As filed with the Securities and Exchange Commission on April
26, 2000
Securities Act Registration No. 333-25499
Investment Company Act Registration No. 811-5928
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 5 [X]
___________________________________________________________
Smith Barney Small Cap Blend 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
(Registrants Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Small Cap Blend Fund, Inc.
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
_____________________
Copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
_______________
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) of Rule 485
[X] On April 28, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] On April 28, 2000 pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of rule 485
[ ] 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.
Title of Securities Being Registered: Shares of Common Stock
SMITH BARNEY SMALL CAP BLEND FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and
documents
Front Cover
Contents Page
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
PART A
[LOGO] Smith Barney
Mutual Funds
P R O S P E C T U S
Small Cap
Blend Fund, Inc.
Class A, B, L and Y Shares
--------------------------
April 28, 2000
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>
Small Cap Blend Fund, Inc.
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Contents
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Investments, risks and performance .................. 2
More on the fund's investments ...................... 7
Management .......................................... 8
Choosing a class of shares to buy ................... 9
Comparing the fund's classes. ....................... 10
Sales charges ....................................... 11
More about deferred sales charges ................... 13
Buying shares ....................................... 14
Exchanging shares ................................... 15
Redeeming shares .................................... 17
Other things to know about share transactions ....... 19
Salomon Smith Barney Retirement
Programs ............................................ 21
Dividends, distributions and taxes .................. 22
Share price ......................................... 23
Financial highlights ................................ 23
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney Mutual Funds 1
<PAGE>
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Investments, risks and performance
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Investment objective
The fund seeks long-term capital appreciation.
Key investments. The fund invests primarily in common stocks of U.S. companies
with relatively small market capitalizations at the time of investment. These
are companies with market capitalizations in excess of $100 million and in the
lowest 20% of publicly traded U.S. companies. The fund will hold a portfolio
that is generally comparable to, but not the same as, the Russell 2000 Stock
Index in terms of economic sector weightings and market capitalization. The
Russell 2000 Stock Index is a broad-based index of the smaller capitalization
segment of the U.S. stock market.
Selection process. The manager employs an active investment strategy that
focuses primarily on individual stock selection and remains diversified across
several industries and sectors. The manager uses quantitative analysis to
identify stocks that possess attractive growth or value characteristics. This
style of stock selection, which blends in similar proportions both the growth
and value disciplines of investing, is commonly known as "growth at a reasonable
price." Quantitative methods are also used to control portfolio risk related to
broad macroeconomic factors such as interest rate changes.
In selecting stocks based on growth characteristics, the manager generally looks
for companies with:
o Above average earnings growth
o A pattern of reported earnings that exceeds market expectations
o Rising earnings estimates over the next several quarters
o High relative return based on invested capital
In selecting stocks with value characteristics, the manager looks for companies
whose stock price is undervalued relative to their earnings, sale or bookvalues.
The timing of buy and sell decisions is based on recent price trends.
2 Small Cap Blend Fund
<PAGE>
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Investments, risks and performance (cont'd)
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Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
o Stock prices decline generally
o Small capitalization companies fall out of favor with investors
o Stock prices of smaller, newer companies decline further and more abruptly
than those of larger, more established companies in response to negative
stock market movements
o The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
o A particular product or service developed by a company in which the fund
invests is unsuccessful, the company does not meet earnings expectations
or other events depress the value of the company's stock
Compared to mutual funds that focus on large capitalization companies, the
fund's share price may be more volatile because of its focus on small
capitalization companies.
Compared to large capitalization companies, small capitalization companies and
the markets for their common stocks are more likely to have:
o More limited product lines
o Fewer capital resources
o More limited management depth
Further, securities of small capitalization companies are more likely to:
o Experience sharper swings in market values
o Be harder to sell at times and prices the manager believes appropriate
o Offer greater potential for gains and losses
Who may want to invest. The fund may be an appropriate investment if you:
o Are seeking to participate in the long-term growth potential of small
capitalization companies
o Currently have exposure to fixed income investments and the stocks
commonly held by large capitalization oriented mutual funds and wish to
broaden your investment portfolio
o Are willing to accept the risks of the stock market and the special risks
and potential long-term rewards of investing in smaller companies with
limited track records
Smith Barney Mutual Funds 3
<PAGE>
Risk return bar chart
This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future. The bar chart
shows the performance of the fund's Class A shares for each of the past 9
calendar years. Class B, L and Y shares had different performance because of
their different expenses. The performance information in the chart does not
reflect sales charges, which would reduce your return.
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Total Return for Class A Shares
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[The following table was represented as a bar chart in the printed material.]
91 22.69%
92 11.71%
93 8.9%
94 (4.36)%
95 18.90%
96 20.56%
97 28.25%
98 (1.31)%
99 21.09%
Calendar years ended December 31
Quarterly returns:
Highest: 18.67% in 4th quarter 1998; Lowest: (21.00)% in 3rd quarter 1998
Risk return table
This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the Russell
2000 Stock Index, a broad-based unmanaged index of common stocks of smaller
capitalization companies. This table assumes imposition of the maximum sales
charge applicable to the class, redemption of shares at the end of the period,
and reinvestment of distributions and dividends.
4 Small Cap Blend Fund
<PAGE>
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Average Annual Total Returns
Calendar Years Ended December 31, 1999
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Since Inception
Class 1 year 5 years 10 years Inception Date
A 15.05% 16.83% n/a 10.53% 01/23/90
B 15.21% n/a n/a 12.47% 06/25/97
L 17.94% n/a n/a 13.31% 06/24/97
Y 21.55% n/a n/a 8.97% 10/17/97
Russell 2000
Index= 21.26% 16.69% 13.40% 14.57% *
Prior to June 23, 1997, the fund was a non-diversified, closed-end fund, and was
not subject to the cash flow fluctuations, or the diversification and liquidity
requirements of a diversified open-end fund. The fund's past performance may
have been different if it had been a diversified open-end fund since inception.
*Index comparison begins on 01/31/90.
Fee table
This table sets forth the fees and expenses you will pay if you invest in the
fund
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Shareholder fees
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(fees paid directly from your investment) Class A Class B Class L Class Y
Maximum sales charge (load) imposed 5.00% None 1.00% None
on purchases (as a % of offering price)
Maximum deferred sales charge
(load) (as a % of the lower of net
asset value at purchase or redemption) None* 5.00% 1.00% None
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Annual fund operating expenses
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(Expenses deducted from fund assets) Class A Class B Class L Class Y
Management fee 0.75% 0.75% 0.75% 0.75%
Distribution and service (12b-1) fees 0.25% 1.00% 1.00% None
Other expenses 0.23% 0.29% 0.26% 0.07%
Total annual fund operating expenses 1.23% 2.04% 2.01% 0.82%
* 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%.
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:
o You invest $10,000 in the fund for the period shown
o Your investment has a 5% return each year
o You reinvest all distributions and dividends without a sales charge
o The fund's operating expenses remain the same
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Number of years you own your shares
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1 year 3 years 5 years 10 years
Class A (with or without redemption) $619 $871 $1,142 $1,914
Class B (redemption at end of period) $707 $940 $1,198 $2,161
Class B (no redemption) $207 $640 $1,098 $2,161
Class L (redemption at end of period) $402 $724 $1,172 $2,414
Class L (no redemption) $302 $724 $1,172 $2,414
Class Y (with or without redemption) $ 84 $262 $ 455 $1,014
6 Small Cap Blend Fund
<PAGE>
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More on the fund's investments
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Derivative contracts. The fund may, but need not, use derivative contracts, such
as futures and options on securities or securities indices, or options on these
futures for any of the following purposes:
o To hedge against the economic impact of adverse changes in the market
value of portfolio securities, because of changes in stock market prices
o As a substitute for buying or selling securities
A derivative contract will obligate or entitle a fund to deliver or receive an
asset or cash payment based on the change in value of one or more securities or
indices. Even a small investment in derivative contracts can have a big impact
on a fund's stock exposure. Therefore, using derivatives can disproportionately
increase losses and reduce opportunities for gains. The fund may not fully
benefit from or may lose money on derivatives if changes in their value do not
correspond accurately to changes in the value of the fund's holdings. The other
parties to certain derivative contracts present the same types of default risk
as issuers of fixed income securities. Derivatives can also make a fund less
liquid and harder to value, especially in declining markets.
Defensive investing. The fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and short-term
debt securities. If the fund takes a temporary defensive position, it may be
unable to achieve its investment goal. Risk of high portfolio turnover. The fund
may engage in active and frequent trading, resulting in high portfolio turnover.
This may lead to the realization and distribution to shareholders of higher
capital gains, increasing their tax liability. Frequent trading also increases
transaction costs, which could detract from the fund's performance.
Investment goal. The fund's investment goal is not fundamental and may be
changed without shareholder approval by the fund's board of trustees.
Smith Barney Mutual Funds 7
<PAGE>
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Management
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Manager. The fund's investment manager is Travelers Investment Management
Company, an affiliate of Salomon Smith Barney Inc. The manager's address is One
Tower Square, Hartford, CT 06183-2030. The manager selects the fund's
investments and oversees its operations. The manager and Salomon Smith Barney
are subsidiaries of Citigroup Inc. Citigroup businesses produce a broad range of
financial services -- asset management, banking and consumer finance, credit and
charge cards, insurance, investments, investment banking and trading -- and use
diverse channels to make them available to consumer and corporate customers
around the world. The fund's administrator is SSBCiti Fund Management LLC
(successor to SSBC Fund Management Inc.), an affiliate of Salomon Smith Barney
Inc. The administrator oversees all aspects of the fund's administration and
operation.
Sandip Bhagat, president of the manager, has been responsible for the day-to-
day management of the fund since July, 1995.
Management fee. For its services, the manager received a fee during the fund's
last fiscal year equal to 0.65% of the fund's average daily net assets. In
addition, the administrator received a fee for its administrative services to
the fund equal to 0.10% of the fund's average daily net assets.
Distributor. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plan. The fund has adopted a Rule 12b-1 distribution plan for its
Class A, B and L shares. Under the plan, the fund pays distribution and/or
service 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 the 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 the fund's sub-transfer
agent (the "sub-transfer agent") to render certain shareholder record keeping
and accounting services and functions.
8 Small Cap Blend Fund
<PAGE>
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Choosing a class of shares to buy
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You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
o If you plan to invest regularly or in large amounts, buying Class A shares
may help you reduce sales charges and ongoing expenses.
o For Class B shares, all of your purchase 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.
o Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and
Class L shares do not, Class B shares may be more attractive to long-term
investors.
You may buy shares from:
o A Salomon Smith Barney Financial Consultant
o An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
o The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
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Initial Additional
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Classes A, B, L Class Y All Classes
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
* 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 9
<PAGE>
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Comparing the fund's classes
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Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different compensation
depending upon which class you choose.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Class A Class B Class L Class Y
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Key features o Initial sales o No initial o Initial sales o No initial or
charge sales charge charge is deferred sales
lower than charge
o You may o Deferred sales Class A
qualify for charge o Must invest at
reduction or declines over o Deferred sales least $15
waiver of time charge for million
initial sales only 1 year
charge o Converts to o Lower annual
Class A after o Does not expenses than
o Lower annual 8 years convert to the other
expenses than Class A classes
Class B and o Higher annual
Class L expenses than o Higher annual
Class A expenses than
Class A
- ------------------------------------------------------------------------------------------------
Initial sales Up to 5.00%; None 1.00% None
charge reduced for
large purchases
and waived for
certain investors;
no charge for
purchases of
$500,000 or more
- ------------------------------------------------------------------------------------------------
Deferred 1.00% on Up to 5.00% 1.00% if you None
sales charge purchases charged when redeem within
of $500,000 you redeem 1 year of
or more shares. The purchase
if you redeem charge is
within 1 year reduced over
of purchase time and there
is no deferred
sales charge
after 6 years
- ------------------------------------------------------------------------------------------------
Annual 0.25% of average 1.00% of average 1.00% of average None
distribution daily net assets daily net assets daily net assets
and service
fees
- ------------------------------------------------------------------------------------------------
Exchangeable Class A shares of Class B shares of Class L shares of Class Y shares of
into* most Smith Barney most Smith Barney most Smith Barney most Smith Barney
funds. funds. funds. funds.
- ------------------------------------------------------------------------------------------------
</TABLE>
* Ask your Salomon Smith Barney Financial Consultant, dealer representative
or visit the web site for the Smith Barney funds available for exchange.
10 Small Cap Blend Fund
<PAGE>
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Sales charges
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Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge on
the fund's distributions or dividends you reinvest in additional Class A shares.
- --------------------------------------------------------------------------------
Sales Charge as a % of:
Offering Net amount
Amount of purchase price (%) invested (%)
- --------------------------------------------------------------------------------
Less than $25,000 5.00 5.26
$25,000 but less than $50,000 4.00 4.17
$50,000 but less than $100,000 3.50 3.63
$100,000 but less than $250,000 3.00 3.09
$250,000 but less than $500,000 2.00 2.04
$500,000 or more 0.00 0.00
Investments of $500,000 or more You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
Accumulation privilege - lets you combine the current value of Class A shares
owned
o by you, or
o by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
Smith Barney Mutual Funds 11
<PAGE>
o Letter of intent - lets you purchase Class A shares of the fund and other
Smith Barney funds over a 13-month period and pay the same sales charge,
if any, as if all shares had been purchased at once. You may include
purchases on which you paid a sales charge within 90 days before you sign
the letter.
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:
o Employees of members of the NASD
o Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met
o Investors who redeemed Class A shares of a Smith Barney fund in the past
60 days, if the investor's Salomon Smith Barney Financial Consultant or
dealer representative is notified
If you want to learn 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 purchase,
you will pay a deferred sales charge. The deferred sales charge decreases as the
number of years since your purchase increases.
- --------------------------------------------------------------------------------
6th through
Year after purchase 1st 2nd 3rd 4th 5th 8th
- --------------------------------------------------------------------------------
Deferred sales charge 5% 4% 3% 2% 1% 0%
Class B conversion After 8 years, Class B shares automatically convert into
Class A shares. This helps you because Class A shares have lower annual
expenses. Your Class B shares will convert to Class A shares as follows:
- --------------------------------------------------------------------------------
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon exchange from
purchase dividends and another Smith Barney
distributions fund
- --------------------------------------------------------------------------------
Eight years In same proportion as On the date the shares
after the date the number of Class B originally acquired
of purchase shares converting is to would have converted
total Class B shares into Class A shares
you own (excluding
shares issued as dividends)
12 Small Cap Blend Fund
<PAGE>
Class L shares
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1.00% (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 1.00%. If you held Class C shares of the fund and/or 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 6-month period. To qualify, you must
initially invest $5,000,000.
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More about deferred sales charges
- --------------------------------------------------------------------------------
The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
o Shares exchanged for shares of another Smith Barney fund
o Shares representing reinvested distributions and dividends
o Shares no longer subject to the deferred sales charge
Each time you place a request to redeem shares, the fund will first redeem 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 13
<PAGE>
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
o On payments made through certain systematic withdrawal plans
o On certain distributions from a retirement plan
o For involuntary redemptions of small account balances
o For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
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Buying shares
- --------------------------------------------------------------------------------
Through a You should contact your Salomon Smith Barney Financial
Salomon Smith Consultant or dealer representative to open a brokerage
Barney Financial account and make arrangements to buy shares.
Consultant
or dealer If you do not provide the following information, your order
representative will be rejected
o Class of shares being bought
o Dollar amount or number of shares being bought
You should pay for your shares through your brokerage
account no later than the third business day after you place
your order. Salomon Smith Barney or your dealer
representative may charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund's sub- are clients of a selling group member are eligible to buy
transfer agent shares directly from the fund.
o Write the sub-transfer agent at the following address:
Smith Barney Mutual Funds
Smith Barney Small Cap Blend Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
o Enclose a check made payable to the fund to pay for
the shares. For initial purchases, complete and send
an account application.
o For more information, call the transfer agent at
1-800-451-2010.
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14 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
You may authorize Salomon Smith Barney, your dealer
Through a representative or the sub-transfer agent to transfer funds
systematic automatically from a regular bank account, cash held in a
investment plan Salomon Smith Barney brokerage account or Smith Barney money
market fund to buy shares on a regular basis.
o Amounts transferred should be at least: $25 monthly or
$50 quarterly.
o If you do not have sufficient funds in your account on
a transfer date, Salomon Smith Barney, your dealer
representative or the 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
- --------------------------------------------------------------------------------
You should contact your Salomon Smith Barney Financial
Smith Barney Consultant or dealer representative to exchange into other
offers a Smith Barney funds. Be sure to read the prospectus of the
distinctive Smith Barney fund you are exchanging into. An exchange is a
family of funds taxable mutual transaction.
tailored
to help meet o You may exchange shares only for shares of the same
the varying class of another Smith Barney fund. Not all Smith
needs of both Barney funds offer Class A,B, L, and Y shares.
large and small o Not all Smith Barney funds may be offered in your
investors. state of residence. Contact your Salomon Smith Barney
Financial Consultant, dealer representative or the
transfer agent.
o You must meet the minimum investment amount for each
fund (except for systematic exchanges).
o If you hold share certificates, the sub-transfer agent
must receive the certificates endorsed for transfer or
with signed stock powers (a document that transfers
ownership of certificate) before the exchange is
effective.
o The fund may suspend or terminate your exchange
privilege if you engage in an excessive pattern of
exchanges.
- --------------------------------------------------------------------------------
Smith Barney Mutual Funds 15
<PAGE>
- --------------------------------------------------------------------------------
Waiver of Your shares will not be subject to an initial sales charge
additional at the time of the exchange.
sales charges
Your deferred sales charge (if any) will continue to be
measured from the date of your original purchase. If the
fund you exchange into has a higher deferred sales charge,
you will be subject to that charge. If you exchange at any
time into a fund with a lower charge, the sales charge will
not be reduced.
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must
complete an authorization form to authorize telephone
transfers. If eligible, you may make telephone exchanges on
any day the New York Stock Exchange is open. Call the
transfer agent at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset
value next determined.
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on the opposite page.
16 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
Redeeming shares
- --------------------------------------------------------------------------------
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your
redemption proceeds will not be sent to you until your
original check clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other
cases, unless you direct otherwise, your redemption proceeds
will be paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written
requests to the transfer agent at the following address:
Smith Barney Mutual Funds
Smith Barney Small Cap Blend Fund
(Specify class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
Your written request must provide the following:
o Your account number
o The class of shares and the dollar amount or number of
shares to be redeemed
o Signatures of each owner exactly as the account is
registered
- --------------------------------------------------------------------------------
Smith Barney Mutual Funds 17
<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 telephone on any day the New York Stock
Exchange is open. Call the transfer agent at 1-800-451-2010
between 9:00 a.m. and 5:00 p.m. (Eastern time). Requests
received after the close of regular trading on the Exchange
are priced at the net asset value next determined.
Your redemption proceeds can be sent by check to your
address of record or by wire transfer to a bank account
designated on your authorization form. You may be charged a
fee for wire transfers. You must submit a new authorization
form to change the bank account designated to receive wire
transfers and you may be asked to provide certain other
documents.
