<PAGE>
SMITH BARNEY
ADJUSTABLE RATE GOVERNMENT INCOME FUND
ARIZONA MUNICIPALS FUND INC.
EUROPEAN FUND
FLORIDA MUNICIPALS FUND
GLOBAL OPPORTUNITIES FUND
GROWTH AND INCOME FUND
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND
INVESTMENT GRADE BOND FUND
LIMITED MATURITY MUNICIPALS FUND
LIMITED MATURITY TREASURY FUND
MASSACHUSETTS MUNICIPALS FUND
OREGON MUNICIPALS FUND
PRECIOUS METALS AND MINERALS FUND INC.
TELECOMMUNICATIONS GROWTH FUND
SUPPLEMENT DATED NOVEMBER 7, 1994 TO PROSPECTUSES*
INTRODUCTION. To complete the consolidation of the Smith Barney Shearson
and the Smith Barney mutual fund complexes, on November 7, 1994, the above funds
(each a "Fund") implemented a uniform class and sales charge structure. This
pricing system, which is based on a recently completed, comprehensive study by
Smith Barney Inc. ("Smith Barney") of both the Smith Barney mutual funds and
their competitors, entails adding and reclassifying certain share classes and
minor adjustments of certain sales charges.
Under the new system, almost every Fund now offers Class A, B, C and Y
shares to the public. The Class A and Class B shares under the new pricing
structure are identical to the former Class A and Class B shares of the Funds.
Class D shares have been reclassified as "Class C" shares and have the
distribution fee and service fee shown below. Class C shares purchased under the
universal pricing system are subject to a one-year, 1% contingent deferred sales
charge ("CDSC"). Shares of Smith Barney Global Opportunities Fund that were
classified as "Class C" shares prior to the universal pricing system have been
reclassified as "Class Z" shares and are not subject to any sales charges or
distribution or service fee. These shares, which are offered pursuant to a
separate prospectus, are available exclusively to (a) tax-exempt employee
benefit plans of Smith Barney and its affiliates and (b) unit investment trusts
("UITs") sponsored by Smith Barney and its affiliates. In addition, a new class
of shares, Class Y shares, is offered to purchasers who invest at least $5
million. These shares are not subject to any sales charges, distribution or
service fees.
<PAGE>
Effective as of November 7, 1994, the following changes to the disclosure in the
Fund's prospectus apply:
EQUITY FUNDS
------------
EUROPEAN FUND
GLOBAL OPPORTUNITIES FUND
GROWTH AND INCOME FUND
PRECIOUS METALS AND MINERALS FUND
TELECOMMUNICATIONS GROWTH FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 5.00% 0.25%
$25,000 to $49,999 4.00 0.25
$50,000 to $99,999 3.50 0.25
$100,000 to $249,999 3.00 0.25
$250,000 to $499,999 2.00 0.25
$500,000 and over* 0.00 0.25
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 5.00% 0.25% 0.75%
Year 2 4.00 0.25 0.75
Year 3 3.00 0.25 0.75
Year 4 2.00 0.25 0.75
Year 5 1.00 0.25 0.75
Year 6 0.00 0.25 0.75
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.25% 0.75%
Year 2 0.00 0.25 0.75
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only. Smith
Barney, at its own expense, provides a "finder's fee" to Financial Consultants
in respect of these sales.
</TABLE>
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<PAGE>
TAXABLE FIXED INCOME
--------------------
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 4.50% 0.25%
$25,000 to $49,999 4.00 0.25
$50,000 to $99,999 3.50 0.25
$100,000 to $249,999 2.50 0.25
$250,000 to $499,999 1.50 0.25
$500,000 and over* 0.00 0.25
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 4.50% 0.25% 0.50%
Year 2 4.00 0.25 0.50
Year 3 3.00 0.25 0.50
Year 4 2.00 0.25 0.50
Year 5 1.00 0.25 0.50
Year 6 0.00 0.25 0.50
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.25% 0.45%
Year 2 0.00 0.25 0.45
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only. Smith
Barney, at its own expense, provides a "finder's fee" to Financial Consultants
in respect of these sales.
</TABLE>
MUNICIPAL FUNDS
----------------
ARIZONA MUNICIPALS FUND
FLORIDA MUNICIPALS FUND
MASSACHUSETTS MUNICIPALS FUND
OREGON MUNICIPALS FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 4.00% 0.15%
$25,000 to $49,999 3.50 0.15
$50,000 to $99,999 3.00 0.15
$100,000 to $249,999 2.50 0.15
$250,000 to $499,999 1.50 0.15
$500,000 and over* 0.00 0.15
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 4.50% 0.15% 0.50%
Year 2 4.00 0.15 0.50
Year 3 3.00 0.15 0.50
Year 4 2.00 0.15 0.50
Year 5 1.00 0.15 0.50
Year 6 0.00 0.15 0.50
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.15% 0.55%
Year 2 0.00 0.15 0.55
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only. Smith
Barney, at its own expense, provides a "finder's fee" to Financial Consultants
in respect of these sales.
