As filed with the Securities and Exchange Commission on
May 31, 2000
Registration No. 33 -7339
811-4757
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. 27
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940, as amended
Amendment No. 28 [X]
Smith Barney Sector Series Inc.
(f/k/a Smith Barney Natural Resources Fund Inc.)
(a Maryland Corporation)
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street
New York, New York 10013
(Address of Principal Executive Offices)
(212) 816-6474
(Registrant's Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Sector Series Inc.
(f/k/a Smith Barney Natural Resources Fund Inc.)
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
Continuous.
It is proposed that this filing will become effective
(check appropriate box):
[ ] Immediately upon filing pursuant to paragraph b
[ ] on February 14, 2000 pursuant to paragraph b
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X ] 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-Combined Prospectus for the Biotechnology Fund,
Global Media & Telecommunications Fund and Global
Technology Fund
<PAGE>
[LOGO OF SMITH BARNEY MUTUAL FUNDS]
P R O S P E C T U S
Biotechnology Fund
Global Media &
Telecommunications Fund
Global Technology Fund
Class A,B,L and Y Shares
-------------------------------------
August, 20000
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
<TABLE>
<S>
<C>
Investments, risks and
performance.................. 2
Smith Barney Biotechnology
Fund....................... 2
Smith Barney Global Media & Telecommunications
Fund....................... 7
Smith Barney Global Technology
Fund.......................... 12
More on the funds'
investments.............. 16
Feeder fund
structure.................... 17
Management................... 18
Subscription offering period......20
Choosing a class of shares to buy...... 21
Comparing the fund's
classes.....................22
Sales charges............... 23
More about deferred sales charges............ 25
Buying shares................... 26
Exchanging shares............... 27
Redeeming shares................... 29
Other things to know about share
transactions....................... 31
Salomon Smith Barney Retirement
Programs........................... 32
Dividends, distributions and
taxes.......................... 33
Share
price........................ 34
</TABLE>
Each fund is a separate series of Smith Barney Sector
Series Inc., a Maryland
corporation.
You should know: An investment in a fund is not a bank
deposit and is not
insured or guaranteed by the FDIC or any other government
agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Smith Barney Biotechnology Fund
Investment objective
Smith Barney Biotechnology Fund (the "Biotechnology
Fund") seeks long-term cap-
ital appreciation by investing primarily in common
stocks.
The Biotechnology Fund is a feeder fund in a
master/feeder structure. Accord-
ingly, the fund does not buy individual securities
directly. Instead, it
invests all of its assets in the Biotechnology Master
Portfolio ("Master Port-
folio"), a series of Master Sector Portfolio Trust
("MSP"), a registered open-
end management investment company. The Master Portfolio
seeks long-term capital
appreciation by investment primarily in common stocks.
In addition to selling its shares to the fund, the Master
Portfolio will sell
and may continue to sell its shares to certain other
mutual funds or other
accredited investors. The expenses and, correspondingly,
the returns of other
investment options in the Master Portfolio may differ
from those of the fund.
Principal Investment Strategies
Key investments The Master Portfolio normally invests at
least 80% of its
assets in securities of companies principally engaged in
the research, develop-
ment, and manufacture of various biotechnological
products, services, and
processes. These companies may include, but are not
limited to, the following: companies involved with
applications and developments in such areas as health
care; pharmaceuticals; agricultural and veterinary
applications; chemicals; medical/surgical; and industrial
applications. They may also include companies that
manufacture biotechnological and biomedical products,
including devices and instruments; companies that provide
biotechnological and biomedical processes or services;
companies that provide scientific and technological
advances in biotechnology; and companies involved with
new or experimental technologies related to any of the
above.
The Master Portfolio may also invest its assets in
securities of companies that
distribute biotechnological and biomedical products,
including without limitation devices and instruments, and
companies that benefit significantly from scientific and
technological advances in biotechnology. The Master
Portfolio may invest its assets in securities of foreign
and domestic issuers.
The Master Portfolio invests primarily in companies with
medium and large mar-
ket capitalizations. To a lesser extent, the Master
Portfolio also may invest
in common stocks of companies with small market
Sector Funds
2
<PAGE>
capitalizations. Medium and large market capitalization
companies are those
companies with market capitalizations exceeding $5
billion.
Selection process The Master Portfolio normally invests
at least 80% of its
assets in companies doing business in the biotechnology
sector. The remainder
of the Master Portfolio's assets are not required to be
invested in that sec-
tor. The Master Portfolio must maintain a portion of its
assets in cash and
liquid securities to meet redemption requests and pay the
Master Portfolio's
expenses. To determine whether a potential investment is
principally doing
business in the sector, a company must meet at least one
of the following
tests:
. At least 50% of its gross income or its net sales must
come from activities
in the sector;
. At least 50% of its assets must be devoted to producing
revenues from the
sector; or
. Based on other available information, the manager
determines that the
company's primary business is within the sector.
In buying and selling securities, the Master Portfolio
relies on fundamental
analysis of each issuer and its potential for success in
light of its current
financial condition and its industry position. Factors
considered, among other
things, include long-term growth potential, earnings
estimates and quality of
management.
The Master Portfolio may lend its securities to earn
income for the Master
Portfolio.
The Master Portfolio may, but is not required to, use
various techniques, such
as buying and selling futures and options contracts, to
increase or decrease
its exposure to changing security prices or other factors
that affect security
values. The Master Portfolio may engage in foreign
currency transactions solely
to manage its exposure to foreign securities. If the
Master Portfolio's strate-
gies do not work as intended, the fund may not achieve
its objective.
Principal risks of investing in the fund
Investors could lose money on their investments in the
Biotechnology Fund, or
the fund may not perform as well as other investments,
because:
. Stock markets are volatile and can decline
significantly in response to
adverse issuer, political, regulatory, market or
economic developments. Dif-
ferent parts of the market can react differently to
these developments.
Smith Barney Mutual Funds
3
<PAGE>
. Foreign markets can be more volatile than the U.S.
market because of
increased risks of adverse issuer, political,
regulatory, market or economic
developments and can perform differently than the U.S.
market. Currency fluc-
tuations may adversely impact the fund's investments.
. The biotechnology industry can be significantly
affected by patent considera-
tions, intense competition, rapid technological change
and obsolescence, and
government regulation. Biotechnology companies can have
persistent losses
during a new product's transition from development to
production, and revenue
patterns can be erratic.
. The value of an individual security or particular type
of security can be
more volatile than the market as a whole and can
perform differently than the
market as a whole. The value of smaller capitalized
companies may involve
greater risks, such as limited product lines, markets
and financial or mana-
gerial resources.
. The Master Portfolio is "non-diversified," which means
it may invest a larger
percentage of its assets in one issuer than a
diversified fund. To the extent
the Master Portfolio concentrates its assets in fewer
issuers, the Master
Portfolio will be more susceptible to negative events
affecting those
issuers. The Master Portfolio's investments are spread
across the sector on
which it focuses. However, because those investments
are limited to a compar-
atively narrow segment of the economy, the Master
Portfolio's investments are
not as diversified as most mutual funds, and far less
diversified than the
broad securities markets. This means that the fund
tends to be more volatile
than other mutual funds, and the values of its
portfolio investments tend to
increase and decrease more rapidly. As a result, the
value of your investment
in the fund may rise or fall rapidly.
. The judgment of the Master Portfolios' manager about
the attractiveness,
growth prospects, value or potential appreciation of a
particular stock may
prove to be incorrect.
Who may want to invest The fund may be an appropriate
investment if you:
. Are seeking to participate in the long-term growth
potential of the biotech-
nology sector
. Are seeking capital appreciation and can tolerate
short-term volatility.
. Are looking for an investment with potentially greater
return but higher risk
than a fund investing primarily in fixed income
securities
. Are comfortable with the risks of the stock market and
the special risks of
foreign securities, including emerging market
securities
. Currently have exposure to the stock market and can
tolerate concentrated
investment in a single market sector
Sector Funds
4
<PAGE>
Performance
The Biotechnology Fund is new and does not yet have the
performance information
which other Smith Barney funds show in bar and table form
in this part of the
prospectus.
Fee table
This table sets forth the fees and expenses you will pay
if you invest in Bio-
technology Fund shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A
Class B Class L Class Y
<S> <C>
<C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a % of offering price) 5.00%
None 1.00% None
Maximum deferred sales charge (load) (as a %
of the lower of net asset value at purchase or
redemption) None*
5.00% 1.00% None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A
Class B Class L Class Y
<S> <C>
<C> <C> <C>
Management fee** %
% % %
Distribution and service
(12b-1) fees %
% % 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 sales charge) but if you
redeem those shares
within 12 months of their purchase, you will pay a
deferred sales charge of
1.00%.
** The "Management fee" includes an investment
management fee payable by the
Master Portfolio and an administration fee payable by
the fund.
*** The fund is new, and therefore, has no historical
expense data. The amount
set forth in "Other expenses" represents the
aggregate amount that is pay-
able by the Master Portfolio, the Underlying
Portfolios and the fund, and
has been estimated based on expenses the fund expects
to incur during its
first fiscal year.
**** Management has agreed to cap the fund's other
expenses at %. Management
may not discontinue or modify this cap without the
approval of the fund's
trustees. As a result of the expense cap, the total
annual fund operating
expenses will not exceed % for Class A Shares and
% for Class D Shares.
Smith Barney Mutual Funds
5
<PAGE>
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:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a
sales charge
. The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
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) $ $
</TABLE>
Sector Funds
6
<PAGE>
Investments, risks and performance
Smith Barney Global Media & Telecommunications Fund
Investment objective
Smith Barney Global Media & Telecommunications Fund (the
"Global Media & Tele-
communications Fund") seeks long-term capital
appreciation by investing primar-
ily in common stocks.
The Global Media & Telecommunications Fund is a feeder
fund in a master/feeder
structure. Accordingly, the fund does not buy individual
securities directly.
Instead, it invests all of its assets in the Global Media
& Telecommunications
Master Portfolio ("Master Portfolio"), a series of Master
Sector Portfolio
Trust ("MSP"), a registered open-end management
investment company. The Master
Portfolio seeks long-term capital appreciation by
investing primarily in common
stocks.
In addition to selling its shares to the fund, the Master
Portfolio will sell
and may continue to sell its shares to certain other
mutual funds or other
accredited investors. The expenses and, correspondingly,
the returns of other
investment options in the Master Portfolio may differ
from those of the fund.
Principal Investment Strategies
Key investments The Master Portfolio normally invests at
least 80% of its
assets in securities of companies principally engaged in
the development, pro-
duction, sale and distribution of goods or services used
in the broadcast and
media industries as well as, companies engaged in design,
development, manufac-
ture, distribution, or sale of communications services
and equipment and compa-
nies that are involved in supplying equipment or services
to such companies.
The media and telecommunications sector includes without
limitation advertising companies; companies that own,
operate, or broadcast free or pay television, radio, or
cable stations; theaters; film studios; television and
movie programming, broadcasting and Internet access;
publishers or sellers of newspapers, magazines, books, or
video products; printing, cable television and video
companies and equipment providers; companies involved in
emerging technologies for the broadcast and media
industries; companies involved in the development,
syndication, and transmission of television, movie
programming, advertising, and cellular communications;
companies that offer
Smith Barney Mutual Funds
7
<PAGE>
local and long-distance telephone service or equipment,
wireless communica-
tions, satellite communications; companies principally
engaged in the develop-
ment, manufacture, or sale of communications services or
communications
equipment. These companies may include companies that
provide the following:
cellular, paging, and local and wide area product
networks, service or equip-
ment; microwave and cable television or equipment; and
new technologies such as
fiber optics, semiconductors, and data transmission; and
companies that dis-
tribute data-based information; and other companies
involved in the ownership,
operation, or development of media and telecommunications
products or services.
The Master Portfolio may invest without limitation in
securities of foreign
issuers and will invest in securities of issuers located
in at least three
countries, including the U.S. The Master Portfolio
invests primarily in companies with medium and
large market capitalizations. To a lesser extent, the
fund also may invest in
common stocks of companies with small market
capitalizations. Medium and large
market capitalization companies are those companies with
market capitalizations
exceeding $5 billion.
Selection process The Master Portfolio normally invests
at least 80% of its
assets in companies doing business in the media and
telecommunications
sector. The remainder of the Master Portfolio's assets
are not required to be
invested in that sector. The Master Portfolio must
maintain a portion of its
assets in cash and liquid securities to meet redemption
requests and pay the
Master Portfolio's expenses. To determine whether a
potential investment is
principally doing business in the sector, a company must
meet at least one of
the following tests:
. At least 50% of its gross income or its net sales must
come from activities
in the sector;
. At least 50% of its assets must be devoted to producing
revenues from the
sector; or
. Based on other available information, the manager
determines that the
company's primary business is within the sector.
In buying and selling securities, the Master Portfolio
relies on fundamental
analysis of each issuer and its potential for success in
light of its current
financial condition and its industry position. Factors
considered, among other
things, include long-term growth potential, earnings
estimates and quality of
management.
The Master Portfolio may lend its securities to earn
income for the Master
Portfolio.
Sector Funds
8
<PAGE>
The Master Portfolio may, but is not required to, use
various techniques, such
as buying and selling futures and options contracts, to
increase or decrease
the fund's exposure to changing security prices or other
factors that affect
security values. The Master Portfolio may engage in
foreign currency transac-
tions solely to manage its exposure to foreign
securities. If the Master Port-
folio's strategies do not work as intended, the Master
Portfolio may not
achieve its objective.
Principal risks of investing in the fund
Investors could lose money on their investments in the
Global Media & Telecom-
munications Fund, or the fund may not perform as well as
other investments,
because:
. Stock markets are volatile and can decline
significantly in response to
adverse issuer, political, regulatory, market or
economic developments. Dif-
ferent parts of the market can react differently to
these developments.
. The fund may invest a substantial portion of its assets
in foreign securi-
ties. Foreign markets can be more volatile than the
U.S. market because of
increased risks of adverse issuer, political,
regulatory, market or economic
developments and can perform differently than the U.S.
market. Currency fluc-
tuations may adversely impact the fund's investments.
. The media industry can be significantly affected by the
federal deregulation
of cable and broadcasting, competitive pressures and
government regulation.
. The telecommunications industry is subject to
government regulation of rates
of return and services that may be offered and can be
significantly (and
adversely)affected by intense competition.
. The value of an individual security or particular type
of security can be
more volatile than the market as a whole and can
perform differently than the
market as a whole. The value of smaller capitalized
companies may involve
greater risks, such as limited product lines, markets
and financial or mana-
gerial resources.
. The Master Portfolio is "non-diversified," which means
it may invest a larger
percentage of its assets in one issuer than a
diversified fund. To the extent
the Master Portfolio concentrates its assets in fewer
issuers, the Master
Portfolio will be more susceptible to events affecting
those issuers. The
Master Portfolio's investments are spread across the
sector on which it
focuses. However, because those investments are limited
to a comparatively
narrow segment of the economy, the Master Portfolio's
investments are not as
diversified as most mutual funds, and far less
diversified than the broad
securities markets. This means that the Master
Portfolio tends to be more
volatile than other mutual funds, and
Smith Barney Mutual Funds
9
<PAGE>
the values of its portfolio investments tend to go up
and down more rapidly.
As a result, the value of your investment in the fund
may rise or fall rapid-
ly.
. The judgment of the Master Portfolio's manager about
the attractiveness,
growth prospects, value or potential appreciation of a
particular stock may
prove to be incorrect.
Who may want to invest The Global Media &
Telecommunications Fund may be an
appropriate investment if you:
. Are seeking to participate in the long-term growth
potential of the global
media and telecommunications sector
. Are seeking capital appreciation and can tolerate
significant short-term vol-
atility
. Are looking for an investment with potentially greater
return but higher risk
than a fund investing primarily in fixed income
securities
. Are comfortable with the risks of the stock market and
the special risks of
foreign securities, including emerging market
securities
. Currently have exposure to the stock market and can
tolerate concentrated
investment in a single market sector
Performance
The Global Media & Telecommunications Fund is new and
does not yet have the
performance information which other Smith Barney funds
show in bar and table
form in this part of the prospectus.
Fee table
This table sets forth the fees and expenses you will pay
if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A
Class B Class L Class Y
<S> <C> <C>
<C> <C>
Maximum sales charge (load) imposed on
purchases
(as a % of offering price) 5.00%
None 1.00% None
Maximum deferred sales charge (load)
(as a % of the lower of net asset value at
purchase or redemption) None*
5.00% 1.00% None
</TABLE>
Sector Funds
10
<PAGE>
Annual fund operating expenses
<TABLE>
<CAPTION>
(expenses deducted from fund assets) Class A Class B
Class L Class Y
<S> <C> <C> <C>
<C>
Management fee** % %
% %
Distribution and service
(12b-1) fees % %
% 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 sales charge) but if you
redeem those shares
within 12 months of their purchase, you will pay a
deferred sales charge
of 1.00%.
** The "Management fee" includes an investment
management fee payable by the
Master Portfolio and an administration fee payable
by the fund.
*** The fund is new, and therefore, has no historical
expense data. The amount
set forth in "Other expenses" represents the
aggregate amount that is pay-
able by the Master Portfolio, the Underlying
Portfolios and the fund, and
has been estimated based on expenses the fund
expects to incur during its
first full fiscal year.
**** Management has agreed to cap the fund's other
expenses at %. Management
may not discontinue or modify this cap without the
approval of the fund's
trustees. As a result of the expense cap, the total
annual fund operating
expenses will not exceed % for Class A Shares
and % for Class D
Shares.
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:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a
sales charge
. The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
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) $ $
</TABLE>
Smith Barney Mutual Funds
11
<PAGE>
Investments, risks and performance
Smith Barney Global Technology Fund
Investment objective
Smith Barney Global Technology Fund (the "Global
Technology Fund") seeks long-
term capital appreciation by investing primarily in
common stocks.
The fund is a feeder fund in a master/feeder structure.
Accordingly, the fund
does not buy individual securities directly. Instead, it
invests all of its
assets in the Global Technology Master Portfolio ("Master
Portfolio"), a series
of Master Sector Portfolio Trust ("MSP"), a registered
open-end management
investment company. The Master Portfolio seeks long-term
capital appreciation
by investing primarily in common stocks.
In addition to selling its shares to the fund, the Master
Portfolio will sell
and may continue to sell its shares to certain other
mutual funds or other
accredited investors. The expenses and, correspondingly,
the returns of other
investment options in the Master Portfolio may differ
from those of the fund.
Principal Investment Strategies
Key investments The Master Portfolio normally invests at
least 80% of its
assets in securities of companies principally engaged in
offering, using or
developing products, processes or services that will
provide or will benefit
significantly from technological advances and
improvements. These companies may
include, for example, companies that develop, produce or
distribute products or
services in the computer, semi-conductor, software,
electronics, media, commu-
nications, health care, and biotechnology sectors. The
Master Portfolio may
invest without limitation in securities of foreign
issuers and will invest in
securities of issuers located in at least three
countries, including the U.S. The Master Portfolio
invests primarily in companies with medium and large
market capitalizations. To a lesser extent, the Master
Portfolio also may invest in common stocks of companies
with small market capitalizations. Medium and large
market capitalization companies are those companies with
market capitalizations exceeding $5 billion.
