Securities Act Registration No. 33-43446
Investment Company Act Registration No. 811-6444
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. 25 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 25
__________________ [ ]
Smith Barney Investment Trust
(a Massachusetts Business Trust)
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street
New York, New York 10013
(Address of Principal Executive Offices)
(212) 816-6474
(Registrants Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Investment Trust
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
_____________________
Approximate Date of Proposed Public Offering:
Continuous.
It is proposed that this filing will become effective
(check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] pursuant to paragraph (b)
of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
On (date) pursuant to paragraph (a)(1) of Rule 485
[XX] 75 days after filing pursuant to paragraph (a)(2)
of rule 485
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates
a new effective date for a previously filed
post effective amendment.
Title of Securities Being Registered: Shares of
Beneficial
PART A
Smith Barney Mutual Funds
P R O S P E C T U S
U.S. 5000
Index Fund
Class A and D Shares
- --------------------------------------------------------------------------------
October 13, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
U.S. 5000 Index Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
More on the fund's investments.............................................. 6
Fund's structure............................................................ 7
Management.................................................................. 8
Choosing a class of shares to buy........................................... 9
Buying shares............................................................... 10
Exchanging shares........................................................... 11
Redeeming shares............................................................ 11
Other things to know
about share transactions.................................................... 13
Smith Barney 401(k) and
ExecChoice(TM) programs..................................................... 14
Dividends, distributions and taxes.......................................... 15
Share price................................................................. 16
</TABLE>
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks to offer long-term capital growth by approximating the perfor-
mance of the Wilshire 5000 Index (the "Wilshire 5000 Index").
The fund is structured as a "feeder fund." The fund does not buy individual
securities directly. Instead, it invests in a corresponding mutual fund- the US
Equity Index Master Portfolio ("Master Portfolio"). The Master Portfolio in
turn, invests in securities in accordance with investment objectives, policies
and limitations that are similar to those of the fund.
While this structure is designed to reduce costs, it may not do so. As a
result, a feeder fund might encounter operational or other complications.
The investment adviser for the Master Portfolio in which the fund invests is
Barclays Global Fund Advisors ("BGFA").
Principal Investment Strategies
Key investments. The Master Portfolio invests in a sampling of securities that
are selected and weighted to result in investment characteristics comparable to
the Wilshire 5000 Index and performance that will correlate with the
performance
of the Wilshire 5000 Index.
The fund will invest in the Master Portfolio, which invests in two other Master
Portfolios of BGFA-the Extended Index Master Portfolio ("Extended Index Portfo-
lio") and the S&P 500 Index Master Portfolio ("S&P 500 Index Portfolio") (to-
gether, the "Underlying Portfolios") that invest in a sampling of securities
contained in the Wilshire 4500 Index and the S&P 500 Index, respectively, in
order to approximate, before fee and expenses, the performance of the Wilshire
5000 Index.
The returns for the fund are likely to be below that of the Wilshire 5000 Index
because the fund, the Master Portfolio and the Underlying Portfolios have fees
and transaction expenses while the Wilshire 5000 Index, the Wilshire 4500 Index
and the S&P 500 Index have none.
The Master Portfolio invests at least 90% of its assets, through the Underlying
Portfolios, in common stocks included in the Wilshire 5000 Index, which repre-
sents the performance of a broad range of U.S. stocks.
The Master Portfolio uses statistical sampling techniques based on capitaliza-
tion, industry exposures, dividend yield, price/earnings ratio, price/book
ratio and earnings growth.
Selection process. The Master Portfolio follows an indexed or "passively man-
aged" approach to investing. The means that Barclays selects securities
designed to approximate the investment characteristics and performance of the
Index. BGFA manages the Master Portfolio as a "pure" index fund.
U.S. 5000 Index Fund
2
<PAGE>
This means that BGFA does not evaluate individual companies to
identify attractive investment candidates. Instead, BGFA attempts to mirror the
composition of the Index as closely as possible by adjusting the Master Portfo-
lio's portfolio daily to reflect the companies included in the index and their
weightings. The Master Portfolio does not mirror the index exactly because,
unlike the index, the fund must maintain a portion of its assets in cash and
liquid securities to meet redemption requests and pay the fund's expenses.
The Wilshire 5000 Index, an unmanaged capitalization-weighted index of over
7,000 U.S. equity
securities, consists of all the U.S. stocks regularly traded on the New York
and American Stock Exchanges and the Nasdaq over-the-counter market for which
daily pricing is available.
Principal risks of investing in the fund
Investors could lose money on their investments in the fund, or the fund may
not perform as well as other investments, if:
.The Wilshire 5000 Index goes down, or performs poorly relative to other U.S.
equity indexes or individual stocks
.An adverse company specific event, such as an unfavorable earnings report,
negatively affects the stock price of one of the larger companies in the
Wilshire 5000 Index
.The stocks of companies which comprise the Wilshire 5000 Index fall out of
favor with investors
The fund is exposed to the risks of investing in common stocks as well as the
additional risks of investing in foreign securities, which can be affected by
currency, political, legal, regulatory and operational factors.
The fund is expected to have the same volatility as the U.S. stock market as a
whole. Additionally, the Wilshire 5000 Index includes smaller capitalization
companies whose stocks tend to have more price volatility than those of larger
companies.
The fund may not track the index perfectly because differences between the
Wilshire 5000 Index and the fund's portfolio can cause differences in
performance. In addition, expenses and transaction costs, the size and
frequency of cash flows into and out of the fund, and the differences
between how and when the fund and the index are valued can cause
differences in performance.
BGFA uses various techniques, such as buying and selling futures contracts, to
increase or decrease the fund's exposure to changing security prices or other
factors that affect security values. If BGFA's strategies do not work as
intended, the fund may not achieve its objective.
Smith Barney Mutual Funds
3
<PAGE>
The Master Portfolio may enter into transactions in futures contracts and
options on futures contracts, each of which involves risk. The futures con-
tracts and options on futures contracts the Master Portfolio may purchase are
considered derivatives. Derivatives are financial instruments whose values are
derived, at least in part, from the prices of other securities or specified
assets, indices or rates. The Master Portfolio intends to use futures contracts
and options as part of its short-term liquidity holdings and/or as substitutes
for comparable market positions in the underlying securities. Some derivatives
may be more sensitive than direct securities to changes in interest rates or
sudden market moves. Some derivatives also may be susceptible to fluctuations
in yield or value because of their structure or contract terms.
Who may want to invest The fund may be an appropriate investment if you:
.Are seeking to participate in the long term growth potential of U.S. stocks
.Are seeking an investment which tracks the performance of the Wilshire 5000
Index
.Are looking for an investment with potentially greater return but higher risk
than a fund investing primarily in fixed income securities
.Are willing to accept the risks of the stock market
Performance
The fund does not yet have a sufficient operating history to generate the per-
formance information which other Smith Barney funds show in bar and table form
in this location of the prospectus.
U.S. 5000 Index Fund
4
<PAGE>
Fees table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class D
<S> <C> <C>
Maximum sales charge (load) imposed
on purchases None None
Maximum deferred sales charge (load)
(as a % of the lower of net asset value at
purchase or redemption) None None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A Class D
<S> <C> <C>
Management fee* % %
Service (12b-1) fees None
Other expenses**
Total annual fund operating expenses
</TABLE>
* The "Management Fee" includes an investment management fee payable by the
Master Portfolio and an administration fee payable by the fund.
** The fund is new, and therefore, has no historical expense data. The amount
set forth in "Other Expenses" represents the aggregate amount that is pay-
able by both the Master Portfolios and the fund, and have been estimated
based on expenses the fund expects to incur during its fiscal year.
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
.You invest $10,000 in the fund for the period shown
.You redeem all shares at the end of the period
.Your investment has a 5% return each year
.The fund's operating expenses remain the same
Number of years you own your shares*
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class D $ $ $ $
</TABLE>
* Reflects costs at both the fund and Master Portfolio levels.
Smith Barney Mutual Funds
5
<PAGE>
More on the fund's investments
The fund seeks long-term growth of capital by investing in common stocks of
U.S. companies across all capitalization ranges. The goal is to provide a port-
folio that approximates the investment characteristics and performance of the
Wilshire 5000 Index.
The Master Portfolio invests substantially all of its assets in two other Mas-
ter Portfolios of BGFA. The Extended Index Portfolio invests substantially
all of its assets in a representative sample of
stocks comprising the Wilshire 4500 Index. The S&P
500 Index Portfolio, invests substantially all of its assets in stocks compris-
ing the S&P 500 Index. The Master Portfolio's assets will be invested in the
Underlying Portfolios in proportions adjusted periodically to maintain the cap-
italization range of the Wilshire 5000 Index.
Because it can be very expensive to buy and sell all of the securities in the
Wilshire 5000 Index, the fund employs a "sampling" technique to approximate
Wilshire 5000 Index characteristics such as capitalization and industry
weight using fewer securities than contained in the Wilshire 5000 Index.
In seeking to match the performance of the Wilshire 5000 Index, the Master
Portfolio also may engage in futures and options transactions and other deriva-
tive securities transactions and lend its portfolio securities, each of which
involves risk. Although the Master Portfolio attempts to be fully invested at
all times in securities comprising the Wilshire 5000 Index and in futures con-
tracts and options on futures contracts, the Master Portfolio may also invest
up to 10% of its assets in high-quality money market instruments to provide
liquidity. The Master Portfolio also may invest up to 15% of the value of its
net assets in illiquid securities, including repurchase agreements providing
for settlement in more than seven days.
The Master Portfolio maintains an equity exposure for a cash balance by pur-
chasing appropriate futures contracts. Futures contracts are not used for lev-
erage. The Master Portfolio seeks to remain fully invested at all times,
without a significant cash balance.
U.S. 5000 Index Fund
6
<PAGE>
Fund's Structure
The fund is a separate series of Smith Barney Investment Trust, a Massachusetts
business trust. The fund is a feeder fund in a master/feeder structure. Accord-
ingly, the fund invests all of its assets in the Master Portfolio. The Master
Portfolio seeks to provide investment results that match as closely as practi-
cable, before fees and expenses, the performance of the Wilshire 5000 Index.
In addition to selling its shares to the fund, the Master Portfolio has and
may continue to sell its shares to certain other mutual funds or other
accredited investors. The expenses and, correspondingly, the returns of
other investment options in the Master Portfolio may differ from those
of the fund.
As other investors invest their assets in the Master
Portfolio, certain economic efficiencies may be realized with respect to the
Master Portfolio. For example, fixed expenses that otherwise would have been
borne solely by the fund (and the other existing interestholders in the Master
Portfolio) would be spread across a larger asset base as more funds invest in
the Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from the Master Portfolio, the economic efficiencies that should be
available through investment in the Master Portfolio
may not be fully achieved or maintained. In addition, given the relatively com-
plex nature of the master/feeder structure, accounting and operational diffi-
culties could occur. For example, coordination of calculation of met asset
value would be affected at the master and/or feeder level.
Fund shareholders may be asked to vote on matters concerning the Master Portfo-
lio.
The fund may withdraw its investments in the Master Portfolio if the Board
determines that it is in the best interests of the fund and its shareholders to
do so. Upon any such withdrawal, the Board would consider what action might be
taken, including the investment of all the assets of the fund in another pooled
investment entity having the same investment objective as the fund, direct man-
agement of a portfolio by SSBC or the hiring of a sub-advisor to manage the
fund's assets.
Investment of the fund's assets in the Master Portfolio is not a fundamental
policy of the fund and a shareholder vote is not required for the fund to with-
draw its investment from the Master Portfolio.
Smith Barney Mutual Funds
7
<PAGE>
Management
A feeder fund does not need an investment manager. The Master Portfolio's
investment advisor is BGFA. BGFA is a wholly
owned direct subsidiary of Barclays Global Investors, N.A. (which is an indi-
rect subsidiary of Barclays Bank PLC) and is located at 45 Fremont Street, San
Francisco, California 94105. BGFA has provided asset management, administration
and advisory services for over 25 years. BGFA receives a monthly advisory fee
from the Master Portfolio at an annual rate equal to [ ]% of the Master Portfo-
lio's average daily net assets, [ ]% of the average daily net assets of the
Extended Index Portfolio and [ ]% of the average daily net assets of the S&P
500 Index Portfolio. From time to time, BGFA may waive such fees in whole or in
part. Any such waiver will reduce the expenses of the Master Portfolio, and
accordingly, have a favorable impact on its performance.
The Fund bears a pro rata portion of the investment advisory fees paid by the
Master Portfolio and the Underlying Portfolios, as well as certain other fees
paid by the Master Portfolio, such as accounting, legal and Securities and
Exchange Commission registration fees.
Administrator The fund's administrator is SSBC Fund Management Inc. SSBC's
address is 388 Greenwich Street, New York, New York 10013. SSBC is an affiliate
of Salomon Smith Barney Inc. SSBC and Salomon Smith Barney are subsidiaries of
Citigroup Inc. Citigroup businesses produce a broad range of financial servic-
es--asset management, banking and consumer finance, credit and charge cards,
insurance, investments, investment banking and trading--and use diverse chan-
nels to make them available to consumer and corporate customers around the
world.
Administration fees For its services, SSBC receives a fee equal on an annual
basis to [ ]% of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the fund's shares. A selling group consisting of Salomon Smith Barney and
other broker-dealers sells fund shares to the public.
Distribution plans The fund has adopted a Rule 12b-1 service plan for its Class
A shares. Under the plan, Class A shares pay a service fee. The fee for Class A
shares is an ongoing expense and, over time, may cost you more than other types
of sales charges.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue,
U.S. 5000 Index Funds
8
<PAGE>
could have an adverse impact on the fund. The cost of addressing the Year 2000
issue, if substantial, could adversely affect companies and governments that
issue securities held by the fund. SSBC and Salomon Smith Barney are addressing
the Year 2000 issue for their systems. The fund has been informed by other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guaran-
tee the efforts of the fund, which are limited to requesting and receiving
reports from its service providers, or the efforts of its service providers to
correct the problem will be successful.
The Master Portfolio's investment advisor and principal service providers have
also advised the Master Portfolio that they are working on any necessary
changes to their systems and that they expect their systems to be Year 2000
compliant in time. There can, of course, be no assurance of success by either
the Fund's or the Master Portfolio's service providers. In addition, because
the Year 2000 Problem affects virtually all organizations, the issuers in whose
securities the Master Portfolio invests and the economy as a whole also could
be adversely impacted by the Year 2000 Problem. The extent of such impact can-
not be predicted.
Choosing a class of shares to buy
You may purchase Class A shares which are sold at net asset value with no ini-
tial or deferred sales charge. Class A shares are subject to an ongoing service
fee.
You may purchase Class D shares only if you are participating in certain
investment programs which charge a fee for participation, including the Smith
Barney 401(k) Platform program. Class D shares are also offered to tax-exempt
employee benefit and retirement plans of Salomon Smith Barney and its affili-
ates. For more information about these programs, please contact a Salomon Smith
Barney Financial Consultant.
You may buy shares from:
.A Salomon Smith Barney Financial Consultant
.An investment dealer in the selling group or a broker that clears through Sal-
omon Smith Barney--a dealer representative
.The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums Minimum initial and additional investment amounts vary
depending on the nature of your investment account.
Smith Barney Mutual Funds
9
<PAGE>
<TABLE>
<CAPTION>
Initial Additional
<S> <C> <C>
General $1,000 $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts $ 250 $50
Qualified Retirement Plans* $ 25 $25
Simple IRAs $ 1 $ 1
Monthly Systematic Investment Plans $ 25 $25
Quarterly Systematic Investment Plans $ 25 $25
</TABLE>
* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
Buying shares
Through a You should contact your Salomon Smith Barney Financial Con-
Salomon Smith sultant or dealer representative to open a brokerage account
Barney and make arrangements to buy shares.
Financial
Consultant or .Class of shares being bought
dealer .Dollar amount or number of shares being bought
representative
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund's are clients of the selling group are eligible to buy shares
transfer directly from the fund.
agent
.Write the transfer agent at the following address:
Smith Barney Investment Trust
U.S. 5000 Index Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
.Enclose a check to pay for the shares. For initial pur-
chases, complete and send an account application
.For more information, call the transfer agent at 1-800-451-
2010.
U.S. 5000 Index Funds
10
<PAGE>
- --------------------------------------------------------------------------------
Through a You may authorize Salomon Smith Barney, your dealer represen-
systematic tative or the transfer agent to transfer funds automatically
investment from a regular bank account, cash held in a Salomon Smith
plan Barney brokerage account or Smith Barney money market fund to
buy shares on a regular basis.
.Amounts transferred should be at least: $25 monthly or $50
quarterly
.If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer represen-
tative or the transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the Statement of Additional Information
("SAI").
Exchanging shares
You may exchange fund shares only for shares of other classes
of another Smith Barney funds only if you are participating
in certain fee based advisory programs or employer-sponsored
retirement plans. Please contact your Salomon Smith Barney
Financial Consultant or your dealer representative for more
information.
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant or
your dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers (documents transferring ownership of certifi-
cates) before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Smith Barney Mutual Fund
11
<PAGE>
Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your redemp-
tion proceeds will not be sent to you until your original
check clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests
to the transfer agent at the following address:
Smith Barney Investment Trust
U.S. 5000 Index Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
.The account number
.The class of shares and the dollar amount or number of
shares to be redeemed
.Signatures of each owner exactly as the account is regis-
tered
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible
to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by tel-
ephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and
5:00 p.m. (Eastern time). Requests received after the close
of regular trading on the Exchange are priced at the net
asset value next determined.
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank
U.S. 5000 Index Funds
12
<PAGE>
account designated on your authorization form. You must sub-
mit a new authorization form to change the bank account des-
ignated to receive wire transfers and you may be asked to
provide certain other documents.
- --------------------------------------------------------------------------------
Automatic
cash
withdrawal
plans
You can arrange for the automatic redemption of a portion of
your shares on a monthly or quarterly basis. To qualify you
must own shares of the fund with a value of at least $10,000
($5,000 for retirement plan accounts) and each automatic
redemption must be at least $50.
The following conditions apply:
.Your shares must not be represented by certificates
.All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information without which your
request will not be processed:
.Name of the fund
.Account number
.Class of shares being bought, exchanged or redeemed
.Dollar amount or number of shares being bought, exchanged or redeemed
.Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for your account, sending you a written
confirmation or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
.Are redeeming over $10,000 of shares
.Are sending signed share certificates or stock powers to the transfer agent
Smith Barney Mutual Funds
13
<PAGE>
.Instruct the transfer agent to mail the check to an address different from the
one on your account
.Changed your account registration
.Want the check paid to someone other than the account owner(s)
.Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
The fund has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
.Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities.
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other share-
holders. If so, the fund may limit additional purchases and/or exchanges by a
shareholder.
Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares.
Smith Barney 401(k) and ExecChoiceTM programs
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoiceTM program. The fund offers Class A shares to partici-
pating plans as an investment alternative under the programs. You can meet min-
imum investment and exchange amounts by combining the plan's investments in any
of the Smith Barney funds.
U.S. 5000 Index Fund
14
<PAGE>
There are no sales charges when you buy or sell shares.
Class A Shares may be purchased by Plans investing at least $1 million.
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
Dividends, distributions and taxes
Dividends The fund generally makes capital gain distributions and pays divi-
dends, if any, once a year, typically in December. The fund may pay additional
distributions and dividends at other times if necessary for the fund to avoid a
federal tax. Capital gain distributions and dividends are reinvested in addi-
tional fund shares of the same class you hold. The fund expects distributions
to be primarily from capital gains. Alternatively, you can instruct your Salo-
mon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or divi-
dend, except that any change given to the transfer agent less than five days
before the payment date will not be effective until the next distribution or
dividend is paid.
Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually capital gain or loss;
long-term only if shares owned
more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
</TABLE>
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a long-term capital gain dis-
tribution or a dividend, because it will be taxable to you even though it may
actually be a return of a portion of your investment.
After the end of each year, the fund will provide you with information about
the distributions and dividends you received and any redemptions of shares dur-
ing the previous year. If you do not provide the fund with your correct tax-
payer identification number and any required certifications, you
Smith Barney Mutual Funds
15
<PAGE>
may be subject to back-up withholding of 31% of your distributions, dividends,
and redemption proceeds. Because each shareholder's circumstances are different
and special tax rules may apply, you should consult your tax adviser about your
investment in the fund.
Share price
You may buy, exchange or redeem shares at their net asset value next determined
after receipt of your request in good order. The fund's net asset value is the
value of its assets minus its liabilities. Net asset value is calculated sepa-
rately for each class of shares. The fund calculates its net asset value every
day the New York Stock Exchange is open. The Exchange is closed on certain hol-
idays listed in the SAI. This calculation is done when regular trading closes
on the Exchange (normally 4:00 p.m., Eastern time).
The underlying Master Portfolio for the fund is valued daily by the Master
Portfolio itself, and the Master Portfolio's net asset value is part of the
calculation of the fund's net asset value.
The assets of the fund include its investments in the Master Portfolio, plus
cash and any other assets. The fund's investment in the Master Portfolio is
valued at the fund's proportionate interest in the net asset value of the Mas-
ter Portfolio. The Master Portfolio calculates the net asset value of its
shares on the same days and at the same time as the fund.
The Master Portfolio's assets are valued based on current market prices. If
such prices are not readily available, Barclays estimates the securities' fair
value in accordance with guidelines approved by the Master Portfolio's Board of
Trustees.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If the Exchange closes
early, you must place your order prior to the actual closing time. Otherwise,
you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's or
Wilshire Associates and Standard & Poor's or Wilshire Associates makes no rep-
resentation regarding the advisability of investing in the fund. Please see the
SAI for further disclosure.
U.S. 5000 Index Fund
16
<PAGE>
(This page is intentionally left blank.)
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
U.S. 5000 Index Fund
An investment portfolio of Smith Barney Investment Trust
Shareholder reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's perfor-
mance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply
to you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by ref-
erence into (is a legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salo-
mon Smith Barney Financial Consultant or dealer representative, by calling the
fund at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com.
You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commis-
sion's Public Reference Room in Washington, D.C. You can get copies of these
materials for a duplicating fee by writing to the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. Information about the public ref-
erence room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the Commission's Internet web site--
www.sec.gov
If someone makes a statement about the fund that is not in this prospectus,
you should not rely upon that information. Neither the fund nor the distribu-
tor is offering to sell shares of the fund to any person to whom the fund may
not lawfully sell its shares.
(TM)Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act
file no. 811-06444)
FD 10/99
Smith Barney Mutual Funds
P R O S P E C T U S
EAFE
Index Fund
Class A and D Shares
- --------------------------------------------------------------------------------
October 13, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
EAFE Index Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
More on the fund's investments.............................................. 5
Fund's structure............................................................ 6
Management.................................................................. 7
Choosing a class of shares to buy........................................... 8
Buying shares............................................................... 9
Exchanging shares........................................................... 10
Redeeming shares............................................................ 10
Other things to know
about share transactions.................................................... 12
Smith Barney 401(k) and
ExecChoice(TM) programs..................................................... 14
Dividends, distributions and taxes.......................................... 14
Share price................................................................. 15
</TABLE>
You should know: An investment in the fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
Investment objective
The fund seeks to offer long-term capital growth and diversification by approx-
imating the performance of the Morgan Stanley Capital International Europe,
Australia, and Far East Free Index (the "Index").
The fund is structured as a "feeder fund." The fund does not buy individual
securities directly. Instead, it invests in a corresponding mutual fund- the
International Index Master Portfolio ( "Master Portfolio"). The Master
Portfolio in turn, invests in securities in accordance with investment objec-
tives, policies and limitations that are similar to those of the fund.
While this structure is designed to reduce costs, it may not do so. As a
result, a feeder fund might encounter operational or other complications.