</TABLE>
SMITH BARNEY INCOME TRUST
-------------------------------
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
LIMITED MATURITY MUNICIPALS FUND
LIMITED MATURITY TREASURY FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $500,000 2.00% 0.15%
$500,000 and over* 0.00 0.15
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.15% 0.20%
Year 2 0.00 0.15 0.20
<FN>
- ------------------------
*These shares are subject to a 1.00% CDSC for the first year only. The
investment adviser, at its own expense, provides a "finder's fee" to Financial
Consultants in respect of these sales.
</TABLE>
-4-
<PAGE>
ADJUSTABLE RATE GOVERNMENT INCOME FUND
-------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION
FRONT-END AND
CLASS SALES CHARGE CDSC SERVICE FEE
- ----------- ------------- ------------- --------------
<S> <C> <C> <C>
Class A 0.00% 0.00% 0.75%
Class B* 0.00 0.00 0.25
Class C** 0.00 1.00 0.25
<FN>
- ------------------------
*Investors in the Smith Barney 401(k) Program may purchase Class B shares of the
Fund; all other investors may acquire Class B shares of the Fund through
exchange only. Upon an exchange, the new Class B shares will be subject to the
same CDSC, and will be deemed to have been purchased on the same date, as the
Class B shares of the fund that have been exchanged. Class B shares acquired by
participating plans will be subject to an eight year 3.00% CDSC, payable upon a
participating plan's withdrawal from the Smith Barney 401(k) Program. See "Smith
Barney 401(k) Program," below.
**Only investors in the Smith Barney 401(k) Program may purchase Class C shares
of the Fund. Class C shares acquired by participating plans will be subject to a
four year 1.00% CDSC, payable upon a participating plan's withdrawal from the
Smith Barney 401(k) Program. See "Smith Barney 401(k) Program," below.
</TABLE>
Each share of Class A, B, C, Y and Z represents an identical pro rata
interest in the investment portfolio of the respective Funds. The only
difference between the Classes is the varying expenses that will be incurred for
distribution fees, transfer agency fees and certain other expenses clearly
identifiable to a single Class. To the extent those expenses differ, investment
returns of the Classes will vary. All other expenses, including investment
advisory and administrative fees, custody fees and other generally applicable
fund expenses, will continue to be incurred at the portfolio level and would
therefore be reflected in each shareholder's investment return equally,
regardless of Class.
MODIFICATION OF SERVICES AND DISTRIBUTION PLANS. Under the universal
pricing system, the newly-identified Class C shares are subject to an annual
service fee equal to 0.25% of the average daily net assets of the Class for
Smith Barney Adjustable Rate Government Income Fund and the equity and taxable
fixed income funds and 0.15% for municipal funds and Smith Barney Income Trust.
In addition, Class C shares are subject to an annual distribution fee equal to
0.75% of the average daily net assets of the Class for equity funds, 0.45% for
taxable fixed income funds, 0.55% for municipal funds and 0.20% for Smith Barney
Income Trust. The distribution fee is intended to compensate Smith Barney over
time for its expenses in paying Financial Consultants upon the sale of those
shares, thus allowing an investor to have all of his or her funds invested
immediately and to spread the sales cost over time.
The Class B and Class C distribution fees are paid as compensation for
services, and not as reimbursement for specific expenses incurred. Thus, even if
the distributor's actual expenses exceed the 12b-1 fee, a Fund would not be
obligated to pay more than that fee. Conversely, if the distributor's expenses
are less than the
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<PAGE>
12b-1 fee, it would be entitled to retain the full fee and realize a profit,
which would be subject to the Board's regular review and consideration in
connection with the annual renewal of the Fund's amended Services and
Distribution Plan.
SMITH BARNEY 401(K) PROGRAM. Investors may be eligible to participate in
the Smith Barney 401(k) Program (the "Smith Barney 401(k) Program"), which is
generally designed to assist plan sponsors in the creation and operation of
retirement plans under Section 401(a) of the Internal Revenue Code of 1986, as
amended (collectively, the "Participating Plans"). Class A, Class B, Class C and
Class Y shares may be available as investment alternatives to Participating
Plans.
