As filed with the Securities and Exchange Commission on February 25, 1999
Securities Act Registration No. 2 -86519
Investment Company Act Registration No. 811-3763
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 23 [X]
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 24
__________________ [ ]
Smith Barney Telecommunications Trust
(a Massachusetts Business Trust)
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street
New York, New York 10013
(Address of Principal Executive Offices)
(212) 816-6474
(Registrants Telephone Number, including Area Code)
Christina T. Sydor, Secretary
Smith Barney Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(Name and Address of Agent for Service)
_____________________
Approximate Date of Proposed Public Offering:
Continuous.
It is proposed that this filing will become effective
(check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] On (date) pursuant to paragraph (b)
of Rule 485
XXX 60 days after filing pursuant to paragraph (a)(1) of Rule 485
On (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2)
of rule 485
[ ] On (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates
a new effective date for a previously filed
post effective amendment.
Part A-Prospectus
Part B-Statement of Additional Information
PART C
OTHER INFORMATION
Signature
Exhibits
Part A
[Logo]
Smith Barney Mutual
Funds
Investing for your
future.
Every day.
Everyday.
SMITH BARNEY TELECOMMUNICATIONS TRUST
Prospectus
April 30, 1999
Existing shareholders may purchase new shares through the reinvestment of
dividends and
distributions. Except for reinvestment of dividends and distributions,
shares of the fund
are not currently being offered to investors. Consequently, the fund's
assets may be
reduced by market fluctuations, a redemption of shares and payment of cash
dividends and
distributions. A reduction in the fund's net assets may increase the fund's
expenses on a
per share basis and make it more difficult for the fund to achieve its
investment
objective.
The Securities and Exchange Commission has not approved or disapproved these
securities or
determined whether this prospectus is accurate or complete. Any statement to
the contrary
is a crime.
Contents
Page
Fund goals, strategies and risks 1
Management 3
Reinvestment of dividends 4
Exchanging shares 4
Redeeming shares 5
Other things to know about share transactions 6
Dividends, distributions and taxes 7
Share price 8
Financial highlights 9
You should know:
An investment in the fund is not a bank deposit and is not insured or
guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Fund goals, strategies and risks
Investment
objective
The fund seeks current income, with long-term growth of capital as a
secondary objective.
Key
investment
s
The fund invests primarily in income producing common stocks of companies
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 the forms of: voice, data or print facsimile.
Investment
strategy
The manager holds stocks in the telecommunication industry it believes have
potential to produce high current income.
For tax efficiency purposes and because the Fund does not currently offer
shares to the public, the manager generally does not buy additional stocks
for the fund's portfolio and does not sell shares of stocks held by the
fund except to satisfy redemption requests and other fund expenses.
Principal
risks of
investing
in the
fund
The fund concentrates its assets in the telecommunications industry and, as
a result, is more susceptible to events affecting this industry than is a
fund that does not concentrate its assets. For this reason, the fund
should not be considered as a complete investment program. Investors could
lose money on their investment in the fund, or the fund may not perform as
well as other investments, if:
? The telecommunications industry underperforms the market
? Telecommunications companies fall out of favor with investors
? The stock market declines generally
? Government action adversely impacts existing federal or state regulation
relating to rates of return and services in the telecommunications
industry
? The manager's judgment about the relative yield, value or potential
appreciation of a particular securities proves to be incorrect
The fund is not diversified, which means it may concentrate a high
percentage of its assets in the securities of one or more companies. To
the extent the fund concentrates its investments, the fund will be subject
to greater risks than if its assets were not so concentrated.
Total return
Comparative performance
This bar chart indicates the risks of
investing in the fund by showing changes in
the fund's performance from year to year.
Past performance does not necessarily
indicate how the fund will perform in the
future. The bar chart shows the
performance of a share of the fund for each
of the past 10 calendar years. The
performance information in the chart does
not reflect sales charges, which would
reduce your return.
This table indicates the risk of investing
in the fund by comparing the average
annual total return for the periods shown
with that of the return of the Standard
and Poor's 500 Index, a broad-based index
of widely held common stock listed on the
New York or American Stock Exchanges and
the over the counter markets. Unlike the
fund, the S&P 500 Index is unmanaged and
does not incur expenses.
Average Annual Total Return
Calendar Years Ended December 31, 1998
1
Year
5
Years
Since
Incept
ion
Incept
ion
Date
Telecommunic
ations Trust
8/30/9
1
S&P 500
Index
8/30/9
1
This table assumes imposition of the
maximum sales charge, redemption of shares
at the end of the period, and reinvestment
of distributions and dividends.
Quarterly returns: Highest: xx% in __
quarter 199x; Lowest: xx% in __ quarter
199x.
Fees and Expenses
This table sets forth the fees and expenses you will pay if you invest in the
fund's
shares .
Annual fund operating expenses (paid by the fund as a % of net assets)
Management fees
0.75%
Other expenses
____%
Total annual fund operating expenses
____%
Example
This example helps you compare the costs of investing in the fund with
other mutual funds.
Your actual costs may be higher or lower. The
example assumes:
You invest $10,000 in the fund for the time periods shown
Your investment has a 5% return each year
You reinvest all distributions and dividends without a sales charge
The fund's operating expenses remain the same
Number of years you own your shares
1 year
3
years
5
years
10 Years
Telecommunications Trust
$____
$____
$____
$____
Management
Manager The fund's investment manager is SSBC Fund Management Inc.
(formerly Mutual
Management Corp.), an affiliate of Salomon Smith Barney Inc. The manager's
address is 388
Greenwich Street, New York, New York 10013. The manager selects the fund's
investments
and oversees its operations. The manager and Salomon Smith Barney are
subsidiaries of
Citigroup Inc. Citigroup businesses produce a broad range of financial
services -- asset
management, banking and consumer finance, credit and charge cards, insurance,
investments,
investment banking and trading -- and use diverse channels to make them
available to
consumer and corporate customers around the world.
Robert E. Swab, investment officer of SSBC and managing director of Salomon
Smith Barney,
has been responsible for the day to day management of the Fund since
November 1998. Prior
to that time he served as a Portfolio Manager to other Smith Barney Funds.
Management fees During the fiscal year ended December 31, 1998, the
adviser received an
advisory fee equal to 0.55% of the fund's average daily net assets. In
addition, the
manager received a fee for its administrative services to the fund equal
to 0.20% of the
fund's average daily net assets.
Distributor CFBDS, Inc. serves as the fund's distributor.
Year 2000 issue Information technology experts are concerned about computer
systems'
ability to process date-related information on and after January 1, 2000.
This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
fund. The
cost of addressing the Year 2000 issue, if substantial, could adversely
affect companies
and governments that issue securities held by the fund. The manager, the
administrator
and Salomon Smith Barney are addressing the Year 2000 issue for their
systems. The fund
has been informed by other service providers that they are taking similar
measures.
Although the fund does not expect the Year 2000 issue to adversely affect it,
the fund
cannot guarantee the efforts of the fund, which are limited to requesting and
receiving
reports from its service providers, or the efforts of its service providers
to correct the
problem will be successful.
Reinvestment of dividends
The fund currently is closed to investors except through reinvestment of
dividends or
distributions from the fund. The trustees may reopen the fund if they
determine the
reopening to be in the best interests of the fund and its shareholders.
Exchanging shares
In
general
Smith
Barney
offers a
distinct
ive
family
of
funds
tailored
to help
meet the
varying
needs of
both
large
and
small
investor
s
Because the fund is closed to new investments other than investment of
dividends or distributions, an investor who exchanges shares of the fund for
shares of another fund will not be able to effect an exchange back into the
fund. You should contact your Salomon Smith Barney Financial Consultant or
dealer representative to exchange into other Smith Barney funds. Be sure to
read the prospectus of the Smith Barney fund you are exchanging into. An
exchange is a taxable transaction.
? You may exchange shares only for Class A shares of most Smith Barney
funds.
? Not all Smith Barney funds may be offered in your state of residence.
Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent.
? You must meet the minimum investment amount for the fund.
? If you hold share certificates, the transfer agent must receive the
certificates endorsed for transfer or with signed stock powers (documents
transferring ownership of certificates) before the exchange is effective.
? The fund may suspend or terminate your exchange privilege if you engage
in an excessive pattern of exchanges.
Waiver
of
addition
al
sales
charges
Shares acquired in the exchange will not be subject to an initial sales
charge at the time of the exchange.
By
telephon
e
If you do not have a brokerage account, you may be eligible to exchange
shares through the transfer agent. To find out, call the transfer agent.
You must complete an authorization form to authorize telephone transfers. If
eligible, you may make telephone exchanges on any day the New York Stock
Exchange is open. Call the transfer agent at 1-800-451-2010 between 9:00
a.m. and 5:00 p.m. (Eastern time). Requests received after the close of
regular trading on the Exchange are priced at the net asset value next
determined.
You can make telephone exchanges only between accounts that have identical
registrations.
By mail
If you do not have a Salomon Smith Barney brokerage account, contact your
dealer representative or write to the transfer agent at the address on the
next page.
Redeeming shares
Generall
y
Contact your Salomon Smith Barney Financial Consultant or an investment
dealer in the selling group of a broker that clears through Salomon Smith
Barney as a dealer representative - to redeem shares of the fund.
If you hold share certificates, the transfer agent must receive the
certificates endorsed for transfer or with signed stock powers before the
redemption is effective.
If the shares are held by a fiduciary or corporation, other documents may be
required.
Your redemption proceeds will be sent within three business days after your
request is received in good order. However, if you recently purchased your
shares by check, your redemption proceeds will not be sent to you until your
original check clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your redemption
proceeds will be placed in your account and not reinvested without your
specific instruction. In other cases, unless you direct otherwise, your
redemption proceeds will be paid by check mailed to your address of record.
By mail
For accounts held directly at the fund, send written requests to the transfer
agent at the following address:
Smith Barney Telecommunications Trust
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
? Your account number
? The specific fund and the dollar amount or number of shares to be redeemed
? Signatures of each owner exactly as the account is registered
By
telephon
e
If you do not have a brokerage account, you may be eligible to redeem shares
(except those held in retirement plans) in amounts up to $10,000 per day
through the transfer agent. You must complete an authorization form to
authorize telephone redemptions. If eligible, you may request redemptions by
telephone on any day the New York Stock Exchange is open. Call the transfer
agent at 1-800-451-2010 between 9:00 a.m. and 5:00 p.m. (Eastern time).
Requests received after the close of regular trading on the Exchange are
priced at the net asset value next determined.
Your redemption proceeds can be sent by check to your address of record or by
wire transfer to a bank account designated on your authorization form. You
may be charged a fee for wire transfers. You must submit a new authorization
form to change the bank account designated to receive wire transfers and you
may be asked to provide certain other documents.
Other things to know about share transactions
When you exchange or redeem shares, your request must be in good order.
This means you
have provided the following information without which your request will not
be processed.
These same requirements would apply if a fund reopened to new investment
purchases.
? Name of the fund
? Account number
? Dollar amount or number of shares being exchanged or redeemed
? Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or
redemption request
is genuine by recording calls, asking the caller to provide a personal
identification
number for the account, sending you a written confirmation or requiring
other confirmation
procedures from time to time.
Signature guarantees To be in good order, your redemption request must
include a
signature guarantee if you:
? Are redeeming (together with other requests submitted in the previous
10 days) over
$10,000 of shares
? Are sending signed share certificates or stock powers to the transfer agent
? Instruct the transfer agent to mail the check to an address different
from the one
on your account
? Changed your account registration
? Want the check paid to someone other than the account owner(s)
? Are transferring the redemption proceeds to an account with a different
registration
You can obtain a signature guarantee from most banks, dealers, brokers,
credit unions and
federal savings and loan institutions, but not from a notary public.
