Registration No. 2-86519
811-3763
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 17
X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 18
X
SMITH BARNEY TELECOMMUNICATIONS TRUST
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street , New York, New York, 10013
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 723 -9218
Christina T. Sydor
Secretary
Smith Barney Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent of Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
on pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
X on May 1, 1995 pursuant to Rule 485(a)
___________________________________________________________________________
______
The Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant's Rule 24f-2 Notice for the
fiscal year ended December 31, 1994 was filed on February 27, 1995.
SMITH BARNEY TELECOMMUNICATIONS TRUST
FORM N-IA
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Financial Highlights
Financial Highlights
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Investment Objective and
Management Policies; Additional
Information
5. Management of the Fund
Management of the (Fund and the)
Trust; The Growth Fund's
Expenses ; Additional
Information; Annual Report
6. Capital Stock and Other
Securities
Investment Objective and
Management Policies; Dividends,
Distributions and Taxes;
Additional Information
7. Purchase of Securities Being
Offered*
Purchase of Shares;Valuation of
Shares; Redemption of Shares;
Exchange Privilege;
Distributor ; Additional
Information; Minimum Account
Size
8. Redemption or Repurchase
Purchase of Shares; Redemption
of Shares
9. Pending Legal Proceedings
Not Applicable
* Information contained in the Growth Fund's Prospectus only.
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover Page
11. Table of Contents
Contents
12. General Information and
History
Distributor; Additional
Information
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the (Fund and the)
Trust; Distributor
15. Control Persons and Principal
Holders of Securities
Management of the (Fund and the)
Trust
16. Investment Advisory and Other
Services
Management of the (Fund and the)
Trust; Distributor
17. Brokerage Allocation and
Other Services
Investment Objective and
Management Policies ;
Distributor
18. Capital Stock and Other
Securities
Purchase of Shares;
Redemption of Shares
;
Taxes
19. Purchase, Redemption and
Pricing of
Securities Being Offered
Purchase of Shares*;
Redemption of Shares; Valuation of
Shares; Exchange
Privilege; Distributor
20. Tax Status
Taxes
21. Underwriters
Distributor
22. Calculation of Performance
Performance Data
23. Financial Statements
Financial Statements
* Information contained in the Growth Fund's Statement of Additional
Information only.
<PAGE>
P R O S P E C T U S
S M I T H B A R N E Y
TELECOMMUNICATIONS
GROWTH FUND
M A Y 1, 1 9 9 5
PROSPECTUS BEGINS ON PAGE ONE
[LOGO]
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ----------------------------------------------------------------
PROSPECTUS
MAY 1, 1995
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney Telecommunications Growth Fund (the "Growth Fund") of Smith
Barney Telecommunications Trust (the "Trust") is a mutual fund which seeks
capital appreciation, with income as a secondary consideration. The Growth
Fund
seeks to achieve this objective primarily by investing in common stocks and
other securities of companies in the telecommunications industry. The Trust
is a
non-diversified, open-end management investment company consisting of two
portfolios, the Growth Fund and Smith Barney Telecommunications Income Fund
(the
"Income Fund").
This Prospectus sets forth concisely certain information about the Growth
Fund
and the Trust, including sales charges, distribution and service fees and
expenses which 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 Trust and the Growth Fund is contained
in a
Statement of Additional Information dated May 1, 1995, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Growth Fund at the telephone number or
address
set forth above, or by contacting a Smith Barney Financial Consultant. The
Statement of Additional Information 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
SMITH BARNEY STRATEGY ADVISERS INC.
Investment Adviser
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Administrator
THE BOSTON COMPANY ADVISORS, INC.
Sub-Investment Adviser and Sub-Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
-------------------------------------------------------------
FINANCIAL HIGHLIGHTS 12
-------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 16
-------------------------------------------------------------
VALUATION OF SHARES 21
-------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 22
-------------------------------------------------------------
PURCHASE OF SHARES 24
-------------------------------------------------------------
EXCHANGE PRIVILEGE 35
-------------------------------------------------------------
REDEMPTION OF SHARES 39
-------------------------------------------------------------
MINIMUM ACCOUNT SIZE 41
-------------------------------------------------------------
PERFORMANCE 41
-------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE GROWTH FUND 42
-------------------------------------------------------------
DISTRIBUTOR 44
-------------------------------------------------------------
ADDITIONAL INFORMATION 46
-------------------------------------------------------------
</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 OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER BY THE TRUST 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 AN
OFFER OR SOLICITATION IN SUCH JURISDICTION.
2
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
INVESTMENT OBJECTIVE The Growth Fund is one of two portfolios of the Trust,
a
non-diversified open-end management investment company that was created in
response to the reorganization of American Telephone and Telegraph Company
("AT&T") and provided stockholders of AT&T with the opportunity to exchange
their shares of AT&T for shares of the Trust (the "Exchange"). The Exchange
took
place and the Trust commenced operations on January 1, 1984. For
information
about the Income Fund, which currently is not selling additional shares,
please
contact a Smith Barney Financial Consultant. The Growth Fund seeks capital
appreciation, with income as a secondary consideration, primarily by
investing
in common stocks and other securities of companies in the
telecommunications
industry. See "Investment Objective and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Growth Fund offers several classes of
shares ("Classes") to investors designed to provide them with the
flexibility of
selecting an investment best suited to their needs. The general public is
offered three classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of the sales charges and rates of
expenses to which they are subject. A fourth Class of shares, Class Y
shares, is
offered only to investors meeting an initial investment minimum of
$5,000,000.
See "Purchase of Shares" and "Redemption of Shares."
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales
charge of up to 5.00% and are subject to an annual service fee of 0.25% of
the
average daily net assets of the Class. The initial sales charge may be
reduced
or waived for certain purchases. Purchases of Class A shares, which when
combined with current holdings of Class A shares offered with a sales
charge
equal or exceed $500,000 in the aggregate, will be made at net asset value
with
no sales charge, but will be subject to a contingent deferred sales charge
("CDSC") of 1.00% on redemptions made within 12 months of purchase. See
"Prospectus Summary -- Reduced or No Initial Sales Charge."
3
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
CLASS B SHARES. Class B shares are offered at net asset value subject to a
maximum CDSC of 5.00% of redemption proceeds, declining by 1.00% each year
after
the date of purchase to zero. This CDSC may be waived for certain
redemptions.
Class B shares are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class. The
Class B shares' distribution fee may cause that Class to have higher
expenses
and pay lower dividends than Class A shares.
CLASS B SHARES CONVERSION FEATURE. Class B shares will convert
automatically to
Class A shares, based on relative net asset value, eight years after the
date of
the original purchase. Upon conversion, these shares will no longer be
subject
to an annual distribution fee. In addition, a certain portion of Class B
shares
that have been acquired through the reinvestment of dividends and
distributions
("Class B Dividend Shares") will be converted at that time. See "Purchase
of
Shares -- Deferred Sales Charge Alternatives."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales
charge. They are subject to an annual service fee of 0.25% and an annual
distribution fee of 0.75% of the average daily net assets of the Class, and
investors pay a CDSC of 1.00% if they redeem Class C shares within 12
months of
purchase. The CDSC may be waived for certain redemptions. The Class C
shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A shares. Purchases of Class C shares, which when
combined
with current holdings of Class C shares of the Fund equal or exceed
$500,000 in
the aggregate, should be made in Class A shares at net asset value with no
sales
charge, and will be subject to a CDSC of 1.00% on redemptions made within
12
months of purchase.
CLASS Y SHARES. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net
asset
value with no initial sales charge or CDSC. They are not subject to any
service
or distribution fees.
In deciding which Class of Growth Fund shares to purchase, investors
should
consider the following factors, as well as any other relevant facts and
circumstances:
INTENDED HOLDING PERIOD. 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
4
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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
investment alternative, Class B and Class C shares are sold without any
initial
sales charge so the entire purchase price is immediately invested in the
Growth
Fund. Any investment return on these additional invested amounts may
partially
or wholly offset the higher annual expenses of these Classes. Because the
Growth
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.
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.
REDUCED OR NO INITIAL SALES CHARGE. The initial sales charge on Class A
shares
may be waived for certain eligible purchasers, and the entire purchase
price
will be immediately invested in the Growth Fund. In addition, Class A share
purchases, which when combined with current holdings of Class A shares
offered
with a sales charge equal or exceed $500,000 in the aggregate, will be made
at
net asset value with no initial sales charge, but will be subject to a CDSC
of
1.00% on redemptions made within 12 months of purchase. The $500,000
aggregate
investment may be met by adding the purchase to the net asset value of all
Class
A shares held in funds sponsored by Smith Barney Inc. ("Smith Barney")
listed
under "Exchange Privilege." Class A share purchases may also be eligible
for a
reduced initial sales charge. See "Purchase of Shares." Because the ongoing
expenses of Class A shares may be lower than those for Class B and Class C
shares, purchasers eligible to purchase Class A shares at net asset value
or at
a reduced sales charge should consider doing so.
5
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Smith Barney Financial Consultants may receive different compensation for
selling each Class of shares. Investors should understand that the purpose
of
the CDSC on the Class B and Class C shares is the same as that of the
initial
sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Trust and the Growth
Fund" for
a complete description of the sales charges and service and distribution
fees
for each Class of shares and "Valuation of Shares," "Dividends,
Distributions
and Taxes" and "Exchange Privilege" for other differences between the
Classes of
shares.
SMITH BARNEY 401(K) PROGRAM Investors may be eligible to participate in 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 (the "Code"), as well as other
types
of participant directed, tax-qualified employee benefit plans
(collectively,
"Participating Plans"). Class A, Class B, Class C and Class Y shares are
available as investment alternatives for Participating Plans. See "Purchase
of
Shares -- Smith Barney 401(k) Program."
PURCHASE OF SHARES Shares may be purchased through the Growth Fund's
distributor, Smith Barney, a broker that clears securities transactions
through
Smith Barney on a fully disclosed basis (an "Introducing Broker") or an
investment dealer in the selling group. Direct purchases by certain
retirement
plans may be made through the Trust's transfer agent, The Shareholder
Services
Group, Inc. ("TSSG"), a subsidiary of First Data Corporation. See "Purchase
of
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 individual retirement account ("IRA") or a Self-Employed
Retirement
Plan. 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
6
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
shares and the subsequent investment requirement for all Classes through
the
Systematic Investment Plan described below is $50. See "Purchase of
Shares."
SYSTEMATIC INVESTMENT PLAN The Growth Fund offers shareholders a Systematic
Investment Plan under which they may authorize the automatic placement of a
purchase order each month or quarter for Growth Fund shares in an amount
not
less than $50. See "Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and
"Redemption of Shares."
MANAGEMENT OF THE FUND Smith Barney Strategy Advisers Inc. ("SBSA") serves
as
the Growth Fund's investment adviser. SBSA is a wholly owned subsidiary of
Smith
Barney Holdings Inc. ("Holdings"). Holdings is a wholly owned subsidiary of
The
Travelers Inc. ("Travelers"), a diversified financial services holding
company
engaged, through its subsidiaries, principally in four business segments:
Investment Services, Consumer Finance Services, Life Insurance Services and
Property & Casualty Insurance Services.
Smith Barney Mutual Funds Management Inc. ("SBMFM") serves as the Growth
Fund's administrator. SBMFM is a wholly owned subsidiary of Holdings. The
Boston
Company Advisors, Inc. ("Boston Advisors") serves as the Growth Fund's
sub-investment adviser and sub-administrator. Boston Advisors is a wholly
owned
subsidiary of The Boston Company, Inc. ("TBC") which in turn is a wholly
owned
subsidiary of Mellon Bank Corporation ("Mellon"). See "Management of the
Trust
and the Growth Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the
same
Class of certain other funds of the Smith Barney Mutual Funds at the
respective
net asset values next determined, plus any applicable sales charge
differential.
See "Exchange Privilege."
VALUATION OF SHARES Net asset value of the Growth Fund for the prior day
generally is quoted daily in the financial section of most newspapers and
is
also available from Smith Barney Financial Consultants. See "Valuation of
Shares."
7
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income and
distributions of net realized capital gains, if any, are declared and paid
annually. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically in additional shares of the same Class at
current net asset value unless otherwise specified by an investor. Shares
acquired by dividend and distribution reinvestments will not be subject to
any
sales charge or CDSC. Class B shares acquired through dividend and
distribution
reinvestments will become eligible for conversion to Class A shares on a
PRO
RATA basis. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS No assurance can be given that the
Growth Fund will achieve its investment objective. The Growth Fund seeks to
achieve its investment objective primarily through investments in common
stocks
and other securities of companies engaged in the telecommunications
industry. As
a result, the Growth Fund will be subject to market and economic
developments
affecting that industry to a greater degree than if its investments were
not
concentrated in that industry. Therefore, the Growth Fund should not be
considered a complete investment program. The Trust is classified as a
non-diversified investment company under the Investment Company Act of
1940, as
amended (the "1940 Act"), which means that the Growth Fund is not limited
by the
1940 Act in the proportion of its assets that it may invest in the
obligations
of a single issuer. The Growth Fund's assumption of large positions in the
securities of a small number of issuers may cause its share price to
fluctuate
to a greater extent than that of a diversified investment company as a
result of
changes in the financial condition or in the market's assessment of the
issuers.
See "Investment Objective and Management Policies."
THE GROWTH FUND'S EXPENSES THE FOLLOWING EXPENSE TABLE LISTS THE COSTS AND
EXPENSES THAT AN INVESTOR WILL INCUR, EITHER DIRECTLY OR INDIRECTLY, AS A
SHAREHOLDER OF THE GROWTH FUND, BASED ON THE MAXIMUM SALES CHARGE OR
8
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
MAXIMUM CDSC THAT MAY BE INCURRED AT THE TIME OF PURCHASE OR REDEMPTION
AND,
UNLESS OTHERWISE NOTED, THE GROWTH FUND'S OPERATING EXPENSES FOR ITS MOST
RECENT
FISCAL YEAR:
<TABLE>
<CAPTION>
CLASS
CLASS A CLASS B
CLASS C Y
<S> <C> <C>
<C> <C>
--------------------------------------------------------------------------
- -----------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.00% None
None None
Maximum CDSC (as a percentage of original cost or
redemption proceeds, whichever is lower) None* 5.00%
1.00% None
--------------------------------------------------------------------------
- -----------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.75% 0.75%
0.75% 0.75%
12b-1 fees** 0.25% 1.00%
1.00% None
Other expenses*** 0.24% 0.32%
0.33% 0.24%
--------------------------------------------------------------------------
- -----------
TOTAL FUND OPERATING EXPENSES 1.24% 2.02%
2.08% 0.99%
--------------------------------------------------------------------------
- -----------
<FN>
*Purchases of Class A shares, which when combined with current holdings
of Class A shares
offered with a sales charge equal or exceed $500,000 in the aggregate,
will be made at net
asset value with no sales charge, but will be subject to a CDSC of
1.00% on redemptions
within 12 months.
**Upon conversion of Class B shares to Class A shares, such shares will
no longer be subject
to a distribution fee. Class C shares do not have a conversion feature
and, therefore, are
subject to an ongoing distribution fee. As a result, long-term
shareholders of Class C
shares may pay more than the economic equivalent of the maximum front-
end sales charge
permitted by the National Association of Securities Dealers, Inc.
***For Class Y shares, "Other expenses" have been estimated based on
expenses incurred by the
Class A shares because no Class Y shares had been sold prior to
December 31, 1994.
</TABLE>
The sales charge and CDSC set forth in the above table are the maximum
charges
imposed on purchases or redemptions of Growth Fund shares and investors may
actually pay lower or no charges, depending on the amount purchased and, in
the
case of Class B, Class C and certain Class A shares, the length of time the
shares are held and whether the shares are held through the Smith Barney
401(k)
Program. See "Purchase of Shares" and "Redemption of Shares." Smith Barney
receives an annual 12b-1 service fee of 0.25% of the value of average daily
net
assets of Class A shares. Smith Barney also receives, with respect to Class
B
shares, an annual 12b-1 fee of 1.00% of the value of average daily net
assets of
that Class, consisting of a 0.75% distribution fee and a 0.25% service fee.
For
Class C shares,
9
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Smith Barney receives an annual 12b-1 fee of 1.00% of the value of average
daily
net assets of this Class, consisting of a 0.75% distribution fee and a
0.25%
service fee. "Other expenses" in the above table includes fees for
shareholder
services, custodial fees, legal and accounting fees, printing costs and
registration fees.
EXAMPLE THE FOLLOWING EXAMPLE IS INTENDED TO ASSIST AN INVESTOR IN
UNDERSTANDING
THE VARIOUS COSTS THAT AN INVESTOR IN THE GROWTH FUND WILL BEAR DIRECTLY OR
INDIRECTLY. THE EXAMPLE ASSUMES PAYMENT BY THE GROWTH FUND OF OPERATING
EXPENSES
AT THE LEVELS SET FORTH IN THE TABLE ABOVE. SEE "PURCHASE OF SHARES,"
"REDEMPTION OF SHARES" AND "MANAGEMENT OF THE TRUST AND THE GROWTH FUND."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5
YEARS 10 YEARS*
<S> <C> <C> <C>
<C>
--------------------------------------------------------------------------
- ------
An investor 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:
Class A $62 $87
$115 $193
Class B 71 95
121 219
Class C 31 65
112 241
Class Y 10 32
55 121
An investor would pay the following expenses
on the same investment, assuming the same
annual return and no redemption:
Class A $62 $87
$115 $193
Class B 21 65
111 219
Class C 21 65
112 241
Class Y 10 32
55 121
--------------------------------------------------------------------------
- ------
<FN>
*Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the
eighth year following the date of purchase.
</TABLE>
The example also provides 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 5.00%
annual
return assumption. However, the Growth Fund's actual return will vary and
may be
greater or less than 5.00%. THIS EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR
LESS THAN THOSE SHOWN.
10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION HAS BEEN AUDITED BY COOPERS & LYBRAND L.L.P.,
INDEPENDENT ACCOUNTANTS, WHOSE REPORT THEREON APPEARS IN THE GROWTH FUND'S
ANNUAL REPORT DATED DECEMBER 31, 1994. THE TABLE SET OUT BELOW SHOULD BE
READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES THAT ALSO
APPEAR IN
THE GROWTH FUND'S ANNUAL REPORT, WHICH IS INCORPORATED BY REFERENCE INTO
THE
STATEMENT OF ADDITIONAL INFORMATION.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR
YEAR YEAR
ENDED
ENDED ENDED
12/31/94#
12/31/93# 12/31/92*
<S> <C> <C>
<C>
Net Asset Value, beginning of year $ 12.86 $
9.63 $ 8.68
- ---------------------------------------------------------------------------
- ----------
Income from investment operations:
Net investment income/(loss) (0.04)
(0.04) 0.05
Net realized and unrealized gain/(loss) on
investments (0.78)
3.44 1.63
- ---------------------------------------------------------------------------
- ----------
Total from investment operations (0.82)
3.40 1.68
- ---------------------------------------------------------------------------
- ----------
Less distributions:
Distributions to shareholders from:
Dividends from net investment income (0.13) -
- - (0.02)
Distributions from net realized capital gain --
(0.17) (0.71)
Distributions from capital (Note 1) -- -
- - --
- ---------------------------------------------------------------------------
- ----------
Total distributions (0.13)
(0.17) (0.73)
- ---------------------------------------------------------------------------
- ----------
Net Asset Value, end of year $ 11.91 $
12.86 $ 9.63
- ---------------------------------------------------------------------------
- ----------
Total return++ (6.37)%
35.27% 19.41%
- ---------------------------------------------------------------------------
- ----------
Ratios to average net assets/supplemental data:
Net assets, end of year (000's) $83,918
$77,564 $36,947
Ratio of operating expenses to average net assets 1.24%
1.34% 1.31%
Ratio of net investment income/(loss) to average net
assets (0.29)%
(0.32)% 0.55%
Portfolio turnover rate 19%
25% 64%
- ---------------------------------------------------------------------------
- ----------
<FN>
*The Fund commenced selling Class B shares on November 6, 1992. Any shares
outstanding prior
to November 6, 1992 were designated as Class A shares.
#The average monthly shares method was used to calculate per share data as
the undistributed
net investment income method does not accord with results of operations
for this year.
++Total return represents aggregate total return for the periods indicated
and does not reflect
any applicable sales charge.
</TABLE>
12
<PAGE>
- ---------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
ENDED ENDED
12/31/91 12/31/90 12/31/89+ 12/31/88+ 12/31/87+
12/31/86+ 12/31/85+
<S> <C> <C> <C> <C>
<C> <C>
$ 7.36 $ 8.78 $ 7.08 $ 6.10 $ 11.05
$ 12.64 $ 10.20
----------------------------------------------------------------------
- ---------------
0.06 0.14 0.17 0.12 0.31
0.26 0.33
1.47 (1.32) 2.51 0.96 (0.61)
1.86 2.75
----------------------------------------------------------------------
- ---------------
1.53 (1.18) 2.68 1.08 (0.30)
2.12 3.08
----------------------------------------------------------------------
- ---------------
(0.06) (0.14) (0.16) (0.10) (0.69)
(0.32) (0.45)
(0.14) (0.10) (0.82) -- (3.96)
(3.39) (0.19)
(0.01) -- -- -- --
- -- --
----------------------------------------------------------------------
- ---------------
(0.21) (0.24) (0.98) (0.10) (4.65)
(3.71) (0.64)
----------------------------------------------------------------------
- ---------------
$ 8.68 $ 7.36 $ 8.78 $ 7.08 $ 6.10
$ 11.05 $ 12.64
----------------------------------------------------------------------
- ---------------
20.94% (13.46)% 37.85% 17.69% (3.53)%
18.84% 31.68%
----------------------------------------------------------------------
- ---------------
$34,643 $33,130 $40,595 $30,253 $30,160
$38,840 $38,516
1.19% 1.20% 1.17% 1.21% 1.06%
1.08% 1.32%
0.67% 1.77% 1.93% 1.72% 2.63%
2.14% 2.95%
111% 107% 94% 49% 115%
71% 108%
----------------------------------------------------------------------
- ---------------
<FN>
+Per share data and the number of shares outstanding reflect a 7-for-1
stock dividend issued
on August 7, 1989, to shareholders of record at the close of business
on August 4, 1989.
</TABLE>
13
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE YEAR:
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/94# 12/31/93# 12/31/92*
<S> <C>
<C> <C>
Net Asset Value, beginning of period $
12.77 $ 9.63 $ 9.33
- ---------------------------------------------------------------------------
- ----------
Income from investment operations:
Net investment loss
(0.14) (0.14) (0.00)**
Net realized and unrealized gain on investments
(0.78) 3.45 1.02
- ---------------------------------------------------------------------------
- ----------
Total from investment operations
(0.92) 3.31 1.02
- ---------------------------------------------------------------------------
- ----------
Less distributions:
Distributions to shareholders from:
Dividends from net investment income
(0.03) -- (0.01)
Distributions from net realized capital gains --
(0.17) (0.71)
- ---------------------------------------------------------------------------
- ----------
Total distributions
(0.03) (0.17) (0.72)
- ---------------------------------------------------------------------------
- ----------
Net Asset Value, end of period $
11.82 $ 12.77 $ 9.63
- ---------------------------------------------------------------------------
- ----------
Total return++
(7.17)% 34.34% 10.98%
- ---------------------------------------------------------------------------
- ----------
Ratios to average net assets/supplemental data:
Net assets, end of period (000's)
$185,980 $156,781 $ 586
Ratio of operating expenses to average net assets
2.07% 2.18% 2.21%+
Ratio of net investment loss to average net assets
(1.11)% (1.16)% (0.38)%+
Portfolio turnover rate
19% 25% 64%
- ---------------------------------------------------------------------------
- ----------
<FN>
*The Fund commenced selling Class B shares on November 6, 1992.
**Amount represents less than $0.01 per share.
#The average monthly shares method was used to calculate per share data as
the undistributed net investment
income method does not accord with results of operations for this period.
+Annualized.
++Total return represents aggregate total return for the period indicated
and does not reflect any applicable
sales charge.
</TABLE>
14
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/94*#
<S> <C>
Net Asset Value, beginning of period $12.70
- ---------------------------------------------------------------------------
- ---
Income from investment operations:
Net investment loss
(0.01)
Net realized and unrealized loss on investments
(0.66)
- ---------------------------------------------------------------------------
- ---
Total from investment operations
(0.67)
- ---------------------------------------------------------------------------
- ---
Less distributions:
Distributions to shareholders from:
Dividends from net investment income
(0.03)
- ---------------------------------------------------------------------------
- ---
Total distributions
(0.03)
- ---------------------------------------------------------------------------
- ---
Net Asset Value, end of period $12.00
- ---------------------------------------------------------------------------
- ---
Total return++
(5.24)%
- ---------------------------------------------------------------------------
- ---
Ratios/supplemental data:
Net assets, end of period (000's) $ 151
Ratio of operating expenses to average net assets
2.08%+
Ratio of net investment (loss) to average net assets
(1.13)%+
Portfolio turnover rate
19%
- ---------------------------------------------------------------------------
- ---
<FN>
*The Fund commenced selling Class C shares on November 7, 1994.
+Annualized.
++Total return represents aggregate total return for the period indicated
and
does not reflect any applicable sales charge.
#The average monthly shares method was used to calculate per share data as
the undistributed net investment income method does not accord with
results
of operations for this period.
</TABLE>
AS OF DECEMBER 31, 1994, NO CLASS Y SHARES HAD BEEN SOLD AND,
ACCORDINGLY, NO
COMPARABLE FINANCIAL INFORMATION IS AVAILABLE AT THIS TIME FOR THAT CLASS.
15
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Growth Fund is capital appreciation, with
income as a secondary consideration. This investment objective may not be
changed without the approval of the holders of a majority of the Growth
Fund's
outstanding shares. There is no assurance that the Growth Fund's investment
objective will be achieved.
The Growth Fund seeks to achieve its investment objective primarily
through
investments in common stocks and other securities of companies engaged in
the
telecommunications industry. The Growth Fund defines the telecommunications
industry as including companies engaged in the communication, display,
reproduction, storage and retrieval of information, generally in one or
more of
the following forms: voice, data or print facsimile. Under normal market
conditions, at least 65% of the value of the total assets of the Growth
Fund
will be invested in securities of issuers engaged in the telecommunications
industry. When SBSA and/or Boston Advisors believes that market conditions
warrant adoption of a defensive investment posture, the Growth Fund
temporarily
may have less than 65% of the value of its total assets invested in that
industry. Examples of companies in the telecommunications industry in which
the
Growth Fund may invest include issuers engaged in providing the following
products and services:
COMMUNICATIONS EQUIPMENT AND SERVICES, including equipment and services
for
both data and voice transmission.
ELECTRONIC COMPONENTS AND EQUIPMENT, including semiconductors and other
electronic components used in the manufacture of communications equipment,
as
well as electronic testing instruments, and companies providing component
parts
and services to companies engaged in these activities.
BROADCASTING, including television and radio broadcasting and cable
television.
COMPUTER EQUIPMENT, including mainframe computers, minicomputers,
microcomputers, peripheral devices and software.
MOBILE COMMUNICATIONS AND CELLULAR RADIO/PAGING.
ELECTRONIC MAIL.
16
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
LOCAL NETWORKING AND LINKAGE OF WORD AND DATA PROCESSING SYSTEMS.
PUBLISHING AND INFORMATION SYSTEMS, including news production and
dissemination and data base information services.
VIDEOTEXT AND TELETEXT. This list is illustrative only as the
telecommunications industry is changing rapidly due to technological and
other
developments.
Securities for the Growth Fund are selected primarily on the basis of
their
potential for capital appreciation and, as a result, the Growth Fund
invests
principally in common stocks. The Growth Fund also may invest in other
types of
securities, including convertible bonds, convertible preferred stocks,
warrants,
preferred stocks and debt securities, when SBSA and/or Boston Advisors
determines that their purchase would further the Growth Fund's investment
objective.
The Trust is classified as a non-diversified investment company under the
1940
Act, which means that the Growth Fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the obligations of a single
issuer. The Growth Fund intends to conduct its operations, however, so as
to
qualify as a "regulated investment company" for purposes of the Code, which
will
relieve the Growth Fund of any liability for Federal income tax to the
extent
its earnings are distributed to shareholders. To so qualify, among other
requirements, the Growth Fund will limit its investments so that, at the
close
of each quarter of the taxable year, (a) not more than 25% of the market
value
of the Growth Fund's total assets will be invested in the securities of a
single
issuer and (b) with respect to 50% of the market value of its total assets,
not
more than 5% of the market value of its total assets will be invested in
the
securities of a single issuer and the Growth Fund will not own more than
10% of
the outstanding voting securities of a single issuer. These 25% and 5%
limits
will not be deemed to be exceeded to the extent that any excess results
from
fluctuations in market value or sales of other securities, as opposed to
purchases of securities. The Growth Fund's assumption of large positions in
the
securities of a small number of issuers may cause its share price to
fluctuate
to a greater extent than that of a diversified investment company as a
result of
changes in the financial condition or in the market's assessment of the
issuers.
17
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Further information about the Growth Fund's investment policies,
including a
list of those restrictions on the Growth Fund's investment activities that
cannot be changed without shareholder approval, appears in the Statement of
Additional Information.
INVESTMENT POLICIES AND STRATEGIES
FOREIGN SECURITIES. The Growth Fund may invest up to 10% of its net
assets in
the securities of foreign issuers. There are certain risks involved in
investing
in foreign securities, including those resulting from fluctuations in
currency
exchange rates, revaluation of currencies, future political and economic
developments and the possible imposition of currency exchange blockages or
other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers and the fact that foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory practices and requirements comparable to
those
applicable to domestic companies. Moreover, securities of many foreign
companies
may be less liquid and their prices more volatile than those of securities
of
comparable domestic companies. In addition, with respect to certain foreign
countries, there is the possibility of expropriation, confiscatory taxation
and
limitations on the use or removal of funds or other assets of the Growth
Fund,
including the withholding of dividends.
LENDING OF PORTFOLIO SECURITIES. From time to time, the Growth Fund may
lend
its portfolio securities to brokers, dealers and other financial
organizations.
Such loans will not exceed 33 1/3% of the Growth Fund's total assets, taken
at
value. Loans of portfolio securities by the Growth Fund will be
collateralized
by cash, letters of credit or obligations of the United States government,
its
agencies and instrumentalities ("U.S. government securities") which are
maintained at all times in a segregated account with the Growth Fund's
custodian
in an amount at least equal to the current market value of the loaned
securities. By lending its portfolio securities, the Growth Fund will seek
to
generate income by continuing to receive interest on the loaned securities,
by
investing the cash collateral in short-term instruments or by obtaining
yield in
the form of interest paid by the borrower when U.S. government securities
are
used as collateral. The risks in lending portfolio securities, as with
other
extensions of secured credit, consist of possible delays in receiving
additional
collateral or in the recovery of the securities or
18
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
possible loss of rights in the collateral should the borrower fail
financially.
Loans will be made to firms deemed by SBSA and/or Boston Advisors to be of
good
standing and will not be made unless, in the judgment of SBSA and/or Boston
Advisors, the consideration to be earned from such loans would justify the
risk.
BORROWING. The Growth Fund is authorized to borrow money in an amount up
to
10% of its total assets (including the amount borrowed) valued at the
market
less liabilities (not including the amount borrowed) for extraordinary or
emergency purposes (such as meeting unanticipated redemptions). Whenever
borrowings exceed 5% of the value of the Growth Fund's total assets, the
Growth
Fund will not purchase securities for investment.
SHORT-TERM INVESTMENTS. The Growth Fund may hold a limited amount of
money
market instruments (no more than 35% of the value of its assets) under
normal
market conditions but, when market conditions dictate a defensive
investment
strategy, the Growth Fund may invest without limitation (except for
applicable
Investment Restrictions as described in the Statement of Additional
Information), in short-term money market instruments, such as: U.S.
government
securities; certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks (including their branches located outside the
United
States and subsidiaries located in Canada), domestic branches of foreign
banks,
savings and loan associations and similar institutions; high grade
commercial
paper; and repurchase agreements with respect to such instruments.
REPURCHASE AGREEMENTS. The Growth Fund may enter into repurchase
agreements
with banks which are the issuers of instruments acceptable for purchase by
the
Fund and with certain dealers on the Federal Reserve Bank of New York's
list of
reporting dealers. Under the terms of a typical repurchase agreement, the
Growth
Fund would acquire an underlying debt obligation for a relatively short
period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Growth Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Growth Fund's
holding
period. This arrangement results in a fixed rate of return that is not
subject
to market fluctuations during the Growth Fund's holding period. The value
of the
underlying securities at all times will be at least equal to the total
amount of
the repurchase obligation,
19
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
including interest. Repurchase agreements could involve certain risks in
the
event of default or insolvency of the other party, including possible
delays or
restrictions upon the Growth Fund's ability to dispose of the underlying
securities, the risk of a possible decline in the value of the underlying
securities during the period in which the Growth Fund seeks to assert its
rights
to them, the risk of incurring expenses associated with asserting those
rights
and the risk of losing all or part of the income from the agreement. SBSA
and/or
Boston Advisors, acting under the supervision of the Trust's Board of
Trustees,
reviews on an ongoing basis the value of the collateral and the
creditworthiness
of those banks and dealers with which the Growth Fund enters into
repurchase
agreements to evaluate potential risks.
COVERED CALL OPTIONS. In order to earn additional income, and as a means
of
seeking to partially protect its assets against market declines, the Growth
Fund
may, to a limited extent, write covered call option contracts on certain
securities and purchase call option contracts for the purpose of
terminating its
outstanding obligations with respect to securities upon which call option
contracts have been written ("closing purchase transactions"). Only call
option
contracts that are traded on a domestic exchange will be written. The
Growth
Fund's ability to engage in closing purchase transactions depends on the
existence of a liquid secondary market; for some options no such secondary
market may exist or the market may cease to exist.
The Growth Fund may write option contracts on its securities up to an
amount
not in excess of 20% of the value of its net assets at the time that such
options are written. The Growth Fund may not sell (uncover) the securities
against which an option contract has been written until after the option
period
has expired, the option contract has been exercised or a closing purchase
transaction has been executed. Successful use of options by the Growth Fund
will
depend on the ability of SBSA and/or Boston Advisors to correctly predict
movements in the prices of the securities underlying the options.
