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. 29 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 29 [X]
__________________
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
[ X ] on April 28, 2000 pursuant to paragraph (b)
of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1)
of Rule 485
[ ] On (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
of rule 485
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates
a new effective date for a previously filed
post effective amendment.
Title of Securities Being Registered: Shares of
Beneficial
PART A - COMBINED PROSPECTUS
For each of the following, dated April 28, 2000:
Smith Barney S&P 500 Index Fund - A and D shares
Smith Barney U.S. 5000 Index Fund - A and D shares
Smith Barney EAFE Index Fund - A and D shares
<PAGE>
SB Smith Barney
MF Mutual Funds
P R O S P E C T U S
S&P 500
Index Fund
U.S. 5000
Index Fund
EAFE
Index Fund
Class A and D Shares
- -------------------------
April 29, 2000
The Securities and Exchange Commission has not approved
or disapproved these
securities or determined whether this prospectus is
accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Contents
<TABLE>
<S>
<C>
Investments, risks and
performance.......................................... 2
Smith Barney S&P 500 Index
Fund........................................... 2
Smith Barney U.S. 5000 Index
Fund......................................... 6
Smith Barney EAFE Index
Fund.............................................. 10
More on the funds'
investments..............................................
14
Feeder fund
structure................................................
....... 16
Management...............................................
................... 17
Choosing a class of shares to
buy........................................... 19
Buying
shares...................................................
............ 20
Exchanging
shares...................................................
........ 21
Redeeming
shares...................................................
......... 22
Other things to know about share
transactions............................... 24
Salomon Smith Barney Retirement
Programs.................................... 25
Dividends, distributions and
taxes.......................................... 25
Share
price....................................................
............. 26
Financial
Highlights...............................................
......... 28
Smith Barney S&P 500 Index
Fund........................................... 28
Smith Barney U.S. 5000 Index
Fund......................................... 30
Smith Barney EAFE Index
Fund.............................................. 31
</TABLE>
Each fund is a separate series of Smith Barney Investment
Trust, a Massachu-
setts Business Trust.
You should know: An investment in a fund is not a bank
deposit and is not
insured or guaranteed by the FDIC or any other government
agency.
Smith Barney Mutual Funds
1
<PAGE>
Investments, risks and performance
S&P 500 Index Fund
Investment objective
The Smith Barney S&P 500 Index Fund ("S&P 500 Index
Fund") seeks to provide
investment results that, before expenses, correspond to
the price and yield
performance of the S&P 500 Index. The fund will hold a
broadly diversified
portfolio of common stocks that is comparable to the S&P
500 Index in terms of
economic sector weightings, market capitalization and
liquidity.
Principal investment strategies
Key Investments The S&P 500 Index Fund invests at least
80% of its assets in
common stocks included in the S&P 500 Index. The fund
holds stocks of substan-
tially all of the companies which comprise the S&P 500
Index, including those
companies which are headquartered outside the U.S. The
fund also enters into
repurchase agreements, lends portfolio securities and
uses certain types of
derivative instruments to help implement its objective.
Selection process The manager manages the S&P 500 Index
Fund as a "pure" index
fund. This means that the manager does not evaluate
individual companies to
identify attractive investment candidates. Instead, the
manager attempts to
mirror the composition of the S&P 500 Index as closely as
possible by adjusting
the fund's portfolio daily to reflect the companies
included in the index and
their weightings. The fund 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 S&P 500 Index is one of the mostly widely used
benchmarks of U.S. equity
performance. The index consists of 500 stocks chosen for
market capitalization,
liquidity and industry group representation. The index is
market-value-
weighted, so the larger of the 500 companies have a
bigger impact on the per-
formance of the index. The index is unmanaged and does
not have to maintain
liquidity to meet redemption requests or pay expenses.
Index Funds
2
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investments in the
S&P 500 Index Fund, or
the fund may not perform as well as other investments,
if:
.The S&P 500 Index declines 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 S&P
500 Index
.The stocks of companies which comprise the S&P 500 Index
fall out of favor
with investors
Because the S&P 500 Index Fund is managed as an index
fund, it will not ordi-
narily sell a portfolio security because of the
security's poor performance.
The fund normally buys or sells a portfolio security only
to reflect additions
or deletions of stocks that comprise the S&P 500 Index or
to adjust their rela-
tive weightings. Although the manager seeks to replicate
the performance of the
S&P 500 Index, the fund may underperform the index even
before deducting
expenses because the fund must maintain a portion of its
assets in liquid
short-term debt securities which historically have
generated significantly
lower returns than common stocks.
Who may want to invest The S&P 500 Index Fund may be an
appropriate investment
if you:
.Are seeking to participate in the long term growth
potential of U.S. large
capitalization stocks
.Are seeking an investment which tracks the performance
of the S&P 500 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
Smith Barney Mutual Funds
3
<PAGE>
Risk return bar chart
This bar chart shows the performance of the S&P 500 Index
fund's common shares
since inception through December 31, 1999, and, in the
future, will show
changes in the fund's performance from year to year. Past
performance does not
necessarily indicate how the fund will perform in the
future. This bar chart
shows the performance of the fund's Class A shares since
inception. Class D
shares have different performance because of different
expenses.
Total Return for Class A Shares
99 20.03%
Quarterly returns:
Highest: 14.62% in 4th quarter 1999; Lowest: (6.27)% in
3rd quarter 1999
Risk return table
This table compares the average annual total return of
each class for the peri-
ods shown with that of the S&P 500 Index, a broad-based
unmanaged market capi-
talization-weighted measure of 500 widely held common
stocks. This table
assumes the redemption of shares at the end of the period
and the reinvestment
of distributions and dividends.
Average Annual Total Returns
Calendar Years Ended December 31, 1999
<TABLE>
<CAPTION>
1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A 20.03% 23.53% 01/05/98
Class D 20.29% 26.25% 08/04/98
S&P 500 Index 21.03% 25.20% *
</TABLE>
*Index Comparison begins on January 31, 1998
Index Funds
4
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay
if you invest in fund
shares.
Shareholder fees
<TABLE>
<CAPTION>
(fees paid directly from your investment)
Class A Class D
<S>
<C> <C>
Maximum sales charge (load) imposed on purchases (as a %
of
offering price)
None None
Maximum deferred sales charge (load)
None None
(as a % of the lower of net asset value at
purchase or redemption)
Annual fund operating expenses*
<CAPTION>
(expenses deducted from fund assets)
Class A Class D
<S>
<C> <C>
Management fees
0.25% 0.25%
Service (12b-1) fees
0.20% None
Other expenses
0.23% 0.18%
- ------ ------
Total annual fund operating expenses
0.68% 0.43%
Expense reimbursement**
(0.09%) (0.09%)
- ------ ------
Net annual operating expenses
0.59% 0.34%
====== ======
</TABLE>
*For the fiscal year ended November 30, 1999.
**Management has agreed to cap the fund's net annual
operating expenses at
0.59% for Class A shares and 0.39% for Class D shares.
Management may not dis-
continue or modify this cap without the approval of the
fund's trustees.
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 $69 $218 $379 $847
Class D $44 $138 $241 $542
</TABLE>
Smith
Barney Mutual Funds
5
<PAGE>
Investments, risks and performance
Smith Barney U.S. 5000 Index Fund
Investment objective
The Smith Barney U.S. 5000 Index Fund (the "U.S. 5000
Index Fund") seeks to
offer long-term capital growth by approximating, before
fees and expenses, the
performance of the Wilshire 5000 Index.
The U.S. 5000 Index Fund is a feeder fund in a
master/feeder structure. Accord-
ingly, the fund does not buy individual securities
directly. Instead, it
invests all of its assets in the US Equity Index Master
Portfolio ("Master
Portfolio"), a series of Master Investment Portfolio
("MIP"), a registered
open-end management investment company. The Master
Portfolio seeks to provide
investment results that match as closely as practicable,
before fees and
expenses, the performance of the Wilshire 5000 Index. The
Master Portfolio's
investment objective may be changed by MIP's Board of
Trustees with
interestholder approval.
The U.S. 5000 Index Fund will invest in the Master
Portfolio, which seeks to
achieve its objective by investing substantially all of
its assets in two other
Master Portfolios of MIP--the Extended Index Master
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 Master
Portfolio (which invests
substantially all of its assets in stocks comprising the
S&P 500 Index) (to-
gether, the "Underlying Portfolios"). The Master
Portfolio's assets will be
invested in the Underlying Portfolios in proportions
adjusted periodically to
approximate the capitalization range of the Wilshire 5000
Index.
In addition to selling its beneficial interest to the
U.S. 5000 Index Fund, the
Master Portfolio has sold and may continue to sell its
beneficial interest to
certain other mutual funds or other accredited investors.
The expenses and,
correspondingly, the returns of other investment options
in the Master Portfo-
lio may differ from those of the fund.
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, and performance that will correlate with the
performance before fees and
expenses of, the Wilshire 5000 Index. The statistical
sampling techniques are
based on capitalization, industry exposures, dividend
yield, price/earnings
ratio, price/book ratio and earnings growth.
Index Funds
6
<PAGE>
The returns for the U.S. 5000 Index Fund are likely to be
below those of the
Wilshire 5000 Index because the fund, the Master
Portfolio and the Underlying
Portfolios each have fees and transaction expenses while
the Wilshire 5000
Index, the Wilshire 4500 Index and the S&P 500 Index have
none.
Under normal market conditions the Master Portfolio
invests at least 90% of its
assets, through the Underlying Portfolios, in common
stocks included in the
Wilshire 5000 Index, which represents the performance of
a broad range of U.S.
stocks.
Selection process The Master Portfolio follows an indexed
or "passively man-
aged" approach to investing. This means that Barclays
Global Fund Advisors
("BGFA") determines which proportion of the Equity Index
Master Portfolio's
assets will be invested in each Underlying Portfolio to
match, to the extent
feasible, the capitalization range and returns of the
Wilshire 5000 Index. In
turn, the Underlying Portfolios determine which
securities are to be purchased
or sold to match or sample their respective benchmarks.
This means that BGFA does not evaluate individual
companies to identify attrac-
tive investment candidates. Instead, BGFA attempts to
mirror the composition of
the Wilshire 5000 Index as closely as possible by
adjusting the Master Portfo-
lio's portfolio periodically to reflect the companies
included in the index and
their weightings. The Master Portfolio does not mirror
the Wilshire 5000 Index
exactly because, unlike the Wilshire 5000 Index, the
Master Portfolio must
maintain a portion of its assets in cash and liquid
securities to meet redemp-
tion requests and pay the Master Portfolio'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. An index is
a hypothetical measure
of performance based on the movement of securities that
make up a particular
market. The Wilshire 5000 Index does not show actual
investment returns or
reflect payment of management or brokerage fees, which
would lower the index's
performance. The Wilshire 5000 Index does not have to
maintain liquidity to
meet redemption requests or pay expenses.
The Wilshire 5000 Index is comprised of the stocks in the
Standard & Poor's 500
Stock Index, except for a small number of foreign stocks
that represent approx-
imately 3% of the S&P 500 Index, and the stocks in the
Wilshire 4500 Index.
Smith
Barney Mutual Funds
7
<PAGE>
Principal risks of investing in the fund
Investors could lose money on their investments in the
U.S. 5000 Index Fund, or
the fund may not perform as well as other investments,
if:
.The Wilshire 5000 Index declines or performs poorly
relative to other U.S.
equity indices 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 U.S. 5000 Index Fund is exposed to the risks of
investing in common stocks
as well as, to a lesser extent, the additional risks of
investing in foreign
securities, which can be affected by currency, political,
legal, regulatory and
operational factors.
The U.S. 5000 Index 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
larger companies.
The U.S. 5000 Index Fund may not track the Wilshire 5000
Index perfectly
because differences between the Wilshire 5000 Index and
the fund's portfolio
will 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
Wilshire 5000 Index are val-
ued can also cause differences in performance.
Who may want to invest The U.S. 5000 Index Fund may be an
appropriate invest-
ment if you:
.Are seeking to participate in the long term growth
potential of U.S. stocks
.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 U.S. 5000 Index Fund does not yet have a sufficient
operating history to
generate the performance information which other Smith
Barney funds show in bar
and table form in this part of the prospectus.
Index Funds
8
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay
if you invest in
U.S. 5000 Index 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 (as a % of offering price) 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* 0.23%
0.23%
Service (12b-1) fees 0.20% None
Other expenses** 0.25%
0.25%
Total annual fund operating expenses*** 0.68%
0.48%
</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 the Master Portfolio, the Underlying
Portfolios and the fund, and
has been estimated based on expenses the fund expects
to incur during its
first full fiscal year.
*** Management has agreed to cap the fund's other
expenses at 0.25%. Management
may not discontinue or modify this cap without the
approval of the fund's
trustees. As a result of the expense cap, the total
annual fund operating
expenses will not exceed 0.68% for Class A Shares and
0.48% Class D Shares.
Example
This example helps you compare the costs of investing in
the fund with the
costs of investing in other mutual funds. Your actual
costs may be higher or
lower. The example assumes:
.You invest $10,000 in the fund for the period shown
.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
<S> <C> <C>
Class A $49 $218
Class D $49 $154
</TABLE>
* Reflects costs at the fund, the Master Portfolio and
the Underlying Portfolio
levels.
Smith
Barney Mutual Funds
9
<PAGE>
Investments, risks and performance
Smith Barney EAFE Index Fund
Investment objective
The Smith Barney EAFE Index Fund (the "EAFE Index Fund")
seeks to offer long-
term capital growth and diversification by approximating,
before fees and
expenses, the performance of the Morgan Stanley Capital
International Europe,
Australasia, and Far East Free (EAFE Free) Index (the
"EAFE Index").
The EAFE Index Fund is a feeder fund in a master/feeder
structure. Accordingly,
the fund does not buy individual securities directly.
Instead, it invests all
of its assets in the International Index Master Portfolio
("Master Portfolio")
a series of MIP, rather than directly in a portfolio of
securities. The Master
Portfolio seeks to provide investment results that match
as closely as practi-
cable, before fees and expenses, the performance of the
Index. The Master Port-
folio's investment objective may be changed by MIP's
Board of Trustees without
interestholder approval.
In addition to selling its shares to the EAFE Index Fund,
the Master Portfolio
has sold and may continue to sell its shares to certain
other mutual funds or
other accredited investors. The expenses and,
correspondingly, the returns of
other investment options in the Master Portfolio may
differ from those of the
fund.
Principal investment strategies
Key investments The Master Portfolio invests in a
sampling of securities that
are selected and weighted to result in investment
characteristics comparable
to, and performance that will correlate with the
performance before fees and
expenses of, the EAFE Index. Under normal conditions, the
Master Portfolio
invests at least 90% of its assets in common stocks
included in the EAFE Index,
which represents the performance of foreign stock
markets. The Master Portfolio
attempts to achieve, in both rising and falling markets,
a correlation of at
least 95% between the total return of its net assets
before expenses and the
EAFE Index. The statistical sampling techniques are based
on capitalization,
industry exposures, dividend yield, price/earnings ratio,
price/book ratio,
earnings growth, country weightings and the effect of
foreign taxes.
The returns for the EAFE Index Fund are likely to be
below those of the EAFE
Index because the fund and the Master Portfolio each have
fees and transaction
expenses while the EAFE Index has none.
Index Funds
10
<PAGE>
Selection process BGFA follows an indexed or "passively
managed" approach to
investing. This means that BGFA does not evaluate
individual companies to iden-
tify attractive investment candidates. Instead, BGFA
attempts to mirror the
composition of the EAFE Index as closely as possible by
adjusting the Master
Portfolio's portfolio periodically to reflect the
companies included in the
EAFE Index and their weightings. The Master Portfolio
does not mirror the EAFE
Index exactly because, unlike the EAFE Index, the Master
Portfolio must main-
tain a portion of its assets in cash and liquid
securities to meet redemption
requests and pay the Master Portfolio's expenses.
The EAFE Index is an unmanaged index of common stocks of
companies located in
Europe, Australasia and the Far East (includes dividends
net of withholding
taxes). An index is a hypothetical measure of performance
based on the movement
of securities that make up a particular market. The EAFE
Index does not show
actual investment returns or reflect payment of
management or brokerage fees,
which would lower the index's performance. The EAFE 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
EAFE Index Fund, or the
fund may not perform as well as other investments, if:
.An adverse company specific event, such as an
unfavorable earnings report,
negatively affects the stock price of one of the larger
companies in the EAFE
Index
.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
value relative to the
U.S. dollar
.The EAFE Index declines or performs poorly relative to
other non-U.S. equity
indices or individual stocks
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 volatile
than that of larger issuers. Currency fluctuations could
erase investment gains
or add to investment losses. Because the value of an
American Depositary
Receipt ("ADR") is dependent upon the market price of an
underlying foreign
security, ADRs are subject to most of the risks
associated with foreign invest-
ing.
Smith
Barney Mutual Funds
11
<PAGE>
The EAFE Index Fund may not track the EAFE Index
perfectly because differences
between the EAFE Index and the fund's portfolio will
cause differences in per-
formance. 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 EAFE Index are valued can also
cause differences in per-
formance.
Who may want to invest The EAFE Index Fund may be an
appropriate investment if
you:
.Are seeking to participate in the long term growth
potential of international
markets
.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 EAFE Index Fund does not yet have a sufficient
operating history to gener-
ate the performance information which other Smith Barney
funds show in bar and
table form in this part of the prospectus.
Index Funds
12
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay
if you invest in EAFE
Index 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 (as a % of offering price) 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* 0.40%
0.40%
Service (12b-1) fees 0.20% None
Other expenses** 0.25%
0.25%
Total annual fund operating expenses*** 0.85%
0.65%
</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
has been estimated
based on expenses the fund expects to incur during
its first full fiscal
year.
*** Management has agreed to cap the fund's other
expenses to 0.25%. Management
may not discontinue or modify this cap without the
approval of the fund
trustees. As a result of this expense cap, the total
annual fund operating
expenses will not exceed 0.85% for Class A Shares and
0.65% for Class D
Shares.
Smith
Barney Mutual Funds
13
<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
<S> <C> <C>
Class A $87 271
Class D $66 208
</TABLE>
*Reflects costs at both the fund and Master Portfolio
levels.
More on the funds' investments
S&P 500 Index Fund
Derivatives The fund may, but is not required to, use
futures and options on
securities and securities indexes, and options on these
futures, for any of the
following purposes:
.to simulate full investment in the S&P 500 Index while
maintaining sufficient
liquidity to satisfy daily redemption requests and
operating expenses
.to facilitate trading in the securities of companies
that comprise the index
.to reduce transaction costs
.to seek higher investment returns when a contract is
priced more attractively
than the stocks comprising the index
The S&P 500 Index Fund may not invest more than 20% of
its assets in derivative
contracts or more than 5% of its assets in open purchased
put options.
A derivative contract will obligate or entitle the fund
to deliver or receive
an asset or cash payment based on the change in value of
one or more securities
or indexes. Even a small investment in derivative
contracts can have a big
impact on the fund's stock market exposure. Therefore,
using derivatives can
disproportionately increase losses and reduce
opportunities for gains when
stock prices are changing. The fund may not fully benefit
from or may lose
money on derivatives if changes in their value do not
correspond accurately to
changes in the value of the fund's holdings.
Index Funds
14
<PAGE>
The other parties to certain derivative contracts present
the same types of
credit risk as issuers of fixed income securities.
Derivatives can also make
the fund less liquid and harder to value, especially in
declining markets.
Money market instruments The S&P 500 Index Fund may
temporarily maintain up to
20% of its assets in money market instruments. The fund
invests in money market
instruments under the following circumstances:
.pending investment of proceeds of the sale of shares of
the fund
.pending settlement of purchases of securities by the
fund
.to maintain liquidity to meet anticipated redemptions
Foreign investments The S&P 500 Index Fund may purchase
common stocks and ADRs
of the foreign companies included in the S&P 500 Index.
These securities are
publicly traded on U.S. securities exchanges or over-the-
counter markets. ADRs
are U.S. dollar denominated securities which represent an
interest in an under-
lying foreign security.
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.
U.S. 5000 Index and EAFE Index Funds
Because it can be very expensive to buy and sell all of
the securities in each
funds' corresponding Index, each Master Portfolio employs
a "sampling" tech-
nique to approximate Index characteristics such as
capitalization and industry
weight using fewer securities than contained in the
corresponding Index.
Each Master Portfolio follows an indexed or "passively
managed" approach to
investing. This means that BGFA selects securities for
each Master Portfolio
designed to approximate the investment characteristics
and performance of the
corresponding Index.
Derivative BGFA uses various techniques, such as buying
and selling
futures contracts, to increase or decrease each fund's
exposure to changing
security prices or other factors that affect security
values. If BGFA's strate-
gies do not work as intended, each fund may not achieve
its objective.
Smith
Barney Mutual Funds
15
<PAGE>
In seeking to match the performance of the corresponding
Index, each Master
Portfolio also may engage in futures and options
transactions and other deriva-
tive securities transactions which involve risk. The
futures contracts and
options on futures contracts each 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. Each 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.
Although each Master Portfolio attempts to be fully
invested at all times in
securities comprising the corresponding Index and in
futures contracts and
options on futures contracts, each Master Portfolio may
also invest up to 10%
of its assets in high-quality money market instruments to
provide liquidity.
Each Master Portfolio also may invest up to 15% of the
value of its net assets
in illiquid securities, including repurchase agreements
providing for settle-
ment in more than seven days.
Feeder fund structure
The U.S. 5000 Index Fund and the EAFE Index Fund is each
structured as a feeder
fund. Neither fund buys individual securities directly.
Instead, each fund
invests in a corresponding Master Portfolio. Each Master
Portfolio invests in
securities in accordance with investment objectives,
policies and limitations
that are similar to those of the corresponding fund.
As other investors invest their assets in each Master
Portfolio, certain eco-
nomic efficiencies may be realized with respect to each
Master Portfolio. For
example, fixed expenses that otherwise would have been
borne solely by a fund
(and the other existing interestholders in each Master
Portfolio) would be
spread across a larger asset base as more funds invest in
the Master Portfolio.
However, if a mutual fund or other investor withdraws its
investment from a
Master Portfolio, the economic efficiencies that should
be available through
investment in a Master Portfolio may not be fully
achieved or maintained. In
addition, given the relatively complex nature of the
master/feeder structure,
accounting and operational difficulties could occur. For
example, coordination
of calculation of net asset value could be affected at
the master and/or feeder
level.
The U.S. 5000 Index Fund or the EAFE Index Fund may
withdraw its investments in
a Master Portfolio if the Board determines that it is in
the
Index Funds
16
<PAGE>
best interests of the corresponding 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 each fund
in another pooled
investment entity having the same investment objective as
a fund, direct man-
agement of such fund by SSB Citi Fund Management LLC
("SSB Citi") or the hiring
of a sub-advisor to manage the fund's assets.
Investment of either fund's assets in a 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
S&P 500 Index Fund
Manager The S&P 500 Index Fund's investment adviser is
The Travelers Investment
Management Company (TIMCO). The manager selects the
fund's investments and
oversees its operations. The manager's address is One
Tower Square, Hartford,
Connecticut 06183-2030. TIMCO and SSB Citi are affiliates
of Salomon Smith Bar-
ney Inc. The manager, administrator and Salomon Smith
Barney are subsidiaries
of Citigroup Inc. Citigroup businesses produce a broad
range of financial serv-
ices--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.
Sandip Bhagat, president and chief investment officer of
TIMCO, and John Lau,
portfolio manager for TIMCO, have been responsible for
the day-to-day manage-
ment of the fund's portfolio since its inception. Messrs.
Bhagat and Lau have
more than 11 and 4 years, respectively, of securities
business experience.
U.S. 5000 Index and EAFE Index Fund
A feeder fund does not need an investment manager. Each
Master Portfolio's
investment advisor is BGFA. BGFA is a wholly owned direct
subsidiary of
Barclays Global Investors, N.A. (which is an indirect
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. For the U.S. 5000 Index Fund, BGFA
receives a monthly advisory
fee from the Master Portfolio at an annual rate equal to
0.01% of the U.S.
Equity Index Master Portfolio's average daily net assets,
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.
Smith
Barney Mutual Funds
17
<PAGE>
for the EAFE Index Fund, BGFA receives a monthly advisory
fee from the Interna-
tional Index Master Portfolio at an annual rate equal to
0.15% of the first
$1 billion, and 0.10% thereafter, of the International
Index Master Portfolio's
average 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 applicable Master
Portfolio, and accordingly, have a favorable impact on
its performance.
Each 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.
Management fees For its services, the manager received a
fee during the S&P 500
Index Fund's last fiscal year equal on an annual basis to
0.15%, of the fund's
average daily net assets.
All Funds
Administrator The funds' administrator is SSB Citi whose
address is 388 Green-
wich Street, New York, New York 10013. SSB Citi and
Salomon Smith Barney are
subsidiaries of Citigroup.
Administration fees For its services, SSB Citi receives a
fee equal on an
annual basis to 0.10% of the S&P 500 Index Funds' average
daily net assets. The
administrator waived all of its fees during the S&P 500
Index Fund's last fiscal
year. For its services, SSB Citi receives a fee equal on
an annual basis to
0.15% of each of the U.S. 5000 Index and EAFE Index
funds' average daily net
assets.
Distributor Each fund has entered into an agreement with
CFBDS, Inc. to dis-
tribute the fund's shares. A selling group consisting of
Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans Each fund has adopted a Rule 12b-1
service plan for its
Class A shares. Under the plan, Class A shares pay a
service fee for the sale
of its shares and for services provided to shareholders.
The fee for Class A
shares is an ongoing expense and, over time, may cost you
more than other types
of sales charges.
Index Funds
18
<PAGE>
Transfer agent and shareholder servicing agent Citi
Fiduciary Trust Company
serves as each fund's transfer agent and shareholder
servicing agent (the
"transfer agent"). Pursuant to a sub-transfer agency and
services agreement
with the transfer agent, PFPC Global Fund Services serves
as each fund's sub-
transfer agent (the "sub-transfer agent") to render
certain shareholder record
keeping and accounting services and functions.
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 Salomon
Smith Barney Retirement Programs. 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.
<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 $ 50 $50
</TABLE>
* Qualified Retirement Plans are retirement plans
qualified under Section
403(b)(7) or Section 401(a) of the Internal Revenue
Code, including 401(k)
plans
Smith
Barney Mutual Funds
19
<PAGE>
Buying shares
Through a You should contact your Salomon Smith
Barney Financial Con-
Salomon Smith sultant or dealer representative to open
a brokerage account
Barney and make arrangements to buy shares. If
you do not provide
Financial the following information, your order
will be rejected:
Consultant or
dealer
representative
.Class of shares being bought
.Dollar amount or number of shares being
bought
You should pay for your shares through
your brokerage account
no later than the third business day
after you place your
order. Salomon Smith Barney or your
dealer representative may
charge an annual account maintenance
fee.
- ---------------------------------------------------------
- -----------------------
Through each Qualified retirement plans and certain
other investors who
fund's sub- are clients of a selling group member
are eligible to buy
transfer shares directly from a fund.
agent
.Write the sub-transfer agent at the
following address:
Smith Barney Investment Trust
S&P 500 Index Fund
U.S. 5000 Index Fund
EAFE Index Fund
(Specify fund and class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
.Enclose a check made payable to the
applicable fund to pay
for the shares. For initial purchases,
complete and send an
account application
.For more information, call the transfer
agent at 1-800-451-
2010.
- ---------------------------------------------------------
- -----------------------
Through a
systematic You may authorize Salomon Smith Barney,
your dealer represen-
investment tative or the sub-transfer agent to
transfer funds automati-
plan cally from a regular bank account, cash
held in a Salomon
Smith Barney brokerage account or Smith
Barney money market
fund to buy shares on a regular basis.
Index Funds
20
<PAGE>
.Amounts transferred should be at least
$25 monthly or $50
quarterly
.If you do not have sufficient funds in
your account on a
transfer date, Salomon Smith Barney,
your dealer represen-
tative or the sub-transfer agent may
charge you a fee
For more information, contact your
Salomon Smith Barney
Financial Consultant, dealer
representative or the transfer
agent or consult the Statement of
Additional Information
("SAI").
Exchanging shares
Smith Barney Each fund is exchangeable into the
other.
offers a
distinctive
family of
funds
tailored to
help meet the
varying needs
of both large
and small
investors
You should contact your Salomon Smith
Barney Financial
Consultant or dealer representative to
exchange into the
funds. Be sure to read the prospectus of
mutual funds you are
exchanging into. An exchange is a
taxable transaction.
.You may exchange shares only for shares
of the same class.
.You may also exchange fund shares only
for shares of other
classes if you are participating in
certain fee based advi-
sory programs or employer-sponsored
retirement plans.
Please contact your Salomon Smith
Barney Financial Consul-
tant or your dealer representative for
more information.
.You must meet the minimum investment
amount for each fund
(except for systematic exchanges)
.If you hold share certificates, the
sub-transfer agent must
receive the certificates endorsed for
transfer or with
signed stock powers (documents
transferring ownership of
certificates) before the exchange is
effective.
.The fund may suspend or terminate your
exchange privilege if
you engage in an excessive pattern of
exchanges
Smith
Barney Mutual Funds
21
<PAGE>
- ---------------------------------------------------------
- -----------------------
By telephone
If you do not have a brokerage account,
you may be eligible
to exchange shares through the transfer
agent. You must com-
plete an authorization form to authorize
telephone transfers.
If eligible, you may make telephone
exchanges on any day the
New York Stock Exchange is open. Call
the transfer agent at
1-800-451-2010 between 9:00 a.m. and
4:00 p.m. (Eastern
time).
You can make telephone exchanges only
between accounts that
have identical registrations.
- ---------------------------------------------------------
- -----------------------
By mail
If you do not have a Salomon Smith
Barney brokerage account,
contact your dealer representative or
write to the sub-trans-
fer agent at the address on the next
page.
Redeeming shares
Generally Contact your Salomon Smith Barney
Financial Consultant or
your dealer representative to redeem
shares of a fund.
If you hold share certificates, the sub-
transfer agent must
receive the certificates endorsed for
transfer or with signed
stock powers (documents transferring
ownership of certifi-
cates) before the redemption is
effective.
If the shares are held by a fiduciary or
corporation, other
documents may be required.
