SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [XXX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[XXX] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
THE INEFFICIENT-MARKET FUND, INC.
(Name of Registrant as Specified In Its Charter)
CHRISTINA SYDOR, NANCY LE DONNE
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[XXX] $125 per Exchange Act Rules 0-11 (c) (1)(ii), 14a-6
(i)(1), or 14a-6(j)(2) or the 1940 Act Rule 20a-1.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and
state how
it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Dear Stockholder,
An Important notice about The Inefficient-Market Fund
The Annual Meeting of Stockholders of The Inefficient-Market Fund,
Inc. will be held on July 7, 1995 at the Fund's headquarters
located at
388 Greenwich Street, New York, New York, 26th Floor at 4:00 pm.
Among other business matters to be discussed at the meeting,
aproposal
concerning the investment management of The Inefficient-Market Fund
will be presented.
The Proposal, which has been reviewed and unanimously endorsed by
the Board of Directors of The Inefficient-Market Fund, calls for
the Fund
to engage Travelers Investment Management Company (TIMCO) as the
Fund's new investment advisor. The recommendation reflects the
Board's
desire to improve the Fund's performance by broadening its
investment
focus to include small- and mid-capitalization companies. TIMCO is
a
wholly owned subsidiary of Travelers Group and currently manages
more than $950 million for pensioin funds, registered investment
companies and variable annuity funds.
The Board of Directors believes that TIMCO's investment style is
particularly well-suited to the Fund's direction and overall
objective. In
addition, the board of Directors believes that the recommended
proposal
is in the best interests of The Inefficient-MArket Fund's
stockholders and
will not have any material effect on the level of investmetn
advisory fees
nor incur any other additional extraordinary fees to the Fund.
Please complete, sign and mail the enclosed proxy card ... today!
We strongly urge you to participate by reviewing, completing and
returning your proxy by no later than July 6, 1995 in the
postage-paid
envelope provided.
For more details about the proposal and other business to be
discussed
at the meeting, please refer to the enclosed proxy statement. If
you sign
and date your proxy card, but do not provide voting instructions,
your
shares will be voted FOR the proposal.
We thank you for your timely participation and look forward to
serving
your investment needs with Smith Barney Mutual Funds. If you have
any
questions, please call your Financial Consultant who will be
pleased to
assist you.
Sincerely,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board
The Inefficient-Market Fund, Inc.
THE INEFFICIENT-MARKET FUND, INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 7, 1995
To the Stockholders of The Inefficient-Market Fund, Inc.:
The Annual Meeting of Stockholders of THE
INEFFICIENT-MARKET FUND, INC. (the "Fund") will be held at the
Fund's offices at 388 Greenwich Street, New York, New York, 26th
Floor, on July 7, 1995 at 4:00 p.m. (New York time) for the
following
purposes:
1. To elect to the Board one class of directors consisting of three
directors;
2. To consider and act upon the ratification of the selection of
KPMG
Peat Marwick LLP as independent auditors for the Fund;
3. To approve or disapprove a new investment advisory agreement
between the Fund and Travelers Investment Management Company, a
wholly-owned subsidiary of Smith Barney Holdings Inc., the parent
company of the Fund's distributor and its administrator, containing
substantially the same terms and conditions, including the same
level of
fees, as the Fund's current investment advisory agreement; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The stock transfer books will not be closed, but in lieu
thereof, the
Board of Directors has fixed the close of business on April 26,
1995 as
the record date for the determination of stockholders entitled to
notice
of, and to vote at, the meeting.
By Order of the Board of Directors
Christina T. Sydor, Secretary
New York, New York
June 5, 1995
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED
AT THE MEETING IN PERSON OR BY PROXY; IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE PROVIDED FOR YOUR
CONVENIENCE, WHICHREQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES.
THE INEFFICIENT-MARKET FUND, INC.
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 7, 1995
INTRODUCTION
This proxy statement is furnished in connection with the
solicitation by
the Board of Directors (the "Board") of The Inefficient-Market
Fund,
Inc. (the "Fund") of proxies to be voted at the Annual Meeting of
Stockholders (the "Meeting") of the Fund to be held at the Fund's
offices at 388 Greenwich Street, New York, New York, 26th Floor, on
July 7, 1995 at 4:00 p.m. (New York time), and at any adjournments
thereof, for the purposes set forth in the accompanying Notice of
Annual
Meeting of Stockholders.The cost of soliciting proxies will be
borne by
the Fund. In addition, certain officers, directors and employees
of the
Fund and Smith Barney Inc., 388 Greenwich Street, New York, N.Y.
10013 ("Smith Barney") (none of whom will receive additional
compensation therefor) may solicit proxies in person or by
telephone,
telegraph, or mail.
The Annual Report of the Fund, including audited financial
statements
for the fiscal year ended December 31, 1994 has previously been
furnished to all shareholders of the Fund. This proxy statement is
first
being mailed to shareholders on or about June 5, 1995.
All properly executed proxies received prior to the Meeting will be
voted
at the Meeting in accordance with the instructions marked thereon
or
otherwise as provided therein. Unless instructions to the contrary
are
marked, shares represented by the proxies will be voted "FOR" all
the
proposals. Proposal 1 requires for approval the affirmative vote of
a
plurality of the votes cast at the Meeting with a quorum present,
in
person or by proxy by the shareholders of the Fund voting on the
matter. Proposals 2 and 3 require for approval the affirmative vote
of a
majority of the votes cast at the Meeting with a quorum present,
in
person or by proxy by the shareholders of the Fund voting on the
matter. Abstentions and broker non-votes (that is, proxies from
brokers
or nominees indicating that such persons have not received
instructions
from the beneficial owner or other persons entitled to vote shares
on a
particular matter with respect to which the brokers or nominees do
not
have discretionary power) will be treated as shares that are
present but
which have not been voted. For this reason, abstentions and broker
non-votes will have the effect of a "no" vote for purposes of
obtaining
the requisite approval of each proposal. Any proxy may be revoked
at
any time prior to the exercise thereof bysubmitting another proxy
bearing
a later date or by giving written notice to the Secretary of the
Fund at the
Fund's address indicated above or by voting in person at the
Meeting.