The investment adviser for the Master Portfolio in which the fund invests is
Barclays Global Fund Advisors ("BGFA").
Principal Investment Strategics
Key investments The Master Portfolio invests in a sampling of securities that
are selected and weighted to result in investment characteristics comparable to
the Index and performance, before fees and and expenses, that will correlate
with the performance of the
Index. The Master Portfolio invests at least 90% of assets in common stocks
included in the Index, which represents the performance of foreign stock
markets.
The returns for the fund are likely to be below that of the Index because the
fund and the Master Portfolio have fees and transaction expenses while the
Index has none.
The Master Portfolio uses statistical sampling techniques based on capitaliza-
tion, industry exposures, dividend yield, price/earning ratio, price/book ratio
and earnings growth.
Selection process BGFA manages the Master Portfolio as a "pure" index fund.
This means that BGFA does not evaluate individual companies to identify
attractive investment candidates. Instead, BGFA attempts to mirror the
composition of the Index as closely as possible by adjusting the Master
Portfolio's portfolio daily to reflect the companies included in the index and
their weightings. The Master Portfolio does not mirror the index exactly
because, unlike the index, the Master Portfolio must maintain a portion of its
assets in cash and liquid securities to meet redemption requests and pay the
Master Portfolio's expenses.
EAFE Index Fund
2
<PAGE>
The Index is an unmanaged index of common stocks and includes Europe, Australa-
sia and the Far East (includes dividends net of withholding taxes). An index is
a hypothetical measure of performance based on the ups and downs of securities
that make up a particular market. The index does not show actual investment
returns or reflect payment of management or brokerage fees, which would lower
the index's performance. The index is unmanaged and does not have to maintain
liquidity to meet redemption requests or pay expenses.
Principal risks of investing in the fund
Investors could lose money on their investments in the fund, or the fund may
not perform as well as other investments, if:
.Foreign securities prices decline
.Adverse governmental action or political, economic or market instability
affects a foreign country or region
.The currency in which a security is priced declines in values relative to the
U.S. dollar
.The Index goes down, or performs poorly relative to other Non-U.S. equity
indexes or individual stocks
.An adverse company specific event, such as an unfavorable earnings report,
negatively affects the stock price of one of the larger companies in the
Index
.The stocks of companies which comprise the Index fall out of favor with
investors
The fund is exposed to the risks of investing in common stocks as well as the
additional risks of investing in foreign securities, which can be affected by
currency, political, legal, regulatory, and operational factors.
Foreign markets can be less liquid and more volatile than the U.S. market
because of increased risks of adverse issuer, political, regulatory, market or
economic developments and can perform differently that the U.S. market. The
value of securities of smaller, less well-known issuers can perform differently
than the market as a whole and other types of stocks and can be more than that
of larger issuers.
The fund may not track the index perfectly because differences between the
index and the fund's portfolio can cause differences in performance. In addi-
tion, expenses and transaction costs, the size and frequency of cash flows into
and out of the fund, and the differences between how and when the fund and the
index are valued can cause differences in performance.
BGFA uses various techniques, such as buying and selling futures contracts, to
increase or decrease the fund's exposure to changing security prices or other
factors that affect security values. If BGFA's strategies do not work as
intended, the fund may not achieve its objective.
Smith Barney Mutual Funds
3
<PAGE>
Who may want to invest The fund may be an appropriate investment if you:
.Are seeking to participate in the long term growth potential of international
markets
.Are seeking an investment which tracks the performance of the Index
.Currently have exposure to U.S. stock markets and wish to diversify your
investment portfolio by adding non-U.S. stocks that may not move in tandem
with U.S. stocks
.Are comfortable with the risks of the stock market and the special risks of
investing in foreign securities, including emerging market securities
Performance
The fund does not yet have a sufficient operating history to generate the per-
formance information which other Smith Barney funds show in bar and table form
in this location of the prospectus.
Fees table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment) Class A Class D
<S> <C> <C>
Maximum sales charge (load) imposed on purchases None None
Maximum deferred sales charge (load)(as a % of the lower of
net asset value at purchase or redemption) None None
Annual fund operating expenses
<CAPTION>
(expenses deducted from fund assets) Class A Class D
<S> <C> <C>
Management fee* % %
Service (12b-1) fees None
Other expenses**
Total annual fund operating expenses % %
</TABLE>
* The "Management Fee" includes an investment management fee payable by
theMaster Portfolio and an administration fee payable by the fund.
** The fund is new, and therefore, has no historical expense data. The amount
set forth in "Other Expenses" represents the aggregate amount that is pay-
able by both the Master Portfolio and the fund, and have been estimated
based on expenses the fund expects to incur during its fiscal year.
EAFE Index Fund
4
<PAGE>
Example
This example helps you compare the costs of investing in the fund with the
costs of investing in other mutual funds. Your actual costs may be higher or
lower. The example assumes:
.You invest $10,000 in the fund for the period shown
.You redeem all shares at the end of the period
.Your investment has a 5% return each year
.The fund's operating expenses remain the same
Number of years you own your shares*
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A $
Class D $
</TABLE>
*Reflects costs at both the fund and Master Portfolio levels.
More on the fund's investments
Because it can be very expensive to buy and sell all of the securities in the
Index, the Master Portfolio employs a "sampling" technique to approximate Index
characteristics such as capitalization and industry weight using fewer securi-
ties than contained in the Index.
The Master Portfolio seeks long-term growth of capital by investing in common
stocks of companies domiciled outside the U.S. The goal is to provide a portfo-
lio that approximates the investment characteristics and performance of the
Index. The Master Portfolio follows an indexed or "passively managed" approach
to investing. The means that BGFA selects securities designed to approxi-
mate the investment characteristics and performance of the Index.
The Master Portfolio may enter into transactions in futures contracts and
options on futures contracts, each of which involves risk. The futures con-
tracts and options on futures contracts the Master Portfolio may purchase are
considered derivatives. Derivatives are financial instruments whose values are
derived, at least in part, from the prices of other securities or specified
assets, indices or rates. The Master Portfolio intends to use futures contracts
and options as part of its short-term liquidity holdings and/or as substitutes
for comparable market positions in the underlying securities. Some derivatives
may be more sensitive than direct securities to changes in
Smith Barney Mutual Funds
5
<PAGE>
interest rates or sudden market moves. Some derivatives also may be susceptible
to fluctuations in yield or value due to their structure or contract terms.
Foreign countries generally have markets that are less liquid and more volatile
than markets in the U.S. In some foreign countries, there is also less informa-
tion available about foreign issuers and markets because of less rigorous
accounting and regulatory standards than in the U.S. Currency fluctuations
could erase investment gains or add to investment losses. Because the value of
an ADR is dependent upon the market price of an underlying foreign security,
ADRs are subject to most of the risks associated with foreign investing.
Fund's structure
The fund is a separate series of Smith Barney Investment Trust, a Massachusetts
business trust. The fund is a feeder fund in a master/feeder structure. Accord-
ingly, the fund invests all of its assets in the Master Portfolio. The Master
Portfolio seeks to provide investment results that match as closely as practi-
cable, before fees and expenses, the performance of the Index. In addition to
selling its shares to the fund, the Master Portfolio has and may continue to
sell its shares to certain other mutual funds or other accredited investors.
The expenses and, correspondingly, the returns of other investment options in
the Master Portfolio may differ from those of the fund.
As other investors invest their assets in the Master
Portfolio, certain economic efficiencies may be realized with respect to the
Master Portfolio. For example, fixed expenses that otherwise would have been
borne solely by the fund (and the other existing interestholders in the Master
Portfolio) would be spread across a larger asset base as more funds invest in
the Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from the Master Portfolio, the economic efficiencies that should
be available through investment in the Master Portfolio
may not be fully achieved or maintained. In addition, given the relatively com-
plex nature of the master/feeder structure, accounting and operational diffi-
culties could occur. For example, coordination of calculation of net asset
value would be affected at the master and/or feeder level.
Fund share holders may be asked to vote on matters concerning the Master Port-
folio.
EAFE Index Fund
6
<PAGE>
The fund may with draw its investments in the Master Portfolio if the Board
determines that it is in the best interests of the fund and its shareholders to
do so. Upon any such withdrawal, the Board would consider what action might be
taken, including the investment of all the assets of the fund in another pooled
investment entity having the same investment objective as the fund, direct man-
agement of a portfolio by SSBC or the hiring of a sub-advisor to manage the
fund's assets.
Investment of the fund's assets in the Master Portfolio is not a fundamental
policy of the fund and a shareholder vote is not required for the fund to with-
draw its investment from the Master Portfolio.
Management
A feeder fund does not need an investment manager. The Master Portfolio's
investment advisor is BGFA. BGFA is a wholly owned direct subsidiary of
Barclays Global Investors, N.A. (which, in turn, is an indirect subsidiary of
Barclays Bank PLC) and is located at 45 Fremont Street, San Francisco, Califor-
nia 94105. BGFA has provided asset management, administration and advisory
services for over 25 years. BGFA receives a monthly advisory fee from the Mas-
ter Portfolio at an annual rate equal to [ ]% of the Master Portfolio's aver-
age daily net assets. From time to time, BGFA may waive such fees in whole or
in part. Any such waiver will reduce the expenses of the Master Portfolio, and
accordingly, have a favorable impact on its performance.
The fund bears a pro rata portion of the investment advisory fees paid by the
Master Portfolio, as well as certain other fees paid by the Master Portfolio,
such as accounting, legal, and Securities and Exchange Commission registration
fees.
Administrator The fund's administrator is SSBC Fund Management Inc. SSBC's
address is 388 Greenwich Street, New York, New York 10013. SSBC is an affiliate
of Salomon Smith Barney Inc. SSBC and Salomon Smith Barney are subsidiaries of
Citigroup Inc. Citigroup businesses produce a broad range of financial servic-
es--asset management, banking and consumer finance, credit and charge cards,
insurance, investments, investment banking and trading--and use diverse chan-
nels to make them available to consumer and corporate customers around the
world.
Administration fees For its services, SSBC receives a fee equal on an annual
basis to [ ]% of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the fund's shares. A selling group consisting of Salomon Smith Barney and
other broker-dealers sells fund shares to the public.
Smith Barney Mutual Funds
7
<PAGE>
Distribution plans The fund has adopted a Rule 12b-1 service plan for its Class
A shares. Under the plan, Class A shares pay a service fee. The fee for Class A
shares is an ongoing expense and, over time, may cost you more than other types
of sales charges.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if sub-
stantial, could adversely affect companies and governments that issue securi-
ties held by the fund. SSBC and Salomon Smith Barney are addressing the Year
2000 issue for their systems. The fund has been informed by other service prov-
iders that they are taking similar measures. Although the fund does not expect
the Year 2000 issue to adversely affect it, the fund cannot guarantee the
efforts of the fund, which are limited to requesting and receiving reports from
its service providers, or the efforts of its service providers to correct the
problem will be successful.
The Master Portfolio's investment advisor and principal service providers have
also advised the Master Portfolio that they are working on any necessary
changes to their systems and that they expect their systems to be Year 2000
compliant in time. There can, of course, be no assurance of success by either
the Fund's or the Master Portfolio's service providers. In addition, because
the Year 2000 Problem affects virtually all organizations, the issuers in whose
securities the Master Portfolio invests and the economy as a whole also could
be adversely impacted by the Year 2000 Problem. The extent of such impact can-
not be predicted.
Choosing a class of shares to buy
You may purchase Class A shares which are sold at net asset value with no ini-
tial or deferred sales charge. Class A shares are subject to an ongoing service
fee.
You may purchase Class D shares only if you are participating in certain
investment programs which charge a fee for participation, including the Smith
Barney 401(k) Platform program. Class D shares are also offered to tax-exempt
employee benefit and retirement plans of Salomon Smith Barney and its affili-
ates. For more information about these programs, please contact a Salomon Smith
Barney Financial Consultant.
You may buy shares from:
.A Salomon Smith Barney Financial Consultant
.An investment dealer in the selling group or a broker that clears through Sal-
omon Smith Barney--a dealer representative
EAFE Index Fund
8
<PAGE>
.The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums Minimum initial and additional investment amounts vary
depending on the nature of your investment account.
<TABLE>
<CAPTION>
Initial Additional
<S> <C> <C>
General $1,000 $50
IRAs, Self Employed Retirement Plans,
Uniform Gift to Minor Accounts $ 250 $50
Qualified Retirement Plans* $ 25 $25
Simple IRAs $ 1 $ 1
Monthly Systematic Investment Plans $ 25 $25
Quarterly Systematic Investment Plans $ 25 $25
</TABLE>
* Qualified Retirement Plans are retirement plans qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue Code, including 401(k)
plans
Buying shares
Through a You should contact your Salomon Smith Barney Financial Con-
Salomon Smith sultant or dealer representative to open a brokerage account
Barney and make arrangements to buy shares.
Financial
Consultant or .Class of shares being bought
dealer .Dollar amount or number of shares being bought
representative
You should pay for your shares through your brokerage account
no later than the third business day after you place your
order. Salomon Smith Barney or your dealer representative may
charge an annual account maintenance fee.
- --------------------------------------------------------------------------------
Through the Qualified retirement plans and certain other investors who
fund's are clients of the selling group are eligible to buy shares
transfer directly from the fund.
agent
.Write the transfer agent at the following address:
Smith Barney Investment Trust
EAFE Index Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Smith Barney Mutual Funds
9
<PAGE>
.Enclose a check to pay for the shares. For initial pur-
chases, complete and send an account application
.For more information, call the transfer agent at 1-800-451-
2010.
- --------------------------------------------------------------------------------
Through a You may authorize Salomon Smith Barney, your dealer represen-
systematic tative or the transfer agent to transfer funds automatically
investment from a regular bank account, cash held in a Salomon Smith
plan Barney brokerage account or Smith Barney money market fund to
buy shares on a regular basis.
.Amounts transferred should be at least: $25 monthly or $50
quarterly
.If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer represen-
tative or the transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the Statement of Additional Information
("SAI").
Exchanging shares
You may exchange fund shares for shares of other classes of
another Smith Barney funds only if you are participating in
certain fee based advisory programs or employer-sponsored
retirement plans. Please contact your Salomon Smith Barney
Financial Consultant or your dealer representative for more
information.
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant or
your dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
EAFE Index Fund
10
<PAGE>
signed stock powers (documents transferring ownership of cer-
tificates) before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However,
if you recently purchased your shares by check, your redemp-
tion proceeds will not be sent to you until your original
check clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests
to the transfer agent at the following address:
Smith Barney Investment Trust
EAFE Index Fund
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
.The account number
.The class of shares and the dollar amount or number of
shares to be redeemed
.Signatures of each owner exactly as the account is regis-
tered
By telephone If you do not have a brokerage account, you may be eligible
to redeem shares (except those held in retirement plans) in
amounts up to $10,000 per day through the transfer agent. You
must complete an authorization form to authorize telephone
redemptions. If eligible, you may request redemptions by tel-
ephone on any day the New York Stock Exchange is open. Call
the transfer agent at 1-800-451-2010 between 9:00 a.m. and
5:00
Smith Barney Mutual Funds
11
<PAGE>
p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset
value next determined.
Your redemption proceeds can be sent by check to your address
of record or by wire transfer to a bank account designated on
your authorization form. You must submit a new authorization
form to change the bank account designated to receive wire
transfers and you may be asked to provide certain other docu-
ments.
- --------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans ($5,000 for retirement plan accounts) and each automatic
redemption must be at least $50.
The following conditions apply:
.Your shares must not be represented by certificates
.All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information without which your
request will not be processed:
.Name of the fund
.Account number
.Class of shares being bought, exchanged or redeemed
.Dollar amount or number of shares being bought, exchanged or redeemed
.Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for your account, sending you a written
confirmation or requiring other confirmation procedures from time to time.
EAFE Index Fund
12
<PAGE>
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
.Are redeeming over $10,000 of shares
.Are sending signed share certificates or stock powers to the transfer agent
.Instruct the transfer agent to mail the check to an address different from the
one on your account
.Changed your account registration
.Want the check paid to someone other than the account owner(s)
.Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
The fund has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
.Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities.
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other share-
holders. If so, the fund may limit additional purchases and/or exchanges by a
shareholder.
Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares.
Smith Barney Mutual Funds
13
<PAGE>
Smith Barney 401(k) and ExecChoice(TM) programs
You may be eligible to participate in the Smith Barney 401(k) program or the
Smith Barney ExecChoice(TM) program. The fund offers Class A shares to partici-
pating plans as an investment alternative under the programs. You can meet min-
imum investment and exchange amounts by combining the plan's investments in any
of the Smith Barney funds.
There are no sales charges when you buy or sell shares.
Class A Shares may be purchased by Plans investing at least $1 million.
For more information, call your Salomon Smith Barney Financial Consultant or
the transfer agent, or consult the SAI.
Dividends, distributions and taxes
Dividends The fund generally makes capital gain distributions and pays divi-
dends, if any, once a year, typically in December. The fund may pay additional
distributions and dividends at other times if necessary for the fund to avoid a
federal tax. Capital gain distributions and dividends are reinvested in addi-
tional fund shares of the same class you hold. The fund expects distributions
to be primarily from capital gains. Alternatively, you can instruct your Salo-
mon Smith Barney Financial Consultant, dealer representative or the transfer
agent to have your distributions and/or dividends paid in cash. You can change
your choice at any time to be effective as of the next distribution or divi-
dend, except that any change given to the transfer agent less than five days
before the payment date will not be effective until the next distribution or
dividend is paid.
Taxes In general, redeeming shares, exchanging shares and receiving distribu-
tions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually capital gain or loss;
long-term only if shares owned
more than one year
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income
</TABLE>
EAFE Index Fund
14
<PAGE>
Long-term capital gain distributions are taxable to you as long-term capital
gain regardless of how long you have owned your shares. You may want to avoid
buying shares when the fund is about to declare a long-term capital gain dis-
tribution or a dividend, because it will be taxable to you even though it may
actually be a return of a portion of your investment.
After the end of each year, the fund will provide you with information about
the distributions and dividends you received and any redemptions of shares dur-
ing the previous year. If you do not provide the fund with your correct tax-
payer identification number and any required certifications, you may be subject
to back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult your tax adviser about your investment
in the fund.
Share price
You may buy, exchange or redeem shares at their net asset value next determined
after receipt of your request in good order. The fund's net asset value is the
value of its assets minus its liabilities. Net asset value is calculated sepa-
rately for each class of shares. The fund calculates its net asset value every
day the New York Stock Exchange is open. The Exchange is closed on certain hol-
idays listed in the SAI. This calculation is done when regular trading closes
on the Exchange (normally 4:00 p.m., Eastern time).
The underlying Master Portfolio for the fund is valued daily by the Master
Portfolio itself, and the Master Portfolio's net asset value is part of the
calculation of the fund's net asset value.
The assets of the fund include its investments in the Master Portfolio, plus
cash and any other assets. The fund's investment in the Master Portfolio is
valued at the fund's proportionate interest in the net asset value of the Mas-
ter Portfolio. The Master Portfolio calculates the net asset value of its
shares on the same days and at the same time as the fund.
The Master Portfolio's assets are valued based on current market prices. If
such prices are not readily available, Barclays estimates the securities' fair
value in accordance with guidelines approved by the Master Portfolio's Board of
Trustees.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If the Exchange closes
early, you must place your order prior to the actual closing time. Otherwise,
you will receive the next business day's price.
Smith Barney Mutual Funds
15
<PAGE>
Salomon Smith Barney or members of the selling group must transmit all orders
to buy, exchange or redeem shares to the fund's agent before the agent's close
of business.
Morgan Stanley Capital International Inc. ("MSCI") does not sponsor the fund or
the Master Portfolio, nor it is affiliated in any way with the fund, Barclays
or the Master Portfolio. "Morgan Stanley Capital International Europe, Austra-
lia, Far East Free Index(R)," "EAFE Free Index(R)," are trademarks of MSCI. The
Master Portfolio is not sponsored, endorsed, sold or promoted by the EAFE Free
Index, and neither MSCI or the EAFE Free Index make any representation or war-
ranty, express or implied, regarding the advisability of investing in the Mas-
ter Portfolio.
EAFE Index Fund
16
<PAGE>
(This page is intentionally left blank.)
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
EAFE Index Fund
An investment portfolio of Smith Barney Investment Trust
Shareholder reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's perfor-
mance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply
to you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by ref-
erence into (is a legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salo-
mon Smith Barney Financial Consultant or dealer representative, by calling the
fund at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com.
You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commis-
sion's Public Reference Room in Washington, D.C. You can get copies of these
materials for a duplicating fee by writing to the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. Information about the public ref-
erence room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the Commission's Internet web site--
www.sec.gov
If someone makes a statement about the fund that is not in this prospectus,
you should not rely upon that information. Neither the fund nor the distribu-
tor is offering to sell shares of the fund to any person to whom the fund may
not lawfully sell its shares.
(TM)Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act
file no. 811-06444)
FD 10/99
PART B
October 13, 1999
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY INVESTMENT TRUST
Smith Barney U.S. 5000 Index Fund
Smith Barney EAFE Index Fund
388 Greenwich Street
New York, New York 10013
(800) 451-2010
This Statement of Additional Information ("SAI") is meant to
be read in conjunction with the prospectuses of the Smith
Barney U.S. 5000 Index Fund (the "U.S. 5000 Index Fund")
and the Smith Barney EAFE Index Fund (the "EAFE Index
Fund") (each, a "Fund") dated October 13, 1999, as amended
or supplemented from time to time (each, the
"prospectus"), and is incorporated by reference in its
entirety into the prospectus. Additional information about
the fund's investments is available in the fund's annual and
semi-annual reports to shareholders, which are incorporated
herein by reference. The prospectus and copies of the
reports may be obtained free of charge by contacting a
Salomon Smith Barney Financial Consultant, or by writing or
calling Salomon Smith Barney at the address or telephone
number above. Each fund is a separate investment series of
Smith Barney Investment Trust (the "Trust").
TABLE OF CONTENTS
Investment Objective and Management Policies
Portfolio Securities
Investment Restrictions........................
Risk Considerations
Trustees of the Trust and Executive Officers of the Fund....
Investment Management and Other Services
Portfolio Transactions and Turnover...............
Purchase of Shares ......................
Redemption of Shares
Valuation of Shares
Performance Data
Dividends, Distributions and Taxes
Additional Information
Other Information
Financial Statements ......................
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES tc "INVESTMENT
OBJECTIVES AND MANAGEMENT POLICIES"
General.
In order to take advantage of the economies of scale offered
by a larger pool of assets, each Fund is structured as a
"feeder" fund. A feeder fund seeks to achieve its
investment objective by investing its assets in a "Master
Portfolio" managed by Barclays Global Fund Advisors
("BGFA"). The Master Portfolio invests substantially all
of its assets in securities in accordance with investment
objectives, policies, and limitations that are substantially
similar to those of the Fund. In other words, the Fund
"feeds" shareholder investments into its corresponding
Master Portfolio.
The prospectus discusses each Fund's and each Master
Portfolio's investment objective and policies. This section
contains supplemental information concerning the types of
securities and other instruments, in which each Fund and
each Master Portfolio may invest, the investment policies
and portfolio strategies the Fund and each Master Portfolio
may utilize and certain risks associated with these
investments, policies and strategies. SSBC Fund Management
Inc. ("SSBC" or the "administrator") serves as the
Fund's administrator.
Master Investment Portfolio ("MIP") is an open-end,
management investment company, organized on October 21, 1993
as a business trust under the laws of the State of Delaware.
