Registration No. 2-87001
811-3869
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 20 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 21 X
SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC.
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
(212) 720-9218
Francis J. McNamara, III
Secretary
Smith Barney Shearson New York Municipals Fund Inc.
One Boston Place
Boston, Massachusetts 02108
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
X on March 1, 1994 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)
on __________ pursuant to Rule 485(a)
______________________________________________________________________________
______
The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. Registrant's Rule 24f-2 Notice for the fiscal year ending
December 31, 1993 was filed on February 28, 1994.
SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Condensed Financial
Information
Financial Highlights; The Fund's
Performance
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Variable Pricing System; Investment
Objective and Management Policies;
Additional Information
5. Management of the Fund
Management of the Fund;
Distributor; Additional
Information
6. Capital Stock and Other
Securities
Variable Pricing System; Dividends,
Distributions and Taxes; Additional
Information
7. Purchase of Securities Being
Offered
Variable Pricing System; Purchase
of Shares; Valuation of Shares;
Redemption of Shares; Exchange
Privilege; Distributor; Additional
Information
8 Redemption or Repurchase
Variable Pricing System; Purchase of
Shares; Redemption of Shares
9. Legal Proceedings
Not Applicable
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
History
Distributor
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the Fund;
Distributor
15. Control Persons and Principal
Holders of Securities
Management of the Fund
16. Investment Advisory and Other
Services
Management of the Fund;
Distributor
17. Brokerage Allocation
Investment Objective and
Management Policies
18. Capital Stock and Other
Securities
Purchase of Shares; Redemption
of Shares; Taxes
19. Purchase, Redemption and
Pricing of Securities Being
Offered
Purchase of Shares; Redemption of
Shares; Distributor; Valuation of
Shares; Exchange Privilege
20. Tax Status
Taxes
21. Underwriters
Distributor
22. Calculation of Performance
Data
Performance Data
23. Financial Statements
Financial Statements
<PAGE>
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March 1, 1994
SMITH BARNEY SHEARSON
New York
Municipals
Fund Inc.
Prospectus begins
on page one.
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[SMITH BARNEY SHEARSON LOGO]
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<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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PROSPECTUS March 1, 1994
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Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson New York Municipals Fund Inc. (the "Fund") is a
non-diversified municipal fund that seeks to provide New York investors with
as
high a level of dividend income exempt from Federal income taxes and New York
State and New York City personal income taxes as is consistent with prudent
investment management and the preservation of capital.
This Prospectus concisely sets forth certain information about the Fund,
including sales charges, distribution and service fees and expenses, which
prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference.
Additional information about the Fund is contained in a Statement of
Additional Information dated March 1, 1994, as amended or supplemented from
time
to time, that is available upon request and without charge by calling or
writing
the Fund at the telephone number or address set forth above or by contacting
your Smith Barney Shearson Financial Consultant. The Statement of Additional
Information has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
THE BOSTON COMPANY ADVISORS, INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
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FINANCIAL HIGHLIGHTS 9
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VARIABLE PRICING SYSTEM 12
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THE FUND'S PERFORMANCE 13
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MANAGEMENT OF THE FUND 18
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 19
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NEW YORK MUNICIPAL SECURITIES 25
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PURCHASE OF SHARES 28
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REDEMPTION OF SHARES 31
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VALUATION OF SHARES 34
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EXCHANGE PRIVILEGE 36
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DISTRIBUTOR 42
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DIVIDENDS, DISTRIBUTIONS AND TAXES 43
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ADDITIONAL INFORMATION 46
---------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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- --
PROSPECTUS SUMMARY
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The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus.
See "Table of Contents."
BENEFITS TO INVESTORS The Fund offers investors several important benefits:
- - Dividends consisting primarily of tax-exempt income for New York
investors.
- - A professionally managed portfolio comprised primarily of investment-grade
New York municipal bonds.
- - Investment liquidity through convenient purchase and redemption
procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
securities.
- - Different methods for purchasing shares that allow investment flexibility
and a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within
the
same class of shares of most other funds in the Smith Barney Shearson
Group
of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to provide New York investors with as high a
level
of dividend income exempt from Federal income taxes and New York State and New
York City personal income taxes as is consistent with prudent investment
management and the preservation of capital. Its investments consist primarily
of
intermediate-and long-term investment-grade municipal securities issued by the
State of New York and certain other municipal issuers, political subdivisions,
agencies and public authorities that pay interest which is exempt from New
York
State and New York City personal income taxes ("New York Municipal
Securities").
Intermediate-and long-term municipal securities have remaining maturities at
the
time of purchase of between three and twenty years. See "Investment Objective
and Management Policies."
VARIABLE PRICING SYSTEM The Fund offers two classes of shares ("Classes")
designed to provide investors with the flexibility of selecting an investment
best suited to their needs. These Classes, Class A shares and Class B shares,
differ
3
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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PROSPECTUS SUMMARY (CONTINUED)
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principally in terms of the sales charges and rate of expenses to which they
are
subject. See "Variable Pricing System."
CLASS A SHARES These shares are offered at net asset value per share plus a
maximum initial sales charge of 4.50%. The Fund pays an annual service fee of
.15% of the value of average daily net assets of this Class. See "Purchase of
Shares."
CLASS B SHARES These shares are offered at net asset value per share subject
to
a maximum contingent deferred sales charge ("CDSC") of 4.50% of redemption
proceeds, declining by .50% after the first year and by 1% each year
thereafter
to zero. The Fund pays an annual service fee of .15% and an annual
distribution
fee of .50% of the value of average daily net assets of this Class. See
"Purchase of Shares."
CLASS B CONVERSION FEATURE Class B shares will convert automatically to Class
A
shares, based on relative net asset value, eight years after the date of
original purchase. Upon conversion, these shares will no longer be subject to
an
annual distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System--Class B Shares."
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed
basis
(an "Introducing Broker"). Smith Barney Shearson recommends that, in most
cases,
single investments of $250,000 or more should be made in Class A. See
"Purchase
of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $1,000 and a minimum subsequent investment requirement of $200.
See "Purchase of Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount not less than $100. See
"Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. Class A shares are redeemable at
net asset value and Class B shares are redeemable at net asset value less any
applicable CDSC. See "Redemption of Shares."
4
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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PROSPECTUS SUMMARY (CONTINUED)
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MANAGEMENT OF THE FUND Greenwich Street Advisors, a division of Mutual
Management Corp., serves as the Fund's investment adviser. Mutual Management
Corp. provides investment advisory and management services to investment
companies affiliated with Smith Barney Shearson. Smith Barney Shearson is a
wholly owned subsidiary of Smith Barney Shearson Holdings Inc., which is in
turn
a wholly owned subsidiary of The Travelers Inc. ("Travelers") (formerly known
as
Primerica Corporation), a diversified financial services holding company
principally engaged in the business of providing investment, consumer finance
and insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors"), serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which is in turn a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other funds in the Smith Barney Shearson Group of Funds and
certain money market funds. Certain exchanges may be subject to a sales charge
differential. See "Exchange Privilege."
VALUATION OF SHARES Net asset value of each Class is quoted daily in the
financial section of most newspapers and is also available from your Smith
Barney Shearson Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are declared
daily and paid on the last business day of the Smith Barney Shearson statement
month. Distributions of net realized long-and short-term capital gains, if
any,
are declared and paid annually after the end of the fiscal year in which they
have been earned. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically, unless otherwise specified by an investor,
in
additional shares of the same Class at current net asset value. Shares
acquired
by dividend and distribution reinvestments will not be subject to any sales
charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a
pro-rata basis. See "Dividends, Distributions and Taxes" and "Variable Pricing
System."
RISK FACTORS AND SPECIAL CONSIDERATIONS There can be no assurance that the
Fund
will achieve its investment objective. Assets of the Fund also may be invested
in the municipal securities of non-New York municipal issuers.
5
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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PROSPECTUS SUMMARY (CONTINUED)
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Dividends derived from interest on obligations of non-New York municipal
issuers
will be exempt from Federal income taxes, but may be subject to New York State
and New York City personal income taxes. Dividends derived from certain
municipal securities (including New York Municipal Securities), however, may
be
a specific tax preference item for Federal alternative minimum tax purposes.
The
Fund may invest without limit in securities subject to the Federal alternative
minimum tax. See "Investment Objective and Management Policies" and
"Dividends,
Distributions and Taxes."
The Fund is more susceptible to factors adversely affecting issuers of New
York Municipal Securities than is a municipal bond fund that does not
emphasize
these issuers. See "New York Municipal Securities" in the Prospectus and
"Special Considerations Relating to New York Municipal Securities" in the
Statement of Additional Information for further details about the risks of
investing in New York obligations.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), which means that
the Fund is not limited by the 1940 Act in the proportion of its assets that
it
may invest in the obligations of a single issuer. The Fund's assumption of
large
positions in the obligations of a small number of issuers may cause the Fund's
share price 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.
The Fund generally will invest at least 75% of its assets in securities
rated
investment grade, and may invest the remainder of its assets in securities
rated
as low as C by Moody's Investors Service, Inc. ("Moody's") or D by Standard &
Poor's Corporation ("S&P"), or in unrated obligations of comparable quality.
Securities in the fourth highest rating category, though considered to be
investment grade, have speculative characteristics. Securities rated as low as
D
are extremely speculative and are in actual default of interest and/or
principal
payments.
There are several risks in connection with the use of when-issued
securities,
municipal bond index futures contracts and put and call options on interest
rate
futures contracts as hedging devices, municipal leases and securities lending.
See "Investment Objective and Management Policies--Certain Portfolio
Strategies."
6
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
PROSPECTUS SUMMARY (CONTINUED)
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<TABLE>
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur, either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and an estimate of the Fund's operating
expenses.
<CAPTION>
CLASS A
CLASS B
<S> <C>
<C>
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- ------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of
offering price) 4.50%
- --
Maximum CDSC (as a percentage of redemption proceeds) --
4.50%
- ------------------------------------------------------------------------------
- ------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .35%
.35%
12b-1 fees* .15
.65
Other expenses** .28
.31
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- ------------
TOTAL FUND OPERATING EXPENSES .78%
1.31%
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- ------------
<FN>
* Upon conversion, Class B shares will no longer be subject to a
distribution
fee.
** Other expenses are based on the Fund's fiscal year ended December 31, 1993
and have been restated to reflect current expenses of the Fund.
</TABLE>
The sales charge and CDSC set forth in the above table are the maximum
charges
imposed on purchases or redemptions of Fund shares and investors may pay
actual
charges of less than 4.50% depending on the amount purchased and, in the case
of
Class B shares, the length of time the shares are held. See "Purchase of
Shares"
and "Redemption of Shares." Management fees paid by the Fund include
investment
advisory fees paid to Greenwich Street Advisors at the following annual rates:
.35% of the value of the Fund's average daily net assets up to $500 million
and
.32% of the value of its average daily net assets in excess of $500 million,
and
administration fees payable to Boston Advisors at the following annual rates:
.20% of the value of the Fund's average daily net assets up to $500 million
and
.18% of the value of its average daily net assets in excess of $500 million.
The
nature of the services for which the Fund pays management fees is described
under "Management of the Fund." Smith Barney Shearson receives an annual 12b-1
service fee of .15% of the value of average daily net assets of Class A
shares.
Smith Barney Shearson also receives with respect to Class B shares an annual
12b-1 fee of .65% of the value of average daily net assets of Class B shares,
consisting of a .50% distribution fee and a .15%
7
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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PROSPECTUS SUMMARY (CONTINUED)
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service fee. "Other expenses" in the above table include fees for shareholder
services, custodial fees, legal and accounting fees, printing costs and
registration fees.
EXAMPLE
<TABLE>
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to
a hypothetical $1,000 investment in the Fund assuming a 5% total return. The
example assumes payment by the Fund of operating expenses at the levels set
forth in the above table. The example should not be considered a
representation
of past or future expenses and actual expenses may be greater or less than
those
shown. Moreover, while the example assumes a 5% annual return, the Fund's
actual
performance will vary and may result in an actual return greater or less than
5%.
<CAPTION>
1 YEAR 3 YEARS 5 YEARS
10 YEARS*
<S> <C> <C> <C>
<C>
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- -------
Class A shares** $ 53 $ 55 $ 53
$ 94
Class B shares:
Assumes complete redemption at end of
each time period*** $ 58 $ 71 $ 81
$ 139
Assumes no redemption $ 13 $ 41 $ 71
$ 139
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- -------
<FN>
* Ten-year figures assume conversion of Class B shares to Class A shares at
the end of the eighth year following the date of purchase.
** Assumes deduction at the time of purchase of the maximum 4.50% sales
charge.
*** Assumes deduction at the time of redemption of the maximum CDSC applicable
for that time period.
</TABLE>
8
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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FINANCIAL HIGHLIGHTS
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The following information has been audited by Coopers & Lybrand, independent
accountants, whose report thereon appears in the Fund's Annual Report dated
December 31, 1993. The information set forth below should be read in
conjunction
with the financial statements and related notes that also appear in the Fund's
Annual Report, which are incorporated by reference into the Statement of
Additional Information.
<TABLE>
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<CAPTION>
YEAR ENDED DECEMBER 31,
1993# 1992 1991 1990
1989
<S> <C> <C> <C> <C>
<C>
Net asset investment of year $17.12 $16.77 $15.94 $16.26
$15.97
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Income from investment operations:
Net investment income 1.02 1.12 1.15 1.16
1.16
Net realized and unrealized gain/(loss) on
investment 0.80 0.39 0.84
(0.32) 0.26
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Total from investment operations 1.82 1.51 1.99 0.84
1.42
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Less distributions:
Dividends from net investment income (1.03) (1.12) (1.16)
(1.16) (1.13)
Distributions from net capital gains (0.23) (0.03) -- --
- --
Distributions from capital (Note 1) -- (0.01) -- --
- --
- ------------------------------------------------------------------------------
- ------------
Total Distributions (1.26) (1.16) (1.16)
(1.16) (1.13)
- ------------------------------------------------------------------------------
- ------------
Net asset value, end of year $17.68 $17.12 $16.77 $15.94
$16.26
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Total return++ 10.93% 9.36% 12.98%
5.41% 9.18%
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Ratios to average net assets/Supplemental
Data:
Net assets, end of year (in 000's) $575,166 $535,514 $469,139
$428,304 $442,563
Ratio of operating expenses to average net
assets 0.78% 0.67% 0.64%
0.64% 0.66%
Ratio of net investment income to average
net assets 5.83% 6.56% 7.04%
7.31% 7.17%
Portfolio turnover rate 20% 30% 31%
18% 7%
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<FN>
* The Fund commenced operations on January 23, 1984. Any shares outstanding
prior to November 6, 1992 were designated Class A shares.
** Annualized.
+ Annualized expense ratio before waiver of fees by investment adviser and
sub-investment adviser and administrator was 0.82%.
++ Total return represents aggregate total return for the periods indicated
and
does not reflect any applicable sales charges.
+++ Net investment income before waiver of fees by investment adviser and
sub-investment adviser and administrator was $1.15.
# Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this year
since use of the undistributed method did not accord with results of
operations.
</TABLE>
(Continued on next
page)
9
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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FINANCIAL HIGHLIGHTS (CONTINUED)
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<TABLE>
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<CAPTION>
PERIOD
ENDED
YEAR ENDED DECEMBER 31,
DECEMBER 31,
1988 1987 1986 1985
1984*
<S> <C> <C> <C> <C>
<C>
Net asset investment of year $15.37 $16.71 $15.48 $13.90
$ 14.25
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- ------------
Income from investment operations:
Net investment income 1.15 1.14 1.20 1.24
1.16+++
Net realized and unrealized gain/(loss)
on
investment 0.61 (1.33) 1.52 1.58
(0.35)
- ------------------------------------------------------------------------------
- ------------
Total from investment operations 1.76 (0.19) 2.72 2.82
0.81
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- ------------
Less distributions:
Dividends from net investment income (1.16) (1.14) (1.20) (1.24)
(1.16)
Distributions from net capital gains -- (0.01) (0.29) --
- --
Distributions from capital (Note 1) -- -- -- --
- --
- ------------------------------------------------------------------------------
- ------------
Total Distributions (1.16) (1.15) (1.49) (1.24)
(1.16)
- ------------------------------------------------------------------------------
- ------------
Net asset value, end of year $15.97 $15.37 $16.71 $15.48
$ 13.90
- ------------------------------------------------------------------------------
- ------------
Total return++ 11.82% (1.09%) 18.13% 21.03%
6.90%
- ------------------------------------------------------------------------------
- ------------
Ratios to average net
assets/Supplemental
Data:
Net assets, end of year (in 000's) $429,703 $202,265 $218,980 $125,365
$54,182
Ratio of operating expenses to average
net
assets 0.64% 0.68% 0.68% 0.81%
0.77%+**
Ratio of net investment income to
average
net assets 7.50% 7.22% 7.25% 8.20%
8.94%**
Portfolio turnover rate 27% 22% 11% 20%
45%
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- ------------
<FN>
* The Fund commenced operations on January 23, 1984. Any shares outstanding
prior to November 6, 1992 were designated Class A shares.
** Annualized.
+ Annualized expense ratio before waiver of fees by investment adviser and
sub-investment adviser and administrator was 0.82%.
++ Total return represents aggregate total return for the periods indicated
and
does not reflect any applicable sales charges.
+++ Net investment income before waiver of fees by investment adviser and
sub-investment adviser and administrator was $1.15.
# Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this year
since use of the undistributed method did not accord with results of
operations.
</TABLE>
10
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
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- --
FINANCIAL HIGHLIGHTS (CONTINUED)
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- --
<TABLE>
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<CAPTION>
YEAR
PERIOD
ENDED
ENDED
12/31/93#
12/31/92*
<S> <C>
<C>
Net asset value, beginning of period $17.12
$16.93
- ------------------------------------------------------------------------------
- ------------
Income from investment operations:
Net investment income 0.94
0.17
Net realized and unrealized gain on investments 0.80
0.20
- ------------------------------------------------------------------------------
- ------------
Total from investment operations 1.74
0.37
- ------------------------------------------------------------------------------
- -------
Less distributions:
Dividends from net investment income (0.95)
(0.15)
Distributions from capital (Note 1) --
- --+
Distributions from net capital gains (0.23)
(0.03)
- ------------------------------------------------------------------------------
- ------------
Total Distributions: (1.18)
(0.18)
- ------------------------------------------------------------------------------
- ------------
Net asset value, end of period $17.68
$17.12
- ------------------------------------------------------------------------------
- ------------
Total return++ 10.33%
2.23%
- ------------------------------------------------------------------------------
- ------------
Ratios to average net assets/Supplemental Data:
Net assets, end of period (in 000's) $137,126
$ 18,125
Ratio of net investment income to average net asset 5.31%
5.94%**
Ratio of operating expenses to average net assets 1.31%
1.30%**
Portfolio turnover rate 20%
30%
- ------------------------------------------------------------------------------
- ------------
<FN>
* The Fund's Class B shares commenced operations on November 6, 1992.
** Annualized.
+ Amount represents less than $0.01 per Fund share.
++ Total return represents aggregate total return for the periods indicated
and
does not reflect any applicable sales charges.
# Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the per share data for this year
since use of the undistributed method did not accord with results of
operations.
</TABLE>
11
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM
- ------------------------------------------------------------------------------
- --
The Fund offers individual investors two methods of purchasing shares, thus
enabling investors to choose the Class that best suits their needs, given the
amount of purchase and intended length of investment.
Class A Shares. Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 4.50% imposed at the time of purchase. The
initial sales charge may be reduced or waived for certain purchases. Class A
shares are subject to an annual service fee of .15% of the value of the Fund's
average daily net assets attributable to the Class. The annual service fee is
used by Smith Barney Shearson to compensate its Financial Consultants for
ongoing services provided to shareholders. The sales charge is used to
compensate Smith Barney Shearson for expenses incurred in selling Class A
shares. See "Purchase of Shares."
Class B Shares. Class B shares are sold at net asset value per share
subject
to a maximum 4.50% CDSC, which is assessed only if the shareholder redeems
shares within the first five years of investment. This results in 100% of the
investor's assets being used to acquire shares of the Fund. After the first
year
after the purchase of a share, the CDSC declines to 4.00%; for each year of
investment thereafter within this five-year time frame, the applicable CDSC
declines by 1%; in year six, the applicable CDSC is reduced to 0%. See
"Purchase
of Shares" and "Redemption of Shares."
Class B shares are subject to an annual service fee of .15% and an annual
distribution fee of .50% of the value of the Fund's average daily net assets
attributable to the Class. Like the service fee applicable to Class A shares,
the Class B service fee is used to compensate Smith Barney Shearson Financial
Consultants for ongoing services provided to shareholders. Additionally, the
distribution fee paid with respect to Class B shares compensates Smith Barney
Shearson for expenses incurred in selling those shares, including expenses
such
as sales commissions, Smith Barney Shearsons' branch office overhead expenses
and marketing costs associated with Class B shares, such as preparation of
sales
literature, advertising and printing and distributing prospectuses, statements
of additional information and other materials to prospective investors in
Class
B shares. A Financial Consultant may receive different levels of compensation
for selling different Classes of shares. Class B shares are subject to a
distribution fee and higher transfer agency fees than Class A shares which, in
turn, will cause Class B shares to have a higher expense ratio and pay lower
dividends than Class A shares.
12
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
VARIABLE PRICING SYSTEM (CONTINUED)
- ------------------------------------------------------------------------------
- --
Eight years after the date of purchase, Class B shares will convert
automatically to Class A shares, based on the relative net asset values of
shares of each Class, and will no longer be subject to a distribution fee. In
addition, a certain portion of Class B shares that have been acquired through
the reinvestment of dividends and distributions ("Class B Dividend Shares")
will
be converted at that time. That portion will be a percentage of the total
number
of Class B Dividend Shares owned by the shareholder, equal to the ratio of the
total number of Class B shares converting at the time to the total number of
Class B shares (other than Class B Dividend Shares) owned by the shareholder.
Class B shares will first be convertible into Class A shares on or about
September 30, 1994. The conversion of Class B shares into Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that such conversions will not constitute taxable events for Federal tax
purposes.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE
YIELD
From time to time, the Fund may advertise the 30-day "yield" and "equivalent
taxable yield" of each Class. The yield of a Class refers to the income
generated by an investment in those shares over the 30-day period identified
in
the advertisement and is computed by dividing the net investment income per
share earned by the Class during the period by the maximum public offering
price
per share on the last day of the period. This income is "annualized" by
assuming
that the amount of income is generated each month over a one-year period and
is
compounded semi-annually. The annualized income is then shown as a percentage
of
the net asset value.
The Fund's equivalent taxable yield demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's tax-
free
yield for each Class. It is calculated by increasing the yield shown for the
Class to the extent necessary to reflect the payment of taxes at specified tax
rates. Thus, the equivalent taxable yield always will exceed the Fund's yield.
For more information on equivalent taxable yields, please refer to the table
under "Dividends, Distributions and Taxes."
The Fund's yield for Class A shares for the 30-day period ended December 31,
1993 was 4.44%. The Fund's equivalent taxable yield for Class A shares for the
13
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
- ------------------------------------------------------------------------------
- --
same period was 7.29%, assuming the payment of Federal income taxes at a rate
of
31% and a combined New York State and City tax rate of 11.785%.
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total return"
over various periods of time for each Class. Total return figures show the
average percentage change in the value of an investment in the Class from the
beginning date of the measuring period to the end of the measuring period.
These
figures reflect changes in the price of the shares and assume that any income
dividends and/or capital gains distributions made by the Fund during the
period
were reinvested in shares of the same Class. Class A total return figures
include the maximum initial 4.50% sales charge and Class B total return
figures
include any applicable CDSC. These figures also take into account the service
and distribution fees, if any, payable with respect to the Classes.
Total return figures will be given for the recent one-, five-and ten-year
periods, or for the life of a Class to the extent that it has not been in
existence for any such periods, and may be given for other periods as well,
such
as on a year-by-year basis. When considering average annual total return
figures
for periods longer than one year, it is important to note that average annual
total return for any one year in the period might have been greater or less
than
the average for the entire period. "Aggregate total return" figures may be
used
for various periods, representing the cumulative change in the value of an
investment in a Class for the specific period (again reflecting changes in
share
prices and assuming reinvestment of dividends and distributions). Aggregate
total return may be calculated either with or without the effect of the
maximum
4.50% sales charge for the Class A shares or any applicable CDSC for Class B
shares and may be shown by means of schedules, charts, or graphs, and may
indicate subtotals of the various components of total return (that is, changes
in the value of initial investment, income dividends and capital gains
distributions). Because of the differences in sales charges and distribution
fees, the performance of each of the Classes will differ.
In reports or other communications to shareholders or in advertising
material,
performance of the Classes may be compared with that of other mutual funds or
Classes of shares of other funds as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services that monitor the
performance of mutual funds, or other industry or financial publications such
14
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
- ------------------------------------------------------------------------------
- --
as Barron's, Business Week, CDA Investment Technologies, Inc., Forbes,
Fortune,
Institutional Investor, Investors Daily, Kiplinger's Personal Finance,
Morningstar Mutual Fund Values, Money, The Wall Street Journal, The New York
Times and USA Today. It is important to note that yield and total return
figures
are based on historical earnings and are not intended to indicate future
performance and any given performance comparison should not be considered as
representative of the Fund's performance for any future period. To the extent
that any advertisement or sales literature of the Fund describes the expenses
or
performance of a Class, it will also disclose such information for the other
Class. The Statement of Additional Information contains a description of the
methods used to determine performance. Performance figures may be obtained
from
your Smith Barney Shearson Financial Consultant.
From the Fund's commencement of operations on January 23, 1984, through
December 31, 1993, an investment in shares of the Fund (now designated as
Class
A shares) of $10,000 (after deducting the maximum sales charge of 4.50%) grew
to
$25,271 when all dividends and capital gains distributions were reinvested.
This
represents an aggregate total return of 164.27%. This was a period of widely
fluctuating interest rates and prices for municipal bonds and should not
necessarily be considered as representative of the return which may be
realized
from an investment in the Fund today.
