Registration No. 33-18779
811-5486
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. 12
X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 14
X
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code:
(212) 720-9218
Christina T. Sydor
Secretary
Smith Barney Shearson New Jersey Municipal Fund Inc.
1345 Avenue of the Americas
New York, New York 10105
(Name and Address of Agent of Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
X on August 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.
Registrant's Rule 24f-2 Notice for the fiscal year ended March 31, 1994
was filed on May 26, 1994.
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
FORM N-IA
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. 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
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
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. Calculations of Performance
Data
Performance Data
23. Financial Statements
Financial Statements
August 1, 1994
SMITH BARNEY SHEARSON
New Jersey
Municipals
Fund Inc.
Prospectus begins
on page one.
SMITH BARNEY SHEARSON
SMITH BARNEY SHEARSON
New Jersey Municipals Fund Inc.
PROSPECTUS August 1, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson New Jersey Municipals Fund Inc. (the "Fund") is a
non-diversified municipal fund that seeks to provide New Jersey investors
with as high a level of dividend income exempt from Federal income taxes
and New Jersey state personal income tax as is consistent with prudent in-
vestment 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
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 Addi-
tional Information dated August 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 Financial Consultant. The Statement of Ad-
ditional Information has been filed with the Securities and Exchange Com-
mission (the "SEC") and is incorporated by reference into this Prospectus
in its entirety.
SMITH BARNEY INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
SMITH, BARNEY ADVISERS, INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES 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.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
FINANCIAL HIGHLIGHTS 9
VARIABLE PRICING SYSTEM 12
THE FUND'S PERFORMANCE 13
MANAGEMENT OF THE FUND 15
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 16
NEW JERSEY MUNICIPAL SECURITIES 25
PURCHASE OF SHARES 27
REDEMPTION OF SHARES 30
VALUATION OF SHARES 33
EXCHANGE PRIVILEGE 34
DISTRIBUTOR 39
DIVIDENDS, DISTRIBUTIONS AND TAXES 40
ADDITIONAL INFORMATION 43
</TABLE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the Pro-
spectus. See "Table of Contents."
BENEFITS TO INVESTORS The Fund offers investors several important
benefits:
* Dividends consisting primarily of tax-exempt income for New Jersey
investors.
* Ownership of a professionally managed portfolio comprised primarily of
investment-grade New Jersey 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 flexibil-
ity 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 Shear-
son Group of Funds.
INVESTMENT OBJECTIVE The Fund is an open-end, non-diversified, management
investment company that seeks to provide New Jersey investors with as high
a level of dividend income exempt from Federal income taxes and New Jersey
state personal income tax as is consistent with prudent investment manage-
ment and the preservation of capital. Its investments consist primarily of
intermediate- and long-term investment-grade municipal securities issued
by or on behalf of the State of New Jersey or any of its instrumentali-
ties, and its political subdivisions, agencies and public authorities and
certain other municipal issuers such as the Commonwealth of Puerto Rico,
the Virgin Islands and Guam ("New Jersey Municipal Securities") that pay
interest which is excluded from gross income for Federal income tax pur-
poses and exempt from New Jersey state personal income taxes.
Intermediate- and long- term municipal securities have remaining maturi-
ties at the time of purchase of between three and twenty years. See "In-
vestment 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 invest-
ment best suited to their needs. These Classes, Class A shares and Class B
shares, differ principally in terms of the sales charges and rate of ex-
penses 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 sub-
ject 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 as-
sets 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 Inc. ("Smith Barney"), or a broker that clears securities
transactions through Smith Barney on a fully disclosed basis (an
"Introducing Broker"). Smith Barney recommends that, in most cases, single
investments of $250,000 or more should be made in Class A shares. 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 In-
vestment 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 redeem-
able at net asset value and Class B shares are redeemable at net asset
value less any applicable CDSC. See "Redemption of Shares."
MANAGEMENT OF THE FUND Greenwich Street Advisors, a division of Mutual
Management Corp. ("Greenwich Street Advisors") serves as the Fund's in-
vestment adviser. Mutual Management Corp. provides investment advisory and
management services to investment companies affiliated with Smith Barney.
Smith Barney is a wholly owned subsidiary of Smith Barney Holdings Inc.
("Holdings"), which is in turn a wholly owned subsidiary of The Travelers
Inc. ("Travelers"). Travelers is a diversified financial services holding
company engaged through its subsidiaries principally in the businesses of
consumer financial, investment and insurance services.