- --------------------------------------------------------------------------------
Automatic cash You can arrange for the automatic redemption of a portion of
withdrawal plans your shares on a monthly or quarterly basis. To qualify you
must own shares of the fund with a value of at least $10,000
and each automatic redemption must be at least $50. If your
shares are subject to a deferred sales charge, the sales
charge will be waived if your automatic payments do not
exceed 1% per month of the value of your shares subject to a
deferred sales charge.
The following conditions apply:
o Your shares must not be represented by certificates
o All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
- --------------------------------------------------------------------------------
18 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
Other things to know about share transactions
- --------------------------------------------------------------------------------
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed.
o Name of the fund
o Account number
o Class of shares being bought, exchanged or redeemed
o Dollar amount or number of shares being bought, exchanged or redeemed
o Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees. To be in good order, your redemption request must include
a signature guarantee if you:
o Are redeeming (together with other requests submitted in the previous 10
days) over $10,000 of shares
o Are sending signed share certificates or stock powers to the transfer
agent
o Instruct the transfer agent to mail the check to an address different from
the one on your account
o Changed your account registration
o Want the check paid to someone other than the account owner(s)
o Are transferring the redemption proceeds to an account with a different
registration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
Smith Barney Mutual Funds 19
<PAGE>
The fund has the right to:
o Suspend the offering of shares
o Waive or change minimum and additional investment amounts
o Reject any purchase or exchange order
o Change, revoke or suspend the exchange privilege
o Suspend telephone transactions
o Suspend or postpone redemptions of shares on any day when trading on the
New York Stock Exchange is restricted, or as otherwise permitted by the
Securities and Exchange Commission
Small account balances. If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions. The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges by
the shareholder. Share certificates. The fund does not issue share certificates
unless a written request is made to the transfer agent. If you hold share
certificates it will take longer to exchange or redeem shares.
Share certificates The fund does 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.
20 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
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 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 be of the same class.
o 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.
o 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:
o Class A shares may be purchased by plans investing at least $1
million.
o Class L shares may be purchased by plans investing less than $1
million. Class L shares are eligible to exchange into Class A shares
not later than 8 years after the plan joined the program. They are
eligible for exchange 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 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, or consult the SAI.
Smith Barney Mutual Funds 21
<PAGE>
- --------------------------------------------------------------------------------
Dividends, distributions and taxes
- --------------------------------------------------------------------------------
Dividends The fund generally pays dividends and makes capital gain
distributions, if any, once a year, typically in December. The fund may pay
additional distributions and dividends at other times if necessary for the fund
to avoid a federal tax. Capital gain distributions and dividends are reinvested
in additional fund shares of the same class that you hold. The fund expects
distributions to be primarily from income. You do not pay a sales charge on
reinvested distributions or dividends. Alternatively, you can instruct your
Salomon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or dividend,
except that any change given to the transfer agent less than five days before
the payment date will not be effective until the next distribution or dividend
is paid.
Taxes In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.
- --------------------------------------------------------------------------------
Transaction Federal tax status
- --------------------------------------------------------------------------------
Redemption or exchange of shares Usually capital gain or loss;
long-term only if shares
owned more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
Long-term capital gain distributions are taxable to you as capital gain
regardless of how long you have owned your shares. You may want to avoid buying
shares when the fund is about to declare a capital gain distribution or a
dividend, because it will be taxable to you even though it may actually be a
return of a portion of your investment.
After the end of each year, the fund will provide you with information about the
distributions and dividends that you received and any redemptions of shares
during the previous year. If you do not provide the fund with your correct
taxpayer identification number and any required certifications, you may be
subject to back-up withholding of 31% of your distributions, dividends, and
redemption proceeds. Because each shareholder's circumstances are different and
special tax rules may apply, you should consult your tax adviser about your
investment in the fund.
22 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
Share price
- --------------------------------------------------------------------------------
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed on the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).
The fund generally values its fund securities based on market prices or
quotations. The 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, the fund may price those
securities at fair value. Fair value is determined in accordance with procedures
approved by the fund's board. A fund that uses fair value to price securities
may value those securities higher or lower than another fund using market
quotations to price the same securities.
International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by the fund could change on days when you
cannot buy or redeem shares.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the Exchange closes
early, you must place your order prior to the actual closing time. Otherwise,
you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.
- --------------------------------------------------------------------------------
Financial highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the
performance of each class for the past five years (or since inception if less
than 5 years). Certain information reflects financial results for a single
share. Total return represents the rate that a shareholder would have earned (or
lost) on a fund share assuming reinvestment of all dividends and distributions.
The information in the following tables was audited by KPMG LLP, independent
accountants, whose report, along with the fund's financial statements, is
included in the annual report (available upon request).
Smith Barney Mutual Funds 23
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
For a Class A share(1) of capital stock
outstanding throughout each year ended December 31:
- --------------------------------------------------------------------------------------------------------
1999(2) 1998(2) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 13.35 $ 13.68 $ 12.30 $ 12.15 $ 11.78
- --------------------------------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.02 0.00* 0.04 0.05 0.11
Net realized and
unrealized gain (loss) 2.65 (0.17)+ 3.23 2.14 2.31
- --------------------------------------------------------------------------------------------------------
Total income (loss)
from operations 2.67 (0.17) 3.27 2.19 2.42
- --------------------------------------------------------------------------------------------------------
Less distribution from:
Net investment income (0.08) -- (0.04) (0.04) (0.11)
Net realized gains (1.68) (0.16) (1.98) (2.00) (1.94)
- --------------------------------------------------------------------------------------------------------
Total distributions (1.76) (0.16) (2.02) (2.04) (2.05)
- --------------------------------------------------------------------------------------------------------
Redemption fee(3) -- -- (0.13) -- --
- --------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 14.26 $ 13.35 $ 13.68 $ 12.30 $ 12.15
- --------------------------------------------------------------------------------------------------------
Total return 21.09% (1.31)% 28.25% 20.56% 18.90%
- --------------------------------------------------------------------------------------------------------
Net assets, end of
year (000's) $ 41,669 $ 42,747 $ 46,036 $ 52,911 $ 52,546
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.23% 1.33% 1.21% 1.21% 1.22%
Net investment income 0.13 0.03 0.24 0.43 0.84
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate 104% 129% 140% 151% 177%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund operated as a closed-end investment company until June 23, 1997.
As of that date all existing shares were converted to Class A shares. The
Fund's total returns while it was a closed-end fund are based on net asset
value.
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Amount relates to a redemption fee that was in effect through December 31,
1997.
* Amount represents less than $0.01 per share.
+ The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of fund shares throughout the year.
24 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
For a Class B share of capital stock
outstanding throughout each year ended December 31:
- --------------------------------------------------------------------------------
1999(1) 1998(1) 1997(2)
- --------------------------------------------------------------------------------
Net asset value, beginning of year $ 13.09 $ 13.52 $ 13.34
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment loss (0.09) (0.09) (0.01)
Net realized and unrealized gain (loss) 2.60 (0.18)* 2.18
- --------------------------------------------------------------------------------
Total income (loss) from operations 2.51 (0.27) 2.17
- --------------------------------------------------------------------------------
Less distribution from:
Net investment income -- -- (0.01)
Net realized gains (1.68) (0.16) (1.98)
- --------------------------------------------------------------------------------
Total distributions (1.68) (0.16) (1.99)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 13.92 $ 13.09 $ 13.52
- --------------------------------------------------------------------------------
Total return 20.21% (2.07)% 16.73%++
- --------------------------------------------------------------------------------
Net assets, end of year (000's) $28,746 $23,551 $12,685
- --------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 2.04% 2.10% 1.99%+
Net investment loss (0.66) (0.72) (0.26)+
- --------------------------------------------------------------------------------
Portfolio turnover rate 104% 129% 140%
- --------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from June 25, 1997 (inception date) to December 31, 1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ Total return is not annualized, as it may be representatvie of the total
return for the year.
+ Annualized.
Smith Barney Mutual Funds 25
<PAGE>
- --------------------------------------------------------------------------------
For a Class L share of capital stock
outstanding throughout each year ended December 31:
- --------------------------------------------------------------------------------
1999(1) 1998(1)(2) 1997(3)
- --------------------------------------------------------------------------------
Net asset value, beginning of year $ 13.09 $ 13.51 $ 13.24
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment loss (0.08) (0.10) (0.01)
Net realized and unrealized gain (loss) 2.58 (0.16)* 2.27
- --------------------------------------------------------------------------------
Total income (loss) from operations 2.50 (0.26) 2.26
- --------------------------------------------------------------------------------
Less distribution from:
Net investment income -- -- (0.01)
Net realized gains (1.68) (0.16) (1.98)
- --------------------------------------------------------------------------------
Total distributions (1.68) (0.16) (1.99)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 13.91 $ 13.09 $ 13.51
- --------------------------------------------------------------------------------
Total return 20.12% (1.99)% 17.53%++
- --------------------------------------------------------------------------------
Net assets, end of year (000's) $14,684 $ 7,101 $ 2,974
- --------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 2.01% 2.13% 2.00%+
Net investment loss (0.61) (0.74) (0.26)+
- --------------------------------------------------------------------------------
Portfolio turnover rate 104% 129% 140%
- --------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) On June 12, 1998, Class C shares were renamed Class L shares. (3) For the
period from June 24, 1997 (inception date) to December 31, 1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ Total return is not annualized, as it may be representatvie of the total
return for the year.
+ Annualized.
26 Small Cap Blend Fund
<PAGE>
- --------------------------------------------------------------------------------
For a Class Y share of capital stock
outstanding throughout each year ended December 31:
- --------------------------------------------------------------------------------
1999(1) 1998(1) 1997(2)
- --------------------------------------------------------------------------------
Net asset value, beginning of year $ 13.34 $ 13.63 $ 13.87
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income 0.08 0.06 0.01
Net realized and unrealized gain (loss) 2.66 (0.16)* (0.21)
- --------------------------------------------------------------------------------
Total income (loss) from operations 2.74 (0.10) (0.20)
- --------------------------------------------------------------------------------
Less distribution from:
Net investment income (0.03) (0.03) (0.04)
Net realized gains (1.68) (0.16) --
- --------------------------------------------------------------------------------
Total distributions (1.71) (0.19) (0.04)
- --------------------------------------------------------------------------------
Net asset value, end of year $ 14.37 $ 13.34 $ 13.63
- --------------------------------------------------------------------------------
Total return 21.55% (0.80)% (1.42)%++
- --------------------------------------------------------------------------------
Net assets, end of year (000's) $258,594 $207,513 $104,503
- --------------------------------------------------------------------------------
Ratios to average net assets:
Expenses 0.82% 0.94% 1.11%+
Net investment income 0.56 0.44 0.58+
- --------------------------------------------------------------------------------
Portfolio turnover rate 104% 129% 140%
- --------------------------------------------------------------------------------
(1) Per share amounts have been calculated using the monthly average shares
method.
(2) For the period from October 17, 1997 (inception date) to December 31,
1997.
* The amount shown may not be consistent with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and
redemptions of Fund shares throughout the year.
++ Total return is not annualized, as it may be representatvie of the total
return for the year.
+ Annualized.
Smith Barney Mutual Funds 27
<PAGE>
SALOMON SMITH BARNEY
----------------------------
A member of citigroup [LOGO]
Small Cap Blend Fund, Inc.
Shareholder reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
Information about the fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's (the "Commission") Public Reference Room in
Washington, D.C. In addition, information on the operation of the Public
Reference Room may be obtained by calling the Commission at 1-202-942-8090.
Reports and other information about the 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 the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.
Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file no. 811-05928)
FD01305 4/00
PART B
Smith Barney
SMALL CAP BLEND FUND, INC.
388 Greenwich Street
New York, New York 10013
800-451-2010
Statement of Additional
Information
April 28, 2000
This Statement of Additional Information (the "SAI") expands upon and
supplements the information contained in the current Prospectus of Smith
Barney Small Cap Blend Fund, Inc. (formerly Smith Barney Disciplined
Small Cap Fund, Inc.) (the "fund"), dated April 28, 2000, as amended or
supplemented from time to time, and should be read in conjunction with
the fund's Prospectus. The fund's Prospectus may be obtained from any
Smith Barney Financial Consultant, or by writing or calling the fund at
the address or telephone number set forth above. This SAI, although not
in itself a prospectus, is incorporated by reference into the Prospectus
in its entirety.
Table of Contents
For ease of reference, the same section headings are used in both the
Prospectus and this SAI except where shown below:
Management of the fund 02
Investment Objective and Management Policies 06
Purchase, Exchange and Redemption of Shares 19
Distribution 29
Determination of Net Asset Value 31
IRA and Other Prototype Retirement Plans 32
Performance Data 33
Additional Information Concerning Taxes 36
Additional Information 41
Financial Statements 43
MANAGEMENT OF THE FUND
The executive officers of the fund are employees of certain of the
organizations that provide services to the fund. These organizations are
as follows:
Name Service
CFBDS, Inc.
("CFBDS'') Distributor
Travelers Investment Management Company
("TIMCO") Investment Adviser
SSB Citi Fund Management LLC (successor
to SSBC Fund Management Inc.) ("SSB Citi") Administrator
PNC Bank, National Association ("PNC") Custodian
Citi Fiduciary Trust Company ("Transfer Agent") Transfer Agent
PFPC Global Fund Services ("sub-transfer agent") Sub-Transfer
Agent
These organizations and the functions they perform for the fund are
discussed in the Prospectus and in this SAI.
Directors and Executive Officers of the fund
The Directors and executive officers of the fund, 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 the fund, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), is indicated by an asterisk. The address of each
executive officer is 388 Greenwich Street, New York, NY 10013, unless
otherwise indicated.
LEE ABRAHAM, Director
Retired; Director/Trustee of twelve investment companies associated with
Citigroup, Inc. ("Citigroup"); Director of R.G.Barry Corp., a footwear
manufacturer, Signet plc, a specialty retailer and eNote.com, Inc., a
computer hardware company; formerly Chairman and Chief Executive Officer
of Associated Merchandising Corporation, a major retail merchandising and
sourcing organization; 106 Barnes Road, Stamford, Connecticut 06902; 72.
ALLAN J. BLOOSTEIN, Director
President of Allan J. Bloostein Associates, a consulting firm;
Director/Trustee of nineteen investment companies associated with
Citigroup; Director of CVS Corporation, a drug store chain, and Taubman
Centers Inc., a real estate development company; Retired Vice Chairman
and Director of The May Department Stores Company; 27 West 67th Street,
New York, New York 10023; 70.
JANE DASHER, Director
Investment Officer, Korsant Partners; Director/Trustee of twelve
investment companies associated with Citigroup; Prior to 1997 Independent
Financial Consultant, 283 Greenwich Avenue, Greenwich, Connecticut 06830;
50.
DONALD R. FOLEY, Director
Retired; Director/Trustee of twelve investment companies associated with
Citigroup. Formerly Vice President of Edwin Bird Wilson, Incorporated
(advertising); 3668 Freshwater Drive, Jupiter, Florida 33477; 77.
RICHARD E. HANSON, Jr., Director
Head of School, New Atlanta Jewish Community High School, Atlanta,
Georgia, since September 1996; Director/Trustee of twelve investment
companies associated with Citigroup; formerly Headmaster, The Peck
School, Morristown, New Jersey; 58 Ivy Chase, Atlanta, GA 30342; 59.
PAUL HARDIN, Director
Professor of Law at University of North Carolina at Chapel Hill,
Director/Trustee of fourteen investment companies associated with
Citigroup; Director of The Summit Bancorporation; Formerly, Chancellor
of the University of North Carolina at Chapel Hill, University of North
Carolina; 12083 Morehead, Chapel Hill, North Carolina 27514; 69.
*HEATH B. McLENDON, Chairman of the Board, President and Chief Executive
Officer
Managing Director of Salomon Smith Barney Inc. ("Salomon Smith Barney");
Director/Trustee of seventy-one investment companies associated with
Citigroup; Director and President of SSB Citi and Travelers Investment
Adviser, Inc. ("TIA"); former Chairman of the Board of Smith Barney
Strategy Advisors Inc.; 7 World Trade Center, New York, NY 10048; 66.
RODERICK C. RASMUSSEN, Director
Investment Counselor; Director/Trustee of twelve investment companies
associated with Citigroup. Formerly Vice President of Dresdner and
Company Inc. (investment counselors); 9 Cadence Court, Morristown, New
Jersey 07960; 73.
JOHN P. TOOLAN, Director
Retired; Director/Trustee of twelve investment companies associated with
Citigroup;. Trustee of the John Hancock Funds; Formerly, Director and
Chairman of Smith Barney Trust Company, Director of Smith Barney Holdings
Inc. and SSB Citi and Senior Executive Vice President, Director and
Member of the Executive Committee of Smith Barney; 13 Chadwell Place,
Morristown, New Jersey 07960; 69.
SANDIP BHAGAT, Vice President
Managing Director of Salomon Smith Barney; President of TIMCO, Vice
President of certain other investment companies affiliated with
Citigroup; One Tower Square, Hartford, CT 06183; 39.
LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Salomon Smith Barney; Senior Vice President and
Treasurer of sixty-one investment companies associated with Citigroup;
Director and Senior Vice President of SSB Citi and TIA; 42.
PAUL BROOK, Controller
Director of Salomon Smith Barney and Controller or Assistant Treasurer
of forty-three investment companies associated with Citigroup; Managing
Director of AMT Capital Services Inc. from 1997-1998; Partner with Ernst
& Young LLP prior to 1997; 46.
CHRISTINA T. SYDOR, Secretary
Managing Director of Salomon Smith Barney; Secretary of sixty-one
investment companies associated with Citigroup; Secretary and General
Counsel of SSB Citi and TIA; 49.
As of March 30, 2000, the Directors and Officers of the fund owned in the
aggregate less than 1% of the outstanding shares of the fund. No
officer, director or employee of SalomonSmith Barney or any parent or
subsidiary receives any compensation from the fund for serving as an
officer or Director of the fund. The Fund pays each Director/Trustee who
is not an officer, director or employee of SalomonSmith Barney or any of
its affiliates a fee of $60,000 per annum plus $2500 per meeting attended
and $100 for each telephone meeting. The Fund also reimburses them for
travel and out-of-pocket expenses. For the fund's fiscal year ended
December 31, 1999, such fees and expenses totaled $14,695.
For the fiscal year ended December 31, 1999, the Directors/Trustees of
the fund were paid the following compensation:
COMPENSATION TABLE
Name of Person
Aggregate
Compensation
from the fund
Pension or
Retirement
Benefits
Accrued as
Part of Fund's
Expenses
Total
Compensation
from Fund
Complex
Total Number
of Funds for
Which Person
Served within
Fund Complex
Lee Abraham
$138
$0
$71,133
12
Allan J.
Bloostein
$138
$0
$112,48
3
19
Jane F. Dasher
$252
$0
$65,733
12
Donald R. Foley**
$389
$0.00
$71,300
12
Paul Hardin
$389
$0.00
$90,450
14
Richard E.
Hanson++
$133
$0
$68,233
12
Heath B.
McLendon*
- --
- --
- --
71
Roderick C.
