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. _9_
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. _9_
SMITH BARNEY INVESTMENT TRUST
(formerly known as Smith Barney Income Trust)
(Exact name of Registrant as specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Christina T. Sydor
Secretary
Smith Barney Investment Trust
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective
It is proposed that this filing will becomes effective:
___ immediately upon filing pursuant to Rule 485(b)
___ on_______ pursuant to Rule 485(b)
X 75 days after filing pursuant to Rule 485(a)(2)
___ on _______ pursuant to Rule 485(a)
Registrant previously registered an indefinite number of its
shares pursuant to Rule 24f-2 of the
Investment Company Act of 1940. The Registrant's Rule 24f-2
Notice of the fiscal year ended
November 30, 1994 was filed on January 27, 1995.
SMITH BARNEY INVESTMENT TRUST
FORM N-1A
CROSS-REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Financial Highlights Financial Highlights
4. General Description of Cover Page; Prospectus
Registrant Summary; Investment
Objective and Management
Policies; Additional
Information
5. Management of the Fund Management of the Trust and
the Fund; Distributor;
Additional Information;
Annual Report
6. Capital Stock and Other Investment Objective and
Securities Management Policies;
Dividends, Distributions and
Taxes; Additional
Information
7. Purchase of Securities Purchase of Shares;
Being Offered Valuation of Shares;
Exchange Privilege;
Redemption of Shares;
Minimum Account Size;
Distributor; Additional
Information
8. Redemption or Repurchase Purchase of Shares;
Redemption of Shares;
Exchange Privilege
9. Pending Legal Not applicable
Proceedings
Part B Item No. Statement of Additional
Information Caption
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and Distributor; Additional
History Information
13. Investment Objectives Investment Objectives and
and Policies Management Policies
14. Management of the Fund Management of the Trust;
Distributor
15. Control Persons and Management of the Trust
Principal Holders of
Securities
16. Investment Advisory and Management of the Trust;
Other Services Distributor
17. Brokerage Allocation and Investment Objective and
Other Services Management Policies;
Distributor
18. Capital Stock and Other Investment Objective and
Securities Management Policies;
Purchase of Shares;
Redemptions of Shares; Taxes
19. Purchase, Redemption and Purchase of Shares;
Pricing of Redemption of Shares;
Securities Being Valuation of Shares;
Offered Distributor; Exchange
Privilege
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Data
Performance Data
23. Financial Statements Financial Statements
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS NOVEMBER ,
1995
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- --------------------
3100 Breckenridge Blvd., Bldg 200
Duluth, Georgia 30199-0062
(800) 544-5445
Smith Barney S&P 500 Advantage Fund (the "Fund") is a
mutual fund which seeks
a total return that is consistent with the return of the
aggregate U.S. stock
market, as measured by the Standard & Poor's 500 Composite
Stock Price Index
(the "S&P Index"). The Fund will hold a broadly diversified
portfolio of common
stocks that is comparable to the S&P Index in terms of
economic sector
weightings, market capitalization and liquidity. However,
the Fund is not an
index fund and will not be limited to investing in the 500
stocks that comprise
the S&P Index.
The Fund is one of a number of funds, each having distinct
investment objec-
tives and policies making up the Smith Barney Investment
Trust (the "Trust").
The Trust is an open-end management investment company
commonly referred to as
a mutual fund.
This Prospectus sets forth concisely certain information
about the Fund,
including sales charges, distribution and service fees and
expenses, that pro-
spective investors will find helpful in making an investment
decision. Invest-
ors are encouraged to read this Prospectus carefully and
retain it for future
reference.
Shares of the other Funds offered by the Trust are
described in separate pro-
spectuses that may be obtained by calling the Trust at (212)
723-9218.
Additional information about the Fund is contained in a
Statement of Addi-
tional Information dated November , 1995, as amended or
supplemented from time
to time, that is available upon request and without charge
by calling or writ-
ing the Fund at the telephone number or address set forth
above or by contact-
ing an Investments Representative of PFS Investments Inc.
("PFS Investments").
The Statement of Additional Information has been filed with
the Securities and
Exchange Commission (the "SEC") and is incorporated by
reference into this Pro-
spectus in its entirety.
PFS DISTRIBUTORS
Distributor
THE TRAVELERS INVESTMENT MANAGEMENT COMPANY
Investment Adviser
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 9
- -------------------------------------------------
VALUATION OF SHARES 11
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DIVIDENDS, DISTRIBUTIONS AND TAXES 12
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PURCHASE OF SHARES 13
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EXCHANGE PRIVILEGE 19
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REDEMPTION OF SHARES 21
- -------------------------------------------------
MINIMUM ACCOUNT SIZE 23
- -------------------------------------------------
PERFORMANCE 23
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MANAGEMENT OF THE FUND 24
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DISTRIBUTOR 25
- -------------------------------------------------
ADDITIONAL INFORMATION 27
- -------------------------------------------------
</TABLE>
No person has been authorized to give any information or
to
make any representations in connection with this offering
other
than those contained in this Prospectus and, if given or
made,
such other information or representations must not be
relied upon
as having been authorized by the Fund or the distributor.
This
Prospectus does not constitute an offer by the Fund or the
distributor to sell or a solicitation of an offer to buy
any of
the securities offered hereby in any jurisdiction to any
person
to whom it is unlawful to make such offer or solicitation
in such
jurisdiction.
2
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by
detailed information
appearing elsewhere in this Prospectus and in the Statement
of Additional
Information. Cross references in this summary are to
headings in the Prospec-
tus. See "Table of Contents."
INVESTMENT OBJECTIVE The Fund is an open-end, diversified
management investment
company whose investment objective is to seek a total return
that is consistent
with the return of the aggregate U.S. stock market, as
measured by the S&P
Index. The Fund will hold a broadly diversified portfolio of
common stocks that
is comparable to the S&P Index in terms of economic sector
weightings, market
capitalization and liquidity. However, the Fund will not be
limited to invest-
ing in the 500 stocks that comprise the S&P Index. See
"Investment Objective
and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers two
classes of shares ("Clas-
ses") to investors designed to provide them with the
flexibility of selecting
an investment best suited to their needs. The two classes of
shares available
are: Class A shares and Class B shares.
Class A Shares. Class A shares are sold at net asset value
plus an initial
sales charge of up to 5.00% and are subject to an annual
service fee of 0.25%
of the average daily net assets of the Class. The initial
sales charge may be
reduced or waived for certain purchases. Purchases of Class
A shares, which
when combined with current holdings of Class A shares equal
or exceed $500,000
in the aggregate, will be made at net asset value with no
initial sales charge,
but will be subject to a contingent deferred sales charge
("CDSC") of 1.00% on
redemptions made within 12 months of purchase. See
"Prospectus Summary--Reduced
or No Initial Sales Charge."
Class B Shares. Class B shares are offered at net asset
value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by
1.00% each year
after the date of purchase to zero. This CDSC may be waived
for certain redemp-
tions. Class B shares bear an annual service fee of 0.25%
and an annual distri-
bution fee of 0.75% of the average daily net assets of the
Class. The Class B
shares' distribution fee may cause that Class to have higher
expenses and pay
lower dividends than Class A shares.
Class B Shares Conversion Feature. Class B shares will
convert automatically
to Class A shares, based on relative net asset value, eight
years after the
date of the original purchase. Upon conversion, these shares
will no longer be
subject to an annual distribution fee. In addition, a
certain portion of Class
B
3
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY (CONTINUED)
shares that have been acquired through the reinvestment of
dividends and dis-
tributions ("Class B Dividend Shares") will be converted at
that time. See
"Purchase of Shares--Deferred Sales Charge Alternatives."
In deciding which Class of Fund shares to purchase,
investors should consider
the following factors, as well as any other relevant facts
and circumstances:
Intended Holding Period. The decision as to which Class of
shares is more
beneficial to an investor depends on the amount and intended
length of his or
her investment. Shareholders who are planning to establish a
program of regular
investment may wish to consider Class A shares; as the
investment accumulates
shareholders may qualify for reduced sales charges and the
shares are subject
to lower ongoing expenses over the term of the investment.
As an alternative,
Class B shares are sold without any initial sales charge so
the entire purchase
price is immediately invested in the Fund. Any investment
return on these addi-
tional invested amounts may partially or wholly offset the
higher annual
expenses of this Class. Because the Fund's future return
cannot be predicted,
however, there can be no assurance that this would be the
case.
Reduced or No Initial Sales Charge. The initial sales
charge on Class A
shares may be waived for certain eligible purchasers, and
the entire purchase
price will be immediately invested in the Fund. In addition,
Class A share pur-
chases, which when combined with current holdings of Class A
shares equal or
exceed $500,000 in the aggregate, will be made at net asset
value with no ini-
tial sales charge, but will be subject to a CDSC of 1.00% on
redemptions made
within 12 months of purchase. The $500,000 aggregate
investment may be met by
adding the purchase to the net asset value of all Class A
shares held in funds
sponsored by Smith Barney listed under "Exchange Privilege."
Class A share pur-
chases may also be eligible for a reduced initial sales
charge. See "Purchase
of Shares." Because the ongoing expenses of Class A shares
may be lower than
those for Class B shares, purchasers eligible to purchase
Class A shares at net
asset value or at a reduced sales charge should consider
doing so.
PFS Investments Representatives may receive different
compensation for sell-
ing each Class of shares. Investors should understand that
the purpose of the
CDSC on the Class B shares is the same as that of the
initial sales charge on
the Class A shares.
See "Purchase of Shares" and "Management of the Fund" for
a complete descrip-
tion of the sales charges and service and distribution fees
for each Class
4
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY (CONTINUED)
of shares and "Valuation of Shares," "Dividends,
Distributions and Taxes" and
"Exchange Privilege" for other differences between the
Classes of shares.
PURCHASE OF SHARES Shares may be purchased through PFS
Distributors ("PFS"), a
distributor of the Fund. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A and Class B shares
may open an account
by making an initial investment of at least $1,000 for each
account, or $250
for an individual retirement account ("IRA") or a Self-
Employed Retirement
Plan. The initial investment amount will be waived for
accounts establishing a
Systematic Investment Plan. Subsequent investments of at
least $50 may be made
for both Classes. For participants in retirement plans
qualified under Section
403(b)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"), the
minimum initial and subsequent investment requirement for
both Classes is $25.
The minimum initial and subsequent investment requirement
for both Classes
through the Systematic Investment Plan described below is
$50. See "Purchase of
Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a
Systematic Investment
Plan under which they may authorize the automatic placement
of a purchase order
each month or quarter for Fund shares in an amount of at
least $50. See "Pur-
chase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the
New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase
of Shares" and "Re-
demption of Shares."
MANAGEMENT OF THE FUND The Travelers Investment Management
Company (the "Manag-
er") serves as the Fund's investment adviser. The Manager
provides investment
advisory and management services to certain investment
companies affiliated
with Smith Barney. The Manager is a wholly owned subsidiary
of Smith Barney
Holdings Inc. ("Holdings"). Holdings is a wholly owned
subsidiary of Travelers
Group Inc. ("Travelers"), a diversified financial services
holding company
engaged, through its subsidiaries, principally in four
business segments:
Investment Services, Consumer Finance Services, Life
Insurance Services and
Property & Casualty Insurance Services.
Smith Barney Mutual Funds Management Inc. ("SBMFM") serves
as the Fund's
administrator. SBMFM is a wholly owned subsidiary of
Holdings.
5
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY (CONTINUED)
SBMFM provides investment advisory and administration
services to investment
companies affiliated with Smith Barney. See "Management of
the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for
shares of the same
Class of certain other funds of the Smith Barney Mutual
Funds at the respective
net asset values next determined, plus any applicable sales
charge differen-
tial. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of the Fund for the
prior day generally is
quoted daily in the financial section of most newspapers and
is also available
from PFS Shareholder Services (the "Sub-Transfer Agent").
See "Valuation of
Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment
income and
distributions of net realized capital gains, if any, are
declared and paid
annually. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid
on shares of a Class
will be reinvested automatically, unless otherwise specified
by an investor, in
additional shares of the same Class at current net asset
value. Shares acquired
by dividend and distribution reinvestments will not be
subject to any sales
charge or CDSC. Class B shares acquired through dividend and
distribution
reinvestments will become eligible for conversion to Class A
shares on a pro-
rata basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no
assurance that the
Fund's investment objective will be achieved. The value of
the Fund's
investments will fluctuate in response to changes in market
and economic
conditions, as well as the financial condition and prospects
of issuers in
which the Fund invests. Because the Fund will incur
operating expenses and the
S&P Index does not, in order to achieve performance
consistent with the Index,
the Fund's portfolio must diverge from time to time from the
securities
included in the Index. Accordingly, the Fund's performance
will differ from
that of the S&P Index--either below or above--during
particular short periods
and market cycles. See "Investment Objective and Management
Policies."
6
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES The following expense table lists the
costs and estimated
expenses that an investor will incur either directly or
indirectly as a
shareholder of the Fund, based on the maximum sales charge
or maximum CDSC that
may be incurred at the time of purchase or redemption:
<TABLE>
<CAPTION>
CLASS A CLASS B
- ------------------------------------------------------------
- -----------------
<S>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price)
5.00% None
Maximum CDSC (as a percentage of original cost or
redemption
proceeds, whichever is lower)
None* 5.00%
- ------------------------------------------------------------
- -----------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of offering price)
Management Fees
0.60% 0.60%
12b-1 Fees**
0.25 1.00
Other Expenses***
0.25 0.25
- ------------------------------------------------------------
- -----------------
TOTAL FUND OPERATING EXPENSES
1.10% 1.85%
- ------------------------------------------------------------
- -----------------
</TABLE>
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge, equal or
exceed $500,000 in the
aggregate, will be made at net asset value with no sales
charge, but will
be subject to a CDSC of 1.00% on redemptions made within
12 months.
** Upon conversion of Class B shares to Class A shares,
such shares will no
longer be subject to a distribution fee.
*** "Other Expenses" have been based on estimated expenses
of the Fund for the
fiscal year ending November 30, 1996.
The sales charge and CDSC set forth in the above table are
the maximum
charges imposed on purchases or redemptions of Fund shares
and investors may
actually pay lower or no charges, depending on the amount
purchased and, in the
case of Class B and certain Class A shares, the length of
time the shares are
held. See "Purchase of Shares" and "Redemption of Shares."
PFS receives an
annual 12b-1 service fee of 0.25% of the value of average
daily net assets of
the Class A shares which it has sold. With respect to Class
B shares which it
has sold, PFS receives an annual 12b-1 fee of 1.00% of the
value of average
daily net assets of that Class, consisting of a 0.25%
service fee and a 0.75%
distribution fee. "Other expenses" in the above table
include fees for share-
holder services, custodial fees, legal and accounting fees,
printing costs and
registration fees.
7
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PROSPECTUS SUMMARY (CONTINUED)
EXAMPLE
The following example is intended to assist an investor in
understanding the
various costs that an investor in the Fund will bear
directly or indirectly.
The example assumes payment by the Fund of operating
expenses at the levels set
forth in the table above. See "Purchase of Shares,"
"Redemption of Shares" and
"Management of the Fund."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------------------------------------------------------------
- -------------------
<S>
<C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5.00% annual return and (2)
redemption
at the end of each time period:
Class A
$61 $83
Class B
69 88
- ------------------------------------------------------------
- -------------------
An investor would pay the following expenses on the same
investment, assuming the same annual return and no
redemption:
Class A
$61 $83
Class B
19 58
- ------------------------------------------------------------
- -------------------
</TABLE>
The example also provides a means for the investor to
compare expense levels
of funds with different fee structures over varying
investment periods. To
facilitate such comparison, all funds are required to
utilize a 5.00% annual
return assumption. However, the Fund's actual return will
vary and may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTA-
TION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN
THOSE SHOWN ABOVE.
8
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The S&P 500 Advantage Fund is a mutual fund which seeks a
total return that
is consistent with the return of the aggregate U.S. stock
market, as measured
by the Standard & Poor's 500 Composite Stock Price Index
(the "S&P Index"). The
Fund invests in a broadly diversified portfolio of common
stocks that is compa-
rable to the S&P Index in terms of economic sector
weightings, market capital-
ization and liquidity. However, the Fund is not an index
fund and is not lim-
ited to investing in the 500 stocks that comprise the S&P
Index. The S&P Index
is a market capitalization index composed of 500 widely held
common stocks
listed on the New York Stock Exchange, American Stock
Exchange and the over-
the-counter market. The S&P Index is used as the performance
benchmark because
it represents approximately 70% of the total market value of
all U.S. common
stocks and is well known to investors; because it is
unmanaged it is not sub-
ject to the same management and trading expenses as a mutual
fund. Over time,
the Fund is expected to exhibit performance volatility that
is similar to that
of the S&P Index. Of course, there can be no assurance that
the Fund's total
return, before or after expenses, will match or exceed that
of the S&P Index.