Selection process The Master Portfolio normally invests
at least 80% of its
assets in companies doing business in the technology
sector. The remainder of
the Master Portfolio's assets are not required to be
invested in that
Sector Funds
12
<PAGE>
sector. The Master Portfolio must maintain a portion of
its assets in cash and
liquid securities to meet redemption requests and pay the
Master Portfolio's
expenses. To determine whether a potential investment is
principally doing
business in the sector, a company must meet at least one
of the following
tests:
. At least 50% of its gross income or its net sales must
come from activities
in the sector;
. At least 50% of its assets must be devoted to producing
revenues from the
sector; or
. Based on other available information, the manager
determines that the
company's primary business is within the sector.
In buying and selling securities, the Master Portfolio
relies on fundamental
analysis of each issuer and its potential for success in
light of its current
financial condition and its industry position. Factors
considered, among other
things, include long-term growth potential, earnings
estimates and quality of
management.
The Master Portfolio may lend its securities to earn
income for the Master
Portfolio.
The Master Portfolio may, but is not required to, use
various techniques, such
as buying and selling futures and options contracts, to
increase or decrease
the Master Portfolio's exposure to changing security
prices or other factors
that affect security values. The Master Portfolio may
engage in foreign cur-
rency transactions solely to manage its exposure to
foreign securities. If the
Master Portfolio's strategies do not work as intended,
the Master Portfolio may
not achieve its objective.
Principal risks of investing in the fund
Investors could lose money on their investments in the
Global Technology Fund,
or the fund may not perform as well as other investments,
because:
. Stock markets are volatile and can decline
significantly in response to
adverse issuer, political, regulatory, market or
economic develop-
ments. Different parts of the market can react
differently to these
developments.
. The Master Portfolio may invest a substantial portion
of its assets in for-
eign securities. Foreign markets can be more volatile
than the U.S. market
because of increased risks of adverse issuer,
political, regulatory, market
or economic developments and can perform differently
than the U.S. market.
Currency fluctuations may adversely impact the fund's
investments.
Smith Barney Mutual Funds
13
<PAGE>
. Technology companies can be significantly affected by
obsolescence of exist-
ing technology, short product cycles, falling prices
and profits, and compe-
tition from new market entrants. The technology sector
may be subject to
greater governmental regulation than many other areas,
and changes in govern-
mental policies and the need for regulatory approvals
may have a material
adverse effect on the sector. The performance of the
technology sector may
differ in direction and degree from that of the overall
stock market.
. The value of an individual security or particular type
of security can be
more volatile than the market as a whole and can
perform differently than the
market as a whole. The value of smaller capitalized
companies may involve
greater risks such as limited product lines, markets
and financial or manage-
rial resources.
. The Master Portfolio is "non-diversified," which means
it may invest a larger
percentage of its assets in one issuer than a
diversified fund. To the extent
the Master Portfolio concentrates its assets in fewer
issuers, the Master
Portfolio will be more susceptible to negative events
affecting those
issuers. The Master Portfolio's investments are spread
across the sector on
which it focuses. However, because those investments
are limited to a compar-
atively narrow segment of the economy, the Master
Portfolio's investments are
not as diversified as most mutual funds, and far less
diversified than the
broad securities markets. This means that the fund
tends to be more volatile
than other mutual funds, and the values of its
portfolio investments tend to
go up and down more rapidly. As a result, the value of
your investment in the
fund may rise or fall rapidly.
. The judgment of the Master Portfolio's manager about
the attractiveness,
growth prospects, value or potential appreciation of a
particular stock may
prove to be incorrect.
Who may want to invest The fund may be an appropriate
investment if you:
. Are seeking to participate in the long-term growth
potential of the
technology sector
. Are seeking capital appreciation and can tolerate
significant short-term vol-
atility
. Are looking for an investment with potentially greater
return but higher risk
than a fund investing primarily in fixed income
securities
. Are comfortable with the risks of the stock market and
the special risks of
foreign securities, including emerging market
securities
. Currently have exposure to the stock market and can
tolerate concentrated
investment in a single market sector.
Sector Funds
14
<PAGE>
Performance
The Global Technology Fund is new and does not yet have
the performance infor-
mation which other Smith Barney funds show in bar and
table form in this part
of the prospectus.
Fee table
This table sets forth the fees and expenses you will pay
if you invest in
Global Technology Fund shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class
B Class L Class Y
<S> <C> <C>
<C> <C>
Maximum sales charge (load)
imposed on purchases
(as a % of offering price) 5.00%
None 1.00% None
Maximum deferred sales charge (load)
(as a % of the lower of net asset value at
purchase or redemption) None*
5.00% 1.00% None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A Class
B Class L Class Y
<S> <C> <C>
<C> <C>
Management fee** %
% % %
Distribution and service (12b-1) fees %
% % None
Other expenses*** %
% % %
----- ----
- ----- -----
Total annual fund operating expenses 1.43%
2.18% 2.18% 1.18%
</TABLE>
* You may buy Class A shares in amounts of $500,000
or more at net asset
value (without an initial sales charge) but if you
redeem those shares
within 12 months of their purchase, you will pay a
deferred sales charge
of 1.00%.
** The Management fee" includes an investment
management fee payable by the
Master Portfolio and an administration fee payable
by the fund.
*** The fund is new and therefore, has no historical
expense data. The
amounts set forth in "Other expenses" represents
the aggregate amount
that is payable by the Master Portfolio, the
Underlying Portfolios and
the fund, and has been estimated based on expenses
the fund expects to
incur during its first full fiscal year.
**** Management has agreed to cap the fund's other
expenses at %. Manage-
ment may not discontinue or modify this cap without
the approval of the
fund's trustees. As a result of the expense cap,
the total annual fund
operating expenses will not exceed % for Class
A Shares and % for
Class D Shares.
Smith Barney Mutual Funds
15
<PAGE>
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:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a
sales charge
. The fund's operating expenses remain the same
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years
<S> <C> <C>
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) $ $
</TABLE>
More on the funds' investments
Foreign investments Each Master Portfolio's investments
in securities of for-
eign issuers involves greater risk than investments in
securities of U.S.
issuers. Many foreign countries the funds may invest in
have markets that are
less liquid and more volatile than markets in the U.S. In
some foreign coun-
tries, less information is available about foreign
issuers and markets because
of less rigorous accounting and regulatory standards than
in the U.S. Currency
fluctuations could erase investment gains or add to
investment losses. The
risks of investing in foreign securities are greater for
securities of emerging
market issuers because political or economic instability,
lack of market
liquidity, and negative government actions like currency
controls or seizure of
private businesses or property are more likely.
Derivatives and hedging techniques Each Master Portfolio
may, but need not, use
derivate contracts, such as futures and options on
securities, securities indi-
ces or currencies; options on these futures; forward
currency contracts; and
interest rate or currency swaps for any of the following
purposes:
. To hedge against the economic impact of adverse changes
in the market value
of its securities, because of changes in stock market
prices, currency
exchange rates or interest rates
. Settle transactions in securities quoted in foreign
currencies
Sector Funds
16
<PAGE>
. As a substitute for buying or selling securities
A derivative contract will obligate or entitle each
Master Portfolio, as appli-
cable, to deliver or receive an asset or cash payment
based on the change in
value of one or more securities, currencies or indices.
Even a small investment
in derivative contracts can have a big impact on each
Master Portfolio's stock
market, currency and interest rate exposure. Therefore,
using derivatives can
disproportionately increase losses and reduce
opportunities for gains when
stock prices, currency rates or interest rates are
changing. Each Master Port-
folio 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 Master
Portfolio's holdings. The other parties to certain
derivative contracts present
the same types of credit risk as issuers of fixed income
securities. Deriva-
tives can also make a Master Portfolio less liquid and
harder to value, espe-
cially in declining markets.
Defensive investing Each Master Portfolio may depart from
its principal invest-
ment 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 a Master Portfolio takes a
temporary defensive posi-
tion, it may be unable to achieve its investment goal.
Feeder fund structure
Each of the Biotechnology Fund, Global Media &
Telecommunications Fund and
Global Technology Fund is structured as a feeder fund.
None of these funds buy
individual securities directly. Instead, each fund
invests in a corresponding
Master Portfolio. Each Master Portfolio invests in
securities in accordance
with investment objectives, policies and limitations that
are similar to those
of the corresponding fund.
As other investors invest their assets in each Master
Portfolio, certain eco-
nomic efficiencies may be realized with respect to each
Master Portfolio. For
example, fixed expenses that otherwise would have been
borne solely by the fund
(and the other existing interestholders in each Master
Portfolio) would be
spread across a larger asset base as more funds invest in
the Master Portfolio.
However, if a mutual fund or other investor withdraws its
investment from a
Master Portfolio, the economic efficiencies that should
be available through
investment in a Master Portfolio may not be fully
achieved or maintained. In
addition, given the relatively complex nature of the
master/feeder structure,
accounting and operational difficulties could occur. For
example, coordination
of calculation of net asset value could be affected at
the master and/or feeder
level.
Smith Barney Mutual Funds
17
<PAGE>
Each of the Biotechnology Fund, Global Media &
Telecommunications Fund and
Global Technology Fund may withdraw its investments in a
Master Portfolio if
the Board determines that it is in the best interests of
the corresponding fund
and its shareholders to do so. Upon any such withdrawal,
the Board would con-
sider what action might be taken, including the
investment of all the assets of
each fund in another pooled investment entity having the
same investment objec-
tive as each fund, direct management of each fund by SSB
Citi Fund Management
LLC ("SSB Citi") or CGAM.
Investment of each fund's assets in the Master Portfolio
is not a fundamental
policy of the fund and a shareholder vote is not required
for the fund to with-
draw its investment from the Master Portfolio.
Management
Manager A feeder fund does not need an investment
manager. Each Master Portfo-
lio's investment manager is SSB Citi Fund Management LLC,
an affiliate of Salo-
mon Smith Barney Inc. The manager's address is 388
Greenwich Street, New York,
New York 10013. The manager oversees the selection of the
Master Portfolio's
investments and its general operations. The manager and
Salomon Smith Barney
are subsidiaries of Citigroup Inc. Citigroup businesses
offer 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.
Subadviser Citibank, N.A., through its Citibank Global
Asset Management divi-
sion, an affiliate of the manager located at 100 First
Stamford Place, Stam-
ford, Connecticut 06902, serves as subadviser to each
Master Portfolio. The
manager, and not the funds, pays the subadviser for its
services out of its
management fee. The subadviser, utilizing a portfolio
management team approach,
manages the Master Portfolio's investment portfolio,
subject to the supervision
of the manager. The subadviser provides investment
management and advisory
services to other mutual funds and, with its affiliates,
currently manages over
$351 billion in assets worldwide.
Management fees For services provided to the Master
Portfolio, each Master
Portfolio pays the manager the annual investment
management fee described below
(based on a percentage of the Master Portfolio's average
daily net assets):
Biotechnology Fund: %
Global Media & Telecommunications Fund: %
Global Technology Fund: %
Sector Funds
18
<PAGE>
Sub-Advisory fees For services provided to the Master
Portfolios, the manager
pays the subadviser the annual subadvisory fee described
below (based on a per-
centage of the Master Portfolios's average daily net
assets):
Biotechnology Fund: %
Global Media & Telecommunications Fund: %
Global Technology Fund: %
Administrator SSB Citi serves as the administrator of
each of the Financial
Services Fund, the Health Sciences Fund and the
Technology Fund.
Pursuant to a written agreement, State Street Bank and
Trust Company provides
certain fund accounting services and calculates the daily
net asset value for
each of the Financial Services Fund, Health Sciences Fund
and Technology Fund.
The principal business address of State Street is 225
Franklin Street, Boston,
Massachusetts 02110.
Administration fees For its services, SSB Citi receives a
fee equal on an
annual basis to % of each fund's average daily net
assets.
Distributor Each fund has entered into an agreement with
Salomon Smith Barney
to distribute the fund's shares. A selling group
consisting of other broker-
dealers sells fund shares to the public.
Distribution plans Each fund has adopted a Rule 12b-1
distribution plan for its
Class A, B and L shares. Under each plan, the fund pays
distribution and serv-
ice fees. These fees are an ongoing expense and, over
time, may cost you more
than other types of sales charges.
Transfer agent and shareholder servicing agent Citi
Fiduciary Trust Company
serves as each fund's transfer agent and shareholder
servicing agent (the
"transfer agent"). Pursuant to a sub-transfer agency and
services agreement
with the transfer agent, PFPC Global Fund Services serves
as each fund's sub-
transfer agent (the "sub-transfer agent") to render
certain shareholder record
keeping and accounting services and functions.
Smith Barney Mutual Funds
19
<PAGE>
Subscription offering period
Salomon Smith Barney and investment dealers in the
selling group will solicit
subscriptions for shares of the fund during the
subscription offering period,
which is scheduled to end on , 2000. On the third
business day after the
end of the subscription offering period, subscriptions
for the shares will be
payable, exchanges into the fund will be permitted,
shares will be issued and
the fund will commence investment operations.
The fund will suspend the offering of shares to new
investors on , 2000.
This suspension, which is expected to last two weeks, may
be lengthened or
shortened at the fund's discretion. During the
suspension, existing sharehold-
ers of the fund may still purchase, redeem or exchange
fund shares. After the
suspension, the fund will commence a continuous offering
of shares to the pub-
lic.
For more information on how to subscribe for fund shares
during the subscrip-
tion offering period, please contact a Salomon Smith
Barney Financial Consul-
tant.
Sector Funds
20
<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.
. If you plan to invest regularly or in large amounts,
buying Class A shares may
help you reduce sales charges and ongoing expenses.
. For Class B shares, all of your purchase amount 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.
. 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:
. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker
that clears through Sal-
omon Smith Barney--a dealer representative
. 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,
Uniform Gift to Minor Accounts $ 250
$15 million $50
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
Smith Barney Mutual Funds
21
<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 com-
pensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class
L Class Y
<S> <C> <C> <C>
<C>
Key features .Initial .No initial .The
ini- .No initial
sales sales tial
sales or
charge charge charge
is deferred
.You may .Deferred lower
than sales
qualify sales Class A
charge
for reduc- charge
.Deferred .Must
tion or declines sales
invest at
waiver of over time charge
for least $15
initial .Converts only 1
million
sales to Class A year
.Lower
charge after 8 .Does
not annual
.Lower years convert
to expenses
annual .Higher Class A
than the
expenses annual .Higher
other
than Class expenses annual
classes
B and than Class
expenses
Class L A than
Class
A
---------------------------------------------------------
---------------
Initial sales charge Up to None 1.00%
None
5.00%;
reduced for
large pur-
chases and
waived for
certain
investors;
no charge
for pur-
chases of
$500,000 or
more
---------------------------------------------------------
---------------
Deferred sales charge 1% on pur- Up to 5% 1% if
you None
chases of charged redeem
$500,000 or when you within 1
more if you redeem year of
redeem shares. The purchase
within 1 charge is
year of reduced
purchase over time
and there
is no
deferred
sales
charge
after 6
years
---------------------------------------------------------
---------------
Annual distribution and 0.25% of 1% of aver- 1% of
aver- None
service fees average age daily age
daily
daily net net assets net
assets
assets
---------------------------------------------------------
---------------
Exchange privilege* Class A Class B Class L
Class Y
shares of shares of shares
of shares of
most Smith most Smith most
Smith most Smith
Barney Barney Barney
Barney
funds funds 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.
Sector Funds
22
<PAGE>
Sales charges
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.
<TABLE>
<CAPTION>
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
<S> <C> <C>
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.25 4.44
$50,000 but less than $100,000 3.75 3.90
$100,000 but less than $250,000 3.25 3.36
$250,000 but less than $500,000 2.75 2.83
$500,000 but less than $1,000,000 2.00 2.04
$1,000,000 or more -0- -0-
</TABLE>
Investments of $1,000,000 or more You do not pay an
initial sales charge when
you buy $1,000,000 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
. by you, or
. 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. Cer-
tain trustees and fiduciaries may be entitled to combine
accounts in deter-
mining their sales charge.
. 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
Smith Barney Mutual Funds
23
<PAGE>
charge, if any, as if all shares had been purchased at
once. You may include
purchases on which you paid a sales charge made 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:
. Employees of members of the NASD
. 403(b) or 401(k) retirement plans, if certain
conditions are met
. Clients of newly employed Salomon Smith Barney
Financial Consultants, if cer-
tain conditions are met
. 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 about additional 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").
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 pur-
chase, you will pay a deferred sales charge. The deferred
sales charge
decreases as the number of years since your purchase
increases.
<TABLE>
<CAPTION>
Year after purchase 1st 2nd 3rd 4th 5th 6th through
8th
<S> <C> <C> <C> <C> <C> <C>
Deferred sales charge 5% 4% 3% 2% 1% 0%
</TABLE>
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:
<TABLE>
<CAPTION>
Shares issued: Shares
issued:
On reinvestment of Upon
exchange from
Shares issued: dividends and another
Smith Barney
At initial purchase distributions fund
<S> <C> <C>
Eight years after the date In same proportion On the
date the
of purchase as the number of shares
originally
Class B shares acquired
would
converting is to have
converted
total Class B into Class
A
shares you own shares
(excluding shares
issued as a divi-
dend)
</TABLE>
Sector Funds
24
<PAGE>
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 any
other Smith Barney mutual
funds on June 12, 1998, you will not pay an initial sales
charge on Class L
shares you buy before June 22, 2001.
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 13-month
period. To qualify, you
must initially invest $5,000,000.
More about deferred sales charges
The deferred sales charge is based on the net asset value
at the time of pur-
chase 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:
. Shares exchanged for shares of another Smith Barney
fund
. Shares representing reinvested distributions and
dividends
. Shares no longer subject to the deferred sales charge
Each time you place a request to sell shares, the fund
will first sell any
shares in your account that are not subject to a deferred
sales charge and then
the shares in your account that have been held the
longest.
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.
Smith Barney Mutual Funds
25
<PAGE>
Deferred sales charge waivers
The deferred sales charge for each share class will
generally be waived:
. On payments made through certain systematic withdrawal
plans
. On certain distributions from a retirement plan
. For involuntary redemptions of small account balances
. 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.
Buying shares
Through a You should contact your Salomon Smith
Barney Financial Con-
Salomon Smith sultant or dealer representative to open
a brokerage account
Barney and make arrangements to buy shares. If
you do not provide
Financial the following information, your order
will be rejected:
Consultant or
dealer .Class of shares being bought
representative .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 the Qualified retirement plans and certain
other investors who
fund's sub- are clients of a selling group member
are eligible to buy
transfer shares directly from the fund.
agent
. Write the sub-transfer agent at the
following address:
Smith Barney Sector Series Inc.
(Specify fund and class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
. Enclose a check made payable to the
applicable fund to pay
for the shares. For initial purchases,
complete and send an
account application.
. For more information, call the
transfer agent at
1-800-451-2010.
Sector Funds
26
<PAGE>
---------------------------------------------------------
-----------------------
Through a You may authorize Salomon Smith Barney,
your dealer represen-
systematic tative or the sub-transfer agent to
transfer funds automati-
investment cally from a regular bank account, cash
held in a Salomon
plan Smith Barney brokerage account or Smith
Barney money market
fund to buy shares on a regular basis.
. Amounts transferred should be at least
$25 monthly or $50
quarterly
. If you do not have sufficient funds in
your account on a
transfer date, Salomon Smith Barney,
your dealer represen-
tative or the sub-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.