Rasmussen
$389
$0.00
$71,200
12
John P. Toolan**
$289
$0.00
$69,100
12
________________________________________
* Designates a director who is an "interested person" of the
fund.
** Pursuant to a deferred compensation plan, the indicated persons
elected to defer the following amounts of their compensation from
the fund: Donald R. Foley: $66 and John P. Toolan: $289, and the
following amounts of their total compensation from the fund
Complex: Donald R. Foley: $21,600.00 and John P. Toolan: $69,100.
Upon attainment of age 72 the fund's current Directors may elect
to change to emeritus status. Any directors elected or appointed
to the Board of Directors in the future will be required to change
to emeritus status upon attainment of age 80. 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 the fund's directors,
together with reasonable out-of-pocket expenses for each meeting
attended. During the fund's last fiscal year aggregate
compensation from the fund to Emeritus Directors totaled $193.
Investment Adviser -TIMCO
TIMCO serves as investment adviser to the fund pursuant to a
written agreement (the "Advisory Agreement"). The services
provided by TIMCO under the Advisory Agreement are described in
the Prospectus under "Management." TIMCO bears all of the
expenses of its employees and overhead in connection with its
duties under the Advisory Agreement. TIMCO is a wholly owned
subsidiary of Salomon Smith Barney Holdings ("Holdings"), which is
in turn a wholly owned subsidiary of Citigroup.
As compensation for investment advisory services, the fund pays
TIMCO a fee computed daily and paid monthly at the annual rate of
0.65% of the value of the fund's average daily net assets. For the
1999, 1998 and 1997 fiscal years, the fund paid $1,941,540,
$1,321,762 and $439,687, respectively, in investment advisory
fees.
The Investment Advisory Agreement provides that except for the
expenses specifically assumed by TIMCO, the fund bears expenses
incurred in its operation, including: fees of the Directors not
affiliated with the Adviser or its affiliates and board meeting
expenses; fees of the Adviser and of SSB Citi (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 issue, repurchase or redemption of
Shares; expenses of printing and mailing 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 fidelity bonding and
other insurance premiums; expenses of stockholder's meetings;
filing fees and expenses related to the registration and
qualification of the fund's shares and the fund under federal and
state securities laws and maintaining such registrations and
qualifications (including the printing of the funds registration
statements and prospectuses); and its other business and operating
expenses.
Administrator
SSB Citi serves as administrator to the fund pursuant to a written
agreement (the "Administration Agreement"). The services provided
by SSB Citi under the Administration Agreement are described in
the Prospectus under "Management." SSB Citi pays the salary of any
officer and employee who is employed by both it and the fund and
bears all expenses in connection with the performance of its
services. As compensation for administration services rendered to
the fund, SSB Citi receives a fee at the annual rate of 0.10% of
the value of the fund's average daily net assets. For the 1999,
1998 and 1997 fiscal years, the fund paid SSB Citi $298,698,
$203,348 and $102,195, respectively, in administration fees.
SSB Citi, successor to SSBC Fund Management Inc., 388 Greenwich
Street, New York, NY 10013 was formed in 1999 and renders
investment management advice to investment companies with
aggregate assets under management in excess of $134 billion as of
March 31, 2000. SSB Citi is an affiliate of Salomon Smith Barney.
SSB Citi and Salomon Smith Barney are subsidiaries of Citigroup,
a financial services company that uses diverse channels to offer
a broad range of financial services to consumer and corporate
customers around the world. Among these businesses are Citibank,
Commercial Credit, Primerica Financial Services, Salomon Smith
Barney, SSB Citi Asset Management, Travelers Life & Annuity, and
Travelers Property Casualty.
Code of Ethics Pursuant to Rule 17j-1 of the 1940 Act, the fund,
its investment advisers and principal underwriter have adopted
codes of ethics that permit personnel to invest in securities for
their own accounts, including securities that may be purchased or
held by the fund. All personnel must place the interests of
clients first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in the best
interests of the clients. All personal securities transactions by
employees must adhere to the requirements of the codes and must be
conducted in such a manner as to avoid any actual or potential
conflict of interest, the appearance of such a conflict, or the
abuse of an employee's position of trust and responsibility.
A copy of the fund's code of ethics is on file with the Securities
and Exchange Commission (the "SEC").
Auditors
KPMG LLP, 757 Third Avenue, New York, New York 10017, has been
selected as the fund's independent auditors to examine and report
on the fund's financial statements and highlights for the fiscal
year ending December 31, 2000.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the fund's investment objective and the
policies it employs to achieve its objective. The following
discussion supplements the description of the fund's investment
objective and management policies in the Prospectus.
Small Capitalization Companies. The fund may invest in securities
of companies which fall in the bottom 20% of U.S. market
capitalization at the time of initial investment. Small companies
may (i) be subject to more volatile market movements than
securities of larger, more established companies; (ii) have
limited product lines, markets or financial resources; and (iii)
depend upon a limited or less experienced management group. The
securities of small companies may be traded only on the over-the-
counter market or on a regional securities exchange and may not be
traded daily or in the volume typical of trading on a national
securities exchange. Disposition by the fund of small company
securities in order to meet redemptions may require the fund to
sell these securities at a discount from market prices, over a
longer period of time or during periods when disposition is not
desirable.
Preferred Stocks and Convertible Securities. The fund may invest
in convertible debt and preferred stocks. Convertible debt
securities and preferred stock entitle the holder to acquire the
issuer's stock by exchange or purchase for a predetermined rate.
Convertible securities are subject both to the credit and
interest rate risks associated with fixed income securities and to
the stock market risk associated with equity securities.
Warrants. Warrants acquired by the fund entitle it to buy common
stock from the issuer at a specified price and time. Warrants are
subject to the same market risks as stocks, but may be more
volatile in price. The fund's investment in warrants will not
entitle it to receive dividends or exercise voting rights and will
become worthless if the warrants cannot be profitably exercised
before the expiration dates.
REITs. The fund may invest in shares of real estate investment
trusts (REITs), which are pooled investment vehicles that invest
in real estate or real estate loans or interests. Investing in
REITs involves risks similar to those associated with investing in
equity securities of small capitalization companies. REITs are
dependent upon management skills, are not diversified, and are
subject to risks of project financing, default by borrowers, self-
liquidation, and the possibility of failing to qualify for the
exemption from taxation on distributed amounts under the Internal
Revenue Code of 1986, as amended (the "Code").
Illiquid and Restricted Securities. The fund may invest up to 15%
of its assets in securities (excluding those subject to Rule 144A
under the Securities Act of 1933, as amended (the ''1933 Act'')),
with contractual or other restrictions on resale and other
instruments that are not readily marketable, including (a)
repurchase agreements with maturities greater than seven days, (b)
time deposits maturing from two business days through seven
calendar days, (c) to the extent that a liquid secondary market
does not exist for the instruments, futures contracts and options
on those contracts and (d) other securities that are subject to
restrictions on resale that the investment adviser has determined
are not liquid under guidelines established by the fund's Board of
Directors.
Foreign Securities. The fund may invest up to 10% of its assets
in securities of foreign issuers, including securities denominated
in foreign currencies. These investments involve certain risks
not ordinarily associated with investments in securities of
domestic issuers. These risks include differences in accounting,
auditing and financial reporting standards, generally higher
commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political
instability which could affect U.S. investments in foreign
countries and potential restrictions on the flow of international
capital. Additionally, dividends or interest payable on foreign
securities, and in some cases capital gains, may be subject to
foreign withholding or other foreign taxes. Foreign securities
often trade with less frequency and volume than domestic
securities and therefore may exhibit greater price volatility.
Changes in foreign exchange rates will affect the value of those
securities which are denominated or quoted in currencies other
than U.S. dollars. Certain of the foreign securities held by the
fund may not be registered with, nor will the issuers thereof be
subject to the reporting requirements of, the SEC. Accordingly,
there may be less publicly available information about the
securities and the foreign company or government issuing them than
is available about a domestic company or government entity.
Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payment positions.
ADRs. The fund may purchase ADRs or other securities representing
underlying shares of foreign companies. ADRs are publicly traded
on exchanges or over-the-counter in the United States and are
issued through "sponsored" or "unsponsored" arrangements. In a
sponsored ADR arrangement, the foreign issuer assumes the
obligation to pay some or all of the depository's transaction
fees, whereas under an unsponsored arrangement, the foreign issuer
assumes no obligation and the depository's transaction fees are
paid by the ADR holders. In addition, less information is
available in the United States about an unsponsored ADR than about
a sponsored ADR, and the financial information about a company may
not be as reliable for an unsponsored ADR as it is for a sponsored
ADR. The fund may invest in ADRs through both sponsored and
unsponsored arrangements.
Repurchase Agreements. The fund may enter into repurchase
agreements. A repurchase agreement is a contract under which the
fund acquires a security for a relatively short period (usually
not more than one week) subject to the obligation of the seller to
repurchase and the fund to resell such security at a fixed time
and price (representing the fund's cost plus interest). It is the
fund's present intention to enter into repurchase agreements only
upon receipt of fully adequate collateral and only with commercial
banks (whether U.S. or foreign) and registered broker-dealers.
Repurchase agreements may also be viewed as loans made by the fund
which are collateralized primarily by the securities subject to
repurchase. The fund bears a risk of loss in the event that the
other party to a repurchase agreement defaults on its obligations
and the fund is delayed in or prevented from exercising its rights
to dispose of the collateral securities. Pursuant to policies
established by the fund's Board of Trustees, the investment
adviser monitors the creditworthiness of all issuers with which
the fund enters into repurchase agreements.
Reverse Repurchase Agreements. The fund may enter into reverse
repurchase agreements with broker/dealers and other financial
institutions. Such agreements involve the sale of fund securities
with an agreement to repurchase the securities at an agreed-upon
price, date and interest payment, are considered to be borrowings
by the fund and are subject to the borrowing limitations set forth
under "Investment Restrictions." Since the proceeds of 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 fund 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 fund
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 fund intends to use the
reverse repurchase technique only when the investment adviser
believes it will be advantageous to the fund. The use of reverse
repurchase agreements may exaggerate any interim increase or
decrease in the value of the fund's assets. The fund or its
custodian bank will maintain a separate account for the fund with
securities having a value equal to or greater than such
commitments.
Lending of Portfolio Securities. As stated in the Prospectus, the
fund has the ability to lend securities from its portfolio to
brokers, dealers and other financial organizations. The Fund may
not lend its portfolio securities to Salomon Smith Barney or its
affiliates unless it has applied for and received specific
authority from the SEC. Loans of portfolio securities by the fund
will be collateralized by cash, letters of credit or securities
issued or guaranteed by the United States government, its agencies
or instrumentality's ("U.S. government securities") which will be
maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. From time to time,
the fund 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, which is unaffiliated with the fund
or with Salomon Smith Barney, and which is acting as a "finder."
In lending its portfolio securities, the fund can increase its
income by continuing to receive interest on the loaned securities
as well as by either investing the cash collateral in short-term
instruments or obtaining yield in the form of interest paid by the
borrower when government securities are used as collateral.
Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions
must be met whenever portfolio securities are loaned: (a) the fund
must receive at least 100% cash collateral or equivalent
securities from the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities rises above
the level of such collateral; (c) the fund must be able to
terminate the loan at any time; (d) the fund must receive
reasonable interest on the loan, as well as an amount equal to any
dividends, interest or other distributions on the loaned
securities, and any increase in market value; (e) the fund may pay
only reasonable custodian fees in connection with the loan; and
(f) voting rights on the loaned securities may pass to the
borrower; however, if a material event adversely affecting the
investment occurs, the fund's Board of Directors must terminate
the loan and regain the right to vote the securities. The risks in
lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional
collateral or in the recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially.
Short Term Instruments. As stated in the Prospectus, the fund may
invest in short term and money market instruments. Money market
instruments in which the fund may invest include: 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. The following is a more detailed description
of such money market instruments.
Bank Obligations. Certificates of deposits ("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.
Domestic commercial banks organized under Federal law are
supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be
insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. Most state
banks are insured by the FDIC (although such insurance may not be
of material benefit to the fund, depending upon the principal
amount of CDs of each bank held by the fund) and are subject to
Federal examination and to a substantial body of Federal law and
regulation. As a result of governmental regulations, domestic
branches of domestic banks are, among other things, generally
required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial
soundness.
Obligations of foreign branches of domestic banks, such as CDs and
TDs, may be general obligations of the parent bank in addition to
the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are
subject to different risks than are those of domestic banks or
domestic branches of foreign banks. These risks include foreign
economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches
of domestic banks are not necessarily subject to the same or
similar regulatory requirements that apply to domestic banks, such
as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In
addition, less information may be publicly available about a
foreign branch of a domestic bank than about a domestic bank. CDs
issued by wholly owned Canadian subsidiaries of domestic banks are
guaranteed as to repayment of principal and interest (but not as
to sovereign risk) by the domestic parent bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch,
or may be limited by the terms of a specific obligation and by
governmental regulation as well as governmental action in the
country in which the foreign bank has its head office. A domestic
branch of a foreign bank with assets in excess of $1 billion may
or may not be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch is
located if the branch is licensed in that state. In addition,
branches licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may not be
required to: (a) pledge to the regulator by depositing assets with
a designated bank within the state, an amount of its assets equal
to 5% of its total liabilities; and (b) maintain assets within the
state in an amount equal to a specified percentage of the
aggregate amount of liabilities of the foreign bank payable at or
through all of its agencies or branches within the state. The
deposits of State Branches may not necessarily be insured by the
FDIC. In addition, there may be less publicly available
information about a domestic branch of a foreign bank than about
a domestic bank.
In view of the foregoing factors associated with the purchase of
CDs and TDs issued by foreign branches of domestic banks or by
domestic branches of foreign banks, TIMCO will carefully evaluate
such investments on a case-by-case basis.
Savings and loans associations whose CDs may be purchased by the
fund are supervised by the Office of Thrift Supervision and are
insured by the Savings Association Insurance Fund which is
administered by the FDIC and is backed by the full faith and
credit of the United States government. As a result, such savings
and loan associations are subject to regulation and examination.
Derivative Contracts
Writing Covered Call Options. The fund may write (sell) covered
call options for hedging purposes. Covered call options will
generally be written on securities and currencies which, in the
opinion of the investment adviser, are not expected to make any
major price moves in the near future but which, over the long
term, are deemed to be attractive investments for the fund.
A call option gives the holder (buyer) the right to purchase a
security or currency at a specified price (the exercise price) at
any time until a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he may be
assigned an exercise notice by the broker-dealer through whom such
option was sold, requiring him to deliver the underlying security
or currency against payment of the exercise price. This
obligation terminates upon the expiration of the call option, or
such earlier time at which the writer effects a closing purchase
transaction by purchasing an option identical to that previously
sold. The investment adviser and the fund believe that writing of
covered call options is less risky than writing uncovered or
"naked" options, which the fund will not do.
Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment
considerations consistent with the fund's investment objective.
When writing a covered call option, the fund, in return for the
premium, gives up the opportunity for profit from a price increase
in the underlying security or currency above the exercise price
and retains the risk of loss should the price of the security or
currency decline. Unlike one who owns securities or currencies
not subject to an option, the fund has no control over when it may
be required to sell the underlying securities or currencies, since
the option may be exercised at any time prior to the option's
expiration. If a call option which the fund has written expires,
the fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value
of the underlying security or currency during the option period.
If the call option is exercised, the fund will realize a gain or
loss from the sale of the underlying security or currency. The
security or currency covering the call option will be maintained
in a segregated account of the fund's custodian.
The premium the fund receives for writing a call option is deemed
to constitute the market value of an option. The premium the fund
will receive from writing a call option will reflect, among other
things, the current market price of the underlying security or
currency, the relationship of the exercise price to such market
price, the implied price volatility of the underlying security or
currency, and the length of the option period. In determining
whether a particular call option should be written on a particular
security or currency, the investment adviser will consider the
reasonableness of the anticipated premium and the likelihood that
a liquid secondary market will exist for those options. The
premium received by the fund for writing covered call options will
be recorded as a liability in the fund's statement of assets and
liabilities. This liability will be adjusted daily to the
option's current market value, which will be calculated as
described in "Determination of Net Asset Value." The liability
will be extinguished upon expiration of the option or delivery of
the underlying security or currency upon the exercise of the
option. The liability with respect to a listed option will also
be extinguished upon the purchase of an identical option in a
closing transaction.
Closing transactions will be effected in order to realize a profit
or to limit losses on an outstanding call option, to prevent an
underlying security or currency from being called, or to permit
the sale of the underlying security or currency. Furthermore,
effecting a closing transaction will permit the fund to write
another call option on the underlying security or currency with
either a different exercise price, expiration date or both. If
the fund desires to sell a particular security or currency from
its portfolio on which it has written a call option or purchases
a put option, it will seek to effect a closing transaction prior
to, or concurrently with, the sale of the security or currency.
There is no assurance that the fund will be able to effect such
closing transactions at a favorable price. If the fund cannot
enter into such a transaction, it may be required to hold a
security or currency that it might otherwise have sold, in which
case it would continue to be at market risk with respect to the
security or currency.
The fund will pay transaction costs in connection with the writing
of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher
than those applicable to purchases and sales of portfolio
securities.
The exercise price of the options may be below, equal to or above
the current market values of the underlying securities or
currencies at the time the options are written. From time to
time, the fund may purchase an underlying security or currency for
delivery in accordance with the exercise of an option, rather than
delivering such security or currency from its portfolio. In such
cases, additional costs will be incurred.
The fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more,
respectively, than the premium received from the writing of the
option. Because increases in the market price of a call option
will generally reflect increases in the market price of the
underlying security or currency, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security or currency owned
by the fund.
Purchasing Put Options. The fund may purchase put options. As
the holder of a put option, the fund has the right to sell the
underlying security or currency at the exercise price at any time
during the option period. The fund may enter into closing sale
transactions with respect to such options, exercise them or permit
them to expire.
The fund may purchase a put option on an underlying security or
currency (a "protective put") owned by the fund as a hedging
technique in order to protect against an anticipated decline in
the value of the security or currency. Such hedge protection is
provided only during the life of the put option when the fund, as
the holder of the put option, is able to sell the underlying
security or currency at the put exercise price regardless of any
decline in the underlying security's market price or currency's
exchange value. For example, a put option may be purchased in
order to protect unrealized appreciation of a security or currency
when the investment adviser deems it desirable to continue to hold
the security or currency because of tax considerations. The
premium paid for the put option and any transaction costs may
reduce any capital gain or, in the case of currency, ordinary
income otherwise available for distribution when the security or
currency is eventually sold.
The fund may also purchase put options at a time when the fund
does not own the underlying security or currency. By purchasing
put options on a security or currency it does not own, the fund
seeks to benefit from a decline in the market price of the
underlying security or currency. If the put option is not sold
when it has remaining value, and if the market price of the
underlying security or currency remains equal to or greater than
the exercise price during the life of the put option, the fund
will lose its entire investment in the put option. In order for
the purchase of a put option to be profitable, the market price of
the underlying security or currency must decline sufficiently
below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale
transaction.
