SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HIGH INCOME OPPORTUNITY FUND INC.
----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HIGH INCOME OPPORTUNITY FUND INC.
125 Broad Street
New York, New York 10004
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
To be Held on February 22, 2006
--------------------
To the Stockholders of High Income Opportunity Fund Inc.:
The Annual Meeting of Stockholders of High Income Opportunity Fund Inc.
(the "Fund") will be held at Citigroup Center, 153 East 53rd Street, 14th Floor
Conference Center, New York, New York, on February 22, 2006 at 3:30 p.m. (New
York Time) for the following purposes:
1. To elect three Class II Directors, each to hold office for the term
indicated and until his or her successor shall have been elected and
qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on January 13, 2006
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting and any adjournments thereof.
By Order of the Board of Directors
Robert I. Frenkel
Secretary
New York, New York
January 24, 2006
--------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON
OR BY PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE PROVIDED FOR
YOUR CONVENIENCE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
i
Instructions for Signing Proxy Cards
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense to the Fund in validating your vote if you
fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signature
------------ ---------------
Corporate Accounts
------------------
(1) ABC Corp ............................ ABC Corp. (by John Doe, Treasurer)
(2) ABC Corp. ........................... John Doe, Treasurer
(3) ABC Corp., c/o John Doe, Treasurer .. John Doe
(4) ABC Corp. Profit Sharing Plan ....... John Doe, Trustee
Trust Accounts
--------------
(1) ABC Trust ............................ Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee, u/t/d 12/28/78 . Jane B. Doe
Custodial or Estate Accounts
----------------------------
(1) John B. Smith, Cust., f/b/o John B.
Smith, Jr. UGMA ...................... John B. Smith
(2) John B. Smith ........................ John B. Smith, Jr., Executor
ii
HIGH INCOME OPPORTUNITY FUND INC.
125 Broad Street
New York, New York 10004
--------------------
PROXY STATEMENT
--------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 22, 2006
INTRODUCTION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of High Income Opportunity Fund Inc.
(the "Fund") of proxies to be voted at the Annual Meeting of Stockholders (the
"Meeting") of the Fund to be held at the Citigroup Center, 153 East 53rd
Street,14th Floor Conference Center, New York, New York 10022, on February 22,
2006 at 3:30 p.m. (Eastern Time), and at any adjournments thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders
(the "Notice").
The cost of soliciting proxies will be borne by the Fund. Solicitation
costs are expected to be approximately $90,000. Proxy solicitations will be made
mainly by mail. In addition, certain officers, Directors and employees of the
Fund, Legg Mason, Inc. ("Legg Mason"), the parent company of the Fund's
investment manager; Smith Barney Fund Management LLC ("SBFM" or the "Manager"),
the Fund's investment manager, an affiliate of Legg Mason; and/or PFPC Inc.
("PFPC"), the Fund's transfer agent, may solicit proxies in person or by
telephone, telegraph, or mail. Legg Mason is located at 100 Light Street,
Baltimore, Maryland 21202; SBFM is located at 399 Park Avenue New York, NY
10022; PFPC is located at P.O. Box 8030, Boston, Massachusetts 02266. In
addition, the Fund will reimburse brokerage firms or other record holders for
their expenses in forwarding solicitation material to beneficial owners of
shares of the Fund.
The Annual Report of the Fund, including audited financial statements for
the fiscal year ended September 30, 2005, has previously been furnished to all
stockholders of the Fund. This proxy statement and form of proxy are first being
mailed to stockholders on or about January 25, 2006. The Fund will provide,
without charge, additional copies of the Annual Report to any stockholder upon
request by calling the Fund at 1-800-331-1710.
All properly executed proxies received prior to the Meeting will be voted
at the Meeting in accordance with the instructions marked thereon or otherwise
as provided therein. Unless instructions to the contrary are marked, shares
represented
1
by the proxies will be voted "FOR" all the proposals. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (i.e. proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. Because the
requisite approval of the proposal is measured by a portion of the votes
actually cast, abstentions and broker "non-votes" will have no impact on the
approval of Proposal 1. Proposal 1 requires for approval the affirmative vote of
a plurality majority of the votes cast at the Meeting with a quorum present. Any
proxy may be revoked at any time prior to the exercise thereof by submitting
another proxy bearing a later date, by giving written notice to the Secretary of
the Fund at the Fund's address indicated above, or by voting in person at the
Meeting.
The Board knows of no business other than that specifically mentioned in
the Notice to be presented for consideration at the Meeting. If any other
matters are properly presented, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment to the extent
permissible under applicable law.
The Board has fixed the close of business on January 13, 2006 as the
record date (the "Record Date") for the determination of stockholders of the
Fund entitled to notice of and to vote at the Meeting or any adjournment
thereof. Stockholders of the Fund on that date will be entitled to one vote on
each matter for each share held, and a fractional vote with respect to
fractional shares, with no cumulative voting rights. At the Record Date, the
Fund had outstanding 72,927,179.2490 shares of Common Stock, par value $.001 per
share, the only authorized class of stock, of which 72,992,804 or 98.7% were
held in accounts, but not beneficially owned, by CEDE & Co., as nominee for The
Depository Trust Company, Box 20, Bowling Green Station, New York, New York
10004-9998.
At the Record Date, no single shareholder or "group" (as that term is used
in Section 13(d) of the Securities Exchange Act of 1934) (the "1934 Act"), to
the knowledge of the Fund, owned beneficially 5% or more of the outstanding
shares of the Fund. As of the Record Date, the officers and Board members of the
Fund in the aggregate beneficially owned less than 1% of the outstanding shares
of the Fund.
In the event that a quorum is not present, or if sufficient votes in favor
of Proposal 1 set forth in the Notice and this Proxy Statement are not received
by the time scheduled for the Meeting, the persons named as proxies may move for
one or more adjournments of the Meeting to permit further solicitation of
proxies with respect to such Proposal 1. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the proposal
that is the subject
2
of the Meeting, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to stockholders with respect to the reasons for the
solicitation. Any such adjournment will require the affirmative vote of a
majority of the shares present at the Meeting. The persons named as proxies will
vote in favor of such adjournment those shares which they are entitled to vote
and which have voted in favor of such proposal.
As of the Record Date, to the knowledge of the Fund, no securities issued
by Legg Mason were held by Directors who are not "interested persons" of the
Fund (the "Non-Interested Directors") as that term is used in the Investment
Company Act of 1940, as amended (the "1940 Act").