In selecting individual holdings for the Fund's portfolio,
the investment
adviser will employ a number of computerized investment
models to identify
stocks that have a high probability of outperforming their
respective
industry/sector peer groups within the S&P Index. These
investment models uti-
lize a diverse set of valuation, earnings and relative price
variables to pro-
duce a comprehensive appraisal profile on every stock in a
selection universe
of roughly 1,000 securities. Stocks that are determined to
be attractive based
on a combination of quantitative and fundamental criteria
will be overweighed
relative to the benchmark S&P Index. In general, this
discipline will favor
stocks that demonstrate an improving trend of earnings and
also appear under-
valued relative to historical patterns. While these
securities have the poten-
tial to outperform the securities represented by the S&P
500, they may in fact
be more volatile and/or have a lower return than the Index.
Although equity
securities have historically demonstrated long-term growth
in value, their
prices fluctuate based on changes in a company's financial
condition and gen-
eral economic conditions. This is especially true in the
case of smaller compa-
nies.
Once the Fund has reached sufficient asset size, it will
seek to remain fully
invested in common stocks. The Fund may invest in certain
short-term money mar-
ket instruments for cash management purposes and in S&P 500
stock index futures
contracts for the purpose of gaining short-term equity
exposure.
9
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund can use various techniques to meet changing
securities prices,
interest rates, commodity prices and other factors that
affect securities val-
ues. If the Fund incorrectly judges the market conditions,
these techniques
could result in a loss and the Fund could underperform the
S&P Index. In addi-
tion, these techniques may increase the volatility of the
Fund relative to the
S&P 500.
Further information about the Fund's investment policies,
including a list of
those restrictions on its investment activities that cannot
be changed without
shareholder approval, appears in the Statement of Additional
Information.
INVESTMENTS AND STRATEGIES
Short-Term Investments. As noted above, the Fund may
invest in short-term
money market instruments, such as: U.S. government
securities; certificates of
deposit, time deposits and bankers' acceptances issued by
domestic banks (in-
cluding their branches located outside the United States and
subsidiaries
located in Canada), domestic branches of foreign banks,
savings and loan asso-
ciations and similar institutions; high grade commercial
paper; and repurchase
agreements with respect to such instruments.
Repurchase Agreements. The Fund may enter into repurchase
agreements with
banks which are the issuers of instruments acceptable for
purchase by the Fund
and with certain dealers on the Federal Reserve Bank of New
York's list of
reporting dealers. Under the terms of a typical repurchase
agreement, the Fund
would acquire an underlying obligation for a relatively
short period (usually
not more than one week) subject to an obligation of the
seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon
price and time,
thereby determining the yield during the Fund's holding
period. This arrange-
ment results in a fixed rate of return that is not subject
to market fluctua-
tions during the Fund's holding period. Further information
on repurchase
agreements and the risks associated with such investments
appears in the State-
ment of Additional Information.
Stock Index Futures Contracts. The Fund will use exchange-
traded stock index
futures contracts as a hedge to protect against changes in
stock prices. A
stock index futures contract is a contractual obligation to
buy or sell a spec-
ified index of stocks at a future date for a fixed price.
Stock index futures
may also be used to hedge cash inflows to gain market
exposure until the cash
is invested in specific common stocks. The Fund will not
purchase or sell
futures contracts for which the aggregate initial margin
exceeds five percent
(5%) of the fair mar-
10
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ket value of its assets, after taking into account
unrealized profits and
losses on any such contracts which it has entered into. When
a futures contract
is purchased, the Fund will set aside, in an identifiable
manner, an amount of
cash and cash equivalents equal to the total market value of
the futures con-
tract, less the amount of the initial margin.
All stock index futures will be traded on exchanges that
are licensed and
regulated by the Commodity Futures Trading Commission
("CFTC"). To ensure that
its futures transactions meet CFTC standards, the Fund will
enter into futures
contracts for hedging purposes only. The Fund expects that
risk management
transactions involving futures contracts will not impact
more than twenty per-
cent (20%) of its assets at any one time. For a more
detailed discussion of
financial futures contracts and associated risks, please see
the Statement of
Additional Information.
Portfolio Transactions and Turnover. Portfolio securities
transactions on
behalf of the Fund may be placed by the Manager with a
number of brokers and
dealers, including Smith Barney. Smith Barney has advised
the Fund that in
transactions with the Fund, Smith Barney will charge a
commission rate at least
as favorable as the rate that Smith Barney charges its
comparable unaffiliated
customers in similar transactions.
The Fund intends generally to purchase securities for long-
term capital
appreciation. The Fund's annual portfolio turnover rate is
not expected to
exceed 150%. The Fund's portfolio turnover rate will vary
from year to year.
High turnover rates increase transaction costs and may
increase taxable capital
gains. The Manager considers these effects when evaluating
the anticipated ben-
efits of short-term investing.
VALUATION OF SHARES
The Fund's net asset value per share 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.
Generally, the Fund's investments are valued at market
value or, in the
absence of a market value with respect to any securities, at
fair value as
deter-
11
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
VALUATION OF SHARES (CONTINUED)
mined by or under the direction of the Trust's Board of
Trustees. Short-term
investments that mature in 60 days or less are valued at
amortized cost when
ever the Trust's Board of Trustees determines that amortized
cost is the fair
value of those instruments. Further information regarding
the Fund's valuation
policies is contained in the Statement of Additional
Information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to distribute substantially all of
its net investment
income (that is, its income other than its net realized
capital gains) and net
realized capital gains, if any, once a year, normally at the
end of the year in
which earned or at the beginning of the next year.
If a shareholder does not otherwise instruct, dividends
and capital gains
distributions will be reinvested automatically in additional
shares of the same
Class at net asset value, subject to no sales charge or
CDSC. In order to avoid
the application of a 4.00% nondeductible excise tax on
certain undistributed
amounts of ordinary income and capital gains, the Fund may
make an additional
distribution, shortly before December 31 in each year, of
any undistributed
ordinary income or capital gains and expects to pay any
other dividends and
distributions necessary to avoid the application of this
tax.
The per share dividends on Class B shares of the Fund may
be lower than the
per share dividends on Class A shares principally as a
result of the distribu-
tion fee applicable with respect to Class B shares.
Distributions of capital
gains, if any, will be in the same amount for Class A and
Class B shares.
TAXES
The Fund intends to qualify as a "regulated investment
company" under the
Code. To qualify, the Fund must first meet certain tests,
including the distri-
bution of at least 90% of its investment company taxable
income (which
includes, among other items, dividends, interest and the
excess of any net
short-term capital gains over net long-term capital losses).
Dividends paid from net investment income and
distributions of net realized
short-term capital gains are taxable to shareholders as
ordinary income,
regardless of how long shareholders have held their Fund
shares and whether
such
12
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
dividends and distributions are received in cash or
reinvested in additional
Fund shares. Distributions of net realized long-term capital
gains will be tax-
able to shareholders as long-term capital gains, regardless
of how long share-
holders have held Fund shares and whether such distributions
are received in
cash or are reinvested in additional Fund shares.
Furthermore, as a general
rule, a shareholder's gain or loss on a sale or redemption
of Fund shares will
be a long-term capital gain or loss if the shareholder has
held the shares for
more than one year and will be a short-term capital gain or
loss if the share-
holder has held the shares for one year or less. Some of the
Fund's dividends
declared from net investment income may qualify for the
Federal dividends-
received deduction for corporations.
Statements as to the tax status of each shareholder's
dividends and distribu-
tions are mailed annually. Each shareholder also will
receive, if appropriate,
various written notices after the close of the Fund's prior
taxable year as to
the Federal income tax status of his or her dividends and
distributions which
were received from the Fund during the Fund's prior taxable
year. Shareholders
should consult their own tax advisors about the status of
the Fund's dividends
and distributions for state and local tax liabilities.
PURCHASE OF SHARES
GENERAL
The Fund offers two Classes of shares to investors
purchasing through PFS
Investments Representatives. Class A shares are sold to
investors with an ini-
tial sales charge and Class B shares are sold without an
initial sales charge
but are subject to a CDSC payable upon certain redemptions.
See "Prospectus
Summary--Alternative Purchase Arrangements" for a discussion
of factors to con-
sider in selecting which Class of shares to purchase.
Investors making their initial purchases of Fund shares
through a PFS Invest-
ments Representative must complete the appropriate
application found in this
Prospectus. The completed application should be forwarded to
the Sub-Transfer
Agent, 3100 Breckenridge Blvd., Bldg. 200, Duluth, Georgia
30199-0062. Checks
drawn on foreign banks must be payable in U.S. dollars and
have the routing
number of the U.S. bank encoded on the check. Subsequent
investments may be
sent directly to the Sub-Transfer Agent.
13
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
Investors 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. Subsequent investments of at least $50 may be
made for both Clas-
ses. For participants in retirement plans qualified under
Section 403(b)(7) of
the Code, the minimum initial and subsequent investment
requirement for both
Classes is $25. The initial investment amount will be waived
for accounts
establishing a Systematic Investment Plan. The minimum
initial and subsequent
investment requirement under the Systematic Investment Plan
for both Classes is
$50. There are no minimum investment requirements for Class
A shares for
employees of Travelers and its subsidiaries, including Smith
Barney, Trustees
of the Trust 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 Sub-Transfer Agent prior
to the close of reg-
ular trading on the NYSE, on any day the Fund calculates its
net asset value,
are priced according to the net asset value determined on
that day (the "trade
date").
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, the Sub-Transfer Agent is
authorized through preau-
thorized transfers of $50 or more to charge the regular bank
account or other
financial institution indicated by the shareholder on a
monthly or quarterly
basis 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 PFS or the Sub-Transfer Agent.
14
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The sales charges applicable to purchases of Class A
shares of the Fund are
as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS
------------------------------
DEALERS'
% OF % OF
REALLOWANCE AS % OF
AMOUNT OF INVESTMENT OFFERING PRICE AMOUNT INVESTED
OFFERING PRICE
- ------------------------------------------------------------
- ---------------
<S> <C> <C> <C>
Less than $ 25,000 5.00% 5.26%
4.50%
$ 25,000 - 49,999 4.00 4.17
3.60
50,000 - 99,999 3.50 3.63
3.15
100,000 - 249,999 3.00 3.09
2.70
250,000 - 499,999 2.00 2.04
1.80
500,000 - and over * *
*
- ------------------------------------------------------------
- ---------------
</TABLE>
* Purchases of Class A shares, which when combined with
current holdings of
Class A shares offered with a sales charge equal or exceed
$500,000 in the
aggregate, 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 PFS,
which, in turn,
pays PFS Investments to compensate its Investments
Representatives 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
shares is waived. See
"Deferred Sales Charge Alternatives" and "Waivers of
CDSC."
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, his or her spouse and children, or a trustee or
other fiduciary of
a single trust estate or single fiduciary account. The
reduced sales charge
minimums may also be met by aggregating the purchase with
the net asset value
of all Class A shares offered with a sales charge held in
funds sponsored by
Smith Barney that are offered with a sales charge listed
under "Exchange Privi-
lege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value
without a sales
charge in the following circumstances: (a) sales of Class A
shares to Trustees
of the Trust and employees of Travelers and its subsidiaries
and employees of
members of the National Association of Securities Dealers,
Inc., or the spouses
and children of such persons (including the surviving spouse
of a deceased
Director or employee, and retired Directors or employees),
or sales to any
trust, pension, profit-sharing or other benefit plan for
such persons 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 com-
15
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
pany in connection with the combination of such company with
the Fund by merg-
er, acquisition of assets or otherwise; (c) shareholders who
have redeemed
Class A shares in the Fund (or Class A shares of another
fund in the Smith Bar-
ney Mutual Funds that are offered with a sales charge equal
to or greater than
the maximum sales charge of the Fund) and who wish to
reinvest their redemption
proceeds in the Fund, provided the reinvestment is made
within 60 calendar days
of the redemption; (d) accounts managed by registered
investment advisory sub-
sidiaries of Travelers; and (e) sales through PFS
Investments Representatives
where the amounts invested represent the redemption proceeds
from investment
companies distributed by an entity other than PFS, on the
condition that (i)
the redemption has occurred no more than 60 days prior to
the purchase of the
shares, (ii) the shareholder paid an initial sales charge on
such redeemed
shares and (iii) the shares redeemed were not subject to a
deferred sales
charge. PFS Investments may pay its Investments
Representatives an amount equal
to 0.40% of the amount invested if the purchase represents
redemption proceeds
from an investment company distributed by an entity other
than PFS. 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.
VOLUME DISCOUNTS
The "Amount of Investment" referred to in the sales charge
table set forth
above under "Initial Sales Charge Alternative--Class A
Shares" includes the
purchase of Class A shares in the Fund and of other funds
sponsored by Smith
Barney that are offered with a sales charge listed under
"Exchange Privilege."A
person eligible for a volume discount includes: an
individual; members of a
family unit comprising a husband, wife and minor children; a
trustee or other
fiduciary purchasing for a single fiduciary account
including pension, profit-
sharing and other employee benefit trusts qualified under
Section 401(a) of the
Code, or multiple custodial accounts where more than one
beneficiary is
involved if purchases are made by salary reduction and/or
payroll deductionfor
qualified and nonqualified accounts and transmitted by a
common employer enti-
ty. Employer entities for payroll deduction accounts may
include trade and
craft associations and any other similar organizations.
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
the investments
16
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
over a 13 month period, provided the investor refers to such
Letter when plac-
ing orders. For purposes of a Letter of Intent, the "Amount
of Investment" as
referred to in the preceding sales charge table includes (i)
all Class A shares
of the Fund and other funds of the Smith Barney Mutual Funds
offered with a
sales charge acquired during the term of the Letter plus
(ii) the value of all
Class A shares previously purchased and still owned. Each
investment made dur-
ing the period receives the reduced sales charge applicable
to the total amount
of the investment goal. If the goal is not achieved within
the period, the
investor must pay the difference between the sales charges
applicable to the
purchases made and the charges previously paid, or an
appropriate number of
escrowed shares will be redeemed. The term of the Letter
will commence upon the
date the Letter is signed, or at the option of the investor,
up to 90 days
before such date. Please contact an Investments
Representative.
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, and (b)
Class A shares which, when combined with Class A shares
offered with a sales
charge currently held by an investor, equal or exceed
$500,000 in the
aggregate.
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 A shares that
are CDSC Shares,
shares redeemed more than 12 months after their purchase.
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 pur-
chase payment, all purchase payments made during a month
will be aggregated and
deemed to have been made on the last day of the preced-
17
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
ing Fund's statement month. The following table sets forth
the rates of the
charge for redemptions of Class B shares by shareholders.
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
- --------------------------------
<S> <C>
First 5.00%
Second 4.00
Third 3.00
Fourth 2.00
Fifth 1.00
Sixth 0.00
Seventh 0.00
Eighth 0.00
- --------------------------------
</TABLE>
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 fee. There will also be converted at
that time such propor-
tion 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 gains distribu-
tions 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 amount realized on redemption. The amount of any CDSC
will be paid to PFS.
To provide an example, assume an investor purchased 100
Class B shares at $10
per share for a cost of $1,000. Subsequently the investor
acquired 5 additional
shares through dividend reinvestment. During the fifteenth
month after the pur-
chase, 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
18
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PURCHASE OF SHARES (CONTINUED)
$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-$260)
would be charged at
a rate of 4% (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"); (c) redemption of
shares within 12
months following the death or disability of the shareholder;
(d) redemption of
shares made in connection with qualified distributions from
retirement plans or
IRAs upon the attainment of age 59 1/2; (e) involuntary
redemptions; and (f)
redemption of shares in connection with a combination of the
Fund with any
investment company by merger, acquisition of assets or
otherwise. In addition,
a shareholder who has redeemed shares from other 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
PFS of the sharehold-
er's status or holdings, as the case may be.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may
be exchanged at the
net asset value next determined for shares of the same Class
in the following
funds of the Smith Barney Mutual Funds, to the extent shares
are offered for
sale in the shareholder's state of residence. Exchanges of
shares are subject
to minimum investment requirements and all shares are
subject to the other
requirements of the fund into which exchanges are made and a
sales charge dif-
ferential may apply.