PORTFOLIO TRANSACTIONS. Portfolio securities transactions on behalf of
the
Growth Fund will be executed by a number of brokers and dealers, including
Smith
Barney and certain of its affiliated brokers, that are selected by SBSA
and/or
Boston Advisors. The Growth Fund may use Smith Barney or a broker
affiliated
with Smith Barney in connection with a purchase or
20
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
sale of securities when SBSA and/or Boston Advisors believes that such
broker's
charge for the transaction does not exceed usual and customary levels.
CERTAIN RISK CONSIDERATIONS
Shareholders should be aware that the Growth Fund concentrates its assets
in
the telecommunications industry and, as a result, the Growth Fund should
not be
considered as a complete investment program. Moreover, the investment
flexibility of the Growth Fund may be restricted by the necessity of
satisfying
certain diversification requirements in order to maintain the qualification
of
the Growth Fund as a regulated investment company within the meaning of the
Code. See "Dividends, Distributions and Taxes." The Growth Fund's
assumption of
large positions in the securities of a small number of issuers may cause
its
share price to fluctuate to a greater extent than that of a diversified
investment company as a result of changes in the financial condition or in
the
market's assessment of the issuers.
- --------------------------------------------------------------------
VALUATION OF SHARES
The Growth Fund's net asset value per share is determined as of the close
of
regular trading on the NYSE on each day that the NYSE is open, by dividing
the
value of the Growth Fund's net assets attributable to each Class by the
total
number of shares of the Class outstanding.
Generally, the Growth Fund's investments are valued at market value, or
in the
absence thereof with respect to any securities, at fair value as determined
by
SBSA and/or Boston Advisors after consultation with or under the direction
of an
independent pricing service approved by the Trust's Board of Trustees.
Short-term investments that mature in 60 days or less are valued at
amortized
cost whenever the Trust's Board of Trustees determines that amortized cost
reflects fair value for those investments. Amortized cost involves valuing
an
instrument at its original cost to the Growth Fund 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.
Further information regarding the Growth Fund's valuation policies is
contained
in the Statement of Additional Information.
21
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Growth Fund's policy is to distribute its net investment income (that
is,
its income other than its net realized capital gains) and net realized
capital
gains, if any, once a year, normally at the end of the year in which earned
or
at the beginning of the next year.
If a shareholder does not otherwise instruct, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
same
Class at net asset value, subject to no sales charge or CDSC. In order to
avoid
the application of a 4% nondeductible excise tax on certain undistributed
amounts of ordinary income and capital gains, the Growth Fund may make an
additional distribution shortly before December 31 in each year of any
undistributed ordinary income or capital gains and expects to pay any other
dividends and distributions necessary to avoid the application of this tax.
The per share dividends on Class B and Class C shares of the Growth Fund
may
be lower than the per share dividends on Class A and Class Y shares
principally
as a result of the distribution fee applicable with respect to Class B and
Class
C shares. The per share dividends on Class A shares of the Growth Fund may
be
lower than the per share dividends on Class Y shares principally as a
result of
the service fee applicable to Class A shares. Distributions of capital
gains, if
any, will be in the same amount for Class A, Class B, Class C and Class Y
shares.
TAXES
The Growth Fund will be treated as a separate taxpayer with the result
that,
for Federal tax purposes, the amount of investment income and capital gains
earned will be determined on a fund-by-fund basis, rather than on a Trust-
wide
basis. The Growth Fund has qualified and intends to continue to qualify as
a
"regulated investment company" under the Code. In any taxable year in which
the
Growth Fund so qualifies and distributes at least 90% of its investment
company
taxable income (which includes, among other items, dividends, interest and
the
excess of any net short-term capital gains over net long-term capital
losses),
the Growth Fund (but not its shareholders) generally will be relieved of
Federal
income tax on the investment company taxable income and net realized
capital
gains (the excess of net long-term
22
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
capital gains over net short-term capital losses), if any, distributed to
shareholders. In order to qualify as a regulated investment company, the
Growth
Fund will be required to meet various Code requirements.
Distributions of any investment company taxable income are taxable to
shareholders as ordinary income. Distributions of any net capital gains
designated by the Growth Fund as capital gains dividends are taxable to
shareholders as long-term capital gains regardless of the length of time a
shareholder may have held shares of the Growth Fund.
Generally, dividends of investment income (but not capital gain) from the
Growth Fund will qualify for the Federal dividends-received deduction for
corporate shareholders. Each shareholder will receive a statement annually
from
the Growth Fund, which will set forth separately the aggregate dollar
amount of
dividends and capital gains distributed to the shareholder by the Growth
Fund
with respect to the prior calendar year and the amount of the distributions
that
qualify for the dividends-received deduction.
Upon the disposition of shares of the Growth Fund (whether by redemption,
sale
or exchange), a shareholder generally will realize a taxable gain or loss.
Such
gain or loss generally will be a capital gain or loss if the shares are
capital
assets in the shareholder's hands, and generally will be long-term or
short-term
depending upon the shareholder's holding period for the shares. Any loss
realized by a shareholder on disposition of Growth Fund shares held by the
shareholder for six months or less will be treated as long-term capital
loss to
the extent of any distributions of capital gain dividends received by the
shareholder with respect to such shares.
Shareholders will be notified annually about the amounts of dividends and
distributions, including the amounts (if any) for that year which have been
designated as capital gain dividends. Dividends and distributions and gains
realized upon a disposition of Growth Fund shares may also be subject to
state,
local or foreign taxes depending on each shareholder's particular
situation.
Dividends consisting of interest from U.S. government securities may be
exempt
from all state and local income taxes. Shareholders should consult their
tax
advisors for specific information on the tax consequences of particular
types of
distributions.
23
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- --------------------------------------------------------------------
PURCHASE OF SHARES
GENERAL
The Growth Fund offers four Classes of shares. Class A shares are sold to
investors with an initial sales charge and Class B and Class C shares are
sold
without an initial sales charge but are subject to a CDSC payable upon
certain
redemptions. Class Y shares are sold without an initial sales charge or a
CDSC
and are available only to investors investing a minimum of $5,000,000. See
"Prospectus Summary -- Alternative Purchase Arrangements" for a discussion
of
factors to consider in selecting which Class of shares to purchase.
Purchases of Growth Fund shares must be made through a brokerage account
maintained with Smith Barney, an Introducing Broker or an investment dealer
in
the selling group, except for investors purchasing shares of the Growth
Fund
through a qualified retirement plan who may do so directly through TSSG.
When
purchasing shares of the Growth Fund, investors must specify whether the
purchase is for Class A, Class B, Class C or Class Y shares. No maintenance
fee
will be charged in connection with a brokerage account through which an
investor
purchases or holds shares.
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
a Self-Employed Retirement Plan in the Fund. Investors in Class Y shares
may
open an account by making 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 in the
Fund
is $25. For the Fund's Systematic Investment Plan, the minimum initial
investment requirement for Class A, Class B and Class C shares and the
subsequent investment requirement for all Classes is $50. There are no
minimum
investment requirements for Class A shares for employees of Travelers and
its
subsidiaries, including Smith Barney, Trustees of the Trust 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 Trust's transfer agent, TSSG. Share certificates are issued only upon a
shareholder's written request to TSSG.
24
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Purchase orders received by Smith Barney prior to the close of regular
trading
on the NYSE, on any day the Growth Fund calculates its net asset value, are
priced according to the net asset value determined on that day. Orders
received
by dealers or Introducing Brokers prior to the close of regular trading on
the
NYSE on any day the Growth Fund calculates its net asset value, are priced
according to the net asset value determined on that day, provided the order
is
received by Smith Barney prior to Smith Barney's close of business (the
"trade
date"). Currently, payment for Growth Fund shares is due on the fifth
business
day after the trade date (the "settlement date"). The Growth Fund
anticipates
that, in accordance with regulatory changes, beginning on or about June 1,
1995,
the settlement date will be the third business day after the trade date.
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
preauthorized transfers of $50 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 Growth
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 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 the Growth Fund or a Smith Barney Financial Consultant.
25
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Growth
Fund
are as follows:
<TABLE>
<CAPTION>
DEALERS
REALLOWANCE AS
SALES CHARGE AS %
SALES CHARGE AS % % OF OFFERING
AMOUNT OF INVESTMENT OF OFFERING PRICE OF
AMOUNT INVESTED PRICE
<S> <C> <C>
<C>
- ---------------------------------------------------------------------------
- ----------------------
Less than $25,000 5.00%
5.26% 4.50%
$25,000 -- $49,999 4.00%
4.17% 3.60%
$50,000 -- $99,999 3.50%
3.63% 3.15%
$100,000 -- $249,999 3.00%
3.09% 2.70%
$250,000 -- $499,999 2.00%
2.04% 1.80%
$500,000 and over *
* *
- ---------------------------------------------------------------------------
- ----------
<FN>
*Purchases of Class A share, which when combined with current holdings of
Class A shares offered with a sales
charge equal or exceed $500,000 in the aggregate, will be made at net
asset value without any initial sales
charge, but will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase. The CDSC on Class
A shares is payable to Smith Barney, which compensates Smith Barney
Financial Consultants and other dealers whose
clients make purchases of $500,000 or more. The CDSC is waived in the same
circumstances in which the CDSC
applicable to Class B and Class C shares is waived. See "Deferred Sales
Charge Alternatives" and "Waivers of
CDSC."
</TABLE>
Members of the selling group may receive up to 90% of the sales charge
any may
be deemed to be underwriters of the Growth Fund as defined in the
Securities Act
of 1933, as amended.
The reduced sales charges shown above apply to the aggregate of purchases
of
Class A shares of the Growth Fund made at one time by "any person," which
includes an individual, his or her spouse and children, or a trustee or
other
fiduciary of a single trust estate or single fiduciary account. The reduced
sales charge minimums may also be met by aggregating the purchase with the
net
asset value of all Class A shares held in funds sponsored by Smith Barney
that
are offered with a sales charge listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
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
Trustees
of the Trust and employees of Travelers and its subsidiaries, or the
spouses and
children of such persons (including the surviving spouse of a
26
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
deceased Trustee or employee, and retired Trustees 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 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 the Growth Fund by merger, acquitisiton 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 that
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
the Growth 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 Growth Fund) and who wish to reinvest their redemption
proceeds in the Growth Fund, provided the reinvestment is made within 60
calendar days of the redemption; and (e) accounts managed by registered
investment advisory subsidiaries of Travelers. 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 the Growth 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 Growth 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.
27
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 table set forth under
"Initial Sales Charge Alternative -- Class A Shares," 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 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
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 Growth Fund shares at a discount and (c) satisfies uniform
criteria
which enable 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
Growth
Fund and the members, and must agree to include sales and other materials
related to the Growth 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.
28
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 investments
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" as
referred to in the preceding sales charge table includes purchases of all
Class
A shares of the Growth 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 previously
purchased
and 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. Please contact a Smith Barney Financial
Consultant or TSSG to obtain a Letter of Intent application.
DEFERRED SALES CHARGE ALTERNATIVES
"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 the Growth 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 currently held by an investor, equal or exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser of
the
cost of the shares being redeemed or their net asset value at the time of
redemption. CDSC Shares that are redeemed will not be subject to a CDSC to
the
extent that the value of such shares represents: (a) capital appreciation
of
Growth Fund assets; (b) reinvestment of dividends or capital gains
distributions; (c) with respect to Class B shares, shares redeemed more
than
five years after their purchase; or (d) with respect to Class C shares and
Class
A shares that are CDSC Shares, shares redeemed more than 12 months after
their
purchase.
29
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Class C shares and Class A shares that are CDSC Shares are subject to a
1.00%
CDSC if redeemed within 12 months of purchase. In circumstances in which
the
CDSC is imposed on Class B shares, the amount of the charge will depend on
the
number of years since the shareholder made the purchase payment from which
the
amount is being redeemed. Solely for purposes of determining the number of
years
since a purchase payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of the preceding
Smith
Barney statement month. The following table sets forth the rates of the
charge
for redemptions of Class B shares by shareholders, except in the case of
purchases by Participating Plans, as described below. See "Purchase of
Shares --
Smith Barney 401(k) Program."
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE
CDSC
<S>
<C>
- ---------------------------------------------------------------------------
- -------
First
5.00%
Second
4.00%
Third
3.00%
Fourth
2.00%
Fifth
1.00%
Sixth
0.00%
Seventh
0.00%
Eighth
0.00%
- ---------------------------------------------------------------------------
- -------
</TABLE>
Class B shares will convert automatically to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be
subject
to any distribution fee. There also will be converted at that time such
proportion of Class B Dividend Shares owned by the shareholder as the total
number of his or her Class B shares converting at the time bears to the
total
number of Class B shares (other than Class B Dividend Shares) owned by the
shareholder. Shareholders who held Class B shares of Smith Barney Shearson
Short-Term World Income Fund (the "Short-Term World Income Fund") on July
15,
1994 and who subsequently exchange those shares for Class B shares of the
Growth
Fund will be offered the opportunity to exchange all such Class B shares
for
Class A shares of the Growth 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 has been
rejected in writing, the
30
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
exchange will occur on or about the fourth anniversary date. See
"Prospectus
Summary -- Alternative Purchase Arrangements -- Class B Shares Conversion
Feature."
The length of time that CDSC Shares acquired through an exchange have
been
held will be calculated from the date that the shares exchanged were
initially
acquired in one of the other applicable Smith Barney Mutual Funds, and
Growth
Fund shares being redeemed will be considered to represent, as applicable,
capital appreciation or dividend and capital gains 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 amount of any CDSC will be paid to Smith Barney.
To provide an example, assume an investor purchased 100 Class B shares at
$10
per share for a cost of $1,000. Subsequently, the investor acquired 5
additional
shares through dividend reinvestment. During the fifteenth month after the
purchase, the investor decided to redeem $500 of his or her investment.
Assuming
at the time of the redemption the net asset value had appreciated to $12
per
share, the value of the investor's shares would be $1,260 (105 shares at
$12 per
share). The CDSC would not be applied to the amount which represents
appreciation ($200) and the value of the reinvested dividend shares ($60).
Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would be
charged at a rate of 4.00% (the applicable rate for Class B shares) for a
total
deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (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 12 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 the attainment of age 59
1/2;
(e) involuntary redemptions; and (f) redemptions of shares in connection
with a
combination of the
31
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Growth 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 TSSG in the
case of
all other shareholders) of the shareholder's status or holdings, as the
case may
be.
SMITH BARNEY 401(K) PROGRAM
Investors may be eligible to participate in 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 Code. To the
extent
applicable, the same terms and conditions are offered to all Participating
Plans
in the Smith Barney 401(k) Program.
The Growth Fund offers to Participating Plans Class A, Class B, Class C
and
Class Y shares as investment alternatives under the Smith Barney 401(k)
Program.
Class A, Class B and Class C shares acquired through the Smith Barney
401(k)
Program are subject to the same service and/or distribution fees as, but
different sales charge and CDSC schedules than, the Class A, Class B and
Class C
shares acquired by other investors. Similar to those available to other
investors, Class Y shares acquired through the Smith Barney 401(k) Program
are
not subject to any initial sales charge, CDSC or service or distribution
fee.
Once a Participating Plan has made an initial investment in the Growth
Fund, all
of its subsequent investments in the Growth Fund must be in the same Class
of
shares; except as otherwise described below.
CLASS A SHARES. Class A shares of the Growth Fund are offered without any
initial 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. Class A shares acquired through the Smith Barney 401(k) Program
after
November 7, 1994 are subject to a
32
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
CDSC of 1.00% of redemption proceeds, if the Participating Plan terminates
within four years of the date the Participating Plan first enrolled in the
Smith
Barney 401(k) Program.
CLASS B SHARES. Class B shares of the Growth Fund 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 a CDSC of 3.00% of redemption proceeds, if
the
Participating Plan terminates within eight years of the date the
Participating
Plan first enrolled in the Smith Barney 401(k) Program.
Eight years after the date the Participating Plan enrolled in the Smith
Barney
401(k) Program, it will be offered the opportunity to exchange all of its
Class
B shares for Class A shares of the Growth Fund. Such Plans will be notified
of
the pending exchange in writing approximately 60 days before the eighth
anniversary of the enrollment date and, unless the exchange has been
rejected in
writing, the exchange will occur on or about the eighth anniversary date.
Once
the exchange has occurred, a Participating Plan will not be eligible to
acquire
additional Class B shares of the Growth Fund but instead may acquire Class
A
shares of the Growth Fund. If the Participating Plan elects not to exchange
all
of its Class B shares at that time, each Class B share held by the
Participating
Plan will have the same conversion feature as Class B shares held by other
investors. See "Purchase of Shares -- Deferred Sales Charge Alternatives."
CLASS C SHARES. Class C shares of the Growth Fund are offered to any
Participating Plan that purchases from $250,000 to $499,999 of one or more
funds
of the Smith Barney Mutual Funds. Class C shares acquired through the Smith
Barney 401(k) Program after November 7, 1994 will be subject to a CDSC of
1.00%
of redemption proceeds, if the Participating Plan terminates within four
years
of the date the Participating Plan first enrolled in the Smith Barney
401(k)
Program. In any year after the date a Participating Plan enrolled in the
Smith
Barney 401(k) Program, if its total Class C holdings equal at least
$500,000 as
of the calendar year-end, the Participating Plan will be offered the
opportunity
to exchange all of its Class C shares for Class A shares of the Growth
Fund.
Such Plans will be notified in writing within 30 days after the last
business
day of the calendar year, and unless the exchange offer has been rejected
in
writing, the
33
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
exchange will occur on or about the last business day of the following
March.
Once the exchange has occurred, a Participating Plan will not be eligible
to
acquire Class C shares of the Growth Fund but instead may acquire Class A
shares
of the Growth Fund. Class C shares not converted will continue to be
subject to
the distribution fee.
CLASS Y SHARES. Class Y shares of the Growth Fund are offered without any
service or distribution fee, sales charge 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.
No CDSC is imposed on redemptions of CDSC Shares to the extent that the
net
asset value of the shares redeemed does not exceed the current net asset
value
of the shares purchased through reinvestment of dividends or capital gains
distributions, plus (a) with respect to Class A and Class C shares, the
current
net asset value of such shares purchased more than one year prior to
redemption
and, with respect to Class B shares, the current net asset value of Class B
shares purchased more than eight years prior to the redemption, plus (b)
with
respect to Class A and Class C shares, increases in the net asset value of
the
shareholder's Class A or Class C shares above the purchase payments made
during
the preceding year and, with respect to Class B shares, increases in the
net
asset value of the shareholder's Class B shares above the purchase payments
made
during the preceding eight years. Whether or not the CDSC applies to a
Participating Plan depends on the number of years since the Participating
Plan
first became enrolled in the Smith Barney 401(k) Program, unlike the
applicability of the CDSC to other shareholders, which depends on the
number of
years since those shareholders made the purchase payment from which the
amount
is being redeemed.
The CDSC will be waived on redemptions of CDSC 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
Code; or
(f) redemptions of shares in connection with a loan made by the
Participating
Plan to an employee.
34
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
Participating Plans wishing to acquire shares of the Growth Fund through
the
Smith Barney 401(k) Program must purchase such shares directly from TSSG.
For
further information regarding the Smith Barney 401(k) Program, investors
should
contact a Smith Barney Financial Consultant.
- --------------------------------------------------------------------
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 Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Telecommunications Growth Fund
Smith Barney Special Equities Fund
GROWTH AND INCOME FUNDS
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Income and Growth Portfolio
Smith Barney Funds, Inc. -- Utilities Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
TAXABLE FIXED-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
</TABLE>
35
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<C> <S>
Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
TAX-EXEMPT 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 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
INTERNATIONAL FUNDS
Smith Barney Precious Metals and Minerals Fund Inc.
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
</TABLE>
36
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<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 Muni Funds -- California Money Market Portfolio
+++ Smith Barney Muni Funds -- New York Money Market Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
<FN>
------------------------
* Available for exchange with Class A, Class C and Class Y shares of the
Growth Fund.
** Available for exchange with Class A, Class B and Class Y shares of the
Growth Fund. In addition, shareholders who own Class C shares of the
Growth
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 Growth Fund.
+ Available for exchange with Class B and Class C shares of the Growth
Fund.
++ Available for exchange with Class A and Class Y shares of the Growth
Fund.
In addition, shareholders who own Class C shares of the Growth 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 Growth
Fund.
</TABLE>
CLASS A EXCHANGES. Class A shares of the Smith Barney Mutual Funds sold
without a sales charge or with a maximum sales charge of less than the
maximum
charged by other Smith Barney Mutual Funds will be subject to the
appropriate
"sales charge differential" upon the exchange of their shares for Class A
shares
of a fund sold with a higher sales charge. The "sales charge differential"
is
limited to a percentage rate no greater than the excess of the sales charge
rate
applicable to purchases of shares of the mutual fund being acquired in the
exchange over the sales charge rate(s) actually paid on the mutual fund
shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends and capital gain distributions, are treated as
having
paid the same sales charges applicable to the shares on which the dividends
or
distributions were paid; however, except in the case of the Smith Barney
401(k)
Program, if no sales charge was imposed upon the initial purchase of the
shares,
any shares obtained through automatic reinvestment will be subject to a
sales
charge differential upon exchange.
CLASS B EXCHANGES. In the event a Class B shareholder (unless such
shareholder
was a Class B shareholder of the Short-Term World Income Fund on July 15,
1994)
wishes to exchange all or a portion of his or her shares in any of the
funds
imposing a higher CDSC than that imposed by
37
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
the Growth Fund, the exchanged Class B shares will be subject to the higher
applicable CDSC. Upon an exchange, the new Class B shares will be deemed to
have
been purchased on the same date as the Class B shares of the Growth Fund
that
have been exchanged.
CLASS C EXCHANGES. Upon an exchange, the new Class C shares will be
deemed to
have been purchased on the same date as the Class C shares of the Growth
Fund
that have been exchanged.
CLASS Y EXCHANGES. Class Y shareholders of the Growth 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.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Although the
exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Growth Fund's performance and its shareholders. SBSA
and/or
Boston Advisors may determine that a pattern of frequent exchanges is
excessive
and contrary to the best interests of the Growth Fund's other shareholders.
In
this event, SBSA and/or Boston Advisors will notify Smith Barney, and Smith
Barney may, at its discretion, decide to limit additional purchases and/or
exchanges by the shareholder. Upon such a determination, Smith Barney 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 Growth
Fund
or (b) remain invested in the Growth 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.
Exchanges will be processed at the net asset value next determined, plus
any
applicable sales charge differential. Redemption procedures discussed below
are
also applicable for exchanging shares, and exchanges will be made upon
receipt
of all supporting documents in proper form. If the account registration of
the
shares of the fund being acquired is identical to the registration of the
shares
of the fund exchanged, no signature guarantee is required. 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
38
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
exchanging shares, investors should read the current prospectus describing
the
shares to be acquired. The Growth Fund reserves the right to modify or
discontinue exchange privileges upon 60 days' prior notice to shareholders.
- --------------------------------------------------------------------
REDEMPTION OF SHARES
The Growth Fund is required to redeem the shares of the Growth Fund
tendered
to it, as described below, at a redemption price equal to their net asset
value
per share next determined after receipt of a written request in proper form
at
no charge other than any applicable CDSC. Redemption requests received
after the
close of regular trading on the NYSE are priced at the net asset value next
determined.
If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a failure
to
specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Trust's
transfer
agent receives further instructions from Smith Barney or, if the
shareholder's
account is not with Smith Barney, from the shareholder directly. The
redemption
proceeds will be remitted on or before the seventh day following receipt of
proper tender, except on any days on which the NYSE is closed or as
permitted
under the 1940 Act in extraordinary circumstances. The Growth Fund
anticipates
that, in accordance with regulatory changes, beginning on or about June 1,
1995,
payment will be made on the third business day after receipt of proper
tender.
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. Redemption proceeds for shares purchased by check, other
than
a certified or official bank check, will be remitted upon clearance of the
check, which may take up to ten days or more.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares
39
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
other than those held by Smith Barney as custodian may be redeemed through
an
investor's Financial Consultant, Introducing Broker or dealer in the
selling
group or by submitting a written request for redemption to:
Smith Barney Telecommunications Growth Fund
Class A, B, C or Y (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
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 TSSG together with the redemption request. Any
signature
appearing on a redemption request, share certificate or stock power 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. TSSG 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 TSSG receives all required documents in proper
form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Growth 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 cash payments of at least $50 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 the Growth 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
40
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
2.00% per month of the value 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
The Growth Fund reserves the right to involuntarily liquidate any
shareholder's account in the Growth Fund if the aggregate net asset value
of the
shares held in the account is less than $500. (If a shareholder has more
than
one account in the Growth Fund, each account must satisfy the minimum
account
size.) The Growth Fund, however, will not redeem shares based solely on
market
reductions in net asset value. Before the Growth 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.
- --------------------------------------------------------------------
PERFORMANCE
TOTAL RETURN
From time to time, the Growth Fund may include its total return, average
annual total return and current dividend return in advertisements and/or
other
types of sales literature. These figures are computed separately for Class
A,
Class B, Class C and Class Y shares of the Growth Fund. THESE FIGURES ARE
BASED
ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
Total return is computed for a specified period of time assuming deduction
of
the maximum sales charge, if any, from the initial amount invested and
reinvestment of all income dividends and capital gain distributions on the
reinvestment dates at prices calculated as stated in this Prospectus, then
dividing the value of the investment at the end of the period so calculated
by
the initial amount invested and subtracting 100%. The standard average
annual
total return, as prescribed by the SEC, is derived from this total return,
which
provides the ending redeemable value. Such standard total return
information may
also be accompanied with nonstandard total return information for differing
periods computed in the same manner but without annualizing the total
return or
taking sales
41
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
PERFORMANCE (CONTINUED)
charges into account. The Growth Fund calculates current dividend return
for
each Class by annualizing the most recent monthly distribution and dividing
by
the net asset value or the maximum public offering price (including sales
charge) on the last day of the period for which current dividend return is
presented. The current dividend return for each Class may vary from time to
time
depending on market conditions, the composition of its investment portfolio
and
operating expenses. These factors and possible differences in the methods
used
in calculating current dividend return should be considered when comparing
a
Class' current return to yields published for other investment companies
and
other investment vehicles. The Growth Fund may also include comparative
performance information in advertising or marketing its shares. Such
performance
information may include data from Lipper Analytical Services, Inc. and
other
financial publications. The Growth Fund will include performance data for
Class
A, Class B, Class C and Class Y shares in any advertisement or information
including performance data of the Growth Fund.
- --------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE GROWTH FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Growth Fund
rests
with the Trust's Board of Trustees. The Trustees approve all significant
agreements between the Growth Fund and the companies that furnish services
to
the Growth Fund, including agreements with its distributor, investment
adviser,
sub-investment adviser, administrator, sub-administrator, custodian and
transfer
agent. The day-to-day operations of the Growth Fund are delegated to the
Growth
Fund's investment adviser, sub-investment adviser and administrator. The
Statement of Additional Information contains background information
regarding
the Trust's Trustees and the executive officers of the Growth Fund.
INVESTMENT ADVISER--SBSA
SBSA, located at 388 Greenwich Street, New York, New York 10013, serves
as the
Growth Fund's investment adviser pursuant to an investment advisory
agreement
dated July 27, 1994. SBSA (through its predecessors) has
42
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE GROWTH FUND (CONTINUED)
been in the investment counseling business since 1968 and is a registered
investment adviser. SBSA renders investment advice to investment companies
that
had aggregate assets under management as of March 31, 1995, in excess of
$___
billion.
Subject to the supervision and direction of the Trust's Board of
Trustees,
SBSA manages the Growth Fund's portfolio in accordance with the Growth
Fund's
stated investment objective and policies, makes investment decisions for
the
Growth Fund, places orders to purchase and sell securities and employs
professional portfolio managers and securities analysts who provide
research
services to the Growth Fund. For investment advisory services rendered, the
Growth Fund pays SBSA a monthly fee at the annual rate of 0.55% of the
value of
its average daily net assets. For the fiscal period from July 27, 1994
through
December 31, 1994, SBSA received $1,481,035 in investment advisory fees
from the
Growth Fund.
PORTFOLIO MANAGEMENT
Guy Scott, Senior Vice President of Boston Advisors, has served as an
Investment Administrator to the Growth Fund since October 1991 and manages
the
day-to-day operations of the Growth Fund, including making all investment
decisions.
Management's discussion and analysis, and additional performance
information
regarding the Growth Fund during the fiscal year ended December 31, 1994 is
included in the Annual Report dated December 31, 1994. A copy of the Annual
Report may be obtained upon request without charge from a Smith Barney
Financial
Consultant or by writing or calling the Growth Fund at the address or phone
number listed on page one of this Prospectus.
SUB-INVESTMENT ADVISER--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts
02108,
serves as the Growth Fund's sub-investment adviser and sub-administrator.
Boston
Advisors serves as the Growth Fund's sub-investment adviser pursuant to a
sub-investment advisory agreement dated July 27, 1994. For sub-investment
advisory services rendered, Boston Advisors receives a fee from SBSA, paid
monthly at the annual rate of 0.275% of the value of the Growth Fund's
average
daily net assets. Boston Advisors
43
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE GROWTH FUND (CONTINUED)
provides investment management, investment advisory and/or administrative
services to investment companies which had aggregate assets under
management as
of March 31, 1995, in excess of $____ billion.
ADMINISTRATOR--SBMFM
SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves
as
the Growth Fund's administrator and oversees all aspects of the Growth
Fund's
administration. SBMFM provides investment management, investment advisory
and/or
administrative services to investment companies that had aggregate assets
under
management as of March 31, 1995, in excess of $___ billion. For
administration
services rendered, the Growth Fund pays SBMFM a monthly fee at the annual
rate
of 0.20% of the value of the Growth Fund's average daily net assets. For
the
fiscal year ended December 31, 1994, the Growth Fund paid $538,558 in
administration fees.
SUB-ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors calculates the net asset value of the Growth Fund's
shares and
generally assists SBMFM in all aspects of the Growth Fund's administration
and
operation. Under a sub-administration agreement dated April 21, 1994,
Boston
Advisors is paid a portion of the fee paid by the Growth Fund to SBMFM at a
rate
agreed upon from time to time between Boston Advisors and SBMFM. Prior to
April
21, 1994, Boston Advisors served as the Growth Fund's administrator. For
the
fiscal year ended December 31, 1994, the Growth Fund paid investment
advisory
and/or sub-investment advisory fees to Boston Advisors totalling $_______.
- --------------------------------------------------------------------
DISTRIBUTOR
Smith Barney is located at 388 Greenwich Street, New York, New York
10013.
Smith Barney distributes shares of the Growth Fund as principal underwriter
and
as such conducts a continuous offering pursuant to a "best efforts"
arrangement
requiring Smith Barney to take and pay for only such securities as may be
sold
to the public. Pursuant to a plan of distribution adopted by the Growth
Fund
under Rule 12b-1 under the 1940 Act (the "Plan"), Smith Barney is paid a
service
fee with respect to Class A, Class B
44
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
and Class C shares at the annual rate of 0.25% of the average daily net
assets
of the respective Class. Smith Barney is also paid an annual distribution
fee
with respect to Class B and Class C shares at the annual rate of 0.75% of
the
average daily net assets attributable to those Classes. Class B shares that
automatically convert to Class A shares eight years after the date of
original
purchase will no longer be subject to distribution fees. The fees are used
by
Smith Barney to pay its Financial Consultants for servicing shareholder
accounts
and, in the case of Class B and Class C shares, to cover expenses primarily
intended to result in the sale of those shares. These expenses include:
advertising expenses; the cost of printing and mailing prospectuses to
potential
investors; payments to and expenses of Smith Barney Financial Consultants
and
other persons who provide support services in connection with the
distribution
of shares; interest and/or carrying charges; and indirect and overhead
costs of
Smith Barney associated with the sale of Growth Fund shares, including
lease,
utility, communications and sales promotion expenses.
The payments to Smith Barney Financial Consultants for selling shares of
a
Class include a commission or fee paid by the investor or Smith Barney at
the
time of sale and, with respect to Class A, Class B and Class C shares, a
continuing fee for servicing shareholder accounts for as long as a
shareholder
remains a holder of that Class. The service fee is credited at the rate of
up to
0.25% of the value of the average daily net assets of the Class that remain
invested in the Growth Fund. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney, and the
payments
may exceed distribution expenses actually incurred. The Trust's Board of
Trustees will evaluate the appropriateness of the Plan and its payment
terms on
a continuing basis and in so doing will consider all relevant factors,
including
expenses borne by Smith Barney, amounts received under the Plan and
proceeds of
the CDSC.
45
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
The Trust, organized on June 2, 1983, under the laws of the Commonwealth
of
Massachusetts, is a business entity commonly known as a "Massachusetts
business
trust" and is registered with the SEC as an open-end, non-diversified
management
investment company.
Each Class of the Growth Fund represents an identical interest in the
Growth
Fund's portfolio. As a result, the Classes have the same rights, privileges
and
preferences, except with respect to: (a) the designation of each Class; (b)
the
effect of the respective sales charges for each Class; (c) the distribution
and/or service fees borne by each Class; (d) the expenses allocable
exclusively
to each Class; (e) voting rights on matters exclusively affecting a single
Class; (f) the exchange privilege of each Class; and (g) the conversion
feature
of the Class B shares. The Trust's Board of Trustees does not anticipate
that
there will be any conflicts among the interests of the holders of the
different
Classes. The Trustees, on an ongoing basis, will consider whether any such
conflict exists and, if so, take appropriate action.
The Trust does not hold annual shareholder meetings. There normally will
be no
meeting of shareholders for the purpose of electing Trustees unless and
until
such time as less than a majority of the Trustees holding office have been
elected by shareholders. The Trustees will call a meeting for any purpose
upon
written request of shareholders holding at least 10% of the Growth Fund's
outstanding shares and the Growth Fund will assist shareholders in calling
such
a meeting as required by the 1940 Act. When matters are submitted for
shareholder vote, shareholders of each Class will have one vote for each
full
share owned and a proportionate fractional vote for any fractional share
held of
that Class. Generally, shares of the Growth Fund will be voted on a Fund-
wide
basis on all matters except matters affecting only the interests of one or
more
of the Classes.
Boston Safe Deposit and Trust Company, an indirect wholly owned
subsidiary of
Mellon, is located at One Boston Place, Boston, Massachusetts 02108, and
serves
as custodian of the Trust's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and
serves as
the Trust's transfer agent.
