Smith Barney and Salomon Brothers Funds

DEFA14A 1 ddefa14a.htm SMITH BARNEY AND SALOMON BROTHERS FUNDS Smith Barney and Salomon Brothers Funds

SCHEDULE 14A

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Smith Barney Allocation Series Inc.		Zenix Income Fund Inc.
Smith Barney Multiple Discipline Trust		Managed High Income Portfolio Inc.
Smith Barney Institutional Cash Management Fund Inc.		Smith Barney Investment Series
Smith Barney Aggressive Growth Fund Inc.		Smith Barney Trust II
Smith Barney Investment Funds Inc.		Salomon Funds Trust
Smith Barney Equity Funds		Variable Annuity Portfolios
Smith Barney Muni Funds		CitiFunds Premium Trust
Intermediate Muni Fund Inc.		CitiFunds Institutional Trust
Smith Barney Municipal Money Market Fund Inc.		CitiFunds Trust I
High Income Opportunity Fund Inc.		CitiFunds Trust III
Smith Barney Funds, Inc.		Salomon Brothers Capital Fund Inc
Smith Barney Income Funds		Salomon Brothers Investors Value Fund Inc
Smith Barney Small Cap Core Fund, Inc.		Salomon Brothers Opportunity Fund Inc
Smith Barney Money Funds, Inc.		Salomon Brothers Series Funds Inc
Smith Barney Fundamental Value Fund Inc.		Salomon Brothers Variable Series Funds Inc
Greenwich Street Series Fund		Salomon Brothers Institutional Series Funds Inc
Smith Barney Managed Municipals Fund Inc.		The Salomon Brothers Fund Inc
Smith Barney California Municipals Fund Inc.		Salomon Brothers Capital and Income Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.		Salomon Brothers Emerging Markets Debt Fund Inc.
Smith Barney Oregon Municipals Fund		Salomon Brothers Emerging Markets Income Fund Inc.
Smith Barney Arizona Municipals Fund Inc.		Salomon Brothers Emerging Markets Income Fund II Inc.
Smith Barney Core Plus Bond Fund Inc.		Salomon Brothers Emerging Markets Floating Rate Fund Inc.
Smith Barney Sector Series Inc.		Salomon Brothers Global High Income Fund Inc.
Smith Barney Massachusetts Municipals Fund		Salomon Brothers Global Partners Income Fund Inc.
Smith Barney Investment Trust		Salomon Brothers High Income Fund Inc
Smith Barney Appreciation Fund Inc.		Salomon Brothers High Income Fund II Inc
Smith Barney World Funds, Inc.		Salomon Brothers Inflation Management Fund Inc.
Travelers Series Fund Inc.		Salomon Brothers Municipal Partners Fund Inc.
SB Adjustable Rate Income Fund		Salomon Brothers Municipal Partners Fund II Inc.
Managed Municipals Portfolio Inc.		Salomon Brothers 2008 Worldwide Dollar Government Term Trust Inc
Municipal High Income Fund Inc.		Salomon Brothers Variable Rate Strategic Fund Inc.
Citigroup Investments Corporate Loan Fund Inc.		Salomon Brothers Worldwide Income Fund Inc.
Real Estate Income Fund Inc.

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Citigroup Asset Management–

Advised Investment Companies

ISS Presentation Relating to

Transaction with Legg Mason

September 27, 2005


Citigroup Asset Management [Logo]		— Page 0

Contents


1.		Overview

2.		The Proposed Transaction

3.		Approval of New Management & Subadvisory Agreements

4.		Election of Directors

5.		Corporate Governance

6.		Dissident Proxy Fights

7.		Dissident Proxy Fights on Certain Closed-End Funds


Citigroup Asset Management [Logo]		— Page 1

Overview – Items for Shareholder Approval


•	Proposal 1:	To Approve a New Management Agreement

		-	All Funds in Fund Complex (Appendix A)

•	Proposal 2:	To Approve a New Subadvisory Agreement

		-	Certain Funds (Appendix B)

•	Proposal 3:	To Elect Board Members

		-	All Open-End Funds (Appendix C)


Citigroup Asset Management [Logo]		— Page 2

The Proposed Transaction

•

Sale of substantially all of Citigroup’s asset management business, Citigroup Asset Management (CAM), to Legg Mason in exchange for the broker-dealer and investment banking business of Legg Mason, shares of common and preferred stock of Legg Mason and a loan

•

Several conditions to the sale, including:

•

Obtaining certain required regulatory approvals

•

Consent of certain advisory clients of CAM representing no less than 75% of the revenue attributable to the assets under management for such clients to continue their advisory relationship with CAM


Citigroup Asset Management [Logo]		— Page 3

The Proposed Transaction – Advisory Agreements

•

Sale will cause the Funds’ current investment advisory and subadvisory agreements to terminate as a matter of law

•

Shareholder approval is needed to assure continuity of investment advisory services after the completion of the transaction

•

Total fees for advisory and administrative services will remain the same under the new management agreements and new subadvisory agreements


Citigroup Asset Management [Logo]		— Page 4

The Proposed Transaction – About Legg Mason

•

The combination will create the world’s 5^thlargest money manager in the U.S. with assets under management of over $830 billion

•

Legg Mason becomes a singularly focused, more profitable and certainly more influential organization within the global asset management community¹

•

Legg Mason becomes the 5th largest manager of mutual funds in the United States ¹

•

Legg Mason’s equity fund platform gains a number of large-cap growth and large-cap core funds and well regarded managers to complement Legg Mason’s existing strength across value, blend and small-cap asset classes

•

Western Asset becomes the #1 pure manager of fixed income in the world, with approximately $490 billion of assets under management and broad capabilities in all major fixed income asset types and currencies

¹	Source: Pensions & Investments, “The Top Money Managers,” May 30, 2005.