Under the universal pricing system, Class A shares are offered without
any sales charge to any Participating Plan that purchases from $500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney Mutual
Funds that are offered with a sales charge. Class A shares acquired through the
Smith Barney 401(k) Program are subject to an annual service fee of 0.25% of the
average daily net assets of the Class (0.15% in the case of the Smith Barney
Income Trust and 0.75% in the case of Smith Barney Adjustable Rate Government
Income Fund). In addition, if a Participating Plan withdraws from the Smith
Barney 401(k) Program within four years from the date of its enrollment in the
Program a CDSC of 1.00% will be assessed on all redeemed Class A shares that
were subject to a sales charge upon initial purchase. Class A shares held by a
Participating Plan upon implementation of the universal pricing system will not
be subject to any CDSC.
Class B shares are offered to any Participating Plan that purchases less
than $250,000 of one or more funds of the Smith Barney Mutual Funds. Class B
shares acquired through the Smith Barney 401(k) Program are subject to an annual
service fee of 0.25% of the average daily net assets of the Class, an annual
distribution fee of 0.75% (0.50% in the case of taxable fixed income funds and
0.25% in the case of Smith Barney Adjustable Rate Government Income Fund) and a
3.00% CDSC payable if the Participating Plan terminates within eight years of
the date the Participating Plan first enrolled in the Smith Barney 401(k)
Program. After eight years from the date of a Plan's enrollment, all Class B
shares held by such Plan shall be eligible for conversion to Class A shares of
the Fund.
Class C shares are offered to Participating Plans that purchase from
$250,000 to $499,999 of one or more funds of the Smith Barney Mutual Funds that
are offered with a sales charge. Class C shares acquired through the Smith
Barney 401(k) Program after the implementation of the universal pricing system
are subject to an annual service fee of 0.25% of the average daily net assets of
the Class (0.15% in the case of Smith Barney Income Trust), a distribution fee
of 0.75%, (0.45% in the case of taxable fixed income funds and 0.20% in the case
of Smith Barney Income Trust) and a CDSC of 1.00% if the Participating Plan
terminates within four years from the date of its enrollment in the Smith Barney
401(k) Program. Class C shares (formerly Class D shares) held by a Participating
Plan upon implementation of the universal pricing system will not be subject to
any
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<PAGE>
CDSC. In any year that the Class C shares held by a Participating Plan of any
funds of the Smith Barney Mutual Funds offered with a sales charge (except Smith
Barney Adjustable Rate Government Income Fund) equal $500,000 at year end, the
Class C shares shall be eligible to be exchanged for Class A shares of the Fund.
Class Y shares are offered without any service or distribution fees,
sales charges or CDSC to any Participating Plan that purchases $5,000,000 or
more of Class Y shares of one or more funds of the Smith Barney Mutual Funds.
The CDSC will be waived on redemptions of Class A, Class B and Class C
shares in connection with lump-sum or other distributions made by a
Participating Plan as a result of: (a) the retirement of an employee in the
Participating Plan; (b) the termination of employment of an employee in the
Participating Plan; (c) the death or disability of an employee in the
Participating Plan; (d) the attainment of age 59 1/2 by an employee in the
Participating Plan; (e) hardship of an employee in the Participating Plan to the
extent permitted under Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"); or (f) redemptions of shares in connection with a loan
made by the Participating Plan to an employee.
Participating Plans wishing to acquire shares of a Fund through the Smith
Barney 401(k) Program must purchase such shares directly from The Shareholder
Services Group, Inc., a subsidiary of First Data Corporation ("TSSG"). For
further information regarding the Smith Barney 401(k) Program, investors should
contact a Smith Barney Financial Consultant.
PURCHASE OPTIONS CONSIDERATIONS. The decision as to which Class of
shares is more beneficial to an investor depends on the amount and intended
length of his or her investment. Shareholders who are planning to establish a
program of regular investment may wish to consider Class A shares; as the
investment accumulates shareholders may qualify for reduced sales charges and
the shares are subject to lower ongoing expenses over the term of the
investment. As an alternative, Class B and Class C shares are sold without any
initial sales charge so the entire purchase price is immediately invested in the
Fund. Any investment return on these additional invested amounts may partially
or wholly offset the higher annual expenses of these Classes. Because the Fund's
future return cannot be predicted, however, there can be no assurance that this
would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class B
shares, they do not have a conversion feature, and therefore, are subject to an
ongoing distribution fee. Thus, Class B shares may be more attractive than Class
C shares to investors with longer term investment outlooks.
-7-
<PAGE>
Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to an initial sales charge, CDSC or service or
distribution fee. The maximum purchase amount for Class A shares is $4,999,999,
Class B shares is $249,999 and Class C shares is $499,999. There is no maximum
purchase amount for Class Y shares.
INVESTMENT MINIMUMS. Investors in Class A, Class B and Class C shares
may open an account by making an initial investment of at least $1,000 for each
account, or $250 for an IRA or Self-Employed Retirement Plan in the Fund.
