As filed with the Securities and Exchange Commission on April 29, 1997
Registration No. 2-86519 811-3763
- ------------------------------------------------------------------------------
- ---------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [X] Post-Effective
Amendment No. 21
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940, as amended
Amendment No. 22 [X]
SMITH BARNEY TELECOMMUNICATIONS TRUST
(Exact name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 723-9218
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Christina T. Sydor
Secretary
388 Greenwich Street New York, New York 10013
(Name and Address of Agent for Service)
copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment becomes effective.
It is proposed that this filing become effective:
_____ Immediately upon filing pursuant to Rule 485(b)
__X___ on April 30, 1996 pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
_____ on -------------- 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 of the fiscal year ended
December 31, 1996 was filed on February 25, 1997, as accession number
000091155-97-000097.
To Register Additional Securities under Reg. 270.24e-2
CALCULATION OF REGISTRATION FEE
Title of Share
securities Amount
being being
registered registered
Income Fund 23,282
During its fiscal year ended December 31, 1996, the Income Fund redeemed
50,952. During its current fiscal year, the Incocme Fund used 27,670 shares of
the Income Fund it redeemed during its fiscal year ended December 31, 1996,
for a reduction pursuant to Rule 24f-2(c).
The fund currently is registering 23,282 shares for the Income Fund, during
its fiscal year ended December 31, 1996.
During its current fiscal year, the Regstrant filed no other post-effective
amendments for the purpose of reduction pursuant to Rule 24e-2(a).
SMITH BARNEY TELECOMMUNICATIONS TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY TELECOMMUNICATIONS TRUST
FORM N-1A CROSS REFERENCE SHEET
Pursuant to Rule 495(b) Under the Securities Act of 1933, as amended
Part A
Item No. and Caption Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial
Highlights;
4. General Description of Registrant Cover Page;
Prospectus Summary;
Investment Objective and
Policies; Distributor;
Additional
Information
5 Management of the Fund Prospectus
Summary; Management
of the Trust and the
Fund;
Distributor; Additional
Information
5A Management's Discussion of Management of the
Trust and the
Fund Performance Fund
6. Capital Stock and Other Securities Investment
Objective and Policies;
Dividends, Distributions and
Taxes; Additional Information
7. Purchase of Securities Being Offered Valuation of
Shares; Purchase of
Shares; Exchange Privilege;
Redemption of Shares;
Minimum
Account Size; Distributor
8. Redemption or Repurchase of Shares Purchase of
Shares; Redemption of
Shares; Exchange Privilege
9. Pending Legal Proceedings Not Applicable
Part B
Item No. and Caption 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
Objectives and
Management Policies
14. Management of the Fund Management of the Trust
and the
Funds; Distributor
15. Control Persons and Principal Management of the
Trust and the
Funds Holders of Securities
16 Investment Advisory and Other Services Management of the
Trust and the
Funds; Distributor
17 Brokerage Allocation Investment
Objectives and
Management Policies;
Distributor
18. Capital Stock and Other Securities Investment
Objectives and
Management Policies; Purchase
of
Shares; Redemption of Shares;
Taxes
19. Purchase, Redemption and Pricing Purchase of
Shares; Redemption of
Securities Being Offered Shares; Valuation
of Shares;
Distributor; Exchange
Privilege
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Data Performance Data
23. Financial Statements Financial
Statements
SMITH BARNEY
TELECOMMUNICATIONS INCOME TRUST
388 Greenwich Street, New York, New York 10013 - 800-451-2010
PROSPECTUS April 30, 1997
The investment objective of Smith Barney Telecommunications Fund (the "Fund")
of Smith Barney Telecommunications Trust (the "Trust") is current income, with
growth of capital as a secondary consideration. The Fund seeks to achieve
this objective primarily by investing in income-producing equity and debt
securities of companies in the telecommunications industry. The Fund is a
portfolio of the Trust, a non-diversified, open-end management investment
company.
Shares of the 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 Fund is contained in a
Statement of Additional Information dated April 30, 1997, as amended or
supplemented from time to time, which is available upon request and without
charge by calling or writing the Fund at the telephone number or address set
forth above or by contacting a Smith Barney Financial Consultant. The
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 ASSET MANAGEMENT, INC.
Sub-Investment Adviser
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.
INTRODUCTION
The Fund is a portfolio 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. The Fund's investments are primarily concentrated in the securities of
issuers engaged in the telecommunications industry. The Fund does not
currently offer its shares for sale to new investors.
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 Asset
Management, Inc. ("TBCAM") as its sub-investment adviser , PNC Bank, National
Association ("PNC") as its custodian and First Data Investor Shareholder
Services Group, Inc. ("First Data"), 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.............................................................
.........................................................................
............
2
The Fund's
Expenses.................................................................
....................................................................
3
Financial
Highlights...............................................................
.......................................................................
4
Management of the Fund and the
Trust....................................................................
.....................................
6
Investment Objective and Management
Policies.................................................................
...........................
8
Redemption of
Shares...................................................................
.................................................................
1
1
Minimum Account
Size.....................................................................
............................................................
1
3
Valuation of
Shares...................................................................
....................................................................
1
3
Exchange
Privilege................................................................
........................................................................
1
3
Dividends, Distributions and
Taxes....................................................................
............................................
1
6
Additional
Information..............................................................
....................................................................
1
7
THE 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 Fund, based upon
the Fund's expenses for its most recent fiscal year:
Annual Fund Operating Expenses (as a percentage of average daily net assets)
Management fees 0.75%
Other expenses 0.15%
Total Fund Operating Expenses 0.90%
Management fees paid by the 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 Fund's average daily net assets. The nature of the services for
which the Fund pays management fees is described under "Management of the 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 Fund. These amounts are based upon
(a) payment by the 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 $9 $29 $50 $111
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 for the two year period ended December 31, 1996 has
been audited by KPMG Peat Marwick LLP, independent auditors, whose report
thereon appears in the Fund's Annual Report dated December 31, 1996. The
following information for the fiscal years ended December 31, 1987 through
December 31, 1994 has been audited by other independent auditors. The
information set out below should be read in conjunction with the financial
statements and related notes that also appear in the Fund's Annual Report,
which is incorporated by reference into the Statement of Additional
Information.
For a share of beneficial interest outstanding throughout each year:
1996
1995
1994
1993
1992
1991
Net Asset Value, Beginning
of Year
$119.69
$95.62
$107.62
$102.67
$110.75
$129.06
Income (Loss) From
Operations:
Net investment income
3.12
3.58
4.02
3.94
4.91
5.74
Net realized and
unrealized gain/(loss)
(5.35)
35.57
(5.91)
12.30
6.79
(2.20)
Total Income (Loss) From
Operations
(2.23)
39.15
(1.89)
16.24
11.70
3.54
Less Distributions From:
Net investment income
(3.12)
(3.58)
(4.05)
(4.42)
(4.55)
(6.05)
Net realized gains
(9.72)
(11.50)
(6.06)
(6.87)
(15.23)
(14.62)
Capital
- --
- --
- --
- --
- --
(1.18)
Total Distributions
(12.84)
(15.08)
(10.11)
(11.29)
(19.78)
(21.85)
Net Asset Value, End of
Year
$104.62
$119.69
$95.62
$107.62
$102.67
$110.75
Total Return*
(1.45)%
42.93%
(1.83)%
16.00%
10.89%
3.30%
Net Assets, End of Year
(millions)
$63
$75
$61
$72
$71
$79
Ratios to Average Net
Assets:
Expenses
0.90%
0.95%
0.95%
0.93%
0.92%
0.90%
Net investment income
2.80
3.23
3.80
3.47
4.41
4.57
Portfolio Turnover Rate
0%
0%
0%
0%
2%
18%
Average commissions paid
on equity security
transactions(1)
$0.05
$0.06
- --
- --
- --
- --
(1) As of September 1995, the SEC instituted new guidelines requiring the
disclosure of average commissions per share.
* Total return represents the aggregate total return for the period indicated.
For a share of beneficial interest outstanding throughout each year:
1990
1989
1988
1987
Net Asset Value, Beginning of
Year
$140.93
$99.10
$90.28
$99.20
Income (Loss) From
Operations:
Net investment income
6.10
5.18
5.55
5.87
Net realized and unrealized
gain/loss
(8.98)
45.31
9.66
(4.67)
Total Income (Loss) From
Operations
(2.88)
50.49
15.21
1.20
Less Distributions From:
Net investment income
(5.79)
(5.85)
(5.40)
(7.20)
Net realized gains
(3.20)
(2.81)
(0.99)
(2.92)
Capital
- --
- --
- --
- --
In excess of net realized
gains
- --
(0.16)
- --
- --
Total Distributions
(8.99)
(8.66)
(6.39)
(10.12)
Net Asset Value, End of Year
$129.06
$140.93
$99.10
$90.28
Total Return*
(1.80)%
52.11%
17.12%
0.91%
Net Assets, End of Year
(millions)
$95
$110
$83
$80
Ratios to Average Net Assets:
Expenses
0.92%
0.89%
0.95%
0.97%
Net investment income
4.81%
4.32%
5.70%
5.84%
Portfolio Turnover Rate
3%
5%
3%
6%
*Total return represents the aggregate total return for the period indicated.
MANAGEMENT OF THE FUND AND THE TRUST
Board of Trustees
Overall responsibility for management and supervision of the Fund rests with
the Trusts Board of Trustees. The Trustees approve all significant agreements
between the Fund and the companies that furnish services to the Fund,
including agreements with its distributor, investment adviser, sub-investment
adviser, administrator, custodian and transfer agent. The day-to-day
operations of the Fund are delegated to the 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 Fund.
Investment Adviser -- SBSA
SBSA, located at 388 Greenwich Street, New York, New York 10013, serves as the
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 which had aggregate assets
under management as of March 31, 1997 in excess of $80 billion.
Subject to the supervision and direction of the Trust's Board of Trustees,
SBSA manages the Fund's portfolio in accordance with the Fund's stated
objective and policies, makes investment decisions for the Fund, places orders
to purchase and sell securities and employs professional portfolio managers
and securities analysts who provide research services to the Fund. For
investment advisory services rendered, the Fund pays SBSA a monthly fee at the
annual rate of 0.55% of the value of its average daily net assets.
Portfolio Management
Valerie Sill, Senior Vice President of TBCAM, has served as portfolio manager
of the Fund since April 1997 and manages the day-to-day operations of the
Fund, including making all investment decisions.
Management's discussion and analysis, and additional performance information
regarding the Fund during the fiscal year ended December 31, 1996, is included
in the Annual Report dated December 31, 1996. 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 Fund's administrator and oversees all aspects of the Fund's
administration. SBMFM provides investment management, investment advisory
and/or administrative services to investment companies that had aggregate
assets under management as of January 31, 1997 in excess of $84 billion. For
administration services rendered, the Fund pays SBMFM a monthly fee at the
annual rate of 0.20% of the value of the Fund's average daily net assets.
Sub-Investment Adviser -- TBCAM
TBCAM, located at One Boston Place, Boston, Massachusetts 02108, serves as the
Fund's sub-investment adviser . TBCAM is a wholly owned subsidiary of The
Boston Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of
Mellon Bank Corporation ("Mellon"). TBCAM serves as the Fund's sub-investment
adviser pursuant to a sub-investment advisory agreement dated June 16, 1994.
For sub-investment advisory services rendered, TBCAM receives a fee from SBSA
paid monthly at the annual rate of 0.275% of the value of the Fund's average
daily net assets.
Subject to the supervision and direction of the Trust's Board of Trustees and
SBSA, TBCAM manages the Fund's portfolio in accordance with the Fund's
investment objective and policies, makes investment decisions for the Fund,
places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the Fund.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the 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 Fund's
outstanding shares. There is no guarantee the Fund's investment objective will
be achieved.
The 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 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 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 Fund may
temporarily have less than 65% of the value of its total assets invested in
that industry.
Securities for the Fund are selected principally on the basis of their ability
to produce current income and, as a result, the Fund invests principally in
income-producing common stocks, preferred stocks and debt securities,
including securities convertible into common and preferred stocks. The Fund
also may invest in short-term fixed-income obligations, such as commercial
paper. Debt securities purchased by the Fund will be rated within the three
highest ratings by Standard & Poor's Ratings Group ("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 TBCAM. Commercial paper purchased by the 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 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 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 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 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 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 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 Fund's assumption of large
positions in the obligations of a small number of issuers may cause the 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 Fund's investment policies, including a list of
those restrictions on the 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 Fund is authorized to lend securities
that it holds to brokers, dealers and other financial organizations. These
loans, if any, may not exceed 33 1/3% of the Fund's assets taken at value. The
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 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 TBCAM to be of good standing and will not be made unless, in the
judgment of SBSA and/or TBCAM, the consideration to be earned from such loans
would justify the risk.
Borrowing. The 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 Fund's total
assets, the Fund will not purchase securities for investment.
Short-Term Investments. The 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 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 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 Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the 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 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 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 TBCAM, 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 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 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
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 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 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 Fund will depend on the
ability of SBSA and/or TBCAM to correctly predict movements in the prices of
the securities underlying the option.
Portfolio Transactions. Portfolio securities transactions on behalf of the
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
TBCAM. The 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 TBCAM
believes that such brokers charge for the transaction does not exceed the
usual and customary levels.
Certain Risk Considerations
Shareholders should be aware that the Fund concentrates its assets in the
telecommunications industry and, as a result, the Fund should not be
considered as a complete investment program. Moreover, the investment
flexibility of the Fund may be restricted by the necessity of satisfying
certain diversification requirements in order to maintain the qualification of
the Fund as a regulated investment company within the meaning of the Code. See
"Dividends, Distributions and Taxes."
REDEMPTION OF SHARES
The Fund is required to redeem the shares of the 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. Redemption requests received after the close of regular trading on
the New York Stock Exchange (NYSE") are priced at the net asset value as next
determined.
The redemption proceeds will be remitted on or before the third business day
following reciept of proper tender, except on any days on which the NYSE is
closed or as permitted under the 1940 Act in extraordinary circumstances.