Smith, Barney Advisers, Inc. ("SBA"), a wholly owned subsidiary of Hold-
ings, serves as the Fund's administrator.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
sub-administrator. Boston Advisors is a wholly owned subsidiary of The
Boston Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary
of Mellon Bank Corporation ("Mellon"). See "Management of the 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 The net asset value of each Class is quoted daily in
the financial section of most newspapers and is also available from your
Smith Barney Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are de-
clared daily and paid on the last business day of the Smith Barney state-
ment 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 invested automatically, unless otherwise specified by an in-
vestor, 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 divi-
dend 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 Jersey municipal issuers
("Other Municipal Securities" and, together with New Jersey Municipal Se-
curities, "Municipal Securities"). Dividends paid by the Fund that are de-
rived from interest attributable to New Jersey Municipal Securities will
be excluded from gross income for Federal income tax purposes and exempt
from New Jersey state personal income taxes (but not from New Jersey state
franchise tax or New Jersey state corporate income tax), provided, how-
ever, the Fund is a qualified investment fund under New Jersey law. Divi-
dends derived from interest on Other Municipal Securities will be exempt
from Federal income taxes, but may be subject to New Jersey state personal
income taxes. Dividends derived from certain Municipal Securities (includ-
ing New Jersey Municipal Securities), however, may be a specific tax pref-
erence item for Federal alternative minimum tax purposes. The Fund may in-
vest without limit in securities subject to the Federal alternative mini-
mum tax. See "Investment Objective and Management Policies" and
"Dividends, Distributions and Taxes."
The Fund is more susceptible to factors adversely affecting issuers of New
Jersey Municipal Securities than is a municipal bond fund that does not
emphasize these issuers. See "New Jersey Municipal Securities" in the Pro-
spectus and "Special Considerations Relating to New Jersey Municipal Secu-
rities" in the Statement of Additional Information for further details
about the risks of investing in New Jersey 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 as-
sets 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 is-
suers 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
conditions 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 se-
curities 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 characteris-
tics. 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 securi-
ties, municipal bond index and interest rate futures contracts and put and
call options thereon as hedging devices, and municipal leases. See "In-
vestment Objective and Management Policies -- Certain Portfolio Strate-
gies."
THE FUND'S EXPENSES The following expense table lists the costs and ex-
penses an investor will incur either directly or indirectly as a share-
holder of the Fund, based on the maximum sales charge or maximum CDSC that
may be incurred at the time of purchase or redemption of the Fund's oper-
ating expenses for its most recent fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS
B
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a per-
centage of offering price) 4.50% --
Maximum CDSC (as a percentage of redemption pro-
ceeds) --
4.50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees .55%
.55%
12b-1 fees* .15
.65
Other expenses** .13
.16
TOTAL FUND OPERATING EXPENSES .83%
1.36%
<FN>
* Upon conversion of Class B shares to Class A shares, such shares will
no longer be subject to a distribution fee.
** All expenses are based on data for the Fund's fiscal year ended March
31, 1994.
</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 pur-
chased 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 payable to Green-
wich 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 ad-
ministration fees payable to SBA 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 mil-
lion. The nature of the services for which the Fund pays management fees
is described under "Management of the Fund." Smith Barney receives an an-
nual 12b-1 service fee of .15% of the value of average daily net assets of
Class A shares. Smith Barney also receives with respect to Class B shares
an annual 12b-1 fee of .65% of the value of average daily net assets of
Class B shares, consisting of a .50% distribution and a .15% service fee.
"Other expenses" in the above table includes fees for shareholder ser-
vices, custodial fees, legal and accounting fees, printing costs and reg-
istration fees.
During the fiscal year ended March 31, 1994, the Fund's investment adviser
and former administrator voluntarily waived portions of their fees in
amounts equal to .03% and .02%, respectively, of the value of the Fund's
average daily net assets. This had the effect of lowering the Fund's over-
all expenses and increasing the returns otherwise available to investors.
If these fees had not been waived, the Fund's total operating expenses for
the 1994 fiscal year, as a percentage of its average daily net assets,
would have been 0.88% for Class A shares and 1.41% for Class B shares.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with re-
spect 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 consid-
ered 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%.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5
YEARS 10 YEARS*
<S> <C> <C> <C>
<C>
Class A shares** $53 $70 $91
$148
Class B shares:
Assumes complete redemption at end of each
time period*** $59 $73 $84
$149
Assumes no redemption $14 $43 $74
$149
<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 appli-
cable for that time period.
</TABLE>
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand, indepen-
dent accountants, whose report thereon appears in the Fund's Annual Report
dated March 31, 1994. This information should be read in conjunction with
the financial statements and related notes that also appear in the Fund's
Annual Report, which is incorporated by reference into the Statement of
Additional Information.