The fund has the right to:
? Suspend the issuance of shares completely, even through reinvestment
of dividends,
or reopen the fund to new investors
? Waive or change the minimum account balance required by the fund
? Reject any exchange order
? Change, revoke or suspend the exchange privilege
? Suspend telephone transactions
? Suspend or postpone redemptions of shares on any day when trading on the
New York
Stock Exchange is restricted, or as otherwise permitted by the Securities and
Exchange Commission
? Pay redemption proceeds by giving you securities. You may pay transaction
costs to
dispose of the securities
Small account balances If your account falls below $500 because of
redemption of fund
shares, the fund may close your account and send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern
of frequent
exchanges is detrimental to the fund's performance and other shareholders.
If so, the
fund may limit additional exchanges by the shareholder.
Share certificates The fund does not issue share certificates unless a
written request is
made to the transfer agent. If you hold share certificates it will take
longer to
exchange or redeem shares.
Distributions, dividends and taxes
Dividends The fund generally pays quarterly income dividends and makes
capital gain
distributions, if any, once a year, typically in December. The fund may
pay additional
distributions and dividends at other times if necessary for the fund to
avoid a federal
tax. Capital gain distributions and dividends are reinvested in additional
fund shares.
The fund expects distributions to be primarily from capital gains. You
do not pay a sales
charge on reinvested distributions or dividends. Alternatively, you can
instruct your
Salomon Smith Barney Financial Consultant, dealer representative or the
transfer agent to
have your distributions and/or dividends paid in cash. You can change
your choice at any
time to be effective as of the next distribution or dividend, except that
any change given
to the transfer agent less than five days before the payment date will not
be effective
until the next distribution or dividend is paid.
Taxes In general, redeeming shares, exchanging shares and receiving
distributions
(whether in cash or additional shares) are all taxable events.
Transaction
Federal tax status
Redemption or exchange of
shares
Usually capital gain or loss; long-
term only if shares owned more than
one year
Long-term capital gain
distributions
Long-term capital gain
Short-term capital gain
distributions
Ordinary income
Dividends
Ordinary income
As stated in "Fund goals and strategies" above, for tax efficiency purposes
and because
the Fund does not currently offer shares to the public, the manager
generally does not buy
additional stocks for the Fund's portfolio or sell shares of stocks held by
the Fund
except to satisfy redemption requests and other fund expenses. Therefore,
the securities
held by the fund have appreciated over time and have substantial unrealized
appreciation,
which would be treated as long-term capital gains if the securities were
sold. In the
event of significant shareholder redemptions or for portfolio management
reasons, the fund
may be required to sell some of these securities and distribute any net
long-term taxable
gains realized in these sales. Long-term capital gain distributions are
taxable to you as
long-term capital gain regardless of how long you have owned your shares.
After the end of each year, the fund will provide you with information
about the
distributions and dividends you received and any redemptions of shares
during the previous
year. If you do not provide the fund with your correct taxpayer
identification number and
any required certifications, you may be subject to back-up withholding of
31% of your
distributions, dividends, and redemption proceeds. Because each shareholder's
circumstances are different and special tax rules may apply, you should
consult your tax
adviser about your investment in the fund.
Share price
You may exchange or redeem shares at their net asset value next determined
after receipt
of your request in good order. Shares acquired through reinvestment of
dividends and
distributions will be purchased at the net asset value calculated on the
reinvestment date
established by the trustees. The fund's net asset value is the value of its
assets minus
its liabilities. The fund calculates its net asset value every day the New
York Stock
Exchange is open. The Exchange is closed on certain holidays listed in the
SAI. This
calculation is done when regular trading closes on the Exchange (normally
4:00 p.m.,
Eastern time).
The fund generally values its portfolio securities based on market prices or
quotations.
When reliable market prices are not readily available, the fund may price
those securities
at fair value. Fair value is determined in accordance with procedures
approved by the
fund's board. A fund that uses fair value to price securities may value
those securities
higher or lower than another fund that uses market quotations to price the
same
securities.
Investments in U.S. government securities (other than short-term securities)
are valued at
the quoted bid price in the over-the-counter market. Short-term investments
maturing in
60 days or less are valued at amortized cost. Under the amortized cost
method, assets are
valued by constantly amortizing over the remaining life of an instrument
the difference
between the principal amount due at maturity and the cost of the instrument
to the fund.
In order to redeem or exchange shares at that day's price, you must place
your order with
your Salomon Smith Barney Financial Consultant or dealer representative
before the New
York Stock Exchange closes. If the New York Stock Exchange closes early,
you must place
your order prior to the actual closing time. Otherwise, you will receive
the next business
day's price.
Salomon Smith Barney or members of the selling group must transmit all
orders to exchange
or redeem shares to the fund's agent before the agent's close of business.
Financial Highlights
The financial highlights table is intended to help you understand the
performance of a
share for the past five years. Certain information reflects financial
results for a
single share. Total return represents the rate that a shareholder would
have earned (or
lost) on a fund share assuming reinvestment of all dividends and
distributions. The
information in the following tables was audited by KPMG LLP, independent
accountants,
whose report, along with the fund's financial statements, is included in
the annual report
(available upon request).
For a share of beneficial interest outstanding throughout each year.
1998
1997
1996
1995
1994
Net asset value,
beginning
of year
$
$104.62
$119.69
$95.62
$107.62
Income (loss) from
operations:
Net investment
income(loss)
Net realized and
unrealized gain
(loss)
2.83
43.05
3.12
(5.35)
3.58
35.57
4.02
(5.91)
Total income (loss)
from
operations
45.88
(2.23)
39.15
(1.89)
Less distributions
from:
Net investment
income
Net realized gains
(2.83)
(13.61)
(3.12)
(9.72)
(3.58)
(11.50)
(4.05)
(6.06)
Total distributions
(16.44)
(12.84)
(15.08)
(10.11)
Net asset value, end
of year
$134.06
$104.62
$119.69
$95.62
Total return
45.11%
(1.45)%
42.93%
(1.83)%
Net assets, end of
year (millions)
$73
$63
$75
$61
Ratios to average net
assets:
Expenses
Net investment
income
(loss)
0.92%
2.35
0.90%
2.80
0.95%
3.23
0.95%
3.80
Portfolio turnover
rate
0%
0%
0%
0%
SALOMON SMITH BARNEY_
a member of citigroup [Symbol]
SMITH BARNEY TELECOMMUNICATIONS TRUST
ADDITIONAL INFORMATION
Shareholder reports Annual and semiannual reports to shareholders provide
additional
information about the fund's investments. These reports discuss the market
conditions and
investment strategies that affected the fund's performance.
The fund sends only one report to a household if more than one account has
the same
address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or
the transfer agent if you do not want this policy to apply to you.
Statement of additional information The statement of additional information
provides more
detailed information about the fund and is incorporated by reference into
(is legally part
of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of
additional information (without charge) by contacting your Salomon Smith
Barney Financial
Consultant or dealer representative by calling the fund at 1-800-451-2010
or by writing to
the fund at Smith Barney Mutual Funds, 388 Greenwich Street, MF2, New York,
New York
10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review the fund's shareholder reports, prospectus and statement
of additional
information at the Securities and Exchange Commission's Public Reference
Room in
Washington, D.C. You can get copies of these materials for a fee by
writing to the Public
Reference Section of the Commission, Washington, D.C. 20549-6009.
Information about the
public reference room may be obtained by calling 1-800-SEC-0330. You can
get the same
reports and information free from the Commission's Internet web site at
http:www.sec.gov
If someone makes a statement about the fund that is not in this prospectus,
you should not
rely upon that information. The fund is not offering to sell their shares
to any person
to whom the fund may not lawfully sell its shares.
(Investment Company Act file no. 811-____________)
(FD-01103 3/99)
Telecommunications Trust -5-
Part B
Smith Barney
Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(800)-451-2010
STATEMENT OF ADDITIONAL INFORMATION April 30, 1999
This Statement of Additional Information (SAI) 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, 1999, as amended or
supplemented from time to time, and should be read in conjunction with the
fund's Prospectus. The Prospectus may be obtained from a Salomon Smith
Barney Financial Consultant or by writing or calling the address or
telephone number set forth above. This SAI, although not in itself a
prospectus, is incorporated by reference into the Prospectus in its
entirety.
CONTENTS
Trustees and Executive Officers of the
Fund........................................................................2
Investment Objective and Management
Policies...................................................................4
Redemption of Shares......................................................12
Valuation of Shares.......................................................12
Exchange Privilege.........................................................12
Performance Data...........................................................13
Taxes......................................................................14
Additional Information.....................................................16
Financial Statements......................................................17
Appendix...................................................................18
The fund is 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 fund. This
exchange of shares took place and the fund 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 currently is closed to investors except through reinvestment of
dividends or distributions from the fund. The Trustees may reopen the
fund if they determine the reopening to be in the best interests of the
fund and its shareholders.
TRUSTEES AND EXECUTIVE OFFICERS OF THE FUND
The Trustees of the fund 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 59). Partner in the law firm of Murov & Ades.
His address is 272 South Wellwood Avenue, Lindenhurst, New York 11757.
Herbert Barg, Trustee (Age 76). Private investor. His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Dwight B. Crane, Trustee (Age 61). 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 65).
Managing Director of Salomon Smith Barney Inc. (Salomon Smith
Barney);President of SSBC Fund Management Inc. (SSBC) (formerly known as
Mutual Management Corp.) and Travelers Investment Adviser, Inc. ("TIA");
Chairman or Co-Chairman of the Board of 59 investment companies associated
with Salomon Smith Barney and former Chairman of Smith Barney Strategy
Advisers Inc. His address is 388 Greenwich Street, New York, New York
10013.
Ken Miller, Trustee (Age 57). President of Young Stuff Apparel Group, Inc.
His address is 1407 Broadway, 6th Floor, New York, New York 10018.
Jerome Miller, Trustee (Age 61). Retired, Former President, Asset
Management Group of Shearson Lehman Brothers. His address is 27 Hemlock
Road, Manhasset, New York, NY 11030.
Jack White, (Trustee Emeritus effective February 6, 1998). 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.
Lewis E. Daidone, Senior Vice President and Treasurer (age 41). Managing
Director of Salomon Smith Barney; Chief Financial Officer of the Smith
Barney Mutual Funds; Director and Senior Vice President of SSBC and TIA.
His address is 388 Greenwich Street, New York, New York 10013.
Paul Brook, Controller (Age 45). Director of Salomon Smith Barney; from
1997-1998 Managing Director of AMT Capital Services Inc.; prior to 1997
Partner at Ernst & Young LLP. His address is 388 Greenwich Street, New
York, New York 10013.
Christina T. Sydor, Secretary (age 48). Managing Director of Salomon
Smith Barney, General Counsel and Secretary of SSBC and TIA. 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 Salomon Smith Barney
serves as distributor. As of February 22, 1999, the Trustees and officers
of the trust, as a group, owned less than 1% of the fund's outstanding
shares. As of February 22, 1999, to the best knowledge of the trust and
the Board no single shareholder or "group" (as that term is used in
Section 13 (d) of the Securities Act of 1934) beneficially owned more than
5% of the outstanding shares of trust.
No officer, director or employee of Salomon 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 Salomon Smith Barney or any of its
affiliates a fee of $2,250 per annum plus $125 per meeting attended and
reimburses them for travel and out-of-pocket expenses. For the fiscal year
ended December 31, 1998, such fees and expenses totaled $________.