Generally, if the redemption proceeds are remitted to a Smith Barney brokerage
account, these funds will not be invested for the shareholders benefit without
specific instruction, and Smith Barney will benefit from the use of
temporarily uninvested funds.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than
those held by Smith Barney as custodian may be redeemed through an investors
Financial Consultant, a broker that clears securities transactions through
Smith Barney on a fully disclosed basis or dealer in the selling group or by
submitting a written request for redemption to:
Smith Barney Telecommunications Income Fund
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Boston, Massachusetts 01581-5128
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 First Data together with a redemption request. Any
signature appearing on a redemption request in excess of $2,000, share
certificate or stock power 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. Written redemption requests of $2,000 or less do
not require a signature guarantee unless more than one such redemption request
is made in any 10-day period or the redemption proceeds are to to sent to an
address other than the address of record. Unless otherwise directed,
redemption proceeds will be mailed to an investor's address of record. First
Data may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or guardians. A redemption
request will not be deemed to be properly received until First Data receives
all required documents in proper form.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM
Shareholders who do not have a Smith Barney brokerage account may be
eligible to redeem and exchange Fund shares by telephone. To determine if a
shareholder is entitled to participate in this program he or she should
contact First Data at 1-800-451-2010. Once eligibility is confirmed, the
shareholder must complete and return a Telephone/Wire Authorization Form,
along with a signature guarantee that will be provided by First Data upon
request.
Redemptions. Redemption requests of up to $10,000 of the Fund's shares
may be made by eligible shareholders by calling First Data at 1-800-451-2010.
Such requests may be made between 9:00 a.m. and 5:00 p.m. (New York City time)
on any day the NYSE is open. Redemption requests receive after the close of
regular trading on the NYSE are priced at the net asset value next determined.
Redemptions of shares (i) by retirement plans or (ii) for which certificates
have been issued are not permitted under this program.
A shareholder will have the option of having the redemption proceeds
mailed to his/her address of record or wired to a bank account predesignated
by the shareholder. Generally, redemption proceeds will be mailed or wired,
as the case may be, on the next business day following the redemption request.
In order to use the wire procedures, the bank receiving the proceeds must be a
member of the Federal Reserve System or have a correspondent/relationship with
a member bank. The Fund reserves the right to charge shareholders a nominal
fee for each wire redemption. Such charges, if any, will be assessed against
the shareholder's account from which shares were redeemed. In order to change
the bank account designated to receive redemption proceeds, a shareholder must
complete a new Telephone/Wire Authorization Form and, for the protection of
the shareholder's assets, will be required to provide a signature guarantee
and certain other documentation.
Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the shares of the fund being acquired is identical to
the registration of the shares of the fund exchanged. Such exchange requests
may be made by calling First Data at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m. (New York City time) on any day on which the NYSE is open. Exchange
requests received after the close of regular trading on the NYSE are processed
at the net asset value next determined.
Additional Information regarding Telephone Redemption and Exchange
Program. Neither the Fund nor its agents will be liable for following
instructions communicated that are reasonably believed to be genuine. The
Fund and its agents will employ procedures designed to verify the identity of
the caller and legitimacy of instructions (for example, a shareholder's name
and account number will be required and phone calls may be recorded). The
Fund reserves the right to suspend, modify or discontinue the telephone
redemption and exchange program or to impose a charge for this service at any
time following at least seven (7) days' prior notice to shareholders.
MINIMUM ACCOUNT SIZE
The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
account is less than $500. (If a shareholder has more than one account in the
Fund, each account must satisfy the minimum account size.) The Fund, however,
will not redeem shares based solely on market reductions in net asset value.
Before the Fund exercises such right, shareholders will receive written notice
and will be permitted 60 days to bring accounts up to the minimum to avoid
involuntary liquidation.
VALUATION OF SHARES
The 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 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 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 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 Fund shares are subject to
minimum investment requirements and to the other requirements of the fund into
which exchanges are made.
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 Natural Resources Fund
Smith Barney Special Equities Fund
Growth and Funds
Concert Social Awareness Fund
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Equity Income Portfolio
Smith Barney Growth and Fund
Smith Barney Premium Total Return Fund
Smith Barney Utilities Fund
Taxable Fixed-Funds
Smith Barney Adjustable Rate Government Fund
Smith Barney Diversified Strategic Fund
Smith Barney Funds, Inc. -- Income Return Account 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 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 Intermediate Maturity California Municipals Fund
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund
Smith Barney Massachusetts Municipals Fund
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Fund
International Funds
Smith Barney World Funds Inc. -- Emerging Markets Portfolio
Smith Barney World Funds Inc. -- European Portfolio
Smith Barney World Funds Inc. -- Global Government Bond Portfolio
Smith Barney World Funds Inc. -- International Balanced Portfolio
Smith Barney World Funds Inc. -- International Equity Portfolio
Smith Barney World Funds Inc. -- Pacific Portfolio
Smith Barney Concert Allocation Series, Inc.
Smith Barney Concert Allocation Series, Inc. -- Balanced Portfolio
Smith Barney Concert Allocation Series, Inc. -- Conservative Portfolio
Smith Barney Concert Allocation Series, Inc. -- Growth Portfolio
Smith Barney Concert Allocation Series, Inc. -- High Growth Portfolio
Smith Barney Concert Allocation Series, Inc. -- Income Portfolio
Money Market Funds
Smith Barney Money Funds, Inc. -- Cash Portfolio
Smith Barney Money Funds, Inc. -- Government Portfolio
Smith Barney Money Funds, Inc. -- Retirement Portfolio
Smith Barney Muni Funds -- California Money Market Portfolio
Smith Barney Muni Funds -- New York Money Market Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can be detrimental to the Fund's performance and its shareholders. SBSA may
determine that a pattern of frequent exchanges is excessive and contrary to
the best interests of the Fund's other shareholders. In this event, SBSA will
notify Smith Barney and the Fund may, at its discretion, decide to limit
additional purchases and/or exchanges by the shareholder. Upon such a
determination, the Fund will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege and
during the 15 day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds of the Smith Barney Mutual Funds listed above, which position the
shareholder would be expected to maintain for a significant period of time.
All relevant factors will be considered in determining what constitutes an
abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by telephone. See
"Redemption of Shares - Telephone Redemption and Exchange Program." Exchanges
will be processed at the net asset value next determined. 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 Fund reserves the right
to modify or discontinue exchange privileges upon 60 days' prior notice to
shareholders.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends from the 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 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 Fund to pay
dividends and capital gains distributions in cash and credit them to the
shareholders account at Smith Barney, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
Fund at net asset value, without a sales charge. The 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 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 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
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 Fund, regardless of the length of time that Fund
shares have been held by the shareholder.
Generally, dividends of investment income (but not capital gain) from the Fund
will qualify for the Federal dividends-received deduction for corporate
shareholders. Each shareholder will receive a statement annually from the
Fund, which will set forth separately the aggregate dollar amount of dividends
and capital gains distributed to the shareholder by the 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 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 Fund's prior
taxable year as to the Federal income tax status of his or her dividends and
distributions which were received from the Fund during it's prior taxable
year. Shareholders should consult their tax advisors about the status of
dividends and distributions from the 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. 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 Fund's
outstanding shares and the 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 Fund will have one vote for each full
share held and a proportionate, fractional vote for each fractional share
held.
PNC Bank, located at 17th and Chestnut Streets, PA 19103, serves as custodian
of the Trust's investments.
First Data located at Exchange Place, Boston, Massachusetts 02109, serves as
the Trust's transfer agent.
The Fund sends shareholders a semi-annual report and an audited annual report,
which include listings of the investment securities held by the Fund at the
end of the period covered. In an effort to reduce the Fund's printing and
mailing costs, the Fund plans to consolidate the mailing of its semi-annual
and annual reports by household. This consolidation means that a household
having multiple accounts with the identical address of record will receive a
single copy of each report. In addition, the 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 First Data.
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 Fund
or the distributor. This Prospectus does not constitute an offer by the Fund
or the distributor to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction.
FD 01120 4/97
PART B
SMITH BARNEY
TELECOMMUNICATIONS TRUST
388 Greenwich Street, New York, New York 10013 - 800-451-2010
STATEMENT OF ADDITIONAL INFORMATION April 30, 1997
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney
Telecommunications Income Fund (the "Fund") of Smith Barney Telecommunications
Trust (the "Trust"), dated April 30, 1997, as amended or supplemented from
time to time, and should be read in conjunction with the Prospectus of the
Fund. The 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 Fund and the Trust
2
Investment Objective and Management Policies
7
Redemption of Shares
17
Valuation of Shares
17
Exchange Privilege
18
Performance Data
18
Taxes (See in the Prospectus "Dividends,
Distributions
and Taxes")
20
Additional Information
22
Financial Statements
22
Appendix
24
MANAGEMENT OF THE 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 Asset Management, Inc.
(TBCAM")
Sub-Investment
Adviser
PNC Bank, National Association
(PNC")
Custodian
First Data Investor Services Group, Inc.
("FDISG"),....................................
..................................
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 Fund
The Trustees of the Trust and executive officers of the 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 56). Partner in the law firm of Murov & Ades. His
address is 272 South Wellwood Avenue, Lindenhurst, New York 11757.
Herbert Barg, Trustee (Age 73). Private investor. His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Alger B. Chapman, Trustee (Age 65). 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 59). Professor, Graduate School of Business
Administration, Harvard University; Business Consultant. His address is
Graduate School of Business Administration, Harvard University, Boston,
Massachusetts 02163.
Frank G. Hubbard, Trustee (Age 61). Vice President, S & S Industries; Former
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.
*Heath B. McLendon, Chairman of the Board and Investment Officer (Age 63).
Managing Director of Smith Barney, Chairman of SmithBarney Strategy Advisers
Inc. 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. Mr McLendon is Chairman of the Board
of 42 Smith Barney Mutual Funds. His address is 388 Greenwich Street, New
York, New York 10013.
Ken Miller, Trustee (Age 55). President of Young Stuff Apparel Group, Inc. His
address is 1407 Broadway, 6th Floor, New York, New York 10018.
John F. White, Trustee (Age 79). 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 97 Sunset Drive, Apt 402, Sarasota, Florida
34236.
Allan R. Johnson, Trustee Emeritus (Age 80). 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.
Jessica M. Bibliowicz, President (Age 37). Executive Vice President of Smith
Barney; prior to 1994, Director of Sales and Marketing for Prudential Mutual
Funds. Ms. Bibliowicz serves as President of 40 funds of the Smith Barney
Mutual Funds. Her address is 388 Greenwich Avenue, New York, New York 10013.
Lewis E. Daidone, Senior Vice President and Treasurer (age 39). Managing
Director of Smith Barney; Director and Senior Vice President of SBMFM. Mr.
Daidone also serves as Senior Vice President and Treasurer of 42 of the Smith
Barney Mutual Funds. His address is 388 Greenwich Street, New York, New York
10013.
Christina T. Sydor, Secretary (age 46). Managing Director of Smith Barney,
General Counsel and Secretary of SBMFM. Ms. Sydor also serves as Secretary of
42 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 Fund's outstanding shares as of February 28, 1997.
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 an officer, director 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, 1996, such fees and
expenses totaled $ 11,500.
For the calendar year ended December 31, 1996, the Trustees of the Trust were
paid the following compensation:
Trustee(#)
Aggregate Compensation
from the Trust
Aggregate Compensation
from the Smith Barney
Mutual Funds
Paul R. Ades (5)
$1,643
$ 52,475
Herbert Barg (20)
1,643
105,175
Alger B. Chapman (9)
1,643
76,775
Dwight B. Crane (26)
1,643
140,375
Frank G. Hubbard (5)
1,643
52,475
+Allan Johnson (5)
1,538
33,125
Heath B. McLendon (42)
N/A
N/A
Ken Miller (5)
1,643*
37,350
John F. White (5)
1,643*
48,375
________________________
(#) Number of director/trusteeships held with mutual funds in the Smith Barney
Mutual Funds family.
* Mr. Miller has deferred $402 and Mr. White has deferred $1,643 of his
compensation.
(+) Trustee Emeritus
Upon attainment of age 72 the Fund's current Directors may elect to change to
emeritus status. Any directors elected or appointed to the Board in the
future will be required to change to emeritus status upon attainment of age
80. Directors Emeritus are entitled to serve in emeritus status for a maximum
of 10 years during which time they are paid 50% of the annual retainer fee and
meeting fees otherwise applicable to the Fund Directors, together with
reasonable out-of-pocket expenses for each meeting attended.
Investment Adviser -- SBSA
SBSA serves as investment adviser to the 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 Fund. The services provided by
SBSA under the Advisory Agreement are described in the Prospectus under
"Management of the Trust and the 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 Travelers Group Inc. ("Travelers").
As compensation for investment advisory services rendered, the Fund pays SBSA
a fee computed daily and paid monthly at the annual rate of 0.55% of the
Fund's average daily net assets. For the period from June 16, 1994 through
December 31, 1994, and for the fiscal years ended December 31, 1995 and
December 31, 1996, the Fund paid SBSA $202,511, $ 373,600, and $369,448,
respectively, in investment advisory fees.
Sub-Investment Adviser -- TBCAM
TBCAM serves as sub-investment adviser to the 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 Fund or TBCAM, on April 21,
1994 and by shareholders on June 15, 1994. TBCAM is a wholly owned subsidiary
of Mellon Bank.
As compensation for sub-investment advisory services rendered, SBSA pays TBCAM
a monthly fee at the annual rate of 0.275% of the value of the Fund's average
daily net assets. For the period from June 16, 1994 through December 31, 1994,
and for the fiscal years ended December 31, 1995 and December 31, 1996, TBCAM
received $101,255, $186,800 and $184,724 respectively in sub-investment
advisory fees. Prior to June 16, 1994, TBCAM served as the Fund's investment
adviser and administrator. As compensation for those services, the Fund paid
TBCAM a fee, computed daily and paid monthly, at the annual rate of 0.75% of
the value of the Fund's average daily net assets. For the period from January
1, 1994 through June 15, 1994, TBCAM received $209,635 from the Fund.
Administrator-- SBMFM
SBMFM serves as administrator to the 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 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 Fund. "
SBMFM pays the salary of any officer and employee who is employed by both it
and the Fund and bears all expenses in connection with the performance of its
services.
