FILE NO. 2-69938
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 28
To The
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
AND
THE INVESTMENT COMPANY ACT OF 1940
SMITH BARNEY MUNICIPAL MONEY MARKET FUND, INC.
(Exact name of Registrant as specified
in the Articles of Incorporation)
388 Greenwich Street, New York, New York l0013
(Address of principal executive offices)
(212) 816-6474
(Registrant's telephone number)
Christina T. Sydor
388 Greenwich Street, New York, New York l0013 (22nd Floor)
(Name and address of agent for service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective:
XXX immediately upon filing pursuant to paragraph (b)
______on (date) pursuant to paragraph (b) of Rule 485
______60 days after filing pursuant to paragraph (a)(i)
______on (date) pursuant to paragraph (a)(i)
______75 days after filing pursuant to paragraph (a)(ii)
______on (date) pursuant to paragraph (a)( ii) 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 Common Stock, par value
$0.01 per share
CROSS REFERENCE SHEET
(as required by Rule 495(a))
Part A of
Form N-1A Location in Part A
l. Cover Page cover page
2. Synopsis "Fee Table"
3. Condensed Financial Information "Financial Highlights"
"Performance"
4. General Description of Registrant "Shares of the Fund"
cover page
"Investment Objective
and Policies"
"Risk and Portfolio Management"
5. Management of the Fund "Investment Management and
Distribution of Shares"
"Purchase of Shares"
"Financial Highlights"
6. Capital Stock and Other Securities "Shares of the Fund"
"Redemption of Shares"
cover page
"Dividends, Automatic
Reinvestment and Taxes"
7. Purchase of Securities Being Offered "Purchase of Shares"
"Investment Management
and Distribution of Shares"
"Determination of Net
Asset Value"
"Exchange Privileges"
8. Redemption or Repurchase "Redemption of Shares"
"Minimum Account Size"
9. Pending Legal Proceedings not applicable
Part B of Statement of Additional
Form N-1A Information Caption
10. Cover page cover page
11. Table of Contents "Table of Contents"
12. General Information and History not applicable
13. Investment Objectives and Policies "Investment Policies and
Restrictions"
"Repurchase Agreements"
"Puts"
See Prospectus-"Investment
Objective and Policies"
14. Management of the Fund "Directors and Officers"
15. Control Persons and Principal
Holders of Securities "Directors and Officers"
See Prospectus - "Shares of
the Fund"
16. Investment Advisory and
Other Services "Directors and Officers"
"Management Agreement, Plan
of Distribution and Other
Services"
"Custodian"
"Independent Auditors"
See Prospectus -
"Investment Management and
Distribution of Shares"
"Fee Table"
17. Brokerage Allocation and Other Practices See Prospectus -
"Investment Management and
Distribution of Shares"
18. Capital Stock and Other Securities See Prospectus - "Shares
of
the Fund"
"Voting Rights"
19. Purchase, Redemption and Pricing
of Securities Being Offered See Prospectus - "Purchase
of Shares"
See Prospectus -
"Determination of
Net Asset Value"
"Determination of Net Asset
Value
and Amortized Cost Valuation"
"Financial Statements"
20. Tax Status See Prospectus - "Dividends,
Automatic Reinvestment and
Taxes"
Part B of Statement of Additional
Form N-1A Information Caption
21. Underwriters See Prospectus - "Investment
Management and Distribution
of Shares"
22. Calculation of Performance Data "Computation of Yield"
23. Financial Statements "Financial Statements"
Part C of
Form N-1A
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Post-Effective
Amendment.
PART A PROSPECTUS
<PAGE>
PROSPECTUS JULY 29, 1998
Smith Barney Municipal Money Market Fund, Inc.
388 Greenwich Street
New York, New York 10013
800-451-2010
Smith Barney Municipal Money Market Fund, Inc. (the "Fund") seeks to
provide its shareholders with income exempt from Federal income tax from a
portfolio of high quality short-term municipal obligations selected for
liquidity and stability of principal.
SHARES OF THE FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely certain information about the Fund,
including service fees and expenses, that prospective investors will find
helpful in making an investment decision. Investors are encouraged to read this
Prospectus carefully and retain it for future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated July 29, 1998, as amended or supplemented from time
to time (the "SAI"), that is available upon request and without charge by
calling or writing the Fund at the telephone number or address set forth above
or by contacting a Smith Barney Financial Consultant. The SAI has been filed
with the Securities and Exchange Commission (the "SEC") and is incorporated by
reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
MUTUAL MANAGEMENT CORP.
Investment Manager
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FEE TABLE 3
- ---------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 4
- ---------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 6
- ---------------------------------------------------------------------
RISK AND PORTFOLIO MANAGEMENT 9
- ---------------------------------------------------------------------
VALUATION OF SHARES 11
- ---------------------------------------------------------------------
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES 12
- ---------------------------------------------------------------------
PURCHASE OF SHARES 14
- ---------------------------------------------------------------------
REDEMPTION OF SHARES 16
- ---------------------------------------------------------------------
EXCHANGE PRIVILEGE 20
- ---------------------------------------------------------------------
MINIMUM ACCOUNT SIZE 22
- ---------------------------------------------------------------------
YIELD INFORMATION 23
- ---------------------------------------------------------------------
MANAGEMENT OF THE FUND 23
- ---------------------------------------------------------------------
DISTRIBUTION 26
- ---------------------------------------------------------------------
ADDITIONAL INFORMATION 27
- ---------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund or
Smith Barney Inc. ("Smith Barney" or the "Distributor"). This Prospectus does
not constitute an offer by the Fund or the Distributor to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction.
- --------------------------------------------------------------------------------
2
<PAGE>
FEE TABLE
The following expense table lists the costs and expenses that an investor
will incur either directly or indirectly as a shareholder of the Fund, based on
its operating expenses for its most recent fiscal year:
SMITH BARNEY MUNICIPAL MONEY MARKET FUND, INC.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
- ----------------------------------------------------------------------------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases None None
Deferred Sales Charge None* None
- ----------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.48% 0.48%
12b-1 Fees 0.10 --
Other Expenses 0.03 0.04
- ----------------------------------------------------------------------------------
Total Fund Operating Expenses 0.61% 0.52%
- ----------------------------------------------------------------------------------
</TABLE>
* Class A shares acquired as part of an exchange privilege transaction, which
were originally acquired in one of the other funds of the Smith Barney Mutual
Funds at net asset value subject to a contingent deferred sales charge
("CDSC"), remain subject to the original fund's CDSC while held in the Fund.
Class A shares of the Fund purchased through the Smith Barney AssetOne
Program will be subject to an annual asset-based fee, payable quarterly. The fee
will vary to a maximum of 1.50%, depending on the amount of assets held through
the Program. For more information, please call your Smith Barney Financial
Consultant.
EXAMPLE
The following example is intended to assist an investor in understanding
the various costs that an investor in the Fund will bear directly or indirectly.
The example assumes payment by the Fund of operating expenses at the levels set
forth in the table above. See "Purchase of Shares," "Redemption of Shares,"
"Management of the Fund" and "Distributor."
You would pay the following expenses on a $1,000 investment, assuming (1) 5.00%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $6 $20 $34 $76
Class Y 5 17 29 65
- --------------------------------------------------------------------------------------
</TABLE>
The example is included to provide a means for the investor to compare
expense levels of funds with different fee structures over varying investment
periods. To facilitate such comparison, all funds are required to utilize a
3
<PAGE>
FEE TABLE (CONTINUED)
5.00% annual return assumption. This assumption is unrelated to the Fund's prior
performance and is not a projection of future performance. THIS EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon for the five years ended March 31,
1998 appears in the Fund's annual report dated March 31, 1998. The information
set out below should be read in conjunction with the financial statements and
related notes that also appear in the Fund's Annual Report to Shareholders,
which is incorporated by reference into the SAI.
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
Smith Barney Municipal Money Market Fund, Inc.
<TABLE>
<CAPTION>
CLASS A SHARES 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment
income(1) 0.031 0.029 0.033 0.027 0.019 0.022 0.037 0.052 0.057 0.051
Dividends from net
investment income (0.031) (0.029) (0.033) (0.027) (0.019) (0.022) (0.037) (0.052) (0.057) (0.051)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 3.15% 2.94% 3.34% 2.71% 1.89% 2.25% 3.73% 5.33% 5.89% 5.23%
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(MILLIONS) $6,336 $5,562 $5,395 $4,651 $1,286 $1,251 $1,355 $1,373 $1,252 $992
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS:
Expenses(1) 0.61% 0.67% 0.63% 0.61% 0.64% 0.62% 0.53% 0.52% 0.53% 0.53%
Net investment
income 3.10 2.90 3.28 3.01 1.87 2.22 3.66 5.18 5.70 5.08
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The manager has waived a part of its fees for the years ended March 31, 1996
and March 31, 1995. If such fees were not waived, the per share effect on
net investment income and expense ratios would have been as follows:
<TABLE>
<CAPTION>
PER SHARE DECREASES EXPENSE RATIOS
OF NET INVESTMENT INCOME WITHOUT FEE WAIVERS
------------------------- -------------------------
1996 1995 1996 1995
------- ------- ----- -----
<S> <C> <C> <C> <C>
Class A $0.0001 $0.0002 0.64% 0.63%
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OF EACH CLASS OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
CLASS Y SHARES 1998 1997 1996(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00
- ------------------------------------------------------------------
Net investment income 0.032 0.030 0.004
Dividends from net investment
income (0.032) (0.030) (0.004)
- ------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00
- ------------------------------------------------------------------
TOTAL RETURN 3.25% 3.04% 0.39%++
- ------------------------------------------------------------------
NET ASSETS, END OF YEAR
(MILLIONS) $0.5 $5.0 $18.0
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.52% 0.57% 0.55%+
Net investment income 3.23 3.00 2.81+
- ------------------------------------------------------------------
</TABLE>
(1) For the period from February 12, 1996 (inception date) to March 31, 1996.
++ Total return is not annualized, as it may be representative of the total
return for the year.
+ Annualized.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective is to provide income exempt from Federal income tax
from a portfolio of high quality short-term municipal obligations selected for
liquidity and stability of principal. The Fund will pursue its objective by
investing in a diversified portfolio of municipal obligations, the interest on
which is exempt from Federal income tax in the opinion of counsel to the various
issuers. The Fund operates as a money market fund, and utilizes certain
investment policies so that, to the extent reasonably possible, its price per
share will not change from $1.00, although no assurance can be given that this
goal will be achieved on a continuous basis. For example, the Fund will not
purchase a security which, after giving effect to any demand features, has a
remaining maturity of greater than 13 months, or maintain a dollar-weighted
average portfolio maturity in excess of 90 days.
Opinions relating to the validity of municipal obligations and to the
exemption of interest thereon from Federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Fund nor
Mutual Management Corp. ("MMC" or the "Manager") will review the proceedings
relating to the issuance of municipal obligations or the bases for such
opinions.
Except for temporary defensive purposes, at least 80% of the Fund's assets
will be invested in municipal obligations that produce income that is exempt
from Federal income tax (other than the alternative minimum tax). In each of the
Fund's prior fiscal years, 100% of its income has been exempt from Federal
income tax and the Fund's shares have had a stable $1.00 price.
The Fund's investments are limited to United States dollar-denominated
instruments that, at the time of acquisition (including any related credit
enhancement features) have received a rating in one of the two highest
categories for short-term debt obligations from the "Requisite NRSROs",
securities of issuers that have received such a rating with respect to other
comparable securities, and comparable unrated securities. "Requisite NRSROs"
means (a) any two nationally recognized statistical rating organizations
("NRSROs") that have issued a rating with respect to a security or class of debt
obligations of an issuer, or (b) one NRSRO, if only one NRSRO has issued such a
rating at the time that the Fund acquires the security. The NRSROs currently
designated as such by the SEC are Standard & Poor's Ratings Group ("S&P"),
Moody's Investors Service, Inc. ("Moody's"), Duff and Phelps Inc., Fitch IBCA,
Inc. ("Fitch") and Thomson BankWatch.
Municipal obligations, which are issued by states, municipalities and their
agencies, may include municipal notes and bonds. The two principal
classifications of municipal obligations are "general obligation" and "reve-
6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES (CONTINUED)
nue." General obligations are secured by a municipal issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
Revenue obligations are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source. Although industrial
development bonds ("IDBs") are issued by municipal authorities, they are
generally secured by the revenues derived from payments of the industrial user.
