 1").
(c) Form of share certificate for Class A, B,
C and Y shares will be filed by amendment.
(d) (1) Investment Advisory Agreement
between Registrant and Smith Barney Strategy Advisers
Inc., with respect to Concert Social Awareness Fund,
is incorporated by reference to Post-Effective
Amendment No. 31 to the Registration Statement filed
on January 30, 1996 ("Post-Effective Amendment No.
31").
(d) (2) Investment Advisory Agreement
between Registrant and Greenwich Street Advisors
(relating to the Growth and Income Fund) dated May 22,
1993 is incorporated by reference to Post-Effective
Amendment No. 26.
(e) (1) Distribution Agreement between Registrant
and Smith Barney Shearson dated July 30, 1993 is
incorporated by reference to Post-Effective Amendment
No. 26.
(e) (2) Distribution Agreement between the Registrant and
CFBDS Inc.
dated October 8, 1998 is filed herewith.
(e) (3) Selling Group Agreement between the Registrant and
CFBDS, Inc.
is filed herewith.
(f) Not applicable.
(g) Custodian Agreement between Registrant and
PNC Bank, National Association ("PNC Bank") is
incorporated by reference to Post-Effective Amendment
No. 31.
(h)(1) Administration Agreements between
Registrant and SBMFM (relating to the Growth and
Income Fund and Strategic Investors Fund) dated May 4,
1994 are incorporated by reference to Post-
Effective Amendment No. 29
(2) Transfer Agency Agreement between
Registrant and First Data Investor Services Group
(formerly The Shareholder Services Group, Inc.) dated
August 5, 1993 is incorporated by reference to Post-
Effective Amendment No. 26.
(i) Opinion of Robert A. Vegliante, Deputy General
Counsel of Smith Barney Mutual Funds Management Inc.
filed with the Registrant's rule 24-f2 (Accession No.
000091155-97-000182) is incorporated by reference.
(j) Auditor's Consent (to be filed by amendment)
(k) Not applicable.
(l) Not Applicable
(m) (1) Prototype Defined Contribution Plan
relating to 401(k) program is incorporated by
reference to Post-Effective Amendment No. 33.
(m) (2) Form of Individual Retirement
Account Disclosure Statement is incorporated by
reference to Post-Effective Amendment No. 33.
(m) (3) Amended Services and Distribution Plans
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Growth and Income Fund and
Concert Social Awareness Fund are incorporated by
reference to Post-Effective Amendment No. 29.
(m) (4) Performance information is incorporated by
reference to Post-Effective Amendments No. 9 and 10.
(m) (5) Form of Amended and Restated Shareholder Services and
Distribution Plan
pursuant to Rule 12b-1 for the Registrant is filed herewith.
(n) Financial Data Schedule (to be filed by amendment).
(o)(1) Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment
No. 31.
(o) (2) Amended Plan pursuant to Rule 18f-3 is filed herewith.
Item 24. Persons Controlled by or Under Common Control
with Registrant
None
Item 25. Indemnification
The response to this item is incorporated by reference to
Registrant's Pre-Effective
Amendment No. 1 to the Registration Statement.
Item 26. Business and Other Connections of Investment Adviser
Investment Adviser - - SSBC Fund Management Inc. ("SSBC")
SSBC, formerly known as Mutual Management Corp., was incorporated
in December 1968
under the laws of the State of Delaware. SSBC is a wholly owned
subsidiary of Salomon
Smith Barney Holdings Inc. ("Holdings") (formerly known as Smith
Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of Citigroup
Inc. SSBC is registered as an
investment adviser under the Investment Advisers Act of 1940 (the
"Advisers Act").
The list required by this Item 26 of officers and directors of
SSBC 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 with the Commission
pursuant to the Advisers Act
(SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is also
the distributor for the following Smith Barney funds: Concert
Investment Series, Consulting Group Capital Markets Funds,
Greenwich Street Series Fund, Smith Barney Adjustable Rate
Government Income Fund, Smith Barney Aggressive Growth Fund
Inc., Smith Barney Appreciation Fund Inc., Smith Barney Arizona
Municipals Fund Inc., Smith Barney California Municipals Fund
Inc., Smith Barney Concert Allocation Series Inc., Smith Barney
Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith
Barney Income Funds, Smith Barney Institutional Cash Management
Fund, Inc., Smith Barney Investment Funds Inc., Smith Barney
Investment Trust, Smith Barney Managed Governments Fund Inc.,
Smith Barney Managed Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Money Funds, Inc.,
Smith Barney Muni Funds, Smith Barney Municipal Money Market
Fund, Inc., Smith Barney Natural Resources Fund Inc., Smith
Barney New Jersey Municipals Fund Inc., Smith Barney Oregon
Municipals Fund Inc., Smith Barney Principal Return Fund, Smith
Barney Small Cap Blend Fund, Inc., Smith Barney
Telecommunications Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc., and
various series of unit investment trusts.
CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA
for Variable Annuities, The Travelers Fund BD for Variable
Annuities, The Travelers Fund BD II for Variable Annuities, The
Travelers Fund BD III for Variable Annuities, The Travelers Fund
BD IV for Variable Annuities, The Travelers Fund ABD for Variable
Annuities, The Travelers Fund ABD II for Variable Annuities, The
Travelers Separate Account PF for Variable Annuities, The
Travelers Separate Account PF II for Variable Annuities, The
Travelers Separate Account QP for Variable Annuities, The
Travelers Separate Account TM for Variable Annuities, The
Travelers Separate Account TM II for Variable Annuities, The
Travelers Separate Account Five for Variable Annuities, The
Travelers Separate Account Six for Variable Annuities, The
Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL II
for Variable Annuities, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance
Separate Account Two, The Travelers Variable Life Insurance
Separate Account Three, The Travelers Variable Life Insurance
Separate Account Four, The Travelers Separate Account MGA, The
Travelers Separate Account MGA II, The Travelers Growth and Income
Stock Account for Variable Annuities, The Travelers Quality Bond
Account for Variable Annuities, The Travelers Money Market Account
for Variable Annuities, The Travelers Timed Growth and Income
Stock Account for Variable Annuities, The Travelers Timed Short-
Term Bond Account for Variable Annuities, The Travelers Timed
Aggressive Stock Account for Variable Annuities, The Travelers
Timed Bond Account for Variable Annuities.
In addition, CFBDS, the Registrant's Distributor, is also the
distributor for CitiFunds Multi-State Tax Free Trust, CitiFunds
Premium Trust, CitiFunds Institutional Trust, CitiFunds Tax Free
Reserves, CitiFunds Trust I, CitiFunds Trust II, CitiFunds Trust
III, CitiFunds International Trust, CitiFunds Fixed Income Trust,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP
Folio 400, CitiSelect VIP Folio 500, CitiFunds Small Cap Growth
VIP Portfolio. CFBDS is also the placement agent for Large Cap
Value Portfolio, Small Cap Value Portfolio, International
Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio,
Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, Large Cap Growth Portfolio, Small Cap Growth Portfolio,
International Equity Portfolio, Balanced Portfolio, Government
Income Portfolio, Tax Free Reserves Portfolio, Cash Reserves
Portfolio and U.S. Treasury Reserves Portfolio.
In addition, CFBDS is also the distributor for the following
Salomon Brothers funds: Salomon Brothers Opportunity Fund Inc.,
Salomon Brothers Investors Fund Inc., Salomon Brothers Capital
Fund Inc., Salomon Brothers Series Funds Inc., Salomon Brothers
Institutional Series Funds Inc., Salomon Brothers Variable Series
Funds Inc.