As compensation for administrative services rendered to the Fund, SBMFM
receives a fee at the annual rate of 0.20% of the value of the Fund's average
daily net assets. For the fiscal period from April 21, 1994 through December
31, 1994, and the fiscal years ended December 31, 1995 and December 31, 1996,
the Fund paid SBMFM $94,363, $135,855 and $134,345, respectively, in
administration fees.
The 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 TBCAM; 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 TBCAM have agreed that if in any fiscal year the aggregate expenses
of the Fund (including fees paid pursuant to the Advisory, Sub-Advisory and
Administration Agreements, but excluding interest, taxes, brokerage fees paid
pursuant to the 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 Fund, SBMFM and TBCAM will, to the extent required by state 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 Fund. Such fee reduction, if any, will
be estimated and reconciled on a monthly basis. The most restrictive state
expense limitation applicable to the Fund would require SBMFM and TBCAM 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 Fund for the 1996, 1995 and 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
LLP, as their counsel.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been
selected as the Trust's independent auditor to examine and report on the
Trust's financial statements and highlights for the fiscal year ending
December 31, 1997.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the policies it
employs to achieve that objective. The following discussion supplements the
description of the Fund's investment objective and policies in the Prospectus.
Lending of Portfolio Securities
The 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
Fund's assets taken at value. The 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
Fund's securities are loaned: (a) the 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 Fund must be able to terminate the
loan at any time; (d) the 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 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 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 Fund or with Smith Barney, and which is acting as a
"finder."
The limit of 33 1/3% of the Fund's total assets to be committed to securities
lending is a fundamental policy of the Fund, which means that it cannot be
changed without approval of a majority of the Fund's outstanding shares. See
"Investment Restrictions" below.
Money Market Instruments The Fund may invest without limit in short-term
money market instruments when SBSA and/or TBCAM believes that a "defensive"
investment posture is advisable due to market or economic conditions. Money
market instruments in which the 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 Fund, depending upon the principal amount of CDs of each bank held by the
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 TBCAM will carefully evaluate such investments on a
case-by-case basis.
Savings and loan associations, the CDs of which may be purchased by the 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 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
Ratings Group ("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 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 Fund and
an issuer, and are not normally traded in a secondary market. The 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 TBCAM 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 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 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 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 Fund may write (a) in-the-money call
options when SBSA and/or TBCAM 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 TBCAM 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 TBCAM 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 Fund as the writer of an option continues,
the Fund may be assigned an exercise notice by the broker-dealer through which
the option was sold, requiring the Fund to deliver the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. The 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 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 Fund expects to write options
only on national securities exchanges.
The Fund may realize a profit or loss upon entering into a closing
transaction. In cases where the 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 Fund generally will write only those options for which SBSA
and/or TBCAM 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 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 Fund and other clients of SBSA and/or TBCAM 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 Fund's combined stock and option positions.
Dollar amount limits apply to U.S. government securities. These limits may
restrict the number of options which the Fund will be able to write on a
particular security.
Call options may be purchased by the 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 Fund of
such a transaction may be greater than the net premium received by the Fund
upon writing the original option, the Trust's Board of Trustees believes that
it is appropriate for the Fund to have the ability to make closing purchase
transactions in order to limit the risks involved in writing options. SBSA
and/or TBCAM also may permit the call option to be exercised.
Investment Restrictions
The Fund has adopted the following investment restrictions for the protection
of shareholders. Investment restrictions 1 through 7 below cannot be changed
without approval by the holders of a majority of the outstanding shares of the
Funds, 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 Fund are present or represented by
proxy or (b) more than 50% of the outstanding shares of the 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 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 TBCAM, 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 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 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 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 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 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 Fund's total assets, the
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 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 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 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 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
control.
(10) Purchase securities on margin (except short-term credits as are
necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box).
For purposes of this restriction, the deposit or payment by the
Fund of initial or maintenance margin in connection with futures
contracts and related options and options on securities is not
considered to be the purchase of a security on margin.
(11) Purchase or retain the securities of any issuer if those Trustees
and officers of the Trust or directors and officers of SBSA and/or
TBCAM 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 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 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 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 Fund's
portfolio securities. Securities with remaining maturities of one year or less
at the date of acquisition are excluded from the calculation. The Fund has no
fixed policy with respect to portfolio turnover; however, it is anticipated
that the annual portfolio turnover rate in the Fund generally will not exceed
50%. For the 1996 and 1995 fiscal years, the portfolio turnover rates for the
Fund were 0%.
Portfolio Transactions
Decisions to buy and sell securities for the Fund are made by SBSA and/or
TBCAM, subject to the overall supervision and review of the Trust's Board of
Trustees. Portfolio securities transactions for the Fund are effected by or
under the supervision of SBSA and/or TBCAM.
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
1996, 1995 and 1994 fiscal years, the Fund paid total brokerage commissions of
$14,543, $13,538 and $8,075, respectively.
In executing portfolio transactions and selecting brokers or dealers, it is
the Fund's policy to seek the best overall terms available. In assessing the
best overall terms available for any transactions, SBSA and/or TBCAM 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 TBCAM, 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 Fund or other accounts over which SBSA and/or TBCAM or
an affiliate exercises investment discretion.
The Trust's Board of Trustees periodically will review the commissions paid by
the Fund to determine if the commissions paid over representative periods of
time were reasonable in relation to the benefits inuring to the 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 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
TBCAM under the Advisory Agreement are not reduced by reason of SBSA and/or
TBCAM receiving such brokerage and research services. Further, Smith Barney
will not participate in commissions from brokerage given by the 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 Fund may be executed through Smith Barney or an affiliate of Smith Barney,
if, in the judgment of SBSA and/or TBCAM, 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 Fund a
commission rate consistent with that 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 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 Fund of
the aggregate compensation it earned on such transactions. For the 1996, 1995
and 1994 fiscal years, brokerage commissions of $5,343, $5,960 and $2,000,
respectively, were paid by the Fund to Smith Barney. The amount of brokerage
commissions paid to Smith Barney for the 1996 fiscal year represented 36.7% of
the total brokerage commissions paid by the Fund and Smith Barney effected
10.9% of the total dollar amount of transactions involving the payment of
brokerage commissions.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by SBSA and/or TBCAM, investments of the
kind made by the Fund also may be made by those other accounts. When the Fund
and one or more accounts managed by SBSA and/or TBCAM 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
TBCAM to be equitable. In some cases, this procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained for or
disposed of by the 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 Fund normally utilizes is restricted, or an
emergency exists, as determined by the SEC, so that disposal of the 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 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 Fund to make a
redemption payment wholly in cash, the 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 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 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 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 Trusts Board of Trustees.
Amortized cost involves valuing an instrument at its original cost to the 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 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.
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.
PERFORMANCE DATA
From time to time, a Fund may quote its yield or total return in
advertisements or in reports and other communications to shareholders. The
fund may include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may include the
following industry and financial publications: Barron's, Business Week, CDA
Investment Technologies Inc., Changing Times, Forbes, Fortune, 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 a Fund describes the expenses or performance of a
Class, it will also disclose such information for the other Classes.
Yield
A Fund's 30-day yield figure described below is calculated according to a
formula prescribed by the SEC. The Formula can be expressed as follows:
YIELD = 2[(a-bcd + 1)6 - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during
the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day of
the period.
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations purchased by the Fund at a discount or premium,
the formula generally calls for amortization of the discount or premium, the
amortization schedule will be adjusted monthly to reflect changes in the
market values of the debt obligations.
Investors should recognize that in periods of declining interest rates a
Fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates, the Fund's yield will tend to be somewhat
lower. In addition, when interest rates are falling, the inflow of net new
money to the fund from the continuous sales of its shares will likely be
invested in portfolio instruments producing lower yields than the balance of
the Fund's investments, thereby reducing the current yield of the Fund. In
periods of rising interest rates, the opposite can be expected to occur.
Average Annual Total Return
"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. A
Class' total return figures calculated in
accordance with above formula assume that the
maximum applicable sales charge or maximum
applicable CDSC, as the case may be, has been
deducted from the hypothetical $1,000 initial
investment at the time of purchase or redemption,
as applicable.
Period Ended 12/31/96
One Year Five Year Ten Year
(1.45)% 12.21% 12.49%
TAXES
The following is a summary of selected Federal income tax considerations that
may affect the 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 Fund.
Taxation of the Fund
The Fund has qualified and intends to qualify each year as a "regulated
investment company" under the Code. As a regulated investment company, the
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 Fund will be reinvested
automatically in additional shares of the Fund at net asset value, unless the
shareholder elects to receive dividends and distributions in cash.
To qualify as a regulated investment company, the Fund must meet certain
requirements set forth in the Code. One requirement is that the 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 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 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 Fund may sell securities held for less than three months or covered
call options.
Tax Status of the Fund's Investments
Gain or loss on the sale of a security by the Fund generally will be long-term
capital gain or loss if the 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 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 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 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
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
Fund will recognize a capital gain or loss from the underlying security, and
the option premium will constitute additional sales proceeds.
The 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 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
Fund.
Dividends of investment income (but not distributions of capital gain) from
the 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 Fund from domestic corporations.
If securities held by the Fund are considered to be "debt-financed"
(generally, acquired with borrowed funds) or are held by the Fund for less
than 46 days (91 days in the case of certain preferred stock), the portion of
the dividends paid by the Fund that corresponds to the dividends paid with
respect to the securities will not be eligible for the corporate dividends-
received deduction.
If the 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 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 Fund acquired such stock. Accordingly, in
order to satisfy its income distribution requirements, the 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
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 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 Fund
changed their names from American Telecommunications Trust and Income
Portfolio Shares to SLH Telecommunications Trust and SLH Telecommunications
Fund, respectively. On August 27, 1990, July 30, 1993 and October 14, 1994,
the Trust and the Fund changed their names to Shearson Lehman Brothers
Telecommunications Trust and Telecommunications Fund, Smith Barney Shearson
Telecommunications Trust and Smith Barney Shearson Telecommunications Fund,
and Smith Barney Telecommunications Trust and Smith Barney Telecommunications
Fund, respectively.
PNC Bank National Association is located at 17th and Chestnut Streets,
Philadelphia, PA 19103 and serves as the custodian of the Trust investments
pursuant to a custody agreement. Under the custody agreement, PNC holds the
Trust's securities and keeps all necessary accounts and records. For its
services, PNC 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. PNC 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.
First Data is located at Exchange Place, Boston, Massachusetts 02109 and
serves as the Trust's transfer agent. Under the transfer agency agreement,
First Data maintains the shareholder account records for the Trust and handles
certain communications between shareholders and the Trust. For these services,
First Data 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 Fund's Annual Report for the fiscal year ended December 31, 1996 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-l 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 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 earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuers 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-l 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 issuers 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-l+ by IBCA Limited
or its affiliate, IBCA Inc., are obligations supported by the highest capacity
for timely repayment. Obligations rated A-l -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 the 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-l 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".
SMITH BARNEY TELECOMMUNICATIONS TRUST PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's Annual Reports for the fiscal year ended
December 31, 1996 and the reports of Independent Accountants are incorporated
by reference to the definitive 30b2-1 filed on March 13, 1997 as accession
numbers 91155-97-000143.
(b) Exhibits
All references are to the Registrant's registration statement on Form
N-1A (the "Registration Statement") as filed with the Securities and Exchange
Commission (the "SEC") on September 14, 1983, (File Nos. 2-86519 and 811-
3736).
(1) (a) Registrant's Second Amended and Restated Master Trust Agreement
and Declaration of Trust is incorporated by reference to Post-Effective
Amendment No. 14 as filed on April 27, 1993.
(b) Amendment No. 1 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 as filed on February 28, 1995.
(c) Amendment No. 2 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 as filed on February 28, 1995
(d) Amendment No. 3 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrant's Post-Effective
Amenddment No. 18 as filed on February 28, 1995.
(2) Registrant's By-Laws are incorporated by reference to the
Registration Statement.
(3) Not Applicable.
(4) Specimen Share Certificate for the Income Fund is incorporated by
reference to the Registration Statement.
(5) (a) Investment Advisory Agreements between the Registrant and Smith
Barney Strategic Advisers, Inc. dated June 16, 1994 and July 27, 1994 are
incorporated by reference to Registrant's Post-Effective Amendment No. 18 as
filed on February 28, 1995.
(b) Sub-Investment Advisory Agreement between the Registrant, Smith
Barney Strategy Advisers Inc. and the Boston Company Inc.dated June 16, 1994
and July 27, 1994 are incorporated by reference to Registrant's Post-
Effective Amendment No. 18 as filed on February 28, 1995
(6) Distribution Agreement between the Registrant and Smith Barney Inc. is
incorporated by reference to the Post-Effective Amendment No. 15 to the
Registration Statement as filed on July 30, 1993.
(7) Not Applicable.
(8) Custodian Agreement between the Registrant and PNC Bank, National
Association ("PNC Bank") is filed herewith
(9) (a) Transfer Agency Agreement dated August 2, 1993 between the
Registrant and First Data Investors Services Group (formerly the Shareholder
Services Group, Inc.) is incorporated by reference to Post-Effective Amendment
No. 15 to the Registration Statement..
(b) Administration Agreement dated April 21, 1994 between the
Registrant and Smith Barney Mutual Funds Management Inc. (formerly Smith
Barney Advisers, Inc.) is incorporated by reference to Post-Effective
Amendment No. 18 to the Registration Statement.
(10) Opinion filed with Registrant's Rule 24f-2 notice as Accession
No.0000091155-97-000097 is incorporated by reference.
(11) Consent of KPMG Peat Marwick Llp is filed herewith.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Services and Distribution Plan pursuant to Rule 12b-1 between Registrant
on behalf of Smith Barney Telecommunications Income Fund is incorporated by
reference to Post-Effective Amendment No.16 to the Registration Statement.
(16) Performance Data for Registrant is incorporated by reference to Post-
Effective Amendments No. 5 to the Registration Statement filed on May 1, 1988
(17) Financial Data Schedule is filed herewith
(18) Plan pursuant to Rule 18f-3 is incorporated by reference to the Post-
Effective Amendment No. 19 to the registration Statement as filed on December
26, 1995.
Item 25 Persons Controlled by or Under Common Control with Registrant
None.