The premium paid by the fund when purchasing a put option will be
recorded as an asset in the fund's statement of assets and
liabilities. This asset will be adjusted daily to the option's
current market value, as calculated by the fund. The asset will
be extinguished upon expiration of the option or the delivery of
the underlying security or currency upon the exercise of the
option. The asset with respect to a listed option will also be
extinguished upon the writing of an identical option in a closing
transaction.
Purchasing Call Options. The fund may purchase call options. As
the holder of a call option, the fund has the right to purchase
the underlying security or currency at the exercise price at any
time during the option period. The fund may enter into closing
sale transactions with respect to such options, exercise them or
permit them to expire. Call options may be purchased by the fund
for the purpose of acquiring the underlying security or currency
for its portfolio. Utilized in this fashion, the purchase of call
options enables the fund to acquire the security or currency at
the exercise price of the call option plus the premium paid. At
times the net cost of acquiring the security or currency in this
manner may be less than the cost of acquiring the security or
currency directly. This technique may also be useful to the fund
in purchasing a large block of securities that would be more
difficult to acquire by direct market purchases. So long as it
holds such a call option rather than the underlying security or
currency itself, the fund is partially protected from any
unexpected decline in the market price of the underlying security
or currency and in such event could allow the call option to
expire, incurring a loss only to the extent of the premium paid
for the option.
The fund may also purchase call options on underlying securities
or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option would be
purchased for this purpose where tax considerations make it
inadvisable to realize such gains through a closing purchase
transaction. Call options may also be purchased at times to avoid
realizing losses that would result in a reduction of the fund's
current return.
Index Futures Contracts. The fund may enter into futures
contracts based on financial indices including any index of U.S.
Government securities, foreign government securities or corporate
debt securities.
A futures contract provides for the future sale by one party and
purchase by another party of a specified amount of a specific
financial instrument or currency for a specified price at a
designated date, time and place. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the debt
securities underlying the index is made. Brokerage fees are
incurred when a futures contract is bought or sold, and margin
deposits must be maintained at all times that the futures contract
is outstanding.
Futures contracts are usually closed out before the delivery date.
Closing out an open futures contract sale or purchase is effected
by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the identical
financial instrument and the same delivery date. If the
offsetting purchase price is less than the original sale price,
the fund realizes a gain; if it is more, the fund realizes a loss.
Conversely, if the offsetting sale price is more than the
original purchase price, the fund realizes a gain; if it is less,
the fund realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance,
however, that the fund will be able to enter into an offsetting
transaction with respect to a particular futures contract at a
particular time. If the fund is not able to enter into an
offsetting transaction, the fund will continue to be required to
maintain the margin deposits of the underlying financial
instrument or currency on the relevant delivery date. The Fund
intends to enter into futures transactions only on exchanges or
boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market
will exist for a particular contract at a particular time.
Persons who trade in futures contracts may be broadly classified
as "hedgers" and "speculators." Hedgers, whose business activity
involves investment or other commitment in securities or other
obligations, use the Futures markets to offset unfavorable changes
in value that may occur because of fluctuations in the value of
the securities and obligations held or committed to be acquired by
them or fluctuations in the value of the currency in which the
securities or obligations are denominated. Debtors and other
obligors may also hedge the interest cost of their obligations.
The speculator, like the hedger, generally expects neither to
deliver nor to receive the financial instrument underlying the
futures contract, but, unlike the hedger, hopes to profit from
fluctuations in prevailing interest rates or currency exchange
rates.
The fund's futures transactions will be entered into for
traditional hedging purposes; that is, futures contracts will be
sold to protect against a decline in the price of securities that
the fund owns, or futures contracts will be purchased to protect
the fund against an increase in the price of securities it has
committed to purchase or expects to purchase.
"Margin" with respect to futures contracts is the amount of funds
that must be deposited by the fund with a broker in order to
initiate Futures trading and to maintain the fund's open positions
in futures contracts. A margin deposit made when the futures
contract is entered into ("initial margin") is intended to assure
the fund's performance of the futures contract. The margin
required for a particular futures contract is set by the exchange
on which the futures contract is traded, and may be significantly
modified from time to time by the exchange during the term of the
futures contract. Futures contracts are customarily purchased and
sold on margins, which may be 5% or less of the value of the
futures contract being traded.
If the price of an open futures contract changes (by increase in
the case of a sale or by decrease in the case of a purchase) so
that the loss on the futures contract reaches a point at which the
margin on deposit does not satisfy margin requirements, the broker
will require an increase in the margin deposit ("variation
margin"). If, however, the value of a position increases because
of favorable price changes in the futures contract so that the
margin deposit exceeds the required margin, it is anticipated that
the broker will pay the excess to the fund. In computing daily
net asset values, the fund will mark to market the current value
of its open futures contracts. The fund expects to earn interest
income on its margin deposits.
Options on Futures Contracts. Options on futures contracts are
similar to options on securities or currencies except that options
on futures contracts give the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the
option is a put), rather than to purchase or sell the futures
contract, at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery
of the Futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated
balance in the writer's Futures margin account which represents
the amount by which the market price of the futures contract, at
exercise, exceeds (in the case of a call) or is less than (in the
case of a put) the exercise price of the option on the futures
contract. If an option is exercised on the last trading day prior
to the expiration date of the option, the settlement will be made
entirely in cash equal to the difference between the exercise
price of the option and the closing level of the securities or
currencies upon which the futures contracts are based on the
expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium
paid.
As an alternative to purchasing call and put options on Futures,
the fund may purchase call and put options on the underlying
securities or currencies themselves (see "Purchasing Put Options"
and "Purchasing Call Options" above). Such options would be used
in a manner identical to the use of options on futures contracts.
To reduce or eliminate the leverage then employed by the fund or
to reduce or eliminate the hedge position then currently held by
the fund, the fund may seek to close out an option position by
selling an option covering the same securities or currency and
having the same exercise price and expiration date. The ability
to establish and close out positions on options on futures
contracts is subject to the existence of a liquid market. It is
not certain that this market will exist at any specific time.
In order to assure that the fund will not be deemed to be
"commodity pools" for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission ("CFTC")
require that the fund enter into transactions in futures contracts
and options on futures contracts only (i) for bona fide hedging
purposes (as defined in CFTC regulations), or (ii) for non-hedging
purposes, provided that the aggregate initial margin and premiums
on such non-hedging positions does not exceed 5% of the
liquidation value of the fund's assets. The fund will enter into
transactions in futures contracts and options on futures contracts
only for hedging purposes.
New options and futures contracts and various combinations thereof
continue to be developed and the fund may invest in any such
options and contracts as may be developed to the extent consistent
with their investment objectives and regulatory requirements
applicable to investment companies.
Investment Restrictions
The fund is subject to certain restrictions and policies that
are "fundamental," which may not be changed without a "vote of a
majority of the outstanding voting securities" of the fund, as
defined under the 1940 Act and Rule 18f-2 thereunder. The fund
is subject to other restrictions and policies that are "non-
fundamental" and which may be changed by the fund's Board of
Directors without shareholder approval, subject to any
applicable disclosure requirements.
Fundamental Policies. Without the approval of a majority of its
outstanding voting securities, the fund may not:
1. invest in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the rules,
regulations and orders thereunder;
2. 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;
3. invest more than 25% of its total assets in securities, the
issuers of which conduct their principal business activities
in the same industry. For purposes of this limitation,
securities of the U.S. government (including its agencies
and instrumentalities) and securities of state or municipal
governments and their political subdivisions are not
considered to be issued by members of any industry;
4. borrow money, except that (a) the fund may borrow from banks
for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might
otherwise require the untimely disposition of securities,
and (b) the fund may, to the extent consistent with its
investment policies, enter into reverse repurchase
agreements, forward roll transactions and similar investment
strategies and techniques. To the extent that it engages in
transactions described in (a) and (b), the fund will be
limited so that no more than 33 1/3% 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), is derived from such transactions;
5. make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the fund may invest
consistent with its investment objective and policies; (b)
repurchase agreements; and (c) loans of its portfolio
securities, to the fullest extent permitted under the 1940
Act;
6. engage in the business of underwriting securities issued by
other persons, except to the extent that the fund may
technically be deemed to be an underwriter under the
Securities Act of 1933, as amended, in disposing of
portfolio securities; and
7. purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction
shall not prevent the fund from (a) investing in securities
of issuers engaged in the real estate business or the
business of investing in real estate (including interests in
limited partnerships owning or otherwise engaging in the
real estate business or the business of investing in real
estate) and securities which are secured by real estate or
interests therein; (b) holding or selling real estate
received in connection with securities it holds or held; (c)
trading in futures contracts and options on futures
contracts (including options on currencies to the extent
consistent with the funds' investment objective and
policies); or (d) investing in real estate investment trust
securities.
Non-fundamental Policies. As a non-fundamental policy, the fund
may not:
1. purchase any securities on margin (except for such short-
term credits as are necessary for the clearance of purchases
and sales of portfolio securities) or sell any securities
short (except "against the box"). For purposes of this
restriction, the deposit or payment by the fund of
underlying securities and other assets in escrow and
collateral agreements with respect to initial or maintenance
margin in connection with futures contracts and related
options and options on securities, indexes or similar items
is not considered to be the purchase of a security on
margin;
2. purchase or otherwise acquire any security if, as a result,
more than 15% of its net assets would invested in securities
that are illiquid; and
3. invest in any company for the purpose of exercising control
of management.
The fund has adopted a non-fundamental investment policy
prohibiting it from investing in other registered open-end
management investment companies and registered unit investment
trusts in reliance upon the provisions of subparagraphs (G) or (F)
of Section 12(d)(1) of the 1940 Act. The foregoing investment
policy does not restrict the fund from (i) acquiring securities of
other registered investment companies in connection with a merger,
consolidation, reorganization, or acquisition of assets, or (ii)
purchasing the securities of registered closed-end investment
companies, to the extent permissible under Section 12(d) (1) (G)
of the 1940 Act.
Certain restrictions listed above permit the fund without
shareholder approval to engage in investment practices that the
fund does not currently pursue. The Fund has no present intention
of altering its current investment practices as otherwise
described in the Prospectus and this Statement of Additional
Information and any future change in these practices would require
Board approval. 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.
Portfolio Turnover
The Fund's investment policies may result in its experiencing a
greater portfolio turnover rate than those of investment companies
that seek to produce income or to maintain a balanced investment
position. The Fund's portfolio turnover rate cannot be predicted
and will vary from year to year, yet TIMCO expects that the fund's
annual portfolio turnover rate may exceed 100%. A 100% portfolio
turnover rate would occur, for instance, if all securities were
replaced once during a period of one year. A high rate of
portfolio turnover in any year will increase brokerage commissions
paid and could result in high amounts of realized investment gain
subject to the payment of taxes by shareholders. Any realized
short-term investment gain will be taxed to shareholders as
ordinary income. For the 1999, 1998 and 1997 fiscal years, the
fund's portfolio turnover rates were 104%, 129% and 140%,
respectively.
Portfolio Transactions and Brokerage
Decisions to buy and sell securities for the fund are made by
TIMCO, subject to the overall supervision and review of the fund's
Board of Directors. Portfolio securities transactions for the fund
are effected by or under the supervision of TIMCO.
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 markets, but
the price of those securities includes an undisclosed commission
or mark-up. 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. For the 1999, 1998 and 1997
fiscal years, the fund paid $407,960, $778,402 and $358,528,
respectively, in brokerage commissions.
In executing portfolio transactions and selecting brokers or
dealers, it is the fund's policy to seek the best overall terms
available. The Advisory Agreement between the fund and TIMCO
provides that, in assessing the best overall terms available for
any transaction, TIMCO shall consider the factors it deems
relevant, including the breadth of the market in the security, the
price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, for the specific transaction and on a
continuing basis. In addition, the Advisory Agreement authorizes
TIMCO, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, to
consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the fund and/or other accounts over which TIMCO or an
affiliate exercises investment discretion.
The fund's Board of Directors will periodically review the
commissions paid by the fund to determine if the commissions paid
over representative periods of time were reasonable in relation to
the benefits inuring to the fund. It is possible that certain of
the services received will primarily benefit one or more other
accounts for which investment discretion is exercised. Conversely,
the fund may be the primary beneficiary of services received as a
result of portfolio transactions effected for other accounts.
TIMCO's fee under the Advisory Agreement is not reduced by reason
of TIMCO's receiving such brokerage and research services. For the
fiscal year ended December 31, 1999, the fund directed brokerage
transactions totaling $139,412 to brokers because of research
services provided.
The fund's Board of Directors has determined that any portfolio
transaction for the fund may be executed through Salomon Smith
Barney and other affiliated broker-dealers if, in TIMCO's
judgment, the use of an affiliated broker-dealer is likely to
result in price and execution at least as favorable as those of
other qualified brokers, and if, in the transaction, the
affiliated broker-dealer charges the fund a commission rate
consistent with that charged by it to comparable unaffiliated
customers in similar transactions. In addition, under SEC rules,
the affiliated broker-dealer may directly execute such
transactions for the fund on the floor of any national securities
exchange, provided (a) the Board of Directors has expressly
authorized the affiliated broker-dealer to effect such
transactions and (b) the affiliated broker-dealer annually advises
the fund of the aggregate compensation it earned on such
transactions. An affiliated broker-dealer will not participate in
commissions from brokerage given by the fund to other brokers or
dealers and will not receive any reciprocal brokerage business
resulting therefrom. 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. For the 1999, 1998 and 1997 fiscal years, the fund paid
$47,650, $51,249 and $9,374, respectively, in brokerage
commissions to Salomon Smith Barney. For the 1999 fiscal year,
Salomon Smith Barney received 11.68% of the brokerage commissions
paid by the fund and effected 13.08% of the total dollar amount
of transactions for the fund involving the payment of brokerage
commissions.
Even though investment decisions for the fund are made
independently from those of the other accounts managed by TIMCO,
investments of the kind made by the fund also may be made by those
other accounts. When the fund and one or more accounts managed by
TIMCO 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 TIMCO to be equitable. In some
cases, this procedure may adversely affect the price paid or
received by the fund or the size of the position obtained for or
disposed of by the fund.
Economic and Monetary Union (EMU). EMU began on January 1, 1999
when 11 European countries adopted a single currency-the Euro.
EMU may create new economic opportunities for investors, such as
lower interest rates, easier cross-border mergers, acquisitions
and similar restructurings, more efficient distribution and
product packaging and greater competiton. Budgetary decisions
remain in the hands of each participating country, but are subject
to each country's commitment to avoid "excessive deficits" and
other more specific budgetary criteria. A European Central Bank
is responsible for setting the official interest rate within the
Euro zone. EMU and the introduction of the Euro, however, present
unique risks and uncertainties for investors in EMU-participating
countries, including: (i) monetary and economic union on this
scale has never before been attempted; (ii) there is uncertainty
whether participating countries will remain committed to EMU in
the face of changing economic conditions; (iii) instability
within EMU may increase the volatility of European markets and may
adversely affect the prices of securities of European issuers in
the fund's portfolio; (iv) there is uncertainty concerning the
fluctuation of the Euro relative to non-Euro currencies during the
transition period from January 1, 1999 to December 31, 2000, and
beyond; and (v) there is no assurance that interest rate, tax and
labor regimes of EMU-participating countries will converge over
time. These and other factors may cause market disruption and
could adversely affect European securities and currencies held by
the fund.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
Purchase of Shares
General. The fund offers four Classes of shares. Class A and
Class L shares are sold to investors with an initial sales charge.
Class B shares are sold without an initial sales charge but are
subject to a contingent deferred sales charge ("CDSC") payable
upon certain redemptions. Class L shares are also subject to a
CDSC payable upon certain redemptions. Class Y shares are sold
without an initial sales charge or CDSC and are available only to
investors investing a minimum of $15,000,000. See the Prospectus
for a discussion of factors to consider in selecting a class of
shares to purchase.
Purchases of shares of the fund must be made through a brokerage
account maintained with Salomon Smith Barney, an Introducing
Broker or an investment dealer in the selling group. In addition,
certain investors, including qualified retirement plans and
certain other institutional investors, may purchase shares
directly from the 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 other
broker/dealers may charge their customers an annual account
maintenance fee in connection with a brokerage account through
which an investor purchases or holds shares. Accounts held
directly at the sub-transfer agent are not subject to a
maintenance fee.
Investors in Class A, Class B and Class L shares may open an
account by making an initial investment 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(a) of the Code, the minimum initial and subsequent
investment requirement for Class A, Class B and Class L shares and
the subsequent investment requirement for all Classes in the fund
is $25. For shareholders purchasing shares of the fund through
the Systematic Investment Plan on a monthly basis, the minimum
initial investment requirement for Class A, Class B and Class L
shares and the subsequent investment requirement for all Classes
is $25. For shareholders purchasing shares of the fund through
the Systematic Investment Plan on a quarterly basis, the minimum
initial investment requirement for Class A, Class B and Class L
shares and the subsequent investment requirement for all Classes
is $50. There are no minimum investment requirements in Class A
shares for employees of Citigroup and its subsidiaries, including
Salomon Smith Barney, unitholders who invest distributions form a
UIT sponsored by Salomon Smith Barney, Directors or 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 Salomon Smith Barney 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 dealers or Introducing
Brokers 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's agent prior to he agent's close of
business. For shares purchased through Salomon Smith Barney and
Introducing Brokers purchasing through Salomon Smith Barney,
payment for shares of the fund is due on the third business day
after the trade date. In all other cases, payment must be made
with the purchase order.
Systematic Investment Plan. Shareholders may make additions to
their accounts at any time by purchasing shares through a service
known as the Systematic Investment Plan. Under the Systematic
Investment Plan, Salomon Smith Barney or the sub-transfer agent is
authorized through preauthorized transfers of at least $25 on a
monthly basis or at least $50 on a quarterly basis to charge the
regular bank account or other financial institution indicated by
the shareholder, to provide systematic additions to the
shareholder's fund account. A shareholder who has insufficient
funds to complete the transfer will be charged a fee of up to $25
by Salomon Smith Barney or the sub-transfer agent. The Systematic
Investment Plan also authorizes Salomon Smith Barney to apply cash
held in the shareholder's Salomon Smith Barney brokerage account
or redeem the shareholder's shares of a Smith Barney money market
fund to make additions to the account. Additional information is
available from the fund or a Salomon Smith Barney Financial
Consultant.
Initial Sales Charge Alternative - Class A Shares. The sales
charges applicable to purchases of Class A shares of the fund are
as follows:
Amount of
Investment
Sales Charge
as % of
Offering
Price
Sales Charge as
% of Amount Invested
Less than $25,000
5.00%
5.26%
$ 25,000 - 49,999
4.00
4.17
50,000 - 99,999
3.50
3.63
100,000 - 249,999
3.00
3.09
250,000 - 499,999
2.00
2.04
500,000 and over
- -0-
- -0-
* Purchases of Class A shares of $500,000 or more will be made at
net asset value without any initial sales charge, but will be
subject to a CDSC of 1.00% on redemptions made within 12 months
of purchase. The CDSC 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 CDSC is waived in the same circumstances
in which the CDSC applicable to Class B and Class L shares is
waived. See ''Deferred Sales Charge Alternatives'' and ''Waivers
of CDSC.''