The Board knows of no business other than that specifically
mentioned
in the Notice of Meeting which will be presented for consideration
at the
Meeting. If any other matters are properly presented, it is the
intention
of the persons named in the enclosed proxy to vote in accordance
with
their best judgment.
The Board of Directors of the Fund has fixed the close of business
on
April 26, 1995 as the record date for the determination of
stockholders
of the Fund entitled to notice of and to vote at the Meeting or any
adjournment thereof. Stockholders of the Fund on that date will be
entitled to one vote on each matter for each share held and a
fractional
vote with respect to fractional shares with no cumulative voting
rights.
At the close of business on April 26, 1995, the Fund had
outstanding
4,384,000 shares of Common Stock, par value $.001 per share, the
only
authorized class of stock, of which ( %) were held in
accounts,
but not beneficially owned by, Smith Barney International Inc.,
388
Greenwich Street, New York, NY 10013. As of April 26, 1995 the
following single shareholder or "group" (as that term is used in
Section
13(d) of the Securities Exchange Act of 1934) held in accounts, but
not
beneficially owned 5% or more of the Fund's outstanding shares:
Cede
& Co., P.O. Box 20, Bowling Green Station, New York, NY 10274
(4,124,314 shares - 94.0%).
The principal executive offices of the Fund are located at 388
Greenwich
Street, New York, New York 10013. The enclosed proxy and this proxy
statement are first being sent to the Fund's stockholders on or
about
June 5, 1995.
In the event that sufficient votes in favor of the proposals set
forth in the
Notice of Meeting and this Proxy Statement are not received by the
time
scheduled for the Meeting, the persons named as proxies may move
one
or more adjournments of the Meeting to permit further solicitation
of
proxies with respect to any such proposals. In determining whether
to
adjourn the Meeting, the following factors may be considered: the
nature
of the proposals that are the subject of the Meeting, the
percentage of
votes actually cast; the percentage of negative votes actually
cast; the
nature of any further solicitation and the information to be
provided to
shareholders with respect to the reasons for the solicitation. Any
such
adjournment will require the affirmative vote of a majority of the
shares
present at the Meeting. The persons named as proxies will vote in
favor
of such adjournment those shares which they are entitled to vote
and
which have voted in favor of such proposals.
PROPOSAL NO. 1.
ELECTION OF DIRECTORS
The Board of Directors of the Fund is classified into three
classes. The
directors serving in Class II have terms expiring at the Annual
Meeting;
each Class II director currently serving on the Board has been
nominated by the Board of Directors for re-election at the Meeting
to
serve until the 1998 Annual Meeting of Stockholders or until their
successors have been duly elected and qualified.
The Board of Directors of the Fund knows of no reason why any of
the
Class II nominees listed below will be unable to serve, but in the
event
of any such unavailability, the proxies received will be voted for
such
substitute nominees as the Board of Directors may recommend.
Certain information concerning the directors is set forth below.
All of the
individuals listed are currently directors of the Fund and, except
as
indicated, each individual has held the office shown or other
offices in
the same company for the last five years. Directors affiliated
with Smith
Barney and considered an "interested person" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act") are
indicated by an asterisk(*).
Persons Nominated for Election as Directors
Number and
Percentage of Fund
Principal Occupations
Shares of the Fund
During Past Five Years,
Beneficially Owned
Name
Other Directorships, and Age
on April 26, 1995
CLASS II DIRECTORS
Francis P. Martin
Director since 1989 Practicing physician; Director of ten
investment
companies associated with Smith Barney. Formerly President of the
Nassau Physicians' Fund, Inc.; 70. None
Roderick C. Rasmussen
Director since 1989 Investment Counselor; Director of ten
investment
companies associated with Smith Barney. Formerly Vice President of
Dresdner and Company Inc. (investment counselors); 68. None
Bruce D. Sargent*
Director since 1991 Director and Executive Vice President of
Smith
Barney, and Vice President and Director of Smith Barney Mutual
Funds
Management Inc. ("SBMFM"), Smith Barney Funds, Inc., and Smith
Barney World Funds, Inc.; 51. 302(a)
(a) Represents shares owned by members of this director's family.
The remainder of the Board constitutes the Class III and Class I
directors, none of whom will stand for election at the Meeting, as
their
terms will expire in 1996 and 1997, respectively.
Directors Continuing in Office
Number and
Percentage of Fund
Principal Occupations
Shares of the Fund
During Past Five Years,
Beneficially Owned
Name
Other Directorships, and Age
on April 26, 1995
CLASS III DIRECTORS
Ralph D. Creasman
Director since 1989 Retired; Director of ten investment companies
associated with Smith Barney. Formerly, Chairman, President and
Chief
Executive Officer of Lionel D. Edie & Co., Inc. (investment
counselors), Chairman of Edie International S.A. and President and
Director of Edie Ready Assets Trust, Fundamerica of Japan, Edie
Special
Growth Fund and Edie Capital Fund; 73.
None
Donald R. Foley
Director since 1989 Retired; Director of ten investment companies
associated with Smith Barney. Formerly Vice President of Edwin Bird
Wilson, Incorporated (advertising); 72.