The Growth Fund sends shareholders a semi-annual report and an audited
annual
report, each of which includes a list of the investment securities held by
it at
the end of the period covered. In an effort to reduce
46
<PAGE>
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
the Growth Fund's printing and mailing costs, the Growth 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. In addition,
the
Growth Fund also plans to consolidate the mailing of its Prospectus so that
a
shareholder having multiple accounts (that is, individual, IRA and/or
Self-Employed Retirement Plan accounts) will receive a single Prospectus
annually. Shareholders who do not want this consolidation to apply to their
accounts should contact their Smith Barney Financial Consultants or the
Trust's
transfer agent.
47
<PAGE>
[LOGO]
SMITH
BARNEY
TELECOMMUNICATIONS
GROWTH
FUND
388 Greenwich
Street
New York, New York
10013
Fund
XXXXX
FD
XXXX XX
[LOGO]
SMITH BARNEY
TELECOMMUNICATIONS INCOME FUND
388 Greenwich Street , New York, New York 10013 -
(212) 723 -9218
PROSPECTUS
May 1, 1995
The investment objective of Smith Barney Telecommunications
Income Fund ("Income Fund") of Smith Barney
Telecommunications Trust (the "Trust") is current income, with
growth of capital as a secondary consideration. The Income Fund
seeks to achieve this objective primarily by investing in income-
producing equity and debt securities of companies in the
telecommunications industry. The Trust is a non-diversified, open-
end management investment company consisting of two portfolios, the
Income Fund and Smith Barney Telecommunications Growth Fund
("Growth Fund").
Shares of the Income Fund are not currently being offered for sale
to new investors. Current shareholders are encouraged to read this
Prospectus carefully and retain it for future reference.
Additional information about the Trust and the Income Fund is
contained in a Statement of Additional Information dated May 1,
1995 , as amended or supplemented from time to time, which is
available upon request and without charge by calling or writing the
Income Fund at the telephone number or address set forth above or by
contacting a Smith Barney Financial Consultant. The
Statement of Additional Information 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
SMITH BARNEY STRATEGY ADVISERS INC.
Investment Adviser
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Administrator
THE BOSTON COMPANY ADVISORS, INC.
Sub-Investment Adviser and Sub-Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
May 1,
1995
FD 0265 0B4
INTRODUCTION
The Income Fund is one of two portfolios of the Trust, a non-
diversified, open-end management investment company created in
response to the reorganization of American Telephone & Telegraph
Company ("AT&T") to provide stockholders of AT&T with the
opportunity to exchange their shares of AT&T for shares of the
Trust. This exchange of shares took place and the Trust commenced
operations on January 1, 1984. Each portfolio's investments are
primarily concentrated in the securities of issuers engaged in the
telecommunications industry.
The Income Fund does not currently offer its shares for sale
to new investors. Shares of the Growth Fund, however, are offered
for sale through a separate Prospectus that is available by calling
or writing the Trust or by contacting a Smith Barney
Financial Consultant.
As with most mutual funds, the Trust employs various
organizations to perform necessary functions and to provide services
to its shareholders. These organizations are carefully selected by
the Trust's Board of Trustees which regularly reviews the quality
and scope of their performance. The Trust employs Smith Barney
Inc. ("Smith Barney") as its distributor, Smith Barney Strategy
Advisers Inc. ("SBSA") as its investment adviser, Smith Barney
Mutual Funds Management Inc. ("SBMFM") as its administrator,
The Boston Company Advisors, Inc. ("Boston Advisors") as its sub-
investment adviser and sub-administrator , Boston Safe Deposit
and Trust Company ("Boston Safe") as its custodian and The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First
Data Corporation, as its transfer agent.
More detailed information regarding these organizations and
the functions they perform is provided in this Prospectus as well as
in the Statement of Additional Information.
TABLE OF CONTENTS
Introduction Page 2
The Income Fund's Expenses Page 3
Financial Highlights Page 4
Management of the Income Fund and the Trust Page 6
Investment Objective and Management Policies Page 7
Redemption of Shares Page 10
Minimum Account Size Page 11
Valuation of Shares Page 12
Exchange Privilege Page 12
Dividends, Distributions and Taxes Page 15
Additional Information Page 16
THE INCOME FUND'S EXPENSES
The following expense table lists the costs and expenses that
an investor will incur either directly or indirectly as a
shareholder in the Income Fund, based upon the Income Fund's
expenses for its most recent fiscal year:
Annual Income Fund Operating Expenses (as a percentage of average
daily net assets)
Management fees 0.75%
Other expenses %
Total Income Fund Operating Expenses %
Management fees paid by the Income Fund include investment
advisory fees paid monthly to SBSA at the annual rate of
0.55% and administration fees paid monthly to SBMFM at the annual
rate of 0.20%, both of which are based on the value of the
Income Fund's average daily net assets. This fee is higher than the
investment advisory fee paid by other investment companies. The
nature of the services for which the Income Fund pays management
fees is described under "Management of the Income Fund and the
Trust." "Other expenses" in the above table include fees for
shareholder services, custodial fees, legal and accounting fees,
printing costs and registration fees.
Example The following example demonstrates the projected dollar
amount of total cumulative expenses that would be incurred over
various periods with respect to a hypothetical investment in the
Income Fund. These amounts are based upon (a) payment by the Income
Fund of operating expenses at the levels set forth in the table
above and (b) the following assumptions:
1 year 3 years 5 years 10
years
A shareholder 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:
The example also provides 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 5.00% annual return assumption.
However, the Fund's actual return will vary and may be greater or
less than 5.00%. This example should not be considered a
representation of past or future expenses and actual expenses may be
greater or less than those shown.
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers &
Lybrand L.L.P. , independent accountants, whose report
thereon appears in the Income Fund's Annual Report dated December
31, 1994 . The table set out below should be read in
conjunction with the financial statements and related notes that
also appear in the Income Fund's Annual Report, which is
incorporated by reference into the Statement of Additional
Information.
For an Income Fund share throughout each year:
Yea
r
Ended
Year
Ended
Year
Ended
Year
Ended
Year
Ended
12/31/
94
12/31/
93
12/31/
92
12/31/
91
12/31/
90
Net Asset Value, beginning
of year
$107.6
2
$
102.67
$110.7
5
$
129.06
$
140.93
_____________________________________________________________
_______________________________
Income from investment
operations:
Net investment income
4.02
3.94
4.91
5
.74
6
.10
Net realized and unrealized
gain/(loss)
on investments
(5.91)
12.30
6.79
(
2.20)
(
8.98)
_____________________________________________________________
_______________________________
Total from investment
operations
(1.89)
1
6.24
11.70
3
.54
(
2.88)
Less distributions:
Distributions to
shareholders from:
Dividends from net
investment income
(4.05)
(
4.42)
(4.55)
(
6.05)
(
5.79)
Distributions from net
realized gains
(6.06)
(
6.87)
(15.23
)
(
14.62)
(
3.20)
Distributions from capital
-
- -
--
--
(
1.18)
--
Distributions in excess of
net realized
gains
-
- -
--
--
--
--
_____________________________________________________________
_______________________________
Total distributions
(10.11
)
(
11.29)
(19.78
)
(
21.85)
(
8.99)
_____________________________________________________________
_______________________________
Net Asset Value, end of year
$95.62
$
107.62
$102.6
7
$
110.75
$
129.06
_____________________________________________________________
_______________________________
Total returns
(1.83)
%
1
6.00%
10.89%
3
.30%
(1.80%
)
_____________________________________________________________
_______________________________
Ratios
/ supplemental
data:
Net assets, end of year
(000's)
$61,25
6
$71,57
0
$70,63
7
$79,41
9
$94,85
4
Ratio of operating expenses
to average
net assets
0.95%
0
.93%
0.92%
0
.90%
0
.92%
Ratio of net investment
income to average
net assets
3.80%
3
.47%
4.41%
4
.57%
4
.81%
Portfolio turnover rate
0%
0%
2%
18%
3%
_____________________________________________________________
________________________________
Total return represents aggregate total return for the
period indicated
For an Income Fund share throughout each year:
Year
Ended
Year
Ended
Year
Ended
Year
Ended
Year
Ended
12/31/
89
12/31
/88
12/31
/87
12/31
/86
12/31/8
5
Net Asset Value, beginning
of year
$99.1
0
$90.2
8
$
99.20
$
86.19
$
70.16
_____________________________________________________________
_______________________________
Income from investment
operations:
Net investment income
5
.18
5.55
5.87
5
.54
5
.30
Net realized and unrealized
gain/loss
on investments
4
5.31
9.66
(4.67)
1
5.38
1
6.87
_____________________________________________________________
________________________________
Total from investment
operations
5
0.49
1
5.21
1.20
2
0.92
2
2.17
Less distributions:
Distributions to
shareholders from:
Dividends from net
investment income
(
5.85)
(
5.40)
(7.20)
(
5.40)
(
5.34)
Distributions from net
realized gains
(
2.65)
(
0.99)
(2.92)
(
2.51)
(
0.80)
Distributions from capital
--
--
--
--
--
Distributions in excess of
net realized
capital gains
(
0.16)
--
--
--
--
_____________________________________________________________
_________________________________
Total distributions
(
8.66)
(
6.39)
(10.12
)
(
7.91)
(
6.14)
_____________________________________________________________
_________________________________
Net Asset Value, end of year
$
140.93
$
99.10
$90.28
$
99.20
$
86.19
_____________________________________________________________
_________________________________
Total return
5
2.11%
1
7.12%
0.91%
2
4.99%
3
3.30%
_____________________________________________________________
_________________________________
Ratios /
supplemental
data:
Net assets, end of year
(000's)
$109,
970
$82,5
46
$80,3
49
$95,4
39
$88,9
26
Ratio of operating
expenses to average
net assets
0.89%
0.95%
0.97%
0.96%
1.07%
Ratio of net investment
income to average
net assets
4.32%
5.70%
5.84%
5.68%
6.91%
Portfolio turnover rate
5%
3%
6%
15%
21%
_____________________________________________________________
__________________________________
Total return represents aggregate total return for the
period indicated
MANAGEMENT OF THE INCOME FUND AND THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the
Income Fund rests with the Trust's Board of Trustees. The Trustees
approve all significant agreements between the Income Fund and the
companies that furnish services to the Income Fund,
including agreements with its distributor, investment
adviser, sub-investment adviser, administrator, sub-
administrator, custodian and transfer agent. The day-to-day
operations of the Income Fund are delegated to the Income Fund's
investment adviser, sub-investment adviser, administrator and sub-
administrator. The Statement of Additional Information contains
background information regarding the Trust's
Trustees and the executive officers of the Income Fund.
Investment Adviser -- SBSA
SBSA, located at 388 Greenwich Street, New York, New York
10013, serves as the Income Fund's investment adviser pursuant to an
investment advisory agreement dated June 16, 1994. SBSA (through
its predecessors) has been in the investment counseling business
since 1968 and is a registered investment adviser. SBSA renders
investment advice to investment companies that had aggregate assets
under management as of March 31, 1995, in excess of $
billion.
Subject to the supervision and direction of the Trust's
Board of Trustees, SBSA manages the Income Fund's portfolio in
accordance with the Income Fund's stated objective and policies,
makes investment decisions for the Income Fund, places orders to
purchase and sell securities and employs professional portfolio
managers and securities analysts who provide research services to
the Income Fund. For investment advisory services rendered, the
Income Fund pays SBSA a monthly fee at the annual rate of 0.55% of
the value of its average daily net assets. For the fiscal period
from June 16, 1994 through December 31, 1994, SBSA received $
in investment advisory fees from the Income Fund.
Portfolio Management
Guy Scott, Senior Vice President of Boston Advisors has
served as an Investment Administrator to the Income Fund since
October 1991 and manages the day-to-day operations of the
Income Fund, including making all investment decisions.
Management's discussion and analysis, and additional
performance information regarding the Income Fund during the
fiscal year ended December 31, 1994 is included in the Annual
Report dated December 31, 1994 . A copy of the Annual Report
may be obtained upon request without charge from a Smith
Barney Financial Consultant or by writing or calling the Trust at
the address or phone number listed on page one of this Prospectus.
Administrator -- SBMFM
SBMFM, located at 388 Greenwich Street, New York, New York
10013, serves as the Income Fund's administrator and oversees all
aspects of the Income Fund's administration. SBMFM provides
investment management, investment advisory and/or administrative
services to investment companies that had aggregate assets under
management as of March 31, 1995, in excess of $ billion. For
administration services rendered, the Income Fund pays SBMFM a
monthly fee at the annual rate of 0.20% of the value of the Income
Fund's average daily net assets. For the fiscal year ended December
31, 1994, the Income Fund paid $ in administration fees.
Sub-Investment Adviser and Sub-Administrator -- Boston
Advisors
Boston Advisors, located at One Boston Place, Boston,
Massachusetts 02108, serves as the Income Fund's sub-investment
adviser and sub-administrator . Boston Advisors is a wholly
owned subsidiary of The Boston Company, Inc. ("TBC"), which is in
turn a wholly owned subsidiary of Mellon Bank Corporation
("Mellon"). Boston Advisors serves as the Income Fund's sub-
investment adviser pursuant to a sub-investment advisory agreement
dated June 16, 1994. For sub-investment advisory services rendered,
Boston Advisors receives a fee from SBSA, paid monthly at the annual
rate of 0.275% of the value of the Income Fund's average daily net
assets. Boston Advisors provides investment management,
investment advisory and/or administrative services to investment
companies which had aggregate assets under management as of March
31, 1995 in excess of $ billion .
Subject to the supervision and direction of the Trust's
Board of Trustees and SBSA, Boston Advisors manages the Income
Fund's portfolio in accordance with the Income Fund's investment
objective and policies, makes investment decisions for the Income
Fund, places orders to purchase and sell securities and employs
professional portfolio managers and securities analysts who provide
research services to the Income Fund. For sub-investment advisory
services rendered, Boston Advisors receives a fee from SBSA, paid
monthly at the annual rate of 0.275% of the value of the Income
Fund's average daily net assets.
Boston Advisors calculates the net asset value of the
Income Fund's shares and generally assists SBMFM in all aspects of
the Income Fund's administration and operation. Under a sub-
administration agreement dated April 21, 1994, Boston Advisors is
paid a portion of the fee paid by the Income Fund to SBMFM at a rate
agreed upon from time to time between Boston Advisors and SBMFM.
Prior to April 21, 1994, Boston Advisors served as the Income Fund's
administrator. For the fiscal year ended, December 31, 1994, the
Income Fund paid investment advisory and/or sub-investment advisory
fees to Boston Advisors totalling $ .
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Income Fund is current income,
with long-term growth of capital as a secondary objective. This
investment objective may not be changed without the approval of the
holders of a majority of the Income Fund's outstanding shares.
There is no guarantee the Income Fund's investment objective will be
achieved.
The Income Fund seeks to achieve its investment objective
primarily through investment in income-producing equity and debt
securities of companies engaged in the telecommunications industry.
The Income Fund defines the telecommunications industry as companies
engaged in the communication, display, reproduction, storage and
retrieval of information, generally in one or more of the following
forms: voice, data, or print facsimile. Under normal market
conditions, at least 65% of the total assets of the Income Fund will
be invested in securities of issuers engaged in the
telecommunications industry. During certain periods when economic
conditions in that industry are adverse or when market conditions
suggest a defensive position, however, the Income Fund temporarily
may have less than 65% of the value of its total assets invested in
that industry.
Securities for the Income Fund are selected principally on the
basis of their ability to produce current income and, as a result,
the Income Fund invests principally in income-producing common
stocks, preferred stocks and debt securities, including securities
convertible into common and preferred stocks. The Income Fund also
may invest in short-term fixed-income obligations, such as
commercial paper. Debt securities purchased by the Income Fund will
be rated within the three highest ratings by Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's")
or, if not so rated, of comparable quality in the opinion of SBSA
and/or Boston Advisors. Commercial paper purchased by the Income
Fund will be rated Prime-2 or better by Moody's or A-2 or better by
S&P.
The Trust is classified as a non-diversified investment
company under the Investment Company Act of 1940, as amended ("the
1940 Act"), which means that the Income Fund is not limited by the
1940 Act in the proportion of its assets that it may invest in the
obligations of a single issuer. The Income Fund intends to conduct
its operations, however, so as to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Income Fund of any
liability for Federal income tax to the extent that its earnings are
distributed to shareholders. To so qualify, among other
requirements, the Income Fund will limit its investments so that, at
the close of each quarter of the taxable year, (a) not more than 25%
of the market value of the Income Fund's total assets will be
invested in the securities of a single issuer, and (b) with respect
to 50% of the market value of its total assets, not more than 5% of
the market value of its total assets will be invested in the
securities of a single issuer and the Income Fund will not own more
than 10% of the outstanding voting securities of a single issuer.
These 25% and 5% limits will not be deemed exceeded to the extent
that any excess results from fluctuations in market value or sales
of other securities, as opposed to purchases of securities. The
Income Fund's assumption of large positions in the obligations of a
small number of issuers may cause the Income Fund's yield to
fluctuate to a greater extent than that of a diversified company as
a result of changes in the financial condition or in the market's
assessment of the issuers.
Further information about the Income Fund's investment
policies, including a list of those restrictions on the Income
Fund's investment activities that cannot be changed without
shareholder approval, appears in the Statement of Additional
Information.
Investment Policies and Strategies
Lending of Portfolio Securities. The Income Fund is authorized
to lend securities that it holds to brokers, dealers and other
financial organizations. These loans, if any when made, may not
exceed 33 1/3% of the Income Fund's assets taken at value. The
Income Fund's loans of securities will be collateralized by cash,
letters of credit or obligations of the United States government and
its agencies and instrumentalities ("U.S. government securities")
which are maintained at all times in a segregated account with the
Trust's custodian in an amount equal to at least 100% of the current
market value of the loaned securities. By lending its portfolio
securities, the Income Fund will seek to generate income by
continuing to receive interest on the loaned securities, by
investing the cash collateral in short-term instruments or by
obtaining yield in the form of interest paid by the borrower when
U.S. government securities are used as collateral. The risks in
lending portfolio securities, as with other extensions of secured
credit, consist of possible delays in receiving additional
collateral or in the recovery of the securities or possible loss of
rights in the collateral should the borrower fail financially.
Loans will be made to firms deemed by SBSA and/or Boston
Advisors to be of good standing and will not be made unless, in the
judgment of SBSA and/or Boston Advisors, the consideration
to be earned from such loans would justify the risk.
Borrowing. The Income Fund is authorized to borrow money in
an amount up to 10% of its total assets for extraordinary or
emergency purposes (such as meeting anticipated redemptions) and to
pledge its assets in connection with such borrowings. Whenever
borrowings exceed 5% of the value of the Income Fund's total assets,
the Income Fund will not purchase securities for investment.
Short-Term Investments. The Income Fund may invest in short-
term money market instruments, such as U.S. government securities;
certificates of deposit, time deposits, and bankers' acceptances
issued by domestic banks (including their branches located outside
of the United States and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations and similar
institutions; high grade commercial paper; and repurchase agreements
with respect to such instruments.
Repurchase Agreements. The Income Fund may enter into
repurchase agreements with banks which are the issuers of
instruments acceptable for purchase by the Fund and with certain
dealers on the Federal Reserve Bank of New York's list of reporting
dealers. Under the terms of a typical repurchase agreement, the
Income Fund would acquire an underlying debt obligation for a
relatively short period (usually not more than one week) subject to
an obligation of the seller to repurchase, and the Income Fund to
resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Income Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to
market fluctuations during the Income Fund's holding period. The
value of the underlying securities at all times will be at least
equal to the total amount of the repurchase obligation, including
interest. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including
possible delays or restrictions upon the Income Fund's ability to
dispose of the underlying securities, the risk of a possible decline
in the value of the underlying securities during the period in which
the Income Fund seeks to assert its rights to them, the risk of
incurring expenses associated with asserting those rights and the
risk of losing all or part of the income from the agreement. SBSA
and/or Boston Advisors, acting under the supervision of the
Trust's Board of Trustees, reviews on an ongoing basis the value of
the collateral and the creditworthiness of those banks and dealers
with which the Income Fund enters into repurchase agreements to
evaluate potential risks.
Covered Call Options. In order to earn additional income, and
as a means of seeking to partially protect its assets against market
declines, the Income Fund may, to a limited extent, write covered
call option contracts on certain securities and purchase call option
contracts for the purpose of terminating its outstanding obligations
with respect to securities upon which call option contracts have
been written ("closing purchase transactions"). Only call options
which are traded on a United States exchange will be written. The
Income Fund's ability to engage in closing purchase transactions
depends on the existence of a liquid secondary market; for some
options no such secondary market may exist or the market may cease
to exist.
The Income Fund may write option contracts on its securities
up to an amount not in excess of 20% of the value of its net assets
at the time that such options are written. The Income Fund may not
sell (uncover) the securities against which an option contract has
been written until after the option period has expired, the option
contract has been exercised or a closing purchase transaction has
been executed. Successful use of options by the Income Fund will
depend on the ability SBSA and/or Boston Advisors to
correctly predict movements in the prices of the securities
underlying the option.
Portfolio Transactions. Portfolio securities transactions on
behalf of the Income Fund will be executed by a number of brokers
and dealers, including Smith Barney and certain of its
affiliated brokers, that are selected by SBSA and/or Boston
Advisors. The Income Fund may use Smith Barney or a broker
affiliated with Smith Barney in connection with a purchase or
sale of securities when SBSA and/or Boston Advisors believes
that such broker's charge for the transaction does not exceed the
usual and customary levels.
Certain Risk Considerations
Shareholders should be aware that the Income Fund concentrates
its assets in the telecommunications industry and, as a result, the
Income Fund should not be considered as a complete investment
program. Moreover, the investment flexibility of the Income Fund
may be restricted by the necessity of satisfying certain
diversification requirements in order to maintain the qualification
of the Income Fund as a regulated investment company within the
meaning of the Code. See "Dividends, Distributions and Taxes."
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day that the
Income Fund calculates its net asset value. See "Valuation of
Shares." Redemption requests received in proper form prior to the
close of regular trading on the New York Stock Exchange, Inc. (the
"NYSE"), currently 4:00 p.m., New York time, are priced at the net
asset value per share determined on that day. Redemption requests
received after the close of regular trading on the NYSE are priced
at the net asset value as next determined.
The Income Fund normally transmits redemption proceeds for
credit to the shareholder's account at Smith Barney or to a
broker that clears securities transactions through Smith
Barney on a fully disclosed basis at no charge within seven
days after receipt of a redemption request. The Income Fund
anticipates that, in accordance with regulatory changes, beginning
on or about June 1, 1995, payment will be made on the third business
day after receipt of proper tender. Generally, 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.
Shares may be redeemed in one of the following ways:
Redemption through Smith Barney
Redemption requests may be made through Smith Barney . A
shareholder desiring to redeem shares of the Income Fund represented
by certificates also must present such certificates to Smith
Barney 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 such certificates are received by
TSSG in proper form.
Redemption By Mail
Shares may be redeemed by submitting a written request for
redemption to:
Smith Barney Telecommunications Income Fund
c/o The Shareholders Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the number
of shares or dollar amount 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 TSSG together with a redemption request.
Any signature appearing on a redemption request must be guaranteed
by an eligible guarantor institution such as a domestic bank,
savings and loan institution, a domestic credit union, member bank
of the Federal Reserve System or member firm of a national
securities exchange. TSSG may require additional supporting
documents for redemptions made by corporations, executors,
administrators, trustees or guardians. A redemption request will
not be deemed to be properly received until TSSG receives all
required documents in proper form.
MINIMUM ACCOUNT SIZE
The Income Fund reserves the right to involuntarily
liquidate any shareholder's account in the Income Fund if the
aggregate net asset value of the shares held in the account is less
than $500. (If a shareholder has more than one account in the
Income Fund, each account must satisfy the minimum account size.)
The Income Fund, however, will not redeem shares based solely on
market reductions in net asset value. Before the Income 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.
VALUATION OF SHARES
The Income Fund's net asset value per share is determined as
of the close of regular trading on the NYSE on each day that the
NYSE is open, by dividing the value of the Income Fund's net
assets by the total number of shares outstanding.
Securities listed on an exchange are valued on the basis of
the last sale prior to the time the valuation is made. If there has
been no sale since the immediately previous valuation, then the
current bid price is used. Quotations are taken from the exchange
where the security is primarily traded. Portfolio securities which
are primarily traded on foreign exchanges may be valued at the
preceding closing values of such securities on their respective
exchange, except that when an occurrence subsequent to the time a
foreign security is valued is likely to have changed such value,
then the fair value of those securities will be determined by
consideration of other factors by or under the the direction of the
Board of Trustees. Over-the-counter securities are valued on the
basis of the bid price at the close of business on each day.
Unlisted foreign securities are valued at the mean between the last
available bid and offer price prior to the time of valuation. Any
assets or liabilities initially expressed in terms of foreign
currencies will be converted into U.S. dollars as last quoted by any
recognized dealer. Securities for which market quotations are not
readily available are valued at fair value. Notwithstanding the
above, bonds and other fixed-income securities are valued by using
market quotations and may be valued on the basis of prices provided
by a pricing service approved by the Board of Trustees.
EXCHANGE PRIVILEGE
Except as otherwise noted below, shares of the Income Fund
may be exchanged at the net asset value next determined for Class A
shares 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. Exhanges of Income Fund shares are subject to minimum
investment requirements and to the other requirements of the fund
into which exchanges are made and a sales charge differential may
apply.
Fund Name
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Income and Growth Portfolio
Smith Barney Funds, Inc. -- Utlities Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Taxable Fixed-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 Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Tax-Exempt 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
Smith Barney Massachusetts Municipals Fund
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
International Funds
Smith Barney Precious Metals and Minerals Fund Inc.
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
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
Smith Barney Municipal Money Market Fund, Inc.
Exchanges. Class A shares of the Smith Barney Mutual Funds
sold without a sales charge or with a maximum sales charge of less
than the maximum charged by other Smith Barney Mutual Funds will be
subject to the appropriate "sales charge differential" upon the
exchange of their shares for Class A shares of a fund sold with a
higher sales charge. The "sales charge differential" is limited
to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being
acquired in the exchange over the sales charge rate(s) actually paid
on the mutual fund shares relinquished in the exchange and on any
predecessor of those shares. For purposes of the exchange
privilege, shares obtained through automatic reinvestment of
dividends and capital gain distributions , are treated as
having paid the same sales charges applicable to the shares on which
the dividends were paid ; however, if no sales charge was imposed
upon the initial purchase of the shares, any shares obtained through
automatic reinvestment will be subject to a sales charge
differential upon exchange.
Additional Information Regarding the Exchange Privilege.
Although the exchange privilege is an important benefit, excessive
exchange transactions can be detrimental to the Income Fund's
performance and its shareholders. SBMFM may determine that a
pattern of frequent exchanges is excessive and contrary to the best
interests of the Income Fund's other shareholders. In this
event, SBMFM will notify Smith Barney and Smith
Barney may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a
determination, Smith Barney 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 the shareholder will be required to
(a) redeem his or her shares in the Income Fund or (b) remain
invested in the Income 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.
Exchanges will be processed at the net asset value next
determined, plus any applicable sales charge differential.
Redemption procedures discussed below are also applicable for
exchanging shares, and exchanges will be made upon receipt of all
supporting documents in proper form. If the account registration of
the shares of the fund being acquired is identical to the
registration of shares of the fund exchanged, no signature guarantee
is required. A taxable 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. The
Income Fund reserves the right to modify or discontinue exchange
privileges upon 60 days' prior notice to shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from the Income Fund's net investment income (i.e.,
its income other than its net long- and short-term capital gains, if
any) will be declared as of the last Friday of each quarter and will
be payable as of the last Friday of the calendar quarter .
Distributions of the Income Fund's net short-and long-term capital
gains, if any, will be declared and paid once a year, normally at
the end of the calendar year in which they were earned or at the
beginning of the next year. Short-term gains also may be attributed
to the regular quarterly distributions as necessary. Unless a
shareholder instructs the Income Fund to pay dividends and capital
gains distributions in cash and credit them to the shareholder's
account at Smith Barney , dividends and capital gains
distributions will be reinvested automatically in additional shares
of the Income Fund at net asset value, without a sales charge. The
Income Fund is subject to a 4.00% non-deductible excise tax measured
with respect to certain undistributed amounts of income and capital
gain. In order to avoid the application of this tax, the Income
Fund may make an additional distribution shortly before December 31
in each year of any undistributed ordinary income or capital gains
and expects to make any other distributions necessary to avoid the
application of this tax.
Dividends paid by the Income Fund from investment income and
distributions of any net realized short-term capital gains are
taxable to shareholders as ordinary income, whether received in cash
or reinvested in additional shares of the Income Fund.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gains whether received in cash or
reinvested in additional shares of the Income Fund, regardless of
the length of time that Income Fund shares have been held by the
shareholder.
Generally, dividends of investment income (but not capital
gain) from the Income Fund will qualify for the Federal dividends-
received deduction for corporate shareholders. Each shareholder
will receive a statement annually from the Income Fund, which will
set forth separately the aggregate dollar amount of dividends and
capital gains distributed to the shareholder by the Income Fund with
respect to the prior calendar year and the amount of the
distributions that qualify for the dividends-received deduction.
Shareholders are urged to consult their tax advisors regarding
the application of Federal, state and local tax laws to their
specific situations before investing in the Income Fund.
Statements as to the tax status of each shareholder's
dividends and distributions are mailed annually. Each shareholder
also will receive, if appropriate, various written notices after the
close of the Income Fund's prior taxable year as to the Federal
income tax status of his or her dividends and distributions which
were received from the Income Fund during it's prior taxable year.
Shareholders should consult their tax advisors about the status of
dividends and distributions from the Income Fund in their own states
and localities and with respect to their own tax situations.
ADDITIONAL INFORMATION
The Trust, organized on June 2, 1983 under the laws of the
Commonwealth of Massachusetts, is a business entity commonly known
as a "Massachusetts business trust" and is registered with the SEC
as a non-diversified, open-end management investment company.
The Trustees have authority to create an unlimited number of
shares of beneficial interest of the Trust, with a par value of
$.001 per share. To date, two sub-trusts of the Trust have been
authorized, which constitute the Income Fund and the Growth Fund.
The Trustees have authority to create additional sub-trusts at any
time in the future without shareholder approval. The Trustees from
time to time may consider whether to offer a new sub-trust to the
general public.
The Trust does not hold annual shareholder meetings. There
normally will be no meetings of shareholders held for the purpose of
electing Trustees unless and until such time as less than a majority
of the Trustees holding office have been elected by shareholders.
The Trustees will call a meeting for any purpose upon written
request of shareholders holding at least 10% of the Income Fund's
outstanding shares and the Income Fund will assist shareholders in
calling such a meeting as required by the 1940 Act. When matters
are submitted for shareholder vote, shareholders of the Income Fund
will have one vote for each full share held and a proportionate,
fractional vote for each fractional share held.
Boston Safe, an indirect wholly owned subsidiary of
Mellon , is located at One Boston Place, Boston, Massachusetts
02108, and serves as custodian of the Trust's investments.
TSSG is located at Exchange Place, Boston, Massachusetts
02109, and serves as the Trust's transfer agent.
The Income Fund sends shareholders a semi-annual report and an
audited annual report, which include listings of the investment
securities held by the Income Fund at the end of the period covered.
In an effort to reduce the Income Fund's printing and mailing
costs, the Income 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. In addition,
the Income Fund also plans to consolidate the mailing of its
Prospectus so that a shareholder having multiple accounts (i.e.,
individual, IRA and/or Self-Employed Retirement Plan accounts) will
receive a single Prospectus annually. Shareholders who do not
want this consolidation to apply to their accounts should
contact their Smith Barney Financial Consultants or
TSSG .
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 or representations must not be relied upon as
having been authorized by the Income Fund or the distributor .
This Prospectus does not constitute an offer by the Income 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 an offer or solicitation in such
jurisdiction.
- -1-
- -17-
shared domestic clients shearson funds att pros95doc.
Smith Barney
TELECOMMUNICATIONS GROWTH FUND
388 Greenwich Street
New York, New York 10013
(212) 723-9218
STATEMENT OF ADDITIONAL INFORMATION MAY 1, 1995
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney
Telecommu-
nications Growth Fund (the "Growth Fund") of Smith Barney
Telecommunica-
tions Trust (the "Trust") dated May 1, 1995 , as amended or
supplemented
from time to time, and should be read in conjunction with Growth Fund's
Prospectus. The Growth Fund is one of two portfolios of the Trust; the
other portfolio is the Smith Barney Telecommunications Income Fund
(the
"Income Fund"). The Growth Fund's Prospectus may be obtained from a Smith
Barney Financial Consultant or by writing or calling the Growth Fund at
the address or phone number set forth above. This Statement of Additional
Information, although not in itself a prospectus, is incorporated by ref-
erence into the Prospectus in its entirety.
TABLE OF CONTENTS
For ease of reference the same section headings are used in both the Pro-
spectus and this Statement of Additional Information, except where shown
below.
<TABLE>
<S>
<C>
Management of the Growth Fund and the Trust
1
Investment Objective and Management Policies
5
Purchase of Shares
14
Redemption of Shares
15
Distributor
16
Valuation of Shares
18
Exchange Privilege
18
Performance Data (See in the Prospectus "Performance")
19
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")
21
Additional Information
23
Financial Statements
24
Appendix
25
</TABLE>
MANAGEMENT OF THE GROWTH FUND AND THE TRUST
The executive officers of the Trust are employees of certain of the orga-
nizations that provide services to the Trust. These organizations are as
follows:
<TABLE>
<CAPTION>
NAME SERVICE
<S> <C>
Smith Barney Inc.
("Smith Barney") Distributor
Smith Barney Strategy Advisers Inc.
("SBSA") Investment
Adviser
Smith Barney Mutual Funds Management Inc.
("SBMFM") Administrator
The Boston Company Advisors, Inc.
("Boston Advisors") Sub-Investment
Adviser
and Sub-Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation Transfer Agent
</TABLE>
These organizations and the functions they perform for the Trust are dis-
cussed in the Prospectus and in this Statement of Additional Information.
TRUSTEES OF THE TRUST AND EXECUTIVE OFFICERS OF
THE GROWTH FUND
The Trustees of the Trust and executive officers of the Growth Fund, to-
gether with information as to their principal business occupations during
the past five years, are shown below. Each Trustee who is an "interested
person" of the Trust, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), is indicated by an asterisk.
Paul R. Ades, Trustee (age 54) . Partner in the law firm of Murov &
Ades.
His address is 272 South Wellwood Avenue, Lindenhurst, New York 11757.