Your redemption proceeds will be sent
within three business
days after your request is received in
good order. However,
if you recently purchased your shares by
check, your redemp-
tion proceeds will not be sent to you
until your original
check clears, which may take up to 15
days.
If you have a Salomon Smith Barney
brokerage account, your
redemption proceeds will be placed in
your account and not
reinvested without your specific
instruction. In other cases,
unless you direct otherwise, your
redemption proceeds will be
paid by check mailed to your address of
record.
Index Funds
22
<PAGE>
- ---------------------------------------------------------
- -----------------------
By mail
For accounts held directly at a fund,
send written requests
to the sub-transfer agent at the
following address:
Smith Barney Investment Trust
S&P 500 Index Fund
U.S. 5000 Index Fund
EAFE Index Fund
(Specify fund and class of shares)
c/o PFPC Global Fund Services
P.O. Box 9699
Providence, Rhode Island 02940-9699
Your written request must provide the
following:
.The account number
.The class of shares and the dollar
amount or number of
shares to be redeemed
.Signatures of each owner exactly as the
account is regis-
tered
- ---------------------------------------------------------
- -----------------------
By telephone
If you do not have a brokerage account,
you may be eligible
to redeem shares (except those held in
retirement plans) in
amounts up to $10,000 per day through
the transfer agent. You
must complete an authorization form to
authorize telephone
redemptions. If eligible, you may
request redemptions by tel-
ephone on any day the New York Stock
Exchange is open. Call
the transfer agent at 1-800-451-2010
between 9:00 a.m. and
4:00 p.m. (Eastern time).
Your redemption proceeds can be sent by
check to your address
of record or by wire transfer to a bank
account designated on
your authorization form. You must submit
a new authorization
form to change the bank account
designated to receive wire
transfers and you may be asked to
provide certain other docu-
ments.
- ---------------------------------------------------------
- -----------------------
Automatic You can arrange for the automatic
redemption of a portion of
cash your shares on a monthly or quarterly
basis. To qualify you
withdrawal must own shares of the fund with a value
of at least $10,000
plans ($5,000 for retirement plan accounts)
and each automatic
redemption must be at least $50.
Smith
Barney Mutual Funds
23
<PAGE>
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 sub-transfer
agent
.Instruct the sub-transfer agent to mail the check to an
address different from
the one on your account
.Changed your account registration
.Want the check paid to someone other than the account
owner(s)
.Are transferring the redemption proceeds to an account
with a different 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.
Index Funds
24
<PAGE>
Each fund has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment
amounts
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.Suspend or postpone redemptions of shares on any day
when trading on the New
York Stock Exchange is restricted, or as otherwise
permitted by the Securi-
ties and Exchange Commission
.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, a 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 SSB Citi may determine
that a pattern of fre-
quent exchanges is detrimental to a fund's performance
and other shareholders.
Each fund may limit additional purchases and/or exchanges
by a shareholder.
Share certificates The funds do not issue share
certificates unless a written
request signed by all registered owners is made to the
sub-transfer agent. If
you hold share certificates it will take longer to
exchange or redeem shares.
Salomon Smith Barney Retirement Programs
You may be eligible to participate in the Salomon Smith
Barney Retirement Pro-
grams. Each fund offers Class A shares to participating
plans as an investment
alternative under the programs. You can meet minimum
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.
For more information, call your Salomon Smith Barney
Financial Consultant or
the transfer agent, or consult the SAI.
Dividends, distributions and taxes
Dividends Each fund generally pays dividends and makes
capital gain distribu-
tions, if any, once a year, typically in December. Each
fund may pay
Smith
Barney Mutual Funds
25
<PAGE>
additional distributions and dividends at other times if
necessary for the fund
to avoid a federal tax. Each fund expects distributions
to be primarily from
capital gains. Capital gain distributions and dividends
are reinvested in addi-
tional fund shares of the same class you hold.
Alternatively, you can instruct
your Salomon Smith Barney Financial Consultant, dealer
representative or the
transfer agent to have your distributions and/or
dividends paid in cash. You
can change your choice at any time to be effective as of
the next distribution
or dividend, except that any change given to the transfer
agent less than five
days before the payment date will not be effective until
the next distribution
or dividend is paid.
Taxes In general, redeeming shares, exchanging shares and
receiving 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, each fund will provide you
with information about
the distributions and dividends you received and any
redemptions of shares dur-
ing the previous year. If you do not provide the fund
with your correct tax-
payer identification number and any required
certifications, you may be subject
to back-up withholding of 31% of your distributions,
dividends, and redemption
proceeds. Because each shareholder's circumstances are
different and special
tax rules may apply, you should consult your tax adviser
about your investment
in the fund.
Share price
You may buy, exchange or redeem shares at their net asset
value next determined
after receipt of your request in good order. Each 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. Each fund calculates its
net
Index Funds
26
<PAGE>
asset value every day the New York Stock Exchange is
open. This calculation is
done when regular trading closes on the Exchange
(normally 4:00 p.m., Eastern
time). The Exchange is closed on certain holidays listed
in the SAI.
Each fund's currency conversions are done when the London
stock exchange
closes. When reliable market prices or quotations are not
readily available, or
when the value of a security has been materially affected
by events occurring
after a foreign exchange closes, a fund may price those
securities at fair val-
ue. Fair value is determined in accordance with
procedures approved by the
fund's board. Each fund that uses fair value to price
securities may value
those securities higher or lower than another fund using
market quotations to
price the same securities.
International markets may be open on days when U.S.
markets are closed and the
value of foreign securities owned by a fund could change
on days when you can-
not buy or redeem shares.
In order to buy, redeem or exchange shares at that day's
price, you must place
your order with your Salomon Smith Barney Financial
Consultant or dealer repre-
sentative before the New York Stock Exchange closes. If
the Exchange closes
early, you must place your order prior to the actual
closing time. Otherwise,
you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must
transmit all order to
buy, exchange or redeem shares to the fund's agent before
the agent's close of
business.
U.S. 5000 Index Fund and EAFE Index Fund
The Master Portfolio for each fund is valued daily by a
Master Portfolio
itself, and a Master Portfolio's net asset value is part
of the calculation of
the fund's net asset value.
The assets of each feeder fund include its investments in
a Master Portfolio,
plus cash and any other assets. Each feeder fund's
investment in a Master Port-
folio is valued at the feeder fund's proportionate
interest in the net assets
of a Master Portfolio. Each Master Portfolio calculates
the net assets on the
same days and at the same time as the fund.
Each Master Portfolio's assets are valued based on
current market prices. If
such prices are not readily available, BGFA estimates the
securities' fair
value in accordance with guidelines approved by the
applicable Master Portfo-
lio's Board of Trustees.
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.
Smith Barney Mutual Funds
27
<PAGE>
Financial highlights
The financial highlights tables are intended to help you
understand the perfor-
mance of each class for the past 5 years (or since
inception if less than 5
years). Certain information reflects financial results
for a single share.
Total return represents the rate that a shareholder would
have earned (or lost)
on a fund share assuming reinvestment of all dividends
and distributions. The
information in the following tables was audited by KPMG
LLP, independent
accountants, whose report, along with the fund's
financial statements, are
included in the annual report (available upon request).
S&P 500 Index Fund
For a Class A share of beneficial interest outstanding
throughout each year
ended November 30, except where noted:
<TABLE>
<CAPTION>
1999(/1/)(/2/)
1999(/2/) 1998(/3/)
- ---------------------------------------------------------
- ------------------
<S> <C> <C>
<C>
Net asset value, beginning of period $ 14.24 $
11.98 $ 10.00
- ---------------------------------------------------------
- ------------------
Income from operations:
Net investment income(/4/) 0.01
0.12 0.05
Net realized and unrealized gain 0.83
2.27 1.93
- ---------------------------------------------------------
- ------------------
Total income from operations 0.84
2.39 1.98
- ---------------------------------------------------------
- ------------------
Less distributions from:
Net investment income (0.08)
(0.06) --
Net realized gains --
(0.07) --
- ---------------------------------------------------------
- ------------------
Total distributions (0.08)
(0.13) --
- ---------------------------------------------------------
- ------------------
Net asset value, end of period $ 15.00 $
14.24 $ 11.98
- ---------------------------------------------------------
- ------------------
Total return 5.88%++
19.96% 19.80%++
- ---------------------------------------------------------
- ------------------
Net assets, end of period (000s) $252,435
$223,787 $55,187
- ---------------------------------------------------------
- ------------------
Ratios to average net assets:
Expenses(/4/)(/5/) 0.60%+
0.59% 0.59%+
Net investment income 0.67+
0.83 1.05+
- ---------------------------------------------------------
- ------------------
Portfolio turnover rate 0%
6% 4%
- ---------------------------------------------------------
- ------------------
</TABLE>
(/1/For)the period from December 1, 1999 to December 31,
1999, which reflects a
change in the fiscal year end of the Fund.
(/2/Per)share amounts have been calculated using the
monthly average shares
method.
(/3/For)the period from January 5, 1998 (inception date)
to November 30, 1998.
(/4/The)administrator agreed to waive all or a portion of
its fees for the
period ended December 31, 1999, the year ended
November 30, 1999 and for
the period ended November 30, 1998. In addition, the
administrator agreed
to reimburse expenses of $15,109 and $177,520 for the
periods ended
December 31, 1999 and November 30, 1998,
respectively. If these fees had
not been waived and expenses not reimbursed, the per
share effect on net
investment income and the expense ratio would have
been as follows:
<TABLE>
<CAPTION>
Per Share Decreases to
Expense Ratios Without
Net Investment Income
Waiver and Reimbursement
<S> <C>
<C>
1999(/1/) $0.00
0.77%+
- ---------------------------------------------------------
- -------------------------------
1999 0.01
0.68
- ---------------------------------------------------------
- -------------------------------
1998 0.04
1.42+
- ---------------------------------------------------------
- -------------------------------
</TABLE>
(/5/As)a result of voluntary expense limitations, the
ratio of expenses to
average net assets will not exceed 0.60%.
++Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
Index Funds
28
<PAGE>
For a Class D share of beneficial interest outstanding
throughout each year
ended November 30, except where noted:
<TABLE>
<CAPTION>
1999(/1/)(/2/)
1999(/2/) 1998(/3/)
- ---------------------------------------------------------
- ----------------
<S> <C> <C>
<C>
Net asset value, beginning of period $ 14.28 $
11.99 $11.00
- ---------------------------------------------------------
- ----------------
Income from operations:
Net investment income(/4/) 0.01
0.17 0.03
Net realized and unrealized gain 0.83
2.26 0.96
- ---------------------------------------------------------
- ----------------
Total income from operations 0.84
2.43 0.99
- ---------------------------------------------------------
- ----------------
Less distributions from:
Net investment income (0.11)
(0.07) --
Net realized gains --
(0.07) --
- ---------------------------------------------------------
- ----------------
Total distributions (0.11)
(0.14) --
- ---------------------------------------------------------
- ----------------
Net asset value, end of period $ 15.01 $
14.28 $11.99
- ---------------------------------------------------------
- ----------------
Total return 5.91%++
20.29% 9.00%++
- ---------------------------------------------------------
- ----------------
Net assets, end of period (000s) $20,626
$14,068 $1,810
- ---------------------------------------------------------
- ----------------
Ratios to average net assets:
Expenses(/4/)(/5/) 0.36%+
0.34% 0.36%+
Net investment income 0.90+
1.08 1.33+
- ---------------------------------------------------------
- ----------------
Portfolio turnover rate 0%
6% 4%
- ---------------------------------------------------------
- ----------------
</TABLE>
(/1/For)the period from December 1, 1999 to December 31,
1999, which reflects a
change in the fiscal year end of the Fund.
(/2/Per)share amounts have been calculated using the
monthly average shares
method.
(/3/For)the period from August 4, 1998 (inception date)
to November 30, 1998.
(/4/The)administrator agreed to waive all or a portion of
its fees for the
period ended December 31, 1999, the year ended
November 30, 1999 and for
the period ended November 30, 1998. In addition, the
administrator agreed
to reimburse expenses of $15,109 and $177,520 for the
periods ended
December 31, 1999 and November 30, 1998,
respectively. If these fees had
not been waived and expenses not reimbursed, the per
share effect on net
investment income and the expense ratio would have
been as follows:
<TABLE>
<CAPTION>
Per Share Decreases to
Expense Ratios Without
Net Investment Income
Waiver and Reimbursement
<S> <C>
<C>
1999(/1/) $0.00
0.53%+
- ---------------------------------------------------------
- -------------------------------
1999 0.01
0.43
- ---------------------------------------------------------
- -------------------------------
1998 0.02
1.18+
- ---------------------------------------------------------
- -------------------------------
</TABLE>
(/5/As)a result of voluntary expense limitations, the
ratio of expenses to
average net assets will not exceed 0.40%.
++Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
Smith
Barney Mutual Funds
29
<PAGE>
Smith Barney U.S. 5000 Index Fund
For a Class A share of capital stock outstanding
throughout the period:
<TABLE>
<CAPTION>
1999(/1/)
- ----------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
- ----------------------------------------------------
Income from operations:
Net investment income(/2/) 0.01
Net realized and unrealized gain 1.63
- ----------------------------------------------------
Total income from operations 1.64
- ----------------------------------------------------
Net asset value, end of period $11.64
- ----------------------------------------------------
Total return++ 16.40%
- ----------------------------------------------------
Net assets, end of period (000)'s $1,287
- ----------------------------------------------------
Ratios to average net assets:+
Expenses(/2/)(/3/)(/4/) 0.68%
Net investment income 0.62
- ----------------------------------------------------
Portfolio turnover rate 9%(/5/)
- ----------------------------------------------------
</TABLE>
(/1/) For the period from October 18, 1999 (commencement
of operations) to
December 31, 1999.
(/2/) The administrator has agreed to waive all of its
fees and reimburse
expenses of $23,824 for the period ended December
31, 1999. If such fees
had not been waived or expenses reimbursed, the
decrease to net invest-
ment income per share and actual expense ratio
would have been $(0.21)
and 22.19% (annualized), respectively.
(/3/) As a result of an expense limitation, expense
ratios will not exceed
0.68%.
(/4/) This expense ratio includes expenses charged to the
Master Portfolio.
(/5/This)rate represents the Portfolio turnover of the
Master Portfolio in
which the fund invests.
++ Total return is not annualized, as it may not be
representative of the
total return for the year.
+ Annualized.
Index Funds
30
<PAGE>
Smith Barney EAFE Index Fund
For a Class A share of capital stock outstanding
throughout the period:
<TABLE>
<CAPTION>
1999(/1/)
- ----------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
- ----------------------------------------------------
Income from operations:
Net investment loss(/2/) (0.00)*
Net realized and unrealized gain 1.52
- ----------------------------------------------------
Total income from operations 1.52
- ----------------------------------------------------
Net asset value, end of period $11.52
- ----------------------------------------------------
Total return++ 15.20%
- ----------------------------------------------------
Net assets, end of period (000)'s $ 814
- ----------------------------------------------------
Ratios to average net assets:+
Expenses(/2/)(/3/)(/4/) 0.85%
Net investment loss (0.19)
- ----------------------------------------------------
Portfolio turnover rate 39%(/5/)
- ----------------------------------------------------
</TABLE>
(/1/) For the period from October 18, 1999 (commencement
of operations) to
December 31, 1999.
(/2/) The administrator has agreed to waive all of its
fees and reimburse
expenses of $34,325 for the period ended December 31,
1999. If such fees were
not waived or expenses reimbursed, the increase to net
investment loss per
share and actual expenses ratio would have been $(0.49)
and 55.46%
(annualized), respectively.
(/3/) As a result of an expense limitation, the expense
ratio will not exceed
0.85%.
(/4/) This expense ratio includes expenses charged to
the Master Portfolio.
(/5/) This rate represents the Portfolio turnover of the
Master Portfolio in
which the fund invests.
*Amount represents less than $0.01 per share.
++Total return is not annualized, as it may not be
representative of the total
return for the year.
+ Annualized.
Smith Barney Mutual Funds
31
<PAGE>
(This page is intentionally left
blank.)
<PAGE>
SalomonSmithBarney
------
- ----------------------
A
member of citigroup [LOGO]
S&P 50 0 Index Fund
U.S. 5000
Index Fund
EAFE Index Fund
Each an investment portfolio of Smith Barney Investment
Trust
Shareholder reports Annual and semiannual reports to
shareholders provide
additional information about a fund's investments. These
reports discuss the
market conditions and investment strategies that affected
the fund's perfor-
mance.
Each fund sends only one report to a household if more
than one account has
the same address. Contact your Salomon Smith Barney
Financial Consultant,
dealer representative or the transfer agent if you do not
want this policy to
apply to you.
Statement of additional information The statement of
additional information
provides more detailed information about a fund and is
incorporated by refer-
ence into (is a legally part of) this prospectus.
You can make inquiries about a fund or obtain shareholder
reports or the
statement of additional information (without charge) by
contacting your Salo-
mon Smith Barney Financial Consultant or dealer
representative, by calling the
fund at 1-800-451-2010, or by writing to the fund at
Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York
10013.
Visit our web site. Our web site is located at
www.smithbarney.com
Information about the fund (including the SAI) can be
reviewed and copied at
the Securities and Exchange Commission's (the
"Commission") Public Reference
Room in Washington, D.C. In addition, information on the
operation of the Pub-
lic Reference Room may be obtained by calling the
Commission at 1-202-942-
8090. Reports and other information about the Fund are
available on the EDGAR
Database on the Commission's Internet site at
http://www.sec.gov. Copies of
this information may be obtained for a duplicating fee by
electronic request
at the following E-mail address: [email protected], or
by writing the Commis-
sion's Public Reference Section, Washington, D.C. 20549-
0102.
If someone makes a statement about a fund that is not in
this prospectus, you
should not rely upon that information. Neither the funds
nor the distributor
is offering to sell shares of a fund to any person to
whom the fund may not
lawfully sell its shares.
TMSalomon Smith Barney is a service mark of Salomon Smith
Barney Inc.
(Investment Company Act
file no. 811-06444)
FD 01711 4/00
PART B - STATEMENT OF ADDITIONAL INFORMATION
For each of the following, dated April 28, 2000:
A combined Statement of Additional Information for Smith
Barney U.S. 5000 Index Fund and Smith Barney EAFE Index
Fund
April 28, 2000
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 combined
prospectus 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")
which also includes the Smith Barney S&P 500 Index
Fund, dated April 28, 2000, 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 Inc. ("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................................................... 2
Portfolio Securities............................................... 8
Investment Restrictions of the
Fund................................................................ 27
Risk Considerations............................................ 33
Trustees of the Trust and Executive Officers of the
Fund....................................... 35
Investment Management and Other
Services...................................................... 38
Portfolio Transactions and
Turnover............................................................... 43
Purchase of Shares................................................. 45
Redemption of Shares................................................ 46
Exchange Privilege.................................................... 48
Valuation of Shares...............................................49
Performance Data................................................... 50
Dividends, Distributions and
Taxes............................................................... 53
Additional Information........................................ 58
Other Information................................................. 61
INVESTMENT OBJECTIVE 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, N.A. ("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. SSB Citi Fund Management LLC (successor to
SSBC Management Inc.) ("SSB Citi" 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.
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").
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 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 International Index 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 the
corresponding index perfectly, as
differences between the index and the
Master Portfolio's Underlying Portfolios
may cause differences in performance. The
U.S. Equity Index 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
determine 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.
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.
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--
vis the Wilshire 5000 Index are substantially similar
to those employed by the Underlying Portfolios in
pursuing their respective investment objectives vis--
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.
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 International Index 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 attempts to achieve, in both
rising and falling markets, a correlation of at least
95% between the total return of its net assets before
expenses and the total return of 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.
PORTFOLIO SECURITIES
The U.S. 5000 Index Fund and the EAFE Index 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, SSB Citi
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--vis the
Wilshire 5000 Index are substantially similar to those
employed by the Underlying Portfolios in pursuing
their respective investment objectives vis--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 future time for a
specified 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 unleveraged.
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"). 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. The International Index Master Portfolio
may also purchase and sell foreign currency futures
contracts (see "Purchase and Sale of Currency Futures
Contracts").
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, a "Master
Portfolio") may invest in the securities described
below.
Short-Term Instruments and Temporary
Investments.
The Master Portfolios 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 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.
Although the fund currently will invest all of its
assets in the Master Portfolio, the board of trustees
intends to maintain the following additional
investment restrictions. To the extent that the
fund's restrictions listed are inconsistent with the
Master Portfolios, the Master Portfolios restrictions
are controlling. 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), 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 fund's 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 U.S. Equity Index Master Portfolio has adopted the
following investment restrictions 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. 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 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.
The U.S. Equity Index Master Portfolio has adopted the
following investment restrictions as non-fundamental
policies. These restrictions may be changed without
shareholder approval by a vote of a majority of the
trustees of MIP, at any time. The Master Portfolio is
subject to the following investment restrictions, all
of which are non-fundamental policies.
1. 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 is 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 expense, such as investment
advisory and administration fees, that would be
in addition to those charged by the Master
Portfolio.
2. 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.
3. 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 International Index Master Portfolio has adopted
the following investment restrictions 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. 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 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.
The International Index Master Portfolio has adopted
the following investment restrictions as non-
fundamental policies. These restrictions may be
changed without shareholder approval by a vote of a
majority of the trustees of MIP, at any time. The
Master Portfolio is subject to the following
investment restrictions, all of which are non-
fundamental policies.
1. 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.
2. 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.
3. 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 U.S. Equity Index 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 International Index 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 Company 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 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.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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, unless
otherwise indicated.
Herbert Barg, Trustee (Age 77). Private Investor.
His address is 273 Montgomery Avenue, Bala Cynwyd,
Pennsylvania 19004. Director/Trustee of sixteen
investment companies associated with Citigroup, Inc.
("Citigroup")
*Alfred J. Bianchetti Trustee (Age 77). Retired;
formerly Senior Consultant to Dean Witter Reynolds
Inc. His address is 19 Circle End Drive, Ramsey, New
Jersey 07466. Director/Trustee of eleven investment
companies associated with Citigroup.
Martin Brody Trustee (Age 78). Consultant, HMK
Associates; Retired Vice Chairman of the Board of
Restaurant Associates Corp. His address is c/o HMK
Associates, 30 Columbia Turnpike, Florham Park, New
Jersey 07932. Director/Trustee of twenty-one
investment companies associated with Citigroup.
Dwight B. Crane Trustee (Age 62). Professor, Harvard
Business School. His address is c/o Harvard Business
School, Soldiers Field Road, Boston, Massachusetts
02163. Director/Trustee of twenty-four investment
companies associated with Citigroup.
Burt N. Dorsett Trustee (Age 69). Managing Partner of
Dorsett McCabe Management. Inc., an investment
counseling firm; Director of Research Corporation
Technologies, Inc., a nonprofit patent clearing and
licensing firm. His address is 201 East 62nd Street,
New York, New York 10021. Director/Trustee of eleven
investment companies associated with Citigroup.
Elliot S. Jaffe Trustee (Age 73). Chairman of the
Board and President of The Dress Barn, Inc. His
address is 30 Dunnigan Drive, Suffern, New York 10901.
Director/Trustee of eleven investment companies
associated with Citigroup.
Stephen E. Kaufman Trustee (Age 68). Attorney. His
address is 277 Park Avenue, New York, New York 10172.
Director/Trustee of thirteen investment companies
associated with Citigroup.
Joseph J. McCann Trustee (Age 69). Financial
Consultant; Retired Financial Executive, Ryan Homes,
Inc. His address is 200 Oak Park Place, Pittsburgh,
Pennsylvania 15243. Director/Trustee of eleven
investment companies associated with Citigroup.
*Heath B. McLendon Trustee (Age 66). Chairman of the
Board, President and Chief Executive Officer; Managing
Director of Salomon Smith Barney; President of SSB
Citi and Travelers Investment Adviser, Inc. ("TIA");
Chairman or Co-Chairman of the Board of seventy-one
investment companies associated with Salomon Smith
Barney. His address is 7 World Trade Center, New York,
New York 10048.
Cornelius C. Rose, Jr. Trustee (Age 66). President,
Cornelius C. Rose Associates, Inc., financial
consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. His
address is Meadowbrook Village, Building 4, Apt 6,
West Lebanon, New Hampshire 03784. Director/Trustee
of eleven investment companies associated with
Citigroup.
Lewis E. Daidone (Age 42). Senior Vice President and
Treasurer; Managing Director of Salomon Smith Barney;
Chief Financial Officer of the Smith Barney mutual
funds; Treasurer and Senior Vice President or
Executive Vice President of sixty-one investment
companies associated with Citigroup; Director and
Senior Vice President of SSB Citi and TIA.
Irving David (Age 39). Controller
Director of Salomon Smith Barney; formerly Assistant
Treasurer of First Investment Management Company.
Controller or Assistant Treasurer of fifty-three
investment companies associated with Citigroup.
Christina T. Sydor (Age 49). Secretary
Managing Director of Salomon Smith Barney; Secretary
of sixty-one investment companies associated with
Citigroup; General Counsel and Secretary of SSB Citi
and TIA.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
No officer, trustee 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 $12,000 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 $14,437.
For the fiscal year ended November 30, 1999, 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.**
$15,600
14,600
13,600
15,500
15,500
12,600
15,600
15,600
- -----
14,600
$ 0
0
0
0
0
0
0
0
0
0
$114,288
53,900
138,600
155,363
57,950
45,100
110,650
58,050
- ------
53,500
16
11
21
24
11
11
13
11
71
11
_________________
* 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. A trustee emeritus may attend meetings but
has no voting rights.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Master Portfolio Adviser
Each Master Portfolio has substantially the same
investment objectives as the corresponding fund.
Consequently, the funds do not have their own
investment adviser. BGFA serves as the Master
Portfolios' Investment Adviser and provides investment
guidance and policy direction for the Master
Portfolios.
BGFA makes no attempt to apply economic, financial or
market analysis when managing the Master Portfolios.
BGFA selects securities because they will help the
Master Portfolios achieve returns corresponding to the
returns of 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
Portfolios and the Underlying Portfolios. BGFA is a
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, CA 94105. As of December 31, 1999, BGFA
and its affiliates provided investment advisory
services for approximately $782 billion of assets
under management.
BGFA provides the Master Portfolios 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 Portfolios 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
U.S. Equity Index 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 U.S. Equity Index 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. As compensation
for its advisory services to the International Index
Master Portfolio, BGFA is entitled to receive fees at
an annual rate of 0.15% of the first $1 billion and
0.10% thereafter, of the International Index Master
Portfolio's average 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.
Purchase and sale orders for portfolio securities of
the Master Portfolios 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 a 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 - SSB Citi
SSB Citi serves as administrator to the fund pursuant
to a written agreement (the "Administration
Agreement"). SSB Citi is a wholly owned subsidiary of
Salomon Smith Barney Holdings Inc. ("Holdings"), which
in turn, is a wholly owned subsidiary of Citigroup
Inc. 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 SSB Citi: (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 SSB Citi's own offices),
statistical and research data, data processing
services, clerical, accounting and bookkeeping
services, including, but not limited to, the
calculation of (i) the net asset value of shares of
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
0.15% of the value of the fund's average daily net
assets.
The fund bears expenses incurred in its operation,
including: taxes, interest, brokerage fees and
commissions, if any; fees of trustees who are not
officers, Directors, shareholders or employees of 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, 757 Third Avenue, New
York, New York 100174, 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
December 31, 2000. The Master Investment Portfolio
has been audited by KPMG LLP, independent auditors, 3
Embarcadero Center, 21st Floor, San Francisco,
California 94111.
Custodian, Fund Accounting Services Agent and Sub-
administrator of the Master Portfolio
Investors Bank & Trust Company ("IBT"), 200 Clarendon
Street, Boston, MA 02116, serves as custodian of
the assets of the fund and the Master Portfolio. As a
result, IBT has custody of all securities and cash of
the fund and the Master Portfolio, delivers and
receives payment for securities sold, receives and
pays for securities purchased, collects income from
investments, and performs other duties, all as
directed by the officers of the fund and the Master
Portfolio. The custodian has no responsibility for any
of the investment policies or decisions of the fund
and the Master Portfolio. IBT also acts as the
fund's Accounting Services Agent.
Custodial fees of up to 0.10% are payable after the
first two years of the Master Portfolio's operations.
The Master Portfolio was launched on February 22, 1998
therefore, the initial two year period expires on
February 22, 2001. Thereafter IBT will be entitled to
receive custodial fees from the Master Portfolio
(after waivers). This will increase the total
operating expense of the Master Portfolio by 0.10%.
Transfer Agent and Sub-Transfer Agent
Citi Fiduciary Trust Company, (successor to Smith
Barney Private Trust Company) (the "transfer agent")
located at 388 Greenwich Street, New York, New York
10013 serves as the transfer agent and shareholder
services agent for the fund.
PFPC Global Fund Services ("PFPC" or "sub-transfer
agent") located at Exchange Place, Boston,
Massachusetts 02109, serves as the trust's sub-
transfer agent. Under the sub-transfer agency
agreement, the sub-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 sub-
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.
Code of Ethics. Pursuant to Rule 17j-1 of the 1940
Act, the funds, their investment advisers and
principal underwriter have adopted codes of ethics
that permit personnel to invest in securities for
their own accounts, including securities that may be
purchased or held by the funds. All personnel must
place the interests of clients first and avoid
activities, interests and relationships that might
interfere with the duty to make decisions in the best
interests of the clients. All personal securities
transactions by employees must adhere to the
requirements of the codes and must be conducted in
such a manner as to avoid any actual or potential
conflict of interest, the appearance of such a
conflict, or the abuse of an employee's position of
trust and responsibility.
A copy of the fund's Code of Ethics is on file with
the Securities and Exchange Commission.
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 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 0.20 % 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.
Co-Administrators and Placement Agent of the Master
Portfolios
Stephens, Inc. ("Stephens"), and Barclays Global
Investors, N.A. ("BGI") serve as co-administrators on
behalf of the Master Portfolios. Under the Co-
Administration Agreement between Stephens, BGI and the
Master Portfolios, Stephens and BGI provide the Master
Portfolios with administrative services, including:
(i) general supervision of the Master Portfolios' non-
investment operations, coordination of the other
services provided to the Master Portfolios; (ii)
compilation of information for reports to, and filings
with, the SEC and state securities commissions; and
preparation of proxy statements and shareholder
reports for the Master Portfolios; and (iii) general
supervision relative to the compilation of data
required for the preparation of periodic reports
distributed to the MIP's officers and board. Stephens
also furnishes office space and certain facilities
required for conducting the business of the Master
Portfolios and compensates the MIP's trustees,
officers and employees who are affiliated with
Stephens. In addition, Stephens and BGI will be
responsible for paying all expenses incurred by the
U.S. Equity Index Master Portfolio other than the fees
payable to BGFA and other than custodial fees of up to
0.01% payable after the first two years of the Master
Portfolio's operations. Stephens and BGI are entitled
to receive a monthly fee, in the aggregate, at an
annual rate of 0.02% of the average daily net assets
of the U.S. Equity Index Master Portfolio for
providing administrative services and assuming
expenses.