MIP is a "series fund," which is a mutual fund divided
into separate portfolios. The U.S. Equity Index Master
Portfolio and the International Index Portfolio are
diversified portfolios of MIP. Each Master Portfolio is
treated as a separate entity for certain matters under the
Investment Company Act of 1940, as amended (the "1940
Act"), and for other purposes, and an interestholder of the
Master Portfolio is not deemed to be an interestholder of
any other portfolio of MIP.
Beneficial interests in the Master Portfolios are issued
solely in private placement transactions which do not
involve any "public offering" within the meaning of
Regulation D under the Securities Act of 1933, as amended
(the "1933 Act"). Investments in the Master Portfolios
may be made only by investment companies or certain other
entities, which are "accredited investors" within the
meaning of Regulation D under the 1933 Act. Investment
companies that hold units of beneficial interest
("interests") in the Master Portfolios are sometimes
referred to herein as "feeder funds."
Master/Feeder Fund Structure
Unlike mutual funds that directly acquire and managed their
own portfolio of securities, each Fund is a "feeder" fund
in a "master/feeder" structure. This means that each Fund
invests in a larger "master" portfolio of securities that
has investment objectives and policies substantially
identical to those of each Fund. The investment performance
of each Fund depends on the investment performance of each
Master Portfolio. If the investment policies of the Fund
and the Master Portfolio become inconsistent, the Board of
Trustees of the Fund can decide what actions to take.
Actions the Board of Trustees may recommend include
withdrawal of the Fund's assets from the Master Portfolio.
The Board of Trustees would then consider whether it should
hire its own investment adviser, invest in a different
master portfolio, or take other action.
The U.S. 5000 Index Fund seeks to offer long-term capital
growth by approximating the performance, before expenses,
of the Wilshire 5000 Index.
The U.S. 5000 Index Fund's Master Portfolio, the U.S. Equity
Index Master Portfolio, invests substantially all of its
assets in two other Master Portfolios of BGFA. One of these
Master Portfolios invests substantially all of its assets in
a representative sample of stocks comprising the Wilshire
4500 Index (the "Extended Index Portfolio"). The other
Master Portfolio invests substantially all of it assets in
stocks comprising the S&P 500 Index (the "S&P 500 Index
Portfolio") (together, the "Underlying Portfolios"). The
Master Portfolio's assets will be invested in the Underlying
Portfolios in proportions adjusted periodically to maintain
the capitalization range of the Wilshire 5000 Index.
Because it can be very expensive to buy and sell all of the
securities in a target benchmark, the Master Portfolio
employs "sampling" techniques to approximate benchmark
characteristics such as capitalization and industry weight
using fewer securities than contained in the benchmark.
Therefore, the performance of the Master Portfolio versus
its benchmark can be expected to deviate more than that of
funds investing in all of the securities contained in a
benchmark.
The EAFE Index Fund seeks to offer long-term capital
growth and diversification by approximating the performance,
before expenses, of the Morgan Stanley Capital International
Europe, Australia, and Far East Free Index (the "EAFE
Index").
The EAFE Index Fund and the International Index Master
Portfolio maintain equity exposure for cash balances by
purchasing appropriate futures contracts. Futures contracts
are not used for leverage. The EAFE Index Fund and the
Master Portfolio seek to remain fully invested at all times,
without significant cash balances.
INVESTMENT OBJECTIVE-U.S. Equity Index Master Portfolio.
The U.S. Equity Index Master Portfolio seeks to match as
closely as practicable, before fees and expenses, the
performance of the Wilshire 5000 Equity Index (the
"Wilshire 5000 Index"). The U.S. Equity Index Master
Portfolio uses a "fund of funds" structure to track the
Wilshire 5000 Index, which is comprised of the stocks in the
Standard & Poor's 500 Stock Index ("S&P 500 Index"),
except for a small number of foreign stocks that represent
approximately 3% of the S&P 500 Index, and the stocks in the
Wilshire 4500 Equity Index (the "Wilshire 4500 Index").
In this regard, the U.S. Equity Index Master Portfolio seeks
to achieve its objective by investing substantially all of
its assets in two other portfolios of MIP-the Extended
Index Portfolio (which invests substantially all of its
assets in a representative sample of stocks comprising the
Wilshire 4500 Index) and the S&P 500 Index Portfolio (which
invests substantially all of its assets in stocks comprising
the S&P 500 Index) (together, the "Underlying
Portfolios"). The U.S. Equity Index Master Portfolio's
assets will be invested in the Underlying Portfolios of MIP
in proportions adjusted periodically to maintain the
capitalization range of the Wilshire 5000 Index. The
performance of the U.S. Equity Index Master Portfolio will
correspond directly to the performance of the Underlying
Portfolios. The Master Portfolio and the Fund may not track
its index perfectly, as differences between the Index and
the Master Portfolio's Underlying Portfolios may cause
differences in performance.
INVESTMENT OBJECTIVES-Underlying Portfolios
? The S&P 500 Index Portfolio seeks to provide
investment results, before fees and expenses,
that correspond to the total return performance
of publicly traded common stocks in the
aggregate, as represented by the Standard &
Poor's 500 Stock Index.
? The Extended Index Portfolio seeks to
approximate, before fees and expenses, the
capitalization range and performance of the
Wilshire 4500 Index.
? The Master Portfolio's investment objective can
be changed by MIP's Board of Trustees without
interestholder approval. The objective and
policies of the Master Portfolio determines the
types of portfolio securities in which it
invests, the degree of risk to which it is
subject and, ultimately, its performance. There
can be no assurance that the Master Portfolio's
investment objective will be achieved.
ABOUT THE INDICES The Wilshire 5000 Index was created
December 31, 1980. It measures the performance of all U.S.
headquartered equity securities with readily available price
data. Over 7,000 capitalization weighted security returns
are used to adjust the index.
? The Wilshire 4500 Index was created December 31,
1983. It is the Wilshire 5000 Index with most
of the companies in the S&P 500 Index removed.
Over 6,500 capitalization weighted security
returns are used to adjust the index.
? The S&P 500 Index was created March 5, 1957. It
is composed of 500 selected common stocks, most
of which are listed on the NYSE.
The securities comprising the S&P 500 Index represent the
stocks of primarily large-cap companies. The securities
comprising the Wilshire 4500 Index represent the smaller-
and medium-sized companies of the Wilshire 5000 Index. In
order for the U.S. Equity Index Master Portfolio to maintain
a capitalization weighted representative sample of the
Wilshire 5000 Index, it will invest in the Underlying
Portfolios in proportion to the overall capitalization of
their respective indices. Based on their relative overall
capitalizations as of the date of this SAI, roughly two
thirds of the U.S. Equity Index Master Portfolio's portfolio
will be invested in the S&P 500 Index Portfolio and the
other third in the Extended Index Portfolio. Historically,
the overall capitalization of the indices have varied, and
as a result, the U.S. Equity Index Master Portfolio's
portfolio is also likely to vary.
INVESTMENT POLICIES- U.S. Equity Index Master Portfolio.
? The U.S. Equity Index Master Portfolio seeks to
match the total return performance of the
Wilshire 5000 Index, which is composed of over
7,000 selected common stocks traded on the New
York Stock Exchange, American Stock Exchange and
Nasdaq Stock Market. The weightings of stocks
in the Wilshire 5000 Index are based on each
stock's relative total market capitalization;
that is, its market price per share times the
number of shares outstanding. The percentage of
the U.S. Equity Index Master Portfolio's assets
invested in the Underlying Portfolios is
approximately the same as the percentage such
Portfolios are invested in stocks represented in
the Wilshire 5000 Index. Securities are
selected for investment by the Underlying
Portfolios as indicated below.
INVESTMENT POLICIES - Underlying Portfolios.
? The Extended Index Portfolio seeks to match the
total return performance of U.S. stocks,
excluding the large-cap stocks included in the
S&P 500 Index. The Fund defines these stocks as
those comprising the Wilshire 4500 Index, which
is composed of over 6,500 equity stocks of
issuers headquartered in the United States. The
Index is almost entirely comprised of common
stocks listed on the New York Stock Exchange,
American Stock Exchange or Nasdaq Stock Market.
The weightings of stocks in the Wilshire 4500
Index are based on each stock's relative total
market capitalization, that is, its market price
per share times the number of shares
outstanding. The Extended Index Portfolio
invests in a representative sample of these
securities. Securities are selected for
investment by the Extended Index Portfolio in
accordance with their capitalization, industry
sector and valuation, among other factors.
? The S&P 500 Index Portfolio seeks to match the
total return performance of the S&P 500 Index,
which is composed of 500 selected common stocks,
most of which are listed on the New York Stock
Exchange. The weightings of stocks in the S&P
500 Index are based on each stock's relative
total market capitalization; that is, its market
price per share times the number of shares
outstanding. The percentage of the S&P 500
Index Portfolio's assets invested in a given
stock is approximately the same as the
percentage such stock represents in the S&P 500
Index
Unlike the Extended Index Portfolio, which invests in a
representative sample of the over 6,500 stocks represented
by its benchmark, the Wilshire 4500 Index, the S&P 500 Index
Portfolio invests in all 500 of the stocks represented by
its benchmark, the S&P 500 Index.
No attempt is made to manage the portfolio of the U.S.
Equity Index Master Portfolio using economic, financial or
market analysis. The U.S. Equity Index Master Portfolio is
managed by determining which proportion of its assets will
be invested in each Underlying Portfolio to match, to the
extent feasible, the capitalization range and returns of the
Wilshire 5000 Index. The Underlying Portfolios determine
which securities are to be purchased or sold to match or
sample their respective benchmarks. Under normal market
conditions, at least 90% of the value of the U.S. Equity
Index Master Portfolio's total assets is invested, through
the Underlying Portfolios, in securities comprising the
Wilshire 5000 Index. The U.S. Equity Index Master
Portfolio's ability to match its investment performance to
the investment performance of the Wilshire 5000 Index may be
affected by, among other things, the U.S. Equity Index
Master Portfolio's and Underlying Portfolios' expenses, the
amount of cash and cash equivalents held by the U.S. Equity
Index Master Portfolio and the Underlying Portfolios, the
manner in which the total returns of the Wilshire 5000
Index, the Wilshire 4500 Index and the S&P 500 Index are
calculated; the size of the U.S. Equity Index Master
Portfolio's investment portfolio; and the timing, frequency
and size of shareholder purchases and redemptions.
The Underlying Portfolios use cash flows from interestholder
purchase and redemption activity to maintain, to the extent
feasible, the similarity of their portfolio to the
securities comprising their respective benchmarks. The U.S.
Equity Index Master Portfolio uses cash flows from its
interestholder purchase and redemption activity to
periodically adjust its investment in the Underlying
Portfolios to maintain, to the extent feasible, the
similarity of its capitalization range and returns to those
of the securities comprising the Wilshire 5000 Index. BGFA
regularly monitors the U.S. Equity Index Master Portfolio's
correlation to the Wilshire 5000 Index and adjusts the U.S.
Equity Index Master Portfolio's investment in the Underlying
Portfolios to the extent necessary. Inclusion of a security
in an Index in no way implies an opinion by the sponsor of
the Index as to its attractiveness as an investment.
The sampling techniques utilized by the U.S. Equity Index
Master Portfolio and the Extended Index Portfolio are
designed to allow said portfolios to substantially duplicate
the investment performance of their respective benchmarks.
However, the U.S. Equity Index Master Portfolio is not
expected to track the Wilshire 5000 Index with the same
degree of accuracy that complete replication of such Index
would provide. In addition, at times, the portfolio
composition of the U.S. Equity Index Master Portfolio may be
altered (or "rebalanced") to reflect changes in the
characteristics of the Wilshire 5000 Index, primarily by
adjusting the U.S. Equity Index Master Portfolio's
investment in the Underlying Portfolios. The S&P 500 Index
seeks to replicate completely the investments and
capitalization range of the S&P 500 Index
The investment policies, strategies, techniques and
restrictions employed by the U.S. Equity Index Master
Portfolio in pursuing its investment objective vis-a-vis the
Wilshire 5000 Index are substantially similar to those
employed by the Underlying Portfolios in pursuing their
respective investment objectives vis-a-vis their respective
benchmarks. Unless otherwise indicated, references to the
investment policies, strategies, techniques and restrictions
of the U.S. Equity Index Master Portfolio also are
references to the investment policies, strategies,
techniques and restrictions of the Underlying Portfolios in
which the U.S. Equity Index Master Portfolio invests
substantially all of its assets.
In seeking to match the performance of the Wilshire 5000
Index, the U.S. Equity Index Master Portfolio also may
engage in futures and options transactions and other
derivative securities transactions and lend its portfolio
securities, each of which involves risk. The U.S. Equity
Index Master Portfolio attempts to be fully invested at all
times in securities comprising the Wilshire 5000 Index and
in futures contracts and options on futures contracts,
although the U.S. Equity Index Master Portfolio may invest
up to 10% of its assets in high-quality money market
instruments to provide liquidity. The U.S. Equity Index
Master Portfolio also may invest up to 15% of the value of
its net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days.
CERTAIN FUNDAMENTAL POLICIES. The U.S. Equity Index Master
Portfolio may (i) borrow money to the extent permitted under
the 1940 Act (for purposes of this investment restriction,
the U.S. Equity Index Master Portfolio's entry into options,
forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or
indices, shall not constitute borrowing to the extent
certain segregated accounts are established and maintained
by the U.S. Equity Index Master Portfolio); (ii) invest up
to 5% of its total assets in the securities of any single
issuer, except that up to 25% of the value of the total
assets of the U.S. Equity Index Master Portfolio may be
invested without regard to this limitation, and obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities may be purchased without regard to this
limitation; and (iii) invest up to 25% of the value of its
total assets in the securities of issuers in a particular
industry or group of closely related industries, subject to
certain exceptions specified in Part B, including that there
is no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental
policies that cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act) of the
U.S. Equity Index Master Portfolio's outstanding voting
securities.
INVESTMENT OBJECTIVE - International Index Master Portfolio
? The International Index Master Portfolio seeks to
match as closely as practicable, before fees and
expenses, the performance of an international
portfolio of common stocks represented by the
Morgan Stanley Capital International Europe,
Australia, Far East Free Index (the "EAFE Free
Index," or the "Index").
The Master Portfolio's investment objective can be changed
by MIP's Board of Trustees without interestholder approval.
The objective and policies of the Master Portfolio
determines the types of portfolio securities in which it
invests, the degree of risk to which it is subject and,
ultimately, its performance. There can be no assurance that
the Master Portfolio's investment objective will be
achieved.
PRINCIPAL STRATEGIES - International Index Master Portfolio
? The International Index Master Portfolio seeks to match
the total return performance of foreign stock markets by
investing in common stocks included in the EAFE Free
Index. The EAFE Free Index is a capitalization-weighted
index that currently includes stocks of companies located
in 15 European countries (Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland
and the United Kingdom), Australia, New Zealand, Hong
Kong, Japan and Singapore The EAFE Free Index
broadly represents the performance of foreign stock
markets. The weightings of stocks in the EAFE Free Index
are based on each stock's relative total market
capitalization, that is, its market price per share times
the number of shares outstanding. The Master Portfolio
invests in a representative sample of these securities.
Securities are selected for investment by the Master
Portfolio in accordance with their capitalization,
industry sector and valuation, among other factors.
No attempt is made to manage the portfolio of the Master
Portfolio using economic, financial and market analysis.
The Master Portfolio is managed by determining which
securities are to be purchased or sold to match, to the
extent feasible, the capitalization range and returns of the
EAFE Free Index. Under normal market conditions, at least
90% of the value of the Master Portfolio's total assets is
invested in securities comprising the EAFE Free Index The
Master Portfolio's ability to match its investment
performance to the investment performance of the EAFE Free
Index may be affected by, among other things: the Master
Portfolio's expenses; the amount of cash and cash
equivalents held by the Master Portfolio; the manner in
which the total return of the EAFE Free Index is calculated;
the size of the Master Portfolio's investment portfolio; and
the timing, frequency and size of interestholder purchases
and redemptions. The Master Portfolio uses cash flows from
interestholder purchase and redemption activity to maintain,
to the extent feasible, the similarity of its capitalization
range and returns to those of the securities comprising the
EAFE Free Index. BGFA regularly monitors the Master
Portfolio's correlation to the EAFE Free Index and adjusts
the Master Portfolio's portfolio to the extent necessary.
Inclusion of a security in the EAFE Free Index in no way
implies an opinion by MSCI as to its attractiveness as an
investment.
BGFA may use statistical sampling techniques to attempt to
replicate the returns of the EAFE Free Index using a smaller
number of securities. Statistical sampling techniques
attempt to match the investment characteristics of the index
and the fund by taking into account such factors as
capitalization, industry exposures, dividend yield,
price/earnings ratio, price/book ratio, earnings growth,
country weightings and the effect of foreign taxes. The
sampling techniques utilized by the Master Portfolio are
designed to allow the Master Portfolio to substantially
duplicate the investment performance of the EAFE Free Index.
However, the Master Portfolio is not expected to track the
EAFE Free Index with the same degree of accuracy that
complete replication of such Index would provide. In
addition, at times, the portfolio composition of the Master
Portfolio may be altered (or "rebalanced") to reflect
changes in the characteristics of the EAFE Free Index.
In seeking to match the performance of the EAFE Free Index,
the Master Portfolio also may engage in futures and options
transactions and other derivative securities transactions
and lend its portfolio securities, each of which involves
risk. The Master Portfolio attempts to be fully invested at
all times in securities comprising the EAFE Free Index and
in futures contracts and options on futures contracts,
although the Master Portfolio may invest up to 10% of its
assets in high-quality money market instruments to provide
liquidity. The Master Portfolio may invest up to 15% of the
value of its net assets in illiquid securities, including
repurchase agreements providing for settlement in more than
seven days. See Item 12, "Description of the Master
Portfolio and Its Investments and Risks-Investment
Restrictions," in Part B.
PORTFOLIO SECURITIES
The Fund
Repurchase Agreements. The fund may agree to purchase
securities from a bank or recognized securities dealer and
simultaneously commit to resell the securities to the bank
or dealer at an agreed-upon date and price reflecting a
market rate of interest unrelated to the coupon rate or
maturity of the purchased securities ("repurchase
agreements"). The fund would maintain custody of the
underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price
on the date agreed to would be, in effect, secured by such
securities. If the value of such securities were less than
the repurchase price, plus interest, the other party to the
agreement would be required to provide additional collateral
so at all times the collateral is at least 102% of the
repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose the fund to possible
loss because of adverse market action, expenses and/or
delays in connection with the disposition of the underlying
obligations. The financial institutions with which the fund
may enter into repurchase agreements will be banks and non-
bank dealers of U.S. Government securities on the Federal
Reserve Bank of New York's list of reporting dealers, if
such banks and non-bank dealers are deemed creditworthy by
the fund's manager. The manager will continue to monitor
creditworthiness of the seller under a repurchase agreement,
and will require the seller to maintain during the term of
the agreement the value of the securities subject to the
agreement to equal at least 102% of the repurchase price
(including accrued interest). In addition, the manager will
require the value of this collateral, after transaction
costs (including loss of interest) reasonably expected to be
incurred on a default, be equal to 102% or greater than the
repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the
difference between the purchase price and the repurchase
price specified in the repurchase agreement. The manager
will mark-to-market daily the value of the securities.
Repurchase agreements are considered to be loans by the fund
under the 1940 Act.
U.S. Equity Index Master Portfolio
The U.S. Equity Index Master Portfolio may invest in the
securities described below.
The investment policies, strategies, techniques and
restrictions employed by the Master Portfolio in pursuing
its investment objective vis-a-vis the Wilshire 5000 Index
are substantially similar to those employed by the
Underlying Portfolios in pursuing their respective
investment objectives vis-a-vis their respective benchmarks.
Unless otherwise indicated, references to the investment
policies, strategies, techniques and restrictions of the U.S
Equity Index Master Portfolio also are references to the
investment policies, strategies, techniques and restrictions
of the Underlying Portfolios in which the U.S, Equity Index
Master Portfolio invests substantially all of its assets.
Futures Contracts and Options Transactions-The U.S. Equity
Index Master Portfolio may use futures as a substitute for a
comparable market position in the underlying securities.
A futures contract is an agreement between two parties, a
buyer and a seller, to exchange a particular commodity or
financial statement at a specific price on a specific date
in the future. An option transaction generally involves a
right, which may or may not be exercised, to buy or sell a
commodity or financial instrument at a particular price on a
specified future date. Futures contracts and options are
standardized and traded on exchanges, where the exchange
serves as the ultimate counterparty for all contracts.
Consequently, the primary credit risk on futures contracts
is the creditworthiness of the exchange. Futures contracts
are subject to market risk (i.e., exposure to adverse price
changes).
Although the U.S. Equity Index Master Portfolio intends to
purchase or sell futures contracts only if there is an
active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract
at any particular time. Many 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
or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the
limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures
positions and potentially subjecting the U.S. Equity Index
Master Portfolio to substantial losses. If it is not
possible, or if the U.S. Equity Index Master Portfolio
determines not to close a futures position in anticipation
of adverse price movements, the U.S. Equity Index Master
Portfolio will be required to make daily cash payments on
variation margin.
Stock Index Futures and Options on Stock Index Futures-The
U.S. Equity Index Master Portfolio may invest in stock index
futures and options on stock index futures as a substitute
for a comparable market position in the underlying
securities. A stock index future obligates the seller to
deliver (and the purchaser to take), effectively, an amount
of cash equal to a specific dollar amount times the
difference between the value of a specific stock index at
the close of the last trading day of the contract and the
price at which the agreement is made. No physical delivery
of the underlying stocks in the index is made. With respect
to stock indices that are permitted investments, the U.S.
Equity Index Master Portfolio intends to purchase and sell
futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.
There can be no assurance that a liquid market will exist at
the time when the U.S. Equity Index Master Portfolio seeks
to close out a futures contract or a futures option
position. Lack of a liquid market may prevent liquidation
of an unfavorable position.
Index Swaps-The U.S. Equity Index Master Portfolio may
enter into index swaps in pursuit of its investment
objective. Index swaps involve the exchange by the U.S.
Equity Index Master Portfolio with another party of cash
flows based upon the performance of an index of securities
or a portion of an index of securities that usually include
dividends or income. In each case, the exchange commitments
can involve payments to be made in the same currency or in
different currencies. The U.S. Equity Index Master
Portfolio will usually enter into swaps on a net basis. In
so doing, the two payment streams are netted out, with the
U.S. Equity Index Master Portfolio receiving or paying, as
the case may be, only the net amount of the two payments.
If the U.S. Equity Index Master Portfolio enters into a
swap, it will maintain a segregated account on a gross
basis, unless the contract provides for a segregated account
on a net basis. If there is a default by the other party to
such a transaction, the U.S. Equity Index Master Portfolio
will have contractual remedies pursuant to the agreements
related to the transaction.
The use of index swaps is a highly specialized activity
which involves investment techniques and risks different
from those associated with ordinary portfolio security
transactions. There is no limit, except as provided below,
on the amount of swap transactions that may be entered into
by the U.S. Equity Index Master Portfolio. These
transactions generally do not involve the delivery of
securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps
generally is limited to the net amount of payments that the
U.S. Equity Index Master Portfolio is contractually
obligated to make. There is also a risk of a default by the
other party to a swap, in which case the U.S. Equity Index
Master Portfolio may not receive net amount of payments that
the U.S. Equity Index Master Portfolio contractually is
entitled to receive.
Borrowing Money-As a fundamental policy, the U.S. Equity
Index Master Portfolio is permitted to borrow to the extent
permitted under the 1940 Act. However, the U.S. Equity
Index Master Portfolio currently intends to borrow money
only for temporary or emergency (not leveraging) purposes,
and may borrow up to one-third of the value of its total
assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made.
International Index Master Portfolio
The International Index Master Portfolio may invest in the
securities described below.