Herbert Barg, Trustee (age 71) . Private investor. His address is 273
Mont-
gomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Alger B. Chapman, Trustee (age 63 Chairman and Chief Operating Officer
of the Chicago Board of Options Exchange. His address is Chicago Board of
Options Exchange, LaSalle at Van Buren, Chicago, Illinois 60605.
Dwight B. Crane, Trustee (age 57). Professor, Graduate School of
Business
Administration, Harvard University. His address is Graduate School of
Business Administration, Harvard University, Boston, Massachusetts 02163.
Frank G. Hubbard, Trustee (age 59). Corporate Vice President, Materials
Management and Marketing Services of Huls America, Inc. His address is 80
Centennial Avenue P.O. Box 456, Piscataway, New Jersey 08855-0456.
Allan R. Johnson, Trustee (age 78) . Retired; former Chairman, Retail
Divi-
sion of BATUS, Inc., and Chairman and Chief Executive Officer of Saks
Fifth Avenue, Inc. His address is 2 Sutton Place South, New York, New York
10022.
*Heath B. McLendon, Chairman of the Board and Investment Officer (age
61).
Managing Director of Smith Barney, Chairman of SBSA and President of
SBMFM ; prior to July 1993, Senior Executive Vice President of Shearson
Le-
hman Brothers Inc. ("Shearson Lehman Brothers"); Vice Chairman of Shearson
Asset Management, a Director of PanAgora Asset Management, Inc. and PanAg-
ora Asset Management Limited. His address is 388 Greenwich Street, New
York, New York 10013.
Ken Miller, Trustee (age 53) . President of Young Stuff Apparel
Group, Inc.
His address is 1407 Broadway, 6th Floor, New York, New York 10018.
John F. White, Trustee (age 77) . President Emeritus of The Cooper
Union
for the Advancement of Science and Art. Special Assistant to the President
of the Aspen Institute. His address is Crows Nest Road, Tuxedo Park, New
York 10987.
Jessica M. Bibliowicz, President (age 35). Executive Vice President of
Smith Barney; prior to 1994, Director of Sales and Marketing for Pruden-
tial Mutual Funds; prior to 1990, First Vice President, Asset Management
Division of Shearson Lehman Brothers. (Ms. Bibliowicz also serves as Pres-
ident of 26 other funds of the Smith Barney Mutual Funds.) Her address is
388 Greenwich Avenue, New York, New York 10013.
Guy R. Scott, Investment Administrator (age 55). Senior Vice President
of
Boston Advisors; Senior Vice President and Equity Portfolio Manager of The
Boston Company Asset Management, Inc.; and, Officer of Mellon Bank Corpo-
ration ("Mellon") ; prior to December 1990, Vice President of the Boston
Company Institutional Investors, Inc. and a Portfolio Manager from October
1988. His address is One Boston Place, Boston, Massachusetts 02108.
Lewis E. Daidone, Senior Vice President and Treasurer (age 37). Managing
Director of Smith Barney; Chief Financial Officer of the Smith Barney Mu-
tual Funds; Director and Senior Vice President of SBMFM. (Mr. Daidone also
serves as Senior Vice President and Treasurer of 41 other funds of the
Smith Barney Mutual Funds.) His address is 388 Greenwich Street, New York,
New York 10013.
Christina T. Sydor, Secretary (age 44). Managing Director of Smith Barney.
General Counsel and Secretary of SBMFM. (Ms. Sydor also serves as Secre-
tary of 41 other funds of the Smith Barney Mutual Funds.) Her address is
388 Greenwich Street, New York, New York, 10013.
Each Trustee also serves as a director, trustee and/or general partner of
certain other mutual funds for which Smith Barney serves as distributor.
As of April 15, 1995 , the Trustees and officers of the Trust, as a
group,
owned less than 1.00% of the outstanding shares of beneficial interest of
the Growth Fund.
No officer, director or employee of Smith Barney or any parent or subsid-
iary receives any compensation from the Trust for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of Smith Barney or any of its affiliates, a fee of
$4,500 per annum plus $250 per meeting attended and reimburses them for
travel and out-of-pocket expenses. For the fiscal year ended December 31,
1994, such fees and expenses totalled $18,408.
For the calendar year ended December 31, 1994, the Trustees of the
Growth
Fund were paid the following compensation:
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
AGGREGATE COMPENSATION
FROM THE SMITH BARNEY
TRUSTEES(*) FROM THE GROWTH FUND
MUTUAL FUNDS
<S> <C> <C>
Paul R. Ades(4) $3,000.00
$ 42,750
Herbert Barg(11) 3,000.00
77,850
Alger B. Chapman(5) 812.50
34,125
Dwight B. Crane(18) 812.50
125,975
Frank G. Hubbard(3) 812.50
37,125
Allan Johnson(4) 3,000.00
72,750
Health B. McLendon(29) N/A
N/A
Ken Miller(4) 3,000.00
49,250
John F. White(4) 3,000.00
72,250
<FN>
(*) Number of director/trusteeships held with other mutual funds in the
Smith Barney Mutual Funds family.
</TABLE>
INVESTMENT ADVISER -- SBSA
SBSA serves as investment adviser to the Growth Fund pursuant to a written
agreement dated July 27, 1994 (the "Advisory Agreement"), which was first
approved by the Board of Trustees, including a majority of the Trustees
who are not "interested persons" of the Trust or SBSA, on April 21, 1994
and by shareholders on July 26, 1994. SBSA pays the salary of any officer
and employee who is employed by both it and the Growth Fund. The services
provided by SBSA under the Advisory Agreement are described in the Pro-
spectus under "Management of the Trust and the Growth Fund." SBSA bears
all expenses in connection with the performance of its services. SBSA is a
wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings"). Hold-
ings is a wholly owned subsidiary of The Travelers Inc. ("Travelers").
As compensation for investment advisory services, the Growth Fund pays
SBSA a fee computed daily and paid monthly at the annual rate of 0.55% of
the value of the Growth Fund's average daily net assets. For the fiscal
period from July 27, 1994 through December 31, 1994, the Growth Fund paid
SBSA $ in investment advisory fees.
SUB-INVESTMENT ADVISER -- BOSTON ADVISORS
Boston Advisors serves as sub-investment adviser to the Growth Fund pursu-
ant to a written agreement dated July 27, 1994 (the "Sub-Advisory Agree-
ment"), which was first approved by the Trust's Board of Trustees, includ-
ing a majority of the Trustees who are not "interested persons" of the
Growth Fund or Boston Advisors, on April 21, 1994 and by shareholders on
July 26, 1994. Boston Advisors is a wholly owned subsidiary of Mellon.
Prior to July 27, 1994, Boston Advisors acted in the capacity of the
Growth Fund's investment adviser.
ADMINISTRATOR -- SBMFM
SBMFM serves as administrator to the Growth Fund pursuant to a written
agreement dated April 21, 1994 (the "Administration Agreement"), which was
first approved by the Trust's Board of Trustees including a majority of
the Trustees who are not "interested persons" of the Growth Fund or SBMFM,
on April 21, 1994. The services provided by SBMFM under the Administration
Agreement are described in the Prospectus under "Management of the Trust
and the Growth Fund." SBMFM pays the salary of any officer and employee
who is employed by both it and the Growth Fund and bears all expenses in
connection with the performance of its services.
As compensation for administrative services rendered to the Growth Fund,
SBMFM receives a fee at the annual rate of 0.20% of the value of the
Growth Fund's average daily net assets. For the fiscal period from April
21, 1994 through December 31, 1994, the Growth Fund paid SBMFM $ in
administration fees.
SUB-ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors also serves as sub-administrator to the Growth Fund pursu-
ant to a written agreement dated April 21, 1994 (the "Sub-Administration
Agreement"), which was first approved by the Trust's Board of Trustees,
including a majority of Trustees who are not "interested persons" of the
Growth Fund or Boston Advisors on April 21, 1994. As compensation for Bos-
ton Advisors' services rendered to the Growth Fund, Boston Advisors is
paid a portion of the administration fee paid by the Growth Fund to SBMFM
at a rate agreed upon from time to time between Boston Advisors and SBMFM.
Prior to April 21, 1994, Boston Advisors served as the Growth Fund's ad-
ministrator and received a fee computed daily and paid monthly at the an-
nual rate of 0.20% of the value of the Growth Fund's average daily net as-
sets. For the 1994, 1993 and 1992 fiscal years, Boston Advisors received
$ , $ and $ , respectively, in investment advisory and/or
administration fees.
Certain of the services provided to the Growth Fund by Boston Advisors are
described in the Prospectus under "Management of the Trust and the Growth
Fund." In addition to those services, Boston Advisors pays the salaries of
all officers and employees who are employed by both it and the Growth
Fund, maintains office facilities for the Growth Fund, furnishes the
Growth Fund with statistical and research data, clerical help and account-
ing, data processing, bookkeeping, internal auditing and legal services
and certain other services required by the Growth Fund, prepares reports
to the Growth Fund's shareholders and prepares tax returns, reports to and
filings with the Securities and Exchange Commission (the "SEC") and state
Blue Sky authorities. Boston Advisors bears all expenses in connection
with performance of its services.
The Growth Fund bears expenses incurred in its operation, including taxes,
interest, brokerage fees and commissions, if any; fees of Trustees who are
not officers, directors, shareholders or employees of Smith Barney or Bos-
ton Advisors; SEC fees and state Blue Sky qualification fees; charges of
custodians; transfer and dividend disbursing agents' fees; certain insur-
ance premiums; outside auditing and legal expenses; investor services (in-
cluding allocated telephone and personnel expenses); and costs of prepara-
tion and printing of prospectuses for regulatory purposes and for distri-
bution to existing shareholders, shareholders' reports and corporate
meetings.
SBMFM and Boston Advisors have agreed that if in any fiscal year the ag-
gregate expenses of the Growth Fund (including fees paid pursuant to the
Advisory, Sub-Advisory, Administration and Sub- Administration Agreements,
but excluding interest, taxes, brokerage fees paid pursuant to the Growth
Fund's services and distribution plan, and, with the prior written consent
of the necessary state securities commissions, extraordinary expenses) ex-
ceed the expense limitation of any state having jurisdiction over the
Growth Fund, SBMFM and Boston Advisors will, to the extent required by
law, reduce their management fees for the Growth Fund by the amount of
such excess expense, such amount to be allocated between them in the pro-
portion that their respective fees bear to the aggregate of such fees paid
by the Growth Fund. Such fee reduction, if any, will be estimated and rec-
onciled on a monthly basis. The most restrictive state expense limitation
applicable to the Growth Fund would require SBMFM and Boston Advisors to
reduce their fees in any year that such excess expenses exceed 2.50% of
the first $30 million of average daily net assets, 2.00% of the next $70
million of average daily net assets and 1.50% of the remaining average
daily net assets. No fee reduction was required for the Growth Fund for
the 1992, 1993 or 1994 fiscal years.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Trust. The Trustees who
are not "interested persons" of the Trust have selected Stroock & Stroock
& Lavan as their counsel.
KPMG Peat Marwick LLP, independent accountants, 345 Park Avenue, New York,
New York 10154, have been selected to serve as auditors of the Trust and
will render an opinion on the Trust's financial statements for the fiscal
year ending December 31, 1995. Coopers & Lybrand L.L.P., independent ac-
countants, served as auditors of the Trust and rendered an opinion on the
Trust's financial statements for the fiscal year ended December 31, 1994.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Growth Fund's investment objective and the
policies it employs to achieve that objective. The following discussion
supplements the description of the Growth Fund's investment objective and
policies in the Prospectus.
LENDING OF PORTFOLIO SECURITIES
The Growth Fund has the ability to lend its portfolio securities to bro-
kers, dealers and other financial organizations. These loans, if and when
made, may not exceed 33 1/3 % of the Growth Fund's assets taken at value.
The Growth Fund may not lend its portfolio securities to Smith Barney or
its affiliates unless it has applied for and received specific authority
to do so from the SEC.
Requirements of the SEC, which may be subject to future modifications,
currently provide that the following conditions must be met whenever the
Growth Fund's securities are loaned: (a) the Growth Fund must receive at
least 100% cash collateral or equivalent securities or letters of credit
from the borrower; (b) the borrower must increase such collateral whenever
the market value of the securities rises above the level of such collat-
eral; (c) the Growth Fund must be able to terminate the loan at any time;
(d) the Growth Fund must receive reasonable interest on the loan, as well
as an amount equal to any dividends, interest or other distributions on
the loaned securities, and any increase in market value; (e) the Growth
Fund may pay only reasonable custodian fees in connection with the loan;
and (f) voting rights on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely affecting the in-
vestment occurs, the Trust's Board of Trustees must terminate the loan and
regain the right to vote the securities. From time to time, the Growth
Fund may return a part of the interest earned from the investment of col-
lateral received for securities loaned to the borrower and/or a third
party which is unaffiliated with the Growth Fund or with Smith Barney and
which is acting as a "finder."
The limit of 33 1/3 % of the Growth Fund's total assets to be committed to
securities lending is a fundamental policy of the Growth Fund, which means
that it cannot be changed without approval of a majority of the Growth
Fund's outstanding shares. See "Investment Restrictions" below.
CONVERTIBLE SECURITIES
Convertible securities are fixed-income securities that may be converted
at either a stated price or stated rate into underlying shares of common
stock. Convertible securities have general characteristics similar to both
fixed-income and equity securities. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securi-
ties tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock and,
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the mar-
ket price of the underlying common stock declines, convertible securities
tend to trade increasingly on a yield basis, and so may not experience
market value declines to the same extent as the underlying common stock.
When the market price of the underlying common stock increases, the prices
of the convertible securities tend to rise as a reflection of the value of
the underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than
common stocks. Of course, like all fixed-income securities, there can be
no assurance of current income because the issuers of the convertible se-
curities may default on their obligations. Convertible securities, how-
ever, generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the potential for
capital appreciation. A convertible security, in addition to providing
fixed income, offers the potential for capital appreciation through the
conversion feature, which enables the holder to benefit from increases in
the market price of the underlying common stock. There can be no assurance
of capital appreciation, however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all
equity securities, and convertible preferred stock is senior to common
stock, of the same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar non-
convertible securities.
PREFERRED STOCK
Preferred stocks, like debt obligations, are generally fixed-income secu-
rities. Shareholders of preferred stocks normally have the right to re-
ceive dividends at a fixed rate when and as declared by the issuer's board
of directors, but do not participate in other amounts available for dis-
tribution by the issuing corporation. Dividends on the preferred stock may
be cumulative, and all cumulative dividends usually must be paid prior to
common shareholders receiving any dividends. Preferred stock dividends
must be paid before common stock dividends and, for that reason, preferred
stocks generally entail less risk than common stocks. Upon liquidation,
preferred stocks are entitled to a specified liquidation preference, which
is generally the same as the par or stated value, and are senior in right
of payment to common stock. Preferred stocks are, however, equity securi-
ties in the sense they do not represent a liability of the issuer and
therefore do not offer as great a degree of protection of capital or as-
surance of continued income as investments in corporate debt securities.
In addition, preferred stocks are subordinated in right of payment to all
debt obligations and creditors of the issuer, and convertible preferred
stocks may be subordinated to other preferred stock of the same issuer.
WARRANTS
Because a warrant does not carry with it the right to dividends or voting
rights with respect to the securities that the warrant holder is entitled
to purchase, and because it does not represent any rights to the assets of
the issuer, warrants may be considered more speculative than certain other
types of investments. Also, the value of a warrant does not necessarily
change with the value of the underlying securities and a warrant ceases to
have value if it is not exercised prior to its expiration date. The in-
vestment in warrants, valued at the lower of cost or market, may not ex-
ceed 5.0% of the value of the Growth Fund's net assets. Included within
that amount, but not to exceed 2.0% of the value of the Growth Fund's net
assets, may be warrants which are not listed on the New York Stock Ex-
change, Inc. ("NYSE") or the American Stock Exchange. Warrants acquired by
the Growth Fund in units or attached to securities may be deemed to be
without value.
MONEY MARKET INSTRUMENTS
As stated in the Prospectus, the Growth Fund may invest without limit in
short-term money market instruments when SBSA and/or Boston Advisors
be-
lieves that a "defensive" investment posture is advisable due to market or
economic conditions. Money market instruments in which the Growth Fund may
invest include obligations issued or guaranteed by the United States gov-
ernment, its agencies or instrumentalities ("U.S. government securities");
certificates of deposit ("CDs"), time deposits ("TDs") and bankers' accep-
tances issued by domestic banks (including their branches located outside
the United States and subsidiaries located in Canada), domestic branches
of foreign banks, savings and loan associations and similar institutions;
high grade commercial paper; and repurchase agreements with respect to the
foregoing types of instruments. The following is a more detailed descrip-
tion of such money market instruments.
Bank Obligations. CDs are short-term negotiable obligations of commercial
banks; TDs are non-negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates; and bankers' ac-
ceptances are time drafts drawn on commercial banks by borrowers usually
in connection with international transactions.
Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System and to be insured by the Federal Deposit In-
surance Corporation (the "FDIC"). Domestic banks organized under state law
are supervised and examined by state banking authorities but are members
of the Federal Reserve System only if they elect to join. Most state banks
are insured by the FDIC (although such insurance may not be of material
benefit to the Growth Fund, depending upon the principal amount of CDs of
each bank held by the Growth Fund) and are subject to Federal examination
and to a substantial body of Federal law and regulation. As a result of
governmental regulations, domestic branches of domestic banks, among other
things, generally are required to maintain specified levels of reserves,
and are subject to other supervision and regulation designed to promote
financial soundness.
Obligations of foreign branches of domestic banks, such as CDs and TDs,
may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and gov-
ernmental regulation. Such obligations are subject to different risks than
are those of domestic banks or domestic branches of foreign banks. These
risks include foreign economic and political developments, foreign govern-
mental restrictions that may adversely affect payment of principal and in-
terest on the obligations, foreign exchange controls and foreign withhold-
ing and other taxes on interest income. Foreign branches of domestic banks
are not necessarily subject to the same or similar regulatory requirements
that apply to domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and financial recordkeeping require-
ments. In addition, less information may be publicly available about a
foreign branch of a domestic bank than about a domestic bank. CDs issued
by wholly owned Canadian subsidiaries of domestic banks are guaranteed as
to repayment of principal and interest (but not as to sovereign risk) by
the domestic parent bank.
Obligations of domestic branches of foreign banks may be general obliga-
tions of the parent bank in addition to the issuing branch, or may be lim-
ited by the terms of a specific obligation and by Federal and state regu-
lation as well as governmental action in the country in which the foreign
bank has its head office. A domestic branch of a foreign bank with assets
in excess of $1 billion may or may not be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state. In addition, branches
licensed by the Comptroller of the Currency and branches licensed by cer-
tain states ("State Branches") may or may not be required to: (a) pledge
to the regulator by depositing assets with a designated bank within the
state, an amount of its assets equal to 5% of its total liabilities; and
(b) maintain assets within the state in an amount equal to a specified
percentage of the aggregate amount of liabilities of the foreign bank pay-
able at or through all of its agencies or branches within the state. The
deposits of State Branches may not necessarily be insured by the FDIC. In
addition, there may be less publicly available information about a domes-
tic branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks or by domestic branches
of foreign banks, SBSA and/or Boston Advisors will carefully
evaluate such
investments on a case-by-case basis.
Savings and loan associations, the CDs of which may be purchased by the
Growth Fund, are supervised by the Office of Thrift Supervision and are
insured by the Savings Association Insurance Fund, which is administered
by the FDIC and is backed by the full faith and credit of the United
States government. As a result, such savings and loan associations are
subject to regulation and examination.
Commercial Paper. Commercial paper is a short-term, unsecured negotiable
promissory note of a domestic or foreign company. When investing for de-
fensive purposes, the Growth Fund may invest in short-term debt obliga-
tions of issuers that at the time of purchase are rated A-2, A-1 or A-1+
by Standard & Poor's Corporation ("S&P") or Prime-2, Prime-1 by Moody's
Investors Service, Inc. ("Moody's") and other rating services or, if un-
rated, are issued by companies having an outstanding unsecured debt issue
currently rated within the two highest ratings of S&P or Moody's. A dis-
cussion of S&P, Moody's and other rating categories appears in the Appen-
dix to this Statement of Additional Information. The Growth Fund may in-
vest in variable rate master demand notes, which are unsecured demand
notes typically issued by large corporate borrowers providing for variable
amounts of principal indebtedness and periodic adjustments in the interest
rate according to the terms of the instrument. Demand notes are direct
lending arrangements between the Growth Fund and an issuer, and normally
are not traded in a secondary market. The Growth Fund, however, may demand
payment of principal and accrued interest at any time. In addition, while
demand notes generally are not rated, their issuers must satisfy the same
criteria as those set forth above for issuers of commercial paper. SBSA
and/or Boston Advisors will consider the earning power, cash flow and
other liquidity ratios of issuers of demand notes and will continually
monitor their financial ability to meet payment on demand.
COVERED CALL OPTIONS
The Growth Fund, to a limited extent, may write covered call option con-
tracts on certain securities and purchase call options for the purpose of
terminating its outstanding obligations with respect to securities upon
which call option contracts have been written. The principal reason for
writing covered call options on securities is to attempt to realize,
through the receipt of premiums, a greater return than would be realized
on the securities alone. In return for a premium, the writer of a covered
call option forfeits the right to any appreciation in the value of the un-
derlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). Nevertheless, the
call writer retains the risk of a decline in the price of the underlying
security. The size of the premiums that the Growth Fund may receive may be
adversely affected as new or existing institutions, including other in-
vestment companies, engage in or increase their option-writing activities.
Options written by the Growth Fund normally will have expiration dates be-
tween three and nine months from the date written. The exercise price of
the options may be below ("in-the-money"), equal to ("at-the-money") or
above ("out-of-the-money") the market values of the underlying securities
at the times the options are written. The Growth Fund may write (a) in-
the-money call options when SBSA and/or Boston Advisors expects the
price
of the underlying security will remain flat or decline moderately during
the option period, (b) at-the-money call options when SBSA and/or Boston
Advisors expects the price of the underlying security will remain flat or
advance moderately during the option period and (c) out-of-the-money call
options when SBSA and/or Boston Advisors expects the premiums
received
from writing the call option plus the appreciation in market price of the
underlying security up to the exercise price will be greater than the ap-
preciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security de-
clines and the security is sold at this lower price, the amount of any re-
alized loss will be offset wholly or in part by the premium received.
So long as the obligation of the Growth Fund as the writer of an option
continues, the Growth Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the Growth Fund
to deliver the underlying security against payment of the exercise price.
This obligation terminates when the option expires or the Growth Fund ef-
fects a closing purchase transaction. The Growth Fund can no longer effect
a closing purchase transaction with respect to an option once it has been
assigned an exercise notice. To secure its obligation to deliver the un-
derlying security when it writes a call option, the Growth Fund will be
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "Clear-
ing Corporation") and of the national securities exchange on which the op-
tion is written.
An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized national securi-
ties exchange or in the over-the-counter market. The Growth Fund expects
to write options only on national securities exchanges.
The Growth Fund may realize profit or loss upon entering into a closing
purchase transaction. In cases where the Growth Fund has written an op-
tion, it will realize a profit if the cost of the closing purchase trans-
action is less than the premium received upon writing the original option
and will incur a loss if the cost of the closing purchase transaction ex-
ceeds the premium received upon writing the original option.
Although the Growth Fund generally will write only those options for which
SBSA and/or Boston Advisors believes there is an active secondary
market
so as to facilitate closing transactions, there is no assurance that suf-
ficient trading interest to create a liquid secondary market on a securi-
ties exchange will exist for any particular option or at any particular
time, and for some options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a variety of reasons.
In the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, have at times rendered certain of
the facilities of the Clearing Corporation and the national securities ex-
changes inadequate and resulted in the institution of special procedures,
such as trading rotations, restrictions on certain types of orders or
trading halts or suspensions in one or more options. There can be no as-
surance that similar events, or events that may otherwise interfere with
the timely execution of customers' orders, will not recur. In such event,
it might not be possible to effect closing transactions in particular op-
tions. If as a covered call option writer the Growth Fund is unable to ef-
fect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security until the option expires or it deliv-
ers the underlying security upon exercise.
Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or writ-
ten, or exercised within certain time periods, by an investor or group of
investors acting in concert (regardless of whether the options are written
on the same or different national securities exchanges or are held, writ-
ten or exercised in one or more accounts or through one or more brokers).
It is possible that the Growth Fund and other clients of SBSA
and/or Bos-
ton Advisors and certain of their affiliates may be considered to be such
a group. A national securities exchange or the National Association of Se-
curities Dealers, Inc. may order the liquidation of positions found to be
in violation of these limits and it may impose certain other sanctions. At
the date of this Statement of Additional Information, the position and ex-
ercise limits for common stocks generally were 3,000, 5,500 or 8,000 op-
tions per stock (i.e., options representing 300,000, 550,000 or 800,000
shares), depending on various factors relating to the underlying security
and the Growth Fund's combined stock and option position. These limits may
restrict the number of options which the Growth Fund will be able to write
on a particular security.
Call options may be purchased by the Growth Fund but only to terminate an
obligation as a writer of a call option. This is accomplished by making a
"closing purchase transaction" (i.e., the purchase of a call option on the
same security with the same exercise price and expiration date as speci-
fied in the call option which had previously been written). A closing pur-
chase transaction with respect to calls traded on a national securities
exchange has the effect of extinguishing the obligation of a writer of an
option. Although the cost to the Growth Fund of such a transaction may be
greater than the net premium received by the Growth Fund upon writing the
original option, the Trust's Board of Trustees believes that it is appro-
priate for the Growth Fund to have the ability to make closing purchase
transactions in order to limit the risks involved in writing options.
SBSA
and/or
Boston Advisors also may permit the call option to be exercised.
INVESTMENT RESTRICTIONS
The Growth Fund has adopted the following investment restrictions for the
protection of shareholders. Restrictions 1 through 7 below cannot be
changed without approval by the holders of a majority of the outstanding
shares of the Growth Fund, defined as the lesser of (a) 67% or more of the
voting securities present or represented by proxy at a meeting of the
holders if more than 50% of the outstanding voting securities of the
Growth Fund are present or represented by proxy or (b) more than 50% of
the outstanding shares of the Growth Fund. The remaining restrictions may
be changed by vote of a majority of the Trustees at any time. If any per-
centage restriction described below is complied with at the time of an in-
vestment, a later increase or decrease in the percentage resulting from a
change in the values of assets will not constitute a violation of the re-
striction.
The Growth Fund may not:
1. Issue senior securities as defined in the 1940 Act and any rules
and orders thereunder, except insofar as the Growth Fund may be deemed
to have issued senior securities by reason of: (a) borrowing money or
purchasing securities on a when-issued or delayed-delivery basis; (b)
purchasing or selling futures contracts and options on futures con-
tracts and other similar instruments; and (c) issuing separate classes
of shares.
2. Invest more than 25% of its total assets in securities, the issu-
ers of which are in the same industry, other than in the telecommuni-
cations industry as determined by the Growth Fund's investment ad-
viser. For purposes of this limitation, U.S. government securities are
not considered to be issued by members of any industry.
3. Borrow money, except that the Growth Fund may borrow from banks
for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise require the un-
timely disposition of securities in an amount not exceeding 10% of the
value of the Growth Fund's total assets (including the amount bor-
rowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made. Whenever borrowings ex-
ceed 5% of the value of the Growth Fund's total assets, the Growth
Fund will not make additional investments.
4. Make loans. This restriction does not apply to: (a) the purchase
of debt obligations in which the Growth Fund may invest consistent
with its investment objective and policies; (b) repurchase agreements;
and (c) loans of its portfolio securities.
5. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Growth Fund may technically be
deemed to be an underwriter under the Securities Act of 1933, as
amended (the "1933 Act"), in disposing of portfolio securities.
6. Purchase or sell real estate, real estate mortgages, real estate
investment trust securities, commodities or commodity contracts, but
this shall not prevent the Growth Fund from: (a) investing in securi-
ties of issuers engaged in the real estate business 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 (c) trading in futures contracts and options on futures contracts.
7. Purchase any securities on margin (except for such short-term cred-
its as are necessary for the clearance of purchases and sales of port-
folio securities) or sell any securities short (except against the
box). For purposes of this restriction, the deposit or payment by the
Growth Fund of initial or maintenance margin in connection with fu-
tures contracts and related options and options on securities is not
considered to be the purchase of a security on margin.
8. Purchase for any portfolio securities subject to restrictions on
disposition under the 1933 Act ("restricted securities") or securities
without readily available market quotations, if the purchase causes
more than 15% of its assets to be invested in restricted securities,
securities without readily available market quotations and repurchase
agreements maturing in more than seven days;
9. Purchase securities of companies for the purpose of exercising con-
trol;
10. Purchase or retain for any portfolio the securities of any issuer
if those Trustees and officers of the Trust or directors and officers
of SBSA and/or Boston Advisors who beneficially own more than 1/2 of
1% of the outstanding securities of the issuer together beneficially
own more than 5% of such outstanding securities;
11. Purchase securities of any other investment company except as part
of a plan of merger, consolidation or acquisition of assets;
12. Purchase securities of any issuers which together with predeces-
sors have a record of less than three years' continuous operation, if
as a result, more than 5% of the Growth Fund's net assets would then
be invested in such securities;
13. Invest in puts, calls, straddles, spreads, and any combination
thereof (except in connection with the writing of covered call op-
tions);
14. Invest in oil, gas or other mineral exploration or development
programs;
15. Purchase securities from or sell securities to any of its officers
or Trustees, except with respect to its own shares and as is permissi-
ble under applicable statutes, rules and regulations; or
16. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except in an amount up to 10% of the value of its total assets to se-
cure borrowings for temporary or emergency purposes.
Certain restrictions listed above permit the Growth Fund without share-
holder approval to engage in investment practices that the Growth Fund
does not currently pursue. The Growth Fund has no present intention of al-
tering its current investment practices as otherwise described in the Pro-
spectus and this Statement of Additional Information and any future change
in those practices would require Board approval and appropriate disclosure
to investors.
PORTFOLIO TURNOVER
Generally, the Growth Fund will not trade in securities for short-term
profits but, when circumstances warrant, securities may be sold without
regard to the length of time that they have been held. Numerous factors,
including those relating to particular investments, tax considerations,
covered call option writing, market or economic conditions or redemptions
of shares, may affect the rate at which the Growth Fund buys or sells
portfolio securities from year to year. The portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of portfolio secu-
rities for the year by the average monthly value of the Growth Fund's se-
curities. Securities with remaining maturities of one year or less at the
date of acquisition are excluded from the calculation. The Growth Fund has
no fixed policy with respect to portfolio turnover; however, it is antici-
pated that the annual turnover rate in the Growth Fund generally will not
exceed 100%. For the 1994 and 1993 fiscal years, the portfolio turnover
rates for the Growth Fund were % and 25%, respectively.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Growth Fund are made by SBSA
and/or Boston Advisors, subject to the overall supervision and review of
the Trust's Board of Trustees. Portfolio securities transactions for the
Growth Fund are effected by or under the supervision of SBSA and/or Boston
Advisors.
Transactions on stock exchanges involve the payment of negotiated broker-
age commissions. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price of those
securities includes an undisclosed commission or mark-up. Over-the-counter
purchases and sales are transacted directly with principal market makers
except in those cases in which better prices and executions may be ob-
tained elsewhere. The cost of securities purchased from underwriters in-
cludes an underwriting commission or concession, and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-
up or mark-down. For the fiscal years ended December 31, 1994, 1993 and
1992, the Growth Fund paid $155,050, $162,253 and $42,900, respectively,
in brokerage commissions.
In executing portfolio transactions and selecting brokers or dealers, it
is the Growth Fund's policy to seek the best overall terms available. The
Advisory and Sub-Advisory Agreements between the Trust, SBSA and Boston
Advisors provide that, in assessing the best overall terms available for
any transaction, SBSA and Boston Advisors shall consider the factors that
it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capabil-
ity of the broker or dealer, and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis. In addition,
the Advisory and Sub-Advisory Agreements authorize SBSA and Boston Advi-
sors, in selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, to consider the bro-
kerage and research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) provided to the Growth Fund and/or
other accounts over which SBSA and Boston Advisors or an affiliate exer-
cises investment discretion.
The Trust's Board of Trustees periodically will review the commissions
paid by the Growth Fund to determine if the commissions paid over repre-
sentative periods of time were reasonable in relation to the benefits in-
uring to the Growth Fund. It is possible that certain of the services re-
ceived will primarily benefit one or more other accounts for which invest-
ment discretion is exercised. Conversely, the Growth Fund may be the
primary beneficiary of services received as a result of portfolio transac-
tions effected for other accounts. SBSA's and Boston Advisors' respective
fees under the Advisory and Sub-Advisory Agreements is not reduced by rea-
son of SBSA's and/or Boston Advisors' receiving such brokerage and re-
search services. Further, Smith Barney will not participate in commissions
from brokerage given by the Growth Fund to other brokers or dealers and
will not receive any reciprocal brokerage business resulting therefrom.
In accordance with Section 17(e) of the 1940 Act and Rule 17e-1 thereun-
der, the Trust's Board of Trustees has determined that any portfolio
transaction for the Growth Fund may be executed through Smith Barney or an
affiliate of Smith Barney if, in SBSA's and/or Boston Advisors' judgment,
the use of Smith Barney is likely to result in price and execution at
least as favorable as those of other qualified brokers, and if, in the
transaction, Smith Barney charges the Growth Fund a commission rate con-
sistent with those charged by Smith Barney to comparable unaffiliated cus-
tomers in similar transactions. In addition, under the rules recently
adopted by the SEC, Smith Barney may directly execute such transactions
for the Growth Fund on the floor of any national securities exchange, pro-
vided: (a) the Trust's Board of Trustees has expressly authorized Smith
Barney to effect such transactions; and (b) Smith Barney annually advises
the Growth Fund of the aggregate compensation it earned on such transac-
tions. For the 1994, 1993 and 1992 fiscal years the Growth Fund paid
$40,204, $63,935 and $26,265, respectively, in brokerage commissions to
Smith Barney and/or Shearson Lehman Brothers. For the 1994 fiscal year,
Smith Barney received 26% of the total brokerage commissions paid by the
Growth Fund and effected % of the total dollar amount of transactions
involving the payment of brokerage commissions.