In addition, CFBDS is also the distributor for the Centurion
Funds, Inc.
(b) The information required by this Item 27 with respect to
each director and officer of CFBDS is incorporated by reference to
Schedule A of Form BD filed by CFBDS pursuant to the Securities
and Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Equity Funds
388 Greenwich Street
New York, New York 10013
(3) SSBC Fund Management Corp.
388 Greenwich Street
New York, New York 10013
(4) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(5) First Data Investor Services Group
One Exchange Place
Boston, Massachusetts 02109
(6) CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant, has duly caused this Post-Effective Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, and where applicable, the true and lawful attorney-
in-fact, thereunto duly authorized, in the City of New York, State
of New York on the 1st day of April, 1999.
SMITH BARNEY EQUITY
FUNDS
By: /s/ Heath B.
McLendon*
Heath B. McLendon,
Chairman of the
Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment to the Registration
Statement 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 April 1,
1999
Heath B. McLendon Board, President and
Chief Executive Officer
/s/ Lewis E. Daidone Senior Vice April 1,
1999
Lewis E. Daidone President and
Treasurer (Principal Financial
and Accounting Officer)
/s/ Lee Abraham* Trustee April 1,
1999
Lee Abraham
/s/ Allan J. Bloostein* Trustee April 1,
1999
Allan J. Bloostein
/s/ Richard E. Hanson* Trustee April 1,
1999
Richard E. Hanson
* Signed by Heath B. McLendon, their duly authorized attorney-in-
fact, pursuant to power of attorney dated October 27, 1992.
/s/ Heath B. McLendon
Heath B McLendon
EXHIBITS
(a) (3) Amendment to Master Trust Agreement dated June 12,
1998 is filed herewith.
(e) (2) Distribution Agreement between the Registrant and
CFBDS Inc.
dated October 8, 1998 is filed herewith.
(e) (3) Selling Group Agreement between the Registrant and
CFBDS, Inc.
is filed herewith.
(j) Auditor's Consent to be filed by amendment
(m) (5) Form of Amended and Restated Shareholder Services and
Distribution Plan
pursuant to Rule 12b-1 for the Registrant is filed herewith.
(n) Financial Data Schedule to be filed by amendment.
(o) (2) Amended Plan pursuant to Rule 18f-3 is filed herewith.
Cover Letter
SMITH BARNEY EQUITY FUNDS
AMENDMENT NO. 6
TO
THE FIRST AMENDED AND RESTATED MASTER TRUST
AGREEMENT
AMENDMENT NO. 6 to the First Amended and Restated Master Trust
Agreement dated as of November 5, 1992 (the "Agreement") of Smith Barney
Equity Funds (the "Trust"), made as of the 12th day of June, 1998.
WITNESSETH:
WHEREAS, Article VII, Section 7.3 of the Agreement provides that the
Agreement may be amended at any time, so long as such amendment does not
materially adversely affect the rights of any shareholder and so long as such
amendment is not in contravention of applicable law, including the Investment
Company Act of 1940, as amended, by an instrument in writing signed by an
officer of the Trust pursuant to a vote of a majority of the Trustees; and
WHEREAS, the Trustees have the authority under Section 4.1 of the
Agreement to issue classes of shares (as defined in the Agreement) of any Sub-
Trust (as defined in the Agreement) 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 to establish and designate
the specific classes of shares of each Sub-Trust; and
WHEREAS, on May 15, 1998, a majority of the Trustees voted to
redesignate "Class C" shares as "Class L" shares for the following sub-trust -
Concert Social Awareness Fund; and
WHEREAS, on May 15, 1998, a majority of Trustees voted to
redesignate "Class C" shares as "Class O" shares for the following Sub-Trust -
Smith Barney Large Cap Blend Fund; and
WHEREAS, on May 15, 1998, a majority of Trustees voted to establish a
new class of shares designated "Class L" shares for the following Sub-Trust -
Smith Barney Large Cap Blend Fund; and
WHEREAS, the undersigned has been duly authorized by the Trustees to
execute and file this Amendment No. 6 to the Agreement; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. The first paragraph of Article IV, Section 4.2 of the Agreement is
hereby amended to read in pertinent part as follows:
"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:
"Concert Social Awareness Fund", which shall consist of four classes
designated as Class A, Class B, Class L, and Class Y shares and "Smith Barney
Large Cap Blend Fund," which shall consist of five classes designated as
Class A, Class B, Class L, Class O and Class Y shares. 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:"
The undersigned hereby certifies that the Amendment set forth above has
been duly adopted in accordance with the provisions of the Agreement.
IN WITNESS WHEREOF, the undersigned has hereto set his hands as
of the day and year first above written.
SMITH BARNEY
EQUITY FUNDS
By:
/s/ David A. Barnett
Name: David A. Barnett
Title: Assistant Secretary
g:legal\funds\slep\1999\secdocs\pea46amd
SMITH BARNEY EQUITY FUNDS
DISTRIBUTION AGREEMENT
October 8,
1998
CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the
"Fund") has agreed that you shall be, for the period of this
Agreement, the non-exclusive principal underwriter and distributor
of shares of the Fund and each Series of the Fund set forth on
Exhibit A hereto, as such Exhibit may be revised from time to time
(each, including any shares of the Fund not designated by series,
a "Series"). For purposes of this Agreement, the term "Shares"
shall mean shares of the each Series, or one or more Series, as
the context may require.
1. Services as Principal Underwriter and Distributor
1.1 You will act as agent for the distribution of
Shares covered by, and in accordance with, 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"), and will transmit or cause to be transmitted promptly
any orders received by you or those with whom you have sales or
servicing agreements for purchase or redemption of Shares to the
Transfer and Dividend Disbursing Agent for the Fund of which the
Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit
orders for the sale of Shares. It is contemplated that you will
enter into sales or servicing agreements with registered
securities dealers and banks and into servicing agreements with
financial institutions and other industry professionals, such as
investment advisers, accountants and estate planning firms. In
entering into such agreements, you will act only on your own
behalf as principal underwriter and distributor. You will not be
responsible for making any distribution plan or service fee
payments pursuant to any plans the Fund may adopt or agreements it
may enter into.
1.3 You shall act as principal underwriter and
distributor of Shares in compliance with all applicable laws,
rules, and regulations, including, without limitation, all rules
and regulations made or adopted from time to time by the
Securities and Exchange Commission (the "SEC") pursuant to the
1933 Act or the 1940 Act or by any securities association
registered under the Securities Exchange Act of 1934, as amended.
1.4 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, any Shares until
such time as those officers deem it advisable to accept such
orders and to make such sales and the Fund shall advise you
promptly of such determination.
2. Duties of the Fund
2.1 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the 1933 Act, and
all expenses in connection with maintaining facilities for the
issue and transfer of Shares and for supplying information, prices
and other data to be furnished by the Fund hereunder, and all
expenses in connection with the preparation and printing of the
Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided
however, that nothing contained herein shall be deemed to require
the Fund to pay any of the costs of advertising or marketing the
sale of Shares.
2.2 The Fund agrees to execute any and all documents
and to furnish any and all information and otherwise to take any
other actions that may be reasonably necessary in the discretion
of the Fund's officers in connection with the qualification of
Shares for sale in such states and other U.S. jurisdictions as the
Fund may approve and designate to you from time to time, and the
Fund agrees to pay all expenses that may be incurred in connection
with such qualification. You shall pay all expenses connected
with your own qualification as a securities broker or dealer under
state or Federal laws and, except as otherwise specifically
provided in this Agreement, all other expenses incurred by you in
connection with the sale of Shares as contemplated in this
Agreement.