<TABLE>
CLASS A SHARES
<CAPTION>
VALUE OF
INITIAL VALUE OF
$10,000 REINVESTED
TOTAL PERIOD
YEAR ENDED INVESTMENT DIVIDENDS
VALUE CHANGE
- ------------------------------------------------------------------------------
- ----------------------
<S> <C> <C>
<C> <C>
January 23, 1984(1) $ 9,550 --
$ 9,550 --
December 31, 1984 9,315 $ 817
10,132 +6%
December 31, 1985 10,374 1,889
12,263 +21
December 31, 1986 11,199 3,287
14,486 +18
December 31, 1987 10,301 4,027
14,328 -1
December 31, 1988 10,703 5,319
16,022 +12
December 31, 1989 10,897 6,595
17,492 +9
December 31, 1990 10,683 7,756
18,439 +5
December 31, 1991 11,239 9,592
20,831 +13
December 31, 1992 11,473 11,308
22,781 +9
December 31, 1993 11,849 13,422
25,271 +11
- ------------------------------------------------------------------------------
- ----------------------
<FN>
(1) Commencement of operations.
(2) Based on the current maximum sales charge of 4.50% of the offering price.
</TABLE>
15
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
- ------------------------------------------------------------------------------
- --
CLASS A SHARES
Illustration of an Assumed Investment of $10,000
with Income Dividends and Capital Gains Distributions Reinvested
From January 23, 1984(1) through December 31, 1993
[CHART]
- ------------------------------------------------------------------------------
- --
(1) Commencement of operations.
(2) Based on maximum sales charge of 4.50% of the offering price.
16
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
THE FUND'S PERFORMANCE (CONTINUED)
- ------------------------------------------------------------------------------
- --
The Fund's average annual total return for Class A shares was as follows for
the periods indicated:
5.86% for the one-year period beginning on January 1, 1993 through
December 31, 1993;
8.51% per annum for the five-year period beginning on January 1, 1988
and
ended December 31, 1993; and
9.76% per annum during the period from the Fund's commencement of
operations on January 23, 1984 and ended December 31, 1993.
These average annual total return figures assume that the maximum 4.5% sales
charge was deducted from the investment at the time of purchase.
The Fund's average annual total return for Class A shares assumes that the
maximum 4.5% sales charge was not deducted from the investment at the time of
purchase.
10.85% for the one-year period beginning on January 1, 1993 through
December 31, 1993;
9.51% per annum for the five-year period beginning on January 1, 1988
and
ended December 31, 1993; and
10.27% per annum during the period from the Fund's commencement of
operations on January 23, 1984 and ended December 31, 1993.
The Fund's aggregate total return was as follows for the periods indicated:
10.85% for the one-year period beginning on January 1, 1993 through
December 31, 1993;
57.52% for the five-year period beginning on January 1, 1988 through
December 31, 1993; and
164.27% for the period from the Fund's commencement of operations on
January 23, 1984 through December 31, 1993.
These aggregate total return figures do not assume that the maximum 4.5%
sales
charge has been deducted from the investment at the time of purchase. If the
maximum sales charge had been deducted at the time of purchase, the Fund's
aggregate total return for those same periods would have been 5.86%, 50.43%
and
152.37%, respectively.
17
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
- --
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests with
the Fund's Board of Directors. The Directors approve all significant
agreements
between the Fund and the companies that furnish services to the Fund,
including
agreements with the Fund's distributor, investment adviser, administrator,
custodian and transfer agent. The day-to-day operations of the Fund are
delegated to the Fund's investment adviser and administrator. The Statement of
Additional Information contains background information regarding each Director
and executive officer of the Fund.
INVESTMENT ADVISER -- GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through its predecessors) has been in the investment counselling business
since
1934 and is a division of Mutual Management Corp., which was incorporated in
1978. Greenwich Street Advisors renders investment advice to investment
company
clients that had aggregate assets under management as of January 31, 1994, in
excess of $44.4 billion.
Subject to the supervision and direction of the Fund's Board of Directors,
Greenwich Street Advisors manages the Fund's portfolio in accordance with the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund. For the fiscal year ended December 31, 1993, the Fund paid investment
advisory fees to Greenwich Street Advisors in an amount equal to .35% of the
value of the average daily net assets of the Fund.
PORTFOLIO MANAGEMENT
Lawrence T. McDermott, Managing Director of Greenwich Street Advisors, has
served as Vice President and Investment Officer of the Fund since it commenced
operations and manages the day-to-day operations of the Fund, including making
all investment decisions.
Mr. McDermott's management discussion and analysis, and additional
performance
information regarding the Fund during the fiscal year ended December 31, 1993,
is included in the Annual Report dated December 31, 1993. A copy of the Annual
Report may be obtained upon request and without charge from
18
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
MANAGEMENT OF THE FUND (CONTINUED)
your Smith Barney Shearson Financial Consultant or by writing or calling the
Fund at the address or phone number listed on page one of the Prospectus.
ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of January 31, 1994,
in
excess of $93.8 billion. Boston Advisors calculates the net asset value of the
Fund's shares and generally assists in all aspects of the Fund's
administration
and operation. For the fiscal year ended December 31, 1993 the Fund paid
administration fees to Boston Advisors in an amount equal to .20% of the value
of the average daily net assets of the Fund.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The investment objective of the Fund is to provide New York investors with
as
high a level of dividend income exempt from Federal income and New York State
and New York City personal income taxes as is consistent with prudent
investment
management and the preservation of capital. This investment objective may not
be
changed without the approval of the holders of a majority of the Fund's
outstanding shares. There can be no assurance that the Fund's investment
objective will be achieved.
The Fund will operate subject to an investment policy providing that, under
normal market conditions, the Fund will invest at least 80% of its net assets
in
New York Municipal Securities which pay interest which is excluded from gross
income for Federal income tax purposes and which is exempt from New York State
and New York City personal income taxes. The Fund may invest up to 20% of its
net assets in municipal securities of non-New York municipal issuers, the
interest on which is excluded from gross income for Federal income tax
purposes
(not including the possible applicability of a Federal alternative minimum
tax),
but which is subject to New York State and New York City personal income
taxes.
When Greenwich Street Advisors believes that market conditions warrant
adoption
of a temporary defensive investment posture, the Fund may invest without limit
in non-New York municipal issuers and in "Temporary Investments" as described
below.
19
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund generally will invest at least 75% of its total assets in
investment-
grade debt obligations rated no lower than Baa, MIG 3 or Prime-1 by Moody's or
BBB, SP-2 or A-1 by S&P, or in unrated obligations of comparable quality, with
no minimum rating required for the balance of the Fund's investments. Unrated
securities will be considered to be of investment grade if deemed by Greenwich
Street Advisors to be comparable in quality to instruments so rated, or if
other
outstanding obligations of the issuers thereof are rated Baa or better by
Moody's or BBB or better by S&P. The balance of the Fund's assets may be
invested in securities rated as low as C by Moody's or D by S&P, or comparable
unrated securities. Securities in the fourth highest rating category, though
considered to be investment grade, have speculative characteristics.
Securities
rated as low as D are extremely speculative and are in actual default of
interest and/or principal payments.
The Fund's average weighted maturity will vary from time to time based on
the
judgment of Greenwich Street Advisors. The Fund intends to focus on
intermediate-and long-term obligations, that is, obligations with remaining
maturities at the time of purchase of between three and twenty years.
Obligations which are rated Baa by Moody's or BBB by S&P and those which are
rated lower than investment-grade are subject to greater market fluctuation
and
more uncertainty as to payment of principal and interest, and therefore
generate
higher yields than obligations rated above Baa or BBB. The Fund has no present
intention of investing in instruments rated lower than Baa by Moody's or BBB
by
S&P. A description of the rating systems of Moody's and S&P is contained in
the
Statement of Additional Information.
The Fund may invest without limit in "municipal leases," which generally are
participations in intermediate-and short-term debt obligations issued by
municipalities consisting of leases or installment purchase contracts for
property or equipment. Municipal leases may take the form of a lease or an
installment purchase contract issued by state and local government authorities
to obtain funds to acquire a wide variety of equipment and facilities such as
fire and sanitation vehicles, computer equipment and other capital assets.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that
the municipality has no obligation to make lease or installment purchase
payments in future years unless
20
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
money is appropriated for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with
more conventional bonds. Although "non-appropriation" lease obligations are
often secured by the underlying property, disposition of the property in the
event of foreclosure might prove difficult. There is no limitation on the
percentage of the Fund's assets that may be invested in municipal lease
obligations. In evaluating municipal lease obligations, Greenwich Street
Advisors will consider such factors as it deems appropriate, which may
include:
(a) whether the lease can be canceled; (b) the ability of the lease obligee to
direct the sale of the underlying assets; (c) the general creditworthiness of
the lease obligor; (d) the likelihood that the municipality will discontinue
appropriating funding for the leased property in the event such property is no
longer considered essential by the municipality; (e) the legal recourse of the
lease obligee in the event of such a failure to appropriate funding; (f)
whether
the security is backed by a credit enhancement such as insurance; and (g) any
limitations which are imposed on the lease obligor's ability to utilize
substitute property or services rather than those covered by the lease
obligation.
The Fund may invest without limit in private activity bonds. Interest income
on certain types of private activity bonds issued after August 7, 1986 to
finance non-governmental activities is a specific tax preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders may be subject to a Federal alternative
minimum tax to the extent the Fund's dividends are derived from interest on
those bonds. Dividends derived from interest income on New York Municipal
Securities are a component of the "current earnings" adjustment item for
purposes of the Federal corporate alternative minimum tax.
The Fund 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
21
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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. The Fund's assumption of
large
positions in the obligations of a small number of issuers may cause the Fund's
share price 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.
The Fund may invest without limit in debt obligations that are repayable out
of revenue streams generated from economically-related projects or facilities.
Sizeable investments in such obligations could involve an increased risk to
the
Fund should any of the related projects or facilities experience financial
difficulties. In addition, the Fund may invest up to an aggregate of 15% of
its
total assets in securities with contractual or other restrictions on resale
and
other instruments which are not readily marketable and up to 5% of its assets
in
the securities of issuers which have been in continuous operation for less
than
three years. The Fund also is authorized to borrow an amount of up to 10% of
its
total assets in order to meet anticipated redemptions and to pledge its assets
(including the amount borrowed) valued at market less liabilities (not
including
the amount borrowed) to the same extent in connection with the borrowings.
Further information about the Fund's investment policies, including a list
of
those restrictions on the Fund's investment activities that cannot be changed
without shareholder approval, appears in the Statement of Additional
Information.
CERTAIN PORTFOLIO STRATEGIES
In attempting to achieve its investment objective, the Fund may employ,
among
others, the following strategies:
When-Issued Securities. New issues of New York Municipal Securities (and
other tax-exempt obligations) frequently are offered on a when-issued basis,
which means that delivery and payment for such securities normally take place
15
to 45 days after the date of the commitment to purchase. The payment
obligation
and interest rate that will be received on when-issued securities are fixed at
the time the buyer enters into the commitment. New York Municipal Securities,
like other investments made by the Fund, may decline or appreciate in value
before their actual delivery to the Fund. Due to fluctuations in the value of
securities purchased and sold on a when-issued basis, the yields obtained on
22
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
these securities may be higher or lower than the yields available in the
market
on the date when the investments actually are delivered to the buyers. The
Fund
will not accrue income with respect to a when-issued security prior to its
stated delivery date. The Fund will establish a segregated account with the
Fund's custodian consisting of cash, obligations issued or guaranteed by the
United States government or its agencies or instrumentalities ("U.S.
government
securities") or other high grade debt obligations in an amount equal to the
amount of the purchase price of the when-issued securities. Placing securities
rather than cash in the segregated account may have a leveraging effect on the
Fund's net assets. The Fund generally will make commitments to purchase New
York
Municipal Securities (and other tax-exempt obligations) on a when-issued basis
only with the intention of actually acquiring the securities, but the Fund may
sell such securities before the delivery date if it is deemed advisable.
Temporary Investments. Under normal market conditions, the Fund may hold up
to 20% of its total assets in cash or money market instruments, including
taxable money market instruments ("Temporary Investments"). In addition, when
Greenwich Street Advisors believes that market conditions warrant, including
when acceptable New York Municipal Securities are unavailable, the Fund may
take
a temporary defensive posture and invest without limitation in Temporary
Investments. Tax-exempt securities eligible for short-term investment by the
Fund under such circumstances are municipal notes rated at the time of
purchase
within the three highest grades by Moody's or S&P or, if not rated, issued by
issuers with outstanding debt securities rated within the three highest grades
by Moody's or S&P. The Fund also may invest in certain taxable short-term
instruments having quality characteristics comparable to those for tax-exempt
investments. To the extent the Fund holds Temporary Investments, it may not
achieve its investment objective. Since the commencement of its operations,
the
Fund has not found it necessary to make taxable Temporary Investments and it
is
not expected that such action will be necessary.
Municipal Bond Index Futures Contracts and Options on Interest Rate Futures
Contracts. The Fund may enter into municipal bond index futures contracts and
purchase and sell options on interest rate futures contracts that are traded
on
a domestic exchange or board of trade. Such investments, if any, by the Fund
will be made solely for the purpose of hedging against changes in the value of
its portfolio securities and in the value of securities it intends to purchase
due to anticipated changes in interest rates and market conditions and
23
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
where the transactions are economically appropriate to the reduction of risks
inherent in the management of the Fund.
A municipal bond index futures contract, which is based on an index of long-
term, tax-exempt municipal bonds, is an agreement in which two parties agree
to
take or make delivery of an amount of cash equal to a specific dollar amount
times the difference between the value of the index at the close of the last
trading day of the contract and the price at which the index contract was
originally written. While an interest rate futures contract provides for the
future sale by one party and the purchase by the other party of a certain
amount
of a specified financial instrument (debt security) at a specified price,
date,
time and place, an option on an interest rate futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in
an
interest rate futures contract at a specified exercise price at any time prior
to the expiration date of the option. The Fund may purchase put options on
interest rate futures contracts to hedge its portfolio securities against the
risk of rising interest rates, and may purchase call options on interest rate
futures contracts to hedge against a decline in interest rates. The Fund will
sell options on interest rate futures contracts only as part of closing
purchase
transactions to terminate its options positions, although there is no
guarantee
that such transactions can be effected.
There are several risks in connection with the use of municipal bond index
futures contracts and options on interest rate futures contracts as hedging
devices. There can be no assurance that there will be a correlation between
price movements in the municipal bond index or options on interest rate
futures,
on the one hand, and price movements in the municipal bonds which are the
subject of the hedge, on the other hand. The lack of correlation could be
pronounced with respect to municipal bond index futures contracts because the
Fund primarily will hold New York Municipal Securities rather than a selection
of bonds constituting an index. Positions in municipal bond index futures
contracts and options on interest rate futures contracts may be closed out
only
on an exchange or board of trade that provides an active market; therefore,
there can be no assurance that a liquid market will exist for the contract or
the option at any particular time. Consequently, the Fund may realize a loss
on
a futures contract that is not offset by an increase in the price of the
municipal bonds being hedged or may not be able to close a futures position in
the event of adverse price movements. Any income earned from transactions in
municipal bond index futures contracts and options on interest rate futures
contracts will be taxable. Accordingly, it is anticipated that such
investments
will be made
24
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
only in unusual circumstances, such as when Greenwich Street Advisors
anticipates an extreme change in interest rates or market conditions.
The Fund may not purchase or sell municipal bond index futures contracts or
purchase options on interest rate futures contracts if, immediately
thereafter,
more than 33 1/3% of its net assets would be hedged, or the sum of the amount
of
margin deposits on the Fund's existing futures contracts and premiums paid for
options would exceed 5% of the value of the Fund's total assets. When the Fund
enters into futures contracts to purchase an index or debt security or
purchases
call options, an amount of cash, U.S. government securities or other high
grade
debt securities equal to the market value of the contract will be deposited
and
maintained in a segregated account with the Fund's custodian to collateralize
the positions, thereby insuring that the use of the contract is unleveraged.
Lending of Portfolio Securities. The Fund has the ability to lend
securities
from its portfolio to brokers, dealers and other financial organizations. Such
loans, if and when made, may not exceed 20% of the Fund's total assets, taken
at
value. Loans of portfolio securities by the Fund will be collateralized by
cash,
letters of credit or U.S. government securities which are maintained at all
times in an amount equal to at least 100% of the current market value
(determined by marking to market daily) of the loaned securities. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in the
recovery
of the securities or possible loss of rights in the collateral should the
borrower fail financially. Loans will be made to firms deemed by Greenwich
Street Advisors to be of good standing and will not be made unless, in the
judgment of Greenwich Street Advisors, the consideration to be earned from
such
loans would justify the risk.
- ------------------------------------------------------------------------------
- --
NEW YORK MUNICIPAL SECURITIES
As used in this Prospectus, the term "New York Municipal Securities"
generally
refers to intermediate-and long-term debt obligations issued by the State of
New
York and its political subdivisions, agencies and public authorities (together
with certain other governmental issuers such as Puerto Rico and the Virgin
Islands) to obtain funds for various public purposes. The interest on such
obligations is, in the opinion of bond counsel to the issuers, excluded from
gross income for Federal income tax purposes and exempt from New York State
and
New York City personal income taxes and, for that reason, generally is fixed
at
a lower rate than it would be if it were subject to such taxes. Interest
25
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
NEW YORK MUNICIPAL SECURITIES (CONTINUED)
income on certain municipal securities (including New York Municipal
Securities)
is a specific tax preference item for purposes of the Federal individual and
corporate alternative minimum taxes.
CLASSIFICATIONS
The two principal classifications of New York Municipal Securities are
"general obligation bonds" and "revenue bonds." General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source,
but
not from the general taxing power. Sizeable investments in such obligations
could involve an increased risk to the Fund should any of such related
facilities experience financial difficulties. In addition, certain types of
private activity bonds issued by or on behalf of public authorities to obtain
funds for privately operated facilities are included in the term New York
Municipal Securities, provided the interest paid thereon qualifies as excluded
from gross income for Federal income tax purposes and as exempt from New York
State and New York City personal income taxes. Private activity bonds
generally
do not carry the pledge of the credit of the issuing municipality.
SPECIAL CONSIDERATIONS
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among
Federal,
state and local governmental units. Such non-payment would result in a
reduction
of income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of the Fund. Issuers of municipal securities might seek protection
under the bankruptcy laws. In the event of bankruptcy of such an issuer, the
Fund could experience delays and limitations with respect to the collection of
principal and interest on such municipal leases and the Fund may not, in all
circumstances, be able to collect all principal and interest to which it is
entitled. To enforce its right in the event of a default in lease payments,
the
Fund may take possession of and manage the assets securing the issuer's
obligations on such securities, which may increase the Fund's operating
expenses
and adversely affect the net asset value of the Fund. Any income derived from
the Fund's
26
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
NEW YORK MUNICIPAL SECURITIES (CONTINUED)
ownership or operation of such assets may not be tax-exempt. In addition, the
Fund's intention to qualify as a "regulated investment company" under the Code
may limit the extent to which the Fund may exercise its rights by taking
possession of such assets, because as a regulated investment company the Fund
is
subject to certain limitations on its investments and on the nature of its
income.
The Fund's ability to achieve its investment objective is dependent upon the
ability of the issuers of New York Municipal Securities to meet their
continuing
obligations for the payment of principal and interest. New York State and New
York City face long-term economic problems that could seriously affect their
ability and that of other issuers of New York Municipal Securities to meet
their
financial obligations.
Certain substantial issuers of New York Municipal Securities (including
issuers whose obligations may be acquired by the Fund) have experienced
serious
financial difficulties in recent years. These difficulties have at times
jeopardized the credit standing and impaired the borrowing abilities of all
New
York issuers and have generally contributed to higher interest costs for their
borrowing and fewer markets for their outstanding debt obligations. In recent
years, several different issues of municipal securities of New York State and
its agencies and instrumentalities and of New York City have been downgraded
by
S&P and Moody's. On the other hand, strong demand for New York Municipal
Securities has more recently had the effect of permitting New York Municipal
Securities to be issued with yields relatively lower, and after issuance, to
trade in the market at prices relatively higher, than comparably rated
municipal
obligations issued by other jurisdictions. A recurrence of the financial
difficulties previously experienced by certain issuers of New York Municipal
Securities could result in defaults or declines in the market values of those
issuers' existing obligations and, possibly, in the obligations of other
issuers
of New York Municipal Securities. Although as of the date of this Prospectus,
no
issuers of New York Municipal Securities are in default with respect to the
payment of their municipal obligations, the occurrence of any such default
could
affect adversely the market values and marketability of all New York Municipal
Securities and, consequently, the net asset value of the Fund's portfolio.
Other considerations affecting the Fund's investments in New York Municipal
Securities are summarized in the Statement of Additional Information.
27
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES
Purchases of shares must be made through a brokerage account maintained with
Smith Barney Shearson or with an Introducing Broker. When purchasing shares of
the Fund, investors must specify whether the purchase is for Class A or Class
B
shares. No maintenance fee will be charged in connection with any brokerage
account through which an investor purchases or holds shares. Purchases are
effected at the public offering price next determined after a purchase order
is
received by Smith Barney Shearson or an Introducing Broker (the "trade date").
Payment for Fund shares generally is due to Smith Barney Shearson or an
Introducing Broker on the fifth business day (the "settlement date") after the
trade date. Investors who make payment prior to the settlement date may permit
the payment to be held in their brokerage accounts or may designate a
temporary
investment (such as a money market fund in the Smith Barney Shearson Group of
Funds) for the payment until the settlement date. The Fund reserves the right
to
reject any purchase order and to suspend the offering of shares for a period
of
time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE, currently 4:00 p.m., New
York
time, on any day the Fund calculates its net asset value, are priced according
to the net asset value determined on that day. Purchase orders received after
the close of regular trading on the NYSE are priced as of the time the net
asset
value is next determined. See "Valuation of Shares."
Systematic Investment Plan. The Fund offers shareholders a Systematic
Investment Plan under which shareholders may authorize Smith Barney Shearson
or
an Introducing Broker to place a purchase order each month or quarter for Fund
shares in an amount not less than $100. The purchase price is paid
automatically
from cash held in the shareholder's Smith Barney Shearson brokerage account or
through the automatic redemption of the shareholder's shares of a Smith Barney
Shearson money market fund. For further information regarding the Systematic
Investment Plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
Minimum Investments. The minimum initial investment in the Fund is $1,000
and
the minimum subsequent investment is $200, except that the minimum initial and
subsequent investments for the Systematic Investment Plan are both $100. There
are no minimum investment requirements for employees of Travelers and its
subsidiaries including Smith Barney Shearson. The Fund reserves the right at
any
time to vary the initial and subsequent investment
28
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
minimums. Share certificates for Fund shares are issued upon request to the
Fund's transfer agent, The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation.
CLASS A SHARES
<TABLE>
The public offering price for Class A shares is the per share net asset
value
of that Class plus a sales charge, which is imposed in accordance with the
following schedule:
<CAPTION>
SALES CHARGE AS % SALES
CHARGE AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET
ASSET VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
- -------
Less than $25,000 4.50%
4.71%
$25,000 but under $50,000 4.00%
4.17%
$50,000 but under $100,000 3.50%
3.63%
$100,000 but under $250,000 3.00%
3.09%
$250,000 but under $500,000 2.50%
2.56%
$500,000 but under $1,000,000 1.50%
1.52%
$1,000,000 or more** 0.00%
0.00%
- ------------------------------------------------------------------------------
- -------
<FN>
* Smith Barney Shearson has adopted guidelines directing its Financial
Consultants and Introducing Brokers that single investments of $250,000 or
more should be in Class A shares.
** No sales charge is imposed on purchases of Class A shares of $1 million or
more; however, a CDSC of .75% is imposed for the first year after
purchase.
The CDSC on Class A shares is payable to Smith Barney Shearson which, with
Boston Advisors, compensates Smith Barney Shearson Financial Consultants
upon the sale of these shares. The CDSC is waived in the same
circumstances
in which the CDSC applicable to Class B shares is waived. See "Redemption
of
Shares--Contingent Deferred Sales Charge--Class B Shares--Waiver of CDSC."
</TABLE>
REDUCED SALES CHARGES -- CLASS A SHARES
Reduced sales charges are available to investors who are eligible to combine
their purchases of Fund shares to receive volume discounts. Investors eligible
to receive volume discounts include individuals and their immediate families,
tax-qualified employee benefit plans and trustees or other professional
fiduciaries (including a bank or an investment adviser registered with the SEC
under the Investment Advisers Act of 1940, as amended) purchasing shares for
one
or more trust estates or fiduciary accounts even though more than one
beneficiary is involved. The initial sales charge is reduced to 1% for Smith
Barney Shearson Personal Living Trust program participants for whom Smith
Barney
Shearson acts as trustee. Reduced sales charges on Class A shares also are
available under a combined right of accumulation, under which an investor may
combine the
29
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
value of Class A shares already held in the Fund and in any of the funds in
the
Smith Barney Shearson Group of Funds listed below (except those sold without a
sales charge), along with the value of the Class A shares being purchased, to
qualify for a reduced sales charge. For example, if an investor owns Class A
shares of the Fund and other funds in the Smith Barney Shearson Group of Funds
that have an aggregate value of $22,000, and makes an additional investment in
Class A shares of the Fund of $4,000, the sales charge applicable to the
additional investment would be 4%, rather than the 4.50% normally charged on a
$4,000 purchase. Investors interested in further information regarding reduced
sales charges should contact their Smith Barney Shearson Financial
Consultants.