The payment of the principal and interest on IDBs is dependent solely on the
ability of the user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
Among the types of obligations in which the Fund may invest are floating or
variable rate instruments subject to demand features ("demand instruments");
tax-exempt commercial paper; and notes such as Tax Anticipation Notes, Revenue
Anticipation Notes, Tax and Revenue Anticipation Notes and Bond Anticipation
Notes. Demand instruments usually have an indicated maturity of more than 13
months but have a demand feature (or "put") that entitles the holder to receive
the principal amount of the underlying security and may be exercised either (a)
at any time on no more than 30 days' notice; or (b) at specified intervals not
exceeding one year and upon no more than 30 days' notice. Demand features
generally consist of a letter of credit issued by a domestic or foreign bank. A
variable rate instrument provides for adjustment of its interest rate on set
dates and upon such adjustment can reasonably be expected to have a market value
that approximates its amortized cost; a floating rate instrument provides for
adjustment of its interest rate whenever a specified interest rate (e.g., the
prime rate) changes and at any time can reasonably be expected to have a market
value that approximates its amortized cost.
The Fund may invest without limit in private activity bonds. Interest
income on certain types of private activity bonds issued after August 7, 1986,
to finance non-governmental activities is a specific tax preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders may be subject to a Federal alternative
minimum tax to the extent the Fund's dividends are derived from interest on
these bonds. These private activity bonds are included in the term "municipal
obligations" for purposes of determining compliance with the 80% test described
above. Dividends derived from interest income on all municipal obligations are a
component of the "current earnings" adjustment item for purposes of the Federal
corporate alternative minimum tax.
7
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES (CONTINUED)
The Fund may invest up to 20% of the value of its assets in one or more of
the three principal types of derivative product structures described below.
Derivative products are typically structured by a bank, broker-dealer or other
financial institution. A derivative product generally consists of a trust or
partnership through which the Fund holds an interest in one or more underlying
bonds coupled with a conditional right to sell ("put") the Fund's interest in
the underlying bonds at par plus accrued interest to a financial institution (a
"Liquidity Provider"). Typically, a derivative product is structured as a trust
or partnership which provides for pass-through tax-exempt income. There are
currently three principal types of derivative structures: (1) "Tender Option
Bonds", which are instruments which grant the holder thereof the right to put an
underlying bond at par plus accrued interest at specified intervals to a
Liquidity Provider; (2) "Swap Products", in which the trust or partnership swaps
the payments due on an underlying bond with a swap counterparty who agrees to
pay a floating municipal money market interest rate; and (3) "Partnerships",
which allocate to the partners income, expenses, capital gains and losses in
accordance with a governing partnership agreement.
Investments in derivative products raise certain tax, legal, regulatory and
accounting issues which may not be presented by investments in other municipal
bonds. There is some risk that certain issues could be resolved in a manner that
could adversely impact the performance of the Fund. For example, the tax-exempt
treatment of the interest paid to holders of derivative products is premised on
the legal conclusion that the holders of such derivative products have an
ownership interest in the underlying bonds. While the Fund receives an opinion
of legal counsel to the effect that the income from each derivative product is
tax-exempt to the same extent as the underlying bond, the Internal Revenue
Service (the "IRS") has not issued a ruling on this subject. Were the IRS to
issue an adverse ruling, there is a risk that the interest paid on such
derivative products would be deemed taxable.
The Fund intends to limit the risk of derivative products by purchasing
only those derivative products that are consistent with the Fund's investment
objective and policies. The Fund will not use such instruments to leverage
securities. Hence, derivative products' contributions to the overall market risk
characteristics of a Fund will not materially alter its risk profile and will be
fully representative of the Fund's maturity guidelines.
The Fund will not invest more than 10% of the value of its assets in
illiquid securities, which may include certain derivative products and will
include any repurchase transactions that do not mature within seven days.
8
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES (CONTINUED)
Please see "Investment Policies and Restrictions" in the SAI for a more
detailed discussion about the different types of municipal obligations. The Fund
cannot change its investment objective and fundamental policies without the vote
of a "majority of the outstanding voting securities" as defined under the
Investment Company Act of 1940, as amended (the "1940 Act"). (See "Voting
Rights" in the SAI.)
RISK AND PORTFOLIO MANAGEMENT
There can be no assurance that the Fund will achieve its investment
objective. The ability of the Fund to achieve its investment objective is
dependent on a number of factors, including the skills of the investment manager
in purchasing municipal obligations whose issuers have the continuing ability to
meet their obligations for the payment of interest and principal when due. The
ability to achieve a high level of income is dependent on the yields of the
securities in the portfolio. Yields on municipal obligations are the product of
a variety of factors, including the general conditions of the money market and
of the municipal bond and municipal note markets, the size of a particular
offering, the maturity of the obligation and its rating. Municipal obligations
with longer maturities tend to produce higher yields and are generally subject
to potentially greater price fluctuations than obligations with shorter
maturities.
When-Issued Purchase Commitments. New issues of municipal obligations are
often offered on a "when-issued" basis, i.e., delivery and payment normally take
place 15 to 45 days after the purchase date. The payment obligation and the
interest rate to be received on the securities are fixed at the time the buyer
enters into the commitment, although no interest accrues with respect to a
"when-issued" security prior to its stated delivery date. The Fund will only
make commitments to purchase such securities with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy. A
segregated account of the Fund consisting of cash, debt securities of any grade
or equity securities having a value equal to or greater than the Fund's purchase
commitments, provided such securities have been determined by the Manager to be
liquid and unencumbered, and are marked to market daily, pursuant to guidelines
established by the Board of Directors, will be maintained with PNC Bank,
National Association (the "Custodian") and monitored on a daily basis so that
the market value of the account will equal or exceed the amount of such
commitments by the Fund.
Securities purchased on a "when-issued" basis and the securities held in
the Fund's portfolio are subject to changes in market value based not only
9
<PAGE>
RISK AND PORTFOLIO MANAGEMENT (CONTINUED)
upon the public's perception of the creditworthiness of the issuer but also
changes in the level of interest rates, and this will generally result in both
changing in value in the same way, i.e., both appreciating when interest rates
decline and depreciating when interest rates rise. Therefore, if in order to
achieve higher interest income the Fund remains substantially fully invested at
the same time that it has purchased securities on a "when-issued" basis, there
will be a greater possibility that the market value of the Fund's assets will
vary from $1.00 per share. (See "Valuation of Shares.") There will also be a
greater potential for the realization of capital gains, which are not exempt
from Federal income taxes.
Stand-By Commitments. The Fund may acquire "stand-by commitments" with
respect to municipal obligations held in its portfolio. Under a stand-by
commitment a dealer agrees to purchase, at the Fund's option, specified
municipal obligations at a specified price. The Fund intends to enter into
stand-by commitments only with dealers, banks and broker-dealers that, in the
opinion of the investment manager, present minimal credit risks. In evaluating
the creditworthiness of the issuer of a stand-by commitment, the investment
manager will review periodically the issuer's assets, liabilities, contingent
claims and other relevant financial information. Because the Fund invests in
securities backed by banks and other financial institutions, change in the
credit quality of these institutions could cause losses to the Fund and effect
its share price. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes.
Other Factors to be Considered. The Fund anticipates being as fully
invested as practicable in tax-exempt securities. The Fund may invest in taxable
investments due to market conditions or pending investment of proceeds from
sales of shares or proceeds from the sale of portfolio securities or in
anticipation of redemptions. However, the Fund generally expects to invest the
proceeds received from the sale of shares in municipal obligations as soon as
reasonably possible, which is generally within one day. At no time will more
than 20% of the Fund's net assets be invested in taxable investments except when
the Manager has determined that market conditions warrant the Fund adopting a
temporary defensive investment posture. To the extent the Fund's assets are
invested for temporary defensive purposes, such assets will not be invested in a
manner designed to achieve the Fund's investment objective.
The Fund may engage in short-term trading to attempt to take advantage of
short-term market variations or may dispose of a portfolio security prior to its
maturity if it believes such disposition advisable or it needs to generate cash
to satisfy redemptions. In such cases, the Fund may
10
<PAGE>
RISK AND PORTFOLIO MANAGEMENT (CONTINUED)
realize a gain or loss. From its commencement of operations, the Fund has not
realized any significant gain or loss during any fiscal year.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal obligations, and similar proposals may be introduced in
the future. If one of these proposals were enacted, the availability of tax
exempt obligations for investment by the Fund and the value of the Fund's
portfolio would be affected. The Fund's Board of Directors would then reevaluate
the Fund's investment objective and policies.
Year 2000. The investment management services provided to the Fund by the
Manager and the services provided to shareholders by Smith Barney depend on the
smooth functioning of their computer systems. Many computer software systems in
use today cannot recognize the year 2000, but revert to 1900 or some other date,
due to the manner in which dates were encoded and calculated. That failure could
have a negative impact on the Fund's operations, including the handling of
securities trades, pricing and account services. The Manager and Smith Barney
have advised the Fund that they have been reviewing all of their computer
systems and actively working on necessary changes to their systems to prepare
for the year 2000 and expect that their systems will be compliant before that
date. In addition, the Manager has been advised by the Fund's custodian,
transfer agent and accounting service agent that they are also in the process of
modifying their systems with the same goal. There can, however, be no assurance
that the Manager, Smith Barney or any other service provider will be successful,
or that interaction with other non-complying computer systems will not impair
Fund nor shareholder services at that time.
In addition, the ability of issuers to make timely payments of interest and
principal or to continue their operations or services may be impaired by the
inadequate preparation of their computer systems for the year 2000. This may
adversely affect the market values of securities of specific issuers or of
securities generally if the inadequacy of preparation is perceived as widespread
or as affecting trading markets.
VALUATION OF SHARES
The net asset value per share is determined as of the close of regular
trading on each day that the New York Stock Exchange ("NYSE") is open by
dividing the net asset values attributable to each Class (i.e., the value of its
assets less liabilities) by the total number of shares of the Class outstanding.
The Fund may also determine net asset value per share on days when the NYSE is
not open, but when the settlement of securities may
11
<PAGE>
VALUATION OF SHARES (CONTINUED)
otherwise occur. As noted above, the Fund employs the "amortized cost method" of
valuing portfolio securities and intends to use its best efforts to continue to
maintain a constant net asset value of $1.00 per share.
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES
The Fund declares a dividend of substantially all of its net investment
income on each day the NYSE is open. Net investment income includes interest
accrued and discount earned and is less premium amortized and expenses accrued
(the discount or premium on portfolio investments is fixed at the time of
purchase). Unless the shareholder has elected to receive monthly distributions
of income, such dividends will automatically be reinvested in Fund shares of the
same Class at net asset value. If a shareholder redeems an account in full
between payment dates, all dividends accrued up to and including the date of
liquidation will be paid with the proceeds from the redemption of shares. The
per share dividends on Class A shares of the Fund may be less than the per share
dividends on Class Y shares principally as a result of the service fee
applicable to Class A shares. Long-term capital gains, if any, will be in the
same amount for each Class and will be distributed annually.
The following is a summary of the material federal tax considerations
affecting the Fund and the Fund's shareholders, please refer to the SAI for
further discussion. In addition to the considerations described below and in the
SAI, there may be other federal, state, local or foreign tax applications to
consider. Because taxes are a complex matter, prospective shareholders are urged
to consult their tax advisors for more detailed information with respect to the
tax consequences of any investment.
The Fund intends to qualify, as it has in prior years, under Subchapter M
of the Internal Revenue Code (the "Code") for tax treatment as a regulated
investment company. In each taxable year that the Fund qualifies, so long as
such qualification is in the best interests of its shareholders, the Fund will
pay no federal income tax on its net investment income and long-term capital
gain that is distributed to shareholders, provided the Fund distributes at least
90% of its net investment income and net short-term capital gains for the
taxable year. The Fund also intends to satisfy conditions that will enable it to
pay "exempt-interest dividends" to its shareholders. Exempt-interest dividends
are generally not subject to regular federal income taxes, although, may be
considered taxable for certain state and local income (or intangible) tax
purposes.
Exempt-interest dividends attributable to interest received by the Fund on
certain "private-activity" bonds will be treated as a specific tax preference
12
<PAGE>
DIVIDENDS, AUTOMATIC REINVESTMENT AND TAXES (CONTINUED)
item to be included in a shareholder's alternative minimum tax computation. All
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the federal corporate alternative minimum tax
computation. Exempt-interest dividends derived from the interest earned on
private activity bonds will not be exempt from federal income tax for those
shareholders who are "substantial users") or persons related to "substantial
users") of the facilities financed by these bonds.
Shareholders who receive social security or equivalent railroad retirement
benefits should note that exempt-interest dividends are one of the items taken
into consideration in determining the amount of these benefits that may be
subject to federal income tax.
The interest expense incurred by a shareholder on borrowing made to
purchase or carry shares is not deductible for federal income tax purposes to
the extent related to the exempt-interest dividends received on such shares.
Dividends paid by the Fund from interest income on taxable investments, net
realized short-term securities gains, and all or a portion of any gains realized
from the sale or other disposition of certain market discount bonds are subject
to federal income tax as ordinary income. Distributions, if any, from net
realized long-term securities gains, derived from the sale of bonds held by the
Fund for more than one year, are taxable as long-term capital gains, regardless
of the length of time a shareholder has owned Fund shares.