Exchanging shares
Smith Barney You should contact your Salomon Smith
Barney Financial Con-
offers a sultant or dealer representative to
exchange into other Smith
distinctive Barney funds. Be sure to read the
prospectus of the Smith
family of Barney fund you are exchanging into. An
exchange is a taxable
funds transaction.
tailored to
help meet the . You may exchange shares only for
shares of the same class
varying needs of another Smith Barney fund. Not all
Smith Barney funds
of both large offer all classes.
and small . Not all Smith Barney funds may be
offered in your state of
investors residence. Contact your Salomon Smith
Barney Financial Con-
sultant, dealer representative or the
transfer agent.
. You must meet the minimum investment
amount for each fund.
. If you hold share certificates, the
sub-transfer agent must
receive the certificates endorsed for
transfer or with
signed stock powers (documents
transferring ownership of
certificates) before the exchange is
effective.
. The fund may suspend or terminate your
exchange privilege
if you engage in an excessive pattern
of exchanges.
Smith Barney Mutual Funds
27
<PAGE>
---------------------------------------------------------
-----------------------
Waiver of Your shares will not be subject to an
initial sales charge at
additional the time of the exchange.
sales charges
Your deferred sales charge (if any) will
continue to be mea-
sured 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 com-
plete 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
4:00 p.m. (Eastern
time).
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 sub-trans-
fer agent at the address on the
following page.
Sector Funds
28
<PAGE>
Redeeming shares
Generally Contact your Salomon Smith Barney
Financial Consultant or
your dealer representative to redeem
shares of a fund.
If you hold share certificates, the sub-
transfer agent must
receive the certificates endorsed for
transfer or with signed
stock powers (documents transferring
ownership of certifi-
cates) 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 redemp-
tion 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 a fund,
send written requests
to the sub-transfer agent at the
following address:
Smith Barney Sector Series Inc.
(Specify fund and class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
Your written request must provide the
following:
. The account number
. The class of shares and the dollar
amount or number of
shares to be redeemed
. Signatures of each owner exactly as
the account is regis-
tered
Smith Barney Mutual Funds
29
<PAGE>
---------------------------------------------------------
-----------------------
By telephone If you do not have a brokerage account,
you may be eligible
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 tel-
ephone 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
4:00 p.m. (Eastern time).
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 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 docu-
ments.
---------------------------------------------------------
-----------------------
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 ($5,000 for retirement plan accounts)
and each automatic
redemption must be at least $50.
The following conditions apply:
. Your shares must not be represented by
certificates
. All dividends and distributions must
be reinvested
For more information, contact your
Salomon Smith Barney
Financial Consultant or dealer
representative or consult the
SAI.
Sector Funds
30
<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:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought,
exchanged or redeemed
. Signature of each owner exactly as the account is
registered
The transfer agent will try to confirm that any telephone
exchange or redemp-
tion request is genuine by recording calls, asking the
caller to provide a per-
sonal identification number for your 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:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers
to the sub-transfer
agent
. Instruct the sub-transfer agent to mail the check to an
address different
from the one on your account
. Changed your account registration
. Want the check paid to someone other than the account
owner(s)
. Are transferring the redemption proceeds to an account
with a different reg-
istration
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.
Each fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment
amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
. 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 Securi-
ties and Exchange Commission
Smith Barney Mutual Funds
31
<PAGE>
. 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 a fund's performance
and other sharehold-
ers. Each fund may limit additional purchases and/or
exchanges by a sharehold-
er.
Share certificates The funds do not issue share
certificates unless a written
request signed by all registered owners is made to the
sub-transfer agent. If
you hold share certificates it will take longer to
exchange or redeem shares.
Salomon Smith Barney Retirement Programs
You may be eligible to participate in a retirement
program sponsored by Salomon
Smith Barney or one of its affiliates. The funds offer
Class A shares at net
asset value to participating plans under the programs.
You can meet minimum
investment and exchange amounts, if any, 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 and/or the
date your account is opened. Once a class of shares is
chosen, all additional
purchases must be of the same class.
. For plans opened on or after March 1, 2000 that are not
plans for which
Paychex Inc. or an affiliate provides administrative
services ("Paychex
plan"), Class A shares may be purchased regardless of
the amount invested.
. For plans opened prior to March 1, 2000 and for Paychex
plans, the class of
shares you may purchase depends on the amount of your
initial investment:
. Class A shares may be purchased by plans investing at
least $1 million.
. Class L shares may be purchased by plans investing
less than $1 million.
Class L shares are eligible for exchange into Class A
shares not later
than 8 years after the plan joined the program. They
are eligible for
exchange sooner in the following circumstances:
Sector Funds
32
<PAGE>
If the plan was opened on or after June 21, 1996 and a
total 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 plan was opened before June 21, 1996 and a total
of $500,000 is
invested in Smith Barney Funds Class L shares (other
than money market
funds) on December 31 in any year, all Class L shares
are eligible for
exchange on or about March 31 of the following year.
For more information, call you Salomon Smith Barney
Financial Consultant or the
transfer agent, or consult the SAI.
Dividends, distributions and taxes
Dividends Each fund generally pays dividends and makes
capital gain distribu-
tions, if any, once a year, typically in December. Each
fund may pay additional
distributions and dividends at other times if necessary
for the fund to avoid a
federal tax. Each fund expects distributions to be
primarily from capital
gains. Capital gain distributions and dividends are
reinvested in additional
fund shares of the same class you hold. Alternatively,
you can instruct your
Salomon Smith Barney Financial Consultant, dealer
representative or the trans-
fer 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 distribu-
tions (whether in cash or additional shares) are all
taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
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
</TABLE>
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 long-
term capital
Smith Barney Mutual Funds
33
<PAGE>
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, each fund will provide you
with information about
the distributions and dividends you received and any
redemptions of shares dur-
ing the previous year. If you do not provide the fund
with your correct tax-
payer 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.
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. Each fund's net asset value is the value of its
assets minus its liabil-
ities. Net asset value is calculated separately for each
class of shares. Each
fund calculates its net asset value every day the New
York Stock Exchange is
open. This calculation is done when regular trading
closes on the Exchange
(normally 4:00 p.m., Eastern time). The Exchange is
closed on certain holidays
listed in the SAI.
Each fund's currency conversions are done when the London
stock exchange
closes. When reliable market prices or quotations are not
readily available, or
when the value of a security has been materially affected
by events occurring
after a foreign exchange closes, a fund may price those
securities at fair val-
ue. Fair value is determined in accordance with
procedures approved by the
fund's board. Each 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 a fund could change
on days when you can-
not 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 repre-
sentative before the New York Stock Exchange closes. If
the 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.
Sector Funds
34
<PAGE>
(This page is intentionally left
blank.)
<PAGE>
SalomonSmithBarney
------
----------------------
A
member of citigroup [LOGO]
Biotechnology
Fund
Global Media & Telecommunications Fund
Global Technology Fund
Each an investment portfolio of Smith Barney Sector
Series Inc.
Shareholder reports Annual and semiannual reports to
shareholders provide
additional information about a fund's investments. These
reports discuss the
market conditions and investment strategies that affected
the fund's perfor-
mance.
Each 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 a fund and is
incorporated by refer-
ence into (is a legally part of) this prospectus.
You can make inquiries about a fund or obtain shareholder
reports or the
statement of additional information (without charge) by
contacting your Salo-
mon 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
Information about each fund (including the SAI) can be
reviewed and copied at
the Commission's Public Reference Room in Washington D.C.
In addition, infor-
mation on the operation of the Public Reference Room may
be obtained by call-
ing the Commission at 1-202-942-8090. Reports and other
information about each
fund are available on the EDGAR Database on the
Commission's Internet site
at http://www.sec.gov. Copies of this information may be
obtained for a
duplicating fee by electronic request at the following E-
mail address:
[email protected], or by writing the Commission's Public
Reference Section,
Washington, D.C. 20549-0102.
If someone makes a statement about a fund that is not in
this prospectus, you
should not rely upon that information. Neither the funds
nor the distributor
is offering to sell shares of a fund to any person to
whom the fund may not
lawfully sell its shares.
SMSalomon Smith Barney is a service mark of Salomon
Smith Barney Inc.
(Investment Company Act
file no. 811-04757)
FD 01756 2/00
Part B-Statement of Additional Information for the
Biotechnology Fund, Global Media & Telecommunications
Fund and Global Technology Fund
August __, 2000
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY SECTOR SERIES INC.
Smith Barney Biotechnology Fund
Smith Barney Global Media & Telecommunications Fund
Smith Barney Global Technology Fund
388 Greenwich Street
New York, New York 10013
(800) 451-2010
This Statement of Additional Information ("SAI") is
meant to be read in conjunction with the combined
prospectus of Smith Barney Biotechnology Fund
("Biotechnology Fund"), Smith Barney Global Media &
Telecommunications Fund ("Global Media &
Telecommunications Fund") and Smith Barney Global
Technology Fund ("Global Technology Fund") (each, a
"Fund") dated August __, 2000, as amended or
supplemented from time to time (the "prospectus"), and
is incorporated by reference in its entirety into the
prospectus. Each Fund is a series of the Smith Barney
Sector Series Inc. (the "Company") which also offers
four other series: Smith Barney Natural Resources
Fund, Smith Barney Financial Services Fund, Smith
Barney Health Sciences Fund and Smith Barney
Technology Fund. The prospectus and copies of other
information on the funds may be obtained free of
charge by contacting a Salomon Smith Barney Financial
Consultant, or by writing or calling Salomon Smith
Barney at the address or telephone number above.
TABLE OF CONTENTS
Investment Objective and Management Policies 2
Risk Factors 8
Investment Restrictions 18
Directors and Executive Officers of the Company 20
Investment Management and Other Services 22
Portfolio Transactions 25
Portfolio Turnover 27
Purchase of Shares 27
Redemption of Shares 34
Valuation of Shares 35
Exchange Privilege 36
Performance Information 37
Dividends, Distributions and Taxes 39
Other Information About the Company 44
Financial Statements 45
Other Information 45
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
In order to take advantage of the economies of scale
offered by a larger pool of assets, each fund is
structured as a "feeder" fund. A feeder fund seeks to
achieve its investment objective through investments
in a corresponding Master Portfolio. The Master
Portfolio invests substantially all of its assets in
securities in accordance with investment objectives,
policies, and limitations that are substantially
similar to those of the fund. In other words, the
fund "feeds" shareholder investments into its
corresponding Master Portfolio.
The prospectus discusses each fund's and each Master
Portfolio's investment objective and policies. This
section contains supplemental information concerning
the types of securities and other instruments in which
each fund and each Master Portfolio may invest, the
investment policies and portfolio strategies the fund
and each Master Portfolio may utilize and certain
risks associated with these investments, policies and
strategies. SSB Citi Fund Management LLC ("SSB Citi")
serves as each fund's administrator.
Master Sector Portfolio ("MSP") is an open-end,
management investment company, organized on April
2000, as a business trust under the laws of the State
of [New York]. MSP is a "series fund," which is a
mutual fund divided into separate portfolios:
Financial Services Master Portfolio, Health Sciences
Master Portfolio and Technology Master Portfolio
(each, a "Master Portfolio") are non-diversified
portfolios of MSP. Each Master Portfolio is treated as
a separate entity for certain purposes under the
Investment Company Act of 1940, as amended (the "1940
Act"), and for other purposes, an interestholder of
the Master Portfolio is not deemed to be an
interestholder of any other master portfolio of MSP.
A feeder fund does not need an investment manager. SSB
Citi (the "Manager") serves as Investment Manager to
each Master Portfolio. Citibank, N.A., through its
Citibank Global Asset Management division ("CGAM" or
the "Sub-Adviser"), an affiliate of the Manager,
serves as the sub-adviser to each Master Portfolio.
Beneficial interests in the Master Portfolios are
issued solely in private placement transactions which
do not involve any "public offering" within the
meaning of Regulation D under the Securities Act of
1933, as amended (the "1933 Act"). Investments in the
Master Portfolios may be made only by investment
companies or certain other entities, which are
"accredited investors" within the meaning of
Regulation D under the 1933 Act. Investment companies
that hold units of beneficial interest ("interests")
in the Master Portfolios are sometimes referred to
herein as "feeder funds."
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and manage
their own portfolio of securities, each fund is a
"feeder" fund in a "master/feeder" structure. This
means that each fund invests in a larger "master"
portfolio of securities that has investment objectives
and policies substantially identical to those of each
fund. The investment performance of each fund depends
on the investment performance of each Master
Portfolio. If the investment policies of a fund and
the Master Portfolio become inconsistent, the Board of
Directors of the fund can decide what actions to take.
Actions the Board of Directors may recommend include
withdrawal of a fund's assets from the Master
Portfolio. The Board of Directors would then consider
whether it should hire its own investment adviser,
invest in a different master portfolio, or take other
action.
Investment in each fund's assets in the Master
Portfolio is not a fundamental policy of the fund and
a shareholder vote is not required for the fund to
withdraw its investment from the Master Portfolio.
Biotechnology Fund
Biotechnology Fund seeks long-term capital
appreciation by investing primarily in common stocks.
The Fund invests in the Biotechnology Master Portfolio
that invests at least 80% of its assets in securities
of companies principally engaged in the research,
development, and manufacture of various
biotechnological products, services, and processes.
The Fund will also invest in securities of companies
that distribute biotechnological and biomedical
products and companies that benefit significantly from
scientific and technological advances in
biotechnology.
Global Media & Telecommunications Fund
Global Media & Telecommunications Fund seeks long-term
capital appreciation by investing primarily in common
stocks. The Fund invests in the Global Media &
Telecommunications Master Portfolio that invests at
least 80% of its assets in securities of companies
principally engaged in the following: the development,
production, sale, and distribution of goods or
services used in the broadcast and media industries;
and in securities of companies principally engaged in
the development, manufacture, or sale of
communications services or communications equipment.
The Fund may invest without limitation in securities
of foreign issuers and will invest in securities of
issuers located in at least three countries, including
the U.S.
Global Technology Fund
Global Technology Fund seeks long-term capital
appreciation by investing its assets primarily in
common stocks. The Fund invests in the Global
Technology Master Portfolio that normally invests at
least 80% of its assets in securities of companies
principally engaged in offering, using or developing
products, processes or services that will provide or
will benefit significantly from technological advances
and improvements. These companies may include, for
example, companies that develop, produce or distribute
products or services in the computer, semi-conductor,
software, electronics, media, communications, health
care, and biotechnology sectors. The Fund may invest
without limitation in securities of foreign issuers
and will invest in securities of issuers located in at
least three countries, including the U.S.
Each Master Portfolio
Each Master Portfolio may invest its assets in
securities of foreign issuers in addition to
securities of domestic issuers. In addition, the
Global Media & Telecommunications Master Portfolio and
Global Technology Master Portfolio may invest without
limitation in securities of foreign issuers and will
invest in securities of issuers located in at least
three countries, including the U.S. Because each
Master Portfolio is considered non-diversified, a
Master Portfolio may invest a significant percentage
of its assets in a single issuer.
In buying and selling securities for each Master
Portfolio, CGAM relies on fundamental analysis of each
issuer and its potential for success in light of its
current financial condition and its industry position.
Factors considered include long-term growth potential,
earnings estimates and quality of management.
CGAM may lend each Master Portfolio's securities to
broker-dealers or other institutions to earn income
for the Master Portfolio. CGAM may, but is not
required to, use various techniques, such as buying
and selling futures and options contracts, to increase
or decrease a Master Portfolio's exposure to changing
security prices or other factors that affect security
values. If CGAM's strategies do not work as intended,
a Master Portfolio may not achieve its objective.
Under normal market conditions, the majority of a
Master Portfolio's portfolio will consist of common
stock, but it also may contain money market
instruments for cash management purposes. Each Master
Portfolio 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. If a Master Portfolio takes a
temporary defensive position, it may be unable to
achieve its investment goal.
Equity Securities. Each Master Portfolio will
normally invest at least 80% of its assets in equity
securities, including primarily common stocks and, to
a lesser extent, securities convertible into common
stock and rights to subscribe for common stock. Common
stocks represent an equity (ownership) interest in a
corporation. Although equity securities have a
history of long-term growth in value, their prices
fluctuate based on changes in a company's financial
condition and on overall market and economic
conditions.
When-Issued Securities and Delayed-Delivery
Transactions. Each Master Portfolio may purchase
securities on a "when-issued" basis, for delayed
delivery (i.e., payment or delivery occur beyond the
normal settlement date at a stated price and yield) or
on a forward commitment basis. A Master Portfolio does
not intend to engage in these transactions for
speculative purposes, but only in furtherance of its
investment goal. These transactions occur when
securities are purchased or sold by a Master Portfolio
with payment and delivery taking place in the future
to secure what is considered an advantageous yield and
price to a Master Portfolio at the time of entering
into the transaction. The payment obligation and the
interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into
the commitment. Because of fluctuations in the value
of securities purchased or sold on a when-issued,
delayed-delivery basis or forward commitment basis,
the prices obtained on such securities may be higher
or lower than the prices available in the market on
the dates when the investments are actually delivered
to the buyer.
When the Master Portfolio agrees to purchase
when-issued or delayed-delivery securities, the Master
Portfolio will set aside cash or liquid securities
equal to the amount of the commitment in a segregated
account on the Master Portfolio's books. Normally,
the custodian will set aside portfolio securities to
satisfy a purchase commitment, and in such a case the
Master Portfolio may be required subsequently to place
additional assets in the segregated account in order
to ensure that the value of the account remains equal
to the amount of the Master Portfolio's commitment.
The assets contained in the segregated account will be
marked-to-market daily. It may be expected that the
Master Portfolio's net assets will fluctuate to a
greater degree when it sets aside portfolio securities
to cover such purchase commitments than when it sets
aside cash. When the Master Portfolio engages in
when-issued or delayed-delivery transactions, it
relies on the other party to consummate the trade.
Failure of the seller to do so may result in the
Master Portfolio's incurring a loss or missing an
opportunity to obtain a price considered to be
advantageous.
Foreign Securities. Each Master Portfolio may invest
in securities of foreign issuers. Moreover, the Global
Media & Telecommunication Master Portfolio and the
Global Technology Master Portfolio may invest without
limitation in foreign securities. Such investments
involve certain risks not ordinarily associated with
investments in securities of domestic issuers. Such
risks include currency exchange control regulations
and costs, the possibility of expropriation, seizure,
or nationalization of foreign deposits, less liquidity
and volume and more volatility in foreign securities
markets and the impact of political, social, economic
or diplomatic developments or the adoption of other
foreign government restrictions that might adversely
affect the payment of principal and interest on or
market value of securities. If it should become
necessary, the Master Portfolio might encounter
greater difficulties in invoking legal processes
abroad than would be the case in the United States.
In addition, there may be less publicly available
information about a non-U.S. company, and non-U.S.
companies are not generally subject to uniform
accounting and financial reporting standards,
practices and requirements comparable to those
applicable to U.S. companies. Furthermore, some of
these securities may be subject to foreign brokerage
and withholding taxes.
Each Master Portfolio may also invest in securities of
foreign issuers in the form of American Depository
Receipts ("ADRs"), European Depository Receipts
("EDRs") or similar securities representing interests
in the common stock of foreign issuers. ADRs are
receipts, typically issued by a U.S. bank or trust
company, which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities
markets and EDRs are designed for use in European
securities markets. The underlying securities are not
always denominated in the same currency as the ADRs or
EDRs. Although investment in the form of ADRs or EDRs
facilitates trading in foreign securities, it does not
mitigate the risks associated with investing in
foreign securities. However, by investing in ADRs or
EDRs rather than directly in foreign issuers' stock,
the Master Portfolio can avoid currency risks during
the settlement period for either purchases or sales.