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Fund's Charter, the Board is currently classified
into three classes. The Directors serving in Class II have terms expiring at the
Meeting; the Class II Directors currently serving on the board have been
nominated by the Board of Directors for re-election at the Meeting to serve for
a term of three years (until the 2009 Annual Meeting of Stockholders) or until
their successors have been duly elected and qualified. The affirmative vote of a
plurality of the votes cast at the Meeting at which a quorum is present is
sufficient to elect each nominee. It is the intention of the persons named in
the enclosed proxy to vote in favor of the election of the persons listed below
as nominees.
The Board knows of no reason why any of the Class II nominees listed below
will be unable to serve, but in the event of any such unavailability, the
proxies received will be voted for such substitute nominees as the Board may
recommend.
Certain information concerning the nominees is set forth below. All of the
nominees for Class II currently serve as Directors of the Fund. Any Director
affiliated with the Manager or otherwise considered an "interested person" of
the Fund, as defined in the 1940 Act, is indicated by an asterisk(*).
Information as to beneficial ownership is based upon information furnished to
the Fund by the Directors.
3
Number of
Term of Portfolios
Office and in Fund Other
Positions Length Principal Complex Directorships
Held with Time Occupations During Overseen Held by
Name, Address and Birth Year Fund Served Past Five Years by Director Director
---------------------------- --------- ---------- --------------------- ----------- -------------
CLASS II DIRECTORS
INTERESTED DIRECTOR:
R. Jay Gerken, CFA* Chairman, Since Managing Director of 171 None
Citigroup Asset President 2002 CAM; Chairman,
Management ("CAM") and Chief President and Chief
399 Park Avenue Executive Executive Officer of
New York, NY 10022 Officer SBFM and Citi Fund
Birth Year: 1951 Management Inc.
("CFM"); President and
Chief Executive
Officer of certain
mutual funds
associated with
Legg Mason; Formerly
Portfolio Manager of
Smith Barney
Allocation Series Inc.
(from 1996-2001) and
Smith Barney Growth
and Income Fund (from
1996-2000).
NON-INTERESTED DIRECTORS:
Roderick C. Rasmussen Director Since Investment Counselor 27 None
9 Cadence Court 1993
Morristown, NJ 07960
Birth Year: 1926
John P. Toolan Director Since Retired 27 None
13 Chadwell Place 1993
Morristown, NJ 07960
Birth Year: 1930
----------
* Designates a Director who is affiliated with the Manager and considered an
"interested person" of the Fund as defined under the 1940 Act.
4
Persons Nominated for Election as Directors
The remainder of the Board currently constitutes the Class I and the Class
III Directors, none of whom will stand for election at the Meeting, as their
terms are not due to expire until the year 2007 and 2008, respectively.
Directors Continuing in Office
Number of
Term of Portfolios
Office and in Fund Other
Positions Length Principal Complex Directorships
Held with Time Occupations During Overseen Held by
Name, Address and Birth Year Fund Served Past Five Years by Director Director
---------------------------- --------- ---------- --------------------- ----------- -------------
CLASS I DIRECTORS
NON-INTERESTED DIRECTORS:
Lee Abraham Director Since Retired; Former 27 None
13732 LeHavre Drive 1999 Director of Signet
Frenchman's Creek Group PLC
Palm Beach Gardens, FL 33410 (specialty retail
Birth Year: 1927 jeweler)
Richard E. Hanson, Jr. Director Since Retired; Former 27 None
2751 Vermont Route 140 1999 Head of the New
Poultney, VT 05764 Atlanta Jewish
Birth Year: 1941 Community High
School
CLASS III DIRECTORS
NON-INTERESTED DIRECTORS:
Jane F. Dasher Director Since Controller of PBK 27 None
Korsant Partners 1999 Holdings Inc., a
283 Greenwich Avenue family investment
3rd Floor company
Greenwich, CT 06830
Birth Year 1949
Donald R. Foley Director Since Retired 18 None
3668 Freshwater Drive 1993
Jupiter, FL 33477
Birth Year 1922
Paul Hardin Director Since Professor of Law & 34 None
12083 Morehead 1994 Chancellor Emeritus
Chapel Hill, NC 27514-8426 at the University of
Birth Year:1931 North Carolina
5
Beneficial Ownership Report
Aggregate Dollar Range*(1)
Dollar Range*(1) of Equity Securities in all
of Equity Funds Overseen by
Securities in Director and Advised
Name of Director the Fund by SBFM
---------------- ---------------- ----------------------------
NON-INTERESTED DIRECTORS
Lee Abraham B E
Jane F. Dasher B E
Donald R. Foley E E
Richard E. Hanson B C
Dr. Paul Hardin C E
Roderick Rasmussen B C
John P. Toolan A E
INTERESTED DIRECTOR
R. Jay Gerken B E
----------
(*) The dollar ranges are as follows: "A" = None; "B" = $1-$10,000; "C" =
$10,001-$50,000; "D" = $50,001-$100,000; "E" = over $100,000.
(1) This information has been furnished by each Director as of June 30, 2005.
"Beneficial Ownership" is determined in accordance with Rule 16a-1(a)(2)
promulgated under the 1934 Act.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act and Section 30(h) of the 1940 Act in
combination require the Fund's Directors and officers and persons who own more
than 10% of the Fund's common stock, as well as SBFM and certain of its
affiliated persons, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC") and the New York Stock Exchange,
Inc. ("NYSE"). Such persons are required by SEC regulations to furnish the Fund
with copies of all such filings. Based solely upon its review of the copies of
such filings received by it and certain other information received by it, the
Fund believes that, for the fiscal year ended September 30, 2005, all filing
requirements applicable to such persons were met.
Committees of the Board of Directors
The Fund has a separately designated standing Corporate Governance and
Nominating committee ("Nominating Committee"). The Fund has a separately
designated standing Audit Committee ("Audit Committee") established in
accordance with Section 3(a)(58)(A) of the 1934 Act. Both committees are
comprised solely of members who are independent as defined in the NYSE's listing
standards and are not "interested persons" of the Fund as defined in the 1940
Act. The Board of Directors of the Fund has determined that all members of the
Fund's Audit Committee are financially literate. Ms. Dasher has been designated
as the audit committee financial expert within the meaning of the rules adopted
and implemented under Section 407 of the Sarbanes-Oxley Act of 2002. The members
of the Audit Committee are Ms. Dasher and Messrs. Abraham and Toolan. The
members of the Nominating Committee are Messrs. Abraham, Foley and Hanson.