2.3 The Fund shall furnish you from time to time, for
use in connection with the sale of Shares, such information
reports with respect to the Fund or any relevant Series and the
Shares as you 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 also shall furnish you upon request with (a) the reports
of annual audits of the financial statements of the Fund for each
Series made by independent certified public accountants
retained by the Fund for such purpose; (b) semi-annual unaudited
financial statements pertaining to each Series; (c) quarterly
earnings statements prepared by the Fund; (d) a monthly itemized
list of the securities in each Series' portfolio; (e) monthly
balance sheets as soon as practicable after the end of each month;
(f) the current net asset value and offering price per share for
each Series on each day such net asset value is computed and (g)
from time to time such additional information regarding the
financial condition of each Series of the Fund as you may
reasonably request.
3. Representations and Warranties
The Fund represents to you 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 prepared in conformity with the
requirements of said Acts 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 filed by the Fund with the SEC.
The Fund represents and warrants to you that any registration
statement, prospectus and statement of additional information,
when such registration statement becomes effective and as such
prospectus and statement of additional information are amended or
supplemented, will include at the time of such effectiveness,
amendment or supplement 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 material
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, 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 you to do so, you may, at your option,
terminate this Agreement or decline to make offers of the Fund's
Shares until such amendments are made. The Fund shall not file
any amendment to any registration statement or supplement to any
prospectus or statement of additional information without giving
you 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 you to use any prospectus or
statement of additional information furnished by the Fund from
time to time, in connection with the sale of Shares. The Fund
agrees to indemnify, defend and hold you, your several officers
and directors, and any person who controls you 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 you, your 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 of them not misleading; provided,
however, that the Fund's agreement to indemnify you, your 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 you or your
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 you pursuant to paragraph 2.3 of this
Agreement; and further provided that the Fund's agreement to
indemnify you 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 you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
your duties, or by reason of your reckless disregard of your
obligations and duties under this Agreement. The Fund's agreement
to indemnify you, your officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon
the Fund's being notified of any action brought against you, your
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. In the event the Fund elects to assume the defense
of any such suit and retains counsel of good standing, 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,
the Fund will reimburse you, your 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
you 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
you, your 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 your benefit, to
the benefit of your several officers and directors, and their
respective estates, and to the benefit of the controlling persons
and their successors. The Fund agrees to notify you promptly of
the commencement of any litigation or proceedings against the Fund
or any of its officers or Board members in connection with the
issuance and sale of any of the Fund's Shares.
4.2 You agree to indemnify, defend and hold the Fund,
its several officers and Board members, 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 Board members 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 Board members, or such controlling person
resulting from such claims or demands shall arise out of or be
based upon (a) any unauthorized sales literature, advertisements,
information, statements or representations or (b) any untrue, or
alleged untrue, statement of a material fact contained in
information furnished in writing by you 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
you to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Your agreement
to indemnify the Fund, its officers or Board members, and any such
controlling person, as aforesaid, is expressly conditioned upon
your being notified of any action brought against the Fund, its
officers or Board members, or any such controlling person, such
notification to be given by letter or telegram addressed to you at
your principal office in Boston, Massachusetts and sent to you by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. You shall have the right to control the defense of such
action, with counsel of your own choosing, satisfactory to the
Fund, if such action is based solely upon such alleged
misstatement or omission on your part or with the Fund's consent,
and in any event the Fund, its officers or Board members or such
controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action with
counsel of its own choosing reasonably acceptable to you but shall
not have the right to settle any such action without your consent,
which will not be unreasonably withheld. The failure to so notify
you of any such action shall not relieve you from any liability
that you may have to the Fund, its officers or Board members, 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 your indemnity agreement contained in
this paragraph 4.2. You agree to notify the Fund promptly of the
commencement of any litigation or proceedings against you or any
of your officers or directors in connection with the issuance and
sale of any of the Fund's Shares.
5. Effectiveness of Registration
No Shares shall be offered by either you or the Fund under
any of the provisions of this Agreement and no orders for the
purchase or sale of such 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 provisions 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, however, 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 charter
documents, as amended from time to time.
6. Offering Price
Shares of any class of any Series of the Fund offered for
sale by you shall be offered for sale at a price per share (the
"offering price") equal to (a) their net asset value (determined
in the manner set forth in the Fund's charter documents and the
then-current prospectus and statement of additional information)
plus (b) a sales charge, if applicable, which shall be the
percentage of the offering price of such Shares as set forth in
the Fund's then-current prospectus relating to such Series. In
addition to or in lieu of any sales charge applicable at the time
of sale, Shares of any class of any Series of the Fund offered for
sale by you may be subject to a contingent deferred sales charge
as set forth in the Fund's then-current prospectus and statement
of additional information. You shall be entitled to receive any
sales charge levied at the time of sale in respect of the Shares
without remitting any portion to the Fund. Any payments to a
broker or dealer through whom you sell Shares shall be governed by
a separate agreement between you and such broker or dealer and the
Fund's then-current prospectus and statement of additional
information
7. Notice to You
The Fund agrees to advise you 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
of 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 the
registration statement, or any
supplement to the prospectus or
statement of additional information
which may from time to time be filed
with the SEC.
8. Term of the Agreement
This Agreement shall become effective on the date hereof,
shall have an initial term of one year from the date hereof, and
shall continue for successive annual periods thereafter so long as
such continuance is specifically approved at least annually by (a)
the Fund's Board 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 Board members 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 30 days' notice by the Fund's Board or by vote
of holders of a majority of the relevant Series outstanding voting
securities, or on 90 days' notice by you. This Agreement will
also terminate automatically, as to the relevant Series, in the
event of its assignment (as defined in the 1940 Act and the rules
and regulations thereunder).
9. Arbitration
Any claim, controversy, dispute or deadlock arising
under this Agreement (collectively, a "Dispute") shall be settled
by arbitration administered under the rules of the American
Arbitration Association ("AAA") in New York, New York. Any
arbitration and award of the arbitrators, or a majority of them,
shall be final and the judgment upon the award rendered may be
entered in any state or federal court having jurisdiction. No
punitive damages are to be awarded.
10. Miscellaneous
So long as you act as a principal underwriter and
distributor of Shares, you shall not perform any services for any
entity other than investment companies advised or administered by
Citigroup Inc. or its subsidiaries. The Fund recognizes that the
persons employed by you to assist in the performance of your
duties under this Agreement may not devote their full time to such
service and nothing contained in this Agreement shall be deemed to
limit or restrict your or any of your affiliates right to engage
in and devote time and attention to other businesses or to render
services of whatever kind or nature. This Agreement and the
terms and conditions set forth herein shall be governed by, and
construed in accordance with, the laws of the State of New York.
11. Limitation of Liability (Massachusetts business
trusts only)
The Fund and you 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, whereupon this Agreement will
become binding on you.
Very truly yours,
SMITH BARNEY EQUITY FUNDS
By: _____________________
Authorized Officer
Accepted:
CFBDS, INC.