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
3/31/94 3/31/93
3/31/92
<S> <C> <C> <C>
Net asset value, beginning of year $13.16 $12.44
$12.17
Income from investment operations:
Net investment income*** 0.70 0.75
0.77
Net realized and unrealized gain/(loss) on
investments (0.46) 0.87
0.44
Total from investment operations 0.24 1.62
1.21
Distributions:
Distributions from net investment income (0.69) (0.75)
(0.77)
Distributions in excess of net investment
income (0.01) -- --
Distributions from net realized gains (0.15) (0.14)
(0.13)
Distributions from capital (Note 1) (0.00)** (0.01)
(0.04)
Total distributions (0.85) (0.90)
(0.94)
Net asset value, end of year $12.55 $13.16
$12.44
Total return+++ 1.66% 13.49%
10.22%
Ratios/supplemental data:
Net assets, end of year (in 000's) $119,913 $115,694
$92,797
Ratio of operating expenses to average net
assets+ 0.83% 0.74%
0.67%++
Ratio of net investment income to average
net assets 5.17% 5.76%
6.18%
Portfolio turnover rate 32% 58%
98%
<FN>
** Amount represents less than $0.01 per Class A share.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment adviser, sub-investment adviser and administra-
tor for the years ended March 31, 1994, 1993, 1992, 1991,1990 and 1989
would have been $.69, $.73, $.75, $.78, $.77 and $.74, respectively.
+ Expense ratios before partial waiver of fees by investment adviser and
sub-investment adviser and/or administrator for the years ended March
31, 1994, 1993, 1992, 1991, and 1990 and before the partial waiver of
fees and reimbursement of expenses by investment adviser and sub-
investment adviser and/or administrator for the period ended March 31,
1989 were 0.88%, 0.90%, 0.83%, 1.08% and 1.23%, respectively.
++ The operating expense ratio excludes interest expense. The operating
expense ratio including interest expense was 0.68% for the year ended
March 31, 1992.
+++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
</TABLE>
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR YEAR
PERIOD
ENDED ENDED ENDED
3/31/91 3/31/90
3/31/89*
<S> <C> <C> <C>
Net asset value, beginning of year $11.92 $11.67
$11.40
Income from investment operations:
Net investment income*** 0.82 0.83
0.82
Net realized and unrealized gain/(loss) on
investments 0.32 0.27
0.28
Total from investment operations 1.14 1.10
1.10
Distributions:
Distributions from net investment income (0.83) (0.82)
(0.82)
Distributions in excess of net investment
income -- -- --
Distributions from net realized gains (0.05) (0.03)
(0.01)
Distributions from capital (Note 1) (0.01) -- --
Total distributions (0.89) (0.85)
(0.83)
Net asset value, end of year $12.17 $11.92
$11.67
Total return++ 9.89% 9.62%
9.84%
Ratios/supplemental data:
Net assets, end of year (in 000's) $65,378 $38,728
$29,265
Ratio of operating expenses to average net
assets+ 0.57% 0.55%
0.52%**
Ratio of net investment income to average
net assets 6.74% 6.89%
7.23%**
Portfolio turnover rate 44% 42%
25%
<FN>
* The Fund commenced operations on April 22, 1988. Those shares in ex-
istence prior to November 6, 1992 were designated as Class A shares.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment adviser, sub-investment adviser and/or adminis-
trator for the years ended March 31, 1994, 1993, 1992, 1991,1990, and
1989 would have been $.69, $.73, $.75, $.78, $.77, and $.74,
respectively.
+ Expense ratios before partial waiver of fees by investment adviser and
sub-investment adviser and administrator for the years ended March 31,
1994, 1993, 1992, 1991, and 1990 and before the partial waiver of fees
and reimbursement of expenses by investment adviser and sub-investment
adviser and administrator for the period ended March 31, 1989 were
0.88%, 0.90%, 0.83%, 1.08% and 1.23%, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any applicable sales charges.
</TABLE>
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<t>
<TABLE>
<CAPTION>
YEAR
PERIOD
ENDED ENDED
3/31/94
3/31/93*
<S> <C> <C>
Net asset value, beginning of period $13.16
$12.75
Income from investment operations:
Net investment income*** 0.64
0.28
Net realized and unrealized gain/(loss) on in-
vestments (0.47)
0.55
Total from investment operations 0.17
0.83
Distributions:
Distributions from net investment income (0.62)
(0.27)
Distributions in excess of net investment income (0.01) --
Distributions from net realized gains (0.15)
(0.14)
Distributions from capital (Note 1) (0.00)+++
(0.01)
Total distributions (0.78)
(0.42)
Net asset value, end of period $12.55
$13.16
Total return++ 1.15%
6.60%
Ratios/supplemental data:
Net assets, end of period (in 000's) $48,375
$16,293
Ratio of operating expenses to average net as-
sets+ 1.36%
1.33%**
Ratio of net investment income to average net
assets 4.64%
5.17%**
Portfolio turnover rate 32%
58%
<FN>
* The Fund commenced selling Class B shares on November 6, 1992.
** Annualized.
*** Net investment income before waiver of fees and/or reimbursement of
expenses by investment
adviser, sub-investment adviser and/or administrator for the years
ended March 31, 1994 and 1993 would have been $.63 and $.27,
respectively.