FUND NAME:
Smith Barney Appreciation Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Investment Grade Bond Fund
19
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
EXCHANGE PRIVILEGE (CONTINUED)
Class A Exchanges. Class A shares of Smith Barney Mutual
Funds sold without a
sales charge or with a maximum sales charge of less than the
maximum charged by
other Smith Barney Mutual Funds will be subject to the
appropriate "sales
charge differential" upon the exchange of their shares for
Class A shares of a
fund sold with a higher sales charge. The "sales charge
differential" is lim-
ited to a percentage rate no greater than the excess of the
sales charge rate
applicable to purchases of shares of the mutual fund being
acquired in the
exchange over the sales charge rate(s) actually paid on the
mutual fund shares
relinquished in the exchange and on any predecessor of those
shares. For pur-
poses of the exchange privilege, shares obtained through
automatic reinvestment
of dividends and capital gains distributions are treated as
having paid the
same sales charges applicable to the shares on which the
dividends or distribu-
tions were paid; however, if no sales charge was imposed
upon the initial pur-
chase of the shares, any shares obtained through automatic
reinvestment will be
subject to a sales charge differential upon exchange.
Class B Exchanges. In the event a Class B shareholder
wishes to exchange all
or a portion of his or her shares in any of the funds
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.
Additional Information Regarding the Exchange Privilege.
Although the
exchange privilege is an important benefit, excessive
exchange transactions can
be detrimental to the Fund's performance and its
shareholders. The Manager may
determine that a pattern of frequent exchanges is excessive
and contrary to the
best interests of the Fund's other shareholders. In this
event, the Manager
will notify PFS that the Fund may, at its discretion, decide
to limit addi-
tional purchases and/or exchanges by the shareholder. Upon
such a determina-
tion, the Fund will provide notice in writing or by
telephone to the share-
holder 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 Smith Barney Mutual Funds listed under "Exchange
Privilege," 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 abu-
sive pattern of exchanges.
20
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
EXCHANGE PRIVILEGE (CONTINUED)
Exchanges will be processed at the net asset value next
determined, plus any
applicable sales charge differential. 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. A capital
gain or loss for tax purposes will be realized upon the
exchange, depending
upon the cost or other basis of shares redeemed. 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 privi-
leges upon 60 days' prior notice to shareholders.
REDEMPTION OF SHARES
Shareholders may redeem for cash some or all of their
shares of the Fund at
any time by sending a written request in proper form
directly to the Sub-Trans-
fer Agent, PFS Shareholder Services, at 3100 Breckinridge
Blvd., Bldg. 200,
Duluth, Georgia 30199-0062. Shareholders who, after
reviewing the information
below, have questions on how to redeem their accounts should
contact the Sub-
Transfer Agent at: (800) 544-5445 (English speaking
representatives); (800)
544-7278 (Spanish speaking representatives); or (800) 824-
1721 (TDD Line for
the Hearing Impaired).
As described under "Purchase of Shares," redemptions of
Class B shares are
subject to a CDSC.
The request for redemption must be signed by all persons
in whose names the
shares are registered. Signatures must conform exactly to
the account registra-
tion. If the proceeds of the redemption exceed $50,000, or
if the proceeds are
not to be paid to the record owner(s) at the record address,
if the sharehold-
er(s) has had an address change in the past 45 days, or if
the shareholder(s)
is a corporation, sole proprietor, partnership, trust or
fiduciary, signa-
ture(s) must be guaranteed by one of the following: a bank
or trust company; a
broker-dealer; a credit union; a national securities
exchange, registered secu-
rities association or clearing agency; a savings and loan
association; or a
federal savings bank.
Generally, a properly completed Redemption Form with any
required signature
guarantee is all that is required for a redemption. In some
cases, however,
other documents may be necessary. For example, in the case
of shareholders
21
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
REDEMPTION OF SHARES (CONTINUED)
holding certificates, the certificates for the shares being
redeemed must
accompany the redemption request. Additional documentary
evidence of authority
is required by the Sub-Transfer Agent in the event
redemption is requested by a
corporation, partnership, trust, fiduciary, executor or
administrator. Addi-
tionally, if a shareholder requests a redemption from a
Retirement Plan account
(IRA, SEP or 403(b)(7) ), such request must state whether or
not federal income
tax is to be withheld from the proceeds of the redemption
check.
A shareholder may utilize the Sub-Transfer Agent's FAX to
redeem his or her
account as long as a signature guarantee or other
documentary evidence is not
required. Redemption requests should be properly signed by
all owners of the
account and faxed to the Sub-Transfer Agent at (800) 554-
2374. Facsimile
redemptions may not be available if the shareholder cannot
reach the Sub-Trans-
fer Agent by FAX, whether because all telephone lines are
busy or for any other
reason; in such case, a shareholder would have to use the
Fund's regular
redemption procedure described above. Facsimile redemptions
received by the
Sub-Transfer Agent prior to 4:00 p.m. Eastern time on a
regular business day
will be processed at the net asset value per share
determined that day.
In all cases, the redemption price is the net asset value
per share of the
Fund next determined after the request for redemption is
received in proper
form by the Sub-Transfer Agent. Payment for shares redeemed
will be made by
check mailed within three days after acceptance by the Sub-
Transfer Agent of
the request and any other necessary documents in proper
order. Such payment may
be postponed or the right of redemption suspended as
provided by the rules of
the SEC. If the shares to be redeemed have been recently
purchased by check or
draft, the Sub-Transfer Agent may hold the payment of the
proceeds until the
purchase check or draft has cleared, usually a period of up
to 15 days. Any
taxable gain or loss will be recognized by the shareholder
upon redemption of
shares.
After following the above-stated redemption guidelines, a
shareholder may
elect to have the redemption proceeds wire-transferred
directly to the share-
holder' bank account of record (defined as a currently
established pre-autho-
rized draft on the shareholder's account with no changes
within the previous 45
days), as long as the bank account is registered in the same
name(s) as the
account with the Fund. If the proceeds are not to be wired
to the bank account
of record, or mailed to the registered owner, a signature
guarantee will be
required from all shareholders. A $25 service fee will be
charged by the Sub-
Transfer
22
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
REDEMPTION OF SHARES (CONTINUED)
Agent to help defray the administrative expense of executing
a wire redemption.
Redemption proceeds will normally be wired to the designated
bank account on
the next business day following the redemption, and should
ordinarily be cred-
ited to the shareholder's bank account by his/her bank
within 48 to 72 hours.
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 periodic 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. For further information regarding the automatic
cash withdrawal
plan, shareholders should contact the Sub-Transfer Agent.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any
shareholder's
account in the Fund if the aggregate net asset value of the
shares held in the
Fund account is less than $500. (If a shareholder has more
than one account in
this Fund, each account must satisfy the minimum account
size). The Fund, how-
ever, will not redeem shares based solely on market
reductions in net asset
value. Before the Fund exercises such right, shareholders
will receive written
notice and will be permitted 60 days to bring accounts up to
the minimum to
avoid automatic redemption.
PERFORMANCE
From time to time the Fund may include its total return,
average annual total
return and current dividend return in advertisements and/or
other types of
sales literature. These figures are computed separately for
Class A and Class B
shares of the Fund. These figures will be based on
historical earnings and will
not be intended to indicate future performance. Total return
is computed for a
specified period of time assuming deduction of the maximum
sales charge, if
23
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
PERFORMANCE (CONTINUED)
any, from the initial amount invested and reinvestment of
all income dividends
and capital gain distributions on the reinvestment dates at
prices calculated
as stated in this Prospectus, then dividing the value of the
investment at the
end of the period so calculated by the initial amount
invested and subtracting
100%. The standard average annual total return, as
prescribed by the SEC, is
derived from this total return, which provides the ending
redeemable value.
Such standard total return information may also be
accompanied with nonstandard
total return information for differing periods computed in
the same manner but
without annualizing the total return or taking sales charges
into account. The
Fund calculates current dividend return for each Class by
annualizing the most
recent monthly distribution and dividing by the net asset
value or the maximum
public offering price (including sales charge) on the last
day of the period
for which current dividend return is presented. The current
dividend return for
each Class may vary from time to time depending on market
conditions, the com-
position of its investment portfolio and operating expenses.
These factors and
possible differences in the methods used in calculating
current dividend return
should be considered when comparing a Class' current return
to yields published
for other investment companies and other investment
vehicles. The Fund may also
include comparative performance information in advertising
or marketing its
shares. Such performance information may include data from
Lipper Analytical
Services, Inc. and other financial publications. The Fund
may from time to time
illustrate the benefits of tax-deferral by comparing taxable
investments to
investments made through tax-deferred retirement plans, and
the Fund may illus-
trate in graph or chart form, or otherwise, the benefits of
the systematic
investment plan to investments made in a rising market.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of
the Fund rests with
the Trust's Board of Trustees. The Trustees approve all
significant agreements
between the Trust, on behalf of the Fund, and the companies
that furnish serv-
ices to the Fund, including agreements with its distributor,
investment advis-
er, custodian and transfer agent. The day-to-day operations
of the Fund are
delegated to the Fund's investment adviser and
administrator. The Statement of
Additional Information contains background information
regarding each Trustee
of the Trust and the executive officers of the Fund.
24
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
MANAGEMENT OF THE FUND (CONTINUED)
MANAGER -- TIMCO
The Manager, located at One Tower Square, Hartford,
Connecticut 06183-203,
serves as the Fund's investment adviser and manages the day-
to-day operations
of the Fund pursuant to a management agreement entered into
by the Manager and
the Fund. The Manager, which is a registered investment
adviser, has been in
the investment counseling business since 1967 and renders
investment advice to
investment companies that had aggregate assets under
management as of September
, 1995, in excess of $ million.
Subject to the supervision and direction of the Fund's
Board of Trustees, the
Manager manages the Fund's portfolio in accordance with the
Fund's stated
investment objective and policies, makes investment
decisions for the Fund,
places orders to purchase and sell securities and employs
professional portfo-
lio managers and securities analysts who provide research
services to the Fund.
Investment advisory fees are computed daily and paid
monthly at the annual
rate of 0.50% of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
The investment management team of the Fund's Manager is
headed by Sandip
Bhagat and Kent Kelley, president and chief executive
officer, respectively, of
TIMCO. Messrs. Bhagat and Kelley are primarily responsible
for the day-to-day
operations of the Fund, including making all investment
decisions.
Management's discussion and analysis, and additional
performance information
regarding the Fund during the fiscal year ended November 30,
1996 will be
included in the Annual Report dated November 30, 1996. A
copy of the Annual
Report may be obtained upon request and without charge from
the Sub-Transfer
Agent or by writing or calling the Fund at the address or
phone number listed
on page one of this Prospectus.
ADMINISTRATOR
SBMFM, located at 388 Greenwich Street, New York, New York
10013, serves as
the Fund's administrator and oversees all aspects of the
Fund's administration
and operation. Administration fees are computed daily and
paid monthly at the
annual rate of 0.10% of the Fund's average daily net assets.
DISTRIBUTOR
PFS is located at 3100 Breckenridge Boulevard, Duluth,
Georgia 30199-0001.
PFS distributes shares of the Fund as a principal
underwriter and as such
25
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
DISTRIBUTOR (CONTINUED)
conducts a continuous offering pursuant to a "best efforts"
arrangement requir-
ing PFS to take and pay for only such securities as may be
sold to the public.
Pursuant to a plan of distribution adopted by the Fund under
Rule 12b-1 under
the 1940 Act (the "Plan"), PFS is paid an annual service fee
with respect to
Class A and Class B shares of the Fund at the annual rate of
0.25% of the aver-
age daily net assets of the respective Class. PFS is also
paid an annual dis-
tribution fee with respect to Class B shares at the annual
rate of 0.75% of the
average daily net assets attributable to that Class. Class B
shares that auto-
matically convert to Class A shares eight years after the
date of original pur-
chase will no longer be subject to distribution fees. PFS,
in turn, pays PFS
Investments to compensate its Investments Representatives
for servicing share-
holder accounts and, in the case of Class B shares, to cover
expenses primarily
intended to result in the sale of those shares. These
expenses include: adver-
tising expenses; the cost of printing and mailing
prospectuses to potential
investors; payments to and expenses of Investments
Representatives and other
persons who provide support services in connection with the
distribution of
shares; interest and/or carrying charges; and indirect and
overhead costs of
PFS Investments associated with the sale of Fund shares,
including lease, util-
ity, communications and sales promotion expenses.
The payments to PFS Investments Representatives for
selling shares of a Class
include a commission or fee paid by the investor or PFS at
the time of sale and
a continuing fee for servicing shareholder accounts for as
long as a share-
holder remains a holder of that Class. PFS Investments
Representatives may
receive different levels of compensation for selling
different Classes.
PFS Investments may be deemed to be an underwriter for
purposes of the Secu-
rities Act of 1933. From time to time, PFS or its affiliates
may also pay for
certain non-cash sales incentives provided to PFS
Investments Representatives.
Such incentives do not have any effect on the net amount
invested. In addition
to the reallowances from the applicable public offering
price described above,
PFS may, from time to time, pay or allow additional
reallowances or promotional
incentives, in the form of cash or other compensation to PFS
Investments Repre-
sentatives that sell shares of the Fund.
Payments under the Plan are not tied exclusively to the
distribution and
shareholder service expenses actually incurred by PFS and
the payments may
exceed distribution expenses actually incurred. The Trust's
Board of Trustees
will evaluate the appropriateness of the Plan and its
payment terms on a con-
tinuing basis and in so doing will consider all relevant
factors, including
expenses borne by PFS, amounts received under the Plan and
proceeds of the
CDSC.
26
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
ADDITIONAL INFORMATION
The Trust was organized on October 17, 1991 under the laws
of the Common-
wealth of Massachusetts and is a business entity commonly
known as a "Massachu-
setts business trust."
The Fund offers to investors making investments through
PFS Investments Rep-
resentatives shares of common stock classified into two
Classes, A and B. Each
Class represents an identical interest in the Fund's
investment portfolio. As a
result, the Classes have the same rights, privileges and
preferences, except
with respect to: (a) the designation of each Class; (b) the
effect of the
respective sales charges for each Class; (c) the
distribution and/or service
fees borne by each Class pursuant to the Plan; (d) the
expenses allocable
exclusively to each Class; (e) voting rights on matters
exclusively affecting a
single Class; (f) the exchange privilege of each Class; and
(g) the conversion
feature of the Class B shares. The Trust's Board of Trustees
does not antici-
pate that there will be any conflicts among the interests of
the holders of the
two Classes. The Trustees, on an ongoing basis, will
consider whether any such
conflicts exists and, if so, take appropriate action.
PNC Bank, National Association, located at 17th and
Chestnut Streets, Phila-
delphia, Pennsylvania 19103, serves as custodian of the
Fund's investments.
The Shareholder Services Group, Inc., located at Exchange
Place, Boston, Mas-
sachusetts 02109, serves as the Fund's transfer agent.
PFS Shareholder Services, located at 3100 Breckenridge
Blvd., Bldg. 200,
Duluth, Georgia 30199-0062, serves as the Fund's Sub-
Transfer Agent.
The Fund does not hold annual shareholder meetings. There
normally will be no
meeting of shareholders for the purpose of electing Trustees
unless and until
such time as less than a majority of the Trustees holding
office have been
elected by shareholders. The Trustees will call a meeting
for any purpose upon
written request of shareholders holding at least 10% of the
Fund's outstanding
shares and the Fund will assist shareholders in calling such
a meeting as
required by the 1940 Act. When matters are submitted for
shareholder vote,
shareholders of each Class will have one vote for each full
share owned and a
proportionate, fractional vote for any fractional share held
of that Class.
Generally, shares of the Fund will be voted on a Fund-wide
basis on all matters
except matters affecting only the interests of one Class of
shares.