As compensation for administration services to
International Index Master Portfolio, Stephens and BGI
are entitled to receive a monthly fee, in the
aggregate, at an annual rate of 0.10% of the first $1
billion and 0.07% thereafter of the Master Portfolio
average daily net assets.
Stephens also acts as the placement agent of Master
Portfolio's shares pursuant to a Placement Agency
Agreement with the Master Portfolio.
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 Portfolios. 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 Portfolios may
transact business offer commission rebates to the
Master Portfolios. 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.
The Master Portfolios have no obligation to deal with
any dealer or group of dealers in the execution of
transactions in portfolio securities. Subject to
policies established by the Master Portfolios' board
of trustees, BGFA as advisor is responsible for the
Master Portfolios' investment portfolio decisions and
the placing of portfolio transactions. In placing
orders, it is the policy of the Master Portfolios to
obtain the best results taking into account the
broker/dealer's general execution and operational
facilities, the type of transaction involved and
other factors such as the broker/dealer's risk in
positioning the securities involved. While BGFA
generally seeks reasonably competitive spreads or
commissions, the Master Portfolios will not
necessarily be paying the lowest spread or commission
available.
Purchase and sale orders of the securities held by the
Master Portfolios may be combined with those of other
accounts that BGFA manages, and for which it has
brokerage placement authority, in the interest of
seeking the most favorable overall net results. When
BGFA determines that a particular security should be
bought or sold for the Master Portfolios and other
accounts managed by BGFA, BGFA undertakes to allocate
those transactions among the participants equitably.
Under the 1940 Act, persons affiliated with the Master
Portfolios such as Stephens, BGFA and their affiliates
are prohibited from dealing with the Master Portfolios
as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions
is obtained from the SEC or an exemption is otherwise
available.
Except in the case of equity securities purchased by
the Master Portfolios, purchases and sales of
securities usually will be principal transactions.
Portfolio securities normally will be purchased or
sold from or to dealers serving as market makers for
the securities at a net price. The Master Portfolios
also will purchase portfolio securities in
underwritten offerings and may purchase securities
directly from the issuer. Generally, money market
securities, adjustable rate mortgage securities
("ARMS"), municipal obligations, and collateralized
mortgage obligations ("CMOs") are traded on a net
basis and do not involve brokerage commissions.
The cost of executing the Master Portfolios'
investment portfolio securities transactions will
consist primarily of dealer spreads and underwriting
commissions.
Purchases and sales of equity securities on a
securities exchange are effected through brokers who
charge a negotiated commission for their services.
Orders may be directed to any broker including,
to the extent and in the manner permitted by
applicable law, Stephens or BGI. In the over-the-
counter market, securities are generally traded
on a "net" basis with dealers acting as principal
for their own accounts without a stated commission,
although the price of the security usually includes
a profit to the dealer. In underwritten offerings,
securities are purchased at a fixed price that
includes an amount of compensation to the
underwriter, generally referred to as the
underwriter's concession or discount.
In placing orders for portfolio securities of the
Master Portfolio, BGFA is required to give primary
consideration to obtaining the most favorable price
and efficient execution. This means that BGFA seeks to
execute each transaction at a price and commission,
if any, that provide the most favorable total cost or
proceeds reasonably attainable in the circumstances.
While BGFA generally seeks reasonably competitive
spreads or commissions, the Master Portfolios will not
necessarily be paying the lowest spread or commission
available. In executing portfolio transactions and
selecting brokers or dealers, BGFA seeks to obtain
the best overall terms available for the Master
Portfolios. 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. Rates are established
pursuant to negotiations with the broker based on
the quality and quantity of execution services
provided by the broker in the light of generally
prevailing rates. The allocation of orders among
brokers and the commission rates paid are reviewed
periodically by the Master Portfolios' board of
trustees.
Certain of the brokers or dealers with whom the Master
Portfolios may transact business offer commission
rebates to the Master Portfolios. 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 commission paid by other
institutional
PURCHASE OF SHARES
Detailed information about the purchase, redemption
and exchange of fund shares appears in the prospectus.
General
The shares of each fund are offered at net asset
value, which is calculated as of the close of The New
York Stock Exchange, Inc. ("NYSE") on each day that
the NYSE is open for business. The value of the
shares of each fund will fluctuate in relation to the
investment experience of the Master Portfolios 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 sub-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 the sub-transfer agent.
Share certificates are issued only upon a
shareholder's written request to the sub-transfer
agent.
Purchase orders received by the fund or a Salomon
Smith Barney Financial Consultant prior to the close
of regular trading on the 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 the sub-transfer agent
is authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the 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
the sub-transfer agent. The Systematic Investment
Plan also authorizes Salomon Smith Barney to apply
cash held in the shareholder's Salomon Smith Barney
brokerage account or redeem the shareholder's shares
of a Smith Barney money market fund to make additions
to the account. Additional information is available
from the fund or a Salomon Smith Barney Financial
Consultant 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
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 the sub-transfer agent
together with the redemption request. Any signature
appearing on a share certificate, stock power or
written redemption request in excess of $10,000 must
be guaranteed by an eligible guarantor institution
such as a domestic bank, savings and loan institution,
domestic credit union, member bank of the Federal
Reserve System or member firm of a national securities
exchange. Written redemption requests of $10,000 or
less do not require a signature guarantee unless more
than one such redemption request is made in any 10-day
period or the redemption proceeds are to be sent to an
address other than the address of record. Unless
otherwise directed, redemption proceeds will be mailed
to an investor's address of record. The transfer
agent may require additional supporting documents for
redemptions made by corporations, executors,
administrators, trustees or guardians. A redemption
request will not be deemed properly received until the
transfer agent receives all required documents in
proper form.
If a shareholder holds shares in more than one Class,
any request for redemption must specify the Class
being redeemed. In the event of a failure to specify
which Class, or if the investor owns fewer shares of
the Class than specified, the redemption request will
be delayed until the transfer agent receives further
instructions from Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith
Barney, from the shareholder directly. The redemption
proceeds will be remitted on or before the third
business day following receipt of proper tender,
except on any days on which the NYSE is closed or as
permitted under the 1940 Act, in extraordinary
circumstances. Generally, if the redemption proceeds
are remitted to a Salomon Smith Barney brokerage
account, these funds will not be invested for the
shareholder's benefit without specific instruction and
Salomon Smith Barney will benefit from the use of
temporarily uninvested funds. Redemption proceeds for
shares purchased by check, other than a certified or
official bank check, will be remitted upon clearance
of the check, which may take up to fifteen days or
more.
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 sub-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 sub-transfer agent may
continue to do so and applications for participation
in the Withdrawal Plan must be received by the sub-
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.
EXCHANGE PRIVILEGE
Shares of each Class of the U.S. 5000 Index Fund may
only be exchanged for shares of the same Class of
1. Smith Barney S&P 500 Index Fund and
2. Smith Barney EAFE Index Fund
Shares of each Class of the EAFE Index Fund may only
be exchanged for shares of the same Class of
1. Smith Barney S&P 500 Index Fund and
2. Smith Barney U.S. 5000 Index Fund
Exchanges can be made to the extent shares are offered
for sale in the shareholder's state of residence.
Exchanges of Class A and Class D shares are subject to
minimum investment requirements and all shares are
subject to the other requirements of the fund into
which exchanges are made.
Class A and Class D shareholders of the fund who wish
to exchange all or a portion of their shares for
shares of the respective Class in any of the funds
identified above may do so without imposition of any
charge.
Additional Information Regarding the Exchange
Privilege
Although the exchange privilege is an important
benefit, excessive exchange transactions can be
detrimental to the fund's performance and its
shareholders. The manager may determine that a pattern
of frequent exchanges is excessive and contrary to the
best interests of the fund's other shareholders. In
this event, the fund may, at its discretion, decide to
limit additional purchases and/or exchanges by the
shareholder. Upon such a determination, the fund will
provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the
shareholder will be required to (a) redeem his or her
shares in the fund or (b) remain invested in the fund
or exchange into any of the funds of the Smith Barney
mutual funds ordinarily available, which position the
shareholder would be expected to maintain for a
significant period of time. All relevant factors will
be considered in determining what constitutes an
abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by
telephone. See ''Redemption of Shares-Additional
Information Regarding Telephone Redemptions and
Exchange Program.'' Exchanges will be processed at the
net asset value next determined. Redemption
procedures discussed below are also applicable for
exchanging shares, and exchanges will be made upon
receipt of all supporting documents in proper form.
If the account registration of the shares of the fund
being acquired is identical to the registration of the
shares of the fund exchanged, no signature guarantee
is required. An exchange involves a taxable
redemption of shares, subject to the tax treatment
described in "Dividend, Distributions and Taxes"
below, followed by a purchase of shares of a different
fund. Before exchanging shares, investors should read
the current prospectus describing the shares to be
acquired. The fund reserves the right to modify or
discontinue exchange privileges upon 60 days' prior
notice to shareholders.
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 will 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 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. The value of each
fund's shares will fluctuate in relation to the
investment experience of the Master Portfolios 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 Portfolios, including
covered call options written by the Master Portfolios,
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
From time to time a fund may advertise its total
return and average annual total return in
advertisements and/or other types of sales literature.
These figures are computed separately for Class A and
Class D shares of the fund. These figures are based
on historical earnings and are not intended to
indicate future performance. Total return is computed
for a specified period of time assuming reinvestment
of all income dividends and capital gain distributions
on the reinvestment dates at prices calculated as
stated in the prospectus, then dividing the value of
the investment at the end of the period so calculated
by the initial amount invested and subtracting 100%.
The standard average annual total return, as
prescribed by the SEC is derived from this total
return, which provides the ending redeemable value.
Such standard total return information may also be
accompanied with nonstandard total return information
for differing periods computed in the same manner but
without annualizing the total return. A fund may also
include comparative performance information in
advertising or marketing its shares. Such performance
information may include data from Lipper Analytical
Services, Inc. and other financial publications.
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.
U.S. 5000 Index Fund
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-Year
Life of
Fund 1
Class A
N/A
N/A
N/A
22.70%
Class D
N/A
N/A
N/A
N/A2
EAFE Index Fund
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-Year
Life of
Fund 1
Class A
N/A
N/A
N/A
14.10%
Class D
N/A
N/A
N/A
N/A2
____________________
1 Class A and D commenced operations on October 18,
1999. The results reflected are for the period
from October 18, 1999 to March 31, 2000.
2 There is no information for Class D shares because
no Class D shares were outstanding.
Aggregate Total Return
A 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.
U.S. 5000 Index Fund
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-
Year
Life of
Fund 1
Class A
N/A
N/A
N/A
22.70%
Class D
N/A
N/A
N/A
N/A2
EAFE Index Fund
Aggregate Annual Total Return
Class of Shares
1-Year
5-Year
10-
Year
Life of
Fund 1
Class A
N/A
N/A
N/A
14.10%
Class D
N/A
N/A
N/A
N/A2
____________________
1 Class A and D commenced operations on October 18,
1999. The results reflected are for the period
from October 18, 1999 to March 31, 2000.
2 There is no information for Class D shares because
no Class D shares were outstanding.
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
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 on its income
and gains (if any). However, each investor in a
Master Portfolio will be taxed on its share (as
determined in accordance with the governing
instruments of MIP) of such Master Portfolio's taxable
income and capital gain in determining its federal
income tax liability. The determination of such share
will be made in accordance with the 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 Portfolios assets, income and distributions
will be managed in such a way that an investor in a
Master Portfolio may satisfy the requirements of
Subchapter M of the Code by investing substantially
all of its assets in the Master Portfolio. Investors
are advised to consult their own tax advisors as to
the tax consequences of an investment in the Master
Portfolio.
Taxes
The following is a summary of the material United
States federal income tax considerations regarding the
purchase, ownership and disposition of shares of a
fund. Each prospective shareholder is urged to
consult his own tax adviser with respect to the
specific federal, state, local and foreign tax
consequences of investing in a fund. The summary is
based on the laws in effect on the date of this SAI,
which are subject to change. Each fund will be
treated as a separate entity for federal tax purposes.
Unless otherwise noted, the following discussion is
applicable to each fund.
The Fund and Its Investments
The fund intends to continue to qualify to be treated
as a regulated investment company each taxable year
under the Code. To so qualify, the fund must, among
other things: (a) derive at least 90% of its gross
income in each taxable year from dividends, interest,
payments with respect to securities loans and gains
from the sale or other disposition of stock or
securities or foreign currencies, or other income
(including, but not limited to, gains from options,
futures or forward contracts) derived with respect to
its business of investing in such stock, securities or
currencies; and (b) diversify its holdings so that, at
the end of each quarter of the fund's taxable year,
(i) at least 50% of the market value of the fund's
assets is represented by cash, securities of other
regulated investment companies, United States
government securities and other securities, with such
other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the fund's
assets and not greater than 10% of the outstanding
voting securities of such issuer and (ii) not more
than 25% of the value of its assets is invested in the
securities (other than United States government
securities or securities of other regulated investment
companies) of any one issuer or any two or more
issuers that the fund controls and are determined to
be engaged in the same or similar trades or businesses
or related trades or businesses. For purposes of
federal income tax law, including the application of
the foregoing qualification requirements, a fund will
be treated as if it derived directly its proportionate
share of each item of income, deduction, gain or loss
(and as if it held directly its proportionate share of
the assets and liabilities) of each Master Portfolio
in which it invests, either directly or indirectly.
As a regulated investment company, the fund will not
be subject to United States federal income tax on its
investment company taxable income (i.e., income other
than any excess of its net realized long-term capital
gains over its net realized short-term capital losses
("net relized capital gains") or on its net realized
capital gains, if any, that it distributes to its
shareholders, provided an amount equal to at least 90%
of its investment company taxable income, plus or
minus certain other adjustments as specified in the
Code, and 90% of its net tax-exempt income for the
taxable year is distributed in compliance with the
Code's timing and other requirements but will be
subject to tax at regular corporate rates on any
taxable income or gains it does not distribute. The
Code imposes a 4% nondeductible excise tax on the fund
to the extent it does not distribute by the end of any
calendar year at least 98% of its net investment
income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-
year period ending, as a general rule, on October 31
of that year. For this purpose, however, any income
or gain retained by the fund that is subject to
corporate income tax will be considered to have been
distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid
the excise tax will be increased or decreased to
reflect any underdistribution or overdistribution, as
the case may be, from the previous year. The fund
anticipates that it will pay such dividends and will
make such distributions as are necessary in order to
avoid the application of this tax.
If, in any taxable year, the fund fails to qualify as
a regulated investment company under the Code or fails
to meet the distribution requirement, it would be
taxed in the same manner as an ordinary corporation
and distributions to its shareholders would not be
deductible by the fund in computing its taxable
income. In addition, in the event of a failure to
qualify, the fund's distributions, to the extent
derived from the fund's current or accumulated
earnings and profits would constitute dividends
(eligible for the corporate dividends-received
deduction) which are taxable to shareholders as
ordinary income, even though those distributions might
otherwise (at least in part) have been treated in the
shareholders' hands as long-term capital gains. If
the fund fails to qualify as a regulated investment
company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify
again as a regulated investment company. In addition,
if the fund failed to qualify as a regulated
investment company for a period greater than one
taxable year, the fund may be required to recognize
any net built-in gains (the excess of the aggregate
gains, including items of income, over aggregate
losses that would have been realized if it had been
liquidated) with respect to certain of its assets in
order to qualify as a regulated investment company in
a subsequent year.
The fund's transactions in foreign currencies, forward
contracts, options and futures contracts (including
options and futures contracts on foreign currencies)
will be subject to special provisions of the Code
(including provisions relating to "hedging
transactions" and "straddles") that, among other
things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate
recognition of income to the fund and defer fund
losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (a) will require
the fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if
they were closed out) and (b) may cause the fund to
recognize income without receiving cash with which to
pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for
avoiding income and excise taxes. The fund will
monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries in
its books and records when it acquires any foreign
currency, forward contract, option, futures contract
or hedged investment in order to mitigate the effect
of these rules and prevent disqualification of the
fund as a regulated investment company.
The fund's investment in Section 1256 contracts, such
as regulated futures contracts, most forward currency
contracts traded in the interbank market and options
on most stock indices, are subject to special tax
rules. All section 1256 contracts held by the fund at
the end of its taxable year are required to be marked
to their market value, and any unrealized gain or loss
on those positions will be included in the fund's
income as if each position had been sold for its fair
market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain
or loss realized by the fund from positions in section
1256 contracts closed during the taxable year.
Provided such positions were held as capital assets
and were not part of a "hedging transaction" nor part
of a "straddle," 60% of the resulting net gain or loss
will be treated as long-term capital gain or loss, and
40% of such net gain or loss will be treated as short-
term capital gain or loss, regardless of the period of
time the positions were actually held by the fund.
Index Swaps. As a result of entering into index swaps,
the fund may make or receive periodic net payments. It
may also make or receive a payment when a swap is
terminated prior to maturity through an assignment of
the swap or other closing transaction. Periodic net
payments will constitute ordinary income or
deductions, while termination of a swap will result in
capital gain or loss (which will be a long-term
capital gain or loss if the fund has been a party to
the swap for more than one year).
Foreign Investments. Dividends or other income
(including, in some cases, capital gains) received by
the fund from investments in foreign securities may be
subject to withholding and other taxes imposed by
foreign countries. Tax conventions between certain
countries and the United States may reduce or
eliminate such taxes in some cases. The fund will not
be eligible to elect to treat any foreign taxes paid
by it as paid by its shareholders, who therefore will
not be entitled to credits for such taxes on their own
tax returns. Foreign taxes paid by the fund will
reduce the return from the fund's investments.
Passive Foreign Investment Companies. If the fund
purchases shares in certain foreign investment
entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United
States federal income tax on a portion of any "excess
distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable
dividend by the fund to its shareholders. Additional
charges in the nature of interest may be imposed on
the fund in respect of deferred taxes arising from
such distributions or gains. If the fund were to
invest in a PFIC and elected to treat the PFIC as a
"qualified electing fund" under the Code, in lieu of
the foregoing requirements, the fund might be required
to include in income each year a portion of the
ordinary earnings and net capital gains of the
qualified electing fund, even if not distributed to
the fund, and such amounts would be subject to the 90%
and excise tax distribution requirements described
above. In order to make this election, the fund would
be required to obtain certain annual information from
the PFICs in which it invests, which may be difficult
or not possible to obtain.
Alternatively, the fund may elect to mark-to-market to
its stock in a PFIC. 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 Internal Revenue Service (the
"IRS"). By making the election, the fund could
potentially ameliorate the adverse tax consequences
with respect to its ownership of shares in a PFIC, but
in any particular year may be required to recognize
income in excess of the distributions it receives from
PFICs and its proceeds from dispositions of PFIC
stock. The fund may have to distribute this "phantom"
income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise
tax. The fund will make the appropriate tax
elections, if possible, and take any additional steps
that are necessary to mitigate the effect of these
rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by
the fund in October, November or December of any
calendar year and payable to shareholders of record on
a specified date in such a month shall be deemed to
have been received by each shareholder on December 31
of such calendar year and to have been paid by the
fund not later than such December 31, provided such
dividend is actually paid by the fund during January
of the following calendar year. The fund intends to
distribute annually to its shareholders substantially
all of its investment company taxable income, and any
net realized capital gains. However, if the fund
retains for investment an amount equal to all or a
portion of its net realized capital gains, it will be
subject to a corporate tax (currently at a rate of
35%) on the amount retained. In that event, the fund
will designate such retained amounts as undistributed
capital gains in a notice to its shareholders who (a)
will be required to include in income for United
Stares federal income tax purposes, as long-term
capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit
their proportionate shares of the 35% tax paid by the
fund on the undistributed amount against their United
States federal income tax liabilities, if any, and to
claim refunds to the extent their credits exceed their
liabilities, if any, and (c) will be entitled to
increase their tax basis, for United States federal
income tax purposes, in their shares by an amount
equal to 65% of the amount of undistributed capital
gains included in the shareholder's income.
Organizations or persons not subject to federal income
tax on such capital gains will be entitled to a refund
of their pro rata share of such taxes paid by the fund
upon filing appropriate returns or claims for refund
with the IRS.
Dividends of net investment income and distributions
of net realized short-term capital gains are taxable
to a United States shareholder as ordinary income,
whether paid in cash or in shares. Distributions of
net-long-term capital gains, if any, that the fund
designates as capital gains dividends are taxable as
long-term capital gains, whether paid in cash or in
shares and regardless of how long a shareholder has
held shares of the fund. Dividends and distributions
paid by the fund attributable to dividends on stock of
U.S. corporations received by the fund, with respect
to which the fund meets certain holding period
requirements, will be eligible for the deduction for
dividends received by corporations. Distributions in
excess of the fund's current and accumulated earnings
and profits will, as to each shareholder, be treated
as a tax-free return of capital to the extent of a
shareholder's basis in his shares of the fund, and as
a capital gain thereafter (if the shareholder holds
his shares of the fund as capital assets).
Shareholders receiving dividends or distributions in
the form of additional shares should be treated for
United States federal income tax purposes as receiving
a distribution in the amount equal to the amount of
money that the shareholders receiving cash dividends
or distributions will receive, and should have a cost
basis in the shares received equal to such amount.
Investors considering buying shares just prior to a
dividend or capital gain distribution should be aware
that, although the price of shares just purchased at
that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may
nevertheless be taxable to them. If the fund is the
holder of record of any stock on the record date for
any dividends payable with respect to such stock, such
dividends are included in the fund's gross income not
as of the date received but as of the later of (a) the
date such stock became ex-dividend with respect to
such dividends (i.e., the date on which a buyer of the
stock would not be entitled to receive the declared,
but unpaid, dividends) or (b) the date the fund
acquired such stock. Accordingly, in order to satisfy
its income distribution requirements, the fund may be
required to pay dividends based on anticipated
earnings, and shareholders may receive dividends in an
earlier year than would otherwise be the case.
Sales of Shares. Upon the sale or exchange of his
shares, a shareholder will realize a taxable gain or
loss equal to the difference between the amount
realized and his basis in 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 Fund
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" under the name Shearson Lehman
Brothers Intermediate-Term Trust. On October 14, 1994
and August 16, 1995, the trust's name was changed to
Smith Barney Income Trust and Smith Barney Investment
Trust, respectively. In addition to each fund, the
trust offers shares of beneficial interest of five
other separate funds with a par value of $.001 per
share. Each 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 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.
Master Portfolio Organization
The Master Portfolios are a series of MIP, an open-
end, series management investment company organized
as Delaware business trust. MIP was organized on
October 21, 1993. In accordance with Delaware law and
in connection with the tax treatment sought by MIP,
the Declaration of Trust provides that its investors
are personally responsible for trust liabilities and
obligations, but only to the extent the trust
property is insufficient to satisfy such
liabilities and obligations. The Declaration of Trust
also provides that MIP must maintain appropriate
insurance (for example, fidelity bonding and errors
and omissions insurance) for the protection of the
trust, its investors, trustees, officers, employees
and agents covering possible tort and other
liabilities, and that investors will be indemnified
to the extent they are held liable for a
disproportionate share of MIP's obligations. Thus,
the risk of an investor incurring financial loss on
account of investor liability is limited to
circumstances in which both inadequate insurance
existed and MIP itself was unable to meet its
obligations.
The Declaration of Trust further provides that
obligations of MIP are not binding upon its
trustees individually but only upon the property of
MIP and that the trustees will not be liable for any
action or failure to act, but nothing in the
Declarations of Trust protects a trustee against any
liability to which the trustee would otherwise be
subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties
involved in the conduct of the trustee's office.
The interests in the Master Portfolios have
substantially identical voting and other rights as
those rights enumerated above for shares of the
fund. MIP is generally not required to hold annual
meetings, but is required by Section 16(c) of the 1940
Act to hold a special meeting and assist investor
communications under certain circumstances. Whenever
the fund is requested to vote on a matter with
respect to the corresponding Master Portfolio, the
fund will hold a meeting of fund shareholders and
will cast its votes as instructed by such
shareholders.
In a situation where the fund does not receive
instruction from certain of its shareholders on how
to vote the corresponding shares of the Master
Portfolio, such fund will vote such shares in the same
proportion as the shares for which the fund does
receive voting instructions.
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
Styles of Fund Management In an industry where the
average portfolio manager has seven years of
experience (source: ICI, 1998), the portfolio managers
of Smith Barney mutual funds average 21 years in the
industry and 15 years with the firm.
Smith Barney mutual funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management
that can be tailored to suit each investor's unique
financial goals.
Style Pure Series
Our Style Pure Series funds stay fully invested
within their asset class and investment style,
enabling investors to make asset allocation
decisions in conjunction with their Salomon
Smith Barney Financial Consultant.
Classic Investor Series
Our Classic Investor Series funds offer a range
of equity and fixed income strategies that seek
to capture opportunities across asset classes
and investment styles using disciplined
investment approaches.
The Concert Allocation Series
As a fund of funds, investors can select a
Concert Portfolio that may help their investment
needs. As needs change, investors can easily
choose another long-term, diversified investment
from our Concert family.
Special Discipline Series
Our Special Discipline Series funds are designed
for investors who are looking beyond more
traditional market categories: from natural
resources to a roster of state-specific
municipal funds.
U.S. 5000 Index Fund
Wilshire Associates, Incorporated ("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.
The fund is not sponsored, endorsed, sold or promoted
by Wilshire Associates. Wilshire Associates makes no
representation or warranty, express or implied, to the
owners of this fund or any member of the public
regarding the advisability of investing in funds
generally or in this fund particularly or the ability
of the Wilshire 5000 Index to track general stock
market performance. Wilshire's only relationship to
the fund is the licensing of certain trademarks and
and trade names of Wilshire. The Wilshire 5000 Index
which is composed and calculated without regard to the
issuer of this fund or this fund. Wilshire has no
obligation to take the needs of the issuer of this
fund or the owners of this fund into consideration in
determining, composing or calculating the Wilshire
5000 Index. Wilshire does not guarantee the accuracy
or the completeness of the Wilshire 5000 Index or any
data included therein and Wilshire shall have no
liability for any errors, omissions, or interruptions
therein. Wilshire makes no warranty, express or
implied, as to results to be obtained by the fund,
owners of the product, or any other person or entity
from the use of the Wilshire 5000 Index or any data
included therein. Wilshire 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 Wilshire
5000 Index or any data included therein. Without
limiting any of the foregoing, in no event shall
Wilshire have any liability for any special, punitive,
indirect, or consequential damages (including lost
profits), even if notified of the possibility of such
damages.
U.S. 5000 Index Fund
"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.
EAFE Index Fund
The fund is not sponsored, endorsed, sold or promoted
by MSCI or any affiliate of MSCI. Neither MSCI nor
any other party makes any representation or warranty,
express or implied, to the owners of this fund or any
member of the public regarding the advisability of
investing in funds generally or in this fund
particularly or the ability of the EAFE Index to track
general stock market performance. MSCI is the
licensor of certain trademarks, service marks, and
trade names of MSCI and the EAFE Index which is
determined, composed and calculated by MSCI without
regard to the issuer of this fund or this fund. MSCI
has no obligation to take the needs of the issuer of
this fund of the owners of this fund into
consideration in determining, composing or calculating
the EAFE Index. MSCI is not responsible for and has
not participated in the determination or calculation
of the equation by which the fund is redeemable for
cash. Neither MSCI nor any other party has any
obligation or liability to owners of this fund in
connection with the administration, marketing or
trading of this fund.
ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION
IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM
SOURCES WHICH MSCI CONSIDERS RELIABLE, NEITHER MSCI
NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED
THEREIN. NEITHER MSCI NOT ANY OTHER PARTY MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY LICENSEE, LICENSEE'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE FUNDS, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY
DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS
LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MSCI
NOT ANY OTHER PARTY MAKES ANY EXPRESS OF IMPLIED
WARRANTIES, AND MSCI HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY
DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MSCI OR ANY OTHER PARTY
HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER 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
April 28, 2000
SMITH BARNEY INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013
SALOMON SMITH
BARNEY
A Member of
Citigroup [Symbol]
1
Statement of Additional Information for Smith Barney S&P
500 Index Fund
April 28, 2000
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY INVESTMENT TRUST
Smith Barney S&P 500 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 prospectus of the
Smith Barney S&P 500 Index Fund (the "fund") dated April
28, 2000, as amended or supplemented from time to time
(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 Inc.
("Salomon Smith Barney") at the address or telephone
number above. The fund is a separate investment series
of Smith Barney Investment Trust (the "trust").
TABLE OF CONTENTS
Investment Objective and Management Policies 2
Investment Restrictions...... ..............................8
of the Trust and Executive Officers of the
Fund............................................... 9
Investment Management and Other Services 12
Portfolio Transactions... ..........................................16
Portfolio Turnover.................. ............................18
Purchase of Shares .............................................18
Redemption of Shares 19
Valuation of Shares 21
Performance Data 22
Dividends, Distributions and Taxes 25
Additional Information 30
Financial Statements ...................................................32
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES tc
"INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES"
The prospectus discusses the fund's investment objective
and policies. This section contains supplemental
information concerning the types of securities and other
instruments in which the fund may invest, the investment
policies and portfolio strategies the fund may utilize
and certain risks associated with these investments,
policies and strategies. Travelers Investment Management
Company ("TIMCO" or the "manager") serves as investment
manager to the fund. SSB Citi Fund Management LLC
(successor to SSBC Fund Management Inc.) ("SSB Citi" or
the "administrator"), serves as the fund's administrator.
The fund seeks to achieve its objective by investing,
under normal circumstances, at least 80% of its total
assets in common stocks included in the S&P 500 Index in
approximately the same weightings as the S&P 500 Index.