+ Annualized expense ratio before partial waivers of fees by investment
adviser and sub-investment adviser and administrator for the years
ended March 31, 1994 and 1993 were 1.41% and 1.49%, respectively.
++ Total return represents aggregate total return for the periods indi-
cated and does not reflect any
applicable sales charges.
+++ Amount represents less than $0.01 per Class B share.
</TABLE>
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 an-
nual service fee is used by Smith Barney to compensate its Financial Con-
sultants for ongoing services provided to shareholders. The sales charge
is used to compensate Smith Barney 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 sub-
ject 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%. 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 as-
sets attributable to the Class. Like the service fee applicable to the
Class A shares, the Class B service fee is used to compensate Smith Barney
Financial Consultants for ongoing services provided to shareholders. Addi-
tionally, the distribution fee paid with respect to Class B shares compen-
sates Smith Barney for expenses incurred in selling those shares, includ-
ing expenses such as sales commissions, Smith Barney's branch office over-
head 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 re-
ceive different levels of compensation for selling different Classes.
Class B shares are subject to a distribution fee and a higher transfer
agency fee 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.
Eight years after the date of purchase, Class B shares will convert auto-
matically 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 outstanding 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 advertises 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 of the Fund over the 30-day pe-
riod 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 gen-
erated 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 equivalent taxable yield demonstrates the yield on a taxable invest-
ment necessary to produce an after-tax yield equal to the Fund's tax-
exempt 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."
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total re-
turn" 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 Fund's
shares and assume that any income dividends and/or capital gains distribu-
tions 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 a Class' average annual total return for any one year in the pe-
riod might have been greater or less than the average for the entire pe-
riod. "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, 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 dis-
tribution fees, the performance of each of the Classes will differ.
In reports or other communications to shareholders or in advertising mate-
rial, 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 pre-
pared by Lipper Analytical Services, Inc. or similar independent services
that monitor the performance of mutual funds, or other industry or finan-
cial publications such as Barron's, Business Week, CDA Investment Technol-
ogies, Inc., Forbes, Fortune, Institutional Investor, Investors Daily, Ki-
plinger's Personal Finance, Money, Morningstar Mutual Fund Values, The New
York Times, USA Today and The Wall Street Journal. It is important to note
that yield and total return figures are based on historical earnings and
are not intended to indicate future performance. 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 further describes the
methods used to determine performance. Performance figures may be obtained
from your Smith Barney Financial Consultant.
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 ad-
viser, administrator, sub- administrator, custodian and transfer agent.
The day-to-day operations of the Fund are delegated to the Fund's invest-
ment adviser and administrator. The Statement of Additional Information
contains general background information regarding each director and execu-
tive 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 counseling
business since 1934 and is a division of Mutual Management Corp. which was
incorporated in 1978. Greenwich Street Advisors renders investment advice
to investment companies that had aggregate assets under management as of
June 30, 1994 in excess of $47.2 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 re-
search services to the Fund. For the fiscal year ended March 31, 1994, the
Fund paid investment advisory fees equal to .32% of the value of the aver-
age daily net assets of the Fund and Greenwich Street Advisors waived in-
vestment advisory fees in an amount equal to .03% of the value of the
Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Lawrence T. McDermott, Vice President and 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 opera-
tions of the Fund, including making all investment decisions.
The management discussion and analysis, and additional performance infor-
mation regarding the Fund during the fiscal year ended March 31, 1994, are
included in the Annual Report dated March 31, 1994. A copy of the Annual
Report may be obtained upon request and without charge from your Smith
Barney Financial Consultant or by writing or calling the Fund at the ad-
dress or telephone number listed on page one of this Prospectus.
ADMINISTRATOR -- SBA
SBA, located at 1345 Avenue of the Americas, New York, New York 10105,
serves as the Fund's administrator. SBA provides investment management and
administration services to investment companies which had aggregate assets
under management as of June 30, 1994 of $9.1 billion.
SBA generally assists in all aspects of the Fund's administration and
operation.
SUB-ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's sub-administrator. Boston Advisors provides invest-
ment management, investment advisory, administrative and/or sub- adminis-
trative services to investment companies which had aggregate assets under
management as of June 30, 1994, in excess of $87.7 billion.
Boston Advisors calculates the net asset value of the Fund's shares and
generally assists SBA in all aspects of the Fund's administration and op-
eration. For the fiscal year ended March 31, 1994, the Fund paid adminis-
tration fees to Boston Advisors in an amount equal to .18% of the value of
the average daily net assets of the Fund and Boston Advisors waived admin-
istration fees payable to it in an amount equal to .02% 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 Jersey investors
with as high a level of income exempt from Federal and New Jersey 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 outstand-
ing shares. There can be no assurance that the Fund's investment objective
will be achieved.