For the calendar year ended December 31, 1998, the Trustees of the trust
were paid the following compensation:
Trustee(#)
Aggregate
Compensation
from the Trust
Aggregate
Compensation
from the Smith
Barney Mutual
Funds
Total Pension or
Retirement
Benefits Accrued
from the Trust
$0
Paul R. Ades (5)
0
Herbert Barg (20)
0
Dwight B. Crane
(26)
0
Frank G. Hubbard
(5)
0
Heath B. McLendon
(59)
0
Jerome Miller (5)
0
Ken Miller (5)
0
John F. White (5)
0
(#) Number of director/trusteeships held with mutual funds in the Smith
Barney Mutual Funds family.
Upon attainment of age 80, Trustees are required to change to emeritus
status. Trustees 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 Trustees,
together with reasonable out-of-pocket expenses for each meeting attended.
During the trust's last fiscal year aggregate compensation paid by the
trust to Trustees emeritus totaled $_____.
Investment Adviser -- SSBC
SSBC serves as investment adviser to the fund pursuant to a written
agreement dated July 23, 1998 (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 SSBC, on April 21,
1994 and by shareholders on June 15, 1994. Subject to the supervision and
direction of the fund's Board of Trustees, SSBC 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. SSBC pays the salary
of any officer or employee who is employed by both it and the fund and
bears all expenses in connection with the performance of its services.
SSBC is an affiliate of Salomon Smith Barney Inc. and a subsidiary of
Citigroup Inc. (Citigroup).
As compensation for investment advisory services rendered, the fund pays
SSBC a fee computed daily and paid monthly at the annual rate of 0.55% of
the fund's average daily net assets. For the fiscal years ended December
31, 1996, December 31, 1997 and December 31, 1998, the fund paid SSBC
$369,448, $367,532 and $_________, respectively, in investment advisory
fees.
Administrator -- SSBC
SSBC also 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 SSBC, on April
21, 1994. The services provided by SSBC under the Administration
Agreement are described in the Prospectus under Management of the Trust
and the Fund. SSBC pays the salary of any officer or 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, SSBC
receives a fee at the annual rate of 0.20% of the value of the fund's
average daily net assets. For the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998, the fund paid SSBC $134,345,
$133,648, and $________, 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 Citigroup; 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.
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 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, 1999.
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. Consistent with applicable regulations,
the fund has the ability to lend its portfolio securities to brokers,
dealers and other financial organizations. The fund may not lend
portfolio securities to Salomon 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 Salomon Smith Barney, and which is acting as a finder.
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. SSBC, 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.
Money Market Instruments. The fund may invest without limit in short-term
money market instruments when SSBC 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, SSBC 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 in the top two ratings
categories for short-term debt securities by a nationally recognized
statistical rating organization (NRSRO) (such as 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 by an NRSRO. 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. SSBC
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 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 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 SSBC 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 SSBC 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 SSBC
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 thefund 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 SSBC
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 SSBC 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.
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. SSBC also may permit the call
option to be exercised.
Non-Diversification. The trust is classified as a non-diversified
investment company under 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 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
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.
Investment Restrictions
The fund has adopted the following investment restrictions for the
protection of shareholders. Investment restrictions 1 through 6 below
cannot be changed without approval by the holders of a majority of the
outstanding shares of the fund, defined as the lesser of (a) 67% or more
of the voting securities present or represented by proxy at a meeting if
the holders of more than 50% of the outstanding voting securities of the
fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the fund. Investment restrictions 7 through 16 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) Purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall
not prevent the fund from (a) investing in securities of
issuers engaged in the real estate business or the business of
investing in real estate (including interests in limited
partnerships owning or otherwise engaging in the real estate
business or the business of investing in real estate) and
securities which are secured by real estate or interests
therein; (b) holding or selling real estate received in
connection with securities it holds or held; (c) trading in
futures contracts and options on futures contracts (including
options on currencies to the extent consistent with the fund's
investment objective and policies); or (d) investing in real
estate investment trust securities.
(2) 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.
(3) 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, to the fullest extent permitted under the 1940
Act.
(4) Borrow money, except that (a) the fund may borrow from banks
for temporary or emergency (not leveraging) purposes including
the meeting of redemption requests which might otherwise
require the untimely disposition of securities, and (b) the
fund may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements, forward
roll transactions and similar investment strategies and
techniques. To the extent that it engages in transactions
described in (a) and (b), the fund will be limited so that no
more than 33 1/3% of the value of the fund's total assets
(including the amount borrowed) valued at the lesser of cost
or market, less liabilities (not including the amount
borrowed) valued at the time the borrowing is made, is derived
from such transactions.
(5) 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.
(6) Issue senior securities as defined in the 1940 Act and the
rules, regulations and orders thereunder, except as permitted
under the 1940 Act and rules, regulations and orders
thereunder.
(7) 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.
(8) Purchase securities of companies for the purpose of exercising
control.
(9) 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.
(10) 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.)
(11) Invest in puts, calls, straddles, spreads, and any combination
thereof (except in connection with the writing of covered call
options).
(12) Invest in oil, gas or other mineral exploration or development
programs.
(14) 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.
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 1998 and 1997
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 SSBC,
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 SSBC.
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 dealers mark-up or mark-down. For the 1998, 1997 and 1996
fiscal years, the fund paid total brokerage commissions of $________,
$11,603 and $14,543, 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, SSBC
shall consider the factors 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 SSBC, 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 SSBC 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 SSBC under the Advisory Agreement are not reduced by
reason of SSBC receiving such brokerage and research services. Further,
Salomon 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 Salomon Smith Barney or an affiliate
of Salomon Smith Barney, if, in the judgment of SSBC, the use of Salomon
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,
Salomon Smith Barney charges the fund a commission rate consistent with
that charged by Salomon Smith Barney to comparable unaffiliated customers
in similar transactions. In addition, under rules adopted by the SEC,
Salomon 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 Salomon Smith Barney to effect such
transactions; and (b) Salomon Smith Barney annually advises the fund of
the aggregate compensation it earned on such transactions. For the 1998,
1997 and 1996 fiscal years, brokerage commissions of $_______, $4,190 and
$5,343, respectively, were paid by the fund to Salomon Smith Barney. The
amount of brokerage commissions paid to Salomon Smith Barney for the 1998
fiscal year represented __% of the total brokerage commissions paid by the
fund and Salomon Smith Barney effected __% 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 SSBC, 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 SSBC 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 SSBC 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. Shareholders
may incur brokerage commissions when they 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, Martin Luther King,
Jr. 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 trust's 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
Shares of the fund may be exchanged at the net asset value next determined
for Class A shares of most Smith Barney mutual funds. You may contact the
fund for information about which mutual funds are available under the
exchange privilege. Because the fund is closed to new investments other
than investment of dividends or distributions, an investor who exchanges
shares of the fund for shares of another fund will not be able to exchange
back into the fund. 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 Salomon 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. Salomon 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.
Yield
The 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, and 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, has
been deducted from the hypothetical $1,000 initial
investment at the time of purchase or redemption, as
applicable.
Period Ended 12/31/98
One Year
Five Year
Ten Year
%
%
%
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 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).
Generally, the fund's return on its investments will be considered to be
qualified income under the 90% Test.
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 gain or loss and the unrealized taxable
year-end gain or loss 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 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 corresponding 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 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 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. For individuals, the maximum rate
for long-term capital gains is 20%.
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 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.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the fund. The Master
Trust Agreement disclaims shareholder liability for acts or obligations of
the fund, however, and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the
fund or a Trustee. The Master Trust Agreement provides for
indemnification from fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the fund. Thus,
the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which the fund itself
would be unable to meet its obligations, a possibility which management of
the fund believes is remote. Upon payment of any liability incurred by
the fund, a shareholder paying such liability will be entitled to
reimbursement from the general assets of the fund. The Trustees intend to
conduct the operation of the fund in such a way so as to avoid, as far as
possible, ultimate liability of the shareholders for liabilities of the
fund.
PNC Bank, National Association (PNC) is located at 17th and Chestnut
Streets, Philadelphia, PA 19103 and serves as the custodian of the trust's
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 Investor Services Group, Inc. (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.
Description of Shares
The Master Trust Agreement of the fund permits the Trustees of the fund to
issue an unlimited number of full and fractional shares of a single class
and to divide or combine the shares into a greater or lesser number of
shares without thereby changing the proportionate beneficial interests in
the fund. Each share in the fund represents an equal proportional
interest in the fund with each other share. Shareholders of the fund are
entitled upon its liquidation to share pro rata in its net assets
available for distribution. No shareholder of the fund has any preemptive
or conversion rights. Shares of the fund are fully paid and non-
assessable.
Pursuant to the Master Trust Agreement, the fund's Trustees may authorize
the creation of additional series of shares (the proceeds of which would
be invested in separate, independently managed portfolios) and additional
classes of shares within any series (which would be used to distinguish
among the rights of different categories of shareholders, as might be
required by future regulations or other unforeseen circumstances).
FINANCIAL STATEMENTS
The fund's annual report for the fiscal year ended December 31, 1998 will
be filed on or about March 1, 1999 and will be incorporated in its
entirety by reference. [Accession No. ____________].
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 issuers industry or industries and an appraisal
of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and
customer acceptance; (d) liquidity; (e) amount and quality of long-term
debt; (f) trend of earnings over a period of ten years; (g) financial
strength of a parent company and the relationship which exists with the
issuer; and (h) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations.
Fitch IBCA, Inc. short term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three
years, including commercial paper, certificates of deposit, medium-term
notes, and municipal and investment notes. The short-term rating places
greater emphasis than a long-term rating on the existence of liquidity
necessary to meet financial commitment in a timely manner. Fitch's
short-term rates are as follows: F1+ indicates issues regarded as having
the strongest capacity for timely payments of financial commitments. The
+ denotes an exceptionally strong credit feature. The rating F1 reflects
issues regarded as having the strongest capacity for timely payment of
financial commitments while the rating F-2 indicates a satisfactory
capacity for timely payment of financial commitments, but the margin of
safety is not as great as in the case of the higher ratings.
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.
U:\legal\funds\sbtt\1999\secdocs\sai
15
Part C-Other Information
Item 23. Exhibits
Unless otherwise noted, all references are to the Registrants 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).
(a)(1)Registrants 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.
(2) Amendment No. 1 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrants Post-Effective
Amendment No. 18 as filed on February 28, 1995.
(3) Amendment No. 2 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrants Post-Effective
Amendment No. 18 as filed on February 28, 1995
(4) Amendment No. 3 to the Second Amended and Restated Master Trust
Agreement is incorporated by reference to Registrants Post-Effective
Amendment No. 18 as filed on February 28, 1995.
(5) Amendment No. 4 to the Seconded Amended and Restated Master Trust
Agreement is filed herein.
(b) Registrant's by-laws are incorporated by reference to the Registration
Statement.
(c) Specimen Share Certificate for the Fund is incorporated by
reference to the Registration Statement.
(d)(1)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 Registrants Post-Effective Amendment No. 18 as
filed on February 28, 1995.
(2) Form of Transfer of Advisory Agreement between the Registrant, Smith
Barney Strategy Advisers Inc. and the Mutual Management Corp. is filed herein.
(e)(1)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.
(2) Distribution Agreement between the Registrant and CFBDS, Inc. dated
October 8, 1998 is filed herein.
(3) Selling Group Agreement is filed herein.