Item 26 Number of Holders of Securities
(2) (1)
Number of Record Holders by Class
Title of Class as of March 31, 1997
Shares of beneficial Interest $.001 par value
Income Funds Class A: 1,742
Item 27 Indemnification
The response to this item is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 to the Registration Statement.
Item 28(a) Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc. ("SBMFM")
SBMFM, formerly known as Smith Barney Advisers, Inc. SBMFM was incorporated in
December 1968 under the laws of the State of Delaware. SBMFM is a wholly
owned subsidiary of Smith Barney Holdings Inc. ("Holdings") (formerly known
as Smith Barney Shearson Holdings Inc.), which in turn is a wholly owned
subsidiary of Travelers Group Inc. (formerly known as Primerica Corporation)
("Travelers"). SBMFM is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act").
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 and
served as the Registrant's investment adviser. On the Closing, Travelers and
Smith Barney 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. 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).
Item 28(b) Business and Other Connections of Investment Adviser
Sub-Investment Adviser - The Boston Company Advisors, Inc. ("Boston
Advisors")
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, administrator or sub-administrator to numerous investment
companies.
The list required by this Item 28 of officers and directors of Boston
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 Boston Advisors pursuant to the
Advisers Act (SEC File No. 801- 14158).
Item 29. Principal Underwriters
Smith Barney Inc. ("Smith Barney") also acts as principal underwriter for
Smith Barney Money Funds, Inc.; Smith Barney Muni Funds; Smith Barney Funds,
Inc., Smith Barney Variable Account Funds; Smith Barney Intermediate Municipal
Fund, Inc., Smith Barney Municipal Fund, Inc., High Income Opportunity Fund
Inc., Smith Barney/Travelers Series Fund Inc., Smith Barney World Funds, Inc.,
Greenwich Street California Municipal Fund Inc., The Inefficient Fund, Inc.,
Smith Barney Adjustable Rate Government Income Fund, Smith Barney Equity
Funds, Smith Barney Income Funds, Smith Barney Massachusetts Municipals Fund,
Zenix Income Fund Inc., Smith Barney Arizona Municipals Fund Inc., Smith
Barney Principal Return Fund, Municipal High Income Fund Inc., The Trust for
TRAK Investments, Smith Barney Series Fund, Smith Barney Income Trust, Smith
Barney Oregon Municipals Fund Inc., Smith Barney Municipal Money Market Fund,
Inc., Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney California Municipals Fund Inc., Smith Barney Fundamental
Value Fund Inc., Smith Barney Managed Governments Fund Inc., Smith Barney
Managed Municipals Fund Inc., Smith Barney New York Municipals Fund., Smith
Barney New Jersey Municipals Fund Inc., Smith Barney Precious Metals and
Minerals Fund Inc., Smith Barney Investment Funds Inc., Smith Barney FMA
Trust, The Italy Fund Inc., Smith Barney Telecommunications Trust, Managed
Municipals Portfolio Inc., Managed Municipals Portfolio II Inc., Smith Barney
Florida Municipal Fund, Managed High Income Portfolio Inc. On June 1, 1994,
Smith Barney changed its name from Smith Barney Shearson Inc. to its current
name. 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).
Item 30 Location of Accounts and Records
(1) Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
(2) Smith Barney Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(3) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
..........(4) Boston Company Advisors, Inc..
One Boston Place
Boston, Massachusetts 02155
(5) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(6) First Data Investor 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 29th day of April, 1997.
SMITH BARNEY INCOME FUNDS
By: /s/ Heath B.McLendon*
Heath B. McLendon, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to the Registration Statement 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 04/29/97
Heath B. McLendon (Chief Executive Officer)
/s/ Lewis E. Daidone* Senior Vice President and
04/29/97
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/ Paul R. Ades* Trustee 04/29/97
Paul Ades
/s/ Herbert Barg* Trustee 04/29/97
Herbert Barg
/s/ Alger B. Chapman* Trustee 04/29/97
Alger B. Chapman
/s/ Dwight B. Crane * Trustee 04/29/97
Dwight B. Crane
/s/ Frank G. Hubbard* Trustee 04/29/97
Frank G. Hubbard
/s/ Ken Miller* Trustee 04/29/97
Ken Miller
/s/ John F. White* Trustee 04/29/97
John F. White
* Signed by Heath McLendon, their duly authorized attorney-in-fact, pursuant
to power of attorney dated October 20, 1993.
/s/ Heath McLendon
Heath McLendon
EXHIBITS
Exhibit No. Description of Exhibits
Custodian Agreement
Consent of Auditors
Financial Data Schedule
Cover Letter to SEC
CUSTODY AGREEMENT
Agreement made as of this day of , 1994,
between Smith Barney
Telecommunications Trust., a corporation organized
and existing under the laws of the State of Massachusetts, having
its
principal office and place of business at 388 Greenwich Street, New York,
NY 10013 (hereinafter called the "Fund"), and PNC Bank, National
Association
Pennsylvania corporation authorized to do banking business, hav-
ing its principal office and place of business at 17th and Chestnut
Streets, Philadelphia, Pennsylvania 19103 (hereinafter called the
"Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises
hereinafter set forth, the Fund and the Custodian agree as
follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
1. "Book-Entry System" shall mean the Federal
Reserve/Treasury book-entry system for United States and
federal agency securities, its successor or successors and its
nominee or nominees.
2. "Call Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and payment of the exercise
price, as specified therein, to purchase from the writer
thereof the specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or
other instrument in writing, authorized or required by this
Agreement to be given to the Custodian which is actually
received by the Custodian and signed on behalf of the Fund by
any two Officers, and the term Certificate shall also include
instructions by the Fund to the Custodian communicated by a
Terminal Link.
4. "Clearing Member" shall mean a registered
broker-dealer which is a clearing member under the rules of
O.C.C. and a member of a national securities exchange
qualified to act as a custodian for an investment company, or
any broker-dealer reasonably believed by the Custodian to be
such a clearing member.
5. "Collateral Account" shall mean a segregated account
so denominated which is specifically allocated to a Series and
pledged to the Custodian as security for, and in consideration
of, the Custodian's issuance of (a) any Put Option guarantee
letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII
herein.
6. "Covered Call Option" shall mean an exchange traded
option entitling the holder, upon timely exercise and payment
of the exercise price, as specified therein, to purchase from
the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer
thereof and subject to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and
Exchange Commission, its successor or successors and its
nominee or nominees. The term "Depository" shall further mean
and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or
successors and its nominee or nominees, specifically identi-
fied in a certified copy of a resolution of the Fund's Board
of Trustees specifically approving deposits therein by the
Custodian.
8. "Financial Futures Contract" shall mean the firm
commitment to buy or sell fixed income securities including,
without limitation, U.S. Treasury Bills, U.S. Treasury Notes,
U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified
month at an agreed upon price.
9. "Futures Contract" shall mean a Financial Futures
Contract and/or Stock Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with
respect to a Futures Contract.
11. "Margin Account" shall mean a segregated account in
the name of a broker, dealer, futures commission merchant, or
a Clearing Member, or in the name of the Fund for the benefit
of a broker, dealer, futures commission merchant, or Clearing
Member, or otherwise, in accordance with an agreement between
the Fund, the Custodian and a broker, dealer, futures commis-
sion merchant or a Clearing Member (a "Margin Account Agree-
ment"), separate and distinct from the custody account, in
which certain Securities and/or money of the Fund shall be
- 2 -
deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time
determine. Securities held in the Book-Entry System or the
Depository shall be deemed to have been deposited in, or
withdrawn from, a Margin Account upon the Custodian's effect-
ing an appropriate entry in its books and records.
12. "Money Market Security" shall be deemed to include,
without limitation, certain Reverse Repurchase Agreements,
debt obligations issued or guaranteed as to interest and
principal by the government of the United States or agencies
or instrumentalities thereof, any tax, bond or revenue
anticipation note issued by any state or municipal government
or public authority, commercial paper, certificates of deposit
and bankers' acceptances, repurchase agreements with respect
to the same and bank time deposits, where the purchase and
sale of such securities normally requires settlement in
federal funds on the same day as such purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corpora-
tion, a clearing agency registered under Section 17A of the
Securities Exchange Act of 1934, its successor or successors,
and its nominee or nominees.
14. "Officers" shall be deemed to include the President,
any Vice President, the Secretary, the Clerk, the Treasurer,
the Controller, any Assistant Secretary, any Assistant Clerk,
any Assistant Treasurer, and any other person or persons,
whether or not any such other person is an officer of the
Fund, duly authorized by the Board of Trustees of the Fund to
execute any Certificate, instruction, notice or other instru-
ment on behalf of the Fund and listed in the Certificate an-
nexed hereto as Appendix A or such other Certificate as may be
received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Op-
tion, Stock Index Option and/or a Put Option.
16. "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from an Officer or from a
person reasonably believed by the Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option
with respect to Securities other than Stock Index Options,
Futures Contracts, and Futures Contract Options entitling the
holder, upon timely exercise and tender of the specified
underlying Securities, to sell such Securities to the writer
thereof for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agree-
ment pursuant to which the Fund sells Securities and agrees to
repurchase such Securities at a described or specified date
and price.
- 3 -
19. "Security" shall be deemed to include, without
limitation, Money Market Securities, Call Options, Put Op-
tions, Stock Index Options, Stock Index Futures Contracts,
Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse
Repurchase Agreements, common stocks and other securities hav-
ing characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal govern-
ments and by public authorities, (including, without limita-
tion, general obligation bonds, revenue bonds, industrial
bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidenc-
ing or representing any other rights or interest therein, or
any property or assets.
20. "Senior Security Account" shall mean an account
maintained and specifically allocated to a Series under the
terms of this Agreement as a segregated account, by recorda-
tion or otherwise, within the custody account in which certain
Securities and/or other assets of the Fund specifically al-
located to such Series shall be deposited and withdrawn from
time to time in accordance with Certificates received by the
Custodian in connection with such transactions as the Fund may
from time to time determine.
21. "Series" shall mean the various portfolios, if any,
of the Fund as described from time to time in the current and
effective prospectus for the Fund and listed on Appendix B
hereto as amended from time to time.
22. "Shares" shall mean the shares of beneficial inter-
est of the Fund, each of which is, in the case of a Fund hav-
ing Series, allocated to a particular Series.
23. "Stock Index Futures Contract" shall mean a
bilateral agreement pursuant to which the parties agree to
take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the value
of a particular stock index at the close of the last business
day of the contract and the price at which the futures
contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded
option entitling the holder, upon timely exercise, to receive
an amount of cash determined by reference to the difference
between the exercise price and the value of the index on the
date of exercise.
25. "Terminal Link" shall mean an electronic data
transmission link between the Fund and the Custodian requiring
in connection with each use of the Terminal Link by or on
behalf of the Fund use of an authorization code provided by
- 4 -
the Custodian and at least two access codes established by the
Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the
Custodian as custodian of the Securities and moneys at any
time owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, the Fund will deliver or cause to
be delivered to the Custodian all Securities and all moneys
owned by it, at any time during the period of this Agreement,
and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated. The
Custodian shall segregate, keep and maintain the assets of the
Series separate and apart. The Custodian will not be
responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any
credits made on the Fund's behalf where such credits have been
previously made and moneys are not finally collected. The
Fund shall deliver to the Custodian a certified resolution of
the Board of Trustees of the Fund, substantially in the form
of Exhibit A hereto, approving, authorizing and instructing
the Custodian on a continuous and on-going basis to deposit in
the Book-Entry System all Securities eligible for deposit
therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to
the extent possible in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities and deliveries and returns of Securities col-
lateral. Prior to a deposit of Securities specifically al-
located to a Series in the Depository, the Fund shall deliver
to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B
hereto, approving, authorizing and instructing the Custodian
on a continuous and ongoing basis until instructed to the
contrary by a Certificate actually received by the Custodian
to deposit in the Depository all Securities specifically al-
located to such Series eligible for deposit therein, and to
utilize the Depository to the extent possible with respect to
such Securities in connection with its performance hereunder,
- 5 -
including, without limitation, in connection with settlements
of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities
and moneys deposited in either the Book-Entry System or the
Depository will be represented in accounts which include only
assets held by the Custodian for customers, including, but not
limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically
allocated on the Custodian's books to the separate account for
the applicable Series. Prior to the Custodian's accepting,
utilizing and acting with respect to Clearing Member confirma-
tions for Options and transactions in Options for a Series as
provided in this Agreement, the Custodian shall have received
a certified resolution of the Fund's Board of Trustees,
substantially in the form of Exhibit C hereto, approving,
authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a
Certificate actually received by the Custodian, to accept,
utilize and act in accordance with such confirmations as
provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate
accounts, in the name of each Series, and shall credit to the
separate account for each Series all moneys received by it for
the account of the Fund with respect to such Series. Money
credited to a separate account for a Series shall be disbursed
by the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name
and address of the person to whom the payment is to be made,
the Series account from which payment is to be made and the
purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of
the expenses and liabilities of the Custodian attributable to
such Series.
3. Promptly after the close of business on each day,
the Custodian shall furnish the Fund with confirmations and a
summary, on a per Series basis, of all transfers to or from
the account of the Fund for a Series, either hereunder or with
any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are
transferred to the account of the Fund for a Series, the
Custodian shall also by book-entry or otherwise identify as
belonging to such Series a quantity of Securities in a
fungible bulk of Securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account
on the books of the Book-Entry System or the Depository. At
least monthly and from time to time, the Custodian shall
furnish the Fund with a detailed statement, on a per Series
basis, of the Securities and moneys held by the Custodian for
the Fund.