The Fund operates subject to an investment policy providing that, under
normal market conditions, the Fund will invest at least 80% of its net as-
sets in Municipal Securities and at least 65% of the aggregate principal
amount of the Fund's investments in New Jersey Municipal Securities. When-
ever less than 80% of the Fund's assets are invested in New Jersey Munici-
pal Securities, the Fund, in order to maintain its status as a "qualified
investment fund" under New Jersey law, will seek to invest in debt obliga-
tions which, in the opinion of counsel to the issuers, are free from state
or local taxation under New Jersey or Federal laws ("Tax-Exempt Obliga-
tions"). The Fund's investments in New Jersey Municipal Securities and
Tax-Exempt Obligations will represent at least 80% of the aggregate prin-
cipal amount of all of its investments, excluding cash and cash items (in-
cluding receivables). Subject to these minimum investment intentions, the
Fund also may acquire intermediate- and long-term debt obligations con-
sisting of Other Municipal Securities, the interest on which is at least
exempt from Federal income taxation (not including the possible applica-
bility of the alternative minimum tax). When Greenwich Street Advisors be-
lieves that market conditions warrant adoption of a temporary defensive
investment posture, the Fund may invest without limit in Other Municipal
Securities and in "Temporary Investments" as described below.
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. Unrated securities will be considered to be of in-
vestment grade if deemed by Greenwich Street Advisors to be comparable in
quality to instruments so rated, or if other outstanding obligations of
the issuers of the unrated securities 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 un-
rated securities. Securities in the fourth highest rating category, though
considered to be investment grade, have speculative characteristics. Secu-
rities rated as low as D are extremely speculative and are in actual de-
fault 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 remain-
ing 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 fluc-
tuation and more uncertainty as to payment of principal and interest, and
therefore generate higher yields, than obligations rated above Baa or BBB.
While the market values of lower-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 lower-
rated and comparable unrated municipal securities also tend to be more
sensitive than higher-rated securities to short-term corporate and indus-
try developments and changes in economic conditions (including recession)
in specific regions or localities or among specific types of issuers. In
addition, lower-rated securities and comparable unrated securities gener-
ally 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 ob-
ligations, meet projected goals or obtain additional financing may be im-
paired. The risk of loss due to default by such issuers is significantly
greater because lower-rated and comparable unrated securities generally
are unsecured and frequently are subordinated to the prior payment of se-
nior 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 bonds is considered to be generally ade-
quate, the existence of limited markets for particular lower-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 lower-rated
and comparable unrated securities has not fully weathered a major economic
recession. Any such economic downturn would likely disrupt the market for
such securities and adversely affect the ability of the issuers of such
securities to repay principal and pay interest thereon.
Fixed-income securities, including lower-rated securities and comparable
unrated 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.
A description of the rating systems of Moody's and S&P is contained in the
Statement of Additional Information.
Because many issuers of New Jersey Municipal Securities may choose not to
have their obligations rated, it is possible that a large portion of the
Fund's portfolio may consist of unrated obligations. Unrated obligations
are not necessarily of lower quality than rated obligations, but to the
extent the Fund invests in unrated obligations, the Fund will be more re-
liant on Greenwich Street Advisors' judgment, analysis and experience than
would be the case if the Fund invested only in rated obligations.
The Fund may invest without limit in participations in municipal lease ob-
ligations or installment purchase contract obligations, (collectively,
"municipal lease obligations") of state and local governments or authori-
ties to finance the acquisition of equipment or facilities. The interest
on such obligations is, in the opinion of counsel to the issuers, excluded
from gross income for Federal and New Jersey State personal income tax
purposes provided that the liability for payments of principal and inter-
est is solely that of a New Jersey governmental entity. Although lease ob-
ligations 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, appropri-
ate 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 money is appropriated for such purpose on
a yearly basis. In addition to the "non-appropriation" risk, these securi-
ties represent a relatively new type of financing that has not yet devel-
oped 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 foreclo-
sure 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 dis-
continue 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 ap-
propriate funding; (f) whether the security is backed by a credit enhance-
ment 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 in-
come 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 min-
imum taxes. Individual and corporate shareholders may be subject to a Fed-
eral alternative minimum tax to the extent the Fund's dividends are de-
rived from interest on those bonds. Dividends derived from interest income
on Municipal Securities are a component of the "current earnings" adjust-
ment items 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 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 lia-
bility for Federal income tax to the extent its earnings are distributed
to shareholders. The Fund must qualify as a regulated investment company
to be a qualified investment fund under New Jersey law. 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 secu-
rities of a single issuer and (b) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its total as-
sets 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 sin-
gle 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 fa-
cilities. Revenue securities may also include private activity bonds which
may be issued by or on behalf of public authorities to finance various
privately operated facilities and are not payable from the unrestricted
revenues of the issuer. Sizeable investments in such obligations could in-
volve an increased risk to the Fund should any of the related projects or