The Fund sends its shareholders a semi-annual report and
an audited annual
report, each of which includes a list of the investment
securities held by the
27
<PAGE>
SMITH BARNEY
S&P 500 Advantage Fund
ADDITIONAL INFORMATION (CONTINUED)
Fund at the end of the reporting period. In an effort to
reduce the Fund's
printing and mailing costs, the Fund plans to consolidate
the mailing of its
semi-annual and annual reports by household. This
consolidation means that a
household having multiple accounts with the identical
address of record will
receive a single copy of each report. In addition, the Fund
plans to consoli-
date the mailing of its Prospectuses so that a shareholder
having multiple
accounts (i.e., individual, IRA and/or Self-Employed
Retirement Plan accounts)
will receive a single Prospectus annually. Shareholders who
do not want this
consolidation to apply to their accounts should contact the
Fund's Sub-Transfer
Agent.
"S&P 500" is a trademark of McGraw-Hill, Inc. and has
been licensed
for use by Smith Barney, Inc. The Fund is not sponsored,
endorsed, sold or
promoted by S&P. S&P makes no representation or warranty,
express or implied,
to the shareholders of the Fund or any member of the public
regarding the
advisability of investing in securities generally or in the
Fund particularly or the
ability of the S&P 500 Index to track general stock market
performance. S&P's
only relationship to Smith Barney, Inc. is the licensing of
certain trademarks and
trade names of S&P and of the S&P 500 Index which is
determined, composed and
calculated by S&P without regard to Smith Barney, Inc. of
the Fund. S&P has no
obligation to take the need of Smith Barney, Inc. or the
shareholders of the fund
into consideration in determining, composing or calculating
the S&P 500 Index.
S&P is not responsible for and has not participated in the
determination of the prices
and the amount of the Fund's shares or the timing of the
issuance or sale of the Fund's
shares or in the determination or calculation of the
equation by which the Fund's
shares are to be converted into cash. S&P has no obligation
or liability in connection
with the administration, marketing or trading of the Fund.
28
<PAGE>
- ------------------------------------------------------------
- --------------------
Smith Barney
S&P 500
Advantage
Fund
3100 Breckenridge Blvd, Bldg 200 Duluth, Georgia 30199-
0062
FDXXXX XX
Smith Barney
S&P 500 Advantage Fund
3100 Breckenridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
(800)544-5445
Statement of Additional Information November , 1995
This Statement of Additional Information expands upon and
supplements the information contained in the current
Prospectus of Smith Barney S&P 500 Advantage Fund (the
"Fund") dated November , 1995, as amended or supplemented
from time to time, and should be read in conjunction with
the Fund's Prospectus. The Fund is a sub-trust of Smith
Barney Investment Trust (the "Trust"). The Fund's Prospectus
may be obtained from an Investments Representative of PFS
Investments Inc. ("PFS Investments"), or by writing or
calling the Fund at the address or telephone number set
forth above. This Statement of Additional Information,
although not in itself a prospectus, is incorporated by
reference into the Prospectus in its entirety.
CONTENTS
For ease of reference, the same section headings are used in
both the Prospectus and this Statement of Additional
Information, except where shown below:
<TABLE>
<C> <C>
Management of the Fund
............................................................
........................... 1
Investment Objective and Management Policies
................................................... 4
Purchase of Shares
............................................................
.................................... 10
Redemption of Shares
............................................................
............................... 11
Distributor
............................................................
................................................. 12
Valuation of Shares
............................................................
................................... 12
Exchange Privilege
............................................................
.................................... 13
Performance Data (See in the Prospectus "Performance")
................................... 13
Taxes (See in the Prospectus "Dividends, Distributions and
Taxes") .................. 14
Additional Information
............................................................
.............................. 16
Financial Statements
............................................................
................................. 16
</TABLE>
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 the following:
<TABLE>
<CAPTION>
Name Service
<C> <C>
PFS Distributors ("PFS")
..............................................
Distributor
Travelers Investment Management Company ("TIMCO") Investment
Adviser
Smith Barney Mutual Funds Management Inc.
("SBMFM")
............................................................
... Administrator
PNC Bank, National Association ("PNC Bank") ..........
Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation
....................... Transfer Agent PFS Shareholder
Services
.............................................. Sub
Transfer Agent
</TABLE>
These organizations and the functions they perform for
the Fund are discussed in the Prospectus and in this
Statement of Additional Information.
Trustees and Executive Officers of the Fund
The Trustees and executive officers of the Fund, together
with information as to their principal business
occupations during the past five years, are shown below.
Each Trustee 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.
Herbert Barg, Trustee (Age 73). Private Investor. His
address is 273 Montgomery Avenue, Bala Cynwyd,
Pennsylvania 19004.
*Alfred J. Bianchetti, Trustee (Age 72). Retired; formerly
Senior Consultant to Dean Witter Reynolds Inc. His address
is 19 Circle End Drive, Ramsey, New Jersey 17466.
Martin Brody, Trustee (Age 74). Vice Chairman of the Board
of Restaurant Associates Industries Corp.; a Director of
Jaclyn, Inc. His address is HMK Associates, Three ADP
Boulevard, Roseland, New Jersey 07068.
Dwight B. Crane, Trustee (Age 57). Professor, Graduate
School of Business Administration, Harvard University; a
Director of Peer Review Analysis, Inc. His address is
Graduate School of Business Administration, Harvard
University, Boston, Massachusetts 02163.
Burt N. Dorsett, Trustee (Age 64). Managing Partner of
Dorsett, McCabe Management, Inc., an investment counseling
firm; Director of Research Corporation Technologies, Inc.,
a non-profit patent-clearing and licensing firm. His
address is 201 East 62nd Street, New York, New York 10021.
Elliot S. Jaffe, Trustee (Age 69). Chairman of the Board
and President of The Dress Barn, Inc. His address is 30
Dunnigan Drive, Suffern, New York 10901.
Stephen E. Kaufman, Trustee (Age 63). Attorney. His
address is 277 Park Avenue, New York, New York 10017.
Joseph J. McCann, Trustee (Age 65). Financial Consultant;
formerly Vice President of Ryan Homes, Inc., Pittsburgh,
Pennsylvania. His address is 200 Oak Park Place,
Pittsburgh, Pennsylvania 15243.
*Heath B. McLendon, Chairman of the Board and Investment
Officer (Age 62). Managing Director of Smith Barney,
Chairman of the Board of Smith Barney Strategy Advisers
Inc. and President of SBMFM; prior to July 1993, Senior
Executive Vice President of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"), Vice Chairman of Asset
Management Division of Shearson Lehman Brothers, a
Director of PanAgora Asset Management, Inc. and PanAgora
Asset Management Limited. His address is 388 Greenwich
Street, New York, New York 10013.
Cornelius C. Rose, Jr., Trustee (Age 61). President,
Cornelius C. Rose Associates, Inc., financial consultants,
and Chairman and Director of Performance Learning Systems,
an educational consultant. His address is Fair Oaks,
Enfield, New Hampshire 03748.
Jessica M. Bibliowicz, President (Age 35). Executive Vice
President of Smith Barney; prior to 1994, Director of
Sales and Marketing for Prudential Mutual Funds; prior to
1990, First Vice President, Asset Management Division of
Shearson Lehman Brothers. Ms. Bibliowicz also serves as
President of 25 other mutual funds of the Smith Barney
Mutual Funds. Her address is 388 Greenwich Street, New
York, New York 10013.
Lewis E. Daidone, Senior Vice President and Treasurer
(Age 37). Managing Director of Smith Barney; Chief
Financial Officer of the Smith Barney Mutual Funds;
Director and Senior Vice President of SBMFM. Mr. Daidone
also serves as Senior Vice President and Treasurer of 41
other mutual funds of the Smith Barney Mutual Funds. His
address is 388 Greenwich Street, New York, New York 10013.
Kent A. Kelley, Vice President and Investment Officer (Age
45). Chief Executive Officer of TIMCO; prior to 1992,
Executive Vice President of TIMCO. His address is One
Tower Square, Hartford, Connecticut 06183-2030.
Sandip Bhagat, Vice President and Investment Officer (Age
35). President of TIMCO; prior to 1995, Senior Portfolio
Manager of TIMCO's quantification active equities
strategies. His address is One Tower Square, Hartford,
Connecticut, 06183-2030.
Christina T. Sydor, Secretary (Age 44). Managing Director
of Smith Barney; General Counsel and Secretary of SBMFM.
Ms. Sydor also serves as Secretary of 41 other mutual
funds of the Smith Barney Mutual Funds. Her address is 388
Greenwich Street, New York, New York 10013.
No officer, director or employee of Smith Barney or PFS or
any parent or subsidiary of either of them receives any
compensation from the Fund for serving as an officer or
Trustee of the Fund. The Trust pays each Trustee who is
not an officer, director or employee of Smith Barney or
PFS or any of their affiliates a fee of $4,000 per annum
plus $500 per meeting attended and each Trustee Emeritus
$2,000 per annum plus $250 per meeting attended. All
Trustees are reimbursed for travel and out-of-pocket
expenses incurred to
attend such meetings.
For the calendar year ended December 31, 1994, the
Trustees of the Fund were paid the following
compensation.
<TABLE>
<CAPTION>
Trustee(*) Aggregate Compensationfrom the Trust
Aggregate Compensationfrom Smith Barney Mutual Funds
<C> <C> <C>
Herbert Barg (13) $** $77,850
Alfred Bianchetti (8) **
38,850
Martin Brody (15) ** 111,675
Dwight B. Crane (18) **
125,975
Burt N. Dorsett (12) 6,500
34,300
Elliot S. Jaffe (12) 6,500
33,300
Stephen E. Kaufman (10) ** 83,600
Joseph J. McCann (18) ** 51,100
Heath B. McLendon (29) ------ ----
- --
Cornelius C. Rose, Jr. (12) 6,500 33,300
<FN>
*Number of directorships/trusteeships held with other
mutual funds in the Smith Barney Mutual Funds complex.
**Was not elected to the Board of Trustees of the Trust
until March 30, 1995.
Investment Adviser-TIMCO
TIMCO serves as investment adviser to the Fund pursuant to
a written agreement (the "Advisory Agreement") dated
, 1995. The services provided by TIMCO under the Advisory
Agreement are described in the Prospectus under
"Management of the Fund." TIMCO will pay the salary of any
officer and employee who is employed by both it and the
Fund. TIMCO will bear all expenses in connection with the
performance of its services. TIMCO is a wholly owned
subsidiary of Travelers Group, Inc. ("Travelers").
As compensation for TIMCO's investment advisory services
rendered to the Fund, the Fund will pay a fee computed
daily and paid monthly at the annual rate of 0.50% of the
Fund's average daily net assets.
Administrator-SBMFM
SBMFM serves as administrator to the Fund pursuant to a
written agreement dated , 1995 (the
"Administration Agreement"). The services provided by
SBMFM under the Administration Agreement are described in
the Prospectus under "Management of the Fund." SBMFM will
pay 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 administrative services rendered to
the Fund, SBMFM will receive a fee computed daily and paid
monthly at the annual rate of 0.10% of the value of the
Fund's average daily net assets.
The Fund bears expenses incurred in its operation,
including: taxes, interest, brokerage fees and
commissions, if any; fees of Trustees who are not
officers, directors, shareholders or employees of SBMFM or
its affiliates; SEC fees and state Blue Sky qualification
fees; charges of custodians; transfer and dividend
disbursing agent's fees; certain insurance premiums;
outside auditing and legal expenses; costs of maintaining
corporate existence; investor services (including
allocated telephone and personnel expenses); costs of
preparation and printing of prospectuses and statements of
additional information for regulatory purposes and for
distribution to existing shareholders; costs of
shareholders' reports and shareholder meetings; and
meetings of the officers or Board of Trustees of the Fund.
TIMCO and SBMFM have agreed that if in any fiscal year the
aggregate expenses of the Fund (including fees paid
pursuant to the Advisory and Administration Agreements,
but excluding interest, taxes, brokerage, fees paid
pursuant to the Fund's services and distribution plan,
and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over
the Fund, TIMCO and SBMFM will, to the extent required by
state law, reduce their fees by such excess expense, such
amount to be allocated between them in the proportion that
their respective fees bear to the aggregate of such fees
paid by the Fund. Such a fee reduction, if any, will be
reconciled on a monthly basis. The most restrictive state
expense limitation applicable to the Fund would require
TIMCO and SBMFM to reduce their fees in any year that such
excess expenses exceed 2.50% of the first $30 million of
average net assets, 2.00% of the next $70 million of
average net assets and 1.50% of the remaining average net
assets.
Counsel and Auditors
Willkie Farr & Gallagher serves as counsel to the Trust.
The Trustees who are not "interested persons" of the Fund
have selected Stroock & Stroock & Lavan to serve as their
legal counsel.
KPMG Peat Marwick LLP ("KPMG Peat Marwick"), independent
accountants, 345 Park Avenue, New York, New York 10154,
serve as auditors of the Trust and will render an opinion
on the Trust's financial statements annually beginning
with the fiscal period ending November 30, 1995.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective
and the policies it employs to achieve its objective. This
section contains supplemental information concerning the
types of securities and other instruments in which the
Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize and certain risks
attendant to such investments, policies and strategies.
Money Market Instruments. As stated in the Prospectus,
the Fund may invest for temporary defensive purposes in
corporate and government bonds and notes and money market
instruments. Money market instruments in which the Fund
may invest include: obligations issued or guaranteed by
the United States government, its agencies or
instrumentalities ("U.S. government securities");
certificates of deposit,
time deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations
and similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types
of instruments. The following is a more detailed
description of such money market instruments.
Certificates of deposit ("CDs") are short-term, negotiable
obligations of commercial banks. Time deposits ("TDs") are
non-negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates.
Bankers' acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with
international transactions.
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 Federal and state regulation as
well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a
foreign bank with assets in excess of $1 billion may or
may not be subject to reserve requirements imposed by the
Federal Reserve System or by the state in which the branch
is
located if the branch is licensed in that state. In
addition, branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State
Branches") may or may not be required: (a) to 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) to 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-
bycase 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 and Insurance Fund. As a result, such savings
and loan associations are subject to regulation and
examination.
Stock Index Options. The Fund may purchase call options
on stock indices listed on U.S. securities exchanges for
the purpose of hedging its portfolio. A stock index
fluctuates with the changes in the market values of the
stocks included in the index. Stock index options may be
based on a broad market index such as the New York Stock
Exchange Composite Index or a narrower market index such
as the S&P Index. Indices also may be based on an industry
or market segment.
Options on stock indexes are generally similar to options
on stock except that the delivery requirements are
different. Instead of giving the right to take or make
delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive a cash
"exercise settlement amount" equal to (a) the amount, if
any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the
case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the option
is based being greater than, in the case of a call, or
less than, in the case of a put, the exercise price of the
option. The amount of cash received will be equal to such
difference between the closing price of the index and the
exercise price of the option, expressed in dollars, times
a specified multiple. The writer of the option is
obligated, in return for the premium received, to make
delivery of this amount. The writer may offset its
position in stock index options prior to expiration by
entering into a closing transaction on an exchange, or it
may let the option expire unexercised.
The effectiveness of purchasing stock index options as a
hedging technique will depend upon the extent to which
price movements in the portion of a securities portfolio
being hedged correlate with price movements of the stock
index selected. Because the value of an index option
depends upon movements in the level of the index rather
than the price of a particular stock, whether the Fund
will realize a gain or loss from the purchase or writing
of options on an index depends upon movements in the level
of stock prices in the
stock market generally or, in the case of certain indexes,
in an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful
use by the Fund of options on stock indexes will be
subject to TIMCO's ability to predict correctly movements
in the direction of the stock market generally or of a
particular industry. This requires different skills and
techniques than predicting changes in the price of
individual stocks.
The Fund will engage in stock index options transactions
only when determined by TIMCO to be consistent with the
Fund's efforts to control risk. There can be no assurance
that such judgment will be accurate or that the use of
these portfolio strategies will be successful.
Lending of Portfolio Securities. The Fund has the ability
to lend securities from its portfolio to brokers, dealers
and other financial organizations. Such loans, if and when
made, may not exceed 33 1/3% of the Fund's total assets
taken at value. The Fund may not lend its portfolio
securities to SBMFM 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 U.S.
government securities that are maintained at all times in
an amount equal to at least 100% of the current market
value of the loaned securities.
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
U.S. 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 the Fund's 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 Trust's Board of Trustees must terminate the loan and
regain the right to vote the securities. The risks in
lending portfolio securities, as with other extensions of
secured credit, consist of possible delay in receiving
additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms
deemed by TIMCO to be of good standing and will not be
made unless, in the judgment of TIMCO, the consideration
to be earned from such loans would justify the risk. From
time to time, the Fund may return a part of the interest
earned from the investment of collateral received for
securities loaned to: (a) the borrower; and/or (b) a
third party, which is unaffiliated with the Fund, TIMCO or
SBMFM and which is acting as a "finder."