Shareholders are required to pay tax on all taxable distributions even if
those distributions are automatically reinvested in additional Fund shares. None
of the dividends paid by the Fund will qualify for the corporate dividends
received deduction. The Fund will inform shareholders of the source and tax
status of all distributions promptly after the close of each calendar year. The
Fund is also required to report annually the source, tax status and recipient
information related to the exempt-interest dividends distributed with the State
of New York.
The Fund is required to withhold ("backup withholding") 31% of all taxable
dividends, capital gain distributions, and the proceeds of any redemption, for
those shareholders who do not provide the Fund with a correct taxpayer
identification number (social security or employer identification number).
Withholding from taxable dividends and capital gain distributions also is
required for shareholders who otherwise are subject to backup withholding. Any
tax withheld as a result of backup withholding does not constitute an additional
tax, and may be claimed as a credit on the shareholders' federal income tax
return.
13
<PAGE>
PURCHASE OF SHARES
Purchases of Fund shares may be made through a brokerage account maintained
with Smith Barney Inc. ("Smith Barney"), with a broker that clears securities
transactions through Smith Barney on a fully disclosed basis (an "Introducing
Broker") or with an investment dealer in the selling group. Smith Barney and
other broker/dealers 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 First Data are not subject to a
maintenance fee.
Class A and Class Y shares of the Fund are available for purchase directly
by investors. Investors in Class A may open an account by making an initial
investment of at least $1,000 for each Fund account. Investors in Class Y may
open an account by making an initial investment of at least $15,000,000.
Subsequent investments of at least $50 may be made for either Class. For
shareholders purchasing shares of the Fund through the Systematic Investment
Plan on a monthly basis, the minimum initial investment requirement for Class A
shares and the 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 requirement for Class
A shares and the subsequent investment requirement for all Classes is $50. There
are no minimum investment requirements in Class A for employees of Travelers
Group Inc. ("Travelers") and its subsidiaries, including Smith Barney, and
Directors or Trustees of any Travelers-affiliated Funds, including 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 Fund's transfer agent, First Data Investor
Services Group, Inc. ("First Data"). Share certificates are issued only upon a
shareholder's written request to First Data.
For investors who maintain a brokerage account with Smith Barney, Smith
Barney has advised the Fund that depending on the type of securities account,
its clients' free credit balances (i.e., immediately available funds) may be
invested automatically in full shares of the Fund either on a daily or weekly
basis. In addition to this "sweep" service, shareholders who open a Smith Barney
FMA(R)PLUS(SM) account, which is a full service investment account, will also be
able to take advantage of, among other things: a free Individual Retirement
Account ("IRA"), free dividend reinvestment, unlimited checking, 100 free ATM
withdrawals each year and online computer access to account information. Smith
Barney clients should contact their Financial Consultant for more complete
information. A complete record of
14
<PAGE>
PURCHASE OF SHARES (CONTINUED)
Fund dividends, purchases and redemptions will be included on such shareholders'
regular Smith Barney statements.
The Fund's shares are sold continuously at their net asset value next
determined after a purchase order is received and becomes effective. A purchase
order becomes effective when the Fund, Smith Barney or an Introducing Broker
receives, or converts the purchase amount into, Federal funds (i.e., monies of
member banks within the Federal Reserve System held on deposit at a Federal
Reserve Bank). When orders for the purchase of Fund shares are paid for in
Federal funds, or are placed by an investor with sufficient Federal funds or
cash balance in the investor's brokerage account with Smith Barney or the
Introducing Broker, the order becomes effective on the day of receipt if
received prior to the close of regular trading on the NYSE, on any day the Fund
calculates its net asset value. See "Valuation of Shares." Purchase orders
received after the close of regular trading on the NYSE on any business day are
effective as of the time the net asset value is next determined. When orders for
the purchase of Fund shares are paid for other than in Federal funds, Smith
Barney or the Introducing Broker, acting on behalf of the investor, will
complete the conversion into, or itself advance, Federal funds, and the order
will become effective on the day following its receipt by the Fund, Smith Barney
or the Introducing Broker. Shares purchased directly through First Data begin to
accrue income dividends on the day that the purchase order becomes effective.
All other shares purchased begin to accrue income dividends on the next business
day following the day that the purchase order becomes effective.
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, Smith Barney or First Data is authorized through
preauthorized transfers of at least $25 on a monthly basis or at least $50 on a
quarterly basis to charge the regular bank account or other financial
institution indicated by the shareholder on a monthly or quarterly basis to
provide systematic additions to the shareholder's Fund account. A shareholder
who has insufficient funds to complete the transfer will be charged a fee of up
to $25 by Smith Barney or First Data. Additional information is available from
the Fund or a Smith Barney Financial Consultant.
LETTER OF INTENT
Class Y Shares. A Letter of Intent provides an opportunity for investors
to meet the minimum investment requirement for Class Y shares by
15
<PAGE>
PURCHASE OF SHARES (CONTINUED)
aggregating investments over a 13-month period. Such investors must make an
initial minimum purchase of $5,000,000 in Class Y shares of the Fund and agree
to purchase a total of $15,000,000 of Class Y shares of the Fund within 13
months from the date of the Letter. If a total investment of $15,000,000 is not
made within the 13-month period, all Class Y shares will be converted into Class
A shares, and will be subject to all fees (including a service fee of 0.10%) and
expenses applicable to the Fund's Class A shares, which may include a CDSC of
1.00%. Please contact a Smith Barney Financial Consultant or First Data for
further information.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any day the Fund
calculates its net asset value. See "Valuation of Shares." Redemption requests
received in proper form before the close of regular trading on the NYSE are
priced at the net asset value as next determined on that day. Redemption
requests received after the close of regular trading on the NYSE are priced at
the net asset value next determined.
The Fund normally transmits redemption proceeds on the business day
following receipt of a redemption request but, in any event, payment will be
made within three days thereafter, exclusive of days on which the New York Stock
Exchange is closed and settlement of securities does not otherwise occur, or as
permitted under the 1940 Act in extraordinary circumstances. Generally, if the
redemption proceeds are remitted to a Smith Barney brokerage account, these
funds will not be invested for the shareholder's benefit without specific
instruction and Smith Barney will benefit from the use of temporarily uninvested
funds. A shareholder who pays for Fund shares by personal check will be credited
with the proceeds of a redemption of those shares only after the purchase check
has been collected, which may take up to ten days or more. A shareholder who
anticipates the need for more immediate access to his or her investment should
purchase shares with Federal funds, by bank wire or with a certified or
cashier's check.
Shareholders who purchase securities through Smith Barney or an Introducing
Broker may take advantage of special redemption procedures under which Class A
shares of the Fund will be redeemed automatically to the extent necessary to
satisfy debit balances arising in the shareholder's account with Smith Barney or
the Introducing Broker. One example of how an automatic redemption may occur
involves the purchase of securities. If a shareholder purchases securities but
does not pay for them by settlement date, the number of Fund shares necessary to
cover the debit will be redeemed automatically as of the settlement date, which
usually occurs three
16
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
business days after the trade date. Class A shares that are subject to a CDSC
(see "Redemption of Shares--Contingent Deferred Sales Charge") are not eligible
for such automatic redemption and will only be redeemed upon specific request.
If the shareholder does not request redemption of such shares, the shareholder's
account with Smith Barney or the Introducing Broker may be margined to satisfy
debit balances if sufficient Fund shares that are not subject to any applicable
CDSC are unavailable. No fee is currently charged with respect to these
automatic transactions. Shareholders not wishing to participate in these
arrangements should notify their Smith Barney Financial Consultant.
Redemption requests must be made through Smith Barney, an Introducing
Broker or the securities dealer through whom the shares are purchased. A
shareholder desiring to redeem shares represented by certificates also must
present the certificates to Smith Barney, the Introducing Broker or First Data
endorsed for transfer (or accompanied by an endorsed stock power), signed
exactly as the shares are registered. Redemption requests involving shares
represented by certificates will not be deemed received until the certificates
are received by First Data in proper form.
A written redemption request must (a) state the Class and number or dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or be accompanied by an endorsed stock power) and
must be submitted to First Data together with the redemption request. Any
signature appearing on a share certificate, stock power or written redemption
request in excess of $10,000 must be guaranteed by an eligible guarantor
institution such as a domestic bank, savings and loan institution, domestic
credit union, member bank of the Federal Reserve System or member firm of a
national securities exchange. Written redemption requests of $10,000 or less do
not require the signature guarantee unless more than one such redemption request
is made in any 10-day period. Redemption proceeds will be mailed to an
investor's address of record. First Data may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees or guardians. A redemption request will not be deemed properly received
until First Data receives all required documents in proper form.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
Shareholders who do not have a Smith Barney brokerage account may be
eligible to redeem and exchange Fund shares by telephone. To determine if a
shareholder is entitled to participate in this program, he or she should
17
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
contact First Data at 1-800-451-2010. Once eligibility is confirmed, the
shareholder must complete and return a Telephone/Wire Authorization Form, along
with a signature guarantee, that will be provided by First Data upon request.
(Alternatively, an investor may authorize telephone redemptions on the new
account application with the applicant's signature guarantee when making his/her
initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of any class or classes
of the Fund's shares may be made by eligible shareholders by calling First Data
at 1-800-451-2010. Such requests may be made between 9:00 a.m. and 4:00 p.m.
(New York City time) on any day the NYSE is open. Redemptions of shares (i) by
retirement plans or (ii) for which certificates have been issued are not
permitted under this program.
A shareholder will have the option of having the redemption proceeds mailed
to his/her address of record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the case
may be, on the next business day following the redemption request. In order to
use the wire procedures, the bank receiving the proceeds must be a member of the
Federal Reserve System or have a correspondent relationship with a member bank.
The Fund reserves the right to charge shareholders a nominal fee for each wire
redemption. Such charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change the bank account
designated to receive redemption proceeds, a shareholder must complete a new
Telephone/Wire Authorization Form and, for the protection of the shareholder's
assets, will be required to provide a signature guarantee and certain other
documentation.
Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical to
the registration of the shares of the fund exchanged. Such exchange requests may
be made by calling First Data at 1-800-451-2010 between 9:00 a.m. and 4:00 p.m.
(New York City time) on any day on which the NYSE is open. See "Exchange
Privilege" for more information.
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
18
<PAGE>
REDEMPTION OF SHARES (CONTINUED)
to impose a charge for this service at any time following at least seven (7)
days prior notice to shareholders.
CONTINGENT DEFERRED SALES CHARGE
Class A shares acquired as part of an exchange privilege transaction, which
were originally acquired in one of the other Smith Barney Mutual Funds at net
asset value subject to a CDSC, continue to be subject to any applicable CDSC of
the original fund. Therefore, such Class A shares that are redeemed within 12
months of the date of purchase of the original fund may be subject to a CDSC of
1.00%. The amount of any CDSC will be paid to and retained by Smith Barney. The
CDSC will be assessed based on an amount equal to the net asset value at the
time of redemption. Accordingly, no CDSC will be imposed on increases in net
asset value above the initial purchase price in the original fund. In addition,
no charge will be assessed on shares derived from reinvestment of dividends or
capital gains distribution.
In determining the applicability of any CDSC, it will be assumed that a
redemption is made first of shares representing capital appreciation, next of
shares representing the reinvestment of dividends and capital gain distributions
and finally of other shares held by the shareholder for the longest period of
time. The length of time that Class A shares have been held will be calculated
from the date that the shares were initially acquired in one of the other Smith
Barney Mutual Funds, and such shares being redeemed will be considered to
represent, as applicable, capital appreciation or dividend and capital gain
distribution reinvestments in such other funds. For Federal income tax purposes,
the amount of the CDSC will reduce the gain or increase the loss, as the case
may be, on the amount realized on redemption.
The CDSC on Class A shares, if any, will be waived on (a) exchanges (see
"Exchange Privilege" below); (b) redemptions of shares within twelve months
following the death or disability of the shareholder; (c) involuntary
redemptions; and (d) redemptions of shares in connection with a combination of
the Fund with any investment company by merger, acquisition of assets or
otherwise. In addition, a shareholder who has redeemed shares from other funds
of the Smith Barney Mutual Funds may, under certain circumstances, reinvest all
or part of the redemption proceeds within 60 days and receive pro rata credit
for any CDSC imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney in
the case of shareholders who are also Smith Barney clients or by First Data in
the case of all other shareholders) of the shareholder's status or holdings, as
the case may be.
19
<PAGE>
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of each Class may be exchanged for
shares of the same Class in the following funds of the Smith Barney Mutual
Funds, to the extent shares are offered for sale in the shareholder's state of
residence. Exchanges of Class A shares are subject to minimum investment
requirements and all shares are subject to other requirements of the fund into
which exchanges are made and a sales charge may apply.