Investors in Class Y shares may open an account for an initial investment of
$5,000,000. Subsequent investments of at least $50 may be made for all Classes.
For participants in retirement plans qualified under Section 403(b)(7) or
Section 401(a) of the Code, the minimum initial investment requirement for Class
A, Class B and Class C shares and the subsequent investment requirement for all
Classes is $25. The minimum initial investment requirement for Class A, Class B
and Class C shares and subsequent investment requirement for all Classes through
the Systematic Investment Plan described below is $100. There are no minimum
investment requirements for (a) employees of The Travelers Inc. ("Travelers")
and its subsidiaries, including Smith Barney, (b) board members of a Fund and
their spouses and children, and (c) with respect to Smith Barney Global
Opportunities Fund and Smith Barney Limited Maturity Municipals Fund,
unitholders who invest distributions from a UIT.
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 TSSG is authorized through pre-authorized transfers of $100 or more 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 account. A shareholder who has insufficient funds to complete
the transfer will be charged a fee of up to $25 by Smith Barney or TSSG. The
Systematic Investment Plan also authorizes Smith Barney to apply cash held in
the shareholder's Smith Barney brokerage account or redeem the shareholder's
shares of a Smith Barney money market fund to make additions to the account.
Additional information is available from a Fund or a Financial Consultant.
INITIAL SALES CHARGE WAIVERS -- CLASS A SHARES. Purchases of Class A
shares may be made at net asset value without a sales charge in the following
circumstances: (a) sales of Class A shares to board members of a Fund and
employees of Travelers and its subsidiaries, or the spouses and children of such
persons (including the surviving spouse of a deceased board member or employee,
and retired board members or employees), or sales to any trust, pension, profit-
sharing or other benefit plan for such persons provided such sales are made upon
the assurance of the purchaser that the purchase is made for investment purposes
-8-
<PAGE>
and that the securities will not be re-sold except through redemption or
repurchase; (b) offers of Class A shares to any other investment company in
connection with the combination of such company with a Fund by merger,
acquisition of assets or otherwise; (c) purchases of Class A shares by any
client of a newly-employed Smith Barney Financial Consultant (for a period up to
90 days from the commencement of the Financial Consultant's employment with
Smith Barney), on the condition the purchase of Class A shares is made with the
proceeds of the redemption of shares of a mutual fund which (i) was sponsored by
the Financial Consultant's prior employer, (ii) was sold to the client by the
Financial Consultant and (iii) was subject to a sales charge; (d) shareholders
who have redeemed Class A shares in a Fund (or Class A shares of another fund of
the Smith Barney Mutual Funds that are offered with a sales charge equal to or
greater than the maximum sales charge of the Fund) and who wish to reinvest
their redemption proceeds in the Fund, provided the reinvestment is made within
60 calendar days of the redemption; (e) accounts managed by registered
investment advisory subsidiaries of Travelers; and (f) with respect to Smith
Barney Global Opportunities Fund and Smith Barney Limited Maturity Municipals
Fund, investments of distributions from a UIT sponsored by Smith Barney. In
order to obtain such discounts, the purchaser must provide sufficient
information at the time of purchase to permit verification that the purchase
would qualify for the elimination of the sales charge.
RIGHT OF ACCUMULATION. Class A shares of a Fund may be purchased by "any
person" (as defined above) at a reduced sales charge or at net asset value
determined by aggregating the dollar amount of the new purchase and the total
net asset value of all Class A shares of the Fund and of funds sponsored by
Smith Barney, which are offered with a sales charge listed under "Exchange
Privilege," then held by such person and applying the sales charge applicable to
such aggregate. In order to obtain such discount, the purchaser must provide
sufficient information at the time of purchase to permit verification that the
purchase qualifies for the reduced sales charge. The right of accumulation is
subject to modification or discontinuance at any time with respect to all shares
purchased thereafter.