Futures. The Fund may enter into stock index futures
contracts and related options that are traded thereon. A
stock index futures agreement is a contract pursuant to
which two parties agree to take or make delivery of an
amount of cash equal to the difference between the value
of the index at the close of the last trading day of the
contract and the price at which the index contract was
originally written. No physical delivery of the underlying
securities in the index is made.
No consideration will be paid or received by the Fund upon
entering into a futures contract. Initially, the Fund
will be required to deposit with the broker an amount of
cash or cash equivalents equal to approximately 1% to 10%
of the contract amount (this amount is subject to change
by the board of trade on which the contract is traded and
members of such board of trade may charge a higher
amount). This amount, known as "initial margin," is in
the nature of a performance bond or good faith deposit on
the contract and is returned to the Fund upon termination
of the futures contract, assuming all contractual
obligations have been satisfied. Subsequent payments,
known as "variation margin," to and from the broker will
be made daily as the price of the index underlying the
futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to
expiration of a futures contract, the Fund may elect to
close the position by taking an opposite position, which
will operate to terminate the Fund's existing position in
the contract.
Several risks are associated with the use of futures
contracts as a hedging device. Successful use of futures
contracts by the Fund will be subject to the ability of
TIMCO to predict correctly changes in market conditions.
These predictions involve skills and techniques that may
be different from those involved in the management of the
Fund being hedged. In addition, there can be no assurance
that there will be a correlation between movements in the
price of the underlying index and movements in the price
of the securities that is the subject of a hedge. A
decision of whether, when and how to hedge involves the
exercise of skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of market
behavior or unexpected trends in interest rates or
currency values.
Although the Fund intends to enter into futures contracts
only if there is an active market for such contracts,
there is no assurance that an active market will exist for
the contracts at any particular time. Most U.S. futures
exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached
in a particular contract, no trades may be made that day
at a
price beyond that limit. It is possible that futures
contract prices could move to the daily limit for several
consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses.
In such event, and in the event of adverse price
movements, the Fund would be required to make daily cash
payments of variation margin, and an increase in the value
of the portion of the Fund being hedged, if any, may
partially or completely offset losses on the futures
contract. As described above, however, there is no
guarantee that the price of the securities being hedged
will, in fact, correlate with the price movements in a
futures contract and thus provide an offset to losses on
the futures contract.
If the Fund hedges against the possibility of a change in
market conditions adversely affecting the value of
securities held in its portfolio and market conditions
move in a direction opposite to that which has been
anticipated, the Fund will lose part or all of the benefit
of the increased value of securities that it has hedged
because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund
had insufficient cash, it may have to sell securities to
meet daily variation margin requirements at a time when it
may be disadvantageous to do so. These sales of
securities may, but will not necessarily, be at increased
prices that reflect the change in interest rates, market
conditions or currency values, as the case may be.
Options on Futures Contracts. An option on a futures
contract, as contrasted with the direct investment in such
a contract, gives the purchaser the right, in return for
the premium paid, to assume a position in the underlying
futures contract at a specified exercise price at any time
prior to the expiration date of the option. Upon exercise
of an 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
exceeds, in the case of a call, or is less than, in the
case of put, the exercise price of the option on the
futures contract. The potential for loss related to the
purchase of an option on a futures contract is limited to
the premium paid for the option plus transaction costs.
Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes
in the value of the underlying contract; however, the
value of the option does change daily and that change
would be reflected in the net asset value of the Fund.
The Fund may purchase and write put and call options on
futures contracts that are traded on a U.S. exchange or
board of trade as a hedge against changes in the value of
its portfolio securities, or in anticipation of the
purchase of securities, and may enter into closing
transactions with respect to such options to terminate
existing positions. There is no guarantee that such
closing transactions can be effected.
Several risks are associated with options on futures
contracts. The ability to establish and close out
positions on such options will be subject to the existence
of a liquid market. In addition, the purchase of put or
call options will be based upon predictions by an TIMCO as
to anticipated trends, which predictions could prove to be
incorrect. Even if the expectations of an TIMCO are
correct, there may be an imperfect correlation between the
change in the value of the options and of the portfolio
securities being hedged.
Investment Restrictions
The Fund has adopted the following investment restrictions
for the protection of shareholders. Restrictions 1 through
8 below cannot be changed without approval by the holders
of a majority of the outstanding shares of the Fund,
defined as the lesser of (a) 67% or more of the Fund's
shares present at a meeting, if the holders of more than
50% of the outstanding shares are present in person or by
proxy or (b)
more than 50% of the Fund's outstanding shares. The
remaining restrictions may be changed by the Fund's Board
of Trustees at any time. In accordance with these
restrictions, the Fund will not:
1. Invest more than 5% of its total assets in securities
of any one issuer, except securities issued or guaranteed
by the United States government, or purchase more than 10%
of the outstanding voting securities of such issuer.
2. Issue senior securities as defined in the 1940 Act
and any rules and orders thereunder, except insofar as the
Fund may be deemed to have issued senior securities by
reason of: (a) borrowing money or purchasing securities on
a whenissued or delayed-delivery basis; (b) purchasing or
selling futures contracts and options on futures contracts
and other similar instruments; and (c) issuing separate
classes of shares.
3. Invest more than 25% of its total assets in
securities, the issuers of which are in the same industry.
For purposes of this limitation, U.S. government
securities and securities of state or municipal
governments and their political subdivisions are not
considered to be issued by members of any industry.
4. Borrow in excess of 33 1/3% of the total value of
its assets (including the amount borrowed) less its
liabilities (not including such borrowings). See the
discussion of "Certain Investment Activities" later in
this Statement of Additional Information.
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.
6. Engage in the business of underwriting securities
issued by other persons, except to the extent that the
Fund may technically be deemed to be an underwriter under
the Securities Act of 1933, as amended, in disposing of
portfolio securities.
7. Purchase or sell real estate, real estate mortgages,
real estate investment trust securities, commodities or
commodity contracts, but this shall not prevent the Fund
from: (a) investing in securities of issuers engaged in
the real estate business 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 (c) trading in futures contracts and options
on futures contracts.
8. 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
initial or maintenance margin in connection with futures
contracts and related options and options on securities is
not considered to be the purchase of a security on margin.
9. Pledge, hypothecate, mortgage or otherwise encumber
its assets in an amount in excess of 5% of its assets to
secure borrowings for investment purposes or otherwise.
10. Invest in mineral-type programs or leases.
11. Purchase or otherwise acquire any security if, as a
result, more than 15% of its net assets would be invested
in securities that are illiquid.
12. Purchase or retain the securities of any issuer if
those officers and Trustees of the Trust or TIMCO owning
individually more than 1 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities
of such issuer.
13. Purchase the securities of any other open-end
investment company, except through a purchase on the open
market involving no commission or profit to a sponsor or
dealer (other than the customary stock exchange or over-
thecounter brokerage commission) and except as part of a
merger, consolidation or acquisition of assets.
14. Invest for the purpose of exercising control of
management.
15. Purchase securities of any company with a record of
less than three years' continuous operation if such
purchase would cause its investments in such companies to
exceed 5% of the value of its total assets. (For purposes
of this limitation, issuers include predecessors,
sponsors, controlling persons, general partners,
guarantors and originators of underlying assets.)
16. Purchasing, writing or selling puts, calls,
straddles, spreads or combinations thereof, except as
described in the Fund's prospectus under "Investment
Objective and Management Policies."
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.
Certain of these restrictions were adopted as the result
of undertakings to state securities commissions and must
be complied with only as long as the Fund's shares are
registered in the particular state. In order to permit the
sale of the Fund's shares in certain states, the Trust may
make commitments more restrictive than the investment
restrictions described above such as those regarding oil
and mineral leases and real estate limited partnerships.
Certain Investment Activities
While the Fund is authorized to borrow money from banks
for purposes of investment (leveraging) and to invest in
securities of foreign issuers, it has no current intention
of engaging in these investment activities and will do so
only when the Trust's Board of Trustees determines that
either or both of these activities are in the best
interests of shareholders.
Portfolio Turnover
The Fund generally will not engage in short-term trading
but intends to purchase securities for long-term capital
appreciation. The Fund's annual portfolio turnover rate is
not expected to exceed 150%. A portfolio turnover rate of
100% would occur if all of the securities in the Fund's
portfolio were replaced once during a period of one year.
The portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of portfolio securities for
the year by the monthly average value of portfolio
securities. Securities with remaining maturities of one
year or less at the date of acquisition are excluded from
the calculation.
Portfolio turnover rates may vary greatly from year to
year as well as within a particular year and may be
affected by cash requirements for redemptions of the
Fund's shares as well as by requirements that enable the
Fund to receive favorable tax treatment. Portfolio
turnover rates will largely depend on the level of
purchases and redemptions of Fund shares. Higher portfolio
turnover rates can result in corresponding increases in
brokerage commissions. In addition, to the extent that the
Fund realizes short-term gains as the result of more
portfolio transactions, such gains would be taxable to
shareholders at ordinary income tax rates.
Portfolio Transactions
Decisions to buy and sell securities for the Fund are made
by TIMCO, subject to the overall supervision and review of
the Trust's Board of Trustees. 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 market, but the price of those securities
includes an undisclosed commission or mark-up. Over-the
counter purchases and sales are transacted directly with
principal market makers except in those cases in which
better prices and executions may
be obtained elsewhere. The cost of securities purchased
from underwriters includes an underwriting commission or
concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-
up or markdown.
In executing portfolio transactions and selecting brokers
or dealers, it is the Fund's policy to seek the best
overall terms available. TIMCO, in seeking the most
favorable price and execution, considers all factors it
deems relevant, including, for example, the price, the
size of the transaction, the reputation, experience and
financial stability of the broker-dealer involved and the
quality of service rendered by the broker-dealer in other
transactions. TIMCO receives research, statistical and
quotation services from several broker-dealers with which
it places the Fund's portfolio transactions. It is
possible that certain of the services received primarily
will benefit one or more other accounts for which TIMCO
exercises investment discretion. 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 its receiving such brokerage and
research services. The Trust's Board of Trustees, in its
discretion, may authorize TIMCO to cause the Fund to pay a
broker that provides brokerage and research services to
TIMCO a commission in excess of that which another
qualified broker would have charged for effecting the same
transaction. Smith Barney Inc. ("Smith Barney") 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.
In accordance with Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Fund's Board of Trustees has
determined that any portfolio transaction for the Fund may
be executed through Smith Barney or an affiliate of Smith
Barney if, in TIMCO's judgment, the use of Smith Barney or
an affiliate is likely to result in price and execution at
least as favorable as those of other qualified brokers and
if, in the transaction, Smith Barney or the affiliate
charges the Fund a commission rate consistent with those
charged by Smith Barney or an affiliate to comparable
unaffiliated customers in similar transactions. In
addition, under rules recently adopted by the SEC, Smith
Barney may directly execute such transactions for the Fund
on the floor of any national securities exchange,
provided: (a) the Board of Trustees has expressly
authorized Smith Barney to effect such transactions; and
(b) Smith Barney annually advises the Fund of the
aggregate compensation it earned on such transactions.
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.
PURCHASE OF SHARES
Volume Discounts
The schedule of sales charges on Class A shares described
in the Prospectus applies to purchases made by any
"purchaser," which is defined to include the following:
(a) an individual; (b) an individual's spouse and his or
her children purchasing shares for their account; (c) a
trustee or other fiduciary purchasing shares for a single
trust estate or single fiduciary account; (d) a pension,
profitsharing or other employee benefit plan qualified
under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), and qualified employee benefit
plans of employers who are "affiliated persons" of each
other within the meaning of the 1940 Act; (e) tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of
the Code; and (f) a trustee or other professional
fiduciary (including a bank, or an investment adviser
registered with the SEC under the Investment Advisers Act
of 1940, as amended) purchasing shares of the Fund for one
or more trust estates or fiduciary accounts. Purchasers
who wish to combine purchase orders to take advantage of
volume discounts should contact a PFS Investments
Representative.
Combined Right of Accumulation
Reduced sales charges, in accordance with the schedule in
the Prospectus, apply to any purchase of Class A shares if
the aggregate investment in Class A shares of the Fund and
in Class A shares of other funds of the Smith Barney
Mutual Funds that are offered with a sales charge,
including the
purchase being made, of any purchaser is $25,000 or more.
The reduced sales charge is subject to confirmation of the
shareholder's holdings through a check of appropriate
records. The Fund reserves the right to terminate or amend
the combined right of accumulation at any time after
written notice to shareholders. For further information
regarding the combined right of accumulation, shareholders
should contact a PFS Investments Representative.
Determination of Public Offering Price
The Fund offers its shares to the public on a continuous
basis. The public offering price for a Class A share of
the Fund is equal to the net asset value per share at the
time of purchase plus an initial sales charge based on the
aggregate amount of the investment. The public offering
price for a Class B share (and Class A share purchases,
including applicable rights of accumulation, equalling or
exceeding $500,000) is equal to the net asset value per
share at the time of purchase and no sales charge is
imposed at the time of purchase. A contingent deferred
sales charge ("CDSC"), however, is imposed on certain
redemptions of Class B shares, and of Class A shares when
purchased in amounts equalling or exceeding $500,000. The
method of computation of the public offering price is
shown in the Fund's financial statements incorporated by
reference in their entirety to this Statement of
Additional Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of
payment postponed (a) for any period during which the NYSE
is closed (other than for customary weekend or holiday
closings), (b) when trading in markets the Fund normally
utilizes is restricted, or an emergency, as determined by
the SEC, exists so that disposal of the Fund's investments
or determination of net asset value is not reasonably
practicable or (c) for such other periods as the SEC by
order may permit for the protection of the Fund's
shareholders.
Distributions in Kind
If the Board of Trustees of the Trust determines that it
would be detrimental to the best interests of the Fund's
remaining shareholders to make a redemption payment wholly
in cash, the Trust may pay in respect of the Fund, in
accordance with SEC rules, any portion of a redemption in
excess of the lesser of $250,000 or 1% of the Fund's net
assets by distribution in kind of portfolio securities in
lieu of cash. Securities issued as a distribution in kind
may incur brokerage commissions when shareholders
subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan")
is available to shareholders who own shares with a value
of at least $10,000 ($5,000 for retirement plan accounts)
and who wish to receive specific amounts of cash monthly
or quarterly. Withdrawals of at least $50 may be made
under the Withdrawal Plan by redeeming as many shares of
the Fund as may be necessary to cover the stipulated
withdrawal payment. Any applicable CDSC will not be waived
on amounts withdrawn by shareholders that exceed 1.00% per
month of the value of a shareholder's shares at the time
the Withdrawal Plan
commences. To the extent withdrawals exceed dividends,
distributions and appreciation of a shareholder's
investment in the Fund, there will be a reduction in the
value of the shareholder's investment and continued
withdrawal payments will reduce the shareholder's
investment and ultimately may exhaust it. Withdrawal
payments should not be considered as income from
investment in the Fund. Furthermore, as it generally would
not be advantageous to a shareholder to make additional
investments in the Fund at the same time he or she is
participating in the Withdrawal Plan, purchases by such
shareholders in amounts of less than $5,000 ordinarily
will not be permitted.
Shareholders who wish to participate in the Withdrawal
Plan and who hold their shares in certificate form must
deposit their share certificates with TSSG as agent for
Withdrawal Plan members. All dividends and distributions
on shares in the Withdrawal Plan are reinvested
automatically at net asset value in additional shares of
the Fund. Withdrawal Plans should be set up with a Smith
Barney Financial Consultant. Applications for
participation in the Withdrawal Plan must be received by
TSSG no later than the eighth day of the month to be
eligible for participation beginning with that month's
withdrawal. For additional information, shareholders
should contact a PFS Investments Representative.
DISTRIBUTOR
PFS serves as a distributor for the Fund on a best efforts
basis pursuant to a written agreement (the "Distribution
Agreement") dated _____________, 1995.