Class A shares may be offered without any applicable sales charges to: (a)
employees of Travelers and its subsidiaries, including Smith Barney Shearson,
and employee benefit plans for such employees and their immediate families
when
orders on their behalf are placed by such employees; (b) accounts managed by
registered investment advisory subsidiaries of Travelers; (c) directors,
trustees or general partners of any investment company for which Smith Barney
Shearson serves as distributor; (d) any other investment company in connection
with the combination of such company with the Fund by merger, acquisition of
assets or otherwise; (e) shareholders who have redeemed Class A shares in the
Fund (or Class A shares of another fund in the Smith Barney Shearson Group of
Funds that are sold with a maximum sales charge of at least 4.50%) and who
wish
to reinvest their redemption proceeds in the Fund, provided the reinvestment
is
made within 30 days of the redemption; and (f) any client of a newly employed
Smith Barney Shearson Financial Consultant (for a period up to 90 days from
the
commencement of the Financial Consultant's employment with Smith Barney
Shearson), on the condition that the purchase is made with the proceeds of the
redemption of shares of a mutual fund that (i) was sponsored by the Financial
Consultant's prior employer, (ii) was sold to the client by the Financial
Consultant, and (iii) when purchased, such shares were sold with a sales
charge.
CLASS B SHARES
The public offering price for Class B shares is the per share net asset
value
of that Class. No initial sales charge is imposed at the time of purchase. A
CDSC is imposed, however, on certain redemptions of Class B shares. See
"Redemption of Shares" which describes the CDSC in greater detail.
30
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
PURCHASE OF SHARES (CONTINUED)
Smith Barney Shearson has adopted guidelines, in view of the relative sales
charges and distribution fees applicable to the Classes, directing Financial
Consultants and Introducing Brokers that all purchases of shares of $250,000
or
more should be for Class A shares. Smith Barney Shearson reserves the right to
vary these guidelines at any time.
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day the Fund calculates net
asset
value. See "Valuation of Shares." Redemption requests received in proper form
prior to the close of regular trading on the NYSE are priced at the net asset
value per share determined on that day. Redemption requests received after the
close of regular trading on the NYSE are priced at the net asset value next
determined. If a shareholder holds shares in more than one Class, any request
for redemption must specify the Class being redeemed. In the event of a
failure
to specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Fund's transfer
agent receives further instructions from Smith Barney Shearson, or if the
shareholder's account is not with Smith Barney Shearson, from the shareholder
directly.
The Fund normally transmits redemption proceeds for credit to the
shareholder's account at Smith Barney Shearson or the Introducing Broker at no
charge (other than any applicable CDSC) within seven days after receipt of a
redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been collected,
which may take up to 10 days or more. A shareholder who anticipates the need
for
more immediate access to his or her investment should purchase shares with
Federal funds, bank wire or by a certified or cashier's check.
A Fund account that is reduced by a shareholder to a value of $500 or less
may
be subject to redemption by the Fund, but only after the shareholder has been
given at least 30 days in which to increase the account balance to more than
$500.
31
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem shares represented by
certificates must also present the certificates to Smith Barney Shearson or
the
Introducing Broker endorsed for transfer (or accompanied by an endorsed stock
power), signed exactly as the shares are registered. Redemption requests
involving shares represented by certificates will not be deemed received until
the certificates are received by the Fund's transfer agent in proper form.
REDEMPTION BY MAIL
Shares may be redeemed by submitting a written request for redemption to:
Smith Barney Shearson New York Municipals Fund Inc.
Class A or B (please specify)
c/o The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request to TSSG or your Smith Barney Shearson Financial
Consultant must (a) state the Class and number or dollar amount of shares to
be
redeemed, (b) identify the shareholder's account number and (c) be signed by
each registered owner exactly as the shares are registered. If the shares to
be
redeemed were issued in certificate form, the certificates must be endorsed
for
transfer (or be accompanied by an endorsed stock power) and must be submitted
to
TSSG together with the redemption request. Any signature appearing on a
redemption request, share certificate or stock power must be guaranteed by a
domestic bank, savings and loan institution, domestic credit union, member
bank
of the Federal Reserve System or member firm of a national securities
exchange.
TSSG may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or guardians. A redemption
request will not be deemed to be properly received until TSSG receives all
required documents in proper form.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under which
shareholders who own shares of the Fund with a value of at least $10,000 may
elect to receive periodic cash payments of at least $50 monthly. Any
applicable
32
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
CDSC will not be waived on amounts withdrawn by a shareholder that exceed 2%
per
month of the value of the shareholder's shares subject to the CDSC at the time
the withdrawal plan commences. For further information regarding the automatic
cash withdrawal plan, shareholders should contact their Smith Barney Shearson
Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
A CDSC payable to Smith Barney Shearson is imposed on any redemption of
Class
B shares, however effected, that causes the current value of a shareholder's
account to fall below the dollar amount of all payments by the shareholder for
the purchase of Class B shares ("purchase payments") during the preceding five
years. No charge is imposed to the extent the net asset value of the Class B
shares redeemed does not exceed (a) the current net asset value of Class B
shares purchased through reinvestment of dividends or capital gains
distributions, plus (b) the current net asset value of Class B shares
purchased
more than five years prior to the redemption, plus (c) increases in the net
asset value of the shareholder's Class B shares above the purchase payments
made
during the preceding five years.
<TABLE>
In circumstances in which the CDSC is imposed, the amount of the charge will
depend on the number of years since the shareholder made the purchase payment
from which the amount is being redeemed. Solely for purposes of determining
the
number of years since a purchase payment, all purchase payments made during a
month will be aggregated and deemed to have been made on the last day of the
preceding Smith Barney Shearson statement month. The following table sets
forth
the rates of the charge for redemptions of Class B shares by investors:
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT WAS MADE CDSC
<S> <C>
- ------------------------------------------------------------------------------
- --
First 4.50%
Second 4.00%
Third 3.00%
Fourth 2.00%
Fifth 1.00%
Sixth 0.00%
Seventh 0.00%
Eighth 0.00%
- ------------------------------------------------------------------------------
- --
</TABLE>
33
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
REDEMPTION OF SHARES (CONTINUED)
Class B shares will automatically convert to Class A shares eight years
after
the date on which they were purchased and thereafter will no longer be subject
to any distribution fee. The first of these conversions will commence on or
about September 30, 1994. See "Variable Pricing System -- Class B Shares."
The purchase payment from which a redemption of Class B shares is made is
assumed to be the earliest purchase payment from which a full redemption has
not
already been effected. In the case of redemptions of Class B shares of other
funds in the Smith Barney Shearson Group of Funds issued in exchange for Class
B
shares of the Fund, the term "purchase payments" refers to the purchase
payments
for the shares given in exchange. In the event of an exchange of Class B
shares
of funds with differing CDSC schedules, the shares will be, in all cases,
subject to the higher CDSC schedule. See "Exchange Privilege."
Waivers of CDSC. The CDSC will be waived on: (a) exchanges (see "Exchange
Privilege"); (b) automatic cash withdrawals in amounts equal to or less than
2%
per month of the value of the shareholder's shares at the time the withdrawal
plan commences (see above); (c) redemptions of shares following the death or
disability of the shareholder; (d) involuntary redemptions; (e) redemption
proceeds from other funds in the Smith Barney Shearson Group of Funds that are
reinvested within 30 days of the redemption; and (f) redemptions of shares in
connection with a combination of any investment company with the Fund by
merger,
acquisition of assets or otherwise.
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES
Each Class' net asset value per share is calculated on each day, Monday
through Friday, except on days on which the NYSE is closed. The NYSE currently
is scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on
a
Saturday or Sunday, respectively.
The net asset value per share of a Class is determined as of the close of
regular trading on the NYSE and is computed by dividing the value of the
Fund's
net assets attributable to that Class by the total number of shares of that
Class outstanding. Generally, the Fund's investments are valued at market
value
or, in the absence of a market value with respect to any securities, at fair
value as determined by or under the direction of the Board of Directors.
Short-term
34
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
VALUATION OF SHARES (CONTINUED)
investments that mature in 60 days or less are valued at amortized cost
whenever
the Fund's Board of Directors determines that amortized cost reflects fair
value
of those investments. Amortized cost involves valuing an instrument at its
cost
initially and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the value of the instrument. Further
information regarding the Fund's valuation policies is contained in the
Statement of Additional Information.
35
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same class in the
following funds in the Smith Barney Shearson Group of Funds, to the extent
shares are offered for sale in the shareholder's state of residence:
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ------------------------------------------------------------------------------
- -
Municipal Bond Funds
A SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND, an
intermediate-term municipal bond fund investing in
investment-grade obligations.
A, B SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund.
A, B SMITH BARNEY SHEARSON TAX-EXEMPT INCOME FUND, an intermediate-
and long-term municipal bond fund investing in medium-and
lower-rated securities.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND, an intermediate-term municipal bond fund
designed for California investors.
A, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed for
Arizona investors.
A, B SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed for
California investors.
A, B SMITH BARNEY SHEARSON FLORIDA MUNICIPALS FUND, an intermediate-
and long-term municipal bond fund designed for Florida
investors.
A, B SMITH BARNEY SHEARSON MASSACHUSETTS MUNICIPALS FUND, an
intermediate-and long-term municipal bond fund designed for
Massachusetts investors.
A, B SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC., an
intermediate-and long-term municipal bond fund designed for New
Jersey investors.
</TABLE>
36
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ------------------------------------------------------------------------------
- -
A, B SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK MUNICIPALS
FUND, an intermediate-term municipal bond fund designed for New
York investors.
Income Funds
A, B SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT INCOME FUND,
seeks high current income while limiting the degree of
fluctuation in net asset value resulting from movement in
interest rates.
A, B SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND, invests in a
portfolio of high quality debt securities that may be
denominated in U.S. dollars or selected foreign currencies and
that have remaining maturities of not more than one year.
A, B SMITH BARNEY SHEARSON SHORT-TERM WORLD INCOME FUND, invests in
high quality, short-term debt securities denominated in U.S.
dollars as well as a range of foreign currencies.
A SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND, invests
exclusively in securities issued by the United States Treasury
and other U.S. government securities.
A, B SMITH BARNEY SHEARSON DIVERSIFIED STRATEGIC INCOME FUND, seeks
high current income primarily by allocating and reallocating
its
assets among various types of fixed-income securities.
A, B SMITH BARNEY SHEARSON MANAGED GOVERNMENTS FUND INC., invests in
obligations issued or guaranteed by the United States
government
and its agencies and instrumentalities with emphasis on
mortgage-backed government securities.
A, B SMITH BARNEY SHEARSON GOVERNMENT SECURITIES FUND, seeks a high
current return by investing in U.S. government securities.
</TABLE>
37
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ------------------------------------------------------------------------------
- -
A, B SMITH BARNEY SHEARSON INVESTMENT GRADE BOND FUND, seeks maximum
current income consistent with prudent investment management
and
preservation of capital by investing in corporate bonds.
A, B SMITH BARNEY SHEARSON HIGH INCOME FUND, seeks high current
income by investing in high-yielding corporate bonds,
debentures
and notes.
A, B SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeking current income
and capital appreciation by investing in bonds, debentures and
notes of foreign and domestic issuers.
Growth and Income Funds
A*, B* SMITH BARNEY SHEARSON CONVERTIBLE FUND, seeks current income
and
capital appreciation by investing in convertible securities.
A*, B* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing in equity and debt securities of utilities companies.
A*, B* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high
total
return consisting of current income and capital appreciation by
investing in a combination of equity, fixed-income and money
market securities.
A*, B* SMITH BARNEY SHEARSON PREMIUM TOTAL RETURN FUND, seeks total
return by investing in dividend-paying common stocks.
A*, B* SMITH BARNEY SHEARSON GROWTH AND INCOME FUND, seeks income and
long-term capital growth by investing in income-producing
equity
securities.
Growth Funds
A*, B* SMITH BARNEY SHEARSON APPRECIATION FUND INC., seeks long-term
appreciation of capital.
A*, B* SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., seeks
long-term capital growth with current income as a secondary
objective.
</TABLE>
38
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ------------------------------------------------------------------------------
- -
A*, B* SMITH BARNEY SHEARSON SECTOR ANALYSIS FUND, seeks capital
appreciation by following a sector strategy.
A*, B* SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital appreciation, with income as a secondary consideration.
A*, B* SMITH BARNEY SHEARSON AGGRESSIVE GROWTH FUND INC., seeks
above-average capital growth.
A*, B* SMITH BARNEY SHEARSON SPECIAL EQUITIES FUND, seeks long-term
capital appreciation by investing in equity securities
primarily
of emerging growth companies.
A*, B* SMITH BARNEY SHEARSON GLOBAL OPPORTUNITIES FUND, seeks long-
term
capital growth by investing principally in the common stocks of
foreign and domestic issuers.
A*, B* SMITH BARNEY SHEARSON EUROPEAN FUND, seeks long-term capital
appreciation by investing primarily in securities of issuers
based in European countries.
A*, B* SMITH BARNEY SHEARSON PRECIOUS METALS AND MINERALS FUND INC.,
seeks long-term capital appreciation by investing primarily in
precious metal-and mineral-related companies and gold bullion.
Money Market Funds
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversified portfolio of high quality money market instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
diversified portfolio of high quality money market instruments.
</TABLE>
39
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGEABLE
WITH SHARES
OF THE
FOLLOWING
CLASSES: FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ------------------------------------------------------------------------------
- -
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC.,
invests
in short-term U.S. government and agency securities.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC., invests
in short-term, high quality municipal obligations.
*** SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality California municipal
obligations.
*** SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality New York municipal
obligations.
<FN>
- ---------------
* Shares of this fund are subject to a higher sales charge or CDSC than
that
applicable to the Fund's shares.
** Shares of this money market fund may be exchanged for Class B shares of
the
Fund.
*** Shares of this money market fund may be exchanged for Class A shares of
the
Fund.
</TABLE>
Tax Effect. The exchange of shares of one fund for shares of another fund
is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
Class A Exchanges. Class A shareholders of the funds in the Smith Barney
Shearson Group of Funds sold without a sales charge or with a maximum sales
charge of less than 4.50% will be subject to the appropriate "sales charge
differential" upon the exchange of their shares for Class A shares of the Fund
or other fund sold with a higher sales charge. The "sales charge differential"
is limited to a percentage rate no greater than the excess of the sales charge
rate applicable to purchases of shares of the mutual fund being acquired in
the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
40
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends, as described below, are treated as having paid the
same sales charges applicable to the shares on which the dividends were paid.
However, if no sales charge was imposed upon the initial purchase of the
shares,
any shares obtained through automatic reinvestment will be subject to a sales
charge differential upon exchange.
Class B Exchanges. Shareholders of the Fund who wish to exchange all or a
portion of their Class B shares for Class B shares in any of the funds
identified above may do so without imposition of an exchange fee. In the event
a
Class B shareholder wishes to exchange all or a portion of his or her shares
for
shares in any of the funds imposing a CDSC higher than that imposed by the
Fund,
the exchanged Class B shares will be subject to the higher applicable CDSC.
Upon
an exchange, the new Class B shares will be deemed to have been purchased on
the
same date as the Class B shares of the Fund which have been exchanged.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can
be detrimental to the Fund's performance and its shareholders. Greenwich
Street
Advisors may determine that a pattern of frequent exchanges is excessive and
contrary to the best interests of the Fund's other shareholders. In this
event,
Greenwich Street Advisors will notify Smith Barney Shearson, and Smith Barney
Shearson may, at its discretion, decide to limit additional purchases and/or
exchanges by the shareholder. Upon such a determination, Smith Barney Shearson
will provide notice in writing or by telephone to the shareholder at least 15
days prior to suspending the exchange privilege and during the 15-day period
the
shareholder will be required to (a) redeem his or her shares in the Fund or
(b)
remain invested in the Fund or exchange into any of the funds in the Smith
Barney Shearson Group of Funds ordinarily available, which position the
shareholder would expect to maintain for a significant period of time. All
relevant factors will be considered in determining what constitutes an abusive
pattern of exchanges.
Shareholders exercising the exchange privilege with any of the other funds
in
the Smith Barney Shearson Group of Funds should review the prospectus of that
fund carefully prior to making an exchange. Smith Barney Shearson reserves the
right to reject any exchange request. The exchange privilege may be modified
or
terminated at any time after written notice to shareholders. For further
information regarding the exchange privilege or to obtain the current
prospectuses for
41
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
EXCHANGE PRIVILEGE (CONTINUED)
members of the Smith Barney Shearson Group of Funds, investors should contact
their Smith Barney Shearson Financial Consultants.
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013 and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual service fee with respect to Class A and Class B shares of the
Fund at the rate of .15% of the value of the average daily net assets of the
respective Class. Smith Barney Shearson is also paid an annual distribution
fee
with respect to Class B shares at the rate of .50% of the value of the average
daily net assets attributable to those shares. The fees are authorized
pursuant
to a services and distribution plan (the "Plan") adopted by the Fund pursuant
to
Rule 12b-1 under the 1940 Act and are used by Smith Barney Shearson to pay its
Financial Consultants for servicing shareholder accounts and, in the case of
Class B shares, to cover expenses primarily intended to result in the sale of
those shares. These expenses include: costs of printing and distributing the
Fund's Prospectus, Statement of Additional Information and sales literature to
prospective investors; an allocation of overhead and other Smith Barney
Shearsons' branch office distribution-related expenses; payments to and
expenses
of Smith Barney Shearson Financial Consultants and other persons who provide
support services in connection with the distribution of the shares; and
accruals
for interest on the amount of the foregoing expenses that exceed distribution
fees and, in the case of Class B shares, the CDSC received by Smith Barney
Shearson. The payments to Smith Barney Shearson Financial Consultants for
selling shares of a Class include a commission paid at the time of sale and a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. The service fee is credited at the rate of
.15%
of the value of the average daily net assets of the Class that remain invested
in the Fund. Smith Barney Shearson Financial Consultants may receive different
levels of compensation for selling one Class over another.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney Shearson and
the
payments may exceed distribution expenses actually incurred. The Fund's Board
of
Directors will evaluate the appropriateness of the Plan and its payment terms
on
a continuing basis and in so doing will consider all relevant factors,
including
42
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
DISTRIBUTOR (CONTINUED)
expenses borne by Smith Barney Shearson, amounts received under the Plan and
proceeds of the CDSC.
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net investment income (that is, income
other than its net realized long-and short-term capital gains) on each day the
Fund is open for business and pays dividends on the last business day of the
Smith Barney Shearson statement month. Unless a shareholder instructs that
dividends and capital gains distributions on shares of any Class be paid in
cash
and credited to the shareholder's account, dividends and capital gains
distributions will be reinvested automatically in additional shares of the
Class
at net asset value, subject to no sales charge or CDSC. The Fund's earnings
for
Saturdays, Sundays and holidays are declared as dividends on the next business
day. Shares redeemed during the month are entitled to dividends declared up to
and including the date of redemption. Distributions of net realized long-and
short-term capital gains, if any, are declared and paid annually after the end
of the fiscal year in which they have been earned. In addition, in order to
avoid the application of a 4% nondeductible excise tax on certain
undistributed
amounts of ordinary income and capital gains, the Fund may make a distribution
shortly before December 31 in each year of any undistributed ordinary income
or
capital gains and expects to make any other distributions as are necessary to
avoid the application of this tax.
If, for any full fiscal year, the Fund's total distributions exceed current
and accumulated earnings and profits the excess distributions generally will
be
treated as a tax-free return of capital (up to the amount of the shareholder's
tax basis in his or her shares). The amount treated as a tax-free return of
capital will reduce a shareholder's adjusted basis in his or her shares.
Pursuant to the requirements of the 1940 Act and other applicable laws, a
notice
will accompany any distribution paid from sources other than net investment
income. In the event the Fund distributes amounts in excess of its net
investment income and net realized capital gains, such distributions may have
the effect of decreasing the Fund's total assets, which may increase the
Fund's
expense ratio.
43
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
TAXES
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code and will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax-
exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes although (a)
all or a portion of such exempt-interest dividends will be a specific
preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent they are derived from certain types of private activity
bonds issued after August 7, 1986 and (b) all exempt-interest dividends will
be
a component of the "current earnings" adjustment item for purposes of the
Federal corporate alternative minimum tax. In addition, corporate shareholders
may incur a greater Federal "environmental" tax liability through the receipt
of
Fund dividends and distributions. Exempt-interest dividends derived from
interest on New York Municipal Securities will be exempt from New York State
and
New York City personal income (but not corporate franchise) taxes.
Dividends paid from taxable net investment income, if any, and distributions
of any net realized short-term capital gains (whether from tax-exempt or
taxable
securities) are taxable to shareholders as ordinary income, regardless of how
long shareholders have held their Fund shares and whether such dividends or
distributions are received in cash or reinvested in additional Fund shares.
Distributions of net realized long-term capital gains are taxable to
shareholders as long-term capital gains regardless of how long shareholders
have
held Fund shares and whether such distributions are received in cash or
reinvested in additional shares. The per share dividends and distributions on
Class A shares will be higher than the per share dividends and distributions
on
Class B shares as a result of lower distribution and transfer agency fees
applicable to the Class A shares. Furthermore, as a general rule, a
shareholder's gain or loss on a sale or redemption of his or her shares will
be
a long-term capital gain or loss if the shareholder has held the shares for
more
than one year and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less. The Fund's dividends and
distributions
will not qualify for the dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder will also receive, if
appropriate, various written notices after the close of the Fund's prior
taxable
year as to the Federal income tax status of his or her dividends and
distributions which were
44
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
received from the Fund during the Fund's prior taxable year. These statements
may set forth the dollar amount of income excluded or exempt from Federal
income
taxes or New York State and New York City personal income taxes and the dollar
amount, if any, subject to such taxes. Moreover, these statements will
designate
the amount of exempt-interest dividends that is a specific preference item for
purposes of the Federal individual and corporate alternative minimum taxes.
Shareholders should consult their own tax advisors with specific reference to
their own tax situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows New York taxpayers how to translate the triple tax
savings from investments such as the Fund into an equivalent return from a
taxable investment. The combined marginal tax rate is lower than the sum of
Federal, New York State and New York City marginal tax rates because the state
and city taxes that shareholders pay are deductible from Federal taxable
income.
<TABLE>
The yields used below are for illustration only and are not intended to
represent current or future yields for the Fund, which may be higher or lower
than those shown.
<CAPTION>
NEW
YORK
STATE &
NEW
YORK COMBINED
TAXABLE INCOME* FEDERAL CITY COMBINED EFFECTIVE TAX-EXEMPT
YIELDS
- ---------------- MARGINAL MARGINAL MARGINAL MARGINAL ------------------------
- ----------------------
SINGLE JOINT RATE RATE RATE RATE 4.0% 5.0% 6.0%
7.0% 8.0% 9.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
EQUIVALENT TAXABLE YIELD
- ------- ------- ------ ------- ------ ------ ------ ------ ------ ---
- --- ------ ------
22,100 36,900 15.00% 11.625% 26.63% 24.88% 5.32% 6.66% 7.99%
9.32% 10.65% 11.98%
53,500 89,150 28.00% 11.735% 39.74% 36.45% 6.29% 7.87% 9.44%
11.01% 12.59% 14.16%
115,000 140,000 31.00% 11.785% 42.79% 39.13% 6.57% 8.21% 9.86%
11.50% 13.14% 14.79%
250,000 250,000 36.00% 11.785% 47.79% 43.54% 7.08% 8.86% 10.63%
12.40% 14.17% 15.94%
250,000 424,760 39.60% 11.785% 51.39% 46.72% 7.51% 9.38% 11.26%
13.14% 15.01% 16.89%
<FN>
* Combined effective marginal tax rate represents the combined Federal, New
York
State and City tax rates adjusted to account for the Federal deduction of
State and City taxes paid. The calculations assume that no income will be
subject to the Federal individual alternative minimum tax.
</TABLE>
45
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on October
6, 1983, and is registered with the SEC as a non-diversified open-end
management
investment company. On December 15, 1988, November 19, 1992, and July 30, 1993
the Fund changed its name from Shearson Lehman New York Municipals Inc. to SLH
New York Municipals Fund Inc., Shearson Lehman Brothers New York Municipals
Fund
Inc. and Smith Barney Shearson New York Municipals Fund Inc., respectively.
The Fund offers shares of common stock currently classified into two Classes
- -- A and B. Each Class of shares has a par value of $.01 per share and
represents an identical interest in the Fund's investment portfolio. As a
result, the Classes have the same rights, privileges and preferences, except
with respect to: (a) the designation of each Class; (b) the effect of the
respective sales charges for each Class; (c) the distribution and/or service
fees borne by each Class; (d) the expenses allocable exclusively to each
Class;
(e) voting rights on matters exclusively affecting a single Class; (f) the
exchange privilege of each Class; and (g) the conversion feature of the Class
B
shares. The Fund's Board of Directors does not anticipate that there will be
any
conflicts among the interests of the holders of the different Classes. The
Directors, on an ongoing basis, will consider whether any such conflict exists
and, if so, take appropriate action.
When matters are submitted for shareholder vote, shareholders of each Class
will have one vote for each full share held and a proportionate, fractional
vote
for any fractional share held of that Class. Generally, shares of the Fund
will
be voted on a Fund-wide basis on all matters except matters affecting only the
interests of one Class. The Fund does not hold annual shareholder meetings.
There normally will be no meetings of shareholders held for the purpose of
electing Directors unless and until such time as less than a majority of the
Directors holding office have been elected by shareholders, at which time the
Directors then in office will call a shareholders' meeting for the election of
Directors. The Directors will call a meeting for any purpose upon the written
request of shareholders holding at least 10% of the Fund's outstanding shares.
Boston Safe Deposit and Trust Company, a wholly owned subsidiary of TBC, is
located at One Boston Place, Boston, Massachusetts 02108, and serves as
custodian of the Fund's investments.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as
the Fund's transfer agent.
46
<PAGE>
SMITH BARNEY SHEARSON
New York Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
ADDITIONAL INFORMATION (CONTINUED)
The Fund sends to each of its shareholders a semi-annual report and an
audited
annual report, which include listings of the investment securities held by the
Fund at the end of the period covered. In an effort to reduce the Fund's
printing and mailing costs, the Fund plans to consolidate the mailing of its
semi-annual and annual reports by household. This consolidation means that a
household having multiple accounts with the identical address of record will
receive a single copy of each report. In addition, the Fund also plans to
consolidate the mailing of its Prospectus so that a shareholder having
multiple
accounts will receive a single Prospectus annually. Any shareholder who does
not
want this consolidation to apply to his or her account should contact his or
her
Financial Consultant or TSSG.