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.
Initial Sales Charge Alternative - Class L Shares. For purchases
of Class L shares, there is a sales charge of 1% of the offering
price (1.01% of the net amount invested).
Initial Sales Charge Waivers for Class A Shares. Purchases of
Class A shares may be made at net asset value without a sales
charge in the following circumstances: (a) sales to (i) Board
Members and employees of Citigroup and its subsidiaries and any of
the Smith Barney Mutual Funds (including retired Board Members and
employees); the immediate families of such persons (including the
surviving spouse of a deceased Board Member or employee); and to
a pension, profit-sharing or other benefit plan for such persons
and (ii) employees of members of the National Association of
Securities Dealers, Inc., provided such sales are made upon the
assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be resold
except through redemption or repurchase; (b) offers of Class A
shares to any other investment company to effect the combination
of such company with the fund by merger, acquisition of assets or
otherwise; (c) purchases of Class A shares by any client of a
newly employed Salomon Smith Barney Financial Consultant (for a
period up to 90 days from the commencement of the Financial
Consultant's employment with Salomon Smith Barney), on the
condition the purchase of Class A shares is made with the proceeds
of the redemption of shares of a mutual fund which (i) was
sponsored by the Financial Consultant's prior employer, (ii) was
sold to the client by the Financial Consultant and (iii) was
subject to a sales charge; (d) purchases by shareholders who have
redeemed Class A shares in the fund (or Class A shares of another
fund of the Smith Barney Mutual Funds that are offered with a
sales charge) and who wish to reinvest their redemption proceeds
in the same fund, provided the reinvestment is made within 60
calendar days of the redemption; (e) purchases by accounts managed
by registered investment advisory subsidiaries of Citigroup; (f)
direct rollovers by plan participants of distributions from a
401(k) plan offered to employees of Citigroup or its subsidiaries
or a 401(k) plan enrolled in the Salomon Smith Barney 401(k)
Program (Note: subsequent investments will be subject to the
applicable sales charge); (g) purchases by separate accounts used
to fund certain unregistered variable annuity contracts; (h)
investments of distributions from or proceeds from a sale of 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 funds sponsored by Salomon Smith
Barney, which are offered with a sales charge, listed under
"Exchange Privilege" then held by such person and applying the
sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information
at the time of purchase to permit verification that the purchase
qualifies for the reduced sales charge. The right of accumulation
is subject to modification or discontinuance at any time with
respect to all shares purchased thereafter.
Letter of Intent. A Letter of Intent for amounts of $50,000 or
more provides an opportunity for an investor to obtain a reduced
sales charge by aggregating investments over a 13 month period,
provided that the investor refers to such Letter when placing
orders. For purposes of a Letter of Intent, the ''Amount of
Investment'' as referred to in the preceding sales charge table
includes purchases of all Class A shares of the fund and other
funds of the Smith Barney Mutual Funds offered with a sales charge
over the 13 month period based on the total amount of intended
purchases plus the value of all Class A shares previously
purchased and still owned. An alternative is to compute the 13
month period starting up to 90 days before the date of execution
of a Letter of Intent. Each investment made during the period
receives the reduced sales charge applicable to the total amount
of the investment goal. If the goal is not achieved within the
period, the investor must pay the difference between the sales
charges applicable to the purchases made and the charges
previously paid, or an appropriate number of escrowed shares will
be redeemed. Please contact a Salomon Smith Barney Financial
Consultant or the Transfer Agent to obtain a Letter of Intent
application.
A Letter of Intent may also be used as a way for investors to meet
the minimum investment requirement for Class Y shares. The
investor must make an initial minimum purchase of $5,000,000 in
Class Y shares of the fund and agree to purchase a total of
$15,000,000 of Class Y shares of the same fund within 13 months
from the date of the Letter. If a total investment of $15,000,000
is not made within the 13-month period, all Class Y shares
purchased to date will be transferred to Class A shares, where
they will be subject to all fees (including a service fee of
0.25%) and expenses applicable to the fund's Class A shares, which
may include a CDSC of 1.00%. Please contact a Salomon Smith Barney
Financial Consultant or the Transfer Agent for further
information.
Deferred Sales Charge Alternatives. CDSC Shares are sold at net
asset value next determined without an initial sales charge so
that the full amount of an investor's purchase payment may be
immediately invested in the fund. A CDSC, however, may be imposed
on certain redemptions of these shares. ''CDSC Shares'' are: (a)
Class B shares; (b) Class L shares; and (c) Class A shares that
were purchased without an initial sales charge but subject to a
CDSC.
Any applicable CDSC 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. CDSC Shares that are
redeemed will not be subject to a CDSC 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 CDSC Shares, shares
redeemed more than 12 months after their purchase.
Class L shares and Class A shares that are CDSC Shares are subject
to a 1.00% CDSC if redeemed within 12 months of purchase. In
circumstances in which the CDSC is imposed on Class B shares, the
amount of the charge will depend on the number of years since the
shareholder made the purchase payment from which the amount is
being redeemed. Solely for purposes of determining the number of
years since a purchase payment, all purchase payments made during
a month will be aggregated and deemed to have been made on the
last day of the preceding Salomon Smith Barney statement month.
The following table sets forth the rates of the charge for
redemptions of Class B shares by shareholders, except in the case
of Class B shares held under the Salomon Smith Barney Retirement
Programs, as described below. See ''Purchase of Shares-Salomon
Smith Barney Retirement Programs.''
Year Since Purchase
Payment Was Made
CDSC
First
5.00%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
0.00
Class B shares will convert automatically to Class A shares eight
years after the date on which they were purchased and thereafter
will no longer be subject to any distribution fees. There will
also be converted at that time such proportion of Class B Dividend
Shares owned by the shareholder as the total number of his or her
Class B shares converting at the time bears to the total number of
outstanding Class B shares (other than Class B Dividend Shares)
owned by the shareholder.
In determining the applicability of any CDSC, 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 CDSC 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 CDSC will reduce
the gain or increase the loss, as the case may be, on the
redemption. The amount of any CDSC 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 CDSC 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 CDSC. The CDSC will be waived on: (a) exchanges (see
''Exchange Privilege''); (b) automatic cash withdrawals in amounts
equal to or less than 1.00% per month of the value of the
shareholder's shares at the time the withdrawal plan commences
(see ''Automatic Cash Withdrawal Plan'') (provided, however, that
automatic cash withdrawals in amounts equal to or less than 2.00%
per month of the value of the shareholder's shares will be
permitted for withdrawal plans that were established prior to
November 7, 1994); (c) redemptions of shares within twelve months
following the death or disability of the shareholder; (d)
redemptions of shares made in connection with qualified
distributions from retirement plans or IRAs upon the attainment of
age 591/2; (e) involuntary redemptions; and (f) redemptions of
shares to effect the combination of the fund with any other
investment company by merger, acquisition of assets or otherwise.
In addition, a shareholder who has redeemed shares from other
funds of the Smith Barney Mutual Funds may, under certain
circumstances, reinvest all or part of the redemption proceeds
within 60 days and receive pro rata credit for any CDSC imposed on
the prior redemption.
CDSC waivers will be granted subject to confirmation (by Salomon
Smith Barney in the case of shareholders who are also Salomon
Smith Barney clients or by the Transfer Agent in the case of all
other shareholders) of the shareholder's status or holdings, as
the case may be.
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 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 be 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 $1 million.
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 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 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 its total Class L holdings in all non-money
market Smith Barney Mutual Funds equal at least $500,000 as of the
calendar year-end, the participating plan will be offered the
opportunity to exchange all of its Class L shares for Class A
shares of the same fund. Such Plans will be notified in writing
within 30 days after the last business day of the calendar year
and, unless the exchange offer has been rejected in writing, the
exchange will occur on or about the last business day of the
following March.
Any participating plan in the Smith Barney 401(k) or ExecChoiceTM
Program, whether opened before or after June 21, 1996, that has not
previously qualified for an exchange into Class A shares will be
offered the opportunity to exchange all of its Class L shares for
Class A shares of the same fund regardless of asset size, at the
end of the eighth year after the date the participating plan
enrolled in the Smith Barney 401(k) or ExecChoiceTM Program. Such
plans will be notified of the pending exchange in writing
approximately 60 days before the eighth anniversary of the
enrollment date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the eighth anniversary
date. Once an exchange has occurred, a participating plan will not
be eligible to acquire additional Class L shares, but instead may
acquire Class A shares of the same fund. Any Class L shares not
converted will continue to be subject to the distribution fee.
Participating plans wishing to acquire shares of the fund through
the Smith Barney 401(k) Program or the Smith Barney ExecChoiceTM
Program must purchase such shares directly from the transfer agent.
For further information regarding these Programs, investors should
contact a Salomon Smith Barney Financial Consultant.
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 plan elects not to exchange
all of its Class B shares at that time, each Class B share held by
the participating plan will have the same conversion feature as
Class B shares held by other investors. See "Purchase of Shares-
Deferred Sales Charge Alternatives."
No deferred sales charge is imposed on redemptions of Class B
shares to the extent that the net asset value of the shares
redeemed does not exceed the current net asset value of the shares
purchased through reinvestment of dividends or capital gain
distributions, plus the current net asset value of Class B shares
purchased more than eight years prior to the redemption, plus
increases in the net asset value of the shareholder's Class B
shares above the purchase payments made during the preceding eight
years. Whether or not the deferred sales charge applies to the
redemption by a participating plan depends on the number of years
since the participating plan first became enrolled in the Smith
Barney 401(k) Program, unlike the applicability of the deferred
sales charge to redemptions by other shareholders, which depends
on the number of years since those shareholders made the purchase
payment from which the amount is being redeemed.
The deferred sales charge will be waived on redemptions of Class
B shares in connection with lump-sum or other distributions made
by a participating plan as a result of: (a) the retirement of an
employee in the participating plan; (b) the termination of
employment of an employee in the participating plan; (c) the death
or disability of an employee in the participating plan; (d) the
attainment of age 591/2 by an employee in the participating plan;
(e) hardship of an employee in the participating plan to the extent
permitted under Section 401(k) of the Code; or (f) redemptions of
shares in connection with a loan made by the participating plan to
an employee.
Exchange Privilege
As your needs change, you may wish to reposition your investments.
With Smith Barney Mutual Funds, you have the ability to exchange
your shares of most Smith Barney mutual funds for those of others
within the family.
Except as otherwise noted below, shares of each Class of the fund
may be exchanged for shares of the same Class of certain Smith
Barney Mutual Funds, to the extent shares are offered for sale in
the shareholder's state of residence. Exchanges of Class A, Class
B and Class L shares are subject to minimum investment
requirements and all shares are subject to the other requirements
of the fund into which exchanges are made.
Class B Exchanges. In the event a Class B shareholder wishes to
exchange all or a portion of his or her shares in any fund
imposing a higher CDSC than that imposed by the fund, the
exchanged Class B shares will be subject to the higher applicable
CDSC. Upon an exchange, the new Class B shares will be deemed to
have been purchased on the same date as the Class B shares of the
fund that have been exchanged.
Class L Exchanges. Upon an exchange, the new Class L shares will
be deemed to have been purchased on the same date as the Class L
shares of the fund that have been exchanged.
Class A and Class Y Exchanges. Class A and Class Y shareholders
of the fund who wish to exchange all or a portion of their shares
for shares of the respective Class in any of the funds identified
above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege.
Although the exchange privilege is an important benefit, excessive
exchange transactions can be detrimental to the fund's performance
and its shareholders. The investment adviser may determine that a
pattern of frequent exchanges is excessive and contrary to the
best interests of the fund's other shareholders. In this event,
the fund may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a
determination, the fund will provide notice in writing or by
telephone to the shareholder at least 15 days prior to suspending
the exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her shares in
the fund or (b) remain invested in the fund or exchange into any
of the funds of the Smith Barney Mutual Funds ordinarily
available, which position the shareholder would be expected to
maintain for a significant period of time. All relevant factors
will be considered in determining what constitutes an abusive
pattern of exchanges.
Certain shareholders may be able to exchange shares by telephone.
See ''Redemption of Shares-Telephone Redemptions and Exchange
Program.'' Exchanges will be processed at the net asset value next
determined. Redemption procedures discussed below are also
applicable for exchanging shares, and exchanges will be made upon
receipt of all supporting documents in proper form. If the
account registration of the shares of the fund being acquired is
identical to the registration of the shares of the fund exchanged,
no signature guarantee is required. An exchange involves a
taxable redemption of shares, subject to the tax treatment
described in "Additional Information Concerning Taxes" below,
followed by a purchase of shares of a different fund. Before
exchanging shares, investors should read the current prospectus
describing the shares to be acquired. The Fund reserves the right
to modify or discontinue exchange privileges upon 60 days' prior
notice to shareholders.
Redemption of Shares
The Fund is required to redeem the shares of the fund tendered to
it, as described below, at a redemption price equal to their net
asset value per share next determined after receipt of a written
request in proper form at no charge other than any applicable
CDSC. Redemption requests received after the close of regular
trading on the NYSE are priced at the net asset value next
determined.
If a shareholder holds shares in more than one Class, any request
for redemption must specify the Class being redeemed. In the
event of a failure to specify which Class, or if the investor owns
fewer shares of the Class than specified, the redemption request
will be delayed until the Transfer Agent receives further
instructions from Salomon Smith Barney, or if the shareholder's
account is not with Salomon Smith Barney, from the shareholder
directly. The redemption proceeds will be remitted on or before
the third business day following receipt of proper tender, except
on any days on which the NYSE is closed or as permitted under the
1940 Act in extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Salomon Smith Barney
brokerage account, these funds will not be invested for the
shareholder's benefit without specific instruction and Salomon
Smith Barney will benefit from the use of temporarily uninvested
funds. Redemption proceeds for shares purchased by check, other
than a certified or official bank check, will be remitted upon
clearance of the check, which may take up to fifteen days or more.
Shares held by Salomon Smith Barney as custodian must be redeemed
by submitting a written request to a Salomon Smith Barney
Financial Consultant. Shares other than those held by Salomon
Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, Introducing Broker or dealer in the selling
group or by submitting a written request for redemption to:
Smith Barney Small Cap Blend Fund, Inc.
Class A, B, L or Y (please specify)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, RI 02940-9699
A written redemption request must (a) state the Class and number
or dollar amount of shares to be redeemed, (b) identify the
shareholder's account number and (c) be signed by each registered
owner exactly as the shares are registered. If the shares to be
redeemed were issued in certificate form, the certificates must be
endorsed for transfer (or be accompanied by an endorsed stock
power) and must be submitted to the 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. Redemption proceeds will be mailed
to an investor's address of record. The Transfer Agent may require
additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or guardians. A
redemption request will not be deemed properly received until the
Transfer Agent receives all required documents in proper form.
Automatic Cash Withdrawal Plan. The fund offers shareholders an
automatic cash withdrawal plan, under which shareholders who own
shares with a value of at least $10,000 may elect to receive cash
payments of at least $50 monthly or quarterly. Retirement plan
accounts are eligible for automatic cash withdrawal plans only
where the shareholder is eligible to receive qualified
distributions and has an account value of at least $5,000. The
withdrawal plan will be carried over on exchanges between funds or
Classes of the fund. Any applicable CDSC will not be waived on
amounts withdrawn by a shareholder that exceed 1.00% per month of
the value of the shareholder's shares subject to the CDSC at the
time the withdrawal plan commences. (With respect to withdrawal
plans in effect prior to November 7, 1994, any applicable CDSC
will be waived on amounts withdrawn that do not exceed 2.00% per
month of the value of the shareholder's shares subject to the
CDSC.) For further information regarding the automatic cash
withdrawal plan, shareholders should contact a Salomon Smith
Barney Financial Consultant.
Telephone Redemption and Exchange Program. Shareholders who do
not have a brokerage account may be eligible to redeem and
exchange shares by telephone. To determine if a shareholder is
entitled to participate in this program, he or she should contact
the Transfer Agent at 1-800-451-2010. Once eligibility is
confirmed, the shareholder must complete and return a
Telephone/Wire Authorization Form, along with a signature
guarantee, that will be provided by the Transfer Agent upon
request. (Alternatively, an investor may authorize telephone
redemptions on the new account application with the applicant's
signature guarantee when making his/her initial investment in the
fund.)
Redemptions. Redemption requests of up to $10,000 of any class
or classes of shares of the fund may be made by eligible
shareholders by calling the Transfer Agent at 1-800-451-2010. Such
requests may be made between 9:00 a.m. and 4:00 p.m. (New York
City time) on any day the NYSE is open. Redemptions of shares (i)
by retirement plans or (ii) for which certificates have been
issued are not permitted under this program.
A shareholder will have the option of having the redemption
proceeds mailed to his/her address of record or wired to a bank
account predesignated by the shareholder. Generally, redemption
proceeds will be mailed or wired, as the case may be, on the next
business day following the redemption request. In order to use
the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or have a correspondent
relationship with a member bank. The Fund reserves the right to
charge shareholders a nominal fee for each wire redemption. Such
charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change the
bank account designated to receive redemption proceeds, a
shareholder must complete a new Telephone/Wire Authorization Form
and, for the protection of the shareholder's assets, will be
required to provide a signature guarantee and certain other
documentation.
Exchanges. Eligible shareholders may make exchanges by telephone
if the account registration of the shares of the fund being
acquired is identical to the registration of the shares of the
fund exchanged. Such exchange requests may be made by calling the
Transfer Agent at 1-800-451-2010 between 9:00 a.m. and 4:00 p.m.
(New York City time) on any day on which the NYSE is open.
Additional Information regarding Telephone Redemption and Exchange
Program. Neither the fund nor any of 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.
Redemptions in Kind. In conformity with applicable rules of the
SEC, redemptions may be paid in portfolio securities, in cash or
any combination of both, as the Board of Directors may deem
advisable; however, payments shall be made wholly in cash unless
the Board of Directors believes that economic conditions exist
that would make such a practice detrimental to the best interests
of the fund and its remaining shareholders. If a redemption is
paid in portfolio securities, such securities will be valued in
accordance with the procedures described under "Determination of
Net Asset Value" in the Prospectus and a shareholder would incur
brokerage expenses if these securities were then converted to
cash.
DISTRIBUTION
CFBDS, Inc. ("CFBDS") located at 20 Milk Street, Boston,
Massachusetts 02109-5408 serves as the trust's distributor on a
best efforts basis pursuant to a distribution agreement dated
October 8, 1998 (the "Distribution Agreement"). Prior to the
merger of Travelers Group, Inc. and Citicorp on October 8, 1998,
Salomon Smith Barney served as the fund's distributor.
To compensate Salomon Smith Barney for the service it provides and
for the expense it bears under the Distribution Agreement, the
fund has adopted a services and distribution plan (the "Plan")
pursuant to Rule 12b-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 Class B
and Class L shares calculated at the annual rate of 0.75% of the
value of the fund's average daily net assets attributable those
shares primarily intended to compensate Salomon Smith Barney for
its initial expense of paying Financial Consultants a commission
upon sales of those shares. Class B shares that automatically
convert to Class A shares eight years after the date of original
purchase will no longer be subject to a distribution fee.