Foreign Currency Futures Contracts.
In General. A foreign currency futures contract is an
agreement between two parties for the future delivery of a
specified currency at a specified time and at a specified
price. A "sale" of a futures contract means the
contractual obligation to deliver the currency at a
specified price on a specified date, or to make the cash
settlement called for by the contract. Futures contracts
have been designed by exchanges which have been designated
"contract markets" by the Commodity Futures Trading
Commission ("CFTC") and must be executed through a
brokerage firm, known as a futures commission merchant,
which is a member of the relevant contract market. Futures
contracts trade on these markets, and the exchanges, through
their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the
exchange.
While futures contracts based on currencies do provide for
the delivery and acceptance of a particular currency, such
deliveries and acceptances are very seldom made. Generally,
a futures contract is terminated by entering into an
offsetting transaction. The International Index Master
Portfolio will incur brokerage fees when it purchases and
sells futures contracts. At the time such a purchase or
sale is made, the International Index Master Portfolio must
provide cash or money market securities as a deposit known
as "margin." The initial deposit required will vary, but
may be as low as 2% or less of a contract's face value.
Daily thereafter, the futures contract is valued through a
process known as "marking to market," and the
International Index Master Portfolio may receive or be
required to pay "variation margin" as the futures contract
becomes more or less valuable.
Purchase and Sale of Currency Futures Contracts. In order
to hedge its portfolio and to protect it against possible
variations in foreign exchange rates pending the settlement
of securities transactions, the International Index Master
Portfolio may buy or sell currency futures contracts. If a
fall in exchange rates for a particular currency is
anticipated, the International Index Master Portfolio may
sell a currency futures contract as a hedge. If it is
anticipated that exchange rates will rise, the International
Index Master Portfolio may purchase a currency futures
contract to protect against an increase in the price of
securities denominated in a particular currency the
International Index Master Portfolio intends to purchase.
These futures contracts will be used only as a hedge against
anticipated currency rate changes.
A currency futures contract sale creates an obligation by
the International Index Master Portfolio, as seller, to
deliver the amount of currency called for in the contract at
a specified futures time for a special price. A currency
futures contract purchase creates an obligation by the
International Index Master Portfolio, as purchaser, to take
delivery of an amount of currency at a specified future time
at a specified price. Although the terms of currency
futures contracts specify actual delivery or receipt, in
most instances the contracts are closed out before the
settlement date without the making or taking of delivery of
the currency. Closing out of a currency futures contract is
effected by entering into an offsetting purchase or sale
transaction.
In connection with transactions in foreign currency futures,
the International Index Master Portfolio will be required to
deposit as "initial margin" an amount of cash or short-
term government securities equal to from 5% to 8% of the
contract amount. Thereafter, subsequent payments (referred
to as "variation margin") are made to and from the broker
to reflect changes in the value of the futures contract.
Risk Factors Associated with Futures Transactions. The
effective use of futures strategies depends on, among other
things, the International Index Master Portfolio's ability
to terminate futures positions at times when BGFA deems it
desirable to do so. Although the International Index Master
Portfolio will not enter into a futures position unless BGFA
believes that a liquid secondary market exists for such
future, there is no assurance that the International Index
Master Portfolio will be able to effect closing transactions
at any particular time or at an acceptable price. The
International Index Master Portfolio generally expects that
its futures transactions will be conducted on recognized US.
and foreign securities and commodity exchanges.
Futures markets can be highly volatile and transactions of
this type carry a high risk of loss. Moreover, a relatively
small adverse market movement with respect to these
transactions may result not only in loss of the original
investment but also in unquantifiable further loss exceeding
any margin deposited.
The use of futures involves the risk of imperfect
correlation between movements in futures prices and
movements in the price of currencies which are the subject
of the hedge. The successful use of futures strategies also
depends on the ability of BGFA to correctly forecast
interest rate movements, currency rate movements and general
stock market price movements.
In addition to the foregoing risk factors, the following
sets forth certain information regarding the potential risks
associated with the International Index Master Portfolio's
futures transactions.
Risk of Imperfect Correlation. The International Index
Master Portfolio's ability effectively to hedge currency
risk through transactions in foreign currency futures
depends on the degree to which movements in the value of the
currency underlying such hedging instrument correlate with
movements in the value of the relevant securities held by
the International Index Master Portfolio. If the values of
the securities being hedged do not move in the same amount
or direction as the underlying currency, the hedging
strategy for the International Index Master Portfolio might
not be successful and the International Index Master
Portfolio could sustain losses on its hedging transactions
which would not be offset by gains on its portfolio. It is
also possible that there may be a negative correlation
between the currency underlying a futures contract and the
portfolio securities being hedged, which could result in
losses both on the hedging transaction and the portfolio
securities. In such instances, the International Index
Master Portfolio's overall return could be less than if the
hedging transactions had not been undertaken.
Under certain extreme market conditions, it is possible that
the International Index Master Portfolio will not be able to
establish hedging positions, or that any hedging strategy
adopted will be insufficient to completely protect the
International Index Master Portfolio.
The International Index Master Portfolio will purchase or
sell futures contracts only if, in BGFA's judgment, there is
expected to be a sufficient degree of correlation between
movements in the value of such instruments and changes in
the value of the relevant portion of the International Index
Master Portfolio's portfolio for the hedge to be effective.
There can be no assurance that BGFA's judgment will be
accurate.
Potential Lack of a Liquid Secondary Market. The ordinary
spreads between prices in the cash and futures markets, due
to differences in the natures of those markets, are subject
to distortions. First, all participants in the futures
market are subject to initial deposit and variation margin
requirements. This could require the International Index
Master Portfolio to post additional cash or cash equivalents
as the value of the position fluctuates. Further, rather
than meeting additional variation margin requirements,
investors may close futures contracts through offsetting
transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity
of the futures market may be lacking. Prior to exercise or
expiration, a futures position may be terminated only by
entering into a closing purchase or sale transaction, which
requires a secondary market on the exchange on which the
position was originally established. While the
International Index Master Portfolio will establish a
futures position only if there appears to be a liquid
secondary market therefor, there can be no assurance that
such a market will exist for any particular futures contract
at any specific time. In such event it may not be possible
to close out a position held by the International Index
Master Portfolio, which could require the International
Index Master Portfolio to purchase or sell the instrument
underlying the position, make or receive a cash settlement
or meet ongoing variation margin requirements. The
inability to close out futures positions also could have an
adverse impact on the International Index Master
Portfolio's ability effectively to hedge its securities, or
the relevant portion thereof.
The liquidity of a secondary market in a futures contract
may be adversely affected by "daily price fluctuation
limits" established by the exchanges, which limit the
amount of fluctuation in the price of a contract during a
single trading day and prohibit trading beyond such limits
once they have been reached. The trading of futures
contracts also is subject to the risk of trading halts,
suspensions, exchange or clearing house, equipment failures,
government intervention, insolvency of the brokerage firm or
clearing house or other disruptions of normal trading
activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover
excess variation margin payments.
Trading and Position Limits. Each contract market on which
futures contracts arc traded has established a number of
limitations governing the maximum number of positions which
may be held by a trader, whether acting alone or in concert
with others. "Shares" means the equal proportionate
transferable units of interest into which the beneficial
interest of each Series or Class is divided from time to
time (including whole Shares and fractions of Shares). BGFA
does not believe that these trading and position limits will
have an adverse impact on the hedging strategies regarding
the International Index Master Portfolio's investments.
Regulations on the Use of Futures Contracts. Regulations of
the CFTC require that the International Index Master
Portfolio enter into transactions in futures contracts for
hedging purposes only, in order to assure that it is not
deemed to be a "commodity pool" under such regulations.
In particular, CFTC regulations require that all short
futures positions be entered into for the purpose of hedging
the value of investment securities held by the International
Index Master Portfolio, and that all long futures positions
either constitute bona fide hedging transactions, as defined
in such regulations, or have a total value not in excess of
an amount determined by reference to certain cash and
securities positions maintained for the International Index
Master Portfolio, and accrued profits on such positions. In
addition, the International Index Master Portfolio may not
purchase or sell such instruments if, immediately
thereafter, the sum of the amount of initial margin deposits
on its existing futures positions and premiums paid for
options on futures contracts would exceed 5% of the market
value of the International Index Master Portfolio's total
assets.
When the International Index Master Portfolio purchases a
futures contract, an amount of cash or cash equivalents or
high quality debt securities will be segregated with the
International Index Master Portfolio's custodian so that the
amount so segregated, plus the initial deposit and variation
margin held in the account of its broker, will at all times
equal the value of the futures contract, thereby insuring
that the use of such futures is leveraged.
The International Index Master Portfolio's ability to engage
in the hedging transactions described herein may be limited
by the policies and concerns of various Federal and state
regulatory agencies. Such policies may be changed by vote
of the Board of Trustees.
BGFA uses a variety of internal risk management procedures
to ensure that derivatives use is consistent with the
International Index Master Portfolio's investment objective,
does not expose the International Index Master Portfolio to
undue risk and is closely monitored. These procedures
include providing periodic reports to the Board of Trustees
concerning the use of derivatives.
Foreign Obligations and Securities.
The foreign securities in which the International Index
Master Portfolio may invest include common stocks, preferred
stocks, warrants, convertible securities and other
securities of issuers organized under the laws of countries
other than the United States. Such securities also include
equity interests in foreign investment funds or trusts, real
estate investment trust securities and any other equity or
equity-related investment whether denominated in foreign
currencies or U.S. dollars.
The International Index Master Portfolio may invest in
foreign securities through American Depository Receipts
("ADRs"), Canadian Depository Receipts (''CDRs''),
European Depository Receipts ("EDRs"), International
Depository Receipts ("IDRs") and Global Depository
Receipts ("GDRs") or other similar securities convertible
into securities of foreign issuers. These securities may
not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs
(sponsored or unsponsored) are receipts typically issued by
a U.S. bank or trust company and traded on a U.S. stock
exchange, and CDRs are receipts typically issued by a
Canadian bank or trust company that evidence ownership of
underlying foreign securities. Issuers of unsponsored ADRs
are not contractually obligated to disclose material
information in the U.S. and, therefore, such information may
not correlate to the market value of the unsponsored ADR.
EDRs and IDRs are receipts typically issued by European
banks and trust companies, and GDRs are receipts issued by
either a U.S. or non-U.S. banking institution, that evidence
ownership of the underlying foreign securities. Generally,
ADRs in registered form are designed for use in US.
securities markets and EDRs and IDRs in bearer form are
designed primarily for use in Europe.
For temporary defensive purposes, the International Index
Master Portfolio may invest in fixed income securities of
non-U.S. governmental and private issuers. Such investments
may include bonds, notes, debentures and other similar debt
securities, including convertible securities.
Investments in foreign obligations involve certain
considerations that are not typically associated with
investing in domestic securities. There may be less
publicly available information about a foreign issuer than
about a domestic issuer. Foreign issuers also are not
generally subject to the same accounting auditing and
financial reporting standards or governmental supervision as
domestic issuers. In addition, with respect to certain
foreign countries, taxes may be withheld at the source under
foreign tax laws, and there is a possibility of
expropriation or confiscatory taxation, political, social
and monetary instability or diplomatic developments that
could adversely affect investments in, the liquidity of, and
the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
From time to time, investments in other investment companies
may be the most effective available means by which the
International Index Master Portfolio may invest in
securities of issuers in certain countries. Investment in
such investment companies may involve the payment of
management expenses and, in connection with some purchases,
sales loads, and payment of substantial premiums above the
value of such companies' portfolio securities. At the same
time, the International Index Master Portfolio would
continue to pay its own management fees and other expenses.
Investment income on certain foreign securities in which the
International Index Master Portfolio may invest may be
subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between
the United States and foreign countries, however, may reduce
or eliminate the amount of foreign taxes to which the
International Index Master Portfolio would be subject.
The International Index Master Portfolio's investments in
foreign securities involve currency risks. The U.S. dollar
value of a foreign security tends to decrease when the value
of the U.S. dollar rises against the foreign currency in
which the security is denominated, and tends to increase
when the value of the U.S. dollar falls against such
currency. To attempt to minimize risks to the International
Index Master Portfolio from adverse changes in the
relationship between the U.S. dollar and foreign currencies,
the International Index Master Portfolio may engage in
foreign currency transactions on a spot (i.e., cash) basis
and may purchase or sell forward foreign currency exchange
contracts ("forward contracts"). The International Index
Master Portfolio may also purchase and sell foreign currency
futures contracts (see "Purchase and Sale of Currency
Futures Contracts"). A forward contract is an obligation
to purchase or sell a specific currency for an agreed price
at a future date that is individually negotiated and
privately traded by currency traders and their customers.
Forward contracts establish an exchange rate at a future
date. These contracts are transferable in the interbank
market conducted directly between currency traders (usually
large commercial banks) and their customers. A forward
contract generally has no deposit requirement and is traded
at a net price without commission. The International Index
Master Portfolio will direct its custodian, to the extent
required by applicable regulations, to segregate high grade
liquid assets in an amount at least equal to its obligations
under each forward contract. Neither spot transactions nor
forward contracts eliminate fluctuations in the prices of
the International Index Master Portfolio's portfolio
securities or in foreign exchange rates, or prevent loss if
the prices of these securities should decline.
The International Index Master Portfolio may enter into a
forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated
in a foreign currency in order to "lock in" the U.S.
dollar price of the security (a "transaction hedge"). In
addition, when BGFA believes that a foreign currency may
suffer a substantial decline against the U.S. dollar, it may
enter into a forward sale contract to sell an amount of that
foreign currency approximating the value of some or all of
the International Index Master Portfolio's securities
denominated in such foreign currency, or when BGFA believes
that the U.S. dollar may suffer a substantial decline
against the foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed
dollar amount (a "position hedge').
The International Index Master Portfolio may, in the
alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount
where BGFA believes that the U.S. dollar value of the
currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of
the currency in which the portfolio securities are
denominated (a "cross-hedge").
Foreign currency hedging transactions are an attempt to
protect the International Index Master Portfolio against
changes in foreign currency exchange rates between the trade
and settlement dates of specific securities transactions or
changes in foreign currency exchange rates that would
adversely affect a portfolio position or an anticipated
portfolio position. Although these transactions tend to
minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of
the hedged currency increase. The precise matching of the
forward contract amount and the value of the securities
involved will not generally be possible because the future
value of these securities in foreign currencies will change
as a consequence of market movements in the value of those
securities between the date the forward contract is entered
into and date it matures.
The International Index Master Portfolio's custodian will,
to the extent required by applicable regulations, segregate
cash, U.S. Government securities or other high-quality debt
securities having a value equal to the aggregate amount of
the International Index Master Portfolio's commitments under
forward contracts entered into with respect to position
hedges and cross-hedges. If the value of the segregated
securities declines, additional cash or securities will be
segregated on a daily basis so that the value of the
segregated securities will equal the amount of the
International Index Master Portfolio's commitments with
respect to such contracts.
The cost to the International Index Master Portfolio of
engaging in currency transactions varies with factors such
as the currency involved, the length of the contract period
and the market conditions then prevailing. Because
transactions in currency exchange usually are conducted on a
principal basis, no fees or commissions are involved. BGFA
considers on an ongoing basis the creditworthiness of the
institutions with which the International Index Master
Portfolio enters into foreign currency transactions. The
use of forward currency exchange contracts does not
eliminate fluctuations in the underlying prices of the
securities, but it does establish a rate of exchange that
can be achieved in the future. If a devaluation generally
is anticipated, the International Index Master Portfolio may
not be able to contract to sell the currency at a price
above the devaluation level it anticipates.
Hedging and Related Strategies.
The International Index Master Portfolio may attempt to
protect the U.S. dollar equivalent value of one or more of
its investments (hedge) by purchasing and selling foreign
currency futures contracts and by purchasing and selling
currencies on a spot (i.e., cash) or forward basis. Foreign
currency futures contracts are bilateral agreements pursuant
to which one party agrees to make, and the other party
agrees to accept, delivery of a specified type of currency
at a specified future time and at a specified price.
Although such futures contracts by their terms call for
actual delivery or acceptance of currency, in most cases the
contracts are closed out before the settlement date without
the making or taking of delivery. A forward currency
contract involves an obligation to purchase or sell a
specific currency at a specified future date, which may be
any fixed number of days from the contract date agreed upon
by the parties, at a price set at the time the contract is
entered into.
The International Index Master Portfolio may enter into
forward currency contracts for the purchase or sale of a
specified currency at a specified future date either with
respect to specific transactions or with respect to
portfolio positions. For example, the International Index
Master Portfolio may enter into a forward currency contract
to sell an amount of a foreign currency approximating the
value of some or all of the Master Portfolio's securities
denominated in such currency. The International Index
Master Portfolio may use forward contracts in one currency
or a basket of currencies to hedge against fluctuations in
the value of another currency when BGFA anticipates there
will be a correlation between the two and may use forward
currency contracts to shift the International Index Master
Portfolio's exposure to foreign currency fluctuations from
one country to another. The purpose of entering into these
contracts is to minimize the risk to the International Index
Master Portfolio from adverse changes in the relationship
between the U.S. dollar and foreign currencies.
BGFA might not employ any of the strategies described above,
and there can be no assurance that any strategy used will
succeed. If BGFA incorrectly forecasts exchange rates,
market values or other economic factors in utilizing a
strategy for the International Index Master Portfolio, the
Master Portfolio might have been in a better position had it
not hedged at all. The use of these strategies involves
certain special risks, including (1) the fact that skills
needed to use hedging instruments are different from those
needed to select the International Index Master Portfolio's
securities, (2) possible imperfect correlation, or even no
correlation, between price movements of hedging instruments
and price movements of the investments being hedged, (3) the
fact that, while hedging strategies can reduce the risk of
loss, they can also reduce the opportunity for gain, or even
result in losses, by offsetting favorable price movements in
hedged investments and (4) the possible inability of the
International Index Master Portfolio to purchase or sell a
portfolio security at a time that otherwise would be
favorable for it to do so, or the possible need for the
International Index Master Portfolio to sell a portfolio
security at a disadvantageous time, due to the need for the
International Index Master Portfolio to maintain "cover"
or to segregate securities in connection with hedging
transactions and the possible inability of the International
Index Master Portfolio to close out or to liquidate its
hedged position.
New financial products and risk management techniques
continue to be developed. The International Index Master
Portfolio my use these instruments and techniques to the
extent consistent with its investment objectives and
regulatory and tax considerations.
Privately Issued Securities.
The International Index Master Portfolio may invest in
privately issued securities, including those which may be
resold only in accordance with Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities"). Rule
144A Securities are restricted securities that are not
publicly traded. Accordingly, the liquidity of the market
for specific Rule 144A Securities may vary. Delay or
difficulty in selling such securities may result in a loss
to the International Index Master Portfolio. Privately
issued or Rule 144A securities that are determined by BGFA
to be "illiquid" are subject to the International Index
Master Portfolio's policy of not investing more than 15% of
its net assets in illiquid securities. BGFA, under
guidelines approved by Board of Trustees of MIP, will
evaluate the liquidity characteristics of each Rule 144A
Security proposed for purchase by the International Index
Master Portfolio on a case-by-case basis and will consider
the following factors, among others, in their evaluation:
(1) the frequency of trades and quotes for the Rule 144A
Security; (2) the number of dealers willing to purchase or
sell the Rule 144A Security and the number of other
potential purchasers; (3) dealer undertakings to make a
market in the Rule 144A Security; and (4) the nature of the
Rule 144A Security and the nature of the marketplace trades
(e.g., the time needed to dispose of the Rule 144A Security,
the method of soliciting offers and the mechanics of
transfer).
PORTFOLIO SECURITIES - U.S. Equity Index and International
Index Master Portfolios
The U.S. Equity Index Master Portfolio and the International
Index Master Portfolio (each, the "Master Portfolio") may
invest in the securities described below.
Short-Term Instruments and Temporary Investments.
The Master Portfolio may invest in high-quality money market
instruments on an ongoing basis to provide liquidity, for
temporary purposes when there is an unexpected level of
interestholder purchases or redemptions or when
"defensive" strategies are appropriate. The instruments
in which the Master Portfolio may invest include: (i) short-
term obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (including
government-sponsored enterprises); (ii) negotiable
certificates of deposit ("CDs"), bankers' acceptances,
fixed time deposits and other obligations of domestic banks
(including foreign branches) that have more than $1 billion
in total assets at the time of investment and that are
members of the Federal Reserve System or are examined by the
Comptroller of the Currency or whose deposits are insured by
the Federal Deposit Insurance Company (the "FDIC"); (iii)
commercial paper rated at the date of purchase "Prime-1"
by Moody's or "A-1+" or "A-1" by S&P, or, if unrated, of
comparable quality as determined by BGFA; (iv) non-
convertible corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date of
purchase of not more than one year that are rated at least
"Aa" by Moody's or "AA" by S&P; (v) repurchase
agreements; and (vi) short-term, U.S. dollar-denominated
obligations of foreign banks (including U.S. branches) that
at the time of investment have more than $10 billion, or the
equivalent in other currencies, in total assets and in the
opinion of BGFA are of comparable quality to obligations of
U.S. banks which may be purchased by the Master Portfolio.
Bank Obligations. The Master Portfolio may invest in bank
obligations, including certificates of deposit, time
deposits, bankers' acceptances and other short-term
obligations of domestic banks, foreign subsidiaries of
domestic banks, foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, domestic
savings and loan associations and other banking
institutions. Certificates of deposit are negotiable
certificates evidencing the obligation of a bank to repay
funds deposited with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a
stated interest rate. Time deposits which may be held by
the Master Portfolio will not benefit from insurance from
the Bank Insurance Fund or the Savings Association Insurance
Fund administered by the FDIC. Bankers' acceptances are
credit instruments evidencing the obligation of a bank to
pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. The
other short-term obligations may include uninsured, direct
obligations, bearing fixed, floating- or variable-interest
rates.
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 have their deposits insured by 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. In addition,
state banks whose certificates of deposit ("CDs") may be
purchased by the Master Portfolio are insured by the FDIC
(although such insurance may not be of material benefit to
the Master Portfolio, depending on the principal amount of
the CDs of each bank held by the Master Portfolio) and are
subject to Federal examination and to a substantial body of
Federal law and regulation. As a result of Federal or state
laws and regulations, domestic branches of domestic banks
whose CDs may be purchased by the Master Portfolio generally
are required, among other things, to maintain specified
levels of reserves, are limited in the amounts which they
can loan to a single borrower and are subject to other
regulation designed to promote financial soundness.
However, not all of such laws and regulations apply to the
foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign
branches of foreign banks, such as CDs and time deposits
("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. 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.
These foreign branches and subsidiaries 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 record keeping requirements. In addition, less
information may be publicly available about a foreign branch
of a domestic bank or about a foreign bank than about a
domestic bank
Obligations of United States 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 or by Federal or 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 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, Federal branches licensed by the Comptroller of
the Currency and branches licensed by certain states
("State Branches") may be required to: (1) pledge to the
regulator by depositing assets with a designated bank within
the state, a certain percentage of their assets as fixed
from time to time by the appropriate regulatory authority;
and (2) 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
Federal and State Branches generally must be insured by the
FDIC if such branches take deposits of less than $100,000.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of
domestic banks, by foreign subsidiaries of domestic banks,
by foreign branches of foreign banks or by domestic branches
of foreign banks, BGFA carefully evaluates such investments
on a case-by-case basis.
The Master Portfolio may purchase CDs issued by banks,
savings and loan associations and similar thrift
institutions with less than $1 billion in assets, which are
members of the FDIC, provided such Master Portfolio
purchases any such CD in a principal amount of not more than
$100,000, which amount would be fully insured by the Bank
Insurance Fund or the Savings Association Insurance Fund
administered by the FDIC. Interest payments on such a CD
are not insured by the FDIC. No Master Portfolio will own
more than one such CD per such issuer.