Even though investment decisions for the Growth Fund are made indepen-
dently from those of the other accounts managed by SBSA and/or Boston Ad-
visors, investments of the kind made by the Growth Fund also may be made
by those other accounts. When the Growth Fund and one or more accounts
managed by SBSA and/or Boston Advisors are prepared to invest in, or de-
sire to dispose of, the same security, available investments or opportuni-
ties for sales will be allocated in a manner believed by SBSA and/or Bos-
ton Advisors to be equitable. In some cases, this procedure may adversely
affect the price paid or received by the Growth Fund or the size of the
position obtained for or disposed of by the Growth Fund.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the Prospec-
tus applies to purchases made by any "purchaser," which is defined to in-
clude the following: (a) an individual; (b) an individual's spouse and his
or her children purchasing shares for his or her own account; (c) a
trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account; (d) a pension, profit-sharing or other employee
benefit plan qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and qualified employee benefit plans of
employers who are "affiliated persons" of each other within the meaning of
the 1940 Act; (e) tax-exempt organizations enumerated in Section 501(c)(3)
or (13) of the Code; and (f) a trustee or other professional fiduciary
(including a bank, or an investment adviser registered with the SEC under
the Investment Advisers Act of 1940, as amended) purchasing shares of the
Growth Fund for one or more trust estates or fiduciary accounts. Purchas-
ers who wish to combine purchase orders to take advantage of volume dis-
counts on Class A shares should contact a Smith Barney Financial Consult-
ant.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedule in the Prospectus,
apply to any purchase of Class A shares if the aggregate investment in
Class A shares of the Growth Fund and in Class A shares of other funds of
the Smith Barney Mutual Funds that are offered with a sales charge, in-
cluding the purchase being made, of any purchaser is $25,000 or more. The
reduced sales charge is subject to confirmation of the shareholder's hold-
ings through a check of appropriate records. The Growth Fund reserves the
right to terminate or amend the combined rights of accumulation at any
time after written notice to shareholders. For further information regard-
ing the rights of accumulation, shareholders should contact a Smith Barney
Financial Consultant.
DETERMINATION OF PUBLIC OFFERING PRICE
The Growth Fund offers its shares to the public on a continuous basis. The
public offering price for a Class A share of the Growth Fund is equal to
the net asset value per share at the time of purchase plus an initial
sales charge based on the aggregate amount of the investment. The public
offering price for a Class B share, Class C share and Class Y share (and
Class A share purchases, including applicable rights of accumulation,
equalling or exceeding $500,000), is equal to the net asset value per
share at the time of purchase and no sales charge is imposed at the time
of purchase. A contingent deferred sales charge ("CDSC"), however, is im-
posed on certain redemptions of Class B shares, Class C shares and Class A
shares when purchased in amounts equalling or exceeding $500,000.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed
(a) for any period during which the NYSE is closed (other than for custom-
ary weekend or holiday closings), (b) when trading in the markets the
Growth Fund normally utilizes is restricted, or an emergency exists, as
determined by the SEC, so that disposal of the Growth Fund's investments
or determination of net asset value is not reasonably practicable, or (c)
for such other periods as the SEC by order may permit for the protection
of the Growth Fund's shareholders.
DISTRIBUTIONS IN KIND
If the Trust's Board of Trustees determines that it would be detrimental
to the best interests of the remaining shareholders of the Growth Fund to
make a redemption payment wholly in cash, the Trust may pay, in accordance
with SEC rules, any portion of a redemption in excess of the lesser of
$250,000 or 1% of the Growth Fund's net assets by a distribution in kind
of portfolio securities in lieu of cash. Portfolio securities issued as a
distribution in kind may incur brokerage commissions when shareholders
subsequently sell those securities.
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares of the Growth Fund with a value of at least
$10,000 ($5,000 for retirement plan accounts) and who wish to receive spe-
cific amounts of cash monthly or quarterly. Withdrawals of at least $50
monthly may be made under the Withdrawal Plan by redeeming as many shares
of the Growth Fund as may be necessary to cover the stipulated withdrawal
payment. Any applicable CDSC will not be waived on amounts withdrawn by
shareholders that exceed 1.00% per month of the value of a shareholder's
shares at the time the Withdrawal Plan commences. (With respect to With-
drawal Plans in effect prior to November 7, 1994, any applicable CDSC
waived on amounts withdrawn that do not exceed 2.00% per month of the
shareholder's shares are subject to a CDSC.) To the extent withdrawals ex-
ceed dividends, distributions and appreciation of a shareholder's invest-
ment in the Growth Fund, there will be a reduction in the value of the
shareholder's investment and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal payments
should not be considered as income from investment in the Growth Fund.
Furthermore, as it generally would not be advantageous to a shareholder to
make additional investments in the Growth Fund at the same time that he or
she is participating in the Withdrawal Plan, purchases by such sharehold-
ers in amounts of less than $5,000 ordinarily will not be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates
with TSSG as agent for Withdrawal Plan members. All dividends and distri-
butions on shares in the Withdrawal Plan are reinvested automatically at
net asset value in additional shares of the Growth Fund. Withdrawal Plans
should be set up with any Smith Barney Financial Consultant. A shareholder
who purchases shares directly through TSSG may continue to do so and ap-
plications for participation in the Withdrawal Plan must be received by
TSSG as Withdrawal Plan agent no later than the eighth day of the month to
be eligible for participation beginning with that month's withdrawal. For
additional information, shareholders should contact a Smith Barney Finan-
cial Consultant.
DISTRIBUTOR
Smith Barney serves as the Growth Fund's distributor on a best efforts
basis pursuant to a distribution agreement (the "Distribution Agreement")
dated July 30, 1993 which was most recently approved by the Trust's Board
of Trustees on July 21, 1994. For the fiscal years ended December 31,
1994, 1993 and 1992, Smith Barney and/or Shearson Lehman Brothers, the
Growth Fund's prior distributor, received $294,730, $593,003 and $39,333,
respectively, in sales charges from the sale of Growth Fund's Class A
shares and did not reallow any portion thereof to dealers. During the fis-
cal years ended December 31, 1994 and 1993, Smith Barney received
$1,038,991 and $68,168, respectively, representing the CDSC on redemptions
of Class B shares of the Growth Fund. No CDSC were received in respect of
the Growth Fund's Class B or Class C shares for the period from November
6, 1992 through December 31, 1992, and the period from November 7, 1994
through December 31, 1994, respectively.
When payment is made by the investor before the settlement date, unless
otherwise directed by the investor, the funds will be held as a free
credit balance in the investor's brokerage account and Smith Barney may
benefit from the temporary use of the funds. The investor may designate
another use for the funds prior to settlement date, such as an investment
in a money market fund (other than Smith Barney Exchange Reserve Fund) of
the Smith Barney Mutual Funds. If the investor instructs Smith Barney to
invest the funds in a Smith Barney money market fund, the amount of the
investment will be included as part of the average daily net assets of
both the Growth Fund and the Smith Barney money market fund, and affili-
ates of Smith Barney that serve the funds in an investment advisory or ad-
ministrative capacity will benefit from the fact that they are receiving
fees from both such investment companies for managing these assets com-
puted on the basis of their average daily net assets. The Trust's Board of
Trustees has been advised of the benefits to Smith Barney resulting from
these settlement procedures and will take such benefits into consideration
when reviewing the Advisory, Administration and Distribution Agreements
for continuance.
DISTRIBUTION ARRANGEMENTS
To compensate Smith Barney for the services it provides and for the ex-
pense it bears under the Distribution Agreement, the Growth Fund has
adopted a services and distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act. Under the Plan, the Growth Fund pays Smith Bar-
ney a service fee, accrued daily and paid monthly, calculated at the an-
nual rate of 0.25% of the value of the Growth Fund's average daily net as-
sets attributable to the Class A, Class B and Class C shares. In addition,
the Growth Fund pays a distribution fee with respect to Class B and Class
C shares primarily intended to compensate Smith Barney for its initial ex-
pense of paying Financial Consultants a commission upon sales of those
shares. The Class B and Class C distribution fee is calculated at the an-
nual rate of 0.75% of the value of the Growth Fund's average net assets
attributable to the shares of the respective Class.
For the period from November 6, 1992 through December 31, 1992, the Growth
Fund's Class A and Class B shares paid $13,307 and $131, respectively, in
service fees. For the same period, the Growth Fund's Class B shares paid
$393 in distribution fees. For the fiscal year ended December 31, 1993,
the Growth Fund's Class A and Class B shares paid $133,200 and $112,633,
respectively, in service fees. For the same period, the Growth Fund's
Class B shares paid $337,900 in distribution fees. For the fiscal year
ended December 31, 1994, the Growth Fund's Class A and Class B shares paid
$202,156 and $471,010, respectively, in service fees. For the same period,
the Growth Fund's Class B shares paid $1,413,030 in distribution fees. For
the period from November 7, 1994 through December 31, 1994, the Growth
Fund paid $32 and $96, respectively, in service and distribution fees for
its Class C shares. During the fiscal year ended December 31, 1994, Smith
Barney incurred distribution expenses totalling approximately $ ,
consisting of $ for support services, $ to Financial Con-
sultants, $ for advertising expenses, and $ for printing
and mailing expenses.
Under its terms, the Plan continues from year to year, provided such con-
tinuance is approved annually by vote of the Trust's Board of Trustees,
including a majority of the Trustees who are not interested persons of the
Trust and who have no direct or indirect financial interest in the opera-
tion of the Plan (the "Independent Trustees"). The Plan may not be amended
to increase the amount to be spent for the services provided by Smith Bar-
ney without shareholder approval, and all amendments of the Plan also must
be approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without penalty, by vote of a majority of the In-
dependent Trustees or by a vote of a majority of the outstanding voting
securities of the Growth Fund (as defined in the 1940 Act) on not more
than 30 days' written notice to any other party to the Plan. Pursuant to
the Plan, Smith Barney will provide the Trust's Board of Trustees with pe-
riodic reports of amounts expended under the Plan and the purpose for
which such expenditures were made.
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except days on which the NYSE is closed. The NYSE cur-
rently is scheduled to be closed on New Years's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. Because of the
differences in distribution fees and Class-specific expenses, the per
share net asset value of each Class may differ. The following is a de-
scription of the procedures used by the Growth Fund in valuing its assets.
A security which is listed or traded on more than one exchange is valued
at the quotation on the exchange determined to be the primary market for
such security. All assets and liabilities initially expressed in foreign
currency values will be converted into U.S. dollar values at the mean be-
tween the bid and offered quotations of such currencies against U.S. dol-
lars as last quoted by any recognized dealer. If such quotations are not
available, the rate of exchange will be determined in good faith by the
Trust's Board of Trustees. In carrying out the Board of Trustee's valua-
tion policies, SBMFM, as administrator, or Boston Advisors, as sub- admin-
istrator, may consult with an independent pricing service (the "Pricing
Service") retained by the Trust.
Debt securities of United States issuers (other than U.S. government secu-
rities and short-term investments) are valued by SBMFM, as administrator,
or Boston Advisors, as sub-administrator, after consultation with the
Pricing Service. When, in the judgment of the Pricing Service, quoted bid
prices for investments are readily available and are representative of the
bid side of the market, these investments are valued at the mean between
the quoted bid prices and asked prices. Investments for which, in the
judgment of the Pricing Service, there are no readily obtainable market
quotations are carried at fair value as determined by the Pricing Service.
The procedures of the Pricing Service are reviewed periodically by the of-
ficers of the Trust under the general supervision and responsibility of
the Trust's Board of Trustees.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund of the Smith Barney Mutual
Funds may exchange all or part of their shares for shares of the same
class of other funds of the Smith Barney Mutual Funds as listed in the
Prospectus, on the basis of relative net asset value per share at the time
of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may be
exchanged for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied. Class A shares of any
fund may be exchanged without a sales charge for shares of the funds
that are offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares sold with
a sales charge, and the appropriate sales charge differential will be
applied.
B. Class A shares of any fund acquired by a previous exchange of
shares purchased with a sales charge may be exchanged for Class A
shares of any of the other funds, and the sales charge differential,
if any, will be applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of the Growth Fund exchanged for Class B shares
of another fund will be subject to the higher applicable CDSC of the
two funds and, for purposes of calculating CDSC rates and conversion
periods, will be deemed to have been held since the date the shares
being exchanged were purchased.
Dealers other than Smith Barney must notify TSSG of the investor's prior
ownership of Class A shares of Smith Barney High Income Fund and the ac-
count number in order to accomplish an exchange of shares of Smith Barney
High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the same
Class in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision. This
privilege is available to shareholders resident in any state in which the
fund shares being acquired may legally be sold. Prior to any exchange, the
shareholder should obtain and review a copy of the current prospectus of
each fund into which an exchange is being considered. Prospectuses may be
obtained from a Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary supporting docu-
ments, shares submitted for exchange are redeemed at the then-current net
asset value, subject to any applicable CDSC, and the proceeds are immedi-
ately invested, at a price as described above, in shares of the fund being
acquired. Smith Barney reserves the right to reject any exchange request.
The exchange privilege may be modified or terminated at any time after
written notice to shareholders.
PERFORMANCE DATA
From time to time, the Growth Fund may quote its total return in adver-
tisements or in reports and other communications to shareholders. The
Growth Fund may include comparative performance information in advertising
or marketing the Growth Fund's shares. Such performance information may
include the following industry and financial publications: Barron's, Busi-
ness Week, CDA Investment Technologies, Inc., Changing Times, Forbes, For-
tune, Institutional Investor, Investors Daily, Money, Morningstar Mutual
Fund Values, The New York Times, USA Today and The Wall Street Journal. To
the extent any advertisement or sales literature of the Growth Fund de-
scribes the expenses or performance of a Class, it will also disclose such
information for the other Classes.
AVERAGE ANNUAL TOTAL RETURN
A Class' "average annual total return" figures, as described below, are
computed according to a formula prescribed by the SEC. The formula can be
expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The Growth Fund's average annual total return for its Class A shares was
as follows for the period indicated:
% for the one-year period beginning January 1, 1994, through December
31, 1994.
% per annum during the five-year period from January 1, 1990 through
December 31, 1994; and
% per annum during the ten-year period from January 1, 1985 through
December 31, 1994.
Class A's average annual total return figures assume that the maximum
sales charge or maximum applicable CDSC has been deducted from the hypo-
thetical investment. If the maximum applicable sales charge had not been
deducted at the time of purchase, Class A's average annual total return
for the same periods would have been %, % and %, respec-
tively.
The average annual total return for Class B shares was as follows for the
period indicated:
% for the one-year period beginning January 1, 1994, through December
31, 1994.
% per annum during the period the Growth Fund commenced selling Class
B shares (November 6, 1992) through December 31, 1994.
If the maximum applicable CDSC had not been deducted at the time of re-
demption, Class B's average annual total return for the same periods would
have been % and %, respectively.
The Growth Fund's average annual total return for its Class C shares was
as follows for the period indicated:
% for the period from November 7, 1994 through December 31, 1994.
If the maximum applicable CDSC had not been deducted at the time of re-
demption, Class C's average annual total return for the same period would
have been %.
AGGREGATE TOTAL RETURN
A Class' aggregate total return figures, as described below, represent the
cumulative change in the value of an investment in the Class of the Growth
Fund for the specified period and are computed by the following formula:
AGGREGATE TOTAL RETURN = ERV-P / P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000
investment made at the beginning of a 1-, 5- or
10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The Growth Fund's aggregate total return for its Class A shares was as
follows for the periods indicated:
% for the one-year period from January 1, 1994 through December 31,
1994.
% for the five-year period from January 1, 1990 through December 31,
1994; and
% for the ten-year period from January 1, 1985 through December 31,
1994.
Aggregate total return figures assume that the maximum sales charge or
maximum applicable CDSC has not been deducted from the investment. If the
maximum applicable sales charge had been deducted at the time of purchase,
Class A's aggregate total return for the same periods would have been
%, % and %, respectively.
The Growth Fund's aggregate total return for Class B shares was as follows
for the periods indicated:
% for the one-year period beginning January 1, 1994, through December
31, 1994.
% for the period from November 6, 1992 through December 31, 1994;
If the maximum applicable CDSC had been deducted at the time of redemp-
tion, Class B's aggregate total return for the same periods would have
been % and %, respectively.
The Growth Fund's aggregate total return for Class C shares was as follows
for the periods indicated:
% for the period from November 7, 1994 through December 31, 1994.
If the maximum applicable CDSC had been deducted at the time of redemp-
tion, Class C's aggregate total return for the same period would have been
%.
A Class' performance will vary from time to time depending upon market
conditions, the composition of the Growth Fund's portfolio and operating
expenses and the expenses exclusively attributable to the Class. Conse-
quently, any given performance quotation should not be considered repre-
sentative of the Class' performance for any specified period in the fu-
ture. Because performance will vary, it may not provide a basis for com-
paring an investment in the Class with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing the Class' performance with that of other mutual funds should
give consideration to the quality and maturity of the respective invest-
ment companies' portfolio securities.
TAXES
The following is a summary of selected Federal income tax considerations
that may affect the Growth Fund and its shareholders. The summary is not
intended as a substitute for individual tax planning, and investors are
urged to consult their own tax advisors as to the tax consequences of an
investment in the Growth Fund.
TAXATION OF THE GROWTH FUND
The Growth Fund has qualified and intends to continue to qualify each year
as a regulated investment company under the Code. As a regulated invest-
ment company, the Growth Fund will not be subject to Federal income tax on
its net investment income and net capital gains, if any, that it distrib-
utes to its shareholders, provided that at least 90% of its net investment
income for the taxable year is distributed. All net investment income and
net capital gains earned by the Growth Fund will be reinvested automati-
cally in additional shares of the same Class of the Growth Fund at net
asset value, unless the shareholder elects to receive dividends and dis-
tributions in cash.
To qualify as a regulated investment company, the Growth Fund must meet
certain requirements set forth in the Code. The Growth Fund is required to
earn at least 90% of its gross income from (a) interest, (b) dividends,
(c) payments with respect to securities loans, (d) gains from the sale or
other disposition of stock or securities and (e) other income derived with
respect to its business of investing in stock or securities (the "90%
Test"). The Growth Fund also must earn less than 30% of its gross income
from the sale or other disposition of stock or securities held for less
than three months (the "30% Test").
Generally, the Growth Fund's return on its investment will be considered
to be qualified income under the 90% Test. The 30% Test may limit the ex-
tent to which the Growth Fund may sell securities held less than three
months or covered call options.
TAX STATUS OF THE GROWTH FUND'S INVESTMENTS
Gain or loss on the sale of a security by the Growth Fund generally will
be long-term capital gain or loss if the Growth Fund has held the security
for more than one year. Gain or loss on the sale of a security held for
one year or less generally will be short-term capital gain or loss. Gener-
ally, if the Growth Fund acquires a debt security at a discount, any gain
on the sale or redemption of the security will be taxable as ordinary in-
come to the extent that such gain reflects accrued market discount.
The tax consequences of the Growth Fund's covered call option transactions
will depend on the nature of the underlying security. In the case of a
call option on an equity or convertible debt security, the Growth Fund
will receive a premium that will be treated for tax purposes as follows:
no income is recognized upon the receipt of an option premium; if the op-
tion expires unexercised or if the Growth Fund enters into a closing pur-
chase transaction, it will realize a gain (or a loss, if the cost of the
closing transaction exceeds the amount of the premium) without regard to
the unrealized gain or loss in the underlying security. Any such gain or
loss will be short-term, except that a loss will be long-term if the op-
tion exercise price is below market and the underlying stock has been held
for more than a year. If a call option is exercised, the Growth Fund will
recognize a capital gain or loss from the underlying security, and the op-
tion premium will constitute additional sales proceeds.
The Growth Fund will not recognize income on the receipt of an option pre-
mium on a debt security. Listed options on debt securities, however, are
subject to a special "mark-to-market" system governing the taxation of
"section 1256 contracts," which include listed options on debt securities
(including U.S. government securities), options on certain stock indexes
and certain foreign currencies. In general, gain or loss on section 1256
contracts will be taken into account for tax purposes when actually real-
ized. In addition, any section 1256 contracts held at the end of a taxable
year (and, for purposes of the 4% excise tax, on October 31 of each year)
will be treated as sold at fair market value (that is, marked-to-market),
and the resulting gain or loss will be recognized for tax purposes. Both
the realized and unrealized taxable year-end gain or loss positions will
be treated as 60% long-term and 40% short-term capital gain or loss, re-
gardless of the period of time that a particular position is actually held
by the Growth Fund.
TAXATION OF SHAREHOLDERS
Dividends of investment income and distributions of short-term capital
gain will be taxable to shareholders as ordinary income for Federal income
tax purposes, whether received in cash or reinvested in additional shares.
Distributions of long-term capital gain will be taxable to shareholders as
long-term capital gain, whether paid in cash or reinvested in additional
shares, and regardless of the length of time that the shareholder has held
his or her shares of the Growth Fund.
Dividends of investment income (but not distributions of capital gain)
from the Growth Fund generally will qualify for the Federal dividends-
received deduction for corporate shareholders to the extent that the divi-
dends do not exceed the aggregate amount of dividends received by the
Growth Fund from domestic corporations. If securities held by the Growth
Fund are considered to be "debt-financed" (generally, acquired with bor-
rowed funds) or are held by the Growth Fund for less than 46 days (91 days
in the case of certain preferred stock), the portion of the dividends paid
by the Growth Fund that corresponds to the dividends paid with respect to
the securities will not be eligible for the corporate dividends-received
deduction.
If the Growth Fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such dividends must
be included in the Growth Fund's gross income as of the later of (a) the
date that such stock became ex-dividend with respect to such dividends
(i.e., the date on which a buyer of the stock would not be entitled to re-
ceive the declared, but unpaid, dividends) or (b) the date that the Growth
Fund acquired such stock. Accordingly, in order to satisfy its income dis-
tribution requirements, the Growth Fund may be required to pay dividends
based on anticipated earnings, and shareholders may receive dividends in
an earlier year than would otherwise be the case.
If a shareholder (a) incurs a sales charge in acquiring or redeeming
shares of the Growth Fund, (b) disposes of those shares within 90 days and
(c) acquires shares in a mutual fund for which the otherwise applicable
sales charge is reduced by reason of a reinvestment right (i.e., exchange
privilege), the original sales charge increases the shareholder's tax
basis in the original shares only to the extent the otherwise applicable
sales charge for the second acquisition is not reduced. The disallowed
charge would be treated as incurred with respect to the second acquisition
and, as a general rule, would increase the shareholder's tax basis in the
newly acquired shares. Furthermore, the same rule also applies to a dispo-
sition of the newly acquired shares made within 90 days of the second ac-
quisition. This provision prevents a shareholder from immediately deduct-
ing the sales charge by shifting his or her investment in a family of mu-
tual funds.
Investors considering buying shares of the Growth Fund just prior to a
record date for a taxable dividend or capital gain distribution should be
aware that, regardless of whether the price of the Growth Fund shares to
be purchased reflects the amount of the forthcoming dividend or distribu-
tion payment, any such payment will be a taxable dividend or distribution
payment.
Capital Gains Distribution. In general, a shareholder who redeems or ex-
changes his or her shares will recognize long-term capital gain or loss if
the shares have been held for more than one year, and will recognize
short-term capital gain or loss if the shares have been held for one year
or less. If a shareholder receives a distribution taxable as long-term
capital gain with respect to shares of the Growth Fund and redeems or ex-
changes the shares before he or she has held them for more than six
months, however, any loss on the redemption or exchange that is less than
or equal to the amount of the distribution will be treated as a long-term
capital loss.
BACKUP WITHHOLDING
If a shareholder fails to furnish a correct taxpayer identification num-
ber, fails fully to report dividend or interest income, or fails to cer-
tify that he or she has provided a correct taxpayer identification number
and that he or she is not subject to such "backup withholding," then the
shareholder may be subject to a 31% backup withholding tax with respect to
(a) dividends and distributions and (b) the proceeds of any redemption of
Growth Fund shares. An individual's taxpayer identification number is his
or her social security number. The backup withholding tax is not an addi-
tional tax and may be credited against a shareholder's regular Federal in-
come tax liability.
ADDITIONAL INFORMATION
The Trust was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declara-
tion of Trust dated June 2, 1983. On June 27, 1985, the Fund filed with
the Commonwealth of Massachusetts an Amended and Restated Master Trust
Agreement. On November 5, 1992, the Fund filed with the Commonwealth of
Massachusetts a Second Amended and Restated Master Trust Agreement (the
"Trust Agreement"). The Trust and the Growth Fund commenced business under
the names of American Telecommunications Trust and Growth Portfolio
Shares, respectively. On October 4, 1989, August 27, 1990, July 30, 1993
and October 14, 1994, the Trust and the Growth Fund changed their names to
SLH Telecommunications Trust and SLH Telecommunications Growth Fund,
Shearson Lehman Brothers Telecommunications Trust and Telecommunications
Growth Fund, Smith Barney Shearson Telecommunications Trust and Smith Bar-
ney Shearson Telecommunications Growth Fund, and Smith Barney Telecommuni-
cations Trust and Smith Barney Telecommunications Growth Fund, respec-
tively.
Boston Safe, an indirect wholly owned subsidiary of Mellon, is located at
One Boston Place, Boston, Massachusetts 02108, and serves as the custodian
of the Trust pursuant to a custody agreement. Under the custody agreement,
Boston Safe holds the Trust's portfolio securities and keeps all necessary
accounts and records. For its services, Boston Safe receives a monthly fee
based upon the month-end market value of securities held in custody and
also receives securities transaction charges, including out-of-pocket ex-
penses. Boston Safe is authorized to establish separate accounts for for-
eign securities owned by the Trust to be held with foreign branches of
other United States banks as well as with certain foreign banks and secu-
rities depositories. The assets of the Trust are held under bank custodi-
anship in compliance with the 1940 Act.
TSSG is located at Exchange Place, Boston, Massachusetts 02019, and serves
as the Trust's transfer agent. Under the transfer agency agreement, TSSG
maintains the shareholder account records for the Trust, handles certain
communications between shareholders and the Trust and distributes divi-
dends and distributions payable by the Trust and produces statements with
respect to account activity for the Trust and its shareholders. For these
services, TSSG receives a monthly fee computed on the basis of the number
of shareholder accounts that it maintains for the Trust during the month
and is reimbursed for out-of-pocket expenses.
FINANCIAL STATEMENTS
The Growth Fund's Annual Report for the fiscal year ended December 31,
1994 accompanies this Statement of Additional Information and is incorpo-
rated herein by reference in its entirety.
APPENDIX
The following is a description of the two highest ratings categories of
NRSROs for commercial paper.
The rating A-1 is the highest commercial paper rating assigned by S&P.
Paper rated A-1 must have either the direct credit support of an issuer or
guarantor that possesses excellent long-term operating and financial
strength combined with strong liquidity characteristics (typically, such
issuers or guarantors would display credit quality characteristics which
would warrant a senior bond rating of AA- or higher), or the direct credit
support of an issuer or guarantor that possesses above-average long-term
fundamental operating and financing capabilities combined with ongoing ex-
cellent liquidity characteristics. Paper rated A-1 must have the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated A or better; the issuer has access to at
least two additional channels of borrowing; basic earnings and cash flow
have an upward trend with allowance made for unusual circumstances; typi-
cally, the issuer's industry is well established and the issuer has a
strong position within the industry; and the reliability and quality of
management are unquestioned.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are
the following: (a) evaluation of the management of the issuer; (b) eco-
nomic evaluation of the issuer's industry or industries and an appraisal
of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and cus-
tomer acceptance; (d) liquidity; (e) amount and quality of long-term debt;
(f) trend of earnings over a period of ten years; (g) financial strength
of a parent company and the relationships which exist with the issuer; and
(h) recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.
Short-term obligations including commercial paper, rated A-1+ by IBCA Lim-
ited or its affiliate IBCA Inc., are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong
capacity for timely repayment. Obligations rated A-2 have a strong capac-
ity for timely repayment, although such capacity may be susceptible to ad-
verse changes in business, economic or financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to indicate issues
regarded as having the strongest degree of assurance for timely payment.
The rating F-1 reflects an assurance of timely payment only slightly less
in degree than issues rated F-1+, while the rating F-2 indicates a satis-
factory degree of assurance for timely payment, although the margin of
safety is not as great as indicated by the F-1+ and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with respect to top
grade commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payments: short-term liquidity is clearly out-
standing, and safety is just below risk-free U.S. Treasury short-term ob-
ligations. Duff 1 - indicates high certainty of timely payment. Duff 2 in-
dicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
The Thomson BankWatch ("TBW") Short-Term Ratings apply to commercial
paper, other senior short-term obligations and deposit obligations of the
entities to which the rating has been assigned, and apply only to unse-
cured instruments that have a maturity of one year or less.
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
388 Greenwich Street
New York, New York 10013
Smith Barney
TELECOMMUNICATIONS
GROWTH FUND
STATEMENT OF
ADDITIONAL INFORMATION
MAY 1, 1995
SMITH BARNEY
A Member of Travelers Group
SMITH BARNEY
TELECOMMUNICATIONS INCOME FUND
388 Greenwich Street , New York, New York 10013 -
(212) 723 -9218
STATEMENT OF ADDITIONAL INFORMATION May 1, 1995
This Statement of Additional Information expands upon and
supplements the information contained in the current Prospectus of
Smith Barney Telecommunications Income Fund (the "Income
Fund") of Smith Barney Telecommunications Trust (the
"Trust"), dated May 1, 1995 , as amended or supplemented from
time to time, and should be read in conjunction with the Prospectus
of the Income Fund, one of two portfolios of the Trust. The other
portfolio is the Smith Barney Telecommunications Growth Fund
(the "Growth Fund"). The Income Fund's Prospectus may be obtained
from a Smith Barney Financial Consultant or by
writing or calling the Trust at the address or telephone number set
forth above. This Statement of Additional Information, although not
in itself a prospectus, is incorporated by reference into the
Prospectus in its entirety.
CONTENTS
For ease of reference the same section headings are used in
both the Prospectus and the Statement of Additional Information,
except where shown below.
Management of the Income Fund and the Trust 2
Investment Objective and Management Policies 7
Redemption of Shares 17
Valuation of Shares 17
Exchange Privilege 18
Taxes (See in the Prospectus "Dividends, Distributions
and Taxes") 19
Additional Information 21
Financial Statements 21
Appendix 22
MANAGEMENT OF THE INCOME FUND AND THE TRUST
The executive officers of the Trust are employees of certain
of the organizations that provide services to the Trust. These
organizations are as follows:
Name Service
Smith Barney Inc.
("Smith Barney")
..............................................................
Distributor
Smith Barney Strategy Advisers Inc.
("SBSA")
....................................................................
..... Investment Adviser
Smith Barney Mutual Funds Management Inc.
("SBMFM")
....................................................................
. Administrator
The Boston Company Advisors, Inc. Sub-
Investment
("Boston Advisors") Adviser and
Sub-Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation Transfer Agent
These organizations and the functions they perform for the
Trust are discussed in the Prospectus and in this Statement of
Additional Information.
Trustees of the Trust and Executive Officers of the Income Fund
The Trustees of the Trust and executive officers of the Income
Fund, together with information as to their principal business
occupations during the past five years, are set forth below. Each
Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), is
indicated by an asterisk.
Paul R. Ades, Trustee (age 54) . Partner in the law
firm of Murov & Ades. His address is 272 South Wellwood Avenue,
Lindenhurst, New York 11757.
Herbert Barg, Trustee (age 71) . Private investor. His
address is 273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Alger B. Chapman, Trustee (age 63). Chairman and Chief
Operating Officer of the Chicago Board of Options Exchange. His
address is Chicago Board of Options Exchange, LaSalle at Van Buren,
Chicago, Illinois 60605.
Dwight B. Crane, Trustee (age 57). Professor, Graduate
School of Business Administration, Harvard University; a Director of
Peer Review Analysis, Inc. His address is Graduate School of
Business Administration, Harvard University, Boston, Massachusetts
02163.
Frank G. Hubbard, Trustee (age 59). Corporate Vice
President, Materials Management and Marketing Services of Huls
America, Inc. His address is 80 Centennial Drive P.O. Box 456,
Piscataway, New Jersey 08855-0456.
Allan R. Johnson, Trustee (age 78) . Retired; former
Chairman, Retail Division of BATUS, Inc., and Chairman and Chief
Executive Officer of Saks Fifth Avenue, Inc. His address is
2 Sutton Place South, New York, New York 10022.
*Heath B. McLendon, Chairman of the Board and Investment
Officer (age 61) . Managing Director of Smith Barney,
Chairman of SBSA and President of SBMFM ; prior to July 1993,
Senior Executive Vice President of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"); Vice Chairman of Shearson Asset
Management, a Director of PanAgora Asset Management, Inc. and
PanAgora Asset Management Limited. His address is 388 Greenwich
Street, New York, New York 10013 .
Ken Miller, Trustee (age 53). President of Young Stuff
Apparel Group, Inc. His address is 1407 Broadway, 6th Floor,
New York, New York 10018.
John F. White, Trustee (age 77). President Emeritus of The
Cooper Union for the Advancement of Science and Art; Special
Assistant to the President of the Aspen Institute. His address is
Crows Nest Road, Tuxedo Park, New York 10987 .
Jessica M. Bibliowicz, President (age 35). Executive Vice
President of Smith Barney; prior to 1994, Director of Sales and
Marketing for Prudential Mutual Funds; prior to 1990, First Vice
President, Asset Management Division of Shearson Lehman Brothers.
(Ms. Bibliowicz also serves as President of 26 other funds of the
Smith Barney Mutual Funds.) Her address is 388 Greenwich Avenue,
New York, New York 10013.
Guy R. Scott, Investment Administrator (age 55). Senior
Vice President of Boston Advisors; Senior Vice President and
Equity Portfolio Manager of The Boston Company Asset
Management, Inc.; and, Officer of Mellon Bank Corporation
("Mellon") ; prior to December 1990, Vice President of The Boston
Company Institutional Investors, Inc. His address is One Boston
Place, Boston, Massachusetts 02108.
Lewis E. Daidone, Senior Vice President and Treasurer (age
37). Managing Director of Smith Barney; Chief Financial Officer of
the Smith Barney Mutual Funds; Director and Senior Vice President of
SBMFM. (Mr. Daidone also serves as Senior Vice President and
Treasurer of 41 other funds of the Smith Barney Mutual Funds.) His
address is 388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (age 44). Managing Director
of Smith Barney; General Counsel and Secretary of SBMFM. (Ms. Sydor
also serves as Secretary of 41 other funds of the Smith Barney
Mutual Funds.) Her address is 388 Greenwich Street, New York, New
York 10013.
Each Trustee also serves as a director, trustee and/or
individual general partner of certain other mutual funds for which
Smith Barney serves as distributor. The Trustees and officers of
the Trust, as a group, owned less than 1.00% of the Income Fund's
outstanding shares as of April 15, 1995 .