By: __________________________
Authorized Officer
EXHIBIT A
Smith Barney Equity Funds
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Page: 3
8
U:\legal\funds\slep\secdocs\1999\distagr
SMITH BARNEY MUTUAL FUNDS
BROKER DEALER CONTRACT
CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
We, CFBDS, Inc. ("CFBDS"), have agreements
with certain investment companies for which Mutual
Management Corp. serves as investment adviser and/or
administrator (each a "Fund") pursuant to which we act
as nonexclusive principal underwriter and distributor
for the sale of shares of capital stock ("shares") of
the various series of such Funds, and as such have the
right to distribute shares for resale. Each Fund is
an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940
Act") and the shares being offered to the public are
registered under the Securities Act of 1933, as
amended (the "1933 Act"). Each series of each Fund
covered by a Distribution Agreement from time to time
is referred to in this agreement as a "Series" and
collectively as the "Series." The term "Prospectus",
as used herein, refers to the prospectus and related
statement of additional information (the "Statement of
Additional Information") incorporated therein by
reference (as amended or supplemented) on file with
the Securities and Exchange Commission at the time in
question. As a broker in the capacity of principal
underwriter and distributor for the Trust, we offer to
sell to you, as a broker or dealer, shares of each
Fund upon the following terms and conditions:
1. PRIVATE In all sales to the public
you shall act as broker for your customers or as
dealer for your own account, and in no transaction
shall you have any authority to act as agent for the
Trust, for us or for any other dealer. tc " In all
sales to the public you shall act as dealer for your
own account, and in no transaction shall you have any
authority to act as agent for the Fund, for us or for
any other dealer."
2. PRIVATE Orders received from you
will be accepted through us only at the public
offering price per share (i.e. the net asset value per
share plus the applicable front-end sales charge, if
any) applicable to each order, and all orders for
redemption of any shares shall be executed at the net
asset value per share less any contingent deferred
sales charge, if any, in each case as set forth in the
Prospectus. You will be entitled to receive and
retain any contingent deferred sales charge amounts in
partial consideration of your payment to financial
consultants of commission amounts at the time of sale
and we will obligate any other brokers with whom we
enter into similar agreements to pay such amounts
directly to you. The procedure relating to the
handling of orders shall be subject to paragraph 4
hereof and instructions which we or the Fund shall
forward from time to time to you. All orders are
subject to acceptance or rejection by the applicable
Fund or us in the sole discretion of either. The
minimum initial purchase and the minimum subsequent
purchase of any shares shall be as set forth in the
Prospectus pertaining to the relevant Series. tc "
Orders received from you will be accepted through us
only at the public offering price per share (i.e. the
net asset value per share plus the applicable sales
charge, if any) applicable to each order, and all
orders for redemption of any Fund shares shall be
executed at the net asset value per share less any
contingent deferred sales charge, if any, in each case
as set forth in the Prospectus. The procedure
relating to the handling of orders shall be subject to
paragraph 4 hereof and instructions which we or the
Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by
Salomon or the Fund in the sole discretion of either.
The minimum initial purchase and the minimum
subsequent purchase shall be as set forth in the
Prospectus of the Fund."
3. PRIVATE You shall not place orders
for any shares unless you have already received
purchase orders for those shares at the applicable
public offering price and subject to the terms hereof.
You agree that you will not offer or sell any shares
except under circumstances that will result in
compliance with the applicable Federal and state
securities laws, the applicable rules and regulations
thereunder and the rules and regulations of applicable
regulatory agencies or authorities and that in
connection with sales and offers to sell shares you
will furnish to each person to whom any such sale or
offer is made, a copy of the Prospectus and, upon
request, the Statement of Additional Information, and
will not furnish to any person any information
relating to shares which is inconsistent in any
respect with the information contained in the
Prospectus or Statement of Additional Information (as
then amended or supplemented). You shall not furnish
or cause to be furnished to any person or display or
publish any information or materials relating to the
shares (including, without limitation, promotional
materials and sales literature, advertisements, press
releases, announcements, statements, posters, signs or
other similar material), except such information and
materials as may be furnished to you by or on behalf
of us or the Funds, and such other information and
materials as may be approved in writing by or on
behalf of us or the Funds. tc " You shall not place
orders for any shares unless you have already received
purchase orders for those shares at the applicable
public offering price and subject to the terms hereof
and of the Distribution Contract. You agree that you
will not"
4. PRIVATE As a broker dealer, you are
hereby authorized (i) to place orders directly with
the applicable Fund or Series for shares subject to
the applicable terms and conditions governing the
placement of orders by us set forth in the Prospectus
and (ii) to tender shares directly to each Fund or its
agent for redemption subject to the applicable terms
and conditions governing the redemption of shares
applicable to us set forth in the Prospectus. tc " As
a dealer, you are hereby authorized (i) to place
orders directly with the Fund for shares to be resold
by us to you subject to the applicable terms and
conditions governing the placement of orders by us set
forth in the Prospectus and the Distribution Contract
and (ii) to tender shares directly to the Fund or its
agent for redemption subject to the applicable terms
and conditions governing the redemption of shares
applicable to us set forth in the Prospectus and the
Distribution Agreement."
5. PRIVATE You shall not withhold
placing orders received from your customers so as to
profit yourself as a result of such withholding, e.g.,
by a change in the "net asset value" from that used in
determining the offering price to your customers. tc "
You shall not withhold placing orders received from
your customers so as to profit yourself as a result of
such withholding, e.g., by a change in the \"net asset
value\" from that used in determining the offering
price to your customers."
6. PRIVATE In determining the amount
of any sales concession payable to you hereunder, we
reserve the right to exclude any sales which we
reasonably determine are not made in accordance with
the terms of the Prospectus and the provisions of this
Agreement. Unless at the time of transmitting an
order we advise you or the transfer agent to the
contrary, the shares ordered will be deemed to be the
total holdings of the specified investor. tc " In
determining the amount of any sales concession payable
to you hereunder, we reserve the right to exclude any
sales which we reasonably determine are not made in
accordance with the terms of the Prospectus and the
provisions of this Agreement. Unless at the time of
transmitting an order we advise you or the transfer
agent to the contrary, the shares ordered will be
deemed to be the total holdings of the specified
investor."
7. PRIVATE (a) You agree that payment
for orders from you for the purchase of shares will be
made in accordance with the terms of the Prospectus.
On or before the business day following the settlement
date of each purchase order for shares, you shall
transfer same day funds to an account designated by us
with the transfer agent in an amount equal to the
public offering price on the date of purchase of the
shares being purchased less your sales concession, if
any, with respect to such purchase order determined in
accordance with the Prospectus. If payment for any
purchase order is not received in accordance with the
terms of the Prospectus, we reserve the right, without
notice, to cancel the sale and to hold you responsible
for any loss sustained as a result thereof. tc " (a)
You agree that payment for orders from you for the
purchase of shares will be made in accordance with the
terms of the Prospectus. On or before the business
day following the settlement date of each purchase
order for shares, you shall transfer same day funds to
an account designated by us with the transfer agent an
amount equal to the public offering price on the date
of purchase of the shares being purchased less your
sales concession, if any, with respect to such
purchase order determined in accordance with the
Prospectus. If payment for any purchase order is not
received in accordance with the terms of the
Prospectus, we reserve the right, without notice, to
cancel the sale and to hold you responsible for any
loss sustained as a result thereof."
(b) PRIVATE If any shares sold under the
terms of this Agreement are sold with a sales charge
and are redeemed or are tendered for redemption within
seven (7) business days after confirmation of your
purchase order for such shares: (i) you shall
forthwith refund to us the full sales concession
received by you on the sale; and (ii) we shall
forthwith pay to the applicable Series our portion of
the sales charge on the sale which has been retained
by us, if any, and shall also pay to the applicable
Series the amount refunded by you. tc " If any shares
sold under the terms of this Agreement are sold with a
sales charge and are redeemed or are tendered for
redemption within seven (7) business days after
confirmation of your purchase order for such shares\:
(i) you shall forthwith refund to us the full sales
concession received by you on the sale; and (ii) we
shall forthwith pay to the applicable Series our
portion of the sales charge on the sale which has been
retained by us, if any, and shall also pay to the
Series the amount refunded by you."