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and PNC Bank, National
Association (PNC Bank) is incorporated by reference to Post-Effective
Amendment No. 21 to the Registration Statement.
(h)(1)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.
(2) 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.
(i) Opinion of counsel regarding legality of
shares being registered is incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration
Statement filed on October 7, 1983.
(j) Auditor's consent is to be filed by amendment in April 1999.
(k) Not Applicable.
(l) Not Applicable.
(m) Not Applicable.
(n) Financial Data Schedule is to be filed by amendment.
(o)(1)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.
(2) Rule 18f-3(d) Multiple Class Plan of the Registrant
is filed herein.
Item 24. Persons Controlled by or under Common
Control with Registrant
None
Item 25. Indemnification
The response to this item is incorporated by
reference to Post-Effective Amendment No. 1.
Item 26(a). Business and Other Connections of
Investment Adviser
Investment Adviser and Administrator - SSBC Fund
Management Inc. ("SSBC") (f/k/a Mutual Management Corp.), was incorporated
in December 1968 under the laws of the State of Delaware. SSBC is a
wholly owned subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"),(formerly known as Smith Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of
Citigroup Inc. ("Citigroup"). SSBC is
registered as an investment adviser under the
Investment Advisers Act of 1940 (the Advisers Act)
and has, through its predecessors, been in the
investment counseling business since 1934. SSBC
serves as the Investment Adviser and Administrator
the Telecommunications Income Fund.
The list required by this Item 26 of the officers and
directors of SSBC together with information as to any other business,
profession, vocation or employment of a substantial
nature engaged in by such officer and directors
during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by
SSBC pursuant to the Advisers Act (SEC File No. 801-
8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is also
the distributor for the following Smith Barney funds: Concert
Investment Series, Consulting Group Capital Markets Funds, Greenwich
Street Series Fund, Smith Barney Adjustable Rate Government Income
Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Arizona Municipals Fund Inc.,
Smith Barney California Municipals Fund Inc., Smith Barney Concert
Allocation Series Inc., Smith Barney Equity Funds, Smith Barney
Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith Barney
Income Funds, Smith Barney Institutional Cash Management Fund, Inc.,
Smith Barney Investment Funds Inc.,
Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund,
Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith Barney
Municipal Money Market Fund, Inc., Smith Barney
Natural Resources Fund Inc., Smith Barney New Jersey Municipals
Fund Inc., Smith Barney Oregon Municipals Fund Inc., Smith Barney
Principal Return Fund, Smith Barney Small Cap Blend Fund, Inc., Smith
Barney Telecommunications Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc., and
various series of unit investment trusts.
CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA for
Variable Annuities, The Travelers Fund BD for Variable Annuities, The
Travelers Fund BD II for Variable Annuities, The Travelers Fund BD
III for Variable Annuities, The Travelers Fund BD IV for Variable
Annuities, The Travelers Fund ABD for Variable Annuities, The
Travelers Fund ABD II for Variable Annuities, The Travelers Separate
Account PF for Variable Annuities, The Travelers Separate Account PF
II for Variable Annuities, The Travelers Separate Account QP for
Variable Annuities, The Travelers Separate Account TM for Variable
Annuities, The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable
Annuities, The Travelers Separate Account Six for Variable Annuities,
The Travelers Separate Account Seven for Variable Annuities, The
Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL II
for Variable Annuities, The Travelers Variable Life Insurance
Separate Account One, The Travelers Variable Life Insurance Separate
Account Two, The Travelers Variable Life Insurance Separate Account
Three, The Travelers Variable Life Insurance Separate Account Four,
The Travelers Separate Account MGA, The Travelers Separate Account
MGA II, The Travelers Growth and Income Stock Account for Variable
Annuities, The Travelers Quality Bond Account for Variable Annuities,
The Travelers Money Market Account for Variable Annuities, The
Travelers Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for Variable
Annuities, The Travelers Timed Aggressive Stock Account for Variable
Annuities, The Travelers Timed Bond Account for Variable Annuities.
In addition, CFBDS, the Registrant's Distributor, is also the
distributor for CitiFunds Multi-State Tax Free Trust, CitiFunds
Premium Trust, CitiFunds Institutional Trust, CitiFunds Tax Free
Reserves, CitiFunds Trust I, CitiFunds Trust II, CitiFunds Trust III,
CitiFunds International Trust, CitiFunds Fixed Income Trust,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP
Folio 400, CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP
Portfolio. CFBDS is also the placement agent for Large Cap Value
Portfolio, Small Cap Value Portfolio, International Portfolio,
Foreign Bond Portfolio, Intermediate Income Portfolio, Short-Term
Portfolio, Growth & Income Portfolio, U.S. Fixed Income Portfolio,
Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio,
Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S.
Treasury Reserves Portfolio.
In addition, CFBDS is also the distributor for the following Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc., Salomon
Brothers Investors Fund Inc., Salomon Brothers Capital Fund Inc.,
Salomon Brothers Series Funds Inc., Salomon Brothers Institutional
Series Funds Inc., Salomon Brothers Variable Series Funds Inc.
In addition, CFBDS is also the distributor for the Centurion Funds,
Inc.
(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to
Schedule A of Form BD filed by CFBDS pursuant to the Securities and
Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records
(1) Smith Barney Telecommunications Trust
388 Greenwich Street
New York, New York 10013
(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(4) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(5) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, and the Investment Company Act of 1940,
the Registrant, SMITH BARNEY TELECOMMUNICATIONS TRUST, has
duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly
authorized in the City of New York, in the State of
New York on the 25th day of February, 1999.
SMITH BARNEY TELECOMMUNICATIONS TRUST
/s/Heath B. McLendon
Heath B. McLendon,
Chief Executive Officer
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed
below by the following persons in the capacities and on
the date indicated.
Signature Title Date
/s/Heath B. McLendon Chairman of the Board 2/25/99
Heath B. McLendon (Chief Executive Officer)
and President
/s/Lewis E. Daidone Treasurer 2/25/99
Lewis E. Daidone (Chief Financial and
Accounting Officer)
/s/Paul Ades* Trustee 2/25/99
Paul Ades
/s/Herbert Barg* Trustee 2/25/99
Herbert Barg
/s/Dwight B. Crane* Trustee 2/25/99
Dwight B. Crane
/s/Frank G. Hubbard* Trustee 2/25/99
Frank G. Hubbard
/s/Ken Miller* Trustee 2/25/99
Ken Miller
/s/Jerome Miller* Trustee 2/25/99
Jerome Miller
_____________________________________________________________________
* Signed by Heath B. McLendon, their duly authorized
attorney-in-fact, pursuant to power
of attorney dated January 27, 1995.
/s/ Heath B. McLendon
Heath B. McLendon
EXHIBITS
Exhibit No. Description of Exhibits
(a)(5) Amendment No. 4 to the Second Amended and Restated
Master Trust Agreement
(d)(2) Form of Transfer of Advisory Agreement
(e)(2) Distribution Agreement
(e)(3) Selling Group Agreement
(j) Auditor's Consent+
(n) Financial Data Schedule+
(o)(2) Rule 18f-3(d) Multiple Class Plan
+ To be filed by further amendment
Form of
TRANSFER AND ASSUMPTION OF ADVISORY AGREEMENT
SMITH BARNEY TELECOMMUNICATIONS TRUST
ON BEHALF OF SMITH BARNEY TELECOMMUNICATIONS INCOME FUND
TRANSFER AND ASSUMPTION OF ADVISORY AGREEMENT, made as of the ___day
of ________, 1998, by and among Smith Barney Telecommunications Trust
(the "Trust"), a trust organized under the laws of the Commonwealth
of Massachusetts, on behalf of the Smith Barney Telecommunications
Income Fund (the "Portfolio"), Smith Barney Strategy Advisers Inc.
("SBSA"), a Delaware corporation, and Mutual Management
Corporation., a Delaware corporation ("MMC").
WHEREAS, the Trust is registered with the Securities and
Exchange Commission as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust consists of one investment portfolio or
series; and
WHEREAS, the Trust, on behalf of the Portfolio, and SBSA
entered into an Advisory Agreement on June 16, 1994, under which SBSA
serves as the investment adviser (the "Investment Adviser") for the
Portfolio; and
WHEREAS, SBSA desires that its interest, rights,
responsibilities and obligations in and under the Advisory Agreement
be transferred to MMC and MMC desires to assume SBSA's interest,
rights, responsibilities and obligations in and under the Advisory
Agreement; and
WHEREAS, this Agreement does not result in a change of actual
control or management of the Investment Adviser to the Trust and,
therefore, is not an "assignment" as defined in Section 2(a)(4) of
the Act nor an "assignment" for the purposes of Section 15(a)(4) of
the Act.
NOW, THEREFORE, in consideration of the mutual covenants set
forth in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Assignment. Effective as of_______, 1998 (the "Effective
Date"), SBSA hereby transfers to MMC all of SBSA's interest, rights,
responsibilities and obligations in and under the Advisory Agreement
dated June 16, 1994, to which SBSA is a party with the Trust.
2. Assumption and Performance of Duties. As of the
Effective Date, MMC hereby accepts all of SBSA's interest and rights,
and assumes and agrees to perform all of SBSA's responsibilities and
obligations in and under the Advisory Agreement; MMC agrees to be
subject to all of the terms and conditions of said Advisory
Agreement; and MMC shall indemnify and hold harmless SBSA from any
claim or demand made thereunder arising or incurred after the
Effective Date.
3. Representation of MMC. MMC represents and warrants that:
(1) it is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended; and (2) is an indirect wholly owned
subsidiary of Salomon Smith Barney Holdings Inc.
4. Consent. The Trust hereby consents to this transfer by
SBSA to MMC of SBSA's interest, rights, responsibilities and
obligations in and under the Advisory Agreement and to acceptance and
assumption by MMC of the same. The Trust agrees, subject to the
terms and conditions of said Advisory Agreement, to look solely to
MMC for the performance of the Investment Adviser's responsibilities
and obligations under said Advisory Agreement from and after the
Effective Date, and to recognize as inuring solely to MMC the
interest and rights heretofore held by SBSA thereunder.
5. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers hereunto
duly attested.
Attest:
By:
Secretary Smith Barney Telecommunications
Trust
on behalf Smith Barney
Telecommunications Income Fund
Date:
Attest:
By:
Secretary Mutual Management
Corporation
Date:
Attest:
By:
Secretary Smith Barney Strategy
Advisers Inc
Date:
Attest:
SMITH BARNEY TELECOMMUNICATIONS TRUST
AMENDMENT NO. 4
TO
THE SECOND AMENDED AND RESTATED MASTER TRUST AGREEMEMT
AMENDMENT NO. 4 to the Second Amended and Restated Master Trust
Agreement dated as of November 5, 1992 (the "Agreement") of Smith
Barney Telecommunications Trust (the "Trust"), made as of the 12th day
of June, 1998.
WITNESSETH:
WHEREAS, Article VII, Section 7.3 of the Agreement provides that
the Agreement may be amended at any time, so long as such amendment
does not materially adversely affect the rights of any shareholder and
so long as such amendment is not in contravention of applicable law,
including the Investment Company Act of 1940, as amended, by an
instrument in writing signed by an officer of the Trust pursuant to a
vote of a majority of the Trustees; and
WHEREAS, the Trustees have the authority under Section 4.1 of the
Agreement to issue classes of shares (as defined in the Agreement) of
any Sub-Trust (as defined in the Agreement) or divide the shares of any
Sub-Trust into classes, each class having such different dividend,
liquidation, voting and other rights as the Trustees may determine, and
to establish and designate the specific classes of shares of each Sub-
Trust; and
WHEREAS, on April 30 1998, a majority of the Trustees voted to
redesignate the "Class C" shares of the Sub-Trust as "Class L" shares;
and
WHEREAS, the undersigned has been duly authorized by the Trustees
to execute and file this Amendment No. 4 to the Agreement; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. The first paragraph of Article IV, Section 4.2 of the
Agreement is hereby amended to read in pertinent part as follows:
"Section 4.2 Establishment and Designation of Sub-Trusts.
Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further Sub-Trusts and classes, the
Trustees hereby establish and designate the following Sub-Trust and
classes thereof: "Smith Barney Telecommunications Income Fund", which
shall consist of five classes designated as Class A, Class B, Class L,
Class Y and Class Z shares. The shares of such Sub-Trust and classes
thereof and any shares of any further Sub-Trusts or classes that may
from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further
Sub-Trust or class at the time of establishing and designating the
same) have the following relative rights and preferences:
The undersigned hereby certifies that the Amendment set forth
above has been duly adopted in accordance with the provisions of the
Agreement.
IN WITNESS WHEREOF, the undersigned has hereto set his hands as
of the day and year first above written.
SMITH BARNEY
TELECOMMUNICATIONS TRUST
By:
Name: Robert M. Nelson
Title: Assistant Secretary
U:legal\general\boards\genlmemo\telat698
U:\LEGAL\FUNDS\SBTT\1999\SECDOCS\TELAT698e.doc
SMITH BARNEY TELECOMMUNICATIONS TRUST
FORM OF
DISTRIBUTION AGREEMENT
October 8, 1998
CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund")
has agreed that you shall be, for the period of this Agreement, the non-
exclusive principal underwriter and distributor of shares of the Fund
and each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, including any shares of
the Fund not designated by series, a "Series"). For purposes of this
Agreement, the term "Shares" shall mean shares of the each Series, or
one or more Series, as the context may require.
1. Services as Principal Underwriter and Distributor
1.1 You will act as agent for the distribution of Shares
covered by, and in accordance with, the registration statement,
prospectus and statement of additional information then in effect under
the Securities Act of 1933, as amended (the "1933 Act"), and the
Investment Company Act of 1940, as amended (the "1940 Act"), and will
transmit or cause to be transmitted promptly any orders received by you
or those with whom you have sales or servicing agreements for purchase
or redemption of Shares to the Transfer and Dividend Disbursing Agent
for the Fund of which the Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit orders
for the sale of Shares. It is contemplated that you will enter into
sales or servicing agreements with registered securities brokers and
banks and into servicing agreements with financial institutions and
other industry professionals, such as investment advisers, accountants
and estate planning firms. In entering into such agreements, you will
act only on your own behalf as principal underwriter and distributor.
You will not be responsible for making any distribution plan or service
fee payments pursuant to any plans the Fund may adopt or agreements it
may enter into.
1.3 You shall act as the non-exclusive principal
underwriter and distributor of Shares in compliance with all applicable
laws, rules, and regulations, including, without limitation, all rules
and regulations made or adopted from time to time by the Securities and
Exchange Commission (the "SEC") pursuant to the 1933 Act or the 1940
Act or by any securities association registered under the Securities
Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such action is warranted
for any reason, including, without limitation, market, economic or
political conditions, the Fund's officers may decline to accept any
orders for, or make any sales of, any Shares until such time as those
officers deem it advisable to accept such orders and to make such sales
and the Fund shall advise you promptly of such determination.
2. Duties of the Fund
2.1 The Fund agrees to pay all costs and expenses in
connection with the registration of Shares under the 1933 Act, and all
expenses in connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and other data
to be furnished by the Fund hereunder, and all expenses in connection
with the preparation and printing of the Fund's prospectuses and
statements of additional information for regulatory purposes and for
distribution to shareholders; provided however, that nothing contained
herein shall be deemed to require the Fund to pay any costs of
advertising or marketing the sale of Shares.
2.2 The Fund agrees to execute any and all documents and
to furnish any and all information and otherwise to take any other
actions that may be reasonably necessary in the discretion of the Fund's
officers in connection with the qualification of Shares for sale in such
states and other U.S. jurisdictions as the Fund may approve and
designate to you from time to time, and the Fund agrees to pay all
expenses that may be incurred in connection with such qualification.
You shall pay all expenses connected with your own qualification as a
securities broker or dealer under state or Federal laws and, except as
otherwise specifically provided in this Agreement, all other expenses
incurred by you in connection with the sale of Shares as contemplated in
this Agreement.
2.3 The Fund shall furnish you from time to time, for use
in connection with the sale of Shares, such information reports with
respect to the Fund or any relevant Series and the Shares as you may
reasonably request, all of which shall be signed by one or more of the
Fund's duly authorized officers; and the Fund warrants that the
statements contained in any such reports, when so signed by the Fund's
officers, shall be true and correct. The Fund also shall furnish you
upon request with (a) the reports of the annual audits of the financial
statements of the Fund for each Series made by independent certified
public accountants retained by the Fund for such purpose; (b) semi-
annual unaudited financial statements pertaining to each Series; (c)
quarterly earnings statements prepared by the Fund for any Series; (d) a
monthly itemized list of the securities in each Series' portfolio; (e)
monthly balance sheets as soon as practicable after the end of each
month; (f) the current net asset value and offering price per share
for each Series on each day such net asset value is computed and (g)
from time to time such additional information regarding the financial
condition of each Series of the Fund as you may reasonably request.
3. Representations and Warranties
The Fund represents to you that all registration statements,
prospectuses and statements of additional information filed by the Fund
with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares have been prepared in conformity with the requirements of said
Acts and the rules and regulations of the SEC thereunder. As used in
this Agreement, the terms "registration statement", "prospectus" and
"statement of additional information" shall mean any registration
statement, prospectus and statement of additional information filed by
the Fund with the SEC and any amendments and supplements thereto filed
by the Fund with the SEC. The Fund represents and warrants to you that
any such registration statement, prospectus and statement of additional
information, when such registration statement becomes effective and as
such prospectus and statement of additional information are amended and
supplemented, includes at the time of such effectiveness, amendment or
supplement all statements required to be contained therein in
conformance with the 1933 Act, the 1940 Act and the rules and
regulations of the SEC; that all statements of material fact contained
in any registration statement, prospectus or statement of additional
information will be true and correct when such registration statement
becomes effective; and that neither any registration statement nor any
prospectus or statement of additional information when such registration
statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Fund's Shares. The Fund may, but shall not be
obligated to, propose from time to time such amendment or amendments to
any registration statement and such supplement or supplements to any
prospectus or statement of additional information as, in the light of
future developments, may, in the opinion of the Fund, be necessary or
advisable. If the Fund shall not propose such amendment or amendments
and/or supplement or supplements within fifteen days after receipt by
the Fund of a written request from you to do so, you may, at your
option, terminate this Agreement or decline to make offers of the Fund's
Shares until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus
or statement of additional information without giving you reasonable
notice thereof in advance; provided, however, that nothing contained in
this Agreement shall in any way limit the Fund's right to file at any
time such amendments to any registration statement and/or supplements to
any prospectus or statement of additional information, of whatever
character, as the Fund may deem advisable, such right being in all
respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes you to use any prospectus or
statement of additional information furnished by the Fund from time to
time, in connection with the sale of Shares. The Fund agrees to
indemnify, defend and hold you, your several officers and directors, and
any person who controls you within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any such counsel fees
incurred in connection therewith) which you, your officers and
directors, or any such controlling person, may incur under the 1933 Act
or under common law or otherwise, arising out of or based upon any
untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement, any prospectus or any statement
of additional information or arising out of or based upon any omission,
or alleged omission, to state a material fact required to be stated in
any registration statement, any prospectus or any statement of
additional information or necessary to make the statements in any of
them not misleading; provided, however, that the Fund's agreement to
indemnify you, your officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or
expenses arising out of any statements or representations made by you or
your representatives or agents other than such statements and
representations as are contained in any prospectus or statement of
additional information and in such financial and other statements as are
furnished to you pursuant to paragraph 2.3 of this Agreement; and
further provided that the Fund's agreement to indemnify you and the
Fund's representations and warranties herein before set forth in
paragraph 3 of this Agreement shall not be deemed to cover any liability
to the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of
your obligations and duties under this Agreement. The Fund's agreement
to indemnify you, your officers and directors, and any such controlling
person, as aforesaid, is expressly conditioned upon the Fund's being
notified of any action brought against you, your officers or directors,
or any such controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office in New
York, New York and sent to the Fund by the person against whom such
action is brought, within ten days after the summons or other first
legal process shall have been served. The failure so to notify the Fund
of any such action shall not relieve the Fund from any liability that
the Fund may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, or
alleged omission, otherwise than on account of the Fund's indemnity
agreement contained in this paragraph 4.1. The Fund will be entitled to
assume the defense of any suit brought to enforce any such claim, demand
or liability, but, in such case, such defense shall be conducted by
counsel of good standing chosen by the Fund. In the event the Fund
elects to assume the defense of any such suit and retains counsel of
good standing, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of them; but
if the Fund does not elect to assume the defense of any such suit, the
Fund will reimburse you, your officers and directors, or the controlling
person or persons named as defendant or defendants in such suit, for the
reasonable fees and expenses of any counsel retained by you or them.
The Fund's indemnification agreement contained in this paragraph 4.1 and
the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation
made by or on behalf of you, your officers and directors, or any
controlling person, and shall survive the delivery of any of the Fund's
Shares. This agreement of indemnity will inure exclusively to your
benefit, to the benefit of your several officers and directors, and
their respective estates, and to the benefit of the controlling persons
and their successors. The Fund agrees to notify you promptly of the
commencement of any litigation or proceedings against the Fund or any of
its officers or Board members in connection with the issuance and sale
of any of the Fund's Shares.
4.2 You agree to indemnify, defend and hold the Fund, its
several officers and Board members, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands
or liabilities and any counsel fees incurred in connection therewith)
that the Fund, its officers or Board members or any such controlling
person may incur under the 1933 Act, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the
Fund, its officers or Board members, or such controlling person
resulting from such claims or demands shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact
contained in information furnished in writing by you to the Fund and
used in the answers to any of the items of the registration statement or
in the corresponding statements made in the prospectus or statement of
additional information, or shall arise out of or be based upon any
omission, or alleged omission, to state a material fact in connection
with such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such
information not misleading. Your agreement to indemnify the Fund, its
officers or Board members, and any such controlling person, as
aforesaid, is expressly conditioned upon your being notified of any
action brought against the Fund, its officers or Board members, or any
such controlling person, such notification to be given by letter or
telegram addressed to you at your principal office in Boston,
Massachusetts and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process
shall have been served. You shall have the right to control the defense
of such action, with counsel of your own choosing, satisfactory to the
Fund, if such action is based solely upon such alleged misstatement or
omission on your part or with the Fund's consent, and in any event the
Fund, its officers or Board members or such controlling person shall
each have the right to participate in the defense or preparation of the
defense of any such action with counsel of its own choosing reasonably
acceptable to you but shall not have the right to settle any such action
without your consent, which will not be unreasonably withheld. The
failure to so notify you of any such action shall not relieve you from
any liability that you may have to the Fund, its officers or Board
members, or to such controlling person by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise
than on account of your indemnity agreement contained in this paragraph
4.2. You agree to notify the Fund promptly of the commencement of any
litigation or proceedings against you or any of your officers or
directors in connection with the issuance and sale of any of the Fund's
Shares.