None
John P. Toolan
Director since 1989 Retired; Director of ten investment companies
associated with Smith Barney. Formerly, Director and Chairman of
Smith Barney Trust Company, Director of Smith Barney, Mutual
Management Corp. ("MMC") and SBMFM. Prior to 1992, Senior
Executive Vice President, Director and Member ofthe Executive
Committee of Smith Barney and formerly President of Loeb Rhodes,
Hornblower & Co. and predecessor securities firms; 64.
None
Heath B. McLendon*
Director since 1995 Managing Director of Smith Barney; Director
of
forty-one investment companies associated with Smith Barney;
President
of the Manager; Chairman of the Board of Smith Barney Strategy
Advisors Inc.; prior to July 1993, Senior Executive Vice President
of
Shearson Lehman Brothers; Vice Chairman of the Board of Asset
Management; 61.
CLASS I DIRECTORS
Joseph H. Fleiss
Director since 1989 Retired; Director of ten investment companies
associated with Smith Barney. Formerly Senior Vice President of
Citibank, Manager of Citibank's Bond Investment Portfolio and
Money
Desk, and a Director of Citicorp Securities Co., Inc.; 77. None
C. Richard Youngdahl
Director since 1989 Retired; Director of ten investment companies
associated with Smith Barney. Formerly Chairman of the Board of
Pensions Lutheran Church in America, Chairman of the Board and
Chief
Executive Officer of Aubrey G. Lanston & Co. (dealers in U. S.
Government Securities) and President of the Association of Primary
Dealers in U.S. Government Securities; 79.
1,079
(less than 1%)
Paul Hardin
Director since 1994 Chancellor of the University of North
Carolina at
Chapel Hill, University of North Carolina; Director of twelve
investment companies associated with Smith Barney; Director of The
Summit Bancorporation; 63.
None
Number and
Percentage of Fund
Principal Occupations
Shares of the Fund
During Past Five Years,
Beneficially Owned
Name
Other Directorships, and Age
on April 26, 1995
Jessica Bibliowicz*
Director since 1995 Executive Vice President of Smith Barney;
Director
of twelve investment companies associated with Smith Barney,
President
of forty investment companies associated with Smith Barney. Prior
to
January 1994, Director of Sales and Marketing for Prudential Mutual
Funds; prior to September 1991, First Vice President, Asset
Management Division of Shearson Lehman Brothers Inc.; 35.
None
As of April 26, 1995 all directors and officers as a group (17
persons)
beneficially owned less than 1% of the shares outstanding of the
Fund.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Fund's
officers and directors, and persons who beneficially own more than
ten
percent of a registered class of the Fund's equity securities, to
file
reports of ownership with the Securities and Exchange Commission,
the
American Stock Exchange and the Fund. Based solely upon its review
of
the copies of such forms received by it and written
representations from
such persons, the Fund believes that, during fiscal year 1994, all
filing
requirements applicable to such persons were complied with.
The Fund has no compensation or nominating committee of the Board
of
Directors, or any committee performing similar functions. The Fund
has
an audit committee composed of all the directors who are not
interested
persons of the Fund or Smith Barney (the "independent directors")
which is charged with recommending a firm of independent auditors
to
the Fund and reviewing accounting matters with the auditors. The
audit
committee met once during the fiscal year ended December 31, 1994.
All of the members of the Audit Committee attended the meeting.
The following table shows the compensation paid by the Fund to each
incumbent director during the Fund's last fiscal year. Only the
independent directors receive remuneration from the Fund for
acting as
a director. Aggregate fees (including reimbursement for travel and
out-of-pocket expenses) of $27,100 were paid to such directors by
the
Fund during the fiscal year ended December 31, 1994. Fees for
independent directors who are directors of a group of funds
sponsored
by Smith Barney are set at $40,000 per annum plus $100 for each
day
of Board meetings attended. These fees are allocated among the
funds
based on the relative net assets of each individual fund or
portfolio.
None of the officers of the Fund received any compensation from the
Fund for such period. Officers and interested directors of the
Fund are
compensated by Smith Barney.
Compensation Table
Name of Person
Aggregate
Compensation
from Fund Pension or
RetirementBenefits
Accrued as partof
Fund ExpensesTotal
Compensation
from Fund and
Fund ComplexPaid
to DirectorsNumber of Funds
for which Director
serves within
Fund Complex
Jessica M. Bibliowicz*
$0
$0
$0
12
Ralph D. Creasman
3,600
0
51,500
10
Joseph H. Fleiss
3,600
0
50,900
10
Donald R. Foley
3,600
0
51,500
10
Paul Hardin
1,900
0
[XP**[AP27,800**
[XP**[AP12**
Heath B. McLendon*
0
0
0
41
Francis P. Martin
3,600
0
51,500
10
Roderick C. Rasmussen
3,600
0
51,500
10
Bruce D. Sargent*
0
0
0
3
John P. Toolan
3,600
0
51,500
10
C. Richard Youngdahl
3,600
0
51,500
10
[XP*[AP* Designates an "interested director".
** Reflects the compensation paid to Dr. Hardin and the number of
funds within the Fund Complex for which Dr. Hardin serves as a
director as of the date of this Proxy Statement. For the fiscal
year ended
December 31, 1994, Mr. Hardin served as a director of 25 funds
within
the Fund Complex and was paid $96,400.
During the Fund's last fiscal year five meetings of the Board of
Directors
were held. No director attended less than 75% of these meetings of
the
Board.
The following is a list of the current executive officers of the
Fund, all
of whom have been elected by the directors to serve until their
respective
successors are elected:
Name
Offices and
Positions
Held
with Fund
Period
Offices
Held
Principal Occupations
During Past Five
Years and Age
Jessica Bibliowicz
President
1995
(see table of directors above)
Ellen Cardozo Sonsino
Vice President
1989 to date
Managing Director of Smith Barney and
Senior Portfolio Manager in the CapitalManagement Division.