GROUP PURCHASES. Upon completion of certain automated systems, a reduced
sales charge or purchase at net asset value will also be available to employees
(and partners) of the same employer purchasing as a group, provided each
participant makes the minimum initial investment required. The sales charge
applicable to purchases by each member of such a group will be determined by the
tables set forth above and will be based upon the aggregate sales of Class A
shares of Smith Barney Mutual Funds offered with a sales charge to, and share
holdings of, all members of the group. To be eligible for such reduced sales
charges or to purchase at net asset value, all purchases must be pursuant to an
employer- or partnership-sanctioned plan meeting certain requirements. One such
requirement is that the plan must be open to specified partners or employees of
the employer and its subsidiaries, if any. Such plan may, but is not required
to, provide for payroll deductions, IRAs or investments pursuant to retirement
plans under Sections 401
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<PAGE>
or 408 of the Code. Smith Barney may also offer a reduced sales charge or net
asset value purchase for aggregating related fiduciary accounts under such
conditions that Smith Barney will realize economies of sales efforts and sales
related expenses. An individual who is a member of a qualified group may also
purchase Class A shares of a Fund at the reduced sales charge applicable to the
group as a whole. The sales charge is based upon the aggregate dollar value of
Class A shares offered with a sales charge that have been previously purchased
and are still owned by the group, plus the amount of the current purchase. A
"qualified group" is one which (a) has been in existence for more than six
months, (b) has a purpose other than acquiring Fund shares at a discount and (c)
satisfies uniform criteria which enables Smith Barney to realize economies of
scale in its costs of distributing shares. A qualified group must have more than
10 members, must be available to arrange for group meetings between
representatives of the Fund and the members, and must agree to include sales and
other materials related to the Fund in its publications and mailings to members
at no cost to Smith Barney. In order to obtain such reduced sales charge or to
purchase at net asset value, the purchaser must provide sufficient information
at the time of purchase to permit verification that the purchase qualifies for
the reduced sales charge. Approval of group purchase reduced sales charge plans
is subject to the discretion of Smith Barney.
LETTER OF INTENT. A Letter of Intent for amounts of $50,000 or more
provides an opportunity for an investor to obtain a reduced sales charge by
aggregating the investment in Class A shares over a 13 month period, provided
that the investor refers to such Letter when placing orders. For purposes of a
Letter of Intent, the amount of investment in the above sales charge tables
includes purchases of all Class A shares of a Fund and other funds of the Smith
Barney Mutual Funds offered with a sales charge over the 13 month period based
on the total amount of intended purchases plus the value of all Class A shares
offered with a sales charge that have been previously purchased and are still
owned. An alternative is to compute the 13 month period starting up to 90 days
before the date of execution of a Letter of Intent. Each investment made during
the period receives the reduced sales charge applicable to the total amount of
the investment goal. If the goal is not achieved within the period, the investor
must pay the difference between the sales charges applicable to the purchases
made and the charges previously paid, or an appropriate number of escrowed
shares will be redeemed. New Letters of Intent will be accepted beginning
January 1, 1995. Please contact a Smith Barney Financial Consultant or TSSG to
obtain a Letter of Intent application.
WAIVERS OF CDSC -- CLASS A, CLASS B AND CLASS C SHARES. "CDSC Shares"
are sold at net asset value next determined without an initial sales charge so
that the full amount of an investor's purchase payment may be immediately
invested in a Fund. A CDSC, however, may be imposed on certain redemptions of
these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C shares; and (c)
Class A shares which when combined with Class A shares offered with a sales
charge
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<PAGE>
currently held by an investor, equal or exceed $500,000 in the aggregate. The
CDSC on CDSC Shares will be waived on: (a) exchanges; (b) automatic cash
withdrawals in amounts equal to or less than 1.00% per month of the value of the
shareholder's shares at the time the withdrawal plan commences (see below)
(provided, however, that automatic cash withdrawals in amounts equal to or less
than 2.00% per month of the value of the shareholder's shares will be permitted
for withdrawal plans that were established prior to November 7, 1994); (c)
redemptions of shares within twelve months following the death or disability of
the shareholder; (d) redemption of shares made in connection with qualified
distributions from retirement plans or IRAs upon attainment of age 59 1/2; (e)
involuntary redemptions; and (f) redemptions of shares in connection with a
combination of a 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.
EXCHANGE PRIVILEGE. Except as otherwise noted below, shares of each
Class may be exchanged at the net asset value next determined 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, Class B and Class C shares are subject to minimum
investment requirements and all shares are subject to the other requirements of
the fund into which exchanges are made and a sales charge differential may
apply.
<TABLE>
<C> <S>
Fund Name
---------------------------------------------------------------------------------
GROWTH FUNDS
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney European Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -- Capital Appreciation Portfolio
Smith Barney Global Opportunities Fund
Smith Barney Precious Metals and Minerals Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
GROWTH AND INCOME FUNDS
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Income and Growth Portfolio
Smith Barney Funds, Inc. -- Utility Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
</TABLE>
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<TABLE>
<C> <S>
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Smith Barney World Funds, Inc. -- International Balanced Portfolio
INCOME FUNDS
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc. -- Income Return Account Portfolio
Smith Barney Funds, Inc. -- Monthly Payment Government Portfolio
+++ Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Portfolio
Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney Global Bond Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
* Smith Barney Limited Maturity Treasury Fund
Smith Barney Managed Governments Fund Inc.