5. Effectiveness of Registration
No Shares shall be offered by either you or the Fund under any of
the provisions of this Agreement and no orders for the purchase or sale
of such Shares under this Agreement shall be accepted by the Fund if and
so long as the effectiveness of the registration statement then in
effect or any necessary amendments thereto shall be suspended under any
of the provisions of the 1933 Act, or if and so long as a current
prospectus as required by Section 5(b) (2) of the 1933 Act is not on
file with the SEC; provided, however, that nothing contained in this
paragraph 5 shall in any way restrict or have any application to or
bearing upon the Fund's obligation to repurchase its Shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information or charter documents, as amended
from time to time.
6. Offering Price
Shares of any class of any Series of the Fund offered for sale by
you shall be offered for sale at a price per share (the "offering
price") equal to (a) their net asset value (determined in the manner
set forth in the Fund's charter documents and the then-current
prospectus and statement of additional information) plus (b) a sales
charge, if applicable, which shall be the percentage of the offering
price of such Shares as set forth in the Fund's then-current prospectus
relating to such Series. In addition to or in lieu of any sales charge
applicable at the time of sale, Shares of any class of any Series of the
Fund offered for sale by you may be subject to a contingent deferred
sales charge as set forth in the Fund's then-current prospectus and
statement of additional information. You shall be entitled to receive
any sales charge levied at the time of sale in respect of the Shares
without remitting any portion to the Fund. Any payments to a broker or
dealer through whom you sell Shares shall be governed by a separate
agreement between you and such broker or dealer and the Fund's then-
current prospectus and statement of additional information. Any
payments to any provider of services to you shall be governed by a
separate agreement between you and such service provider.
7. Notice to You
The Fund agrees to advise you immediately in writing:
(a) of any request by the SEC for
amendments to the registration statement,
prospectus or statement of additional
information then in effect or for additional
information;
(b) in the event of the issuance by
the SEC of any stop order suspending the
effectiveness of the registration statement,
prospectus or statement of additional
information then in effect or the initiation
of any proceeding for that purpose;
(c) of the happening of any event that
makes untrue any statement of a material fact
made in the registration statement,
prospectus or statement of additional
information then in effect or that requires
the making of a change in such registration
statement, prospectus or statement of
additional information in order to make the
statements therein not misleading; and
(d) of all actions of the SEC with
respect to any amendment to the registration
statement, or any supplement to the
prospectus or statement of additional
information which may from time to time be
filed with the SEC.
8. Term of the Agreement
This Agreement shall become effective on the date hereof, shall
have an initial term of one year from the date hereof, and shall
continue for successive annual periods thereafter so long as such
continuance is specifically approved at least annually by (a) the Fund's
Board or (b) by a vote of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board members of the
Fund who are not interested persons (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is terminable
with or without cause, without penalty, on 60 days' notice by the Fund's
Board or by vote of holders of a majority of the relevant Series
outstanding voting securities, or on 90 days' notice by you. This
Agreement will also terminate automatically, as to the relevant Series,
in the event of its assignment (as defined in the 1940 Act and the rules
and regulations thereunder).
9. Arbitration
Any claim, controversy, dispute or deadlock arising under
this Agreement (collectively, a "Dispute") shall be settled by
arbitration administered under the rules of the American Arbitration
Association ("AAA") in New York, New York. Any arbitration and award
of the arbitrators, or a majority of them, shall be final and the
judgment upon the award rendered may be entered in any state or federal
court having jurisdiction. No punitive damages are to be awarded.
10. Miscellaneous
So long as you act as a principal underwriter and distributor of
Shares, you shall not perform any services for any entity other than
investment companies advised or administered by Citigroup Inc. or its
subsidiaries. The Fund recognizes that the persons employed by you to
assist in the performance of your duties under this Agreement may not
devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the persons employed by
you or any of your affiliates right to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature, provided, however, that in conducting such business or rendering
such services your employees and affiliates would take reasonable steps
to assure that the other parties involved are put on notice as to the
legal entity with which they are dealing. This Agreement and the terms
and conditions set forth herein shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect
to its conflict of interest principles.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to
us the enclosed copy, whereupon this Agreement will become binding on
you.
Very truly yours,
SMITH BARNEY TELECOMMUNICATIONS TRUST
By: _____________________
Authorized Officer
Accepted:
CFBDS, INC.
By: __________________________
Authorized Officer
Page: 3
SMITH BARNEY MUTUAL FUNDS
BROKER DEALER CONTRACT
CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
We, CFBDS, Inc. ("CFBDS"), have agreements with certain
investment companies for which Mutual Management Corp. serves as
investment adviser and/or administrator (each a "Fund") pursuant to
which we act as nonexclusive principal underwriter and distributor
for the sale of shares of capital stock ("shares") of the various
series of such Funds, and as such have the right to distribute shares
for resale. Each Fund is an open-end investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act")
and the shares being offered to the public are registered under the
Securities Act of 1933, as amended (the "1933 Act"). Each series of
each Fund covered by a Distribution Agreement from time to time is
referred to in this agreement as a "Series" and collectively as the
"Series." The term "Prospectus", as used herein, refers to the
prospectus and related statement of additional information (the
"Statement of Additional Information") incorporated therein by
reference (as amended or supplemented) on file with the Securities
and Exchange Commission at the time in question. As a broker in the
capacity of principal underwriter and distributor for the Trust, we
offer to sell to you, as a broker or dealer, shares of each Fund upon
the following terms and conditions:
1. PRIVATE In all sales to the public you shall act
as broker for your customers or as dealer for your own account, and
in no transaction shall you have any authority to act as agent for
the Trust, for us or for any other dealer. tc " In all sales to the
public you shall act as dealer for your own account, and in no
transaction shall you have any authority to act as agent for the
Fund, for us or for any other dealer."
2. PRIVATE Orders received from you will be accepted
through us only at the public offering price per share (i.e. the net
asset value per share plus the applicable front-end sales charge, if
any) applicable to each order, and all orders for redemption of any
shares shall be executed at the net asset value per share less any
contingent deferred sales charge, if any, in each case as set forth
in the Prospectus. You will be entitled to receive and retain any
contingent deferred sales charge amounts in partial consideration of
your payment to financial consultants of commission amounts at the
time of sale and we will obligate any other brokers with whom we
enter into similar agreements to pay such amounts directly to you.
The procedure relating to the handling of orders shall be subject to
paragraph 4 hereof and instructions which we or the Fund shall
forward from time to time to you. All orders are subject to
acceptance or rejection by the applicable Fund or us in the sole
discretion of either. The minimum initial purchase and the minimum
subsequent purchase of any shares shall be as set forth in the
Prospectus pertaining to the relevant Series. tc " Orders received
from you will be accepted through us only at the public offering
price per share (i.e. the net asset value per share plus the
applicable sales charge, if any) applicable to each order, and all
orders for redemption of any Fund shares shall be executed at the net
asset value per share less any contingent deferred sales charge, if
any, in each case as set forth in the Prospectus. The procedure
relating to the handling of orders shall be subject to paragraph 4
hereof and instructions which we or the Fund shall forward from time
to time to you. All orders are subject to acceptance or rejection by
Salomon or the Fund in the sole discretion of either. The minimum
initial purchase and the minimum subsequent purchase shall be as set
forth in the Prospectus of the Fund."
3. PRIVATE You shall not place orders for any shares
unless you have already received purchase orders for those shares at
the applicable public offering price and subject to the terms hereof.
You agree that you will not offer or sell any shares except under
circumstances that will result in compliance with the applicable
Federal and state securities laws, the applicable rules and
regulations thereunder and the rules and regulations of applicable
regulatory agencies or authorities and that in connection with sales
and offers to sell shares you will furnish to each person to whom any
such sale or offer is made, a copy of the Prospectus and, upon
request, the Statement of Additional Information, and will not
furnish to any person any information relating to shares which is
inconsistent in any respect with the information contained in the
Prospectus or Statement of Additional Information (as then amended or
supplemented). You shall not furnish or cause to be furnished to any
person or display or publish any information or materials relating to
the shares (including, without limitation, promotional materials and
sales literature, advertisements, press releases, announcements,
statements, posters, signs or other similar material), except such
information and materials as may be furnished to you by or on behalf
of us or the Funds, and such other information and materials as may
be approved in writing by or on behalf of us or the Funds. tc "
You shall not place orders for any shares unless you have already
received purchase orders for those shares at the applicable public
offering price and subject to the terms hereof and of the
Distribution Contract. You agree that you will not"
4. PRIVATE As a broker dealer, you are hereby
authorized (i) to place orders directly with the applicable Fund or
Series for shares subject to the applicable terms and conditions
governing the placement of orders by us set forth in the Prospectus
and (ii) to tender shares directly to each Fund or its agent for
redemption subject to the applicable terms and conditions governing
the redemption of shares applicable to us set forth in the
Prospectus. tc " As a dealer, you are hereby authorized (i) to place
orders directly with the Fund for shares to be resold by us to you
subject to the applicable terms and conditions governing the
placement of orders by us set forth in the Prospectus and the
Distribution Contract and (ii) to tender shares directly to the Fund
or its agent for redemption subject to the applicable terms and
conditions governing the redemption of shares applicable to us set
forth in the Prospectus and the Distribution Agreement."
5. PRIVATE You shall not withhold placing orders
received from your customers so as to profit yourself as a result of
such withholding, e.g., by a change in the "net asset value" from
that used in determining the offering price to your customers. tc "
You shall not withhold placing orders received from your customers so
as to profit yourself as a result of such withholding, e.g., by a
change in the \"net asset value\" from that used in determining the
offering price to your customers."
6. PRIVATE In determining the amount of any sales
concession payable to you hereunder, we reserve the right to exclude
any sales which we reasonably determine are not made in accordance
with the terms of the Prospectus and the provisions of this
Agreement. Unless at the time of transmitting an order we advise you
or the transfer agent to the contrary, the shares ordered will be
deemed to be the total holdings of the specified investor. tc " In
determining the amount of any sales concession payable to you
hereunder, we reserve the right to exclude any sales which we
reasonably determine are not made in accordance with the terms of the
Prospectus and the provisions of this Agreement. Unless at the time
of transmitting an order we advise you or the transfer agent to the
contrary, the shares ordered will be deemed to be the total holdings
of the specified investor."
7. PRIVATE (a) You agree that payment for orders from
you for the purchase of shares will be made in accordance with the
terms of the Prospectus. On or before the business day following the
settlement date of each purchase order for shares, you shall transfer
same day funds to an account designated by us with the transfer agent
in an amount equal to the public offering price on the date of
purchase of the shares being purchased less your sales concession, if
any, with respect to such purchase order determined in accordance
with the Prospectus. If payment for any purchase order is not
received in accordance with the terms of the Prospectus, we reserve
the right, without notice, to cancel the sale and to hold you
responsible for any loss sustained as a result thereof. tc " (a)
You agree that payment for orders from you for the purchase of shares
will be made in accordance with the terms of the Prospectus. On or
before the business day following the settlement date of each
purchase order for shares, you shall transfer same day funds to an
account designated by us with the transfer agent an amount equal to
the public offering price on the date of purchase of the shares being
purchased less your sales concession, if any, with respect to such
purchase order determined in accordance with the Prospectus. If
payment for any purchase order is not received in accordance with the
terms of the Prospectus, we reserve the right, without notice, to
cancel the sale and to hold you responsible for any loss sustained as
a result thereof."