When payment is made by the investor, unless otherwise
noted by the investor, the funds will be held as a free
credit balance in the investor's brokerage account and PFS
may benefit from the temporary use of the funds. The
investor may designate another use for the funds prior to
settlement date, such as an investment in a money market
fund (other than Smith Barney Exchange Reserve Fund) of
the Smith Barney Mutual Funds. If the investor instructs
PFS to invest the funds in a Smith Barney money market
fund, the amount of the investment will be included as
part of the average daily net assets of both the Fund and
the Smith Barney money market fund, and affiliates of
Smith Barney that serve the funds in an investment
advisory or administrative capacity will benefit from the
fact they are receiving fees from both such investment
companies for managing these assets computed on the basis
of their average daily net assets. The Trust's Board of
Trustees has been advised of the benefits to Smith Barney
resulting from these settlement procedures and will take
such benefits into consideration when reviewing the
Distribution Agreement for continuance.
Distributions Arrangements
To compensate PFS 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 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 and Class B shares. In
addition, the Fund pays a distribution fee with respect to
Class B shares, primarily intended to compensate the
applicable distributor for its initial expense of paying
its Investments Representatives a
commission upon sales of those shares. The Class B
distribution fee is calculated at the annual rate of 0.75%
of the value of the Fund's average daily net assets
attributable to the shares of that Class.
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote of
the Trust's Board of Trustees, including a majority of the
Trustees who are not interested persons of the Fund and
who have no direct or indirect financial interest in the
operation of the Plan or in the Distribution Agreement
(the "Independent Trustees"). The Plan may not be amended
to increase the amount of the service and distribution
fees without shareholder approval, and all amendments of
the Plan also must be approved by the Trustees and
Independent Trustees in the manner described above. The
Plan may be terminated with respect to a Class of the Fund
at any time, without penalty, by vote of a majority of the
Independent Trustees or by vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of
the Class. Pursuant to the Plan, the Fund's distributor
will provide the Board of Trustees with periodic reports
of amounts expended under the Plan and the purpose for
which such expenditures were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on
each day, Monday through Friday, except days on which the
NYSE is closed. The NYSE currently is scheduled to be
closed on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas, and on the preceding Friday or
subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Because of the
differences in distribution fees and Class-specific
expenses, the per share net asset value of each Class may
differ. The following is a description of the procedures
used by the Fund in valuing its assets.
Securities listed on a national securities exchange will
be valued on the basis of the last sale on the date on
which the valuation is made or, in the absence of sales,
at the mean between the closing bid and asked prices. Over-
thecounter securities will be valued on the basis of the
bid price at the close of business on each day, or, if
market quotations for those securities are not readily
available, at fair value, as determined in good faith by
the Trust's Board of Trustees. Short-term obligations with
maturities of 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the
Trust's Board of Trustees. Amortized cost involves valuing
an instrument at its original cost to the Fund and
thereafter assuming a constant amortization to maturity of
any discount or premium, regardless of the effect of
fluctuating interest rates on the market value of the
instrument. All other securities and other assets of the
Fund will be valued at fair value as determined in good
faith by the Trust's Board of Trustees.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of the Fund may
exchange all or part of their shares for shares of the
same Class of certain of the Smith Barney Mutual Funds, to
the extent such shares are offered for sale in the
shareholder's state of
residence, on the basis of relative net asset value per
share at the time of exchange as follows:
A. Class A shares of any such fund purchased with a
sales charge may be exchanged for Class A shares of any of
the other such funds, and the sales charge differential,
if any, will be applied. Class A shares of any such fund
may be exchanged without a sales charge for shares of the
funds that are offered without a sales charge. Class A
shares of any such fund purchased without a sales charge
may be exchanged for shares sold with a sales charge, and
the appropriate sales charge differential will be applied.
B. Class A shares of any such fund acquired by a
previous exchange of shares purchased with a sales charge
may be exchanged for Class A shares of any of the other
such funds, and the sales charge differential, if any,
will be applied.
C. Class B shares of any such fund may be exchanged
without a sales charge. Class B shares of the Fund
exchanged for Class B shares of another such fund will be
subject to the higher applicable CDSC of the two funds
and, for purposes of calculating CDSC rates and conversion
periods, will be deemed to have been held since the date
the shares being exchanged were deemed to be purchased.
The exchange privilege enables shareholders to acquire
shares of the same Class in a fund with different
investment objectives when they believe that a shift
between funds is an appropriate investment decision. This
privilege is available to shareholders residing in any
state in which the fund shares being acquired may legally
be sold. Prior to any exchange, the shareholder should
obtain and review a copy of the current prospectus of each
fund into which an exchange is being considered.
Prospectuses may be obtained from a PFS Investments
Representative.
Upon receipt of proper instructions and all necessary
supporting documents, shares submitted for exchange are
redeemed at the then-current net asset value and, subject
to any applicable CDSC, the proceeds are immediately
invested, at a price as described above, in shares of the
fund being acquired. The Fund reserves the right to
reject any exchange request. The exchange privilege may be
modified or terminated at any time after written notice to
shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote total return of a
Class 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 the following industry and financial
publications: Barron's, Business Week, CDA Investment
Technologies, Inc., Changing Times, Forbes, Fortune,
Institutional Investor, Investors Daily, Money,
Morningstar Mutual Fund Values, The New York Times, USA
Today and The Wall Street Journal. To the extent any
advertisement or sales literature of the Fund describes
the expenses or performance of any Class, it will also
disclose such information for the other Classes.
Average Annual Total Return
"Average annual total return" figures are computed
according to a formula prescribed by the SEC. The formula
can be
expressed as follows:
P (1 + T)n = ERV
Where: P = a hypothetical initial payment of
$1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical
$1,000 investment made at the beginning of a 1-, 5- or 10
year period at the end of the 1-, 5- or 10-year period (or
fractional portion thereof), assuming reinvestment of all
dividends and distributions.
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-PP
Where: P = a hypothetical initial payment of
$10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 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.
Performance will vary from time to time depending on
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.
TAXES
The following is a summary of certain Federal income tax
considerations that may affect the Fund and its
shareholders. The summary is not intended as a substitute
for individual tax advice and investors are urged to
consult their own tax advisors as to the tax consequences
of an investment in the Fund.
The Trust has qualified and intends to continue to
qualify each year as a regulated investment company under
the Code. To so qualify, the Fund must, among other
things, derive less than 30% of its gross income in each
taxable year from the sale or disposition of stocks,
securities, and certain financial instruments held for
less than three months. This requirement may limit the
extent to which the Fund is able to sell stocks,
securities, or financial instruments held for less than
three months. If the Fund (a) qualifies as a regulated
investment company and (b) distributes to its shareholders
at least 90% of its net investment income (including, for
this purpose, its net realized short-term capital gains),
the Fund will not be liable for Federal income taxes to
the extent that its net investment income and its net
realized long- and short-term capital gains, if
any, are distributed to its shareholders.
Gains or losses on the sales of stock or securities by the
Fund generally will be long-term capital gains or losses
if the Fund has held the stock or securities for more than
one year. Gains or losses on sales of stock or securities
held for not more than one year generally will be short-
term capital gains or losses.
Any net long-term capital gains realized by the Fund will
be distributed annually as described in the Prospectus.
Such distributions ("capital gain dividends") will be
taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares,
and will be designated as capital gain dividends in a
written notice mailed by the Fund to shareholders after
the close of the Fund's prior taxable year. If a
shareholder receives a capital gain dividend with respect
to any share and if the share has been held by the
shareholder for six months or less, then any loss on the
sale or exchange of such share will be treated as a long-
term capital loss to the extent of the capital gain
dividend.
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 (that is, 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, it 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 or redeemed 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.
Investors considering buying shares of the Fund on or just
prior to a record date for a taxable dividend or capital
gain distribution should be aware that, regardless of
whether the price of the Fund shares to be purchased
reflects the amount of the forthcoming dividend or
distribution payment, any such payment will be a taxable
dividend or distribution payment.
If a shareholder fails to furnish a correct taxpayer
identification number, fails fully to report dividend and
interest income, or fails to certify that he or she has
provided a correct taxpayer identification number and that
he or she is not subject to "backup withholding," then the
shareholder may be subject to a 31% backup withholding tax
with respect to (a) any taxable dividends and
distributions and (b) the proceeds of any redemptions of
Fund shares. An individual's taxpayer identification
number is his or her social security number. The backup
withholding tax is not an additional tax and may be
credited against a shareholder's regular Federal income
tax liability.
The foregoing is only a summary of certain tax
considerations generally affecting the Fund and its
shareholders and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult
their tax advisors with specific reference to their own
tax situations, including their state and local tax
liabilities.
ADDITIONAL INFORMATION
PNC Bank, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as the custodian
of the Fund. Under its agreement with the Trust on behalf
of the Fund, PNC Bank holds the Fund's portfolio
securities and keeps all necessary accounts and records.
For its services, PNC Bank receives a monthly fee based
upon the month-end market value of securities held in
custody and also receives securities transaction charges.
The assets of the Fund are held under bank custodianship
in compliance with the 1940 Act.
TSSG, located at Exchange Place, Boston, Massachusetts
02109, serves as the Trust's transfer agent. Under the
transfer agency agreement, TSSG maintains the shareholder
account records for the Trust, handles certain
communications between shareholders and the Trust and
distributes dividends and distributions payable by the
Trust. For these services, TSSG receives a monthly fee
computed on the basis of the number of shareholder
accounts it maintains for the Trust during the month and
is reimbursed for out-of-pocket expenses.
PFS Shareholder Services, located at 3100 Breckenridge
Blvd., Bldg. 200, Duluth, Georgia 30199-0062 serves as
the Fund's sub-transfer agent. Under the sub-transfer
agency agreement, PFS Shareholder Services maintains the
shareholder account records for the Fund, handles certain
communications between the shareholders and the Fund and
distributes dividends and distributions payable by the
Fund. For these services. PFS Shareholder Services
receives a monthly fee computed on the basis of the number
of shareholder accounts it maintains for the Fund during
the month and is reimbursed for out-of-pocket expenses.
Smith Barney
S&P 500 Advantage Fund
Statement of
Additional Information
November , 1995
Smith Barney
S&P 500 Advantage Fund
3100 Breckenridge Blvd., Bldg. 200
Duluth, Georgia 30199-0062
SMITH BARNEY A
Member of
Travelers Group
SMITH BARNEY INCOME TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Included in Part B:
The Funds' Annual Reports for the fiscal year
ended November 30, 1994 and the Reports of Independent
Accountants dated January 6, 1995 are incorporated by
reference to the Rule 30(b)2-1 filing made on January 27,
1995.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
Unless otherwise noted all references are to the
Registrant's Registration Statement on Form N-1A (the
"Registration Statement") as filed with the SEC on October
21, 1991 (File Nos. 33-43446 and 811-6444).
(1)(a) Registrant's Master Trust Agreement dated
October 17, 1991 and Amendments to the Master Trust
Agreement dated November 21, 1991 and July 30, 1993,
respectively, are incorporated by reference to Post-
Effective Amendment No. 4 to the Registration Statement
filed on January 28, 1994 ("Post-Effective Amendment No.
4").
(b) Amendments to the Master Trust Agreement dated
October 14, 1994 and November 7, 1994, respectively, are
incorporated by reference to a Registration Statement filed
on Form N-14 on January 6, 1995 (the "N-14").
(c) Amendments to the Master Trust Agreement dated
July 20, 1995 and August 10, 1995 are filed herewith.
(2) Registrant's By-Laws are incorporated by reference
to the Registration Statement.
(3) Not Applicable.
(4) Registrant's form of stock certificate is
incorporated by reference to Pre-Effective Amendment No. 1
to the Registration Statement filed on December 6, 1991
("Pre-Effective Amendment No. 1").
(5)(a) Investment Advisory Agreement between the
Registrant and Greenwich Street Advisors dated July 30, 1993
is incorporated by reference to Post-Effective Amendment No.
3 to the Registration Statement filed on December 1, 1993
("Post-Effective Amendment No. 3").
(b) Transfer of Investment Advisory Agreement dated
November 7, 1994 between the Registrant on behalf of Smith
Barney Intermediate Maturity California Municipals Fund.
Greenwich Street Advisors and Smith Barney Mutual Funds
Management Inc. is incorporated by reference to the N-14.
(c) Form of Transfer of Investment Advisory Agreement
for Smith Barney Limited Maturity Municipals Fund, Smith
Barney Intermediate Maturity New York Municipals Fund and
Smith Barney Limited Maturity Treasury Fund is incorporated
by reference to Post-Effective Amendment No. 6 to the
Registration Statement as filed on January 27, 1995 ("Post-
Effective Amendment No. 6").
(6) Distribution Agreement between Registrant and
Smith Barney Shearson Inc. dated July 30, 1993 is
incorporated by reference to Post-Effective Amendment No. 3.
(7) Not Applicable.
(8) A form of Custody Agreement with PNC, National
Association, is filed herewith.
(9)(a) Administration Agreement between the Registrant
on behalf of Smith Barney Intermediate Maturity California
Municipals Fund and Smith, Barney Advisers, Inc. ("SBA") is
incorporated by reference to the N-14.
(b) Form of Administration Agreement between the
Registrant on behalf of Smith Barney Limited Maturity
Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund and Smith Barney Limited Maturity Treasury
Fund and SBA is incorporated by reference to Post-Effective
Amendment No. 6.
(c) Form of Administration Agreement between the
Registrant on behalf of Smith Barney S&P 500 Advantage Fund
and Smith Barney Mutual Funds Management Inc. will be filed
by amendment.
(e) Transfer Agency Agreement with The Shareholder
Services Group, Inc. is incorporated by reference to Post-
Effective Amendment No. 3.
(f) License Agreement between Registrant on behalf of
Smith Barney S&P 500 Advantage Fund and Standard and Poor's,
a division of McGraw-Hill, Inc. will be filed by amendment.
(10) Opinion of California State Counsel for Smith
Barney Intermediate Maturity California Municipals Fund is
incorporated by reference to Post-Effective Amendment No. 6.
(11) Consent of Independent Accountants will be filed
by amendment.
(12) Not Applicable.
(13) Purchase Agreement between the Registrant and
Shearson Lehman Brothers Inc. is incorporated by reference
to Pre-Effective Amendment No. 1.
(14) Not Applicable.
(15)(a) Amended Service and Distribution Plan pursuant
to Rule 12b-1 between the Registrant on behalf of Smith
Barney Intermediate Maturity California Municipals Fund and
Smith Barney Inc. is incorporated by reference to the N-14.
(b) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf of
Smith Barney Limited Maturity Municipals Fund, Smith Barney
Intermediate Maturity New York Municipals Fund and Smith
Barney Limited Maturity Treasury Fund and Smith Barney Inc.
is incorporated by reference to Post-Effective Amendment No.
6.
(c) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf of
Smith Barney S&P 500 Advantage Fund and Smith Barney Inc.
will be filed by amendment.
(16) Performance Data is incorporated by reference to
Post-Effective Amendment No. 2 to the Registration Statement
as filed on April 1, 1993.
Item 25. Persons Controlled by or under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Title of Class
Beneficial Interest par value Number of
Record Holders
$0.001 per share as of July 31, 1995
Limited Maturity Municipals Fund1,672
Intermediate Maturity California
Municipals Fund 577
Intermediate Maturity New York
Municipals Fund 1,468
Limited Maturity Treasury Fund 3,664
Item 27. Indemnification
The response to this item is incorporated by reference
to Pre-Effective Amendment No. 1.
Item 28(a). Business and Other Connections of Investment
Adviser
Investment Adviser -- Smith Barney Mutual Funds Management
Inc. (formerly known as Smith Barney Advisers, Inc.
("SBMFM").
SBMFM was incorporated in 1968 under the laws of the State
of Delaware. SBMFM is a wholly owned subsidiary of Smith
Barney Holdings Inc., which in turn is a wholly owned
subsidiary of Travelers Group Inc. (formerly known as
Primerica Corporation) ("Travelers").
The list required by this Item 28 of officers and directors
of SBMFM, 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 SBMFM
pursuant to the Investment Advisers Act of 1940 (SEC File
No. 801-8314).