Shareholders may seek information regarding the Fund from their Smith Barney
Shearson Financial Consultants.
------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement
of
Additional Information and/or in the Fund's official sales literature in
connection with the offering of the Fund's shares, and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Fund. This Prospectus does not constitute an offer in any
state in which, or to any person to whom, such offer may not lawfully be made.
47
<PAGE>
- ------------------------------------------------------------------------------
- --
- ------------------------------------------------------------------------------
- --
SMITH BARNEY SHEARSON
New York
Municipals
Fund Inc.
Two World Trade Center
New York, New York 10048
Fund 13,194
FD0208 B4
Smith Barney Shearson
NEW YORK MUNICIPALS FUND INC.
Two World Trade Center
New York, New York 10048
(212) 720-9218
STATEMENT OF ADDITIONAL INFORMATION MARCH 1, 1994
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney Shearson
New York Municipals Fund Inc. (the "Fund"), dated March 1, 1994, as
amended or supplemented from time to time, and should be read in conjunc-
tion with the Fund's Prospectus. The Fund's Prospectus may be obtained
from your Smith Barney Shearson Financial Consultant or by writing or
calling the Fund at the address or telephone number set forth above. This
Statement of Additional Information, although not in itself a prospectus,
is incorporated by reference into the Prospectus in its entirety.
TABLE OF CONTENTS
For ease of reference, the same section headings are used in both the Pro-
spectus and the Statement of Additional Information, except where shown
below:
<TABLE>
<CAPTION>
<S>
<C>
Management of the Fund
1
Investment Objective and Management Policies
5
Municipal Bonds (See in the Prospectus "New York Municipal Securities")
13
Special Considerations Relating to New York Municipal Securities
14
Purchase of Shares
25
Redemption of Shares
26
Distributor
27
Valuation of Shares
28
Exchange Privilege
28
Performance Data (See in the Prospectus "The Fund's Performance")
29
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")
31
Custodian and Transfer Agent (See in the Prospectus "Additional Information")
34
Financial Statements
34
Appendix
A-1
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of the organizations that
provide services to the Fund. These organizations are as follows:
<TABLE>
<CAPTION>
NAME SERVICE
<S> <C>
Smith Barney Shearson Inc.
("Smith Barney Shearson") Distributor
Greenwich Street Advisors Investment
Adviser
The Boston Company Advisors, Inc.
("Boston Advisors") Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation Transfer Agent
</TABLE>
These organizations and the functions they perform for the Fund are dis-
cussed in the Prospectus and in this Statement of Additional Information.
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND
The Directors and executive officers of the Fund, together with informa-
tion as to their principal business occupations during the past five
years, are shown below. Each Director who is an "interested person" of the
Fund, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), is indicated by an asterisk.
Herbert Barg, Director. Private Investor. His address is 273 Montgomery
Avenue, Bala Cynwyd, Pennsylvania 19004.
*Alfred J. Bianchetti, Director. Retired; formerly Senior Consultant to
Dean Witter Reynolds Inc. His address is 19 Circle End Drive, Ramsey, New
Jersey 17466.
Robert E. Borgesen, Director. Retired; formerly Vice President of Morgan
Guaranty Trust Company of New York. His address is 160 Southeast Crestwood
Circle, Stuart, Florida 34997.
Martin Brody, Director. Vice Chairman of the Board of Restaurant Associ-
ates Corp.; a Director of Jaclyn, Inc. His address is HMK Associates,
Three ADP Boulevard, Roseland, New Jersey 07068.
Dwight B. Crane, Director. Professor, Graduate School of Business Adminis-
tration, Harvard University; a Director of Peer Review Analysis, Inc. His
address is Graduate School of Business Administration, Harvard University,
Boston, Massachusetts 02163.
James J. Crisona, Director. Attorney; formerly a Justice of the Supreme
Court of the State of New York. His address is 118 East 60th Street, New
York, New York 10022.
Robert A. Frankel, Director. Management Consultant; retired Vice President
of The Reader's Digest Association, Inc. His address is 102 Grand Street,
Croton-on-Hudson, New York 10520.
Dr. Paul Hardin, Director. Chancellor of the University of North Carolina
at Chapel Hill; a Director of The Summit Bancorporation. His address is
University of North Carolina, 103 S. Building, Chapel Hill, North Carolina
27599.
Stephen E. Kaufman, Director. Attorney. His address is 277 Park Avenue,
New York, New York 10172.
Joseph J. McCann, Director. Financial Consultant; formerly Vice President
of Ryan Homes, Inc. His address is 200 Oak Park Place, Pittsburgh, Penn-
sylvania 15243.
*Heath B. McLendon, Chairman of the Board and Investment Officer. Execu-
tive Vice President of Smith Barney Shearson and Chairman of Smith Barney
Strategy Advisers Inc.; prior to July 1993, Senior Executive Vice Presi-
dent of Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers"); Vice
Chairman of Shearson Asset Management, a member of the Asset Management
Group of Shearson Lehman Brothers; a Director of PanAgora Asset Manage-
ment, Inc. and PanAgora Asset Management Limited. His address is Two World
Trade Center, New York, New York 10048.
Stephen J. Treadway, President. Executive Vice President and Director of
Smith Barney Shearson; Director and President of Mutual Management Corp.
and Smith, Barney Advisers, Inc.; and Trustee of Corporate Realty Income
Trust I. His address is 1345 Avenue of the Americas, New York, New York
10105.
Richard P. Roelofs, Executive Vice President. Managing Director of Smith
Barney Shearson; President of Smith Barney Shearson Strategy Advisers
Inc.; prior to July 1993, Senior Vice President of Shearson Lehman Broth-
ers; Vice President of Shearson Lehman Investment Strategy Advisors Inc.,
an investment advisory affiliate of Shearson Lehman Brothers. His address
is Two World Trade Center, New York, New York 10048.
Lawrence T. McDermott, Vice President and Investment Officer. Managing Di-
rector of Greenwich Street Advisors; prior to July 1993, Managing Director
of Shearson Lehman Advisors. His address is Two World Trade Center, New
York, New York 10048.
Karen L. Mahoney-Malcomson, Investment Officer. Senior Vice President of
Greenwich Street Advisors; prior to July 1993, Vice President of Shearson
Lehman Advisors. Her address is Two World Trade Center, New York, New York
10048.
Vincent Nave, Treasurer. Senior Vice President of Boston Advisors and Bos-
ton Safe. His address is One Boston Place, Boston, Massachusetts 02108.
Francis J. McNamara, III, Secretary. Senior Vice President and General
Counsel of Boston Advisors; prior to June 1989, Vice President and Associ-
ate Counsel of Boston Advisors. His address is One Boston Place, Boston,
Massachusetts 02108.
Each Director also serves as a director, trustee or general partner of
other mutual funds for which Smith Barney Shearson serves as principal un-
derwriter. As of February 1, 1994, the Directors and officers of the Fund,
as a group, owned less than 1% of the outstanding common stock of the
Fund.
No director, officer or employee of Smith Barney Shearson or Boston Advi-
sors or of any parent or subsidiary receives any compensation from the
Fund for serving as an officer or Director of the Fund. The Fund pays each
Director who is not an officer, director or employee of Smith Barney
Shearson or Boston Advisors or any of their affiliates a fee of $2,000 per
annum plus $500 per meeting attended and reimburses them for travel and
out-of-pocket expenses. For the fiscal year ended December 31, 1993, such
fees and expenses totalled $41,687.
INVESTMENT ADVISER -- GREENWICH STREET ADVISORS
ADMINISTRATOR -- BOSTON ADVISORS
Greenwich Street Advisors serves as investment adviser to the Fund pursu-
ant to a written agreement dated July 30, 1993 (the "Advisory Agreement"),
which was most recently approved by the Board of Directors, including a
majority of those Directors who are not "interested persons" of the Fund
or Greenwich Street Advisors, on April 7, 1993. The services provided by
Greenwich Street Advisors under the Advisory Agreement are described in
the Prospectus. Greenwich Street Advisors bears all expenses in connection
with the performance of its services. Greenwich Street Advisors is a divi-
sion of Mutual Management Corp., which is in turn a wholly owned subsid-
iary of Smith Barney Shearson Holdings Inc. ("Holdings"). Holdings is a
wholly owned subsidiary of The Travelers Inc. (formerly known as Primerica
Corporation.)
As compensation for Greenwich Street Advisors' services rendered to the
Fund, the Fund pays a fee, computed daily and paid monthly at the follow-
ing annual rates: .35% of the value of the Fund's average daily net assets
up to $500 million and .32% of the value of the Fund's average daily net
assets in excess of $500 million. For the 1991, 1992 and 1993 fiscal
years, such fees amounted to $1,553,171, $1,754,263, and $2,218,952, re-
spectively, in advisory fees.
Boston Advisors serves as the Fund's administrator pursuant to a written
agreement dated March 21, 1993 (the "Administration Agreement"), which was
most recently approved by the Board of Directors of the Fund, including a
majority of the Directors who are not "interested persons" of the Fund or
Boston Advisors, on July 21, 1993. Prior to May 21, 1993, Boston Advisors
acted in the capacity as the Fund's sub-investment adviser and administra-
tor. Boston Advisors is a wholly owned subsidiary of The Boston Company,
Inc., ("TBC") a financial services holding company, which is in turn a
wholly owned subsidiary of Mellon Bank Corporation ("Mellon"). Boston Ad-
visors pays the salaries of all officers and employees who are employed by
both it and the Fund.
Certain services provided to the Fund by Boston Advisors pursuant to the
Administration Agreement are described in the Prospectus under "Management
of the Fund." In addition to those services, Boston Advisors pays the sal-
aries of all officers and employees who are employed by both it and the
Fund, maintains office facilities for the Fund, furnishes the Fund with
statistical and research data, clerical help and accounting, data process-
ing, bookkeeping, internal auditing and legal services and certain other
services required by the Fund, prepares reports to the Fund's sharehold-
ers, and prepares tax returns and reports to and filings with the Securi-
ties and Exchange Commission (the "SEC") and state blue sky authorities.
Boston Advisors bears all expenses in connection with the performance of
its services.
As compensation for Boston Advisors' services rendered to the Fund, the
Fund pays a fee computed daily and paid monthly at the following annual
rates: .20% of the value of the Fund's average daily net assets up to $500
million and .18% of the value of its average daily net assets in excess of
$500 million. For the 1991, 1992 and 1993 fiscal years, such fees amounted
to $887,526, $1,002,117 and $1,263,785, respectively, in sub-investment
advisory and/or administration fees.
The Fund bears expenses incurred in its operation including: taxes, inter-
est, brokerage fees and commissions, if any; fees of Directors who are not
officers, directors, shareholders or employees of Smith Barney Shearson or
Boston Advisors; SEC fees and state blue sky qualification fees; charges
of custodian; transfer and dividend disbursing agent's fees; certain in-
surance premiums; outside auditing and legal expenses; costs of any inde-
pendent pricing service; costs of maintaining corporate existence; costs
attributable to investor services (including allocated telephone and per-
sonnel expenses); costs of preparation and printing of prospectuses for
regulatory purposes and for distribution to shareholders; shareholders'
reports and corporate meetings.
Greenwich Street Advisors and Boston Advisors have each agreed that if in
any fiscal year the aggregate expenses of the Fund (including fees paid
under the Advisory Agreement and the Administration Agreement, but exclud-
ing interest, taxes, brokerage and, with the prior written consent of the
necessary state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over the Fund, Green-
wich Street Advisors and Boston Advisors will, to the extent required by
state law, reduce their management fees by the amount of such excess ex-
penses, such amount to be allocated between them in the proportion that
their respective fees bear to the aggregate of such fees paid by the Fund.
Any fee reductions will be reconciled on a monthly basis. The most re-
strictive state expense limitation applicable to the Fund would require
Greenwich Street Advisors and Boston Advisors to reduce their fees in any
year that such expenses exceed 2.5% of the first $30 million of average
net assets, 2% of the next $70 million of average net assets and 1.5% of
the remaining average net assets. No fee reduction was required for the
fiscal years ended December 31, 1991, 1992 and 1993.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as legal counsel to the Fund. The Direc-
tors who are not "interested persons" of the Fund have selected Stroock &
Stroock & Lavan as their counsel.
Coopers & Lybrand, independent accountants, One Post Office Square, Bos-
ton, Massachusetts 02109, serve as auditors of the Fund and render an
opinion on the Fund's financial statements annually.
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 policies in the Prospectus. For
purposes of this Statement of Additional Information, obligations of non-
New York municipal issuers, the interest on which is excluded from gross
income for Federal income tax purposes, together with obligations of the
State of New York and its political subdivisions, agencies and public au-
thorities ("New York Municipal Securities"), are collectively referred to
as "Municipal Bonds."
As noted in the Prospectus, the Fund 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 may be in-
vested in the obligations of a single issuer. The identification of the
issuer of Municipal Bonds generally depends upon the terms and conditions
of the security. When the assets and revenues of an agency, authority, in-
strumentality or other political subdivision are separate from those of
the government creating the issuing entity and the security is backed only
by the assets and revenues of such entity, such entity would be deemed to
be the sole issuer. Similarly, in the case of a private activity bond, if
that bond is backed only by the assets and revenues of the nongovernmental
user, then such nongovernmental user is deemed to be the sole issuer. If
in either case, however, the creating government or some other entity
guarantees a security, such a guarantee would be considered a separate se-
curity and would be treated as an issue of such government or other en-
tity.
USE OF RATINGS AS INVESTMENT CRITERIA
In general, the ratings of Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") represent the opinions of those
agencies as to the quality of the Municipal Bonds and short-term invest-
ments which they rate. It should be emphasized, however, that such ratings
are relative and subjective, are not absolute standards of quality and do
not evaluate the market risk of securities. These ratings will be used by
the Fund as initial criteria for the selection of portfolio securities,
but the Fund also will rely upon the independent advice of Greenwich
Street Advisors to evaluate potential investments. Among the factors that
will be considered are the long-term ability of the issuer to pay princi-
pal and interest and general economic trends. To the extent the Fund in-
vests in low-rated and comparable unrated securities, the Fund's achieve-
ment of its investment objective may be more dependent on Greenwich Street
Advisors' credit analysis of such securities than would be the case for a
portfolio consisting entirely of higher-rated securities. The Appendix
contains information concerning the ratings of Moody's and S&P and their
significance.
Subsequent to its purchase by the Fund, an issue of Municipal Bonds may
cease to be rated or its rating may be reduced below the rating given at
the time the securities were acquired by the Fund. Neither event will re-
quire the sale of such Municipal Bonds by the Fund, but Greenwich Street
Advisors will consider such event in its determination of whether the Fund
should continue to hold the Municipal Bonds. In addition, to the extent
the ratings change as a result of changes in the rating systems or due to
a corporate restructuring of Moody's or S&P, the Fund will attempt to use
comparable ratings as standards for its investments in accordance with its
investment objective and policies.
The Fund generally may invest up to 25% of its total assets in securities
rated below investment grade, (i.e., lower than Baa, MIG 3 or Prime-1 by
Moody's or BBB, SP-2 or A-1 by S&P, or in unrated securities of comparable
quality). Such securities (a) will likely have some quality and protective
characteristics that, in the judgment of the rating organization, are out-
weighed by large uncertainties or major risk exposures to adverse condi-
tions and (b) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation.
While the market values of low-rated and comparable unrated securities
tend to react less to fluctuations in interest rate levels than the market
values of higher-rated securities, the market values of certain low-rated
and comparable unrated municipal securities also tend to be more sensitive
than higher-rated securities to short-term corporate and industry develop-
ments and changes in economic conditions (including recession) in specific
regions or localities or among specific types of issuers. In addition,
low-rated securities and comparable unrated securities generally present a
higher degree of credit risk. During an economic downturn or a prolonged
period of rising interest rates, the ability of issuers of lower-rated and
comparable unrated securities to service their payment obligations, meet
projected goals or obtain additional financing may be impaired. The risk
of loss due to default by such issuers is significantly greater because
low-rated and comparable unrated securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness.
The Fund may incur additional expenses to the extent it is required to
seek recovery upon a default in the payment of principal or interest on
its portfolio holdings.
While the market for municipal securities is considered to be generally
adequate, the existence of limited markets for particular low-rated and
comparable unrated securities may diminish the Fund's ability to (a) ob-
tain accurate market quotations for purposes of valuing such securities
and calculating its net asset value and (b) sell the securities at fair
value either to meet redemption requests or to respond to changes in the
economy or in the financial markets. The market for certain low-rated and
comparable unrated securities has not fully weathered a major economic re-
cession. Any such recession, however, would likely disrupt severely the
market for such securities and adversely affect the value of the securi-
ties and the ability of the issuers of these securities to repay principal
and pay interest thereon.
Fixed-income securities, including low-rated securities and comparable un-
rated securities, frequently have call or buy-back features that permit
their issuers to call or repurchase the securities from their holders,
such as the Fund. If an issuer exercises these rights during periods of
declining interest rates, the Fund may have to replace the security with a
lower yielding security, thus resulting in a decreased return to the Fund.
TEMPORARY INVESTMENTS
When the Fund is maintaining a defensive position, the Fund may invest in
short-term investments ("Temporary Investments") consisting of: (a) the
following tax-exempt securities: notes of municipal issuers having, at the
time of purchase, a rating within the three highest grades of Moody's or
S&P or, if not rated, having an issue of outstanding Municipal Bonds rated
within the three highest grades by Moody's or S&P; and (b) the following
taxable securities: obligations of the United States government, its agen-
cies or instrumentalities ("U.S. government securities"), including repur-
chase agreements with respect to such securities; other debt securities
rated within the three highest grades by Moody's and S&P, commercial paper
rated in the highest grade by either of such rating services; and certifi-
cates of deposit of domestic banks with assets of $1 billion or more. The
Fund may invest in Temporary Investments for defensive reasons in antici-
pation of a market decline. At no time will more than 20% of the Fund's
total assets be invested in Temporary Investments unless the Fund has
adopted a defensive investment policy. The Fund intends, however, to pur-
chase tax-exempt Temporary Investments pending the investment of the pro-
ceeds of the sale of portfolio securities or shares of the Fund's common
stock, or in order to have highly liquid securities available to meet an-
ticipated redemptions. Since the Fund's commencement of operations, the
Fund has not found it necessary to purchase taxable Temporary Investments.
INVESTMENTS IN MUNICIPAL BOND INDEX FUTURES CONTRACTS AND OPTIONS ON
INTEREST RATE FUTURES CONTRACTS
The Fund may invest in municipal bond index futures contracts and options
on interest rate futures contracts that are traded on a domestic exchange
or board of trade. Such investments may be made by the Fund solely for the
purpose of hedging against changes in the value of its portfolio securi-
ties due to anticipated changes in interest rates and market conditions,
and not for purposes of speculation. Further, such investments will be
made only in unusual circumstances, such as when Greenwich Street Advisors
anticipates an extreme change in interest rates or market conditions.
Municipal Bond Index Futures Contracts. Municipal Bond index futures con-
tracts based on an index of 40 tax-exempt, long-term municipal bonds with
an original issue size of at least $50 million and a rating of A- or
higher by S&P or A or higher by Moody's began trading in mid-1985. No
physical delivery of the underlying municipal bonds in the index is made.
The purpose of the acquisition or sale of a municipal bond index futures
contract by the Fund, as the holder of long-term municipal securities, is
to protect the Fund from fluctuations in interest rates on tax-exempt se-
curities without actually buying or selling long-term municipal securi-
ties.
Unlike the purchase or sale of a Municipal Bond, no consideration is paid
or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker an amount
of cash or cash equivalents equal to approximately 10% of the contract
amount (this amount is subject to change by the board of trade on which
the contract is traded and members of such board of trade may charge a
higher amount). This amount is known as initial margin and is in the na-
ture of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming
that all contractual obligations have been satisfied. Subsequent payments,
known as variation margin, to and from the broker, will be made on a daily
basis as the price of the index fluctuates making the long and short posi-
tions in the futures contract more or less valuable, a process known as
marking-to-market. At any time prior to the expiration of the contract,
the Fund may elect to close the position by taking an opposite position,
which will operate to terminate the Fund's existing position in the fu-
tures contract.
There are several risks in connection with the use of municipal bond index
futures contracts as a hedging device. Successful use of municipal bond
index futures contracts by the Fund is subject to Smith Barney Shearson
ability to predict correctly movements in the direction of interest rates.
Such predictions involve skills and techniques which may be different from
those involved in the management of a long-term municipal bond portfolio.
In addition, there can be no assurance that there will be a correlation
between movements in the price of the municipal bond index and movements
in the price of the Municipal Bonds which are the subject of the hedge.
The degree of imperfection of correlation depends upon various circum-
stances, such as variations in speculative market demand for futures con-
tracts and municipal securities, technical influences on futures trading,
and differences between the municipal securities being hedged and the mu-
nicipal securities underlying the municipal bond index futures contracts,
in such respects as interest rate levels, maturities and creditworthiness
of issuers. A decision of whether, when and how to hedge involves the ex-
ercise of skill and judgment and even a well-conceived hedge may be unsuc-
cessful to some degree because of market behavior or unexpected trends in
interest rates.
Although the Fund intends to enter into futures contracts only if an ac-
tive market exists for such contracts, there can be no assurance that an
active market will exist for the contracts at any particular time. Most
domestic futures exchanges and boards of trade limit the amount of fluctu-
ation permitted in futures contract prices during a single trading day.
The daily limit establishes the maximum amount the price of a futures con-
tract may vary either up or down from the previous day's settlement price
at the end of a trading session. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond
that limit. The daily limit governs only price movement during a particu-
lar trading day and therefore does not limit potential losses because the
limit may prevent the liquidation of unfavorable positions. It is possible
that futures contract prices could move to the daily limit for several
consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and subjecting some futures trad-
ers to substantial losses. In such event, it will not be possible to close
a futures position and, in the event of adverse price movements, the Fund
would be required to make daily cash payments of variation margin. In such
circumstances, an increase in the value of the portion of the portfolio
being hedged, if any, may partially or completely offset losses on the fu-
tures contract. As described above, however, there is no guarantee the
price of Municipal Bonds will, in fact, correlate with the price movements
in the municipal bond index futures contract and thus provide an offset to
losses on a futures contract.
If the Fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of Municipal Bonds held in its portfo-
lio and rates decrease instead, the Fund will lose part or all of the ben-
efit of the increased value of the Municipal Bonds it has hedged because
it will have offsetting losses in its futures positions. In addition, in
such situations, if the Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of se-
curities may, but will not necessarily, be at increased prices which re-
flect the decline in interest rates. The Fund may have to sell securities
at a time when it may be disadvantageous to do so.
When the Fund purchases municipal bond index futures contracts, an amount
of cash and U.S. government securities equal to the market value of the
futures contracts will be deposited in a segregated account with the
Fund's custodian (and/or such other persons as appropriate) to collateral-
ize the position and thereby insure that the use of such futures is not
leveraged. In addition, the ability of the Fund to trade in municipal bond
index futures contracts and options on interest rate futures contracts may
be materially limited by the requirements of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to a regulated investment com-
pany. See "Taxes" below.
Options on Interest Rate Futures Contracts. The Fund may purchase put and
call options on interest rate futures contracts which are traded on a do-
mestic exchange or board of trade as a hedge against changes in interest
rates, and may enter into closing transactions with respect to such op-
tions to terminate existing positions. The Fund will sell put and call op-
tions on interest rate futures contracts only as part of closing sale
transactions to terminate its options positions. There is no guarantee
such closing transactions can be effected.
Options on interest rate futures contracts, as contrasted with the direct
investment in such contracts, give the purchaser the right, in return for
the premium paid, to assume a position in interest rate futures contracts
at a specified exercise price at any time prior to the expiration date of
the options. Upon exercise of an option, the delivery of the futures posi-
tion by the writer of the option to the holder of the option will be ac-
companied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the futures con-
tract. The potential loss related to the purchase of an option on interest
rate futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point
of sale, there are no daily cash payments to reflect changes in the value
of the underlying contract; however, the value of the option does change
daily and that change would be reflected in the net asset value of the
Fund.
There are several risks relating to options on interest rate futures con-
tracts. The ability to establish and close out positions on such options
will be subject to the existence of a liquid market. In addition, the
Fund's purchase of put or call options will be based upon predictions as
to anticipated interest rate trends by Greenwich Street Advisors, which
could prove to be inaccurate. Even if Greenwich Street Advisors' expecta-
tions are correct, there may be an imperfect correlation between the
change in the value of the options and of the Fund's portfolio securities.
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 agree-
ment, the Fund would acquire an underlying debt obligation for a rela-
tively short period (usually not more than one week) subject to an obliga-
tion 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. Under each repurchase agreement, the selling insti-
tution will be required to maintain the value of the securities subject to
the repurchase agreement at not less than their repurchase price. Green-
wich Street Advisors or Boston Advisors, acting under the supervision of
the Board of Directors, reviews on an ongoing basis the value of the col-
lateral and the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks. Repur-
chase 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.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions for the protec-
tion of shareholders. Restrictions 1 through 7 below cannot be changed
without the approval of the holders of a majority of the outstanding
shares of the Fund, defined as the lesser of (a) 67% of the Fund's shares
present at a meeting if the holders of more than 50% of the outstanding
shares are present in person or by proxy or (b) more than 50% of the
Fund's outstanding shares. The remaining restrictions may be changed by
the Fund's Board of Directors at any time.
The Fund will not:
1. Issue senior securities as defined in the 1940 Act and any rules
and orders thereunder, except insofar as the Fund may be deemed to
have issued senior securities by reason of: (a) borrowing money or
purchasing securities on a when-issued or delayed-delivery basis; (b)
purchasing or selling futures contracts and options on futures con-
tracts and other similar instruments; and (c) issuing separate classes
of shares.