(b) PRIVATE If any shares sold under the terms of this
Agreement are sold with a sales charge and are redeemed or are
tendered for redemption within seven (7) business days after
confirmation of your purchase order for such shares: (i) you shall
forthwith refund to us the full sales concession received by you on
the sale; and (ii) we shall forthwith pay to the applicable Series
our portion of the sales charge on the sale which has been retained
by us, if any, and shall also pay to the applicable Series the amount
refunded by you. tc " If any shares sold under the terms of this
Agreement are sold with a sales charge and are redeemed or are
tendered for redemption within seven (7) business days after
confirmation of your purchase order for such shares\: (i) you shall
forthwith refund to us the full sales concession received by you on
the sale; and (ii) we shall forthwith pay to the applicable Series
our portion of the sales charge on the sale which has been retained
by us, if any, and shall also pay to the Series the amount refunded
by you."
(c) PRIVATE We will not be obligated to pay or cause to
be paid to you any ongoing trail commission or shareholder service
fees with respect to shares of the Series purchased through you and
held by or for your customers, which you shall collect directly from
the Funds. tc " We will pay you an ongoing trail commission with
respect to holdings by you of shares of the Funds at such rates and
in such manner as may be described in the Prospectus."
(d) PRIVATE Certificates evidencing shares shall be
available only upon request. Upon payment for shares in accordance
with paragraph 7(a) above, the transfer agent will issue and transmit
to you or your customer a confirmation statement evidencing the
purchase of such shares. Any transaction in uncertificated shares,
including purchases, transfers, redemptions and repurchases, shall be
effected and evidenced by book-entry on the records of the transfer
agent. tc " Certificates evidencing shares shall be available only
upon request. Upon payment for shares in accordance with paragraph
7(a) above, the transfer agent will issue and transmit to you a
confirmation statement evidencing the purchase of such shares. Any
transaction in uncertificated shares, including purchases, transfers,
redemptions and repurchases, shall be effected and evidenced by
book-entry on the records of the transfer agent."
8. PRIVATE No person is authorized to make any
representations concerning shares except those contained in the
current Prospectus and Statement of Additional Information and in
printed information subsequently issued by us or the Funds as
information supplemental to the Prospectus and the Statement of
Additional Information. In purchasing or offering shares pursuant to
this Agreement you shall rely solely on the representations contained
in the Prospectus, the Statement of Additional Information and the
supplemental information above mentioned. tc " No person is
authorized to make any representations concerning shares except those
contained in the current Prospectus and Statement of Additional
Information and in printed information subsequently issued by us or
the Fund as information supplemental to the Prospectus and the
Statement of Additional Information. In purchasing sor offering
shares pursuant to this Agreement you shall rely solely on the
representations contained in the Prospectus, the Statement of
Additional Information and the supplemental information above
mentioned."
9. PRIVATE You agree to deliver to each purchaser
making a purchase of shares from or through you a copy of the
Prospectus at or prior to the time of offering or sale, and, upon
request, the Statement of Additional Information. You may instruct
the transfer agent to register shares purchased in your name and
account as nominee for your customers. You agree thereafter to
deliver to any purchaser whose shares you or your nominee are holding
as record holder copies of the annual and interim reports and proxy
solicitation materials and any other information and materials
relating to the Trust and prepared by or on behalf of us, the Funds
or the investment adviser, custodian, transfer agent or dividend
disbursing agent for distribution to beneficial holders of shares.
The Funds shall be responsible for the costs associated with
forwarding such reports, materials and other information and shall
reimburse you in full for such costs. You further agree to make
reasonable efforts to endeavor to obtain proxies from such purchasers
whose shares you or your nominee are holding as record holder. You
further agree to obtain from each customer to whom you sell shares
any taxpayer identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder, and to provide
us or our designee with timely written notice of any failure to
obtain such taxpayer identification number certification in order to
enable the implementation of any required backup withholding in
accordance with Section 3406 of the Code and the regulations
thereunder. Additional copies of the Prospectus, Statement of
Additional Information, annual or interim reports, proxy solicitation
materials and any such other information and materials relating to
the Trust will be supplied to you in reasonable quantities upon
request. tc " You agree to deliver to each purchaser making a
purchase of shares from you a copy of the Prospectus at or prior to
the time of offering or sale, and, upon request, the Statement of
Additional Information. You may instruct the transfer agent to
register shares purchased in your name and account as nominee for
your customers. You agree thereafter to deliver to any purchaser
whose shares you are holding as record holder copies of the annual
and interim reports and proxy solicitation materials and any other
information and materials relating to the Fund and prepared by or on
behalf of us, the Fund or its investment adviser, custodian, transfer
agent or dividend disbursing agent for distribution to such customer.
The Fund shall be responsible for the costs associated with
forwarding such reports, materials and other information and shall
reimburse you in full for such costs. You further agree to make
reasonable efforts to endeavor to obtain proxies from such purchasers
whose shares you are holding as record holder. You further agree to
obtain from each customer to whom you sell shares any taxpayer
identification number certification required under Section 3406 of
the Internal Revenue Code of 1986, as amended (the \"Code\"), and the
regulations promulgated thereunder, and to provide us or our
designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding in accordance with
Section 3406 of the Code and the regulations thereunder. Additional
copies of the Prospectus, Statement of Additional Information, annual
or interim reports, proxy solicitation materials and any such other
information and materials relating to the Fund will be supplied to
you in reasonable quantities upon request."
10. PRIVATE (a) In accordance with the terms of the
Prospectus, a reduced sales charge may be available to customers,
depending on the amount of the investment or proposed investment. In
each case where a reduced sales charge is applicable, you agree to
furnish to the transfer agent sufficient information to permit
confirmation of qualification for a reduced sales charge, and
acceptance of the purchase order is subject to such confirmation.
Reduced sales charges may be modified or terminated at any time in
the sole discretion of each Fund. tc " (a) In accordance with the
terms of the Prospectus, a reduced sales charge may be available to
customers, depending on the amount of the investment. In each case
where a reduced sales charge is applicable, you agree to furnish to
the transfer agent sufficient information to permit confirmation of
qualification for a reduced sales charge, and acceptance of the
purchase order is subject to such confirmation. Reduced sales
charges may be modified or terminated at any time in the sole
discretion of the Fund."
(b) PRIVATE You acknowledge that certain classes of
investors may be entitled to purchase shares at net asset value
without a sales charge as provided in the Prospectus and Statement of
Additional Information. tc " You acknowledge that certain classes of
investors may be entitled to purchase shares at net asset value
without a sales charge as provided in the Prospectus and Statement of
Additional Information."
(c) PRIVATE You agree to advise us promptly as to the
amount of any and all sales by you qualifying for a reduced sales
charge or no sales charge. tc " You agree to advise us promptly as
to the amount of any and all sales by you qualifying for a reduced
sales charge or no sales charge."
(d) PRIVATE Exchanges (i.e., the investment of the
proceeds from the liquidation of shares of one Series in the shares
of another Series, each of which is managed by the same or an
affiliated investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus. tc " Exchanges (i.e.,
the investment of the proceeds from the liquidation of shares of one
fund in the shares of another fund, each of which is managed by the
Fund's investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus."
11. PRIVATE We and each Fund reserve the right in our
discretion, without notice, to suspend sales or withdraw the offering
of any shares entirely. Each party hereto has the right to cancel
the portions of this Agreement to which it is party upon notice to
the other parties; provided, however, that no cancellation shall
affect any party's obligations hereunder with respect to any
transactions or activities occurring prior to the effective time of
cancellation. We reserve the right to amend this Agreement in any
respect effective on notice to you. tc " We reserve the right in our
discretion, without notice, to suspend sales or withdraw the offering
of shares entirely. Each party hereto has the right to cancel this
agreement upon notice to the other part parties; provided; however,
that no cancellation shall affect any party's obligations hereunder
with respect to any transactions or activities occurring prior to the
effective time of cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to you."
12. PRIVATE We shall have full authority to take such
action as we may deem advisable in respect of all matters pertaining to
the continuous offering of shares. We shall be under no liability to
you except for lack of good faith and for obligations expressly assumed
by us herein. Nothing contained in this paragraph 12 is intended to
operate as, and the provisions of this paragraph 12 shall not in any way
whatsoever constitute a waiver by you of compliance with, any provisions
of the 1933 Act or of the rules and regulations of the Securities and
Exchange Commission issued thereunder. tc " We shall have full
authority to take such action as we may deem advisable in respect of all
matters pertaining to the continuous offering of shares. We shall be
under no liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing contained in this
paragraph 12 is intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever constitute a waiver by you
of compliance with, any provisions of the 1933 Act or of the rules and
regulations of the Securities and Exchange Commission issued
thereunder."
13. PRIVATE You agree that: (a) you shall not effect
any transactions (including, without limitation, any purchases and tc
" You agree that\: (a) you shall not effect any transactions
(including, without limitation, any purchases and" redemptions) in
any shares registered in the name of, or beneficially owned by, any
customer unless such customer has granted you full right, power and
authority to effect such transactions on his behalf, (b) we shall
have full authority to act upon your express instructions to sell,
repurchase or exchange shares through us on behalf of your customers
under the terms and conditions provided in the Prospectus and (c) we,
the Funds, the investment adviser, the administrator, the transfer
agent and our and their respective officers, directors or trustees,
agents, employees and affiliates shall not be liable for, and shall
be fully indemnified and held harmless by you from and against, any
and all claims, demands, liabilities and expenses (including, without
limitation, reasonable attorneys' fees) which may be incurred by us
or any of the foregoing persons entitled to indemnification from you
hereunder arising out of or in connection with (i) the execution of
any transactions in shares registered in the name of, or beneficially
owned by, any customer in reliance upon any oral or written
instructions believed to be genuine and to have been given by or on
behalf of you, (ii) any statements or representations that you or
your employees or representatives make concerning the Funds that are
inconsistent with the applicable Fund's Prospectus, (iii) any written
materials used by you or your employees or representatives in
connection with making offers or sales of shares that were not
furnished by us, the Funds or the investment adviser or an affiliate
thereof and (iv) any sale of shares of a Fund where the Fund or its
shares were not properly registered or qualified for sale in any
state, any U.S. territory or the District of Columbia, when we have
indicated to you that the Fund or its shares were not properly
registered or qualified. The indemnification agreement contained in
this Paragraph 13 shall survive the termination of this Agreement.
14. PRIVATE You represent that: (a) you are a member
in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"), or, if a foreign dealer who is not eligible for
membership in the NASD, that (i) you will not make any sales of
shares in, or to nationals of, the United States of America, its
territories or its possessions, and (ii) in making any sales of
shares you will comply with the NASD's Conduct Rules and (b) you are
a member in good standing of the Securities Investor Protection
Corporation ("SIPC"). You agree that you will provide us with timely
written notice of any change in your NASD or SIPC status. tc " You
represent that you are a member in good standing of the National
Association of Securities Dealers, Inc. (the \"NASD\"), or, if a
foreign dealer who is not eligible for membership in the NASD, that
(a) you will not make any sales of shares in, or to nationals of, the
United States of America, its territories or its possessions, and (b)
in making any sales of shares you will comply with the NASD's Rules
of Fair Practice."
15. PRIVATE We shall inform you as to the states or
other jurisdictions in which the Fund has advised us that shares have
been qualified for sale under, or are exempt from the requirements of,
the respective securities laws of such states, but we assume no
responsibility or obligation as to your qualification to sell shares
in any jurisdiction.