MUNICIPAL BOND FUNDS
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Florida Municipals Fund
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
* Smith Barney Limited Maturity Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds -- California Limited Term Portfolio
Smith Barney Muni Funds -- California Portfolio
* Smith Barney Muni Funds -- Florida Limited Term Portfolio
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 Jersey Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Ohio Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney New York Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
</TABLE>
-12-
<PAGE>
<TABLE>
<C> <S>
MONEY MARKET FUNDS
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc. -- Cash Portfolio
++ Smith Barney Money Funds, Inc. -- Government Portfolio
*** Smith Barney Money Funds, Inc. -- Retirement Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
+++ Smith Barney Muni Funds -- California Money Market Portfolio
+++ Smith Barney Muni Funds -- New York Money Market Portfolio
<FN>
- ------------------------
* Available for exchange with Class A, Class C and Class Y shares of the Fund.
** Available for exchange with Class A, Class B and Class Y shares of the Fund.
In addition, shareholders who own Class C shares of the Fund through the
Smith Barney 401(k) Program may exchange those shares for Class C shares of
this fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the Fund. In
addition, shareholders who own Class C shares of the Fund through the Smith
Barney 401(k) Program may exchange those shares for Class C shares of this
fund.
+++ Available for exchange with Class A and Class Y shares of the Fund.
</TABLE>
Investors who held Class B shares of the Smith Barney Shearson Short-Term
World Income Fund on July 15, 1994 and who subsequently exchange those shares
for Class B shares of a Fund will be offered the opportunity to exchange all
such Class B shares for Class A shares of the Fund four years after the date on
which those shares were deemed to have been purchased. Holders of such Class B
shares will be notified of the pending exchange in writing approximately 30 days
before the fourth anniversary of the purchase date and, unless the exchange is
rejected in writing, the exchange will occur on or about the fourth anniversary
date.
AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers shareholders an
automatic cash withdrawal plan, under which shareholders who own shares with a
value of at least $10,000 may elect to receive periodic cash payments of at
least $100 monthly or quarterly. Retirement plan accounts are eligible for
automatic cash withdrawal plans only where the shareholder is eligible to
receive qualified distributions and has an account value of at least $5,000. The
withdrawal plan will be carried over on exchanges between funds or Classes of a
Fund. Any applicable CDSC will not be waived on amounts withdrawn by a
shareholder that exceed 1.00% per month of the value of the shareholder's shares
subject to the CDSC at the time the withdrawal plan commences. (With respect to
withdrawal plans in effect prior to November 7, 1994, any applicable CDSC will
be waived on amounts withdrawn that do not exceed 2.00% per month of the
shareholder's shares subject to the CDSC.) For further information regarding the
automatic cash withdrawal plan, shareholders should contact a Smith Barney
Financial Consultant.
MINIMUM ACCOUNT SIZE. Each Fund reserves the right to involuntarily
liquidate any shareholder's account in the Fund if the aggregate net asset value
of the shares held in the Fund account is less than $500. (If a shareholder has
more than one account in the Fund, each account must satisfy the minimum account
-13-
<PAGE>
size.) The Fund, however, will not redeem shares based solely on market
reductions in net asset value. Before the Fund exercises such right,
shareholders will receive written notice and will be permitted 60 days to bring
accounts up to the minimum to avoid automatic redemption.
MANAGEMENT OF THE FUND. The day-to-day operations of each Fund are
delegated to the Fund's investment adviser, administrator and sub-administrator.
The investment adviser of each Fund is:
<TABLE>
<CAPTION>
ASSETS UNDER MANAGEMENT
FUND INVESTMENT ADVISER AS OF SEPTEMBER 30, 1994
- -------------------------- ------------------------- ------------------------
<S> <C> <C>
Adjustable Rate Government Smith Barney Strategy
Income Fund Advisers Inc. ("SBSA") $3.03 billion
Arizona Municipals Fund Smith Barney Mutual Funds
Management Inc.
("SBMFM")* $52.4 billion
European Fund SBMFM** $52.4 billion
Florida Municipals Fund SBMFM* $52.4 billion
Global Opportunities Fund SBMFM** $52.4 billion
Growth and Income Fund SBMFM* $52.4 billion
Intermediate Maturity SBMFM* $52.4 billion
California Municipals
Fund
Intermediate Maturity New SBMFM* $52.4 billion
York Municipals Fund
Investment Grade Bond Fund SBMFM* $52.4 billion
Limited Maturity SBMFM* $52.4 billion
Municipals Fund
Limited Maturity Treasury SBMFM* $52.4 billion
Fund
Massachusetts Municipals SBMFM* $52.4 billion
Fund
Oregon Municipals Fund SBMFM* $52.4 billion
Precious Metals and SBSA $3.03 billion
Minerals Fund
Telecommunications Growth SBSA $3.03 billion
Fund
<FN>
- ------------------------------
* The fund's advisory agreement was transferred to SBMFM effective November 7,
1994, from its affiliate, Mutual Management Corp. (Mutual Management Corp.
and SBMFM are both wholly owned subsidiaries of Smith Barney Holdings Inc.)