The fund intends to invest in substantially all of the
stocks that comprise the S&P 500 Index. The fund
operates as a "pure" index fund and will not be actively
managed; as such, adverse performance of a security will
ordinarily not result in the elimination of the security
from the fund's portfolio. The fund will be reviewed
daily and adjusted, when necessary, to maintain security
weightings as close to those of the S&P 500 Index as
possible, given the amount of assets in the fund at that
time.
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 that at all
times the collateral is at least 102% of the repurchase
price plus accrued interest. Default by or bankruptcy of
a seller would expose the 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 that
the value of this collateral, after transaction costs
(including loss of interest) reasonably expected to be
incurred on a default, be equal to 102% or greater than
the repurchase price (including accrued premium) provided
in the repurchase agreement or the daily amortization of
the difference between the purchase price and the
repurchase price specified in the repurchase agreement.
The manager will mark-to-market daily the value of the
securities. Repurchase agreements are considered to be
loans by the fund under the Investment Company Act of
1940, as amended ("1940 Act").
Lending of Portfolio Securities. Consistent with
applicable regulatory requirements, the fund may lend
portfolio securities to brokers, dealers and other
financial organizations that meet capital and other
credit requirements or other criteria established by the
Board. The fund will not lend portfolio securities to
affiliates of the manager unless they have applied for
and received specific authority to do so from the
Securities and Exchange Commission ("SEC"). Loans of
portfolio securities will be collateralized by cash,
letters of credit or U.S. Government Securities, which
are maintained at all times in an amount equal to at
least 102% of the current market value of the loaned
securities. Any gain or loss in the market price of the
securities loaned that might occur during the term of the
loan would be for the account of the fund. From time to
time, the fund may return a part of the interest earned
from the investment of collateral received for securities
loaned to the borrower and/or a third party that is
unaffiliated with the fund and that is acting as a
"finder."
By lending its securities, the fund can increase its
income by continuing to receive interest and any
dividends on the loaned securities as well as by either
investing the collateral received for securities loaned
in short-term instruments or obtaining yield in the form
of interest paid by the borrower when U.S. Government
Securities are used as collateral. Although the
generation of income is not the primary investment goal
of the fund, income received could be used to pay the
fund's expenses and would increase an investor's total
return. The fund will adhere to the following conditions
whenever its portfolio securities are loaned: (i) the
fund must receive at least 102% cash collateral or
equivalent securities of the type discussed in the
preceding paragraph from the borrower; (ii) the borrower
must increase such collateral whenever the market value
of the securities rises above the level of such
collateral; (iii) the fund must be able to terminate the
loan at any time; (iv) the fund must receive reasonable
interest on the loan, as well as any dividends, interest
or other distributions on the loaned securities and any
increase in market value; (v) the fund may pay only
reasonable custodian fees in connection with the loan;
and (vi) voting rights on the loaned securities may pass
to the borrower, provided, however, that if a material
event adversely affecting the investment occurs, the
Board must terminate the loan and regain the right to
vote the securities. Loan agreements involve certain
risks in the event of default or insolvency of the other
party including possible delays or restrictions upon a
Fund's ability to recover the loaned securities or
dispose of the collateral for the loan.
Foreign Securities. The fund may purchase common stocks
of foreign corporations represented in the S&P 500 Index
(such securities are publicly traded on securities
exchanges or over-the-counter in the United States). The
fund's investment in common stock of foreign corporations
represented in the S&P 500 Index may also be in the form
of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a United States bank or trust company
evidencing ownership of the underlying securities and are
designated for use in the U.S. Securities markets.
Investing in the securities of foreign companies involves
special risks and considerations not typically associated
with investing in U.S. companies. These include
differences in accounting, auditing and financial
reporting standards, the possibility of expropriation or
confiscatory taxation, adverse changes in investment or
exchange control regulations, political instability which
could affect U.S. investments in foreign countries, and
potential restrictions on the flow of international
capital. Investments in foreign securities may be
affected by changes in governmental administration or
economic policy (in the United Stated and abroad) or
changed circumstances in dealings between nations.
Foreign companies may be subject to less governmental
regulation than U.S. companies. Securities of foreign
companies may be more volatile than securities of U.S.
companies. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross domestic product, rate
of inflation, capital reinvestment, resource self-
sufficiency and balance of payment positions.
Money Market Instruments. The fund may invest up to 20%
of its assets in corporate and government bonds and notes
and money market instruments. Money market instruments
include: obligations issued or guaranteed by the United
States government, its agencies or instrumentalities
("U.S. government securities"); certificates of deposit,
time deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the
United States and subsidiaries located in Canada),
domestic branches of foreign banks, savings and loan
associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect
to the foregoing types of instruments. Certificates of
deposit ("CDs") are short-term, negotiable obligations of
commercial banks. Time deposits ("TDs") are non-
negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates.
Bankers' acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with
international transactions.
Futures and Options. The fund may enter into futures
contracts, options, and options on futures contracts,
subject to the limitation that the value of these futures
contracts and options will not exceed 20% of the fund's
total assets. Also, the fund will not purchase options
to the extent that more than 5% of the value of the
fund's total assets would be invested in premiums on open
put option positions. These futures contracts and
options will be used for the following reasons: to
simulate full investment in the S&P 500 Index while
retaining a cash balance for fund management purposes, to
facilitate trading, to reduce transaction costs or to
seek higher investment returns when a futures contract is
priced more attractively than stocks comprising the S&P
500 Index. The fund will only enter into futures
contracts and options on futures contracts that are
traded on a domestic exchange and board of trade. The
fund will not use futures or options for speculative
purposes.
A call option gives a holder the right to purchase a
specific security at a specified price referred to as the
"exercise price," within a specified period of time. A
put option gives a holder the right to sell a specific
security at a specified price within a specified period
of time. The initial purchaser of a call option pays the
"writer" a premium, which is paid at the time of purchase
and is retained by the writer whether or not such option
is exercised. Institutions, such as the fund, that sell
(or "write") call options against securities held in
their investment portfolios retain the premium. The fund
may purchase put options to hedge its portfolio against
the risk of a decline in the market value of securities
held, and may purchase call options to hedge against an
increase in the price of securities it is committed to
purchase. The fund may write put and call options along
with a long position in options to increase its ability
to hedge against a change in the market value of the
securities it holds or is committed to purchase.
Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount
of a specific security at a specified future time and at
a specified price. Stock index futures contracts are
based on indices that reflect the market value of common
stock of the firms included in the indices. The fund may
enter into futures contracts to purchase securities when
the manager anticipates purchasing the underlying
securities and believes prices will rise before the
purchase will be made. Assets committed to futures
contracts will be segregated at the fund's custodian to
the extent required by law.
There are several risks accompanying the utilization of
futures contracts and options on futures contracts.
First, positions in futures contracts and options on
futures contracts may be closed only on an exchange or
board of trade that furnishes a secondary market for such
contracts. While the fund plans to utilize future
contracts only if there exists an active market for such
contracts, there is no guarantee that a liquid market
will exist for the contracts at a specified time.
Furthermore, because, by definition, futures contracts
look to projected price levels in the future and not to
current levels of valuation, market circumstances may
result in there being a discrepancy between the price of
the stock index future and the movement in the stock
index. The absence of a perfect price correlation
between the futures contract and its underlying stock
index could stem from investors choosing to close futures
contracts by offsetting transactions, rather than
satisfying additional margin requirements. This could
result in a distortion of the relationship between the
index and futures market. In addition, because the
futures market imposes less burdensome margin
requirements than the securities market, an increased
amount of participation by speculators in the futures
market could result in price fluctuations.
In view of these considerations, the fund will comply
with the following restrictions when purchasing and
selling futures contracts. First, the fund will not
participate in futures transactions if the sum of its
initial margin deposits on open contracts will exceed 5%
of the market value of the fund's total assets, after
taking into account the unrealized profits and losses on
those contracts which it has entered. Second, the fund
will not enter into these contracts for speculative
purposes. Third, the fund will limit transactions in
futures and options on futures to the extent necessary to
prevent the fund from being deemed a "commodity pool"
under regulations of the Commodity Futures Trading
Commission.
No consideration will be paid or received by the fund
upon entering into a futures contract. Initially, the
fund will be required to deposit with the broker an
amount of cash or cash equivalents equal to approximately
1% to 10% of the contract amount (this amount is subject
to change by the board of trade on which the contract is
traded and members of such board of trade may charge a
higher amount). This amount, known as "initial margin,"
is in the nature of a performance bond or good faith
deposit on the contract and is returned to the fund upon
termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the
broker will be made daily as the price of the index
underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." At
any time prior to expiration of a futures contract, the
fund may elect to close the position by taking an
opposite position, which will operate to terminate the
fund's existing position in the contract.
Although the fund intends to enter into futures contracts
only if there is an active market for such contracts,
there is no assurance that an active market will exist
for the contracts at any particular time. Most U.S.
futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made
that day at a price beyond that limit. It is possible
that futures contract prices could move to the daily
limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to
substantial losses. In such event, and in the event of
adverse price movements, the fund would be required to
make daily cash payments of variation margin, and an
increase in the value of the portion of the fund being
hedged, if any, may partially or completely offset losses
on the futures contract. As described above, however,
there is no guarantee that the price of the securities
being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an
offset to losses on the futures contract.
If the fund hedges against the possibility of a change in
market conditions adversely affecting the value of
securities held in its portfolio and market conditions
move in a direction opposite to that which has been
anticipated, the fund will lose part or all of the
benefit of the increased value of securities that it has
hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if
the fund had insufficient cash, it may have to sell
securities to meet daily variation margin requirements at
a time when it may be disadvantageous to do so. These
sales of securities may, but will not necessarily, be at
increased prices that reflect the change in interest
rates, market conditions or currency values, as the case
may be.
Options on Futures Contracts. An option on a futures
contract, as contrasted with the direct investment in
such a contract, gives the purchaser the right, in return
for the premium paid, to assume a position in the
underlying futures contract at a specified exercise price
at any time prior to the expiration date of the option.
Upon exercise of an option, the delivery of the futures
position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which
represents the amount by which the market price of the
futures contract exceeds, in the case of a call, or is
less than, in the case of put, the exercise price of the
option on the futures contract. The potential for loss
related to the purchase of an option on a futures
contract is limited to the premium paid for the option
plus transaction costs. Because the value of the option
is fixed at the point of sale, there are no daily cash
payments to reflect changes in the value of the
underlying contract; however, the value of the option
does change daily and that change would be reflected in
the net asset value of the fund.
The fund may purchase and write put and call options on
futures contracts that are traded on a U.S. exchange or
board of trade as a hedge against changes in the value of
its portfolio securities, or in anticipation of the
purchase of securities, and may enter into closing
transactions with respect to such options to terminate
existing positions. There is no guarantee that such
closing transactions can be effected.
Several risks are associated with options on futures
contracts. The ability to establish and close out
positions on such options will be subject to the
existence of a liquid market. In addition, the purchase
of put or call options will be based upon predictions by
the manager as to anticipated trends, which predictions
could prove to be incorrect. Even if the expectations of
the manager are correct, there may be an imperfect
correlation between the change in the value of the
options and of the portfolio securities being hedged.
Stock Index Options. As described generally above, the
fund may purchase put and call options and write call
options on domestic stock indexes listed on domestic
exchanges in order to realize its investment objective of
capital appreciation or for the purpose of hedging its
portfolio. A stock index fluctuates with changes in the
market values of the stocks included in the index. Some
stock index options are based on a broad market index
such as the New York Stock Exchange Composite Index or
the Canadian Market Portfolio Index, or a narrower market
index such as the Standard & Poor's 100.
Options on stock indexes are generally similar to options
on stock except that the delivery requirements are
different. Instead of giving the right to take or make
delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive a cash
"exercise settlement amount" equal to (a) the amount, if
any, by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the
case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon
the closing level of the stock index upon which the
option is based being greater than, in the case of a
call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be
equal to such difference between the closing price of the
index and the exercise price of the option expressed in
dollars or a foreign currency, as the case may be, times
a specified multiple. The writer of the option is
obligated, in return for the premium received, to make
delivery of this amount. The writer may offset its
position in stock index options prior to expiration by
entering into a closing transaction on an exchange or it
may let the option expire unexercised.
The effectiveness of purchasing or writing stock index
options as a hedging technique will depend upon the
extent to which price movements in the portion of the
securities portfolio of the fund correlate with price
movements of the stock index selected. Because the value
of an index option depends upon movements in the level of
the index rather than the price of a particular stock,
whether the fund will realize a gain or loss from the
purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock
market generally or, in the case of certain indexes, in
an industry or market segment, rather than movements in
the price of a particular stock. Accordingly, successful
use by the fund of options on stock indexes will be
subject to the manager's ability to predict correctly
movements in the direction of the stock market generally
or of a particular industry. This requires different
skills and techniques than predicting changes in the
price of individual stocks.
INVESTMENT RESTRICTIONS
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), 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.
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, unless otherwise indicated.
Herbert Barg, Trustee (Age 76). Private Investor. His
address is 273 Montgomery Avenue, Bala Cynwyd,
Pennsylvania 19004. Director/Trustee of sixteen
investment companies associated with Citigroup, Inc.
("Citigroup")
*Alfred J. Bianchetti Trustee (Age 77). Retired;
formerly Senior Consultant to Dean Witter Reynolds Inc.
His address is 19 Circle End Drive, Ramsey, New Jersey
07466. Director/Trustee of eleven investment companies
associated with Citigroup.
Martin Brody Trustee (Age 78). Consultant, HMK
Associates; Retired Vice Chairman of the Board of
Restaurant Associates Corp. His address is c/o HMK
Associates, 30 Columbia Turnpike, Florham Park, New
Jersey 07932. Director/Trustee of twenty-one investment
companies associated with Citigroup.
Dwight B. Crane Trustee (Age 62). Professor, Harvard
Business School. His address is c/o Harvard Business
School, Soldiers Field Road, Boston, Massachusetts 02163.
Director/Trustee of twenty-four investment companies
associated with Citigroup.
Burt N. Dorsett Trustee (Age 69). Managing Partner of
Dorsett McCabe Management. Inc., an investment counseling
firm; Director of Research Corporation Technologies,
Inc., a nonprofit patent clearing and licensing firm.
His address is 201 East 62nd Street, New York, New York
10021. Director/Trustee of eleven investment companies
associated with Citigroup.
Elliot S. Jaffe Trustee (Age 73). Chairman of the Board
and President of The Dress Barn, Inc. His address is 30
Dunnigan Drive, Suffern, New York 10901.
Director/Trustee of eleven investment companies
associated with Citigroup.
Stephen E. Kaufman Trustee (Age 68). Attorney. His
address is 277 Park Avenue, New York, New York 10172.
Director/Trustee of thirteen investment companies
associated with Citigroup.
Joseph J. McCann Trustee (Age 69). Financial Consultant;
Retired Financial Executive, Ryan Homes, Inc. His
address is 200 Oak Park Place, Pittsburgh, Pennsylvania
15243. Director/Trustee of eleven investment companies
associated with Citigroup.
*Heath B. McLendon Trustee (Age 66). Chairman of the
Board, President and Chief Executive Officer; Managing
Director of Salomon Smith Barney; President of SSB Citi
and Travelers Investment Adviser, Inc. ("TIA"); Chairman
or Co-Chairman of the Board of seventy-one investment
companies associated with Salomon Smith Barney. His
address is 7 World Trade Center, New York, New York
10048.
Cornelius C. Rose, Jr. Trustee (Age 66). President,
Cornelius C. Rose Associates, Inc., financial
consultants, and Chairman and Director of Performance
Learning Systems, an educational consultant. His address
is Meadowbrook Village, Building 4, Apt 6, West Lebanon,
New Hampshire 03784. Director/Trustee of eleven
investment companies associated with Citigroup.
Lewis E. Daidone (Age 42). Senior Vice President and
Treasurer; Managing Director of Salomon Smith Barney;
Chief Financial Officer of the Smith Barney Mutual funds;
Treasurer and Senior Vice President or Executive Vice
President of sixty-one investment companies associated
with Citigroup; Director and Senior Vice President of SSB
Citi and TIA.
Sandip Bhagat, (Age 38). Vice President and Investment
Officer President of TIMCO; prior to 1995, Senior
Portfolio Manager of TIMCO; Managing Director of Salomon
Smith Barney. His address is One Tower Square, Hartford,
Connecticut, 06183-2030.
John Lau (Age 33). Vice President and Investment
Officer; Portfolio Manager of TIMCO; prior to 1995, Lead
Engineer of knowledge-based engineering projects at
United Technologies, Pratt and Whitney Aircraft Engine
Division. His address is One Tower Square, Hartford,
Connecticut, 06183-2030.
Paul Brook (Age 46). Controller; Director of Salomon
Smith Barney; Controller or Assistant Treasurer of forty-
three investment companies associated with Citigroup;
from 1997-1998 Managing Director of AMT Capital Services
Inc.; prior to 1997 Partner with Ernst & Young LLP.
Christina T. Sydor (Age 49) Secretary; Managing Director
of Salomon Smith Barney; Secretary of sixty-one
investment companies associated with Citigroup; General
Counsel and Secretary of SSB Citi and TIA.
As of April 10, 2000, the trustees and officers owned, in
the aggregate, less than 1% of the outstanding shares of
each of the funds. 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
$12,000 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 and for the last fiscal year it was $14,437.
For the fiscal year ended November 30, 1999, 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.**
$15,600
14,600
13,600
15,500
15,500
12,600
15,600
15,600
- -----
14,600
$ 0
0
0
0
0
0
0
0
0
0
$114,288
53,900
138,600
155,363
57,950
45,100
110,650
58,050
- -----------
53,500
16
11
21
24
11
11
13
11
71
11
_________________
* 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. A
trustee emeritus may attend meetings but has no voting
rights.
The following table contains a list of shareholders of
record or who beneficially owned at least 5% of the
outstanding shares of a particular class of shares of the
fund as of April 10, 2000.
CLASS A
PERCENTAGE OF SHARES
Travelers Insurance Company
Separate Account QPN 401(k)-TIC
Travelers Insurance Company
Atn: Roger Ferland
One Tower Square
Hartford, CT 06183
Owned 3,301,129.864 (15.58%) shares
Jack M Eckerd TR Jack M Eckerd
REV TR 12/18/69
Amended & Restated 8/28/81
P.O. Box 5165
Clearwater, FL 33758-5165
Owned 1,606,473.666 (7.58%) shares
CLASS D
PERCENTAGE OF SHARES
Smith Barney 401(k)Advisor Group
Smith Barney Corporate Trust
Two Tower Square
P.O. Box 1063
East Brunswick, NJ 08816
Owned 1,928,013.789 (100%) shares
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Manager - TIMCO
TIMCO serves as investment adviser to the fund pursuant
to an investment advisory agreement (the "Investment
Advisory Agreement") with the trust which was approved by
the board of trustees, including a majority of trustees
who are not "interested persons" of the trust or the
manager. The manager is a wholly owned subsidiary of
Citigroup Inc. Subject to the supervision and direction
of the board of trustees, the manager manages the fund's
portfolio in accordance with the fund's stated investment
objective and policies, makes investment decisions for
the fund, places orders to purchase and sell securities,
and employs professional portfolio managers and
securities analysts who provide research services to the
fund. The manager pays the salary of any officer and
employee who is employed by both it and the trust. The
manager bears all expenses in connection with the
performance of its services. TIMCO has been in the
investment counseling business since 1967 and renders
investment advice to a wide variety of individual,
institutional and investment company clients that had
aggregate assets under management as of March 2000 in
excess of $4.8 billion.
As compensation for investment advisory services, the
fund pays the manager a fee computed daily and payable
monthly at the annual rate of 0.15% of the value of the
fund's average daily net assets. The management fee paid
by the fund in fiscal period ended November 30, 1998 was
$36,394. The management fee paid by the fund for the
year ended November 30, 1999 was $233,127. The
management fee paid by the fund for the period from
December 1, 1999 to December 31, 1999 (which reflects a
change in the fiscal year end of the fund) was $34,480.
Administrator - SSB Citi
SSB Citi serves as administrator to the fund pursuant to
a written agreement (the "Administration Agreement"). SSB
Citi is a wholly owned subsidiary of Salomon Smith Barney
Holdings Inc. ("Holdings"), which in turn, is a wholly
owned subsidiary of Citigroup Inc. 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 SSB Citi: (a) assists in supervising all
aspects of the Fund's operations except those performed
by the fund's investment manager under its investment
advisory agreement; b) supplies the fund with office
facilities (which may be in SSB Citi 's own offices),
statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including,
but not limited to, the calculation of (i) the net asset
value of shares of the fund, (ii) applicable contingent
deferred sales charges ("deferred sales charge") and
similar fees and charges and (iii) distribution fees,
internal auditing and legal services, internal executive
and administrative services, and stationary and office
supplies; and (c) prepares reports to shareholders of the
fund, 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 0.10% of the
value of the fund's average daily net assets. The
administration fee was waived by the administrator in the
fiscal period ended November 30, 1998. The
administration fee for the year ended November 30, 1999
was $155,418, of which $122,303 was waived. The
administration fee for the period from December 1, 1999
to December 31, 1999 (which reflects a change in the
fiscal year end of the fund) was waived by the
administrator, and in addition, the fund was reimbursed
$15,109 for other expenses.
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
manager or the administrator or their 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, 757 Third Avenue, New
York, New York 100174, 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
December 31, 2000.
Custodian, Transfer Agent and Sub-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.
Citi Fiduciary Trust Company, (formerly known as Smith
Barney Private Trust Company) (the "transfer agent"),
located at 388 Greenwich Street, New York, New York 10013
serves as the transfer agent and shareholder services
agent for the fund.
PFPC Global Fund Services ("PFPC" or "sub-transfer
agent") located at Exchange Place, Boston, Massachusetts
02109, serves as the trust's sub-transfer agent. Under
the sub-transfer agency agreement, the sub-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 sub-
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.
Code of Ethics. Pursuant to Rule 17j-1 of the 1940 Act,
the funds, their investment advisers and principal
underwriter have adopted codes of ethics that permit
personnel to invest in securities for their own accounts,
including securities that may be purchased or held by the
funds. All personnel must place the interests of clients
first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in
the best interests of the clients. All personal
securities transactions by employees must adhere to the
requirements of the codes and must be conducted in such a
manner as to avoid any actual or potential conflict of
interest, the appearance of such a conflict, or the abuse
of an employee's position of trust and responsibility.
A copy of the Fund's Code of Ethics is on file with the
Securities and Exchange Commission.
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. Prior to the
merger of Travelers Group, Inc. and Citicorp Inc. on
October 8, 1998, Salomon Smith Barney served as the
fund's distributor.
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 Investment Advisory, Administration
and Distribution Agreements for continuance.
For the year ended November 30, 1999, Salomon Smith
Barney incurred distribution expenses totaling $341,063
consisting of $22,963 for advertising, $162,998 for
support services, $155,102 to Salomon Smith Barney
Financial Consultants.
Shareholding Servicing Arrangements
To compensate Salomon Smith Barney for the services it
provided to fund shareholders, the 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 0.20%
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.
For the fiscal period ended November 30, 1998, the
distributor reimbursed plan fees totaling $47,919. For
the period from December 1, 1999 to December 31, 1999
(which reflects a change in the fiscal year end of the
fund) and for the year ended November 30, 1999 the fund
paid distribution fees to Salomon Smith Barney totaling
$40,031 and $292,236, respectively.
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 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 a fund
(as defined in the 1940 Act). 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
The manager arranges for the purchase and sale of the
fund's securities and selects brokers and dealers
(including Salomon Smith Barney) which in its best
judgment provide prompt and reliable execution at
favorable prices and reasonable commission rates. The
manager may select brokers and dealers that provide it
with research services and may cause the fund to pay such
brokers and dealers commissions which exceed those other
brokers and dealers may have charged, if it views the
commissions as reasonable in relation to the value of the
brokerage and/or research services. In selecting a
broker, including Salomon Smith Barney, for a
transaction, the primary consideration is prompt and
effective execution of orders at the most favorable
prices. Subject to that primary consideration, dealers
may be selected for research, statistical or other
services to enable the manager to supplement its own
research and analysis.
Decisions to buy and sell securities for the fund are
made by the manager, subject to the overall supervision
and review of the trust's Board of Trustees. Portfolio
securities transactions for the fund are effected by or
under the supervision of the manager.
Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. There is generally no
stated commission in the case of securities traded in the
over-the-counter market, but the price of those
securities includes an undisclosed commission or mark-up.
Over-the-counter purchases and sales are transacted
directly with principal market makers except in those
cases in which better prices and executions may be
obtained elsewhere. The cost of securities purchased from
underwriters includes an underwriting commission or
concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's
mark-up or mark-down.
In executing portfolio transactions and selecting brokers
or dealers, it is the fund's policy to seek the best
overall terms available. The manager, in seeking the most
favorable price and execution, considers all factors it
deems relevant, including, for example, the price, the
size of the transaction, the reputation, experience and
financial stability of the broker-dealer involved and the
quality of service rendered by the broker-dealer in other
transactions. The manager receives research, statistical
and quotation services from several broker-dealers with
which it places the fund's portfolio transactions. It is
possible that certain of the services received primarily
will benefit one or more other accounts for which the
manager exercises investment discretion. Conversely, the
fund may be the primary beneficiary of services received
as a result of portfolio transactions effected for other
accounts. The manager's fee under the Investment Advisory
Agreement is not reduced by reason of its receiving such
brokerage and research services. The trust's Board of
Trustees, in its discretion, may authorize the manager to
cause the fund to pay a broker that provides brokerage
and research services to the manager a commission in
excess of that which another qualified broker would have
charged for effecting the same transaction. Salomon Smith
Barney will not participate in commissions from brokerage
given by the fund to other brokers or dealers and will
not receive any reciprocal brokerage business resulting
therefrom.
In accordance with Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the 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.
The fund has paid the following in brokerage commissions
for portfolio transactions
Fiscal Period
Fiscal Year Fiscal Period
Ended 12/31/99 1
Ended 11/30/99 Ended
11/30/982
Total Brokerage Commissions $7,233
$86,196 $24,665
Total Brokerage Commissions
paid to Salomon Smith Barney $ 0 $ 0
$ 0
% of Total Brokerage Commissions
paid to Salomon Smith Barney 0%
0% 0%
% of Total Transactions involving
Commissions paid to Salomon
Smith Barney 0%
0% 0%
_____________________________
1 For the period from December 1, 1999 to December
31, 1999, which reflects a change in the fiscal year end
of the fund.
2 For the period from January 5, 1998 (commencement
of operations) to November 30, 1998.
PORTFOLIO TURNOVER
Although the fund generally seeks to invest for the long
term, the fund retains the right to sell securities
irrespective of how long they have been held.
Ordinarily, securities will be sold from the fund only to
reflect certain administrative changes in the S&P 500
Index (including mergers or changes in the composition of
the Index) or to accommodate cash flows into and out of
the fund while maintaining the similarity of the fund to
the index. Generally, an index fund sells securities only
to respond to redemption requests or to adjust the number
of shares held to reflect a change in the fund's target
index. Because of this, the turnover rate for the fund
will be relatively low. The fund's portfolio turnover
rate for the fiscal period ended November 30, 1998 was
4%. The fund's portfolio turnover rate for the fiscal
period from December 1, 1999 to December 31, 1999 (which
reflects a change in the fiscal year end of the fund),
and the year ended November 30, 1999 was 0% and 6%,
respectively.
PURCHASE OF SHARES tc "PURCHASE OF SHARES"
Detailed information about the purchase, redemption and
exchange of fund shares appears in the prospectus.
General
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 sub-transfer agent are not subject to a
maintenance fee.
Investors in 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 for 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 the sub-transfer agent. Share
certificates are issued only upon a shareholder's written
request to the sub-transfer agent.
Purchase orders received by the fund or a Salomon Smith
Barney Financial Consultant prior to the close of regular
trading on the New York Stock Exchange, Inc. (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 the sub-transfer agent is
authorized through preauthorized transfers of at least
$25 on a monthly basis or at least $50 on a quarterly
basis to charge the 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 the sub-transfer agent.
The Systematic Investment Plan also authorizes Salomon
Smith Barney to apply cash held in the shareholder's
Salomon Smith Barney brokerage account or redeem the
shareholder's shares of a Smith Barney money market fund
to make additions to the account. Additional information
is available from the fund or a Salomon Smith Barney
Financial Consultant 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 or a
Dealer Representative.
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 PFPC together with the redemption request.
Any signature appearing on a share certificate, stock
power or written redemption request in excess of $10,000
must be guaranteed by an eligible guarantor institution
such as a domestic bank, savings and loan institution,
domestic credit union, member bank of the Federal Reserve
System or member firm of a national securities exchange.
Written redemption requests of $10,000 or less do not
require a signature guarantee unless more than one such
redemption request is made in any 10-day period or the
redemption proceeds are to be sent to an address other
than the address of record. Unless otherwise directed,
redemption proceeds will be mailed to an investor's
address of record. The transfer agent may require
additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or
guardians. A redemption request will not be deemed
properly received until the transfer agent receives all
required documents in proper form.
If a shareholder holds shares in more than one Class, any
request for redemption must specify the Class being
redeemed. In the event of a failure to specify which
Class, or if the investor owns fewer shares of the Class
than specified, the redemption request will be delayed
until the transfer agent receives further instructions
from Salomon Smith Barney, or if the shareholder's
account is not with Salomon Smith Barney, from the
shareholder directly. The redemption proceeds will be
remitted on or before the third business day following
receipt of proper tender, except on any days on which the
NYSE is closed or as permitted under the 1940 Act, in
extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Salomon Smith
Barney brokerage account, these funds will not be
invested for the shareholder's benefit without specific
instruction and Salomon Smith Barney will benefit from
the use of temporarily uninvested funds. Redemption
proceeds for shares purchased by check, other than a
certified or official bank check, will be remitted upon
clearance of the check, which may take up to fifteen days
or more.
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 sub-
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 sub-transfer
agent may continue to do so and applications for
participation in the Withdrawal Plan must be received by
the sub-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.
Securities listed on a national securities exchange will
be valued on the basis of the last sale on the date on
which the valuation is made or, in the absence of sales,
at the mean between the closing bid and asked prices.