16. Any claim, controversy, dispute or deadlock arising
under this Agreement (collectively, a "Dispute") shall be settled by
arbitration administered under the rules of the American Arbitration
Association ("AAA") in New York, New York. Any arbitration and
award of the arbitrators, or a majority of them, shall be final and
the judgment upon the award rendered may be entered in any state or
federal court having jurisdiction. No punitive damages are to be
awarded.
17. PRIVATE All communications to us should be sent,
postage prepaid, to 21 Milk Street, Boston, Massachusetts 02109
Attention: Philip Coolidge. Any notice to you shall be duly given if
mailed, telegraphed or telecopied to you at the address specified by
you below. Communications regarding placement of orders for shares
should be sent, postage prepaid, to First Data Investor Services
Group, Inc., P.O. Box 5128, Westborough, Massachusetts 01581-5128. tc
" All communications to us should be sent, postage prepaid, to 7
World Trade Center, New York, New York 10048. Attention\: Robert J.
Leonard. Any notice to you shall be duly given if mailed,
telegraphed or telecopied to you at the address specified by you
below. Communications regarding placement of orders for shares
should be sent, postage prepaid, to The Shareholder Services Group,
Inc., P.O. Box 9109, Boston, Massachusetts 02205-9109."
18. PRIVATE This Agreement shall be binding upon both
parties hereto when signed by us and accepted by you in the space
provided below tc " This Agreement shall be binding upon both
parties hereto when signed by us and accepted by you in the space
provided below until July 14, 1995 or such earlier date upon
negotiation of section 3 and 12 of this agreement. " .
19. PRIVATE This Agreement and the terms and
conditions set forth herein shall be governed by, and construed in
accordance with, the laws of the State of New York. tc " This
Agreement and the terms and conditions set forth herein shall be
governed by, and construed in accordance with, the laws of the State
of New York."
CFBDS, INC.
By:
(Authorized Signature)
Accepted:
Firm Name:
Address:
Accepted By (signature):
Name (print):
Title: Date:
u:\legal\general\forms\agreemts\dist12b-1\dealerag1.doc
Rule 18f-3 (d) Multiple Class Plan for Smith Barney Mutual Funds
Introduction
This plan (the "Plan") is adopted pursuant to Rule 18f-3 (d) of the
Investment Company Act of 1940, as amended (the "1940 Act"). The
purpose of the Plan is to restate the existing arrangements previously
approved by the Boards of Directors and Trustees of certain of the open-
end investment companies set forth on Schedule A (the "Funds" and each a
"Fund") under the Funds' existing order of exemption (Investment Company
Act Release Nos. 20042 (January 28, 1994) (notice) and 20090 (February
23, 1994)). Shares of the Funds are distributed pursuant to a system
(the "Multiple Class System") in which each class of shares (a "Class")
of a Fund represents a pro rata interest in the same portfolio of
investments of the Fund and differs only to the extent outlined below.
I. Distribution Arrangements and Service Fees
One or more Classes of shares of the Funds are offered for purchase by
investors with the following sales load structure. In addition,
pursuant to Rule 12b-1 under the 1940 Act (the "Rule"), the Funds have
each adopted a plan (the "Services and Distribution Plan") under which
shares of the Classes are subject to the
services and distribution fees described below.
1. Class A Shares
Class A shares are offered with a front-end sales load and under the
Services and Distribution Plan are subject to a service fee of up to
0.25% of average daily net assets. In addition, the Funds are permitted
to assess a contingent deferred sales charge ("CDSC") on certain
redemptions of Class A shares sold pursuant to a complete waiver of
front-end sales loads applicable to large purchases, if the shares are
redeemed within one year of the date of purchase. This waiver applies
to sales of Class A shares where the amount of purchase is equal to or
exceeds $500,000 although this amount may be changed in the future.
2. Class B Shares
Class B shares are offered without a front-end sales load, but are
subject to a five-year declining CDSC and under the Services and
Distribution Plan are subject to a service fee at an annual rate of up
to 0.25% of average daily net assets and a distribution fee at an annual
rate of up to 0.75% of average daily net assets.
3. Class D Shares
Class D shares are offered without a front-end sales load, CDSC, service
fee or distribution fee.
4. Class L Shares
Class L shares are offered with a front-end load, are subject to a one-
year CDSC and under the Services and Distribution Plan are subject to a
service fee at an annual rate of up to 0.25% of average daily net assets
and a distribution fee at an annual rate of up to 0.75% of average daily
net assets. Unlike Class B shares, Class L shares do not have the
conversion feature as discussed below and accordingly, these shares are
subject to a
distribution fee for an indefinite period of time. The Funds reserve
the right to impose these fees at such higher rates as may be
determined.
5. Class I Shares
Class I shares are offered without a front-end sales load, but are
subject under the Services and Distribution Plan to a service fee at an
annual rate of up to 0.25% of average daily net assets.
6. Class O Shares
Class O shares are offered without a front-end load, but are subject to
a one-year CDSC and under the Services and Distribution Plan are subject
to a service fee at an annual rate of up to 0.25% of average daily net
assets and a distribution fee at an annual rate of up to 0.50% of
average daily net assets. Unlike Class B
shares, Class O shares do not have the conversion feature as discussed
below and accordingly, these shares are subject to a distribution fee
for an indefinite period of time. The Funds reserve the right to impose
these fees at such higher rates as may be determined.
Effective June 28, 1999, Class O shares will be offered with a front-end
load and will continue to be subject to a one year CDSC, a service fee
at an annual rate of up to 0.25% of average daily net assets and a
distribution fee at an annual rate of up to 0.50% of average daily net
assets.
7. Class Y Shares
Class Y shares are offered without imposition of either a sales charge
or a service or distribution fee for investments where the amount of
purchase is equal to or exceeds a specific amount as specified in each
Fund's prospectus.
8. Class Z Shares
Class Z shares are offered without imposition of either a sales charge
or a service or distribution fee for purchase (i) by employee benefit
and retirement plans of Salomon Smith Barney Inc. ("Salomon Smith
Barney") and its affiliates, (ii) by certain unit investment trusts
sponsored by Salomon Smith Barney and its affiliates, and (iii) although
not currently authorized by the governing boards of the Funds, when and
if authorized, (x) by employees of Salomon Smith Barney and its
affiliates and (y) by directors, general partners or trustees of any
investment company listed on Schedule A and, for each of (x) and (y),
their
spouses and minor children.
9. Additional Classes of Shares
The Boards of Directors and Trustees of the Funds have the authority to
create additional classes, or change existing Classes, from time to
time, in accordance with Rule 18f-3 of the 1940 Act.
II. Expense Allocations
Under the Multiple Class System, all expenses incurred by a Fund are
allocated among the various Classes of shares based on the net assets of
the Fund attributable to each Class, except that each Class's net asset
value and expenses reflect the expenses associated with that Class under
the Fund's Services and
Distribution Plan, including any costs associated with obtaining
shareholder approval of the Services and Distribution Plan (or an
amendment thereto) and any expenses specific to that Class. Such
expenses are limited to the following:
(i) transfer agency fees as identified by the transfer agent as
being attributable to a specific Class;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and
proxies to current shareholders;
(iii) Blue Sky registration fees incurred by a Class of shares;
(iv) Securities and Exchange Commission registration fees
incurred by a Class of shares;
(v) the expense of administrative personnel and services as
required to support the shareholders of a specific Class;
(vi) litigation or other legal expenses relating solely to one
Class of shares; and
(vii) fees of members of the governing boards of the funds
incurred as a result of issues relating to one Class of shares.
Pursuant to the Multiple Class System, expenses of a Fund allocated to a
particular Class of shares of that Fund are borne on a pro rata basis by
each outstanding share of that Class.
III. Conversion Rights of Class B Shares
All Class B shares of each Fund will automatically convert to Class A
shares after a certain holding period, expected to be, in most cases,
approximately eight years but may be shorter. Upon the expiration of
the holding period, Class B shares (except those purchases through the
reinvestment of dividends and other
distributions paid in respect of Class B shares) will automatically
convert to Class A shares of the Fund at the relative net asset value of
each of the Classes, and will, as a result, thereafter be subject to the
lower fee under the Services and Distribution Plan. For purposes of
calculating the holding period required for conversion, newly created
Class B shares issued after the date of implementation of the Multiple
Class
System are deemed to have been issued on (i) the date on which the
issuance of the Class B shares occurred or (ii) for Class B shares
obtained through an exchange, or a series of exchanges, the date on
which the issuance of the original Class B shares occurred.
Shares purchased through the reinvestment of dividends and other
distributions paid in respect of Class B shares are also Class B shares.
However, for purposes of conversion to Class A, all Class B shares in a
shareholder's Fund account that were purchased through the reinvestment
of dividends and other distributions paid in respect of Class B shares
(and that have not converted to Class A shares as provided in the
following sentence) are considered to be held in a separate sub-account.
Each time any Class B shares
in the shareholder's Fund account (other than those in the sub-account
referred to in the preceding
sentence) convert to Class A, a pro rata portion of the Class B shares
then in the sub-account also converts to Class A. The portion is
determined by the ratio that the shareholder's Class B shares converting
to Class A bears to the shareholder's total Class B shares not acquired
through dividends and distributions.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a ruling of the Internal Revenue Service that
payment of different dividends on Class A and Class B shares does not
result in the Fund's dividends or distributions constituting
"preferential dividends" under the Internal Revenue
Code of 1986, as amended (the "Code"), and the continuing availability
of an opinion of counsel to the effect that the conversion of shares
does not constitute a taxable event under the Code. The conversion of
Class B shares to Class A shares may be suspended if this opinion is no
longer available, In the event that conversion of Class B shares does
not occur, Class B shares would continue to be subject to the
distribution fee and any incrementally higher transfer agency costs
attending the Class B shares for an indefinite period.
IV. Exchange Privileges
Shareholders of a Fund may exchange their shares at net asset value for
shares of the same Class in certain other of the Smith Barney Mutual
Funds as set forth in the prospectus for such Fund. Funds only permit
exchanges into shares of money market funds having a plan under the Rule
if, as permitted by paragraph (b) (5) of Rule 11a-3 under the 1940 Act,
either (i) the time period during which the shares of the money market
funds are held is included in the calculations of the CDSC or (ii) the
time period is not included but the amount of the CDSC is reduced by the
amount of any payments made under a plan adopted pursuant to the
Rule by the money market funds with respects to those shares.
Currently, the Funds include the time period during which shares of the
money market fund are held in the CDSC period. The exchange privileges
applicable to all Classes of shares must comply with Rule 11a-3 under
the 1940 Act.
Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of October 31, 1998)
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund
Smith Barney Concert Allocation Series Inc.
Conservative Portfolio
Balanced Portfolio
Global Portfolio
Growth Portfolio
Income Portfolio
High Growth Portfolio
Smith Barney Equity Funds -
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Large Cap Value Fund
Short-Term High Grade Bond Fund
U.S. Government Securities Fund
Smith Barney Income Funds -
Smith Barney Balanced Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Total Return Bond Fund
Smith Barney Investment Trust -
Smith Barney Intermediate Maturity California Municipals Fund
Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Large Capitalization Growth Fund
Smith Barney S&P 500 Index Fund
Smith Barney Mid Cap Blend Fund
Smith Barney Investment Funds Inc. -
Concert Peachtree Growth Fund
Smith Barney Contrarian Fund
Smith Barney Government Securities Fund
Smith Barney Hansberger Global Small Cap Value Fund
Smith Barney Hansberger Global Value Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Special Equities Fund
Smith Barney Institutional Cash Management Fund, Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New York Portfolio
New York Money Market
Pennsylvania Portfolio
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
Emerging Markets Portfolio