FUND NAME
- --------------------------------------------------------------------------------
Growth Funds
Concert Peachtree Growth Fund
Concert Social Awareness Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Balanced Fund
Smith Barney Contrarian Fund
Smith Barney Convertible Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -- Large Cap Value Fund
Smith Barney Large Cap Blend Fund
Smith Barney Large Capitalization Growth Fund
Smith Barney Natural Resources Fund Inc.
Smith Barney Premium Total Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Special Equities Fund
Taxable Fixed-Income Funds
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Funds, Inc. -- Short-Term High Grade Bond Fund
Smith Barney Funds, Inc. -- U.S. Government Securities Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Smith Barney Total Return Bond Fund
Tax-Exempt Funds
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Intermediate Maturity California Municipals Fund
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund Inc.
20
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
Smith Barney Massachusetts Municipals Fund
Smith Barney Municipal High Income Fund
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Global-International Funds
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney World Funds, Inc. -- Emerging Markets Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney World Funds, Inc. -- International Balanced Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
Smith Barney Concert Allocation Series Inc.
Smith Barney Concert Allocation Series Inc. -- Balanced Portfolio
Smith Barney Concert Allocation Series Inc. -- Conservative Portfolio
Smith Barney Concert Allocation Series Inc. -- Global Portfolio
Smith Barney Concert Allocation Series Inc. -- Growth Portfolio
Smith Barney Concert Allocation Series Inc. -- High Growth Portfolio
Smith Barney Concert Allocation Series Inc. -- Income Portfolio
Money Market Funds
Smith Barney Money Funds, Inc. -- Cash Portfolio
Smith Barney Money Funds, Inc. -- Government Portfolio
* Smith Barney Money Funds, Inc. -- Retirement Portfolio
Smith Barney Muni Funds -- California Money Market Portfolio
Smith Barney Muni Funds -- New York Money Market Portfolio
- ------------------------
* Available for exchange with Class A shares of the Fund.
Class A Exchanges. Class A shares of the Fund will be subject to the
appropriate sales charge upon the exchange of such shares for Class A shares of
another fund of the Smith Barney Mutual Funds sold with a sales charge.
Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange
all or a portion of their Class Y shares for Class Y shares in any of the funds
identified above may do so without imposition of any charge.
21
<PAGE>
EXCHANGE PRIVILEGE (CONTINUED)
Additional Information Regarding the Exchange Privilege. Excessive
exchange transactions may be detrimental to the Fund's performance and its
shareholders. The investment 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 -- Telephone Redemption and Exchange Program." Exchanges
will be processed at the net asset value next determined plus any applicable
sales charge. Redemption procedures discussed above are also applicable for
exchanging shares, and exchanges will be made upon receipt of all supporting
documents in proper form. If the account registration of the shares of the fund
being acquired is identical to the registration of the shares of the fund
exchanged, no signature guarantee is required. A capital gain or loss for tax
purposes will be realized upon the exchange, depending upon the cost or other
basis of shares redeemed. Before exchanging shares, investors should read the
current prospectus describing the shares to be acquired. These exchange
privileges are available to shareholders resident in any state in which the fund
shares being acquired may legally be sold. The Fund reserves the right to modify
or discontinue exchange privileges upon 60 days' prior notice to shareholders.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to redeem involuntarily any shareholder's
account if the aggregate net asset value of the shares held in the account is
less than $500, in which event the shareholder will receive prior written notice
and will be permitted 60 days to bring the account up to the minimum to avoid
involuntary liquidation. Any applicable CDSC will be deducted from the proceeds
of this liquidation. (If a shareholder has more than one account in the Fund,
each account must satisfy the minimum account size.)
22
<PAGE>
YIELD INFORMATION
From time to time the Fund may advertise the yield, effective yield and
taxable equivalent yield of its Class A and Class Y shares. These yield figures
are based on historical earnings and are not intended to indicate future
performance. The yield of each Class refers to the net investment income
generated by an investment in the Class over a specific seven-day period,
expressed as an annual percentage rate. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in the Class
is assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of the assumed reinvestment. The tax
equivalent yield also is calculated similarly to the yield, except that a stated
income tax rate is used to demonstrate the taxable yield necessary to produce an
after-tax yield equivalent to the tax-exempt yield of the Class.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all significant
agreements between the Fund and the companies that furnish services to the Fund,
including agreements with the Fund's distributor, investment manager, custodian
and transfer agent. The day-to-day operations of the Fund are delegated to the
Fund's investment manager. The SAI contains background information regarding
each Director and executive officer of the Fund.
MANAGER
Mutual Management Corp. ("MMC" or the "Manager"), formerly known as Smith
Barney Mutual Funds Management Inc., manages the day-to-day operations of the
Fund pursuant to a Management Agreement. MMC was incorporated in 1968 under the
laws of the State of Delaware. MMC is a wholly-owned subsidiary of Salomon Smith
Barney Holdings Inc. ("Holdings"), the parent company of Smith Barney. Holdings
is a wholly-owned subsidiary of Travelers, a diversified financial services
holding company engaged, through its subsidiaries, principally in four business
segments: Investment Services including Asset Management, Consumer Finance
Services, Life Insurance Services and Property & Casualty Insurance Services.
MMC, Holdings and Smith Barney are each located at 388 Greenwich Street, New
York, New York 10013. MMC renders investment advice to investment companies that
had aggregate assets under management as of March 31, 1998 of approximately
$100.5 billion.
23
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
Pursuant to the Management Agreement, the Manager provides advice and
assistance to the Fund with respect to the acquisition, holding or disposal of
securities and recommendations with respect to other aspects of the business and
affairs of the Fund. It also furnishes the Fund with bookkeeping, accounting and
administrative services, office space and equipment, and the services of the
officers and employees of the Fund. It provides a variety of administrative and
shareholder services directly or at its expense through securities firms. For
the last fiscal year, the effective rate of the management fee was 0.48% of the
Fund's average daily net assets and the total expenses were 0.61% and 0.52% of
average net assets for Class A and Class Y shares, respectively. The Fund's
management agreement provides for daily compensation of the Manager at the
annual rate of 0.50% on the first $2.5 billion of the Fund's net assets, 0.475%
of the next $2.5 billion, 0.45% on the next $2.5 billion and 0.40% on net assets
in excess of $7.5 billion. The Manager has agreed that to the extent that in any
fiscal year the aggregate expenses of any Class of the Fund, exclusive of taxes,
brokerage, interest and extraordinary expenses such as litigation costs, exceed
0.70% of such Class' average daily net asset values for that fiscal year of the
Fund, the Manager will reduce its fee or reimburse the Fund to the extent of
such excess. The 0.70% voluntary expense limitation shall be in effect until it
is terminated by notice to shareholders and by supplement to the then current
prospectus.
MMC, in effecting purchases and sales of portfolio securities for the
account of the Fund, implements the Fund's policy of seeking the best execution
of orders. The Fund's portfolio transactions have for the most part been
principal transactions directly with the major underwriters for, and dealers in,
tax exempt money market instruments. No brokerage commissions are paid on such
transactions, but the price paid to underwriters or dealers will normally
include an underwriter's spread or dealer's markup. The primary consideration in
the allocation of transactions is prompt execution of orders in an effective
manner at the most favorable price. Under certain circumstances, transactions
will be effected with remarketing agents who receive fees from the issuers for
services rendered. No principal transactions are handled by Smith Barney.
On April 6, 1998, Travelers announced that it had entered into a Merger
Agreement with Citicorp. The transaction, which is expected to be completed
during the third quarter of 1998, is subject to various regulatory approvals,
including approval by the Federal Reserve Board. The transaction is also subject
to approval by the stockholders of each of Travelers and Citicorp. Travelers has
filed an application to become a bank holding company so that, upon consummation
of the merger, the surviving
24
<PAGE>
MANAGEMENT OF THE FUND (CONTINUED)
corporation would be a bank holding company subject to regulation under the Bank
Holding Company Act of 1956 (the "BHCA"). The requirements of the BHCA, the
Glass-Steagall Act and certain other laws and regulations will then be
applicable to Travelers and its subsidiaries.
The Manager does not believe that its compliance with applicable law
following the merger of Travelers and Citicorp will have a material adverse
effect on its ability to continue to provide the Fund with the same level of
investment advisory services that it currently receives. Smith Barney and the
Manager believe that the Manager's services under the Management Agreement and
the shareholder service activities performed by Smith Barney are not
underwriting and would be consistent with the Glass-Steagall Act and other
relevant federal and state laws. However, there is little controlling precedent
regarding the performance of the combination of investment advisory, shareholder
servicing and administrative activities by subsidiaries of bank holding
companies. If Smith Barney and the Manager, or their affiliates, were to be
prevented from acting as the manager or a shareholder service agent, the Fund
would seek alternative means for obtaining these services. The Fund does not
expect that shareholders would suffer any adverse financial consequences as a
result of any such occurrence.
25
<PAGE>
DISTRIBUTION
Smith Barney serves as Principal Underwriter of shares of the Fund for
which it receives no compensation and conducts a continuous offering pursuant to
a "best efforts" arrangement requiring it to take and pay for only such
securities as may be sold to the public. Under a plan of distribution pursuant
to Rule 12b-1 (the "Plan") under the 1940 Act, a service fee is paid by Class A
to Smith Barney at an annual rate of up to 0.10% of the Class' average daily net
assets. The fee is used by Smith Barney to pay Smith Barney financial
consultants for servicing shareholder accounts for as long as a shareholder
remains a holder of the Class. The service fee is credited at a rate of 0.10% of
the average balance of Class shares held in the accounts of the customers of
financial consultants. The service fee is also spent on the following types of
expenses: (1) the pro rata share of other employment costs of such financial
consultants (e.g., FICA, employee benefits, etc.); (2) employment expenses of
home office personnel primarily responsible for providing service to the Fund's
shareholders and (3) the pro rata share of branch office fixed expenses
(including branch overhead allocations).
Shareholder servicing expenses incurred by Smith Barney but not reimbursed
by a Class in any year will not be a continuing liability of the Class in
subsequent years.
Smith Barney also advises profit-sharing and pension accounts. Smith Barney
and its affiliates may in the future act as investment advisers for other
accounts.
The Glass-Steagall Act currently prohibits certain financial institutions
from underwriting securities of open-end investment companies, such as the Fund.
Therefore, in connection with the anticipated merger of Travelers and Citicorp
and as a consequence of the anticipated applicability of the BHCA and the
Glass-Steagall Act, the Fund plans to retain the services of a new entity (which
is not otherwise affiliated with Travelers) to act as distributor of the
Portfolio's shares.
26
<PAGE>
ADDITIONAL INFORMATION
The Fund, an open-end, diversified investment company, was incorporated
under Maryland law on April 1, 1980. Class A and Class Y shares represent
interests in the assets of the Fund and have identical voting, dividend,
liquidation and other rights on the same terms and conditions except that
expenses related to the distribution of each Class of shares are borne solely by
each Class and each Class of shares has exclusive voting rights with respect to
provisions of the Fund's Rule 12b-1 distribution plan which pertain to a
particular Class. Fund shares do not have cumulative voting rights; are fully
paid when issued; have no preemptive, subscription or conversion rights; and are
redeemable and subject to redemption as set forth under "Redemption of Shares"
and "Minimum Account Size." As described under "Voting Rights" in the SAI, the
Fund ordinarily will not hold shareholder meetings; however, shareholders have
the right to call a meeting upon a vote of 10% of the Fund's outstanding shares
for the purpose of voting to remove directors and the Fund will assist
shareholders in calling such a meeting as required by the 1940 Act.
PNC Bank, National Association, located at 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, serves as custodian of the Fund's investments.
First Data, located at Exchange Place, Boston, Massachusetts 02109, serves
as the Fund's transfer agent.
The Fund sends its shareholders a semi-annual report and an audited annual
report, which include listings of the 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 plans to consolidate the mailing of its semi-annual and
annual reports by household. This consolidation means that a household having
multiple accounts with the identical address of record will receive a single
copy of each report. Shareholders who do not want this consolidation to apply to
their account should contact their Smith Barney Financial Consultant or the
Fund's transfer agent.
27
<PAGE>
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<PAGE>
PROSPECTUS
Smith Barney
Municipal
Money
Market
Fund, Inc.
JULY 29, 1998
Prospectus begins on page one
LOGO Smith Barney Mutual Funds
Investing for your future.
Everyday.(SM)
<PAGE>
Smith Barney
A Member of Travelers Group
Smith Barney
Municipal Money
Market Fund, Inc.
388 Greenwich Street
New York, New York 10013
FD 2310 7/98
PART B STATEMENT OF ADDITIONAL INFORMATION
PART B PRIVATE
July 29, 1998
SMITH BARNEY MUNICIPAL MONEY MARKET FUND, INC.