Over-the-counter securities will be valued at the mean
between the closing bid and asked prices on each day, or,
if market quotations for those securities are not readily
available, at fair value, as determined in good faith by
the fund's board of trustees. Short-term obligations
with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as
determined by the fund's board of trustees. Amortized
cost involves valuing an instrument at its original cost
to the fund and thereafter assuming a constant
amortization to maturity of any discount or premium,
regardless of the effect of fluctuating interest rates on
the market value of the instrument. All other securities
and other assets of the fund will be valued at fair value
as determined in good faith by the fund'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 Business 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 reinvest-
ment 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.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
Average Annual Total Return
Class of Shares
1-Year
5-Year
10-
Year
Life
of
fund 3
1999 1
1999 2
Class A
5.88%
19.96%
N/A
N/A
23.53%
Class D
5.91%
20.29%
N/A
N/A
26.25%
_________________________________
1 For the period from December 1, 1999 to
December
31, 1999 which reflects a change in the fiscal year
end of the fund. Total return is not annualized,
as it may not be representative of the total return
for the year.
2 For the fiscal year ended November 30, 1999.
3 Class A and D commenced operations on January
5,
1998 and August 4, 1998, respectively.
THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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 Total Return
Class of Shares
1-Year
5-Year
10-
Year
Life
of
fund 3
1999 1
1999 2
Class A
20.03%
19.96%
N/A
N/A
52.16%
Class D
20.29%
20.29%
N/A
N/A
38.85%
__________________________
1 For the period from December 1, 1999 to
December
31, 1999 which reflects a change in the fiscal year
end of the fund. Total return is not annualized, as
it may not be representative of the total return
for the year.
2 For the fiscal year ended November 30, 1999.
3 Class A and D commenced operations on January
5,
1998 and August 4, 1998, respectively.
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 "
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 Internal Revenue Code of 1986, as amended (the
"Code"). To so qualify, the fund must, among other
things: (a) derive at least 90% of its gross income in
each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or
other disposition of stock or securities or foreign
currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts)
derived with respect to its business of investing in such
stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each quarter of the
fund's taxable year, (i) at least 50% of the market value
of the fund's assets is represented by cash, securities
of other regulated investment companies, United States
government securities and other securities, with such
other securities limited, in respect of any one issuer,
to an amount not greater than 5% of the fund's assets and
not greater than 10% of the outstanding voting securities
of such issuer and (ii) not more than 25% of the value of
its assets is invested in the securities (other than
United States government securities or securities of
other regulated investment companies) of any one issuer
or any two or more issuers that the fund controls and
which 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 company taxable income (i.e., income other
than any excess of its net realized long-term capital
gains over its net realized short-term capital losses,
("net realized capital gains") or on its net realized
capital gains if any, that it distributes to its
shareholders, provided an amount equal to at least 90% of
its investment company taxable income, plus or minus
certain other adjustments as specified in the Code's and
90% of its net tax-exempt income for the taxable year is
distributed in compliance with the Code's timing and
other requirements but will be subject to tax at regular
corporate rates on any taxable income or gains it does
not distribute.
The Code imposes a 4% nondeductible excise tax on the
fund to the extent it does not distribute by the end of
any calendar year at least 98% of its net investment
income for that year and 98% of the net amount of its
capital gains (both long-and short-term) for the one-year
period ending, as a general rule, on October 31 of that
year. For this purpose, however, any income or gain
retained by the fund that is subject to corporate income
tax will be considered to have been distributed by year-
end. In addition, the minimum amounts that must be
distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution
or overdistribution, as the case may be, from the
previous year. The fund anticipates that it will pay
such dividends and will make such distributions as are
necessary in order to avoid the application of this tax.
If, in any taxable year, the fund fails to qualify as a
regulated investment company under the Code or fails to
meet the distribution requirement, it would be taxed in
the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible
by the fund in computing its taxable income. In
addition, in the event of a failure to qualify, the
fund's distributions, to the extent derived from the
fund's current or accumulated earnings and profits, would
constitute dividends (eligible for the corporate
dividends-received deduction) which are taxable to
shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have
been treated in the shareholders' hands as long-term
capital gains. If the fund fails to qualify as a
regulated investment company in any year, it must pay out
its earnings and profits accumulated in that year in
order to qualify again as a regulated investment company.
In addition, if the fund failed to qualify as a regulated
investment company for a period greater than one taxable
year, the fund may be required to recognize any net
built-in gains (the excess of the aggregate gains,
including items of income, over aggregate losses that
would have been realized if it had been liquidated) with
respect to certain of its assets in order to qualify as a
regulated investment company in a subsequent year.
The fund's transactions in foreign currencies, forward
contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will
be subject to special provisions of the Code (including
provisions relating to "hedging transactions" and
"straddles") that, among other things, may affect the
character of gains and losses realized by the fund (i.e.,
may affect whether gains or losses are ordinary or
capital), accelerate recognition of income to the fund
and defer fund losses. These rules could therefore affect
the character, amount and timing of distributions to
shareholders. These provisions also (a) will require the
fund to mark-to-market certain types of the positions in
its portfolio (i.e., treat them as if they were closed
out) and (b) may cause the fund to recognize income
without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise
taxes. The fund will monitor its transactions, will make
the appropriate tax elections and will make the
appropriate entries in its books and records when it
acquires any foreign currency, forward contract, option,
futures contract or hedged investment in order to
mitigate the effect of these rules and prevent
disqualification of the fund as a regulated investment
company.
The fund's investment in Section 1256 contracts, such as
regulated futures contracts, most forward currency
forward contracts traded in the interbank market and
options on most stock indices, are subject to special tax
rules. All section 1256 contracts held by the fund at
the end of its taxable year are required to be marked to
their market value, and any unrealized gain or loss on
those positions will be included in the fund's income as
if each position had been sold for its fair market value
at the end of the taxable year. The resulting gain or
loss will be combined with any gain or loss realized by
the fund from positions in section 1256 contracts closed
during the taxable year. Provided such positions were
held as capital assets and were not part of a "hedging
transaction" nor part of a "straddle," 60% of the
resulting net gain or loss will be treated as long-term
capital gain or loss, and 40% of such net gain or loss
will be treated as short-term capital gain or loss,
regardless of the period of time the positions were
actually held by the fund.
Foreign Investments. Dividends or other income
(including, in some cases, capital gains) received by the
fund from investments in foreign securities may be
subject to withholding and other taxes imposed by foreign
countries. Tax conventions between certain countries and
the United States may reduce or eliminate such taxes in
some cases. The fund will not be eligible to elect to
treat any foreign taxes paid by it as paid by its
shareholders, who therefore will not be entitled to
credits for such taxes on their own tax returns. Foreign
taxes paid by the fund will reduce the return from the
fund's investments.
Passive Foreign Investment Companies. If the fund
purchases shares in certain foreign investment entities,
called "passive foreign investment companies" (a "PFIC"),
it may be subject to United States federal income tax on
a portion of any "excess distribution" or gain from the
disposition of such shares even if such income is
distributed as a taxable dividend by the fund to its
shareholders. Additional charges in the nature of
interest may be imposed on the fund in respect of
deferred taxes arising from such distributions or gains.
If the fund were to invest in a PFIC and elected to treat
the PFIC as a "qualified electing fund" under the Code,
in lieu of the foregoing requirements, the fund might be
required to include in income each year a portion of the
ordinary earnings and net capital gains of the qualified
electing fund, even if not distributed to the fund, and
such amounts would be subject to the 90% and excise tax
distribution requirements described above. In order to
make this election, the fund would be required to obtain
certain annual information from the passive foreign
investment companies in which it invests, which may be
difficult or not possible to obtain.
Alternatively, the fund may make a mark-to-market
election that would result in the fund being treated as
if it had sold and repurchased all of the PFIC stock at
the end of each year. In this case, the fund would
report gains as ordinary income and would deduct losses
as ordinary losses to the extent of previously recognized
gains. The election, once made, would be effective for
all subsequent taxable years of the fund, unless revoked
with the consent of the IRS. By making the election, the
fund could potentially ameliorate the adverse tax
consequences with respect to its ownership of shares in a
PFIC, but in any particular year may be required to
recognize income in excess of the distributions it
receives from PFICs and its proceeds from dispositions of
PFIC stock. The fund may have to distribute this
"phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise tax.
The fund will make the appropriate tax elections, if
possible, and take any additional steps that are
necessary to mitigate the effect of these rules.
Taxation of United States Shareholders
Dividends and Distributions. Any dividend declared by
the fund in October, November or December of any calendar
year and payable to shareholders of record on a specified
date in such a month shall be deemed to have been
received by each shareholder on December 31 of such
calendar year and to have been paid by the fund not later
than such December 31, provided such dividend is actually
paid by the fund during January of the following calendar
year. The fund intends to distribute annually to its
shareholders substantially all of its investment company
taxable income, and any net realized 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 such shares. Such gain or loss will be
treated as capital gain or loss, if the shares are
capital assets in the shareholder's hands, and will be
long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if
the shares are held for one year or less. Any loss
realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced, including
replacement through the reinvesting of dividends and
capital gains distributions in the fund, within a 61-day
period beginning 30 days before and ending 30 days after
the disposition of the shares. In such a case, the basis
of the shares acquired will be increased to reflect the
disallowed loss. Any loss realized by a shareholder on
the sale of a fund share held by the shareholder for six
months or less will be treated for United States federal
income tax purposes as a long-term capital loss to the
extent of any distributions or deemed distributions of
long-term capital gains received by the shareholder with
respect to such share. If a shareholder incurs a sales
charge in acquiring shares of the fund, disposes of those
shares within 90 days and then acquires shares in a
mutual fund for which the otherwise applicable sales
charge is reduced by reason of a reinvestment right
(e.g., an exchange privilege), the original sales charge
will not be taken into account in computing gain/loss on
the original shares to the extent the subsequent sales
charge is reduced. Instead, the disregarded portion of
the original sales charge will be added to the tax basis
in the newly acquired shares. Furthermore, the same rule
also applies to a disposition of the newly acquired
shares made within 90 days of the second acquisition.
This provision prevents a shareholder from immediately
deducting the sales charge by shifting his or her
investment in a family of mutual funds.
Backup Withholding. The fund may be required to
withhold, for United States federal income tax purposes,
31% of the dividends, distributions and redemption
proceeds payable to shareholders who fail to provide the
fund with their correct taxpayer identification number or
to make required certifications, or who have been
notified by the IRS that they are subject to backup
withholding. Certain shareholders are exempt from backup
withholding. Backup withholding is not an additional tax
and any amount withheld may be credited against a
shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by the
fund as to the United States federal income tax status of
the dividends, distributions and deemed distributions
attributable to undistributed capital gains (discussed
above in "Taxes- Taxation of United States Shareholders -
Dividends and Distributions") made by the fund to its
shareholders. Furthermore, shareholders will also
receive, if appropriate, various written notices after
the close of the fund's taxable year regarding the United
States federal income tax status of certain dividends,
distributions and deemed distributions that were paid (or
that are treated as having been paid) by the fund to its
shareholders during the preceding taxable year.
Other Taxation
Distributions also may be subject to additional state,
local and foreign taxes depending on each shareholder's
particular situation.
The foregoing is only a summary of certain material tax
consequences affecting the fund and its shareholders.
Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences
to them of an investment in the 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 seven 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 charges; if
any, for each class; (c) the distribution and/or service
fees borne by each Class pursuant to the Plan; (d) the
expenses allocable exclusively to each Class; (e) voting
rights on matters exclusively affecting a single Class;
(f) the exchange privilege of each Class; and (g) the
conversion feature of the Class B shares. The 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. In addition, the fund also consolidates the
mailing of its prospectus so that a shareholder having
multiple accounts (that is, individual, IRA and/or Self-
Employed Retirement Plan accounts) will receive a single
Prospectus annually. Shareholders who do not want this
consolidation to apply to their accounts should contact
their Salomon Smith Barney Financial Consultant or the
transfer agent.
Styles of Fund Management: In an industry where the
average portfolio manager has seven years of experience
(source: ICI, 1998), the portfolio managers of Smith
Barney mutual funds average 21 years in the industry and
15 years with the firm.
Smith Barney mutual funds offers more than 60 mutual
funds. We understand that many investors prefer an
active role in allocating the mix of funds in their
portfolio, while others want the asset allocation
decisions to be made by experienced managers.
That's why we offer four "styles" of fund management that
can be tailored to suit each investor's unique financial
goals.
Style Pure Series - Our style Pure Series funds stay
fully invested within their asset class and investment
style, enabling investors to make asset allocation
decisions in conjunction with their Salomon Smith Barney
Financial Consultant.
Classic Investor Series - Our Classic Investor Series
funds offer a range of equity and fixed income strategies
that seek to capture opportunities across asset classes
and investment styles using disciplined investment
approaches.
The Concert Allocation Series - As a fund of funds,
investors can select a Concert Portfolio that may help
their investment needs. As needs change, investors can
easily choose another long-term, diversified investment
from our Concert family.
Special Discipline Series - Our Special Discipline Series
funds are designed for investors who are looking beyond
more traditional market categories: from natural
resources to a roster of state-specific municipal funds.
FINANCIAL STATEMENTS
The fund's annual report for the fiscal year ended
November 30, 1999 and for the period from December 1,
1999 to December 31, 1999, which reflects a change in the
fiscal year end of the fund, is incorporated herein by
reference in its entirety. The annual report for the
year ended November 30, 1999 was filed on February 15,
2000, Accession Number 91155-00-000110. The annual
report for the year ended December 31, 1999 was filed on
March 2, 2000, Accession Number 91155-00-000172.
"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.
SMITH BARNEY
INVESTMENT TRUST
S&P 500 Index Fund
April 28, 2000
SMITH BARNEY INVESTMENT TRUST
388 Greenwich Street
New York, NY 10013
SALOMON
SMITH
BARNEY
A Member
of
Citigroup [Symbol]
1
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.
(a)(7) Amendment No.3 to the First Amended and
Restated Master Trust Agreement dated February 28, 1998
is filed herein.
(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).
(e)(5) Form of Third Party Feeder Agreement between
the
Registrant, CFBDS Inc. and Barclays Global Fund Advisors
on
behalf of the Smith Barney U.S. 5000 Index Fund and EAFE
Index Fund
is filed herein.
(f) Not Applicable.
(g)(1) Form of Custody Agreement with PNC Bank,
National Association, is incorporated by reference to
Post-Effective Amendment No. 9.
(g)(2) Form of Custodian Agreement with Investors
Bank & Trust Company is filed herein.
(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 MMC 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.
(h)(6) Form of Administration Agreement between
the Registrant on behalf of Smith Barney U.S. 5000 Index
Fund ("U.S. 5000 Index Fund") and SSB Citi Fund
Management LLC ("SSB Citi") is incorporated by reference
to
Post-Effective Amendment No. 26 to the Registration
Statement
filed on October 13, 1999 (Post-Effective Amendment No.
26).
(h)(7) Form of Administration Agreement between
the Registrant on behalf of Smith Barney EAFE Index Fund
("EAFE Index Fund") and SSB Citi is incorporated by
reference
to Post-Effective Amendment No. 26.
(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) Auditor's consent is filed herein.
(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 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.
(m)(6) Form of Shareholder Services Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of the U.S. 5000 Index Fund and Salomon
Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 26.
(m)(7) Form of Shareholder Services Plan
pursuant to Rule 12b-1 between the Registrant on
behalf of the EAFE Index Fund and Salomon
Smith Barney Inc. is incorporated by reference
to Post-Effective Amendment No. 26.
(n) Financial Data Schedules are filed herein.
(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.
(p) Code of Ethics is incorporated by reference to
Post-Effective
Amendment No. 27 to the Registration Statement filed on
March 27, 2000 (Post-Effective Amendment No. 27).
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 - SSB Citi Fund Management LLC ("SSB
Citi")
(successor to SSBC Fund Management Inc.) was incorporated
in
March 1968 under the laws of the State of Delaware.
On September 21, 1999, SSB Citi was converted into a
Delaware Limited
Liability Company. SSB Citi is a wholly owned subsidiary
of Salomon
Smith Barney Holdings Inc. ("Holdings"), which in turn is
a wholly
owned subsidiary of Citigroup Inc. (formerly known as
Travelers
Group Inc.). SSB Citi 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 1968.
SSB Citi 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.
SSB Citi also serves as the administrator to the Smith
Barney S&P 500
Index Fund, the Smith Barney U.S. 5000 Index Fund and the
Smith Barney EAFE Index Fund.
The list required by this Item 26 of officers and
directors of SSB
Citi together with information as to any other business,
profession,
vocation or employment of a substantial nature engaged in
by such
officers and directors during the past two fiscal years,
is incorporated
by reference to Schedules A and D of FORM ADV filed by
SSB Citi
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. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM
Large Cap
Growth Portfolio, CitiFundsSM Intermediate Income
Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash
Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM
Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid
Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free
Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM
Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth
& Income
Portfolio,CitiFundsSM Small Cap Growth Portfolio,
CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free
Income
Portfolio,CitiSelect VIP Folio 200, Citiselect VIP Folio
300,
CitiSelect VIP Folio 400, CitiSelect VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect
Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400, and
CitiSelect Folio
500.
CFBDS is also the placement agent for Large Cap Value
Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity
Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves
Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Institutional Cash Management Fund, Inc.
Smith Barney Investment 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 Sector Series 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.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
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, 22nd Floor
New York, New York 10013
(2) With respect to the Registrant's Administrator:
SSB Citi Fund Management LLC
(successor to SSBC Fund Management Inc.)
388 Greenwich Street, 22nd Floor
New York, New York 10013
(3) With respect to the Registrant's Investment
Adviser:
Travelers Investment Management Company
One Tower Square
Hartford, CT 06183
(For Smith Barney S&P 500 Index Fund)
(4) With respect to the Registrant's Custodian:
(a) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(Custodian for Smith Barney Intermediate Maturity
California Municipals Fund, Smith Barney
Intermediate
Maturity New York Municipals Fund, Smith Barney
Large Capitalization Growth Fund and Smith Barney
Mid Cap Blend Fund and Smith Barney S&P 500
Index Fund)
(b) Investors Bank and Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
(Custodian for Smith Barney U.S. 5000 Index Fund
and
Smith Barney EAFE Index Fund)
(5) With respect to the Registrant's Sub-Transfer
Agent:
PFPC Global Fund Services
One Exchange Place
Boston, Massachusetts 02109
(6) With respect to the Registrant's Distributor:
CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
EXHIBIT INDEX
Exhibit No. Exhibit
(a)(7) Amendment No.3 to the First
Amended
and Restated Master Trust Agreement
(e)(5) Form of Third Party Feeder Fund
Agreement
(g)(2) Form of Custodian Agreement
(j) Consent of Auditor's
(n) Financial Data Schedules
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, and the Investment Company Act of 1940,
the Fund certifies that it meets all of the requirements
for effectiveness
of this registration statement under rule 485(b) under
the Securities
Act and 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 25th day of April, 2000.
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
04/25/00
Heath B. McLendon (Chief Executive Officer)
and President
/s/Lewis E. Daidone Treasurer
04/25/00
Lewis E. Daidone (Chief Financial and
Accounting Officer)
/s/Herbert Barg* Trustee
04/25/00
Herbert Barg
/s/Alfred J. Bianchetti* Trustee
04/25/00
Alfred J. Bianchetti
/s/Martin Brody* Trustee
04/25/00
Martin Brody
/s/Dwight B. Crane* Trustee
04/25/00
Dwight B. Crane
/s/Burt N. Dorsett* Trustee
04/25/00
Burt N. Dorsett
/s/Elliot S. Jaffe* Trustee
04/25/00
Elliot S. Jaffe
/s/Stephen E. Kaufman* Trustee
04/25/00
Stephen E. Kaufman
/s/Joseph J. McCann* Trustee
04/25/00
Joseph J. McCann
/s/Cornelius C. Rose, Jr.* Trustee
04/25/00
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
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, Smith
Barney Investment Trust certifies that it meets all of
the requirements for effectiveness of this registration
statement pursuant to Rule 485(b) under the Securities
Act of 1933 and Master Investment Portfolio has duly
caused this Post-Effective Amendment No. 29 to be signed
on its behalf by the undersigned, thereto duly
authorized, in the City of Little Rock, and State of
Arkansas on the 25th day of April, 2000.
MASTER INVESTMENT PORTFOLIO
U.S. EQUITY INDEX MASTER PORTFOLIO
INTERNATIONAL INDEX MASTER PORTFOLIO
By: /s/ Richard H.
Blank, Jr.
Richard H. Blank,
Jr.
Secretary and
Treasurer
(and Principal
Financial Officer)
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 29 to the
registration statement has been signed below by the
following persons in the capacities and on the date
indicated:
Name Title
Date
Chairman, President
(Principal 4/25/00
R. Greg Feltus* Executive Officer) and
Trustee
/s/ Richard H. Blank, Jr. Secretary and Treasurer 4/25/00
Richard H. Blank, Jr. (Principal Financial
Officer)
Trustee 4/25/00
Jack S. Euphrat*
Trustee 4/25/00
W. Rodney Hughes*
Trustee 4/25/00
Leo Soong*
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Attorney-in-Fact pursuant to powers of attorney
previously filed and as filed herewith.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Marco E. Adelfio, Richard H.
Blank, Jr., R. Greg Feltus and Robert M. Kurucza, and
each of them, his true and lawful attorney-in-fact and
agent (each, an "Attorney-in Fact") with full power of
substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, (i) to
execute the Registration Statement of each of Barclays
Global Investors Funds, Inc. and Master Investment
Portfolio and any investment company whose fund(s) invest
in a Master Portfolio of Master Investment Portfolio
(each, a "Company"), and any or all amendments (including
post-effective amendments) thereto and to file the same,
with any and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission and any state securities commissions or
authorities, and (ii) to execute any and all federal or
state regulatory filings, including all applications with
regulatory authorities, state charter or organizational
documents and any amendments or supplements thereto, to
be executed by, on behalf of, or for the benefit of, a
Company. The undersigned hereby grants to each Attorney-
in-Fact full power and authority to do and perform each
and every act and thing contemplated above, as fully and
to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by
virtue hereof.
Dated: February 17, 2000 /s/ Leo Soong
Leo Soong
THIS SIGNATURE PAGE HAS BEEN INCLUDED AS A PART OF POST-
EFFECTIVE AMENDMENT NO. 29, IN ORDER TO INCORPORATE IT
WITH POST-EFFECTIVE AMENDMENT NO. 26 WHICH WAS FILED ON
OCTOBER 13, 1999, WITH REFERENCE TO THE MASTER INVESTMENT
PORTFOLIO FOR U.S. EQUITY INDEX MASTER PORTFOLIO AND THE
INTERNATIONAL INDEX MASTER PORTFOLIO
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective
Amendment No. 26 to the Registration Statement on Form N-
1A of the Smith Barney Investment Trust pursuant to Rule
485(b) under the Securities Act of 1933 and Master
Investment Portfolio has duly caused this Post-Effective
Amendment No. 26 to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of
Little Rock, and State of Arkansas on the 13th day of
October, 1999.
MASTER INVESTMENT PORTFOLIO
U.S. EQUITY INDEX MASTER PORTFOLIO
INTERNATIONAL INDEX MASTER PORTFOLIO
By: /s/ Richard H.
Blank, Jr.
Richard H. Blank,
Jr.
Secretary and
Treasurer
(and Principal
Financial Officer)
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A of the Smith Barney
Investment Trust has been signed below by the following
persons in the capacities and on the date indicated:
Name Title Date
Chairman, President
(Principal 10/13/99
R. Greg Feltus* Executive Officer) and
Trustee
/s/ Richard H. Blank, Jr. Secretary and Treasurer 10/13/99
Richard H. Blank, Jr. (Principal Financial
Officer)
Trustee 10/13/99
Jack S. Euphrat*
Trustee 10/13/99
W. Rodney Hughes*
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Attorney-in-Fact pursuant to powers of attorney as
filed herewith.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
constitutes and appoints Marco E. Adelfio, Richard H.
Blank, Jr., R. Greg Feltus and Robert M. Kurucza, and
each of them, his true and lawful attorney-in-fact and
agent (each, an "Attorney-in Fact") with full power of
substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, (i) to
execute the Registration Statement of each of MasterWorks
Funds Inc. and Master Investment Portfolio and any
investment company whose fund(s) invest in a Master
Portfolio of Master Investment Portfolio (each, a
"Company"), and any or all amendments (including post-
effective amendments) thereto and to file the same, with
any and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange
Commission and any state securities commissions or
authorities, and (ii) to execute any and all federal or
state regulatory filings, including all applications with
regulatory authorities, state charter or organizational
documents and any amendments or supplements thereto, to
be executed by, on behalf of, or for the benefit of, a
Company. The undersigned hereby grants to each Attorney-
in-Fact full power and authority to do and perform each
and every act and thing contemplated above, as fully and
to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms all that said
Attorney-in-Fact may lawfully do or cause to be done by
virtue hereof.
Dated: August 11, 1998 /s/ Jack S.
Euphrat
Jack S.
Euphrat
SMITH BARNEY INVESTMENT TRUST
AMENDMENT NO. 3
TO
THE FIRST AMENDED AND RESTATED MASTER TRUST AGREEMENT
AMENDMENT NO. 3 to the First Amended and Restated
Master Trust Agreement dated as of February 28, 1998 (the
"Agreement") of Smith Barney Investment Trust (the
"Trust"), made as of the 13th day of October 1999.
WITNESSETH:
WHEREAS, Article VII, Section 7.3 of the Agreement
provides that the Agreement may be amended at any time, so
long as such amendment does not adversely affect the rights
of any shareholder and so long as such amendment is not in
contravention of applicable law, including the Investment
Company Act of 1940, as amended, by an instrument in
writing signed by an officer of the Trust pursuant to a
vote of a majority of the Trustees; and
WHEREAS, the Trustees have the authority under
Section 4.1 of the Agreement to issue shares in one or more
Sub-Trusts (as defined in the Agreement); to establish and
designate such Sub-Trusts; and to issue classes of shares
(as defined in the Agreement) of any Sub-Trust or divide
the shares of any Sub-Trust into classes, each class having
such different dividend, liquidation, voting and other
rights as the Trustees may determine, and to establish and
designate the specific classes of shares of each Sub-Trust;
and
WHEREAS, on July 28, 1999, a majority of the Trustees
voted to authorize the establishment of two new Sub-Trusts
to be designated as the "Smith Barney U.S. 5000 Index Fund"
and "Smith Barney EAFE Index Fund," each of which shall
consist of two classes of shares to be designated as Class
A and Class D; and
WHEREAS, the undersigned has been duly authorized by
the Trustees to execute and file this Amendment No. 3 to
the Agreement; and
NOW, THEREFORE, the Agreement is hereby amended as
follows:
1. The first paragraph of Article IV, Section 4.2
of the Agreement is hereby amended to read in pertinent
part as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts.
Without limiting the authority of the Trustees set forth in
Section 4.1 to establish and designate any further Sub-
Trusts and classes, the Trustees hereby establish and
designate the following Sub-Trusts and classes thereof:
Smith Barney Intermediate Maturity California Municipals
Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth
Fund, Smith Barney S&P 500 Index Fund; Smith Barney Mid Cap
Blend Fund, Smith Barney U.S. 5000 Index Fund and Smith
Barney EAFE Index Fund, each of which shall consist of one
class designated as Class A, and solely with respect to
Smith Barney Intermediate Maturity California Municipals
Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth
Fund, Smith Barney S&P 500 Index Fund; Smith Barney Mid Cap
Blend Fund, additional classes designated as Class B, Class
L and Class Y shares and solely with respect to the Smith
Barney S&P 500 Index Fund, Smith Barney U.S. 5000 Index
Fund, and Smith Barney EAFE Index Fund an additional class
designated as Class D shares, and solely with respect to
Smith Barney Mid Cap Blend Fund, Smith Barney Large
Capitalization Growth Fund and Smith Barney S&P 500 Index
Fund an additional class designated as Class Z shares. The
Shares of such Sub-Trusts and classes thereof and any
Shares of any further Sub-Trust or classes that may from
time to time be established and designated by the Trustees
shall (unless the Trustees otherwise determine with respect
to some further Sub-Trust or class at the time of
establishing and designating the same) have the following
relative rights and preferences:"
The undersigned hereby certifies that the Amendment
set forth above has been duly adopted in accordance with
the provisions of the Agreement.
IN WITHNESS WHEREOF, the undersigned has hereto set
his hands as of the day and year first above written.
SMITH BARNEY
INVESTMENT TRUST
By: /s/
Name: Michael
Kocur
Title:
Assistant Secretary
LEGAL\FUNDS\SLIT\MTA AMENDMENT 3
FORM OF
THIRD PARTY FEEDER FUND
AGREEMENT
AMONG
SMITH BARNEY INVESTMENT TRUST
CFBDS, INC.
AND
MASTER INVESTMENT PORTFOLIO
dated as of
October 13, 1999
TABLE OF CONTENTS
ARTICLE I. REPRESENTATIONS AND WARRANTIES
1.1 Trust
1.2 MIP
1.3 Distributor
ARTICLE II. COVENANTS
2.1 Trust
2.2 MIP
2.3 Reasonable Actions
ARTICLE III. INDEMNIFICATION
3.1 Trust
3.2 Distributor
3.3 MIP
ARTICLE IV. ADDITIONAL AGREEMENTS
4.1 Access to Information
4.2 Confidentiality
4.3 Obligations of Trust and MIP
ARTICLE V. TERMINATION, AMENDMENT
5.1 Termination
5.2 Amendment
ARTICLE VI. GENERAL PROVISIONS
6.1 Expenses
6.2 Headings
6.3 Entire Agreement
6.4 Successors
6.5 Governing Law
6.6 Counterparts
6.7 Third Parties
6.8 Notices
6.9 Interpretation
6.10 Operation of the Fund
6.11 Relationship of Parties; No Joint Venture, Etc.
6.12 Use of Name
Signatures
Schedule A
Schedule B
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered
into as of the 13th day of October, 1999, by and among Smith
Barney Investment Trust, a Massachusetts business trust (the
"Trust"), for itself and on behalf of its series now
existing or hereafter created as set forth on Schedule A,
the Smith Barney U.S. 5000 Index Fund and the Smith Barney
EAFE Index Fund (each, a Fund and collectively, the "Funds")
CFBDS, Inc. (the "Distributor"), a Massachusetts
corporation, and Master Investment Portfolio ("MIP"), a
Delaware business trust, for itself and on behalf of its
series set forth on Schedule B (each, a "Portfolio" and
collectively, the "Portfolios").