- 6 -
4. Except as otherwise provided in paragraph 7 of this
Article and in Article VIII, all Securities held by the
Custodian hereunder, which are issued or issuable only in
bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that
form; all other Securities held hereunder may be registered in
the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry
System or the Depository or their successor or successors, or
their nominee or nominees. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the
Book-Entry System or the Depository any Securities which it
may hold hereunder and which may from time to time be
registered in the name of the Fund. The Custodian shall hold
all such Securities specifically allocated to a Series which
are not held in the Book-Entry System or in the Depository in
a separate account in the name of such Series physically
segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and
unless otherwise instructed to the contrary by a Certificate,
the Custodian by itself, or through the use of the Book-Entry
System or the Depository with respect to Securities held
hereunder and therein deposited, shall with respect to all
Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount pay-
able upon such Securities which are called, but only if either
(i) the Custodian receives a written notice of such call, or
(ii) notice of such call appears in one or more of the
publications listed in Appendix C annexed hereto, which may be
amended at any time by the Custodian without the prior
notification or consent of the Fund;
(c) Present for payment and collect the amount pay-
able upon all Securities which mature;
(d) Surrender Securities in temporary form for
definitive Securities;
(e) Execute, as custodian, any necessary declara-
tions or certificates of ownership under the Federal Income
Tax Laws or the laws or regulations of any other taxing
authority now or hereafter in effect; and
(f) Hold directly, or through the Book-Entry System
or the Depository with respect to Securities therein
deposited, for the account of a Series, all rights and similar
- 7 -
securities issued with respect to any Securities held by the
Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the
Custodian, directly or through the use of the Book-Entry
System or the Depository, shall:
(a) Execute and deliver to such persons as may be
designated in such Certificate proxies, consents, authoriza-
tions, and any other instruments whereby the authority of the
Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be
exercised;
(b) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate in
exchange for other Securities or cash issued or paid in con-
nection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege and receive and
hold hereunder specifically allocated to such Series any cash
or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian
hereunder for the Series specified in such Certificate to any
protective committee, reorganization committee or other person
in connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically al-
located to such Series such certificates of deposit, interim
receipts or other instruments or documents as may be issued to
it to evidence such delivery;
(d) Make such transfers or exchanges of the assets
of the Series specified in such Certificate, and take such
other steps as shall be stated in such Certificate to be for
the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) Present for payment and collect the amount pay-
able upon Securities not described in preceding paragraph 5(b)
of this Article which may be called as specified in the
Certificate.
7. Notwithstanding any provision elsewhere contained
herein, the Custodian shall not be required to obtain posses-
sion of any instrument or certificate representing any Futures
Contract, any Option, or any Futures Contract Option until
after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments
or certificates are available. The Fund shall deliver to the
Custodian such a Certificate no later than the business day
preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall
- 8 -
comply with Section 17(f) of the Investment Company Act of
1940, as amended, in connection with the purchase, sale,
settlement, closing out or writing of Futures Contracts, Op-
tions, or Futures Contract Options by making payments or
deliveries specified in Certificates received by the Custodian
in connection with any such purchase, sale, writing, settle-
ment or closing out upon its receipt from a broker, dealer, or
futures commission merchant of a statement or confirmation
reasonably believed by the Custodian to be in the form
customarily used by brokers, dealers, or future commission
merchants with respect to such Futures Contracts, Options, or
Futures Contract Options, as the case may be, confirming that
such Security is held by such broker, dealer or futures com-
mission merchant, in book-entry form or otherwise, in the name
of the Custodian (or any nominee of the Custodian) as
custodian for the Fund, provided, however, that notwithstand-
ing the foregoing, payments to or deliveries from the Margin
Account and payments with respect to Securities to which a
Margin Account relates, shall be made in accordance with the
terms and conditions of the Margin Account Agreement.
Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this
Agreement to the contrary, make payment for any Futures
Contract, Option, or Futures Contract Option for which such
instruments or such certificates are available only against
the delivery to the Custodian of such instrument or such
certificate, and deliver any Futures Contract, Option or
Futures Contract Option for which such instruments or such
certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or
certificate delivered to the Custodian shall be held by the
Custodian hereunder in accordance with, and subject to, the
provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the
Fund, other than a purchase of an Option, a Futures Contract,
or a Futures Contract Option, the Fund shall deliver to the
Custodian (i) with respect to each purchase of Securities
which are not Money Market Securities, a Certificate, and (ii)
with respect to each purchase of Money Market Securities, a
Certificate or Oral Instructions, specifying with respect to
each such purchase: (a) the Series to which such Securities
are to be specifically allocated; (b) the name of the issuer
and the title of the Securities; (c) the number of shares or
the principal amount purchased and accrued interest, if any;
(d) the date of purchase and settlement; (e) the purchase
price per unit; (f) the total amount payable upon such
purchase; (g) the name of the person from whom or the broker
- 9 -
through whom the purchase was made, and the name of the
clearing broker, if any; and (h) the name of the broker to
whom payment is to be made. The Custodian shall, upon receipt
of Securities purchased by or for the Fund, pay to the broker
specified in the Certificate out of the moneys held for the
account of such Series the total amount payable upon such
purchase, provided that the same conforms to the total amount
payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund,
other than a sale of any Option, Futures Contract, Futures
Contract Option, or any Reverse Repurchase Agreement, the Fund
shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money
Market Securities, a Certificate or Oral Instructions,
specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the
name of the issuer and the title of the Security; (c) the
number of shares or principal amount sold, and accrued
interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale;
(g) the name of the broker through whom or the person to whom
the sale was made, and the name of the clearing broker, if
any; and (h) the name of the broker to whom the Securities are
to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified
in the Certificate against payment upon receipt of the total
amount payable to the Fund upon such sale, provided that the
same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the
Fund, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each Option purchased: (a) the
Series to which such Option is specifically allocated; (b) the
type of Option (put or call); (c) the name of the issuer and
the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which
such Option relates and the number of Stock Index Options
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the total amount
payable by the Fund in connection with such purchase; (h) the
name of the Clearing Member through whom such Option was
purchased; and (i) the name of the broker to whom payment is
to be made. The Custodian shall pay, upon receipt of a Clear-
ing Member's statement confirming the purchase of such Option
held by such Clearing Member for the account of the Custodian
(or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for
- 10 -
the account of the Series to which such Option is to be
specifically allocated, the total amount payable upon such
purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount pay-
able as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall
deliver to the Custodian a Certificate specifying with respect
to each such sale: (a) the Series to which such Option was
specifically allocated; (b) the type of Option (put or call);
(c) the name of the issuer and the title and number of shares
subject to such Option or, in the case of a Stock Index Op-
tion, the stock index to which such Option relates and the
number of Stock Index Options sold; (d) the date of sale; (e)
the sale price; (f) the date of settlement; (g) the total
amount payable to the Fund upon such sale; and (h) the name of
the Clearing Member through whom the sale was made. The
Custodian shall consent to the delivery of the Option sold by
the Clearing Member which previously supplied the confirmation
described in preceding paragraph 1 of this Article with
respect to such Option against payment to the Custodian of the
total amount payable to the Fund, provided that the same
conforms to the total amount payable as set forth in such
Certificate.
3. Promptly after the exercise by the Fund of any Call
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Call Option: (a) the Series to which
such Call Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Call Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call
Option was exercised. The Custodian shall, upon receipt of
the Securities underlying the Call Option which was exercised,
pay out of the moneys held for the account of the Series to
which such Call Option was specifically allocated the total
amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the
total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put
Option purchased by the Fund pursuant to paragraph 1 hereof,
the Fund shall deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series to which
such Put Option was specifically allocated; (b) the name of
the issuer and the title and number of shares subject to the
Put Option; (c) the expiration date; (d) the date of exercise
and settlement; (e) the exercise price per share; (f) the
total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Op-
tion was exercised. The Custodian shall, upon receipt of the
- 11 -
amount payable upon the exercise of the Put Option, deliver or
direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the
amount payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock
Index Option purchased by the Fund pursuant to paragraph 1
hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to such Stock Index Option: (a) the
Series to which such Stock Index Option was specifically al-
located; (b) the type of Stock Index Option (put or call); (c)
the number of Options being exercised; (d) the stock index to
which such Option relates; (e) the expiration date; (f) the
exercise price; (g) the total amount to be received by the
Fund in connection with such exercise; and (h) the Clearing
Member from whom such payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Covered Call Option: (a) the
Series for which such Covered Call Option was written; (b) the
name of the issuer and the title and number of shares for
which the Covered Call Option was written and which underlie
the same; (c) the expiration date; (d) the exercise price; (e)
the premium to be received by the Fund; (f) the date such
Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received.
The Custodian shall deliver or cause to be delivered, in
exchange for receipt of the premium specified in the
Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs
prevailing among Clearing Members dealing in Covered Call Op-
tions and shall impose, or direct the Depository to impose,
upon the underlying Securities specified in the Certificate
specifically allocated to such Series such restrictions as may
be required by such receipts. Notwithstanding the foregoing,
the Custodian has the right, upon prior written notification
to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Op-
tion.
7. Whenever a Covered Call Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate instructing the Custodian to deliver, or to direct
the Depository to deliver, the Securities subject to such
Covered Call Option and specifying: (a) the Series for which
such Covered Call Option was written; (b) the name of the is-
suer and the title and number of shares subject to the Covered
Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount pay-
able to the Fund upon such delivery. Upon the return and/or
cancellation of any receipts delivered pursuant to paragraph 6
of this Article, the Custodian shall deliver, or direct the
- 12 -
Depository to deliver, the underlying Securities as specified
in the Certificate against payment of the amount to be
received as set forth in such Certificate.
8. Whenever the Fund writes a Put Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to such Put Option: (a) the Series for which
such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date;
(d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Put Option is written; (g) the name of
the Clearing Member through whom the premium is to be received
and to whom a Put Option guarantee letter is to be delivered;
(h) the amount of cash, and/or the amount and kind of Securi-
ties, if any, specifically allocated to such Series to be
deposited in the Senior Security Account for such Series; and
(i) the amount of cash and/or the amount and kind of Securi-
ties specifically allocated to such Series to be deposited
into the Collateral Account for such Series. The Custodian
shall, after making the deposits into the Collateral Account
specified in the Certificate, issue a Put Option guarantee
letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member
specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing,
the Custodian shall be under no obligation to issue any Put
Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and
described in the preceding paragraph is exercised, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject
to the Put Option; (c) the Clearing Member from whom the
underlying Securities are to be received; (d) the total amount
payable by the Fund upon such delivery; (e) the amount of cash
and/or the amount and kind of Securities specifically al-
located to such Series to be withdrawn from the Collateral
Account for such Series and (f) the amount of cash and/or the
amount and kind of Securities, specifically allocated to such
Series, if any, to be withdrawn from the Senior Security Ac-
count. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian
in connection with such Put Option, the Custodian shall pay
out of the moneys held for the account of the Series to which
such Put Option was specifically allocated the total amount
payable to the Clearing Member specified in the Certificate as
set forth in such Certificate against delivery of such Securi-
ties, and shall make the withdrawals specified in such
Certificate.
10. Whenever the Fund writes a Stock Index Option, the
Fund shall promptly deliver to the Custodian a Certificate
- 13 -
specifying with respect to such Stock Index Option: (a) the
Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the
number of options written; (d) the stock index to which such
Option relates; (e) the expiration date; (f) the exercise
price; (g) the Clearing Member through whom such Option was
written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if
any, specifically allocated to such Series to be deposited in
the Senior Security Account for such Series; (j) the amount of
cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the
Collateral Account for such Series; and (k) the amount of cash
and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in a Margin Account,
and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium
specified in the Certificate, make the deposits, if any, into
the Senior Security Account specified in the Certificate, and
either (1) deliver such receipts, if any, which the Custodian
has specifically agreed to issue, which are in accordance with
the customs prevailing among Clearing Members in Stock Index
Options and make the deposits into the Collateral Account
specified in the Certificate, or (2) make the deposits into
the Margin Account specified in the Certificate.
11. Whenever a Stock Index Option written by the Fund
and described in the preceding paragraph of this Article is
exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to such Stock Index Op-
tion: (a) the Series for which such Stock Index Option was
written; (b) such information as may be necessary to identify
the Stock Index Option being exercised; (c) the Clearing
Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise,
and whether such amount is to be paid by or to the Fund; (e)
the amount of cash and/or amount and kind of Securities, if
any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any,
to be withdrawn from the Senior Security Account for such
Series; and the amount of cash and/or the amount and kind of
Securities, if any, to be withdrawn from the Collateral Ac-
count for such Series. Upon the return and/or cancellation of
the receipt, if any, delivered pursuant to the preceding
paragraph of this Article, the Custodian shall pay out of the
moneys held for the account of the Series to which such Stock
Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any,
as specified therein.
12. Whenever the Fund purchases any Option identical to
a previously written Option described in paragraphs, 6, 8 or
10 of this Article in a transaction expressly designated as a
"Closing Purchase Transaction" in order to liquidate its posi-
tion as a writer of an Option, the Fund shall promptly deliver
- 14 -
to the Custodian a Certificate specifying with respect to the
Option being purchased: (a) that the transaction is a Closing
Purchase Transaction; (b) the Series for which the Option was
written; (c) the name of the issuer and the title and number
of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and
the number of Options held; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g)
the type of Option (put or call); (h) the date of such
purchase; (i) the name of the Clearing Member to whom the
premium is to be paid; and (j) the amount of cash and/or the
amount and kind of Securities, if any, to be withdrawn from
the Collateral Account, a specified Margin Account, or the
Senior Security Account for such Series. Upon the Custodian's
payment of the premium and the return and/or cancellation of
any receipt issued pursuant to paragraphs 6, 8 or 10 of this
Article with respect to the Option being liquidated through
the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed
restrictions on the Securities underlying the Call Option.
13. Upon the expiration, exercise or consummation of a
Closing Purchase Transaction with respect to any Option
purchased or written by the Fund and described in this
Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3
Article III herein, and upon the return and/or cancellation of
any receipts issued by the Custodian, shall make such
withdrawals from the Collateral Account, and the Margin Ac-
count and/or the Senior Security Account as may be specified
in a Certificate received in connection with such expiration,
exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures
Contract, the Fund shall deliver to the Custodian a
Certificate specifying with respect to such Futures Contract,
(or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is
being entered; (b) the category of Futures Contract (the name
of the underlying stock index or financial instrument); (c)
the number of identical Futures Contracts entered into; (d)
the delivery or settlement date of the Futures Contract(s);
(e) the date the Futures Contract(s) was (were) entered into
and the maturity date; (f) whether the Fund is buying (going
long) or selling (going short) on such Futures Contract(s);
(g) the amount of cash and/or the amount and kind of Securi-
ties, if any, to be deposited in the Senior Security Account
for such Series; (h) the name of the broker, dealer, or
futures commission merchant through whom the Futures Contract
was entered into; and (i) the amount of fee or commission, if
- 15 -
any, to be paid and the name of the broker, dealer, or futures
commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Ac-
count in accordance with the terms and conditions of the
Margin Account Agreement. The Custodian shall make payment
out of the moneys specifically allocated to such Series of the
fee or commission, if any, specified in the Certificate and
deposit in the Senior Security Account for such Series the
amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment
required to be made by the Fund to a broker, dealer, or
futures commission merchant with respect to an outstanding
Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agree-
ment.