388 Greenwich Street
New York, New York 10013
STATEMENT OF ADDITIONAL INFORMATION
Smith Barney Municipal Money Market Fund, Inc.
seeks to provide its shareholders
with income exempt from Federal income tax
from a portfolio of high quality
short-term municipal obligations selected
for liquidity and stability of principal
This Statement of Additional Information is not a Prospectus. It
is intended to provide more detailed information about Smith Barney
Municipal Money Market Fund, Inc. (the "Fund"), formerly known as Smith
Barney Tax Free Money Fund, Inc., as well as matters already discussed in
the Prospectus and therefore should be read in conjunction with the July
29, 1998 Prospectus, which may be obtained from the Fund or a Smith
Barney Financial Consultant.
TABLE OF CONTENTS
Page
Directors and Officers 2
Investment Policies and Restrictions 4
Computation of Yield 8
Valuation of Shares and
Amortized Cost Valuation 8
Additional Tax Information 9
Management Agreement, Plan of Distribution
and Other Services 10
Repurchase Agreements 11
"Puts" 11
Voting Rights 12
Custodian, Transfer and Dividend Disbursing Agent 12
Independent Auditors 12
Financial Statements 12
Ratings of Municipal Notes and Bonds 13
DIRECTORS AND OFFICERS
DONALD R. FOLEY, Director
Retired, 3668 Freshwater Drive, Jupiter, Florida 33477. Trustee or
director of ten investment companies associated with Smith Barney Inc.
("Smith Barney"). Formerly Vice President of Edwin Bird Wilson,
Incorporated (advertising); 75.
PAUL HARDIN, Director
Professor of Law at University of North Carolina at Chapel Hill, 12083
Morehead, Chapel Hill, North Carolina 27514. Trustee or director of 12
investment companies associated with Smith Barney; and a Director of The
Summit Bancorporation. Formerly, Chancellor of the University of North
Carolina at Chapel Hill; 67.
*HEATH B. MCLENDON, Chairman of the Board, President and Chief Executive
Officer
Managing Director of Smith Barney; Trustee or director of 58 investment
companies associated with Smith Barney; President of Mutual Management
Corp. ("MMC" or the "Manager"); Chairman of Smith Barney Strategy
Advisors Inc. and President of Travelers Investment Adviser, Inc.
("TIA"); 65.
RODERICK C. RASMUSSEN, Director
Investment Counselor, 9 Cadence Court, Morristown, NJ 07960. Trustee or
director of ten investment companies associated with Smith Barney.
Formerly, Vice President of Dresdner and Company Inc. (investment
counselors); 72.
JOHN P. TOOLAN, Director
Retired, 13 Chadwell Place, Morristown, New Jersey, 07960. Trustee or
director of ten investment companies associated with Smith Barney.
Formerly, Director and Chairman of Smith Barney Trust Company, Director
of Smith Barney Holdings Inc. and the Manager and Senior Executive Vice
President, Director and Member of the Executive Committee of Smith
Barney; 67.
LEWIS E. DAIDONE, Senior Vice President and Treasurer
Managing Director of Smith Barney; Senior Vice President and Treasurer
of 42 investment companies associated with Smith Barney, and Director
and Senior Vice President of the Manager and TIA; 40.
LAWRENCE MCDERMOTT, Vice President and Investment Officer
Managing Director of Smith Barney and Vice President of the Fund and six
investment companies associated with Smith Barney; 50.
JOSEPH BENEVENTO; Vice President and Investment Officer
Vice President of Smith Barney and Vice President of the Fund and four
investment companies associated with Smith Barney; 29.
___________________
*Designates a director that is an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended. Such person,
and all officers of the Fund, have their business address at 388
Greenwich Street, New York, New York 10013. Such persons are not
separately compensated for their services as Fund officers or Directors.
IRVING DAVID, Controller
Director of Smith Barney and the Manager, Controller of several other
investment companies associated with Smith Barney. Prior to March 1994,
Assistant Treasurer of First Investment Management Company; 37.
CHRISTINA T. SYDOR, Secretary
Managing Director of Smith Barney and Secretary of 42 investment
companies associated with Smith Barney; Secretary and General Counsel of
the Manager and TIA; 47.
On July 2, 1998, Directors and officers owned in the aggregate less than
1% of the outstanding securities of the Fund.
The following table shows the compensation paid by the Fund to each
director during the Fund's last fiscal year. 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 Smith Barney.
COMPENSATION TABLE
Name of Person
Aggregate
Compensatio
n from Fund
Pension or
Retirement
Benefits
Accrued as
part of Fund
Expenses
Total
Compensation
from Fund and
Fund Complex
Number of
Funds for
Which Person
Serves within
Fund Complex
Joseph H. Fleiss+@
$6,192
0
$54,900
10
Donald R. Foley+
6,740
0
55,400
10
Paul Hardin
6,740
0
73,000
12
Francis P. Martin
4,051
0
53,000
10
Heath B. McLendon*
0
0
0
58
Roderick C.
Rasmussen
6,740
0
55,400
10
John P. Toolan+
6,740
0
55,400
10
* Designates a Director that is an "interested person" of the Fund.
+ Pursuant to a deferred compensation plan, the indicated persons
elected to defer payment of the following amounts of their compensation
from the Fund: Joseph H. Fleiss - $1,825, Donald R. Foley - $3,070, and
John P. Toolan - $6,740, and the following amounts of their compensation
from the Fund Complex: Joseph H. Fleiss: $21,000, Donald R. Foley:
$21,000, and John P. Toolan: $55,400.
@ Effective January 1, 1998, Mr. Fleiss became a Director Emeritus.
Upon attainment of age 72 the Fund's current Directors may elect to
change to emeritus status. Any directors elected or appointed to the
Board in the future will be required to change to emeritus status upon
attainment of age 80. 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 the Fund's Directors, together with reasonable out-of-
pocket expenses for each meeting attended. For the last fiscal year,
the total paid to Emeritus Directors by the Fund was $9,412.
INVESTMENT POLICIES AND RESTRICTIONS
INVESTMENT POLICIES
In general, municipal obligations are debt obligations (bonds or notes)
issued by or on behalf of states, territories and possessions of the
United States and their political subdivisions, agencies and
instrumentalities the interest on which is exempt from Federal income
tax in the opinion of bond counsel to the issuer. Municipal obligations
are issued to obtain funds for various public purposes, many of which
may enhance the quality of life, including the construction of a wide
range of public facilities, such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets, water and
sewer works, gas, and electric utilities. They may also be issued to
refund outstanding obligations, to obtain funds for general operating
expenses, or to obtain funds to loan to other public institutions and
facilities and in anticipation of the receipt of revenue or the issuance
of other obligations. In addition, the term "municipal obligations"
includes certain types of industrial development bonds ("IDBs") issued
by public authorities to obtain funds to provide various privately-
operated facilities for business and manufacturing, housing, sports,
convention or trade show facilities, airport, mass transit, port and
parking facilities, air or water pollution control facilities, and
certain facilities for water supply, gas, electricity or sewerage or
solid waste disposal.
The two principal classifications of municipal obligations are "general
obligation" and "revenue." General obligations are secured by a
municipal issuer's pledge of its full faith, credit, and taxing power
for the payment of principal and interest. Revenue obligations are
payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special
excise tax or other specific revenue source. Although IDBs are issued
by municipal authorities, they are generally secured by the revenues
derived from payments of the industrial user. The payment of the
principal and interest on IDBs is dependent solely on the ability of the
user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so
financed as security for such payment.
For purposes of diversification and concentration under the Investment
Company Act of 1940, as amended (the "1940 Act"), the identification of
the issuer of municipal obligations depends on the terms and conditions
of the obligation. If the assets and revenues of an agency, authority,
instrumentality or other political subdivision are separate from those
of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision is
regarded as the sole issuer. Similarly, in the case of an IDB or a
pollution control revenue bond, if the bond is backed only by the assets
and revenues of the non-governmental user, the non-governmental user is
regarded as the sole issuer. If in either case the creating government
or another entity guarantees an obligation, the guaranty is regarded as
a separate security and treated as an issue of such guarantor. Similar
criteria apply for purposes of the diversification requirements under
Subchapter M of the Internal Revenue Code (the "Code").
Among the types of short-term instruments in which the Fund may invest
are floating- or variable-rate demand instruments, tax-exempt commercial
paper (generally having a maturity of less than nine months), and other
types of notes generally having maturities of less than three years,
such as Tax Anticipation Notes, Revenue Anticipation Notes, Tax and
Revenue Anticipation Notes and Bond Anticipation Notes. Demand
instruments usually have an indicated maturity of more than one year,
but contain a demand feature that enables the holder to redeem the
investment on no more than 30 days' notice; variable-rate demand
instruments provide for automatic establishment of a new interest rate
on set dates; floating-rate demand instruments provide for automatic
adjustment of their interest rates whenever some other specified
interest rate changes (e.g., the prime rate). The Fund may purchase
participation interests in variable-rate tax-exempt securities (such as
Industrial Development Bonds) owned by banks. Participations are
frequently backed by an irrevocable letter of credit or guarantee of a
bank that the Manager has determined meets the prescribed quality
standards for the Fund. Participation interests will be purchased only;
if management believes interest income on such interests will be tax-
exempt when distributed as dividends to shareholders.
Investments in participation interests in variable-rate tax-exempt
securities (such as IDBs) purchased from banks give the purchaser an
undivided interest in the tax-exempt security in the proportion that the
Fund participation interest bears to the total principal amount of the
tax-exempt security with a demand repurchase feature. Participation
interests are frequently backed by an irrevocable letter of credit or
guarantee of a bank that the Manager, under the supervision of the Board
of Directors (the "Board"), has determined meets the prescribed
quality standards for the Fund. The Fund has the right to sell the
instrument back to the bank and draw on the letter of credit on demand
on seven days' notice or less, for all or any part of its participation
interest in the tax-exempt security, plus accrued interest. The Fund
intends to exercise the demand under the letter of credit only (1) upon
a default under the terms of the documents of the tax-exempt security,
(2) as needed to provide liquidity in order to meet redemptions, or (3)
to maintain a high quality investment portfolio. Banks will retain a
service and letter of credit fee and a fee for issuing repurchase
commitments in an amount equal to the excess of the interest paid on the
tax-exempt securities over the negotiated yield at which the instruments
were purchased by the Fund. The Manager will monitor the pricing,
quality and liquidity of the variable-rate demand instruments held by
the Fund, including the IDBs supported by bank letters of credit or
guarantees, on the basis of published financial information, reports of
rating agencies and other bank analytical services to which the Manager
may subscribe.
The yields on municipal obligations are dependent on a variety of
factors, including general market conditions, supply and demand, general
conditions of the municipal market, size of a particular offering, the
maturity of the obligation and the rating of the issue. The ratings of
Nationally Recognized Statistical Ratings Organizations ("NRSROs")
such as Moody's Investment Service, Inc. ("Moody's") and Standard &
Poor's Ratings Group ("S&P") represent their opinions as to the
quality to the municipal obligations that they undertake to rate. It
should be emphasized, however, that such ratings are general and are not
absolute standards of quality. Consequently, municipal obligations with
the same maturity, coupon and rating may have different yields when
purchased in the open market, while municipal obligations of the same
maturity and coupon with different ratings may have the same yield.
Municipal obligations purchased on a when-issued basis as well as the
securities held in the Fund are generally subject to similar changes in
market value based upon the public's perception of the creditworthiness
of the issuer and changes in the level of interest rates (i.e., both
experiencing appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility
that the market value of the Fund's assets will fluctuate. Purchasing a
tax-exempt security on a when-issued basis involves the risk that the
yields available in the market when the delivery takes place may be
higher than those obtained on the security so purchased. A separate
account of the Fund consisting of cash or debt securities of any grade
equal to the amount of the when-issued commitments will be established
with PNC Bank, National Association (the "Custodian") and marked-to-
market daily pursuant to guidelines established by the Board, with
additional cash or debt securities added when necessary. When the time
comes to pay for when-issued securities, the Fund will meet its
respective obligations from then-available cash flow, sale of securities
held in the separate account, sale of other securities or, although they
would not normally
expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations carries with
it a greater potential for the realization of capital gain, which is not
exempt from Federal income tax (see "Dividends, Distributions and Taxes"
in the Prospectus).
The Fund may invest in municipal bond index futures contracts or in
listed contracts based on U.S. government securities. Such investments
will be made solely for the purpose of hedging against changes in the
value of portfolio securities due to anticipated changes in interest
rates and market conditions and not for purposes of speculation. The
acquisition or sale of a futures contract could enable the Fund to
protect its assets from fluctuations in rates on tax-exempt securities
without actually buying or selling securities. The municipal bond index
futures contract is based on an index of long-term, tax-exempt municipal
bonds. The contract obligates the buyer or seller to take or make
delivery, respectively, of an amount of cash equal to the difference
between the value of the index upon liquidation of the contract and the
price at which the index contract was originally purchased or sold. In
connection with the use of futures contracts as a hedging device, there
can be no assurance that there will be a precise or even a positive
correlation between price movement in the futures contracts with that of
the municipal bonds that are the subject of the hedge, consequently, the
Fund may realize a profit on a futures contract that is less than the
loss in the price of the municipal bonds being hedged or may even incur
a loss. The Fund also may not be able to close a futures position in
the event of adverse price movements or in the event an active market
does not exist for the hedging contract on the exchange or board of
trade on which the contract is traded. The successful use of these
investments is dependent on the ability of the Manager to predict price
or interest rate movements or the correlation of futures and cash
markets, or both.