Commercial Paper and Short-Term Corporate Debt Instruments.
The Master Portfolio may invest in commercial paper
(including variable amount master demand notes), which
consists of short-term, unsecured promissory notes issued by
corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity
at the time of issuance not exceeding nine months. Variable
amount master demand notes are demand obligations that
permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangements between
the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to
vary the amount of the outstanding indebtedness on the
notes. BGFA monitors on an ongoing basis the ability of an
issuer of a demand instrument to pay principal and interest
on demand.
The Master Portfolio also may invest in non-convertible
corporate debt securities (e.g., bonds and debentures) with
not more than one year remaining to maturity at the date of
settlement. The Master Portfolio will invest only in such
corporate bonds and debentures that are rated at the time of
purchase at least "Aa" by Moody's or "AA" by S&P.
Subsequent to its purchase by the Master Portfolio, an issue
of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by
the Master Portfolio. BGFA will consider such an event in
determining whether the Master Portfolio should continue to
hold the obligation. To the extent the Master Portfolio
continues to hold such obligations, it may be subject to
additional risk of default.
U.S. Government Obligations. The Master Portfolio may
invest in various types of U.S. Government obligations.
U.S. Government obligations include securities issued or
guaranteed as to principal and interest by the U.S.
Government its agencies or instrumentalities. Payment of
principal and interest on U.S. Government obligations (i)
may be backed by the full faith and credit of the United
States (as with U.S. Treasury obligations and GNMA
certificates) or (ii) may be backed solely by the issuing or
guaranteeing agency or instrumentality itself (as with FNMA
notes). In the latter case, the investor must look
principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, which
agency or instrumentality may be privately owned. There can
be no assurance that the U.S. Government would provide
financial support to its agencies or instrumentalities where
it is not obligated to do so. As a general matter, the
value of debt instruments, including U.S. Government
obligations, declines when market interest rates increase
and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to
fluctuations in yield or value due to their structure or
contract terms.
Repurchase Agreements
The Master Portfolio may engage in a repurchase agreement
with respect to any security in which it is authorized to
invest, although the underlying security may mature in more
than thirteen months. The Master Portfolio may enter into
repurchase agreements wherein the seller of a security to
the Master Portfolio agrees to repurchase that security from
the Master Portfolio at a mutually agreed-upon time and
price that involves the acquisition by the Master Portfolio
of an underlying debt instrument, subject to the seller's
obligation to repurchase, and the Master Portfolio's
obligation to resell, the instrument at a fixed price
usually not more than one week after its purchase. The
Master Portfolio's custodian has custody of, and holds in a
segregated account, securities acquired as collateral by the
Master Portfolio under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and
Exchange Commission (the "SEC") to be loans by the Master
Portfolio. The Master Portfolio may enter into repurchase
agreements only with respect to securities of the type in
which it may invest, including government securities and
mortgage-related securities, regardless of their remaining
maturities, and requires that additional securities be
deposited with the custodian if the value of the securities
purchased should decrease below resale price. BGFA monitors
on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price.
Certain costs may be incurred by the Master Portfolio in
connection with the sale of the underlying securities if the
seller does not repurchase them in accordance with the
repurchase agreement. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the
securities, disposition of the securities by the Master
Portfolio may be delayed or limited. While it does not
presently appear possible to eliminate all risks from these
transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as
delay and costs to the Master Portfolio in connection with
insolvency proceedings), it is the policy of the Master
Portfolio to limit repurchase agreements to selected
creditworthy securities dealers or domestic banks or other
recognized financial institutions. The Master Portfolio
considers on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase
agreements. Repurchase agreements are considered to be
loans by the Master Portfolio under the 1940 Act.
Floating- and Variable-Rate Obligations.
The Master Portfolio may purchase floating- and variable-
rate obligations. The Master Portfolio may purchase
floating- and variable-rate demand notes and bonds, which
are obligations ordinarily having stated maturities in
excess of thirteen months, but which permit the holder to
demand payment of principal at any time, or at specified
intervals not exceeding thirteen months. Variable rate
demand notes include master demand notes that are
obligations that permit the Master Portfolio to invest
fluctuating amounts, which may change daily without penalty,
pursuant to direct arrangements between the Master
Portfolio, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of
such obligations ordinarily has a corresponding right after
a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest
upon a specified number of days' notice to the holders of
such obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate, such as
a bank's prime rate, and is adjusted automatically each time
such rate is adjusted. The interest rate on a variable-rate
demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by
letters of credit or other credit support arrangements
provided by banks. Because these obligations are direct
lending arrangements between the lender and borrower, it is
not contemplated that such instruments generally will be
traded, and there generally is no established secondary
market for these obligations, although they are redeemable
at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support
arrangements, the Master Portfolio's right to redeem is
dependent on the ability of the borrower to pay principal
and interest on demand. Such obligations frequently are not
rated by credit rating agencies and the Master Portfolio may
invest in obligations, which are not so rated only if BGFA
determines that at the time of investment the obligations
are of comparable quality to the other obligations in which
each Master Portfolio may invest. BGFA, on behalf of the
Master Portfolio, considers on an ongoing basis the
creditworthiness of the issuers of the floating- and
variable-rate demand obligations in the Master Portfolio's
portfolio. Each Master Portfolio will not invest more than
10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be
treated as liquid, provided an active secondary market
exists.
Illiquid Securities.
The Master Portfolio may invest up to 15% of the value of
its net assets in securities as to which a liquid trading
market does not exist, provided such investments are
consistent with its investment objective. Such securities
may include securities that are not readily marketable, such
as privately issued securities and other securities that are
subject to legal or contractual restrictions on resale,
floating- and variable-rate demand obligations as to which
the Master Portfolio cannot exercise a demand feature on not
more than seven days' notice and as to which there is no
secondary market and repurchase agreements providing for
settlement more than seven days after notice.
Investment Company Securities.
The Master Portfolio may invest in securities issued by
other open-end, management investment companies to the
extent permitted under the 1940 Act. As a general matter,
under the 1940 Act investment in such securities is limited
to: (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Master Portfolio's net assets with
respect to any one investment company and (iii) 10% of the
Master Portfolio's net assets with respect to all such
companies in the aggregate. Investments in the securities
of other investment companies generally will involve
duplication of advisory fees and certain other expenses.
The Master Portfolio may also purchase interests of
exchange-listed closed-end funds to the extent permitted
under the 1940 Act.
Loans of Portfolio Securities.
The Master Portfolio may lend securities from its portfolio
to brokers, dealers and financial institutions (but not
individuals) if cash, U.S. Government securities or other
high quality debt obligations equal to at least 100% of the
current market value of the securities loaned (including
accrued interest thereon) plus the interest payable to the
Master Portfolio with respect to the loan is maintained with
the Master Portfolio. In determining whether or not to lend
a security to a particular broker, dealer or financial
institution, the BGFA considers all relevant facts and
circumstances, including the size, creditworthiness and
reputation of the broker, dealer, or financial institution.
Any loans of portfolio securities are fully collateralized
based on values that are marked to market daily. The Master
Portfolio does not enter into any portfolio security lending
arrangements having a duration longer than one year. Any
securities that the Master Portfolio receives as collateral
do not become part of its portfolio at the time of the loan
and, in the event of a default by the borrower, the Master
Portfolio will, if permitted by law, dispose of such
collateral except for such part thereof that is a security
in which the Master Portfolio is permitted to invest.
During the time securities are on loan, the borrower will
pay the Master Portfolio any accrued income on those
securities, and the Master Portfolio may invest the cash
collateral and earn income or receive an agreed-upon fee
from a borrower that has delivered cash-equivalent
collateral. The Master Portfolio will not lend securities
having a value that exceeds one-third of the current value
of its respective total assets. Loans of securities by the
Master Portfolio are subject to termination at the Master
Portfolio or the borrower's option. The Master Portfolio
may pay reasonable administrative and custodial fees in
connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the
collateral to the borrower or the placing broker. Borrowers
and placing brokers are not permitted to be affiliated,
directly or indirectly, with the Master Portfolio or BGFA.
Forward Commitments, When-Issued Purchases and
Delayed-Delivery Transactions.
The Master Portfolio may purchase or sell securities on a
when-issued or delayed-delivery basis and make contracts to
purchase or sell securities for a fixed price at a future
date beyond customary settlement time. Securities purchased
or sold on a when-issued, delayed-delivery or forward
commitment basis involve a risk of loss if the value of the
security to be purchased declines, or the value of the
security to be sold increases, before the settlement date.
Although the Master Portfolio will generally purchase
securities with the intention of acquiring them, the Master
Portfolio may dispose of securities purchased on a when-
issued, delayed-delivery or a forward commitment basis
before settlement when deemed appropriate by the adviser.
Securities purchased on a when-issued or forward commitment
basis may expose the Master Portfolio to risk because they
may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued or
forward-commitment basis can involve the additional risk
that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the
transaction itself.
The Master Portfolio will segregate cash, U.S. Government
obligations or other high-quality debt instruments in an
amount at least equal in value to the Master Portfolio's
commitments to purchase when-issued securities. If the
value of these assets declines, the Master Portfolio will
segregate additional liquid assets on a daily basis so that
the value of the segregated assets is equal to the amount of
such commitments.
Future Developments.
The Master Portfolio may take advantage of opportunities in
the area of options and futures contracts and options on
futures contracts and any other derivative investments which
are not presently contemplated for use by the Master
Portfolio or which are not currently available but which may
be developed, to the extent such opportunities are both
consistent with the Master Portfolio's investment objective
and legally permissible for the Master Portfolio. Before
entering into such transactions or making any such
investment, the Master Portfolio will provide appropriate
disclosure in its prospectus.
Portfolio Characteristics and Policies
Each of the Funds and the Master Portfolios are diversified
under the federal securities laws and regulations.
Because the structures of the Master Portfolios are based on
the relative market capitalizations of eligible holdings, it
is possible that a Master Portfolio might include at least
5% of the outstanding voting securities of one or more
issuers. In such circumstances, the Master Portfolio and the
issuer would be deemed affiliated persons and certain
requirements under the federal securities laws and
regulations regulating dealings between mutual funds and
their affiliates might become applicable. However, based on
the present capitalizations of the groups of companies
eligible for inclusion in the Master Portfolios and the
anticipated amount of the assets intended to be invested in
such securities, management does not anticipate that the
Master Portfolios will include as much as 5% of the voting
securities of any issuer.
The Fund will not incur any brokerage or other costs in
connection with their purchase or redemption of shares of
the Master Portfolio, except if the Fund receives securities
or currencies from a Master Portfolio to satisfy the Fund's
redemption request.
INVESTMENT LIMITATIONS
Futures Contracts
The Master Portfolio may enter into futures contracts and
options on futures contracts only for the purpose of
remaining fully invested and to maintain liquidity to pay
redemptions. Futures contracts provide for the future sale
by one party and purchase by another party of a specified
amount of defined securities at a specified future time and
at a specified price. Futures contracts that are
standardized as to maturity date and underlying financial
instruments are traded on national futures exchanges. A
Master Portfolio will be required to make a margin deposit
in cash or government securities with a broker or custodian
to initiate and maintain positions in futures contracts.
Minimal initial margin requirements are established by the
futures exchange and brokers may establish margin
requirements that are higher than the exchange requirements.
After a futures contract position is opened, the value of
the contract is marked to market daily. If the futures
contract price changes, to the extent that the margin on
deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely,
reduction in the contract value may reduce the required
margin resulting in a repayment of excess margin to a Master
Portfolio. Variation margin payments are made to and from
the futures broker for as long as the contract remains open.
The Master Portfolios expect to earn income on their margin
deposits. To the extent a Master Portfolio invests in
futures contracts and options thereon for other than bona
fide hedging purposes, no Master Portfolio will enter into
such transactions if, immediately thereafter, the sum of the
amount of initial margin deposits and premiums paid for open
futures options would exceed 5% of the Master Portfolio's
net assets, after taking into account unrealized profits and
unrealized losses on such contracts it has entered into;
provided, however, that, in the case of an option that is
in-the-money at the time of purchase, the in-the-money
amount may be excluded in calculating the 5%. Pursuant to
published positions of the SEC, the Master Portfolios may be
required to maintain segregated accounts consisting of
liquid assets, such as cash or liquid securities (or, as
permitted under applicable regulation, enter into offsetting
positions) in connection with their futures contract
transactions in order to cover their obligations with
respect to such contracts.
Positions in futures contracts may be closed out only on an
exchange that provides a secondary market. However, there
can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific
time. Therefore, it might not be possible to close a
futures position and, in the event of adverse price
movements, a Master Portfolio would continue to be required
to make variation margin deposits. In such circumstances,
if a Master Portfolio has insufficient cash, it might have
to sell portfolio securities to meet daily margin
requirements at a time when it might be disadvantageous to
do so. Management intends to minimize the possibility that
it will be unable to close out a futures contract by only
entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid
secondary market.
Cash Management Practices
The Fund and the Master Portfolios engage in cash management
practices in order to earn income on uncommitted cash
balances. Generally, cash is uncommitted pending investment
in other obligations, payment of redemptions or in other
circumstances where BGFA believes liquidity is necessary or
desirable. For example, cash investments may be made for
temporary defensive purposes during periods in which market,
economic or political conditions warrant. All the Portfolios
and Master Funds may invest cash in short-term repurchase
agreements.
The aggregate amount of expenses for the Fund and the Master
Portfolio may be greater than it would be if the fund were
to invest directly in the securities held by the Master
Portfolios. However, the total expense ratios for the fund
and the Master Portfolios are expected to be less over time
than such ratios would be if the fund were to invest
directly in the underlying securities. This arrangement
enables institutional investors, including the fund, to pool
their assets, which may be expected to result in economies
by spreading certain fixed costs over a larger asset base.
Each shareholder in a Master Portfolio, including the Fund,
will pay its proportionate share of the expenses of that
Master Portfolio.
The shares of the Master Portfolio will be offered to
institutional investors for the purpose of increasing the
funds available for investment, to reduce expenses as a
percentage of total assets and to achieve other economies
that might be available at higher asset levels. Investment
in a Master Portfolio by other institutional investors
offers potential benefits to the Master Portfolio and
through their investment in the Master Portfolio, the Fund
also. However, such economies and expense reductions might
not be achieved, and additional investment opportunities,
such as increased diversification, might not be available if
other institutions do not invest in the Master Portfolio.
Also, if an institutional investor were to redeem its
interest in a Master Portfolio, the remaining investors in
that Master Portfolio could experience higher pro rata
operating expenses, thereby producing lower returns, and the
Master Portfolio's security holdings may become less
diverse, resulting in increased risk. Institutional
investors that have a greater pro rata ownership interest in
a Master Portfolio than the corresponding Feeder Fund could
have effective voting control over the operation of the
Master Portfolio.
If the Board of Trustees of the Fund determines that it is
in the best interest of the Fund, the fund may withdraw its
investment in the Master Portfolio at any time. Upon any
such withdrawal, the Board would consider what action the
Fund might take, including either seeking to invest its
assets in another registered investment company with the
same investment objective as the Fund, which might not be
possible, or retaining an investment advisor to manage the
Fund's assets in accordance with its own investment
objective, possibly at increased cost. Shareholders of the
Fund will receive written notice thirty days prior to the
effective date of any changes in the investment objective of
its corresponding Master Portfolio. A withdrawal by a Fund
of its investment in the corresponding Master Portfolio
could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) to the Fund.
Should such a distribution occur, the Fund could incur
brokerage fees or other transaction costs in converting such
securities to cash in order to pay redemptions. In addition,
a distribution in kind to a Fund could result in a less
diversified portfolio of investments and could affect
adversely the liquidity of the Fund. Moreover, a
distribution in kind by a Master Portfolio to a Fund may
constitute a taxable exchange for federal income tax
purposes resulting in gain or loss to such Fund. Any net
capital gains so realized will be distributed to that Fund's
shareholders
Shareholder Rights
Whenever the Fund, as an investor in its corresponding
Master Portfolio, is asked to vote on a shareholder
proposal, the respective Fund will solicit voting
instructions from the Fund's shareholders with respect to
the proposal. The Trustees of the Trust will then vote the
Fund's shares in the Master Portfolio in accordance with the
voting instructions received from the Fund's shareholders.
The Trustees of the Trust will vote shares of the Fund for
which they receive no voting instructions in accordance with
their best judgment.
INVESTMENT RESTRICTIONS OF THE FUND
The fund has adopted the following investment restrictions
for the protection of shareholders. Restrictions 1 through 7
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 in a manner that would cause it to fail to be a
"diversified company" under the 1940 Act and the
rules, regulations and orders thereunder.
2. Issue "senior securities" as defined in the 1940
Act, and the rules, regulations and orders thereunder,
except as permitted under the 1940 Act and the rules,
regulations and orders thereunder.
3. Invest more than 25% of its total assets in
securities, the issuers of which conduct their
principal business activities in the same industry.
For purposes of this limitation, securities of the
U.S. government (including its agencies and
instrumentalities) and securities of state or
municipal governments and their political subdivisions
are not considered to be issued by members of any
industry.
4. Borrow money, except that (a) the fund may borrow from
banks for temporary or emergency (not leveraging)
purposes, including the meeting of redemption requests
which might otherwise require the untimely disposition
of securities, and (b) the fund may, to the extent
consistent with its investment policies, enter into
reverse repurchase agreements, forward roll
transactions and similar investment strategies and
techniques. To the extent that it engages in
transactions described in (a) and (b), the fund will
be limited so that no more than 33 1/3% of the value
of its total assets (including the amount borrowed),
valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) valued
at the time the borrowing is made, is derived from
such transactions.
5. Make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the fund may
invest consistent with its investment objective and
policies; (b) repurchase agreements; and (c) loans of
its portfolio securities, to the fullest extent
permitted under the 1940 Act.
6. Engage in the business of underwriting securities
issued by other persons, except to the extent that the
fund may technically be deemed to be an underwriter
under the Securities Act of 1933, as amended, in
disposing of portfolio securities.
7. Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this
restriction shall not prevent the fund from: (a)
investing in securities of issuers engaged in the real
estate business or the business of investing in real
estate (including interests in limited partnerships
owning or otherwise engaging in the real estate
business or the business of investing in real estate)
and securities which are secured by real estate or
interests therein; (b) holding or selling real estate
received in connection with securities it holds or
held; (c) trading in futures contracts and options on
futures contracts (including options on currencies to
the extent consistent with the funds' investment
objective and policies); or (d) investing in real
estate investment trust securities.
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 underlying securities and
other assets in escrow and collateral agreements with
respect to initial or maintenance margin in connection
with futures contracts and related options and options
on securities, indexes or similar items is not
considered to be the purchase of a security on margin.
9. Invest in oil, gas or other mineral exploration or
development programs.
10. 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.
11. Invest for the purpose of exercising control of
management.
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.
INVESTMENT RESTRICTIONS OF THE U.S. EQUITY INDEX MASTER
PORTFOLIO
The Master Portfolio has adopted investment restrictions
numbered I through 9 as fundamental policies. These
restrictions cannot be changed, as to the Master Portfolio,
without approval by the holders of a majority (as defined in
the 1940 Act) of the Master Portfolio's outstanding voting
securities. Investment restrictions numbered 10 through 13
are not fundamental policies and may be changed by vote of a
majority of the Trustees of MIP at any time. The Master
Portfolio may not:
1. Invest more than 5% of its assets in the obligations
of any single issuer, except that up to 25% of the
value of its total assets may be invested, and
securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities may be purchased,
without regard to any such limitation.
2. Hold more than 10% of the outstanding voting
securities of any single issuer. This Investment
Restriction applies only with respect to 75% of its
total assets.
3. Invest in commodities, except that the Master
Portfolio may purchase and sell (i.e., write) options,
forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts
or indexes.
4. Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development
programs, but the Master portfolio may purchase and
sell securities that are secured by real estate or
issued by companies that invest or deal in real
estate.
5. Borrow money, except to the extent permitted under the
1940 Act provided that the Master Portfolio may
borrow up to 20% of the current value of its net
assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by
the pledge of up to 20% of the current value of its
net assets. For purposes of this investment
restriction, the Master Portfolio's entry into
options, forward contracts, futures contracts,
including those relating to indexes, and options on
futures contracts or indexes shall not constitute
borrowing to the extent certain segregated accounts
are established and maintained by the Master
Portfolio.
6. Make loans to others, except through the purchase of
debt obligations and the entry into repurchase
agreements. However, the Master Portfolio may lend
its portfolio securities in an amount not to exceed
one-third of the value of its total assets. Any loans
of portfolio securities will be made according to
guidelines established by the Securities and Exchange
Commission and the MIP's Board of Trustees.
7. Act as an underwriter of securities of other issuers,
except to the extent the Master Portfolio may be
deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio
securities.
8. Invest 25% or more of its total assets in the
securities of issuers in any particular industry or
group of closely related industries and except that
there shall be no limitation with respect to
investments in (i) obligations of the U.S. Government,
its agencies or instrumentalities (ii) any industry in
which the Wilshire 4500 Index becomes concentrated to
the same degree during the same period, the Master
Portfolio will be concentrated as specified above only
to the extent the percentage of its assets invested in
those categories of investments is sufficiently large
that 25% or more of its total assets would be invested
in a single industry.
9. Issue any senior security (as such term is defined in
Section 18(f) of the 1940 Act), except to the extent
the activities permitted in Investment Restriction
Nos. 3 and 5 may be deemed to give rise to a senior
security.
10. Purchase securities on margin, but the Master
Portfolio may make margin deposits in connection with
transactions in options, forward contracts, futures
contracts, including those related to indexes, and
options on futures contracts or indexes.
11. The Master Portfolio may invest in shares of other
open-end management investment companies, subject to
the limitations of Section 12(d)(1) of the 1940 Act.
12. The Master Portfolio may not invest more than 15% of
the Master Portfolio's net assets in illiquid
securities. For this purpose, illiquid securities
include, among others, (a) securities that are
illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions
on resale, (b) fixed time deposits that are subject to
withdrawal penalties and that have maturities of more
than seven days, and (c) repurchase agreements not
terminable within seven days.
13. The Master Portfolio may lend securities from its
portfolio to brokers, dealers and financial
institutions, in amounts not to exceed (in the
aggregate) one-third of the Fund's total assets. Any
such loans of portfolio securities will be fully
collateralized based on values that are marked to
market daily. The Master Portfolio will not enter
into any portfolio security lending arrangement having
a duration of longer than one year.
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.
INVESTMENT RESTRICTIONS OF THE INTERNATIONAL INDEX MASTER
PORTFOLIO
The Master Portfolio has adopted investment restrictions
numbered 1 through 9 as fundamental policies. These
restrictions cannot be changed, as to the Master Portfolio,
without approval by the holders of a majority (as defined in
the 1940 Act) of the Master Portfolio's outstanding voting
securities. Investment restrictions numbered 11 through 13
are not fundamental policies and may be changed by vote of a
majority of the Trustees of MIP at any time. The Master
Portfolio may not:
1 Invest more than 5% of its assets in the obligations
of any single issuer, except that up to 25% of the
value of its total assets may be invested, and
securities issued or guaranteed by the US. Government
or its agencies or instrumentalities may be purchased,
without regard to any such limitation. This
limitation does not apply to foreign currency
transactions including without limitation forward
currency contracts.
2 Hold more than 10% of the outstanding voting
securities of any single issuer. This Investment
Restriction applies only with respect to 75% of its
total assets.
3 Invest in commodities, except that the Master
Portfolio may purchase and sell (i.e., write) options,
forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts
or indices.