Formerly
a Vice President/Senior Investment Analyst with ABD Securities
Corporation; prior to that, a Vice President with Lionel D. Edie
& Co.,
Inc.; 41.
Lewis E. Daidone
Treasurer
1990 to date
Managing Director of Smith Barney,
Director and Senior Vice President of SBMFM and Senior Vice
President and Treasurer of other investment companies associated
with
Smith Barney. Prior to January 1990, Senior Vice President and
Chief
Financial Officer of Cortland Financial Group, Inc. and Vice
President
and Treasurer of its associated investment companies and
subsidiary
broker-dealer; 37.
Name
Offices and
Positions
Held
with Fund
Period
Offices
Held
Principal Occupations
During Past Five
Years and Age
Christina T. Sydor
Secretary
1989 to date
Managing Director of Smith Barney. General
Counsel and Secretary of SBMFM and Secretary of other investment
companies associated with Smith Barney; 44.
Thomas M. Reynolds
Controller and
Assistant Secretary
1991 to date
Director of Smith Barney in the Asset
Management Division, and Controller and Assistant Secretary of
other
investment companies associated with Smith Barney. Prior to
September
1991, Assistant Treasurer of Aquila Management Corporation and its
associated investment companies; 35.
Anthony J. Pace
Assistant
Controller
1992 to date
Vice President of Smith Barney in the Asset
Management Division, and Assistant Controller of other investment
companies associated with Smith Barney; 29.
As of April 26, 1995 the directors and officers of the Fund as a
group
beneficially owned less than 1% of the outstanding shares of Common
Stock of The Travelers Inc., the ultimate parent of Smith Barney.
The Board of Directors recommends that you vote "FOR" the nominees.
PROPOSAL NO. 2.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP ("KPMG") have been selected as the
independent auditors to audit the accounts of the Fund for and
during
the fiscal year ending December 31, 1995 by a majority of the
independent directors by a vote cast in person subject to
ratification by
the stockholders at the Meeting (the entire Board concurred in the
selection). KPMG also serves as the independent auditors for other
investment companies associated with Smith Barney and for The
Travelers Inc. KPMG has no direct or material indirect financial
interest
in the Fund, Smith Barney, its parent, The Travelers Inc., or any
other
investment company sponsored by Smith Barney or its affiliates.
If the Fund receives a written request from any stockholder at
least five
days prior to the Meeting stating that the stockholder will be
present in
person at the Meeting and desires to ask questions of the auditors
concerning the Fund's financial statements, the Fund will arrange
to
have a representative of KPMG present at the Meeting who will
respond
to appropriate questions and have an opportunity to make a
statement.
The affirmative vote of a majority of shares present and voting at
the
meeting is required to ratify the selection of KPMG. The Board of
Directors recommends that the stockholders vote "FOR" the
ratification
of the selection of independent auditors.
PROPOSAL NO. 3.
TO APPROVE OR DISAPPROVE A NEW INVESTMENT ADVISORY
AGREEMENT BETWEEN TRAVELERS INVESTMENT
MANAGEMENT COMPANY AND THE FUND, CONTAINING
SUBSTANTIALLY THE SAME TERMS AND CONDITIONS,
INCLUDING THE SAME LEVEL OF FEES, AS THE FUND'S
CURRENT INVESTMENT ADVISORY AGREEMENT.
For the reasons and based on an extensive analysis of factors
described
below, the Directors of the Fund unanimously determined, subject
to
approval by the shareholders of the Fund, to enter into a new
investment
advisory agreement (the "New Agreement") between the Fund and
Travelers Investment Management Company ("TIMCO"), a wholly
owned subsidiary of Smith Barney Holdings Inc. ("Holdings"), which
in
turn is a wholly owned subsidiary of Travelers, the ultimate
parent
company of the Fund's distributor and administrator. Smith Barney
Inc.
(the "Current Adviser") is currently the Fund's investment adviser
pursuant to an investment advisory agreement dated December 18,
1989
(the "Current Agreement"). The New Agreement contains substantially
the same terms and conditions, including the same investment
advisory
fee, contained in the Current Agreement. If approved by
shareholders,
the New Agreement will continue initially for a two-year period
and
would continue automatically for successive annual periods
thereafter;
provided such continuance is approved at least annually by: (a) a
majority of the Board who are not interested persons of the Fund
(as the
term is used in the Investment Company Act of 1940, as amended
(the
"1940 Act")) and (b) a majority of the full Board of Directors or
a
majority of the outstanding voting securities of the Portfolio, as
defined
in the 1940 Act.
The Current Adviser
Smith Barney Inc., 388 Greenwich Street, New York, N.Y. 10013
("Smith Barney" or the "Current Adviser") is currently the
investment
adviser of the Fund. The Current Adviser is a wholly owned
subsidiary
of Holdings, which is, in turn, a wholly owned subsidiary of
Travelers.
The principal executive offices of Holdings are located at 388
Greenwich Street, 26th Floor, New York, N.Y. 10013; the principal
executive offices of Travelers are located at 65 East 55th Street,
New
York, N.Y. 10022. The Current Agreement was approved by
shareholders on November 2, 1990. Under the terms of the Current
Agreement, the Fund pays an investment advisory fee at an annual
rate
of 0.75% of the Fund's average daily net assets. During the fiscal
year
ended December 31, 1994, the Fund paid Smith Barney $402,574 in
investment advisory fees.