(c) PRIVATE We will not be obligated to
pay or cause to be paid to you any ongoing trail
commission or shareholder service fees with respect to
shares of the Series purchased through you and held by
or for your customers, which you shall collect
directly from the Funds. tc " We will pay you an
ongoing trail commission with respect to holdings by
you of shares of the Funds at such rates and in such
manner as may be described in the Prospectus."
(d) PRIVATE Certificates evidencing
shares shall be available only upon request. Upon
payment for shares in accordance with paragraph 7(a)
above, the transfer agent will issue and transmit to
you or your customer a confirmation statement
evidencing the purchase of such shares. Any
transaction in uncertificated shares, including
purchases, transfers, redemptions and repurchases,
shall be effected and evidenced by book-entry on the
records of the transfer agent. tc " Certificates
evidencing shares shall be available only upon
request. Upon payment for shares in accordance with
paragraph 7(a) above, the transfer agent will issue
and transmit to you a confirmation statement
evidencing the purchase of such shares. Any
transaction in uncertificated shares, including
purchases, transfers, redemptions and repurchases,
shall be effected and evidenced by book-entry on the
records of the transfer agent."
8. PRIVATE No person is authorized to
make any representations concerning shares except
those contained in the current Prospectus and
Statement of Additional Information and in printed
information subsequently issued by us or the Funds as
information supplemental to the Prospectus and the
Statement of Additional Information. In purchasing or
offering shares pursuant to this Agreement you shall
rely solely on the representations contained in the
Prospectus, the Statement of Additional Information
and the supplemental information above mentioned. tc "
No person is authorized to make any representations
concerning shares except those contained in the
current Prospectus and Statement of Additional
Information and in printed information subsequently
issued by us or the Fund as information supplemental
to the Prospectus and the Statement of Additional
Information. In purchasing sor offering shares
pursuant to this Agreement you shall rely solely on
the representations contained in the Prospectus, the
Statement of Additional Information and the
supplemental information above mentioned."
9. PRIVATE You agree to deliver to
each purchaser making a purchase of shares from or
through you a copy of the Prospectus at or prior to
the time of offering or sale, and, upon request, the
Statement of Additional Information. You may instruct
the transfer agent to register shares purchased in
your name and account as nominee for your customers.
You agree thereafter to deliver to any purchaser whose
shares you or your nominee are holding as record
holder copies of the annual and interim reports and
proxy solicitation materials and any other information
and materials relating to the Trust and prepared by or
on behalf of us, the Funds or the investment adviser,
custodian, transfer agent or dividend disbursing agent
for distribution to beneficial holders of shares. The
Funds shall be responsible for the costs associated
with forwarding such reports, materials and other
information and shall reimburse you in full for such
costs. You further agree to make reasonable efforts
to endeavor to obtain proxies from such purchasers
whose shares you or your nominee are holding as record
holder. You further agree to obtain from each
customer to whom you sell shares any taxpayer
identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated
thereunder, and to provide us or our designee with
timely written notice of any failure to obtain such
taxpayer identification number certification in order
to enable the implementation of any required backup
withholding in accordance with Section 3406 of the
Code and the regulations thereunder. Additional
copies of the Prospectus, Statement of Additional
Information, annual or interim reports, proxy
solicitation materials and any such other information
and materials relating to the Trust will be supplied
to you in reasonable quantities upon request. tc "
You agree to deliver to each purchaser making a
purchase of shares from you a copy of the Prospectus
at or prior to the time of offering or sale, and, upon
request, the Statement of Additional Information. You
may instruct the transfer agent to register shares
purchased in your name and account as nominee for your
customers. You agree thereafter to deliver to any
purchaser whose shares you are holding as record
holder copies of the annual and interim reports and
proxy solicitation materials and any other information
and materials relating to the Fund and prepared by or
on behalf of us, the Fund or its investment adviser,
custodian, transfer agent or dividend disbursing agent
for distribution to such customer. The Fund shall be
responsible for the costs associated with forwarding
such reports, materials and other information and
shall reimburse you in full for such costs. You
further agree to make reasonable efforts to endeavor
to obtain proxies from such purchasers whose shares
you are holding as record holder. You further agree
to obtain from each customer to whom you sell shares
any taxpayer identification number certification
required under Section 3406 of the Internal Revenue
Code of 1986, as amended (the \"Code\"), and the
regulations promulgated thereunder, and to provide us
or our designee with timely written notice of any
failure to obtain such taxpayer identification number
certification in order to enable the implementation of
any required backup withholding in accordance with
Section 3406 of the Code and the regulations
thereunder. Additional copies of the Prospectus,
Statement of Additional Information, annual or interim
reports, proxy solicitation materials and any such
other information and materials relating to the Fund
will be supplied to you in reasonable quantities upon
request."
10. PRIVATE (a) In accordance with the
terms of the Prospectus, a reduced sales charge may be
available to customers, depending on the amount of the
investment or proposed investment. In each case where
a reduced sales charge is applicable, you agree to
furnish to the transfer agent sufficient information
to permit confirmation of qualification for a reduced
sales charge, and acceptance of the purchase order is
subject to such confirmation. Reduced sales charges
may be modified or terminated at any time in the sole
discretion of each Fund. tc " (a) In accordance
with the terms of the Prospectus, a reduced sales
charge may be available to customers, depending on the
amount of the investment. In each case where a
reduced sales charge is applicable, you agree to
furnish to the transfer agent sufficient information
to permit confirmation of qualification for a reduced
sales charge, and acceptance of the purchase order is
subject to such confirmation. Reduced sales charges
may be modified or terminated at any time in the sole
discretion of the Fund."
(b) PRIVATE You acknowledge that
certain classes of investors may be entitled to
purchase shares at net asset value without a sales
charge as provided in the Prospectus and Statement of
Additional Information. tc " You acknowledge that
certain classes of investors may be entitled to
purchase shares at net asset value without a sales
charge as provided in the Prospectus and Statement of
Additional Information."
(c) PRIVATE You agree to advise us
promptly as to the amount of any and all sales by you
qualifying for a reduced sales charge or no sales
charge. tc " You agree to advise us promptly as to
the amount of any and all sales by you qualifying for
a reduced sales charge or no sales charge."
(d) PRIVATE Exchanges (i.e., the
investment of the proceeds from the liquidation of
shares of one Series in the shares of another Series,
each of which is managed by the same or an affiliated
investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus. tc "
Exchanges (i.e., the investment of the proceeds from
the liquidation of shares of one fund in the shares of
another fund, each of which is managed by the Fund's
investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus."
11. PRIVATE We and each Fund reserve
the right in our discretion, without notice, to
suspend sales or withdraw the offering of any shares
entirely. Each party hereto has the right to cancel
the portions of this Agreement to which it is party
upon notice to the other parties; provided, however,
that no cancellation shall affect any party's
obligations hereunder with respect to any transactions
or activities occurring prior to the effective time of
cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to
you. tc " We reserve the right in our discretion,
without notice, to suspend sales or withdraw the
offering of shares entirely. Each party hereto has
the right to cancel this agreement upon notice to the
other part parties; provided; however, that no
cancellation shall affect any party's obligations
hereunder with respect to any transactions or
activities occurring prior to the effective time of
cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to you."