For the year ended December 31, 1999, the fees which have been
accrued and/or paid to Salomon Smith Barney pursuant to Rule 12b-1
for the fund were $99,696 for Class A shares, $243,047 for Class
B shares and $102,735 for Class L shares. The distribution
expenses for 1999 included compensation of financial consultants
and printing costs of prospectuses and marketing materials.
For the fiscal year ended December 31, 1999, Salomon Smith Barney
incurred the following distribution expenses for the fund:
Salomon
Smith
Barney
Financial
Consultant
s
Branch
Expenses
Marketing
and
Advertisin
g
Printing
Expense
Interest
Expense
Total
$407,723
$213,524
$32,344
$2,302
$16,326
$672,220
Commissions on Class A Shares. For the 1997 fiscal year, the
aggregate dollar amount of commissions on Class A shares, all of
which were paid to Salomon Smith Barney, was $173,000. For the
period January 1, 1998 through October 7, 1998 and for the period
October 8, 1998 through December 31, 1999, the aggregate dollar
amounts of commissions on Class A shares are as follows:
01/01/98 through 10/08/98 through
01/01/99 through
10/07/98 12/31/98
12/31/99
Class A Shares $136,000* $35,000**
$124,000***
* The entire amount was paid to Salomon Smith Barney.
** The following amount was paid to Salomon Smith Barney:
$31,500.00.
***The following amount was paid to Salomon Smith Barney $111,600
Commissions on Class L Shares. For the period June 12, 1998
through October 7, 1998 and for the period October 8, 1998 through
December 31, 1999, the aggregate dollar amounts of commissions on
Class L shares are as follows:
06/12/98 through 10/08/98 through
01/01/99 through
10/07/98 12/31/98
12/31/99
Class L shares $12,000* $7,000**
$71,000***
(On June 12, 1998, Class C
shares were renamed Class L
shares)
* The entire amount was paid to Salomon Smith Barney.
** The following amount was paid to Salomon Smith Barney:
$6,300.00.
*** The following amount was paid to Salomon Smith Barney $63,900.
A contingent deferred sales charge ("CDSC") may be imposed on
certain redemptions of Class A, Class B shares and Class L shares.
For Class B shares, the maximum CDSC is 5.00% of redemption
proceeds, declining by 1.00% each year after the date of purchase
to zero. A CDSC of 1% is imposed on redemptions of Class L
shares. A CDSC of 1.00% is also imposed on redemptions of Class
A shares that were purchased without an initial sales charge but
subject to a CDSC if such redemptions occur within 12 months from
the date such investment was made. Any sales charge imposed on
redemptions is paid to the distributor of the shares.
For the fiscal years ended December 31, 1997, December 31, 1998
and December 31, 1999, Salomon Smith Barney or its predecessor
received from shareholders $328,000, $4,000 and $3,000,
reespectively, in deferred sales charges on the redemption of
Class A shares.
For the fiscal years ended December 31, 1997, December 31, 1998
and December 31, 1999, Salomon Smith Barney or its predecessor
received from shareholders $1,000, $43,000 and $73,000,
respectively, in deferred sales charges on the redemption of Class
B shares.
For the fiscal years ended December 1998 and December 31, 1999,
Salomon Smith Barney or its predecessor received from shareholders
$0 and $6,000, respectively, in deferred sales charges on the
redemption of Class L shares.
CFBDS will pay for the printing, at printer's overrun cost, of
prospectuses and periodic reports after they have been prepared,
set in type and mailed to shareholders, and will also pay the cost
of distributing such copies used in connection with the offering
to prospective investors and will also pay for supplementary sales
literature and other promotional costs. Such expenses incurred by
CFBDS are distribution expenses within the meaning of the Plans
and may be paid from amounts received by CFBDS from the Company
under the Plans.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the fund normally is determined
as of the close of regular trading on the NYSE on each day that
the NYSE is open, by dividing the value of the fund's net assets
attributable to each Class by the total number of shares of the
Class outstanding. If the NYSE closes early, the fund accelerates
the calculation of its net asset value to the actual closing time.
The NYSE is closed for the following holidays: New Year's Day,
Martin Luther King, Jr.'s Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Securities for which market quotations are readily available are
valued at current market value or, in their absence, at fair
value. Securities traded on an exchange are valued at last sales
prices on the principal exchange on which each such security is
traded, or if there were no sales on that exchange on the
valuation date, the last quoted sale, up to the time of valuation,
on the other exchanges. If instead there were no sales on the
valuation date with respect to these securities, such securities
are valued at the mean of the latest published closing bid and
asked prices. Over-the-counter securities are valued at last
sales price or, if there were no sales that day, at the mean
between the bid and asked prices. Options, futures contracts and
options thereon that are traded on exchanges are also valued at
last sales prices as of the close of the principal exchange on
which each is listed or if there were no such sales on the
valuation date, the last quoted sale, up to the time of valuation,
on the other exchanges. In the absence of any sales on the
valuation date, valuation shall be the mean of the latest closing
bid and asked prices. Securities with a remaining maturity of 60
days or less are valued at amortized cost where the Board of
Directors has determined that amortized cost is fair value.
Premiums received from writing call and put options will be
recorded as a liability, the value of which is marked to market
daily. Any other investments of the fund, including restricted
securities and listed securities for which there is a thin market
or that trade infrequently (i.e., securities for which prices are
not readily available), are valued at a fair value determined by
the Board of Directors in good faith. This value generally is
determined as the amount that the fund could reasonably expect to
receive from an orderly disposition of these assets over a
reasonable period of time but in no event more than seven days.
The value of any security or commodity denominated in a currency
other than U.S. dollars will be converted into U.S. dollars at the
prevailing market rate as determined by the investment adviser.
Foreign securities trading may not take place on all days on which
the NYSE is open. Further, trading takes place in various foreign
markets on days on which the NYSE is not open. Accordingly, the
determination of the net asset value of the fund may not take
place contemporaneously with the determination of the prices of
investments held by such fund. Events affecting the values of
investments that occur between the time their prices are
determined and 4:00 P.M. on each day that the NYSE is open will
not be reflected in the fund's net asset value unless the
investment adviser, under the supervision of the Company's Board
of Directors, determines that the particular event would
materially affect net asset value. As a result, the fund's net
asset value may be significantly affected by such trading on days
when a shareholder has no access to that fund.
IRA AND OTHER PROTOTYPE RETIREMENT PLANS
Copies of the following plans with custody or trust agreements
have been approved by the Internal Revenue Service and are
available from the fund or Salomon Smith Barney; investors should
consult with their own tax or retirement planning advisors prior
to the establishment of a plan.
IRA, Rollover IRA and Simplified Employee Pension - IRA
The Small Business Job Protection Act of 1996 changed the
eligibility requirements for participants in Individual Retirement
Accounts ("IRAs"). Under these new provisions, if you or your
spouse have earned income, each of you may establish an IRA and
make maximum annual contributions equal to the lesser of earned
income or $2,000. As a result of this legislation, married
couples where one spouse is non-working may now contribute a total
of $4,000 annually to their IRAs.
The Taxpayer Relief Act of 1997 changed the requirements for
determining whether or not you are eligible to make a deductible
IRA contribution. If you are considered an active participant in
an employer-sponsored retirement plan, you may still be eligible
for a full or partial deduction depending upon your combined
adjusted gross income ("AGI"). For married couples filing jointly
for 2000, a full deduction is permitted if your combined AGI is
$52,000 or less ($32,000 or less for unmarried individuals); a
partial deduction will be allowed when AGI is between $52,000-
$62,000 ($32,000-$42,000 for an unmarried individual); and no
deduction when AGI is above $62,000 ($42,000 for an unmarried
individual). However, if you are married and your spouse is
covered by a employer-sponsored retirement plan, but you are not,
you will be eligible for a full deduction if your combined AGI is
$150,000 or less. A partial deduction is permitted if your
combined AGI is between $150,000-$160,000 and no deduction is
permitted after $160,000.
The rules applicable to so-called "Roth IRAs" differ from those
described above.
A Rollover IRA is available to defer taxes on lump sum payments
and other qualifying rollover amounts (no maximum) received from
another retirement plan.
An employer who has established a Simplified Employee Pension -
IRA ("SEP-IRA") on behalf of eligible employees may make a maximum
annual contribution to each participant's account of 15% (up to
$25,500) of each participant's compensation. Compensation is
capped at $170,000 for 1999.
Paired Defined Contribution Prototype
Corporations (including Subchapter S corporations) and non-
corporate entities may purchase shares of the fund through the
Salomon Smith Barney Prototype Paired Defined Contribution Plan
(the "Prototype"). The Prototype permits adoption of profit-
sharing provisions, money purchase pension provisions, or both, to
provide benefits for eligible employees and their beneficiaries.
The Prototype provides for a maximum annual tax deductible
contribution on behalf of each Participant of up to 25% of
compensation, but not to exceed $30,000 (provided that a money
purchase pension plan or both a profit-sharing plan and a money
purchase pension plan are adopted thereunder).
PERFORMANCE DATA
From time to time, the fund may quote total return of the Classes
in advertisements or in reports and other communications to
shareholders. The Fund may include comparative performance
information in advertising or marketing the fund's shares. Such
performance information may include data from the following
industry and financial publications: Barron's, Business Week, CDA
Investment Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Business 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
Class A, Class B, Class L or Class Y, it will also disclose such
information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed according to a
formula prescribed by the SEC. The formula can be expressed as
follows:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
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.
Class A's average annual total return was as follows for the
periods indicated:
15.05% for the one-year period January 1, 1999 through
December 31, 1999.
16.83% for the five-year period January 1, 1995 through
December 31, 1999.
10.53% for the period from commencement of operations
(January 23, 1990) through December 31, 1999.
Class B's average annual total return was as follows for the
period indicated:
15.21% for the one-year period January 1, 1999 through
December 31, 1999.
12.47% for the period from commencement of operations June
25, 1997 (inception date) through December 31, 1999.
Class L's average annual total return was as follows for the
period indicated:
17.94% for the one-year period January 1, 1999 through
December 31, 1999.
13.31% for the period from June 24, 1997 (inception date)
through December 31, 1999.
Class Y's average annual total return was as follows for the
period indicated:
21.55% for the one-year period January 1, 1999 through
December 31, 1999.
8.97% for the period from October 17, 1997 (inception date)
through December 31, l999.
Average annual total return figures calculated in accordance with
the above formula assume that the maximum 5.00% sales charge or
maximum applicable CDSC, as the case may be, has been deducted
from the hypothetical investment. If the maximum 5.00% sales
charge had not been deducted at the time of purchase, Class A's
average annual total return for the same periods would have been
21.09%, 18.04% and 11.1%, respectively. If the maximum CDSC had
not been deducted at the time of redemption, Class B's average
annual total return for the same periods would have been 20.21%
and 13.46%, respectively. If the maximum CDSC had not been
deducted at the time of redemption, Class L's average annual total
return for the same periods would have been 20.12% and 13.75%,
respectively.
Aggregate Total Return
"Aggregate total return" figures represent the cumulative change
in the value of an investment in the Class for the specified
period and are computed by the following formula:
ERV-P
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of the
1-, 5-, or 10-year period at the end of the 1-,
5-, or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends
and distributions.
Class A's aggregate total return was as follows for the period
indicated:
184.85% for the period from January 23, 1990 through
December 31, 1999.
Class B's aggregate total return was as follows for the period
indicated:
37.42% for the period from June 25, 1997 through December
31, 1999.
Class L's aggregate total return was as follows for the period
indicated:
38.36% for the period from June 24, 1997 through December
31, 1999.
Class Y's average annual total return was as follows for the
period indicated:
20.86% for the period from October 17, 1997 through December
31, l999.
Class A aggregate total return figures assume that the maximum
5.00% sales charge has not been deducted from the investment at
the time of purchase. If the maximum 5.00% sales charge had been
deducted at the time of purchase, Class A's aggregate total return
for the same period would have been 170.5%.
Class B aggregate total return figures assume that the maximum
applicable CDSC has not been deducted from the investment at the
time of redemption. If the maximum 5.00% CDSC had been deducted at
the time of redemption, Class B's aggregate total return for the
same period would have been 34.42%.
Class L aggregate total return figures assume that the maximum
applicable CDSC has not been deducted from the investment at the
time of redemption. If the maximum 1% CDSC had been deducted at
the time of redemption, Class L's aggregate total return for the
same period would have been 37.01%.
Performance will vary from time to time depending upon market
conditions, the composition of the fund's portfolio, operating
expenses and the expenses exclusively attributable to the Class.
Consequently, any given performance quotation should not be
considered representative of the Class' performance for any
specified period in the future. Because performance will vary, it
may not provide a basis for comparing an investment in the Class
with certain bank deposits or other investments that pay a fixed
yield for a stated period of time. Investors comparing the Class'
performance with that of other mutual funds should give
consideration to the quality and maturity of the respective
investment companies' portfolio securities.
It is important to note that the total return figures set forth
above are based on historical earnings and are not intended to
indicate future performance.
ADDITIONAL INFORMATION CONCERNING 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 Statement of Additional Information,
which are subject to change.
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 Internal
Revenue Code of 1986, as amended (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 which are determined to be
engaged in the same or similar trades or businesses or related
trades or businesses. The Fund expects that all of its foreign
currency gains will be directly related to its principal business
of investing in stocks and securities.
As a regulated investment company, the fund will not be
subject to United States federal income tax on its net investment
income (i.e., income other than any excess of its net realized
long-term capital gains over its net realized short-term capital
losses ("net capital gains") or on its net capital gains) and its
net realized long- and short-term capital gains, if any, that it
distributes to its shareholders, provided that an amount equal to
at least 90% of its investment company taxable income, plus or
minus certain other adjustments as specified in the Code and 90%
of 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 that it does not distribute.
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 forward
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.
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.
In the alternative, the fund may make an election 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
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 that 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 long-term capital gains in excess of
net realized short-term capital losses (including any capital loss
carryovers). The fund currently expects to distribute any such
excess annually to its shareholders. However, if the fund retains
for investment an amount equal to all or a portion of its net
long-term capital gains in excess of its net short-term capital
losses and capital loss carryovers, 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 Internal Revenue Service (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 his
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 "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 fund.
ADDITIONAL INFORMATION
The Fund, an open-end management investment company, was
incorporated on October 4, 1989 in Maryland under the name The
Inefficient-Market Fund Inc. as a non-diversified closed-end
management investment company and converted to open-end
diversified status on June 23, 1997 pursuant to shareholder
approval rendered on April 18, 1997 and Securities and Exchange
Declaration of Effectiveness issued on June 23, 1997.
PNC is located at 17th Chestnut Street, Philadelphia, PA 19103,
and serves as the custodian of the fund. Under its agreement with
the fund, PNC holds the fund's portfolio securities and keeps all
necessary accounts and records. For its services, PNC receives a
monthly fee based upon the month-end market value of securities
held in custody and also receives securities transaction charges.
PNC is authorized to establish separate accounts for foreign
securities owned by the fund to be held with foreign branches of
other domestic banks as well as with certain foreign banks and
securities depositories. The assets of the fund are held under
bank custodianship in compliance with the 1940 Act.
Citi Fiduciary Trust Company, located at 388 Greenwich Street, New
York, NY 10013 serves as the Transfer Agent and shareholder
services agent of the fund. PFPC Global Fund Services, located at
P.O. Box 9699, Providence, RI 02940-9699 serves as the fund's sub-
transfer agent to render certain shareholder record keeping and
accounting services functions.
As of March 30, 2000, the following table contains a list of
shareholders who of record or beneficially own at least 5% of the
outstanding shares of a particular class of shares of the fund:
Class A
Holder % of shares
Old Lyne Insurance Company 8.1781%
122 East 42nd Street, 20th Floor
New York, NY 10168
Class Y
Holder
Smith Barney Concert Series, Inc. 63.2901%
High Growth Portfolio
PNC Bank
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
% of shares
Smith Barney Concert Series, Inc. 18.5233%
Growth Portfolio
PNC Bank
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
Smith Barney Concert Series, Inc. 11.6189%
Select High Growth Portfolio
PNC Bank
Attn: Beverly Timson
200 Stevens Drive Suite 440
Lester, PA 19113
Styles of fund management 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.
FINANCIAL STATEMENTS
The fund's Annual Report for the fiscal year ended December 31,
1999, is incorporated herein by reference in its entirety. The
annual report was filed on was filed on February 23, 2000,
accession number 91155-99-000118.
Smith Barney
Small Cap Blend
Fund, Inc.
Statement of
Additional
Information
April 28, 2000
Smith Barney
Small Cap Blend Fund, Inc.
388 Greenwich Street
New York, NY 10013
SALOMON SMITH
BARNEY
A Member of
Citigroup
48
U/legalfunds/scbf/secdoc/2000/SAAI2000
47
PART C
OTHER INFORMATION
Item 23. Exhibits
(a)(1) Amended and Restated Articles of Incorporation dated June
16, 1997 are
incorporated by reference to Pre-Effective Amendment No. 1.
(2) Articles of Amendment dated June 12, 1998 is incorporated by
(3) reference to Post-Effective Amendment No. 3.
(b)Registrants By-Laws are incorporated by reference to Pre-
Effective
Amendment No. 1
(c) Registrants form of Stock Certificate for Class A is
incorporated by
reference to Pre-Effective Amendment No. 1
(d) Investment Advisory Agreement dated June 23, 1997, between the
Registrant
and Travelers Investment Management Company is incorporated by
reference to
Pre-Effective Amendment No. 1.
(e)(1) Form of Distribution Agreement between the Registrant and
Smith Barney
Inc., is incorporated by reference to Pre-Effective Amendment No.
1.
(2) Form of Distribution Agreement is incorporated by reference to
Post-Effective Amendment No. 3.
(f) Not applicable.
(g) Form of Custodian Services Agreement between the Registrant and
PNC Bank,
National Association is incorporated by reference to Pre-Effective
Amendment
No. 1.
(h)(1) Form of Transfer Agency Agreement between the Registrant and
First
Data Investor Services Group, Inc. is incorporated by reference to
Pre-Effective Amendment No. 1.
(2) Amended Administration Agreement dated June 23, 1997, between
the
Registrant and Mutual Management Corp. (f/k/a Smith Barney Mutual
Funds
Management Inc.,) is incorporated by reference to Pre-Effective
Amendment No. 1.
(i) Opinion of Sullivan and Cromwell dated June 13, 1997 is
(ii) incorporated by
reference to Pre-Effective Amendment No. 1.
(j) Consent of Independent Accountants is filed herewith.
(k) Not applicable.
(l) Not applicable.
(m)(1) Services and Distribution plan pursuant to Rule 12b-1 is
incorporated by
reference to Pre-Effective Amendment No. 1.
(2) Form of Amended and Restated Shareholder Services and
Distribution Plan is incorporated by reference to Post-Effective
Amendment No. 3.
(n) Financial Data Schedule is filed herewith.
(o)(1) Form of Rule 18f-3 Plan of the Registrant is incorporated by
reference to
the Pre-Effective Amendment No. 1.