Smith Barney is a registered investment adviser and a registered
broker/dealer incorporated in l960 under the laws of the State of
Delaware. Smith Barney was formed through the merger of Smith
Barney, Harris Upham & Co. Incorporated and Shearson Lehman
Brothers Incorporated in 1993. Prior to that time, Smith Barney,
Harris
Upham & Co. Incorporated (or its predecessor firms) had operated as
an
investment banking and brokerage firm since l873. Smith Barney is
engaged in the securities underwriting and securities and
commodities
brokerage business with over 480 branch offices throughout the
world
and more than 27,000 employees. Smith Barney is a member of the New
York Stock Exchange and other major securities and commodities
exchanges. It acts as sponsor of numerous unit investment trust
funds and
as a principal underwriter of other investment companies. Smith
Barney,
in addition to participating as a member of various selling groups
or as
agent of other investment companies, executes orders on behalf of
investment companies for the purchase and sale of their securities
and
sells securities to such companies as a broker or dealer in
securities.
Smith Barney acts as investment adviser to various individual and
institutional clients whose portfolios include corporate, United
States
Government and municipal securities. Affiliates of Smith Barney
are
investment managers of other investment companies, including money
market funds, with assets in excess of $54 billion.
The name of each director of Smith Barney is as follows: Robert F.
Greenhill, Chairman and Chief Executive Officer; James Dimon,
Chief
Operating Officer; Robert Druskin, Vice Chairman and Chief
Administrative Officer; Steven D. Black, Vice Chairman and Deputy
Chief Operating Officer; Jeffrey B. Lane, Vice Chairman; Robert H.
Lessin, Vice Chairman; Michael B. Panitch, Vice Chairman; Jack L.
Rivkin, Vice Chairman; James S. Boshart, III, Managing Director;
Robert A. Case, Managing Director; and John F. Lyness, Managing
Director. The address of Smith Barney and each director is 388
Greenwich Street, New York, NY 10013.
Under the Advisory Agreement the Fund is responsible for the costs
of
its operations. During the fiscal year ended December 31, 1994 an
aggregate of $ of operating expenses (excluding interest and
advisory fees) was accrued and/or paid by the Fund. Of this
amount, $
was accrued and/or paid to Mutual Management Corp. ("MMC"),
an affiliate of the Current Adviser, during this period for
administration
services provided to the Fund pursuant to an Administration
Agreement
with the Fund dated as of December 18, 1989, which provides that
MMC shall be paid a fee calculated at the annual rate of 0.25% per
annum of the Fund's average daily net assets paid monthly.
The Proposed Investment Adviser
TIMCO was founded over 25 years ago as an investment adviser
responsible for providing investment advice to investment
companies
and private accounts. The investment professionals at TIMCO, which
has been a registered investment adviser since 1971, have extensive
experience in developing and managing equity portfolios with
objectives
similar to the Portfolio's objectives. Exhibit B to this Proxy
Statement
identifies investment companies that invest in equities for which
TIMCO
serves as investment adviser, the fees charged by TIMCO and the
size
of each such investment company. Under the terms of these various
investment advisory agreements, TIMCO provides portfolio advice and
assistance with respect to theselection, acquisition, holding and
disposal
of securities and receives compensation based on direct and
indirect
costs it incurs in performing such services.The name, position with
TIMCO and principal occupation of each executive officer and
director
of TIMCO are set forth in the following table. The businessaddress
of
TIMCO and each officer and director is One Tower Square, Hartford,
CT 06183-2030.
Name
Position with TIMCO
Principal Occupation
Kent A. Kelley
Chief Executive Officer
Chief Executive Officer and
Portfolio Manager
Sandip A. Bhagat
President
President and Portfolio
Manager
Jacob E. Hurwitz
Vice President
Portfolio Manager
Daniel B. Willey
Vice President
Head Trader
Evaluation by the Board and Reasons for the Proposal
On May 16, 1995, the Board of Directors met in person at a meeting
called for the purpose of considering, among other things, the New
Agreement with TIMCO. The Board also considered at that time the
continuation of the Fund's Current Agreement with Smith Barney and
various other possible alternatives. The Board reviewed materials
furnished by TIMCO that described, among other matters,TIMCO and
its affiliates, senior personnel, portfolio managers, analysts and
others,
its method of operations, investment philosophy, performance record
and
financial condition. Representatives of TIMCO met with the Board
to
discuss in depth thewritten materials and to respond to questions
from the
Board and its independent counsel.
The Board of Directors of the Fund determined to terminate the
Fund's
Current Agreement with Smith Barney and to enter into the New
Agreement with TIMCO subject to the approval of shareholders. In so
doing, a variety of factors were evaluated.
The Board reviewed Smith Barney's investment performance on behalf
of the Fund and the past investment performance of TIMCO in
managing portfolios offunds with objectives and policies similar to
those
of the Fund and evaluated such performance against various indices
and
industry standards. The Board considered the fact that TIMCO
specializes in quantitative equity management and uses adisciplined
approach to common stock management in the small/mid capitalization
segments of the equity market. It also considered TIMCO's
systematic
approach to stock selection that employs a set of sophisticated
valuation
and earnings models to identify stocks that have a high
probability of
outperforming the broad market from a universe of over 3,000
securities. The Board felt that TIMCO's investment style, which is
to
emphasize stocks that appear undervalued relative to fundamental
measures based on discounted cash flow analysis and also
demonstrate
a current trend of improving earnings, would be an excellent match
with
the Fund's objective of investing in equity securities of
companies that
are believed to be inefficiently valued and therefore have good
potential
for capital appreciation.
After carefully evaluating the foregoing material and factors, the
Board
of Directors of the Fund who were not interested persons of the
Fund
approved, subject to shareholder approval, the New Agreement with
TIMCO containing substantially identical terms and conditions as
the
Current Agreement, and recommended its approval by the Fund's
shareholders.