6
The principal functions of the Audit Committee are to (a) assist the Board
of Directors in its oversight of (i) the integrity of the Fund's financial
statements, (ii) the Fund's compliance with legal and regulatory requirements,
(iii) the qualifications and independence of the Fund's independent registered
public accounting firm and (iv) the performance of the Fund's internal audit
function and independent auditors; (b) approve, and recommend to the Independent
Board Members (as such term is defined in the Audit Committee Charter) for their
ratification, the selection, appointment, retention or termination of the Fund's
independent registered public accounting firm , as well as approving the
compensation thereof; (c) approve all audit and permissible nonaudit services
provided to the Fund and certain other persons by such independent registered
public accounting firm ; and (d) prepares the report required to be prepared by
the Committee pursuant to SEC rules for inclusion in the Fund's annual proxy
statement. The Fund adopted an Amended and Restated Audit Committee Charter at
a meeting held on December 16, 2005, a copy of which is attached hereto as
Exhibit A.
The Fund has an Investment Committee responsible for reviewing the
investment performance of the Fund. The members of this committee are Directors
who are not "interested persons" of the Fund as defined under the 1940 Act. The
members of the Investment Committee are Messrs. Hardin, Toolan, and Rasmussen.
The Fund also has a Pricing Committee composed of the Chairman of the
Board and one Non-Interested Director which is charged with determining fair
value prices for securities when required. During the Fund's most recent fiscal
year, the Pricing Committee met eight times.
Eleven meetings of the Board were held during the Fund's fiscal year ended
September 30, 2005, five of which were regular meetings. Two Audit Committee
meetings were held and four Investment Committee meetings were held during the
fiscal year ended September 30, 2005. The Nominating Committee did not meet
during the Fund's most recent fiscal year. No Director attended less than 75% of
the Board meetings and the committee meetings of which he or she is a member.
The Fund does not have a formal policy regarding attendance by Directors at
annual meetings but may consider a policy in the future. At the 2005 Annual
Meeting one Board member attended.
The Nominating Committee ("Committee") will accept nominees recommended by
a stockholder as it deems appropriate. At the present time there are no
vacancies on the Board. Stockholders who wish to recommend a nominee should send
recommendations to the Fund's Secretary that include all information relating to
such person that is required to be disclosed in solicitations of proxies for the
election of Directors. A recommendation must be accompanied by a written consent
of the individual to stand for election if nominated by the Board of Directors
and to serve if elected by the stockholders. The Fund adopted a Corporate
Governance and
7
Nominating Committee Charter (the "Charter") at a meeting held on March 10,
2004, a copy of which is attached to this Proxy Statement as Exhibit B.
The Committee identifies potential nominees through its network of
contacts. The Committee meets to discuss and consider such candidates'
qualifications and then chooses a candidate by majority vote. The Committee does
not have specific, minimum qualifications for nominees and has not established
specific qualities or skills that it regards as necessary for one or more of the
Fund's Directors to possess (other than any qualities or skills that may be
required by applicable law, regulation or listing standard). However, as set
forth in the Committee Charter, in evaluating a person as a potential nominee to
serve as a Director of the Fund, the Committee may consider the following
factors, among any others it may deem relevant:
o whether or not the person is an "interested person" as defined in
the 1940 Act and whether the person is otherwise qualified under
applicable laws and regulations to serve as a Director of the Fund;
o whether or not the person has any relationships that might impair
his or her independence, such as any business, financial or family
relationships with Fund management, the investment manager of the
Fund, Fund service providers or their affiliates;
o whether or not the person serves on boards of, or is otherwise
affiliated with, competing financial service organizations or their
related mutual fund complexes;
o whether or not the person is willing to serve, and willing and able
to commit the time necessary for the performance of the duties of a
Director of the Fund;
o the contribution which the person can make to the Board and the Fund
(or, if the person has previously served as a Director of the Fund,
the contribution which the person made to the Board during his or
her previous term of service), with consideration being given to the
person's business and professional experience, education and such
other factors as the Committee may consider relevant;
o the character and integrity of the person; and
o whether or not the selection and nomination of the person would be
consistent with the requirements of the Fund's retirement policies.
8
COMPENSATION
Only the Independent Directors receive remuneration from the Fund for
acting as a Director. Aggregate fees and expenses (including reimbursement for
travel and out-of-pocket expenses) of $26,299 were paid to such Directors by the
Fund during the calendar year ended December 31, 2004. Fees for the Independent
Directors, who also serve as board members of certain other funds sponsored by
or affiliated with Legg Mason, are currently set at $60,000 per annum plus a per
meeting fee of $2,500 with respect to in-person meetings and $100 for each
telephone meeting. None of the officers of the Fund received any compensation
from the Fund for such period. Officers and interested Directors of the Fund are
compensated by the Manager or Legg Mason.
The following table shows the compensation paid by the Fund to each person
who was a Director during the Fund's fiscal year ended September 30, 2005 and
calendar year ended December 31, 2004.
Compensation Table
Aggregate
Compensation
Aggregate from Fund and
Compensation Fund Complex Number of
from Fund Paid to Directors Portfolios for
for the Fiscal for the Calendar Which Director
Year Ended Year Ended Serves Within
Name of Person 9/30/05 12/31/04 fund Complex
--------------- -------------- ----------------- --------------
Lee Abraham $ 846 $ 87,600 27
Allan J. Bloostein** $ 493 $133,400 34
Jane F. Dasher $1,683 $ 85,100 27
Donald R. Foley* $ 712 $ 40,900 18
R. Jay Gerken+ $ 0 $ 0 171
Richard E. Hanson, Jr. $ 761 $ 79,400 27
Paul Hardin $ 846 $133,800 34
Roderick C. Rasmussen* $ 288 $ 19,400 27
John P. Toolan* $ 983 $ 82,400 27
----------
+ Designates a Director who is an "interested person" of the Fund as defined
under the 1940 Act.
* Pursuant to the Fund's deferred compensation plan, the indicated Directors
have elected to defer the following amounts of their compensation from the
Fund: Donald R. Foley: $201, Roderick C. Rasmussen: $279, and the
following amounts of their total compensation from the Fund Complex:
Donald R. Foley: $11,650, Roderick C. Rasmussen: $30,000.
At the end of the calendar year during which a Director attains the age of
80, the Director is required to change to emeritus status. Directors
emeritus are entitled to serve in emeritus status for a maximum of 10
years during which time they are paid 50% of the annual retainer fee and
meeting fees otherwise applicable to Fund Directors, together with
reasonable out-of-pocket expenses for each meeting attended. During the
Fund's last fiscal year, total compensation paid by the Fund to directors
emeritus totaled $224.30.