Prior to the close of business on July 30, 1993 (the
"Closing"), Smith Barney Asset Management ("Asset
Management") was a member of the Asset Management Division
of Shearson Lehman Brothers Inc. ("Shearson Lehman
Brothers"), and served as the Registrant's investment
adviser. On the Closing, Travelers and Smith Barney
Shearson Inc. (now known as Smith Barney Inc.) acquired the
domestic retail brokerage and asset management business of
Shearson Lehman Brothers, which included the business of the
Registrant's prior investment adviser. Shearson Lehman
Brothers was a wholly-owned subsidiary of Shearson Lehman
Brothers Holdings Inc. ("Shearson Holdings"). All of the
issued and outstanding common stock of Shearson Holdings
(representing 92% of the voting stock) was held by American
Express Company. Information as to any past business
vocation or employment of a substantial nature engaged in
by officers and directors of Asset Management can be located
in Schedules A and D of Form ADV filed by Shearson Lehman
Brothers on behalf of the Asset Management Division prior to
July 30, 1993 (SEC File No. 801-3701).
01/01/95
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts as
distributor for Smith Barney Managed Municipals Fund Inc.,
Smith Barney New York Municipals Fund Inc., Smith Barney
California Municipals Fund Inc., Smith Barney Massachusetts
Municipals Fund, Smith Barney Global Opportunities Fund,
Smith Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Principal Return Fund,
Smith Barney Managed Governments Fund Inc., Smith Barney
Income Funds, Smith Barney Equity Funds, Smith Barney
Investment Funds Inc., Smith Barney Precious Metals and
Minerals Fund Inc., Smith Barney Telecommunications Trust,
Smith Barney Arizona Municipals Fund Inc., Smith Barney New
Jersey Municipals Fund Inc., Smith Barney Fundamental Value
Fund Inc., Smith Barney Series Fund, Consulting Group
Capital Markets Funds, Smith Barney Income Trust, Smith
Barney Adjustable Rate Government Income Fund, Smith Barney
Florida Municipals Fund, Smith Barney Oregon Municipals
Fund, Smith Barney Funds, Inc., Smith Barney Muni Funds,
Smith Barney World Funds, Inc., Smith Barney Money Funds,
Inc., Smith Barney Tax Free Money Fund, Inc., Smith Barney
Variable Accounts Funds, Smith Barney U.S. Dollar Reserve
Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited (Bermuda), Smith Barney International
Fund (Luxembourg), Smith Barney Institutional Cash
Management Fund, Inc. and various series of unit investment
trusts.
Smith Barney is a wholly owned subsidiary of Smith
Barney Holdings Inc., which in turn is a wholly owned
subsidiary of Travelers Group Inc. (formerly known as
Primerica Corporation). The information required by this
Item 29 with respect to each director, officer and partner
of Smith Barney is incorporated by reference to Schedule A
of Form BD filed by Smith Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 812-8510).
Item 30. Location of Accounts and Records
(1) Smith Barney Income Trust
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(Records relating to its function as investment
adviser to certain of the funds and administrator
to all of the Funds)
(3) Travelers Investment Management Company
One Tower Square
Hartford, CT 06183-2030
(Records relating to its function as investment
adviser to Smith Barney S&P 500 Advantage Fund)
(4) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(Records relating to its function as custodian)
(5) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(Records relating to its function as Transfer
Agent and Dividend Paying Agent)
Item 31. Management Services
Not Applicable
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of its
shareholders of the Series for the purpose of voting upon
the question of removal of a trustee or trustees of
Registrant when requested in writing to do so by the holders
of at least 10% of Registrant's outstanding shares.
Registrant undertakes further, in connection with the
meeting, to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940, as amended, relating to
communications with the shareholders of certain common-law
trusts.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, and the Investment Company Act of 1940, the
Registrant, SMITH BARNEY INVESTMENT TRUST, has duly caused
this registration statement to be signed on its behalf by
the undersigned, thereto duly authorized in the City of New
York, in the State of New York on the 29th day of August,
1995.
SMITH BARNEY
INVESTMENT TRUST
/s/Heath B. McLendon
Heath B. McLendon,
Chief
Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed below by
the following persons in the capacities and on the date
indicated.
/s/Heath B.
McLendon Chairman of the August 29, 1995
Heath B. McLendon Board
(Chief Executive
Officer)
/s/Lewis E. Daidone
Lewis E. Daidone Treasurer August 29, 1995
(Chief Financial
and Accounting
Officer)
/s/Herbert Barg
Herbert Barg Director August 29, 1995
/s/Alfred J.
Bianchetti Director August 29, 1995
Alfred J.
Bianchetti
/s/Martin Brody
Martin Brody Director August 29, 1995
/s/Dwight B. Crane
Dwight B. Crane Director August 29, 1995
/s/Burt N. Dorsett
Burt N. Dorsett Director August 29, 1995
/s/Elliot S. Jaffe
Elliot S. Jaffe Director August 29, 1995
/s/Stephen E.
Kaufman Director August 29, 1995
Stephen E. Kaufman
/s/Joseph J. McCann
Joseph J. McCann Director August 29, 1995
/s/Cornelius C.
Rose, Jr. Director August 29, 1995
Cornelius C. Rose,
Jr.
</TABLE>
SMITH BARNEY INCOME TRUST
AMENDMENT NO. 5 TO THE MASTER TRUST AGREEMENT
WHEREAS, Section 4.1 of the Master Trust Agreement of
Smith Barney Income Trust (the "Trust") dated October 17,
1991, as amended, authorizes the Trustees of the Trust to
issue classes of shares of any Sub-Trust or divide the
Shares of any Sub-Trust into classes, having different
dividend, liquidation, voting and other rights as the
Trustees may determine.
WHEREAS, the Trustees has previously established and
designated two classed of shares for each of the four Sub-
Trusts of the Trust: Smith Barney Limited Maturity Treasury
Fund, Smith Barney Limited Maturity Municipals Fund, Smith
Barney Intermediate Maturity New York Municipals Fund and
Smith Barney Intermediate Maturity California Municipals
Fund;
WHEREAS, the Trustees unanimously voted on July 20,
1994 to establish and designated a third class of shares of
each Sub-Trust as Class Y.
NOW THEREFORE, the undersigned Assistant Secretary of
the Trust hereby states as follows:
1. That Pursuant to the vote of Trustees, each of the
aforementioned Sub-Trusts be divided into an additional
class of shares established and designated as Class Y
shares. Such class of shares shall have the rights and
preferences as forth in the Prospectus of each Sub-Trust
dated January 29, 1995, as such Prospectus may be further
amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets her
hand this 20th day of July, 1995.
SMITH BARNEY INCOME TRUST
/s/ Caren Cunningham
By: Caren Cunningham
Title: Assistant Secretary
SMITH BARNEY INCOME TRUST
AMENDMENT NO. 6 TO MASTER TRUST AGREEMENT
(Change of Name of the Trust)
The undersigned, Assistant Secretary of Smith Barney Income
Trust (the "Trust"), does hereby certify that pursuant to
Article 1, Section 1.1 and Article VII, Section 7.3 of the
Master Trust Agreement dated October 17, 1991, as amended,
the following vote was duly adopted by the Board of Trustees
at a Regular Meeting of the Board held on July 19, 1995:
(Change of Name of the Trust)
That the name of the Trust previously
established and designated pursuant to the Trust's
Master Trust Agreement be modified and amended as
set forth below:
Current Name: Name as
Amended:
Smith Barney Income Trust Smith
Barney Investment Trust
IN WITNESS WHEREOF, the undersigned hereby sets her
hand this 15th day of August, 1995.
/s/ Caren Cunningham
By: Caren Cunningham
Title: Assistant
Secretary
CUSTODIAN SERVICES AGREEMENT
This Agreement is made as of _______, 1995 by and
between SMITH BARNEY INVESTMENT TRUST, a Massachusetts
business trust (the "Fund") and PNC BANK, NATIONAL
ASSOCIATION, a national banking association ("PNC Bank").
The Fund is registered as an open-end investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Fund wishes to retain PNC Bank to
provide custodian services and PNC Bank wishes to furnish
such services, either directly or through an affiliate or
affiliates, as more fully described herein. In
consideration of the premises and mutual covenants herein
contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized
Person" shall mean any officer of the Fund and any other
person, who is duly authorized by the Fund's Governing
Board, to give Oral and Written Instructions on behalf of
the Fund. Such persons are listed in the Certificate
attached hereto as the Authorized Persons Appendix, as such
Appendix may be amended in writing by the Fund's Governing
Board from time to time.
(b) "Book-Entry System." The term "Book-Entry
System" means Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor
or successors, and its nominee or nominees and any book
entry system maintained by an exchange registered with the
SEC under the 1934 Act.
(c) "CFTC." The term "CFTC" shall mean the
Commodities Futures Trading Commission.
(d) "Governing Board." The term "Governing
Board" shall mean the Fund's Board of Directors if the Fund
is a corporation or the Fund's Board of Trustees if the Fund
is a trust, or, where duly authorized, a competent committee
thereof.
(e) "Oral Instructions." The term "Oral
Instructions" shall mean oral instructions received by PNC
Bank from an Authorized Person or from a person reasonably
believed by PNC Bank to be an Authorized Person.
(f) "SEC." The term "SEC" shall mean the
Securities and Exchange Commission.
(g) "Securities and Commodities Laws." The term
"Securities and Commodities Laws" shall mean the "1933 Act"
which shall mean the Securities Act of 1933, the "1934 Act"
which shall mean the Securities Exchange Act of 1934, the
1940 Act, and the "CEA" which shall mean the Commodities
Exchange Act, as amended.
(h) "Shares." The term "Shares" shall mean the
shares of stock of any series or class of the Fund, or,
where appropriate, units of beneficial interest in a trust
where the Fund is organized as a Trust.
(i) "Property." The term "Property" shall mean:
(i) any and all securities and other
investment items which the Fund may from time to time
deposit, or cause to be deposited, with PNC Bank or which
PNC Bank may from time to time hold for the Fund;
(ii) all income in respect of any of such
securities or other investment items;
(iii) all proceeds of the sale of any of such
securities or investment items; and
(iv) all proceeds of the sale of securities
issued by the Fund, which are received by PNC Bank from
time to time, from or on behalf of the Fund.
(j) "Written Instructions." The term "Written
Instructions" shall mean written instructions signed by one
Authorized Person and received by PNC Bank. The
instructions may be delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to
provide custodian services to the Fund, and PNC Bank accepts
such appointment and agrees to furnish such services.
3. Delivery of Documents. The Fund has provided or,
where applicable, will provide PNC Bank with the following:
(a) certified or authenticated copies of the
resolutions of the Fund's Governing Board, approving the
appointment of PNC Bank or its affiliates to provide
services;
(b) a copy of the Fund's most recent effective
registration statement;
(c) a copy of the Fund's advisory agreement or
agreements;
(d) a copy of the Fund's distribution agreement
or agreements;
(e) a copy of the Fund's administration
agreements if PNC Bank is not providing the Fund with such
services; (f) copies of any shareholder
servicing agreements made in respect of the Fund; and
(g) certified or authenticated copies of any and
all amendments or supplements to the foregoing.
4. Compliance with Government Rules and Regulations.
PNC Bank undertakes to comply with all applicable
requirements of the Securities and Commodities Laws and any
laws, rules and regulations of governmental authorities
having jurisdiction with respect to all duties to be
performed by PNC Bank hereunder. Except as specifically set
forth herein, PNC Bank assumes no responsibility for such
compliance by the Fund.
5. Instructions. Unless otherwise provided in this
Agreement, PNC Bank shall act only upon Oral and Written
Instructions. PNC Bank shall be entitled to rely upon any
Oral and Written Instructions it receives from an Authorized
Person (or from a person reasonably believed by PNC Bank to
be an Authorized Person) pursuant to this Agreement. PNC
Bank may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with the
provisions of organizational documents or this Agreement or
of any vote, resolution or proceeding of the Fund's
Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PNC Bank Written
Instructions confirming Oral Instructions so that PNC Bank
receives the Written Instructions by the close of business
on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not
received by PNC Bank shall in no way invalidate the
transactions or enforceability of the transactions
authorized by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no
liability to the Fund in acting upon Oral or Written
Instructions provided such instructions reasonably appear to
have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt
as to any action it should or should not take, PNC Bank may
request directions or advice, including Oral or Written
Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in
doubt as to any questions of law pertaining to any action it
should or should not take, PNC Bank may request advice at
its own cost from such counsel of its own choosing (who may
be counsel for the Fund, the Fund's advisor or PNC Bank, at
the option of PNC Bank).
(c) Conflicting Advice. In the event of a
conflict between directions, advice or Oral or Written
Instructions PNC Bank receives from the Fund, and the advice
it receives from counsel, PNC Bank shall be entitled to rely
upon and follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be
protected in any action it takes or does not take in
reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and
which PNC Bank believes, in good faith, to be consistent
with those directions, advice or Oral or Written
Instructions.
Nothing in this paragraph shall be construed so as to
impose an obligation upon PNC Bank (i) to seek such
directions, advice or Oral or Written Instructions, or (ii)
to act in accordance with such directions, advice or Oral or
Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PNC
Bank's properly taking or not taking such action.
7. Records. The books and records pertaining to the
Fund which are in the possession of PNC Bank, shall be the
property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and
other applicable securities laws, rules and regulations.
The Fund, or the Fund's Authorized Persons, shall have
access to such books and records at all time during PNC
Bank's normal business hours. Upon the reasonable request
of the Fund, copies of any such books and records shall be
provided by PNC Bank to the Fund or to an Authorized Person
of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep
confidential all records of the Fund and information
relative to the Fund and its shareholders (past, present and
potential), unless the release of such records or
information is otherwise consented to, in writing, by the
Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PNC Bank
may be exposed to civil or criminal contempt proceedings or
when required to divulge. The Fund further agrees that,
should PNC Bank be required to provide such information or
records to duly constituted authorities (who may institute
civil or criminal contempt proceedings for failure to
comply), PNC Bank shall not be required to seek the Fund's
consent prior to disclosing such information.
9. Cooperation with Accountants. PNC Bank shall
cooperate with the Fund's independent public accountants and
shall take all reasonable action in the performance of its
obligations under this Agreement to ensure that the
necessary information is made available to such accountants
for the expression of their opinion, as required by the
Fund.
10. Disaster Recovery. PNC Bank shall enter into and
shall maintain in effect with appropriate parties one or
more agreements making reasonable provision for emergency
use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of
equipment failures, PNC Bank shall, at no additional expense
to the Fund, take reasonable steps to minimize service
interruptions but shall have no liability with respect
thereto.
11. Compensation. As compensation for custody
services rendered by PNC Bank during the term of this
Agreement, the Fund will pay to PNC Bank a fee or fees as
may be agreed to in writing from time to time by the Fund
and PNC Bank.
12. Indemnification. The Fund agrees to indemnify and
hold harmless PNC Bank and its nominees from all taxes,
charges, expenses, assessment, claims and liabilities
(including, without limitation, liabilities arising under
the Securities and Commodities Laws and any state and
foreign securities and blue sky laws, and amendments
thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or
indirectly from any action which PNC Bank takes or does not
take (i) at the request or on the direction of or in
reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PNC Bank, nor any of its
nominees, shall be indemnified against any liability to the
Fund or to its shareholders (or any expenses incident to
such liability) arising out of PNC Bank's own willful
misfeasance, bad faith, negligence or reckless disregard of
its duties and obligations under this Agreement.
13. Responsibility of PNC Bank. PNC Bank shall be
under no duty to take any action on behalf of the Fund
except as specifically set forth herein or as may be
specifically agreed to by PNC Bank, in writing. PNC Bank
shall be obligated to exercise care and diligence in the
performance of its duties hereunder, to act in good faith
and to use its best effort, within reasonable limits, in
performing services provided for under this Agreement. PNC
Bank shall be responsible for its own negligent failure to
perform its duties under this Agreement. Notwithstanding the
foregoing, PNC Bank shall not be responsible for losses
beyond its control, provided that PNC Bank has acted in
accordance with the standard of care set forth above; and
provided further that PNC Bank shall only be responsible for
that portion of losses or damages suffered by the Fund that
are attributable to the negligence of PNC Bank.
Without limiting the generality of the foregoing or of
any other provision of this Agreement, PNC Bank, in
connection with its duties under this Agreement, shall not
be under any duty or obligation to inquire into and shall
not be liable for (a) the validity or invalidity or
authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to
the applicable requirements of this Agreement, and which PNC
Bank reasonably believes to be genuine; or (b) delays or
errors or loss of data occurring by reason of circumstances
beyond PNC Bank's control, including acts of civil or
military authority, national emergencies, labor
difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
Notwithstanding anything in this Agreement to the
contrary, PNC Bank shall have no liability to the Fund for
any consequential, special or indirect losses or damages
which the Fund may incur or suffer by or as a consequence of
PNC Bank's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was
known by PNC Bank.