The Proposed Agreement
A copy of the form of the New Agreement is set forth as Exhibit A
to
this Proxy Statement. Under its terms, TIMCO, subject to the
supervision and approval of the Fund's Board, would manage the
Fund's
investments in accordance with its investment objective and
policies. As
investment adviser, TIMCO would beresponsible for making investment
decisions concerning assets, supplying investment research and
portfolio
management services and placing orders to purchase and sell assets
on
behalf of the Fund. TIMCO would receive a fee that is computed
daily
and paid monthly at the annual rate of 0.75% of the value of the
Fund's
average daily net assets. With the exception of the identity of the
investment adviser and the commencement and termination dates, the
provisions of the New Agreement and the Current Agreement with
Smith
Barney are virtually identical.Under the terms of the New
Agreement,
TIMCO bears all expenses inconnection with its performance. Other
expenses incurred in the operation of the Fund will continue to be
borne
by the Fund, including: taxes, interest, brokeragefees and
commissions,
if any; fees of the Board members who are not "interested persons"
as
defined in the 1940 Act; blue sky qualification fees; charges of
custodian
and transfer and dividend disbursing agents; certain insurance
premiums;
outside auditing and legal expenses; costs of preparation and
printing of
shareholders' reports; costs incurred in connection with meetings
of the
shareholders of the Fund, and its other business and operating
expenses
and any extraordinary expenses.
The New Agreement provides that in the absence of willful
misfeasance,
bad faith, gross negligence or reckless disregard for its
obligations
thereunder, TIMCO shall not be liable for any act or omission in
the
course of or in connection with the rendering of its services
thereunder.
Required Vote
Approval of the New Agreement requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. The
term
"majority of the outstanding voting securities" of the Fund, as
defined in
the 1940 Act, means an affirmative vote of the lesser of: (a) 67%
of the
voting securities of the Fund present at the Meeting if more than
50%
of the outstanding shares are present in person or by proxy at the
Meeting; and (b) more than 50% of the outstanding voting securities
of
the Fund.
If the New Agreement is not approved by the shareholders of the
Fund,
Smith Barney will continue to serve as investment adviser to the
Fund
and the Board of Directors will consider other appropriate actions
in the
best interests of the Fund.
The Board of Directors recommends that the stockholders vote "FOR"
the ratification of the new investment advisory agreement.
Portfolio Transactions and Brokerage
Subject to policies established by the Board of Directors of the
Fund, the
investment adviser (collectively referring to both TIMCO and Smith
Barney) will arrange for the execution of the Fund's portfolio
transactions and the allocation of brokerage. In executing
portfolio
transactions, the investment adviser will seek to obtain the most
favorable execution of portfolio transactions, that is, the best
combination
of net price and prompt reliable execution. In the investment
adviser's
opinion it is not possible to determine in advance that any
particular
broker will actually be able to effect the most favorable execution
because, in the context of a constantly changing market, order
execution
involves judgments as to price, volume, the trend and breadth of
the
market, the possibility of a block transaction, and the broker's
activity
in the security as well as its general record for prompt, competent
and
reliable service in all aspects of order processing, execution and
settlement as well as anticipated commission rates.
A substantial portion of the securities in which the Fund will
invest may
be traded in the over-the-counter markets, and the Fund intends to
deal
directly with the dealers who make markets in the securities
involved,
except in those circumstances where better prices and execution are
otherwise available. Under the 1940 Act, persons affiliated with
the
Fund are prohibited from dealing with the Fund as principal in the
purchase and sale of securities. Transactions in the over-the-
counter
markets usually involve transactions with dealers acting as
principal for
their own account. The Fund will not deal with affiliated persons
as
principal; however, affiliated persons of the Fund may serve as its
broker
in over-the-counter markets and other transactions conducted on an
agency basis in accordance with the 1940 Act.
The investment adviser has no obligation to deal with any broker or
group of brokers in the execution of transactions. The Fund's
portfolio
transactions may be effected through Smith Barney provided it is
consistent with the policy of obtaining the most favorable
execution. The
Fund's Board of Directors has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions
paid to Smith Barney are reasonable and fair.
In allocating brokerage among other brokers who are believed to be
capable of providing equally favorable execution, the Fund may
also
take into consideration the fact that a particular broker may, in
addition
to execution capability, provide other services to the Fund such as
research and statistical information. It is not possible to place
a dollar
value on such services, other than services provided by third
parties, nor
does their availability reduce the investment adviser's expenses in
a
determinable amount. These various services may, however, be useful
to the investment adviser in connection with its services rendered
to the
Fund or to other advisory clients and not all such services may be
used
in connection with the Fund.
During the fiscal year ended December 31, 1994, the Fund paid $
in brokerage commissions, of which $ ( %) was paid to
Smith
Barney for services in connection with trades that were directed
to Smith
Barney, but executed by unaffiliated brokers and not for research
or
statistical services. During the same period, Smith Barney
effected
% of the total dollar amount of transactions involving the payment
of
commissions.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1996 Annual
Meeting of the Stockholders of the Fund must be received by
February
5, 1996 to be included in the proxy statement and the form of
proxy
relating to that meeting.
OTHER MATTERS
The management knows of no other matters which are to be brought
before the Meeting. However, if any other matters not now known or
determined properly come before the Meeting, it is the intention of
the
persons named in the enclosed form of proxy to vote such proxy in
accordance with their judgment on such matters.
All proxies received will be voted in favor of all the proposals,
unless
otherwise directed therein.