2. Invest more than 25% of its total assets in securities, the issu-
ers of which are in the same industry. For purposes of this limita-
tion, U.S. government securities and securities of state or municipal
governments and their political subdivisions are not considered to be
issued by members of any industry.
3. Borrow money, except that the Fund may borrow from banks for tem-
porary or emergency (not leveraging) purposes, including the meeting
of redemption requests which might otherwise require the untimely dis-
position of securities, in an amount not exceeding 10% of the value of
the Fund's total assets (including the amount borrowed) valued at mar-
ket less liabilities (not including the amount borrowed) at the time
the borrowing is made. Whenever borrowings exceed 5% of the value of
the Fund's total assets, the Fund will not make additional invest-
ments.
4. Make loans. This restriction does not apply to: (a) the purchase
of debt obligations in which the Fund may invest consistent with its
investment objective and policies; (b) repurchase agreements; and (c)
loans of its portfolio securities.
5. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed
to be an underwriter under the Securities Act of 1933, as amended, in
disposing of portfolio securities.
6. Purchase or sell real estate, real estate mortgages, real estate
investment trust securities, commodities or commodity contracts, but
this shall not prevent the Fund from: (a) investing in securities of
issuers engaged in the real estate business and securities which are
secured by real estate or interests therein; (b) holding or selling
real estate received in connection with securities it holds; or (c)
trading in futures contracts and options on futures contracts.
7. Purchase any securities on margin (except for such short-term cred-
its as are necessary for the clearance of purchases and sales of port-
folio securities) or sell any securities short (except against the
box). For purposes of this restriction, the deposit or payment by the
Fund of initial or maintenance margin in connection with futures con-
tracts and related options and options on securities is not considered
to be the purchase of a security on margin.
8. Purchase or otherwise acquire any security if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
9. Purchase or sell oil and gas interests.
10. Invest more than 5% of the value of its total assets in the secu-
rities of issuers having a record, including predecessors, of less
than three years of continuous operation, except U.S. government secu-
rities. For purposes of this restriction, issuers include predeces-
sors, sponsors, controlling persons, general partners, guarantors and
originators of underlying assets.
11. Invest in companies for the purpose of exercising control.
12. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of
assets and except to the extent permitted by Section 12 of the 1940
Act (currently, up to 5% of the total assets of the Fund and no more
than 3% of the total outstanding voting stock of any one investment
company).
13. Engage in the purchase or sale of put, call, straddle or spread
options or in writing such options, except that the Fund may purchase
and sell options on interest rate futures contracts.
Certain restrictions listed above permit the Fund to engage in investment
practices that the Fund does not currently pursue. The Fund has no present
intention of altering its current investment practices as otherwise de-
scribed in the Prospectus and this Statement of Additional Information and
any future change in those practices would require Board approval and ap-
propriate notice to shareholders. If any percentage restriction is com-
plied with at the time of an investment, a later increase or decrease in
the percentage of assets resulting from a change in the values of portfo-
lio securities or in the amount of the Fund's assets will not constitute a
violation of such restriction. In order to permit the sale of the Fund's
shares in certain states, the Fund may make commitments more restrictive
than the restrictions described above such as those regarding real estate
limited partnerships. Should the Fund determine that any such commitment
is no longer in the best interests of the Fund and its shareholders it
will revoke the commitment by terminating sales of its shares in the state
involved.
PORTFOLIO TRANSACTIONS
Newly issued securities normally are purchased directly from the issuer or
from an underwriter acting as principal. Other purchases and sales usually
are placed with those dealers from which it appears the best price or exe-
cution will be obtained; those dealers may be acting as either agents or
principals. The purchase price paid by the Fund to underwriters of newly
issued securities usually includes a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers nor-
mally are executed at a price between the bid and asked prices. The Fund
has paid no brokerage commissions since its commencement of operations.
Allocation of transactions, including their frequency, to various dealers
is determined by Greenwich Street Advisors in its best judgment and in a
manner deemed fair and reasonable to shareholders. The primary consider-
ations are availability of the desired security and the prompt execution
of orders in an effective manner at the most favorable prices. Subject to
these considerations, dealers that provide supplemental investment re-
search and statistical or other services to Greenwich Street Advisors may
receive orders for portfolio transactions by the Fund. Information so re-
ceived is in addition to, and not in lieu of, services required to be per-
formed by Greenwich Street Advisors and the fees of Greenwich Street Advi-
sors are not reduced as a consequence of its receipt of such supplemental
information. Such information may be useful to Greenwich Street Advisors
in serving both the Fund and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to Greenwich Street Advisors in carrying out its obligations to the
Fund.
The Fund will not purchase Municipal Bonds during the existence of any un-
derwriting or selling group relating thereto of which Smith Barney Shear-
son is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of this limita-
tion in comparison with other investment companies which have a similar
investment objective but which are not subject to such limitation.
While investment decisions for the Fund are made independently from those
of the other accounts managed by Greenwich Street Advisors, investments of
the type the Fund may make also may be made by those other accounts. When
the Fund and one or more other accounts managed by Greenwich Street Advi-
sors are prepared to invest in, or desire to dispose of, the same secu-
rity, available investments or opportunities for sales will be allocated
in a manner believed by Greenwich Street Advisors to be equitable to each.
In some cases, this procedure may adversely affect the price paid or re-
ceived by the Fund or the size of the position obtained or disposed of by
the Fund.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate (the lesser of purchases or sales of
portfolio securities during the year, excluding purchases or sales of
short-term securities, divided by the monthly average value of portfolio
securities) generally is not expected to exceed 100%, but the portfolio
turnover rate will not be a limiting factor whenever the Fund deems it de-
sirable to sell or purchase securities. Securities may be sold in antici-
pation of a rise in interest rates (market decline) or purchased in antic-
ipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another security of comparable qual-
ity may be purchased at approximately the same time in order to take ad-
vantage of what the Fund believes to be a temporary disparity in the nor-
mal yield relationship between the two securities. These yield disparities
may occur for reasons not directly related to the investment quality of
particular issues or the general movement of interest rates, such as
changes in the overall demand for or supply of various types of tax-exempt
securities. For the 1992 and 1993 fiscal years, the Fund's portfolio turn-
over rates were 30%, and 20% respectively.
MUNICIPAL BONDS
GENERAL INFORMATION
Municipal Bonds generally are understood to include debt obligations is-
sued to obtain funds for various public purposes, including the construc-
tion of a wide range of public facilities, refunding of outstanding obli-
gations, payment of general operating expenses and extensions of loans to
public institutions and facilities. Private activity bonds that are issued
by or on behalf of public authorities to obtain funds to provide privately
operated facilities are included within the term Municipal Bonds if the
interest paid thereon qualifies as excludable from gross income (but not
necessarily from alternative minimum taxable income) for Federal income
tax purposes in the opinion of bond counsel to the issuer.
The yields on Municipal Bonds are dependent upon a variety of factors, in-
cluding general economic and monetary conditions, general money market
conditions, general conditions of the Municipal Bond market, the financial
condition of the issuer, the size of a particular offering, the maturity
of the obligation offered and the rating of the issue.
Municipal Bonds are also subject to the provisions of bankruptcy, insol-
vency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, that may be enacted by
Congress or state legislatures extending the time for payment of principal
or interest, or both, or imposing other constraints upon enforcement of
the obligations or upon the ability of municipalities to levy taxes. There
is also the possibility that as a result of litigation or other condi-
tions, the power or ability of any one or more issuers to pay, when due,
principal of and interest on its, or their, Municipal Bonds may be materi-
ally affected.
The Fund cannot predict what legislation, if any, with respect to New York
Municipal Securities may be proposed in the New York State Legislature as
regards the New York State or New York City personal income tax status of
interest on such obligations, or which proposals, if any, might be en-
acted. Such proposals, if enacted, might materially adversely affect the
availability of New York Municipal Securities for investment by the Fund
and the value of the Fund's portfolio. In such event, the Fund would re-
evaluate its investment objective and policies and submit possible changes
in the structure of the Fund for the consideration of shareholders.
WHEN-ISSUED SECURITIES
The Fund may purchase Municipal Bonds on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield).
The payment obligation and the interest rate that will be received on the
Municipal Bonds purchased on a when-issued basis are each fixed at the
time the buyer enters into the commitment. Although the Fund will purchase
Municipal Bonds on a when-issued basis only with the intention of actually
acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strat-
egy.
Municipal Bonds are subject to changes in value based upon the public's
perception of the creditworthiness of the issuers and changes, real or an-
ticipated, in the level of interest rates. In general, Municipal Bonds
tend to appreciate when interest rates decline and depreciate when inter-
est rates rise. Purchasing Municipal Bonds on a when-issued basis, there-
fore, can involve the risk that the yields available in the market when
the delivery takes place actually may be higher than those obtained in the
transaction itself. To account for this risk, a separate account of the
Fund consisting of cash or liquid debt securities equal to the amount of
the when-issued commitments will be established at the Fund's custodian
bank. For the purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market or fair value.
If the market or fair value of such securities declines, additional cash
or securities will be placed in the account on a daily basis so that the
value of the account will equal the amount of such commitments by the
Fund. Placing securities rather than cash in the segregated account may
have a leveraging effect on the Fund's net assets. That is, to the extent
the Fund remains substantially fully invested in securities at the same
time it has committed to purchase securities on a when-issued basis, there
will be greater fluctuations in its net assets than if it had set aside
cash to satisfy its purchase commitment. Upon the settlement date of the
when-issued securities, the Fund will meet its obligations from then-
available cash flow, sale of securities held in the segregated account,
sale of other securities or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have
a value greater or less than the Fund's payment obligations). Sales of se-
curities to meet such obligations may involve the realization of capital
gains, which are not exempt from Federal, New York State or New York City
income taxes.
When the Fund engages in when-issued transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price con-
sidered to be advantageous.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK MUNICIPAL SECURITIES
Some of the significant financial considerations relating to the Fund's
investment in New York Municipal Securities are summarized below. This
summary information is not intended to be a complete description and is
principally derived from official statements relating to issues of New
York Municipal Securities that were available prior to the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in those official statements have not been indepen-
dently verified.
State Economy. New York State (the "State") is the second most populous
state in the nation and has a relatively high level of personal wealth.
The State's economy is diverse with a comparatively large share of the na-
tion's finance, insurance, transportation, communications and services em-
ployment, and a comparatively small share of the nation's farming and min-
ing activity. The State has a declining proportion of its workforce en-
gaged in manufacturing, and an increasing proportion engaged in service
industries. New York City (the "City"), which is the most populous city in
the State and nation and is the center of the nation's largest metropoli-
tan area, accounts for approximately 41% of both the State's population
and personal income.
The State has historically been one of the wealthiest states in the na-
tion. For decades, however, the State has grown more slowly than the na-
tion as a whole, gradually eroding its relative economic affluence. The
recession has been more severe in the State, owing to a significant re-
trenchment in the financial services industry, cutbacks in defense spend-
ing, and an overbuilt real estate market. There can be no assurance that
the State economy will not experience worse-than-predicted results in the
1993-94 and 1994-95 fiscal years, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
The unemployment rate in the State dipped below the national rate in the
second half of 1981 and remained lower until 1991. The total employment
growth rate in the State has been below the national average since 1984,
and in 1992 the unemployment rate rose to 8.5%. State per capita personal
income remains above the national average. State per capita income for
1992 was $23,534, which is 18.5% above the 1992 national average of
$20,114. Between 1970 and 1980, the percentage by which the State's per
capita income exceeded that of the national average fell from 19.8% to
8.1%, and the State dropped from fifth to eleventh in the nation in terms
of per capita income. However, since 1980, the State's rate of per capita
income growth was greater than that of the nation generally and the
State's rank improved to fourth in 1990 and remained fourth in 1991 and
1992. Some analysts believe that the decline in jobs in both the City and
State is the result of State and local taxation, which is among the high-
est in the nation, and which may cause corporations to locate outside the
State. The current high level of taxes limits the ability of the State and
the City to impose higher taxes in the event of future difficulties.
State Budget. The State Constitution requires the Governor to submit to
the Legislature a balanced Executive Budget which contains a complete plan
of expenditures for the ensuing fiscal year and all moneys and revenues
estimated to be available therefor, accompanied by bills containing all
proposed appropriations or reappropriations and any new or modified reve-
nue measures to be enacted in connection with the Executive Budget. The
entire plan constitutes the proposed State financial plan for that fiscal
year. The Governor submits to the Legislature, on at least a quarterly
basis, reports of actual receipts, revenues, disbursements, expenditures,
tax refunds and reimbursements, and repayment of advances in form suitable
for comparison with the State financial plan, together with explanations
of deviations from the State financial plan. At such time, the Governor is
required to submit any amendments to the State financial plan necessitated
by such deviations.
The Governor released the recommended Executive Budget for the 1994-95
fiscal year on January 18, 1994. The Recommended 1994-95 State Financial
Plan projected a balanced General Fund, with receipts and transfers from
other funds projected at $33.422 billion, including $299 million carried
over from the surplus anticipated for the State's 1993-94 fiscal year.
Disbursements and transfers to other funds are projected at $33.399 bil-
lion and, in addition, the financial plan includes a $23 million repayment
to the State's Tax Stabilization Reserve Fund. The Division of the Budget
projects that at the close of the State's 1994-95 fiscal year, the balance
in the Tax Stabilization Reserve Fund will be $157 million. The balance
available in the Contingency Reserve Fund on April 1, 1994 is projected by
the Division of the Budget at $311 million.
There can be no assurance that the Legislature will enact the Executive
Budget as proposed, nor can there be any assurance that the Legislature
will enact a budget for the State's 1994-95 fiscal year prior to the be-
ginning of such fiscal year. In recent years, the Legislature has failed
to enact a budget prior to the beginning of the State's fiscal year. A
protracted delay in legislative enactment of the State's 1994-95 fiscal
year budget may reduce the effectiveness of several of the actions pro-
posed. The 1994-95 State Financial Plan, when formulated after enactment
of the budget, would have to take into account any reduced savings arising
from any late budget enactment.
The 1993-94 State Financial Plan issued on April 16, 1993 projected Gen-
eral Fund receipts and transfers from other funds at $32.367 billion and
disbursements and transfers to other funds at $32.300 billion. Excess re-
ceipts of $67 million were to be used for a required repayment to the
State's Tax Stabilization Reserve Fund.
The 1993-94 State Financial Plan was last revised on January 18, 1994 (the
"Revised 1993-94 State Financial Plan"). This update now projects a sur-
plus of $299 million, almost one percent of the General Fund. Positive de-
velopments affecting both receipts and disbursements contributed to this
improved outlook for the current year.
The Revised 1993-94 State Financial Plan is based on a number of assump-
tions and projections. Because it is not possible to predict accurately
the occurrence of all factors that may affect the Revised 1993-94 State
Financial Plan, actual results may differ and have differed materially in
recent years, from projections made at the outset of a fiscal year. There
can be no assurance that the State will not face substantial potential
budget gaps in future years resulting from a significant disparity between
tax revenues projected from a lower recurring receipts base and the spend-
ing required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant ac-
tions to align recurring receipts and disbursements in future fiscal
years.
Recent Financial Results. During its 1989-90, 1990-91 and 1991-92 fiscal
years, the State incurred cash-basis operating deficits, prior to the is-
suance of short-term tax and revenue anticipation notes, owing to lower-
than-projected receipts, which it believes to have been principally the
result of a significant slowdown in the New York and regional economy, and
with respect to the 1989-90 fiscal year, changes in taxpayer behavior
caused by the Federal Tax Reform Act of 1986.
The General Fund is the principal operating fund of the State. It receives
all State income that is not required by law to be deposited in another
fund which for the State's 1993-94 fiscal year, comprises approximately
53% of total projected governmental fund receipts.
General Fund receipts, excluding transfers from other funds, totalled
$28.818 billion in the State's 1991-92 fiscal year (before repayment of
$1.081 billion of deficit notes issued in its 1990-91 fiscal year and be-
fore issuance of $531 million in deficit notes to close the 1991-92 fiscal
year General Fund cash basis operating deficit) and $29.950 billion in the
State's 1992-93 fiscal year (before repayment of $531 million in deficit
notes issued to close the State's 1991-92 fiscal year General Fund cash
basis deficit.) General Fund receipts in the State's 1993-94 fiscal year
are estimated in the Revised 1993-94 State Financial Plan at $30.200 bil-
lion. Taxes account for 96% of estimated 1993-94 and 1994-95 General Fund
receipts, with the balance comprised of miscellaneous receipts.
General Fund disbursements, exclusive of transfers to other funds, to-
talled $28.058 billion in the State's 1991-92 fiscal year and $29.068 bil-
lion in the State's 1992-93 fiscal year and are estimated and recommended
to total $30.421 billion and $31.453 billion in the State's 1993-94 and
1994-95 fiscal years, respectively.
The State's financial position as shown in its Combined Balance Sheet as
of March 31, 1993 included an accumulated deficit in its combined govern-
mental funds of $681 million represented by liabilities of $12.864 billion
and assets of $12.183 billion available to liquidate such liabilities.
Debt Limits and Outstanding Debt. There are a number of methods by which
the State of New York may incur debt. Under the State Constitution, the
State may not, with limited exceptions for emergencies, undertake long-
term borrowing (i.e., borrowing for more than one year) unless the borrow-
ing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the
amount of long-term debt that may be so authorized and subsequently in-
curred by the State. The total amount of long-term State general obliga-
tion debt authorized but not issued as of December 31, 1993 was approxi-
mately $2.273 billion.
The State may undertake short-term borrowings without voter approval (a)
in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (b) in anticipation of the receipt of pro-
ceeds from the sale of duly authorized but unissued bonds, by issuing bond
anticipation notes. The State may also, pursuant to specific constitu-
tional authorization, directly guarantee certain obligations of the
State's authorities and public benefit corporations ("Authorities"). Pay-
ments of debt service on New York State's general obligation and State-
guaranteed bonds and notes are legally enforceable obligations of the
State.
The State also employs two other types of long-term financing mechanisms
which are State-supported but are not general obligations of the State:
moral obligation and lease-purchase or contractual-obligation financing.
In 1990, as part of a State fiscal reform program, legislation was enacted
creating the New York Local Government Assistance Corporation ("LGAC"), a
public benefit corporation empowered to issue long-term obligations to
fund certain payments to local governments traditionally funded through
New York State's annual seasonal borrowing. The legislation empowered LGAC
to issue its bonds and notes in an amount not in excess of $4.7 billion
(exclusive of certain refunding bonds) plus certain other amounts. Over a
period of years, the issuance of those long-term obligations, which will
be amortized over no more than 30 years, is expected to result in elimi-
nating the need for continuing short-term seasonal borrowing for those
purposes. The legislation also imposed a cap on the annual seasonal bor-
rowing of the State at $4.7 billion, less net proceeds of bonds issued by
LGAC and bonds issued to provide for capitalized interest, except in cases
where the Governor and the legislative leaders have certified both the
need for additional borrowing and a schedule for reducing it to the cap.
If borrowing above the cap is thus permitted in any fiscal year, it is re-
quired by law to be reduced to the cap by the fourth fiscal year after the
limit was first exceeded. As of December 31, 1993, LGAC had issued its
bonds to provide net proceeds of $3.581 billion and has been authorized to
issue its bonds to provide net proceeds of up to an additional $275 mil-
lion during the State's 1993-94 fiscal year. The Governor has recommended
up to $315 million in additional bond issuances in the 1994-95 fiscal
year. In April 1993, legislation was also enacted providing for signifi-
cant changes in the long-term financing practices of the State and the Au-
thorities.
The Legislature passed a proposed constitutional amendment that would per-
mit the State, without a voter referendum but within a formula-based cap,
to issue revenue bonds, which would be debt of the State secured solely by
a pledge of certain State tax receipts (including those allocated to State
funds dedicated for transportation purposes), and not by the full faith
and credit of the State. In addition, the proposed amendment would require
that State debt be incurred only for capital projects included in a multi-
year capital financing plan and would prohibit lease-purchase and
contractual-obligation financing mechanisms for State facilities. Public
hearings have been held on the proposed constitutional amendment. The Gov-
ernor has announced that he intends to submit changes to the proposed con-
stitutional amendment. Before becoming effective, the proposed constitu-
tional amendment must first be passed again by the next separately elected
Legislature and then approved by the voters at a general election, so that
it could not become effective at the earliest until January 1, after the
general election in November 1995.
On March 26, 1990, S&P downgraded the State's (a) general obligation bonds
from "AA-" to "A" and (b) commercial paper from "A-1+" to "A-1." Also
downgraded was certain of the State's variously rated moral obligation,
lease-purchase, guaranteed and contractual-obligation debt, including debt
issued by certain New York State agencies. On August 27, 1990, S&P af-
firmed these ratings without change. On June 6, 1990, Moody's changed its
ratings on all the State's outstanding general obligation bonds from "A1"
to "A." On March 26, 1990, S&P changed its ratings on all the State's out-
standing general obligation bonds from "AA-" to "A." On January 6, 1992,
Moody's lowered from "A" to "Baa1" the ratings on certain appropriation-
backed debt of the State of New York and its agencies. Approximately two-
thirds of the State's tax-supported debt is affected by Moody's rating ac-
tion. Moody's stated that the more secure general obligation, state-
guaranteed and LGAC bonds continue to be rated "A" but are placed under
review for possible downgrade over the coming months. On January 13, 1992,
S&P lowered its rating on $4.8 billion of the State's general obligation
bonds to "A-" from "A." Various agency debt, state moral obligations, con-
tractual obligations, lease-purchase obligations and state guarantees are
also affected by S&P's action. Additionally, under S&P's minimum-rating
approach, New York local school district debt will now carry a minimum
rating of "A-" rather than "A" and school districts currently rated "A"
are placed on CreditWatch with negative implications. In taking these rat-
ing actions, Moody's and S&P variously cited continued economic
deterioration, chronic operating deficits, mounting GAAP fund balance def-
icits and the legislative stalemate in seeking permanent and structurally
sound fiscal operations. On January 15, 1992, S&P took further action by
lowering the rating on the claims-paying ability of the State of New York
Mortgage Agency Mortgage Insurance Fund to "BBB+" from "A-" following the
January 13, 1992 downgrade of New York State's general obligation bond
rating to "A-."
The State anticipates that its borrowings for capital purposes in its
1993-94 fiscal year will consist of approximately $456 million in general
obligation bonds. In addition, it is anticipated that the State will issue
$140 million in general obligation bonds for the purpose of redeeming out-
standing bond anticipation notes. The Legislature has also authorized the
issuance of up to $85 million in certificates of participation for equip-
ment purchases and real property purposes during the State's 1993-94 fis-
cal year. The Governor has recommended the issuance of $413 million in
bonds and new commercial paper issuances for capital purposes during the
State's 1994-95 fiscal year. In addition, the State expects to issue $154
million in bonds for the purpose of redeeming outstanding bond anticipa-
tion notes. The Governor has also recommended authorization for the issu-
ance of up to $67.8 million in certificates of participation during the
State's 1994-95 fiscal year for personal property acquisitions. The pro-
jection of the State regarding its borrowings for the 1993-94 and 1994-95
fiscal years may change if circumstances require.
Payments for principal and interest due on general obligation bonds, in-
terest due on bond anticipation notes and on tax and revenue anticipation
notes, and contractual-obligation and lease-purchase commitments were
$1.783 billion and $2.045 billion in the aggregate, for New York State's
1991-92 and 1992-93 fiscal years, respectively, and are estimated and rec-
ommended to be $2.167 billion and $2.459 billion for the State's 1993-94
and 1994-95 fiscal years, respectively. These figures do not include in-
terest payable on either State General Obligation Refunding Bonds issued
on July 30, 1992, to the extent that such interest is to be paid from an
escrow fund established with the proceeds of such bonds or New York
State's installment payments relating to the issuance of certificates of
participation.
New York State has never defaulted on any of its general obligation in-
debtedness or its obligations under lease-purchase or contractual-
obligation financing arrangements and has never been called upon to make
any direct payments pursuant to its guarantees. There has never been a de-
fault on any moral obligation debt of any Authority.
Litigation. Certain litigation pending against the State or its officers
or employees could have a substantial or long-term adverse effect on New
York State finances. Among the more significant of these cases are those
that involve (a) the validity of agreements and treaties by which various
Indian tribes transferred title to the State of certain land in central
and upstate New York; (b) certain aspects of New York State's Medicaid
policies and its rates and regulations, including reimbursements to pro-
viders of mandatory and optional Medicaid services; (c) contamination in
the Love Canal area of Niagara Falls; (d) an action against the State and
City officials alleging inadequate shelter allowances to maintain proper
housing; (e) challenges to the practice of reimbursing certain Office of
Mental Health patient care expenses from the client's Social Security ben-
efits; (f) alleged responsibility of the State's officials to assist in
remedying racial segregation in the City of Yonkers; (g) a challenge to
the methods by which the State reimburses localities for the administra-
tive costs of food stamp programs; (h) an action in which the State is a
third party defendant, for injunctive or other appropriate relief, con-
cerning liability for the maintenance of stone groins constructed along
certain areas of Long Island's shoreline; (i) action by school districts
and their employees challenging the constitutionality of Chapter 175 of
the Laws of 1990 which deferred school district contributions to the pub-
lic retirement system and reduced by like amount state aid to the school
districts; (j) challenges to portions of Public Health Law, which imposed
a 13% surcharge on inpatient hospital bills paid by commercial insurers
and employee welfare benefit plans and portions of Chapter 55 of the Laws
of 1992 requiring hospitals to impose and remit to the State an 11% sur-
charge on hospital bills paid by commercial insurers, and which required
health maintenance organizations to remit to the State a surcharge of up
to 9%; and (k) a challenge to provisions of the Public Health Law and im-
plementing regulations that imposed a bad debt and charity care allowance
on all hospital bills and a 13% surcharge on inpatient bills paid by em-
ployee welfare benefit plans.
A number of cases have also been instituted against the State challenging
the constitutionality of various public authority financing programs.