No officer, director or employee of Smith Barney or any
parent or subsidiary , receives any compensation from the Trust
for serving as an officer or Trustee of the Trust. The Trust pays
each Trustee who is not a director, officer or employee of Smith
Barney or any of its affiliates a fee of $4,500 per annum
plus $250 per meeting attended and reimburses them for travel and
out-of-pocket expenses. For the fiscal year ended December 31,
1994 , such fees and expenses totalled $18,408 .
For the calendar year ended December 31, 1994, the Trustees
of the Income Fund were paid the following compensation:
Trustee (*)
Aggregate Compensation
from the Income Fund
Aggregate Compensation
from the Smith Barney
Mutual Funds
Paul R. Ades
(4).................
....
$3,000
$ 42,750
Herbert Barg
(11)................
...
3,000
77,850
Alger B. Chapman
(5)............
812.50
34,125
Dwight B. Crane
(18).............
812.50
125,975
Frank G. Hubbard
(3).............
812.50
37,125
Allan Johnson
(4).................
..
3,000
72,750
Heath B. McLendon
(29).......
N/A
N/A
Ken Miller
(4).................
.......
3,000
49,250
John F. White
(4).................
..
3,000
72,250
__________________
(*) Number of director/trusteeships held with other mutual
funds in the Smith Barney Mutual Funds family.
Investment Adviser -- SBSA
SBSA serves as investment adviser to the Income Fund
pursuant to a written agreement dated June 16, 1994 (the
"Advisory Agreement"), which was first approved by the
Trust's Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust or SBSA , on
April 21, 1994 and by shareholders on June 15, 1994 . SBSA
pays the salary of any officer and employee who is employed by both
it and the Income Fund. The services provided by SBSA under the
Advisory Agreement are described in the Prospectus under "Management
of the Trust and the Income Fund." SBSA bears all expenses in
connection with the performance of its services. SBSA is a wholly
owned subsidiary of Smith Barney Holdings Inc. ("Holdings").
Holdings is a wholly owned subsidiary of The Travelers Inc.
("Travelers").
As compensation for investment advisory services rendered,
the Income Fund pays SBSA a fee computed daily and paid monthly at
the annual rate of 0.55% of the Income Fund's average daily net
assets. For the fiscal period from June 16, 1994 through December
31, 1994, the Income Fund paid SBSA $ in investment advisory
fees.
Sub-Investment Adviser -- Boston Advisors
Boston Advisors serves as sub-investment adviser to the
Income Fund pursuant to a written agreement dated June 16, 1994 (the
"Sub-Advisory Agreement"), which was first approved by the Trust's
Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Income Fund or Boston Advisors, on April
21, 1994 and by shareholders on June 15, 1994. Boston Advisors is a
wholly owned subsidiary of Mellon. Prior to June 16, 1994, Boston
Advisors acted in the capacity of the Income Fund's investment
adviser.
As compensation for sub-investment advisory services
rendered, SBSA pays Boston Advisors a monthly fee at the annual rate
of 0.275% of the value of the Income Fund's average daily net
assets. For the fiscal year ended December 31, 1994, Boston
Advisors received $ in investment advisory and/or sub-
investment advisory fees.
Administrator -- SBMFM
SBMFM serves as administrator to the Income Fund pursuant
to a written agreement dated April 21, 1994 (the "Administration
Agreement"), which was first approved by the Trust's Board of
Trustees including a majority of the Trustees who are not
"interested persons" of the Income Fund or SBMFM, on April 21, 1994.
The services provided by SBMFM under the Administration Agreement
are described in the Prospectus under "Management of the Trust and
the Income Fund." SBMFM pays the salary of any officer and employee
who is employed by both it and the Income Fund and bears all
expenses in connection with the performance of its services.
As compensation for administrative services rendered to the
Income Fund, SBMFM receives a fee at the annual rate of 0.20% of the
value of the Income Fund's average daily net assets. For the fiscal
period from April 21, 1994 through December 31, 1994, the Income
Fund paid SBMFM $ in administration fees.
Sub-Administrator -- Boston Advisors
Boston Advisors also serves as sub-administrator to the
Income Fund pursuant to a written agreement dated April 21, 1994
(the "Sub-Administration Agreement"), which was first approved by
the Trust's Board of Trustees, including a majority of the Trustees
who are not "interested persons" of the Trust or Boston Advisors, on
April 21, 1994. As compensation for Boston Advisors' services
rendered to the Income Fund, Boston Advisors is paid a portion of
the administration fee paid by the Income Fund to SBMFM at a rate
agreed upon from time to time between Boston Advisors and SBMFM.
Prior to April 21, 1994, Boston Advisors served as the
Income Fund's administrator and received a fee computed daily and
paid monthly at the annual rate of 0.75% of the value of the Income
Fund's average daily net assets. For the 1994, 1993 and 1992 fiscal
years, Boston Advisors received $ , $ and $ ,
respectively, in administration and/or sub-administration fees.
Certain of the services provided the Income Fund by Boston
Advisors are described in the Prospectus under "Management of the
Trust and the Income Fund." In addition to those services,
Boston Advisors pays the salaries of all officers and employees who
are employed by both it and the Income Fund, maintains office
facilities for the Income Fund, furnishes the Income Fund with
statistical and research data, clerical help and accounting, data
processing, bookkeeping, internal auditing and legal services and
certain other services required by the Income Fund, prepares reports
to the Income Fund's shareholders and prepares tax returns, reports
to and filings with the Securities and Exchange Commission (the
"SEC") and state Blue Sky authorities. Boston Advisors bears all
expenses in connection with the performance of its services.
The Income Fund bears expenses incurred in its operation,
including taxes, interest, brokerage fees and commissions, if any;
fees of Trustees who are not officers, directors, shareholders or
employees of Smith Barney or Boston Advisors; SEC fees and
state Blue Sky qualification fees; charges of custodians; transfer
and dividend disbursing agents' fees; certain insurance premiums;
outside auditing and legal expenses; investor services (including
allocated telephone and personnel expenses); and costs of
preparation and printing of prospectuses for regulatory purposes and
for distribution to existing shareholders, shareholders' reports and
meetings.
SBMFM and Boston Advisors have agreed that if in any
fiscal year the aggregate expenses of the Income Fund (including
fees paid pursuant to the Advisory , Sub-Advisory, Administration
and Sub-Administration Agreements , but excluding interest,
taxes, brokerage fees paid pursuant to the Income Fund's services
and distribution plan, and, with the prior written consent of the
necessary state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over
the Income Fund, SBMFM and Boston Advisors will , to the
extent required by law, reduce their management fees by the amount
of such excess expense, such amount to be allocated between them in
the proportion that their respective fees bear to the aggregate of
such fees paid by the Income Fund to the extent required by law.
Such fee reduction, if any, will be estimated and reconciled on a
monthly basis. The most restrictive state expense limitation
applicable to the Income Fund would require SBMFM and Boston
Advisors to reduce their fees in any year that such excess
expenses exceed 2.50% of the first $30 million of average daily net
assets, 2.00% of the next $70 million of average daily net assets
and 1.50% of the remaining average daily net assets. No fee
reduction was required for the Income Fund for the 1994, 1993 and
1992 fiscal years.
Counsel and Auditors
Willkie Farr & Gallagher serves as counsel to the Trust. The
Trustees who are not "interested persons" of the Trust have selected
Stroock & Stroock & Lavan as their counsel.
KPMG Peat Marwick LLP, independent accountants, 345 Park
Avenue, New York, New York 10154 have been selected to serve as
auditors of the Trust and will render an opinion on the Trust's
financial statements for the fiscal year ending December 31, 1995.
Coopers & Lybrand L.L.P., independent accountants, One Post Office
Square, Boston, Massachusetts 02109, served as auditors of the Trust
and rendered an opinion on the Trust's financial statements for the
fiscal year ended December 31, 1994.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Income Fund's investment
objective and the policies it employs to achieve that objective.
The following discussion supplements the description of the Income
Fund's investment objective and policies in the Prospectus.
Lending of Portfolio Securities
The Income Fund has the ability to lend its portfolio
securities to brokers, dealers and other financial organizations.
These loans may not exceed 33 1/3% of the Income Fund's assets taken
at value. The Income Fund may not lend portfolio securities to
Smith Barney or its affiliates without specific authority to
do so from the SEC.
Requirements of the SEC, which may be subject to future
modifications, currently provide that the following conditions must
be met whenever the Income Fund's securities are loaned: (a) the
Income Fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities rises above
the level of such collateral; (c) the Income Fund must be able to
terminate the loan at any time; (d) the Income Fund must receive
reasonable interest on the loan, as well as an amount equal to any
dividends, interest or other distributions on the loaned securities
and any increase in market value; (e) the Income Fund may pay only
reasonable custodian fees in connection with the loan; and (f)
voting rights on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely affecting the
investment in the loaned securities occurs, the Trust's Board of
Trustees must terminate the loan and regain the right to vote the
securities. From time to time, the Income Fund may return a part of
the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party, which is
unaffiliated with the Income Fund or with Smith Barney , and
which is acting as a "finder."
The limit of 33 1/3% of the Income Fund's total assets to be
committed to securities lending is a fundamental policy of the
Income Fund, which means that it cannot be changed without approval
of a majority of the Income Fund's outstanding shares. See
"Investment Restrictions" below.
Money Market Instruments
The Income Fund may invest without limit in short-term money
market instruments when SBSA and/or Boston Advisors believes
that a "defensive" investment posture is advisable due to market or
economic conditions. Money market instruments in which the Income
Fund may invest include obligations issued or guaranteed by the
United States government, its agencies or instrumentalities ("U.S.
government securities"); certificates of deposit ("CDs"), time
deposits ("TDs") and bankers' acceptances issued by domestic banks
(including their branches located outside the United States and
subsidiaries located in Canada), domestic branches of foreign banks,
savings and loan associations and similar institutions; high grade
commercial paper; and repurchase agreements with respect to the
foregoing types of instruments. The following is a more detailed
description of such money market instruments.
Bank Obligations. CDs are short-term negotiable obligations of
commercial banks; TDs are non-negotiable deposits maintained in
banking institutions for specified periods of time at stated
interest rates; and bankers' acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with
international transactions.
Domestic commercial banks organized under Federal law are
supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be
insured by the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and examined
by state banking authorities but are members of the Federal Reserve
System only if they elect to join. Most state banks are insured by
the FDIC (although such insurance may not be of material benefit to
the Income Fund, depending upon the principal amount of CDs of each
bank held by the Income Fund) and are subject to Federal examination
and to a substantial body of Federal law and regulation. As a
result of governmental regulations, domestic branches of domestic
banks, among other things, generally are required to maintain
specified levels of reserves, and are subject to other supervision
and regulation designed to promote financial soundness.
Obligations of foreign branches of domestic banks, such as CDs
and TDs, may be general obligations of the parent bank in addition
to the issuing branch, or may be limited by the terms of a specific
obligation and governmental regulations. Such obligations are
subject to different risks than are those of domestic banks or
domestic branches of foreign banks. These risks include foreign
economic and political developments, foreign governmental
restrictions that may adversely affect payment of principal and
interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches of
domestic banks are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting,
auditing and financial recordkeeping requirements. In addition,
less information may be publicly available about a foreign branch of
a domestic bank than about a domestic bank. CDs issued by wholly
owned Canadian subsidiaries of domestic banks are guaranteed as to
repayment of principal and interest (but not as to sovereign risk)
by the domestic parent bank.
Obligations of domestic branches of foreign banks may be
general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and
by Federal and state regulation as well as governmental action in
the country in which the foreign bank has its head office. A
domestic branch of a foreign bank with assets in excess of $1
billion may or may not be subject to reserve requirements imposed by
the Federal Reserve System or by the state in which the branch is
located if the branch is licensed in that state. In addition,
branches licensed by the Comptroller of the Currency and branches
licensed by certain states ("State Branches") may or may not be
required to: (a) pledge to the regulator by depositing assets with
a designated bank within the state, an amount of its assets equal to
5% of its total liabilities; and (b) maintain assets within the
state in an amount equal to a specified percentage of the aggregate
amount of liabilities of the foreign bank payable at or through all
of its agencies or branches within the state. The deposits of State
Branches may not necessarily be insured by the FDIC. In addition,
there may be less publicly available information about a domestic
branch of a foreign bank than about a domestic bank.
In view of the foregoing factors associated with the purchase
of CDs and TDs issued by foreign branches of domestic banks or by
domestic branches of foreign banks, SBSA and/or Boston
Advisors will carefully evaluate such investments on a case-by-case
basis.
Savings and loan associations, the CDs of which may be
purchased by the Income Fund, are supervised by the Office of Thrift
Supervision and are insured by the Savings Association Insurance
Fund which is administered by the FDIC and is backed by the full
faith and credit of the United States government. As a result, such
savings and loan associations are subject to regulation and
examination.
Commercial Paper. Commercial paper is a short-term, unsecured
negotiable promissory note of a domestic or foreign company. When
investing for defensive purposes, the Income Fund may invest in
short-term debt obligations of issuers that at the time of purchase
are rated A-2, A-1 or A-1+ by Standard & Poor's Corporation ("S&P")
or Prime-2 or Prime-l by Moody's Investors Service, Inc, ("Moody's")
or, if unrated, are issued by companies having an outstanding
unsecured debt issue currently rated within the two highest ratings
of S&P or Moody's. A discussion of S&P and Moody's rating
categories appears in the Appendix to this Statement of Additional
Information. The Income Fund also may invest in variable rate
master demand notes, which typically are issued by large corporate
borrowers providing for variable amounts of principal indebtedness
and periodic adjustments in the interest rate according to the terms
of the instrument. Demand notes are direct lending arrangements
between the Income Fund and an issuer, and are not normally traded
in a secondary market. The Income Fund, however, may demand payment
of principal and accrued interest at any time. In addition, while
demand notes generally are not rated, their issuers must satisfy the
same criteria as those set forth above for issuers of commercial
paper. SBSA and/or Boston Advisors will consider the earning
power, cash flow and other liquidity ratios of issuers of demand
notes and continually will monitor their financial ability to meet
payment on demand.
Convertible Securities
Convertible securities are fixed-income securities that may be
converted at either a stated price or stated rate into underlying
shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities.
Although to a lesser extent than with fixed-income securities,
generally the market value of convertible securities tends to
decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the
conversion feature, the market value of convertible securities tends
to vary with fluctuations in the market value of the underlying
common stocks and, therefore, also will react to variations in the
general market for equity securities. A unique feature of
convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market
value declines to the same extent as the underlying common stock.
When the market price of the underlying common stock increases, the
prices of the convertible securities tend to rise as a reflection of
the value of the underlying common stock. While no securities
investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the
same issuer.
As fixed-income securities, convertible securities are
investments that provide for a stable stream of income with
generally higher yields than common stocks. Of course, like all
fixed-income securities, there can be no assurance of current income
because the issuers of the convertible securities may default on
their obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of
similar quality because of the potential for capital appreciation.
A convertible security, in addition to providing fixed income,
offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the
market price of the underlying common stock. There can be no
assurance of capital appreciation, however, because securities
prices fluctuate.
Convertible securities generally are subordinated to other
similar but non-convertible securities of the same issuer, although
convertible bonds, as corporate debt obligations, enjoy seniority in
right of payment to all equity securities, and convertible preferred
stock is senior to common stock, of the same issuer. Because of the
subordination feature, however, convertible securities typically
have lower ratings than similar non-convertible securities.
Preferred Stock
Preferred stocks, like debt obligations, are generally fixed-
income securities. Shareholders of preferred stocks normally have
the right to receive dividends at a fixed rate when and as declared
by the issuer's board of directors, but do not participate in other
amounts available for distribution by the issuing corporation.
Dividends on preferred stock may be cumulative, and all cumulative
dividends usually must be paid prior to common shareholders
receiving any dividends. Preferred stock dividends must be paid
before common stock dividends and for that reason, preferred stocks
generally entail less risk than common stocks. Upon liquidation,
preferred stocks are entitled to a specified liquidation preference,
which is generally the same as the par or stated value, and are
senior in right of payment to common stock. Preferred stocks are,
however, equity securities in the sense that they do not represent a
liability of the issuer and therefore do not offer as great a degree
of protection of capital or assurance of continued income as
investments in corporate debt securities. In addition, preferred
stocks are subordinated in right of payment to all debt obligations
and creditors of the issuer, and convertible preferred stocks may be
subordinated to other preferred stock of the same issuer.
Covered Call Options
The Income Fund may, to a limited extent, write covered call
option contracts on certain securities and purchase call options for
the purpose of terminating their outstanding obligations with
respect to securities upon which call option contracts have been
written.
The principal reason for writing covered call options on
securities is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the securities
alone. In return for a premium, the writer of a covered call option
forfeits the right to any appreciation in the value of the
underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in the
price of the underlying security. The size of the premiums that the
Income Fund may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or
increase their option-writing activities.
Options written by the Income Fund normally will have
expiration dates between three and nine months from the date that
they are written. The exercise price of the options may be below,
equal to or above the market values of the underlying securities at
the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-
money" and "out-of-the-money," respectively. The Income Fund may
write (a) in-the-money call options when SBSA and/or Boston
Advisors expects that the price of the underlying security will
remain flat or decline moderately during the option period, (b) at-
the-money call options when SBSA and/or Boston Advisors
expects that the price of the underlying security will remain flat
or advance moderately during the option period and (c) out-of-the-
money call options when SBSA and/or Boston Advisors expects
that the premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the
exercise price will be greater than the appreciation in the price of
the underlying security alone. In any of the preceding situations,
if the market price of the underlying security declines, and the
security is sold at this lower price, the amount of any realized
loss will be offset wholly or in part by the premium received.
So long as the obligation of the Income Fund as the writer of
an option continues, the Income Fund may be assigned an exercise
notice by the broker-dealer through which the option was sold,
requiring the Income Fund to deliver the underlying security against
payment of the exercise price. This obligation terminates when the
option expires or the Income Fund effects a closing purchase
transaction. The Income Fund can no longer effect a closing
purchase transaction with respect to an option once it has been
assigned an exercise notice. To secure its obligation to deliver
the underlying security when it writes a call option, the Income
Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the national
securities exchange on which the option is written.
An option position may be closed out only where there exists a
secondary market for an option for the same series on a recognized
national securities exchange or in the over-the-counter market. The
Income Fund expects to write options only on national securities
exchanges.
The Income Fund may realize a profit or loss upon entering
into a closing transaction. In cases where the Income Fund has
written an option, it will realize a profit if the cost of the
closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the
closing purchase transaction exceeds the premium received upon
writing the original option.
Although the Income Fund generally will write only those
options for which SBSA and/or Boston Advisors believes there
is an active secondary market so as to facilitate closing
transactions, there is no assurance that sufficient trading interest
to create a liquid secondary market on a securities exchange will
exist for any particular option or at any particular time, and for
some options no such secondary market may exist. A liquid secondary
market in an option may cease to exist for a variety of reasons. In
the past, for example, higher than anticipated trading activity or
order flow, or other unforeseen events, have at times rendered
certain of the facilities of the Clearing Corporation and the
national securities exchanges inadequate and resulted in the
institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that
similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such
event, it might not be possible to effect closing transactions in
particular options. If as a covered call option writer the Income
Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying
security upon exercise.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which
may be held or written, or exercised within certain time periods, by
an investor or group of investors acting in concert (regardless of
whether the options are written on the same or different national
securities exchanges or are held, written or exercised in one or
more accounts or through one or more brokers). It is possible that
the Income Fund and other clients of SBSA and/or Boston
Advisors and certain of their affiliates may be considered to be
such a group. A national securities exchange or the National
Association of Securities Dealers, Inc. may order the liquidation of
positions found to be in violation of these limits and it may impose
certain other sanctions. At the date of this Statement of
Additional Information, the position and exercise limits for common
stocks generally were 3,000, 5,500 or 8,000 options per stock (i.e.,
options representing, 300,000, 550,000 or 800,000 shares), depending
on various factors relating to the underlying security and the
Income Fund's combined stock and option position. Dollar amount
limits apply to U.S. government securities. These limits may
restrict the number of options which the Income Fund will be able to
write on a particular security.
Call options may be purchased by the Income Fund but only to
terminate an obligation as a writer of a call option. This is
accomplished by making a "closing purchase transaction," (i.e., the
purchase of a call option on the same security with the same
exercise price and expiration date as specified in the call option
which had previously been written). A closing purchase transaction
with respect to calls traded on a national securities exchange has
the effect of extinguishing the obligation of a writer. Although
the cost to the Income Fund of such a transaction may be greater
than the net premium received by the Income Fund upon writing the
original option, the Trust's Board of Trustees believes that it is
appropriate for the Income Fund to have the ability to make closing
purchase transactions in order to limit the risks involved in
writing options. SBSA and/or Boston Advisors also may permit
the call option to be exercised.
Investment Restrictions
The Income Fund has adopted the following investment
restrictions for the protection of shareholders. Investment
restrictions l through 7 below cannot be changed without approval by
the holders of a majority of the outstanding shares of the Income
Fund, defined as the lesser of (a) 67% or more of the voting
securities present or represented by proxy at a meeting if the
holders of more than 50% of the outstanding voting securities of the
Income Fund are present or represented by proxy or (b) more than 50%
of the outstanding shares of the Income Fund. Investment
restrictions 8 through 17 may be changed by vote of a majority of
the Trustees at any time. If any percentage restriction described
below is complied with at the time of an investment, a later
increase or decrease in the percentage resulting from a change in
the values of assets will not constitute a violation of the
restriction.
The Income Fund may not:
(1) Invest less than 65% of the value of its total assets in
the telecommunications industry under normal market conditions as
determined by SBSA and/or Boston Advisors, as described under
"Investment Objective and Management Policies" in the Prospectus.
(2) Purchase or sell real estate, real estate mortgages, real
estate investment trust securities, commodities or commodity
contracts, but this shall not prevent the Income Fund from (a)
investing in securities of issuers engaged in the real estate
business 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 (c) trading in futures
contracts and options on futures contracts.
(3) Engage in the business of underwriting securities issued
by other persons, except to the extent that the Income Fund may
technically be deemed to be an underwriter under the Securities Act
of 1933, as amended, (the "1933 Act") in disposing of portfolio
securities.
(4) Make loans. This restriction does not apply to: (a) the
purchase of debt obligations in which the Income Fund may invest
consistent with its investment objective and policies, (b)
repurchase agreements; and (c) loans of its portfolio securities.
(5) Borrow money, except that the Income 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, in an amount not exceeding 10%
of the value of the Income Fund's total assets (including the amount
borrowed) valued at market less liabilities (not including the
amount borrowed) at the time the borrowing is made. Whenever
borrowings exceed 5% of the value of the Income Fund's total assets,
the Income Fund will not make any additional investments.
(6) Purchase the securities of any issuer (except U.S.
government securities) if, as a result of such purchase, more than
10% of any class of securities or of the outstanding voting
securities of such issuer would be held in the Income Fund; for this
purpose, all securities of an issuer shall be divided into three
classes, namely, all debt securities, all preferred stock and all
common stock.
(7) Issue senior securities as defined in the 1940 Act and any
rules and orders thereunder, except insofar as the Income Fund may
be deemed to have issued Senior Securities by reason of (a)
borrowing money or purchasing securities on a when-issued or
delayed-delivery basis, (b) purchasing or selling futures contracts
and options on futures contracts and other similar instruments and
(c) issuing separate classes of shares.
(8) Purchase for any portfolio securities subject to
restrictions on disposition under the 1933 Act ("restricted
securities"), or securities without readily available market
quotations, if the purchase causes more than 10% of such portfolio's
assets to be invested in restricted securities, securities without
readily available market quotations and repurchase agreements
maturing in more than seven days.
(9) Purchase securities of companies for the purpose of
exercising control.
(10) Purchase securities on margin (except short-term credits
as are necessary for the clearances 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 Income Fund of initial or maintenance margin in connection
with futures contracts and related options and options on securities
is not considered to be the purchases of a security on margin.
(11) Purchase or retain for any portfolio the securities of
any issuer if those Trustees and officers of the Trust or directors
and officers of SBSA and/or Boston Advisors who beneficially
own more than 1/2 of 1% of the outstanding securities of the issuer
together beneficially own more than 5% of such outstanding
securities.
(12) Purchase securities of any other investment company
except as part of a plan of merger, consolidation or acquisition of
assets.
(13) Purchase securities of any portfolio issuers which
together with predecessors have a record of less than three years
continuous operation, if, as a result, more than 5% of such
portfolio's net assets would then be invested in such securities.
(For purposes of this restriction, issuers include predecessors,
sponsors, controlling persons, general partners, guarantors and
originators of underlying assets which have less than three years of
continuous operations or relevant business experience.)
(14) Invest in puts, calls, straddles, spreads, and any
combination thereof (except in connection with the writing of
covered call options).
(15) Invest in oil, gas or other mineral exploration or
development programs.
(16) Purchase securities from or sell securities to any of its
officers or Trustees, except with respect to its own shares and as
is permissible under applicable statutes, rules and regulations.
(17) Pledge, hypothecate, mortgage or otherwise encumber the
assets of any portfolio, except in an amount up to 10% of the value
of such portfolio's total assets to secure borrowings for temporary
or emergency purposes.
Portfolio Turnover
In seeking its objective, the Income Fund does not generally
engage in short-term trading but may do so when circumstances
warrant. Numerous factors, including those relating to particular
investments, tax considerations, covered call option writing (see
"Covered Call Options"), market or economic conditions or
redemptions of shares, may affect the rate at which the Income Fund
buys or sells portfolio securities from year to year. The portfolio
turnover rate is calculated by dividing the lesser of purchases or
sales of portfolio securities during the year by the average monthly
value of the Income Fund's portfolio securities. Securities with
remaining maturities of one year or less at the date of acquisition
are excluded from the calculation. The Income Fund has no fixed
policy with respect to portfolio turnover; however, it is
anticipated that the annual portfolio turnover rate in the Income
Fund generally will not exceed 50%. For the 1994 and 1993
fiscal years, the portfolio turnover rates for the Income Fund were
% and 0.00%, respectively. The difference is a result of the Income
Fund's diversification of its holdings in response to the slowing
dividend growth.
Portfolio Transactions
Decisions to buy and sell securities for the Income Fund are
made by SBSA and/or Boston Advisors, subject to the overall
supervision and review of the Trust's Board of Trustees. Portfolio
securities transactions for the Income Fund are effected by or under
the supervision of SBSA and/or Boston Advisors.
Transactions on stock exchanges involve the payment of
negotiated brokerage commissions. There is generally no stated
commission in the case of securities traded in the over-the-counter
markets, but the price of those securities includes an undisclosed
commission or mark-up. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those
cases in which better prices and executions may be obtained
elsewhere. The cost of securities purchased from underwriters
includes an underwriting commission or concession, and the prices at
which securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down. For the 1994, 1993 and 1992
fiscal years, the Income Fund paid total brokerage commissions of
$8,075, $8,474 and $16,790 , respectively. This difference is
a result of the Income Fund's efforts to broaden its holdings which
result in higher brokerage commissions.
In executing portfolio transactions and selecting brokers or
dealers, it is the Income Fund's policy to seek the best overall
terms available. In assessing the best overall terms available for
any transactions, SBSA and/or Boston Advisors shall consider
the factors that it deems relevant, including the breadth of the
market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In addition, the Advisory
Agreement authorizes SBSA and/or Boston Advisors, in
selecting brokers or dealers to execute a particular transaction and
in evaluating the best overall terms available, to consider the
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to
the Income Fund or other accounts over which SBSA and/or
Boston Advisors or an affiliate exercises investment discretion.
The Trust's Board of Trustees periodically will review the
commissions paid by the Income Fund to determine if the commissions
paid over representative periods of time were reasonable in relation
to the benefits inuring to the Income Fund. It is possible that
certain of the services received will primarily benefit one or more
other accounts for which investment discretion is exercised.
Conversely, the Income Fund may be the primary beneficiary of
services received as a result of portfolio transactions effected for
other accounts. The fees of SBSA and/or Boston Advisors under
the Advisory Agreement are not reduced by reason of SBSA
and/or Boston Advisors receiving such brokerage and research
services. Further, Smith Barney will not participate in
commissions from brokerage given by the Income Fund to other brokers
or dealers and will not receive any reciprocal brokerage business
resulting therefrom.
The Trustees of the Trust have determined that any portfolio
transaction for the Income Fund may be executed through Smith Barney
or an affiliate of Smith Barney , if, in the judgment
of SBSA and/or Boston Advisors, the use of Smith Barney
is likely to result in price and execution at least as
favorable as those of other qualified brokers, and if, in the
transaction, Smith Barney charges the Income Fund a
commission rate consistent with those charged by Smith Barney
to comparable unaffiliated customers in similar
transactions. In addition, under rules recently adopted by the SEC,
Smith Barney may directly execute such transactions for the
Income Fund on the floor of any national securities exchange,
provided: (a) the Board of Trustees has expressly authorized Smith
Barney to effect such transactions; and (b) Smith Barney
annually advises the Income Fund of the aggregate
compensation it earned on such transactions. For the 1994, 1993
and 1992 fiscal years, brokerage commissions of $2,000,
$3,500 and $6,050 , respectively, were paid by the Income Fund to
Smith Barney . The amount of brokerage commission paid to
Smith Barney for the 1994 fiscal year represented
25% of the total brokerage commission paid by the Income Fund
and Smith Barney effected % of the total dollar
amount of transactions involving the payment of brokerage
commissions.
Even though investment decisions for the Income Fund are made
independently from those of the other accounts managed by SBSA
and/or Boston Advisors, investments of the kind made by the
Income Fund also may be made by those other accounts. When the
Income Fund and one or more accounts managed by SBSA and/or
Boston Advisors are prepared to invest in, or desire to dispose of,
the same security, available investments or opportunities for sales
will be allocated in a manner believed by SBSA and/or Boston
Advisors to be equitable. In some cases, this procedure may
adversely affect the price paid or received by the Income Fund or
the size of the position obtained for or disposed of by the Income
Fund.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of
payment postponed (a) for any period during which the New York Stock
Exchange, Inc. (the "NYSE") is closed (other than for customary
weekend or holiday closings), (b) when trading in the markets the
Income Fund normally utilizes is restricted, or an emergency exists,
as determined by the SEC, so that disposal of the Income Fund's
investments or determination of net asset value is not reasonably
practicable, or (c) for such other periods as the SEC by order may
permit for protection of the Income Fund's shareholders.
Distributions in Kind
If the Trust's Board of Trustees determines that it would
be detrimental to the best interests of the remaining shareholders
of the Income Fund to make a redemption payment wholly in cash, the
Income Fund may pay, in accordance with SEC rules, any portion of a
redemption in excess of the lesser of $250,000 or 1.00% of the
Income Fund's net assets by a distribution in kind of portfolio
securities in lieu of cash. Securities issued as a distribution in
kind may incur brokerage commissions when shareholders subsequently
sell those securities.
VALUATION OF SHARES
The Income Fund's net asset value per share is calculated
on each day, Monday through Friday, except days on which the NYSE is
closed. The NYSE currently is expected to be closed on New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas and on the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively. The following is a description of the
procedures used by the Income Fund in valuing its assets.
Securities listed on a national securities exchange will be
valued on the basis of the last sale on the date on which the
valuation is made or, in the absence of such sales, at the mean
between the closing bid and asked prices. Over-the-counter
securities will be valued at the most recent bid price at the close
of regular trading on the NYSE on each day, or, if market quotations
for those securities are not readily available, at fair market
value, as determined in good faith by the Trust's Board of Trustees.
Short-term obligations with maturities of 60 days or less are valued
at amortized cost, which constitutes fair value as determined by the
Trust's Board of Trustees. Amortized cost involves valuing an
instrument at its original cost to the Income Fund 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. All other securities and other
assets of the Income Fund will be appraised at their fair value as
determined in good faith by the Trust's Board of Trustees.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund of the
Smith Barney Mutual Funds may exchange all or part of their shares
for shares of the same class of other funds of the Smith Barney
Mutual Funds as listed in the Prospectus, on the basis of
relative net asset value per share at the time of exchange as
follows:
A. Shares of the Income Fund may be exchanged for Class A
shares of any of the other funds, and the sales charge differential,
if any, will be applied. Class A shares of any fund may be
exchanged without a sales charge for shares of the funds that are
offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares sold
with a sales charge, and the appropriate sales charge will be
applied.
B. Class A shares of any fund acquired by a previous
exchange of shares purchased with a sales charge may be exchanged
for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied.
Dealers other than Smith Barney must notify TSSG of
the investor's prior ownership of shares of Smith Barney
High Income Fund and the account number in order to accomplish an
exchange of shares of the Smith Barney High Income Fund
under paragraph B above.
The exchange privilege enables shareholders to acquire
shares of the same Class in a fund with different investment
objectives when they believe that a shift between funds is an
appropriate investment decision. This privilege is available to
shareholders resident in any state in which the fund shares being
acquired may be legally sold. Prior to any exchange, the investor
should obtain and review a copy of the current prospectus of each
fund into which an exchange is being made. Prospectuses may
be obtained from a Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary
supporting documents, shares submitted for exchange are redeemed at
the then-current net asset value and the proceeds are
immediately invested , at a price as described above, in
shares of the fund being acquired with such shares being subject
to any applicable contingent deferred sales charge . Smith
Barney reserves the right to reject any exchange request.
The exchange privilege may be modified or terminated at any
time after written notice to shareholders .
TAXES
The following is a summary of selected Federal income tax
considerations that may affect the Income Fund and its shareholders.
The summary is not intended as a substitute for individual tax
advice and investors are urged to consult their own tax advisors as
to the tax consequences of an investment in the Income Fund.
Taxation of the Income Fund
The Income Fund has qualified and intends to qualify each year
as a "regulated investment company" under the Code. As a regulated
investment company, the Income Fund will not be subject to Federal
income tax on its net investment income and capital gain net income
(capital gains net of capital losses), if any, that it distributes
to shareholders provided that at least 90% of its net investment
income for the taxable year is distributed. All net investment
income and capital gain net income earned by the Income Fund will be
reinvested automatically in additional shares of the Income Fund at
net asset value, unless the shareholder elects to receive dividends
and distributions in cash.