WITNESSETH
WHEREAS, Trust and MIP are each registered under the
Investment Company Act of 1940, as amended (the "1940 Act")
as open-end management investment companies;
WHEREAS, each Fund and its corresponding Portfolio
have the same investment objective and substantially the
same investment policies;
WHEREAS, each Fund desires to invest on an ongoing
basis all or substantially all of its investable assets (the
"Assets") in exchange for shares of beneficial interest in
the corresponding Portfolio (the "Investment") on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises made herein and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Trust. Trust represents and warrants to MIP
that:
(a) Organization. Trust is a business trust
duly organized, validly existing and in good standing
under the laws of The Commonwealth of Massachusetts,
and the Funds are duly and validly designated series
of Trust. Trust and each Fund has the requisite power
and authority to own its property and conduct its
business as proposed to be conducted pursuant to this
Agreement.
(b) Authorization of Agreement. The execution
and delivery of this Agreement by Trust on behalf of
the Funds and the conduct of business contemplated
hereby have been duly authorized by all necessary
action on the part of Trust's Board of Trustees and no
other action or proceeding is necessary for the
execution and delivery of this Agreement by the Funds,
or the performance by the Funds of their obligations
hereunder. This Agreement when executed and delivered
by Trust on behalf of the Funds shall constitute a
legal, valid and binding obligation of Trust,
enforceable against the Funds in accordance with its
terms, except as may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or
other similar law affecting the enforcement of
creditors rights generally and subject to general
principles of equity. No meeting of, or consent by,
shareholders of the Funds is necessary to approve or
implement the Investments.
(c) 1940 Act Registration. Trust is duly
registered under the 1940 Act as an open-end
management investment company, and such registration
is in full force and effect.
(d) SEC Filings. Trust has duly filed all
forms, reports, proxy statements and other documents
(collectively, the "SEC Filings") required to be filed
with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), the Securities Exchange Act of 1934
(the "1934 Act") and the 1940 Act, and the rules and
regulations thereunder (collectively, the "Securities
Laws"), in connection with the registration of the
Funds' shares, any meetings of its shareholders and
its registration as an investment company. All SEC
Filings relating to the Funds were prepared to comply
in all material respects in accordance with the
requirements of the applicable Securities Laws and do
not, as of the date of this Agreement, contain any
untrue statement of a material fact or omit to state
any material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading, provided that Trust makes no
representation or warranty hereunder with respect to
information supplied or required to be supplied by by
MIP or any service provider of MIP for use in Trust's
SEC Filings, including but not limited to any written
information contained in MIP's current registration
statement relating to the Portfolios.
(e) Fund Assets. Each Fund currently intends
on an ongoing basis to invest its Assets solely in the
corresponding Portfolio, although it reserves the
right to invest Assets in other securities and other
assets and/or to redeem any or all units of the
corresponding Portfolio at any time without notice.
(f) Registration Statement. Trust has
reviewed MIP's and the Portfolios' most recent
registration statement on Form N-lA, as provided by
MIP and as filed with the SEC.
(g) Insurance. Trust has in force an errors
and omissions liability insurance policy insuring the
Funds against loss up to [$______] million for
negligence or wrongful acts.
1.2 MIP. MIP represents and warrants to Trust that:
(a) Organization. MIP is a trust duly
organized, validly existing and in good standing under
the laws of the State of Delaware and the Portfolios
are duly and validly designated series of MIP. MIP
and each Portfolio has the requisite power and
authority to own its property and conduct its business
as now being conducted and as proposed to be conducted
pursuant to this Agreement.
(b) Authorization of Agreement. The execution
and delivery of this Agreement by MIP on behalf of the
Portfolios and the conduct of business contemplated
hereby have been duly authorized by all necessary
action on the part of MIP's Board of Trustees and no
other action or proceeding is necessary for the
execution and delivery of this Agreement by the
Portfolios, or the performance by the Portfolios of
their obligations hereunder and the consummation by
the Portfolios of the transactions contemplated
hereby. This Agreement when executed and delivered by
MIP on behalf of the Portfolios shall constitute a
legal, valid and binding obligation of MIP and the
Portfolios, enforceable against MIP and the Portfolios
in accordance with its terms. No meeting of, or
consent by, interestholders of the Portfolios is
necessary to approve the issuance of the Interests (as
defined below) to the Funds.
(c) Issuance of Beneficial Interest. The
issuance by MIP of beneficial interests in the
Portfolios ("Interests") in exchange for the
Investments by the corresponding Funds of their Assets
has been duly authorized by all necessary action on
the part of the Board of Trustees of MIP. When issued
in accordance with the terms of this Agreement and
MIP's then effective registration statement, the
Interests will be validly issued, fully paid and non-
assessable.
(d) 1940 Act Registration. MIP is duly
registered as an open-end management investment
company under the 1940 Act and such registration is in
full force and effect.
(e) SEC Filings; Securities Exemptions. MIP
has duly filed all SEC Filings relating to the
Portfolios required to be filed with the SEC under the
Securities Laws. Interests in Portfolios are not
required to be registered under the 1933 Act because
such Interests are offered solely in private placement
transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the
1933 Act. In addition, Interests in the Portfolios
are either (i) noticed or qualified for sale or (ii)
exempt from notice or qualification requirements under
applicable securities laws in those states and other
jurisdictions in which Interests are offered and sold.
All SEC Filings relating to the Portfolios comply in
all material respects with the requirements of the
applicable Securities Laws and do not, as of the date
of this Agreement, contain any untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the
circumstances under which they were made, not
misleading.
(f) Tax Status. Each Portfolio is taxable as
a partnership for federal income tax purposes under
the Internal Revenue Code of 1986, as amended (the
"Code").
(g) Taxable and Fiscal Year. The taxable and
fiscal year end of each Portfolio is December.
(h) Insurance. MIP has in force an errors and
commissions liability insurance policy insuring the
Portfolios against loss up to [$______] million for
negligence and wrongful acts.
1.3 Distributor. Distributor represents and
warrants to MIP that the execution and delivery of this
Agreement by Distributor have been duly authorized by all
necessary action on the part of Distributor and no other
action or proceeding is necessary for the execution and
delivery of this Agreement by Distributor, or the
performance by Distributor of its obligations hereunder.
This Agreement when executed and delivered by Distributor
shall constitute a legal, valid and binding obligation of
Distributor, enforceable against Distributor in accordance
with its terms.
ARTICLE II
COVENANTS
2.1 Trust. Trust covenants that:
(a) Advance Review of Certain Documents.
Trust will furnish MIP at least ten (10) business days
prior to the earlier of filing or first use, with
drafts of the Funds' registration statement on Form N-
lA and any amendments thereto, and alo will furnish
MIP at least one (1) business day prior to the earlier
of filing or first use, with drafts of any prospectus
or statement of additional information supplements.
In addition, Trust will furnish or will cause to be
furnished to MIP at least three (3) business days
prior to the earlier of filing or first use, as the
case may be, any proposed advertising or sales
literature that contains language that describes or
refers to MIP or the Portfolios and that was not
previously approved in material respects by MIP.
Trust agrees that it will include in all such Fund
documents any disclosures that may be required by law,
and that it will incorporate in all such Fund
documents any material and reasonable comments made by
MIP; provided such comments are provided by MIP to
Trust within a reasonable time prior to filing or
first use of such Fund documents. MIP will not,
however, in any way be liable to Trust for any errors
or omissions in such documents, whether or not MIP
makes any objection thereto, except to the extent such
errors or omissions result from information provided
in the Portfolios' 1940 Act registration statement or
otherwise provided by MIP or any service provider of
MIP for inclusion therein. In addition, neither the
Funds nor Distributor will make any other written or
oral representations about MIP or the Portfolios other
than those contained in such documents without MIP's
prior written consent.
(b) SEC and Blue Sky Filings. Trust will file
all SEC Filings required to be filed with the SEC
under the Securities Laws in connection with the
registration of the Funds' shares, any meetings of its
shareholders, and its registration as a series of an
investment company. Trust will file such similar or
other documents as may be required to be filed with
any securities commission or similar authority by the
laws or regulations of any state, territory or
possession of the United States, including the
District of Columbia, in which shares of the Funds are
or will be noticed for sale ("State Filings"). The
Funds' SEC Filings will be prepared in all material
respects in accordance with the requirements of the
applicable Securities Laws, and, insofar as they
relate to information other than that supplied or
required to be supplied by MIP, will not, at the time
they are filed or used to offer the Funds shares,
contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary in order to make the statements
therein, in light of the circumstances under which
they were made, not misleading. The Funds' State
Filings will be prepared in accordance with the
requirements of applicable state and federal law and
the rules and regulations thereunder.
(c) 1940 Act Registration. Trust will be duly
registered as an open-end management investment
company under the 1940 Act.
(d) Tax Status. The Funds will qualify for
treatment as regulated investment companies under
Subchapter M of the Code for any taxable year during
which this Agreement continues in effect, except to
the extent that a failure to so qualify may result
from any action or omission of the corresponding
portfolio or MIP.
(e) Fiscal Year. Each Fund shall take
appropriate action to adopt and maintain the same
fiscal year end as the corresponding Portfolio
(currently the last day of December).
(f) Proxy Voting. If requested to vote on
matters pertaining to MIP or the Portfolios, the Funds
will vote such shares in accordance with applicable
law or exemption therefrom.
(g) Compliance with Laws. Trust shall comply,
in all material respects, with all applicable laws,
rules and regulations in connection with conducting
its operations as a registered investment company.
(h) Year 2000 Readiness. Trust shall use its
best efforts to ensure the readiness of its computer
systems, or those used by it in the performance of its
duties, to properly process information and data from
and after January 1, 2000. Trust shall promptly
notify MIP of any significant problems that arise in
connection with such readiness.
2.2 MIP. MIP covenants that:
(a) Signature Pages. MIP shall promptly
provide all required signature pages to Trust for
inclusion in any SEC Filings of Trust, provided Trust
is in material compliance with its covenants and other
obligations under this Agreement at the time such
signature pages are provided and included in the SEC
Filing. Trust and Distributor acknowledge and agree
that the provision of such signature pages does not
constitute a representation by MIP, its Trustees or
Officers, that such SEC Filing complies with the
requirements of the applicable Securities Laws, or
that such SEC Filing does not contain any untrue
statement of a material fact or does not omit to the
state any material fact required to be stated therein
or necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading, except with respect to
information provided by MIP or any service provider of
MIP for inclusion in such SEC Filing or for use by
Trust in preparing such filing, which shall in any
event include any written information obtained from
MIP's current registration statement on Form N-1A.
(b) Redemption. Except as otherwise provided
in this Section 2.2(b), redemptions of Interests owned
by the Funds will be effected pursuant to Section
2.2(c). In the event a Fund desires to withdraw its
entire Investment from the corresponding Portfolio,
either by submitting a redemption request or by
terminating this Agreement in accordance with
Section 5.1 hereof, such Portfolio, unless otherwise
agreed to by the parties, and in all cases subject to
Sections 17 and 18 of the 1940 Act and the rules and
regulations thereunder, will effect such redemption
"in kind" and in such a manner that the securities
delivered to the Fund or its custodian for the account
of the Fund mirror, as closely as practicable, the
composition of the Portfolio immediately prior to such
redemption. Each Portfolio further agrees that, to
the extent legally possible, it will not take or cause
to be taken any action without Trust's prior approval
that would cause the withdrawal of a Fund's
Investments to be treated as a taxable event to the
Fund. The Portfolios further agree to conduct their
activities in accordance with all applicable
requirements of Regulation 1.731-2(e) under the Code
or any successor regulation.
(c) Ordinary Course Redemptions. The
Portfolios will effect redemptions of Interests in
accordance with the provisions of the 1940 Act and the
rules and regulations thereunder, including, without
limitation, Section 17 thereof. All redemption
requests other than a withdrawal of a Fund's entire
Investment in the corresponding Portfolio under
Section 2.2(b) or, at the sole discretion of MIP, a
withdrawal (or series of withdrawals over any three
(3) consecutive business days) of an amount that
exceeds 10% of a Portfolio's net asset value, will be
effected in cash at the next determined net asset
value after the redemption request is received. The
Portfolios will use their best efforts to settle
redemptions on the business day following the receipt
of a redemption request by a Fund and if such next
business day settlement is not practicable, will
immediately notify the Fund regarding the anticipated
settlement date, which shall in all events be a date
permitted under the 1940 Act.
(d) SEC Filings. MIP will file all SEC
Filings required to be filed with the SEC under the
Securities Laws in connection with any meetings of the
Portfolios' investors and its registration as an
investment company and will provide copies of all such
definitive filings to Trust. The Portfolios' SEC
Filings will comply in all material respects with the
requirements of the applicable Securities Laws, and
will not, at the time they are filed or used, contain
any untrue statement of a material fact or omit to
state any material fact required to be stated therein
or necessary in order to make the statements therein,
in light of the circumstances under which they were
made, not misleading.
(e) 1940 Act Registration. MIP will remain
duly registered as an open-end management investment
company under the 1940 Act.
(f) Tax Status. Based upon applicable IRS
interpretations and rulings and Treasury Regulations,
each Portfolio will continue to be treated as a
partnership for federal income tax purposes. Each
Portfolio will continue to satisfy (i) the income test
imposed on regulated investment companies under
Section 851(b)(2) of the Code and (ii) the asset test
imposed on regulated investment companies under
Section 851(b)(3) of the Code as if such Sections
applied to it for so long as this Agreement continues
in effect. MIP agrees to forward to Trust prior to
the Funds' initial Investment a copy of its opinion of
counsel or private letter ruling relating to the tax
status of the Portfolios and expressly agrees that
Trust and the Funds may rely upon such opinion or
ruling during the entire term of this Agreement.
(g) Securities Exemptions. Interests in the
Portfolios have been and will continue to be offered
and sold solely in private placement transactions
which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act or require
registration or notification under any state law.
(h) Advance Notice of Certain Changes. MIP
shall provide Trust with at least one hundred twenty
(120) days' advance notice, or such lesser time as may
be agreed to by the parties, of any change in a
Portfolio's investment objective, and at least ninety
(90) days' advance notice, or if MIP has knowledge or
should have knowledge that one of the following
changes is likely to occur more than ninety (90) days
in advance of such event, notice shall be provided as
soon as reasonably possible after MIP obtains or
should have obtained such knowledge, of any material
change in a Portfolio's investment policies or
activities, any material increase in a Portfolio's
fees or expenses, or any change in a Portfolio's
fiscal year or time for calculating net asset value
for purposes of Rule 22c-1.
(i) Compliance with Laws. MIP shall comply,
in all material respects, with all applicable laws,
rules and regulations in connection with conducting
its operations as a registered investment company.
(j) Proxy Costs. If and to the extent that:
(i) MIP submits a matter to a vote of a Portfolio's
Interestholders; and (ii) the corresponding Fund
determines that it is necessary or appropriate to
solicit proxies from its shareholders in order to vote
its Interests then MIP shall assume the costs
associated with soliciting proxies from the
shareholders of the Fund.
(k) Year 2000 Readiness. MIP shall use its
best efforts to ensure the readiness of its computer
systems, or those used by it in the performance of its
duties, to properly process information and data from
and after January 1, 2000. MIP shall promptly notify
Trust of any significant problems that arise in
connection with such readiness.
(l) Due Diligence Costs. MIP agrees to pay
Distributor's expenses, including counsel fees, for a
due diligence review of MIP. Such fees shall not
exceed $15,000
2.3 Reasonable Actions. Each party covenants that
it will, subject to the provisions of this Agreement, from
time to time, as and when requested by another party or in
its own discretion, as the case may be, execute and deliver
or cause to be executed and delivered all such documents,
assignments and other instruments, take or cause to be taken
such actions, and do or cause to be done all things
reasonably necessary, proper or advisable in order to
conduct the business contemplated by this Agreement and to
carry out its intent and purpose.
ARTICLE III
INDEMNIFICATION
3.1 Trust
(a) Trust agrees to indemnify and hold
harmless MIP, the Portfolios and the Portfolios'
investment adviser, and any director/trustee, officer,
employee or agent of MIP, the Portfolio or Portfolios'
investment adviser (in this Section, each, a "Covered
Person" and collectively, "Covered Persons"), against
any and all losses, claims, demands, damages,
liabilities or expenses (including, with respect to
each Covered Person, the reasonable cost of
investigating and defending against any claims
therefor and any counsel fees incurred in connection
therewith, except as provided in subparagraph (b))
("Losses"), that:
(i) arise out of or are based upon any
violation or alleged violation of any of the
Securities Laws, or any other applicable
statute, rule, regulation or common law, or are
incurred in connection with or as a result of
any formal or informal administrative proceeding
or investigation by a regulatory agency, insofar
as such violation or alleged violation,
proceeding or investigation arises out of or is
based upon any direct or indirect omission or
commission (or alleged omission or commission)
by Trust or by any of its trustees/directors,
officers, employees or agents, but only insofar
as such omissions or commissions relate to the
Funds; or
(ii) arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in any advertising or
sales literature, prospectus, registration
statement, or any other SEC Filing relating to
the Funds, or any amendments or supplements to
the foregoing (in this Section, collectively
"Offering Documents"), or arise out of or are
based upon the omission or alleged omission to
state therein a material fact required to be
stated therein or necessary to make the
statements therein in light of the circumstances
under which they were made, not misleading, in
each case to the extent, but only to the extent,
that such untrue statement or alleged untrue
statement or omission or alleged omission was
not made in the Offering Documents in reliance
upon and in conformity with MIP's registration
statement on Form N-1A and other written
information furnished or required to be
furnished by MIP or any service provider of MIP
to the Funds or by any service provider of MIP
for use therein or for use by the Funds in
preparing such documents, including but not
limited to any written information contained in
MIP's current registration statement on Form
N-1A;
provided, however, that in no case shall Trust
be liable for indemnification hereunder with respect
to any claims made against any Covered Person unless a
Covered Person shall have notified Trust in writing
within a reasonable time after the summons, other
first legal process, notice of a federal, state or
local tax deficiency, or formal initiation of a
regulatory investigation or proceeding giving
information of the nature of the claim shall have
properly been served upon or provided to a Covered
Person seeking indemnification. Failure to notify
Trust of such claim shall not relieve Trust from any
liability that it may have to any Covered Person
otherwise than on account of the indemnification
contained in this Section.
(b) Trust will be entitled to participate at
its own expense in the defense or, if it so elects, to
assume the defense of any suit brought to enforce any
such liability, but if Trust elects to assume the
defense, such defense shall be conducted by counsel
chosen by Trust. In the event Trust elects to assume
the defense of any such suit and retain such counsel,
each Covered Person in the suit may retain additional
counsel but shall bear the fees and expenses of such
counsel unless (A) Trust shall have specifically
authorized the retaining of and payment of fees and
expenses of such counsel or (B) the parties to such
suit include any Covered Person and Trust, and any
such Covered Person has been advised in a written
opinion by counsel reasonably acceptable to Trust that
one or more legal defenses may be available to it that
may not be available to Trust, in which case Trust
shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the fees
and expenses of one counsel to all such persons. For
purposes of the foregoing, the parties agree that the
fact that the interests in a Portfolio are not
registered under the 1933 Act shall be deemed not to
give rise to one or more legal or equitable defenses
available to a Portfolio that are not available to the
Trust and/or Distributor. Trust shall not be required
to indemnify any Covered Person for any settlement of
any such claim effected without its written consent,
which consent shall not be unreasonably withheld or
delayed. The indemnities set forth in paragraph (a)
will be in addition to any liability that Trust might
otherwise have to Covered Persons.
3.2 Distributor
(a) Distributor agrees to indemnify and hold
harmless MIP, the Portfolios and the Portfolios'
investment adviser, and any director/trustee, officer,
employee or agent of MIP, the Portfolios or
Portfolios' investment adviser (in this Section, each,
a "Covered Person" and collectively, "Covered
Persons"), against any and all losses, claims,
demands, damages, liabilities or expenses (including,
with respect to each Covered Person, the reasonable
cost of investigating and defending against any claims
therefor and any counsel fees incurred in connection
therewith, except as provided in subparagraph (b))
("Losses"), that:
(i) arise out of or are based upon any
violation or alleged violation of any of the
Securities Laws, or any other applicable
statute, rule, regulation or common law, or are
incurred in connection with or as a result of
any formal or informal administrative proceeding
or investigation by a regulatory agency, insofar
as such violation or alleged violation,
proceeding or investigation arises out of or is
based upon any direct or indirect omission or
commission (or alleged omission or commission)
by Distributor or by any of its or their
trustees/directors, officers, employees or
agents, but only insofar as such omissions or
commissions relate to the Funds; or
(ii) arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in any advertising or
sales literature, prospectus, registration
statement, or any other SEC Filing relating to
the Funds, or any amendments or supplements to
the foregoing (in this Section, collectively
"Offering Documents"), or arise out of or are
based upon the omission or alleged omission to
state therein a material fact required to be
stated therein or necessary to make the
statements therein in light of the circumstances
under which they were made, not misleading, in
each case to the extent, but only to the extent,
that such untrue statement or alleged untrue
statement or omission or alleged omission was
not made in the Offering Documents in reliance
upon and in conformity with MIP's registration
statement on Form N-1A and other written
information furnished by MIP to the Funds or by
any service provider of MIP for use therein or
for use by the Funds in preparing such
documents, including but not limited to any
written information contained in MIP's current
registration statement on Form N-1A;
provided, however, that in no case shall
Distributor be liable for Losses to the extent Trust
pays the amount of such Losses to the Covered Person
under Section 3.1(a) hereof, nor shall Distributor be
liable for indemnification hereunder with respect to
any claims made against any Covered Person unless a
Covered Person shall have notified Distributor in
writing within a reasonable time after the summons,
other first legal process, notice of a federal, state
or local tax deficiency, or formal initiation of a
regulatory investigation or proceeding giving
information of the nature of the claim shall have
properly been served upon or provided to a Covered
Person seeking indemnification. Failure to notify
Distributor of such claim shall not relieve
Distributor from any liability that it may have to any
Covered Person otherwise than on account of the
indemnification contained in this Section.
(b) Distributor will be entitled to
participate at its own expense in the defense or, if
it so elects, to assume the defense of any suit
brought to enforce any such liability, but if
Distributor elects to assume the defense, such defense
shall be conducted by counsel chosen by Distributor.
In the event Distributor elects to assume the defense
of any such suit and retain such counsel, each Covered
Person in the suit may retain additional counsel but
shall bear the fees and expenses of such counsel
unless (A) Distributor shall have specifically
authorized the retaining of and payment of fees and
expenses of such counsel or (B) the parties to such
suit include any Covered Person and Distributor, and
any such Covered Person has been advised in a written
opinion by counsel reasonably acceptable to
Distributor that one or more legal defenses may be
available to it that may not be available to
Distributor, in which case Distributor shall not be
entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and
expenses of one counsel to all such persons.
Distributor shall not be required to indemnify any
Covered Person for any settlement of any such claim
effected without its written consent, which consent
shall not be unreasonably withheld or delayed. The
indemnities set forth in paragraph (a) will be in
addition to any liability that Distributor might
otherwise have to Covered Persons.
3.3 MIP.
(a) MIP agrees to indemnify and hold harmless
Trust, the Funds, Distributor, and any affiliate of
the Trust, the Funds and/or the Distributor providing
services to Trust and/or the Funds, and any
trustee/director, officer, employee or agent of any of
them (in this Section, each, a "Covered Person" and
collectively, "Covered Persons"), against any and all
losses, claims, demands, damages, liabilities or
expenses (including, with respect to each Covered
Person, the reasonable cost of investigating and
defending against any claims therefor and any counsel
fees incurred in connection therewith, except as
provided in subparagraph (b)) ("Losses"), that:
(i) arise out of or are based upon any
violation or alleged violation of any of the
Securities Laws, or any other applicable
statute, rule, regulation or common law or are
incurred in connection with or as a result of
any formal or informal administrative proceeding
or investigation by a regulatory agency, insofar
as such violation or alleged violation,
proceeding or investigation arises out of or is
based upon any direct or indirect omission or
commission (or alleged omission or commission)
by MIP, or any of its trustees, officers,
employees or agents; or
(ii) arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in any advertising or
sales literature, or any other SEC Filing
relating to the Portfolios, or any amendments to
the foregoing (in this Section, collectively,
the "Offering Documents") relating to the
Portfolios, or arise out of or are based upon
the omission or alleged omission to state
therein, a material fact required to be stated
therein, or necessary to make the statements
therein in light of the circumstances under
which they were made, not misleading; or
(iii) arise out of or are based upon any
untrue statement or alleged untrue statement of
a material fact contained in any Offering
Documents relating to Trust or the Funds, or
arise out of or are based upon the omission or
alleged omission to state therein a material
fact required to be stated therein or necessary
to make the statements therein in light of the
circumstances under which they were made, not
misleading, in each case to the extent, but only
to the extent, that such untrue statement or
alleged untrue statement or omission or alleged
omission was made in reliance upon and in
conformity with written information furnished or
required to be furnished to the Funds by MIP or
any service provider of MIP for use therein or
for use by the Funds in preparing such
documents, including but not limited to any
written information contained in MIP's current
registration statement on Form N-1A.
provided, however, that in no case shall MIP be
liable for indemnification hereunder with respect to
any claims made against any Covered Person unless a
Covered Person shall have notified MIP in writing
within a reasonable time after the summons, other
first legal process, notice of a federal, state or
local tax deficiency, or formal initiation of a
regulatory investigation or proceeding giving
information of the nature of the claim shall have
properly been served upon or provided to a Covered
Person seeking indemnification. Without limiting the
generality of the foregoing, Portfolio's indemnity to
Covered Persons shall include all relevant liabilities
of Covered Persons under the Securities Laws, as if
the Offering Documents constitute a "prospectus"
within the meaning of the 1933 Act, and MIP had
registered its interests under the 1933 Act pursuant
to a registration statement meeting the requirements
of the 1933 Act. Failure to notify MIP of such claim
shall not relieve MIP from any liability that it may
have to any Covered Person otherwise than on account
of the indemnification contained in this Section.
(b) MIP will be entitled to participate at its
own expense in the defense or, if it so elects, to
assume the defense of any suit brought to enforce any
such liability, but, if MIP elects to assume the
defense, such defense shall be conducted by counsel
chosen by MIP. In the event MIP elects to assume the
defense of any such suit and retain such counsel, each
Covered Person in the suit may retain additional
counsel but shall bear the fees and expenses of such
counsel unless (A) MIP shall have specifically
authorized the retaining of and payment of fees and
expenses of such counsel or (B) the parties to such
suit include any Covered Person and MIP, and any such
Covered Person has been advised in a written opinion
by counsel reasonably acceptable to MIP that one or
more legal defenses may be available to it that may
not be available to MIP, in which case MIP shall not
be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and
expenses of one counsel to such persons. MIP shall
not be required to indemnify any Covered Person for
any settlement of any such claim effected without its
written consent, which consent shall not be
unreasonably withheld or delayed. The indemnities set
forth in paragraph (a) will be in addition to any
liability that MIP might otherwise have to Covered
Persons.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Access to Information. Throughout the life of
this Agreement, Trust and MIP shall afford each other
reasonable access at all reasonable times to such party's
officers, employees, agents and offices and to all relevant
books and records and shall furnish each other party with
all relevant financial and other data and information as
such other party may reasonably request.
4.2 Confidentiality. Each party agrees that it
shall hold in strict confidence all data and information
obtained from another party (unless such information is or
becomes readily ascertainable from public or published
information or trade sources or public disclosure of such
information is required by law) and shall ensure that its
officers, employees and authorized representatives do not
disclose such information to others without the prior
written consent of the party from whom it was obtained,
except if disclosure is required by the SEC, any other
regulatory body, the Funds' or Portfolios' respective
auditors, or in the opinion of counsel to the disclosing
party such disclosure is required by law, and then only with
as much prior written notice to the other parties as is
practical under the circumstances. Each party hereto
acknowledges that the provisions of this Section 4.2 shall
not prevent Trust or MIP from filing a copy of this
Agreement as an exhibit to a registration statement on Form
N-1A as it relates to the Funds or Portfolios, respectively,
and that such disclosure by Trust or MIP shall not require
any additional consent from the other parties.
4.3 Obligations of Trust and MIP. MIP agrees that
the financial obligations of Trust under this Agreement
shall be binding only upon the assets of the Funds, and that
except to the extent liability may be imposed under relevant
Securities Laws, MIP shall not seek satisfaction of any such
obligation from the officers, agents, employees, trustees or
shareholders of Trust or the Funds, and in no case shall MIP
or any covered person have recourse to the assets of any
series of the Trust other than the Funds. Trust agrees that
the financial obligations of MIP under this Agreement shall
be binding only upon the assets of the Portfolios and that,
except to the extent liability may be imposed under relevant
Securities Laws, Trust shall not seek satisfaction of any
such obligation from the officers, agents, employees,
trustees or shareholders of MIP or other classes or series
of MIP.
ARTICLE V
TERMINATION, AMENDMENT
5.1 Termination. This Agreement may be terminated
at any time by the mutual agreement in writing of all
parties, or by any party on ninety (90) days' advance
written notice to the other parties hereto; provided,
however, that nothing in this Agreement shall limit Trust's
right to redeem all or a portion of its units of the
Portfolios in accordance with the 1940 Act and the rules
thereunder. The provisions of Article III and Sections 4.2
and 4.3 shall survive any termination of this Agreement.
5.2 Amendment. This Agreement may be amended,
modified or supplemented at any time in such manner as may
be mutually agreed upon in writing by the parties.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. All costs and expenses incurred in
connection with this Agreement and the conduct of business
contemplated hereby shall be paid by the party incurring
such costs and expenses.
6.2 Headings. The headings and captions contained
in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
6.3 Entire Agreement. This Agreement sets forth the
entire understanding between the parties concerning the
subject matter of this Agreement and incorporates or
supersedes all prior negotiations and understandings. There
are no covenants, promises, agreements, conditions or
understandings, either oral or written, between the parties
relating to the subject matter of this Agreement other than
those set forth herein. This Agreement may be amended only
in a writing signed by all parties.
6.4 Successors. Each and all of the provisions of
this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this
Agreement, nor any rights herein granted may be assigned to,
transferred to or encumbered by any party, without the prior
written consent of the other parties hereto.