4 Purchase, hold or deal in real estate, or oil, gas or
other mineral leases or exploration or development
program, but the Master Portfolio may purchase and
sell securities that are secured by real estate or
issued by companies that invest or deal in real
estate.
5 Borrow money, except to the extent permitted under the
1940 Act provided that the Master Portfolio may borrow
up to 20% of the current value of its net assets for
temporary purposes only in order to meet redemptions,
and these borrowings may be secured by the pledge of
up to 20% of the current value of its net assets. For
purposes of this investment restriction, the Master
Portfolio's entry into options, forward contracts,
futures contracts, including those relating to
indices, and options on futures contracts or indices
shall not constitute borrowing to the extent certain
segregated accounts are established and maintained by
the Master Portfolio.
6 Make loans to others, except through the purchase of
debt obligations and the entry into repurchase
agreements. However, the Master Portfolio may lend
its portfolio securities in an amount not to exceed
one-third of the value of its total assets. Any loans
of portfolio securities will be made according to
guidelines established by the Securities and Exchange
Commission and the MIP's Board of Trustees.
7 Act as an underwriter of securities of other issuers,
except to the extent the Master Portfolio may be
deemed an underwriter under the 1933 Act as amended,
by virtue of disposing of portfolio securities.
8 Invest 25% or more of its total assets in the
securities of issuers in any particular industry or
group of closely related industries and except that
there shall be no limitation with respect to
investments in (i) obligations of the US. Government,
its agencies or instrumentalities (ii) any industry in
which the EAFE Free Index becomes concentrated to the
same degree during the same period, the Master
Portfolio will be concentrated as specified above only
to the extent the percentage of its assets invested in
those categories of investments is sufficiently large
that 25% or more of its total assets would be invested
in a single industry.
9 Issue any senior security (as such term is defined in
Section 18(f) of the 1940 Act), except to the extent
the activities permitted in Investment Restriction
Nos. 3 and 5 may be deemed to give rise to a senior
security
10 Purchase securities on margin, but each Master
Portfolio may make margin deposits in connection with
transactions in options, forward contracts futures
contracts including those related to indexes, and
options on futures contracts or indexes.
11 The Master Portfolio may invest in shares of other
open-end management investment companies, subject to
the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, the Master Portfolio's investment
in such securities currently is limited, subject to
certain exceptions, to (i) 3% of the total voting
stock of any one investment company, (ii) 5% of the
Master Portfolio's net assets with respect to any one
investment company, and (iii) 10% of the Master
Portfolio's net assets in the aggregate. Other
investment companies in which the Master Portfolio
invests can be expected to charge fees for operating
expenses, such as investment advisory and
administration fees, that would be in addition to
those charged by the Master Portfolio.
12 The Master Portfolio may not invest more than 15% of
its net assets in illiquid securities. For this
purpose, illiquid securities include, among others,
(a) securities that are illiquid by virtue of the
absence of a readily available market or legal or
contractual restrictions on resale, (b) fixed time
deposits that are subject to withdrawal penalties and
that have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven
days.
13 The Master Portfolio may lend securities from its
portfolio to brokers, dealers and financial
institutions, in amounts not to exceed (in the
aggregate) one-third of the Master Portfolio's total
assets. Any such loans of portfolio securities will
be fully collateralized based on values that are
marked to market daily. The Master Portfolio will not
enter into any portfolio security lending arrangement
having a duration of longer than one year.
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.
RISK CONSIDERATIONS
U.S. EQUITY INDEX MASTER PORTFOLIO
General-The value of the Master Portfolio's interests is
neither insured nor guaranteed, is not fixed and should be
expected to fluctuate.
Equity Securities-The stock investments of the Master
Portfolio are subject to equity market risk. Equity market
risk is the possibility that common stock prices will
fluctuate or decline over short or even extended periods.
The U.S. stock market tends to be cyclical, with periods
when stock prices generally rise and periods when prices
generally decline. In addition, many of the companies whose
securities comprise the Wilshire 4500 Index are small- to
medium-sized companies which, historically, have been more
susceptible to market fluctuations than securities of larger
capitalization companies such as those comprising the S&P
500 Index. As of the date of this registration statement,
the U.S. stock market, as measured by the Wilshire 5000
Index and other commonly used indices, was trading at or
close to record levels. There can be no assurance that
these record levels will continue.
Debt Securities-The debt instruments in which the Master
Portfolio may invest are subject to credit and interest rate
risk. Credit risk is the risk that issuers of debt
instruments may default on the payment of principal and/or
interest. Interest-rate risk is the risk that increases in
market interest rates may adversely affect the value of debt
instruments. The value of debt instruments generally
changes inversely to market interest rates. Debt securities
with longer maturities, which tend to produce higher yields,
are subject to potentially greater capital appreciation and
depreciation than, obligations with shorter maturities.
Changes in the financial strength of an issuer or changes in
the ratings of any particular security may also affect the
value of debt instruments. Although some debt instruments
are guaranteed by the U.S. Government, its agencies or
instrumentalities, such instruments are subject to interest
rate risk and the market value of these instruments will
fluctuate. No assurance can be given that the U.S.
Government, would provide financial support to the agencies
or instrumentalities that issue or guarantee these
instruments where it is not obligated to do so.
INTERNATIONAL INDEX MASTER PORTFOLIO
General-The value of the Master Portfolio's interests is
neither insured nor guaranteed, is not fixed and should be
expected to fluctuate.
Equity Securities-The stock investments of the Master
Portfolio are subject to equity market risk. Equity market
risk is the possibility that common stock prices will
fluctuate or decline over short or even extended periods.
International stock markets tend to be cyclical, with
periods when stock prices generally rise and periods when
prices generally decline. In addition, many of the
companies whose securities comprise the EAFE Free Index are
small to medium size companies which, historically, have
been more susceptible to market fluctuations than securities
of larger capitalization companies.
Foreign Investment Risk-The Master Portfolio invests
substantially all of its assets in foreign securities. This
means the Master Portfolio can be affected by the risks of
foreign investing, including changes in currency exchange
rates and the costs of converting currencies; foreign
government controls on foreign investment; repatriation of
capital, and currency and exchange; foreign taxes;
inadequate supervision and regulation of some foreign
markets; volatility from lack of liquidity; different
settlement practices or delayed settlements in some markets;
difficulty in getting complete and accurate information
about foreign companies; less strict accounting, auditing
and financial reporting standards than those in the U.S.;
political, economic and social instability, and difficulty
enforcing legal rights outside the U.S.
In addition, many foreign countries are less prepared than
the United States to properly process and calculate
information related to dates from and after January 1, 2000,
which could result in difficulty pricing foreign investments
and failure by foreign issuers to pay timely dividends,
interest or principal. All of these factors can make
foreign investments, especially those in emerging markets,
more volatile and potentially less liquid than U.S.
investments.
Issuer-Specific Changes-Changes in the financial condition
of an issuer, changes in specific economic or political
conditions that affect a particular type of security or
issuer, and changes in general economic or political
conditions can affect the value of an issuer's securities.
Small Cap Investing-The value of securities of smaller,
less well-known issuers can be more volatile than that of
larger issuers and can react differently to issuer,
political, market and economic developments than the market
as a whole and other types of stocks. Smaller issuers can
have more limited product lines, markets and financial
resources.
Other Investment Considerations-The Master Portfolio may
enter into transactions in futures contracts and options on
futures contracts, each of which involves risk. The futures
contracts and options on futures contracts that the Master
Portfolio may purchase may be considered derivatives.
Derivatives are financial instruments whose values are
derived, at least in part, from the prices of other
securities or specified assets, indices or rates. The
Master Portfolio intends to use futures contracts and
options as part of its short-term liquidity holdings and/or
substitutes for comparable market positions in the
underlying securities. Some derivatives may be more
sensitive than direct securities to changes in interest
rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value due to their
structure or contract terms.
Securities Loans
The Master Portfolios are authorized to lend securities to
qualified brokers, dealers, banks and other financial
institutions for the purpose of earning additional income.
While the Master Portfolios may earn additional income from
lending securities, such activity is incidental to their
investment objectives. The value of securities loaned may
not exceed 33 1/3% of the value of each Master Portfolio's
total assets. In connection with such loans, the Master
Portfolio will receive collateral consisting of cash or U.S.
government securities, which will be maintained at all times
in an amount equal to at least 100% of the current market
value of the loaned securities. In addition, the Master
Portfolio will be able to terminate the loan at any time,
will receive reasonable compensation on the loan, as well as
amounts equal to any dividends, interest or other
distributions on the loaned securities. In the event of the
bankruptcy of the borrower, a Master Portfolio could
experience delay in recovering the loaned securities.
Management believes that this risk can be controlled through
careful monitoring procedures.
The Funds and the Trust bear all of their own costs and
expenses, including: services of its independent
accountants, legal counsel, brokerage commissions and
transfer taxes in connection with the acquisition and
disposition of portfolio securities, taxes, insurance
premiums, costs incidental to meetings of its shareholders
and directors or trustees, the cost of filing its
registration statements under federal securities laws and
the cost of any filings required under state securities
laws, reports to shareholders, and transfer and dividend
disbursing agency, administrative services and custodian
fees. Expenses allocable to a particular Fund or Master
Portfolio are so allocated.
TRUSTEES OF THE TRUST AND EXECUTIVE OFFICERS OF THE FUND
The names of the Trustees of the Trust and executive
officers of the Fund, together with information as to their
principal business occupations, are set forth below. The
executive officers of the Fund are employees of
organizations that provide services to the Fund. Each
Trustee who is an "interested person" of the Trust, as
defined in the 1940 Act, is indicated by an asterisk. The
address of the "non-interested" Trustees and the executive
officers of the Fund is 388 Greenwich Street, New York, New
York 10013.
Herbert Barg (Age 76). Trustee
Private Investor. Director or trustee of 18 investment
companies associated with Citigroup Inc. ("Citigroup") His
address is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania
19004.
*Alfred J. Bianchetti (Age 76). Trustee
Retired; formerly Senior Consultant to Dean Witter Reynolds
Inc. Director or trustee of 13 investment companies
associated with Citigroup. His address is 19 Circle End
Drive, Ramsey, New Jersey 07466.
Martin Brody (Age 77). Trustee
Consultant, HMK Associates; Retired Vice Chairman of the
Board of Restaurant Associates Corp. Director or trustee of
22 investment companies associated with Citigroup. His
address is c/o HMK Associates, 30 Columbia Turnpike, Florham
Park, New Jersey 07932.
Dwight B. Crane (Age 61). Trustee
Professor, Harvard Business School. Director or trustee of
25 investment companies associated with Citigroup. His
address is c/o Harvard Business School, Soldiers Field Road,
Boston, Massachusetts 02163.
Burt N. Dorsett (Age 68). Trustee
Managing Partner of Dorsett McCabe Management. Inc., an
investment counseling firm; Director of Research Corporation
Technologies, Inc., a nonprofit patent clearing and
licensing firm. Director or trustee of 13 investment
companies associated with Citigroup. His address is 201 East
62nd Street, New York, New York 10021.
Elliot S. Jaffe (Age 73). Trustee
Chairman of the Board and President of The Dress Barn, Inc.
Director or trustee of 13 investment companies associated
with Citigroup. His address is 30 Dunnigan Drive, Suffern,
New York 10901.
Stephen E. Kaufman (Age 67). Trustee
Attorney. Director or trustee of 15 investment companies
associated with Citigroup. His address is 277 Park Avenue,
New York, New York 10172.
Joseph J. McCann (Age 68). Trustee
Financial Consultant; Retired Financial Executive, Ryan
Homes, Inc. Director or trustee of 13 investment companies
associated with Citigroup. His address is 200 Oak Park
Place, Pittsburgh, Pennsylvania 15243.
*Heath B. McLendon (Age 66).Chairman of the Board
President and Chief Executive Officer of the Fund; Managing
Director of Salomon Smith Barney Inc.; President of SSBC
Fund Management, Inc. ("SSBC" or the "administrator") and
Travelers Investment Adviser, Inc. ("TIA"); Chairman or Co-
Chairman of the Board and director or trustee of 64
investment companies associated with Citigroup. His address
is 388 Greenwich Street, New York, New York 10013.
Cornelius C. Rose, Jr. (Age 65). Trustee
President, Cornelius C. Rose Associates, Inc., financial
consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. Director or
trustee of 13 investment companies associated with
Citigroup. His address is Meadowbrook Village, Building 4,
Apt 6, West Lebanon, New Hampshire 03784.
Lewis E. Daidone (Age 41). Senior Vice President and
Treasurer
Managing Director of Salomon Smith Barney; Chief Financial
Officer of the Smith Barney Mutual funds; Director and
Senior Vice President of SSBC and TIA. Senior Vice President
and Treasurer of 59 investment companies associated with
Citigroup.
Paul Brook (Age 45). Controller
Director of Salomon Smith Barney; from 1997-1998 Managing
Director of AMT Capital Services Inc.; prior to 1997 Partner
with Ernst & Young LLP. Controller or Assistant Treasurer
of 43 investment companies associated with Citigroup.
Christina T. Sydor (Age 48). Secretary
Managing Director of Salomon Smith Barney; General Counsel
and Secretary of SSBC and TIA. Secretary of 59 investment
companies associated with Citigroup.
No officer, director or employee of Salomon Smith Barney or
any of its affiliates receives any compensation from the
trust for serving as an officer of the funds or trustee of
the trust. The trust pays each trustee who is not an
officer, director or employee of Salomon Smith Barney or any
of its affiliates a fee of $10,000 per annum plus $1000 per
in-person meeting and $100 per telephonic meeting. Each
trustee emeritus who is not an officer, director or employee
of Salomon Smith Barney or its affiliates receives a fee of
$5,000 per annum plus $500 per in-person meeting and $50 per
telephonic meeting. All trustees are reimbursed for travel
and out-of-pocket expenses incurred to attend such meetings,
which for the last fiscal year totaled $13,594.
For the fiscal year ended November 30, 1998, the Trustees of
the trust were paid the following compensation:
Name of Person
Aggregate
Compensat
ion
from
Trust
Total
Pension or
Retirement
Benefits
Accrued
As part of
Trust
Expenses
Compensation
from Trust
and Fund
Complex
Paid to
Trustees
Number of
Funds for Which DirecD
Trustee Serves Within
Fund Complex
Herbert Barg**
Alfred
Bianchetti* **
Martin Brody**
Dwight B.
Crane**
Burt N.
Dorsett**
Elliot S.
Jaffe**
Stephen E.
Kaufman**
Joseph J.
McCann**
Heath B.
McLendon*
Cornelius C.
Rose, Jr.**
$11,600
11,600
11,600
11,600
11,600
11,600
11,600
11,600
- -----
11,600
$0
0
0
0
0
0
0
0
0
0
$105,425
51,200
132,500
139,975
51,200
47,550
96,400
51,200
- -----
51,200
18
13
22
25
13
13
15
13
64
13
_________________
* Designated an "interested" trustee.
** Designates member of Audit Committee.
Upon attainment of age 80, fund trustees are required to
change to emeritus status. Trustees emeritus are entitled to
serve in emeritus status for a maximum of 10 years.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Master Portfolio Adviser
The Master Portfolio has substantially the same investment
objectives as the Fund. Consequently, the Fund does not
have its own investment adviser. BGFA serves as the Master
Portfolio's Investment Adviser and provides investment
guidance and policy direction for the Master Portfolio.
Unlike many traditional active investment funds, there is no
single portfolio manager who makes investment decisions for
the Master Portfolio. Instead, the Master Portfolio tracks
the applicable Index. The process reflects BGFA's
commitment to an objective and consistent investment
management structure.
BGFA serves as investment adviser to the Master Portfolio
and the Underlying Portfolios. BGFA is a direct subsidiary
of BGFA Global Investors, N.A. (which, in turn, is an
indirect subsidiary of BGFA Bank PLC ("BGFA Bank") and is
located at 45 Fremont Street San Francisco, CA 94105. As of
March 31, 1999, BGFA and its affiliates provided investment
advisory services for approximately $651 billion of assets
under management.
BGFA provides the Master Portfolio and the Underlying
Portfolios with investment guidance and policy direction in
connection with the daily portfolio management of each,
subject to the supervision of MIP's Board of Trustees and in
conformity with Delaware law and the stated policies of each
such portfolio. BGFA furnishes to MIP's Board of Trustees
periodic reports on the investment strategy and performance
of the Master Portfolio and the Underlying Portfolios.
BGFA is entitled to receive monthly fees at the annual rate
of [0.01%] of the average daily net assets of the Master
Portfolio, [0.08%] of the average daily net assets of the
Extended Index Portfolio and [0.05%] of the average daily
net assets of the S&P 500 Index Portfolio as compensation
for its advisory services. The Master Portfolio bears its
pro rata share of the advisory fees of the Underlying
Portfolios. Based on these fee levels and the expected
allocation of assets between the two Underlying Portfolios,
the advisory fees payable to BGFA by the Master Portfolio on
a combined basis will be approximately [0.07%] of the
average daily net assets of the Master Portfolio. From time
to time, BGFA may waive such fees in whole or in part. Any
such waiver will reduce the expenses of the Master Portfolio
and, accordingly, have a favorable impact on its
performance.
Purchase and sale orders for portfolio securities of the
Master Portfolio may be combined with those of other
accounts that BGFA manages or advises, and for which it has
brokerage placement authority, in the interest of seeking
the most favorable overall net results. When BGFA, subject
to the supervision and the overall authority of MIP's Board
of Trustees, determines that a particular security should be
bought or sold for the Master Portfolio and other accounts
managed by BGFA, it undertakes to allocate those
transactions among the participants equitably.
BGFA may deal, trade and invest for its own account in the
types of securities in which the Master Portfolio may
invest. BGFA has informed MIP that in making its investment
decisions it does not obtain or use material inside
information in its possession.
Morrison & Foerster LLP, counsel to MIP and special counsel
to BGFA, has advised MIP and BGFA that BGFA and its
affiliates may perform the services contemplated by the BGFA
Advisory Contracts without violation of the Glass-Steagall
Act. Such counsel has pointed out, however, that there are
no controlling judicial or administrative interpretations or
decisions and that future judicial or administrative
interpretations of or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act and
regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent
such entities from continuing to perform, in whole or in
part, such services. If any such entity were prohibited
from performing any such services, it is expected that new
agreements would be proposed or entered into with another
entity or entities qualified to perform such services.
Administrator - SSBC
SSBC serves as administrator to the fund pursuant to a
written agreement (the "Administration Agreement"). SSBC is
a wholly owned subsidiary of Salomon Smith Barney Holdings
Inc. ("Holdings"), which in turn, is a wholly owned
subsidiary of Citigroup Inc. ("Citigroup"). The
administrator 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 administrator SSBC: (a) assists in supervising all
aspects of the Fund's operations except those performed by
other parties pursuant to written agreements; b) supplies
the fund with office facilities (which may be in SSBC's own
offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services,
including, but not limited to, the calculation of (i) the
net asset value of shares of the fund, (ii) service fees,
internal auditing and legal services, internal executive and
administrative services, and stationary and office supplies;
and (c) prepares reports to shareholders of the fund, tax
returns and reports to and filings with the SEC and state
blue sky authorities.
As compensation for administrative services rendered to the
fund, the administrator will receive a fee computed daily
and paid monthly at the annual rate of [ %] 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, Trustees,
shareholders or employees of the administrator 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.
Auditors
KPMG LLP, independent auditors, 345 Park Avenue, New York,
New York 10154, have been selected to serve as auditors of
the trust and to render opinions on the fund's financial
statements for the fiscal year ending November 30, 1999.
Custodian and Transfer Agent
PNC Bank, National Association ("PNC" or "custodian"),
located at 17th and Chestnut Streets, Philadelphia,
Pennsylvania, 19103, serves as the custodian of the fund.
Under its custody agreement with the fund, PNC holds the
fund's securities and keeps all necessary accounts and
records. For its services, PNC receives a monthly fee based
upon the month-end market value of securities held in
custody and also receives securities transactions charges.
The assets of the fund are held under bank custodianship in
compliance with the 1940 Act.
First Data Investor Services Group, Inc, ("First Data" or
"transfer agent") located at Exchange Place, Boston,
Massachusetts 02109, serves as the trust's transfer agent.
Under the transfer agency agreement, the transfer agent
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, the
transfer agent 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.
Distributor tc "DISTRIBUTOR"
CFBDS, Inc. serves as the Fund's distributor pursuant to a
written agreement dated October 8, 1998 (the "Distribution
Agreement") which was approved by the Fund's Board of
Trustees, including a majority of the Independent Trustees,
on July 15, 1998.
When payment is made by the investor before the settlement
date, unless otherwise noted by the investor, the funds will
be held as a free credit balance in the investor's brokerage
account and Salomon Smith Barney may benefit from the
temporary use of the funds. The Fund's board of trustees
has been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will take
such benefits into consideration when reviewing the
Administration and Distribution Agreements for continuance.
Shareholding Servicing Arrangements
To compensate Salomon Smith Barney's Financial Consultants
for the services they provide to fund shareholders, each
Fund has adopted a services plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the fund
pays a service fee with respect to Class A shares that is
accrued daily and paid monthly, calculated at the annual
rate of [ %] of the value of the Fund's average daily net
assets attributable to Class A shares. Class D shares are
not subject to a service fee.
Under its terms, the Plan continues from year to year,
provided such continuance is approved annually by vote of
the Board of Trustees, including a majority of the trustees
who are not interested persons of the trust and who have no
direct or indirect financial interest in the operation of
the Plan (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
including all of the independent trustees in the manner
described above. The Plan may be terminated with respect to
the Class A shares at any time, without penalty, by vote of
a majority of the independent trustees or, with respect to
any fund, by vote of a majority of the outstanding voting
securities of the Fund. Pursuant to the Plan, Salomon Smith
Barney will provide the board of trustees with periodic
reports of amounts expended under the Plan and the purpose
for which such expenditures were made.
PORTFOLIO TRANSACTIONS AND TURNOVER
BGFA assumes general supervision over placing orders on
behalf of the Master Portfolios for the purchase or sale of
portfolio securities. Allocation of brokerage transactions,
including their frequency, is made in the best judgment of
BGFA and in a manner deemed fair and reasonable to
interestholders. In executing portfolio transactions and
selecting brokers or dealers, BGFA seeks to obtain the best
overall terms available for the Master Portfolio. In
assessing the best overall terms available for any
transaction, BGFA considers factors deemed relevant,
including the breadth of the market in the security, the
price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness
of the commission, if any, both for the specific transaction
and on a continuing basis. The primary consideration is
prompt execution of orders at the most favorable net price.
Certain of the brokers or dealers with whom the Master
Portfolio may transact business offer commission rebates to
the Master Portfolio. BGFA considers such rebates in
assessing the best overall terms available for any
transaction. The overall reasonableness of brokerage
commissions paid is evaluated by BGFA based upon its
knowledge of available information as to the general level
of commissions paid by other institutional investors for
comparable services. Brokers also are selected because of
their ability to handle special executions such as are
involved in large block trades or broad distributions,
provided the primary consideration is met. Portfolio
turnover may vary from year to year, as well as within a
year. High turnover rates over 100% are likely to result in
comparatively greater brokerage expenses.
In accordance with Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the trust's Board of Trustees has
determined that any portfolio transaction for the fund may
be executed through Salomon Smith Barney or an affiliate of
Salomon Smith Barney if, in the manager's judgment, the use
of Salomon Smith Barney or an affiliate is likely to result
in price and execution at least as favorable as those of
other qualified brokers and if, in the transaction, Salomon
Smith Barney or the affiliate charges the fund a commission
rate consistent with those charged by Salomon Smith Barney
or an affiliate to comparable unaffiliated customers in
similar transactions. In addition, under SEC rules Salomon
Smith Barney may directly execute such transactions for the
fund on the floor of any national securities exchange,
provided: (a) the Board of Trustees has expressly authorized
Salomon Smith Barney to effect such transactions; and (b)
Salomon Smith Barney annually advises the 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
the manager, 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 the manager 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 the manager 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.