facilities experience financial difficulties. The Fund also may invest up
to 15% of its total assets in securities with contractual or other re-
strictions on resale and other instruments which are not readily market-
able. Notwithstanding the foregoing, the Fund will not invest more than
10% of its assets in securities (excluding those subject to Rule 144A
under the Securities Act of 1933, as amended) that are restricted. The
Fund does not expect to invest more than 5% of its assets in repurchase
agreements. In addition, the Fund may invest 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 in an amount of up
to 10% of its total assets (including the amount borrowed) valued at mar-
ket less liabilities (not including the amount borrowed) in order to meet
anticipated redemptions and to pledge its assets 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 Addi-
tional 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 Municipal Securities frequently are
offered on a when-issued basis, which means that delivery and payment for
the 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 that the buyer
enters into the commitment. As a result, the yields obtained on the secu-
rities may be higher or lower than the yields available in the market on
the dates when the instruments are actually delivered to the buyers. In
addition, during the period before delivery and payment, there is no ac-
crual of interest and there may be fluctuations in the price of the secu-
rities so that there may be an urealized loss at the time of delivery. The
Fund will establish a segregated account with the Fund's custodian con-
sisting of cash, obligations issued or guaranteed by the United States
government, its agencies or instrumentalities ("U.S. government securi-
ties") or other high grade debt obligations in an amount equal to the pur-
chase price of the Fund's 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 pur-
chase Municipal Securities and other tax-exempt obligations on a when-
issued basis with the intention of actually acquiring the securities, but
the Fund may sell the 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, includ-
ing taxable money market instruments ("Temporary Investment"). In addi-
tion, when Greenwich Street Advisors believes that market conditions war-
rant, including when acceptable New Jersey Municipal Securities are un-
available, the Fund may take a temporary defensive posture and invest
without limitation in Temporary Investments. To the extent the Fund holds
Temporary Investments, it will not achieve its investment objective. 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. Any Temporary Investments made for defensive
purposes will be made in conformity with the requirements of a qualified
investment fund under New Jersey law. Since the commencement of its opera-
tions, the Fund has not found it necessary to invest in taxable Temporary
Investments.
Financial Futures and Options Transactions. Pending approval from the
Fund's Board of Directors, the Fund will be permitted to invest in finan-
cial futures and options transactions. To hedge against a decline in the
value of Municipal Securities it owns or an increase in the price of Mu-
nicipal Securities it proposes to purchase, the Fund may enter into finan-
cial futures contracts and invest in options on financial futures con-
tracts that are traded on a domestic exchange or board of trade. The fu-
tures contracts or options on futures contracts that may be entered into
by the Fund will be restricted to those that are either based on an index
of Municipal Securities or relate to debt securities the prices of which
are anticipated by Smith Barney to correlate with the prices of the Munic-
ipal Securities owned or to be purchased by the Fund.
In entering into a financial futures contract, the Fund will be required
to deposit with the broker through which it undertakes the transaction an
amount of cash or cash equivalents equal to approximately 5% of the con-
tract amount. This amount, which is known as "initial margin," is subject
to change by the exchange or board of trade on which the contract is
traded, and members of the exchange or board of trade may charge a higher
amount. Initial margin is in the nature of a performance bond or good
faith deposit on the contract that is returned to the Fund upon termina-
tion of the futures contract, assuming all contractual obligations have
been satisfied. In accordance with a process known as "marking-to-market,"
subsequent payments, known as "variation margin," to and from the broker
will be made daily as the price of the index or securities underlying the
futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable. At any time prior to the expira-
tion of a futures 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 contract.
A financial futures contract provides for the future sale by one party and
the purchase by the other party of a certain amount of a specified prop-
erty at a specified price, date, time and place. Unlike the direct invest-
ment in a futures contract, an option on a financial futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in the financial futures contract at a specified exercise price
at any time prior to the expiration date of the option. Upon exercise of
an option, the delivery of the futures position by the writer of the op-
tion to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which repre-
sents the amount by which the market price of the futures contract ex-
ceeds, 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 contract. The potential loss
related to the purchase of an option on financial futures contracts is
limited to the premium paid for the option (plus transaction costs). The
value of the option may change daily and that change would be reflected in
the net asset value of the Fund.
Regulations of the Commodity Futures Trading Commission applicable to the
Fund require that its transactions in financial futures contracts and op-
tions on financial futures contracts be engaged in for bona fide hedging
purposes, or if the Fund enters into futures contracts for speculative
purposes, that the aggregate initial margin deposits and premiums paid by
the Fund will not exceed 5% of the market value of its assets. In addi-
tion, the Fund will, with respect to its purchases of financial futures
contracts, establish a segregated account consisting of cash or cash
equivalents in an amount equal to the total market value of the futures
contracts, less the amount of initial margin on deposit for the contracts.
The Fund's ability to trade in financial futures contracts and options on
financial futures contracts may be limited to some extent by the require-
ments of the Code applicable to a regulated investment company, in addi-
tion to the requirements of a qualified investment fund under New Jersey
law, that are described below under "Dividends, Distributions and Taxes."