In general, there is a large, liquid market in the
United States for many ADRs and EDRs. The information
available for ADRs and EDRs is subject to the
accounting, auditing and financial reporting standards
of the domestic market or exchange on which they are
traded, which standards are more uniform and more
exacting than those to which many foreign issuers may
be subject.
Investments in foreign securities incur higher costs
than investments in U.S. securities, including higher
costs in making securities transactions as well as
foreign government taxes, which may reduce the
investment return of the Master Portfolio. In
addition, foreign investments may include additional
risks associated with currency exchange rates, less
complete financial information about individual
companies, less market liquidity and political
instability.
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 Master Portfolio'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 Master Portfolio's securities are quoted would
reduce the Fund's net asset value per share.
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
Master Portfolio's investments in such a market. The
claims of many property owners against those of
governments may remain unsettled. There can be no
assurance that any investments that a Master Portfolio
might make in such emerging markets would be
expropriated, nationalized or otherwise confiscated at
some time in the future. In such an event, the Master
Portfolio 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.
Money Market Instruments. Each Master Portfolio may
invest for temporary defensive purposes in short-term
corporate and government bonds and notes and money
market instruments. Money market instruments include:
obligations issued or guaranteed by the United States
government, its agencies or instrumentalities ("U.S.
government securities"); certificates of deposit, time
deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the
United States and subsidiaries located in Canada),
domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade
commercial paper; and repurchase agreements with
respect to the foregoing types of instruments.
Certificates of deposit ("CDs") are short-term,
negotiable obligations of commercial banks. Time
deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified
periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks
by borrowers, usually in connection with international
transactions.
Repurchase Agreements. Each Master Portfolio may
agree to purchase securities from a bank or recognized
securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-upon
date and price reflecting a market rate of interest
unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). A
Master Portfolio would maintain custody of the
underlying securities prior to their repurchase; thus,
the obligation of the bank or dealer to pay the
repurchase price on the date agreed to would be, in
effect, secured by such securities. If the value of
such securities were less than the repurchase price,
plus interest, the other party to the agreement would
be required to provide additional collateral so that
at all times the collateral is at least 102% of the
repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose the Master
Portfolio to possible loss because of adverse market
action, expenses and/or delays in connection with the
disposition of the underlying obligations. The
financial institutions with which the Master Portfolio
may enter into repurchase agreements will be banks and
non-bank dealers of U.S. Government securities on the
Federal Reserve Bank of New York's list of reporting
dealers, if such banks and non-bank dealers are deemed
creditworthy by CGAM. CGAM will continue to monitor
creditworthiness of the seller under a repurchase
agreement, and will require the seller to maintain
during the term of the agreement the value of the
securities subject to the agreement to equal at least
102% of the repurchase price (including accrued
interest). In addition, CGAM will require that the
value of this collateral, after transaction costs
(including loss of interest) reasonably expected to be
incurred on a default, be equal to 102% or greater
than the repurchase price (including accrued premium)
provided in the repurchase agreement or the daily
amortization of the difference between the purchase
price and the repurchase price specified in the
repurchase agreement. CGAM will mark-to-market daily
the value of the securities. Repurchase agreements
are considered to be loans by the Master Portfolio
under the Investment Company Act of 1940, as amended
(the "1940 Act").
Reverse Repurchase Agreements. Each Master Portfolio
may enter into reverse repurchase agreements which
involve the sale of Master Portfolio securities with
an agreement to repurchase the securities at an
agreed-upon price, date and interest payment and have
the characteristics of borrowing. Since the proceeds
of borrowings under reverse repurchase agreements are
invested, this would introduce the speculative factor
known as "leverage." The securities purchased with
the funds obtained from the agreement and securities
collateralizing the agreement will have maturity dates
no later than the repayment date. Generally the
effect of such a transaction is that the Master
Portfolio can recover all or most of the cash invested
in the portfolio securities involved during the term
of the reverse repurchase agreement, while in many
cases it will be able to keep some of the interest
income associated with those securities. Such
transactions are only advantageous if the Master
Portfolio has an opportunity to earn a greater rate of
interest on the cash derived from the transaction than
the interest cost of obtaining that cash.
Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest
required to be paid may not always be available, and
the Master Portfolio intends to use the reverse
repurchase technique only when CGAM believes it will
be advantageous to the Master Portfolio. The use of
reverse repurchase agreements may exaggerate any
interim increase or decrease in the value of the
Master Portfolio's assets. The Master Portfolio's
custodian bank will maintain a separate account for
the Master Portfolio with securities having a value
equal to or greater than such commitments.
Lending of Portfolio Securities. Consistent with
applicable regulatory requirements, each Master
Portfolio may lend portfolio securities to brokers,
dealers and other financial organizations that meet
capital and other credit requirements or other
criteria established by the Board. The Master
Portfolio will not lend portfolio securities to
affiliates of the Manager unless they have applied for
and received specific authority to do so from the
Securities and Exchange Commission ("SEC"). Loans of
portfolio securities will be collateralized by cash or
liquid securities, which are maintained at all times
in an amount equal to at least 102% of the current
market value of the loaned securities. Any gain or
loss in the market price of the securities loaned that
might occur during the term of the loan would be for
the account of the Master Portfolio. From time to
time, the Master Portfolio may return 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 Master
Portfolio and that is acting as a "finder."
By lending its securities, the Master Portfolio can
increase its income by continuing to receive interest
and any dividends on the loaned securities as well as
by either investing the collateral received for
securities loaned 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. Although the generation of income is not
the primary investment goal of the Master Portfolio,
income received could be used to pay the Master
Portfolio's expenses and would increase an investor's
total return. The Master Portfolio will adhere to the
following conditions whenever its portfolio securities
are loaned: (i) the Master Portfolio must receive at
least 102% cash collateral or equivalent securities of
the type discussed in the preceding paragraph from the
borrower; (ii) the borrower must increase such
collateral whenever the market value of the securities
rises above the level of such collateral; (iii) the
Master Portfolio must be able to terminate the loan at
any time; (iv) the Master Portfolio 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;
(v) the Master Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi)
voting rights on the loaned securities may pass to the
borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Board
must terminate the loan and regain the right to vote
the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other
party including possible delays or restrictions upon a
Master Portfolio's ability to recover the loaned
securities or dispose of the collateral for the loan.
Borrowing. Each Master Portfolio also may borrow for
temporary or emergency purposes, but not for
leveraging purposes, in an amount up to 331/3% of its
total assets, and may pledge its assets in connection
with such borrowings. If a Master Portfolio borrows
money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a
Master Portfolio makes additional investments while
borrowings are outstanding, this may be considered a
form of leverage.
Illiquid Securities. Each Master Portfolio may invest
up to an aggregate amount of 15% of its net assets in
illiquid securities, which term includes securities
subject to contractual or other restrictions on resale
and other instruments that lack readily available
markets.
RISK FACTORS
Companies in the each sector face special risks. For
example, their products or services may not prove
commercially successful or may become obsolete
quickly. The value of a Fund's shares may be
susceptible to factors affecting the technology and
science areas and to greater risk and market
fluctuation than an investment in a fund that invests
in a broader range of portfolio securities not
concentrated in any particular industry. As such, a
Fund is not an appropriate investment for individuals
who are not long-term investors and who, as their
primary objective, require safety of principal or
stable income from their investments. Each sector may
be subject to greater governmental regulation than
many other areas and changes in governmental policies
and the need for regulatory approvals may have a
material adverse effect on these areas. Additionally,
companies in these sector may be subject to risks of
developing technologies, competitive pressures and
other factors and are dependent upon consumer and
business acceptance as new technologies evolve.
The types of companies in which a Master Portfolio
invests present risks. The market may value companies
according to size, or market capitalization, rather
than on financial performance. The companies in each
sector may be developing or changing. They may be
subject to greater business risks and more sensitive
to changes in economic conditions than larger, more
established companies. Company earnings in these
sectors may fluctuate more than those of other
companies because of short product cycles and
competitive pricing. Investors' enthusiasm for these
stocks can also change dramatically, causing stock
prices to rise and fall sharply.
Biotechnology Master Portfolio
Patent considerations, intense competition, rapid
technological change and obsolescence, and government
regulation can significantly (and adversely) affect
the biotechnology sector. Biotechnology companies can
have persistent losses during a new product's
transition from development to production, and revenue
patterns can be erratic.
This sector generally is subject to extensive
governmental regulation, which may change frequently.
In addition, the profitability of businesses in
financial services depends heavily upon the
availability and cost of capital, and may fluctuate
significantly in response to changes in interest
rates, as well as changes in general economic
conditions. From time to time, severe competition may
also affect the profitability of financial services
companies.
Global Media & Telecommunications Master Portfolio
Companies in the media and telecommunications sector
are subject to the risks of rapid obsolescence, lack
of investor or consumer acceptance, lack of
standardization or compatibility with existing
technologies, an unfavorable regulatory environment,
intense competition, and a dependency on patent and
copyright protection. The media sector can be
significantly (and adversely) affected by the federal
deregulation of cable and broadcasting, competitive
pressures, and government regulation, including
regulation of the concentration of investment in AM,
FM, or TV stations. The telecommunications industry,
particularly telephone operating companies, is subject
to both federal and state government regulations of
rates of return and services that may be offered. Many
telecommunications companies fiercely compete for
market share.
The telecommunications industry is subject to
governmental regulation and greater price volatility
than the overall market and the products and services
of telecommunications companies may be subject to
rapid obsolescence resulting from changing consumer
tastes, intense competition and strong market
reactions to technological developments throughout the
industry. Certain companies in the United States, for
example, are subject to both state and federal
regulations affecting permitted rates of return and
the kinds of services that may be offered. Such
companies are becoming subject to increasing levels of
competition. As a result, stocks of these companies
may be subject to greater price volatility.
The communications, entertainment, media and
publishing industries are subject to governmental
regulation and a greater price volatility than the
overall market and the products and services of such
companies may be subject to rapid obsolescence
resulting from changing consumer tastes, intense
competition and strong market reactions to
technological developments throughout the industry.
Certain of the companies in which the Master Portfolio
invests may allocate greater than usual financial
resources to research and product development. The
securities of such companies may experience above-
average price movements associated with the perceived
prospects of success of the research and development
programs. In addition, companies in which the Master
Portfolio invests may be adversely affected by lack of
commercial acceptance of a new product or process or
by technological change and obsolescence.
Global Technology Master Portfolio
Many technological products and services are subject
to rapid obsolescence, which may lower the market
value of the securities of the companies in this
sector. Also, the portfolio consists of faster-
growing, more volatile technology companies that CGAM
believes to be emerging leaders in their fields. The
market prices of these companies tend to rise and fall
more rapidly than those of larger, more established
companies.
Sector Risks CGAM believes that because of rapid
advances in each sector, an investment in companies
with business operations in these areas may offer
substantial opportunities for long-term capital
appreciation. Of course, prices of common stocks of
even the best managed, most profitable corporations
are subject to market risk, which means their stock
prices can decline. In addition, swings in investor
psychology or significant trading by large
institutional investors can result in price
fluctuations. Industries likely to be represented in
the portfolio include computers, networking and
internetworking software, computer aided design,
telecommunications, media and information services,
medical devices and biotechnology. A Master Portfolio
may also invest in the stocks of companies that may
benefit from the commercialization of technological
advances, although they may not be directly involved
in research and development.
The sectors have exhibited and may continue to exhibit
rapid growth, both through increasing demand for
existing products and services and the broadening of
the sector. In general, the stocks of large
capitalized companies that are well established in the
sector can be expected to grow with the market and
will frequently be found in a Master Portfolio's
portfolio. The expansion of each sector and its
related industries, however, also provides a favorable
environment for investment in small to medium
capitalized companies. A Master Portfolio's investment
policy is not limited to any minimum capitalization
requirement and a Master Portfolio may hold securities
without regard to the capitalization of the issuer.
CGAM's overall stock selection for a Master Portfolio
is not based on the capitalization or size of the
company but rather on an assessment of the company's
fundamental prospects.
Risks Associated with Particular Investments
Market Risk. Equity stock prices vary and may fall,
thus reducing the value of your Fund's investment.
Certain stocks selected for any Master Portfolio's
portfolio may decline in value more than the overall
stock market.
Foreign Securities. Investments in foreign and
emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks.
Each Master Portfolio has the ability to invest more
than 25% of its respective assets in the securities of
non-U.S. issuers. In addition, the Global Media &
Telecommunications Master Portfolio and Global
Technology Master Portfolio may invest without
limitation in securities of foreign issuers and will
invest in securities of issuers located in at least
three countries
Many countries impose various types of ownership
restrictions on investments both in mass media
companies, such as broadcasters and cable operators,
as well as in common carrier companies, such as the
providers of local telephone service and cellular
radio.
Government actions around the world, specifically
in the area of pre-marketing clearance of products and
prices, can be arbitrary and unpredictable.
Changes in world currency values are also
unpredictable and can have a significant short-term
impact on revenues, profits and share valuations.
Currency Risk. A change in the exchange rate between
U.S. dollars and a foreign currency may reduce the
value of a Master Portfolio's investment in a security
valued in the foreign currency, or based on that
currency value.
Political and Diplomatic Risk. Political actions,
events or instability may result in unfavorable
changes in the value of a security. In addition, a
change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of
investments.
Regulatory Risk. Government regulations may affect
the value of a security. In foreign countries,
securities markets that are less regulated than those
in the U.S. may permit trading practices that are not
allowed in the U.S.
Liquidity Risk. A Master Portfolio's portfolio is
liquid if the Master Portfolio is able to sell the
securities it owns at a fair price within a reasonable
time. Liquidity is generally related to the market
trading volume for a particular security. Investments
in smaller companies or in foreign companies or
companies in emerging markets are subject to a variety
of risks, including potential lack of liquidity.
Smaller Capitalized Companies. CGAMr believes that
smaller capitalized companies generally have greater
earnings and sales growth potential than larger
capitalized companies. The level of risk will be
increased to the extent each Master Portfolio has
significant exposure to smaller capitalized or
unseasoned companies (those with less than a three-
year operating history). Investments in smaller
capitalized companies may involve greater risks, such
as limited product lines, markets and financial or
managerial resources. In addition, less frequently
traded securities may be subject to more abrupt price
movements than securities of larger capitalized
companies.
Derivatives Risk. A Master Portfolio's use of
options, futures and options on futures
("derivatives") involves additional risks and
transaction costs, such as, (i) adverse changes in the
value of these instruments, (ii) imperfect
corrrelation between the price of derivatives and
movements in the price of the underlying securities,
index or futures contracts, (iii) the fact that use of
derivatives requires different skill than those needed
to select portfolio securities, and (iv) the possible
absence of a liquid secondary market for a particular
derivative at any moment in time.
Counterparty Risk. This is a risk associated
primarily with repurchase agreements and some
derivatives transactions. It is the risk that the
other party in such a transaction will not fulfill its
contractual obligation to complete a transaction with
a Master Portfolio.
Lack of Timely Information Risk. Timely information
about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to
smaller company securities issued by foreign companies
and companies in emerging markets than it is to the
securities of U.S.-based companies.
Non-Diversified Classification. Each Master Portfolio
is classified as a non-diversified fund under the 1940
Act which means the Master Portfolio is not limited by
the Act in the proportion of its assets it may invest
in the obligations of a single issuer. As a result,
the Master Portfolios may be subject to greater
volatility with respect to their portfolio securities
than funds that are more broadly diversified. Each
Master Portfolio intends to conduct its operations,
however, so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve the
Master Portfolio of any liability for Federal income
tax to the extent its earnings are distributed to
shareholders. To qualify as a regulated investment
company, the Master Portfolio will, among other
things, limit its investments so that, at the close of
each quarter of the taxable year (a) not more than 25%
of the market value of the Master Portfolio's total
assets will be invested in the securities of a single
issuer and (b) with respect to 50% of the market value
of its total assets, not more than 5% of the market
value of its total assets will be invested in the
securities of a single issuer and the Master Portfolio
will not own more than 10% of the outstanding voting
securities of a single issuer.
Options, Futures and Currency Strategies. Each Master
Portfolio may, but is not required to, use forward
currency contracts and certain options and futures
strategies to seek to increase total return or hedge
its portfolio, i.e., reduce the overall level of
investment risk normally associated with the Master
Portfolio. There can be no assurance that such
efforts will succeed.
In order to assure that the Master Portfolio will not
be deemed to be a "commodity pool" for purposes of the
Commodity Exchange Act, regulations of the Commodity
Futures Trading Commission ("CFTC") require that the
Master Portfolio enter into transactions in futures
contracts and options on futures only (i) for bona
fide hedging purposes (as defined in CFTC
regulations), or (ii) for non-hedging purposes,
provided the aggregate initial margin and premiums on
such non-hedging positions do not exceed 5% of the
liquidation value of the Master Portfolio's assets.
To attempt to hedge against adverse movements in
exchange rates between currencies, the Master
Portfolio may enter into forward currency contracts
for the purchase or sale of a specified currency at a
specified future date. Such contracts may involve the
purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies.
The Master Portfolio may enter into forward currency
contracts either with respect to specific transactions
or with respect to its portfolio positions. For
example, when CGAM anticipates making a purchase or
sale of a security, it may enter into a forward
currency contract in order to set the rate (either
relative to the U.S. dollar or another currency) at
which the currency exchange transaction related to the
purchase or sale will be made ("transaction hedging").
Further, when CGAM believes a particular currency may
decline compared to the U.S. dollar or another
currency, the Master Portfolio may enter into a
forward contract to sell the currency CGAM expects to
decline in an amount approximating the value of some
or all of the Master Portfolio's securities
denominated in that currency, or when CGAM believes
one currency may decline against a currency in which
some or all of the portfolio securities held by the
Master Portfolio are denominated, it may enter into a
forward contract to buy the currency expected to
decline for a fixed amount ("position hedging"). In
this situation, the Master Portfolio may, in the
alternative, enter into a forward contract to sell a
different currency for a fixed amount of the currency
expected to decline where CGAM believes the value of
the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the
value of the currency in which portfolio securities of
the Master Portfolio are denominated ("cross
hedging"). The Master Portfolio places (i) cash, (ii)
U.S. Government securities or (iii) equity securities
or debt securities (of any grade) in certain
currencies provided such assets are liquid,
unencumbered and marked to market daily, or other
high-quality debt securities denominated in certain
currencies in a separate account of the Master
Portfolio having a value equal to the aggregate amount
of the Master Portfolio's commitments under forward
contracts entered into with respect to position hedges
and cross-hedges. If the value of the securities
placed in a separate account declines, additional cash
or securities are placed in the account on a daily
basis so that the value of the amount will equal the
amount of the Master Portfolio's commitments with
respect to such contracts.
For hedging purposes, the Master Portfolio may write
covered call options and purchase put and call options
on currencies to hedge against movements in exchange
rates and on debt securities to hedge against the risk
of fluctuations in the prices of securities held by
the Master Portfolio or which CGAM intends to include
in its portfolio. The Master Portfolio also may use
interest rates futures contracts and options thereon
to hedge against changes in the general level in
interest rates.