** Mr. Bloostein became a Director Emeritus on January 1, 2005.
9
Current Officers
The following is a list of the current executive officers of the Fund, all
of whom have been elected by the Directors to serve until their respective
successors are elected:
Term of
Office
and
Length Principal Occupation(s)
Position(s) Held of Time During Past
Name, Address and Age with Fund Served Five Years
--------------------- ---------------- ------- -----------------------
R. Jay Gerken Chairman, 2002 to (see table of Directors above)
CAM President and date
399 Park Avenue Chief Executive
New York, NY 10022 Officer
Birth Year: 1951
Andrew B. Shoup Senior 2003 to Director of CAM; Senior Vice
CAM Vice President date President and Chief Administrative
125 Broad Street and Chief Officer of mutual funds associated
10th Floor Administrative with Legg Mason; Treasurer of
New York, NY 10004 Officer certain mutual funds associated
Birth Year: 1956 with Legg Mason; Head of International
Funds Administration of CAM from
2001 to 2003); Director of Global
Funds Administration of CAM (from
2000 to 2001); Head of U.S.
Citibank Funds Administration of
CAM (from 1998 to 2000).
Robert J. Brault Chief Financial 2004 to Director of CAM; Chief Financial
CAM Officer and date Officer and Treasurer of certain
125 Broad Street Treasurer mutual funds affiliated with
11th Floor Legg Mason; Director of Internal
New York, NY 10004 Control for CAM U.S. Mutual Fund
Birth Year: 1965 Administration from 2002-2004;
Director of Project Management &
Information Systems for CAM U.S.
Mutual Fund Administration (from
2000 to 2002); Vice President of
Mutual Fund Administration at
Investors Capital Services (from
1999 to 2000)
Beth A. Semmel Vice President 2002 to Managing Director of Salomon
CAM and Investment date Brothers Asset Management Inc.
399 Park Avenue Officer ("SBAM")
4th Floor
New York, NY 10022
Birth Year: 1960
10
Term of
Office
and
Length Principal Occupation(s)
Position(s) Held of Time During Past
Name, Address and Age with Fund Served Five Years
--------------------- ---------------- ------- -----------------------
Peter J. Wilby, CFA Vice President 2002 Managing Director of CAM, Chief
CAM and Investment to date Investment Officer of SBAM
399 Park Avenue Officer
4th Floor
New York, NY 10022
Birth Year: 1958
Kaprel Ozsolak Assistant 2002 Vice President of CAM; Controller
CAM Treasurer to date of certain funds associated with
125 Broad Street Citigroup
11th Floor
New York, NY 10004
Birth Year: 1965
Robert I. Frenkel Secretary and 2003 Managing Director and General
CAM Chief Legal to date Counsel, Global Mutual Funds for
4th Floor Officer CAM and Vice President and
300 First Stamford Place Division Counsel of its predecessor
Stamford, CT 06902 (since 1994); Secretary of CFM;
Birth Year: 1954 Secretary and Chief Legal Officer
of mutual funds associated with
Legg Mason.
Andrew Beagley Chief Anti-Money Since Director of CAM (since 2000);
CAM Laundering 2002 Director of Compliance, North
399 Park Avenue Compliance America, CAM (since 2000); Chief
4th Floor Officer Anti-Money Laundering Compliance
New York, NY 10022 Chief Compliance Since Officer and Chief Compliance
Birth Year: 1962 Officer 2004 Officer of certain mutual funds
associated with CAM; Director of
Compliance, Europe, the Middle
East and Africa. CAM (from 1999 to
2000); Chief Compliance Officer,
SBFM and CFM; Formerly Chief
Compliance Officer of Travelers
Investment, Inc. (from 2002
to 2005)
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE NON-INTERESTED DIRECTORS,
RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF NOMINEES TO THE BOARD.
11
Audit Committee Report
The purposes of the Fund's Audit Committee include assisting the Board of
Directors in its oversight of the Fund's financial reporting process and
internal controls, the Fund's financial statements and the selection of the
Fund's independent registered public accounting firm. Management, however, is
responsible for the preparation, presentation and integrity of the Fund's
financial statements, and the independent registered public accounting firm
responsible for planning and carrying out proper audits and reviews.
In connection with the audited financial statements as of and for the year
ended September 30, 2005 included in the Fund's Annual Report for the year ended
September 30, 2005 (the "Annual Report"), at a meeting held on November 22,
2005, the Audit Committee considered and discussed the audited financial
statements with management and the independent registered public accounting
firm, and discussed the audit of such financial statements with the independent
registered public accounting firm.
In addition, the Audit Committee discussed with the independent registered
public accounting firm the quality, and not just the acceptability under
generally accepted accounting principles, of the accounting principles applied
by the Fund, and such other matters brought to the attention of the Audit
Committee by the independent registered public accounting firm required by
Statement of Auditing Standards No. 61, as currently in effect. The Audit
Committee also received from the independent registered public accounting firm
the written statement required by Independence Standards Board Statement No. 1,
as currently in effect, delineating relationships between the independent
registered public accounting firm and the Fund and discussed the impact that any
such relationships may have on the objectivity and independence of the
independent registered public accounting firm.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing including auditor independence. Moreover, the Audit
Committee relies on and makes no independent verification of the facts presented
to it or representations made by management or the independent registered public
accounting firm. Accordingly, the Audit Committee's oversight does not provide
an independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures, designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not provide any assurance
that the audit of the Fund's financial statements has been carried out in
accordance with generally accepted accounting standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Fund's registered public accounting firm in fact
"independent."
12
Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent registered
public accounting firm and subject to the limitations on the responsibilities
and role of the Audit Committee set forth in the Charter and those discussed
above, the Committee recommended to the Board of Directors that the audited
financial statements be included in the Fund's Annual Report.
Respectfully submitted,
Jane F. Dasher
Lee Abraham
John P. Toolan
November 22, 2005
13
Disclosure of Independent Registered Public Accounting Firm Fees
Audit Fees. Audit fees paid by Fund to KPMG LLP ("KPMG") in connection
with KPMG's audit of the Fund's annual financial statements for the year ended
September 30, 2005 and 2004 were $31,000 and $29,500, respectively.
Audit-Related Fees. Fees for services related to the audit of the Fund's
financial statements rendered by KPMG for the fiscal years ended September 30,
2005 and 2004 were $0 and $0, respectively. These amounts represent procedures
performed and prepared for in an agreed upon procedures letter in accordance
with the terms of the Articles Supplementary.
Tax Fees. Fees for services rendered by KPMG for tax compliance for the
fiscal years ended September 30, 2005 and 2004 were $3,000 and $2,800,
respectively. These amounts represent aggregate fees paid for tax compliance,
tax advice and tax planning services, which include the filing and amendment of
federal, state and local income tax returns, timely tax qualification review and
tax distribution and analysis planning rendered by KPMG to the Fund.
All Other Fees. There were no other fees billed to KPMG for services
rendered to the Fund for the last two fiscal years.