To qualify as a regulated investment company, the Income Fund
must meet certain requirements set forth in the Code. One
requirement is that the Income Fund must earn at least 90% of its
gross income from (a) interest, (b) dividends, (c) payments with
respect to securities loans, (d) gains from the sale or other
disposition of stock, securities or options and (e) other income
derived with respect to its business of investing in stock or
securities (the "90% Test"). The Income Fund must earn no more than
30% of its gross income from the sale or other disposition of stock
or securities or options held for less than three months (the "30%
Test").
Generally, the Income Fund's return on its investments will be
considered to be qualified income under the 90% Test. The 30% Test
may limit the extent to which the Income Fund may sell securities
held for less than three months or covered call options.
Tax Status of the Income Fund's Investments
Gain or loss on the sale of a security by the Income Fund
generally will be long-term capital gain or loss if the Income Fund
has held the security for more than one year. Gain or loss on the
sale of a security held for one year or less generally will be
short-term capital gain or loss. Generally, if the Income Fund
acquires a debt security at a discount, any gain upon the sale or
redemption of the security will be taxable as ordinary income to the
extent that such gain reflects accrued market discount.
The tax consequences of the Income Fund's covered call option
transactions will depend on the nature of the underlying security.
In the case of a call option on an equity or convertible debt
security, the Income Fund will receive a premium that will be
treated for tax purposes as follows: no income is recognized upon
the receipt of an option premium; if the option expires unexercised
or if the Income Fund enters into a closing purchase transaction, it
will realize a gain (or a loss, if the cost of the closing
transaction exceeds the amount of the premium) without regard to the
unrealized gain or loss in the underlying security. Any such gain
or loss will be short-term, except that a loss will be long-term if
the option exercise price is below market and the underlying stock
has been held for more than a year. If a call option is exercised,
the Income Fund will recognize a capital gain or loss from the
underlying security, and the option premium will constitute
additional sales proceeds.
The Income Fund also will not recognize income on the receipt
of an option premium on a debt security. Listed options on debt
securities, however, are subject to a special "mark-to-market"
system governing the taxation of "section 1256 contracts," which
include listed options on debt securities (including U.S. government
securities), options on certain stock indexes and certain foreign
currencies. In general, gain or loss on section 1256 contracts will
be taken into account for tax purposes when actually realized. In
addition, any section 1256 contracts held at the end of a taxable
year (and, for purposes of the 4% excise tax, on October 31 of each
year) will be treated as sold at fair market value (that is, marked-
to-market), and the resulting gain or loss will be recognized for
tax purposes. Both the realized and the unrealized taxable year-end
gain or loss positions will be treated as 60% long-term and 40%
short-term capital gain or loss, regardless of the period of time
that a particular position is actually held by the Income Fund.
Taxation of Shareholders
Dividends of investment income and distributions of short-term
gain will be taxable to shareholders as ordinary income for Federal
income tax purposes, whether received in cash or reinvested in
additional shares. Distributions of long-term capital gain will be
taxable to shareholders as long-term capital gain, whether paid in
cash or reinvested in additional shares, and regardless of the
length of time that the shareholder has held his/her shares of the
Income Fund.
Dividends of investment income (but not distributions of
capital gain) from the Income Fund generally will qualify for the
Federal dividends-received deduction for corporate shareholders to
the extent that the dividends do not exceed the aggregate amount of
dividends received by the Income Fund from domestic corporations.
If securities held by the Income Fund are considered to be "debt-
financed" (generally, acquired with borrowed funds) or are held by
the Income Fund for less than 46 days (91 days in the case of
certain preferred stock), the portion of the dividends paid by the
Income Fund that corresponds to the dividends paid with respect to
the securities will not be eligible for the corporate dividends-
received deduction.
If the Income Fund is the holder of record of any stock on the
record date for any dividends payable with respect to such stock,
such dividends must be included in the Income Fund's gross income as
of the later of (a) the date that such stock became ex-dividend with
respect to such dividends (i.e., the date on which a buyer of the
stock would not be entitled to receive the declared, but unpaid,
dividends) or (b) the date that the Income Fund acquired such stock.
Accordingly, in order to satisfy its income distribution
requirements, the Income Fund may be required to pay dividends based
on anticipated earnings, and shareholders may receive dividends in
an earlier year than would otherwise be the case.
Capital Gains Distribution
In general, a shareholder who redeems or exchanges his or her
shares will recognize long-term capital gain or loss if the shares
have been held for more than one year, and will recognize short-term
capital gain or loss if the shares have been held for one year or
less. If a shareholder receives a distribution taxable as long-term
capital gain with respect to shares of the Income Fund and redeems
or exchanges the shares before he or she has held them for more than
six months, however, any loss on the redemption or exchange that is
less than or equal to the amount of the distribution will be treated
as a long-term capital loss.
Backup Withholding
If a shareholder fails to furnish a correct taxpayer
identification number, fails fully to report dividend and interest
income, or fails to certify that he or she has provided a correct
taxpayer identification number and that he or she is not subject to
"backup withholding," then the shareholder may be subject to a 31%
Federal backup withholding tax with respect to (a) dividends and
distributions and (b) the proceeds of any redemptions or exchanges
of Income Fund shares. An individual's taxpayer identification
number is his or her social security number. The backup withholding
tax is not an additional tax and may be credited against a
shareholder's regular Federal income tax liability.
ADDITIONAL INFORMATION
The Trust is organized as an unincorporated business trust
under the laws of the Commonwealth of Massachusetts pursuant to an
Agreement and Declaration of Trust dated June 2, 1983 (the "Trust
Agreement") which was amended and restated on November 5, 1992.
On October 4, 1989, the Trust and the Income Fund changed their
names from American Telecommunications Trust and Income Portfolio
Shares to SLH Telecommunications Trust and SLH Telecommunications
Income Fund, respectively. On August 27, 1990, July 30, 1993 and
October 14, 1994, the Trust and the Income Fund changed their names
to Shearson Lehman Brothers Telecommunications Trust and
Telecommunications Income Fund, Smith Barney Shearson
Telecommunications Trust and Smith Barney Shearson
Telecommunications Income Fund, and Smith Barney Telecommunications
Trust and Smith Barney Telecommunications Income Fund,
respectively.
Boston Safe, an indirect wholly owned subsidiary of Mellon,
is located at One Boston Place, Boston, Massachusetts 02108, and
serves as the custodian of the Trust pursuant to a custody
agreement. Under the custody agreement, Boston Safe holds the
Trust's securities and keeps all necessary accounts and records.
For its services, Boston Safe receives a monthly fee based upon the
Trust's month-end market value of securities held in custody and
also receives securities transaction charges including out-of-pocket
expenses. Boston Safe is authorized to establish separate accounts
for foreign securities owned by the Trust to be held with foreign
branches of other United States banks as well as with certain
foreign banks and securities depositories. The assets of the Trust
are held under bank custodianship in compliance with the 1940
Act.
TSSG, a subsidiary of First Data Corporation, is located at
Exchange Place, Boston, Massachusetts 02109, and serves as the
Trust's transfer agent. Under the transfer agency agreement, TSSG
maintains the shareholder account records for the Trust and handles
certain communications between shareholders and the Trust. For
these services, TSSG receives a monthly fee computed on the basis of
the number of shareholder accounts that it maintains for the Trust
during the month and is reimbursed for out-of-pocket expenses.
FINANCIAL STATEMENTS
The Income Fund's Annual Report for the fiscal year ended
December 31, 1994 accompanies this Statement of Additional
Information and is incorporated herein by reference in its entirety.
APPENDIX
The following is a description of the two highest ratings categories
of NRSROs for commercial paper:
The rating A-1 is the highest commercial paper rating assigned
by S&P . Paper rated A-1 must have either the direct credit
support of an issuer or guarantor that possesses excellent long-term
operating and financial strength combined with strong liquidity
characteristics (typically, such issuers or guarantors would display
credit quality characteristics which would warrant a senior bond
rating of AA- or higher), or the direct credit support of an issuer
or guarantor that possesses above average long-term fundamental
operating and financing capabilities combined with ongoing above
excellent liquidity characteristics. Paper rated A-1 must have the
following characteristics: liquidity ratios are adequate to meet
cash requirements; long-term senior debt is rated A or better; the
issuer has access to at least two additional channels of borrowing;
basic earning and cash flow have an upward trend with allowance made
for unusual circumstances; typically, the issuer's industry is well
established and the issuer has a strong position within the
industry; and the reliability and quality of management are
unquestioned.
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's . Among the factors considered by Moody's
in assigning ratings are the following: (a) evaluation of the
management of the issuer; (b) economic evaluation of the issuer's
industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; (c) evaluation of the
issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term debt;
(f) trend of earnings over a period of ten years; (g) financial
strength of a parent company and the relationship which exists with
the issuer; and (h) recognition by the management of obligations
which may be present or may arise as a result of public interest
questions and preparations to meet such obligations.
Short-term obligations including commercial paper, rated A-1+
by IBCA Limited or its affiliate IBC A Inc., are obligations
supported by the highest capacity for timely repayment. Obligations
rated A-1 have a very strong capacity for timely repayment.
Obligations rated A-2 have a strong capacity for timely repayment,
although such capacity may be susceptible to adverse changes in
business, economics or financial conditions.
Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance
for timely payment. The rating F-1 reflects an assurance of timely
payment only slightly less in degree than issues rated F-1+, while
rating F-2 indicates a satisfactory degree of assurance for timely
payment, although the margin of safety is not as great as indicated
by the F-1 + and F-1 categories.
Duff & Phelps Inc. employs the designation of Duff 1 with
respect to top grade commercial paper and bank money instruments.
Duff 1+ indicates the highest certainty of timely payments: short-
term liquidity is clearly outstanding, and safety is just below risk
free U.S. Treasury short-term obligations. Duff 1- indicates high
certainty of timely payment. Duff 2 indicates good certainty of
timely payment: liquidity factors and company fundamentals are
sound.
The Thomson BankWatch ("TBW") Short-Term Ratings apply to
commercial paper, other senior short-term obligations and deposit
obligations of the entities to which the rating has been assigned,
and apply only to unsecured instruments that have a maturity of one
year or less.
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a timely
basis.
TWB-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-
1."
- -7-
shared domestic clients shearson funds att sai95R.doc
SMITH BARNEY TELECOMMUNICATIONS TRUST
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Growth and Income Funds:
Financial Highlights
Included in Part B:
Growth and Income Funds:
To be filed by Amendment.
Included in Part C:
Consent of Auditors will be filed by Amendment.
(b) Exhibits
Exhibit No. Description of Exhibit
All references are to the Registrant's registration statement on Form N-1A
(the "Registration Statement") as filed with the Securities and Exchange
Commission on September 14, 1983. (File Nos. 811-3736 and 2-86519)
(1)(a) Second Amended and Restated Master Trust Agreement and
Declaration of Trust is incorporated by reference to Registrant's Post-
Effective Amendment No. 14 as filed on
April 27, 1993 ("Post-Effective Amendment No. 14").
(b) Amendment No. 1 to the Second Amended and Restated Master Trust
Agreement is filed herein.
(c) Amendment No. 2 to the Second Amended and Restated Master Trust
Agreement is filed herein.
(d) Amendment No. 3 to the Second Amended and Restated Master Trust
Agreement is filed herein.
(2) Registrant's By-Laws incorporated by reference to the Registration
Statement.
(3) Not Applicable
(4)(a) Specimen Share Certificate for the Income Fund is incorporated
by reference to the Registration Statement.
(b) Specimen Share Certificate for Class A and B shares of Growth
Fund is incorporated by reference to Registration's Post-Effective
Amendment No. 12 as filed on
October 20, 1992 ("Post-Effective Amendment No. 12").
(5)(a) Investment Advisory Agreements between the Registrant and Smith
Barney Strategy Advisers Inc. dated June 16, 1994 and July 27, 1994 are
filed herein.
(b) Sub-Investment Advisory Agreements between the Registrant,
Smith Barney Strategy Advisers Inc., and The Boston Company Advisors, Inc.
dated June 16, 1994 and July 27, 1994 are filed herein.
(6) Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. as filed on July 30, 1993 is incorporated by reference to
Post-Effective Amendment No. 15 to the Registration Statement.
(7) Not Applicable.
(8) Custody Agreement between Registrant and Boston Safe Deposit and
Trust Company is incorporated by reference to Pre-Effective Amendment No.
1.
(9)(a) Transfer Agency Agreement dated August 2, 1993 between the
Registrant and The Shareholder Services Group, Inc. ("TSSG") is
incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement.
(b) Administration Agreements dated April 21, 1994 between the
Registrant and Smith, Barney Advisers, Inc. are filed herein.
(c) Sub-Administration Agreements dated April 21, 1994 between the
Registrant, Smith, Barney Advisers, Inc. and The Boston Company Advisors,
Inc. are filed herein.
(10) Not Applicable.
(11) Consent of Independent Accountants will be filed by Amendment .
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Services and Distribution Plan for Smith Barney
Telecommunications Growth Fund pursuant to Rule 12b-1 is filed herein.
(16) Performance Data incorporated by reference to Post-Effective
Amendment No. 5 as filed on May 1, 1988 ("Post-Effective Amendment No. 5").
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class as of December 16, 1994
Shares of beneficial
interest, $.001 par value, 2,078
Income Fund
Shares of beneficial
interest $.001 par value, Class A 8,931
Growth Fund Class B 25,483
Class C 37
Item 27. Indemnification
Incorporated by reference to Registrant's Pre-Effective Amendment No.
1 to its Registration Statement.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Strategy Advisers Inc.
Smith Barney Strategy Advisers Inc. ("Strategy Advisers") was incorporated
on October 22, 1986 under the laws of the State of Delaware. On June 1,
1994, Strategy Advisers changed its name from Smith Barney Shearson
Strategy Advisers Inc. to its current name. Strategy Advisers is a wholly
owned subsidiary of Smith Barney Mutual Funds Management Inc. (formerly
known as Smith, Barney Advisers, Inc.) ("SBMFM"), which was incorporated
under the laws of the state of Delaware in 1968. SBMFM is a wholly owned
subsidiary of Smith Barney Holdings Inc. (formerly known as Smith Barney
Shearson Holdings Inc.), which in turn is a wholly owned subsidiary of The
Travelers Inc. (formerly know as Primerica Corporation) ("Travelers").
Strategy Advisers is registered as an investment adviser under the
Investment Adviser Act of 1940 (the "Advisers Act"). Strategy Advisers is
also registered with the Commodity Futures Trading Commission (the "CFTC")
as a commodity pool operator under the Commodity Exchange Act (the "CEA"),
and is a member of the National Futures Association (the "NFA").
The list required by this Item 28 of officers and directors of SBMFM and
Strategy Advisers, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SBMFM on behalf of
Strategy Advisers pursuant to the Advisers Act (SEC File No. 801-8314).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Investment Strategy Advisors Inc. ("Shearson Lehman Strategy
Advisors"), was a wholly owned subsidiary of Shearson Lehman Brothers Inc.
("Shearson Lehman Brothers"), and served as the Registrant's investment
adviser. On the Closing, Travelers and Smith Barney Inc. (formerly known
as Smith Barney Shearson Inc.) acquired the domestic retail brokerage and
asset management business of Shearson Lehman Brothers which included the
business of the Registrant's prior investment adviser. Shearson Lehman
Brothers was a wholly owned subsidiary of Shearson Lehman Brothers Holdings
Inc. ("Shearson Holdings"). All of the issued and outstanding common stock
of Shearson Holdings (representing 92% of the voting stock) was held by
American Express Company. Information as to any past business vocation or
employment of a substantial nature engaged in by officers and directors of
Shearson Lehman Investment Strategy Advisors can be located in Schedules A
and D of FORM ADV filed by Shearson Lehman Investment Strategy Advisors
prior to July 30, 1993. (SEC FILE NO. 801-28715)
11/01/94
Item 28(b). Business and Other Connections of Sub-Investment Adviser
Investment Adviser -- The Boston Company Advisors, Inc.
The Boston Company Advisors, Inc. ("Boston Advisors") is a wholly owned
subsidiary of The Boston Company, Inc., which is in turn a wholly owned
subsidiary of Mellon Bank Corporation ("Mellon"). Mellon is a publicly
owned multibank holding company registered under the Federal Bank Holding
Company Act of 1956 and through its subsidiaries Mellon provides a
comprehensive range of financial products and services in domestic and
selected international markets. Boston Advisors is an investment adviser
registered under the Investment Advisers Act of 1940 (the "Advisers Act")
and serves as investment counsel for individuals with substantial capital,
executors, trustees and institutions. It also serves as investment
adviser, sub-investment adviser, administrator or sub-administrator to
numerous investment companies.
The list required by this Item 28 of officers and directors of Boston
Advisors, together with information as to any other business profession,
vocation or employment of a substantial nature engaged in by such officers
and directors during the past two years, is incorporated by reference to
Schedules A and D of FORM ADV filed by Boston Advisors pursuant to the
Advisers Act (SEC File No. 801-14158).
8/30/94
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") currently acts as distributor for Smith
Barney Managed Municipals Fund Inc., Smith Barney New York Municipals Fund
Inc., Smith Barney California Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Global Opportunities Fund,
Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Principal Return Fund, Smith Barney Managed Governments
Fund Inc., Smith Barney Income Funds, Smith Barney Equity Funds, Smith
Barney Investment Funds Inc., Smith Barney Precious Metals and Minerals
Fund Inc., Smith Barney Telecommunications Trust, Smith Barney Arizona
Municipals Fund Inc., Smith Barney New Jersey Municipals Fund Inc., The USA
High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V., Smith
Barney Fundamental Value Fund Inc., Smith Barney Series Fund, Consulting
Group Capital Markets Funds, Smith Barney Income Trust, Smith Barney
Adjustable Rate Government Income Fund, Smith Barney Florida Municipals
Fund, Smith Barney Oregon Municipals Fund, Smith Barney Funds, Inc., Smith
Barney Muni Funds, Smith Barney World Funds, Inc., Smith Barney Money
Funds, Inc., Smith Barney Tax Free Money Fund, Inc., Smith Barney Variable
Account Funds, Smith Barney U.S. Dollar Reserve Fund (Cayman), Worldwide
Special Fund, N.V., Worldwide Securities Limited, (Bermuda), Smith Barney
International Fund (Luxembourg) and various series of unit investment
trusts.
Smith Barney is a wholly owned subsidiary of Smith Barney Holdings
Inc., which in turn is a wholly owned subsidiary of The Travelers Inc.
(formerly known as Primerica Corporation). The information required by
this Item 29 with respect to each director, officer and partner 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. 812-
8510).
01/01/95
Item 30. Location of Accountants and Record
(1) Smith Barney Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Strategy Advisers Inc.
388 Greenwich Street
New York, New York 10013
(3) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(4) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(5) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(6) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY TELECOMMUNICATIONS TRUST has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, State
of New York on the 28th day of February, 1995.
SMITH BARNEY
TELECOMMUNICATIONS TRUST
By:/s/ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
We, the undersigned, hereby severally constitute and appoint Heath B.
McLendon, Christina T. Sydor and Lee D. Augsburger and each of them singly,
our true and lawful attorneys, with full power to them and each of them to
sign for us, and in our hands and in the capacities indicated below, any
and all Amendments to this Registration Statement and to file the same,
with all exhibits thereto, and other documents therewith, with the
Securities and Exchange Commission, granting unto said attorneys, and each
of them, acting alone, full authority and power to do and perform each and
every act and thing requisite or necessary to be done in the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys or any of them may
lawfully do or cause to be done by virtue thereof.
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement and the above Power
of Attorney has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board
2/28/95
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone Treasurer (Chief Financial
2/28/95
Lewis E. Daidone and Accounting Officer)
/s/ Paul R. Ades Trustee
2/28/95
Paul R. Ades
/s/ Herbert Barg Trustee
2/28/95
Herbert Barg
Signature Title Date
/s/ Alger B. Chapman Trustee
2/28/95
Alger B. Chapman
/s/ Dwight B. Crane Trustee
2/28/95
Dwight B. Crane
/s/ Frank Hubbard Trustee 2/28/95
Frank Hubbard
/s/ Allan R. Johnson Trustee
2/28/95
Allan R. Johnson
/s/ Ken Miller Trustee
2/28/95
Ken Miller
/s/ John F. White Trustee
2/28/95
John F. White
3
SHEARSON LEHMAN BROTHERS TELECOMMUNICATIONS TRUST
AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED MASTER TRUST AGREEMENT
(Change of Name of the Fund and Change of Names of Existing Sub-Trusts )
The undersigned, Assistant Secretary of Shearson Lehman Brothers
Telecommunications Trust (the "Fund"), does hereby certify that pursuant to
Article I, Section 1.1 and Article VII, Section 7.3 of the Amended and
Restated Master Trust Agreement dated June 27, 1985 ("Master Trust
Agreement"), which amended and restated the Master Trust Agreement dated
June 2, 1983, the following votes were duly adopted by the Board of
Trustees at a Special Meeting of the Board held on April 7, 1993:
VOTED: That the name of the Fund previously established and designated
pursuant to the Fund's Master Trust Agreement be modified and amended as
set forth below:
Current Name: Name as Amended:
Shearson Lehman Brothers Smith Barney Shearson
Telecommunications Trust Telecommunications Trust
; and further
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set forth
below:
Current Name: Name as Amended:
Telecommunications Smith Barney Shearson
Income Fund Telecommunications Income Fund
Telecommunications Smith Barney Shearson
Growth Fund Telecommunications Growth Fund
; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's
Master Trust Agreement and By-Laws reflecting the foregoing change; and to
execute and file all requisite certificates, documents and instruments and
to take such other actions required to cause said amendment to become
effective and to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this _____ day of July, 1993.
_________________________________
Lee D. Augsburger
Assistant Secretary
SMITH BARNEY SHEARSON TELECOMMUNICATIONS TRUST
AMENDMENT NO. 2 TO THE SECOND AMENDED AND RESTATED MASTER TRUST AGREEMENT
(Change of Name of the Trust, Change of Names of Existing Sub-Trusts and
Change of Emeritus Policy )
The undersigned, Assistant Secretary of Smith Barney Shearson
Telecommunications Trust (the "Fund"), does hereby certify that pursuant to
Article I, Section 1.1 and Article VII, Section 7.3 of the Second Amended
and Restated Master Trust Agreement dated November 5, 1992 ("Master Trust
Agreement"), which amended and restated the First Amended and Restated
Master Trust Agreement dated June 27, 1985, the following votes were duly
adopted by the Board of Trustees at a Regular Meeting of the Board held on
July 21, 1994:
(Change of Name of the Trust)
VOTED: That the name of the Trust previously established and
designated pursuant to the Trust's Master Trust Agreement be modified and
amended as set forth below:
Current Name: Name as Amended:
Smith Barney Shearson Smith Barney
Telecommunications Trust Telecommunications Trust
; and further
(Change of Names of Existing Sub-Trusts)
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set forth
below:
Current Name: Name as Amended:
Smith Barney Shearson Smith Barney
Telecommunications Income Fund Telecommunications Income Fund
Smith Barney Shearson Smith Barney
Telecommunications Growth Fund Telecommunications Growth Fund
; and further
(Change of Emeritus Policy)
VOTED: That the following new provisions be added to Article III of
the Trust's Master Trust Agreement as follows:
Section 3.1(i)
A Trustee who has reached the age of seventy two (72) years may elect
the status of Trustee Emeritus provided that the Trustee has served for ten
(10) years as a member of the Board of the Trust or of the Board of
Trustees of another investment company distributed, advised or administered
by an entity under common control with the Trust's distributor, investment
adviser or administrator. Upon reaching eighty (80) years of age, a
Trustee must elect status as a Trustee Emeritus. (The foregoing provisions
shall not be deemed to restrict a Trustee's ability to resign.)
Section 3.1(j)
A Board Member designated as a Trustee Emeritus may attend meetings
of the Board of Trustees, however, he or she shall have no voting rights
and shall not be under a duty to manage or direct the business and affairs
of the Trust. A Trustee Emeritus shall not be deemed to stand in a
fiduciary relation to the Trust and shall not be responsible to discharge
the duties of a Trustee or to exercise that diligence, care or skill which
a Trustee would ordinarily be required to exercise under applicable laws.
In addition, a Trustee Emeritus shall be indemnified to the full extent
that an officer or Trustee of the Trustee may be indemnified under the
Trust's governing documents and applicable state and federal laws.
As long as a Board Member is a Trustee Emeritus, but in no event for
more than a period of ten (10) years, provided the Trust has net assets in
excess of $100 million, a Trustee Emeritus will receive 50% of the annual
retainer and annual meeting fees paid to active Board Members. In any
event, a Trustee Emeritus shall be entitled to reasonable out-of-pocket
expenses for each meeting attended; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's
Master Trust Agreement and By-Laws reflecting the foregoing change; and to
execute and file all requisite certificates, documents and instruments and
to take such other actions required to cause said amendment to become
effective and to pay all requisite fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand
this 14th day of October, 1994.
/s/ Lee D. Augsburger
Lee D. Augsburger
Assistant Secretary
SMITH BARNEY TELECOMMUNICATIONS TRUST
AMENDMENT NO. 3 TO THE SECOND AMENDED AND RESTATED
MASTER TRUST AGREEMENT
WHEREAS, Section 4.1 of the Second Amended And Restated Master Trust
Agreement of Smith Barney Telecommunications Trust (the "Trust") dated
November 5,
1992, as amended, authorizes the Trustees of the Trust to issue classes of
shares of any Sub-
Trust or divide the Shares of any Sub-Trust into classes, having different
dividend,
liquidation, voting and other rights as the Trustees may determine;
WHEREAS, the Trustees have previously established and designated four
classes of
shares, Classes A, B, C and D for each of the two Sub-Trusts of the Trust:
Smith Barney
Telecommunications Income Fund and Smith Barney Telecommunications Growth
Fund;
WHEREAS, the Trustees unanimously voted on July 21, 1994 to
redesignate the
existing Class C shares of each Sub-Trust as Class Z shares, such change to
be effective
concurrently with the effectiveness of the Supplement to the Prospectus of
each Sub-Trust
describing said Class Z shares;
WHEREAS, the Trustees unanimously voted on July 21, 1994 to
redesignate the
existing Class D shares of each Sub-Trust as Class C shares, such change to
be effective
concurrently with the effectiveness of the Supplement to the Prospectus of
each Sub-Trust
describing said Class C shares; and
WHEREAS, the Trustees unanimously voted on July 21, 1994 to establish
and
designate a new class of shares of each Sub-Trust as Class Y shares.
NOW, THEREFORE, the undersigned Assistant Secretary of the Trust
hereby states
as follows:
1. That, pursuant to the vote of the Trustees, (i) the existing
class of shares of
the aforementioned Sub-Trusts heretofore designated as Class C shares be
redesignated as
Class Z shares; and (ii) the existing class of shares of the
aforementioned Sub-Trusts
heretofore designated as Class D shares be redesignated as Class C shares;
such changes to
become effective concurrently with the effectiveness of the Supplement to
the Prospectus of
each Sub-Trust describing the redesignated Class Z and Class C shares.
Each such class of
shares shall have the rights and preferences as set forth in the Supplement
to the Prospectus
of each Sub-Trust dated November 7, 1994, as such Prospectus may be further
amended
from time to time.
2. That, pursuant to the vote of the Trustees, each of the
aforementioned Sub-
Trusts be divided into an additional class of shares established and
designated as Class Y
shares. Such class of shares shall have the rights and preferences as set
forth in the
Supplement to the Prospectus of each Sub-Trust dated November 7, 1994, as
such Prospectus
may be further amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand this 7th day
of
November, 1994.
SMITH BARNEY TELECOMMUNICATIONS TRUST
/s/ Lee D. Augsburger
By: Lee D. Augsburger
Title: Assistant Secretary
123782.c1
INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON TELECOMMUNICATIONS TRUST
Smith Barney Shearson Telecommunications Growth Fund
July 27, 1994
Smith Barney Strategy Advisers Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Telecommunications Trust (the "Company"), a
trust organized under the laws of the Commonwealth of Massachusetts,
confirms its agreement with Smith Barney Strategy Advisers Inc. (the
"Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to Smith Barney
Shearson Telecommunications Growth Fund (the "Fund") by investing and
reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations specified in its Master
Trust Agreement, as amended from time to time (the "Master Trust
Agreement"), in the prospectus for the Fund (the "Prospectus") and the
statement of additional information for the Fund (the "Statement") filed
with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in
the manner and to the extent as may from time to time be approved by the
Board of Trustees of the Company (the "Board"). Copies of the Prospectus,
the Statement and the Master Trust Agreement have been or will be submitted
to the Adviser. The Company agrees to provide copies of all amendments to
the Prospectus, the Statement and the Master Trust Agreement to the Adviser
on an on-going basis. The Company desires to employ and hereby appoints
the Adviser to act as the Fund's investment adviser. The Adviser accepts
the appointment and agrees to furnish the services for the compensation set
forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of
the Company, the Adviser will: (a) manage the Fund's portfolio in
accordance with the Fund's investment objective(s) and policies as stated
in the Master Trust Agreement, the Prospectus and the Statement; (b) make
investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; and (d) employ professional portfolio
managers and securities analysts who provide research services to the Fund.
In providing those services, the Adviser will conduct a continual program
of investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. The Adviser may, with the approval of the Board and the
shareholders of the Fund (to the extent required by applicable law), from
time to time, sub-contract with one or more sub-investment advisers to
provide some or all of the services required under this agreement.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and
the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall terms available,
the Adviser is authorized to consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of 1934), provided to the Fund and/or other accounts over which the Adviser
or its affiliates exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Fund's portfolio, and will, on its own initiative, furnish
the Company from time to time with whatever information the Adviser
believes is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Company in connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be deemed to protect
or purport to protect the Adviser against any liability to the Company or
its shareholders of the Fund to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Adviser's
reckless disregard of its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .55 of 1.00% of the Fund's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that
such period bears to the
full monthly period. Upon any termination of this Agreement before the end
of a month, the fee for such part of that month shall be prorated according
to the proportion that such period bears to the full monthly period and
shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to the Adviser, the value of the Fund's
net assets shall be computed at the times and in the manner specified in
the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement and will pay (a) to The Boston Company
Advisors, Inc. ("Boston Advisors"), as sub-investment adviser to the Fund
under the Sub-Investment Advisory Agreement dated of even date herewith
among the Company, the Adviser and Boston Advisors, as amended from time to
time, and (b) to any additional or substitute sub-investment adviser or
advisers retained by the Adviser to provide advisory services to the Fund
(together with Boston Advisors, each a "Sub-Adviser"), the fees required to
be paid to each Sub-Adviser. The Fund will bear certain other expenses to
be incurred in its operation, including, but not limited to, investment
advisory and administration fees, other than those payable to a Sub-Adviser
or any additional or substitute investment adviser; fees for necessary
professional and brokerage services; fees for any pricing service; the
costs of regulatory compliance; and costs associated with maintaining the
Company's legal existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's sub-investment advisory and
administration agreements, but excluding interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Adviser will reduce its fee to the Fund by
the proportion of such excess expense equal to the proportion that its fee
thereunder bears to the aggregate of fees paid by the Fund for investment
advice and administration in that year, to the extent required by state
law. A fee reduction pursuant to this paragraph 8, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts, and as investment adviser to other investment companies,
and the Company has no objection to the Adviser's so acting, provided that
whenever the Fund and one or more other investment companies advised by the
Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula
believed to be equitable to each company. The Fund recognizes that in some
cases this procedure may adversely affect the size of the position
obtainable or disposable for the Fund. In addition, the Fund understands
that the persons employed by the Adviser to assist in the performance of
the Adviser's duties under this
Agreement will not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or restrict the right
of the Adviser or any affiliate of the Adviser to engage in and devote time
and attention to other businesses or to render services of whatever kind or
nature.
10. Term of Agreement
This Agreement shall become effective July 27, 1994 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually by (i) the Board of the Company or (ii) a vote of a "majority" (as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board
who are not "interested persons" (as defined in the 1940 Act) of any party
to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of the Company or by vote
of holders of a majority of the Fund's shares, or upon 90 days' written
notice, by the Adviser. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is
on file with the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
The Company and the Adviser agree that the obligations of the Company
under this Agreement shall not be binding upon any of the members of the
Board, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon
the assets and property of the Company, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement have been
authorized by the Board and a majority of the holders of the Fund's
outstanding voting securities, and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such members of
the Board and shareholders nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the assets and
property of the Company as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
TELECOMMUNICATIONS TRUST
Smith Barney Shearson
Telecommunications Growth Fund
By:_____________________
Name:
Title:
Accepted:
SMITH BARNEY STRATEGY ADVISERS INC.
By:______________________________
Name:
Title:
3
shearson funds att atgr advisry3.doc
ADVISORY AGREEMENT
SMITH BARNEY SHEARSON TELECOMMUNICATIONS TRUST
(Smith Barney Telecommunications Income Fund)
June 16, 1994
Smith Barney Strategy Advisers Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Telecommunications Trust (the "Company"), a
trust organized under the laws of the Commonwealth of Massachusetts,
confirms its agreement with Smith Barney Strategy Advisers Inc. (the
"Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to its Smith
Barney Telecommunications Income Fund (the "Fund") by investing and
reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations specified in its Master
Trust Agreement, as amended from time to time (the "Master Trust
Agreement"), in the prospectus (the "Prospectus") and the statement of
additional information (the "Statement") filed with the Securities and
Exchange Commission as part of the Company's Registration Statement on Form
N-1A, as amended from time to time, and in the manner and to the extent as
may from time to time be approved by the Board of Trustees of the Company
(the "Board"). Copies of the Prospectus, the Statement and the Master
Trust Agreement have been or will be submitted to the Adviser. The Company
agrees to provide copies of all amendments to the Prospectus, the Statement
and the Master Trust Agreement to the Adviser on an on-going basis. The
Company desires to employ and hereby appoints the Adviser to act as the
Fund's investment adviser. The Adviser accepts the appointment and agrees
to furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of
the Company, the Adviser will: (a) manage the Fund's portfolio in
accordance with the Fund's investment objective(s) and policies as stated
in the Master Trust Agreement, the Prospectus and the Statement; (b) make
investment decisions for the Fund; (c) place purchase and sale orders for
portfolio transactions for the Fund; and (d) employ professional portfolio
managers and securities analysts who provide research services to the Fund.