The Master Portfolio may write call options on
securities and currencies only if they are covered,
and such options must remain covered so long as the
Master Portfolio is obligated as a writer. A call
option written by the Master Portfolio is "covered" if
the Master Portfolio owns the securities or currency
underlying the option or has an absolute and immediate
right to acquire that security or currency without
additional cash consideration (or for additional cash
consideration held in a segregated account on the
Master Portfolio's books) upon conversion or exchange
of other securities or currencies held in its
portfolio. A call option is also covered if the
Master Portfolio holds on a share-for-share basis a
call on the same security or holds a call on the same
currency as the call written where the exercise price
of the call held is equal to less than the exercise
price of the call written or greater than the exercise
price of the call written if the difference is
maintained by the Master Portfolio in cash, Treasury
bills or other high-grade, short-term obligations in a
segregated account on the Master Portfolio's books.
The Master Portfolio may purchase put and call options
in anticipation of declines in the value of portfolio
securities or increases in the value of securities to
be acquired. If the expected changes occur, the
Master Portfolio may be able to offset the resulting
adverse effect on its portfolio, in whole or in part,
through the options purchased. The risk assumed by
the Master Portfolio in connection with such
transactions is limited to the amount of the premium
and related transaction costs associated with the
option, although the Master Portfolio may lose such
amounts if the prices of securities underlying the
options do not move in the direction or to the extent
anticipated.
Although the portfolio may not use forward currency
contracts, options and futures, the use of any of
these strategies would involve certain investment
risks and transaction costs. These risks include:
dependence on the CGAM's ability to predict movements
in the prices of individual securities, fluctuations
in the general fixed-income markets and movements in
interest rates and currency markets, imperfect
correlation between movements in the price of
currency, options, futures contracts or options
thereon and movements in the price of the currency or
security hedged or used for cover; the fact that
skills and techniques needed to trade options, futures
contracts and options thereon or to use forward
currency contracts are different from those needed to
select the securities in which the Master Portfolio
invests; and lack of assurance that a liquid market
will exist for any particular option, futures contract
or option thereon at any particular time.
Over-the-counter options in which the Master Portfolio
may invest differ from exchange traded options in that
they are two-party contracts, with price and other
terms negotiated between buyer and seller, and
generally do not have as much market liquidity as
exchange-traded options. The Master Portfolio may be
required to treat as illiquid over-the-counter options
purchased and securities being used to cover certain
written over-the-counter options.
Options on Securities. As discussed more generally
above, each Master Portfolio may engage in writing
covered call options. Each Master Portfolio may also
purchase put options and enter into closing
transactions. 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
forgoes 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. Similarly, the principal
reason for writing covered put options is to realize
income in the form of premiums. The writer of a
covered put option accepts the risk of a decline in
the price of the underlying security. The size of the
premiums the Master Portfolio 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 Master Portfolio will normally
have expiration dates between one and six months from
the date written. The exercise price of the options
may be below, equal to, or above the current market
values of the underlying securities when the options
are written. In the case of call options, these
exercise prices are referred to as "in-the-money,"
"at-the-money" and "out-of-the-money," respectively.
The Master Portfolio may write (a) in-the-money call
options when CGAM expects the price of the underlying
security to remain flat or decline moderately during
the option period, (b) at-the-money call options when
CGAM expects the price of the underlying security to
remain flat or advance moderately during the option
period and (c) out-of-the-money call options when CGAM
expects that the price of the 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. Out-of-the-money, at-the-
money and in-the-money put options (the reverse of
call options as to the relation of exercise price to
market price) may be utilized in the same market
environments as such call options are used in
equivalent transactions.
So long as the obligation of the Master Portfolio as
the writer of an option continues, the Master
Portfolio may be assigned an exercise notice by the
broker-dealer through which the option was sold,
requiring it to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This
obligation terminates when the option expires or the
Master Portfolio effects a closing purchase
transaction. The Master Portfolio 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, or to pay for
the underlying security when it writes a put option,
the Master Portfolio will be required to deposit in
escrow the underlying security or other assets in
accordance with the rules of the Options Clearing
Corporation ("Clearing Corporation") or similar
clearing corporation and the 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 recognized securities exchange or in the
over-the-counter market. The Master Portfolio expects
to write options only on national securities exchanges
or in the over-the-counter market. The Master
Portfolio may purchase put options issued by the
Clearing Corporation or in the over-the-counter
market.
The Master Portfolio may realize a profit or loss upon
entering into a closing transaction. In cases in which
the Master Portfolio has written an option, it will
realize a profit if the cost of the closing purchase
transaction is less than the premium received upon
writing the original option and will incur a loss if
the cost of the closing purchase transaction exceeds
the premium received upon writing the original option.
Similarly, when the Master Portfolio has purchased an
option and engages in a closing sale transaction,
whether it recognizes a profit or loss will depend
upon whether the amount received in the closing sale
transaction is more or less than the premium the
Master Portfolio initially paid for the original
option plus the related transaction costs.
Although the Master Portfolio generally will purchase
or write only those options for which CGAM 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 national 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 may
otherwise 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, the Master Portfolio 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 generally have established
limitations governing the maximum number of calls and
puts of each class which may be held or written, or
exercised within certain periods, by an investor or
group of investors acting in concert (regardless of
whether the options are written on the same or
different securities exchanges or are held, written or
exercised in one or more accounts or through one or
more brokers). It is possible that the Master
Portfolio and other clients of the Manager and certain
of their affiliates may be considered to be such a
group. A securities exchange may order the
liquidation of positions found to be in violation of
these limits, and it may impose certain other
sanctions.
Although CGAM will attempt to take appropriate
measures to minimize the risks relating to the Master
Portfolio's writing of call options and purchasing of
put and call options, there can be no assurance that
the Master Portfolio will succeed in its option-
writing program.
Stock Index Options. As described generally above,
each Master Portfolio may purchase put and call
options and write call options on domestic stock
indexes listed on domestic exchanges in order to
realize its investment objective of long-term capital
appreciation or for the purpose of hedging its
portfolio. A stock index fluctuates with changes in
the market values of the stocks included in the index.
Some stock index options are based on a broad market
index such as the New York Stock Exchange Composite
Index or the Canadian Market Portfolio Index, or a
narrower market index such as the Standard & Poor's
100. Indexes also are based on an industry or market
segment such as the American Stock Exchange Oil and
Gas Index or the Computer and Business Equipment
Index.
Options on stock indexes are generally similar to
options on stock except that the delivery requirements
are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option
on a stock index gives the holder the right to receive
a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied
by (b) a fixed "index multiplier." Receipt of this
cash amount will depend upon the closing level of the
stock index upon which the option is based being
greater than, in the case of a call, or less than, in
the case of a put, the exercise price of the option.
The amount of cash received will be equal to such
difference between the closing price of the index and
the exercise price of the option expressed in dollars
or a foreign currency, as the case may be, times a
specified multiple. The writer of the option is
obligated, in return for the premium received, to make
delivery of this amount. The writer may offset its
position in stock index options prior to expiration by
entering into a closing transaction on an exchange or
it may let the option expire unexercised.
The effectiveness of purchasing or writing stock index
options as a hedging technique will depend upon the
extent to which price movements in the portion of the
securities portfolio of the Master Portfolio correlate
with price movements of the stock index selected.
Because the value of an index option depends upon
movements in the level of the index rather than the
price of a particular stock, whether the Master
Portfolio will realize a gain or loss from the
purchase or writing of options on an index depends
upon movements in the level of stock prices in the
stock market generally or, in the case of certain
indexes, in an industry or market segment, rather than
movements in the price of a particular stock.
Accordingly, successful use by the Master Portfolio of
options on stock indexes will be subject to CGAM's
ability to predict correctly movements in the
direction of the stock market generally or of a
particular industry. This requires different skills
and techniques than predicting changes in the price of
individual stocks.
Futures Contracts and Options on Futures Contracts.
As described generally above, each Master Portfolio
may invest in stock index futures contracts and
options on futures contracts traded on a domestic
exchange or board of trade. Futures contracts provide
for the future sale by one party and purchase by
another party of a specified amount of a specific
security at a specified future time and at a specified
price. The primary purpose of entering into a futures
contract by the Master Portfolio is to protect the
Master Portfolio from fluctuations in the value of
securities without actually buying or selling the
securities. The Master Portfolio may enter into
futures contracts and options on futures to seek
higher investment returns when a futures contract is
priced more attractively than stocks comprising a
benchmark index, to facilitate trading or to reduce
transaction costs. The Master Portfolio will enter
into futures contracts and options only on futures
contracts that are traded on a domestic exchange and
board of trade. Assets committed to futures contracts
will be segregated on the Master Portfolio's books to
the extent required by law.
The purpose of entering into a futures contract by the
Master Portfolio is to protect the Master Portfolio
from fluctuations in the value of securities without
actually buying or selling the securities. For
example, in the case of stock index futures contracts,
if the Master Portfolio anticipates an increase in the
price of stocks it intends to purchase at a later
time, the Master Portfolio could enter into contracts
to purchase the stock index (known as taking a "long"
position) as a temporary substitute for the purchase
of stocks. If an increase in the market occurs that
influences the stock index as anticipated, the value
of the futures contracts increases and thereby serves
as a hedge against the Master Portfolio's not
participating in a market advance. The Master
Portfolio then may close out the futures contracts by
entering into offsetting futures contracts to sell the
stock index (known as taking a "short" position) as it
purchases individual stocks. The Master Portfolio can
accomplish similar results by buying securities with
long maturities and selling securities with short
maturities. But by using futures contracts as an
investment tool to reduce risk, given the greater
liquidity in the futures market, it may be possible to
accomplish the same result more easily and more
quickly.
No consideration will be paid or received by the
Master Portfolio upon the purchase or sale of a
futures contract. Initially, the Master Portfolio will
be required to deposit with the broker an amount of
cash or cash equivalents equal to approximately 1% to
10% of the contract amount (this amount is subject to
change by the exchange or board of trade on which the
contract is traded and brokers or members of such
board of trade may charge a higher amount). This
amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on
the contract which is returned to the Master
Portfolio, upon termination of the futures contract,
assuming all contractual obligations have been
satisfied. Subsequent payments, known as "variation
margin," to and from the broker, will be made daily as
the price of the index or securities underlying the
futures contract fluctuates, making the long and short
positions in the futures contract more or less
valuable, a process known as "marking-to-market." In
addition, when the Master Portfolio enters into a long
position in a futures contract or an option on a
futures contract, it must deposit into a segregated
account with the Master Portfolio's custodian an
amount of cash or cash equivalents equal to the total
market value of the underlying futures contract, less
amounts held in the Master Portfolio's commodity
brokerage account at its broker. At any time prior to
the expiration of a futures contract, the Master
Portfolio may elect to close the position by taking an
opposite position, which will operate to terminate the
Master Portfolio's existing position in the contract.
There are several risks in connection with the use of
futures contracts as a hedging device. Successful use
of futures contracts by the Master Portfolio is
subject to the ability of the CGAM to predict
correctly movements in the stock market or in the
direction of interest rates. These predictions involve
skills and techniques that may be different from those
involved in the management of investments in
securities. In addition, there can be no assurance
that there will be a perfect correlation between
movements in the price of the securities underlying
the futures contract and movements in the price of the
securities that are the subject of the hedge. A
decision of whether, when and how to hedge involves
the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected trends in
market behavior or interest rates.
Positions in futures contracts may be closed out only
on the exchange on which they were entered into (or
through a linked exchange) and no secondary market
exists for those contracts. In addition, although the
Master Portfolio intend to enter into futures
contracts only if there is an active market for the
contracts, there is no assurance that an active market
will exist for the contracts at any particular time.
Most futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily
limit has been reached in a particular contract, no
trades may be made that day at a price beyond that
limit. It is possible that futures contract prices
could move to the daily limit for several consecutive
trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.
In such event, and in the event of adverse price
movements, the Master Portfolio would be required to
make daily cash payments of variation margin; in such
circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract.
As described above, however, no assurance can be given
that the price of the securities being hedged will
correlate with the price movements in a futures
contract and thus provide an offset to losses on the
futures contract.
INVESTMENT RESTRICTIONS
Each fund has adopted the following investment
restrictions for the protection of shareholders.
Although each fund currently will invest all of its
assets in the Master Portfolio, the Board of Directors
intends to maintain the same investment restrictions.
Under the 1940 Act, a fundamental policy may not be
changed with respect to a fund without the vote of a
majority of the outstanding voting securities of a
fund. Majority is defined in the 1940 Act as the
lesser of (a) 67% or more of the shares present at a
fund 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
outstanding shares.
Each Master Portfolio has adopted the following
investment restrictions as fundamental policies.
These restrictions cannot be changed, as to a Master
Portfolio, without approval by the holders of a
majority (as defined in the 1940 Act) of the Master
Portfolio's outstanding voting securities. The Master
Portfolio may not:
1. Purchase or sell the securities of any issuer,
if, as a result of such purchase or sale, less than
25% of the assets of the Master Portfolio would be
invested in the securities of issuers principally
engaged in the business activities having the specific
characteristics denoted by the Master Portfolio.
2. Borrow money, except that (a) the Master
Portfolio 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 Master Portfolio 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 Master Portfolio 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.
3. Issue "senior securities" as defined in the 1940
Act and the rules, regulations and orders thereunder,
except as permitted under the 1940 Act and the rules,
regulations and orders thereunder.
4. Make loans. This restriction does not apply to:
(a) the purchase of debt obligations in which the
Master Portfolio 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 Master
Portfolio 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 Master Portfolio's 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 Master Portfolio may technically be
deemed to be an underwriter under the Securities Act
of 1933, as amended, in disposing of portfolio
securities.
7. Purchase or otherwise acquire any illiquid
security except as permitted under the 1940 Act for
open-end investment companies, which currently permits
up to 15% of the Master Portfolio's net assets to be
invested in illiquid securities.
If any percentage restriction described above is
complied with at the time of an investment, a later
increase or decrease in percentage resulting from a
change in values or assets will not constitute a
violation of such restriction.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Directors and executive officers of the Company,
together with information as to their principal
business occupations during the past five years, are
shown below. Each Director who is an "interested
person" of each Fund, as defined in the 1940 Act, is
indicated by an asterisk.
HERBERT BARG (Age 76). Private Investor. Director or
trustee of 18 investment companies associated with
Citigroup Inc. ("Citigroup") His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania, 19004.
*ALFRED J. BIANCHETTI (Age 77). Retired; formerly
Senior Consultant to Dean Witter Reynolds Inc.
Director or trustee of 13 investment companies
associated with Citigroup. His address is 19 Circle
End Drive, Ramsey, New Jersey 07466.
MARTIN BRODY (Age 78). Consultant, HMK Associates.
Retired Vice Chairman of the Board of Restaurant
Associates Corp. Director or trustee of 22 investment
companies associated with Citigroup. His address is
c/o HMK Associates, 30 Columbia Turnpike, Florham
Park, New Jersey 07932.
DWIGHT B. CRANE (Age 62). Professor, Harvard Business
School. Director or trustee of 25 investment
companies associated with Citigroup. His address is
c/o Harvard Business School, Soldiers Field Road,
Boston, Massachusetts 02163.
BURT N. DORSETT (Age 69). Managing Partner of the
investment counseling firm Dorsett McCabe Management,
Inc. Director of Research Corporation Technologies,
Inc., a nonprofit patent clearing and licensing firm.
Director or trustee of 13 investment companies
associated with Citigroup. His address is 201 East
62nd Street, New York, New York 10021.
ELLIOT S. JAFFE (Age 73). Chairman of the Board and
President of The Dress Barn, Inc. Director or trustee
of 13 investment companies associated with Citigroup.
His address is 30 Dunnigan Drive, Suffern, New York
10021.
STEPHEN E. KAUFMAN (Age 67). Attorney. Director or
trustee of 15 investment companies associated with
Citigroup. His address is 277 Park Avenue, New York,
New York 10172.
JOSEPH J. McCANN (Age 69). Financial Consultant.
Retired Financial Executive, Ryan Homes, Inc.
Director or trustee of 13 investment companies
associated with Citigroup. His address is 200 Oak
Park Place, Pittsburgh, Pennsylvania 15243.
*HEATH B. McLENDON (Age 66). Chairman of the Board,
President and Investment Officer. Managing Director
of Salomon Smith Barney Inc. ("Salomon Smith Barney"),
President of SSB Citi and Travelers Investment
Adviser, Inc. ("TIA"); Chairman or Co-Chairman of the
Board of 71 investment companies associated with
Citigroup. His address is 7 World Trade Center, New
York, New York 10048.
CORNELIUS C. ROSE, JR. (Age 67). President, Cornelius
C. Rose Associates, Inc., financial consultants, and
Chairman and Director of Performance Learning Systems,
an educational consultant. Director or trustee of 13
investment companies associated with Citigroup. His
address is Meadowbrook Village, Building 4, Apt. 6,
West Lebanon, New Hampshire 03784.
LEWIS E. DAIDONE (Age 42). Senior Vice President and
Treasurer. Managing Director of Salomon Smith Barney,
Chief Financial Officer of the Smith Barney Mutual
funds; Director and Senior Vice President of SSB Citi
and TIA; Senior Vice President and Treasurer of 61
investment companies associated with Citigroup.
PAUL BROOK (Age 46). Controller. Director of Salomon
Smith Barney; from 1997-1998 Managing Director of AMT
Capital Services Inc.; prior to 1997 Partner with
Ernst & Young LLP; Controller or Assistant Treasurer
of 43 investment companies associated with Citigroup.
CHRISTINA T. SYDOR (Age 47). Secretary. Managing
Director of Salomon Smith Barney. General Counsel and
Secretary of SSB Citi and TIA; Secretary of 61
investment companies associated with Citigroup.
As of January 12, 2000, the Directors and officers of
the Company, as a group, owned less than 1% of the
outstanding shares of common stock of the Company. As
of January 12, 2000, to the knowledge of the Company
and the Board no single shareholder or "group" (as
that term is used in Section 13(d) of the Securities
Act of 1934) beneficially owned more than 5% of the
outstanding shares of the Company.
No officer, Director or employee of Salomon Smith
Barney or any of its affiliates receives any
compensation from the Company for serving as an
officer or director of the Company. The Company pays
each Director who is not an officer, director or
employee of Salomon Smith Barney or any of its
affiliates a fee of $2000 per annum plus $250 per in-
person meeting and $100 per telephonic meeting. All
Directors are reimbursed for travel and out-of-pocket
expenses incurred to attend such meetings.
The following table shows the compensation paid by the
Company and other Smith Barney Mutual Funds to each
Director during the Company's last fiscal year. None
of the officers of the Company received any
compensation from the Company for such period. The
Company does not pay retirement benefits to its
Directors and officers. Officers and interested
Directors of the Company are compensated by Salomon
Smith Barney.
Name of Person
Aggregate
Compensat
ion
From
Company
Total
Pension or
Retirement
Benefits
Accrued
as part of
Company
Expenses
Compensation
from Company
and Fund
Complex
Paid to
Directors
Number of
Funds for
Which
Director
Serves
Within
Fund Complex
Herbert Barg**
Alfred
Bianchetti* **
Martin Brody**
Dwight B.
Crane**
Burt N.
Dorsett**
Elliot S.
Jaffe**
Stephen E.
Kaufman**
Joseph J.
McCann**
Heath B.
McLendon*
Cornelius C.