** The adviser of this fund has changed its name from "Smith, Barney Advisers,
Inc." to "Smith Barney Mutual Funds Management Inc."
</TABLE>
ADMINISTRATOR. The Funds' administrator has changed its name from
"Smith, Barney Advisers, Inc." to "Smith Barney Mutual Funds Management Inc."
FINANCIAL HIGHLIGHTS. The information set forth in Appendix A should be
read in conjunction with the financial statements and related notes that appear
in the Fund's Semi-Annual Report.
-14-
<PAGE>
- ------------------------
*Prospectuses dated:
<TABLE>
<S> <C>
Adjustable Rate Government
Income Fund 07/30/94
Arizona Municipals Fund Inc. 07/30/94
European Fund 03/01/94
Florida Municipals Fund 12/30/93
Global Opportunities Fund 06/29/94
Growth and Income Fund 04/01/94
Intermediate Maturity California
Municipals Fund 01/29/94
Intermediate Maturity New York
Municipals Fund 01/29/94
Investment Grade Bond Fund 03/01/94
Limited Maturity Municipals Fund 01/29/94
Limited Maturity Treasury Fund 01/29/94
Massachusetts Municipals Fund 01/29/94
Oregon Municipals Fund 05/23/94
Precious Metals and Minerals
Fund Inc. 12/30/93
Telecommunications Growth Fund 03/01/94
</TABLE>
-15-
<PAGE>
APPENDIX A
SMITH BARNEY
FOR A CLASS A SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
PRECIOUS
INVESTMENT METALS
FLORIDA GRADE MASSACHUSETTS AND TELECOMMUNICATIONS
EUROPEAN MUNICIPALS BOND MUNICIPALS MINERALS GROWTH
FUND# FUND FUND FUND FUND INC. FUND
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
<CAPTION>
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
6/30/94 4/30/94 6/30/94 5/31/94 4/30/94 6/30/94
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $14.47 $ 10.53 $ 13.01 $ 13.26 $ 18.89 $ 12.86
Income from
investment
operations:
Net investment
income/(loss)...... 0.05 0.25+ 0.42 0.35+ (0.03) (0.02)
Net realized and
unrealized
gain/(loss) on
investments........ (0.41) (0.83) (1.69) (0.87) 0.75 (1.34)
------------------------------------------------------------------------------------------------------------
Total from
investment
operations......... (0.36) (0.58) (1.27) (0.52) 0.72 (1.36)
------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment
income........... -- (0.26) (0.44) (0.36) -- --
Distributions from
net realized
capital gains.... -- (0.03) -- (0.05) -- --
------------------------------------------------------------------------------------------------------------
Total
distributions...... 0.00 (0.29) (0.44) (0.41) 0.00 0.00
------------------------------------------------------------------------------------------------------------
Net asset value, end
of period.......... $14.11 $ 9.66 $ 11.30 $ 12.33 $ 19.61 $ 11.50
------------------------------------------------------------------------------------------------------------
Total return++...... (2.49)% (5.67)% (9.82)% (4.04)% 3.81% (10.58)%
------------------------------------------------------------------------------------------------------------
Ratios to average
net
assets/supplemental
data:
Net assets, end of
period (in
000's)............. $2,041 $14,764 $12,381 $30,452 $24,404 $74,838
Ratio of operating
expenses to average
net assets......... 2.20%** 0.99%**+++ 1.08%** 0.81%**+++ 1.81%** 1.24%**
Ratio of net
investment
income/(loss) to
average net
assets............. 0.80%** 4.94%** 7.06%** 5.44%** (0.25)%** (0.28)%**
------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate............... 50% 20% 12% 26% 12% 5%
------------------------------------------------------------------------------------------------------------
<FN>
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for six months ended April 30, 1994 and May 31, 1994 were $0.24
and $0.33, respectively.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Annualized expense ratio before waiver of fees by investment adviser and
administrator for the six months ended April 30, 1994 and May 31, 1994 were
1.26% and 1.07%, respectively.
# As of May 10, 1994, the Fund changed its investment adviser from Lehman
Brothers Global Asset Management Limited to its current adviser.