Pre-Approval Policies and Procedures. The Audit Committee Charter requires
that the Audit Committee shall approve (a) all audit and permissible non-audit
services to be provided to the Fund and (b) all permissible non-audit services
to be provided by the Fund's independent registered public accounting firm to
the Manager and any service providers controlling, controlled by or under common
control with the Manager that provide ongoing services to the Fund ("Covered
Service Providers") if the engagement relates directly to the operations and
financial reporting of the Fund. The Audit Committee may implement policies and
procedures by which such services are approved other than by the full Committee.
The Audit Committee may not approve non-audit services that the Committee
believes may impair the independence of the registered public accounting firm.
As of the date of the approval of the Audit Committee Charter, permissible
non-audit services include any professional services (including tax services),
that are not prohibited services as described below, provided to the Fund by the
independent registered public accounting firm, other than those provided to the
Fund in connection with an audit or a review of the financial statements of the
Fund. Permissible non-audit services may not include: (i) bookkeeping or other
services related to the accounting records or financial statements of the Fund;
(ii) financial information systems design and implementation; (iii) appraisal or
valuation services, fairness opinions or contribution-in-kind reports; (iv)
actuarial services; (v) internal audit outsourcing services; (vi) management
functions or human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert services unrelated
to the audit; and (ix) any other
14
service the Public Company Accounting Oversight Board determines, by regulation,
is impermissible.
Pre-approval by the Audit Committee of any permissible non-audit services
is not required so long as: (i) the aggregate amount of all such permissible
non-audit services provided to the Fund, the Manager and any Covered Service
Provider constitutes not more than 5% of the total amount of revenues paid to
the independent registered public accounting firm during the fiscal year in
which the permissible non-audit services are provided to (a) the Fund, (b) the
Manager and (c) any Covered Service Provider during the fiscal year in which the
services are provided that would not have to be approved by the Committee; (ii)
the permissible non-audit services were not recognized by the Fund at the time
of the engagement to be non-audit services; and (iii) such services are promptly
brought to the attention of the Audit Committee and approved by the Committee
(or its delegate(s)) prior to the completion of the audit.
There were no services rendered by KPMG to the Fund for which the
pre-approval requirement was waived.
Aggregate Non-Audit Fees. The aggregate non-audit fees billed by KPMG for
non-audit services rendered to the Fund, the Manager and Covered Service
Providers for the years ended December 31, 2004 and December 31, 2005 were
$75,000 and $0, respectively.
The Fund's Audit Committee has considered whether the provision of
non-audit services that were rendered by KPMG to the Manager and Covered Service
Providers which were not pre-approved (not requiring pre-approval) is compatible
with maintaining KPMG's independence. All services provided by KPMG to the Fund,
the Manager or Covered Service Providers which were required to be pre-approved
were pre-approved as required.
SUBMISSION OF STOCKHOLDER PROPOSALS
AND OTHER STOCKHOLDER COMMUNICATIONS
Stockholder proposals intended to be presented at the 2007 Annual Meeting
of the stockholders of the Fund must be received by September 22, 2006 to be
included in the proxy statement and the form of proxy relating to that meeting,
as the Fund expects that the 2007 Annual Meeting will be held in February 2007.
The shareholder proposal must be delivered by written notice to the Secretary of
the Fund (addressed to High Income Opportunity Fund Inc., 300 First Stamford
Place, 4th Floor, Stamford, CT 06902). The submission by a stockholder of a
proposal for inclusion in the proxy statement does not guarantee that it will be
included. Stockholder proposals are subject to certain regulations under the
federal securities laws.
15
The persons named as proxies for the 2007 Annual Meeting of stockholders
will have discretionary authority to vote on any matter presented by a
stockholder for action at that meeting unless the Fund receives notice of the
matter by December 24, 2006, in which case these persons will not have
discretionary voting authority except as provided in the SEC's rules governing
stockholder proposals.
The Fund's Audit Committee has established guidelines and procedures
regarding the receipt, retention and treatment of complaints regarding
accounting, internal accounting controls or auditing matters (collectively,
"Accounting Matters"). Persons with complaints or concerns regarding Accounting
Matters may submit their complaints to the Chief Compliance Officer ("CCO").
Persons who are uncomfortable submitting complaints to the CCO, including
complaints involving the CCO, may submit complaints directly to the Fund's Audit
Committee Chair (together with the CCO, "Complaint Officers"). Complaints may be
submitted on an anonymous basis.
The CCO may be contacted at:
Legg Mason & Co., LLC
Compliance Department
399 Park Avenue, 4th Floor
New York, New York 10022
Complaints may also be submitted by telephone at 800-742-5274. Complaints
submitted through this number will be received by the CCO.
The Fund's Audit Committee Chair may be contacted at:
High Income Opportunity Fund Inc.
Audit Committee Chair
c/o Jane Dasher
P.O. Box 7441
Greenwich, CT 06836-7441
A stockholder who wishes to send any other communications to the Board
should also deliver such communications to the Secretary of the Fund at 300
First Stamford Place, 4th Floor, Stamford, CT 06902. The Secretary is
responsible for determining, in consultation with other officers of the Fund,
counsel, and other advisers as appropriate, which stockholder communications
will be relayed to the Board.
16
ADDITIONAL INFORMATION
On December 1, 2005, Citigroup announced that it had completed the sale of
substantially all of its asset management business, Citigroup Asset Management
to Legg Mason. As a result, the Fund's investment adviser (the "Manager"),
previously an indirect wholly-owned subsidiary of Citigroup, has become a
wholly-owned subsidiary of Legg Mason. Completion of the sale caused the Fund's
existing investment management contract to terminate.
The Fund's shareholders approved a new investment management contract
between the Fund and the Manager which became effective on December 1, 2005.
Legg Mason's sole business is asset management, with on-the-ground
management capabilities located around the world and assets under management as
of October 31, 2005 aggregating approximately $830 billion (including the
combined assets of Legg Mason and Permal plus approximately $400 billion in
managed assets acquired from Citigroup).
Under a licensing agreement between Citigroup and Legg Mason, the names of
funds, any classes of shares of funds, and the names of investment advisers of
funds, as well as all logos, trademarks and service marks related to Citigroup
or any of its affiliates ("Citi Marks") are licensed for use by Legg Mason and
by the Fund. Citi Marks include, but are not limited to, "Smith Barney,"
"Salomon Brothers," "Citi," "Citigroup Asset Management," and "Davis Skaggs
Investment Management." Legg Mason and its affiliates, as well as the Manager,
are not affiliated with Citigroup.
All Citi Marks are owned by Citigroup, and are licensed for use until no
later than one year after the date of the licensing agreement.