The Fund may invest in securities the disposition of which is subject to
legal or contractual restrictions. The sale of restricted securities
often requires more time and results in higher dealer discounts or other
selling expenses than does the sale of securities that are not subject
to restrictions on resale. Restricted securities may sell at a price
lower than similar securities that are not subject to restrictions on
resale.
Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline
in interest rates). In addition, a security may be sold and another
purchased at approximately the same time to take advantage of what the
Manager believes to be a temporary disparity in the normal yield
relationship between the two securities. The Fund believes that, in
general, the secondary market for tax-exempt securities in the Fund's
portfolio may be less liquid than that for taxable fixed-income
securities. Accordingly, the ability to make purchases and sales of
securities in the foregoing manner may be limited. Yield disparities
may occur for reasons not directly related to the investment quality of
particular issues or the general movement of interest rates, but instead
due to such factors as changes in the overall demand for or supply of
various types of tax-exempt securities or changes in the investment
objectives of investors.
INVESTMENT RESTRICTIONS
The Fund is subject to certain restrictions and policies that are
"fundamental," which means that they may not be changed without a "vote
of a majority of the outstanding voting securities" of the Fund, as
defined under the Investment Company Act of 1940, as amended (the
"Act"). The Fund is subject to other restrictions and policies that are
"non-fundamental" and which may be changed by the Fund's Board of
Directors without shareholder approval, subject to any applicable
disclosure requirements.
Fundamental Policies. Without the approval of a majority of its
outstanding voting securities, the Fund may not:
1. issue "senior securities" as defined in the Act and the rules,
regulations and orders thereunder, except as permitted under the
Act and the rules, regulations and orders thereunder.
2. 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.
3. borrow money, except that (a) the Fund may borrow from banks for
temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise require the
untimely disposition of securities, and (b) the Fund may, to the
extent consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and similar
investment strategies and techniques. To the extent that it
engages in transactions described in (a) and (b), the Fund will be
limited so that no more than 33 -1/3% of the value of its total
assets (including the amount borrowed), valued at the lesser of
cost or market, less liabilities (not including the amount
borrowed) valued at the time the borrowing is made, is derived
from such transactions.
4. make loans. This restriction does not apply to: (a) the purchase
of debt obligations in which the Fund may invest consistent with
its investment objectives and policies; (b) repurchase agreements;
and (c) loans of its portfolio securities, to the fullest extent
permitted under the Act.
5. 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.
6. 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.
7. invest in a manner that would cause the Fund to fail to be a
"diversified company" under the Act and the rules, regulations and
orders thereunder.
Nonfundamental Policies. As nonfundamental policies, the Fund may not:
1. 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.
2. purchase or otherwise acquire any security if, as a result, more
than 10% of its net assets would be invested in securities that
are illiquid.
All of the foregoing restrictions which are stated in terms of
percentages will apply at the time an investment is made; a subsequent
increase or decrease in the percentage that may result from changes in
values or net assets will not result in a violation of the restriction.
COMPUTATION OF YIELD
The Fund's yield for the seven-day period ended March 31, 1998 for Class
A shares was 3.10% (the effective yield was 3.15%) and for Class Y shares
was 3.20% (the effective yield was 3.25%), with an average dollar-
weighted portfolio maturity of 40 days. To compute current yield the
Fund divides the net change, exclusive of capital changes, in the value
of a hypothetical pre-existing account having a balance of one share at
the beginning of a recent seven-day base period by the value of the
account at the beginning of the base period and multiplying this base
period return by 365/7. Effective yield is computed by determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of
the period and dividing such net change by the value of the account at
the beginning of the base period to obtain the base period return, and
then compounding the base period return by adding 1, raising the sum to a
power equal to 365/7, and subtracting 1 from the result. The Fund also
quotes the average dollar-weighted portfolio maturity for the
corresponding seven-day period. In addition, the Fund may publish a tax-
equivalent yield based on federal tax rates that demonstrates the taxable
yield necessary to produce an after-tax yield equivalent to the Fund's
yield. The tax-equivalent yield does not include any element of non-tax-
exempt income.
Although principal is not insured, it is not expected that the net asset
value of the Fund's shares will fluctuate because the Fund uses the
amortized cost method of valuation. (See "Valuation of Shares" in the
Prospectus and below.) The investor should remember that yield is a
function of the type, quality and maturity of the instruments in the
portfolio, and the Fund's operating expenses. While current yield
information may be useful, investors should realize that current yield
will fluctuate, it is not necessarily representative of future results
and may not provide a basis for comparison with bank deposits or other
investments that pay a fixed yield for a stated period of time.
VALUATION OF SHARES AND AMORTIZED COST VALUATION
The Prospectus states that net asset value will be determined on every
day the New York Stock Exchange ("NYSE") is open and that the net asset
value may be determined on any day that the settlement of securities
otherwise occurs. The NYSE is closed on the following holidays: New
Year's Day, Martin Luther King Day, Washington's Birthday, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
The Fund uses the "amortized cost method" for valuing portfolio
securities pursuant to Rule 2a-7 under the Act (the "Rule"). The
amortized cost method of valuation of the Fund's portfolio securities
(including
any securities held in the separate account maintained for "when-issued"
securities -- See "Risk and Portfolio Management" in the Prospectus)
involves valuing a security at its cost at the time of purchase and
thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. The market value of portfolio securities
will fluctuate on the basis of the creditworthiness of the issuers of
such securities and with changes in interest rates generally. While the
amortized cost method provides certainty in valuation, it may result in
periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if it sold the instrument.
During such periods the yield to investors in the Fund may differ
somewhat from that obtained in a similar company that uses mark-to-market
values for all its portfolio securities. For example, if the use of
amortized cost resulted in a lower (higher) aggregate portfolio value on
a particular day, a prospective investor in the Fund would be able to
obtain a somewhat higher (lower) yield than would result from investment
in such similar company, and existing investors would receive less (more)
investment income. The purpose of this method of valuation is to attempt
to maintain a constant net asset value per share, and it is expected that
the price of the Fund's shares will remain at $1.00; however,
shareholders should be aware that despite procedures that will be
followed to
have a stabilized price, including maintaining a maximum dollar-weighted
average portfolio maturity of 90 days, investing in securities that have
or are deemed to have remaining maturities of only 13 months or less and
investing in only United States dollar-denominated instruments determined
to be of high quality with minimal credit risks and which are Eligible
Securities as defined below, there is no assurance that at some future
date there will not be a rapid change in prevailing interest rates, a
default by an issuer or some other event that could cause the Fund's
price per share to change from $1.00.
An Eligible Security is defined in the Rule to mean a security which:
(a) has a remaining maturity of 397 days or less; (b)(i) is rated in the
two highest short-term rating categories by any two nationally-recognized
statistical rating organizations ("NRSROs") that have issued a short-term
rating with respect to the security or class of debt obligations of the
issuer, or (ii) if only one NRSRO has issued a short-term rating with
respect to the security, then by that NRSRO; (c) was a long-term security
at the time of issuance whose issuer has outstanding a short-term debt
obligation which is comparable in priority and security and has a rating
as specified in clause (b) above; or (d) if no rating is assigned by any
NRSRO as provided in clauses (b) and (c) above, the unrated security is
determined to be of comparable quality to any such rated security.
ADDITIONAL TAX INFORMATION
At March 31, 1998, the Fund had, for Federal income tax purposes,
approximately $1,048,000 of capital loss carryforwards available to
offset future capital gains. To the extent that these carryforward
losses are used to offset capital gains, it is possible that the gains
so offset will not be distributed. The amount and expiration of the
carryforwards are indicated below. Expiration occurs on March 31 of the
year indicated:
2001 2002 2003 2005
Carryforward Amounts $870,000 $37,000 $72,000
$69,000
Generally, interest on municipal obligations is exempt from regular
Federal income tax. However, interest on certain "private activity
bonds" (as defined in the Code) will be treated as a specific tax
preference item to be included in the shareholder's alternative minimum
tax computation. In addition to the alternative minimum tax, corporate
shareholders must include this percentage as a component in the
corporate environmental tax computation. Exempt-interest dividends
derived from the interest on private activity bonds will not be exempt
from Federal income tax to any shareholder who is considered to be a
"substantial user" of any facility financed by the proceeds of such
obligations (or a "related person" to such "substantial user" as
defined in the Code).
The Tax Reform Act of 1986 (the "Tax Reform Act") provided that interest
on certain municipal obligations (i.e. certain private activity bonds)
issued after August 7, 1986 will be treated as a preference item for
purposes of both the corporate and individual alternative minimum tax.
Under Treasury regulations, that portion of the Fund's exempt-interest
dividends which is to be treated as a preference item for shareholders
will be based on the proportionate share of the interest received by the
Fund from the specified private activity bonds. In addition, the Tax
Reform Act provided generally that tax preference items for corporations
will include one-half the amount by which adjusted net book income
(which would include tax-exempt interest) of the taxpayer exceeds the
alternative minimum taxable income of the taxpayer before any amount is
added to alternative minimum taxable income because of this preference.
A shareholder's gain or loss on the disposition of Fund shares (whether
by redemption, sale or exchange), generally will be a long-term or
short-term gain or loss depending whether the shares had
been owned for more than 12 months or not for more than 12 months at
disposition. Losses realized by a shareholder on the disposition of
Fund shares owned for six months or less will be treated as a long-term
capital loss to the extent a capital gain dividend had been distributed
on such shares.
From time to time, proceedings have been introduced before Congress for
the purpose of restricting or eliminating the Federal income tax
exemption for interest on municipal obligations. It may be expected
that similar proposals may be introduced in the future. If such
proposals were to be enacted, the ability of the Fund to pay "exempt
interest" dividends could be adversely affected and the Fund would then
need to reevaluate its investment objectives and policies and consider
changes in its structure.
MANAGEMENT AGREEMENT, PLAN OF DISTRIBUTION
AND OTHER SERVICES
The Fund's Management Agreement with the Manager was approved by
shareholders on September 16, 1994, became effective on November 7, 1994,
and was amended as of September 3, 1997. The Management Agreement
provides that the Fund's management fee will be calculated as follows:
0.50% of the first $2.5 billion of average daily net assets; 0.475% of
the next $2.5 billion of average daily net assets; 0.45% of the next $2.5
billion of average daily net assets; and 0.40% of average daily net
assets over $7.5 billion.
For the fiscal years ended March 31, 1996, 1997 and 1998, the management
fees were $24,738,969, $26,073,153, and $27,985,733 respectively, and
there were no expense limitation reimbursements (see "Management of the
Fund" in the Prospectus).
The Management Agreement further provides that all other expenses not
specifically assumed by the Manager are borne by the Fund. Expenses
payable by the Fund include, but are not limited to, charges of
custodians (including sums as custodian and sums for keeping books and
for rendering other services to the Fund), transfer agents and
registrars, expenses of registering or qualifying shares for sale
(including the printing of the Fund's registration statements and
prospectuses), out-of-pocket expenses of directors and fees of directors
who are not "interested persons" of the Fund as defined in the Act,
association membership dues, charges of auditors and legal counsel,
expenses of preparing, printing and distributing all proxy material,
reports and notices to shareholders, insurance expense, costs of
performing portfolio valuations, interest, taxes, fees and commissions of
every kind, expenses of issue, repurchase or redemption of shares, and
all other costs incident to the Fund's corporate existence. No sales or
promotion expenses are incurred by the Fund, but expenses incurred in
complying with laws regulating the issue or sale of the Fund's shares,
which are paid by the Fund, are not deemed sales or promotion expenses.
The Management Agreement will continue in effect if specifically approved
annually by a majority of the directors of the Fund who are not parties
to such contract or "interested persons" of any such party. The
Agreement may be terminated without penalty by either of the parties on
60 days' written notice and must terminate in the event of its
assignment. It may be amended or modified only if approved by vote of
the holders of a majority of the Fund's outstanding shares as defined in
the Act.
The Management Agreement provides that the Manager is not liable for any
act or omission in the course of or in connection with rendering services
under the Agreement in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligation or duties. The
Agreement permits the Manager to render services to others and to engage
in other activities.
Plan of Distribution
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 (the
"Plan") under the Act under which a service fee is paid by Class A of the
Fund to Smith Barney at an annual rate of 0.10% of the Class' average
daily net assets. The fee is used by Smith Barney to pay financial
consultants for servicing
shareholder accounts for as long as a shareholder remains a holder of
shares of the class. The service fee is credited at a rate of 0.10% of
the average balance of class shares held in the accounts of the customers
of financial consultants. Shareholder service expenses incurred by Smith
Barney but not reimbursed by a class in any year will not be a continuing
liability of the class in subsequent years.