In providing those services, the Adviser will conduct a continual program
of investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets. The Adviser may, with the approval of the Board and the
shareholders of the Fund (to the extent required by applicable law), from
time to time, sub-contract with one or more sub-investment advisers to
provide some or all of the services required under this agreement.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and
the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction, and in evaluating the best overall terms available,
the Adviser is authorized to consider the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act
of 1934), provided to the Fund and/or other accounts over which the Adviser
or its affiliates exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Fund's portfolio, and will, on its own initiative, furnish
the Company from time to time with whatever information the Adviser
believes is appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Company in connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be deemed to protect
or purport to protect the Adviser against any liability to the Company or
its shareholders of the Fund to which the Adviser would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or by reason of the Adviser's
reckless disregard of its obligations and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Fund will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of .55 of 1.00% of the Fund's
average daily net assets. The fee for the period from the Effective Date
(defined below) of the Agreement to the end of the month during which the
Effective Date occurs shall be prorated according to the proportion that
such period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the
full monthly period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable to the
Adviser, the value of the Fund's net assets shall be computed at the times
and in the manner specified in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement and will pay (a) to The Boston Company
Advisors, Inc. ("Boston Advisors"), as sub-investment adviser to the Fund
under the Sub-Investment Advisory Agreement dated of even date herewith
among the Company, the Adviser and Boston Advisors, as amended from time to
time, and (b) to any additional or substitute sub-investment adviser or
advisers retained by the Adviser to provide advisory services to the Fund
(together with Boston Advisors, each a "Sub-Adviser"), the fees required to
be paid to each Sub-Adviser. The Fund will bear certain other expenses to
be incurred in its operation, including, but not limited to, investment
advisory and administration fees, other than those payable to a Sub-Adviser
or any additional or substitute investment adviser; fees for necessary
professional and brokerage services; fees for any pricing service; the
costs of regulatory compliance; and costs associated with maintaining the
Company's legal existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's sub-investment advisory and
administration agreements, but excluding interest, taxes, brokerage and
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, the Adviser will reduce its fee to the Fund by
the proportion of such excess expense equal to the proportion that its fee
thereunder bears to the aggregate of fees paid by the Fund for investment
advice and administration in that year, to the extent required by state
law. A fee reduction pursuant to this paragraph 8, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts, and as investment adviser to other investment companies,
and the Company has no objection to the Adviser's so acting, provided that
whenever the Fund and one or more other investment companies advised by the
Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula
believed to be equitable to each company. The Fund recognizes that in some
cases this procedure may adversely affect the size of the position
obtainable for the Fund. In addition, the Fund understands that the
persons employed by the Adviser to assist in the performance of the
Adviser's duties under this Agreement will not devote their full time to
such service and nothing contained in this Agreement shall be deemed to
limit or restrict the right of the Adviser or any affiliate of the Adviser
to engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective June 16, 1994 (the "Effective
Date") and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually by (i) the Board of the Company or (ii) a vote of a "majority" (as
that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board
who are not "interested persons" (as defined in the 1940 Act) of any party
to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of the Company or by vote
of holders of a majority of the Fund's shares, or upon 90 days' written
notice, by the Adviser. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is
on file with the Secretary of The Commonwealth of Massachusetts.
12. Limitation of Liability
The Company and the Adviser agree that the obligations of the Company
under this Agreement shall not be binding upon any of the members of the
Board, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company, individually, but are binding only upon
the assets and property of the Company, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement have been
authorized by the Board and a majority of the holders of the Fund's
outstanding voting securities, and signed by an authorized officer of the
Company, acting as such, and neither such authorization by such members of
the Board and shareholders nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the assets and
property of the Company as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
TELECOMMUNICATIONS TRUST
Smith Barney Shearson
Telecommunications Income Fund
By:___________________________________
Name: Heath B. McLendon
Title: Chairman of the Board
Accepted:
SMITH BARNEY STRATEGY ADVISERS INC.
By:__________________________________
Name:
Title:
5
shared\domestic\clients\shearson\funds\att\atin\advis2ds.doc
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON TELECOMMUNICATIONS TRUST
Smith Barney Shearson Telecommunications Growth Fund
July 27, 1994
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs:
Smith Barney Shearson Telecommunications Trust (the "Company"), a
trust organized under the laws of the Commonwealth of Massachusetts and
Smith Barney Shearson Strategy Advisers Inc. (the "Adviser"), each confirms
its agreement with The Boston Company Advisors, Inc. (the "Sub-Adviser"),
as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to[Smith Barney
Shearson Telecommunications Growth Fund (the "Fund") by investing and
reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations specified in its Master
Trust Agreement, as amended from time to time (the "Master Trust
Agreement"), in the prospectus for the Fund (the "Prospectus") and the
statement of additional information for the Fund (the "Statement") filed
with the Securities and Exchange Commission as part of the Company's
Registration Statement on Form N-1A, as amended from time to time, and in
the manner and to the extent as may from time to time be approved by the
Board of Trustees of the Company (the "Board"). Copies of the Prospectus,
the Statement and the Master Trust Agreement have been or will be submitted
to the Sub-Adviser. The Company agrees to provide copies of all amendments
to the Prospectus, the Statement and the Master Trust Agreement to the Sub-
Adviser on an on-going basis. The Company employs the Adviser as the
investment adviser to the Fund, and the Company and the Adviser desire to
employ and hereby appoint the Sub-Adviser to act as the sub-investment
adviser to the Fund. The Sub-Adviser accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Sub-Investment Adviser
Subject to the supervision, direction and approval of the Board of
the Company and the Adviser, the Sub-Adviser will: (a) manage the Fund's
portfolio in accordance with the Fund's investment objective(s) and
policies as stated in the Master Trust Agreement, the Prospectus and the
Statement; (b) make investment decisions for the Fund; (c) place purchase
and sale orders for portfolio transactions for the Fund; and (d) employ
professional portfolio managers and securities analysts who provide
research services to the Fund. In providing those services, the Sub-
Adviser will conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-
Adviser will consider factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer
and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Adviser is authorized to consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), provided to the Fund and/or other
accounts over which the Sub-Adviser or its affiliates exercise investment
discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Adviser and the Company informed of
developments materially affecting the Fund, and will, on its own
initiative, furnish the Adviser and the Company from time to time with
whatever information the Sub-Adviser believes is appropriate for this
purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund and the Adviser in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect the Sub-Adviser against any liability to
the Adviser, the Company or the shareholders of the Fund to which the Sub-
Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
by reason of the Sub-Adviser's reckless disregard of its obligations and
duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser on the first business day of each
month a fee for the previous month at the annual rate of .275 of 1.00% of
the Fund's average daily net assets. The fee for the period from the
Effective Date (defined below) of the Agreement to the end of the month
during which the Effective Date occurs shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such
part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement. For the purpose of determining fees
payable to the Sub-Adviser, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Prospectus and/or
the Statement.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory and administration fees; fees for necessary
professional and brokerage services; fees for any pricing service; the
costs of regulatory compliance; and costs associated with maintaining the
Company's legal existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's investment advisory
agreement, but excluding interest, taxes, brokerage and extraordinary
expenses) exceed the expense limitation of any state having jurisdiction
over the Fund, the Sub-Adviser will reduce its fee by the proportion of
such excess expense equal to the proportion that its fee thereunder bears
to the aggregate of fees paid by the Fund for investment advice and
administration in that year, to the extent required by state law. A fee
reduction pursuant to this paragraph 8, if any, will be estimated,
reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue
to act and may act in the future as investment adviser to fiduciary and
other managed accounts, and as investment adviser to other investment
companies, and the Company has no objection to the Sub-Adviser's so acting,
provided that whenever the Fund and one or more other investment companies
advised by the Sub-Adviser have available funds for investment, investments
suitable and appropriate for each will be allocated in accordance with a
formula believed to be equitable to each company. The Company recognizes
that in some cases this procedure may adversely affect the size of the
position obtainable or disposable for the Fund. In addition, the Company
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties under this Agreement will not
devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of the Sub-Adviser
or any affiliate of the Sub-Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
10. Term of Agreement
This Agreement shall become effective as of July 27, 1994 (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board of the Company or (ii) a vote of a
"majority" (as that term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a
majority of the Board who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 60 days' written notice, by the Board of
the Company or by vote of holders of a majority of the Fund's shares, or
upon 90 days' written notice, by the Sub-Adviser. This Agreement will also
terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is
on file with the Secretary of The Commonwealth of Massachusetts and with
the Boston City Clerk.
12. Limitation of Liability
The Company, the Adviser and the Sub-Adviser agree that the
obligations of the Company under this Agreement shall not be binding upon
any of the members of the Board, shareholders, nominees, officers,
employees or agents, whether past, present or future, of the Company,
individually, but are binding only upon the assets and property of the Fund
and not upon the assets and property of any other portfolio of the Company.
The execution and delivery of this Agreement have been authorized by the
Board and a majority of the holders of the Fund's outstanding voting
securities, and signed by an authorized officer of the Company, acting as
such, and neither such authorization by such members of the Board and
shareholders nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the Fund as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
TELECOMMUNICATIONS TRUST
Smith Barney Shearson
Telecommunications Growth Fund
By:________________________
SMITH BARNEY SHEARSON
STRATEGY ADVISERS INC.
By:__________________________
Accepted:
THE BOSTON COMPANY ADVISORS, INC.
By:______________________________
2
shearson funds att atgr subadv3.doc
SUB-INVESTMENT ADVISORY AGREEMENT
SMITH BARNEY SHEARSON TELECOMMUNICATIONS TRUST
(Smith Barney Shearson Telecommunications Income Fund)
June 14, 1994
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
Dear Sirs:
Smith Barney Shearson Telecommunications Trust (the "Company"), a
trust organized under the laws of the Commonwealth of Massachusetts and
Smith Barney Shearson Strategy Advisers Inc. (the "Adviser"), each confirms
its agreement with The Boston Company Advisors, Inc. (the "Sub-Adviser"),
as follows:
1. Investment Description; Appointment
The Company desires to employ its capital relating to its Smith
Barney Shearson Telecommunications Income Fund (the "Fund") by investing
and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations specified in its Master
Trust Agreement, as amended from time to time (the "Master Trust
Agreement"), in the prospectus (the "Prospectus") and the statement of
additional information (the "Statement") filed with the Securities and
Exchange Commission as part of the Company's Registration Statement on Form
N-1A, as amended from time to time, and in the manner and to the extent as
may from time to time be approved by the Board of Trustees of the Company
(the "Board"). Copies of the Prospectus, the Statement and the Master
Trust Agreement have been or will be submitted to the Sub-Adviser. The
Company agrees to provide copies of all amendments to the Prospectus, the
Statement and the Master Trust Agreement to the Sub-Adviser on an on-going
basis. The Company employs the Adviser as the investment adviser to the
Fund, and the Company and the Adviser desire to employ and hereby appoint
the Sub-Adviser to act as the sub-investment adviser to the Fund. The Sub-
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Sub-Investment Adviser
Subject to the supervision, direction and approval of the Board of
the Company and the Adviser, the Sub-Adviser will: (a) manage the Fund's
portfolio in accordance with the Fund's investment objective(s) and
policies as stated in the Master Trust Agreement, the Prospectus and the
Statement; (b) make investment decisions for the Fund; (c) place purchase
and sale orders for portfolio transactions for the Fund; and (d) employ
professional portfolio managers and securities analysts who provide
research services to the Fund. In providing those services, the Sub-
Adviser will conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-
Adviser will consider factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer
and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction, and in evaluating the best overall terms
available, the Sub-Adviser is authorized to consider the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934), provided to the Fund and/or other
accounts over which the Sub-Adviser or its affiliates exercise investment
discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Adviser and the Company informed of
developments materially affecting the Fund, and will, on its own
initiative, furnish the Adviser and the Company from time to time with
whatever information the Sub-Adviser believes is appropriate for this
purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund and the Adviser in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect the Sub-Adviser against any liability to
the Adviser, the Company or the shareholders of the Fund to which the Sub-
Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
by reason of the Sub-Adviser's reckless disregard of its obligations and
duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Adviser will pay the Sub-Adviser on the first business day of each
month a fee for the previous month at the annual rate of .275 of 1.00% of
the Fund's average daily net assets. The fee for the period from the
Effective Date (defined below) of the Agreement to the end of the month
during which the Effective Date occurs shall be prorated according to the
proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such
part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement. For the purpose of determining fees
payable to the Sub-Adviser, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Prospectus and/or
the Statement.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including, but not
limited to, investment advisory and administration fees; fees for necessary
professional and brokerage services; fees for any pricing service; the
costs of regulatory compliance; and costs associated with maintaining the
Company's legal existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's investment advisory
agreement, but excluding interest, taxes, brokerage and extraordinary
expenses) exceed the expense limitation of any state having jurisdiction
over the Fund, the Sub-Adviser will reduce its fee by the proportion of
such excess expense equal to the proportion that its fee thereunder bears
to the aggregate of fees paid by the Fund for investment advice and
administration in that year, to the extent required by state law. A fee
reduction pursuant to this paragraph 8, if any, will be estimated,
reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue
to act and may act in the future as investment adviser to fiduciary and
other managed accounts, and as investment adviser to other investment
companies, and the Company has no objection to the Sub-Adviser's so acting,
provided that whenever the Fund and one or more other investment companies
advised by the Sub-Adviser have available funds for investment, investments
suitable and appropriate for each will be allocated in accordance with a
formula believed to be equitable to each company. The Company recognizes
that in some cases this procedure may adversely affect the size of the
position obtainable for the Fund. In addition, the Company understands
that the persons employed by the Sub-Adviser to assist in the performance
of the Sub-Adviser's duties under this Agreement will not devote their full
time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate
of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of [June ___, 1994] (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board of the Company or (ii) a vote of a
"majority" (as that term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Fund's outstanding voting securities,
provided that in either event the continuance is also approved by a
majority of the Board who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 60 days' written notice, by the Board of
the Company or by vote of holders of a majority of the Fund's shares, or
upon 90 days' written notice, by the Sub-Adviser. This Agreement will also
terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
11. Representation by the Company
The Company represents that a copy of the Master Trust Agreement is
on file with the Secretary of The Commonwealth of Massachusetts and with
the Boston City Clerk.
12. Limitation of Liability
The Company, the Adviser and the Sub-Adviser agree that the
obligations of the Company under this Agreement shall not be binding upon
any of the members of the Board, shareholders, nominees, officers,
employees or agents, whether past, present or future, of the Company,
individually, but are binding only upon the assets and property of the Fund
and not upon the assets and property of any other portfolio of the Company.
The execution and delivery of this Agreement have been authorized by the
Board and a majority of the holders of the Fund's outstanding voting
securities, and signed by an authorized officer of the Company, acting as
such, and neither such authorization by such members of the Board and
shareholders nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the Fund as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
TELECOMMUNICATIONS TRUST
By:__________________________________________
SMITH BARNEY SHEARSON STRATEGY
ADVISERS INC.
By:_______________________________________
THE BOSTON COMPANY ADVISORS, INC.
By:______________________________
1
shared/domestic/clients/shearson/funds/att/atin/subadv2.doc
SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND
ADMINISTRATION AGREEMENT
April 21, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Telecommunications Growth Fund (the "Fund"), a
business trust organized under the laws of the Commonwealth of
Massachusetts, confirms its agreement with Smith, Barney Advisers, Inc.
("SBA") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Master Trust Agreement dated June 2, 1983 as
amended from time to time (the "Master Trust Agreement"), in its Prospectus
and Statement of Additional Information as from time to time in effect and
in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Fund (the "Board"). Copies of the Fund's
Prospectus, Statement of Additional Information and Master Trust Agreement
have been or will be submitted to SBA. The Boston Company Advisors, Inc.
("Boston Advisors") serves as the Fund's investment adviser, and the Fund
desires to employ and hereby appoints SBA to act as its administrator. SBA
accepts this appointment and agrees to furnish the services to the Fund for
the compensation set forth below. SBA is hereby authorized to retain third
parties and is hereby authorized to delegate some or all of its duties and
obligations hereunder to such persons provided that such persons shall
remain under the general supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA
will: (a) assist in supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under its investment
advisory agreement; (b) supply the Fund with office facilities (which may
be in SBA's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of shares of the
Fund, (ii) applicable contingent deferred sales charges and similar fees
and charges and (iii) distribution fees, internal auditing and legal
services, internal executive and administrative services, and stationary
and office supplies; and (c) prepare reports to shareholders of the Fund,
tax returns and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBA on the first business day of each month a
fee for the previous month at an annual rate of .20 of 1.00% of the Fund's
average daily net assets. The fee for the period from the date the Fund's
initial registration statement is declared effective by the SEC to the end
of the month during which the initial registration statement is declared
effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to SBA, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
SBA will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the members of the Board of
the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc. or its affiliates or any person who is an affiliate of any
person to whom duties may be delegated hereunder; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement (s), but excluding distribution fees, interest, taxes,
brokerage and, if permitted by state securities commissions, extraordinary
expenses) exceed the expense limitations of any state having jurisdiction
over the Fund, SBA will reimburse the Fund for that excess expense to the
extent required by state law in the same proportion as its respective fees
bear to the combined fees for investment advice and administration. The
expense reimbursement obligation of SBA will be limited to the amount of
its fees hereunder. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect SBA against
liability to the Fund or to its shareholders to which SBA would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of SBA's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act
and may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBA so acting. In addition,
the Fund understands that the persons employed by SBA or its affiliates to
assist in the performance of its duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of SBA or its affiliates to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to
whom responsibilities are delegated hereunder) ("indemnitees") against any
loss, claim, expense or cost of any kind (including reasonable attorney's
fees) resulting or arising in connection with this Agreement or from the
performance or failure to perform any act hereunder, provided that no such
indemnification shall be available if the indemnitee violated the standard
of care in paragraph 6 above. This indemnification shall be limited by the
1940 Act, and relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the requirements of the 1940
Act and the rules, regulations and interpretations thereof as in effect
from time to time.
10. Limitation of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement has been duly
authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson
Telecommunications Growth Fund
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
Accepted:
Smith, Barney Advisers, Inc.
By: /s/Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide a Treasurer and Assistant Treasurer for the
Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor mark-to-market comparisons for money market
funds;
Recommend valuation to be used for securities which
are not readily saleable;
Function as a liaison with the Fund's outside auditors
and arrange for audits;
Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
Prepare and file forms with the Internal Revenue
Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the
Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder
meetings;
Maintain Master Trust Agreement and By-Laws of the
Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATT ATGR ADMN2.DOC
A-1
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATT ATGR ADMN2.DOC
SMITH BARNEY SHEARSON TELECOMMUNICATIONS INCOME FUND
ADMINISTRATION AGREEMENT
April 21, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Telecommunications Income Fund (the "Fund"), a
business trust organized under the laws of the Commonwealth of
Massachusetts, confirms its agreement with Smith, Barney Advisers, Inc.
("SBA") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Master Trust Agreement dated June 2, 1983 as
amended from time to time (the "Master Trust Agreement"), in its Prospectus
and Statement of Additional Information as from time to time in effect and
in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Fund (the "Board"). Copies of the Fund's
Prospectus, Statement of Additional Information and Master Trust Agreement
have been or will be submitted to SBA. The Boston Company Advisors, Inc.
("Boston Advisors") serves as the Fund's investment adviser, and the Fund
desires to employ and hereby appoints SBA to act as its administrator. SBA
accepts this appointment and agrees to furnish the services to the Fund for
the compensation set forth below. SBA is hereby authorized to retain third
parties and is hereby authorized to delegate some or all of its duties and
obligations hereunder to such persons provided that such persons shall
remain under the general supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA
will: (a) assist in supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under its investment
advisory agreement; (b) supply the Fund with office facilities (which may
be in SBA's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net asset value of shares of the
Fund, (ii) applicable contingent deferred sales charges and similar fees
and charges and (iii) distribution fees, internal auditing and legal
services, internal executive and administrative services, and stationary
and office supplies; and (c) prepare reports to shareholders of the Fund,
tax returns and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBA on the first business day of each month a
fee for the previous month at an annual rate of .20 of 1.00% of the Fund's
average daily net assets. The fee for the period from the date the Fund's
initial registration statement is declared effective by the SEC to the end
of the month during which the initial registration statement is declared
effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to SBA, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
SBA will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the members of the Board of
the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc. or its affiliates or any person who is an affiliate of any
person to whom duties may be delegated hereunder; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement (s), but excluding distribution fees, interest, taxes,
brokerage and, if permitted by state securities commissions, extraordinary
expenses) exceed the expense limitations of any state having jurisdiction
over the Fund, SBA will reimburse the Fund for that excess expense to the
extent required by state law in the same proportion as its respective fees
bear to the combined fees for investment advice and administration. The
expense reimbursement obligation of SBA will be limited to the amount of
its fees hereunder. Such expense reimbursement, if any, will be estimated,
reconciled and paid on a monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect SBA against
liability to the Fund or to its shareholders to which SBA would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of SBA's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act
and may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBA so acting. In addition,
the Fund understands that the persons employed by SBA or its affiliates to
assist in the performance of its duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of SBA or its affiliates to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to
whom responsibilities are delegated hereunder) ("indemnitees") against any
loss, claim, expense or cost of any kind (including reasonable attorney's
fees) resulting or arising in connection with this Agreement or from the
performance or failure to perform any act hereunder, provided that no such
indemnification shall be available if the indemnitee violated the standard
of care in paragraph 6 above. This indemnification shall be limited by the
1940 Act, and relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the requirements of the 1940
Act and the rules, regulations and interpretations thereof as in effect
from time to time.
10. Limitation of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement has been duly
authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson
Telecommunications Income Fund
By:
Name: Heath B. McLendon
Title: Chairman of the Board
Accepted:
Smith, Barney Advisers, Inc.
By: _________________________
Name: Christina Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide a Treasurer and Assistant Treasurer for the
Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor mark-to-market comparisons for money market
funds;
Recommend valuation to be used for securities which
are not readily saleable;
Function as a liaison with the Fund's outside auditors
and arrange for audits;
Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
Prepare and file forms with the Internal Revenue
Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the
Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder
meetings;
Maintain Master Trust Agreement and By-Laws of the
Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATTATIN ADMN2.DOC
A-5
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATT ATIN ADMN2.DOC
SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND
SUB-ADMINISTRATION AGREEMENT
April 21, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02109
Dear Sirs:
Smith Barney Shearson Telecommunications Growth Fund, a
business trust organized under the laws of the Commonwealth of
Massachusetts and Smith, Barney Advisers, Inc. ("SBA") confirm their
agreement with The Boston Company Advisors, Inc. ("Boston Advisors") as
follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Master Trust Agreement dated June 2, 1983 as
amended from time to time (the "Master Trust Agreement"), in its Prospectus
and Statement of Additional Information as from time to time in effect, and
in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Fund (the "Board"). Copies of the Fund's
Prospectus, Statement of Additional Information and Master Trust Agreement
have been or will be submitted to you. The Fund employs SBA as its
administrator, and the Fund and SBA desire to employ and hereby appoint
Boston Advisors as the Fund's sub-administrator. Boston Advisors accepts
this appointment and agrees to furnish the services to the Fund, for the
compensation set forth below, under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and SBA,
Boston Advisors will: (a) assist in supervising all aspects of the Fund's
operations except those performed by the Fund's investment adviser under
the Fund's investment advisory agreement; (b) supply the Fund with office
facilities (which may be in Boston Advisor's own offices), statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including, but not limited to, the calculation of (i)
the net asset value of shares of the Fund, (ii) applicable contingent
deferred sales charges and similar fees and changes and (iii) distribution
fees, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; and (c)
prepare reports to shareholders of the Fund, tax returns and reports to and
filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of each
month a fee for the previous month calculated in accordance with the terms
set forth in Appendix B, and as agreed to from time to time by the Fund,
SBA and Boston Advisors. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Boston Advisors, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of the Board members
of the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc., Boston Advisors of their affiliates; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and its Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisory
will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The expense
reimbursement obligation of Boston Advisors will be limited to the amount
of its fees hereunder. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering
the services listed in paragraph 2 above. Boston Advisors shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement
relates, provided that nothing herein shall be deemed to protect or purport
to protect Boston Advisors against liability to the Fund or to its
shareholders to which Boston Advisors would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of
Boston Advisor's reckless disregard of its obligations and duties under
this Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without the
written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or more
other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Boston
Advisors or its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind of nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including reasonable
attorney's fees) resulting or arising in connection with this Agreement or
from the performance or failure to perform any act hereunder, provided that
not such indemnification shall be available if the indemnitee violated the
standard of care in paragraph 6 above. This indemnification shall be
limited by the 1940 Act, and relevant state law. Each indemnitee shall be
entitled to advancement of its expenses in accordance with the requirements
of the 1940 Act and the rules, regulations and interpretations thereof as
in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement and Bylaws. The execution and delivery of this Agreement has
been duly authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board Members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us the
enclosed copy hereof.
Very truly yours,
Smith Barney Shearson
Telecommunications Growth Fund
By: _____________________
Name: Heath B. McLendon
Title: Chairman of the Board
Smith, Barney Advisers, Inc.
By: _____________________
Name: Christina Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: ________________________
Name: Francis J. McNamara
Title: Senior Vice President
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act" ), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide an Assistant Treasurer for the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
Monitor mark-to-market comparisons for money market funds;
Recommend valuations to be used for securities which are not
readily saleable;
Function as a liaison with the Fund's outside auditors and
arrange for audits;
Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
Prepare and file forms with the Internal Revenue Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
Prepare and file proxy statements;
Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
Provide an Assistant Secretary for the Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder meetings;
Maintain Master Trust Agreement and By-Laws of the Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATT ATGR SUBAD.DOC
SHARED DOMESTIC CLIENTS SHEARSON FUNDS ATT ATGR SUBAD.DOC
SMITH BARNEY SHEARSON TELECOMMUNICATIONS INCOME FUND
SUB-ADMINISTRATION AGREEMENT
April 21, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02109
Dear Sirs:
Smith Barney Shearson Telecommunications Income Fund (the
"Fund"), a business trust organized under the laws of the Commonwealth of
Massachusetts and Smith, Barney Advisers, Inc. ("SBA") confirm their
agreement with The Boston Company Advisors, Inc. ("Boston Advisors") as
follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Master Trust Agreement dated June 2, 1983 as
amended from time to time (the "Master Trust Agreement"), in its Prospectus
and Statement of Additional Information as from time to time in effect, and
in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Fund (the "Board"). Copies of the Fund's
Prospectus, Statement of Additional Information and Master Trust Agreement
have been or will be submitted to you. The Fund employs SBA as its
administrator, and the Fund and SBA desire to employ and hereby appoint
Boston Advisors as the Fund's sub-administrator. Boston Advisors accepts
this appointment and agrees to furnish the services to the Fund, for the
compensation set forth below, under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and SBA,
Boston Advisors will: (a) assist in supervising all aspects of the Fund's
operations except those performed by the Fund's investment adviser under
the Fund's investment advisory agreement; (b) supply the Fund with office
facilities (which may be in Boston Advisor's own offices), statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including, but not limited to, the calculation of (i)
the net asset value of shares of the Fund, (ii) applicable contingent
deferred sales charges and similar fees and changes and (iii) distribution
fees, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; and (c)
prepare reports to shareholders of the Fund, tax returns and reports to and
filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of each
month a fee for the previous month calculated in accordance with the terms
set forth in Appendix B, and as agreed to from time to time by the Fund,
SBA and Boston Advisors. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Boston Advisors, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of the Board members
of the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc., Boston Advisors of their affiliates; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and its Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisory
will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The expense
reimbursement obligation of Boston Advisors will be limited to the amount
of its fees hereunder. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering
the services listed in paragraph 2 above. Boston Advisors shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to
protect Boston Advisors against liability to the Fund or to its
shareholders to which Boston Advisors would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of
Boston Advisor's reckless disregard of its obligations and duties under
this Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without the
written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or more
other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Boston
Advisors or its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind of nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including reasonable
attorney's fees) resulting or arising in connection with this Agreement or
from the performance or failure to perform any act hereunder, provided that
not such indemnification shall be available if the indemnitee violated the
standard of care in paragraph 6 above. This indemnification shall be
limited by the 1940 Act, and relevant state law. Each indemnitee shall be
entitled to advancement of its expenses in accordance with the requirements
of the 1940 Act and the rules, regulations and interpretations thereof as
in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement and Bylaws. The execution and delivery of this Agreement has
been duly authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board Members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us the
enclosed copy hereof.
Very truly yours,
Smith Barney Shearson
Telecommunications Income Fund
By: ______________________
Name: Heath B. McLendon
Title: Chairman of the Board
Smith, Barney Advisers, Inc.
By: ______________________
Name: Christina Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: ________________________
Name: Joseph W. Dello Russo
Title: Senior Vice President
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act" ), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide an Assistant Treasurer for the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
Monitor mark-to-market comparisons for money market funds;
Recommend valuations to be used for securities which are not
readily saleable;
Function as a liaison with the Fund's outside auditors and
arrange for audits;
Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
Prepare and file forms with the Internal Revenue Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
Prepare and file proxy statements;
Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
Provide an Assistant Secretary for the Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder meetings;
Maintain Master Trust Agreement and By-Laws of the Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
SHARED DOMESTIC CLIENTS SHEARSON FUND ATT ATIN SUBAD.DOC
A-4
shared\domestic\clients\shearson\agr.doc
shared\domestic\clients\shearson\agr.doc
AMENDED SERVICES AND DISTRIBUTION PLAN
SMITH BARNEY TELECOMMUNICATIONS GROWTH FUND
This Services and Distribution Plan (the "Plan") is adopted in
accordance with rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), by Smith Barney Telecommunications
Growth Fund, a business trust organized under the laws of the Commonwealth
of Massachusetts (the "Fund"), subject to the following terms and
conditions:
Section 1. Annual Fee
(a) Class A Service Fee. The Fund will pay to the distributor of its
shares, Smith Barney Inc., a corporation organized under the laws of the
State of Delaware ("Distributor"), a service fee under the Plan at the
annual rate of .25% of the average daily net assets of the Fund
attributable to the Class A shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class B shares
(the "Class B Service Fee").
(c) Service Fee for Class C shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .25% of the
average daily net assets of the Fund attributable to the Class C shares
(the "Class C Service Fee," and collectively with the Class A Service Fee
and the Class B Service Fee, the "Service Fees").
(d) Distribution Fee for Class B shares. In addition to the Class B
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the fund
attributable to the Class B Distribution Fee, the "Distribution Fees").
(e) Distribution Fee for Class C shares. In addition to the Class C
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .75% of the average daily net assets of the Fund
attributable to the Class C shares (the "Class C Distribution Fee," and
collectively with the Class B Distribution Fee, the "Distribution Fees").
(f) Payment of Fees. The Service Fees and Distribution Fees will be
calculated daily and paid monthly by the Fund with respect to the foregoing
classes of the fund's shares (each a "Class" and together the "Classes") at
the annual rates indicated above.
Section 2. Expenses Covered by the Plan
With respect to expenses incurred by each Class its respective
Service Fees and/or Distribution Fees may be used for; (a) costs of
printing and distributing the Fund's prospectus, statement of additional
information and reports to prospective investors in the Fund; (b) costs
involved in preparing, printing and distributing sales literature
pertaining o the Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of the Distributor; (d) payments made
to, and expenses of Smith Barney Financial Consultants and other persons
who provide support services in connection with the distribution of the
Fund's shares, including but not limited to, office space and equipment,
telephone
facilities, answering routine inquires regarding the Fund, processing
shareholder transactions and providing any other shareholder services not
otherwise provided by the Fund's Transfer agent; and (e) accruals for
interest on the amount of the foregoing expenses that exceed the
Distribution Fee and, in the case of Class B shares, the contingent
deferred sales charge received by the Distributor; provided, however, that
the Distribution Fees may be used by the Distributor only to cover expenses
primarily intended to result in the sale of the Fund's Class B and C
shares, including without limitation, payments to Distributor's financial
consultants ant the time of the sale of Class B and C shares. In addition,
Service Fees are intended to be used by the Distributor primarily to pay
its financial consultants for servicing shareholder accounts, including a
continuing fee to each such financial consultant, which fee shall begin to
accrue immediately after the sale of such shares.
Section 3. Approval of Shareholders
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of the Plan, with respect to a Class until the
Plan has been approved by a vote of a least a majority of the outstanding
voting securities of the Class. The Plan will be deemed to have been
approved with respect to a class so longer as a majority of the outstanding
voting securities of the Class votes for the approval of the Plan,
notwithstanding that: (a) the Plan has not been approved by a major of the
outstanding voting securities of any other Class, or (b) the Plan has not
been approved by a majority of the outstanding voting securities of the
Fund.
Section 4. Approval of Trustees
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Trustees of the Fund
and (b) those Trustees who are not interested persons of the Fund and who
have not direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan and the
related agreements.
Section 5. Continuance of the Plan
The Plan will continue in effect with respect to each Class until
November 7, 1995, and thereafter for successive twelve-month periods with
respect to each Class; provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Fund and by
a majority of the Qualified Trustees.
Section 6. Termination
The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority of
the outstanding voting securities of such Class or (ii) by a vote of the
Qualified Trustees. The Plan may remain in effect with respect to a
particular Class even if the Plan has been terminated in accordance with
this Section 6 with respect to any other Class.
Section 7. Amendments
The Plan may to be amended with respect to any Class so as to
increase materially the amounts of the Fees described in Section 1 above,
unless the amendment is approved by a vote of the holders of at least a
majority of the outstanding voting securities of that class. No material
amendment to the Plan may be made unless approved by the Fund's Board of
Trustees in the manner described in Section 4 above.
Section 8. Selection of Certain Trustees
While the Plan is in effect, the selection and nomination of the
Fund's Trustees who are not interested persons of the Fund will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Fund.
Section 9. Written Reports
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by the Fund
pursuant to the Plan or any related agreement will prepare and furnish to
the Fund's Board of Trustees and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule, which sets out
the amounts expended under the Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials
The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period of
not less than six years (the first two years in an easily accessible place)
from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms
As used in the Plan, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have the same meaning
that those terms have under the 1940 Act by the Securities and Exchange
Commission.
Section 12. Limitation of Liability
It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the
Fund, individually, but are binding only upon the assets and property of
the Fund, as provided, as provided in the Master Trust Agreement of the
Fund. The execution and delivery of this Plan has been authorized by the
Trustees and by shareholders of the Fund holding at least a majority of the
outstanding voting securities and signed by an authorized officer of the
Fund, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officer be deemed to
have made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property or the Fund as
provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the Fund execute the Plan as of November 7, 1994.
SMITH BARNEY
TELECOMMUNICATIONS GROWTH FUND
By:/s/Heath B. McLendon
Heath B. McLendon
Chairman of the Board
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