In a proceeding commenced on August 6, 1991 (Schulz, et al. v. State of
New York, et al., Supreme Court, Albany County), petitioners challenge the
constitutionality of two bonding programs of the New York State Thruway
Authority authorized by Chapters 166 and 410 of the Laws of 1991. In addi-
tion, petitioners challenge the fiscal year 1991-92 judiciary budget as
having been enacted in violation of Sections 1 and 2 of Article VII of the
State Constitution. The defendants' motion to dismiss the action on proce-
dural grounds was denied by order of the Supreme Court dated January 2,
1992. By order dated November 5, 1992, the Appellate Division, Third De-
partment, reversed the order of the Supreme Court and granted defendants'
motion to dismiss on grounds of standing and mootness. By order dated Sep-
tember 16, 1993, on motion to reconsider, the Appellate Division, Third
Department, ruled that plaintiffs have standing to challenge the bonding
program authorized by Chapter 166 of the laws of 1991. The proceeding is
presently pending in Supreme Court, Albany County.
In Schulz, et al. v. State of New York, et al., commenced May 24, 1993,
Supreme Court, Albany County, petitioners challenge, among other things,
the constitutionality of, and seek to enjoin certain highway, bridge and
mass transportation bonding programs of the New York State Thruway Author-
ity and the Metropolitan Transportation Authority authorized by Chapter 56
of the Laws of 1993. Petitioners contend that the application of State tax
receipts held in dedicated transportation funds to pay debt service on
bonds of the Thruway Authority and of the Metropolitan Transportation Au-
thority violates Sections 8 and 11 of Article VII and Section 5 of Article
X of the State Constitution and due process provisions of the State and
Federal Constitutions. By order dated July 27, 1993, the Supreme Court
granted defendants' motions for summary judgment, dismissed the complaint,
and vacated the temporary restraining order previously issued. By decision
dated October 21, 1993, the Appellate Division, Third Department, affirmed
the judgment of the Supreme Court. Plaintiffs' appeal of the decision of
the Appellate Division is pending in the Court of Appeals.
Several actions challenging the constitutionality of legislation enacted
during the 1990 legislative session which changed actuarial funding meth-
ods for determining state and local contributions to state employee re-
tirement systems have been decided against the State. The U.S. Supreme
Court's decision in a case challenging the State's possession of certain
property taken pursuant to the State's Abandoned Property Law may result
in the State having to make certain significant payments during the 1993-
94 fiscal year or thereafter.
The legal proceedings noted above involve State finances, State programs
and miscellaneous tort, real property and contract claims in which the
State is a defendant and the monetary damages sought are substantial.
These proceedings could affect adversely the financial condition of the
State in the 1993-94 and 1994-95 fiscal years or thereafter. Adverse de-
velopments in these proceedings or the initiation of new proceedings could
affect the ability of the State to maintain a balanced Revised 1993-94
State Financial Plan. An adverse decision in any of these proceedings
could exceed the amount of the Revised 1993-94 State Financial Plan re-
serve for the payment of judgments and, therefore, could affect the abil-
ity of the State to maintain a balanced Revised 1993-94 State Financial
Plan. In its audited financial statements for the 1992-93 fiscal year, the
State reported its estimated liability for awarded and anticipated unfa-
vorable judgments to be $721 million.
Although other litigation is pending against the State, except as de-
scribed above, no current litigation involves the State's authority, as a
matter of law, to contract indebtedness, issue its obligations, or pay
such indebtedness when it matures, or affects the State's power or abil-
ity, as a matter of law, to impose or collect significant amounts of taxes
and revenues.
Authorities. The fiscal stability of the State is related to the fiscal
stability of its Authorities, which generally have responsibility for fi-
nancing, constructing and operating revenue-producing public benefit fa-
cilities. Authorities are not subject to the constitutional restrictions
on the incurrence of debt which apply to the State itself, and may issue
bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. As of September 30, 1993, the latest data
available, there were 18 Authorities that had outstanding debt of $100
million or more. The aggregate outstanding debt, including refunding
bonds, of these 18 Authorities was $63.5 billion as of September 30, 1993,
of which approximately $7.7 billion was moral obligation debt and approxi-
mately $19.3 billion was financed under lease-purchase or contractual-
obligation financing arrangements.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as fares, user fees on bridges, highway tolls
and rentals for dormitory rooms and housing. In recent years, however, the
State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the 18 Authorities for operat-
ing and other expenses and, in fulfillment of its commitments on moral ob-
ligation indebtedness or otherwise, for debt service. This operating as-
sistance is expected to continue to be required in future years. The State
provided $947.4 million and $955.5 million in financial assistance to the
18 Authorities during the State's 1991-92 and 1992-93 fiscal years, re-
spectively, and expects to provide approximately $1,171.3 million and
$1,387.8 million in financial assistance to these Authorities in its 1993-
94 and 1994-95 fiscal years, respectively. The amounts set forth above ex-
clude, however, amounts provided for capital construction and pursuant to
lease-purchase or contractual-obligation (including service contract debt)
financing arrangements.
Experience has shown that if an Authority suffers serious financial diffi-
culties, both the ability of the State and the Authorities to obtain fi-
nancing in the public credit markets and the market price of the State's
outstanding bonds and notes may be adversely affected. The Housing Finance
Agency and the Urban Development Corporation have in the past required
substantial amounts of assistance from the State to meet debt service
costs or to pay operating expenses. Further assistance, possibly in in-
creasing amounts, may be required for these, or other, Authorities in the
future. In addition, certain statutory arrangements provide for State
local assistance payments otherwise payable to localities to be made under
certain circumstances to certain Authorities. The State has no obligation
to provide additional assistance to localities whose local assistance pay-
ments have been paid to Authorities under these arrangements. However, in
the event that such local assistance payments are so diverted, the af-
fected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State is
closely related to the fiscal health of its localities, particularly the
City of New York, which has required and continues to require significant
financial assistance from the State. The City's independently audited op-
erating results for each of its 1981 through 1993 fiscal years, which end
on June 30, show a General Fund surplus reported in accordance with GAAP.
In addition, the City's financial statements for the 1993 fiscal year re-
ceived an unqualified opinion from the City's independent auditors, the
eleventh consecutive year the City has received such an opinion.
In 1975, the City suffered a fiscal crisis that impaired the borrowing
ability of both the City and the State. In that year the City lost access
to public credit markets. The City was not able to sell short-term notes
to the public again until 1979.
On February 11, 1991, Moody's lowered its rating on the City's general ob-
ligation bonds to "Baa1" from "A." Moody's expressed doubts about whether
the City's January 16, 1991 financial plan presented a "reasonable program
to achieve budget balance in fiscal 1991 and 1992 and assure long-term
structural integrity." Moody's stated "the enormity of the current prob-
lem, the severity of required expenditure cuts, the substantial revenue
enhancements that will be required to achieve balance, the vulnerability
to exogenous factors, and the extremely short time frame within which all
this must be accomplished introduce substantial new risk to the City's
short- and long-term credit outlook." On April 29, 1991, S&P downgraded
the City's outstanding $1.3 billion of general obligation revenue and an-
ticipation notes from "SP-1" to "SP-2." S&P also announced a rating of
"SP-2" for the City's offering of $1.25 billion of general obligation rev-
enue anticipation notes. The lower ratings of S&P "reflect the City's ag-
gravated short-term cash position for fiscal 1991, the unusually high
level of total revenue anticipation note exposure resulting from the
State's delay in passing its budget and distributing fiscal aid, and con-
tinued pressure on revenues and expenditures due to prevailing economic
conditions." On April 30, 1991, Moody's assigned a rating of "MIG-2" to
the same offering of $1.25 billion of general obligation revenue anticipa-
tion notes. Moody's stated that "although an increasingly strained finan-
cial outlook for both the City and the State complicates the State budget
adoption process, this rating on revenue anticipation notes relies explic-
itly on the expectation that the State is fully cognizant of the conse-
quences of further untimely delays in state budget adoption and will act
responsibly. Failure of the State to find a timely resolution to the bud-
get process will have severe implications for the normal financial perfor-
mance of the City and other local governments in the State." On October 7,
1991, Moody's again assigned a "MIG-2" rating to the City's $1.25 billion
of revenue anticipation notes, fiscal 1992, Series A.
Moody's stated in its January 6, 1992 downgrade of certain State obliga-
tions that while such action did not directly affect the bond ratings of
local governments in the State, the impact of the State's fiscal strin-
gency on local government bond ratings will be assessed on a case-by-case
basis. On June 22, 1992, Moody's gave its "MIG-1" rating to the City's
$1.4 billion revenue anticipation notes and tax anticipation notes citing
the City's "markedly improved" short-term credit position.
On July 6, 1993, S&P reaffirmed the City's "A-" rating on $20.4 billion of
general obligation bonds stating that "[t]he City has identified addi-
tional gap-closing measures that have recurring value and will reduce next
year's budget gap . . . by approximately $400 million." Officials at
Moody's also indicated that there were no plans to alter its "Baa1" rating
on the City's general obligation bonds.
The City is heavily dependent on State and Federal assistance to cover in-
sufficiencies in its revenues. There can be no assurance that in the fu-
ture Federal and State assistance will enable the City to make up its bud-
get deficits. To help alleviate the City's financial difficulties, the
Legislature created the Municipal Assistance Corporation ("MAC") in 1975.
MAC is authorized to issue bonds and notes payable from certain stock
transfer tax revenues, from the City's portion of the State sales tax de-
rived in the City and from State per capita aid otherwise payable by the
State to the City. Failure by the State to continue the imposition of such
taxes, the reduction of the rate of such taxes to rates less than those in
effect on July 2, 1975, failure by the State to pay such aid revenues and
the reduction of such aid revenues below a specified level are included
among the events of default in the resolutions authorizing MAC's long-term
debt. The occurrence of an event of default may result in the acceleration
of the maturity of all or a portion of MAC's debt. As of September 30,
1993, MAC had outstanding an aggregate of approximately $5.304 billion of
its bonds. MAC bonds and notes constitute general obligations of MAC and
do not constitute an enforceable obligation or debt of either the State or
the City. Under its enabling legislation, MAC's authority to issue bonds
and notes (other than refunding bonds and notes) expired on December 31,
1984. Legislation has been passed by the legislature which would, under
certain conditions, permit MAC to issue up to $1.465 billion of additional
bonds, which are not subject to a moral obligation provision.
Since 1975, the City's financial condition has been subject to oversight
and review by the New York State Financial Control Board (the "Control
Board") and since 1978 the City's financial statements have been audited
by independent accounting firms. To be eligible for guarantees and assis-
tance, the City is required during a "control period" to submit annually
for Control Board approval, and when a control period is not in effect for
Control Board review, a financial plan for the next four fiscal years cov-
ering the City and certain agencies showing balanced budgets determined in
accordance with GAAP. The State also established the Office of the State
Deputy Comptroller for New York City ("OSDC") to assist the Control Board
in exercising its powers and responsibilities. On June 30, 1986, the City
satisfied the statutory requirements for termination of the control pe-
riod. This means that the Control Board's powers of approval are sus-
pended, but the Board continues to have oversight responsibilities.
On November 23, 1993, the City adopted and submitted to the Control Board
a modification to its 1994-1997 Financial Plan (the "November Modifica-
tion") incorporating various re-estimates of revenues and expenditures.
For fiscal year 1994, the November Modification includes additional re-
sources stemming primarily from the City comptroller's fiscal year 1993
annual audit, savings from a reduction in prior years' accrued expendi-
tures, and higher State and federal aid resulting from claims by the City
for reimbursement of various social services costs. These resources were
used to fund new needs in the November Modification including higher costs
in the uniformed agencies, at the Board of Education ("BOE") and for cer-
tain social services, the unlikelihood of the sale of certain City assets,
and lower estimates of miscellaneous and other revenues. After taking
these adjustments into account, the November Modification projected a bal-
anced budget for fiscal year 1994, based upon revenues of $31.585 billion.
For fiscal years 1995, 1996 and 1997, the November Modification projected
budget gaps of $1.730 billion, $2,513 billion and $2.699 billion, respec-
tively. These gaps are higher by about $450 million in fiscal year 1995
and by about $700 million in each of fiscal years 1996 and 1997 than in
the 1994-97 Financial Plan, primarily on account of the non-recurring
value of the fiscal year 1994 revenue adjustments, the loss of certain
one-time resources funding BOE fiscal year 1994 spending needs, and the
reclassification of anticipated State aid from the baseline revenue esti-
mates to the gap-closing program. To offset these larger gaps, the Novem-
ber Modification relies on additional City, State and other actions.
On December 21, 1993, the staff of the Control Board issued its report on
the November Modification. The report stated that the plan was now more
realistic in terms of the gaps it portrayed and the solutions it offered.
However, the solutions were mostly limited to fiscal year 1994 while the
gap for fiscal year 1995 had been increased by $450 million. Beginning in
fiscal year 1995, budget gaps will average over $2 billion annually.
Therefore, the staff recommended that prompt action to replace many
current-year one-shots with recurring savings was critical. The staff ad-
vocated a vigorous and effective strategy to restructure revenues and ex-
penditures, accompanied by a convincingly detailed plan of implementation.
The report focused attention on the need for the City to closely examine
its capital spending priorities, including appropriate funding for ongoing
maintenance, implementation of a stretch-out of capital commitments, and
development of a written debt policy. In addition, the report noted that
administrative other-than-personal-service expenditures have not shared in
past spending reduction and must begin to do so, and that the City must
assemble a coherent labor policy that integrates productivity initiatives
with wage increases and headcount reductions. The report concluded that
actions taken in the next few months are critical to reverse the expansion
that has occurred since the fiscal year 1994 budget was adopted.
On December 1, 1993, a three-member panel appointed by then Mayor David
Dinkins to address the City's structural budget imbalance released a re-
port setting forth its findings and recommendations. In its report, the
panel noted that budget imbalance is likely to be greater than the City
now projects by $255 million in fiscal year 1995, rising to nearly $1.5
billion in fiscal year 1997. The report provided a number of options that
the City should consider in addressing the structural balance issue such
as severe cuts in City-funded personnel levels, increases in residential
property taxes and the sales tax, and the imposition of bridge tolls and
solid waste collection fees. The report also noted that additional State
action will be required in many instances to allow the City to cut its
budget without grave damage to basic services.
OSDC issued a report on the City's economy on November 23, 1993. The re-
port concluded that the four-year old recession in New York City was end-
ing, and that Wall Street industries were leading the turn-around with in-
creased levels of activity, profits, compensation and employment. The re-
port indicated that the slow process of ending the local recession has
been influenced by the slow rate of expansion in the nation and the reces-
sions in Europe and Japan, which have hurt the City's key export indus-
tries of finance, advertising, communications, law and medicine. However,
the report noted that improvements are now evident in these areas. In ad-
dition, the report noted that the local rate of inflation has dropped
below that of the nation, leasing activity for primary office space has
increased, the rate of decline in retail sales has slowed and unemploy-
ment, while still high, has declined two percentage points over the last
year. The report projected that overall employment levels in the City's
private sector industries would be higher by early 1994. However, it also
indicated that the recovery in the local economy would likely be a slow
process, in many ways mirroring the recent experience on the national
level.
Estimates of the City's revenues and expenditures are based on numerous
assumptions and are subject to various uncertainties. If expected federal
or State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City
should negotiate wage increases for its employees greater than the amounts
provided for in the City's financial plan or if other uncertainties mate-
rialize that reduce expected revenues or increase projected expenditures,
then, to avoid operating deficits, the City may be required to implement
additional actions, including increases in taxes and reductions in essen-
tial City services. The City might also seek additional assistance from
New York State.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City has issued $1.75 billion of notes for seasonal
financing purposes during its 1994 fiscal year. The City's capital financ-
ing program projects long-term financing requirements of approximately
$18.5 billion for the City's fiscal years 1994 through 1997 and other
fixed assets. The major capital requirements include expenditures for the
City's water supply and sewage disposal systems, roads, bridges, mass
transit, schools, hospitals and housing. In addition to financing for new
purposes, the City and the New York City Municipal Water Finance Authority
have issued refunding bonds totalling $1.5 billion in fiscal year 1994.
Certain localities, in addition to the City, could have financial problems
leading to requests for additional State assistance during the State's
1993-94 and 1994-95 fiscal years and thereafter. The potential impact on
the State of such requests by localities is not included in the projec-
tions of the State receipts and disbursements in the State's 1993-94 and
1994-95 fiscal years.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers") re-
sulted in the creation of the Financial Control Board for the City of Yon-
kers (the "Yonkers Board") by the State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the Legislature to assist Yonkers could result in
allocation of State resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1992, the total indebtedness of all locali-
ties in the State was approximately $35.2 billion, of which $19.5 billion
was debt of the City (excluding $5.9 billion in MAC debt); a small portion
(approximately $71.6 million) of the $35.2 billion of indebtedness repre-
sented borrowing to finance budgetary deficits and was issued pursuant to
enabling State legislation. State law requires the comptroller to review
and make recommendations concerning the budgets of those local government
units other than the City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Seventeen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1992.
In 1992, an unusually large number of local government units requested au-
thorization for deficit financings. According to the State's comptroller,
ten local government units were authorized to issue deficit financing in
the aggregate amount of $131.1 million. The current session of the Legis-
lature may receive as many or more requests for deficit-financing authori-
zations as a result of deficits previously incurred by local governments.
Although the comptroller has indicated that the level of deficit financing
requests is unprecedented, such developments are not expected to have a
material adverse effect on the financial condition of the State.
Certain proposed Federal expenditure reductions would reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities. If the State, the City or any of the Authorities were to suf-
fer serious financial difficulties jeopardizing their respective access to
the public credit markets, the marketability of notes and bonds issued by
localities within the State could be adversely affected. Localities also
face anticipated and potential problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. The longer-
range problems of declining urban population, increasing expenditures and
other economic trends could adversely affect localities and require in-
creasing State assistance.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the Prospec-
tus applies to purchases made by any "purchaser," which is defined to in-
clude the following: (a) an individual; (b) an individual, his or her im-
mediate family purchasing shares for his or her own account; (c) a trustee
or other fiduciary purchasing shares for a single trust estate or single
fiduciary account; (d) a pension, profit-sharing or other employee benefit
plan qualified under Section 401(a) of the Code and qualified employee
benefit plans of employers who are "affiliated persons" of each other
within the meaning of the 1940 Act; (e) tax-exempt organizations enumer-
ated in Section 501(c) (3) or (13) of the Code; (f) any other organized
group of persons, provided that the organization has been in existence for
at least six months and was organized for a purpose other than the pur-
chase of investment company securities at a discount; or (g) a trustee or
other professional fiduciary (including a bank, or an investment adviser
registered with the SEC under the Investment Advisers Act of 1940) pur-
chasing shares of the Fund for one or more trust estates or fiduciary ac-
counts. Purchasers who wish to combine purchase orders to take advantage
of volume discounts on Class A shares should contact their Smith Barney
Shearson Financial Consultants.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedule in the Prospectus,
apply to any purchase of Class A shares if the aggregate investment in
Class A shares of the Fund and in Class A shares of other funds in the
Smith Barney Shearson Group of Funds that are sold with a sales charge,
including the purchase being made, of any "purchaser" (as defined above)
is $25,000 or more. The reduced sales charge is subject to confirmation of
the shareholder's holdings through a check of appropriate records. The
Fund reserves the right to terminate or amend the combined right of accu-
mulation at any time after notice to shareholders. For further information
regarding the right of accumulation, shareholders should contact their
Smith Barney Shearson Financial Consultants.
DETERMINATION OF PUBLIC OFFERING PRICE
The Fund offers its shares to the public on a continuous basis. The public
offering price per Class A share of the Fund is equal to the net asset
value per share at the time of purchase plus a sales charge based on the
aggregate amount of the investment. The public offering price per Class B
share (and Class A share purchases, including applicable rights of accumu-
lation, equalling or exceeding $1 million), is equal to the net asset
value per share at the time of purchase and no sales charge is imposed at
the time of purchase. A contingent deferred sales charge ("CDSC"), how-
ever, is imposed on certain redemptions of (a) Class B shares and (b)
Class A shares when purchased in amounts equalling or exceeding $1 mil-
lion. The method of computing the public offering price is shown in the
Fund's financial statements incorporated by reference into this Statement
of Additional Information.
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. ("NYSE")
is closed (other than for customary weekend or holiday closings), (b) when
trading in the markets that 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.
DISTRIBUTION IN KIND
If the Fund's Board of Directors 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
rules adopted by the SEC, any portion of a redemption in excess of the
lesser of $250,000 or 1% of the Fund's net assets by a distribution in
kind of portfolio securities in lieu of cash. Portfolio securities issued
in a distribution in kind will be readily marketable, although sharehold-
ers receiving distributions in kind may incur brokerage commissions when
subsequently disposing of those securities.
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares with a value of at least $10,000 and who wish
to receive specific amounts of cash periodically. Withdrawals of at least
$50 monthly may be made under the Withdrawal Plan by redeeming as many
shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. Any applicable CDSC will not be waived on amounts withdrawn by
shareholders that exceed 2% per month of the value of a shareholder's
shares at the time the Withdrawal Plan commences. To the extent withdraw-
als exceed dividends, distributions and appreciation of a shareholder's
investment in the Fund, there will be a reduction in the value of the
shareholder's investment and continued withdrawal payments will reduce the
shareholder's investment and may ultimately exhaust it. Withdrawal pay-
ments should not be considered as income from investment in the Fund. Fur-
thermore, as it generally would not be advantageous to a shareholder to
make additional investments in the Fund at the same time he or she is par-
ticipating in the Withdrawal Plan, purchases by such shareholder in
amounts of less than $5,000 will not ordinarily be permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates
with TSSG as agent for Withdrawal Plan members. All dividends and distri-
butions on shares in the Withdrawal Plan are reinvested automatically at
net asset value in additional shares of the Fund. All applications for
participation in the Withdrawal Plan must be received by TSSG as With-
drawal Plan agent no later than the eighth day of the month to be eligible
for participation beginning with that month's withdrawal. The Withdrawal
Plan will not be carried over on exchanges between funds or classes of the
Fund ("Classes"). A new Withdrawal Plan application is required to estab-
lish the Withdrawal Plan in the new fund or Class. For additional informa-
tion, shareholders should contact their Smith Barney Shearson Financial
Consultants.
DISTRIBUTOR
Smith Barney Shearson serves as the Fund's distributor on a best efforts
basis pursuant to a written agreement dated July 30, 1993 (the "Distribu-
tion Agreement"). For the 1991, 1992 and 1993 fiscal years, Smith Barney
Shearson received $1,589,566, $2,199,014 and $5,438,327, respectively, in
sales charges from the sale of Fund's Class A shares, and did not reallow
any portion thereof to dealers.
Smith Barney Shearson forwards investors' funds for the purchase of shares
five business days after the placement of purchase orders (i.e., the "set-
tlement date"). When payment is made by the investor before the settlement
date unless otherwise directed by the investor, the funds may be held as a
free credit balance in the investor's brokerage account, and Smith Barney
Shearson may benefit from the temporary use of the funds. The investor may
designate another use for the funds prior to settlement date, such as an
investment in a money market fund (other than Smith Barney Shearson Money
Market Fund) in the Smith Barney Shearson Group of Funds. If the investor
instructs Smith Barney Shearson to invest the funds in a money market fund
in the Smith Barney Shearson Group of Funds, the amount of the investment
will be included as part of the average daily net assets of both the Fund
and the money market fund, and affiliates of Smith Barney Shearson which
serve the funds in an investment advisory capacity will benefit from the
fact they are receiving investment management fees from both such invest-
ment companies, computed on the basis of their average daily net assets.
The Fund's Board of Directors has been advised of the benefits to Smith
Barney Shearson resulting from five-day settlement procedures and will
take such benefits into consideration when reviewing the Advisory and Dis-
tribution Agreements for continuance.
DISTRIBUTION ARRANGEMENTS
Shares of the Fund are distributed on a best efforts basis by Smith Barney
Shearson as exclusive sales agent of the Fund pursuant to the Distribution
Agreement. To compensate Smith Barney Shearson for the services it pro-
vides and for the expense it bears under the Distribution Agreement, the
Fund has adopted a services and distribution plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays Smith Barney
Shearson a service fee, accrued daily and paid monthly, calculated at the
annual rate of .15% of the value of the Fund's average daily net assets
attributable to Class A and Class B shares. In addition, Class B shares
pay a distribution fee primarily intended to compensate Smith Barney
Shearson for its initial expense of paying financial consultants a commis-
sion upon sales of the respective shares. The Class B distribution fees
are calculated at the annual rate of .50% of the value of the Fund's aver-
age net assets attributable to the shares of the Class. For the period
from November 6, 1992 through December 31, 1992, the Fund's Class A and
Class B shares paid $118,993 and $2,039, respectively, in service fees.
For the same period, the Fund's Class B shares paid $6,798 in distribution
fees. For the fiscal year ended December 31, 1993, the Fund's Class A and
Class B shares paid $848,117 and $122,937, respectively in service fees.
For the same period the Fund's Class B shares paid $409,790 in distribu-
tion fees.
Under its terms, the Plan continues from year to year, provided such con-
tinuance is approved annually by vote of the Fund's Board of Directors,
including a majority of the Directors who are not interested persons of
the Fund and who have no direct or indirect financial interest in the op-
eration of the Plan or in the Distribution Agreement (the "Independent Di-
rectors"). The Plan may not be amended to increase the amount of the ser-
vice and distribution fees without shareholder approval, and all amend-
ments of the Plan also must be approved by the Directors and the
Independent Directors in the manner described above. The Plan may be ter-
minated at any time with respect to a Class, without penalty, by vote of a
majority of the Independent Directors or by a vote of a majority of the
outstanding voting securities of the Class (as defined in the 1940 Act).
Pursuant to the Plan, Smith Barney Shearson will provide the Fund's Board
of Directors with periodic reports of amounts expended under the Plan and
the purpose for which such expenditures were made.
VALUATION OF SHARES
The Prospectus discusses the time at which the net asset value of shares
of each Class is determined for purposes of sales and redemptions. Because
of the differences in distribution fees and Class-specific expenses, the
per share net asset value of each Class will differ. The following is a
description of the procedures used by the Fund in valuing its assets.