6.5 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California without regard to the conflicts of laws
provisions thereof; provided, however, that in the event of
any conflict between the 1940 Act and the laws of
California, the 1940 Act shall govern.
6.6 Counterparts. This Agreement may be executed in
any number of counterparts, all of which shall constitute
one and the same instrument, and any party hereto may
execute this Agreement by signing one or more counterparts.
6.7 Third Parties. Except as expressly provided in
Article III, nothing herein expressed or implied is intended
or shall be construed to confer upon or give any person,
other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this
Agreement.
6.8 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall
be deemed to have been duly given or made when delivered in
person or three days after being sent by certified or
registered United States mail, return receipt requested,
postage prepaid, addressed:
If to Trust:
Smith Barney Investment Trust
388 Greenwich Street, 22nd Floor
New York, New York 10013
If to Distributor:
CFBDS, Inc.
21 Milk Street
Boston, MA 02109-5408
If to MIP:
Chief Operating Officer
Master Investment Portfolio
c/o Stephens Inc.
111 Center Street
Little Rock, AR 72201
6.9 Interpretation. Any uncertainty or ambiguity
existing herein shall not be interpreted against any party,
but shall be interpreted according to the application of the
rules of interpretation for arms' length agreements.
6.10 Operation of the Funds. Except as otherwise
provided herein, this Agreement shall not limit the
authority of the Funds, Trust or Distributor to take such
action as they may deem appropriate or advisable in
connection with all matters relating to the operation of the
Funds and the sale of their shares.
6.11 Relationship of Parties; No Joint Venture, Etc.
It is understood and agreed that neither Trust nor
Distributor shall hold itself out as an agent of MIP with
the authority to bind such party, nor shall MIP hold itself
out as an agent of Trust or Distributor with the authority
to bind such party.
6.12 Use of Name. Except as otherwise provided
herein or required by law (e.g., in Trust's Registration
Statement on Form N-1A), neither Trust, the Funds nor
Distributor shall describe or refer to the name of MIP, the
Portfolios or any derivation thereof, or any affiliate
thereof, or to the relationship contemplated by this
Agreement in any advertising or promotional materials
without the prior written consent of MIP, nor shall MIP
describe or refer to the name of Trust, the Funds or
Distributor or any derivation thereof, or any affiliate
thereof, or to the relationship contemplated by this
Agreement in any advertising or promotional materials
without the prior written consent of Trust, the Funds or
Distributor, as the case may be. In no case shall any such
consents be unreasonably withheld or delayed. In addition,
the party required to give its consent shall have at least
three (3) business days prior to the earlier of filing or
first use, as the case may be, to review the proposed
advertising or promotional materials.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers,
thereunto duly authorized, as of the date first written
above.
SMITH BARNEY INVESTMENT TRUST
on behalf of
itself and the
Funds listed on
Schedule A
By:
Name:
Title:
CFBDS, Inc.
By:
Name:
Title:
MASTER INVESTMENT PORTFOLIO,
on behalf of itself and Master Portfolios
listed on Schedule B
By:
Name:
Title:
SCHEDULE A
Smith Barney U.S. 5000 Index Fund
Smith Barney EAFE Index Fund
Approved: October 13, 1999
SCHEDULE B
MASTER INVESTMENT PORTFOLIOS
International Index Master Portfolio
US Equity Index Master Portfolio
Approved: October 13, 1999
20
|form of tpa/dc-163784 v1| 4/25/00 11:20 AM||
|form of tpa/dc-163784 v1| 4/25/00 11:20 AM||
CUSTODIAN AGREEMENT
AGREEMENT made as of this 13th day of October, 1999,
between the Smith Barney Investment Trust, Massachusetts
business trust (the "Fund"), and INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Bank").
The Fund, an open-end management investment company,
on behalf of each of the series listed on Appendix A hereto
(as such Appendix A may be amended from time to time) (each
a "Portfolio" and collectively, the "Portfolios"), desires
to place and maintain all of its portfolio securities and
cash in the custody of the Bank. The Bank has at least the
minimum qualifications required by Section 17(f)(1) of the
Investment Company Act of 1940, as amended (the "1940 Act")
to act as custodian of the portfolio securities and cash of
the Fund, and has indicated its willingness to so act,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual agreements contained herein, the parties
hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby
appoints the Bank as custodian of its portfolio securities
and cash delivered to the Bank as hereinafter described and
the Bank agrees to act as such upon the terms and conditions
hereinafter set forth. For the services rendered pursuant
to this Agreement the Fund agrees to pay to the Bank, solely
from the assets of the Portfolios, the fees set forth on
Appendix B hereto.
2. Definitions. Whenever used herein, the terms
listed below will have the following meaning:
2.1 Authorized Person. Authorized Person will
mean any of the persons duly authorized to give Proper
Instructions or otherwise act on behalf of the Fund by
appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Trustees
of the Fund.
2.3 Security. The term security as used herein
will have the same meaning assigned to such term in the
Securities Act of 1933, as amended, including, without
limitation, any note, stock, treasury stock, bond,
debenture, evidence of indebtedness, certificate of interest
or participation in any profit sharing agreement,
collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or
other mineral rights, any put, call, straddle, option, or
privilege on any security, certificate of deposit, or group
or index of securities (including any interest therein or
based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities
exchange relating to a foreign currency, or, in general, any
interest or instrument commonly known as a "security", or
any certificate of interest or participation in, temporary
or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures, forward
contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will
mean any security owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate
will mean, unless otherwise indicated, any request,
direction, instruction, or certification in writing signed
by any two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall
mean the Federal Reserve-Treasury Department Book Entry
System for United States government, instrumentality and
agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The
Depository Trust Company ("DTC"), a clearing agency
registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), its successor or successors and
its nominee or nominees. The term "Depository" shall further
mean and include any other person authorized to act as a
depository under the 1940 Act, its successor or successors
and its nominee or nominees, specifically identified in a
certified copy of a resolution of the Board.
2.8 Proper Instructions. Proper Instructions
shall mean (i) instructions (which may be continuing
instructions) regarding the purchase or sale of Portfolio
Securities, and payments and deliveries in connection
therewith, given by an Authorized Person, such instructions
to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions
(which may be continuing instructions) regarding other
matters signed or initialed by an Authorized Person. Oral
instructions will be considered Proper Instructions if the
Bank reasonably believes them to have been given by an
Authorized Person. The Fund shall cause all oral
instructions to be promptly confirmed in writing. The Bank
shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction and the sole
obligation of the Bank with respect to any follow-up or
confirmatory instruction shall be to make reasonable efforts
to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the
Fund. The Fund shall be responsible, at the Fund's expense,
for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent
such action requires the Bank to act, the Fund shall give
the Bank specific Proper Instructions as to the action
required. Upon receipt by the Bank of an Officers'
Certificate as to the authorization by the Board accompanied
by a detailed description of procedures approved by the
Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices
provided that the Board and the Bank agree in writing that
such procedures afford adequate safeguards for the Fund's
assets.
3. Separate Accounts. If the Fund has more than one
portfolio, the Bank will segregate the assets of each
portfolio to which this Agreement relates into a separate
account for each such portfolio containing the assets of
such portfolio (and all investment earnings thereon).
Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be
deemed to refer to the Fund acting on behalf of one or more
of its portfolios, any reference in this Agreement to any
assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable portfolio,
any duty or obligation of the Bank hereunder to the Fund
shall be deemed to refer to duties and obligations with
respect to such individual portfolio and any obligation or
liability of the Fund hereunder shall be binding only with
respect to such individual portfolio, and shall be
discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The
Secretary or Assistant Secretary of the Fund will at all
times maintain on file with the Bank his or her
certification to the Bank, in such form as may be acceptable
to the Bank, of (i) the names and signatures of the
Authorized Persons and (ii) the names of the members of the
Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent
certification on file (including without limitation any
person named in the most recent certification who is no
longer an Authorized Person as designated therein), the
Secretary or Assistant Secretary of the Fund will within a
reasonable period sign a new or amended certification
setting forth the change and the new, additional or omitted
names or signatures. Until such time as the Bank actually
receives a new or amended certification from the Fund, the
Bank will be entitled to rely and act upon the most recent
certification received by the Bank. The Bank will be
entitled to rely and act upon any Officers' Certificate
given to it by the Fund which has been signed by Authorized
Persons named in the most recent certification received by
the Bank.
5. Custody of Cash. As custodian for the Fund, the
Bank will open and maintain a separate account or accounts
in the name of the Fund or in the name of the Bank, as
Custodian of the Fund, and will deposit to the account of
the Fund all of the cash of the Fund, except for cash held
by a subcustodian appointed pursuant to Sections 14.2 or
14.3 hereof, including borrowed funds, delivered to the
Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the
Bank's internal policies regarding the management of cash
accounts, the Bank may segregate certain portions of the
cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7)
days notice prior to withdrawal of cash from such an
account. Upon receipt by the Bank of Proper Instructions
(which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding
shares of common stock of the Fund, notification from the
Fund's transfer agent as provided in Section 7, requesting
such payment, designating the payee or the account or
accounts to which the Bank will release funds for deposit,
and stating that it is for a purpose permitted under the
terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the
accounts of the Fund, insofar as funds are available for
that purpose, only as permitted in subsections 5.1-5.9
below.
5.1 Purchase of Securities. The Bank will make
payments of cash held for the accounts of the Fund upon the
purchase of securities for the Fund, against contemporaneous
receipt of such securities by the Bank or against delivery
of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the
jurisdiction or market in which the transaction occurs
registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or
a nominee of the Bank, or receipt for the account of the
Bank pursuant to the provisions of Section 6 below, each
such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of
Book Entry Paper (as that term is defined in Section 6.6
hereof)) of purchase of the securities received by the Bank
before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is
made.
5.2 Redemptions. The Bank will make payments of
cash held for the accounts of the Fund in such amount as may
be necessary for the repurchase or redemption of common
shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. The Bank
will make payments of cash held for the accounts of the Fund
for the payment on the account of the Fund of dividends or
other distributions to shareholders as may from time to time
be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for
its services hereunder and reimbursement of the expenses and
liabilities of the Bank as provided hereunder, fees of any
transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. The Bank
will make payments of cash held for the accounts of the Fund
for payments in connection with the conversion, exchange or
surrender of Portfolio Securities or securities subscribed
to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. The Bank will make
payments of cash held for the accounts of the Fund to repay
loans of money made to the Fund, but, in the case of final
payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon
surrender of documents evidencing the loan;
5.6 Repayment of Cash. The Bank will make payments
of cash held for the accounts of the Fund to repay the cash
delivered to the Fund for the purpose of collateralizing the
obligation to return to the Fund certificates borrowed from
the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) The Bank will make payments of cash held
for the accounts of the Fund for payments in connection with
foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements")which may be
entered into by the Bank on behalf of the Fund upon the
receipt of Proper Instructions, such Proper Instructions to
specify the currency broker or banking institution (which
may be the Bank, or any other subcustodian or agent
hereunder, acting as principal) with which the contract or
option is made, and the Bank shall have no duty with respect
to the selection of such currency brokers or banking
institutions with which the Fund deals or for their failure
to comply with the terms of any contract or option.
(b) In order to secure any payments in
connection with Foreign Exchange Agreements which may be
entered into by the Bank pursuant to Proper Instructions,
the Fund agrees that the Bank shall have a continuing lien
and security interest, to the extent of any payment due
under any Foreign Exchange Agreement, in and to any property
at any time held by the Bank for the Fund's benefit or in
which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or
control of any third party acting on the Bank's behalf).
The Fund authorizes the Bank, in the Bank's sole discretion,
at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing
to the credit of the Fund on the Bank's books.
5.8 Other Authorized Payments. The Bank will make
payments of cash held for the accounts of the Fund for other
authorized transactions of the Fund, or other obligations of
the Fund incurred for proper Fund purposes; provided that
before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an
Authorized Person (other than the Person certifying such
resolution) and certified by its Secretary or Assistant
Secretary, naming the person or persons to whom such payment
is to be made, and either describing the transaction for
which payment is to be made and declaring it to be an
authorized transaction of the Fund, or specifying the amount
of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and
declaring such purpose to be a proper corporate purpose.
5.9 Termination: The Bank will make payments of
cash held for the accounts of the Fund upon the termination
of this Agreement as hereinafter set forth pursuant to
Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as
otherwise provided herein, and except for securities to be
delivered to any subcustodian appointed pursuant to Sections
14.2 or 14.3 hereof, the Bank as custodian will receive and
hold pursuant to the provisions hereof, in a separate
account or accounts and physically segregated at all times
from those of other persons, any and all Portfolio
Securities which may now or hereafter be delivered to it by
or for the account of the Fund. All such Portfolio
Securities will be held or disposed of by the Bank for, and
subject at all times to, the Proper Instructions of the Fund
pursuant to the terms of this Agreement. Subject to the
specific provisions herein relating to Portfolio Securities
that are not physically held by the Bank, the Bank will
register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the
name of a registered nominee of the Bank as defined in the
Internal Revenue Code of 1986, as amended (the "Code") and
any Regulations of the Treasury Department issued
thereunder, and will execute and deliver all such
certificates in connection therewith as may be required by
such laws or regulations or under the laws of any state.
The Fund will from time to time furnish to the
Bank appropriate instruments to enable it to hold or deliver
in proper form for transfer, or to register in the name of
its registered nominee, any Portfolio Securities which may
from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any
nominee of the Bank will vote any of the Portfolio
Securities held hereunder, except in accordance with Proper
Instructions or an Officers' Certificate. The Bank will
execute and deliver, or cause to be executed and delivered,
to the Fund all notices, proxies and proxy soliciting
materials delivered to the Bank with respect to such
Securities, such proxies to be executed by the registered
holder of such Securities (if registered otherwise than in
the name of the Fund), but without indicating the manner in
which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is
notified that an issuer of any Portfolio Security has taken
or intends to take a corporate action (a "Corporate Action")
that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security,
including without limitation, liquidation, consolidation,
merger, recapitalization, reorganization, reclassification,
subdivision, combination, stock split or stock dividend,
which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security
(a "Response"), the Bank shall notify the Fund promptly of
the Corporate Action, the Response required in connection
with the Corporate Action and the Bank's deadline for
receipt from the Fund of Proper Instructions regarding the
Response (the "Response Deadline"). The Bank shall forward
to the Fund via telecopier and/or overnight courier all
notices, information statements or other materials relating
to the Corporate Action promptly after receipt of such
materials by the Bank.
(a) The Bank shall act upon a required
Response only after receipt by the Bank of Proper
Instructions from the Fund no later than 5:00 p.m. on the
date specified as the Response Deadline and only if the Bank
(or its agent or subcustodian hereunder) has actual
possession of all necessary Securities, consents and other
materials no later than 5:00 p.m. on the date specified as
the Response Deadline.
(b) The Bank shall have no duty to act upon a
required Response if Proper Instructions relating to such
Response and all necessary Securities, consents and other
materials are not received by and in the possession of the
Bank on or prior to 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding the foregoing, the Bank
may, in its sole discretion, use its best efforts to act
upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are
received by the Bank after 5:00 p.m. on the date specified
as the Response Deadline, it being acknowledged and agreed
by the parties that any undertaking by the Bank to use its
best efforts in such circumstances shall in no way create
any duty upon the Bank to complete such Response prior to
its expiration.
(c) In the event that the Fund notifies the
Bank of a Corporate Action requiring a Response and the Bank
has received no other notice of such Corporate Action, the
Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such
Corporate Action.
(d) Section 14.3(e) of this Agreement shall
govern any Corporate Action involving Foreign Portfolio
Securities held by a Selected Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has
received a certified copy of a resolution of the Board
specifically approving deposits of Fund assets in the Book-
Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed
and approved the arrangement and has not delivered an
Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in
the Book-Entry System provided that such Portfolio
Securities are represented in an account ("Account") of the
Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets
held as a fiduciary, custodian, or otherwise for customers;
(b) The records of the Bank (and any such
agent) with respect to the Fund's participation in the Book-
Entry System through the Bank (or any such agent) will
identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and
shall at all times during the regular business hours of the
Bank (or such agent) be open for inspection by duly
authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank
shall also, by book entry or otherwise, identify as
belonging to the Fund a quantity of securities in a fungible
bulk of securities (i) registered in the name of the Bank or
its nominee, or (ii) shown on the Bank's account on the
books of the Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for
securities purchased for the account of the Fund or shall
pay cash collateral against the return of Portfolio
Securities loaned by the Fund upon (i) receipt of advice
from the Book-Entry System that such Securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the Bank (or its agent) to reflect such
payment and transfer for the account of the Fund. The Bank
(or its agent) shall transfer securities sold or loaned for
the account of the Fund upon
(i) receipt of advice from the Book-
Entry System that payment for securities sold or payment of
the initial cash collateral against the delivery of
securities loaned by the Fund has been transferred to the
Account; and
(ii) the making of an entry on the
records of the Bank (or its agent) to reflect such transfer
and payment for the account of the Fund. Copies of all
advices from the Book-Entry System of transfers of
securities for the account of the Fund shall identify the
Fund, be maintained for the Fund by the Bank and shall be
provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule 17f-4 of the 1940
Act, of any transfers to or from the account of the Fund;
(d) The Bank will promptly provide the Fund
with any report obtained by the Bank or its agent on the
Book-Entry System's accounting system, internal accounting
control and procedures for safeguarding securities deposited
in the Book-Entry System;
(e) The Bank shall be liable to the Fund for
any loss or damage to the Fund resulting from the use of a
Book-Entry System to the extent such loss or damage is
solely the result of any gross negligence, willful
misfeasance or bad faith of the Bank or any of its agents,
directors, officers or employees or of the reckless
disregard by the Bank or any of its agents, directors,
officers or employees of its duty to use commercially
reasonable efforts to enforce such rights as it may have
against the Book-Entry System. At the election of the Fund,
the Fund shall be substituted for the Bank in any claim
against the Book-Entry System or any other person which the
Bank may have as a consequence of any loss or damage if and
to the extent the Fund has not been made whole for any loss
or damage.
6.5 Use of a Depository. Provided (i) the Bank
has received a certified copy of a resolution of the Board
specifically approving deposits in DTC or other such
Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed
and approved the arrangement and has not delivered an
Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold,
receive, exchange, release, lend, deliver and otherwise deal
with Portfolio Securities including stock dividends, rights
and other items of like nature, and to receive and remit to
the Bank on behalf of the Fund all income and other payments
thereon and to take all steps necessary and proper in
connection with the collection thereof;
(b) Registration of Portfolio Securities may
be made in the name of any nominee or nominees used by such
Depository;
(c) Payment for securities purchased and sold
may be made through the clearing medium employed by such
Depository for transactions of participants acting through
it. Upon any purchase of Portfolio Securities, payment will
be made only upon delivery of the securities to or for the
account of the Fund and the Fund shall pay cash collateral
against the return of Portfolio Securities loaned by the
Fund only upon delivery of the Securities to or for the
account of the Fund; and upon any sale of Portfolio
Securities, delivery of the Securities will be made only
against payment therefor or, in the event Portfolio
Securities are loaned, delivery of Securities will be made
only against receipt of the initial cash collateral to or
for the account of the Fund; and
(d) The Bank shall be liable to the Fund for
any loss or damage to the Fund resulting from use of a
Depository by reason of any gross negligence, willful
misfeasance or bad faith of the Bank or its employees or
from any reckless disregard by the Bank of its duty to use
its commercially reasonable efforts to enforce such rights
as it may have against a depository. Accordingly, the Bank
shall use its best efforts to provide that:
(i) The Depository obtains replacement
of any certificated Portfolio Security deposited with it in
the event such Security is lost, destroyed, wrongfully taken
or otherwise not available to be returned to the Bank upon
its request;
(ii) Proxy materials received by a
Depository with respect to Portfolio Securities deposited
with such Depository are forwarded immediately to the Bank
for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to
the Bank confirmation of any purchase or sale of Portfolio
Securities and of the appropriate book entry made by such
Depository to the Fund's account;
(iv) Such Depository prepares and
delivers to the Bank such records with respect to the
performance of the Bank's obligations and duties hereunder
as may be necessary for the Fund to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act
and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank
all internal accounting control reports, whether or not
audited by an independent public accountant, as well as such
other reports as the Fund may reasonably request in order to
verify the Portfolio Securities held by such Depository.
(e) The Bank shall be liable to the Fund for
any loss or damage to the Fund resulting from the use of a
Depository to the extent such loss or damage is solely the
result of any gross negligence, willful misfeasance or bad
faith of the Bank or any of its directors, officers or
employees or of the reckless disregard by the Bank or any of
its directors, officers or employees of its duty to use
commercially reasonable efforts to enforce such rights as it
may have against the Depository.
6.6 Use of Book-Entry System for Commercial Paper.
Provided (i) the Bank has received a certified copy of a
resolution of the Board specifically approving participation
in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and
(ii) for each year following such approval the Board has
received and approved the arrangements, upon receipt of
Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such
Issuer's Book-Entry Paper, the Bank shall issue and hold in
book-entry form, on behalf of the Fund, commercial paper
issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining
procedures for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry
Paper held by the Fund in an account of the Bank that
includes only assets held by it for customers;
(b) The records of the Bank with respect to
the Fund's purchase of Book-Entry Paper through the Bank
will identify, by book-entry, commercial paper belonging to
the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the
Bank be open for inspection by duly authorized officers,
employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper
purchased for the account of the Fund upon contemporaneous
(i) receipt of advice from the Issuer that such sale of
Book-Entry Paper has been effected, and (ii) the making of
an entry on the records of the Bank to reflect such payment
and transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry
Paper obligation upon the maturity thereof upon
contemporaneous (i) receipt of advice that payment for such
Book-Entry Paper has been transferred to the Fund, and (ii)
the making of an entry on the records of the Bank to reflect
such payment for the account of the Fund;
(e) The Bank shall transmit to the Fund a
transaction report showing each transaction in Book-Entry
Paper for the account of the Fund on the next business day
following the day on which such transaction is booked; and
(f) The Bank will send to the Fund such
reports on its system of internal accounting control with
respect to the Book-Entry Paper as the Fund may reasonably
request from time to time.
.
6.7 Use of Immobilization Programs. Provided (i)
the Bank has received a certified copy of a resolution of
the Board specifically approving the maintenance of
Portfolio Securities in an immobilization program operated
by a bank which meets the requirements of Section 26(a)(1)
of the 1940 Act, and (ii) for each year following such
approval the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the
Bank shall enter into such immobilization program with such
bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities
which are Eurodollar CDs may be physically held by the
European branch of the U.S. banking institution that is the
issuer of such Eurodollar CD (a "European Branch"), provided
that such Portfolio Securities are identified on the books
of the Bank as belonging to the Fund and that the books of
the Bank identify the European Branch holding such Portfolio
Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first
sentence of this subsection 6.8, the Bank shall be under no
other duty with respect to such Eurodollar CDs belonging to
the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-Counter.
(i) The Bank shall take action as to put
options ("puts") and call options ("calls") purchased or
sold (written) by the Fund regarding escrow or other
arrangements (i) in accordance with the provisions of any
agreement entered into upon receipt of Proper Instructions
among the Bank, any broker-dealer registered with the
National Association of Securities Dealers, Inc. (the
"NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it
to do so, the Bank shall be under no duty or obligation to
see that the Fund has deposited or is maintaining adequate
margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to
present such option to the broker for exercise unless it
receives Proper Instructions from the Fund. The Bank shall
have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of
any such purchase or sale, or the adequacy of any collateral
delivered to a broker in connection with an option or
deposited to or withdrawn from a Segregated Account (as
defined in subsection 6.10 below). The Bank specifically,
but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Fund
that the amount of such collateral held by a broker or held
in a Segregated Account is sufficient to protect such broker
or the Fund against any loss; (ii) effect the return of any
collateral delivered to a broker; or (iii) advise the Fund
that any option it holds, has or is about to expire. Such
duties or obligations shall be the sole responsibility of
the Fund.
(b) Puts, Calls and Futures Traded on
Commodities Exchanges
(i) The Bank shall take action as to
puts, calls and futures contracts ("Futures") purchased or
sold by the Fund in accordance with the provisions of any
agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures
Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund.
(ii) The responsibilities of the Bank as
to futures, puts and calls traded on commodities exchanges,
any Futures Commission Merchant account and the Segregated
Account shall be limited as set forth in subparagraph
(a)(ii) of this Section 6.9 as if such subparagraph referred
to Futures Commission Merchants rather than brokers, and
Futures and puts and calls thereon instead of options.
6.10 Segregated Account. The Bank shall upon
receipt of Proper Instructions establish and maintain a
Segregated Account or Accounts for and on behalf of the
Fund.
(a) Cash and/or Portfolio Securities may be
transferred into a Segregated Account upon receipt of Proper
Instructions in the following circumstances:
(i) in accordance with the provisions of
any agreement among the Fund, the Bank and a broker-dealer
registered under the Exchange Act and a member of the NASD
or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the
rules of the Options Clearing Corporation and of any
registered national securities exchange or the Commodity
Futures Trading Commission or any registered Contract
Market, or of any similar organizations regarding escrow or
other arrangements in connection with transactions by the
Fund;
(ii) for the purpose of segregating cash
or securities in connection with options purchased or
written by the Fund or commodity futures purchased or
written by the Fund;
(iii) for the deposit of liquid assets,
such as cash, U.S. Government securities or other liquid
securities, having a market value (marked to market on a
daily basis) at all times equal to not less than the
aggregate purchase price due on the settlement dates of all
the Fund's then outstanding forward commitment or "when-
issued" agreements relating to the purchase of Portfolio
Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with
broker-dealer firms;
(iv) for the purposes of compliance by
the Fund with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases
of the Securities and Exchange Commission relating to the
maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes,
but only, in the case of this clause (v), upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board, or of the executive committee of
the Board signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such Segregated Account and declaring
such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be
withdrawn from a Segregated Account pursuant to Proper
Instructions in the following circumstances:
(i) with respect to assets deposited in
accordance with the provisions of any agreements referenced
in (a)(i) or (a)(ii) above, in accordance with the
provisions of such agreements;
(ii) with respect to assets deposited
pursuant to (a)(iii) or (a)(iv) above, for sale or delivery
to meet the Fund's obligations under outstanding forward
commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets
of equal or greater value deposited in the Segregated
Account;
(iv) to the extent that the Fund's
outstanding forward commitment or when-issued agreements for
the purchase of portfolio securities or reverse repurchase
agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other
than those in the Segregated Account;
(v) for delivery upon settlement of a
forward commitment or when-issued agreement for the sale of
Portfolio Securities; or
(vi) with respect to assets deposited
pursuant to (a)(v) above, in accordance with the purposes of
such account as set forth in Proper Instructions.
6.11 Interest Bearing Call or Time Deposits. The
Bank shall, upon receipt of Proper Instructions relating to
the purchase by the Fund of interest-bearing fixed-term and
call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its
records with respect to the assets of the Fund appropriate
notation as to the amount of each such deposit, the banking
institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt
evidencing the deposit, if any, as may be forwarded to the
Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of
the Bank therefore shall be the same as and no greater than
the Bank's responsibility in respect of other Portfolio
Securities of the Fund.
6.12 Transfer of Securities. The Bank will
transfer, exchange, deliver or release Portfolio Securities
held by it hereunder, insofar as such Securities are
available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section
only upon receipt of Proper Instructions. The Proper
Instructions shall state that such transfer, exchange or
delivery is for a purpose permitted under the terms of this
Section 6.12, and shall specify the applicable subsection,
or describe the purpose of the transaction with sufficient
particularity to permit the Bank to ascertain the applicable
subsection. After receipt of such Proper Instructions, the
Bank will transfer, exchange, deliver or release Portfolio
Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the
account of the Fund, against contemporaneous receipt by the
Bank of payment therefor in full, or against payment to the
Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which
the transaction occurs, each such payment to be in the
amount of the sale price shown in a broker's confirmation of
sale received by the Bank before such payment is made, as
confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into
other securities alone or other securities and cash pursuant
to any plan of merger, consolidation, reorganization, share
split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such
Portfolio Securities, or for the purpose of tendering shares
in the event of a tender offer therefor, provided, however,
that in the event of an offer of exchange, tender offer, or
other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no
liability for failure to so tender in a timely manner unless
such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has
actual possession of such Security at least two business
days prior to the date of tender;
(c) Upon conversion of Portfolio Securities
pursuant to their terms into other securities;
(d) For the purpose of redeeming in-kind
shares of the Fund upon authorization from the Fund;
(e) In the case of option contracts owned by
the Fund, for presentation to the endorsing broker;
(f) When such Portfolio Securities are called,
redeemed or retired or otherwise become payable;
(g) For the purpose of effectuating the pledge
of Portfolio Securities held by the Bank in order to
collateralize loans made to the Fund by any bank, including
the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the
account of the Fund of the moneys borrowed, provided
further, however, that in cases where additional collateral
is required to secure a borrowing already made, and such
fact is made to appear in the Proper Instructions, Portfolio
Securities may be released for that purpose without any such
payment. In the event that any pledged Portfolio Securities
are held by the Bank, they will be so held for the account
of the lender, and after notice to the Fund from the lender
in accordance with the normal procedures of the lender and
any loan agreement between the fund and the lender that an
event of deficiency or default on the loan has occurred, the
Bank may deliver such pledged Portfolio Securities to or for
the account of the lender;
(h) for the purpose of releasing certificates
representing Portfolio Securities, against contemporaneous
receipt by the Bank of the fair market value of such
security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities
lent by the Fund to a bank or broker dealer, but only
against receipt in accordance with street delivery custom
except as otherwise provided herein, of adequate collateral
as agreed upon from time to time by the Fund and the Bank,
and upon receipt of payment in connection with any
repurchase agreement relating to such securities entered
into by the Fund;
(j) for other authorized transactions of the
Fund or for other proper corporate purposes; provided that
before making such transfer, the Bank will also receive a
certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer
certifying such resolution) and certified by its Secretary
or Assistant Secretary, specifying the Portfolio Securities
to be delivered, setting forth the transaction in or purpose
for which such delivery is to be made, declaring such
transaction to be an authorized transaction of the Fund or
such purpose to be a proper corporate purpose, and naming
the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16
of this Agreement.