Legg Mason, Inc. is a global asset management firm, structured as a
holding company. The firm is headquartered in Baltimore, Maryland.
17
OTHER MATTERS
The Manager knows of no other matters which are to be brought before the
Meeting. However, if any other matters not now known or determined properly come
before the Meeting, it is the intention of the persons named in the enclosed
form of proxy to vote such proxy in accordance with their judgment on such
matters.
By Order of the Board of Directors,
Robert I. Frenkel
Secretary
January 24, 2006
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE AND SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
18
Exhibit A
AUDIT COMMITTEE CHARTER
AMENDED AND RESTATED AS OF DECEMBER 16, 2005
Establishment and Purpose
This document serves as the Charter for the Audit Committee (the
"Committee") of the Board of each registered investment company (the "Fund")
advised by Smith Barney Fund Management or Salomon Brothers Asset Management or
one of their affiliates (each, an "Adviser") listed on Appendix A hereto (each
such Charter being a separate Charter). The primary purposes of the Committee
are to (a) assist Board oversight of (i) the integrity of the Fund's financial
statements, (ii) the Fund's compliance with legal and regulatory requirements,
(iii) the qualifications and independence of the Fund's independent auditors and
(iv) the performance of the Fund's internal audit function and independent
auditors; (b) approve, and recommend to the Independent Board Members (as such
term is defined below) for their ratification, the selection, appointment,
retention or termination of the Fund's independent auditors, as well as
approving the compensation thereof; (c) approve all audit and permissible
nonaudit services provided to the Fund and certain other persons by the Fund's
independent auditors; and (d) for each closed-end Fund, prepare the report
required to be prepared by the Committee pursuant to the rules of the Securities
and Exchange Commission for inclusion in the Fund's annual Proxy Statement.
Duties and Responsibilities
The Fund's independent auditors are accountable to the Committee.
The Committee shall:
1. Bear direct responsibility for the appointment, compensation,
retention and oversight of the Fund's independent auditors, or of
any other public accounting firm engaged for the purpose of
performing other audit, review or attest services for the Fund.
2. Confirm with any independent auditor retained to provide audit
services that the independent auditor has ensured the appropriate
rotation of the lead audit partner pursuant to applicable
regulations.
A-1
3. Approve (a) all audit and permissible non-audit services(1) to be
provided to the Fund and (b) all permissible non-audit services to
be provided by the Fund's independent auditors to the Adviser and
any Covered Service Providers if the engagement relates directly to
the operations and financial reporting of the Fund. The Committee
may implement policies and procedures by which such services are
approved other than by the full Committee.
4. Discuss with the independent auditors any disclosed relationships or
services that may diminish the objectivity and independence of the
independent auditors and, if so determined by the Committee,
recommend that the Board take appropriate action to ensure the
independence of the independent auditors.
5. Review, in consultation with the independent auditors, the proposed
scope of the Fund's audit each year, including the audit procedures
to be utilized in the review of the Fund's financial statements.
6. Inquire of the Adviser and the independent auditors as to
significant tax and accounting policies elected by the Fund
(including matters affecting qualification under Subchapter M of the
Internal Revenue Code).
----------
(1) The Committee shall not approve non-audit services that the Committee
believes may impair the independence of the auditors. As of the date of
the approval of this Audit Committee Charter, permissible non-audit
services include any professional services (including tax services), that
are not prohibited services as described below, provided to the Fund by
the independent auditors, other than those provided to the Fund in
connection with an audit or a review of the financial statements of the
Fund. Permissible non-audit services may not include: (i) bookkeeping or
other services related to the accounting records or financial statements
of the Fund; (ii) financial information systems design and implementation;
(iii) appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v) internal audit
outsourcing services; (vi) management functions or human resources; (vii)
broker or dealer, investment adviser or investment banking services;
(viii) legal services and expert services unrelated to the audit; and (ix)
any other service the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit services in not
required so long as: (i) the aggregate amount of all such permissible
non-audit services provided to the Fund, the Adviser and any service
providers controlling, controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Covered Service
Providers") constitutes not more than 5% of the total amount of revenues
paid to the independent auditors during the fiscal year in which the
permissible non-audit services are provided by (a) the Fund, (b) the
Adviser and (c) any entity controlling, controlled by or under common
control with the Adviser that provides ongoing services to the Fund during
the fiscal year in which the services are provided that would have to be
approved by the Committee; (ii) the permissible non-audit services were
not recognized by the Fund at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention of
the Committee and approved by the Committee (or its delegate(s)) prior to
the completion of the audit.
A-2
7. Review with the independent auditors any problems or difficulties
the auditors may have encountered during the conduct of the audit
and management's response, including a discussion with the
independent auditors of the matters required to be discussed by
Statement on Auditing Standards No. 61, 89, 90 or any subsequent
Statement, relating to the conduct of the audit.
8. Review, in consultation, as appropriate, with the independent
auditors and significant Fund service providers, matters relating to
internal controls over financial reporting and disclosure controls
and procedures of the Fund and of the Fund's significant service
providers.
9. Request, receive and/or review from the independent auditors such
other materials as deemed necessary or advisable by the Committee in
the exercise of its duties under this Charter; such materials may
include, without limitation, any other material written
communications bearing on the Fund's financial statements, or
internal or disclosure controls, between the independent auditors
and the Fund, the Adviser or other Fund service providers, such as
any management letter or schedule of unadjusted differences, and any
comment or "deficiency" letter (to the extent such letters relate to
financial reporting) received from a regulatory or self-regulatory
organization addressed to the Fund or the Adviser that relates to
services rendered to the Fund.
10. For each closed-end Fund, establish procedures regarding the
receipt, retention and treatment of complaints that the Fund may
receive regarding Fund accounting, internal accounting controls or
auditing matters, including procedures for the confidential or
anonymous submission by Fund officers, employees, stockholders or
service providers of concerns regarding questionable accounting or
auditing matters related to the Fund.
11. For each closed-end Fund, obtain and review a report by the Fund's
independent auditors describing (i) the auditing firm's internal
quality-control procedures; (ii) any material issues raised by the
most recent internal quality-control review, or peer review, of the
auditing firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
auditing firm, and any steps taken to deal with any such issues; and
(iii) (to assess the auditor's independence) all relationships
between the independent auditor and the Fund.
12. For each closed-end Fund, discuss policies with respect to risk
assessment and risk management.
13. For each closed-end Fund, review hiring policies for employees or
former employees of the Fund's independent auditors.