(b) Any variation margin payment or similar payment
from a broker, dealer, or futures commission merchant to the
Fund with respect to an outstanding Futures Contract, shall be
received and dealt with by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian
hereunder is retained by the Fund until delivery or settlement
is made on such Futures Contract, the Fund shall deliver to
the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with
respect to a Stock Index Futures Contract, the total cash
settlement amount to be paid or received, and with respect to
a Financial Futures Contract, the Securities and/or amount of
cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or
delivery is to be made or received; and (d) the amount of cash
and/or Securities to be withdrawn from the Senior Security
Account for such Series. The Custodian shall make the payment
or delivery specified in the Certificate, and delete such
Futures Contract from the statements delivered to the Fund
pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures
Contract to offset a Futures Contract held by the Custodian
hereunder, the Fund shall deliver to the Custodian a
Certificate specifying: (a) the items of information required
in a Certificate described in paragraph 1 of this Article, and
(b) the Futures Contract being offset. The Custodian shall
make payment out of the money specifically allocated to such
Series of the fee or commission, if any, specified in the
Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3
of Article III herein, and make such withdrawals from the
Senior Security Account for such Series as may be specified in
such Certificate. The withdrawals, if any, to be made from
- 16 -
the Margin Account shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract
Option by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series to which such Option
is specifically allocated; (b) the type of Futures Contract
Option (put or call); (c) the type of Futures Contract and
such other information as may be necessary to identify the
Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price;
(f) the dates of purchase and settlement; (g) the amount of
premium to be paid by the Fund upon such purchase; (h) the
name of the broker or futures commission merchant through whom
such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made.
The Custodian shall pay out of the moneys specifically al-
located to such Series, the total amount to be paid upon such
purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to
the amount set forth in such Certificate.
2. Promptly after the sale of any Futures Contract Op-
tion purchased by the Fund pursuant to paragraph 1 hereof, the
Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) Series to which
such Futures Contract Option was specifically allocated; (b)
the type of Future Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount pay-
able to the Fund upon such sale; and (h) the name of the
broker of futures commission merchant through whom the sale
was made. The Custodian shall consent to the cancellation of
the Futures Contract Option being closed against payment to
the Custodian of the total amount payable to the Fund,
provided the same conforms to the total amount payable as set
forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the
Fund pursuant to paragraph 1 is exercised by the Fund, the
Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Op-
tion was specifically allocated; (b) the particular Futures
Contract Option (put or call) being exercised; (c) the type of
Futures Contract underlying the Futures Contract Option; (d)
the date of exercise; (e) the name of the broker or futures
- 17 -
commission merchant through whom the Futures Contract Option
is exercised; (f) the net total amount, if any, payable by the
Fund; (g) the amount, if any, to be received by the Fund; and
(h) the amount of cash and/or the amount and kind of Securi-
ties to be deposited in the Senior Security Account for such
Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the pay-
ments, if any, and the deposits, if any, into the Senior
Security Account as specified in the Certificate. The
deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and condi-
tions of the Margin Account Agreement.
4. Whenever the Fund writes a Futures Contract Option,
the Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to such Futures Contract Option: (a)
the Series for which such Futures Contract Option was written;
(b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the
Futures Contract Option; (d) the expiration date; (e) the
exercise price; (f) the premium to be received by the Fund;
(g) the name of the broker or futures commission merchant
through whom the premium is to be received; and (h) the amount
of cash and/or the amount and kind of Securities, if any, to
be deposited in the Senior Security Account for such Series.
The Custodian shall, upon receipt of the premium specified in
the Certificate, make out of the moneys and Securities
specifically allocated to such Series the deposits into the
Senior Security Account, if any, as specified in the
Certificate. The deposits, if any, to be made to the Margin
Account shall be made by the Custodian in accordance with the
terms and conditions of the Margin Account Agreement.
5. Whenever a Futures Contract Option written by the
Fund which is a call is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying: (a) the
Series to which such Futures Contract Option was specifically
allocated; (b) the particular Futures Contract Option
exercised; (c) the type of Futures Contract underlying the
Futures Contract Option; (d) the name of the broker or futures
commission merchant through whom such Futures Contract Option
was exercised; (e) the net total amount, if any, payable to
the Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount of
cash and/or the amount and kind of Securities to be deposited
in the Senior Security Account for such Series. The Custodian
shall, upon its receipt of the net total amount payable to the
Fund, if any, specified in such Certificate make the payments,
if any, and the deposits, if any, into the Senior Security
Account as specified in the Certificate. The deposits, if any,
to be made to the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
- 18 -
6. Whenever a Futures Contract Option which is written
by the Fund and which is a put is exercised, the Fund shall
promptly deliver to the Custodian a Certificate specifying:
(a) the Series to which such Option was specifically al-
located; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying such Futures
Contract Option; (d) the name of the broker or futures commis-
sion merchant through whom such Futures Contract Option is
exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any,
payable by the Fund upon such exercise; and (g) the amount and
kind of Securities and/or cash to be withdrawn from or
deposited in, the Senior Security Account for such Series, if
any. The Custodian shall, upon its receipt of the net total
amount payable to the Fund, if any, specified in the
Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any,
and the deposits, if any, into the Senior Security Account as
specified in the Certificate. The deposits to and/or
withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of
the Margin Account Agreement.
7. Whenever the Fund purchases any Futures Contract
Option identical to a previously written Futures Contract Op-
tion described in this Article in order to liquidate its posi-
tion as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specify-
ing with respect to the Futures Contract Option being
purchased: (a) the Series to which such Option is specifically
allocated; (b) that the transaction is a closing transaction;
(c) the type of Future Contract and such other information as
may be necessary to identify the Futures Contract underlying
the Futures Option Contract; (d) the exercise price; (e) the
premium to be paid by the Fund; (f) the expiration date; (g)
the name of the broker or futures commission merchant to whom
the premium is to be paid; and (h) the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior
Security Account specified in the Certificate. The withdraw-
als, if any, to be made from the Margin Account shall be made
by the Custodian in accordance with the terms and conditions
of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a
closing transaction with respect to, any Futures Contract Op-
tion written or purchased by the Fund and described in this
Article, the Custodian shall (a) delete such Futures Contract
Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdraw-
als from and/or in the case of an exercise such deposits into
the Senior Security Account as may be specified in a
Certificate. The deposits to and/or withdrawals from the
- 19 -
Margin Account, if any, shall be made by the Custodian in ac-
cordance with the terms and conditions of the Margin Account
Agreement.
9. Futures Contracts acquired by the Fund through the
exercise of a Futures Contract Option described in this
Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the
Fund, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series for which such short
sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold,
and accrued interest or dividends, if any; (d) the dates of
the sale and settlement; (e) the sale price per unit; (f) the
total amount credited to the Fund upon such sale, if any, (g)
the amount of cash and/or the amount and kind of Securities,
if any, which are to be deposited in a Margin Account and the
name in which such Margin Account has been or is to be
established; (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such
short sale was made. The Custodian shall upon its receipt of
a statement from such broker confirming such sale and that the
total amount credited to the Fund upon such sale, if any, as
specified in the Certificate is held by such broker for the
account of the Custodian (or any nominee of the Custodian) as
custodian of the Fund, issue a receipt or make the deposits
into the Margin Account and the Senior Security Account
specified in the Certificate.
2. In connection with the closing-out of any short
sale, the Fund shall promptly deliver to the Custodian a
Certificate specifying with respect to each such closing out:
(a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the
number of shares or the principal amount, and accrued interest
or dividends, if any, required to effect such closing-out to
be delivered to the broker; (d) the dates of closing-out and
settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net
total amount payable to the broker upon such closing-out; (h)
the amount of cash and the amount and kind of Securities to be
withdrawn, if any, from the Margin Account; (i) the amount of
cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name
of the broker through whom the Fund is effecting such
closing-out. The Custodian shall, upon receipt of the net
total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued
- 20 -
by the Custodian with respect to the short sale being
closed-out, pay out of the moneys held for the account of the
Fund to the broker the net total amount payable to the broker,
and make the withdrawals from the Margin Account and the
Senior Security Account, as the same are specified in the
Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase
Agreement with respect to Securities and money held by the
Custodian hereunder, the Fund shall deliver to the Custodian a
Certificate, or in the event such Reverse Repurchase Agreement
is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund
in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or
dealer through or with whom the Reverse Repurchase Agreement
is entered; (d) the amount and kind of Securities to be
delivered by the Fund to such broker or dealer; (e) the date
of such Reverse Repurchase Agreement; and (f) the amount of
cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in a
Senior Security Account for such Series in connection with
such Reverse Repurchase Agreement. The Custodian shall, upon
receipt of the total amount payable to the Fund specified in
the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior
Security Account, specified in such Certificate or Oral
Instructions.
2. Upon the termination of a Reverse Repurchase Agree-
ment described in preceding paragraph 1 of this Article, the
Fund shall promptly deliver a Certificate or, in the event
such Reverse Repurchase Agreement is a Money Market Security,
a Certificate or Oral Instructions to the Custodian
specifying: (a) the Reverse Repurchase Agreement being
terminated and the Series for which same was entered; (b) the
total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be
received by the Fund and specifically allocated to such Series
in connection with such termination; (d) the date of termina-
tion; (e) the name of the broker or dealer with or through
whom the Reverse Repurchase Agreement is to be terminated; and
(f) the amount of cash and/or the amount and kind of Securi-
ties to be withdrawn from the Senior Securities Account for
such Series. The Custodian shall, upon receipt of the amount
and kind of Securities to be received by the Fund specified in
the Certificate or Oral Instructions, make the payment to the
broker or dealer, and the withdrawals, if any, from the Senior
- 21 -
Security Account, specified in such Certificate or Oral
Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities
specifically allocated to a Series held by the Custodian
hereunder, the Fund shall deliver or cause to be delivered to
the Custodian a Certificate specifying with respect to each
such loan: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities, (c) the number of shares or the
principal amount loaned, (d) the date of loan and delivery,
(e) the total amount to be delivered to the Custodian against
the loan of the Securities, including the amount of cash col-
lateral and the premium, if any, separately identified, and
(f) the name of the broker, dealer, or financial institution
to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial
institution to which the loan was made upon receipt of the
total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection
with a delivery otherwise than through the Book-Entry System
or Depository only in the form of a certified or bank
cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds and may
deliver Securities in accordance with the customs prevailing
among dealers in securities.
2. Promptly after each termination of the loan of
Securities by the Fund, the Fund shall deliver or cause to be
delivered to the Custodian a Certificate specifying with
respect to each such loan termination and return of Securi-
ties: (a) the Series to which the loaned Securities are
specifically allocated; (b) the name of the issuer and the
title of the Securities to be returned, (c) the number of
shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities
minus any offsetting credits as described in said
Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be
returned. The Custodian shall receive all Securities returned
from the broker, dealer, or financial institution to which
such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the
total amount payable upon such return of Securities as set
forth in the Certificate.
- 22 -
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such
deposits to, or withdrawals from, a Senior Security Account as
specified in a Certificate received by the Custodian. Such
Certificate shall specify the Series for which such deposit or
withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such
Series to be deposited in, or withdrawn from, such Senior
Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the
issuer, the title and the number of shares or the principal
amount of any particular Securities to be deposited by the
Custodian into, or withdrawn from, a Senior Securities Ac-
count, the Custodian shall be under no obligation to make any
such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from
a Margin Account to the broker, dealer, futures commission
merchant or Clearing Member in whose name, or for whose
benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or
distributions with respect to Securities deposited in any
Margin Account shall be dealt with in accordance with the
terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and
security interest in and to any property at any time held by
the Custodian in any Collateral Account described herein. In
accordance with applicable law the Custodian may enforce its
lien and realize on any such property whenever the Custodian
has made payment or delivery pursuant to any Put Option
guarantee letter or similar document or any receipt issued
hereunder by the Custodian. In the event the Custodian should
realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee
letter or similar document or any receipt, such deficiency
shall be a debt owed the Custodian by the Fund within the
scope of Article XIV herein.
5. On each business day the Custodian shall furnish the
Fund with a statement with respect to each Margin Account in
which money or Securities are held specifying as of the close
of business on the previous business day: (a) the name of the
Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The
Custodian shall make available upon request to any broker,
dealer, or futures commission merchant specified in the name
of a Margin Account a copy of the statement furnished the Fund
with respect to such Margin Account.
- 23 -
6. Promptly after the close of business on each busi-
ness day in which cash and/or Securities are maintained in a
Collateral Account for any Series, the Custodian shall furnish
the Fund with a statement with respect to such Collateral Ac-
count specifying the amount of cash and/or the amount and kind
of Securities held therein. No later than the close of busi-
ness next succeeding the delivery to the Fund of such state-
ment, the Fund shall furnish to the Custodian a Certificate
specifying the then market value of the Securities described
in such statement. In the event such then market value is
indicated to be less than the Custodian's obligation with
respect to any outstanding Put Option guarantee letter or
similar document, the Fund shall promptly specify in a
Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such
deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of
the resolution of the Board of Trustees of the Fund, certified
by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, either (i) setting forth with respect to the
Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall
be determined, the amount payable per Share of such Series to
the shareholders of record as of that date and the total
amount payable to the Dividend Agent and any sub-dividend
agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein
the declaration of dividends and distributions on a daily
basis and authorizing the Custodian to rely on Oral Instruc-
tions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of
payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent
on the payment date.