Citigroup Asset Management [Logo]		— Page 5

The Proposed Transaction – About Legg Mason Cont’d

•

Salomon Brothers Asset Management, Smith Barney Fund Management LLC and TIMCO, the Funds’ advisers, will become part of a pure play asset management organization

•

Percent of assets beating the Lipper Category Average (U.S. open- and closed-end funds):


1-Year	3-Year	5-Year	10-Year
71%	88%	95%	98%

Source: Lipper Analytical New Applications v. 4.0 Does not include money market funds


Citigroup Asset Management [Logo]		— Page 6

Approval of New Management and Subadvisory Agreements

•

No increase in the aggregate advisory and administrative fees

•

Advisers will continue to provide the same level of advisory and administrative services to the Funds

•

New standardized investment management agreement for the fund complex combining advisory and administrative services

•

Advisers will be owned by Legg Mason with its reputation for asset management excellence


Citigroup Asset Management [Logo]		— Page 7

Board

Considerations in Approving New Agreements

•

Among other things, the Board Members considered the following when approving the New Management Agreements and New Subadvisory Agreements:

•

The reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries (including Western Asset);

•

There is not expected to be any diminution in the nature, quality and extent of services provided to the Funds and their shareholders by the Advisers, including compliance services

•

The potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason-sponsored funds, including possible economies of scale and access to investment opportunities

•

The fact that each Fund’s total advisory and administrative fees will not increase by virtue of the New Management Agreements, but will remain the same


Citigroup Asset Management [Logo]		— Page 8

Board Considerations in Approving New Agreements

•

Assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, the Advisers will have substantially the same access to the Citigroup sales force when distributing shares of the Funds

•

The Funds would not bear the costs of obtaining shareholder approval of the New Management Agreements


Citigroup Asset Management [Logo]		— Page 9

Election of Directors

•

Open–end mutual funds only

•

Experienced Directors

•

Closed-end funds elect directors at regularly scheduled annual meetings


Citigroup Asset Management [Logo]		— Page 10

Corporate Governance

•

Independence of Board – All Boards have only one interested Director. All other Directors are independent.

•

Each Fund has an Independent Audit Committee & Nominating/Governance Committee

•

Independent Directors meet regularly in executive sessions with counsel to the Independent Directors

•

Independent Directors separately reviewed and unanimously approved the new management and subadvisory agreements


Citigroup Asset Management [Logo]		— Page 11

Dissident Proxy Fights – Closed End Funds

•

Dissident Objectives

•

Side-show issue: Dissidents are focusing on issue that lacks relevance to purpose of Special Meeting

•

Asking shareholders to vote against long-term interests of shareholders and approval of new management agreement

•

Opportunistic proxy fights centered on “discounts”

•

Focusing on the interests of short-term shareholders only

•

Closed-end Funds frequently trade at a discount, these funds are not unique

•

Taking advantage of need for shareholder approval to reap short-term windfall for minority group


Citigroup Asset Management [Logo]		— Page 12

Dissident Proxy Fights – Closed End Funds

•

Board Objectives

•

Focused on the interests of all shareholders

•

The Boards review and evaluate issues surrounding discounts at least quarterly :

•

Reviewed various “solutions” to the discount problem

•

Instituted share repurchase plans for some funds (SBF, SCD)

•

DRIP Plans repurchase shares at certain levels

•

Believe that closed-end fund structure is beneficial to shareholders


Citigroup Asset Management [Logo]		— Page 13

Dissident Proxy Fights on Certain Closed-End Funds

•

Karpus Management Inc. d/b/a Karpus Investment Management

•

Salomon Brothers Municipal Partners Fund

•

Salomon Brothers Municipal Partners Fund II

•

Salomon Brothers Inflation Management Fund

•

Salomon Brothers Capital and Income Fund

•

Real Estate Income Fund

•

Elliott Associates, L.P. and Elliott International, L.P.

•

The Salomon Brothers Fund


Citigroup Asset Management [Logo]		— Page 14

Salomon Brothers Municipal Partners Fund


• Inception Date	January 29, 1993

• Ticker	MNP

• Investment Objective	High level of current income which is exempt from regular federal income taxes, consistent with the preservation of capital

• Portfolio Content	Substantially all of its assets in a diversified portfolio of long-term tax-exempt securities that are rated “investment grade”

• Net Assets as of 8/22/05	$127,172,866

• Average Annualized Total Return	1yr	3yr	5yr	10yr

• NAV (8/31/05)¹	5.37%	6.12%	7.69%	7.13%

• Market Price (8/31/05)¹	12.20%	8.41%	10.20%	9.06%

• Lehman Muni Bond Index	5.31%	5.17%	6.37%	6.20%

• Discount	Discount on 9/22/05: -6.09%

	Discount range for year ended 8/31/05: -14.31% to -6.05%

¹	Source: Lipper Analytical Services.