Although the Fund intends to enter into financial futures contracts and
options on financial futures contracts that are traded on a domestic ex-
change or board of trade only if an active market exists for those instru-
ments, no assurance can be given that an active market will exist for them
at any particular time. If closing a futures position in anticipation of
adverse price movements is not possible, the Fund would be required to
make daily cash payments of variation margin. In those circumstances, an
increase in the value of the portion of the Fund's investments being
hedged, if any, may offset partially or completely losses on the futures
contract. No assurance can be given, however, that the price of the secu-
rities being hedged will correlate with the price movements in a futures
contract and, thus, provide an offset to losses on the futures contract or
option on the futures contract. In addition, in light of the risk of an
imperfect correlation between securities held by the Fund that are the
subject of a hedging transaction and the futures or options used as a
hedging device, the hedge may not be fully effective because, for example,
losses on the securities held by the Fund may be in excess of gains on the
futures contract or losses on the futures contract may be in excess of
gains on the securities held by the Fund that were the subject of the
hedge. In an effort to compensate for the imperfect correlation of move-
ment in the price of the securities being hedged and movements in the
price of futures contracts, the Fund may enter into financial futures con-
tracts or options on financial futures contracts in a greater of lesser
dollar amount than the dollar amount of the securities being hedged if the
historical volatility of the futures contract has been less or greater
than that of the securities. This "over hedging" or "under hedging" may
adversely affect the Fund's net investment results if market movements are
not as anticipated when the hedge is established.
If the Fund has hedged against the possibility of an increase in interest
rates adversely affecting the value of securities it holds and rates de-
crease instead, the Fund will lose part or all of the benefit of the in-
creased value of securities that it has hedged because it will have off-
setting losses in its futures or options position. In addition, in those
situations, if the Fund has insufficient cash, it may have to sell securi-
ties to meet daily variation margin requirements on the futures contracts
at a time when it may be disadvantageous to do so. These sales of securi-
ties may, but will not necessarily, be at increased prices that reflect
the decline in interest rates.
INVESTMENT RESTRICTIONS
The Fund has adopted certain fundamental investment restrictions that may
not be changed without approval of a majority of the Fund's outstanding
voting securities. Included among those fundamental restrictions are the
following:
1. The Fund will not borrow money, except that the Fund may borrow from
banks for temporary or emergency (not leveraging) purposes, including
the meeting of redemption requests which might otherwise require the
untimely disposition of securities, in an amount not exceeding 10% of
the value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed)
at the time the borrowing is made. Whenever borrowings exceed 5% of
the value of the Fund's total assets, the Fund will not make any addi-
tional investments.
2. The Fund will not make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which the Fund may invest consis-
tent with its investment objective and policies; (b) repurchase agree-
ments; and (c) loans of its portfolio securities.
3. The Fund will not invest more than 25% of its total assets in securi-
ties, the issuers of which are in the same industry. For purposes of
this limitation, U.S. government securities and securities of state or
municipal governments and their political subdivisions are not consid-
ered to be issued by members of any industry.
Further information about the Fund's investment policies, including cer-
tain other investment restrictions adopted by the Fund, are described in
the Statement of Additional Information.
NEW JERSEY MUNICIPAL SECURITIES
As used in this Prospectus, the term "New Jersey Municipal Securities"
generally refers to intermediate- and long-term debt obligations issued by
the State of New Jersey and its political subdivisions, agencies and pub-
lic authorities (together with certain other governmental issuers such as
the Commonwealth of Puerto Rico, the Virgin Islands and Guam) 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 incometax purposes and exempt under the New Jersey Gross Income
Tax Act. For that reason, interest on these obligations is generally fixed
at a lower rate than it would be if it were subject to such taxes. Inter-
est income on certain New Jersey Municipal Securities is a specific tax
preference item for purposes of the Federal individual and corporate al-
ternative minimum taxes. See "Dividends, Distributions and Taxes."
CLASSIFICATIONS
The two principal classifications of New Jersey Municipal Securities are
"general obligation bonds" and "revenue bonds." General obligation bonds
are secured by the issuer's pledge of its full 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 facili-
ties or, in some cases, from the proceeds of a special excise tax or other
specific revenue source, but not from the general taxing power. In addi-
tion, 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 Jersey Municipal Securities, so long as the in-
terest paid on the bonds qualifies as excluded from gross income for Fed-
eral income tax purposes and exempt under the New Jersey Gross Income Tax
Act. Private activity bonds are in most cases revenue bonds and generally
do not carry the pledge of the full faith, credit and taxing power of the
issuing entity.
SPECIAL CONSIDERATIONS
Economic, financial and other conditions relating to the State of New Jer-
sey have an obvious impact upon the state's general obligation bonds.