A-3
14. For each closed-end Fund, discuss with management and the Fund's
independent auditors the Fund's audited financial statements and
discuss with management the Fund's unaudited financial statements,
including any narrative discussion by management concerning the
Fund's financial condition and investment performance and, if
appropriate, recommend the publication of the Fund's annual audited
financial statements in the Fund's annual report in advance of the
printing and publication of the annual report.
15. For each closed-end Fund, discuss the Fund's earnings press
releases, as well as financial information and earnings guidance
provided to analysts and rating agencies;
16. For each closed-end Fund, review and evaluate annually the
performance of the Committee and the adequacy of this Charter and
recommend any proposed changes to the Charter to the Board for
approval.
The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain, as it deems
necessary to carry out its duties, special counsel and other experts or
consultants at the expense of the Fund. The Fund shall provide appropriate
funding, as determined by the Committee, for the Committee to carry out its
duties and its responsibilities, including (a) for compensation to be paid to,
or services to be provided by, the Fund's independent auditors or other public
accounting firm providing audit, review or attest services for the Fund, (b) for
payment of compensation to any outside legal, accounting or other advisors,
counsel or consultants employed by the Committee and (c) for the ordinary
administrative expenses of the Committee. In performing its duties, the
Committee shall consult as it deems appropriate with the members of the Board,
officers and employees of the Fund, the Adviser, the Fund's sub-adviser(s), if
any, the Fund's counsel, counsel to the Independent Board Members and the Fund's
other service providers.
Composition
The Committee shall be composed of each Board member who has been
determined not to be an "interested person," as that term is defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended ("1940 Act"), of the
Fund (the "Independent Board Members"), or such lesser number as the Board of
the Fund may specifically determine and reflect in the Board's minutes, each of
whom shall be financially literate and at least one of whom shall have
accounting or related financial management expertise as determined by the Fund's
Board in its business judgment. Each member of the Committee must also meet the
independence and experience requirements as set forth in the New York Stock
Exchange's Listed Company Manual or as set forth in the American Stock
Exchange's listing standards, as applicable, and the independence requirements
applicable to investment companies set forth in the Securities Exchange Act of
A-4
1934. The Committee shall elect a Chairperson, who shall preside over Committee
meetings. The Chairperson shall serve for a term of three years, which term may
be renewed from time to time.
Meetings
The Committee shall meet on a regular basis, but not less frequently than
twice a year. Special meetings may also be held upon reasonable notice to the
members of the Committee. An agenda shall be established for each meeting. The
Committee may request any officer or employee of the Fund, the Fund's counsel,
counsel to the Independent Board Members, the Adviser, the Fund's independent
auditors or other interested persons to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee. The Committee will
meet periodically with the Fund's independent auditors outside the presence of
the Fund's and the Adviser's officers and employees. The Committee will also
meet periodically with the fund's management outside the presence of the Fund's
independent auditors. Meetings of the Committee may be held in person, by
telephone or by other appropriate means.
One-third of the Committee's members, but not fewer than two members,
shall constitute a quorum. At any meeting of the Committee, the decision of a
majority of the members present and voting shall be determinative as to any
matter submitted to a vote.
Reporting
The Chairperson shall report regularly to the Board on the result of the
Committee's deliberations and make such recommendations as deemed appropriate.
Limits on Role of Committee
The function of the Committee is oversight. The Fund's management is
responsible for (i) the preparation, presentation and integrity of the Fund's
financial statements, (ii) the maintenance of appropriate accounting and
financial reporting principles and policies and (iii) the maintenance of
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for planning and carrying out proper audits and reviews. In
fulfilling their responsibilities hereunder, it is recognized that members of
the Committee are not employees of the Fund. As such, it is not the duty or
responsibility of the Committee or its members to conduct "field work" or other
types of auditing or accounting reviews or procedures or to set auditor
independence standards. Each member of the Committee shall be entitled to rely
on (i) the integrity of those persons and organizations within and outside the
Fund from which it receives information and (ii) the accuracy of the financial
and other information provided to the Committee by such persons and
organizations absent actual knowledge to the contrary (which shall be promptly
A-5
reported to the Fund's Board) and (iii) statements made by the officers and
employees of the Fund, the Adviser or other third parties as to any information
technology, internal audit and other non-audit services provided by the
independent auditors to the Fund. The designation of a person as an "audit
committee financial expert," within the meaning of the rules adopted and
implemented under Section 407 of the Sarbanes-Oxley Act of 2002, shall not
impose any greater responsibility or liability on that person than the
responsibility and liability imposed on such person as a member of the
Committee, nor does it decrease the duties and obligations of other Committee
members or the Board.
In carrying out its responsibilities, the Committee's policies and
procedures shall be adapted, as appropriate, in order to best react to a
changing environment.
Amendments
This Charter may be amended by a vote of a majority of the Board members.
A-6
Appendix A
Smith Barney Equity Funds
Smith Barney Social Awareness Fund
Smith Barney Muni Funds
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
Massachusetts Money Market Portfolio
New York Money Market Portfolio
New York Portfolio
Pennsylvania Portfolio
Smith Barney Municipal Money Market Fund, Inc.
High Income Opportunity Fund Inc.*
Smith Barney Funds, Inc.
Large Cap Value Fund
U.S. Government Securities Fund
Short-Term Investment Grade Bond Fund
Smith Barney Income Funds
Smith Barney Dividend and Income Fund
SB Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
SB Capital and Income Fund
Smith Barney Total Return Bond Fund
Smith Barney Small Cap Core Fund, Inc.
Intermediate Muni Fund, Inc.*
Smith Barney Money Funds, Inc.
Cash Portfolio
Government Portfolio
* Closed-end Funds. The duties and responsibilities of paragraphs 10, 11,
12, and 13 and any other provision applicable exclusively to closed-end funds
apply to these funds only.
A-7
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Exhibit B
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE CHARTER
Purpose of Committee
The purpose of the Corporate Governance and Nominating Committees (the
"Committees") of the Boards of Directors (the "Boards") of the Smith Barney
Investment Companies listed on Appendix A of Exhibit A (the "Funds") is to
oversee the board governance practices of the Funds, to identify and recommend
individuals to the Boards for nomination as members of the Boards and their
committees (including these Committees) and to establish the agenda for meetings
of the Independent Directors. Each Board of each Fund shall establish a
Committee. The Committees shall report to the Boards on their activities when
appropriate.
Committee Membership
The Committees shall consist solely of two or more members of each Board,
(a) none of whom is an "interested person" of the Funds or their investment
adviser as defined in the Investment Company Act of 1940 (the "Act") or has a
direct or indirect financial interest in the operation of any Fund's plan under
Rule 12b-1 under the Act or in any agreements related to a plan (any such
person, an "Independent Director"), and (b) each of whom the Boards have
determined has no material relationship with the Funds and is otherwise
"independent" under the rules of the New York Stock Exchange, Inc.