For the fiscal year ended March 31, 1998, the table below represents the
fees which have been accrued and/or paid to Smith Barney under the Plan
of Distribution pursuant to Rule 12b-1. Of the distribution expenses paid
by the Fund, approximately $2,788,059 was allocated as compensation to
Financial Consultants, approximately $2,225,478 was allocated to branch
office expenses, and approximately $786,491 was allocated to the costs of
responding to inquiries and similar matters handled by Smith Barney's
mutual funds marketing desk.
Class A Class Y Total
$5,800,028* N/A $5,800,028
*Amount includes Class C expenses; Class C was converted to Class A
shares as of March 1998.
On July 13, 1998, the Board of Directors approved of a new distribution
agreement between the Fund and CFBDS, Inc., a wholly owned subsidiary of
Signature Financial Group Inc. Such new distribution arrangement is
anticipated to become effective at or about the closing date of the
Travelers Group Inc./Citicorp merger.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. These agreements involve
the purchase of debt securities of the U.S. Treasury, a Federal agency or
instrumentality, or a federally-created corporation or other securities
described under "Investment Objective and Policies" in the Prospectus. At
the same time the Fund purchases the security, it resells it to the
seller (a member bank of the Federal Reserve System, including the Fund's
custodian, or a registered securities dealer) and is obligated to
redeliver the security to the seller on an agreed-upon date in the
future. The resale price is greater than the purchase price and reflects
an agreed-upon market yield unrelated to the coupon rate on the purchased
security. Such transactions afford an opportunity for the Fund to invest
temporarily available cash without market risk. The Fund requires
continual maintenance of the market value of the collateral in amounts at
least equal to the resale price. The Fund's risk is limited to the
ability of the seller to pay the agreed-upon sum on the delivery date;
however, if the seller defaults, realization upon the collateral by the
Fund may be delayed or limited, or the Fund might incur a loss if the
value of the collateral securing the repurchase agreement declines and
might incur disposition costs in connection with liquidating the
collateral. Interest earned from repurchase agreements will be taxable
to shareholders.
"PUTS"
Among the types of securities that the Fund may purchase are municipal
obligations having put features. A "put" is a right to sell a specified
underlying security or securities within a specified period of time and
at a specified exercise price that may be sold, transferred or assigned
only with the underlying security or securities. The types of puts that
the Fund may purchase include "demand features" (see "Risk and Portfolio
Management" in the Prospectus) and "standby commitments." A "standby
commitment" entitles the holder to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
security plus accrued interest, if any, at the time of exercise.
Although it is permissible for the Fund to purchase securities with
standby commitments, as a practical matter, it is unlikely that the Fund
would have the need or the opportunity to do so because such puts are not
commonly available.
VOTING RIGHTS
As permitted by Maryland law, there will normally be no meetings of
shareholders for the purpose of electing directors unless and until such
time as less than a majority of the directors holding office have been
elected by shareholders. At that time, the directors then in office will
call a shareholders' meeting for the election of directors. The
directors must call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to
do so by the record holders of not less than 10% of the outstanding
shares of the Fund. At such a meeting, a director may be removed by
declaration in writing or by votes cast in person or by proxy. Except as
set forth above, the directors shall continue to hold office and may
appoint successor directors.
As used in the Prospectus and this Statement of Additional Information, a
vote of a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Fund (or the affected class) or (b) 67% or more of such
shares present at a meeting if more than 50% of the outstanding shares of
the Fund (or the affected class) are represented at the meeting in person
or by proxy.
As of July 17, 1998, Mr. Peter J. Kleinknecht and Maureen Kleinknecht,
JTWROS, 960 Reef Road, Vero Beach, FL 32963-3023 owned 19,165,263.040
(65.71%) of the outstanding Class Y shares of the Fund, Sabrina
Kleinknecht (same address) owned 4,267,785.430 (14.63%) of the
outstanding Class Y shares of the Fund, and Keir L. Kleinknecht (same
address) owned 4,257,434.730 (14.59%) of the outstanding Class Y shares
of the Fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
All portfolio securities and cash owned by the Fund are held in the
custody of PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103. First Data Investor Services Group,
Inc., Exchange Place, Boston, Massachusetts 02109, serves as the Fund's
dividend disbursing and transfer agent.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, have
been selected as the Fund's independent auditors to examine and report on
the Fund's financial statements and highlights for the fiscal year ending
March 31, 1999.
FINANCIAL STATEMENTS
The following financial information is hereby incorporated by reference
to the indicated pages of the Fund's 1998 Annual Report to Shareholders,
a copy of which is furnished with this Statement of Additional
Information:
Page(s)
Schedule of Investments at March 31, 1998 4-30
Statement of Assets and Liabilities at March 31, 1998
(including specimen computation of net asset value,
offering and redemption price per share) 33
Statement of Operations for the year ended
March 31, 1998 34
Statements of Changes in Net Assets for the years ended
March 31, 1998 and 1997 35
Notes to Financial Statements 36-38
Financial Highlights 39-40
Independent Auditors' Report 41
RATINGS OF MUNICIPAL NOTES AND BONDS
RATINGS OF MUNICIPAL BONDS, NOTES AND COMMERCIAL PAPER
Description of Three Highest Municipal Bond Ratings
Moody's Investors Service, Inc. ("Moody's"):
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Standard & Poor's Ratings Group ("S&P"):
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
Fitch Municipal Bond Ratings:
AAA - Bonds rated AAA by Fitch have the lowest expectation of credit
risk. The obligor has an exceptionally strong capacity for timely
payment of financial commitments, which is highly unlikely to be
adversely affected by foreseeable events.
AA - Bonds rated AA by Fitch have a very low expectation of credit risk.
They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A - Bonds rated A by Fitch are considered to have a low expectation of
credit risk. The capacity for timely payment of financial commitments
is considered to be strong, but may be more vulnerable to changes in
economic conditions and circumstances than bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position
of a credit within a rating category. Plus and minus signs, however,
are not used in the AAA category.
Description of State and Local Government Municipal Note Ratings
Notes are assigned distinct rating symbols in recognition of the
differences between short-term and long-term credit risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements
are critical in short-term ratings, while other factors of major
importance in bond risk-- long-term secular trends for example-- may be
less important over the short run.
Moody's Investors Service, Inc.:
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG"). A short-term rating
may also be assigned on an issue having a demand feature, a variable-
rate demand obligation. Such ratings will be designated as "VMIG."
Short-term ratings on issues with demand features are differentiated by
the use of the VMIG symbol to reflect such characteristics as payment
upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert
to the fact that the source of payment may be limited to the external
liquidity with no or limited legal recourse to the issuer in the event
the demand is not met. Symbols used are as follows:
MIG/VMIG 1 - Loans bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 - Loans bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding
group.
Standard & Poor's Ratings Group:
SP-1 - Very strong or strong capacity to pay principal interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
SP-2 - Satisfactory capacity to pay principal and interest.
Description of Highest Commercial Paper Ratings
Moody's Investors Service, Inc.:
Prime-1 - Issuers (or related supporting institutions) rated Prime-1
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well-
established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-
established access to a range of financial markets and assured sources
of alternate liquidity.
Standard & Poor's Ratings Group:
A-1 - This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted
with a plus (+) sign designation.
Description of Fitch Short-Term Ratings:
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years,
including commercial paper, certificates of deposit, medium-term notes,
and municipal and investment notes.
The short-term rating places greater emphasis than a long-term rating on
the existence of liquidity necessary to meet financial commitments in a
timely manner.
Fitch's short-term ratings are as follows:
F1+ - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments. The "+" denotes
an exceptionally strong credit feature.
F1 - Issues assigned this rating are regarded as having the strongest
capacity for timely payment of financial commitments.
F2 - Issues assigned this rating have a satisfactory capacity for timely
payment of financial commitments, but the margin of safety is not as
great as in the case of the higher ratings.
* * *
After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the
Fund. Neither event will require a sale of such security by the Fund;
however, the Manager will consider such event in determining whether the
Fund should continue to hold the security. To the extent that a rating
may change as a result of changes in rating services or their rating
systems, the Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in the
Prospectus.
U:/legal/funds/tfmx/1998/secdocs/sai98
PART C Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Included in Part B:
The Fund's Annual Report for the fiscal year ended March 31, 1998
and
the Report of Independent Auditors dated May 15, 1998 are incorporated
by reference to the Rule N-30D filing, Accession #: 0000091155-98-381,
made on June 10, 1998.
(b) Exhibits
(1) (a) Articles of Amendment dated March 31, 1981 are
incorporated
by reference to Exhibit 1(a) to Post-Effective Amendment No. 14.
(b) Articles of Amendment and Restatement of Articles of
Incorporation
dated October 28, 1980 are incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment
No. 14.
(c) Articles of Amendment dated July 22, 1991 are
incorporated by
reference to Exhibit 1(c) to Post-Effective Amendment No. 15.
(d) Articles of Amendment dated November 10, 1992 are
incorporated by reference to Exhibit 1(d) to Post-Effective Amendment
No. 20
(e) Articles Supplementary dated December 8, 1992 are
incorporated by refence to Exhibit 1(e) to Post-Effective Amendment
No. 20.
(f) Articles of Amendment dated October 14, 1994 are
incorporated by
reference to Exhibit 1(f) to Post-Effective Amendment No. 26
(g) Articles of Amendment dated November 4, 1994 are
incorporated by
reference to Exhibit 1(g) to Post-Effective Amendment No. 26
(h) Articles Supplementary dated November 7, 1994 are
incorporated by
reference to Exhibit 1(h) to Post-Effective Amendment No. 26
(I) Articles Supplementary dated November 7, 1994 are
incorporated by
reference to Exhibit 1(i) to Post-Effective Amendment No. 26
(2) Bylaws of the Fund are incorporated by reference to Exhibit
2 to
Post-Effective Amendment No. 11 to Registration Statement No. 2-
69938.
(3) Not applicable.
(4) Not applicable.
(5) (a) Management Agreement between Registrant and Mutual
Management
Corp. is incorporated by reference to Exhibit (5) to Post-Effective
Amendment No. 23 to the
Registration Statement.
(b) Transfer and Assumption of Management Agreement is
incorporated
by reference to Exhibit 5(b) to Post-Effective Amendment No. 26.
(6) Underwriting Agreement between Registrant and Smith Barney,
Harris
Upham & Co. Incorporated is incorporated by reference to Exhibit 6 to
Post-Effective Amendment
No. 12.
(7) Not applicable.
(8) Custodian Agreement between Registrant and Provident
National Bank is
incorporated by reference to Exhibit 8 to Post-Effective Amendment No.
5.
(9) Transfer Agency Agreement between Registrant and First Data
Investor Services
Group Inc. is incorporated by reference to Exhibit 9 to Post-Effective
Amendment No. 26.
(10) Not Applicable.
(11) (i) Auditors' Report (see the Annual Report to
Shareholders which
is incorporated by reference in the Statement of Additional
Information).
(ii) Auditors' Consent (filed herewith)
(12) Not applicable.
(13) Subscription Agreement between Registrant and National
Securities &
Research Corporation is incorporated by reference to Exhibit 13 to Post-
Effective Amendment
No. 14.
(14) Not applicable.
(15) Plan of Distribution pursuant to Rule 12b-1 of Registrant is
incorporated by
reference to Exhibit 15 to Post-Effective Amendment No. 23.
(16) Schedule of Computation of Performance Quotations is
incorporated by reference
to Exhibit 16 to Post-Effective Amendment No. 10.
(17) Financial Data Schedule (filed herewith)
(18) Amended and Restated Plan pursuant to Rule 18f-3 is filed
herewith.
Item 25. Persons Controlled by or under Common Control with
Registrant
(None)
Item 26. Number of Holders of Securities as of July 14, 1998
Class A securities 132,035
Class Y securities 8
Item 27. Indemnification
Reference is made to ARTICLE Eighth of Registrant's Articles of
Incorporation for a
complete statement of its terms. Subparagraph (c) of Article EIGHTH
provides: "Notwithstanding
the foregoing provisions, no officer or director of the Corporation
shall be indemnified for or insured
against any liability to the Corporation or its shareholders to which he
would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved
in the conduct of his office.
Registrant is a named assured on a joint insured bond pursuant to
Rule 17g-1 of the Investment
Company Act of 1940. Other assureds include Mutual Management Corp.,
(formerly known as Smith
Barney Mutual Funds Management Inc.) ("MMC") and affiliated investment
companies.
Item 28. Business and other Connections of Investment Adviser
See the material under the caption "Management" included in Part A
(Prospectus) of this
Registration Statement and the material appearing under the caption
"Management Agreements"
included in Part B (Statement of Additional Information) of this
Registration Statement.
Information as to the Directors and Officers of MMC is included in
its Form ADV
(File No. 801-8314), filed with the Commission, which is incorporated
herein by reference thereto.