By Order of the Board of Directors,
Christina T. Sydor
Secretary
June 5, 1995
EXHIBIT A
THE INEFFICIENT-MARKET FUND, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, made as of the day of 1995
between
The Inefficient-Market Fund, Inc., a Maryland Corporation (the
"Fund"), and Travelers Investment Management Company (the
"Adviser").
WITNESSETH:
WHEREAS, the Fund is a non-diversified closed-end management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Fund has been organized for the purpose of investing
its funds and desires to avail itself of the experience, sources
of
information, advice, assistance and facilities available to the
Adviser and
to have the Adviser perform for it various investment management
services; and the Adviser is willing to furnish such advice and
services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed as follows:
1. The Fund hereby appoints the Adviser to act as investment
adviser
to the Fund on the terms set forth in this Agreement. The Adviser
accepts such appointment and agrees to render the services herein
described, for the compensation herein provided.
2. Subject to the supervision of the Board of Directors of the
Fund (the
"Board"), the Adviser shall manage the investment of the Fund
assets
and provide investment research advice and supervision of the
Fund's
portfolio in accordance with the Fund's investment objective,
policies
and restrictions as stated in the Fund's Registration Statement
under the
1940 Act as it may be amended from time to time (the Fund's
"Registration Statement") and subject to the following
understandings:
(a) The Adviser shall provide supervision of the Fund's
investments and
determine from time to time the investments or securities that will
be
purchased, retained, sold or loaned by the Fund, and the portion of
the
assets that will be invested in securities or otherwise.
In determining the securities to be purchased or sold by the Fund,
the
Adviser shall place orders with respect to portfolio securities
either
directly with the issuer or with or through such persons, brokers
(including Smith Barney Inc.) or dealers in conformity with the
policy
with respect to brokerage as set forth in the Fund's Registration
Statement or as the Board may direct from time to time. It is
understood
that it may be desirable for the Fund that the Adviser have access
to
supplemental investment and market research and security and
economic
analysis provided by brokers who may execute brokerage transactions
at
a higher cost to the Fund than may result when allocating brokerage
to
other brokers on the basis of seeking the best price and best
execution.
Therefore, the Adviser is authorized to place orders for the
purchase and
sale of securities for the Fund with such brokers, subject to
review by
the Fund's Board from time to time with respect to the extent and
continuation of this practice. It is understood that the services
provided
by such brokers may be useful to the Adviser or its affiliates in
connection with their services to other clients.
(b) The Adviser shall use its best judgment in the performance of
its
duties
under this Agreement.
(c) The Adviser undertakes to perform its duties and obligations
under
this
Agreement in conformity with the Prospectus of the Fund, with the
requirements of the 1940 Act and all other applicable Federal and
state
laws and regulations and with the instructions and directions of
the
Board.
(d) The Adviser shall maintain such books and records with respect
to
the
Fund's portfolio transactions and such books and records required
to be
maintained by the Adviser pursuant to the Rules of the Commission
under the 1940 Act and the Adviser shall render to the Fund's
Board
such periodic and special reports as the Board may reasonably
request.
The Adviser agrees that all records that it maintains for the Fund
are the
property of the Fund and it will surrender promptly to the Fund
any of
such records upon the Fund's request.
(e) The Adviser shall provide the Fund's Administrator on each
business
day
with information relating to all transactions concerning the Fund's
portfolio.
3. The Adviser will bear all of its expenses of its employees and
overhead in connection with its duties under this Agreement. It
will also
pay all directors' fees and salaries of the Fund's directors and
officers
who are affiliated persons (as such term is defined in the 1940
Act) of
the Adviser.
Except for the expenses specifically assumed by the Adviser, the
Fund
will pay all of its expenses, including, without limitation, fees
of the
directors not affiliated with the Adviser or its affiliates and
board
meeting expenses; fees of the Adviser and of Smith Barney Mutual
Funds Management Inc. (or any successor) as the Administrator;
interest
charges; taxes; charges and expenses of the Fund's legal counsel
and
independent accountants, and of the transfer agent, registrar and
dividend
disbursing agent of the Fund; expenses of repurchasing Shares;
expenses
of printing and mailing share certificates, stockholder reports,
notices,
proxy statements and reports to governmental offices; brokerage and
other expenses connected with the execution, recording and
settlement of
portfolio security transactions; expenses connected with
negotiating,
effecting purchases or sales or registering privately issued
portfolio
securities; fees and expenses of the Fund's custodians for all
services to
the Fund, including safekeeping of funds and securities and
maintaining
required books and accounts; expenses of calculating and publishing
the
net asset value of the Fund's Shares; expenses of membership in
investment company associations; expenses of fidelity bonding and
other
insurance premiums; expenses of stockholders' meetings; SEC and
state
blue sky registration fees; American Stock Exchange listing fees;
fees
payable to the National Association of Securities Dealers, Inc. in
connection with this offering; and its other business and
operating
expenses.
4. For the services provided and the expenses assumed pursuant to
this
Agreement, the Fund will pay to the Adviser a monthly fee in
arrears
equal to 0.75% per annum of the Fund's average daily net assets
during
the month.
5. The Adviser shall authorize and permit any of its directors,
officers
and employees who may be elected as directors or officers of the
Fund
to service in the capacities in which they are elected.