12. PRIVATE We shall have full authority
to take such action as we may deem advisable in respect
of all matters pertaining to the continuous offering of
shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed
by us herein. Nothing contained in this paragraph 12 is
intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever constitute a
waiver by you of compliance with, any provisions of the
1933 Act or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
tc " We shall have full authority to take such action
as we may deem advisable in respect of all matters
pertaining to the continuous offering of shares. We
shall be under no liability to you except for lack of
good faith and for obligations expressly assumed by us
herein. Nothing contained in this paragraph 12 is
intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever constitute a
waiver by you of compliance with, any provisions of the
1933 Act or of the rules and regulations of the
Securities and Exchange Commission issued thereunder."
13. PRIVATE You agree that: (a) you
shall not effect any transactions (including, without
limitation, any purchases and tc " You agree that\:
(a) you shall not effect any transactions (including,
without limitation, any purchases and" redemptions)
in any shares registered in the name of, or
beneficially owned by, any customer unless such
customer has granted you full right, power and
authority to effect such transactions on his behalf,
(b) we shall have full authority to act upon your
express instructions to sell, repurchase or exchange
shares through us on behalf of your customers under
the terms and conditions provided in the Prospectus
and (c) we, the Funds, the investment adviser, the
administrator, the transfer agent and our and their
respective officers, directors or trustees, agents,
employees and affiliates shall not be liable for, and
shall be fully indemnified and held harmless by you
from and against, any and all claims, demands,
liabilities and expenses (including, without
limitation, reasonable attorneys' fees) which may be
incurred by us or any of the foregoing persons
entitled to indemnification from you hereunder arising
out of or in connection with (i) the execution of any
transactions in shares registered in the name of, or
beneficially owned by, any customer in reliance upon
any oral or written instructions believed to be
genuine and to have been given by or on behalf of you,
(ii) any statements or representations that you or
your employees or representatives make concerning the
Funds that are inconsistent with the applicable Fund's
Prospectus, (iii) any written materials used by you or
your employees or representatives in connection with
making offers or sales of shares that were not
furnished by us, the Funds or the investment adviser
or an affiliate thereof and (iv) any sale of shares of
a Fund where the Fund or its shares were not properly
registered or qualified for sale in any state, any
U.S. territory or the District of Columbia, when we
have indicated to you that the Fund or its shares were
not properly registered or qualified. The
indemnification agreement contained in this Paragraph
13 shall survive the termination of this Agreement.
14. PRIVATE You represent that: (a) you
are a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"),
or, if a foreign dealer who is not eligible for
membership in the NASD, that (i) you will not make any
sales of shares in, or to nationals of, the United
States of America, its territories or its possessions,
and (ii) in making any sales of shares you will comply
with the NASD's Conduct Rules and (b) you are a member
in good standing of the Securities Investor Protection
Corporation ("SIPC"). You agree that you will provide
us with timely written notice of any change in your
NASD or SIPC status. tc " You represent that you are
a member in good standing of the National Association
of Securities Dealers, Inc. (the \"NASD\"), or, if a
foreign dealer who is not eligible for membership in
the NASD, that (a) you will not make any sales of
shares in, or to nationals of, the United States of
America, its territories or its possessions, and (b)
in making any sales of shares you will comply with the
NASD's Rules of Fair Practice."
15. PRIVATE We shall inform you as to
the states or other jurisdictions in which the Fund has
advised us that shares have been qualified for sale
under, or are exempt from the requirements of, the
respective securities laws of such states, but we
assume no responsibility or obligation as to your
qualification to sell shares in any jurisdiction.
16. Any claim, controversy, dispute or
deadlock arising under this Agreement (collectively, a
"Dispute") shall be settled by arbitration administered
under the rules of the American Arbitration Association
("AAA") in New York, New York. Any arbitration and
award of the arbitrators, or a majority of them, shall
be final and the judgment upon the award rendered may
be entered in any state or federal court having
jurisdiction. No punitive damages are to be awarded.
17. PRIVATE All communications to us
should be sent, postage prepaid, to 21 Milk Street,
Boston, Massachusetts 02109 Attention: Philip
Coolidge. Any notice to you shall be duly given if
mailed, telegraphed or telecopied to you at the
address specified by you below. Communications
regarding placement of orders for shares should be
sent, postage prepaid, to First Data Investor Services
Group, Inc., P.O. Box 5128, Westborough, Massachusetts
01581-5128. tc " All communications to us should be
sent, postage prepaid, to 7 World Trade Center, New
York, New York 10048. Attention\: Robert J. Leonard.
Any notice to you shall be duly given if mailed,
telegraphed or telecopied to you at the address
specified by you below. Communications regarding
placement of orders for shares should be sent, postage
prepaid, to The Shareholder Services Group, Inc., P.O.
Box 9109, Boston, Massachusetts 02205-9109."
18. PRIVATE This Agreement shall be
binding upon both parties hereto when signed by us and
accepted by you in the space provided below tc " This
Agreement shall be binding upon both parties hereto
when signed by us and accepted by you in the space
provided below until July 14, 1995 or such earlier
date upon negotiation of section 3 and 12 of this
agreement. " .
19. PRIVATE This Agreement and the
terms and conditions set forth herein shall be
governed by, and construed in accordance with, the
laws of the State of New York. tc " This Agreement and
the terms and conditions set forth herein shall be
governed by, and construed in accordance with, the
laws of the State of New York."
CFBDS, INC.
By:/s/
(Authorized
Signature)
Accepted:
Firm Name:
Address:
Accepted By (signature):
Name (print):
Title: Date:
u:\legal\funds\slep\1999\secdocs\dealagr
FORM OF
AMENDED AND RESTATED
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
This Amended and Restated Shareholder Services and Distribution
Plan (the "Plan") is adopted in accordance with Rule 12b-1 (the
"Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by [Name of Fund], a [business trust organized under
the laws of the Commonwealth of Massachusetts (the "Trust") on
behalf of its sub-trust] / [a corporation organized under the laws
of the State of Maryland (the "Fund")], subject to the following
terms and conditions:
Section 1. Annual Fee.
(a) Service Fee for Class A shares. The [Trust/Fund] will pay
to Smith Barney Inc., a corporation organized under the
laws of the State of Delaware ("Smith Barney"), a service
fee under the Plan at an annual rate of [ %] of the
average daily net assets of the Fund attributable to the
Class A shares sold and not redeemed (the "Class A
Service Fee").
(b) Service Fee for Class B shares. The [Trust/Fund] will pay
to Smith Barney a service fee under the Plan at the
annual rate of [ %] of the average daily net assets of
the Fund attributable to the Class B shares sold and not
redeemed (the "Class B Service Fee").
(c) Distribution Fee for Class B shares. In addition to the
Class B Service Fee, the [Trust/Fund] will pay Smith
Barney a distribution fee under the Plan at the annual
rate of [ %] of the average daily net assets of the
Fund attributable to the Class B shares sold and not
redeemed (the "Class B Distribution Fee").
(d) Service Fee for Class L shares. The [Trust/Fund] will
pay to Smith Barney a service fee under the plan at the
annual rate of [ %] of the average daily net assets of
the Fund attributable to the Class L shares sold and not
redeemed (the "Class L Service Fee").
(e) Distribution Fee for Class L shares. In addition to the
Class L Service Fee, the [Trust/Fund] will pay Smith
Barney a distribution fee under the Plan at the annual
rate of [ %] of the average daily net assets of the
Fund attributable to the Class L shares sold and not
redeemed (the "Class L Distribution Fee").