The initial members of the Committees shall be appointed by the Boards,
including a majority of the Independent Directors. Candidates to fill subsequent
vacancies in the Committees shall be nominated by the Committees as set forth
below and appointed by the Boards. Members shall serve at the pleasure of the
Boards and for such term or terms as the Boards may determine.
Committee Structure and Operations
Each Committee shall designate one member as its chairperson. In the event
of a tie vote on any issue, the chairperson's vote shall decide the issue. Each
Committee shall meet in person or telephonically as appropriate for the conduct
of its business at times and places determined by the Committee chairperson. In
addition, actions may be taken by unanimous written consent when deemed
necessary or desirable by the Committee.
B-1
Committee Duties and Responsibilities
The following are the duties and responsibilities of the Committees:
1. To monitor developments in corporate governance of registered
investment companies with a view to advising the Boards on their
policies, programs and procedures designed to assure compliance with
legislative, regulatory and self-regulatory requirements applicable
to investment company board governance.
2. To make recommendations to the Boards from time to time as to
changes that the Committees believe to be desirable to the size of
the Boards or any committee thereof.
3. To identify individuals believed to be qualified to become
Independent Directors of the Funds, and to recommend to the Boards
the nominees to stand for election as directors at meetings of
stockholders. In the case of a vacancy to be filled in the office of
a director (including a vacancy created by an increase in the size
of a Board), each Committee shall recommend to the Board an
individual to fill such vacancy either through appointment by the
Board or through election by stockholders. In nominating candidates,
each Committee shall take into consideration such factors as it
deems appropriate. The Committees may consider candidates proposed
by management but is not required to do so.
In evaluating a person as a potential nominee to serve as a Director
of the Fund, the Committee should consider among other factors it
may deem relevant:
o whether or not the person is an "interested person" as defined
in the 1940 Act and whether the person is otherwise qualified
under applicable laws and regulations to serve as a Director
of the Fund;
o whether or not the person has any relationships that might
impair his or her independence, such as any business,
financial or family relationships with Fund management, the
investment manager of the Fund, other Fund service providers
or their affiliates;
o whether or not the person serves on boards of, or is otherwise
affiliated with, competing financial service organizations or
their related mutual fund complexes;
o whether or not the person is willing to serve, and willing and
able to commit the time necessary for the performance of the
duties of a Director of the Fund;
o the contribution which the person can make to the Board and
the Fund (or, if the person has previously served as a
Director of the Fund, the contribution which the person made
to the Board during
B-2
his or her previous term of service), with consideration being
given to the person's business and professional experience,
education and such other factors as the Committee may consider
relevant;
o the character and integrity of the person; and
o whether or not the selection and nomination of the person
would be consistent with the requirements of the Fund's
retirement policies.
o While the Committee is solely responsible for the selection
and nomination of Directors. It may consider nominees
recommended by Fund stockholders but is not required to do so.
Stockholders who wish to recommend a nominee should send
nominations to the Secretary of the Fund that include all
information relating to such person that is required to be
disclosed in solicitations of proxies for the election of
Directors. The recommendation must be accompanied by a written
consent of the individual to stand for election if nominated
by the Board of Directors and to serve if elected by the
stockholders.
4. To develop and recommend to the Boards standards to be applied in
making determinations as to the absence of material relationships
between the Company and a director.
5. To identify Board members qualified to fill vacancies on any
committee of a Board (including the Committee) and to recommend that
the Boards appoint the identified member or members to the
respective committee. In nominating a candidate for committee
membership, the Committee shall take into consideration the factors
set forth in the charter of that committee, if any, as well as any
other factors it deems appropriate, including without limitation the
consistency of the candidate's experience with the goals of the
committee and the interplay of the candidate's experience with the
experience of other committee members.
6. Establish agendas for the executive sessions of the Independent
Directors and coordinate with management on agendas for regular
meetings of the Board.
7. Prepare and issue the evaluation required under "Performance
Evaluation" below.
8. Review on a periodic basis director fees and compensation.
9. Any other duties or responsibilities expressly delegated to the
Committees by the Boards from time to time relating to the
nomination of Board and committee members and to corporate
governance matters.
B-3
Delegation to Subcommittee
A Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee or a committee of
the Board.
Performance Evaluation
The Committees shall produce and provide to the Boards an annual
performance evaluation of the Committee, which evaluation shall compare the
performance of the Committee with the requirements of this charter. The
performance evaluation shall also recommend to the Boards any improvements to
the Committee charter or to Board governance practices deemed necessary or
desirable by the Committees. The performance evaluation by the Committees shall
be conducted in such manner as the Committees deem appropriate. The report to
the Boards may take the form of an oral report by the chairperson of the
Committees or any other member designated by the Committees to make this report.
Resources and Authority of the Committees
The Committees shall have the resources and authority appropriate to
discharge the duties and responsibilities specified in this Charter, including
the authority to select, retain, terminate, and approve the fees and other
retention terms of special counsel or other experts or consultants, such as
search firms used to identify director candidates, as it deems appropriate,
without seeking approval of the Boards or management. While it is expected that,
in the normal course of business the Committees would consult with the other
Independent Directors in connection with any such retention, the Committees are
not required to do so.
B-4
Please mark 3212
|X| votes as in
this example.
The Board of Directors recommends a vote "FOR" the following proposal. This
proxy, when properly executed, will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR each nominee for director.
1. ELECTION OF DIRECTORS:
Class II Nominees: (01) R. Jay Gerken,
(02) Roderick C. Rasmussen,
(03) John P. Toolan
FOR WITHHOLD
|_| |_|
|_| ________________________________________
For all nominees except as noted above
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as your name appears to the left. When shares are
held by joint tenants, both should sign, or if one signs, that stockholder's
vote binds both stockholders. When signing as attorney, executor,
administrator, agent, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature: ________________ Date: ______ Signature: _______________ Date: ______
PROXY
HIGH INCOME OPPORTUNITY FUND INC.
125 Broad Street
New York, New York 10004
This Proxy is Solicited on Behalf of the Board of Directors of the Fund
The undersigned hereby appoints R. JAY GERKEN, ROBERT I. FRENKEL, and TODD LEBO,
and each of them acting in the absence of the other, as Proxies, each with the
power to appoint a substitute, and hereby authorizes them to represent and to
vote, as designated herein, all the shares of common stock of High Income
Opportunity Fund Inc. held of record by the undersigned on January 13, 2006 at a
Meeting of Stockholders to be held on February 22, 2006 or any adjournment
thereof.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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