Rose, Jr.**
$3,250.00
$3,000.00
$2,750.00
$3,250.00
$3,250.00
$2,500.00
$3,250.00
$3,250.00
$
0.00
$3,000.00
$0
0
0
0
0
0
0
0
0
0
$105,425.00
$
51,200.00
$132,500.00
$139,975.00
$
51,200.00
$
47,550.00
$
96,400.00
$
51,200.00
$
0.00
$
51,200.00
18
13
22
25
13
13
15
13
71
13
* Designates an "interested" Director.
** Designates member of Audit Committee.
Upon attainment of age 80, Company Directors are
required to change to emeritus status. Directors
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 Company Directors, together
with reasonable out-of-pocket expenses for each
meeting attended. Directors Emeritus may attend
meetings but have no voting rights. During the
Company's last fiscal year, aggregate compensation
paid to Directors Emeritus was $1,500.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Master Portfolio Manager and Sub-Adviser
Each Master Portfolio has substantially the same
investment objectives as the corresponding fund.
Consequently, the funds do not have their own
investment adviser. SSB Citi serves as each Master
Portfolio's Investment manager and provides investment
guidance and policy direction for the Master
Portfolios.
SSB Citi serves as Manager to each Master Portfolio
pursuant to an investment management agreement (the
"Investment Management Agreement") with MSP on behalf
of each Master Portfolio which was approved by MSP's
Board of Trustees, including a majority of trustees
who are not "interested persons" of MSP or the
Manager. The Manager is a wholly owned subsidiary of
Salomon Smith Barney Holdings Inc., which in turn, is
a wholly owned subsidiary of Citigroup Inc. Subject to
the supervision and direction of MSP's Board of
Trustees, the Manager manages each Master Portfolio's
portfolio in accordance with the Master Portfolio's
stated investment objective and policies, makes
investment decisions for the Master Portfolio, places
orders to purchase and sell securities, and employs
professional portfolio managers and securities
analysts who provide research services to the Master
Portfolio. The Manager pays the salary of any officer
and employee who is employed by both it and the MSP.
The Manager bears all expenses in connection with the
performance of its services. The Manager also: (a)
assists in supervising all aspects of the Master
Portfolio's operations; (b) supplies each fund and
Master Portfolio with office facilities (which may be
in SSB Citi's own offices), statistical and research
data, data processing services, clerical, accounting
and bookkeeping services, including, but not limited
to, the calculation of (i) the net asset value of
shares of each Master Portfolio and fund, (ii)
applicable contingent deferred sales charges and
similar fees and charges and (iii) distribution fees,
internal auditing and legal services, internal
executive and administrative services, and stationary
and office supplies; and (c) prepares reports to
shareholders of the fund and each Master Portfolio,
tax returns and reports to and filings with the SEC
and state blue sky authorities.
As compensation for investment management services,
the respective Master Portfolio pays the Manager the
annual investment management fee described below
(based on a percentage of it's average daily net
assets) which fees are passed along to each fund as a
shareholder of the corresponding Master Portfolio:
Biotechnology Master Portfolio:
____%
Global Media & Telecommunications Master Portfolio:
____%
Global Technology Master Portfolio:
____%
Sub-adviser - CGAM
CGAM serves as investment sub-adviser to each fund
pursuant to a sub-advisory agreement (the "Sub-
advisory Agreement") with MSP on behalf of each Master
Portfolio which was approved by MSP's Board of
Trustees, including a majority of trustees who are not
"interested persons" of the MSP or the Manager. CGAM
is a division of Citigroup and, together with its
affiliates, managed more than $351 billion in assets
as of December 31, 1999. CGAM offers a wide range of
investment services to customers across the United
States and throughout the world. Its portfolio
managers are responsible for investing in money
market, equity and fixed income securities. CGAM
manages the assets of various mutual funds and
provides certain administrative services to those
funds. CGAM employs a disciplined approach to
investing where its portfolio managers, fundamental
and quantitative analysts work together to meet client
objectives.
As compensation for investment sub-advisory services,
the Manager pays the sub-adviser the fee described
below (based on a percentage of the fund's average
daily net assets) which fees are passed along to each
fund as a shareholder of the corresponding Master
Portfolio:
Biotechnology Master Portfolio:
____%
Global Media & Telecommunications Master Portfolio:
____%
Global Technology Master Portfolio :
____%
Custodian, Fund Accounting Services Agent and Sub-
administrator of the Master Portfolio
State Street Bank and Trust Company ("State Street"),
whose principal business address is 225 Franklin
Street, Boston, Massachusetts, 02110, serves as
custodian of the assets of each fund and the
corresponding Master Portfolio. As a result, State
Street has custody of all securities and cash of each
fund and the corresponding Master Portfolio, delivers
and receives payment for securities sold, receives and
pays for securities purchased, collects income from
investments, and performs other duties, all as
directed by the officers of each fund and
corresponding Master Portfolio. The custodian has no
responsibility for any of the investment policies or
decisions of a fund and the corresponding Master
Portfolio. State Street also acts as each fund's
Accounting Services Agent.
Transfer Agent and Sub-Transfer Agent
Citi Fiduciary Trust Company (the "transfer agent")
located at 388 Greenwich Street, New York, New York
10013, serves as each Fund's transfer agent. Under the
transfer agency agreement, the transfer agent
maintains the shareholder account records for the
Fund, handles certain communications between
shareholders and the Fund and distributes dividends
and distributions payable by the Fund. For these
services, the transfer agent receives a monthly fee
computed on the basis of the number of shareholder
accounts it maintains for the Fund during the month
and is reimbursed for out-of-pocket expenses.
PFPC Global Fund Services (formerly known as First
Data Investor Services Group, Inc.) ("sub-transfer
agent") located at Exchange Place, Boston,
Massachusetts 02109, a subsidiary of PNC Bank, serves
as each Fund's sub-transfer agent. Under the sub-
transfer agency agreement, the sub-transfer agent
maintains the shareholder account records for the
Fund, handles certain communications between
shareholders and the Fund and distributes dividends
and distributions payable by the Fund. For these
services, the sub-transfer agent receives a monthly
fee from the transfer agent computed on the basis of
the number of shareholder accounts it maintains for
the Fund during the month and is reimbursed for out-
of-pocket expenses.
Auditors
KPMG LLP, independent auditors, 345 Park Avenue, New
York, New York 10154, have been selected to serve as
auditors of the Company and to render opinions on each
Fund's financial statements.
Counsel
Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York 10019, serves as counsel to the Company
and each Fund. Stroock & Stroock & Lavan LLP serves
as counsel to the "non-interested" directors of each
Fund.
Distributor
CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 serves as each Fund's
distributor pursuant to a written agreement with the
Company dated October 8, 1998 (the "Distribution
Agreement") which was approved by the Company's Board
of Directors, including a majority of the independent
directors, on July 15, 1998, as amended on January 31,
2000.
When payment is made by the investor before the
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 Company's Board of Directors
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 Investment Management Agreement for
continuance.
Distribution Arrangements
To compensate Salomon Smith Barney for the services it
provides and for the expense it bears under the
Distribution Agreement, each Fund has adopted a
services and distribution plan (the "Plan") pursuant
to Rule l2b-1 under the 1940 Act. Under the Plan, the
Fund pays Salomon Smith Barney 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 Class A, Class B and Class
L shares. In addition, the Fund pays Salomon Smith
Barney a distribution fee with respect to the Class B
and Class L shares primarily intended to compensate
Salomon Smith Barney for its initial expense of paying
Financial Consultants a commission upon sales of those
shares. The Class B and Class L distribution fee is
calculated at the annual rate of 0.75% of the value of
the Fund's average daily net assets attributable to
the shares of the respective Class.
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote
of the Board of Directors, including a majority of the
directors who are not interested persons of the Fund
and who have no direct or indirect financial interest
in the operation of the Plan or in the Distribution
Agreement (the "independent directors"). The Plan may
not be amended to increase the amount of the service
and distribution fees without shareholder approval,
and all amendments of the Plan also must be approved
by the directors including all of the independent
directors 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 the
independent directors or, with respect to the Fund, by
vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act).
Pursuant to the Plan, Salomon Smith Barney will
provide the Board of Directors with periodic reports
of amounts expended under the Plan and the purpose for
which such expenditures were made.
PORTFOLIO TRANSACTIONS
CGAM arranges for the purchase and sale of the Master
Portfolio's securities and selects brokers and dealers
(including Salomon Smith Barney) which in its best
judgment provide prompt and reliable execution at
favorable prices and reasonable commission rates. CGAM
may select brokers and dealers that provide it with
research services and may cause the Master Portfolio
to pay such brokers and dealers commissions which
exceed those other brokers and dealers may have
charged, if it views the commissions as reasonable in
relation to the value of the brokerage and/or research
services. In selecting a broker, including Salomon
Smith Barney, for a transaction, the primary
consideration is prompt and effective execution of
orders at the most favorable prices. Subject to that
primary consideration, dealers may be selected for
research statistical or other services to enable the
Manager, CGAM or its affiliates to supplement its own
research and analysis.
Decisions to buy and sell securities for the Master
Portfolio are made by CGAM, subject to the overall
supervision and review of the MSP's Board of Trustees.
Portfolio securities transactions for the Fund are
effected by or under the supervision of CGAM and/or
the Manager.
Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. There is generally
no stated commission in the case of securities traded
in the over-the-counter market, but the price of those
securities includes an undisclosed commission or mark-
up. Over-the-counter purchases and sales are
transacted directly with principal market makers
except in those cases in which better prices and
executions may be obtained elsewhere. The 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.
In executing portfolio transactions and selecting
brokers or dealers, it is a Master Portfolio's policy
to seek the best overall terms available. CGAM, in
seeking the most favorable price and execution,
considers all factors it deems relevant, including,
for example, the price, the size of the transaction,
the reputation, experience and financial stability of
the broker-dealer involved and the quality of service
rendered by the broker-dealer in other transactions.
CGAM receives research, statistical and quotation
services from several broker-dealers with which it
places the Master Portfolio's portfolio transactions.
It is possible that certain of the services received
primarily will benefit one or more other accounts for
which CGAM exercises investment discretion.
Conversely, the Master Portfolio may be the primary
beneficiary of services received as a result of
portfolio transactions effected for other accounts.
CGAM's fee under the management agreement is not
reduced by reason of its receiving such brokerage and
research services. The MSP's Board of Trustees, in its
discretion, may authorize CGAM to cause a Master
Portfolio to pay a broker that provides brokerage and
research services to CGAM a commission in excess of
that which another qualified broker would have charged
for effecting the same transaction. Salomon Smith
Barney will not participate in commissions from
brokerage given by a Master Portfolio to other brokers
or dealers and will not receive any reciprocal
brokerage business resulting therefrom.
In accordance with Section 17(e) of the 1940 Act and
Rule 17e-1 thereunder, the MSP's Board of Trustees has
determined that any portfolio transaction for a Master
Portfolio may be executed through Salomon Smith Barney
or an affiliate of Salomon Smith Barney if, in CGAM's
judgment, the use of Salomon Smith Barney or an
affiliate is likely to result in price and execution
at least as favorable as those of other qualified
brokers and if, in the transaction, Salomon Smith
Barney or the affiliate charges a Master Portfolio a
commission rate consistent with those charged by
Salomon Smith Barney or an affiliate to comparable
unaffiliated customers in similar transactions. In
addition, under SEC rules, Salomon Smith Barney may
directly execute such transactions for a Master
Portfolio 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 Master Portfolio of the aggregate
compensation it earned on such transactions.
Even though investment decisions for the Master
Portfolio are made independently from those of the
other accounts managed by CGAM, investments of the
kind made by a Master Portfolio also may be made by
those other accounts. When a Master Portfolio and one
or more accounts managed by CGAM 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 CGAM to be
equitable. In some cases, this procedure may adversely
affect the price paid or received by the Master
Portfolio or the size of the position obtained for or
disposed of by the Master Portfolio.
A Master Portfolio will not purchase securities during
the existence of any underwriting or selling group
relating to the securities, of which the Manager or
any affiliates is a member, except to the extent
permitted by the SEC. Under certain circumstances, a
Master Portfolio may be at a disadvantage because of
this limitation in comparison with other funds that
have similar investment objectives but that are not
subject to a similar limitation.
PORTFOLIO TURNOVER
Each Master Portfolio's portfolio turnover rate (the
lesser of purchases or sales of portfolio securities
during the year, excluding purchases or sales of
short-term securities, divided by the monthly average
value of portfolio securities) is generally not
expected to exceed 100%. The rate of turnover will not
be a limiting factor, however, when a Master Portfolio
deems it desirable to sell or purchase securities.
CGAM may cause a Master Portfolio to sell or purchase
securities to ensure compliance with the Master
Portfolio's investment policies.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for
purchase. See the prospectus for a discussion of
factors to consider in selecting which Class of shares
to purchase.
Class A Shares. Class A shares are sold to investors
at the public offering price, which is the net asset
value plus an initial sales charge as follows:
Amount
of
Investme
nt
Sales Charge
as a %
of
Transaction
Sales
Charge as a
% of Amount
Invested
Dealers'
Reallowance as
%
of Offering
Price
Less than
$25,000
5.00%
5.26%
%
$ 25,000 -
$49,999
4.25
4.44
$50,000 -
$99,999
3.75
3.90
$100,000 -
$249,999
3.25
3.36
$250,000 -
$499,999
2.75
2.83
$500,000 -
$1,000,000
2.00
2.04
*
$1,000,000 or
more
-0-
-0-
* Purchases of Class A shares of $1,000,000 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
Provisions" 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 the Fund as defined in the 1933 Act. The reduced
sales charges shown above apply to the aggregate of
purchases of Class A shares of the Fund made at one
time by "any person," which includes an individual and
his or her immediate family, or a trustee or other
fiduciary of a single trust estate or single fiduciary
account.
Class B Shares. Class B shares are sold without an
initial sales charge but are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.
Class L Shares. Class L shares are sold with an
initial sales charge of 1.00% (which is equal to 1.01%
of the amount invested) and are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below. Until June
22, 2001, purchases of Class L shares by investors who
were holders of Class C shares of other Smith Barney
Mutual Funds on June 12, 1998 will not be subject to
the 1.00% initial sales charge.
Class Y Shares. Class Y shares are sold without an
initial sales charge or deferred sales charge and are
available only to investors investing a minimum of
$15,000,000 (except purchases of Class Y shares by
Smith Barney Concert Allocation Series Inc., for which
there is no minimum purchase amount).
General
The Funds' shares are continuously offered to new
investors. See "Purchase of Shares" Investors may
purchase shares from a Salomon Smith Barney Financial
Consultant or a broker that clears through Salomon
Smith Barney ("Dealer Representative"). In addition,
certain investors, including qualified retirement
plans purchasing through certain Dealer
Representatives, may purchase shares directly from the
Fund. When purchasing shares of the Fund, investors
must specify whether the purchase is for Class A,
Class B, Class L or Class Y shares. Salomon Smith
Barney and Dealer Representatives 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 in the Fund by making an initial
investment of at least $1,000 for each account, or
$250 for an IRA or a Self-Employed Retirement Plan, in
the Fund. Investors in Class Y shares may open an
account by making an initial investment of
$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(c) of the Code, the minimum initial
investment required for Class A, Class B and Class L
shares and the subsequent investment requirement for
all Classes in the Fund is $25. There are no minimum
investment requirements for Class A shares for
employees of Citigroup and its subsidiaries, including
Salomon Smith Barney, unitholders who invest
distributions from a Unit Investment Trust ("UIT")
sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney Mutual
Funds, and their spouses and children. The Fund
reserves the right to waive or change minimums, to
decline any order to purchase its shares and to
suspend the offering of shares from time to time.
Shares purchased will be held in the shareholder's
account by the sub-transfer agent. Share certificates
are issued only upon a shareholder's written request
to the sub-transfer agent.
Purchase orders received by the Fund or a Salomon
Smith Barney Financial Consultant prior to the close
of regular trading on the New York Stock Exchange
("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 a Dealer Representative prior to the close
of regular trading on the NYSE on any day the Fund
calculates its net asset value, are priced according
to the net asset value determined on that day,
provided the order is received by the Fund or the
Fund's agent prior to its close of business. For
shares purchased through Salomon Smith Barney or a
Dealer Representative 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.
Sales Charge Waivers and Reductions
Initial Sales Charge Waivers. Purchases of Class A
shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to
(i) Board Members and employees of Citigroup and its
subsidiaries and any Citigroup affiliated funds
including 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
Smith Barney Mutual Fund that is offered with a sales
charge) and who wish to reinvest their redemption
proceeds in the 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 (Note: subsequent investments will be
subject to the applicable sales charge); (g) purchases
by a separate account used to fund certain
unregistered variable annuity contracts; (h)
investments of distributions from a UIT sponsored by
Salomon Smith Barney; (i) purchases by investors
participating in a Salomon Smith Barney fee-based
arrangement; and (j) purchases of Class A shares by
Section 403(b) or Section 401(a) or (k) accounts
associated with Copeland Retirement Programs. In order
to obtain such discounts, the purchaser must provide
sufficient information at the time of purchase to
permit verification that the purchase would qualify
for the elimination of the sales charge.
Right of Accumulation. Class A shares of the Fund may
be purchased by "any person" (as defined above) at a
reduced sales charge or at net asset value determined
by aggregating the dollar amount of the new purchase
and the total net asset value of all Class A shares of
the Fund and of other Smith Barney Mutual Funds that
are offered with a sales charge as currently 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 - Class A Shares. A Letter of Intent
for an amount 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 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 (i) all
Class A shares of the Fund and other Smith Barney
Mutual Funds offered with a sales charge acquired
during the term of the letter plus (ii) the value of
all Class A shares previously purchased and still
owned. 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. The term of the Letter will commence upon
the date the Letter is signed, or at the options of
the investor, up to 90 days before such date. Please
contact a Salomon Smith Barney Financial Consultant or
the sub-transfer agent to obtain a Letter of Intent
application.
Letter of Intent - Class Y Shares. A Letter of Intent
may also be used as a way for investors to meet the
minimum investment requirement for Class Y shares
(except purchases of Class Y shares by Smith Barney
Concert Allocation Series Inc., for which there is no
minimum purchase amount). Such investors 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 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 sub-transfer agent for further
information.
Deferred Sales Charge Provisions
"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 are subject to a deferred sales charge. A
deferred sales charge may be imposed on certain
redemptions of these shares.
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.
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 applicabilty 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 amount realized on 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 the 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) redemptions
of shares within 12 months following the death or
disability of the shareholder; (c) redemptions of
shares made in connection with qualified distributions
from retirement plans or IRAs upon the attainment of
age 591/2; (d) involuntary redemptions; and
(e) redemptions of shares to effect a combination of
the Fund with any investment company by merger,
acquisition of assets or otherwise. In addition, a
shareholder who has redeemed shares from other 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 sub-transfer agent in the case of
all other shareholders) of the shareholder's status or
holdings, as the case may be.
Smith Barney Retirement Programs
You may be eligible to participate in a retirement
program sponsored by Salomon Smith Barney or one of
its affiliates. The Fund offers Class A and Class L
shares at net asset value to participating plans under
the programs. You can meet minimum investment and
exchange amounts, if any 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 and/or the date
your account is opened. Once a class of shares is
chosen, all additional purchases must by of the same
class.
For plans opened on or after March 1, 2000 that are
not part of the Paychex offering, Class A shares may
be purchased regardless of the amount invested.
For plans opened prior to March 1, 2000 and for plans
that are part of the Paychex offering, the class of
shares you may purchase depends on the amount of your
initial investment:
Class A Shares. Class A shares may be purchased by
plans investing at least $1million.