2. Upon the payment date specified in such resolution,
Oral Instructions or Certificate, as the case may be, the
Custodian shall pay out of the moneys held for the account of
each Series the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
- 24 -
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall
deliver to the Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade
date, and price; and
(b) The amount of money to be received by the
Custodian for the sale of such Shares and specifically al-
located to the separate account in the name of such Series.
2. Upon receipt of such money from the Transfer Agent,
the Custodian shall credit such money to the separate account
in the name of the Series for which such money was received.
3. Upon issuance of any Shares of any Series described
in the foregoing provisions of this Article, the Custodian
shall pay, out of the money held for the account of such
Series, all original issue or other taxes required to be paid
by the Fund in connection with such issuance upon the receipt
of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund
desires the Custodian to make payment out of the money held by
the Custodian hereunder in connection with a redemption of any
Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice
setting forth the Series and number of Shares received by the
Transfer Agent for redemption and that such Shares are in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys held in the separate account
in the name of the Series the total amount specified in the
Certificate issued pursuant to the foregoing paragraph 4 of
this Article.
6. Notwithstanding the above provisions regarding the
redemption of any Shares, whenever any Shares are redeemed
pursuant to any check redemption privilege which may from time
to time be offered by the Fund, the Custodian, unless
otherwise instructed by a Certificate, shall, upon receipt of
an advice from the Fund or its agent setting forth that the
redemption is in good form for redemption in accordance with
the check redemption procedure, honor the check presented as
part of such check redemption privilege out of the moneys held
in the separate account of the Series of the Shares being
redeemed.
- 25 -
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion
advance funds on behalf of any Series which results in an
overdraft because the moneys held by the Custodian in the
separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities
specifically allocated to such Series, as set forth in a
Certificate or Oral Instructions, or which results in an
overdraft in the separate account of such Series for some
other reason, or if the Fund is for any other reason indebted
to the Custodian with respect to a Series, including any
indebtedness to The Bank of New York under the Fund's Cash
Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using
Securities as collateral pursuant to a separate agreement and
subject to the provisions of paragraph 2 of this Article),
such overdraft or indebtedness shall be deemed to be a loan
made by the Custodian to the Fund for such Series payable on
demand and shall bear interest from the date incurred at a
rate per annum (based on a 360-day year for the actual number
of days involved) equal to 1/2% over Custodian's prime
commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such
prime commercial lending rate but in no event to be less than
6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security interest
in and to any property specifically allocated to such Series
at any time held by it for the benefit of such Series or in
which the Fund may have an interest which is then in the
Custodian's possession or control or in possession or control
of any third party acting in the Custodian's behalf. The Fund
authorizes the Custodian, in its sole discretion, at any time
to charge any such overdraft or indebtedness together with
interest due thereon against any balance of account standing
to such Series' credit on the Custodian's books. In addition,
the Fund hereby covenants that on each Business Day on which
either it intends to enter a Reverse Repurchase Agreement and/
or otherwise borrow from a third party, or which next succeeds
a Business Day on which at the close of business the Fund had
outstanding a Reverse Repurchase Agreement or such a borrow-
ing, it shall prior to 9 a.m., New York City time, advise the
Custodian, in writing, of each such borrowing, shall specify
the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian
by any bank (including, if the borrowing is pursuant to a
separate agreement, the Custodian) from which it borrows money
for investment or for temporary or emergency purposes using
Securities held by the Custodian hereunder as collateral for
such borrowings, a notice or undertaking in the form currently
- 26 -
employed by any such bank setting forth the amount which such
bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such
borrowing: (a) the Series to which such borrowing relates; (b)
the name of the bank, (c) the amount and terms of the borrow-
ing, which may be set forth by incorporating by reference an
attached promissory note, duly endorsed by the Fund, or other
loan agreement, (d) the time and date, if known, on which the
loan is to be entered into, (e) the date on which the loan
becomes due and payable, (f) the total amount payable to the
Fund on the borrowing date, (g) the market value of Securities
to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities, and (h) a
statement specifying whether such loan is for investment
purposes or for temporary or emergency purposes and that such
loan is in conformance with the Investment Company Act of 1940
and the Fund's prospectus. The Custodian shall deliver on the
borrowing date specified in a Certificate the specified col-
lateral and the executed promissory note, if any, against
delivery by the lending bank of the total amount of the loan
payable, provided that the same conforms to the total amount
payable as set forth in the Certificate. The Custodian may,
at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory
note or loan agreement. The Custodian shall deliver such
Securities as additional collateral as may be specified in a
Certificate to collateralize further any transaction described
in this paragraph. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the
event that the Fund fails to specify in a Certificate the
Series, the name of the issuer, the title and number of shares
or the principal amount of any particular Securities to be
delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Fund
be obligated to have or utilize the Terminal Link, and the
provisions of this Article shall apply if, but only if, the
Fund in its sole and absolute discretion elects to utilize the
Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only
for the purpose of the Fund providing Certificates to the
Custodian with respect to transactions involving Securities or
for the transfer of money to be applied to the payment of
- 27 -
dividends, distributions or redemptions of Fund Shares, and
shall be utilized by the Custodian only for the purpose of
providing notices to the Fund. Such use shall commence only
after the Fund shall have delivered to the Custodian a
Certificate substantially in the form of Exhibit D and shall
have established access codes. Each use of the Terminal Link
by the Fund shall constitute a representation and warranty
that the Terminal Link is being used only for the purposes
permitted hereby, that at least two Officers have each
utilized an access code, that such safekeeping procedures have
been established by the Fund, and that such use does not
contravene the Investment Company Act of 1940, as amended, or
the rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost
and expense all equipment and services, including, but not
limited to communications services, necessary for it to uti-
lize the Terminal Link, and the Custodian shall not be re-
sponsible for the reliability or availability of any such
equipment or services.
4. The Fund acknowledges that any data bases made
available as part of, or through the Terminal Link and any
proprietary data, software, processes, information and docu-
mentation (other than any such which are or become part of the
public domain or are legally required to be made available to
the public) (collectively, the "Information"), are the
exclusive and confidential property of the Custodian. The
Fund shall, and shall cause others to which it discloses the
Information, to keep the Information confidential by using the
same care and discretion it uses with respect to its own
confidential property and trade secrets, and shall neither
make nor permit any disclosure without the express prior
written consent of the Custodian.
5. Upon termination of this Agreement for any reason,
the Fund shall return to the Custodian any and all copies of
the Information which are in the Fund's possession or under
its control, or which the Fund distributed to third parties.
The provisions of this Article shall not affect the copyright
status of any of the Information which may be copyrighted and
shall apply to all Information whether or not copyrighted.
6. The Custodian reserves the right to modify the Ter-
minal Link from time to time without notice to the Fund except
that the Custodian shall give the Fund notice not less than 75
days in advance of any modification which would materially
adversely affect the Fund's operation, and the Fund agrees
that the Fund shall not modify or attempt to modify the
Terminal Link without the Custodian's prior written consent.
The Fund acknowledges that any software or procedures provided
the Fund as part of the Terminal Link are the property of the
Custodian and, accordingly, the Fund agrees that any
modifications to the Terminal Link, whether by the Fund, or by
- 28 -
the Custodian and whether with or without the Custodian's
consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and
suppliers it utilizes or the Fund utilizes in connection with
the Terminal Link makes any warranties or representations,
express or implied, in fact or in law, including but not
limited to warranties of merchantability and fitness for a
particular purpose.
8. The Fund will cause its Officers and employees to
treat the authorization codes and the access codes applicable
to Terminal Link with extreme care, and irrevocably authorizes
the Custodian to act in accordance with and rely on
Certificates received by it through the Terminal Link. The
Fund acknowledges that it is its responsibility to assure that
only its Officers use the Terminal Link on its behalf, and
that a Custodian shall not be responsible nor liable for use
of the Terminal Link on the Fund's behalf by persons other
than such persons or Officers, or by only a single Officer,
nor for any alteration, omission, or failure to promptly
forward.
9(a). Except as otherwise specifically provided in
Section 9(b) of this Article, the Custodian shall have no
liability for any losses, damages, injuries, claims, costs or
expenses arising out of or in connection with any failure,
malfunction or other problem relating to the Terminal Link
except for money damages suffered as the direct result of the
negligence of the Custodian in an amount not exceeding for any
incident $25,000 provided, however, that the Custodian shall
have no liability under this Section 9 if the Fund fails to
comply with the provisions of Section 11.
9(b). The Custodian's liability for its negligence in
executing or failing to execute in accordance with a
Certificate received through Terminal Link shall be only with
respect to a transfer of funds which is not made in accordance
with such Certificate after such Certificate shall have been
duly acknowledged by the Custodian, and shall be contingent
upon the Fund complying with the provisions of Section 12 of
this Article, and shall be limited to (i) restoration of the
principal amount mistransferred, if and to the extent that the
Custodian would be required to make such restoration under
applicable law, and (ii) the lesser of (A) a Fund's actual
pecuniary loss incurred by reason of its loss of use of the
mistransferred funds or the funds which were not transferred,
as the case may be, or (B) compensation for the loss of the
use of the mistransferred funds or the funds which were not
transferred, as the case may be, at a rate per annum equal to
the average federal funds rate as computed from the Federal
Reserve Bank of New York's daily determination of the
effective rate for federal funds, for the period during which
a Fund has lost use of such funds. In no event shall the
Custodian have any liability for failing to execute in
- 29 -
accordance with a Certificate a transfer of funds where the
Certificate is received by the Custodian through Terminal Link
other than through the applicable transfer module for the
particular instructions contained in such Certificate.
10. Without limiting the generality of the foregoing, in
no event shall the Custodian or any manufacturer or supplier
of its computer equipment, software or services relating to
the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund may incur
or experience by reason of its use of the Terminal Link even
if the Custodian or any manufacturer or supplier has been
advised of the possibility of such damages, nor with respect
to the use of the Terminal Link shall the Custodian or any
such manufacturer or supplier be liable for acts of God, or
with respect to the following to the extent beyond such
person's reasonable control: machine or computer breakdown or
malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or
dissimilar cause.
11. The Fund shall notify the Custodian of any errors,
omissions or interruptions in, or delay or unavailability of,
the Terminal Link as promptly as practicable, and in any event
within 24 hours after the earliest of (i) discovery thereof,
(ii) the Business Day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case
of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that
discovery and receipt of notice may only occur on a business
day. The Custodian shall promptly advise the Fund whenever
the Custodian learns of any errors, omissions or interruption
in, or delay or unavailability of, the Terminal Link.
12. The Custodian shall verify to the Fund, by use of
the Terminal Link, receipt of each Certificate the Custodian
receives through the Terminal Link, and in the absence of such
verification the Custodian shall not be liable for any failure
to act in accordance with such Certificate and the Fund may
not claim that such Certificate was received by the Custodian.
Such verification, which may occur after the Custodian has
acted upon such Certificate, shall be accomplished on the same
day on which such Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to
employ, as sub-custodian for each Series' Foreign Securities
(as such term is defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, as amended) and
other assets, the foreign banking institutions and foreign
- 30 -
securities depositories and clearing agencies designated on
Schedule I hereto ("Foreign Sub-Custodians") to carry out
their respective responsibilities in accordance with the terms
of the sub-custodian agreement between each such Foreign Sub-
Custodian and the Custodian, copies of which have been
previously delivered to the Fund and receipt of which is
hereby acknowledged (each such agreement, a "Foreign Sub-
Custodian Agreement"). Upon receipt of a Certificate,
together with a certified resolution substantially in the form
attached as Exhibit E of the Fund's Board of Trustees, the
Fund may designate any additional foreign sub-custodian with
which the Custodian has an agreement for such entity to act as
the Custodian's agent, as its sub-custodian and any such
additional foreign sub-custodian shall be deemed added to
Schedule I. Upon receipt of a Certificate from the Fund, the
Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted
from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be
substantially in the form previously delivered to the Fund and
will not be amended in a way that materially adversely affects
the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as
belonging to each Series of the Fund the Foreign Securities of
such Series held by each Foreign Sub-Custodian. At the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claims by the
Fund or any Series against a Foreign Sub-Custodian as a
consequence of any loss, damage, cost, expense, liability or
claim sustained or incurred by the Fund or any Series if and
to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or
claim.
4. Upon request of the Fund, the Custodian will,
consistent with the terms of the applicable Foreign Sub-
Custodian Agreement, use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as
such books and records relate to the performance of such
Foreign Sub-Custodian under its agreement with the Custodian
on behalf of the Fund.
5. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the
securities and other assets of each Series held by Foreign
Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series'
Foreign Securities and other assets, and advices or
notifications of any transfers of Foreign Securities to or
from each custodial account maintained by a Foreign Sub-
Custodian for the Custodian on behalf of the Series.
- 31 -
6. The Custodian shall furnish annually to the Fund, as
mutually agreed upon, information concerning the Foreign Sub-
Custodians employed by the Custodian. Such information shall
be similar in kind and scope to that furnished to the Fund in
connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information
pertaining to (i) the Foreign Custodians' financial strength,
general reputation and standing in the countries in which they
are located and their ability to provide the custodial
services required, and (ii) whether the Foreign Sub-Custodians
would provide a level of safeguards for safekeeping and
custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor
the general operating performance of each Foreign Sub-
Custodian. The Custodian agrees that it will use reasonable
care in monitoring compliance by each Foreign Sub-Custodian
with the terms of the relevant Foreign Sub-Custodian Agreement
and that if it learns of any breach of such Foreign Sub-
Custodian Agreement believed by the Custodian to have a
material adverse effect on the Fund or any Series it will
promptly notify the Fund of such breach. The Custodian also
agrees to use reasonable and diligent efforts to enforce its
rights under the relevant Foreign Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund
all notices, reports or other written information received
pertaining to the Fund's Foreign Securities, including without
limitation, notices of corporate action, proxies and proxy
solicitation materials.
8. Notwithstanding any provision of this Agreement to
the contrary, settlement and payment for securities received
for the account of any Series and delivery of securities
maintained for the account of such Series may be effected in
accordance with the customary or established securities
trading or securities processing practices and procedures in
the jurisdiction or market in which the transaction occurs,
including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities
from such purchaser or dealer.