The valuation of the Fund's assets is made by Boston Advisors after con-
sultation with an independent pricing service (the "Service") approved by
the Fund's Board of Directors. When, in the judgment of the Service,
quoted bid prices for investments are readily available and are represen-
tative of the bid side of the market, these investments are valued at the
mean between the quoted bid prices and asked prices. Investments for
which, in the judgment of the Service, there is no readily obtainable mar-
ket quotation (which may constitute a majority of the portfolio securi-
ties) are carried at fair value as determined by the Service. For the most
part, such investments are liquid and may be readily sold. The Service may
employ electronic data processing techniques and/or a matrix system to de-
termine valuations. The procedures of the Service are reviewed periodi-
cally by the officers of the Fund under the general supervision and re-
sponsibility of the Board of Directors, which may replace any such Service
at any time if it determines it to be in the best interests of the Fund to
do so.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any fund in the Smith Barney Shear-
son Group of Funds may exchange all or part of their shares for shares of
the same Class of other funds in the Smith Barney Shearson Group of Funds,
to the extent such shares are offered for sale in the shareholder's state
of residence, on the basis of relative net asset value per share at the
time of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may be
exchanged for Class A shares of any of the other funds and the sales
charge differential, if any, will be applied. Class A shares of any
fund may be exchanged without a sales charge for shares of the funds
that are offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares sold with
a sales charge, and the appropriate sales charge differential will be
applied.
B. Class A shares of any fund acquired by a previous exchange of
shares purchased with a sales charge may be exchanged for Class A
shares of any of the other funds, and the sales charge differential,
if any, will be applied.
C. Class B shares of any fund may be exchanged without a sales
charge. Class B shares of the Fund exchanged for Class B shares of an-
other fund will be subject to the higher applicable CDSC of the two
funds and, for purposes of calculating CDSC rates and conversion peri-
ods, will be deemed to have been held since the date the shares being
exchanged were purchased.
Dealers other than Smith Barney Shearson must notify TSSG of the inves-
tor's prior ownership of Class A shares of Smith Barney Shearson High In-
come Fund and the account number in order to accomplish an exchange of
shares of the High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the same
Class in a fund with different investment objectives when they believe
that a shift between funds is an appropriate investment decision. This
privilege is available to shareholders resident in any state in which the
fund shares being acquired may legally be sold. Prior to any exchange, the
shareholder should obtain and review a copy of the current prospectus of
each fund into which an exchange is being considered. Prospectuses may be
obtained from any Smith Barney Shearson Financial Consultant.
Upon receipt of proper instructions and all necessary supporting docu-
ments, shares submitted for exchange are redeemed at the then-current net
asset value and, subject to any applicable CDSC, the proceeds are immedi-
ately invested, at a price as described above, in shares of the fund being
acquired. Smith Barney Shearson reserves the right to reject any exchange
request. The exchange privilege may be modified or terminated at any time
after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote yield or total return of a Class in
advertisements or in reports and other communications to shareholders. To
the extent any advertisement or sales literature of the Fund describes the
expenses or performance of any Class, it will also disclose such informa-
tion for the other Class.
YIELD
A Class' 30-day yield figure for a Class of shares, as described below and
shown in the Prospectus, is calculated according to a formula prescribed
by the SEC. The formula can be expressed as follows:
YIELD =2 [(a-b/cd +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 that were purchased by the Fund at a discount
or premium, the formula generally calls for amortization of the discount
or premium; the amortization schedule will be adjusted monthly to reflect
changes in the market values of the debt obligations.
The Fund's equivalent taxable 30-day yield for a Class of shares is com-
puted by dividing that portion of the Class' 30-day yield which is tax-
exempt by one minus a stated income tax rate and adding the product to
that portion, if any, of the Class' yield that is not tax-exempt.
The Fund's Class B yield for the 30-day period ended December 31, 1993 was
4.05%. The tax equivalent yield for Class B shares for this period was
6.65% assuming the payment of Federal income taxes at a rate of 31% and
New York state and city taxes at a combined rate of 11.785%.
The yields on municipal securities are dependent upon a variety of fac-
tors, including general economic and monetary conditions, conditions of
the municipal securities market, size of a particular offering, maturity
of the obligation offered and rating of the issue. Investors should recog-
nize that, in periods of declining interest rates, the Fund's yield for
each Class of shares will tend to be somewhat higher than prevailing mar-
ket rates, and in periods of rising interest rates the Fund's yield for
each Class of shares will tend to be somewhat lower. In addition, when in-
terest rates are falling, the inflow of net new money to the Fund from the
continuous sale of its shares will likely be invested in portfolio instru-
ments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising in-
terest rates, the opposite can be expected to occur.
AVERAGE ANNUAL TOTAL RETURN
"Average annual total return" figures 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 dis-
tributions.
The average annual total return for Class B shares for the periods indi-
cated were as follows:
5.83% per annum for the one-year period beginning January 1, 1993 through
December 31, 1993.
7.60% per annum during the period the Fund commenced selling Class B
shares on November 6, 1992 through December 31, 1993.
Average annual total return figures assume that the maximum applicable
CDSC assessed by the Fund has been deducted from the hypothetical invest-
ment. If the maximum applicable CDSC had not been deducted from the in-
vestment at the time of redemption the average annual total return for the
Class B shares would have been 10.33% and 11.03%, respectively.
AGGREGATE TOTAL RETURN
Aggregate total return figures, as described below, represent the cumula-
tive change in the value of an investment in the Class for the specified
period and are computed by the following formula:
ERV-P / P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000 invest-
ment made at the beginning of a 1-, 5- or 10-year period
at the end of the 1-, 5- or 10-year period (or fractional
portion thereof), assuming reinvestment of all dividends
and distributions.
The aggregate total return for Class B shares was as follows for the pe-
riod indicated:
10.33% for the period from January 1, 1993 through December 31, 1993.
12.79% for the period from November 6, 1992 through December 31, 1993.
The aggregate total return figure does not assume that the maximum 4.0%
CDSC assessed by the Fund has been deducted from the investment at the
time of purchase. If the maximum CDSC had been deducted at the time of
purchase, the Fund's aggregate total return for the same period would have
been 5.83% and 8.79%, respectively.
Performance will vary from time to time depending upon market conditions,
the composition of the Fund's portfolio and operating expenses and the ex-
penses exclusively attributable to the Class. Consequently, any given per-
formance quotation should not be considered representative of the Class'
performance for any specified period in the future. Because performance
will vary, it may not provide a basis for comparing an investment in the
Class with certain bank deposits or other investments that pay a fixed
yield for a stated period of time. Investors comparing a Class' perfor-
mance with that of other mutual funds should give consideration to the
quality and maturity of the respective investment company's portfolio se-
curities.
TAXES
As described above and in the Prospectus, the Fund is designed to provide
investors with current income which is excluded from gross income for Fed-
eral income tax purposes and exempt from New York State and New York City
personal income taxes. The Fund is not intended to constitute a balanced
investment program and is not designed for investors seeking capital gains
or maximum tax-exempt income irrespective of fluctuations in principal.
Investment in the Fund would not be suitable for tax-exempt institutions,
qualified retirement plans, H.R. 10 plans and individual retirement ac-
counts because such investors would not gain any additional tax benefit
from the receipt of tax-exempt income.
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 con-
sult their own tax advisors as to the tax consequences of an investment in
the Fund.
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code. Provided that the Fund (a) is
a regulated investment company and (b) distributes at least 90% of its
taxable net investment income (including, for this purpose, its net real-
ized short-term capital gains) and 90% of its tax-exempt interest income
(reduced by certain expenses), the Fund will not be liable for Federal in-
come taxes to the extent its taxable net investment income and its net re-
alized long- and short-term capital gains are distributed to its share-
holders. Although the Fund expects to be relieved of all or substantially
all Federal and state income or franchise taxes, depending upon the extent
of its activities in states and localities in which its offices are main-
tained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, that portion of
the Fund's income which is treated as earned in any such state or locality
could be subject to state and local tax. Any such taxes paid by the Fund
would reduce the amount of income and gains available for distribution to
shareholders. All net investment income and net capital gains earned by
the Fund will be reinvested automatically in additional shares of the same
Class of the Fund at net asset value, unless the shareholder elects to re-
ceive dividends and distributions in cash.
Because the Fund will distribute exempt-interest dividends, interest on
indebtedness incurred by a shareholder to purchase or carry Fund shares is
not deductible for Federal income and New York State and New York City
personal income tax purposes. If a shareholder receives exempt-interest
dividends with respect to any share and if such share is held by the
shareholder for six months or less, then any loss on the sale or exchange
of such share may, to the extent of such exempt-interest dividends, be
disallowed. In addition, the Code may require a shareholder, if he or she
receives exempt-interest dividends, to treat as taxable income a portion
of certain otherwise non-taxable social security and railroad retirement
benefit payments. Furthermore, that portion of any exempt-interest divi-
dend paid by the Fund which represents income derived from private activ-
ity bonds held by the Fund may not retain its tax-exempt status in the
hands of a shareholder who is a "substantial user" of a facility financed
by such bonds, or a "related person" thereof. Moreover, as noted in the
Fund's Prospectus, some or all of the Fund's dividends may be a specific
preference item, or a component of an adjustment item, for purposes of the
Federal individual and corporate alternative minimum taxes. In addition,
the receipt of dividends and distributions from the Fund also may affect a
foreign corporate shareholder's Federal "branch profits" tax liability and
the Federal "excess net passive income" tax liability of a shareholder of
a Subchapter S corporation. Shareholders should consult their own tax ad-
visors as to whether they are (a) substantial users with respect to a fa-
cility or related to such users within the meaning of the Code or (b) sub-
ject to a Federal alternative minimum tax, the Federal environmental tax,
the Federal branch profits tax or the Federal excess net passive income
tax.
As described above and in the Fund's Prospectus, the Fund may invest in
municipal bond index futures contracts and options on interest rate fu-
tures contracts. The Fund anticipates that these investment activities
will not prevent the Fund from qualifying as a regulated investment com-
pany. As a general rule, these investment activities will increase or de-
crease the amount of long-term and short-term capital gains or losses re-
alized by the Fund and, accordingly, will affect the amount of capital
gains distributed to the Fund's shareholders.
For Federal income tax purposes, gain or loss on the futures contracts and
options described above (collectively referred to as "section 1256 con-
tracts") is taxed pursuant to a special "mark-to-market" system. Under the
mark-to-market system, the Fund may be treated as realizing a greater or
lesser amount of gains or losses than actually realized. As a general
rule, gain or loss on section 1256 contracts is treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss, and, accord-
ingly, the mark-to-market system will generally affect the amount of capi-
tal gains or losses taxable to the Fund and the amount of distributions
taxable to a shareholder. Moreover, if the Fund invests in both section
1256 contracts and offsetting positions in such contracts, then the Fund
might not be able to receive the benefit of certain recognized losses for
an indeterminate period of time. The Fund expects that its activities with
respect to section 1256 contracts and offsetting positions in such con-
tracts (a) will not cause it or its shareholders to be treated as receiv-
ing a materially greater amount of capital gains or distributions than ac-
tually realized or received and (b) will permit it to use substantially
all of the losses of the Fund for the fiscal years in which the losses ac-
tually occur.
Any net long-term capital gains realized by the Fund will be distributed
annually as described in the Prospectus. Such distributions ("capital gain
dividends") will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held Fund shares, and will be
designated as capital gain dividends in a written notice mailed by the
Fund to shareholders after the close of the Fund's taxable year. If a
shareholder receives a capital gain dividend with respect to any share and
if the share has been held by the shareholder for six months or less, then
any loss (to the extent not disallowed pursuant to the other six-month
rule described above relating to exempt-interest dividends) on the sale or
exchange of such share will be treated as a long-term capital loss to the
extent of the capital gain dividend.
If a shareholder (a) incurs a sales charge in acquiring Fund shares, (b)
disposes of those shares within 90 days and (c) acquires shares in a mu-
tual fund for which the otherwise applicable sales charge is reduced by
reason of a reinvestment right (that is, exchange privilege), the original
sales charge increases the shareholder's tax basis in the original shares
only to the extent that the otherwise applicable sales charge for the sec-
ond acquisition is not reduced. The portion of the original sales charge
that does not increase the shareholder's tax basis in the original shares
would be treated as incurred with respect to the second acquisition and,
as a general rule, would increase the shareholder's tax basis in the newly
acquired shares. Furthermore, the same rule also applies to a disposition
of the newly acquired or redeemed shares made within 90 days of the second
acquisition. This provision prevents a shareholder from immediately de-
ducting the sales charge by shifting his or her investment in a family of
mutual funds.
Each shareholder will receive after the close of the calendar year an an-
nual statement as to the Federal income tax and New York State and New
York City personal income tax status of his or her dividends and distribu-
tions from the Fund for the prior calendar year. These statements also
will designate the amount of exempt-interest dividends that is a specified
preference item for purposes of the Federal individual and corporate al-
ternative minimum taxes. Each shareholder also will receive, if appropri-
ate, various written notices after the close of the Fund's prior taxable
year as to the Federal income tax status of his or her dividends and dis-
tributions which were received from the Fund during the Fund's prior tax-
able year. Shareholders should consult their tax advisors as to any other
state and local taxes that may apply to these dividends and distributions.
The dollar amounts of dividends excluded or exempt from Federal income
taxation or New York State and City personal income taxation and the dol-
lar amount subject to Federal income taxation or New York State and City
personal income taxation, if any, will vary for each shareholder depending
upon the size and duration of each shareholder's investment in the Fund.
In the event the Fund derives taxable net investment income, it intends to
designate as taxable dividends the same percentage of each day's dividend
as its actual taxable net investment income bears to its total net invest-
ment income earned on that day. Therefore, the percentage of each day's
dividend designated as taxable, if any, may vary from day to day.
If a shareholder fails to furnish a correct taxpayer identification num-
ber, fails to report fully dividend or 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% backup withholding tax with respect to (a) taxable
dividends and distributions, and (b) the proceeds of any redemptions 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 taxpayer's regular Federal income tax
liability.
The foregoing is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substi-
tute for careful tax planning. Individuals are often exempt from state and
local personal income taxes on distributions of tax-exempt interest income
derived from obligations of issuers located in the state in which they re-
side when these distributions are received directly from these issuers,
but are usually subject to such taxes on income derived from obligations
of issuers located in other jurisdictions. Shareholders are urged to con-
sult their tax advisors with specific reference to their own Federal,
state and local tax situations.
CUSTODIAN AND TRANSFER AGENT
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston
Place, Boston, Massachusetts 02108, and serves as the Fund's custodian
pursuant to a custody agreement. Under the custody agreement, Boston Safe
holds the Fund's portfolio securities and keeps all necessary accounts and
records. For its services, Boston Safe receives a monthly fee based upon
the month-end market value of securities held in custody and also receives
certain securities transaction charges. The assets of the Fund are held
under bank custodianship in compliance with the 1940 Act.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and pursu-
ant to a transfer agency agreement serves as the Fund's transfer agent.
Under the transfer agency agreement, TSSG maintains the shareholder ac-
count records for the Fund, handles certain communications between share-
holders and the Fund, and distributes dividends and distributions payable
by the Fund. For these services, TSSG receives a monthly fee computed on
the basis of the number of shareholder accounts it maintains for the Fund
during the month, and is reimbursed for out-of-pocket expenses.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended December 31, 1993 is
incorporated into this Statement of Additional Information by reference in
its entirety.
APPENDIX
Description of S&P and Moody's ratings:
S&P RATINGS FOR MUNICIPAL BONDS
S&P's Municipal Bond ratings cover obligations of states and political
subdivisions. Ratings are assigned to general obligation and revenue
bonds. General obligation bonds are usually secured by all resources
available to the municipality and the factors outlined in the rating defi-
nitions below are weighed in determining the rating. Because revenue bonds
in general are payable from specifically pledged revenues, the essential
element in the security for a revenue bond is the quantity and quality of
the pledged revenues available to pay debt service.
Although an appraisal of most of the same factors that bear on the quality
of general obligation bond credit is usually appropriate in the rating
analysis of a revenue bond, other factors are important, including partic-
ularly the competitive position of the municipal enterprise under review
and the basic security covenants. Although a rating reflects S&P's judg-
ment as to the issuer's capacity for the timely payment of debt service,
in certain instances it may also reflect a mechanism or procedure for an
assured and prompt cure of a default, should one occur, i.e., an insurance
program, Federal or state guarantee or the automatic withholding and use
of state aid to pay the defaulted debt service.
AAA
Prime -- These are obligations of the highest quality. They have the
strongest capacity for timely payment of debt service.
General Obligation Bonds -- In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible
to autonomous decline. Debt burden is moderate. A strong revenue structure
appears more than adequate to meet future expenditure requirements. Qual-
ity of management appears superior.
Revenue Bonds -- Debt service coverage has been, and is expected to re-
main, substantial. Stability of the pledged revenues is also exceptionally
strong, due to the competitive position of the municipal enterprise or to
the nature of the revenues. Basic security provisions (including rate cov-
enant, earnings test for issuance of additional bonds, and debt service
reserve requirements) are rigorous. There is evidence of superior manage-
ment.
AA
High Grade -- The investment characteristics of general obligation and
revenue bonds in this group are only slightly less marked than those of
the prime quality issues. Bonds rated "AA" have the second strongest ca-
pacity for payment of debt service.
A
Good Grade -- Principal and interest payments on bonds in this category
are regarded as safe. This rating describes the third strongest capacity
for payment of debt service. It differs from the two higher ratings be-
cause:
General Obligation Bonds -- There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expen-
ditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional. Sta-
bility of the pledged revenues could show some variations because of in-
creased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Medium Grade -- Of the investment grade ratings, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of
debt service. The difference between "A" and "BBB" ratings is that the
latter shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged rev-
enues could show substantial variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC and CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C
The rating C is reserved for income bonds on which no interest is being
paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating cat-
egories, except in the AAA-Prime Grade category.
S&P RATINGS FOR MUNICIPAL NOTES
Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1, -2 or -3) by S&P to distinguish more
clearly the credit quality of notes as compared to bonds. Notes rated SP-1
have a very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
the designation of SP-1+. Notes rated SP-2 have a satisfactory capacity to
pay principal and interest.
MOODY'S RATINGS FOR MUNICIPAL BONDS
Aaa
Bonds which are Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective ele-
ments are likely to change, such changes as can be visualized are most un-
likely to impair the fundamentally strong position of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all stan-
dards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because mar-
gins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving se-
curity to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest pay-
ments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of in-
terest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds that are rated Caa are of poor standing. These issues may be in de-
fault or present elements of danger may exist with respect to principal or
interest.
Ca
Bonds that are rated Ca represent obligations which are speculative in a
high degree. These issues are often in default or have other marked short-
comings.
C
Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Baa. The modifier 1 indicates that the se-
curity ranks in the higher end of its generic rating category; the modi-
fier 2 indicates a mid-range ranking; and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.
MOODY'S RATINGS FOR MUNICIPAL NOTES
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction is in recognition of the differences between short-term credit
risk and long-term credit risk. Loans bearing the designation MIG 1 or
VMIG 1 are of the best quality, enjoying strong protection by established
cash flows of funds for their servicing, superior liquidity support or
from established and broad-based access to the market for refinancing or
both. Loans bearing the designation MIG 2 or VMIG 2 are of high quality,
with ample margins of protection although not as large as the preceding
group. Loans bearing the designation MIG 3 or VMIG 3 are of favorable
quality, with all security elements accounted for but lacking the undeni-
able strength of the preceding grades. Liquidity and flow may be narrow
and market access for refinancing is likely to be less well established.
DESCRIPTION OF S&P A-1+ AND A-1 COMMERCIAL PAPER RATING
The rating A-1+ is the highest, and A-1 the second 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 strengths 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 by S&P has 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 allow-
ance made for unusual circumstances; typically, the issuer's industry is
well established and the issuer has a strong position within the industry;
and the reliability and quality of management are unquestioned.
DESCRIPTION OF MOODY'S PRIME-1 COMMERCIAL PAPER RATING
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are
the following: (a) evaluation of the management of the issuer; (b) eco-
nomic evaluation of the issuer's industry or industries and an appraisal
of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and cus-
tomer acceptance; (d) liquidity; (e) amount and quality of long-term debt;
(f) trend of earnings over a period of ten years; (g) financial strength
of a parent company and the relationships which exist with the issuer; and
(h) recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to
meet such obligations.
SMITH BARNEY SHEARSON
NEW YORK MUNICIPALS FUND INC.
Two World Trade Center
New York, New York 10048
Fund 13,194
Smith Barney Shearson
NEW YORK
MUNICIPALS FUND INC.
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 1, 1994
SMITH BARNEY SHEARSON
SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC.
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Included in Part B:
The Registrant's Annual Report for the fiscal year ended December 31,
1993 and the Report of Independent Accountants dated February 11, 1994 are
incorporated by reference to the Definitive 30b2-1 filed on March 1,
1994 as Accession # 0000053798-94-000108.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's registration statement on Form N-1A as
filed with the Securities and Exchange Commission on October 6, 1983. File
Nos. 2-87001 and 811-3869 (the "Registration Statement").
(1) Registrant's Articles of Incorporation and all Amendments are
incorporated by reference to Post-Effective Amendment No. 19 filed on December
29, 1993 ("Post-Effective Amendment No. 19)
(2) Registrant's By-Laws are incorporated by reference to Pre-Effective
Amendment No. 1.
(3) Not Applicable.
(4) Registrant's form of stock certificate for Class A and Class B shares is
incorporated by reference to Post-Effective Amendment No. 16.
(5) Investment Advisory Agreement between the Registrant and Greenwich
Street Advisors dated July 30, 1993, is incorporated by reference to Post-
Effective Amendment No. 19.
(6) Distribution Agreement between the Registrant and Smith Barney
Shearson Inc., dated July 30, 1993, is incorporated by reference to Post-
Effective Amendment No. 19.
(7) Not Applicable.
(8) Custodian Agreement between the Registrant and Boston Safe Deposit and
Trust Company ("Boston Safe") is incorporated by reference to Pre-Effective
Amendment No. 1.
(9) (a) Transfer Agency Agreement between the Registrant and Boston Safe
dated August 2, 1993 is filed herein.
(b) Administration Agreement between the Registrant and The Boston
Company Advisors, Inc. dated May 21, 1993, is incorporated by reference to
Post-Effective No. 19.
(10) Not Applicable.
(11)(a) Consent of Independent Accountants is filed herein.
(b) Consent of Morningstar Mutual Fund Values is incorporated by
reference to Post-Effective Amendment No. 16.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Services and Distribution Plan pursuant to Rule 12b-1 between the
Registrant and Smith Barney Shearson dated July 30, 1993, is incorporated by
reference to Post-Effective Amendment No. 19
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 10.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders by Class as of February 11, 1994
Common Stock Class A- 11,274
par value $.01 per Class B- 4,786
share
Item 27. Indemnification
Under the Registrant's corporate charter and Maryland law, directors and
officers of the Registrant are not liable to the Registrant or its
stockholders except for receipt of an improper personal benefit or active and
deliberate dishonesty The Registrant's corporate charter requires that it
indemnify its directors and officers against liabilities unless it is proved
that a director or officer acted in bad faith or with active and deliberate
dishonesty or received a improper personal benefit. These indemnification
provisions are subject to the limitation under the Investment Company Act of
1940, as amended, that no director or officer may be protected against
liability for willful misfeasance, bad faith, gross negligence or reckless
disregard for the duties of his office.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Greenwich Street Advisors
Greenwich Street Advisors, through its predecessors, has been in the
investment counseling business since 1934 and is a division of Mutual
Management Corp. ("MMC"). MMC was incorporated in 1978 and is a wholly
owned subsidiary of Smith Barney Shearson Holdings Inc. ("Holdings"),
which is in turn a wholly owned subsidiary of The Travelers Inc.
(formerly known as Primerica Corporation) ("Travelers").
The list required by this Item 28 of officers and directors of MMC and
Greenwich Street Advisors, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two fiscal
years, is incorporated by reference to Schedules A and D of FORM ADV
filed by MMC on behalf of Greenwich Street Advisors pursuant to the
Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"),
Shearson Lehman Advisors, a member of the Asset Management Group of
Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers"), served as
the Registrant's investment adviser. On the Closing, Travelers
and Smith Barney, Harris Upham & Co. Incorporated acquired the domestic
retail brokerage and asset management businesses of Shearson Lehman
Brothers, which included the business of the Registrant's prior
investment adviser. Shearson Lehman Brothers was a wholly owned
subsidiary of Shearson Lehman Brothers Holdings Inc. ("Shearson
Holdings"). All of the issued and outstanding common stock of Shearson
Holdings (representing 92% of the voting stock) was held by American
Express Company. Information as to any past business vocation or
employment of a substantial nature engaged in by officers and directors
of Shearson Lehman Advisors can be located in Schedules A and D of FORM
ADV filed by Shearson Lehman Brothers on behalf of Shearson Lehman
Advisors prior to July 30, 1993. (SEC FILE NO. 801-3701)
1/27/94
Item 29. Principal Underwriters
Smith Barney Shearson Inc. ("Smith Barney Shearson") currently acts as
distributor for Smith Barney Shearson Managed Municipals Fund Inc.,
Smith Barney Shearson New York Municipals Fund Inc., Smith Barney
Shearson California Municipals Fund Inc., Smith Barney Shearson
Massachusetts Municipals Fund, Smith Barney Shearson Global
Opportunities Fund, Smith Barney Shearson Aggressive Growth Fund Inc.,
Smith Barney Shearson Appreciation Fund Inc., Smith Barney Shearson
Small Capitalization Fund, Smith Barney Shearson Worldwide Prime Assets
Fund, Smith Barney Shearson Short-Term World Income Fund, Smith Barney
Shearson Principal Return Fund, Smith Barney Shearson Municipal Money
Market Fund Inc., Smith Barney Shearson Daily Dividend Fund Inc., Smith
Barney Shearson Government and Agencies Fund Inc., Smith Barney Shearson
Managed Governments Fund Inc., Smith Barney Shearson New York Municipal
Money Market Fund, Smith Barney Shearson California Municipal Money
Market Fund, Smith Barney Shearson Income Funds, Smith Barney Shearson
Equity Funds, Smith Barney Shearson Investment Funds Inc., Smith Barney
Shearson Precious Metals and Minerals Fund Inc., Smith Barney Shearson
Telecommunications Trust, Smith Barney Shearson Arizona Municipals Fund
Inc., Smith Barney Shearson New Jersey Municipals Fund Inc., The USA
High Yield Fund N.V., Garzarelli Sector Analysis Portfolio N.V., The
Advisors Fund L.P., Smith Barney Shearson Fundamental Value Fund Inc.,
Smith Barney Shearson Series Fund, The Trust for TRAK Investments, Smith
Barney Shearson Income Trust, Smith Barney Shearson FMA R Trust, Smith
Barney Shearson Adjustable Rate Government Income Fund, Smith Barney
Shearson Florida Municipals Fund, Smith Barney Funds, Inc., Smith Barney
Equity Funds, Inc., Smith Barney Muni Funds, Smith Barney World Funds,
Inc., Smith Barney Money Funds, Inc., Smith Barney Tax Free Money Fund,
Inc., Smith Barney Variable Account Funds, Smith Barney U.S. Dollar
Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), and various series of unit investment
trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of
The Travelers Inc. The information required by this Item 29 with
respect to each director, officer and partner of Smith Barney Shearson
is incorporated by reference to Schedule A of FORM BD filed by Smith
Barney Shearson pursuant to the Securities Exchange Act of 1934 (SEC
File No. 812-8510).