(2) Form of Amended and Restated Rule 18f-3 Multiple Class Plan
(3) is incorporated by reference to Post-Effective Amendment No.
(4) 3.
(p) Code of Ethics filed herewith.
Item 24. Persons Controlled by or Under Common Control with
Registrant
The Registrant is not controlled directly or indirectly by any
person.
Information regarding the Registrants institutional manager is set
forth
under the caption Management of the Fund in the Prospectus included
in
Part A of this Registration Statement on Form N-1A.
Item 25. Indemnification
Reference is made to Article IX of Registrants Articles of
Incorporation for
a complete statement of its terms.
Item 26. Business and other Connections of the Investment Adviser.
Travelers Investment Management Company (TIMCO) (the Adviser)
serves
as the investment adviser for the Fund pursuant to a written
agreement dated June 23, 1997 (the Advisory Agreement). TIMCO was
incorporated on August 31, 1967 under the laws of the State of
Connecticut. TIMCO is a wholly owned subsidiary of Salomon Smith
Barney Holdings Inc. (Holdings) which in turn is a wholly owned
subsidiary of Citigroup Inc. TIMCO is registered as an investment
adviser under the Investment Advisers Act of 1940 (the Advisers
Act) since 1971 and has, through its predecessors, been in the
investment counseling business since 1967.
The list required by this Item 26 of officers and directors of
TIMCO together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two fiscal years,
is incorporated by reference to Schedules A and D of FORM ADV filed
by TIMCO pursuant to the Advisers Act (SEC File No. 801-07212).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also the
distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio,
CitiFundsSM Large Cap Growth Portfolio,
CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves,
CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves,
CitiFundsSM Institutional U.S. Treasury Reserves,
CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves,
CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves,
CitiFundsSM Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio,
CitiFundsSM Growth & Income Portfolio,
CitiFundsSM Small Cap Growth Portfolio,
CitiFundsSM National Tax Free Income Portfolio,
CitiFundsSM New York Tax Free Income Portfolio,
CitiSelect VIP Folio 200,
Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400,
CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio,
CitiSelect (Folio 200,
CitiSelect (Folio 300,
CitiSelect (Folio 400,
and CitiSelect (Folio 500.
CFBDS is also the placement agent for
Large Cap Value Portfolio,
International Portfolio,
Foreign Bond Portfolio,
Intermediate Income Portfolio,
Short-Term Portfolio,
Growth & Income Portfolio,
Large Cap Growth Portfolio,
Small Cap Growth Portfolio,
International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio,
Emerging Asian Markets Equity Portfolio,
Tax Free Reserves Portfolio,
Cash Reserves Portfolio
and U.S. Treasury Reserves Portfolio.
CFBDS, Inc. is also the distributor for the following Smith
Barney Mutual Fund registrants:
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 Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Investment Funds Inc.
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, Inc. 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
CFBDS, Inc is also the distributor for the Centurion Funds, Inc.
(b) The information required by this Item 27 with respect to
each director, officer and partner of CFBDS, Inc. is
incorporated by reference to Schedule A of Form BD filed by
CFBDS, Inc. pursuant to the Securities Exchange Act of 1934
(SEC File No. 8-32417).
Item 28. Location of Accounts and Records
All accounts, books and other documents of Registrant are
maintained at
the offices of:
(1) With respect to the Registrant's Investment Adviser:
TIMCO
One Tower Square
Hartford, Connecticut 06183
(2) With respect to the Registrant's Custodian:
PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(5) With respect to the Registrant's Transfer Agent:
Citi Fiduciary Trust Company
388 Greenwich Street
New York, New York 10013
(4) With respect to the Registrant's Sub-Transfer Agent:
PFPC Global Fund Services
Exchange Place
Boston, Massachusetts 02109
Item 29. Management Services
Not applicable.
Item 30. Undertakings
The Registrant hereby undertakes to furnish to each person to
whom a
Prospectus of any series of the Registrant is delivered a copy of
the
Registrants latest annual report, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and
the Investment Company Act of 1940, as amended, the Registrant,
Smith Barney Small Cap Blend Fund, Inc., has duly caused this Post-
Effective
Amendment No. 5 to the Registration Statement to be signed on its
behalf by
the undersigned, thereunto duly authorized, in the City of New
York, State of
New York on the 26th day of April, 2000.
SMITH BARNEY SMALL CAP BLEND FUND, INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
President
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title
Date
/s/Heath B. McLendon President, Chairman 04/26/00
Heath B. McLendon of the Board and
Chief Executive Officer
/s/Lewis E. Daidone Senior Vice President
04/26/00
Lewis E. Daidone and Treasurer
Chief Financial and
Accounting Officer
/s/ Lee Abraham* Director
04/26/00
Lee Abraham
/s/ Allan J. Bloostein* Director
04/26/00
Allan J. Bloostein
/s/ Donald R. Foley* Director
04/26/00
Donald R. Foley
/s/ Jane Dasher* Director
04/26/00
Jane Dasher
/s/ Richard E. Hanson, Jr.* Director
04/26/00
Richard E. Hanson, Jr.
/s/ Paul Hardin* Director
04/26/00
Paul Hardin
/s/ Roderick C. Rasmussen* Director
04/26/00
Roderick C. Rasmussen
/s/ John P. Toolan* Director
04/26/00
John P. Toolan
*By : /s/ Heath B. McLendon
Heath B. McLendon
Attorney-in-Fact, pursuant to Power of Attorney previously
filed.
EXHIBIT INDEX
(j) Consent of Independent Accountants
(n) Financial Data Schedule
(p) Code of Ethics
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Smith Barney Small Cap Blend Fund, Inc.:
We consent to the incorporation by reference, in this Prospectus and
Statement of Additional
Information, of our report dated February 11, 2000, on the statement
of assets and liabilities for the
Smith Barney Small Cap Blend Fund, Inc. as of December 31, 1999 and
the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the years in
the two-year period then ended and the financial highlights for each
of the years in the five-year
period then ended. These financial statements and financial highlights
and our report thereon are
included in the Annual Report of the Fund as filed on Form N-30D.
We also consent to the references to our firm under the headings
"Financial Highlights" in the
Prospectus and "Auditors" in the Statement of Additional Information.
KPMG LLP
New York, New York
April 25, 2000
Page
PERSONAL INVESTMENT POLICY
FOR
SSB CITI ASSET MANAGEMENT GROUP - NORTH AMERICA
AND CERTAIN REGISTERED INVESTMENT COMPANIES
SSB Citi Asset Management Group ("SSB Citi") , and those U.S.-registered
investment companies advised or managed by SSB Citi that have adopted
this policy ("Funds"), have adopted this policy on securities
transactions in order to accomplish two goals: first, to minimize
conflicts and potential conflicts of interest between employees of SSB
Citi and SSB Citi's clients (including the Funds), and between Fund
directors or trustees and their Funds, and second, to provide policies
and procedures consistent with applicable law, including Rule 17j-1
under the Investment Company Act of 1940, to prevent fraudulent or
manipulative practices with respect to purchases or sales of securities
held or to be acquired by client accounts. All U.S. employees of SSB
Citi, including employees who serve as Fund officers or directors, and
all directors or trustees ("directors") of each Fund, are Covered
Persons under this policy. Other Covered Persons are described in
Section II below.
I. Statement of Principles - All SSB Citi employees owe a fiduciary
duty to SSB Citi's clients when conducting their personal
investment transactions. Employees must place the interests of
clients first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in the best
interests of the clients. All Fund directors owe a fiduciary
duty to each Fund of which they are a director and to that Fund's
shareholders when conducting their personal investment
transactions. At all times and in all matters Fund directors
shall place the interests of their Funds before their personal
interests. The fundamental standard to be followed in personal
securities transactions is that Covered Persons may not take
inappropriate advantage of their positions.
All personal securities transactions by Covered Persons shall
adhere to the requirements of this policy and shall be conducted
in such a manner as to avoid any actual or potential conflict of
interest, the appearance of such a conflict, or the abuse of the
person's position of trust and responsibility. While this policy
is designed to address both identified conflicts and potential
conflicts, it cannot possibly be written broadly enough to cover
all potential situations. In this regard, Covered Persons are
expected to adhere not only to the letter, but also the spirit of
the policies contained herein.
Employees are reminded that they also are subject to other
Citigroup policies, including policies on insider trading, the
purchase and sale of securities listed on any applicable SSB Citi
restricted list, the receipt of gifts and service as a director
of a publicly traded company. Employees must never trade in a
security or commodity while in possession of material, non-public
information about the issuer or the market for those securities
or commodities, even if the employee has satisfied all other
requirements of this policy.
The reputation of SSB Citi and its employees for straightforward
practices and integrity is a priceless asset, and all employees
have the duty and obligation to support and maintain it when
conducting their personal securities transactions.
II. Applicability - SSB Citi Employees - This policy applies to all
U.S. employees of SSB Citi, including part-time employees. Each
employee, including employees who serve as Fund officers or
directors, must comply with all of the provisions of the policy
applicable to SSB Citi employees unless otherwise indicated.
Certain employees are considered to be "investment personnel"
(i.e., portfolio managers, traders and research analysts (and
each of their assistants)), and as such, are subject to certain
additional restrictions outlined in the policy. All other
employees of SSB Citi are considered to be "advisory personnel."
Generally, temporary personnel and consultants working in any SSB
Citi business are subject to the same provisions of the policy as
full-time employees, and their adherence to specific requirements
will be addressed on a case-by-case basis.
The personal investment policies, procedures and restrictions
referred to herein also apply to an employee's spouse and minor
children. The policies also apply to any other account over which
the employee is deemed to have beneficial ownership. This
includes: accounts of any immediate family members sharing the
same household as the employee; accounts of persons or other
third parties for whom the employee exercises investment
discretion or gives investment advice; a legal vehicle in which
the employee has a direct or indirect beneficial interest and has
power over investment decisions; accounts for the benefit of a
third party (e.g., a charity) which may be directed by the
employee (other than in the capacity of an employee); and any
account over which the employee may be deemed to have control.
For a more detailed description of beneficial ownership, see
Exhibit A attached hereto.
These policies place certain restrictions on the ability of an
employee to purchase or sell securities that are being or have
been purchased or sold by an SSB Citi managed fund or client
account. The restrictions also apply to securities that are
"related" to a security being purchased or sold by an SSB Citi
managed fund or client account. A "related security" is one
whose value is derived from the value of another security (e.g.,
a warrant, option or an indexed instrument).
Fund Directors - This policy applies to all directors of Funds
that have adopted this policy. The personal investment policies,
procedures and restrictions that specifically apply to Fund
directors apply to all accounts and securities in which the
director has direct or indirect beneficial ownership. See
Exhibit A attached hereto for a more detailed description of
beneficial ownership.
Securities are defined as stocks, notes, bonds, closed-end mutual
funds, debentures, and other evidences of indebtedness, including
senior debt, subordinated debt, investment contracts, commodity
contracts, futures and all derivative instruments such as
options, warrants and indexed instruments, or, in general, any
interest or instrument commonly known as a "security."
III. Enforcement - It is the responsibility of each Covered Person to
act in accordance with a high standard of conduct and to comply
with the policies and procedures set forth in this document. SSB
Citi takes seriously its obligation to monitor the personal
investment activities of its employees. Any violation of this
policy by employees will be considered serious, and may result in
disciplinary action, which may include the unwinding of trades,
disgorgement of profits, monetary fine or censure, and suspension
or termination of employment. Any violation of this policy by a
Fund director will be reported to the Board of Directors of the
applicable Fund, which may impose such sanctions as it deems
appropriate.
IV. Opening and Maintaining Employee Accounts - All employee
brokerage accounts, including spouse accounts, accounts for which
the employee is deemed to have beneficial ownership, and any
other accounts over which the employee and/or spouse exercise
control, must be maintained either at Salomon Smith Barney
("SSB") or at Citicorp Investment Services ("CIS"). For spouses
or other persons who, by reason of their employment, are required
to conduct their securities, commodities or other financial
transactions in a manner inconsistent with this policy, or in
other exceptional circumstances, employees may submit a written
request for an exemption to the Compliance Department. If
approval is granted, copies of trade confirmations and monthly
statements must be sent to the Compliance Department. In
addition, all other provisions of this policy will apply.
V. Excluded Accounts and Transactions - The following types of
accounts/transactions need not be maintained at SSB or CIS, nor
are they subject to the other restrictions of this policy:
1. Accounts at outside mutual funds that hold only shares
of open-end funds purchased directly from that fund
company. Note: transactions relating to closed-end
funds are subject to the pre-clearance, blackout period
and other restrictions of this policy;
2. Estate or trust accounts in which an employee or related
person has a beneficial interest, but no power to affect
investment decisions. There must be no communication
between the account(s) and the employee with regard to
investment decisions prior to execution. The employee
must direct the trustee/bank to furnish copies of
confirmations and statements to the Compliance
Department;
3. Fully discretionary accounts managed by either an
internal or external registered investment adviser are
permitted and may be custodied away from SSB and CIS if
(i) the employee receives permission from the Regional
Director of Compliance and the unit's Chief Investment
Officer, and (ii) there is no communication between the
manager and the employee with regard to investment
decisions prior to execution. The employee must
designate that copies of trade confirmations and monthly
statements be sent to the Compliance Department;
4. Employees may participate in direct investment programs
which allow the purchase of securities directly from the
issuer without the intermediation of a broker/dealer
provided that the timing and size of the purchases are
established by a pre-arranged, regularized schedule
(e.g., dividend reinvestment plans). Employees must
pre-clear the transaction at the time that the dividend
reinvestment plan is being set up. Employees also must
provide documentation of these arrangements and direct
periodic (monthly or quarterly) statements to the
Compliance Department; and
5. In addition to the foregoing, the following types of
securities are exempted from pre-clearance, blackout
periods, reporting and short-term trading requirements:
open-ended mutual funds; open-end unit investment
trusts; U.S. Treasury bills, bonds and notes; mortgage
pass-throughs (e.g. Ginnie Maes) that are direct
obligations of the U.S. government; bankers acceptances;
bank certificates of deposit; commercial paper; and high
quality short-term debt instruments (meaning any
instrument that has a maturity at issuance of less than
366 days and that is rated in one of the two highest
rating categories by a nationally recognized statistical
rating organization, such as S&P or Moody's), including
repurchase agreements.
VI. Securities Holding Period/Short-Term Trading - Securities
transactions must be for investment purposes rather than for
speculation. Consequently, employees may not profit from the
purchase and sale, or sale and purchase, of the same or
equivalent securities within sixty (60) calendar days, calculated
on a First In, First Out (FIFO) basis (i.e., the security may be
sold on the 61st day). Citigroup securities received as part of
an employee's compensation are not subject to the 60-day holding
period. All profits from short-term trades are subject to
disgorgement. However, with the prior written approval of both a
Chief Investment Officer and the Regional Director of Compliance,
and only in rare and/or unusual circumstances, an employee may
execute a short-term trade that results in a significant loss or
in break-even status.
VII. Pre-Clearance - All SSB Citi employees must pre-clear all
personal securities transactions (see Section V for a listing of
accounts, transactions and securities that do not require pre-
clearance). A copy of the pre-clearance form is attached as
Exhibit B. In addition, employees are prohibited from engaging
in more than twenty (20) transactions in any calendar month,
except with prior written approval from their Chief Investment
Officer, or designee. A transaction must not be executed until
the employee has received the necessary approval. Pre-clearance
is valid only on the day it is given. If a transaction is not
executed on the day pre-clearance is granted, it is required that
pre-clearance be sought again on a subsequent day (i.e., open
orders, such as limit orders, good until cancelled orders and
stop-loss orders, must be pre-cleared each day until the
transaction is effected). In connection with obtaining approval
for any personal securities transaction, employees must describe
in detail any factors which might be relevant to an analysis of
the possibility of a conflict of interest. Any trade that
violates the pre-clearance process may be unwound at the
employee's expense, and the employee will be required to absorb
any resulting loss and to disgorge any resulting profit.
In addition to the foregoing, the CGAM NA Director of Global
Equity Research, or his designate, must approve all personal
securities transactions for members of the CGAM Research
Department prior to pre-clearance from the Compliance Department
as set forth in this section. Pre-approval by the Director of
Research, or his designate, is in addition to and does not
replace the requirement for the pre-clearance of all personal
securities transactions.
VIII. Blackout Periods - No Covered Person shall purchase or sell,
directly or indirectly, any security in which he/she has, or by
reason of the transaction acquires, any direct or indirect
beneficial ownership if he/she has knowledge at the time of such
transaction that the security is being purchased or sold, or is
being considered for purchase or sale, by a managed fund or
client account or in the case of a Fund director, by the
director's Fund. In addition, the following Blackout Periods
apply to the categories of SSB Citi employees listed below:
1. Portfolio Managers and Portfolio Manager Assistants - may
not buy or sell any securities for personal accounts seven
(7) calendar days before or after managed funds or client
accounts he/she manages trade in that security.
2. Traders and Trader Assistants - may not buy or sell any
securities for personal accounts three (3) calendar days
before or seven (7) calendar days after managed funds or
client accounts he/she executes trades for trade in that
security.
3. Research Analysts and Research Assistants - may not buy or
sell any securities for personal accounts: seven (7)
calendar days before or after the issuance of or a change in
any recommendation; or seven (7) calendar days before or
after any managed fund or client account about which the
employee is likely to have trading or portfolio information
(as determined by the Compliance Department) trades in that
security.
4. Advisory Personnel (see Section II for details) - may not
buy or sell any securities for personal accounts on the same
day that a managed fund or client account about which the
employee is likely to have trading or portfolio information
(as determined by the Compliance Department) trades in that
security.
5. Unit Trust Personnel - all employees assigned to the Unit
Trust Department are prohibited from transacting in any
security when a SSB Citi-sponsored Unit Trust portfolio is
buying the same (or a related) security, until seven
business days after the later of the completion of the
accumulation period or the public announcement of the trust
portfolio. Similarly, all UIT employees are prohibited from
transacting in any security held in a UIT (or a related
security) seven business days prior to the liquidation
period of the trust.
Employees in the above categories may also be considered
Advisory Personnel for other accounts about which the employee
is likely to have trading or portfolio information (as
determined by the Compliance Department).
Any violation of the foregoing provisions will require the
employee's trade to be unwound, with the employee absorbing
any resulting loss and disgorging any resulting profit.
Advisory personnel are subject to the unwinding of the trade
provision; however, they may not be required to absorb any
resulting loss (at the discretion of the Compliance Department
and the employee's supervisor). Please be reminded that,
regardless of the provisions set forth above, all employees
are always prohibited from effecting personal securities
transactions based on material, non-public information.
Blackout period requirements shall not apply to any purchase
or sale, or series of related transactions involving the same
or related securities, involving 500 or fewer shares in the
aggregate if the issuer has a market capitalization
(outstanding shares multiplied by the current price per share)
greater than $10 billion and is listed on a U.S. Stock
Exchange or NASDAQ. Note: Pre-clearance is still required.