Class L Shares. 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 in the following
circumstances:
If the plan was opened on or after June 21, 1996 and a
total 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 for 5 years.
If the plan was opened before June 21, 1996 and a
total of $500,000 is invested in Smith Barney Funds
Class L shares (other than money market funds) on
December 31 in any year, all Class L shares are
eligible for exchange on or about March 31 of the
following year.
For more information, call your Salomon Smith Barney
Financial Consultant or the transfer agent.
Retirement Programs 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 the 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.
Retirement Programs Opened Prior to June 21, 1996. In
any year after the date a participating plan enrolled
in the Smith Barney 401(k) Program, if a participating
plan's 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 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
the 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 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)
Program 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.
Retirement Programs 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 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 sahres purchased through
reinvestment of dividends or capital gain
distributions, plus the current net asset vlaue of
Class B shares purchased more than eight years prior
to the redemption, plus increases in the net asset
value of the shareholders 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 or an employee in the
participating plan; (d) the attainment of age 59 1/2 by
an employee in the participating plan; (e) hardship of
an employee in the participating plan to the extent
permitted under Section 401(k) o the Code; or (f)
redemptions of shares in connection with a loan made
by the participating plan to an employee.
Determination of Public Offering Price
The Fund offers its shares to current shareholders of
the Fund on a continuous basis. The public offering
price for a Class A, Class B and Class Y share of the
Fund is equal to the net asset value per share at the
time of purchase, plus for Class A shares an initial
sales charge based on the aggregate amount of the
investment. The public offering price for Class A
share purchases, including applicable rights of
accumulation, equaling or exceeding $500,000 is equal
to the net asset value per share at the time of
purchase and no sales charge is imposed at the time of
purchase. The public offering price for a Class L
share includes a 1.00% initial sales charge. A
deferred sales charge is imposed on certain
redemptions of Class B shares, and on Class L shares
and Class A shares (purchased in amounts exceeding
$500,000) redeemed within one year of purchase.
REDEMPTION OF SHARES
The right of redemption of shares of the Fund may be
suspended or the date of payment postponed (a) for any
periods during which the New York Stock Exchange, Inc.
(the "NYSE") is closed (other than for customary
weekend and holiday closings), (b) when trading in the
markets the Fund normally utilizes is restricted, or
an emergency exists, as determined by the SEC, so that
disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable or
(c) for any other periods as the SEC by order may
permit for the protection of the Fund's shareholders.
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 sub-transfer agent
together with the redemption request. Any signature
appearing on a share certificate, stock power or
written redemption request in excess of $10,000 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 $10,000 or
less do not require a signature guarantee unless more
than one such redemption request is made in any 10-day
period or the redemption proceeds are to be sent to an
address other than the address of record. Unless
otherwise directed, redemption proceeds will be mailed
to an investor's address of record. The sub-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
sub-transfer agent receives all required documents in
proper form.
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 fifteen days.
Distributions in Kind
If the Board of Directors of the Fund determines that
it would be detrimental to the best interests of the
remaining shareholders to make a redemption payment
wholly in cash, the Fund may pay, in accordance with
SEC rules, any portion of a redemption in excess of
the lesser of $250,000 or 1.00% of the Fund's net
assets by a distribution in kind of portfolio
securities in lieu of cash. Securities issued as a
distribution in kind may incur brokerage commissions
when shareholders subsequently sell those securities.
Additional Information Regarding Telephone Redemption
And Exchange Program
Neither the Fund nor its agents will be liable for
following instructions communicated by telephone that
are reasonably believed to be genuine. The Fund and
its 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 Fund reserves 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.
VALUATION OF SHARES
The net asset value per share of the Fund's Classes 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 Fund in
valuing its assets.
Securities listed on a national securities exchange
will be valued on the basis of the last sale on the
date on which the valuation is made or, in the absence
of sales, at the mean between the closing bid and
asked prices. Over-the-counter securities will be
valued at the mean between the closing bid and asked
prices on each day, or, if market quotations for those
securities are not readily available, at fair value,
as determined in good faith by the Company's Board of
Directors. Short-term obligations with maturities of
60 days or less are valued at amortized cost, which
constitutes fair value as determined by the Company's
Board of Directors. Amortized cost involves valuing an
instrument at its original cost to the Fund and
thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the
effect of fluctuating interest rates on the market
value of the instrument. All other securities and
other assets of the Fund will be valued at fair value
as determined in good faith by the Company's Board of
Directors.
EXCHANGE PRIVILEGE
Except as noted below and in the Prospectus,
shareholders of any of the Smith Barney Mutual Funds
may exchange all or part of their shares for shares of
the same class of other Smith Barney Mutual Funds, to
the extent such shares are offered for sale in the
shareholder's state of residence, on the basis of
relative net asset value per share at the time of
exchange as follows:
A. Class A and Class Y shares of the Fund may be
exchanged without a sales charge for the
respective shares of any of the Smith Barney
Mutual Funds.
B. Class B shares of any Fund may be exchanged
without a sales charge. Class B shares of the
Fund exchanged for Class B shares of another
Smith Barney Mutual Fund will be subject to the
higher applicable deferred sales charge of the
two funds and, for purposes of calculating
deferred sales charge rates and conversion
periods, will be deemed to have been held since
the date the shares being exchanged were deemed
to be purchased.
C. Class L shares of any Fund may be exchanged
without a sales charge. For purposes of deferred
sales charge applicability, Class L shares of
the Fund exchanged for Class L shares of another
Smith Barney Mutual Fund will be deemed to have
been owned since the date the shares being
exchanged were deemed to be purchased.
The exchange privilege enables shareholders to acquire
shares of the same Class in a Fund with different
investment objectives when they believe that a shift
between funds is an appropriate investment decision.
This privilege is available to shareholders residing
in any state in which fund shares being acquired may
legally be sold. Prior to any exchange, the
shareholder should obtain and review a copy of the
current prospectus of each fund into which an exchange
is being considered. Prospectuses may be obtained from
a Salomon Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary
supporting documents, shares submitted for exchange
are redeemed at the then-current net asset value and
the proceeds are immediately invested, at a price as
described above, in shares of the Fund being acquired.
Salomon Smith Barney reserves the right to reject any
exchange request. The exchange privilege may be
modified or terminated at any time after written
notice to shareholders.
Additional Information Regarding the Exchange
Privilege. Although the exchange privilege is an
important benefit, excessive exchange transactions can
be detrimental to the Fund's performance and its
shareholders. The Manager may determine that a
pattern of frequent exchanges is excessive and
contrary to the best interests of the Fund's other
shareholders. In this event, the Fund may, at its
discretion, decide to limit additional purchases
and/or exchanges by a 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.
PERFORMANCE INFORMATION
From time to time, the Company may advertise the
Fund's total return and average annual total 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 Fund.
These figures are based on historical earnings and are
not intended to indicate future performance. Total
return is computed for a specified period of time
assuming deduction of the maximum sales charge, if
any, from the initial amount invested and reinvestment
of all income dividends and capital gain distributions
on the reinvestment dates at prices calculated as
stated in the prospectus, then dividing the value of
the investment at the end of the period so calculated
by the initial amount invested and subtracting 100%.
The standard average annual total return, as
prescribed by the SEC is derived from this total
return, which provides the ending redeemable value.
Such standard total return information may also be
accompanied with nonstandard total return information
for differing periods computed in the same manner but
without annualizing the total return or taking sales
charges into account. The Company may also include
comparative performance information in advertising or
marketing the Fund's shares. Such performance
information may include data from Lipper Analytical
Services, Inc. and other financial publications.
From time to time, the Company may quote the Fund's
yield or total return in advertisements or in reports
and other communications to shareholders. The Company
may include comparative performance information in
advertising or marketing the Fund's shares. Such
performance information may include the following
industry and financial publications- Barron's,
Business Week, CDA Investment Technologies, Inc.,
Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual
Fund Values, The New York Times, USA Today and The
Wall Street Journal. To the extent any advertisement
or sales literature of the Fund describes the expenses
or performance of any Class 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
investment made at the
beginning of a 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 ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period. The Fund's net investment income changes in
response to fluctuations in interest rates and the
expenses of the Fund.
Aggregate Total Return
The Fund's "aggregate total return," as described
below, represents the cumulative change in the value
of an investment in the Fund for the specified period
and is 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 ERV assumes complete redemption of the
hypothetical investment at the end of the measuring
period.
Performance will vary from time to time depending on
market conditions, the composition of the Fund's
portfolio and operating expenses. Consequently, any
given performance quotation should not be considered
representative of the Fund's performance for any
specified period in the future. Because performance
will vary, it may not provide a basis for comparing an
investment in the Fund with certain bank deposits or
other investments that pay a fixed yield for a stated
period of time.
DIVIDENDS, DISTRIBUTIONS AND TAXES tc "TAXES "
MSP is organized as a business trust under __________
law. Under MSP's current classification for federal
income tax purposes, it is intended that each Master
Portfolio will be treated as a partnership for such
purposes and, therefore, such Master Portfolio will
not be subject to any federal income tax on its income
and gains (if any). However, each investor in a
Master Portfolio will be taxed on its share (as
determined in accordance with the governing
instruments of MSP) of such Master Portfolio's taxable
income and capital gain in determining its federal
income tax liability. The determination of such share
will be made in accordance with the Code, and
regulations promulgated thereunder.
MSP's taxable year-end is the last day of October.
Although MIP will not be subject to federal income
tax, it will file appropriate federal income tax
returns
The Master Portfolio's assets, income and
distributions will be managed in such a way that an
investor in a Master Portfolio may satisfy the
requirements of Subchapter M of the Code by investing
substantially all of its assets in the Master
Portfolio. Investors are advised to consult their own
tax advisors as to the tax consequences of an
investment in the Master Portfolio.
Taxes
The following is a summary of the material United
States federal income tax considerations regarding the
purchase, ownership and disposition of shares of a
fund. Each prospective shareholder is urged to
consult his own tax adviser with respect to the
specific federal, state, local and foreign tax
consequences of investing in a fund. The summary is
based on the laws in effect on the date of this SAI,
which are subject to change. Each fund will be
treated as a separate entity for federal tax purposes.
Unless otherwise noted, the following discussion is
applicable to each fund.
The Fund and Its Investments
The fund intends to continue to qualify to be treated
as a regulated investment company each taxable year
under the Code. To so qualify, the fund must, among
other things: (a) derive at least 90% of its gross
income in each taxable year from dividends, interest,
payments with respect to securities loans and gains
from the sale or other disposition of stock or
securities or foreign currencies, or 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; and (b) diversify its holdings so that, at
the end of each quarter of the fund's taxable year,
(i) at least 50% of the market value of the fund's
assets is represented by cash, securities of other
regulated investment companies, United States
government securities and other securities, with such
other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's
assets and not greater than 10% of the outstanding
voting securities of such issuer and (ii) not more
than 25% of the value of its assets is invested in the
securities (other than United States government
securities or securities of other regulated investment
companies) of any one issuer or any two or more
issuers that the fund controls and which are
determined to be engaged in the same or similar trades
or businesses or related trades or businesses. For
purposes of federal income tax law, including the
application of the foregoing qualification
requirements, a fund will be treated as if it derived
directly its proportionate share of each item of
income, deduction, gain or loss (and as if it held
directly its proportionate share of the assets and
liabilities) of each Master Portfolio in which it
invests, either directly or indirectly.
As a regulated investment company, the fund will not
be subject to United States federal income tax on its
investment company taxable income (i.e., income other
than any excess of its net realized long-term capital
gains over its net realized capital losses ("net
realized capital gains") or on its net realized
capital gains, if any, that it distributes to its
shareholders, provided an amount equal to at least 90%
of the sum of its investment company taxable, plus or
minus certain other adjustments as specified in the
Code and its net tax-exempt income for the taxable
year is distributed in compliance with the Code's
timing and other requirements but will be subject to
tax at regular corporate rates on any taxable income
or gains it does not distribute. Furthermore, the
fund will be subject to a United States corporate
income tax with respect to such distributed amounts in
any year it fails to qualify as a regulated investment
company or fails to meet this distribution
requirement. The Code imposes a 4% nondeductible
excise tax on the fund to the extent it does not
distribute by the end of any calendar year at least
98% of its net investment income for that year and 98%
of the net amount of its capital gains (both long-and
short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this
purpose, however, any income or gain retained by the
fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In
addition, the minimum amounts that must be distributed
in any year to avoid the excise tax will be increased
or decreased to reflect any underdistribution or
overdistribution, as the case may be, from the
previous year. The fund anticipates that it will pay
such dividends and will make such distributions as are
necessary in order to avoid the application of this
tax.
If, in any taxable year, the fund fails to qualify as
a regulated investment company under the Code or fails
to meet the distribution requirement, it would be
taxed in the same manner as an ordinary corporation
and distributions to its shareholders would not be
deductible by the fund in computing its taxable
income. In addition, in the event of a failure to
qualify, the fund's distributions, to the extent
derived from the fund's current or accumulated
earnings and profits, would constitute dividends
(eligible for the corporate dividends-received
deduction) which are taxable to shareholders as
ordinary income, even though those distributions might
otherwise (at least in part) have been treated in the
shareholders' hands as long-term capital gains. If
the fund fails to qualify as a regulated investment
company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify
again as a regulated investment company. In addition,
if the fund failed to qualify as a regulated
investment company for a period greater than one
taxable year, the fund may be required to recognize
any net built-in gains (the excess of the aggregate
gains, including items of income, over aggregate
losses that would have been realized if it had been
liquidated) with respect to certain of its assets in
order to qualify as a regulated investment company in
a subsequent year.
The fund's transactions in foreign currencies, forward
contracts, options and futures contracts (including
options and futures contracts on foreign currencies)
will be subject to special provisions of the Code
(including provisions relating to "hedging
transactions" and "straddles") that, among other
things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate
recognition of income to the fund and defer fund
losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (a) will require
the fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if
they were closed out) and (b) may cause the fund to
recognize income without receiving cash with which to
pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for
avoiding income and excise taxes. The fund will
monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries in
its books and records when it acquires any foreign
currency, forward contract, option, futures contract
or hedged investment in order to mitigate the effect
of these rules and prevent disqualification of the
fund as a regulated investment company.
The fund's investment in Section 1256 contracts, such
as regulated futures contracts, most forward currency
contracts traded in the interbank market and options
on most stock indices, are subject to special tax
rules. All section 1256 contracts held by the fund at
the end of its taxable year are required to be marked
to their market value, and any unrealized gain or loss
on those positions will be included in the fund's
income as if each position had been sold for its fair
market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain
or loss realized by the fund from positions in section
1256 contracts closed during the taxable year.
Provided such positions were held as capital assets
and were not part of a "hedging transaction" nor part
of a "straddle," 60% of the resulting net gain or loss
will be treated as long-term capital gain or loss, and
40% of such net gain or loss will be treated as short-
term capital gain or loss, regardless of the period of
time the positions were actually held by the fund.
Index Swaps. As a result of entering into index swaps,
the fund may make or receive periodic net payments. It
may also make or receive a payment when a swap is
terminated prior to maturity through an assignment of
the swap or other closing transaction. Periodic net
payments will constitute ordinary income or
deductions, while termination of a swap will result in
capital gain or loss (which will be a long-term
capital gain or loss if the fund has been a party to
the swap for more than one year).
Foreign Investments. Dividends or other income
(including, in some cases, capital gains) received by
the fund from investments in foreign securities may be
subject to withholding and other taxes imposed by
foreign countries. Tax conventions between certain
countries and the United States may reduce or
eliminate such taxes in some cases. The fund will not
be eligible to elect to treat any foreign taxes paid
by it as paid by its shareholders, who therefore will
not be entitled to credits for such taxes on their own
tax returns. Foreign taxes paid by the fund will
reduce the return from the fund's investments.
Passive Foreign Investment Companies. If the fund
purchases shares in certain foreign investment
entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United
States federal income tax on a portion of any "excess
distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable
dividend by the fund to its shareholders. Additional
charges in the nature of interest may be imposed on
the fund in respect of deferred taxes arising from
such distributions or gains. If the fund were to
invest in a PFIC and elected to treat the PFIC as a
"qualified electing fund" under the Code, in lieu of
the foregoing requirements, the fund might be required
to include in income each year a portion of the
ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to
the fund, and such amounts would be subject to the 90%
and excise tax distribution requirements described
above. In order to make this election, the fund would
be required to obtain certain annual information from
the PFICs in which it invests, which may be difficult
or not possible to obtain.
Alternatively, the fund may make a mark-to-market
election that would result in the fund being treated
as if it had sold and repurchased all of the PFIC
stock at the end of each year. In this case, the fund
would report gains as ordinary income and would deduct
losses as ordinary losses to the extent of previously
recognized gains. The election, once made, would be
effective for all subsequent taxable years of the
fund, unless revoked with the consent of the Internal
Revenue Service (the "IRS"). By making the election,
the fund could potentially ameliorate the adverse tax
consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required
to recognize income in excess of the distributions it
receives from PFICs and its proceeds from dispositions
of PFIC stock. The fund may have to distribute this
"phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise
tax. The fund will make the appropriate tax
elections, if possible, and take any additional steps
that are necessary to mitigate the effect of these
rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by
the fund in October, November or December of any
calendar year and payable to shareholders of record on
a specified date in such a month shall be deemed to
have been received by each shareholder on December 31
of such calendar year and to have been paid by the
fund not later than such December 31, provided such
dividend is actually paid by the fund during January
of the following calendar year. The fund intends to
distribute annually to its shareholders substantially
all of its investment company taxable income, and any
net realized capital gains. However, if the fund
retains for investment an amount equal to all or a
portion of its net realized capital gains, it will be
subject to a corporate tax (currently at a rate of
35%) on the amount retained. In that event, the fund
will designate such retained amounts as undistributed
capital gains in a notice to its shareholders who (a)
will be required to include in income for United
Stares federal income tax purposes, as long-term
capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit
their proportionate shares of the 35% tax paid by the
fund on the undistributed amount against their United
States federal income tax liabilities, if any, and to
claim refunds to the extent their credits exceed their
liabilities, if any, and (c) will be entitled to
increase their tax basis, for United States federal
income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital
gains included in the shareholder's income.
Organizations or persons not subject to federal income
tax on such capital gains will be entitled to a refund
of their pro rata share of such taxes paid by the fund
upon filing appropriate returns or claims for refund
with the IRS.
Dividends of net investment income and distributions
of net realized short-term capital gains are taxable
to a United States shareholder as ordinary income,
whether paid in cash or in shares. Distributions of
net-long-term capital gains, if any, that the fund
designates as capital gains dividends are taxable as
long-term capital gains, whether paid in cash or in
shares and regardless of how long a shareholder has
held shares of the fund. Dividends and distributions
paid by the fund attributable to dividends on stock of
U.S. corporations received by the fund, with respect
to which the fund meets certain holding period
requirements, will be eligible for the deduction for
dividends received by corporations. Distributions in
excess of the fund's current and accumulated earnings
and profits will, as to each shareholder, be treated
as a tax-free return of capital to the extent of a
shareholder's basis in his shares of the fund, and as
a capital gain thereafter (if the shareholder holds
his shares of the fund as capital assets).
Shareholders receiving dividends or distributions in
the form of additional shares should be treated for
United States federal income tax purposes as receiving
a distribution in the amount equal to the amount of
money that the shareholders receiving cash dividends
or distributions will receive, and should have a cost
basis in the shares received equal to such amount.