14. Description of Services.
(a) Delivery of the Property. The Fund will
deliver or arrange for delivery to PNC Bank, all the
property owned by the Fund, including cash received as a
result of the distribution of its Shares, during the period
that is set forth in this Agreement. PNC Bank will not be
responsible for such property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank,
acting upon Written Instructions, shall open and maintain
separate account(s) in the Fund's name using all cash
received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written
Instructions, PNC Bank shall open separate custodial
accounts for each separate series, class or portfolio of the
Fund and shall hold in such account(s) all cash received
from or for the accounts of the Fund specifically designated
to each separate series, class or portfolio. PNC Bank shall
make cash payments from or for the account of the Fund only
for:
(i) purchases of securities in the name of
the Fund or PNC Bank or PNC Bank's nominee as provided in
sub-paragraph j and for which PNC Bank has received a copy
of the broker's or dealer's confirmation or payee's invoice,
as appropriate;
(ii) purchase or redemption of Shares of the
Fund delivered to PNC Bank;
(iii) payment of, subject to Written
Instructions, interest, taxes, administration, accounting,
distribution, advisory, management fees or similar expenses
which are to be borne by the Fund;
(iv) payment to, subject to receipt of
Written Instructions, the Fund's transfer agent, as agent
for the shareholders, an amount equal to the amount of
dividends and distributions stated in the Written
Instructions to be distributed in cash by the transfer agent
to shareholders, or, in lieu of paying the Fund's transfer
agent, PNC Bank may arrange for the direct payment of cash
dividends and distributions to shareholders in accordance
with procedures mutually agreed upon from time to time by
and among the Fund, PNC Bank and the Fund's transfer agent;
(v) payments, upon receipt of Written
Instructions, in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund
and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends
received with respect to securities sold short; payments
made to a sub-custodian pursuant to provisions in sub
paragraph c of this Paragraph; and
(viii) payments, upon Written Instructions made
for other proper Fund purposes. PNC Bank is hereby
authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian
for the account of the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities
received by it for the account of the Fund in a separate
account that physically segregates such securities from
those of any other persons, firms or corporations, except
for securities held in a Book-Entry System. All such
securities shall be held or disposed of only upon Written
Instructions of the Fund pursuant to the terms of this
Agreement. PNC Bank shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express terms of
this Agreement and upon Written Instructions, accompanied by
a certified resolution of the Fund's Governing Board,
authorizing the transaction. In no case may any member of
the Fund's Governing Board, or any officer, employee or
agent of the Fund withdraw any securities. At PNC Bank's
own expense and for its own convenience, PNC Bank may enter
into sub-custodian agreements with other banks or trust
companies to perform duties described in this sub-paragraph
c. Such bank or trust company shall have an aggregate
capital, surplus and undivided profits, according to its
last published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of PNC
Bank, or at least twenty million dollars ($20,000,000) if
such bank or trust company is not a subsidiary or
affiliate of PNC Bank. In addition, such bank or trust
company must agree to comply with the relevant provisions of
the 1940 Act and other applicable rules and regulations.
PNC Bank shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Fund harmless from PNC Bank's own (or any sub-custodian
chosen by PNC Bank under the terms of this sub-paragraph c)
acts or omissions, under the standards of care provided for
herein.
(d) Transactions Requiring Instructions. Upon
receipt of Oral or Written Instructions and not otherwise,
PNC Bank, directly or through the use of the Book-Entry
System, shall:
(i) deliver any securities held for the Fund
against the receipt of payment for the sale of such
securities;
(ii) execute and deliver to such persons as
may be designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any
securities may be exercised;
(iii) deliver any securities to the issuer
thereof, or its agent, when such securities are called,
redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is
to be delivered to PNC Bank;
(iv) deliver any securities held for the Fund
against receipt of other securities or cash issued or paid
in connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any
conversion privilege;
(v) deliver any securities held for the Fund
to any protective committee, reorganization committee or
other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the
terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery;
(vi) make such transfer or exchanges of the
assets of the Fund and take such other steps as shall be
stated in said Oral or Written Instructions to be for the
purpose of effectuating a duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to the Fund
to any bank or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released only
upon payment to PNC Bank of the monies borrowed, except that
in cases where additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by
the Fund in connection with any repurchase agreement entered
into on behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection with
such repurchase agreements, but only upon the delivery of
the securities;
(ix) release and deliver or exchange
securities owned by the Fund in connection with any
conversion of such securities, pursuant to their terms, into
other securities;
(x) release and deliver securities owned by
the Fund for the purpose of redeeming in kind shares of the
Fund upon delivery thereof to PNC Bank; and
(xi) release and deliver or exchange
securities owned by the Fund for other corporate purposes.
PNC Bank must also receive a certified resolution describing
the nature of the corporate purpose and the name and address
of the person(s) to whom delivery shall be made when such
action is pursuant to sub-paragraph d above.
(e) Use of Book-Entry System. The Fund shall deliver
to PNC Bank certified resolutions of the Fund's Governing
Board approving, authorizing and instructing PNC Bank on a
continuous and on-going basis, to deposit in the Book-Entry
System all securities belonging to the Fund eligible for
deposit therein and to utilize the Book-Entry System to the
extent possible in connection with settlements of purchases
and sales of securities by the Fund, and deliveries and
returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with
borrowings. PNC Bank shall continue to perform such duties
until it receives Written or Oral Instructions authorizing
contrary actions(s).
To administer the Book-Entry System properly, the
following provisions shall apply:
(i) With respect to securities of the Fund
which are maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the records of PNC
Bank shall identify by Book-Entry or otherwise those
securities belonging to the Fund. PNC Bank shall furnish
the Fund a detailed statement of the Property held for the
Fund under this Agreement at least monthly and from time to
time and upon written request.
(ii) Securities and any cash of the Fund
deposited in the Book-Entry System will at all times be
segregated from any assets and cash controlled by PNC Bank
in other than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities. PNC
Bank and its sub-custodian, if any, will pay out money only
upon receipt of securities and will deliver securities only
upon the receipt of money.
(iii) All books and records maintained by PNC
Bank which relate to the Fund's participation in the Book
Entry System will at all times during PNC Bank's regular
business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be
furnished with all information in respect of the services
rendered to it as it may require.
(iv) PNC Bank will provide the Fund with
copies of any report obtained by PNC Bank on the system of
internal accounting control of the Book-Entry System
promptly after receipt of such a report by PNC Bank. PNC
Bank will also provide the Fund with such reports on its own
system of internal control as the Fund may reasonably
request from time to time.
(f) Registration of Securities. All Securities
held for the Fund which are issued or issuable only in
bearer form, except such securities held in the Book-Entry
System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name
of the Fund; PNC Bank; the Book-Entry System; a sub-
custodian; or any duly appointed nominee(s) of the Fund, PNC
Bank, Book-Entry system or sub-custodian. The Fund reserves
the right to instruct PNC Bank as to the method of
registration and safekeeping of the securities of the Fund.
The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper
form for transfer, or to register its registered nominee or
in the name of the Book-Entry System, any securities which
it may hold for the account of the Fund and which may from
time to time be registered in the name of the Fund. PNC
Bank shall hold all such securities which are not held in
the Book-Entry System in a separate account for the Fund in
the name of the Fund physically segregated at all times from
those of any other person or persons.
(g) Voting and Other Action. Neither PNC Bank
nor its nominee shall vote any of the securities held
pursuant to this Agreement by or for the account of the
Fund, except in accordance with Written Instructions. PNC
Bank, directly or through the use of the Book-Entry System,
shall execute in blank and promptly deliver all notice,
proxies, and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not
the Fund then Written or Oral Instructions must designate
the person(s) who owns such securities.
(h) Transactions Not Requiring Instructions. In
the absence of contrary Written Instructions, PNC Bank is
authorized to take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account
of the Fund, all income, dividends, distributions, coupons,
option premiums, other payments and similar items, included
or to be included in the Property, and, in addition,
promptly advise the Fund of such receipt and credit such
income, as collected, to the Fund's custodian account;
(B) endorse and deposit for collection,
in the name of the Fund, checks, drafts, or other orders for
the payment of money;
(C) receive and hold for the account of
the Fund all securities received as a distribution on the
Fund's portfolio securities as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to any
portfolio securities belonging to the Fund held by PNC Bank
hereunder;
(D) present for payment and collect the
amount payable upon all securities which may mature or be
called, redeemed, or retired, or otherwise become payable on
the date such securities become payable; and
(E) take any action which may be
necessary and proper in connection with the collection and
receipt of such income and other payments and the
endorsement for collection of checks, drafts, and other
negotiable instruments.
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver
or cause to be delivered Property against payment or other
consideration or written receipt therefor in the following
cases:
(1) for examination by a broker or
dealer selling for the account of the Fund in accordance
with street delivery custom;
(2) for the exchange of interim
receipts or temporary securities for definitive securities;
and
(3) for transfer of securities
into the name of the Fund or PNC Bank or nominee of either,
or for exchange of securities for a different number of
bonds,certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same
interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to
be delivered to PNC Bank.
(B) Unless and until PNC Bank receives
Oral or Written Instructions to the contrary, PNC Bank
shall:
(1) pay all income items held by
it which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the
Fund;
(2) collect interest and cash
dividends received, with notice to the Fund, to the Fund's
account;
(3) hold for the account of the
Fund all stock dividends, rights and similar securities
issued with respect to any securities held by PNC Bank; and
(4) execute as agent on behalf of
the Fund all necessary ownership certificates required by
the Internal Revenue Code or the Income Tax Regulations of
the United States Treasury Department or under the laws of
any State now or hereafter in effect, inserting the Fund's
name, on such certificate as the owner of the securities
covered thereby, to the extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written
or Oral Instructions establish and maintain segregated
account(s) on its records for and on behalf of the Fund.
Such account(s) may be used to transfer cash and securities,
including securities in the Book-Entry System:
(A) for the purposes of compliance by
the Fund with the procedures required by a securities or
option exchange, providing such procedures comply with the
1940 Act and any releases of the SEC relating to the
maintenance of segregated accounts by registered investment
companies; and
(B) Upon receipt of Written
Instructions, for other proper corporate purposes.
(ii) PNC Bank may enter into separate
custodial agreements with various futures commission
merchants ("FCMs") that the Fund uses ("FCM Agreement").
Pursuant to an FCM Agreement, the Fund's margin deposits in
any transactions involving futures contracts and options on
futures contracts will be held by PNC Bank in accounts ("FCM
Account") subject to the disposition by the FCM involved in
such contracts and in accordance with the customer contract
between FCM and the Fund ("FCM Contract"), SEC rules and the
rules of the applicable commodities exchange. Such FCM
Agreements shall only be entered into upon receipt of
Written Instructions from the Fund which state that:
(A) a customer agreement between the
FCM and the Fund has been entered into; and
(B) the Fund is in compliance with all
the rules and regulations of the CFTC. Transfers of initial
margin shall be made into a FCM Account only upon Written
Instructions; transfers of premium and variation margin may
be made into a FCM Account pursuant to Oral Instructions.
Transfers of funds from a FCM
Account to the FCM for which PNC Bank holds such an account
may only occur upon certification by the FCM to PNC Bank
that pursuant to the FCM Agreement and the FCM Contract, all
conditions precedent to its right to give PNC Bank such
instructions have been satisfied.
(iii) PNC Bank shall arrange for the
establishment of IRA custodian accounts for such share-
holders holding Shares through IRA accounts, in accordance
with the Fund's prospectuses, the Internal Revenue Code
(including regulations), and with such other procedures as
are mutually agreed upon from time to time by and among the
Fund, PNC Bank and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall
settle purchased securities upon receipt of Oral or Written
Instructions from the Fund or its investment advisor(s) that
specify:
(i) the name of the issuer and the title of
the securities, including CUSIP number if applicable;
(ii) the number of shares or the principal
amount purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such
purchase; and
(vi) the name of the person from whom or the
broker through whom the purchase was made. PNC Bank shall
upon receipt of securities purchased by or for the Fund pay
out of the moneys held for the account of the Fund the total
amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Oral or
Written Instructions.
(k) Sales of Securities. PNC Bank shall settle
sold securities upon receipt of Oral or Written Instructions
from the Fund that specify:
(i) the name of the issuer and the title of
the security, including CUSIP number if applicable;
(ii) the number of shares or principal amount
sold, and accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund
upon such sale;
(vi) the name of the broker through whom or
the person to whom the sale was made; and
(vii) the location to which the security must
be delivered and delivery deadline, if any. PNC Bank shall
deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the total
amount payable is the same as was set forth in the Oral or
Written Instructions. Subject to the foregoing, PNC Bank
may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in
accordance with the customs prevailing among dealers in
securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the
following reports:
(A) such periodic and special reports
as the Fund may reasonably request;
(B) a monthly statement summarizing all
transactions and entries for the account of the Fund,
listing the portfolio securities belonging to the Fund with
the adjusted average cost of each issue and the market value
at the end of such month, and stating the cash account of
the Fund including disbursement;
(C) the reports to be furnished to the
Fund pursuant to Rule 17f-4; and
(D) such other information as may be
agreed upon from time to time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the
Fund any proxy statement, proxy material, notice of a call
or conversion or similar communication received by it as
custodian of the Property. PNC Bank shall be under no other
obligation to inform the Fund as to such actions or events.
(m) Collections. All collections of monies or
other property, in respect, or which are to become part of
the Property (but not the safekeeping thereof upon receipt
by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time
after proper demands have been made, PNC Bank shall notify
the Fund in writing, including copies of all demand letters,
any written responses, memoranda of all oral responses and
telephonic demands thereto, and await instructions from the
Fund. PNC Bank shall not be obliged to take legal action
for collection unless and until reasonably indemnified to
its satisfaction. PNC Bank shall also notify the Fund as
soon as reasonably practicable whenever income due on
securities is not collected in due course.
15. Duration and Termination. This Agreement shall
continue until terminated by the Fund or by PNC Bank on
sixty (60) days' prior written notice to the other party.
In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the
shareholders of the Fund to dissolve or to function without
a custodian of its cash, securities or other property), PNC
Bank shall not deliver cash, securities or other property of
the Fund to the Fund. It may deliver them to a bank or
trust company of PNC Bank's choice, having an aggregate
capital, surplus and undivided profits, as shown by its last
published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under
terms similar to those of this Agreement. PNC Bank shall
not be required to make any such delivery or payment until
full payment shall have been made to PNC Bank of all of its
fees, compensation, costs and expenses. PNC Bank shall have
a security interest in and shall have a right of setoff
against Property in the Fund's possession as security for
the payment of such fees, compensation, costs and expenses.
16. Notices. All notices and other communications,
including Written Instructions, shall be in writing or by
confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address: Airport Business Center, International Court
2, 200 Stevens Drive, Lester, Pennsylvania 19113, marked for
the attention of the Custodian Services Department (or its
successor) (b) if to the Fund, at the address of the Fund;
or (c) if to neither of the foregoing, at such other address
as shall have been notified to the sender of any such notice
or other communication. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall
be deemed to have been given immediately. If notice is sent
by first-class mail, it shall be deemed to have been given
five days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day
it is delivered.
17. Amendments. This Agreement, or any term hereof,
may be changed or waived only by a written amendment, signed
by the party against whom enforcement of such change or
waiver is sought. 18. Delegation. PNC Bank may
assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i)
PNC Bank gives the Fund thirty (30) days prior written
notice; (ii) the delegate agrees with PNC Bank to comply
with all relevant provisions of the 1940 Act; and (iii) PNC
Bank and such delegate promptly provide such information as
the Fund may request, and respond to such questions as the
Fund may ask, relative to the assignment, including (without
limitation) the capabilities of the delegate.
19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument. 20. Further Actions. Each party
agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes
hereof.
21. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties and
supersedes all prior agreements and understandings relating
to the subject matter hereof, provided that the parties may
embody in one or more separate documents their agreement, if
any, with respect to delegated duties and/or Oral
Instructions. The captions in this Agreement are included
for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect
their construction or effect.
This Agreement shall be deemed to be a contract made in
Pennsylvania and governed by Pennsylvania law, without
regard to principles of conflicts of law. If any provision
of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below
on the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By:
Title:
SMITH BARNEY
INVESTMENT TRUST
By:
Title:
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
21