Item 29.Principal Underwriters
(a) Smith Barney Inc. ("Smith Barney") also acts as principal
underwriter for
Consulting Group Capital Markets Funds
Global Horizons Investment Series (Cayman Islands)
Greenwich Street California Municipal Fund Inc.
Greenwich Street Municipal Fund Inc.
Greenwich Street Series Fund
High Income Opportunity Fund Inc.
The Italy Fund Inc.
Managed High Income Portfolio Inc.
Managed Municipals Portfolio II Inc.
Managed Municipals Portfolio Inc.
Municipal High Income Fund Inc.
Puerto Rico Daily Liquidity Fund Inc.
Puerto Rico Equity Index and Income Fund Inc.
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 Intermediate Municipal Fund, Inc.
Smith Barney Investment Funds Inc.
Smith Barney Investment Trust
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 Fund, Inc.
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Smith Barney Worldwide Special Fund N.V. (Netherlands Antilles)
Travelers Series Fund Inc.
The USA High Yield Fund N.V.(Netherlands Antilles)
Worldwide Securities Limited (Bermuda)
Zenix Income Fund Inc. and various series of unit investment
trusts.
(b) The information required by this Item 29 with respect to each
director and officer of Smith Barney
is incorporated by reference to Schedule A of Form BD filed by Smith
Barney pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-8177)
(c) not applicable
Item 30. Location of Accounts and Records
PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103, and First Data Investor Services
Group, Inc., Exchange Place, Boston, Massachusetts 02109-2873, will
maintain the custodian and the shareholders servicing agent records,
respectively required by Section 31(a) of the Investment Company Act
of 1940, as amended (the "1940 Act").
All other records required by Section 31(a) are maintained at the
offices of the Registrant at 388 Greenwich Street, New York, New York
10013 (and preserved for the periods specified by Rule 31a-2 of the
1940 Act).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) Not applicable
(c) Registrant undertakes to furnish each person to whom a
prospectus
is delivered with a copy of Registrant's latest report to shareholders,
upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for
effectiveness of this Post-Effective Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and
has duly caused this Post-Effective Amendment to its Registration
Statement to be signed on its behalf by the undersigned, and where
applicable, the true and lawful attorney-in-fact, thereto duly
authorized, in the City of New York and State of New York, on the 29th
day of July 1998.
SMITH BARNEY MUNICIPAL MONEY MARKET FUND, INC.
BY/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below
by the following persons in the capacities and on the date indicated.
Signatures Title Date
/s/ Heath B. McLendon Chairman of the Board, July
29, 1998
(Heath B. McLendon) President and Chief
Executive Officer
/s/Donald R. Foley* Director July 29,
1998
(Donald R. Foley)
/s/Paul Hardin* Director July
29, 1998
(Paul Hardin)
/s/Roderick C. Rasmussen* Director July 29,
1998
(Roderick C. Rasmussen)
/s/John P. Toolan* Director July
29, 1998
(John P. Toolan)
/s/ Lewis E. Daidone Senior Vice President July
29, 1998
(Lewis E. Daidone) and Treasurer
*By: /s/ Christina T. Sydor Secretary
July 29, 1998
Christina T. Sydor
Pursuant to Power of Attorney
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
11 (ii) Auditors' Consent
(17) Financial Data Schedule
(18) Amended and Restated 18f-3 Plan
U:\legal\funds\tfmx\1998\secdocs\pea28
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Smith Barney Municipal Money Market Fund, Inc.:
We consent to the use of our report dated May 15, 1998 for the Smith
Barney Municipal Money Market Fund, Inc., incorporated herein by
reference and to the references to our Firm under the headings
"Financial Highlights" in the Prospectus and "Independent Auditors"
in the Statement of Additional Information.
KPMG Peat Marwick LLP
New York, New York
July 25, 1998
Rule 18f-3 (d) Multiple Class Plan for Smith Barney Mutual Funds
Introduction
This plan (the "Plan") is adopted pursuant to Rule 18f-3 (d) of the
Investment Company Act of 1940, as amended (the "1940 Act"). The
purpose of the Plan is to restate the existing arrangements previously
approved by the Boards of Directors and Trustees of certain of the open-
end investment companies set forth on Schedule A (the "Funds" and each a
"Fund") distributed by Smith Barney Inc. ("Smith Barney") under the
Funds' existing order of exemption (Investment Company Act Release Nos.
20042 (January 28,
1994) (notice) and 20090 (February 23, 1994)). Shares of the Funds are
distributed pursuant to a system (the "Multiple Class System") in which
each class of shares (a "Class") of a Fund represents a pro rata
interest in the same portfolio of investments of the Fund and differs
only to the extent outlined below.
I. Distribution Arrangements and Service Fees
One or more Classes of shares of the Funds are offered for purchase by
investors with the following sales load structure. In addition,
pursuant to Rule 12b-1 under the 1940 Act (the "Rule"), the Funds have
each adopted a plan (the "Services and Distribution Plan") under which
shares of the Classes are subject to the services and distribution fees
described below.
1. Class A Shares
Class A shares are offered with a front-end sales load and under the
Services and Distribution Plan are subject to a service fee of up to
0.25% of average daily net assets. In addition, the Funds are permitted
to assess a contingent deferred sales charge ("CDSC") on certain
redemptions of Class A shares sold pursuant to a complete waiver of
front-end sales loads applicable to large purchases, if the shares are
redeemed within one year of the date of purchase. This waiver applies
to sales of Class A shares where the amount of purchase is equal to or
exceeds $500,000 although this amount may be changed in the future.
2. Class B Shares
Class B shares are offered without a front-end sales load, but are
subject to a five-year declining CDSC and under the Services and
Distribution Plan are subject to a service fee at an annual rate of up
to 0.25% of average daily net assets and a distribution fee at an annual
rate of up to 0.75% of average daily net assets.
3. Class D Shares
Class D shares are offered without a front-end sales load, CDSC, service
fee or distribution fee.
4. Class L Shares
Class L shares are offered with a front-end load, are subject to a one-
year CDSC and under the Services and Distribution Plan are subject to a
service fee at an annual rate of up to 0.25% of average daily net assets
and a distribution fee at an annual rate of up to 0.75% of average daily
net assets. Unlike Class B shares, Class L shares do not have the
conversion feature as discussed below and accordingly, these shares are
subject to a distribution fee for an indefinite period of time. The
Funds reserve the right to impose these fees at such higher rates as may
be determined.
5. Class I Shares
Class I shares are offered without a front-end sales load, but are
subject under the Services and Distribution Plan to a service fee at an
annual rate of up to 0.25% of average daily net assets.
6. Class O Shares
Class O shares are offered without a front-end load, but are subject to
a one-year CDSC and under the Services and Distribution Plan are subject
to a service fee at an annual rate of up to 0.25% of average daily net
assets and a distribution fee at an annual rate of up to 0.50% of
average daily net assets. Unlike Class B shares, Class O shares do not
have the conversion feature as discussed below and accordingly, these
shares are subject to a distribution fee for an indefinite period of
time. The Funds reserve the right to impose these fees at such higher
rates as may be determined.
Effective June __, 1999, Class O share will be offered with a front-end
load and will continue to be subject to a one year CDSC, a service fee
at an annual rate of up to 0.25% of average daily net assets and a
distribution fee at an annual rate of up to 0.50% of average daily net
assets.
7. Class Y Shares
Class Y shares are offered without imposition of either a sales charge
or a service or distribution fee for investments where the amount of
purchase is equal to or exceeds a specific amount as specified in each
Fund's prospectus.
8. Class Z Shares
Class Z shares are offered without imposition of either a sales charge
or a service or distribution fee for purchase (i) by employee benefit
and retirement plans of Smith Barney and its affiliates, (ii) by certain
unit investment trusts sponsored by Smith Barney and its affiliates, and
(iii) although not currently authorized by the governing boards of the
Funds, when and if authorized, (x) by employees of Smith Barney and its
affiliates and (y) by directors, general partners or trustees of any
investment company for which Smith Barney serves as a distributor and,
for each of (x) and (y), their spouses and minor children.
9. Additional Classes of Shares
The Boards of Directors and Trustees of the Funds have the authority to
create additional classes, or change existing Classes, from time to
time, in accordance with Rule 18f-3 of the 1940 Act.
II. Expense Allocations
Under the Multiple Class System, all expenses incurred by a Fund are
allocated among the various Classes of shares based on the net assets of
the Fund attributable to each Class, except that each Class's net asset
value and expenses reflect the expenses associated with that Class under
the Fund's Services and Distribution Plan, including any costs
associated with obtaining shareholder approval of the Services and
Distribution Plan (or an amendment thereto) and any expenses specific to
that Class. Such expenses are limited to the following:
(i) transfer agency fees as identified by the transfer agent as
being attributable to a specific Class;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and
proxies to current shareholders;
(iii) Blue Sky registration fees incurred by a Class of shares;
(iv) Securities and Exchange Commission registration fees
incurred by a Class of shares;
(v) the expense of administrative personnel and services as
required to support the shareholders of a specific Class;
(vi) litigation or other legal expenses relating solely to one
Class of shares; and
(vii) fees of members of the governing boards of the funds
incurred as a result of issues relating to one Class of shares.
Pursuant to the Multiple Class System, expenses of a Fund allocated to a
particular Class of shares of that Fund are borne on a pro rata basis by
each outstanding share of that Class.
III. Conversion Rights of Class B Shares
All Class B shares of each Fund will automatically convert to Class A
shares after a certain holding period, expected to be, in most cases,
approximately eight years but may be shorter. Upon the expiration of
the holding period, Class B shares (except those purchases through the
reinvestment of dividends and other distributions paid in respect of
Class B shares) will automatically convert to Class A shares of the Fund
at the relative net asset value of each of the Classes, and will, as a
result, thereafter be subject to the lower fee under the Services and
Distribution Plan. For purposes of calculating the holding period
required for conversion, newly created Class B shares issued after the
date of implementation of the Multiple Class System are deemed to have
been issued on (i) the date on which the issuance of the Class B shares
occurred or (ii) for Class B shares obtained through an exchange, or a
series of exchanges, the date on which the issuance of the original
Class B shares occurred.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares are also Class B shares.
However, for purposes of conversion to Class A, all Class B shares in a
shareholder's Fund account that were purchased through the reinvestment
of dividends and other distributions paid in respect of Class B shares
(and that have not converted to Class A shares as provided in the
following sentence) are considered to be held in a separate sub-account.
Each time any Class B shares in the shareholder's Fund account (other
than those in the sub-account referred to in the preceding
sentence) convert to Class A, a pro rata portion of the Class B shares
then in the sub-account also converts to Class A. The portion is
determined by the ratio that the shareholder's Class B shares converting
to Class A bears to the shareholder's total Class B shares not acquired
through dividends and distributions.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a ruling of the Internal Revenue Service that
payment of different dividends on Class A and Class B shares does not
result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue Code of 1986, as
amended (the "Code"), and the continuing availability of an opinion of
counsel to the effect that the conversion of shares does not constitute
a taxable event under the Code. The conversion of Class B shares to
Class A shares may be suspended if this opinion is no longer available,
In the event that conversion of Class B shares does not occur, Class B
shares would continue to be subject to the distribution fee and any
incrementally higher transfer agency costs attending the Class B shares
for an indefinite period.
IV. Exchange Privileges
Shareholders of a Fund may exchange their shares at net asset value for
shares of the same Class in certain other of the Smith Barney Mutual
Funds as set forth in the prospectus for such Fund. Funds only permit
exchanges into shares of money market funds having a plan under the Rule
if, as permitted by paragraph (b) (5) of Rule 11a-3 under the 1940 Act,
either (i) the time period during which the shares of the money market
funds are held is included in the calculations of the CDSC or (ii) the
time period is not included but the amount of the CDSC is reduced by the
amount of any payments made under a plan adopted pursuant to the Rule by
the money market funds with respects to those shares. Currently, the
Funds include the time period during which shares of the money market
fund are held in the CDSC period. The exchange privileges applicable to
all Classes of shares must comply with Rule 11a-3 under the 1940 Act.
Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of May 29, 1998)
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
Smith Barney Concert Allocation Series Inc.
Conservative Portfolio
Balanced Portfolio
Global Portfolio
Growth Portfolio
Income Portfolio
High Growth Portfolio
Smith Barney Equity Funds -
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Large Cap Value Fund
Short-Term High Grade Bond Fund
U.S. Government Securities Fund
Smith Barney Income Funds -
Smith Barney Balanced Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Total Return Bond Fund
Smith Barney Investment Trust -
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 Investment Funds Inc.
Concert Peachtree Growth Fund
Smith Barney Contrarian Fund
Smith Barney Government Securities Fund
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Special Equities Fund
Smith Barney Institutional Cash Management Fund, Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New York Portfolio
New York Money Market
Pennsylvania Portfolio
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
Emerging Markets Portfolio
U:\legal\general\forms\18f3plan.doc
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