1/27/94
Item 30. Location of Accounts and Records
(1) Smith Barney Shearson New York Municipals Fund Inc.
Two World Trade Center
New York, New York 10048
(2) Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
(3) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(4) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(5) The Shareholder Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
None.
Rule 485(b) Certification
The Registrant hereby certifies that it meets all requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933,
as amended.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, all in the
City of Boston, Commonwealth of Massachusetts on the 28th day of
February, 1994.
SMITH BARNEY SHEARSON
NEW YORK MUNICIPALS FUND INC.
By:/s/ Heath B.
McLendon*
Heath B. McLendon, Chief
Executive Officer
Signature Title Date
/s/ Heath B. McLendon*
Heath B. McLendon Director
Chairman of the Board
(Chief Executive Officer)
2/28/94
/s/ Vincent Nave*
Vincent Nave Treasurer (Chief Financial
and Accounting Officer)
2/28/94
/s/ Herbert Barg*
Herbert Barg Director
2/28/94
/s/ Alfred J. Bianchetti*
Alfred J. Bianchetti Director
2/28/94
/s/ Robert E. Borgesen*
Robert E. Borgesen Director
2/28/94
Martin Brody Director
2/28/94
/s/ Dwight B. Crane*
Dwight B. Crane Director
2/28/94
/s/ James J. Crisona*
James J. Crisona Director
2/28/94
/s/ Robert A. Frankel*
Robert A. Frankel Director
2/28/94
Signature Title Date
/s/ Peter H. Gallary Director
2/28/94
Peter H. Gallary
/s/ Dr. Paul Hardin*
Dr. Paul Hardin Director
2/28/94
Stephen E. Kaufman Director
2/28/94
/s/ Joseph J. McCann*
Joseph J. McCann Director
2/28/94
*Signed by Lee D. Augsburger, their
duly authorized attorney-in-fact,
pursuant to power of attorney dated
April 22, 1993
/s/ Lee D. Augsburger______
Lee D. Augsburger
g:\shared\domestic\client\shearson\funds/nymu/pea#20
EXHIBIT 9 (a)
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of August 2, 1993, between Smith Bareny Shearson New
York Municipals Fund Inc., (the "Fund"), a corporation organized under the
laws of Maryland and having its principal place of business at Two World Trade
Center, New york, New York 10048 and THE SHAREHOLDER SERVICES GROUP, INC.
(MA) (the "Transfer Agent"), a Massachusetts corporation with principal
offices at One Exchange Place, 53 State Street, Boston, Massachusetts 02109.
W I T N E S S E T H
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement, or similar
organizational document as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent pursuant to
Section 4(c) hereof as may be received by the Transfer Agent from time to
time.
(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custodian Agreement.
(f) "Fund" shall mean the entity executing this Agreement, and if
it is a series fund, as such term is used in the 1940 Act, such term shall
mean each series of the Fund hereafter created, except that appropriate
documentation with respect to each series must be presented to the Transfer
Agent before this Agreement shall become effective with respect to each such
series.
(g) "1940 Act" shall mean the Investment Company Act of 1940.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by the Transfer Agent from a person
reasonably believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of 1933
and the 1940 Act.
(j) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be, of
the Fund as may be issued from time to time and, if the Fund is a closed-end
or a series fund, as such terms are used in the 1940 Act any other classes or
series of stock, shares of beneficial interest or limited partnership
interests that may be issued from time to time.
(k) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to partners
of limited partnerships.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent for
the Fund. The Transfer Agent accepts such appointments and agrees to perform
the duties hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the Transfer Agent to be
compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written schedule of fees annexed hereto as
Schedule A and incorporated herein. The Transfer Agent will transmit an
invoice to the Fund as soon as practicable after the end of each calendar
month which will be detailed in accordance with Schedule A, and the Fund will
pay to the Transfer Agent the amount of such invoice within thirty (30) days
after the Fund's receipt of the invoice.
In addition, the Fund agrees to pay, and will be billed
separately for, reasonable out-of-pocket expenses incurred by the Transfer
Agent in the performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule B and
incorporated herein. Unspecified out-of-pocket expenses shall be limited to
those out-of-pocket expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the Fund for
expenses incurred by the Transfer Agent in any month shall be made as soon as
practicable but no later than 15 days after the receipt of an itemized bill
from the Transfer Agent.
(b) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A, a revised fee schedule executed and
dated by the parties hereto.
4. Documents. In connection with the appointment of the Transfer Agent
the Fund shall deliver or caused to be delivered to the Transfer Agent the
following documents on or before the date this Agreement goes into effect, but
in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:
(a) If applicable, specimens of the certificates for Shares of
the Fund;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;
(c) A signature card bearing the signatures of any officer of the
Fund or other Authorized Person who will sign Written Instructions or is
authorized to give Oral Instructions.
(d) A certified copy of the Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors
authorizing the execution and delivery of this Agreement;
(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the
validity of the Shares and the status of such Shares under the Securities Act
of 1933, as amended.
5. Further Documentation. The Fund will also furnish the Transfer
Agent with copies of the following documents promptly after the same shall
become available:
(a) each resolution of the Board of Directors authorizing the
issuance of Shares;
(b) any registration statements filed on behalf of the Fund and
all pre-effective and post-effective amendments thereto filed with the
Commission;
(c) a certified copy of each amendment to the Articles of
Incorporation or the By-laws of the Fund;
(d) certified copies of each resolution of the Board of Directors
or other authorization designating Authorized Persons; and
(e) such other certificates, documents or opinions as the
Transfer Agent may reasonably request in connection with the performance of
its duties hereunder.
6. Representations of the Fund. The Fund represents to the Transfer
Agent that all outstanding Shares are validly issued, fully paid and
non-assessable. When Shares are hereafter issued in accordance with the terms
of the Fund's Articles of Incorporation and its Prospectus, such Shares shall
be validly issued, fully paid and non-assessable.
7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the Fund
shall deliver or cause to be delivered to the Transfer Agent written notice of
such declaration signed on behalf of the Fund by an officer thereof, upon
which the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the identity of the Shares involved, (ii) the number of Shares
involved, and (iii) that all appropriate action has been taken.
8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible for administering and/or performing those functions typically
performed by a transfer agent; for acting as service agent in connection with
dividend and distribution functions; and for performing shareholder account
and administrative agent functions in connection with the issuance, transfer
and redemption or repurchase (including coordination with the Custodian) of
Shares in accordance with the terms of the Prospectus and applicable law. The
operating standards and procedures to be followed shall be determined from
time to time by agreement between the Fund and the Transfer Agent and shall
initially be as described in Schedule C attached hereto. In addition, the
Fund shall deliver to the Transfer Agent all notices issued by the Fund with
respect to the Shares in accordance with and pursuant to the Articles of
Incorporation or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
9. Record Keeping and Other Information. The Transfer Agent shall
create and maintain all records required of it pursuant to its duties
hereunder and as set forth in Schedule C in accordance with all applicable
laws, rules and regulations, including records required by Section 31(a) of
the 1940 Act. All records shall be available during regular business hours
for inspection and use by the Fund. Where applicable, such records shall be
maintained by the Transfer Agent for the periods and in the places required by
Rule 31a-2 under the 1940 Act.
Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
10. Other Duties. In addition to the duties set forth in Schedule C,
the Transfer Agent shall perform such other duties and functions, and shall be
paid such amounts therefor, as may from time to time be agreed upon in writing
between the Fund and the Transfer Agent. The compensation for such other
duties and functions shall be reflected in a written amendment to Schedule A
or B and the duties and functions shall be reflected in an amendment to
Schedule C, both dated and signed by authorized persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions
(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice
of any change of authority of any person until receipt of a Written
Instruction thereof from the Fund pursuant to Section 4(c). The Transfer
Agent will also have no liability when processing Share certificates which it
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or for the Transfer Agent. Written Instructions requested by the
Transfer Agent will be provided by the Fund within a reasonable period of
time. In addition, the Transfer Agent, its officers, agents or employees,
shall accept Oral Instructions or Written Instructions given to them by any
person representing or acting on behalf of the Fund only if said
representative is an Authorized Person. The Fund agrees that all Oral
Instructions shall be followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm shall not impair in
any respect the Transfer Agent's right to rely on Oral Instructions. The
Transfer Agent shall have no duty or obligation to inquire into, nor shall the
Transfer Agent be responsible for, the legality of any act done by it upon the
request or direction of a person reasonably believed by the Transfer Agent to
be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares, or the propriety of the amount
to be paid therefor; (iii) the legality of the declaration of any dividend by
the Board of Directors, or the legality of the issuance of any Shares in
payment of any dividend; or (iv) the legality of any recapitalization or
readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be liable or
responsible for delays or errors by acts of God or by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties, mechanical breakdown, insurrection, war,
riots, or failure or unavailability of transportation, communication or power
supply, fire, flood or other catastrophe.
13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party') will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit or other
proceeding (a "Claim") unless such Claim has resulted from a negligent failure
to act or omission to act or bad faith of the Indemnified Party in the
performance of its duties hereunder. In addition, the Fund will indemnify the
Transfer Agent against and hold it harmless from any Claim, damages,
liabilities or expenses (including reasonable counsel fees) that is a result
of: (i) any action taken in accordance with Written or Oral Instructions, or
any other instructions, or share certificates reasonably believed by the
Transfer Agent to be genuine and to be signed, countersigned or executed, or
orally communicated by an Authorized Person; (ii) any action taken in
accordance with written or oral advice reasonably believed by the Transfer
Agent to have been given by counsel for the Fund or its own counsel; or (iii)
any action taken as a result of any error or omission in any record (including
but not limited to magnetic tapes, computer printouts, hard copies and
microfilm copies) delivered, or caused to be delivered by the Fund to the
Transfer Agent in connection with this Agreement.
In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party. The Indemnifying Party
shall have the option to defend the Indemnified Party against any Claim which
may be the subject of this indemnification, and, in the event that the
Indemnifying Party so elects, such defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified Party,
and thereupon the Indemnifying Party shall take over complete defense of the
Claim and the Indemnified Party shall sustain no further legal or other
expenses in respect of such Claim. The Indemnified Party will not confess any
Claim or make any compromise in any case in which the Indemnifying Party will
be asked to provide indemnification, except with the Indemnifying Party's
prior written consent. The obligations of the parties hereto under this
Section shall survive the termination of this Agreement.
14. Consequential Damages. In no event and under no circumstances
shall either party under this Agreement be liable to the other party for
indirect loss of profits, reputation or business or any other special damages
under any provision of this Agreement or for any act or failure to act
hereunder.
15. Term and Termination.
(a) This Agreement shall be effective on the date first written
above and shall continue until Augusst 2, 1994, and thereafter shall
automatically continue for successive annual periods ending on the anniversary
of the date first written above, provided that it may be terminated by either
party upon written notice given at least 60 days prior to termination.
(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors, certified by
the Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, the Transfer
Agent will deliver to such successor a certified list of shareholders of the
Fund (with names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession of the
Transfer Agent, and the Transfer Agent will cooperate with the Fund and any
successor transfer agent or agents in the substitution process.
16. Confidentiality. Both parties hereto agree that any non public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of the
Commission or other governmental agency. The parties further agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this
provision.
17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.
18. Subcontracting. The Fund agrees that the Transfer Agent may, in
its discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto; provided that the appointment of any such
Transfer Agent shall not relieve the Transfer Agent of its responsibilities
hereunder.
19. Miscellaneous.
(a) Notices. Any notice or other instrument authorized or
required by this Agreement to be given in writing to the Fund or the Transfer
Agent, shall be sufficiently given if addressed to that party and received by
it at its office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
Smith Barney Shearson New York Municipals Fund Inc.
Two World Trade Center, Floor 100
New York, NY 10048
Attention: Richard Roelofs
To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Robert F. Radin, President
with a copy to TSSG Counsel
(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the assignor without the written consent of the other party, which consent
shall not be unreasonably withheld.
(c) Governing Law. This Agreement shall be governed exclusively
by the laws of the State of New York without reference to the choice of law
provisions thereof. Each party hereto hereby agrees that (i) the Supreme
Court of New York sitting in New York County shall have exclusive jurisdiction
over any and all disputes arising hereunder; (ii) hereby consents to the
personal jurisdiction of such court over the parties hereto, hereby waiving
any defense of lack of personal jurisdiction; and (iii) appoints the person to
whom notices hereunder are to be sent as agent for service of process.
(d) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall not use the
name of the Transfer Agent in any Prospectus, Statement of Additional
Information, shareholders' report, sales literature or other material relating
to the Fund in a manner not approved prior thereto in writing; provided, that
the Transfer Agent need only receive notice of all reasonable uses of its name
which merely refer in accurate terms to its appointment hereunder or which are
required by any government agency or applicable law or rule. Notwithstanding
the foregoing, any reference to the Transfer Agent shall include a statement
to the effect that it is a wholly owned subsidiary of First Data Corporation.
(g) Use of Fund's Name. The Transfer Agent shall not use the
name of the Fund or material relating to the Fund on any documents or forms
for other than internal use in a manner not approved prior thereto in writing;
provided, that the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of the Transfer
Agent or which are required by any government agency or applicable law or
rule.
(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto relating to the matters covered hereby and supersede any previous
agreements. If any provision is held to be illegal, unenforceable or invalid
for any reason, the remaining provisions shall not be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written.
SMITH BARNEY SHEARSON CALIFORNIA MUNICIPALS FUND
By: /s/ Richard P. Roelofs
Title: President
THE SHAREHOLDER SERVICES GROUP, INC.
By: /s/ Michael G. McCarthy
Title Vice President
A-1
Transfer Agent Fee
Schedule A
Class A shares
The Fund shall pay the Transfer Agent an annualized fee of $11.00 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all accounts that are open
during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per
closed account per month applicable to those shareholder accounts which
close in a given month and remain closed through the following month-end
billing cycle. Such fee shall be billed by the Transfer Agent monthly
in arrears.
Class B shares
The Fund shall pay the Transfer Agent an annualized fee of $12.50 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all accounts that are open
during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per
closed account per month applicable to those shareholder accounts which
close in a given month and remain closed through the following month-end
billing cycle. Such fee shall be billed by the Transfer Agent monthly
in arrears.
Class C shares
The Fund shall pay the Transfer Agent an annualized fee of $8.50 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all accounts that are open
during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per
closed account per month applicable to those shareholder accounts which
close in a given month and remain closed through the following month-end
billing cycle. Such fee shall be billed by the Transfer Agent monthly
in arrears.
Class D shares
The Fund shall pay the Transfer Agent an annualized fee of $9.50 per
shareholder account that is open during any monthly period. Such fee
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all accounts that are open
during such a month.
The Fund shall pay the Transfer Agent an additional fee of $.125 per
closed account per month applicable to those shareholder accounts which
close in a given month and remain closed through the following month-end
billing cycle. Such fee shall be billed by the Transfer Agent monthly
in arrears.
B-1
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following
items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks
and stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first
class)
direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including
all lease, maintenance and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other
equipment and any
expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs,
including, but not
limited to exit fees harged by third party record
keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably incurred by
the Transfer
Agent in performing its duties and responsibilities
under this
Agreement.
The Fund agrees that postage and mailing expenses will be paid on
the day of or prior to mailing as agreed with the Transfer Agent. In
addition, the Fund will promptly reimburse the Transfer Agent for any
other unscheduled expenses incurred by the Transfer Agent whenever the
Fund and the Transfer Agent mutually agree that such expenses are not
otherwise properly borne by the Transfer Agent as part of its duties and
obligations under the Agreement.
C-1
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or its
agent shall maintain a record of the number of Shares held by each
holder of record which shall include name, address, taxpayer
identification and which shall indicate whether such Shares are held in
certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder accounts and will respond to all communications from
Shareholders and others relating to its duties hereunder and such other
correspondence as may from time to time be mutually agreed upon between
the Transfer Agent and the Fund. The Transfer Agent shall provide the
Fund with reports concerning shareholder inquires and the responses
thereto by the Transfer Agent, in such form and at such times as are
agreed to by the Fund and the Transfer Agent.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply the
Transfer Agent or its agent with an adequate supply of blank share
certificates to meet the Transfer Agent or its agent's requirements
therefor. Such Share certificates shall be properly signed by
facsimile. The Fund agrees that, notwithstanding the death,
resignation, or removal of any officer of the Fund whose signature
appears on such certificates, the Transfer Agent or its agent may
continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue replacement
Share certificates in lieu of certificates which have been lost, stolen
or destroyed, upon receipt by the Transfer Agent or its agent of
properly executed affidavits and lost certificate bonds, in form
satisfactory to the Transfer Agent or its agent, with the Fund and the
Transfer Agent or its agent as obligees under the bond.
(c) The Transfer Agent or its agent shall also maintain a
record of each certificate issued, the number of Shares represented
thereby and the holder of record. With respect to Shares held in open
accounts or uncertificated form, i.e., no certificate being issued with
respect thereto, the Transfer Agent or its agent shall maintain
comparable records of the record holders thereof, including their names,
addresses and taxpayer identification. The Transfer Agent or its agent
shall further maintain a stop transfer record on lost and/or replaced
certificates.
C-2
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail to Shareholders of the
Fund, all reports to Shareholders, dividend and distribution notices and
proxy material for the Fund's meetings of Shareholders. In connection
with meetings of Shareholders, the Transfer Agent or its Agent will
prepare Shareholder lists, mail and certify as to the mailing of proxy
materials, process and tabulate returned proxy cards, report on proxies
voted prior to meetings, act as inspector of election at meetings and
certify Shares voted at meetings.
5. Sales of Shares
(a) Suspension of Sale of Shares. The Transfer Agent or
its agent shall not be required to issue any Shares of the Fund where it
has received a Written Instruction from the Fund or official notice from
any appropriate authority that the sale of the Shares of the Fund has
been suspended or discontinued. The existence of such Written
Instructions or such official notice shall be conclusive evidence of the
right of the Transfer Agent or its agent to rely on such Written
Instructions or official notice.
(b) Returned Checks. In the event that any check or other
order for the payment of money is returned unpaid for any reason, the
Transfer Agent or its agent will: (i) give prompt notice of such return
to the Fund or its designee; (ii) place a stop transfer order against
all Shares issued as a result of such check or order; and (iii) take
such actions as the Transfer Agent may from time to time deem
appropriate.
6. Transfer and Repurchase
(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase procedures
set forth in the Fund's Prospectus.
The Transfer Agent or its agent will transfer or repurchase
Shares upon receipt of Oral or Written Instructions or otherwise
pursuant to the Prospectus and Share certificates, if any, properly
endorsed for transfer or redemption, accompanied by such documents as
the Transfer Agent or its agent reasonably may deem necessary.
The Transfer Agent or its agent reserves the right to refuse
to transfer or repurchase Shares until it is satisfied that the
endorsement on the instructions is valid and genuine. The Transfer
Agent or its agent also reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the requested transfer or
repurchase is legally authorized, and it shall incur no liability for
the refusal, in good faith, to make transfers or repurchases which the
Transfer Agent or its agent, in its good judgement, deems improper or
unauthorized, or until it is reasonably satisfied that there is no basis
to any claims adverse to such transfer or repurchase.
C-3
(b) Notice to Custodian and Fund. When Shares are
redeemed, the Transfer Agent or its agent shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and
the Fund or its designee a notification setting forth the number of
Shares to be repurchased. Such repurchased shares shall be reflected on
appropriate accounts maintained by the Transfer Agent or its agent
reflecting outstanding Shares of the Fund and Shares attributed to
individual accounts.
(c) Payment of Repurchase Proceeds. The Transfer Agent or
its agent shall, upon receipt of the moneys paid to it by the Custodian
for the repurchase of Shares, pay such moneys as are received from the
Custodian, all in accordance with the procedures described in the
written instruction received by the Transfer Agent or its agent from the
Fund.
The Transfer Agent or its agent shall not process or effect
any repurchase with respect to Shares of the Fund after receipt by the
Transfer Agent or its agent of notification of the suspension of the
determination of the net asset value of the Fund.
7. Dividends
(a) Notice to Agent and Custodian. Upon the declaration of
each dividend and each capital gains distribution by the Board of
Directors of the Fund with respect to Shares of the Fund, the Fund shall
furnish or cause to be furnished to the Transfer Agent or its agent a
copy of a resolution of the Fund's Board of Directors certified by the
Secretary of the Fund setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per Share to the shareholders of
record as of that date, the total amount payable to the Transfer Agent
or its agent on the payment date and whether such dividend or
distribution is to be paid in Shares of such class at net asset value.
On or before the payment date specified in such resolution
of the Board of Directors, the Custodian of the Fund will pay to the
Transfer Agent sufficient cash to make payment to the shareholders of
record as of such payment date.
(b) Insufficient Funds for Payments. If the Transfer
Agent or its agent does not receive sufficient cash from the Custodian
to make total dividend and/or distribution payments to all shareholders
of the Fund as of the record date, the Transfer Agent or its agent will,
upon notifying the Fund, withhold payment to all Shareholders of record
as of the record date until sufficient cash is provided to the Transfer
Agent or its agent.
C-4
Exhibit 1 to Schedule C
Summary of Services
The services to be performed by the Transfer Agent or its agent
shall be as follows:
A. DAILY RECORDS
Maintain daily the following information with respect to
each Shareholder account as received:
o Name and Address (Zip Code)
o Class of Shares
o Taxpayer Identification Number
o Balance of Shares held by Agent
o Beneficial owner code: i.e., male, female, joint
tenant, etc.
o Dividend code (reinvestment)
o Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
o Answer written inquiries relating to Shareholder
accounts (matters relating to portfolio management, distribution of
Shares and other management policy questions will be referred to the
Fund).
o Process additional payments into established
Shareholder accounts in accordance with Written Instruction from the
Agent.
o Upon receipt of proper instructions and all required
documentation, process requests for repurchase of Shares.
o Identify redemption requests made with respect to
accounts in which Shares have been purchased within an agreed-upon
period of time for determining whether good funds have been collected
with respect to such purchase and process as agreed by the Agent in
accordance with written instructions set forth by the Fund.
o Examine and process all transfers of Shares, ensuring
that all transfer requirements and legal documents have been supplied.
C-5
o Issue and mail replacement checks.
o Open new accounts and maintain records of exchanges
between accounts
C. DIVIDEND ACTIVITY
o Calculate and process Share dividends and
distributions as instructed by the Fund.
o Compute, prepare and mail all necessary reports to
Shareholders or various authorities as requested by the Fund. Report to
the Fund reinvestment plan share purchases and determination of the
reinvestment price.
D. MEETINGS OF SHAREHOLDERS
o Cause to be mailed proxy and related material for all
meetings of Shareholders. Tabulate returned proxies (proxies must be
adaptable to mechanical equipment of the Agent or its agents) and supply
daily reports when sufficient proxies have been received.
o Prepare and submit to the Fund an Affidavit of
Mailing.
o At the time of the meeting, furnish a certified list
of Shareholders, hard copy, microfilm or microfiche and, if requested by
the Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
o Cause to be mailed reports, Prospectuses, and any other
enclosures requested by the Fund (material must be adaptable to
mechanical equipment of Agent or its agents).
o Receive all notices issued by the Fund with respect to the
Preferred Shares in accordance with and pursuant to the Articles of
Incorporation and the Indenture and perform such other specific duties
as are set forth in the Articles of Incorporation including a giving of
notice of a special meeting and notice of redemption in the
circumstances and otherwise in accordance with all relevant provisions
of the Articles of Incorporation.
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g/shared/domestic/clients/shearson/funds/nymu/tranag
g/shared/domestic/clients/shearson/funds/nymu/tranag
EXHIBIT 11 (a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Smith Barney Shearson New York Municipals Fund Inc.:
We hereby consent to the following with respect to
Post-Effective Amendment No. 20 to the Registration Statement on
Form N-1A (File No. 2-87001) under the Securities Act of 1933,
as amended, of Smith Barney Shearson New York Municipals Fund
Inc.:
1. The incorporation by reference of our report dated February
11, 1994 accompanying the Annual Report for the fiscal year
ended December 31, 1993 of Smith Barney Shearson New York
Municipals Fund Inc., in the Statement of Additional Information.
2. The reference to our firm under the heading "Financial
Highlights" in the Prospectus.
3. The reference to our firm under the heading "Counsel and
Auditors" in the Statement of Additional Information.
COOPERS & LYBRAND
Boston, Massachusetts
February 28, 1994