Investors considering buying shares just prior to a
dividend or capital gain distribution should be aware
that, although the price of shares just purchased at
that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may
nevertheless be taxable to them. If the fund is the
holder of record of any stock on the record date for
any dividends payable with respect to such stock, such
dividends are included in the fund's gross income not
as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to
such dividends (i.e., the date on which a buyer of the
stock would not be entitled to receive the declared,
but unpaid, dividends) or (b) the date the fund
acquired such stock. Accordingly, in order to satisfy
its income distribution requirements, the fund may be
required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an
earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his
shares, a shareholder will realize a taxable gain or
loss equal to the difference between the amount
realized and his basis in such shares. Such gain or
loss will be treated as capital gain or loss, if the
shares are capital assets in the shareholder's hands,
and will be long-term capital gain or loss if the
shares are held for more than one year and short-term
capital gain or loss if the shares are held for one
year or less. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed
of are replaced, including replacement through the
reinvesting of dividends and capital gains
distributions in the fund, within a 61-day period
beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis
of the shares acquired will be increased to reflect
the disallowed loss. Any loss realized by a
shareholder on the sale of a fund share held by the
shareholder for six months or less will be treated for
United States federal income tax purposes as a long-
term capital loss to the extent of any distributions
or deemed distributions of long-term capital gains
received by the shareholder with respect to such
share. If a shareholder incurs a sales charge in
acquiring shares of the fund, disposes of those shares
within 90 days and then acquires shares in a mutual
fund for which the otherwise applicable sales charge
is reduced by reason of a reinvestment right (e.g., an
exchange privilege), the original sales charge will
not be taken into account in computing gain/loss on
the original shares to the extent the subsequent sales
charge is reduced. Instead, the disregarded portion
of the original sales charge will be added to the 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.
Backup Withholding. The fund may be required to
withhold, for United States federal income tax
purposes, 31% of the dividends, distributions and
redemption proceeds payable to shareholders who fail
to provide the fund with their correct taxpayer
identification number or to make required
certifications, or who have been notified by the IRS
that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding.
Backup withholding is not an additional tax and any
amount withheld may be credited against a
shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by
the fund as to the United States federal income tax
status of the dividends, distributions and deemed
distributions attributable to undistributed capital
gains (discussed above in "Taxes- Taxation of United
States Shareholders - Dividends and Distributions")
made by the fund to its shareholders. Furthermore,
shareholders will also receive, if appropriate,
various written notices after the close of the fund's
taxable year regarding the United States federal
income tax status of certain dividends, distributions
and deemed distributions that were paid (or that are
treated as having been paid) by the fund to its
shareholders during the preceding taxable year.
Other Taxation
Distributions also may be subject to additional state,
local and foreign taxes depending on each
shareholder's particular situation.
The foregoing is only a summary of certain material
tax consequences affecting the Fund and its
shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular
tax consequences to them of an investment in the
Funds.
OTHER INFORMATION ABOUT THE COMPANY
The Company was incorporated under the laws of the
State of Maryland on July 16, 1986 under the name
Shearson Lehman Precious Metals and Minerals Fund Inc.
As the name of its sponsor has changed, the Company's
name has been changed on December 19, 1995 to Smith
Barney Natural Resources Fund Inc. (the "Natural
Resources Fund"). On November 29, 1999, the Board of
Directors voted to amend the Charter of the Company to
change its name to Smith Barney Sector Series Inc.,
with the Natural Resources Fund, Financial Services
Fund, Health Sciences Fund, Technology Fund,
Biotechnology Fund, Global Media & Telecommunications
Fund, and Global Technology each classified as a
series of the Company.
The Company offers shares of seven separate series
with a par value of $.001 per share. Each Fund offers
shares currently classified into four Classes - A, B,
L and Y. Each Class of the Fund 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 pursuant to the Plan; (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
Company's Board of Directors does not anticipate that
there will be any conflicts among the interests of the
holders of the different Classes. The directors, on
an ongoing basis, will consider whether any such
conflict exists and, if so, take appropriate action.
As permitted by Maryland law, there will normally be
no meetings of shareholders for the purpose of
electing directors unless and until such time as less
than a majority of the directors holding office have
been elected by shareholders. At that time, the
directors then in office will call a shareholder's
meeting for the election of directors. The directors
must call a meeting of shareholders for the purpose of
voting upon the question of removal of any director
when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares
of the Fund. At such a meeting, a director may be
removed after the holders of record of not less than a
majority of the outstanding shares of the Fund have
declared that the director be removed either by
declaration in writing or by votes cast in person or
by proxy. Except as set forth above, the directors
shall continue to hold office and may appoint
successor directors.
As used in the Prospectus and this Statement of
Additional Information, a "vote of a majority of the
outstanding voting securities" means the affirmative
vote of the lesser of (a) more than 50% of the
outstanding shares of the Company (or the affected
series or Class) or (b) 67% or more of such shares
present at a meeting if more than 50% of the
outstanding shares of the Company (or the affected
series or Class) are represented at the meeting in
person or by proxy. A series or Class shall be deemed
to be affected by a matter unless it is clear that the
interests of each series or Class in the matter are
identical or that the matter does not affect any
interest of the series or Class. The approval of a
management agreement or any change in a fundamental
investment policy would be effectively acted upon with
respect to the Fund only if approved by a "vote of a
majority of the outstanding voting securities" of the
Fund; however, the ratification of independent
accountants, the election of directors, and the
approval of a distribution agreement submitted to
shareholders are not subject to the separate voting
requirements and may be effectively acted upon by a
vote of the holders of a majority of all Company
shares voting without regard to series or Class.
Annual and Semi-annual Reports. The Fund sends its
shareholders a semi-annual report and an audited
annual report, which include listings of investment
securities held by the Fund at the end of the period
covered. In an effort to reduce the Fund's printing
and mailing costs, the Fund consolidates the mailing
of its semi-annual and annual reports by household.
This consolidation means that a household having
multiple accounts with the identical address of record
will receive a single copy of each report. In
addition, the Fund also consolidates the mailing of
its 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 their Salomon Smith Barney Financial
Consultant or the transfer agent.
Master Portfolio Organization
The Master Portfolio is a series of Master Sector
Portfolio ("MSP"), an open-end, series management
investment company organized as business
trust. MSP was organized on April , 2000. In
accordance with Delaware law and in connection with
the tax treatment sought by MSP, the Declaration of
Trust provides that its investors are personally
responsible for Trust liabilities and obligations, but
only to the extent the Trust property is insufficient
to satisfy such liabilities and obligations. The
Declaration of Trust also provides that MIP must
maintain appropriate insurance (for example, fidelity
bonding and errors and omissions insurance) for the
protection of the Trust, its investors, trustees,
officers, employees and agents covering possible tort
and other liabilities, and that investors will be
indemnified to the extent they are held liable for a
disproportionate share of MSP's obligations. Thus, the
risk of an investor incurring financial loss on
account of investor liability is limited to
circumstances in which both inadequate insurance
existed and MSP itself was unable to meet its
obligations.
The Declaration of Trust further provides that
obligations of MSP are not binding upon its trustees
individually but only upon the property of MSP and
that the trustees will not be liable for any action or
failure to act, but nothing in the Declarations of
Trust protects a trustee against any liability to
which the trustee would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the
conduct of the trustee's office.
The interests in the Master Portfolio have
substantially identical voting and other rights as
those rights enumerated above for shares of the fund.
MSP is generally not required to hold annual meetings,
but is required by Section 16(c) of the 1940 Act to
hold a special meeting and assist investor
communications under certain circumstances. Whenever
the fund is requested to vote on a matter with respect
to the Master Portfolio, the fund will hold a meeting
of fund shareholders and will cast its votes as
instructed by such shareholders.
In a situation where the fund does not receive
instruction from certain of its shareholders on how to
vote the corresponding shares of the Master Portfolio,
such fund will vote such shares in the same proportion
as the shares for which the fund does receive voting
instructions.
FINANCIAL STATEMENTS
As of the date of this SAI, the Funds had not yet
commenced operations. Consequently, there are no
financial statements for the Funds at this time.
OTHER INFORMATION
In an industry where the average portfolio manager has
seven years of experience (source: ICI, 1998), the
portfolio managers of Smith Barney Mutual Funds
average 21 years in the industry and 15 years with the
firm.
Smith Barney Mutual Funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management
that can be tailored to suit each investor's unique
financial goals.
Style Pure Series
Our Style Pure Series funds stay fully invested
within their asset class and investment style,
enabling investors to make asset allocation
decisions in conjunction with their Salomon
Smith Barney Financial Consultant.
Classic Investor Series
Our Classic Investor Series funds offer a range
of equity and fixed income strategies that seek
to capture opportunities across asset classes
and investment styles using disciplined
investment approaches.
The Concert Allocation Series
As a fund of funds, investors can select a
Concert Portfolio that may help their investment
needs. As needs change, investors can easily
choose another long-term, diversified investment
from our Concert family.
Special Discipline Series
Our Special Discipline Series funds are designed
for investors who are looking beyond more
traditional market categories: from natural
resources to a roster of state-specific
municipal funds.
SMITH BARNEY
SECTOR SERIES INC.
Biotechnology Fund
Global Media &
Telecommunications Fund
Global Technology Fund
August __, 2000
SMITH BARNEY SECTOR SERIES INC.
388 Greenwich Street
New York, NY 10013
SALOMON
SMITH
BARNEY
A Member
of
Citigroup [Symbol]
1
G:\Fund Accounting\Legal\FUNDS\Sect\2000\SECTOR GLOBAL
MASTERFEEDER SAI
AUGUST 2000.doc
Part C. Other Information
Item 23. Exhibits
All references are to the Registrant's Registration
Statement on Form N-1A as filed with the Securities and
Exchange Commission ("SEC") File Nos. 33-7339 and 811-
4757 (the "Registration Statement").
(a)(1)Registrant's Articles of Incorporation are
incorporated by reference to Post-Effective Amendment
No. 12 to the Registration Statement filed on October
27,1993 ("Post-Effective Amendment No. 12").
(a)(2)Articles of Amendment dated October 30, 1986 to
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No. 12.
(a)(3)Articles of Amendment dated November 17, 1989 to
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No.12.
(a)(4)Articles Supplementary dated November 5, 1992 to
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No.12.
(a)(5)Articles of Amendment dated November 19, 1992 to
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No.12.
(a)(6)Articles of Amendment dated July 30, 1993 to
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No.12.
(a)(7)Articles of Amendment dated October 14, 1994 and
November 7, 1994, respectively and Articles Supplementary
dated November 7, 1994 are incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement filed on December 29, 1994 ("Post- Effective
Amendment No. 15").
(a)(8)Articles of Amendment dated December 18, 1995 to
the Articles of Incorporation are incorporated by
reference to Post Effective Amendment No. 20 to the
Registration Statement filed on January 23, 1996 ("Post-
Effective Amendment No. 20").
(a)(9)Articles of Amendment dated June 1, 1998 to the
Articles of Incorporation are incorporated by reference
to Post-Effective Amendment No. 23 to the Registration
Statement filed on December 24, 1998 ("Post-Effective
Amendment No. 23").
(a)(10)Articles of Amendment dated November 29, 1999 to
the Articles of Incorporation are incorporated by
reference to Post-Effective Amendment No. 25 to the
Registration Statement filed on December 1, 1999 ("Post-
Effective Amendment No. 25").
(a)(11)Articles Supplementary dated November 29, 1999 are
incorporated by reference to Post-Effective Amendment No.
25.
(a)(12)Certificate of Correction dated November 29, 1999
is incorporated by reference to Post-Effective Amendment
No. 25.
(a)(13)Certificate of Correction dated November 29, 1999
is incorporated by reference to Post-Effective Amendment
No. 25.
(b)(1)Registrant's By-Laws are incorporated by reference
to the Registration Statement.
(b)(2)Amendment to Registrant's By-Laws is incorporated
by reference to Post-Effective Amendment No. 4 to the
Registration Statement filed on January 3, 1989 ("Post-
Effective Amendment No. 4").
(c)Specimen form of common stock certificate is
incorporated by reference to Post-Effective Amendment No.
23 to the Registration Statement filed on December 24,
1998 ("Post-Effective Amendment No. 23").
(d)(1)Form of Management Agreement between the Registrant
and Mutual Management Corp. (formerly known as Smith
Barney Mutual Funds Management Inc.) is incorporated by
reference to Post-Effective Amendment No. 19 to the
Registration Statement filed on December 18, 1995 ("Post-
Effective Amendment No. 19").
(d)(2)Form of Investment Management Agreement between the
Registrant and SSB Citi Fund Management LLC ("SSB Citi")
on behalf of the Financial Services Fund is incorporated
by reference to Post-Effective Amendment No. 26 to the
Registration Statement filed on February 11, 2000 ("Post-
Effective Amendment No. 26").
(d)(3)Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Health Sciences
Fund is incorporated by reference to Post-Effective
Amendment No. 26.
(d)(4)Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Technology Fund
is incorporated by reference to Post-Effective Amendment
No. 26.
(d)(5)Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Financial Services
Fund, SSB Citi and Citibank, N.A. ("Citibank") is
incorporated by reference to Post-Effective Amendment No.
26.
(d)(6)Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Health Sciences Fund,
SSB Citi and Citibank is incorporated by reference to
Post-Effective Amendment No. 26.
(d)(7)Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Technology Fund, SSB
Citi and Citibank is incorporated by reference to Post-
Effective Amendment No. 26.
(e)(1)Distribution Agreement between the Registrant and
Smith Barney Shearson Inc. is incorporated by reference
to Post-Effective Amendment No. 12.
(e)(2)Amended Distribution Agreement between Registrant
and CFBDS, Inc. is incorporated by reference to Post-
Effective Amendment No. 23 to the Registration Statement
filed on December 24, 1998 ("Post-Effective Amendment No.
23").
(e)(3)Selling Group Agreement is incorporated by
reference to Post-Effective Amendment No. 24 to the
Registration Statement filed on February 25,1999 ("Post-
Effective Amendment No. 24").
(e)(4)Form of Distribution Agreement between Registrant
and CFBDS, Inc. is incorporated by reference to Post-
Effective Amendment No. 26.
(f)Not Applicable.
(g)Form of Custodian Agreement between the Registrant and
The Chase Manhattan Bank N.A. is incorporated by
reference to Post-Effective Amendment No. 21 filed on
February 20, 1997.
(h)Transfer Agency Agreement dated August 2, 1993 between
the Registrant and First Data Investor Services Group is
incorporated by reference to Post-Effective Amendment No.
14 to the Registration Statement filed on December 30,
1993.
(i)Not Applicable.
(j)Consent of Independent Accountants to be filed by
Amendment.
(k)Not Applicable.
(l)Purchase Agreement between the Registrant and Shearson
Lehman Brothers is incorporated by reference to Pre-
Effective Amendment No. 1.
(m)(1)Amended Service and Distribution Plan pursuant to
Rule 12b-1 between the Registrant and Salomon Smith
Barney Inc. is incorporated by reference to Post-
Effective Amendment No. 15.
(m)(2)Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant and Salomon
Smith Barney Inc. is incorporated by reference to Post-
Effective Amendment No. 23 to the Registration Statement
filed on December 24, 1998 ("Post-Effective Amendment No.
23").
(m)(3)Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Financial Services Fund and Salomon
Smith Barney Inc. ("Salomon Smith Barney") is
incorporated by reference to Post-Effective Amendment No.
26.
(m)(4)Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Health Sciences Fund and Salomon Smith
Barney is incorporated by reference to Post-Effective
Amendment No. 26.
(m)(5)Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Technology Fund and Salomon Smith
Barney is incorporated by reference to Post-Effective
Amendment No. 26.
(n)Financial Data Schedule to be filed by Amendment.
(o)(1)Form of Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-Effective
Amendment No. 23.
(o)(2)Form of Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-Effective
Amendment No. 26.
(p) Code of Ethics is filed herein.
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
Post - Effective Amendment No. 1 to the Registration
Statement filed on May 28, 1987.
Item 26.Business and Other Connections of Investment
Adviser
Investment Adviser - - SSB Citi Fund Management LLC ("SSB
Citi") formerly known as SSBC Fund Management Inc.
("SSBC")
SSB Citi was incorporated in December 1968 under the laws
of the State of Delaware. On September 21, 1999, SSB Citi
was converted into a Delaware Limited Liability Company.
SSB Citi is a wholly owned subsidiary of Salomon Smith
Barney Holdings Inc. (formerly known as Smith Barney
Holdings Inc.) which in turn is a wholly owned subsidiary
of Citigroup Inc. ("Citigroup"). SSB Citi 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 SSB Citi together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and
directors during the past two years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SSBC
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
Equity Funds, 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 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 Accountants and Records
(1) Smith Barney Sector Series Inc.
(f/k/a Smith Barney Natural Resources Fund
Inc.)
388 Greenwich Street
New York, New York 10013
(2)(a) SSB Citi Fund Management LLC
(formerly known as SSBC Fund Management Inc.)
388 Greenwich Street
New York, New York 10013
(2)(b) Citibank, N.A.
100 First Stamford Place
Stamford, Connecticut 06902
(Sub-adviser to all funds except Natural
Resources Fund)
(3)(a) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(3)(b) State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(as to all Funds except the Natural Resources
Fund)
(4) Smith Barney Private Trust Company, as
Transfer Agent
388 Greenwich Street
New York, New York 10013
(5) PFPC Global Fund Services, as Sub-Transfer
Agent
(formerly known as First Data Investor
Services Group,
Inc.)
One Exchange Place
Boston, Massachusetts 02109
(6) CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
None
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 (the "Securities Act") and the Investment Company
Act of 1940, as amended, the Registrant, Smith Barney
Sector Series Inc. certifies that it meets all of the
requirements for effectiveness of this registration
statement under rule 485(b) under the Securities Act has
duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized,
in the City of New York and State of New York, on the
31st day of May, 2000.
SMITH BARNEY SECTOR
SERIES INC.
By: /s/ Heath B. McLendon
Health B. McLendon
Chairman of the
Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act
of 1933, as amended, this Amendment to the Registration
Statement has been signed below by the following persons
in the capacities and as of the dates indicated.
Signature Title Date
/s/Heath B. McLendon Chairman of the Board, May
31,2000
Heath B. McLendon President and Chief
Executive Officer
/s/ Lewis E. Daidone Senior Vice President May
31,2000
Lewis E. Daidone and Treasurer, Chief
Financial and Accounting Officer
/s/Herbert Barg Director May
31,2000
Herbert Barg
/s/Alfred J. Bianchetti Director May
31,2000
Alfred J. Bianchetti
/s/Martin Brody Director May
31,2000
Martin Brody
/s/Dwight B. Crane Director May
31,2000
Dwight B. Crane
/s/Burt N. Dorsett Director May
31,2000
Burt N. Dorsett
/s/Elliot S. Jaffe Director May
31,2000
Elliot S. Jaffe
/s/Stephen E. Kaufman Director May
31,2000
Stephen E. Kaufman
/s/Joseph J. McCann Director May
31,2000
Joseph J. McCann
/s/Cornelius C. Rose, Jr. Director May
31,2000
Cornelius C. Rose, Jr.
EXHIBIT INDEX
Exhibit No. Exhibit
(j) Consent of Independent Accountants to be filed
by Amendment
(n) Financial Data Schedule to be filed by
Amendment
(p) Code of Ethics is filed herein.