9. Notwithstanding any other provision in this
Agreement to the contrary, with respect to any losses or
damages arising out of or relating to any actions or omissions
of any Foreign Sub-Custodian the sole responsibility and
liability of the Custodian shall be to take appropriate action
at the Fund's expense to recover such loss or damage from the
Foreign Sub-Custodian. It is expressly understood and agreed
that the Custodian's sole responsibility and liability shall
be limited to amounts so recovered from the Foreign Sub-
Custodian.
- 32 -
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in
Article XVI neither the Custodian nor its nominee shall be
liable for any loss or damage, including counsel fees,
resulting from its action or omission to act or otherwise,
either hereunder or under any Margin Account Agreement, except
for any such loss or damage arising out of its own negligence
or willful misconduct. In no event shall the Custodian be
liable to the Fund or any third party for special, indirect or
consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if
previously informed of the possibility of such damages and
regardless of the form of action. The Custodian may, with
respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and
opinion of counsel to the Fund or of its own counsel, at the
expense of the Fund, and shall be fully protected with respect
to anything done or omitted by it in good faith in conformity
with such advice or opinion. The Custodian shall be liable to
the Fund for any loss or damage resulting from the use of the
Book-Entry System or any Depository arising by reason of any
negligence or willful misconduct on the part of the Custodian
or any of its employees or agents.
2. Without limiting the generality of the foregoing,
the Custodian shall be under no obligation to inquire into,
and shall not be liable for:
(a) The validity of the issue of any Securities
purchased, sold, or written by or for the Fund, the legality
of the purchase, sale or writing thereof, or the propriety of
the amount paid or received therefor;
(b) The legality of the sale or redemption of any
Shares, or the propriety of the amount to be received or paid
therefor;
(c) The legality of the declaration or payment of
any dividend by the Fund;
(d) The legality of any borrowing by the Fund using
Securities as collateral;
(e) The legality of any loan of portfolio Securi-
ties, nor shall the Custodian be under any duty or obligation
to see to it that any cash collateral delivered to it by a
broker, dealer, or financial institution or held by it at any
time as a result of such loan of portfolio Securities of the
Fund is adequate collateral for the Fund against any loss it
might sustain as a result of such loan. The Custodian
specifically, but not by way of limitation, shall not be under
any duty or obligation periodically to check or notify the
- 33 -
Fund that the amount of such cash collateral held by it for
the Fund is sufficient collateral for the Fund, but such duty
or obligation shall be the sole responsibility of the Fund.
In addition, the Custodian shall be under no duty or obliga-
tion to see that any broker, dealer or financial institution
to which portfolio Securities of the Fund are lent pursuant to
Article X of this Agreement makes payment to it of any
dividends or interest which are payable to or for the account
of the Fund during the period of such loan or at the termina-
tion of such loan, provided, however, that the Custodian shall
promptly notify the Fund in the event that such dividends or
interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of
money and/or Securities held in any Margin Account, Senior
Security Account or Collateral Account in connection with
transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer,
futures commission merchant or Clearing Member makes payment
to the Fund of any variation margin payment or similar payment
which the Fund may be entitled to receive from such broker,
dealer, futures commission merchant or Clearing Member, to see
that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the
amount the Fund is entitled to receive, or to notify the Fund
of the Custodian's receipt or non-receipt of any such pay-
ment.
3. The Custodian shall not be liable for, or considered
to be the Custodian of, any money, whether or not represented
by any check, draft, or other instrument for the payment of
money, received by it on behalf of the Fund until the
Custodian actually receives and collects such money directly
or by the final crediting of the account representing the
Fund's interest at the Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall
not be liable for ascertaining or acting upon any calls,
conversions, exchange offers, tenders, interest rate changes
or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received
timely notice from the Depository. In no event shall the
Custodian have any responsibility or liability for the failure
of the Depository to collect, or for the late collection or
late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be
redeemed, retired, called or otherwise become payable.
However, upon receipt of a Certificate from the Fund of an
overdue amount on Securities held in the Depository the
Custodian shall make a claim against the Depository on behalf
of the Fund, except that the Custodian shall not be under any
obligation to appear in, prosecute or defend any action suit
or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or
liability, unless indemnity satisfactory to it against all
- 34 -
expense and liability be furnished as often as may be
required.
5. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount due to
the Fund from the Transfer Agent of the Fund nor to take any
action to effect payment or distribution by the Transfer Agent
of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obliga-
tion to take action to effect collection of any amount if the
Securities upon which such amount is payable are in default,
or if payment is refused after due demand or presentation,
unless and until (i) it shall be directed to take such action
by a Certificate and (ii) it shall be assured to its satisfac-
tion of reimbursement of its costs and expenses in connection
with any such action.
7. The Custodian may in addition to the employment of
Foreign Sub-Custodians pursuant to Article XVI appoint one or
more banking institutions as Depository or Depositories, as
Sub-Custodian or Sub-Custodians, or as Co-Custodian or
Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon such terms and
conditions as may be approved in a Certificate or contained in
an agreement executed by the Custodian, the Fund and the
appointed institution.
8. The Custodian shall not be under any duty or obliga-
tion (a) to ascertain whether any Securities at any time
delivered to, or held by it or by any Foreign Sub-Custodian,
for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or
(b) to ascertain whether any transactions by the Fund, whether
or not involving the Custodian, are such transactions as may
properly be engaged in by the Fund.
9. The Custodian shall be entitled to receive and the
Fund agrees to pay to the Custodian all out-of-pocket expenses
and such compensation as may be agreed upon from time to time
between the Custodian and the Fund. The Custodian may charge
such compensation and any expenses with respect to a Series
incurred by the Custodian in the performance of its duties
pursuant to such agreement against any money specifically al-
located to such Series. Unless and until the Fund instructs
the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner,
the Custodian shall also be entitled to charge against any
money held by it for the account of a Series such Series' pro
rata share (based on such Series net asset value at the time
of the charge to the aggregate net asset value of all Series
at that time) of the amount of any loss, damage, liability or
- 35 -
expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agree-
ment. The expenses for which the Custodian shall be entitled
to reimbursement hereunder shall include, but are not limited
to, the expenses of sub-custodians and foreign branches of the
Custodian incurred in settling outside of New York City
transactions involving the purchase and sale of Securities of
the Fund.
10. The Custodian shall be entitled to rely upon any
Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be a
Certificate. The Custodian shall be entitled to rely upon any
Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the
Custodian a Certificate or facsimile thereof confirming such
Oral Instructions in such manner so that such Certificate or
facsimile thereof is received by the Custodian, whether by
hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such
Oral Instructions are given to the Custodian. The Fund agrees
that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the
Custodian shall in no way affect the validity of the
transactions or enforceability of the transactions hereby
authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral
Instructions given to the Custodian hereunder concerning such
transactions provided such instructions reasonably appear to
have been received from an Officer.
11. The Custodian shall be entitled to rely upon any
instrument, instruction or notice received by the Custodian
and reasonably believed by the Custodian to be given in ac-
cordance with the terms and conditions of any Margin Account
Agreement. Without limiting the generality of the foregoing,
the Custodian shall be under no duty to inquire into, and
shall not be liable for, the accuracy of any statements or
representations contained in any such instrument or other
notice including, without limitation, any specification of any
amount to be paid to a broker, dealer, futures commission
merchant or Clearing Member.
12. The books and records pertaining to the Fund which
are in the possession of the Custodian shall be the property
of the Fund. Such books and records shall be prepared and
maintained as required by the Investment Company Act of 1940,
as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representa-
tives, shall have access to such books and records during the
Custodian's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's
authorized representative, and the Fund shall reimburse the
- 36 -
Custodian its expenses of providing such copies. Upon reason-
able request of the Fund, the Custodian shall provide in hard
copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by
the Custodian on a computer disc, or are similarly maintained,
and the Fund shall reimburse the Custodian for its expenses of
providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System, the Depository or O.C.C.,
and with such reports on its own systems of internal account-
ing control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against
and save the Custodian harmless from all liability, claims,
losses and demands whatsoever, including attorney's fees,
howsoever arising or incurred because of or in connection with
this Agreement, including the Custodian's payment or
non-payment of checks pursuant to paragraph 6 of Article XIII
as part of any check redemption privilege program of the Fund,
except for any such liability, claim, loss and demand arising
out of the Custodian's own negligence or willful misconduct.
15. Subject to the foregoing provisions of this Agree-
ment, including, without limitation, those contained in
Article XVI the Custodian may deliver and receive Securities,
and receipts with respect to such Securities, and arrange for
payments to be made and received by the Custodian in
accordance with the customs prevailing from time to time among
brokers or dealers in such Securities. When the Custodian is
instructed to deliver Securities against payment, delivery of
such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility
and liability for all credit risks involved in connection with
the Custodian's delivery of Securities pursuant to instruc-
tions of the Fund, which responsibility and liability shall
continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or
responsibilities whatsoever except such duties and
responsibilities as are specifically set forth in this Agree-
ment, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
ARTICLE XVIII
TERMINATION
1. Either of the parties hereto may terminate this
Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not
- 37 -
less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it
shall be accompanied by a copy of a resolution of the Board of
Trustees of the Fund, certified by the Secretary, the Clerk,
any Assistant Secretary or any Assistant Clerk, electing to
terminate this Agreement and designating a successor custodian
or custodians, each of which shall be a bank or trust company
having not less than $2,000,000 aggregate capital, surplus and
undivided profits. In the event such notice is given by the
Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board
of Trustees of the Fund, certified by the Secretary, the
Clerk, any Assistant Secretary or any Assistant Clerk,
designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust
company having not less than $2,000,000 aggregate capital,
surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian
shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor
custodian all Securities and moneys then owned by the Fund and
held by it as Custodian, after deducting all fees, expenses
and other amounts for the payment or reimbursement of which it
shall then be entitled.
2. If a successor custodian is not designated by the
Fund or the Custodian in accordance with the preceding
paragraph, the Fund shall upon the date specified in the
notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held
in the Book-Entry System which cannot be delivered to the
Fund) and moneys then owned by the Fund be deemed to be its
own custodian and the Custodian shall thereby be relieved of
all duties and responsibilities pursuant to this Agreement,
other than the duty with respect to Securities held in the
Book Entry System which cannot be delivered to the Fund to
hold such Securities hereunder in accordance with this Agree-
ment.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed
by two of the present Officers of the Fund under its seal,
setting forth the names and the signatures of the present
Officers. The Fund agrees to furnish to the Custodian a new
Certificate in similar form in the event that any such present
Officer ceases to be an Officer or in the event that other or
additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement
- 38 -
upon Oral Instructions or signatures of the present Officers
as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Custodian, shall be sufficiently given if addressed to the
Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other
place as the Custodian may from time to time designate in
writing.
3. Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the
Fund shall be sufficiently given if addressed to the Fund and
mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund
may from time to time designate in writing.
4. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties
with the same formality as this Agreement and approved by a
resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and
assigns; provided, however, that this Agreement shall not be
assignable by the Fund without the written consent of the
Custodian, or by the Custodian without the written consent of
the Fund, authorized or approved by a resolution of the Fund's
Board of Trustees.
6. This Agreement shall be construed in accordance with
the laws of the State of New York without giving effect to
conflict of laws principles thereof. Each party hereby
consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any
dispute arising hereunder and hereby waives its right to trial
by jury.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original,
but such counterparts shall, together, constitute only one
instrument.
8. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts,
and notice is hereby given that this instrument is executed on
behalf of the Board of Trustees of the Fund as Trustees and
not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property
of the Fund; provided, however, that the Declaration of Trust
of the Fund provides that the assets of a particular Series of
the Fund shall under no circumstances be charged with li-
abilities attributable to any other Series of the Fund and
- 39 -
that all persons extending credit to, or contracting with or
having any claim against a particular Series of the Fund shall
look only to the assets of that particular Series for payment
of such credit, contract or claim.
- 40 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective Officers,
thereunto duly authorized and their respective seals to be
hereunto affixed, as of the day and year first above written.
Telecommunications Trust
[SEAL] By:_______________________
Attest:
_______________________
PNC Bank, NA
[SEAL] By:_______________________
Name:
Title:
Attest:
_______________________
Independent Auditors' Consent
To the Shareholders and Board of Trustees of
Smith Barney Telecommunications Trust:
We consent to the use of our report dated February 12, 1997 with respect to
the Smith Barney Telecommunications Income Fund of Smith Barney
Telecommunications Trust, incorporated herein by reference, and to the
references to our Firm under the headings "Financial Highlights" in the
Prospectus and "Counsel and Auditors" in the Statement of Additional
Information.
KPMG Peat Marwick LLP
New York, New York
April 25, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000721648
<NAME> SMITH BARNEY TELECOMMUNICATIONS TRUST
<SERIES>
<NUMBER> 1
<NAME> INCOME
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 13,968,271
<INVESTMENTS-AT-VALUE> 62,913,710
<RECEIVABLES> 148,493
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63,062,332
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80,762
<TOTAL-LIABILITIES> 80,762
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,169,597
<SHARES-COMMON-STOCK> 602,017
<SHARES-COMMON-PRIOR> 622,286
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,009,655
<ACCUMULATED-NET-GAINS> 1,875,587
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 48,945,439
<NET-ASSETS> 62,981,570
<DIVIDEND-INCOME> 2,425,443
<INTEREST-INCOME> 61,529
<OTHER-INCOME> 0
<EXPENSES-NET> 606,550
<NET-INVESTMENT-INCOME> 1,880,422
<REALIZED-GAINS-CURRENT> 5,524,954
<APPREC-INCREASE-CURRENT> (8,908,686)
<NET-CHANGE-FROM-OPS> (1,503,310)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,890,077
<DISTRIBUTIONS-OF-GAINS> 4,817,411
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 50,952
<SHARES-REINVESTED> 27,670
<NET-CHANGE-IN-ASSETS> (11,859,218)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,813,425
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 369,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 606,550
<AVERAGE-NET-ASSETS> 67,120
<PER-SHARE-NAV-BEGIN> 119.69
<PER-SHARE-NII> 003.12
<PER-SHARE-GAIN-APPREC> (00.35)
<PER-SHARE-DIVIDEND> 004.80
<PER-SHARE-DISTRIBUTIONS> 008.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 104.62
<EXPENSE-RATIO> 000.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