(f) Payment of Fees. The Service Fees and Distribution Fees
will be calculated daily and paid monthly by the
[Trust/Fund] with respect to the foregoing classes of the
Fund's shares (each a "Class" and together, the
"Classes") at the annual rates indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its respective
Service Fee and/or Distribution Fee may be used by Smith Barney
for: (a) costs of printing and distributing the [Trust's/Fund's]
prospectuses, statements of additional information and reports to
prospective investors in the [Trust/Fund]; (b) costs involved in
preparing, printing and distributing sales literature pertaining
to the [Trust/Fund]; (c) an allocation of overhead and other
branch office distribution-related expenses of Smith Barney; (d)
payments made to, and expenses of, Smith Barney's financial
consultants and other persons who provide support services to
[Trust/Fund] shareholders in connection with the distribution of
the [Trust's/Fund's] shares, including but not limited to, office
space and equipment, telephone facilities, answering routine
inquires regarding the [Trust/Fund] and its operation, processing
shareholder transactions, forwarding and collecting proxy
material, changing dividend payment elections and providing any
other shareholder services not otherwise provided by the
[Trust's/Fund's] transfer agent; and (e) accruals for interest on
the amount of the foregoing expenses that exceed the Distribution
Fee for that Class and, in the case of Class B and Class L shares,
any contingent deferred sales charges received by Smith Barney;
provided, however, that (i) the Distribution Fee for a particular
Class may be used by Smith Barney only to cover expenses primarily
intended to result in the sale of shares of that Class, including,
without limitation, payments to the financial consultants of Smith
Barney and other persons as compensation for the sale of the
shares, and (ii) the Service Fees are intended to be used by Smith
Barney primarily to pay its financial consultants for servicing
shareholder accounts, including a continuing fee to each such
financial consultant, which fee shall begin to accrue immediately
after the sale of such shares.
Section 3. Approval by Shareholders
The Plan will not take effect, and no fees will be payable
in accordance with Section 1 of
the Plan, with respect to a Class until the Plan has been approved
by a vote of at least a majority
of the outstanding voting securities of the Class. The Plan will
be deemed to have been approved
with respect to a Class so long as a majority of the outstanding
voting securities of the Class votes
for the approval of the Plan, notwithstanding that: (a) the Plan
has not been approved by a majority of the outstanding voting
securities of any other Class, or (b) the Plan has not been
approved by a majority of the outstanding voting securities of the
[Trust/Fund].
Section 4. Approval by [Trustees/Directors.]
Neither the Plan nor any related agreements will take effect
until approved by a majority vote of both (a) the Board of
[Trustees/Directors] and (b) those [Trustees/Directors] who are
not interested persons of the [Trust/Fund] and who have no direct
or indirect financial interest in the operation of the Plan or in
any agreements related to it (the "Qualified
[Trustees/Directors]"), cast in person at a meeting called for the
purpose of voting on the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class
until [ , 1999] and thereafter for successive twelve-month
periods with respect to each Class; provided, however, that such
continuance is specifically approved at least annually by the
[Trustees/Directors] of the [Trust/Fund] and by a majority of the
Qualified [Trustees/Directors].
Section 6. Termination.
The Plan may be terminated at any time with respect to a Class
(i) by the [Trust/Fund] without the payment of any penalty, by the
vote of a majority of the outstanding voting securities of such
Class or (ii) by a majority vote of the Qualified
[Trustees/Directors]. The Plan may remain in effect with respect
to a particular Class even if the Plan has been terminated in
accordance with this Section 6 with respect to any other Class.
Section 7. Amendments.
The Plan may not be amended with respect to any Class so as to
increase materially the amounts of the fees described in Section 1
above, unless the amendment is approved by a vote of holders of at
least a majority of the outstanding voting securities of that
Class. No material amendment to the Plan may be made unless
approved by the [Trust's/Fund's] Board of [Trustees/Directors] in
the manner described in Section 4 above.
Section 8. Selection of Certain [Trustees/Directors].
While the Plan is in effect, the selection and nomination of
the [Trust's/Fund's] [Trustees/Directors] who are not interested
persons of the [Trust/Fund] will be committed to the discretion of
the [Trustees/Directors] then in office who are not interested
persons of the [Trust/Fund].
Section 9. Written Reports
In each year during which the Plan remains in effect, any
person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or any related agreement
will prepare and furnish to the [Trust's/Fund's] Board of
[Trustees/Directors] and the Board will review, at least
quarterly, written reports complying with the requirements of the
Rule, which set out the amounts expended under the Plan and the
purposes for which those expenditures were made.
Section 10. Preservation of Materials.
The [Trust/Fund] will preserve copies of the Plan, any
agreement relating to the Plan and any report made pursuant to
Section 9 above, for a period of not less than six years (the
first two years in an easily accessible place) from the date of
the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the rules and
regulations under the 1940 Act, subject to any exemption that may
be granted to the [Trust/Fund] under the 1940 Act, by the
Securities and Exchange Commission.
Section 12. Limitation of Liability. (Massachusetts business
trusts only)
The obligations of the Trust under this Agreement shall not
be binding upon any of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of
the Trust, individually, but are binding only upon the assets and
property of the Trust, as provided in the Master Trust Agreement.
The execution of this Plan has been authorized by the Trustees and
signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement.
IN WITNESS WHEREOF, the Fund has executed the Plan as of July
_____, 1998.
[NAME OF TRUST/FUND] On behalf of
By:
____________________________________
Heath B. McLendon
Chairman of the Board
g:\legal\general\forms\agreemts\dist12b1\12b1Plan
Rule 18f-3 (d) Multiple Class Plan for Smith Barney Mutual Funds
Introduction
This plan (the "Plan") is adopted pursuant to Rule 18f-3 (d) of
the Investment Company Act of 1940, as amended (the "1940 Act").
The purpose of the Plan is to restate the existing arrangements
previously approved by the Boards of Directors and Trustees of
certain of the open-end investment companies set forth on Schedule
A (the "Funds" and each a "Fund") under the Funds' existing order of
exemption (Investment Company Act Release Nos. 20042 (January 28,
1994) (notice) and 20090 (February 23, 1994)). Shares of the
Funds are distributed pursuant to a system (the "Multiple Class
System") in which each class of shares (a "Class") of a Fund
represents a pro rata interest in the same portfolio of
investments of the Fund and differs only to the extent outlined
below.
I. Distribution Arrangements and Service Fees
One or more Classes of shares of the Funds are offered for
purchase by investors with the following sales load structure. In
addition, pursuant to Rule 12b-1 under the 1940 Act (the "Rule"),
the Funds have each adopted a plan (the "Services and Distribution
Plan") under which shares of the Classes are subject to the
services and distribution fees described below.
1. Class A Shares
Class A shares are offered with a front-end sales load and under
the Services and Distribution Plan are subject to a service fee of
up to 0.25% of average daily net assets. In addition, the Funds
are permitted to assess a contingent deferred sales charge
("CDSC") on certain redemptions of Class A shares sold pursuant to
a complete waiver of front-end sales loads applicable to large
purchases, if the shares are redeemed within one year of the date
of purchase. This waiver applies to sales of Class A shares where
the amount of purchase is equal to or exceeds $500,000 although
this amount may be changed in the future.
2. Class B Shares
Class B shares are offered without a front-end sales load, but are
subject to a five-year declining CDSC and under the Services and
Distribution Plan are subject to a service fee at an annual rate
of up to 0.25% of average daily net assets and a distribution fee
at an annual rate of up to 0.75% of average daily net assets.
3. Class D Shares
Class D shares are offered without a front-end sales load, CDSC,
service fee or distribution fee.