6. The Adviser shall not be liable for any error of judgment or
for any
loss suffered by the Fund in connection with the matters to which
this
Agreement relates, except a loss resulting from a breach of
fiduciary
duty with respect to the receipt of compensation for services (in
which
case any award of damages shall be limited to the period and the
amount
set forth in Section 36(b)(3) of the 1940 Act) or a loss resulting
from
willful misfeasance, bad faith or gross negligence on its part in
the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
7. This Agreement shall continue in effect for a period of two
years
from its effective date, and if not sooner terminated, will
continue in
effect for successive periods of 12 months thereafter, provided
that each
continuance is specifically approved at least annually in
conformity with
the requirements of the 1940 Act. This Agreement may be terminated
as
a whole at any time by the Fund, without the payment of any
penalty,
upon the vote of a majority of the Fund's Board of Directors or the
vote
of a majority of the outstanding voting securities (as defined in
the 1940
Act) of the Fund, or by the Adviser, on 60 days' written notice by
either
party to the other. This Agreement shall terminate automatically in
the
event of its assignment (as such term is defined in the 1940 Act
and the
rules thereunder).
8. Nothing in this Agreement shall limit or restrict the right of
any of
the Adviser's directors, officers, or employees who may also be a
director, officer or employee of the Fund to engage in any other
business
or to devote his time and attention in part to the management or
other
aspects of any business, whether of a similar or a dissimilar
nature, nor
limit or restrict the Adviser's right to engage in any other
business or
to render services of any kind to any other corporation, firm,
individual
or association. The investment advisory services provided by the
Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be
free
to render similar services to others.
9. Any notice or other communication required to be given pursuant
to
this Agreement shall be deemed duly given if delivered or mailed
by
registered mail, postage prepaid, (i) to the Adviser at One Tower
Square,
Hartford, Connecticut 06183, Attention: Chief Executive Officer; or
(ii)
to the Fund at 388 Greenwich Street, New York, New York 10013,
Attention: Secretary.
10. This Agreement shall be governed by and construed in
accordance
with the laws of the State of New York.
11. Under a License Agreement dated December 18, 1989 between the
Fund and Smith Barney Inc., Smith Barney has granted to the Fund
a
royalty-free, non- exclusive license to use the name "The
Inefficient-Market Fund, Inc." in the United States only in
connection
with the operation of an investment company. It is further
provided in
the License Agreement that Smith Barney may use or license the
above
term in connection with other investment companies, subject to the
requirements of the 1940 Act, or any other business enterprise
during
the term of such License Agreement or thereafter. The License
Agreement is terminable by Smith Barney on sixty days' notice to
the
Fund or as soon as practicable thereafter. Upon such termination
the
Fund is required to change its name to one which does not include
the
term "Inefficient Market".
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day
and year
first above written.
THE INEFFICIENT-MARKET
FUND, INC.
Attest:
By
By
TRAVELERS INVESTMENT
MANAGEMENT COMPANY
Attest:
By
By
EXHIBIT B
TIMCO-ADVISED INVESTMENT COMPANIES
INVESTING IN EQUITY SECURITIES
Advisory Fee Schedule
Investment Company
Assets as
of 2/28/95
From
To
Fee
The Travelers Growth and
Income Stock Accountfor VariableAnnuities$339,384,909
0.45%
The Travelers Timed
Growth and IncomeStock Account forVariable Annuities$309,404,904
0.3233%
The Travelers Capital
Appreciation Fund $81,741,073
0.20%
The Travelers Managed
Asset Trust $87,007,655
0.50%
The Travelers Series
Trust-Social AwarenessStock Portfolio $4,408,004
$ 0
$ 50,000,000
0.65%
50,000,001
100,000,000
0.55%
100,000,001
200,000,000
0.45%
200,000,001
and over
0.40%
The Travelers Timed
Aggressive StockAccount for VariableAnnuities $44,139,726
$ 0
$ 20,000,000
0.50%
20,000,001
100,000,000
0.25%
100,000,001
300,000,000
0.20%
300,000,001
and over
0.15%
THE INEFFICIENT-MARKET FUND INC.
This Proxy is Solicited on Behalf of the Directors of the Fund.
388 Greenwich Street
New York, New York 10013
The undersigned hereby appoints HEATH B. McLENDON and LEWIS
E. DAIDONE, and each of them acting in the absence of the other, as
Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated herein, all
the
shares of common stock of The Inefficient-Market Fund, Inc. held of
record by the undersigned on April 26, 1995 at a Meeting of
Stockholders to be held on July 7, 1995 or any adjournment thereof.
PROXY
ELECTION OF DIRECTORS
EXCEPT
1. ELECTION OF DIRECTORS
F.P. Martin, R.C. Rasmussen, and B. Sargent
FOR
OR
FOR ALL EXCEPT
OR WITHHOLD
(INSTRUCTION:To withhold authority to vote for any individual
nominee write that nominee's name on the space provided above and
check center box to the right.)
PROPOSALS
The Board of Directors recommends a vote "FOR" the following
proposals:
2. PROPOSAL TO RATIFY THE SELECTION OF KPMG PEAT
MARWICK LLP AS THE INDEPENDENT
AUDITORS OF THE FUND.
3. PROPOSAL TO APPROVE OR DISAPPROVE NEW
INVESTMENT ADVISORY AGREEMENT BETWEEN THE FUND
AND TRAVELERS INVESTMENT MANAGEMENT COMPANY
4.In their discretion, the Proxies are authorized to vote upon such
other
business as may properly come before the meeting.
FOR
AGAINST
ABSTAIN
Please sign on the reverse side.
This proxy when properly executed will be voted in the manner
directed
herein by the undersigned stockholder. If no direction is made,
this
proxy will be voted FOR each nominee for director and for each
proposal.
Please sign exactly as name appears to the left. When shares are
held by
joint tenants, both should sign, or if one signs, that
stockholder's vote
binds both stockholders. When signing as attorney, executor,
administrator, agent, trustee or guardian, please give full title
as such.
If a corporation, please sign in full corporate name by President
or other
authorized officer. If a partnership, please sign in partnership
name by
authorized person.
Signature
Signature if held jointly
Dated:
,1995
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