As to any deliveries made by the Bank pursuant to this
Section 6.12, securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. Redemptions. In the case of payment of assets of
the Fund held by the Bank in connection with redemptions and
repurchases by the Fund of outstanding common shares, the
Bank will rely on notification by the Fund's transfer agent
of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is
made. Payment shall be made in accordance with the
Declaration of Trust and By-laws of the Fund (the
"Articles"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of
the following transactions, not in the ordinary course of
business, namely, the merger of the Fund into or the
consolidation of the Fund with another investment company,
the sale by the Fund of all, or substantially all, of its
assets to another investment company, or the liquidation or
dissolution of the Fund and distribution of its assets, the
Bank will deliver the Portfolio Securities held by it under
this Agreement and disburse cash only upon the order of the
Fund set forth in an Officers' Certificate, accompanied by a
certified copy of a resolution of the Board authorizing any
of the foregoing transactions. Upon completion of such
delivery in proper form and disbursement and the payment of
the fees, disbursements and expenses of the Bank, this
Agreement will terminate and the Bank shall be released from
any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization.
Notwithstanding anything herein to the contrary, unless and
until the Bank receives an Officers' Certificate to the
contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the
transfer agent:
9.1 Endorse for collection and collect on behalf
of and in the name of the Fund all checks, drafts, or other
negotiable or transferable instruments or other orders for
the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income,
dividends, interest and other payments or distributions of
cash with respect to the Portfolio Securities held
thereunder;
9.2 Present for payment all coupons and other
income items held by it for the account of the Fund which
call for payment upon presentation and hold the cash
received by it upon such payment for the account of the
Fund;
9.3 Receive and hold for the account of the Fund
all securities received as a distribution on Portfolio
Securities as a result of a stock dividend, share split-up,
reorganization, recapitalization, merger, consolidation,
readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it
hereunder.
9.4 Execute as agent on behalf of the Fund all
necessary ownership and other certificates and affidavits
required by the Internal Revenue Code or the regulations of
the Treasury Department issued thereunder, or by the laws of
any state, now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so and as
may be required to obtain payment in respect thereof. The
Bank will execute and deliver such certificates in
connection with Portfolio Securities delivered to it or by
it under this Agreement as may be required under the
provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the
laws of any State;
9.5 Present for payment all Portfolio Securities
which are called, redeemed, retired or otherwise become
payable, and hold cash received by it upon payment for the
account of the Fund; and
9.6 Exchange interim receipts or temporary
securities for definitive securities.
10. Collections and Defaults. The Bank will use
reasonable efforts to collect any funds which may to its
knowledge become collectible arising from Portfolio
Securities, including dividends, interest and other income,
and to transmit to the Fund notice actually received by it
of any call for redemption, offer of exchange, right of
subscription, reorganization or other proceedings affecting
such Securities. If Portfolio Securities upon which such
income is payable are in default or payment is refused after
due demand or presentation, the Bank will notify the Fund in
writing of any default or refusal to pay within two business
days from the day on which it receives knowledge of such
default or refusal. In addition, the Bank will send the
Fund a written report once each month showing any income on
any Portfolio Security held by it which is more than ten
days overdue on the date of such report and which has not
been previously reported.
11. Maintenance of Records and Accounting Services.
The Bank will maintain records with respect to transactions
for which the Bank is responsible pursuant to the terms and
conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act. The books
and records of the Bank pertaining to its actions under this
Agreement and reports by the Bank or its independent
accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls
will be open to inspection and audit at reasonable times by
officers of or auditors employed by the Fund and will be
preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
The Bank will furnish to the Fund as of the end of each
month a report showing the Portfolio Securities and cash
held by it for the Fund.
The Bank shall perform fund accounting and shall keep
the books of account and render statements or copies from
time to time as reasonably requested by the Treasurer or any
executive officer of the Fund.
The Bank shall assist generally in the preparation of
reports to shareholders and others, audits of accounts, and
other ministerial matters of like nature.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and,
unless otherwise directed by the Board, determine as of the
close of regular trading on The New York Stock Exchange,
Inc. on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if
any, as may be authorized by the Board, the net asset value
and the public offering price of a share of capital stock of
the Fund, such determination to be made in accordance with
the provisions of the Articles of the Fund and the
Prospectus and Statement of Additional Information relating
to the Fund, as they may from time to time be amended, and
any applicable resolutions of the Board at the time in force
and applicable; and promptly to notify the Fund, the proper
exchange and the NASD or such other persons as the Fund may
request of the results of such computation and
determination. In computing the net asset value hereunder,
the Bank may rely in good faith upon information furnished
to it by any Authorized Person in respect of (i) the manner
of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of
account kept by the Bank, (ii) reserves, if any, authorized
by the Board or that no such reserves have been authorized,
(iii) the source of the quotations to be used in computing
the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and
(v) the method of computation of the public offering price
on the basis of the net asset value of the shares, and the
Bank shall not be responsible for any loss occasioned by
such reliance or for any good faith reliance on any
quotations received from a source pursuant to (iii) above.
12.2. Yield Calculation. The Bank will compute
the performance results of the Fund (the "Yield
Calculation") in accordance with the provisions of Release
No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the
"Releases") promulgated by the Securities and Exchange
Commission, and any subsequent amendments to, published
interpretations of or general conventions accepted by the
staff of the Securities and Exchange Commission with respect
to such releases or the subject matter thereof ("Subsequent
Staff Positions"), subject to the terms set forth below:
(a) The Bank shall compute the Yield
Calculation for the Fund for the stated periods of time as
shall be mutually agreed upon, and communicate in a timely
manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the
Bank will derive the items of data necessary for the
computation from the records it generates and maintains for
the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any
duty or liability with respect to the accuracy or
correctness of any such data supplied to it by the Fund, any
of the Fund's designated agents or any of the Fund's
designated third party providers.
(c) At the request of the Bank, the Fund shall
provide, and the Bank shall be entitled to rely on, written
standards and guidelines to be followed by the Bank in
interpreting and applying the computation methods set forth
in the Releases or any Subsequent Staff Positions as they
specifically apply to the Fund. In the event that the
computation methods in the Releases or the Subsequent Staff
Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is
any question of interpretation as to the characterization of
a particular security or any aspect of a security or a
payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital,
etc.) or otherwise or as to any other element of the
computation which is pertinent to the Fund, the Fund or its
designated agent shall have the full responsibility for
making the determination of how the security or payment is
to be treated for purposes of the computation and how the
computation is to be made and shall inform the Bank thereof
on a timely basis. The Bank shall have no responsibility to
make independent determinations with respect to any item
which is covered by this Section, and shall not be
responsible for its computations made in accordance with
such determinations so long as such computations are
mathematically correct.
(d) The Fund shall keep the Bank informed of
all publicly available information and of any non-public
advice, or information obtained by the Fund from its
independent auditors or by its personnel or the personnel of
its investment adviser, or Subsequent Staff Positions
related to the computations to be undertaken by the Bank
pursuant to this Agreement and the Bank shall not be deemed
to have knowledge of such information (except as contained
in the Releases) unless it has been furnished to the Bank in
writing.
13. Additional Services. The Bank shall perform the
additional services for the Fund as are set forth on
Appendix C hereto. Appendix C may be amended from time to
time upon agreement of the parties to include further
additional services to be provided by the Bank to the Fund,
at which time the fees set forth in Appendix B shall be
increased by mutual agreement.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care.
In performing its duties hereunder and any other duties
listed on any Schedule hereto, if any, the Bank will be
entitled to receive and act upon the advice of independent
counsel of its own selection, which may be counsel for the
Fund, and will be without liability for any action taken or
thing done or omitted to be done in accordance with this
Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to
inquire into and will not be liable for:
(a) the validity of the issue of any Portfolio
Securities purchased by or for the Fund, the legality of the
purchases thereof or the propriety of the price incurred
therefor;
(b) the legality of any sale of any Portfolio
Securities by or for the Fund or the propriety of the amount
for which the same are sold;
(c) the legality of an issue or sale of any
common shares of the Fund or the sufficiency of the amount
to be received therefor;
(d) the legality of the repurchase of any
common shares of the Fund or the propriety of the amount to
be paid therefor;
(e) the legality of the declaration of any
dividend by the Fund or the legality of the distribution of
any Portfolio Securities as payment in kind of such
dividend; and
(f) any property or moneys of the Fund unless
and until received by it, and any such property or moneys
delivered or paid by it pursuant to the terms hereof.
Moreover, the Bank will not be under any duty or
obligation to ascertain whether any Portfolio Securities at
any time delivered to or held by it for the account of the
Fund are such as may properly be held by the Fund under the
provisions of its Articles, any federal or state statutes or
any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to
Property of the Fund Held in the United States. The Bank
may employ agents of its own selection in the performance of
its duties hereunder and shall be responsible for the acts
and omissions of such agents as if performed by the Bank
hereunder. Without limiting the foregoing, certain duties
of the Bank hereunder may be performed by one or more
affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may
employ subcustodians selected by or at the direction of the
Fund, provided that any such subcustodian meets at least the
minimum qualifications required by Section 17(f)(1) of the
1940 Act to act as a custodian of the Fund's assets with
respect to property of the Fund held in the United States.
The Bank shall have no liability to the Fund or any other
person by reason of any act or omission of any such
subcustodian and the Fund shall indemnify the Bank and hold
it harmless from and against any and all actions, suits and
claims, arising directly or indirectly out of the
performance of any subcustodian. Upon request of the Bank,
the Fund shall assume the entire defense of any action,
suit, or claim subject to the foregoing indemnity. The Fund
shall pay all fees and expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Property
of the Fund Held Outside of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Fund has appointed the Bank
Foreign Custody Manager (as that term is defined in Rule
17f-5 under the 1940 Act), the Bank's duties and obligations
with respect to the Fund's Portfolio Securities and other
assets maintained outside the United States shall be, to the
extent not set forth herein, as set forth in the Delegation
Agreement between the Fund and the Bank (the "Delegation
Agreement").
(ii) If the Fund has appointed any other
person or entity Foreign Custody Manager, the Bank shall act
only upon Proper Instructions from the Fund with regard to
any of the Fund's Portfolio Securities or other assets held
or to be held outside of the United States, and the Bank
shall be without liability for any Claim (as that term is
defined in Section 15 hereof) arising out of maintenance of
the Fund's Portfolio Securities or other assets outside of
the United States. The Fund also agrees that it shall enter
into a written agreement with such Foreign Custody Manager
that shall obligate such Foreign Custody Manager to provide
to the Bank in a timely manner all information required by
the Bank in order to complete its obligations hereunder.
The Bank shall not be liable for any Claim arising out of
the failure of such Foreign Custody Manager to provide such
information to the Bank.
(b) Segregation of Securities. The Bank shall
identify on its books as belonging to the Fund the Foreign
Portfolio Securities held by each foreign sub-custodian
(each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of
the necessary information from such Eligible Foreign
Custodian if the Foreign Custody Manager is not the Bank.
(c) Access of Independent Accountants of the
Fund. If the Bank is the Fund's Foreign Custody Manager,
upon request of the Fund, the Bank will use its best efforts
to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign
banking institution employed as an Eligible Foreign
Custodian insofar as such books and records relate to the
performance of such foreign banking institution with regard
to the Fund's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Fund's
Foreign Custody Manager, the Bank will supply to the Fund
the reports required under the Delegation Agreement.
(e) Transactions in Foreign Custody Account.
Transactions with respect to the assets of the Fund held by
an Eligible Foreign Custodian shall be effected pursuant to
Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable agreement between
the Foreign Custody Manager and such Eligible Foreign
Custodian. If at any time any Foreign Portfolio Securities
shall be registered in the name of the nominee of the
Eligible Foreign Custodian, the Fund agrees to hold any such
nominee harmless from any liability to the extent such
liability arises by reason of the registration of such
securities in the name of such nominee.
Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for
Foreign Portfolio Securities received for the account of the
Fund and delivery of Foreign Portfolio Securities maintained
for the account of the Fund may be effected in accordance
with the customary established securities trading or
securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities
from such purchaser or dealer.
In connection with any action to be taken
with respect to the Foreign Portfolio Securities held
hereunder, including, without limitation, the exercise of
any voting rights, subscription rights, redemption rights,
exchange rights, conversion rights or tender rights, or any
other action in connection with any other right, interest or
privilege with respect to such Securities (collectively, the
"Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to
the Bank by the Eligible Foreign Custodian, and shall
promptly forward to the applicable Eligible Foreign
Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the
actions to be taken in connection therewith, as the Bank
shall receive from the Fund pursuant to Proper Instructions.
Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights,
including, without limitation, the determination of whether
the Fund is entitled to participate in such Rights under
applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such
Rights by the Fund or by the applicable Eligible Foreign
Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or
regulations, or market practices within the market in which
such action is to be taken or omitted.
(f) Tax Law. The Bank shall have no
responsibility or liability for any obligations now or
hereafter imposed on the Fund or the Bank as custodian of
the Fund by the tax laws of any jurisdiction, and it shall
be the responsibility of the Fund to notify the Bank of the
obligations imposed on the Fund or the Bank as the custodian
of the Fund by the tax law of any non-U.S. jurisdiction,
including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications
and governmental reporting. The sole responsibility of the
Eligible Foreign Custodian with regard to such tax law shall
be to use reasonable efforts to assist the Fund with respect
to any claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such
information.
14.4 Insurance. The Bank shall use the same care
with respect to the safekeeping of Portfolio Securities and
cash of the Fund held by it as it uses in respect of its own
similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund
will pay or reimburse the Bank from time to time for any
transfer taxes payable upon transfer of Portfolio Securities
made hereunder, and for all necessary proper disbursements,
expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed
on any Schedule hereto, if any) including any indemnities
for any loss, liabilities or expense to the Bank as provided
above. For the services rendered by the Bank hereunder, the
Fund will pay to the Bank, solely from the assets of the
Portfolios, such compensation or fees at such rate and at
such times as shall be agreed upon in writing by the parties
from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable out-of-pocket
expenses incurred in conjunction with termination of this
Agreement. All such payments made pursuant to this
paragraph shall be paid solely from the assets of the
Portfolios.
14.6 Advances by the Bank. The Bank may, in its
sole discretion, advance funds on behalf of the Fund to make
any payment permitted by this Agreement upon receipt of any
proper authorization required by this Agreement for such
payments by the Fund. Should such a payment or payments,
with advanced funds, result in an overdraft (due to
insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Fund
payable on demand solely from the assets of the Portfolios.
Such overdraft shall bear interest at the current rate
charged by the Bank for such loans unless the Fund shall
provide the Bank with agreed upon compensating balances. The
Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or
indebtedness or to the extent required by law, whichever is
greater, in and to any property at any time held by it for
the Fund's benefit or in which the Fund has an interest and
which is then in the Bank's possession or control (or in the
possession or control of any third party acting on the
Bank's behalf). The Fund authorizes the Bank, in the Bank's
sole discretion, at any time to charge any overdraft or
indebtedness, together with interest due thereon, against
any balance of account standing to the credit of the Fund on
the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to
the contrary, in no event shall the Bank or any of its
officers, directors, employees or agents (collectively, the
"Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and
the Indemnified Parties harmless from and against any and
all loss, damage, liability, actions, suits, claims, costs
and expenses, including legal fees, (a "Claim") arising as a
result of any act or omission of the Bank or any Indemnified
Party under this Agreement, except for any Claim resulting
solely from the gross negligence, willful misfeasance or bad
faith of the Bank or any Indemnified Party. Without
limiting the foregoing, neither the Bank nor the Indemnified
Parties shall be liable for, and the Bank and the
Indemnified Parties shall be indemnified against, any Claim
arising as a result of:
(a) Any act or omission by the Bank or any
Indemnified Party in good faith reliance upon the terms of
this Agreement, any Officer's Certificate, Proper
Instructions, resolution of the Board, telegram, telecopier,
notice, request, certificate or other instrument reasonably
believed by the Bank to genuine;
(b) Any act or omission of any subcustodian
selected by or at the direction of the Fund;
(c) Any act or omission of any Foreign Custody
Manager other than the Bank or any act or omission of any
Eligible Foreign Custodian if the Bank is not the Foreign
Custody Manager;
(d) Any Corporate Action, distribution or
other event related to Portfolio Securities which, at the
direction of the Fund, have not been registered in the name
of the Bank or its nominee;
(e) Any Corporate Action requiring a Response
for which the Bank has not received Proper Instructions or
obtained actual possession of all necessary Securities,
consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch
of a U.S. banking institution that is the issuer of
Eurodollar CDs in connection with any Eurodollar CDs held by
such European Branch;
(g) Information relied on in good faith by the
Bank and supplied by any Authorized Person in connection
with the calculation of (i) the net asset value and public
offering price of the shares of capital stock of the Fund or
(ii) the Yield Calculation; or
(h) Any acts of God, earthquakes, fires,
floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the
interruption, loss or malfunction of utilities,
transportation or computers (hardware or software) and
computer facilities, the unavailability of energy sources
and other similar happenings or events.
15.2 Notwithstanding anything to the contrary in
this Agreement, in no event shall the Bank or the
Indemnified Parties be liable to the Fund or any third party
for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind
whatsoever in connection with this Agreement or any
activities hereunder.
15.3 Notwithstanding anything in this Agreement to
the contrary, in no event shall the Fund be liable to the
Bank or any third party, and the Bank shall indemnify and
hold the Fund harmless from and against any and all Claims
resulting solely from the gross negligence, willful
misfeasance or bad faith of the Bank.
16. Termination.
16.1 This Agreement may be terminated at any time
by either party hereto without penalty upon ninety days
written notice to the other party. Any termination pursuant
to this paragraph 16.1 shall be effective upon expiration of
such ninety days, provided, however, that the effective date
of such termination may be postponed to a date not more than
one hundred twenty days after delivery of the written
notice: (i) at the request of the Bank, in order to prepare
for the transfer by the Bank of all of the assets of the
Fund held hereunder; or (ii) at the request of the Fund, in
order to give the Fund an opportunity to make suitable
arrangements for a successor custodian.
16.2 In the event of the termination of this
Agreement, the Bank will immediately upon receipt or
transmittal, as the case may be, of notice of termination,
commence and prosecute diligently to completion the transfer
of all cash and the delivery of all Portfolio Securities
duly endorsed and all records maintained under Section 11 to
the successor custodian when appointed by the Fund. The
obligation of the Bank to deliver and transfer over the
assets of the Fund held by it directly to such successor
custodian will commence as soon as such successor is
appointed and will continue until completed as aforesaid.
If the Fund does not select a successor custodian within
ninety (90) days from the date of delivery of notice of
termination the Bank may, subject to the provisions of
subsection (16.3), deliver the Portfolio Securities and cash
of the Fund held by the Bank to a bank or trust company of
the Bank's own selection which meets the requirements of
Section 17(f)(1) of the 1940 Act and has a reported capital,
surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under
terms similar to those on which they were held by the Bank,
whereupon such bank or trust company so selected by the Bank
will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board.
Thereafter, the Bank shall be released from any and all
obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days
after notice of termination has been given, the Fund may
furnish the Bank with an order of the Fund advising that a
successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been
submitted to the shareholders of the Fund the question of
whether the Fund will be liquidated or will function without
a custodian for the assets of the Fund held by the Bank. In
that event the Bank will deliver the Portfolio Securities
and cash of the Fund held by it, subject as aforesaid, in
accordance with one of such alternatives which may be
approved by the requisite vote of shareholders, upon receipt
by the Bank of a copy of the minutes of the meeting of
shareholders at which action was taken, certified by the
Fund's Secretary and an opinion of counsel to the Fund in
form and content satisfactory to the Bank. Thereafter, the
Bank shall be released from any and all obligations under
this Agreement.
16.4 The Fund shall reimburse the Bank for any
reasonable expenses incurred by the Bank in connection with
the termination of this Agreement.
16.5 At any time after the termination of this
Agreement, the Fund may, upon written request, have
reasonable access to the records of the Bank relating to its
performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than
any non-public information obtained hereunder concerning the
other party is confidential and may not be disclosed without
the consent of the other party, except as may be required by
applicable law or at the request of a governmental agency.
The parties further agree that a breach of this provision
would irreparably damage the other party and accordingly
agree that each of them is entitled, in addition to all
other remedies at law or in equity to an injunction or
injunctions without bond or other security to prevent
breaches of this provision.
18. Notices. Any notice or other instrument in
writing authorized or required by this Agreement to be given
to either party hereto will be sufficiently given if
addressed to such party and delivered via (I) United States
Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such
party at its office at the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Smith Barney Investment Trust
388 Greenwich Street
New York, NY 10013
Attn: Irving David
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: Paula A. Lordi, Director -
Client Management
With a copy to: John E. Henry, General
Counsel
or at such other place as such party may from
time to time designate in writing.
19. Amendments. This Agreement may not be altered or
amended, except by an instrument in writing, executed by
both parties.
20. Parties. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that
this Agreement will not be assignable by the Fund without
the written consent of the Bank or by the Bank without the
written consent of the Fund, authorized and approved by its
Board; and provided further that termination proceedings
pursuant to Section 16 hereof will not be deemed to be an
assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance
hereunder will be governed by the laws of the Commonwealth
of Massachusetts, without regard to conflict of laws
provisions.
22. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together,
constitute only one instrument.
23. Entire Agreement. This Agreement, together with
its Appendices, constitutes the sole and entire agreement
between the parties relating to the subject matter herein
and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates
and supersedes any and all prior agreements and undertakings
between the parties relating to the subject matter herein.
24. Limitation of Liability. It is expressly agreed
that the obligations of the Fund hereunder shall not bring
upon any of the trustees, shareholders, nominees, officers,
agents or employees of the Fund personally any liability but
shall be limited in all cases to the assets and property of
the Fund as provided in the Declaration of Trust. The
execution and delivery of this Agreement has been authorized
by the Board of the Fund on behalf of the Portfolios, and
signed by an authorized officer of the Fund, acting as such
and neither such authorization by the Board nor such
execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any
liability on any of them personally but shall bind only the
assets and property of the Fund as provided in the
Declaration of Trust.
25. Several Obligations of the Portfolios. This
Agreement is an agreement entered into between the Bank and
the Fund with respect to each Portfolio. With respect to
any obligation of the Fund on behalf of any Portfolio
arising out of this Agreement, the Bank shall look for
payment or satisfaction of such obligation solely to the
assets of the Portfolio to which such obligation relates as
though the Bank had separately contracted with the Fund by
separate written instrument with respect to each Portfolio.
26. Year 2000 Readiness Disclosure. The Bank
certifies that the occurrence in or use by the Bank's own
proprietary internal systems (the "Systems") of dates before
or after January 1, 2000 (the "Millennial Dates") will not
adversely affect the performance of the Systems with respect
to date dependent data, computations, output or other
functions (including, without limitation, calculating,
computing and sequencing) and that the Systems will create,
store and generate output data related to or including
Millennial Dates without errors or omissions ("Year 2000
Compliance").
The parties acknowledge that the Bank relies on
automated data communications with vendors, clients and
other third parties, as well as certain third party hardware
and software providers such as Electronic Data Systems. The
Bank also relies on other third party relationships in the
conduct of its business. For example, the Bank relies on
the services of the landlords of its facilities,
telecommunication companies, utilities and commercial
airlines, among others. The parties acknowledge that the
Bank can make no certification as to the Year 2000
Compliance of third-parties utilized by the Bank in its day
to day operations or with which the Systems interact or
communicate, from which the Systems receive data or to which
the Systems send data. The parties further acknowledge that
while the Bank has contacted such third-parties regarding
Year 2000 Compliance and will use reasonable efforts to
monitor the status of such third-parties' Year 2000
Compliance, failure by such third-parties to achieve timely
Year 2000 Compliance could adversely affect the Bank's
performance.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers
thereunto duly authorized as of the day and year first
written above.
SMITH BARNEY
INVESTMENT TRUST
By:
Name:
Title:
INVESTORS BANK &
TRUST COMPANY
By:
Name:
Title:
Appendices
Appendix
A...........................................................
... Portfolios
Appendix
B...........................................................
... Fee Schedule
Appendix
C...........................................................
... Additional Services
A
p
p
e
n
d
i
x
A
Portfolios Serviced by Investors Bank &
Trust Company
1. U. S. 500 Index Fund
2. EAFE Index Fund
31
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
Smith Barney Investment Trust:
We consent to the incorporation by reference, with respect to the Funds
listed below for the Smith Barney Investment Trust and Master Investment
Portfolio in this Prospectus and Statement of Additional Information, of our
report dated February 11, 2000, on the statement of assets and liabilities,
and the related statement of operations, the statements of changes in net
assets, and the financial highlights for each of the periods described below.
These financial statements and financial highlights and our report thereon
are included in the Annual Report of the Fund as filed on Form N-30D.
We also consent to the references to our firm under the headings
"Financial Highlights" in the Prospectus and "Auditors" in the
Statement of Additional Information
Fund
Smith Barney Investment Trust
Smith Barney S & P 500 Index Fund Statement of Assets
and Liabilities As of December 31,
1999
Statement of Operations One month
ended
December
31, 1999
and for
the year
ended
November
30, 1999
Statements of Changes in Net Assets
One
month
ended
December
31, 1999,
for the
year
ended
November
30, 1999,
and for
the
period
from
January
5, 1998
(commence
ment of
operation
s)
to November 30,
1998.
Financial Highlights One
month
ended
December
31,
1999,
for the
year
ended
November
30,
1999,
and for
the
period
from
January
5, 1998
(commenc
ement of
operatio
ns) to
November
30, 1998
Smith Barney EAFE Index Fund Statement of Assets and Liabilities As of
December 31, 1999
Statement of Operations For the period from
October 18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Statements of Changes in Net Assets For the
period from October
18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Financial Highlights For the period from
October 18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Smith Barney U.S. 5000 Index Fund Statement of Assets and Liabilites As of
December 31, 1999
Statement of Operations For the period from
October 18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Statements of Changes in Net Assets For the
period from October
18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Financial Highlights For the period from
October 18, 1999
(commenceme
nt of
operations)
to December
31, 1999
Master Investment Portfolio
International Index Master Portfolio Statement
of Assets and Liabilities As of December 31, 1999
Statement of Operations For the
period from
October 18,
1999
(commenceme
nt of
operations)
to December
31, 1999
Statements of Changes in Net
Assets
Fo
r the
period
from
October
18, 1999
(commenc
ement of
operatio
ns) to
December
31, 1999
S & P 500 Index Master Portfolio Statement of Assets and
Liabilities As of December 31,
1999
Statement of Operations For the
ten-
month
period
ended
December
31, 1999
and for
the year
ended
February
28, 1999
Statements of Changes in Net
Assets
Fo
r the
ten-
month
period
ended
December
31, 1999
and for
each of
the
years in
the two-
year
period
ended
February
28, 1999
Extended Index Master Portfolio Statement of Assets and Liabilites
As of December 31, 1999
Statement of Operations For the
period
from
March 1,
1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Statements of Changes of Net
Assets
Fo
r the
period
from
March 1,
1999
(commenc
ement of
operatio
ns) to
December
31, 1999
U.S. Equity Master Portfolio Statement of Assets and Liabilites
As of December 31, 1999
Statement of Operations For the
period
from
March 1,
1999
(commenc
ement of
operatio
ns) to
December
31, 1999
Statements of Changes Net Assets
Fo
r the
period
from
March 1,
1999
(commenc
ement of
operatio
ns) to
December
31, 1999
KPMG LLP
New York, New York
April 19, 2000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 784,058
<RECEIVABLES> 29,600
<ASSETS-OTHER> 678
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 814,336
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 217
<TOTAL-LIABILITIES> 217
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 763,764
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1999
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<INVESTMENTS-AT-VALUE> 271,203,166
<RECEIVABLES> 3,915,943
<ASSETS-OTHER> 10,969
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 275,130,078
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,069,577
<TOTAL-LIABILITIES> 2,069,577
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,809,630
<SHARES-COMMON-STOCK> 16,828,532
<SHARES-COMMON-PRIOR> 15,714,082
<ACCUMULATED-NII-CURRENT> (235)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 199,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,051,635
<NET-ASSETS> 273,060,521
<DIVIDEND-INCOME> 242,965
<INTEREST-INCOME> 31,199
<OTHER-INCOME> 0
<EXPENSES-NET> 125,700
<NET-INVESTMENT-INCOME> 148,464
<REALIZED-GAINS-CURRENT> (679)
<APPREC-INCREASE-CURRENT> 14,495,829
<NET-CHANGE-FROM-OPS> 14,643,614
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,261,406
<DISTRIBUTIONS-OF-GAINS> 5,778
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,668,984
<NUMBER-OF-SHARES-REDEEMED> 636,484
<SHARES-REINVESTED> 81,950
<NET-CHANGE-IN-ASSETS> 35,205,732
<ACCUMULATED-NII-PRIOR> 1,263,970
<ACCUMULATED-GAINS-PRIOR> 206,406
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 56,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162,400
<AVERAGE-NET-ASSETS> 237,391,649
<PER-SHARE-NAV-BEGIN> 14.24
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.83
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.08
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.00
<EXPENSE-RATIO> 0.60
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<NAME> SMITH BARNEY INVESTMENT TRUST
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<PERIOD-END> DEC-31-1999
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<INVESTMENTS-AT-VALUE> 271,203,166
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,069,577
<TOTAL-LIABILITIES> 2,069,577
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,809,630
<SHARES-COMMON-STOCK> 1,374,026
<SHARES-COMMON-PRIOR> 984,943
<ACCUMULATED-NII-CURRENT> (235)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 199,491
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,051,635
<NET-ASSETS> 273,060,521
<DIVIDEND-INCOME> 242,965
<INTEREST-INCOME> 31,199
<OTHER-INCOME> 0
<EXPENSES-NET> 125,700
<NET-INVESTMENT-INCOME> 148,464
<REALIZED-GAINS-CURRENT> (679)
<APPREC-INCREASE-CURRENT> 14,495,829
<NET-CHANGE-FROM-OPS> 14,643,614
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 151,263
<DISTRIBUTIONS-OF-GAINS> 458
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 381,854
<NUMBER-OF-SHARES-REDEEMED> 2,964
<SHARES-REINVESTED> 10,193
<NET-CHANGE-IN-ASSETS> 35,205,732
<ACCUMULATED-NII-PRIOR> 1,263,970
<ACCUMULATED-GAINS-PRIOR> 206,406
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 56,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162,400
<AVERAGE-NET-ASSETS> 18,807,630
<PER-SHARE-NAV-BEGIN> 14.28
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.83
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.11
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.01
<EXPENSE-RATIO> 0.36
</TABLE>