The fund will not purchase securities during the existence
of any underwriting or selling group relating to the
securities, of which the manager is a member, except to the
extent permitted by the SEC. Under certain circumstances,
the fund may be at a disadvantage because of this limitation
in comparison with other funds that have similar investment
objectives but that are not subject to a similar limitation.
PURCHASE OF SHARES tc "PURCHASE OF SHARES"
Detailed information about the purchase, redemption and
exchange of fund shares appears in the prospectus.
General
The shares of the fund are offered at net asset value, which
is calculated as of the close of the New York Stock Exchange
("NYSE") on each day that the NYSE is open for business.
The value of the shares of the fund will fluctuate in
relation to the investment experience of the Master
Portfolio in which it invests.
Investors may purchase shares from a Salomon Smith Barney
Financial Consultant or a broker that clears through Salomon
Smith Barney ("Dealer Representative"). In addition,
certain investors, including qualified retirement plans
purchasing through certain Dealer Representatives, may
purchase shares directly from the fund. When purchasing
shares of the fund, investors must specify whether the
purchase is for Class A or Class D shares. Salomon Smith
Barney and Dealer Representatives may charge their customers
an annual account maintenance fee in connection with a
brokerage account through which an investor purchases or
holds shares. Accounts held directly at the transfer agent
are not subject to a maintenance fee.
Investors may open an account in the fund by making an
initial investment of at least $1,000 for each account, or
$250 for an IRA or a Self-Employed Retirement Plan, in the
fund. Subsequent investments of at least $50 may be made for
all Classes. For shareholders purchasing shares of the fund
through the Systematic Investment Plan on a monthly basis,
the minimum initial investment requirement and subsequent
investment requirement for all Classes is $25. For
shareholders purchasing shares of the fund through the
Systematic Investment Plan on a quarterly basis, the minimum
initial investment required and the subsequent investment
requirement for all Classes is $50. There are no minimum
investment requirements for employees of Citigroup and its
subsidiaries, including Salomon Smith Barney, unitholders
who invest distributions from a Unit Investment Trust
("UIT") sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney Mutual Funds,
and their spouses and children. The fund reserves the right
to waive or change minimums, to decline any order to
purchase its shares and to suspend the offering of shares
from time to time. Shares purchased will be held in the
shareholder's account by First Data. Share certificates are
issued only upon a shareholder's written request to First
Data.
Purchase orders received by the fund or a Salomon Smith
Barney Financial Consultant prior to the close of regular
trading on the NYSE, on any day the fund calculates its net
asset value, are priced according to the net asset value
determined on that day (the ''trade date''). Orders
received by a Dealer Representative prior to the close of
regular trading on the NYSE on any day the fund calculates
its net asset value, are priced according to the net asset
value determined on that day, provided the order is received
by the fund or the fund's agent prior to its close of
business. For shares purchased through Salomon Smith Barney
or a Dealer Representative purchasing through Salomon Smith
Barney, payment for shares of the fund is due on the third
business day after the trade date. In all other cases,
payment must be made with the purchase order.
Systematic Investment Plan. Shareholders may make additions
to their accounts at any time by purchasing shares through a
service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Salomon Smith Barney or First
Data is authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a quarterly
basis to charge the shareholder's account held with a bank
or other financial institution on a monthly or quarterly
basis as indicated by the shareholder, to provide for
systematic additions to the shareholder's fund account. A
shareholder who has insufficient funds to complete the
transfer will be charged a fee of up to $25 by Salomon Smith
Barney or First Data. The Systematic Investment Plan also
authorizes Salomon Smith Barney to apply cash held in the
shareholder's Salomon Smith Barney brokerage account or
redeem the shareholder's shares of a Smith Barney money
market fund to make additions to the account. Additional
information is available from the fund or a Salomon Smith
Barney Financial Consultant or a Dealer Representative.
Class D shares are offered to a limited group of investors
who participate in certain investment programs which charge
a fee for participation, including the Smith Barney 401(k)
Platform program. In addition, Class D shares are offered
to tax-exempt employee benefit and retirement plans of
Salomon Smith Barney and its affiliates. For more
information about these programs, contact a Salomon Smith
Barney Financial Consultant.
REDEMPTION OF SHARES tc "REDEMPTION OF SHARES"
The right of redemption of shares of the fund may be
suspended or the date of payment postponed (a) for any
periods during which the NYSE is closed (other than for
customary weekend and holiday closings), (b) when trading in
the markets the fund normally utilizes is restricted, or an
emergency exists, as determined by the SEC, so that disposal
of the fund's investments or determination of its net asset
value is not reasonably practicable or (c) for any other
periods as the SEC by order may permit for the protection of
the fund's shareholders.
If the shares to be redeemed were issued in certificate
form, the certificates must be endorsed for transfer (or be
accompanied by an endorsed stock power) and must be
submitted to First Data together with the redemption
request. Any signature appearing on a share certificate,
stock power or written redemption request in excess of
$10,000 must be guaranteed by an eligible guarantor
institution such as a domestic bank, savings and loan
institution, domestic credit union, member bank of the
Federal Reserve System or member firm of a national
securities exchange. Written redemption requests of $10,000
or less do not require a signature guarantee unless more
than one such redemption request is made in any 10-day
period or the redemption proceeds are to be sent to an
address other than the address of record. Unless otherwise
directed, redemption proceeds will be mailed to an
investor's address of record. First Data may require
additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed properly
received until First Data receives all required documents in
proper form.
If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class being
redeemed. In the event of a failure to specify which Class,
or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the
Transfer Agent receives further instructions from Salomon
Smith Barney, or if the shareholder's account is not with
Salomon Smith Barney, from the shareholder directly. The
redemption proceeds will be remitted on or before the third
business day following receipt of proper tender, except on
any days on which the NYSE is closed or as permitted under
the 1940 Act, in extraordinary circumstances. Generally, if
the redemption proceeds are remitted to a Salomon Smith
Barney brokerage account, these funds will not be invested
for the shareholder's benefit without specific instruction
and Salomon Smith Barney will benefit from the use of
temporarily uninvested funds. Redemption proceeds for
shares purchased by check, other than a certified or
official bank check, will be remitted upon clearance of the
check, which may take up to ten days or more.
Distribution in Kind
If the board of trustees of the trust determines that it
would be detrimental to the best interests of the remaining
shareholders to make a redemption payment wholly in cash,
the fund may pay, in accordance with SEC rules, any portion
of a redemption in excess of the lesser of $250,000 or 1.00%
of the fund's net assets by a distribution in kind of
portfolio securities in lieu of cash. Shareholders may
incur brokerage commissions when they subsequently sell
those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan") is
available to shareholders of the fund who own shares of the
fund with a value of at least $10,000 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. To
the extent withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in a fund,
continued withdrawal payments will reduce the shareholder's
investment, and may ultimately exhaust it. Withdrawal
payments should not be considered as income from investment
in a 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 of the fund who wish to participate in the
Withdrawal Plan and who hold their shares in certificate
form must deposit their share certificates with the transfer
agent 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 involved. A shareholder who purchases
shares directly through the transfer agent may continue to
do so and applications for participation in the Withdrawal
Plan must be received by the transfer agent 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 Salomon Smith
Barney Financial Consultant.
Additional Information Regarding Telephone Redemption And
Exchange Program
Neither the fund nor its agents will be liable for following
instructions communicated by telephone that are reasonably
believed to be genuine. The fund and its agents will employ
procedures designed to verify the identity of the caller and
legitimacy of instructions (for example, a shareholder's
name and account number will be required and phone calls may
be recorded). The fund reserves the right to suspend,
modify or discontinue the telephone redemption and exchange
program or to impose a charge for this service at any time
following at least seven (7) days' prior notice to
shareholders.
VALUATION OF SHARES tc "VALUATION OF SHARES"
The net asset value per share of the fund's Classes is
calculated on each day, Monday through Friday, except days
on which the NYSE is closed. The NYSE currently is
scheduled to be closed on New Year's Day, Martin Luther King
Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and
on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively.
Because of the differences in distribution fees and Class-
specific expenses, the per share net asset value of each
Class may differ. The following is a description of the
procedures used by the trust in valuing its assets.
The net asset value per share of each Fund and Master
Portfolio is calculated as of the close of the NYSE by
dividing the total market value of its investments and other
assets, less any liabilities, by the total outstanding
shares of the stock of the Fund or Master Portfolio. The
value of each Fund's shares will fluctuate in relation to
the investment experience of the Master Portfolio in which
such Fund invests. Securities held by a Fund or Master
Portfolio which are listed on a securities exchange and for
which market quotations are available are valued at the last
quoted sale price of the day. Price information on listed
securities is taken from the exchange where the security is
primarily traded.
The securities of the Master Portfolio, including covered
call options written by the Master Portfolio, are valued as
discussed below. Domestic securities are valued at the last
sale price on the domestic securities or commodities
exchange or national securities market on which such
securities primarily are traded. Securities not listed on a
domestic exchange or national securities market, or
securities in which there were no transactions, are valued
at the most recent bid prices. Portfolio securities which
are traded primarily on foreign securities or commodities
exchanges generally are valued at the preceding closing
values of such securities on their respective exchanges,
except that when an occurrence subsequent to the time a
value was so established is likely to have changed such
value, then the fair value of those securities is determined
by BGFA in accordance with guidelines approved by MIP's
Board of Trustees. Short-term investments are carried at
amortized cost which approximates value. Any securities or
other assets for which recent market quotations are not
readily available are valued at fair value as determined in
good faith by BGFA in accordance with such guidelines.
Restricted securities, as well as securities or other assets
for which market quotations are not readily available, or
are not valued by a pricing service approved by MIP's Board
of Trustees, are valued at fair value as determined in good
faith by BGFA in accordance with guidelines approved by
MIP's Board of Trustees. BGFA and MIP's Board of Trustees
periodically review the method of valuation. In making its
good faith valuation of restricted securities, BGFA
generally takes the following factors into consideration:
restricted securities which are, or are convertible into,
securities of the same class of securities for which a
public market exists usually will be valued at market value
less the same percentage discount at which purchased. This
discount is revised periodically if it is believed that the
discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as
securities for which a public market exists usually are
valued initially at cost. Any subsequent adjustment from
cost is based upon considerations deemed relevant by MIP's
Board of Trustees.
PERFORMANCE DATA
tc "PERFORMANCE DATA"
From time to time, the fund may quote its total return 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.
Average Annual Total Return
A fund's "average annual total return," as described below,
is 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 a 1-, 5- or 10-
year period (or
fractional portion
thereof), assuming
reinvestment of all
dividends and
distributions.
The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period. A fund's net
investment income changes in response to fluctuations in
interest rates and the expenses of the fund.
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-Year
Life of
fund
Class A
N/A
N/A
N/A
N/A
Class D
N/A
N/A
N/A
N/A
Aggregate Total Return
The fund's "aggregate total return," as described below,
represents the cumulative change in the value of an
investment in the fund for the specified period and is
computed by the following formula:
ERV - P
P
Where: P = a hypothetical initial payment
of $10,000.
ERV = Ending Redeemable Value of a
hypothetical $10,000
investment made at the
beginning of the 1-, 5- or 10-
year period at the end of the
1-, 5- or 10-year period (or
fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
The ERV assumes complete redemption of the hypothetical
investment at the end of the measuring period.
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-Year
Life of
fund
Class A
N/A
N/A
N/A
N/A
Class D
N/A
N/A
N/A
N/A
Performance will vary from time to time depending upon
market conditions, the composition of the fund's portfolio
and operating expenses and the expenses exclusively
attributable to the Class. Consequently, any given
performance quotation should not be considered
representative of the Class' performance for any specified
period in the future. Because performance will vary, it may
not provide a basis for comparing an investment in the Class
with certain bank deposits or other investments that pay a
fixed yield for a stated period of time. Investors
comparing a Class' performance with that of other mutual
funds should give consideration to the quality and maturity
of the respective investment companies' portfolio
securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES tc "TAXES "
MIP is organized as a business trust under Delaware law.
Under MIP's current classification for federal income tax
purposes, it is intended that each Master Portfolio will be
treated as a partnership for such purposes and, therefore,
such Master Portfolio will not be subject to any federal
income tax. However, each investor in a Master Portfolio
will be taxable on its share (as determined in accordance
with the governing instruments of MIP) of such Master
Portfolio's ordinary income and capital gain in determining
its federal income tax liability. The determination of such
share will be made in accordance with the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations
promulgated thereunder.
MIP's taxable year-end is the last day of December.
Although MIP will not be subject to federal income tax, it
will file appropriate federal income tax returns
The Master Portfolio's assets, income and distributions will
be managed in such a way that an investor in the Master
Portfolio may satisfy the requirements of Subchapter M of
the Code by investing substantially all of its investable
assets in the Master Portfolio. Investors are advised to
consult their own tax advisors as to the tax consequences of
an investment in the Master Portfolio.
Taxes
The following is a summary of the material United States
federal income tax considerations regarding the purchase,
ownership and disposition of shares of a fund. Each
prospective shareholder is urged to consult his own tax
adviser with respect to the specific federal, state, local
and foreign tax consequences of investing in a fund. The
summary is based on the laws in effect on the date of this
SAI, which are subject to change.
The Fund and Its Investments
The fund intends to continue to qualify to be treated as a
regulated investment company each taxable year under the
Code. To so qualify, the fund must, among other things: (a)
derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to
securities loans and gains from the sale or other
disposition of stock or securities or foreign currencies, or
other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect
to its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at the
end of each quarter of the fund's taxable year, (i) at least
50% of the market value of the fund's assets is represented
by cash, securities of other regulated investment companies,
United States government securities and other securities,
with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's
assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the
value of its assets is invested in the securities (other
than United States government securities or securities of
other regulated investment companies) of any one issuer or
any two or more issuers that the fund controls and are
determined to be engaged in the same or similar trades or
businesses or related trades or businesses.
As a regulated investment company, the fund will not be
subject to United States federal income tax on its net
investment income (i.e., income other than its net realized
long- and short-term capital gains) and its net realized
long- and short-term capital gains, if any, that it
distributes to its shareholders, provided an amount equal to
at least 90% of the sum of its investment company taxable
income (i.e., 90% of its taxable income minus the excess, if
any, of its net realized long-term capital gains over its
net realized short-term capital losses (including any
capital loss carryovers), plus or minus certain other
adjustments as specified in the Code) and its net tax-exempt
income for the taxable year is distributed in compliance
with the Code's timing and other requirements but will be
subject to tax at regular corporate rates on any taxable
income or gains it does not distribute. Furthermore, the
fund will be subject to a United States corporate income tax
with respect to such distributed amounts in any year it
fails to qualify as a regulated investment company or fails
to meet this distribution requirement. The Code imposes a 4%
nondeductible excise tax on the fund to the extent it does
not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the
net amount of its capital gains (both long-and short-term)
for the one-year period ending, as a general rule, on
October 31 of that year. For this purpose, however, any
income or gain retained by the fund that is subject to
corporate income tax will be considered to have been
distributed by year-end. In addition, the minimum amounts
that must be distributed in any year to avoid the excise tax
will be increased or decreased to reflect any
underdistribution or overdistribution, as the case may be,
from the previous year. The fund anticipates that it will
pay such dividends and will make such distributions as are
necessary in order to avoid the application of this tax.
If, in any taxable year, the fund fails to qualify as a
regulated investment company under the Code or fails to meet
the distribution requirement, it would be taxed in the same
manner as an ordinary corporation and distributions to its
shareholders would not be deductible by the fund in
computing its taxable income. In addition, in the event of
a failure to qualify, the fund's distributions, to the
extent derived from the fund's current or accumulated
earnings and profits would constitute dividends (eligible
for the corporate dividends-received deduction) which are
taxable to shareholders as ordinary income, even though
those distributions might otherwise (at least in part) have
been treated in the shareholders' hands as long-term capital
gains. If the fund fails to qualify as a regulated
investment company in any year, it must pay out its earnings
and profits accumulated in that year in order to qualify
again as a regulated investment company. In addition, if
the fund failed to qualify as a regulated investment company
for a period greater than one taxable year, the fund may be
required to recognize any net built-in gains (the excess of
the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had
been liquidated) in order to qualify as a regulated
investment company in a subsequent year.
The fund's transactions in foreign currencies, forward
contracts, options and futures contracts (including options
and futures contracts on foreign currencies) will be subject
to special provisions of the Code (including provisions
relating to "hedging transactions" and "straddles") that,
among other things, may affect the character of gains and
losses realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate recognition
of income to the fund and defer fund losses. These rules
could therefore affect the character, amount and timing of
distributions to shareholders. These provisions also (a)
will require the fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they were
closed out) and (b) may cause the fund to recognize income
without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise
taxes. The fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate
entries in its books and records when it acquires any
foreign currency, forward contract, option, futures contract
or hedged investment in order to mitigate the effect of
these rules and prevent disqualification of the fund as a
regulated investment company.
The fund's investment in Section 1256 contracts, such as
regulated futures contracts, most forward currency contracts
traded in the interbank market and options on most stock
indices, are subject to special tax rules. All section 1256
contracts held by the fund at the end of its taxable year
are required to be marked to their market value, and any
unrealized gain or loss on those positions will be included
in the fund's income as if each position had been sold for
its fair market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain or
loss realized by the fund from positions in section 1256
contracts closed during the taxable year. Provided such
positions were held as capital assets and were not part of a
"hedging transaction" nor part of a "straddle," 60% of the
resulting net gain or loss will be treated as long-term
capital gain or loss, and 40% of such net gain or loss will
be treated as short-term capital gain or loss, regardless of
the period of time the positions were actually held by the
fund.
Foreign Investments. Dividends or other income (including,
in some cases, capital gains) received by the fund from
investments in foreign securities may be subject to
withholding and other taxes imposed by foreign countries.
Tax conventions between certain countries and the United
States may reduce or eliminate such taxes in some cases.
The fund will not be eligible to elect to treat any foreign
taxes paid by it as paid by its shareholders, who therefore
will not be entitled to credits for such taxes on their own
tax returns. Foreign taxes paid by the fund will reduce the
return from the fund's investments.
Passive Foreign Investment Companies. If the fund purchases
shares in certain foreign investment entities, called
"passive foreign investment companies" (a "PFIC"), it may be
subject to United States federal income tax on a portion of
any "excess distribution" or gain from the disposition of
such shares even if such income is distributed as a taxable
dividend by the fund to its shareholders. Additional
charges in the nature of interest may be imposed on the fund
in respect of deferred taxes arising from such distributions
or gains. If the fund were to invest in a PFIC and elected
to treat the PFIC as a "qualified electing fund" under the
Code, in lieu of the foregoing requirements, the fund might
be required to include in income each year a portion of the
ordinary earnings and net capital gains of the qualified
electing fund, even if not distributed to the fund, and such
amounts would be subject to the 90% and excise tax
distribution requirements described above. In order to make
this election, the fund would be required to obtain certain
annual information from the passive foreign investment
companies in which it invests, which may be difficult or not
possible to obtain.
Recently, legislation was enacted that provides a mark-to-
market election for regulated investment companies effective
for taxable years beginning after December 31, 1997. This
election would result in the fund being treated as if it had
sold and repurchased all of the PFIC stock at the end of
each year. In this case, the fund would report gains as
ordinary income and would deduct losses as ordinary losses
to the extent of previously recognized gains. The election,
once made, would be effective for all subsequent taxable
years of the fund, unless revoked with the consent of the
IRS. By making the election, the fund could potentially
ameliorate the adverse tax consequences with respect to its
ownership of shares in a PFIC, but in any particular year
may be required to recognize income in excess of the
distributions it receives from PFICs and its proceeds from
dispositions of PFIC company stock. The fund may have to
distribute this "phantom" income and gain to satisfy its
distribution requirement and to avoid imposition of the 4%
excise tax. The fund will make the appropriate tax
elections, if possible, and take any additional steps that
are necessary to mitigate the effect of these rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by the
fund in October, November or December of any calendar year
and payable to shareholders of record on a specified date in
such a month shall be deemed to have been received by each
shareholder on December 31 of such calendar year and to have
been paid by the fund not later than such December 31,
provided such dividend is actually paid by the fund during
January of the following calendar year. The fund intends to
distribute annually to its shareholders substantially all of
its investment company taxable income, and any net realized
long-term capital gains in excess of net realized short-term
capital losses (including any capital loss carryovers). The
fund currently expects to distribute any excess annually to
its shareholders. However, if the fund retains for
investment an amount equal to all or a portion of its net
long-term capital gains in excess of its net short-term
capital losses and capital loss carryovers, it will be
subject to a corporate tax (currently at a rate of 35%) on
the amount retained. In that event, the fund will designate
such retained amounts as undistributed capital gains in a
notice to its shareholders who (a) will be required to
include in income for United Stares federal income tax
purposes, as long-term capital gains, their proportionate
shares of the undistributed amount, (b) will be entitled to
credit their proportionate shares of the 35% tax paid by the
fund on the undistributed amount against their United States
federal income tax liabilities, if any, and to claim refunds
to the extent their credits exceed their liabilities, if
any, and (c) will be entitled to increase their tax basis,
for United States federal income tax purposes, in their
shares by an amount equal to 65% of the amount of
undistributed capital gains included in the shareholder's
income. Organizations or persons not subject to federal
income tax on such capital gains will be entitled to a
refund of their pro rata share of such taxes paid by the
fund upon filing appropriate returns or claims for refund
with the Internal Revenue Service (the "IRS").
Dividends of net investment income and distributions of net
realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash
or in shares. Distributions of net-long-term capital gains,
if any, that the fund designates as capital gains dividends
are taxable as long-term capital gains, whether paid in cash
or in shares and regardless of how long a shareholder has
held shares of the fund. Dividends and distributions paid
by the fund attributable to dividends on stock of U.S.
corporations received by the fund, with respect to which the
fund meets certain holding period requirements, will be
eligible for the deduction for dividends received by
corporations. Distributions in excess of the fund's current
and accumulated earnings and profits will, as to each
shareholder, be treated as a tax-free return of capital to
the extent of a shareholder's basis in his shares of the
fund, and as a capital gain thereafter (if the shareholder
holds his shares of the fund as capital assets).
Shareholders receiving dividends or distributions in the
form of additional shares should be treated for United
States federal income tax purposes as receiving a
distribution in the amount equal to the amount of money that
the shareholders receiving cash dividends or distributions
will receive, and should have a cost basis in the shares
received equal to such amount.
Investors considering buying shares just prior to a dividend
or capital gain distribution should be aware that, although
the price of shares just purchased at that time may reflect
the amount of the forthcoming distribution, such dividend or
distribution may nevertheless be taxable to them. If the
fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such
dividends are included in the fund's gross income not as of
the date received but as of the later of (a) the date such
stock became ex-dividend with respect to such dividends
(i.e., the date on which a buyer of the stock would not be
entitled to receive the declared, but unpaid, dividends) or
(b) the date the fund acquired such stock. Accordingly, in
order to satisfy its income distribution requirements, the
fund may be required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an
earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his shares, a
shareholder will realize a taxable gain or loss equal to the
difference between the amount realized and his basis in his
shares. Such gain or loss will be treated as capital gain
or loss, if the shares are capital assets in the
shareholder's hands, and will be long-term capital gain or
loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for
one year or less. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are
replaced, including replacement through the reinvesting of
dividends and capital gains distributions in the fund,
within a 61-day period beginning 30 days before and ending
30 days after the disposition of the shares. In such a
case, the basis of the shares acquired will be increased to
reflect the disallowed loss. Any loss realized by a
shareholder on the sale of a fund share held by the
shareholder for six months or less will be treated for
United States federal income tax purposes as a long-term
capital loss to the extent of any distributions or deemed
distributions of long-term capital gains received by the
shareholder with respect to such share. If a shareholder
incurs a sales charge in acquiring shares of the fund,
disposes of those shares within 90 days and then acquires
shares in a mutual fund for which the otherwise applicable
sales charge is reduced by reason of a reinvestment right
(e.g., an exchange privilege), the original sales charge
will not be taken into account in computing gain/loss on the
original shares to the extent the subsequent sales charge is
reduced. Instead, the disregarded portion of the original
sales charge will be added to the tax basis in the newly
acquired shares. Furthermore, the same rule also applies to
a disposition of the newly acquired shares made within 90
days of the second acquisition. This provision prevents a
shareholder from immediately deducting the sales charge by
shifting his or her investment in a family of mutual funds.