4. Class L Shares
Class L shares are offered with a front-end load, are subject to a
one-year CDSC and under the Services and Distribution Plan are
subject to a service fee at an annual rate of up to 0.25% of
average daily net assets and a distribution fee at an annual rate
of up to 0.75% of average daily net assets. Unlike Class B
shares, Class L shares do not have the conversion feature as
discussed below and accordingly, these shares are subject to a
distribution fee for an indefinite period of time. The Funds
reserve the right to impose these fees at such higher rates as may
be determined.
5. Class I Shares
Class I shares are offered without a front-end sales load, but are
subject under the Services and Distribution Plan to a service fee
at an annual rate of up to 0.25% of average daily net assets.
6. Class O Shares
Class O shares are offered without a front-end load, but are
subject to a one-year CDSC and under the Services and Distribution
Plan are subject to a service fee at an annual rate of up to 0.25%
of average daily net assets and a distribution fee at an annual
rate of up to 0.50% of average daily net assets. Unlike Class B
shares, Class O shares do not have the conversion feature as
discussed below and accordingly, these shares are subject to a
distribution fee for an indefinite period of time. The Funds
reserve the right to impose these fees at such higher rates as may
be determined.
Effective June 28, 1999, Class O shares will be offered with a
front-end load and will continue to be subject to a one year CDSC,
a service fee at an annual rate of up to 0.25% of average daily
net assets and a distribution fee at an annual rate of up to 0.50%
of average daily net assets.
7. Class Y Shares
Class Y shares are offered without imposition of either a sales
charge or a service or distribution fee for investments where the
amount of purchase is equal to or exceeds a specific amount as
specified in each Fund's prospectus.
8. Class Z Shares
Class Z shares are offered without imposition of either a sales
charge or a service or distribution fee for purchase (i) by
employee benefit and retirement plans of Salomon Smith Barney Inc.
("Salomon Smith Barney") and its affiliates, (ii) by certain unit
investment trusts sponsored by Salomon Smith Barney and its affiliates,
and (iii) although not currently authorized by the governing boards of the
Funds, when and if authorized, (x) by employees of Salomon Smith Barney and
its affiliates and (y) by directors, general partners or trustees of any
investment company listed on Schedule A and, for each of (x) and (y), their
spouses and minor children.
9. Additional Classes of Shares
The Boards of Directors and Trustees of the Funds have the
authority to create additional classes, or change existing
Classes, from time to time, in accordance with Rule 18f-3 of the
1940 Act.
II. Expense Allocations
Under the Multiple Class System, all expenses incurred by a Fund
are allocated among the various Classes of shares based on the net
assets of the Fund attributable to each Class, except that each
Class's net asset value and expenses reflect the expenses
associated with that Class under the Fund's Services and
Distribution Plan, including any costs associated with obtaining
shareholder approval of the Services and Distribution Plan (or an
amendment thereto) and any expenses specific to that Class. Such
expenses are limited to the following:
(i) transfer agency fees as identified by the transfer
agent as being attributable to a specific Class;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders;
(iii) Blue Sky registration fees incurred by a Class of
shares;
(iv) Securities and Exchange Commission registration fees
incurred by a Class of shares;
(v) the expense of administrative personnel and services
as required to support the shareholders of a specific Class;
(vi) litigation or other legal expenses relating solely to
one Class of shares; and
(vii) fees of members of the governing boards of the funds
incurred as a result of issues relating to one Class of shares.
Pursuant to the Multiple Class System, expenses of a Fund
allocated to a particular Class of shares of that Fund are borne
on a pro rata basis by each outstanding share of that Class.
III. Conversion Rights of Class B Shares
All Class B shares of each Fund will automatically convert to
Class A shares after a certain holding period, expected to be, in
most cases, approximately eight years but may be shorter. Upon
the expiration of the holding period, Class B shares (except those
purchases through the reinvestment of dividends and other
distributions paid in respect of Class B shares) will
automatically convert to Class A shares of the Fund at the
relative net asset value of each of the Classes, and will, as a
result, thereafter be subject to the lower fee under the Services
and Distribution Plan. For purposes of calculating the holding
period required for conversion, newly created Class B shares
issued after the date of implementation of the Multiple Class
System are deemed to have been issued on (i) the date on which the
issuance of the Class B shares occurred or (ii) for Class B shares
obtained through an exchange, or a series of exchanges, the date
on which the issuance of the original Class B shares occurred.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares are also Class B
shares. However, for purposes of conversion to Class A, all Class
B shares in a shareholder's Fund account that were purchased
through the reinvestment of dividends and other distributions paid
in respect of Class B shares (and that have not converted to Class
A shares as provided in the following sentence) are considered to
be held in a separate sub-account. Each time any Class B shares
in the shareholder's Fund account (other than those in the sub-
account referred to in the preceding
sentence) convert to Class A, a pro rata portion of the Class B
shares then in the sub-account also converts to Class A. The
portion is determined by the ratio that the shareholder's Class B
shares converting to Class A bears to the shareholder's total
Class B shares not acquired through dividends and distributions.
The conversion of Class B shares to Class A shares is subject to
the continuing availability of a ruling of the Internal Revenue
Service that payment of different dividends on Class A and Class B
shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Internal Revenue
Code of 1986, as amended (the "Code"), and the continuing
availability of an opinion of counsel to the effect that the
conversion of shares does not constitute a taxable event under the
Code. The conversion of Class B shares to Class A shares may be
suspended if this opinion is no longer available, In the event
that conversion of Class B shares does not occur, Class B shares
would continue to be subject to the distribution fee and any
incrementally higher transfer agency costs attending the Class B
shares for an indefinite period.
IV. Exchange Privileges
Shareholders of a Fund may exchange their shares at net asset
value for shares of the same Class in certain other of the Smith
Barney Mutual Funds as set forth in the prospectus for such Fund.
Funds only permit exchanges into shares of money market funds
having a plan under the Rule if, as permitted by paragraph (b) (5)
of Rule 11a-3 under the 1940 Act, either (i) the time period
during which the shares of the money market funds are held is
included in the calculations of the CDSC or (ii) the time period
is not included but the amount of the CDSC is reduced by the
amount of any payments made under a plan adopted pursuant to the
Rule by the money market funds with respects to those shares.
Currently, the Funds include the time period during which shares
of the money market fund are held in the CDSC period. The
exchange privileges applicable to all Classes of shares must
comply with Rule 11a-3 under the 1940 Act.
Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of October 31, 1998)
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund
Smith Barney Concert Allocation Series Inc.
Conservative Portfolio
Balanced Portfolio
Global Portfolio
Growth Portfolio
Income Portfolio
High Growth Portfolio
Smith Barney Equity Funds -
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Large Cap Value Fund
Short-Term High Grade Bond Fund
U.S. Government Securities Fund
Smith Barney Income Funds -
Smith Barney Balanced Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Total Return Bond Fund
Smith Barney Investment Trust -
Smith Barney Intermediate Maturity California Municipals Fund
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Large Capitalization Growth Fund
Smith Barney S&P 500 Index Fund
Smith Barney Mid Cap Blend Fund
Smith Barney Investment Funds Inc. -
Concert Peachtree Growth Fund
Smith Barney Contrarian Fund
Smith Barney Government Securities Fund
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Special Equities Fund
Smith Barney Institutional Cash Management Fund, Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New York Portfolio
New York Money Market
Pennsylvania Portfolio
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
Emerging Markets Portfolio
U:\legal\funds\slep\1999\secdocs\18f3plan