</TABLE>
<PAGE>
SMITH BARNEY
FOR A CLASS B SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
PRECIOUS
INVESTMENT METALS
FLORIDA GRADE MASSACHUSETTS AND TELECOMMUNICATIONS
EUROPEAN MUNICIPALS BOND MUNICIPALS MINERALS GROWTH
FUND# FUND FUND FUND FUND INC. FUND
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
6/30/94 4/30/94 6/30/94 5/31/94 4/30/94 6/30/94
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............. $ 14.40 $ 10.53 $ 13.01 $ 13.26 $ 18.75 $ 12.77
Income from
investment
operations:
Net investment
income/(loss)...... 0.01 0.23+ 0.39 0.32+ (0.09) (0.06)
Net realized and
unrealized
gain/(loss) on
investments........ (0.43) (0.83) (1.69) (0.87) 0.73 (1.34)
----------------------------------------------------------------------------------------------------------------
Total from
investment
operations......... (0.42) (0.60) (1.30) (0.55) 0.64 (1.40)
----------------------------------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment
income........... -- (0.24) (0.41) (0.33) -- --
Distributions from
net realized
capital gains.... -- (0.03) -- (0.05) -- --
----------------------------------------------------------------------------------------------------------------
Total
distributions...... 0.00 (0.27) (0.41) (0.38) 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Net asset value, end
of period.......... $ 13.98 $ 9.66 $ 11.30 $ 12.33 $ 19.39 $ 11.37
----------------------------------------------------------------------------------------------------------------
Total return++...... (2.92)% (5.87)% (10.05)% (4.26)% 3.41% (10.96)%
----------------------------------------------------------------------------------------------------------------
Ratios to average
net
assets/supplemental
data:
Net assets, end of
period (in
000's)............. $38,029 $36,661 $401,515 $24,388 $57,005 $185,419
Ratio of operating
expenses to average
net assets......... 2.89%** 1.49%**+++ 1.58%** 1.33%**+++ 2.57%** 2.07%**
Ratio of net
investment
income/(loss) to
average net
assets............. 0.11%** 4.44%** 6.56%** 4.92%** (1.01)%** (1.10)%**
----------------------------------------------------------------------------------------------------------------
Portfolio turnover
rate............... 50% 20% 12% 26% 12% 5%
----------------------------------------------------------------------------------------------------------------
<FN>
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for six months ended April 30, 1994 and May 31, 1994 were $0.21
and $0.30, respectively.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Annualized expense ratios before waiver of fees by investment adviser and
administrator for the six months ended April 30, 1994 and May 31, 1994 were
1.77% and 1.59%, respectively.
# As of May 10, 1994, the Fund changed its investment adviser from Lehman
Brothers Global Asset Management Limited to its current adviser.
</TABLE>
<PAGE>
SMITH BARNEY
FOR A FUND SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS ENDED 5/31/94 (UNAUDITED)
<S> <C> <C> <C> <C>
INTERMEDIATE INTERMEDIATE
LIMITED LIMITED MATURITY MATURITY
MATURITY MATURITY CALIFORNIA NEW YORK
MUNICIPALS TREASURY MUNICIPALS MUNICIPALS
FUND FUND FUND FUND
Net asset value,
beginning of period..... $ 8.26 $ 8.14 $ 8.50 $ 8.54
Income from investment
operations:
Net investment income+... 0.17 0.16 0.19 0.20
Net realized and
unrealized gain/(loss)
on investments.......... (0.17) (0.49) (0.32) (0.32)
----------------------------------------------------------------------------------------
Total from investment
operations.............. 0.00* (0.33) (0.13) (0.12)
----------------------------------------------------------------------------------------
Distributions:
Dividends from net
investment income..... (0.17) (0.16) (0.19) (0.20)
Distributions from net
realized capital
gains................. -- (0.33) (0.01) (0.01)
----------------------------------------------------------------------------------------
Total distributions...... (0.17) (0.49) (0.20) (0.21)
----------------------------------------------------------------------------------------
Net asset value, end of
period.................. $ 8.09 $ 7.32 $ 8.17 $ 8.21
----------------------------------------------------------------------------------------
Total return++........... (0.05)% (4.29)% (1.52)% (1.45)%
----------------------------------------------------------------------------------------
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's).............. $94,135 $44,293 $32,242 $69,765
Ratio of operating
expenses to average net
assets+++............... 0.80%** 0.90%** 0.75%** 0.65%**
Ratio of net investment
income/(loss) to average
net assets.............. 4.05%** 4.21%** 4.56%** 4.66%**
----------------------------------------------------------------------------------------
Portfolio turnover
rate.................... 16% 95% 21% 49%
----------------------------------------------------------------------------------------
<FN>
* Amounts represent less than $0.01 per share.
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for the six months ended May 31, 1994 were $0.16, $0.16, $0.18
and $0.18, respectively.
++ Total return represents aggregate total return for the periods indicated and
does not reflect any applicable sales charges.
+++ Annualized operating expense ratio before waiver of fees and/or
reimbursement by investment adviser and administrator for the six months
ended May 31, 1994 were 0.91%, 1.06%, 1.13% and 0.94%, respectively.
</TABLE>