Under certain circumstances, the Compliance Department may
determine that an employee may not rely upon this "Large
Cap/De Minimis" exemption. In such a case, the employee will
be notified prior to or at the time the pre-clearance request
is made.
IX. Prohibited Transactions - The following transactions by SSB Citi
employees are prohibited without the prior written approval from
the Chief Investment Officer, or designee, and the Regional
Compliance Director:
1. The purchase of private placements; and
2. The acquisition of any securities in an initial public
offering (new issues of municipal debt securities may be
acquired subject to the other requirements of this policy
(e.g., pre-clearance).)
X. Transactions in Options and Futures - SSB Citi employees may buy
or sell derivative instruments such as individual stock options,
options and futures on indexes and options and futures on fixed-
income securities, and may buy or sell physical commodities and
futures and forwards on such commodities. These transactions
must comply with all of the policies and restrictions described
in this policy, including pre-clearance, blackout periods,
transactions in Citigroup securities and the 60-day holding
period. However, the 60-day holding period does not apply to
individual stock options that are part of a hedged position where
the underlying stock has been held for more than 60 days and the
entire position (including the underlying security) is closed
out.
XI. Prohibited Recommendations - No Covered Person shall recommend or
execute any securities transaction by any managed fund or client
account, or, in the case of a Fund director, by the director's
Fund, without having disclosed, in writing, to the Chief
Investment Officer, or designee, any direct or indirect interest
in such securities or issuers, except for those securities
purchased pursuant to the "Large Cap/De Minimis" exemption
described in Section VIII above. Prior written approval of such
recommendation or execution also must be received from the Chief
Investment Officer, or designee. The interest in personal
accounts could be in the form of:
1. Any direct or indirect beneficial ownership of any
securities of such issuer;
2. Any contemplated transaction by the person in such
securities;
3. Any position with such issuer or its affiliates; or
4. Any present or proposed business relationship between
such issuer or its affiliates and the person or any
party in which such person has a significant interest.
XII. Transactions in Citigroup Securities - Unless an SSB Citi
employee is a member of a designated group subject to more
restrictive provisions, or is otherwise notified to the contrary,
the employee may trade in Citigroup securities without
restriction (other than the pre-clearance and other requirements
of this policy), subject to the limitations set forth below.
Employees whose jobs are such that they know about
Citigroup's quarterly earnings prior to release may not
engage in any transactions in Citigroup securities during
the "blackout periods" beginning on the first day of a
calendar quarter and ending on the second business day
following the release of earnings for the prior quarter.
Members of the SSB Citi Executive Committee and certain
other senior SSB Citi employees are subject to these
blackout periods.
Stock option exercises are permitted during a blackout
period (but the simultaneous exercise of an option and sale
of the underlying stock is prohibited). With regard to
exchange traded options, no transactions in Citigroup
options are permitted except to close or roll an option
position that expires during a blackout period. Charitable
contributions of Citigroup securities may be made during
the blackout period, but an individual's private foundation
may not sell donated Citigroup common stock during the
blackout period. "Good 'til cancelled" orders on Citigroup
stock must be cancelled before entering a blackout period
and no such orders may be entered during a blackout period.
No employee may engage at any time in any personal
transactions in Citigroup securities while in possession of
material non-public information. Investments in Citigroup
securities must be made with a long-term orientation rather
than for speculation or for the generation of short-term
trading profits. In addition, please note that employees
may not engage in the following transactions:
? Short sales of Citigroup securities;
? Purchases or sales of options ("puts" or "calls") on
Citigroup securities, except writing a covered call at a
time when the securities could have been sold under this
policy;
? Purchases or sales of futures on Citigroup securities; or
? Any transactions relating to Citigroup securities that
might reasonably appear speculative.
The number of Citigroup shares an employee is entitled to
in the Citigroup Stock Purchase Plan is not treated as a
long stock position until such time as the employee has
given instructions to purchase the shares of Citigroup.
Thus, employees are not permitted to use options to hedge
their financial interest in the Citigroup Stock Purchase
Plan.
Contributions into the firm's 401(k) Plan are not subject
to the restrictions and prohibitions described in this
policy.
XIII. Acknowledgement and Reporting Requirements - SSB Citi Employees -
All new SSB Citi employees must certify that they have received a
copy of this policy, and have read and understood its provisions.
In addition, all SSB Citi employees must:
1. Acknowledge receipt of the policy and any modifications
thereof, in writing (see Exhibit C for the form of
Acknowledgement);
2. Within 10 days of becoming an SSB Citi employee,
disclose in writing all information with respect to all
securities beneficially owned and any existing personal
brokerage relationships (employees must also disclose
any new brokerage relationships whenever established).
Such information should be provided on the form attached
as Exhibit D;
3. Direct their brokers to supply, on a timely basis,
duplicate copies of confirmations of all personal
securities transactions (Note: this requirement may be
satisfied through the transmission of automated feeds);
4. Within 10 days after the end of each calendar quarter,
provide information relating to securities transactions
executed during the previous quarter for all securities
accounts (Note: this requirement may be satisfied
through the transmission of automated feeds);
5. Submit an annual holdings report containing similar
information that must be current as of a date no more
than 30 days before the report is submitted, and confirm
at least annually all brokerage relationships and any
and all outside business affiliations (Note: this
requirement may be satisfied through the transmission of
automated feeds or the regular receipt of monthly
brokerage statements); and
6. Certify on an annual basis that he/she has read and
understood the policy, complied with the requirements of
the policy and that he/she has pre-cleared and disclosed
or reported all personal securities transactions and
securities accounts required to be disclosed or reported
pursuant to the requirements of the policy.
Fund Directors - Fund Directors shall deliver the information
required by Items 1 through 6 of the immediately preceding
paragraph, except that a Fund director who is not an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940, and who would be required to make
reports solely by reason of being a Fund Director, is not
required to make the initial and annual holdings reports required
by Items 2 and 5. Also, a "non-interested" Fund Director need
not supply duplicate copies of confirmations of personal
securities transactions required by Item 3, and need only make
the quarterly transactions reports required by Item 4 as to any
security if at the time of a transaction by the Director in that
security, he/she knew or in the ordinary course of fulfilling
his/her official duties as a Fund Director should have known
that, during the 15-day period immediately preceding or following
the date of that transaction, that security is or was purchased
or sold by that Director's Fund or was being considered for
purchase or sale by that Director's Fund.
Disclaimer of Beneficial Ownership - The reports described in
Items 4 and 5 above may contain a statement that the reports
shall not be construed as an admission by the person making the
reports that he/she has any direct or indirect beneficial
ownership in the securities to which the reports relate.
XIV. Handling of Disgorged Profits - Any amounts that are
paid/disgorged by an employee under this policy shall be donated
by SSB Citi to one or more charities. Amounts donated may be
aggregated by SSB Citi and paid to such charity or charities at
the end of each year.
XV. Confidentiality - All information obtained from any Covered
Person pursuant to this policy shall be kept in strict
confidence, except that such information will be made available
to the Securities and Exchange Commission or any other regulatory
or self-regulatory organization or to the Fund Boards of
Directors to the extent required by law, regulation or this
policy.
XVI. Other Laws, Rules and Statements of Policy - Nothing contained in
this policy shall be interpreted as relieving any person subject
to the policy from acting in accordance with the provision of any
applicable law, rule or regulation or, in the case of SSB Citi
employees, any statement of policy or procedure governing the
conduct of such person adopted by Citigroup, its affiliates and
subsidiaries.
XVII. Retention of Records - All records relating to personal
securities transactions hereunder and other records meeting the
requirements of applicable law, including a copy of this policy
and any other policies covering the subject matter hereof, shall
be maintained in the manner and to the extent required by
applicable law, including Rule 17j-1 under the 1940 Act. The
Compliance Department shall have the responsibility for
maintaining records created under this policy.
XVIII. Monitoring - SSB Citi takes seriously its obligation to
monitor the personal investment activities of its employees and
to review the periodic reports of all Covered Persons. Employee
personal investment transaction activity will be monitored by the
Compliance Department. All noted deviations from the policy
requirements will be referred back to the employee for follow-up
and resolution (with a copy to be supplied to the employee's
supervisor). Any noted deviations by Fund directors will be
reported to the Board of Directors of the applicable Fund for
consideration and follow-up as contemplated by Section III
hereof.
XIX. Exceptions to the Policy - Any exceptions to this policy must
have the prior written approval of both the Chief Investment
Officer and the Regional Director of Compliance. Any questions
about this policy should be directed to the Compliance
Department.
XX. Board Review - Fund management and SSB Citi shall provide to the
Board of Directors of each Fund, on a quarterly basis, a written
report of all material violations of this policy, and at least
annually, a written report and certification meeting the
requirements of Rule 17j-1 under the 1940 Act.
XXI. Other Codes of Ethics - To the extent that any officer of any
Fund is not a Covered Person hereunder, or an investment
subadviser of or principal underwriter for any Fund and their
respective access persons (as defined in Rule 17j-1) are not
Covered Persons hereunder, those persons must be covered by
separate codes of ethics which are approved in accordance with
applicable law.
XXII. Amendments - SSB Citi Employees - Unless otherwise noted herein,
this policy shall become effective as to all SSB Citi employees
on March 30, 2000. This policy may be amended as to SSB Citi
employees from time to time by the Compliance Department. Any
material amendment of this policy shall be submitted to the Board
of Directors of each Fund for approval in accordance with Rule
17j-1 under the 1940 Act.
Fund Directors - This policy shall become effective as to a Fund
upon the approval and adoption of this policy by the Board of
Directors of that Fund in accordance with Rule 17j-1 under the
1940 Act or at such earlier date as determined by the Secretary
of the Fund. Any material amendment of this policy that applies
to the directors of a Fund shall become effective as to the
directors of that Fund only when the Board of Directors of that
Fund has approved the amendment in accordance with Rule 17j-1 or
at such earlier date as determined by the Secretary of the Fund.
March 15, 2000
EXHIBIT A
EXPLANATION OF BENEFICIAL OWNERSHIP
You are considered to have "Beneficial Ownership" of Securities if you
have or share a direct or indirect "Pecuniary Interest" in the
Securities.
You have a "Pecuniary Interest" in Securities if you have the
opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the Securities.
The following are examples of an indirect Pecuniary Interest in
Securities:
1. Securities held by members of your immediate family sharing
the same household; however, this presumption may be
rebutted by convincing evidence that profits derived from
transactions in these Securities will not provide you with
any economic benefit.
"Immediate family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-
law, father-in-law, son-in-law, daughter-in-law, brother-in-
law, or sister-in-law, and includes any adoptive
relationship.
2. Your interest as a general partner in Securities held by a
general or limited partnership.
3. Your interest as a manager-member in the Securities held by
a limited liability company.
You do not have an indirect Pecuniary Interest in Securities held by
a corporation, partnership, limited liability company or other entity
in which you hold an equity interest, unless you are a controlling
equityholder or you have or share investment control over the
Securities held by the entity.
The following circumstances constitute Beneficial Ownership by you of
Securities held by a trust:
1. Your ownership of Securities as a trustee where either you
or members of your immediate family have a vested interest
in the principal or income of the trust.
2. Your ownership of a vested interest in a trust.
3. Your status as a settlor of a trust, unless the consent of
all of the beneficiaries is required in order for you to
revoke the trust.
The foregoing is a summary of the meaning of "beneficial ownership".
For purposes of the attached policy, "beneficial ownership" shall be
interpreted in the same manner as it would be in determining whether a
person is subject to the provisions of Section 16 of the Securities
Exchange Act of 1934 and the rules and regulations thereunder
SSB CITI ASSET MANAGEMENT GROUP ("SSB CITI") EXHIBIT
B EMPLOYEE TRADE PRE-APPROVAL FORM
(PAGE 1)
Instructions:
All employees are required to submit this form to the Compliance
Department prior to placing a trade. The Compliance Department will
notify the employee as to whether or not pre-approval is granted. Pre-
approval is effective only on the date granted.
I. Employee Information
Employee Name:
Phone Number:
Account Title:
Account Number:
Managed Account(s)/Mutual Fund(s) for which employee is a
Covered Person:
II. Security Information
IPO
?
Yes
? No
Private Placement
? Yes
? No
Security Name
Security
Type-e.g.,
common stock,
etc.
Tick
er
Buy/Se
ll
If Sale, Date
First Acquired1
No.
Shares/U
nits
Large Cap
Stock?2
III. Your position with the Firm:
(Please check one of the
following)
? Portfolio Manager / Portfolio Manager
Assistant
? Research Analyst / Research Analyst
Assistant
? Trader / Trader Assistant
? Unit Trust Personnel
? Other (Advisory Personnel)
NOTE:
? All Portfolio Managers must complete the reverse side of this form.
? All Research Analysts and Research Analyst Assistants located in
Connecticut must provide an
additional form signed by Rama Krishna or one of his designees.
IV. Certification
I certify that I will not effect the transaction(s) described above
unless and until pre-clearance approval is obtained from the Compliance
Department. I further certify that, except as described on an attached
page, to the best of my knowledge, the proposed transaction(s) will not
result in a conflict of interest with any account managed by SSB Citi
(including mutual funds managed by SSB Citi). I further certify that,
to the best of my knowledge, there are no pending orders for any
security listed above or any related security for any Managed Accounts
and/or Mutual Funds for which I am considered a Covered Person. The
proposed transaction(s) are consistent with all firm policies regarding
employee personal securities transactions.
Signature Date
For Use By the Compliance Department
Are Securities
Restricted?
? Ye
s
? No
Pre-approval
Granted?
? Yes
? No
Reason not
granted:
Compliance Department Signature:
Date:
Time:
1. All securities sold must have been held for at least 60 days.
2. For purposes of SSB Citi's personal trading policies, a Large Cap
Exemption applies to transactions involving 500 or fewer shares in
aggregate and the stock is one that is listed on a U.S. stock
exchange or NASDAQ and whose issuer has a market capitalization
(outstanding shares multiplied by current price) of more than $10
billion.
SSB CITI ASSET MANAGEMENT GROUP ("SSB CITI")
PAGE 2 - PORTFOLIO MANAGER CERTIFICATION
All portfolio managers must answer the following questions in order to
obtain pre-approval. All questions must be answered or the form will
be returned. If a question is not applicable, please indicate "N/A".
1. Have your client accounts purchased or sold the securities (or
related securities) in the past seven calendar days?
Yes ? No ?
2. Do you intend to purchase or sell the securities (or related
securities) for any client accounts in the next seven calendar days?
Yes ? No ?
3. Do any of your client accounts currently own the securities (or
related securities)? Yes ? No ?
3a. If yes, and you are selling the securities for your personal
account, please explain why the sale of the securities was
rejected for client accounts but is appropriate for your personal
account:
4. Have you, in the past 7 calendar days, considered purchasing the
securities (or related securities) for your client accounts? Yes
? No ?
4a. If yes, and you are purchasing securities for your personal
account, please explain why the purchase of the securities is
appropriate for your account but has been rejected for your
client accounts:
4b. If no, and you are purchasing securities for your personal
account, please explain why the purchase of the securities has
not been considered for your client accounts:
Certification
I certify that I will not effect the transaction(s) described above
unless and until pre-clearance approval is obtained from the Compliance
Department. I further certify that, except as described on an attached
page, to the best of my knowledge, the proposed transaction(s) will not
result in a conflict of interest with any account managed by SSB Citi
(including mutual funds managed by SSB Citi). I further certify that,
to the best of my knowledge, there are no pending orders for any
security listed above or any related securities for any Managed
Accounts and/or Mutual Funds for which I am considered a Covered
Person. The proposed transaction(s) are consistent with all firm
policies regarding employee personal securities transactions.
Signature Date
For Use By the Compliance Department
Are Securities
Restricted?
? Ye
s
? No
Pre-approval
Granted?
? Yes
? No
Reason not
granted:
Compliance Department Signature:
Date:
Time:
PERSONAL INVESTMENT POLICY EXHIBIT
C
FOR
SSB CITI ASSET MANAGEMENT GROUP - NORTH AMERICA
AND CERTAIN REGISTERED INVESTMENT COMPANIES
ACKNOWLEDGMENT
I acknowledge that I have received and read the Personal
Investment Policy for SSB Citi Asset Management Group - North
America and Certain Registered Investment Companies dated March
15, 2000. I understand the provisions of the Personal Investment
Policy as described therein and agree to abide by them.
Employee Name (Print):
Signature:
Date:
Social Security
Number:
Date of Hire:
Job Function &
Title:
Supervisor:
Location:
Floor and/or
Zone:
Telephone
Number:
NASD Registered Employee (Please check
one)
? Yes
? No
If registered, list Registration \ License:
This Acknowledgment form must be completed and returned no later
than March 30, 2000 to the Compliance Department - Attention:
Vera Sanducci-Dendy, 388 Greenwich Street, 23rd Floor, New York,
NY 10013.
EXHIBIT D
SSB Citi Asset Management Group - North America Personal Investment
Policy
Financial Services Firm Disclosure and Initial Report of Securities
Holdings
This report must be signed, dated and returned within 10 days of
employment to the Compliance Department - Attention: Vera Sanducci-
Dendy, 388 Greenwich Street, 23rd Floor
Employee Name: ____________________________ Date of Employment:
_____________________
Brokerage Accounts:
? I do not have a beneficial interest in any account(s) with any
financial services firm.
? I maintain the following account(s) with the financial services
firm(s) listed below (attach additional information if necessary-
e.g., a brokerage statement). Please include the information
required below for any broker, dealer or bank where an account is
maintained which holds securities for your direct or indirect
benefit as of the date you began your employment.
Name of Financial Service(s) Firm and Address Account
Title Account Number
Securities Holdings:
Complete the following (or attach a copy of your most recent
statement(s)) listing all of your securities holdings, with the
exception of open-ended mutual funds and U.S Government securities if:
? You own securities which are held by financial services firm(s) as
described above. If you submit a copy of a statement, it must
include all of the information set forth below. Please be sure to
include any additional securities purchased since the date of the
brokerage statement which is attached. Use additional sheets if
necessary.
? Your securities are not held with a financial service(s) firm
(e.g., dividend reinvestment programs and private placements).
Title of
Security
Ticker
Symbol
# of
Shares
Principal
Amt.
Held
Since
Financial
Services Firm
? I have no securities holdings to report.
I certify that I have received the SSB Citi - North America Personal
Investment Policy and have read it and understood its contents. I
further certify that the above represents a complete and accurate
description of my brokerage account(s) and securities holdings as of
my date of employment.
Signature: _________________________________________ Date of
Signature: _________________
The investment advisory entities of SSB Citi covered by this policy
include: Salomon Brothers Asset
Management Inc.; SSB Citi Fund Management LLC; Smith Barney Asset Management
Division of
Salomon Smith Barney Inc.; Travelers Investment Management Company; and the
Citibank Global Asset
Management Division of Citibank, N.A. and Citicorp Trust, N.A.-California.
This requirement will become effective as to all employees on a date to be
determined by the Compliance
Department and may be subject to a phase-in implementation process.
G:\Fund Accounting\Legal\FUNDS\PRTF\2000\Secdocs\Ex. Code of Ethics.doc 1
Z:/Compliance/Charlie/BP2PIPmarked 11
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18
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