Backup Withholding. The fund may be required to withhold,
for United States federal income tax purposes, 31% of the
dividends, distributions and redemption proceeds payable to
shareholders who fail to provide the fund with their correct
taxpayer identification number or to make required
certifications, or who have been notified by the IRS that
they are subject to backup withholding. Certain shareholders
are exempt from backup withholding. Backup withholding is
not an additional tax and any amount withheld may be
credited against a shareholder's United States federal
income tax liabilities.
Notices. Shareholders will be notified annually by the fund
as to the United States federal income tax status of the
dividends, distributions and deemed distributions
attributable to undistributed capital gains (discussed above
in "Taxes- Taxation of United States Shareholders -
Dividends and Distributions") made by the fund to its
shareholders. Furthermore, shareholders will also receive,
if appropriate, various written notices after the close of
the fund's taxable year regarding the United States federal
income tax status of certain dividends, distributions and
deemed distributions that were paid (or that are treated as
having been paid) by the fund to its shareholders during the
preceding taxable year.
Other Taxation
Distributions also may be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation.
The foregoing is only a summary of certain material tax
consequences affecting the fund and its shareholders.
Shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of
an investment in the fund.
ADDITIONAL INFORMATION
The trust was organized on October 17, 1991 under the laws
of the Commonwealth of Massachusetts and is a business
entity commonly known as a "Massachusetts business trust."
The trust offers shares of beneficial interest of five
separate funds with a par value of $.001 per share. The
fund offers shares of beneficial interest currently
classified into two Classes - A and D. Each Class of the
fund represents an identical interest in the fund's
investment portfolio. As a result, the Classes have the
same rights, privileges and preferences, except with respect
to: (a) the designation of each Class; (b) the effect of
the respective sales charge, if any, for each Class; (c) the
distribution and/or service fees borne by each Class
pursuant to the Plan; (d) the expenses allocable exclusively
to each Class; (e) voting rights on matters exclusively
affecting a single Class; and (f) the exchange privilege of
each Class. The trust's board of trustees does not
anticipate that there will be any conflicts among the
interests of the holders of the different Classes. The
trustees, on an ongoing basis, will consider whether any
such conflict exists and, if so, take appropriate action.
Under Massachusetts's law, shareholders could, under certain
circumstances, be held personally liable for the obligations
of the fund. The Master Trust Agreement disclaims
shareholder liability for acts or obligations of the fund,
however, and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered
into or executed by the fund or a trustee. The Master Trust
Agreement provides for indemnification from fund property
for all losses and expenses of any shareholder held
personally liable for the obligations of the fund. Thus,
the risk of a shareholder's incurring financial loss on
account of shareholder liability is limited to circumstances
in which the fund itself would be unable to meet its
obligations, a possibility which management of the fund
believes is remote. Upon payment of any liability incurred
by the fund, a shareholder paying such liability will be
entitled to reimbursement from the general assets of the
fund. The trustees intend to conduct the operation of the
fund in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of
the fund.
The Master Trust Agreement of the fund permits the trustees
of the fund to issue an unlimited number of full and
fractional shares of a single class and to divide or combine
the shares into a greater or lesser number of shares without
thereby changing the proportionate beneficial interests in
the fund. Each share in the fund represents an equal
proportional interest in the fund with each other share.
Shareholders of the fund are entitled upon its liquidation
to share pro rata in its net assets available for
distribution. No shareholder of the fund has any preemptive
or conversion rights. Shares of the fund are fully paid and
non-assessable.
Pursuant to the Master Trust Agreement, the fund's trustees
may authorize the creation of additional series of shares
(the proceeds of which would be invested in separate,
independently managed portfolios) and additional classes of
shares within any series (which would be used to distinguish
among the rights of different categories of shareholders, as
might be required by future regulations or other unforeseen
circumstances).
The fund does not hold annual shareholder meetings. There
normally will be no meetings 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, at which time the trustees then in office
will call a shareholders' meeting for the election of
trustees. Shareholders of record of no less than two-thirds
of the outstanding shares of the trust may remove a trustee
through a declaration in writing or by vote cast in person
or by proxy at a meeting called for that purpose. The
trustees will call a meeting for any purpose upon written
request of shareholders holding at least 10% of the trust's
outstanding shares and the trust 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, in
which case only shares of the affected Class would be
entitled to vote.
The trust was organized as an unincorporated Massachusetts
business trust on October 17, 1991 under the name Shearson
Lehman Brothers Intermediate-Term Trust. On October 14,
1994 and August 16, 1995, the Trust's name was changed Smith
Barney Income Trust and Smith Barney Investment Trust,
respectively.
Annual and Semi-annual Reports. The fund sends its
shareholders a semi-annual report and an audited annual
report, which include listings of investment securities held
by the fund at the end of the period covered. In an effort
to reduce the fund's printing and mailing costs, the fund
consolidates the mailing of its semi-annual and annual
reports by household. This consolidation means that a
household having multiple accounts with the identical
address of record will receive a single copy of each report.
The fund also consolidates the mailing of its prospectus so
that a shareholder having multiple accounts will receive a
single Prospectus annually. Shareholders who do not want
this consolidation to apply to their accounts should contact
their Salomon Smith Barney Financial Consultant or the
transfer agent.
OTHER INFORMATION
In an industry where the average portfolio manager has seven
years of experience (source: ICI, 1998), the portfolio
managers of Smith Barney Mutual Funds average 21 years in
the industry and 15 years with the firm.
Smith Barney Mutual Funds offers more than 60 mutual funds.
We understand that many investors prefer an active role in
allocating the mix of funds in their portfolio, while others
want the asset allocation decisions to be made by
experienced managers.
That's why we offer four "styles" of fund management that
can be tailored to suit each investor's unique financial
goals.
Style Pure Series
Our Style Pure Series funds stay fully invested within
their asset class and investment style, enabling
investors to make asset allocation decisions in
conjunction with their Salomon Smith Barney Financial
Consultant.
Classic Investor Series
Our Classic Investor Series funds offer a range of
equity and fixed income strategies that seek to
capture opportunities across asset classes and
investment styles using disciplined investment
approaches.
The Concert Allocation Series
As a fund of funds, investors can select a Concert
Portfolio that may help their investment needs. As
needs change, investors can easily choose another
long-term, diversified investment from our Concert
family.
Special Discipline Series
Our Special Discipline Series funds are designed for
investors who are looking beyond more traditional
market categories: from natural resources to a roster
of state-specific municipal funds.
Wilshire Associates, Inc. ("Wilshire Associates") does not
sponsor any portfolio of the Fund, nor is it affiliated in
anyway with the Funds. "Wilshire 5000 Equity Index" and
related marks are trademarks of Wilshire Associates. None
of the Funds are sponsored, endorsed, sold, or promoted by
the index or its sponsor and neither the index nor its
sponsor make any representation or warranty, express or
implied, regarding the advisability of investing in the
Funds.
"S&P 500(r)" is a trademark of The McGraw-Hill Companies, Inc.
and has been licensed for use by Salomon Smith Barney. The
fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's (S&P), a division of The McGraw-Hill
Companies, Inc. 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 Salomon Smith
Barney is the licensing of certain trademarks and trade
names of S&P and the S&P 500 Index which is determined,
composed and calculated by S&P without regard to Salomon
Smith Barney or the fund. S&P has no obligation to take the
needs of Salomon Smith Barney 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 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 fund
shares are to be converted into cash. S&P has no obligation
or liability in connection with the administration,
marketing or trading of fund shares.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY
FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND,
OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P
500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
APPENDIX
Description of certain ratings assigned by Standard & Poor's
Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's")
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 and Prime-1 Commercial Paper Ratings
The rating A-1 (including A-1+) is the highest commercial
paper rating assigned by S&P. Commercial paper rated A-1 by
S&P has the following characteristics:
? liquidity ratios are adequate to meet cash
requirements;
? long-term senior debt is rated "A" or better;
? the issuer has access to at least two additional
channels of borrowing;
? basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances;
? typically, the issuer's industry is well established
and the issuer has a strong position within the industry;
and
? the reliability and quality of management are
unquestioned.
Relative strength or weakness of the above factors
determines whether the issuer's commercial paper is rated
A-1, A-2 or A-3. Issues rated A-1 that are determined by
S&P to have overwhelming safety characteristics are
designated A-1+.
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's
in assigning ratings are the following:
? evaluation of the management of the issuer;
? economic evaluation of the issuer's industry or
industries and an appraisal of speculative-type risks
which may be inherent in certain areas;
? evaluation of the issuer's products in relation
to competition and customer acceptance;
? liquidity;
? amount and quality of long-term debt;
? trend of earnings over a period of ten years;
? financial strength of parent company and the
relationships which exist with the issuer; and
? recognition by the management of obligations which
may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
SMITH BARNEY
INVESTMENT TRUST
U.S. 5000 Index Fund
EAFE Index Fund
October 13, 1999
SMITH BARNEY INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013
SALOMON SMITH BARNEY
A Member of
Citigroup [Symbol]
2
PART C
OTHER INFORMATION
Item 23. Exhibits
Unless otherwise noted, all references are to
the Registrants Registration Statement on Form N-1A
(the Registration Statement) as filed with the
Securities and Exchange
Commission (SEC) on October 21, 1991 (File Nos.
33-43446 and 811-6444).
(a)(1) 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).
(a)(2) Amendments to the Master Trust Agreement
dated October 14, 1994 and November 7, 1994,
respectively, are incorporated by reference to the
Registration Statement filed on Form N-14 on January
6, 1995 (the N-14).
(a)(3) Amendments to the Master Trust Agreement
dated July 20, 1995 and August 10, 1995 are
incorporated by reference to Post-Effective Amendment
No. 9 to the Registration Statement filed on August
29, 1995 (Post-Effective Amendment No. 9).
(a)(4) Amended and Restated Master Trust Agreement
dated February 28, 1998 is incorporated by reference
to Post Effective Amendment No. 18 to the Registration
Statement filed on March 30, 1998 (Post-
Effective Amendment No, 18)
(a)(5) Amendment No. 1 to the First Amended and Restated
Master Trust Agreement dated June 1, 1998
is incorporated by reference to Post-Effective Amendment No.20 to the
Registration Statement filed on June 26, 1998.
(a)(6) Amendment No. 2 to the First Amended and Restated Master
Trust Agreement dated October 16, 1998 is incorporated by reference
to Post-Effective Amendment No.21 to the Registration Statement
filed on November 12, 1998.
(b) Registrant's by-laws are incorporated by
reference to the Registration Statement.
(c)(1) Registrant's form of stock certificate
for Smith Barney S&P 500 Index Fund is incorporated by
reference to Post-Effective Amendment No. 16 to the
Registration Statement filed on December 29, 1997.
(c)(2) Registrant's form of stock certificate
for Smith Barney Large Capitalization Growth Fund is
incorporated by reference to Post-Effective Amendment
No.17 to the Registration Statement filed on
February 20, 1998 (Post-Effective Amendment No. 17).
(c)(3) Registrant's form of stock certificate for
Smith Barney Mid Cap Blend Fund is incorporated by
reference to Post-Effective Amendment No. 22 to the
Registration Statement filed on January 28, 1999
(Post-Effective Amendment No. 22).
(d)(1) 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).
(d)(2) 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 Mutual Management Corp. is incorporated by
reference to the N-14.
(d)(3) 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 filed on January 27, 1995 (Post-Effective
Amendment No. 6).
(d)(4) Form of Investment Advisory Agreement
between the Registrant on behalf of Smith Barney S&P
500 Index Fund and Travelers Investment
Management Company dated December 11, 1997 is
incorporated by reference to Post Effective Amendment
No. 15 to the Registration Statement
filed on December 12, 1997.
(d)(5) Form of Investment Management Agreement
between the Registrant on behalf of Smith Barney
Large Capitalization Growth Fund and Mutual
Management Corp.("MMC") (f/k/a Smith Barney Mutual Funds
Management Inc.) is incorporated by reference to
Post-Effective Amendment No. 17 to the Registration
Statement filed on February 20,1998 (Post-Effective
Amendment No. 17)
(d)(6) Form of Investment Management Agreement
between Smith Barney Mid Cap Blend Fund and MMC.
is incorporated by reference to Post-Effective Amendment
No. 17 to the Registration Statement filed on February 20,1998
(Post-Effective Amendment No. 17)
(e)(1) Distribution Agreement between the
Registrant and Smith Barney Shearson Inc. dated July
30, 1993 is incorporated by reference to Post-
Effective Amendment No. 3.
(e)(2) Form of Distribution Agreement between the
Registrant on behalf of Smith Barney S&P 500 Index
Fund and PFS Distributors is incorporated by
reference to Post-Effective Amendment No. 10.
(e)(3) Distribution Agreement between the Registrant
and CFBDS, Inc. dated October 8, 1998 is incorporated by reference
to Post-Effective Amendment No.21 to the Registration Statement
Filed on November 12, 1998.
(e)(4) Selling Group Agreement between CFBDS Inc. And
Salomon Smith Barney is incorporated by reference to Post-Effective
Amendment No. 24 to the Registration Statement filed on March 30, 1999
(Post-Effective Amendment No.24).
(f) Not Applicable.
(g) Form of Custody Agreement with PNC Bank,
National Association, is incorporated by reference to
Post-Effective Amendment No. 9.
(h)(1) 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.
(h)(2) Form of Administration Agreement between
the Registrant on behalf of Smith Barney Limited
Maturity Municipals Fund and Smith Barney
Intermediate Maturity New York Municipals Fund and
SBA is incorporated by reference to Post-Effective
Amendment No. 6.
(h)(3) Form of Administration Agreement between
the Registrant on behalf of Smith Barney S&P 500
Index Fund and Mutual Management Corp. is
incorporated by reference to Post Effective Amendment
No. 15.
(h)(4) Transfer Agency Agreement with First Data
Investor Services Group, Inc. is incorporated by reference
to Post-Effective Amendment No. 3.
(h)(5) Form of Sub-Transfer Agency Agreement
between the Registrant on behalf of Smith Barney S&P
500 Index Fund and PFS Shareholder Services is
incorporated by reference to Post-Effective Amendment
No. 10.
(i) Opinion of counsel regarding legality of
shares being registered is incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration
Statement filed on December 6, 1991.
(i)(2) Legal Counsel's consent is incorporated by
reference to Post-Effective Amendment No. 24.
(j)(1) Auditor's consent is incorporated by reference
to Post-Effective Amendment No. 24.
(k) Not Applicable.
(l) Purchase Agreement between the Registrant
and Shearson Lehman Brothers Inc. is incorporated by
reference to Pre-Effective Amendment No. 1.
(m)(1) Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Intermediate Maturity
California Municipals Fund and Smith Barney Inc. is
incorporated by reference to the N-14.
(m)(2) Form of Amended Service and Distribution
Plan pursuant to Rule 12b-1 between the Registrant on
behalf of Smith Barney Limited Maturity Municipals
Fund and Smith Barney Intermediate Maturity New York
Municipals Fund and Smith Barney Inc. is incorporated
by reference to Post-Effective Amendment No. 6.
(m)(3) Form of Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of Smith Barney S&P 500 Index
Fund is incorporated by reference to Post Effective
Amendment No. 15.
(m)(4) Form of Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf
of the Fund and Smith Barney Large Capitalization Growth
Fund is incorporated by reference to Post
Effective Amendment No. 17 to the Registration
Statement filed on February 20, 1998 (Post-Effective Amendment
No. 17).
(m)(5) Form of Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf
of the Fund and Smith Barney Large Capitalization Growth Fund
is incorporated by reference to Post
Effective Amendment No. 17 to the Registration
Statement filed on February 20, 1998 (Post-Effective Amendment No.
17).
(m)(6) Form of Amended and Restated
Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant on behalf
of the Funds is incorporated by
reference to Post-Effective Amendment No. 22.
(n) Financial Data Schedule is incorporated by reference to
Post-Effective Amendment No. 24.
(o)(1) Plan adopted pursuant to Rule 18f-3(d) of
the Investment Company Act of 1940, as amended, is
incorporated by reference to Post-Effective Amendment
No. 10.
(o)(2) Rule 18f-3(d) Multiple Class Plan of the Registrant
is incorporated by
reference to Post-Effective Amendment No. 22.
Item 24. Persons Controlled by or under Common
Control with Registrant
None
Item 25. Indemnification
The response to this item is incorporated by
reference to Pre-Effective Amendment No. 1.
Item 26(a). Business and Other Connections of
Investment Adviser
Investment Adviser and Administrator - SSBC Fund Management Inc.
("SSBC") (Formerly Mutual Management Corp.),
was incorporated in December 1968
under the laws of the State of Delaware. SSBC is a
wholly owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"),(formerly known as Smith Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of
Citigroup Inc. ("Citigroup"). SSBC is
registered as an investment adviser under the
Investment Advisers Act of 1940 (the Advisers Act)
and has, through its predecessors, been in the
investment counseling business since 1934. SSBC
serves as the Investment Adviser and Administrator
for Smith Barney Intermediate Maturity California
Fund and Smith Barney Intermediate Maturity New York
Fund and Investment Manager for Smith Barney Large
Capitalization Growth Fund and Smith Barney Mid Cap Blend Fund.
SSBC also serves as the administrator to the Smith Barney S&P 500
Index Fund.
The list required by this Item 26 of the officers and
directors of SSBC together with information as to any other business,
profession, vocation or employment of a substantial
nature engaged in by such officer and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by
SSBC pursuant to the Advisers Act (SEC File No. 801-
8314).
Investment Adviser - Travelers Investment Management
Company. (TIMCO). TIMCO serves as the investment
adviser for Smith Barney S&P 500 Index Fund pursuant to a written
agreement (the Advisory Agreement). TIMCO was
incorporated on August 31, 1967 under the laws of the
State of Connecticut. TIMCO is a wholly owned
subsidiary of Holdings, which in turn is a wholly owned
subsidiary of Citigroup.
TIMCO is registered as an investment adviser under
the Investment Advisers Act of 1940 (the Advisers
Act) since 1971 and has, through its predecessors,
been in the investment counseling business since
1967.
The list required by this Item 26 of the officers
and directors of TIMCO together with information as
to any other business, profession, vocation or
employment of a substantial nature engaged in by such
officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A
and D of FORM ADV filed by SSBC pursuant to the
Advisers Act (SEC File No.801-07212).
Item 27. Principal Underwriters
(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is also
the distributor for the following Smith Barney funds: Concert
Investment Series, Consulting Group Capital Markets Funds, Greenwich
Street Series Fund, Smith Barney Adjustable Rate Government Income
Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Arizona Municipals Fund Inc.,
Smith Barney California Municipals Fund Inc., Smith Barney Concert
Allocation Series Inc., Smith Barney Equity Funds, Smith Barney
Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith Barney
Income Funds, Smith Barney Institutional Cash Management Fund, Inc.,
Smith Barney Investment Funds Inc.,
Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith Barney
Municipal Money Market Fund, Inc., Smith Barney
Natural Resources Fund Inc., Smith Barney New Jersey Municipals
Fund Inc., Smith Barney Oregon Municipals Fund Inc., Smith Barney
Principal Return Fund, Smith Barney Small Cap Blend Fund, Inc., Smith
Barney Telecommunications Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc., and
various series of unit investment trusts.
CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA for
Variable Annuities, The Travelers Fund BD for Variable Annuities, The
Travelers Fund BD II for Variable Annuities, The Travelers Fund BD
III for Variable Annuities, The Travelers Fund BD IV for Variable
Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate
Account PF for Variable Annuities, The Travelers Separate Account PF
II for Variable Annuities, The Travelers Separate Account QP for
Variable Annuities, The Travelers Separate Account TM for Variable
Annuities, The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL II
for Variable Annuities, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance Separate
Account Two, The Travelers Variable Life Insurance Separate Account
Three, The Travelers Variable Life Insurance Separate Account Four,
The Travelers Separate Account MGA, The Travelers Separate Account
MGA II, The Travelers Growth and Income Stock Account for Variable
Annuities, The Travelers Quality Bond Account for Variable Annuities,
The Travelers Money Market Account for Variable Annuities, The
Travelers Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable
Annuities, The Travelers Timed Bond Account for Variable Annuities.
In addition, CFBDS, the Registrant's Distributor, is also the
distributor for CitiFunds Multi-State Tax Free Trust, CitiFunds
Premium Trust, CitiFunds Institutional Trust, CitiFunds Tax Free
Reserves, CitiFunds Trust I, CitiFunds Trust II, CitiFunds Trust III,
CitiFunds International Trust, CitiFunds Fixed Income Trust,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP
Folio 400, CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP
Portfolio. CFBDS is also the placement agent for Large Cap Value
Portfolio, Small Cap Value Portfolio, International Portfolio,
Foreign Bond Portfolio, Intermediate Income Portfolio, Short-Term
Portfolio, Growth & Income Portfolio, U.S. Fixed Income Portfolio,
Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio,
Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio.
In addition, CFBDS is also the distributor for the following Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc., Salomon
Brothers Investors Fund Inc., Salomon Brothers Capital Fund Inc.,
Salomon Brothers Series Funds Inc., Salomon Brothers Institutional
Series Funds Inc., Salomon Brothers Variable Series Funds Inc.
In addition, CFBDS is also the distributor for the Centurion Funds,
Inc.
(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to
Schedule A of Form BD filed by CFBDS pursuant to the Securities and
Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Smith Barney Investment Trust
388 Greenwich Street
New York, New York 10013
(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013
(3) Travelers Investment Management Company
One Tower Square
Hartford, CT 06183
(For Smith Barney S&P 500 Index Fund)
(4) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(5) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(6) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
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 30th day of July, 1999.
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.
Signature Title Date
/s/Heath B. McLendon Chairman of the Board 7/30/99
Heath B. McLendon (Chief Executive Officer)
and President
/s/Lewis E. Daidone Treasurer 7/30/99
Lewis E. Daidone (Chief Financial and
Accounting Officer)
/s/Herbert Barg* Trustee 7/30/99
Herbert Barg
/s/Alfred J. Bianchetti* Trustee 7/30/99
Alfred J. Bianchetti
/s/Martin Brody* Trustee 7/30/99
Martin Brody
/s/Dwight B. Crane* Trustee 7/30/99
Dwight B. Crane
/s/Burt N. Dorsett* Trustee 7/30/99
Burt N. Dorsett
/s/Elliot S. Jaffe* Trustee 7/30/99
Elliot S. Jaffe
/s/Stephen E. Kaufman* Trustee 7/30/99
Stephen E. Kaufman
/s/Joseph J. McCann* Trustee 7/30/99
Joseph J. McCann
/s/Cornelius C. Rose, Jr.* Trustee 7/30/99
Cornelius C. Rose, Jr.
_____________________________________________________________________
* Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant to power
of attorney dated January 27, 1995.
/s/ Heath B. McLendon
Heath B. McLendon