These conditions, to varying degrees, also will affect the bonds issued by
the state's political subdivisions, agencies and public authorities, in-
cluding special obligation bonds. In general, the State of New Jersey has
a diversified economic base consisting of, among others, commerce, con-
struction and service industries, selective commercial, agriculture, in-
surance, tourism, petroleum refining and manufacturing, although New Jer-
sey's manufacturing industry has shown a downward trend in the last few
years. New Jersey is a major recipient of Federal assistance and, of all
the states, is among the highest in the amount of Federal aid received.
Hence, a decrease in Federal financial assistance may adversely affect New
Jersey's financial condition. While New Jersey's economic base has become
more diversified over time and thus its economy appears to be less vulner-
able during recessionary periods, a recurrence of high levels of unemploy-
ment could adversely affect New Jersey's overall economy and its ability
to meet its financial obligations.
New Jersey maintains a balanced budget, which generally restricts total
appropriation increases to only 5% annually to any municipality or county
or an index rate determined annually by the Director of the Division of
Local Government Services, whichever is less. New Jersey law provides for
those situations where the index percentage rate exceeds 5%. As a result,
the balanced budget plan may adversely affect a municipality's or county's
ability to repay its obligations. Of course, each municipality, county or
other political subdivision will be subject to different economic, finan-
cial and other conditions, which will affect its ability to pay the prin-
cipal and interest on its bonds. Similarly, special obligation or revenue
bonds payable from revenues generated by particular projects or other spe-
cific revenue sources also will be subject to unique economic, financial
and other conditions. If New Jersey or any of its political subdivisions,
agencies or public authorities is unable to meet its financial obliga-
tions, the income derived by the Fund, the ability to preserve or realize
appreciation of the Fund's capital and the Fund's liquidity could be ad-
versely affected.
PURCHASE OF SHARES
Purchases of Fund shares must be made through a brokerage account main-
tained with Smith Barney 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 connec-
tion with a brokerage account through which an investor purchases or holds
shares. Purchases are effected at the public offering price next deter-
mined after a purchase order is received by Smith Barney or an Introducing
Broker (the "trade date"). Payment for Fund shares is generally due to
Smith Barney or an Introducing Broker on the fifth business day after the
trade date (the "settlement date"). Investors who make payment prior to
the settlement date may permit the payment to be held in their brokerage
account 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 or an Introducing Broker prior to
the close of regular trading on the NYSE, currently 4:00 p.m., New York
time, on any business 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 In-
vestment Plan, under which shareholders may authorize Smith Barney 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 brokerage
account or through the automatic redemption of the shareholder's shares of
a Smith Barney Shearson money market fund. For further information regard-
ing the Systematic Investment Plan, shareholders should contact their
Smith Barney 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. The Fund reserves
the right at any time to vary the initial and subsequent investment mini-
mums. Certificates for Fund shares are issued upon request to the Fund's
transfer agent, The Shareholder Services Group, Inc. ("TSSG"), a subsid-
iary of First Data Corporation.
CLASS A SHARES
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:
<TABLE>
<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** .00% .00%
<FN>
* Smith Barney 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 $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 which compensates Smith
Barney 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 com-
bine their purchases of Fund shares to receive volume discounts. Investors
eligible to receive volume discounts include individuals and their immedi-
ate families, tax-qualified employee benefit plans, and trustees or other
professional fiduciaries (including a bank or an investment adviser regis-
tered 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 Personal Living Trust program participants
for whom Smith Barney acts as a trustee. Reduced sales charges on Class A
shares are also available under a combined right of accumulation, under
which an investor may combine the 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 addi-
tional investment would be 4%, rather than the 4.50% normally charged on a
$4,000 purchase. Investors interested in further information regarding re-
duced sales charges should contact their Smith Barney Financial Consult-
ants.
Class A shares may be offered without any applicable sales charges to: (a)
employees of Travelers and its subsidiaries, including Smith Barney, and
employee benefit plans for those employees and their immediate families
when orders on their behalf are placed by those 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 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 re-
deemed 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; or (f) any client of a newly employed Smith Barney Finan-
cial Consultant (for a period up to 90 days from the commencement of the
Financial Consultant's employment with Smith Barney), on the condition
that the purchase 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 de-
tail.
Smith Barney has adopted guidelines, in view of the relative sales charges
and distribution fees applicable to the Classes, directing Financial Con-
sultants and Introducing Brokers that all purchases of shares of $250,000
or more should be for Class A shares. Smith Barney reserves the right to
vary these guidelines at any time.
REDEMPTION OF SHARES
Shareholders may redeem their shares on any day that 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 as 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 redemp-
tion request will be delayed until the Fund's transfer agent receives fur-
ther instructions from Smith Barney, or if the shareholder's account is
not with Smith Barney, from the shareholder directly.
The Fund normally transmits redemption proceeds for credit to the share-
holder's account at Smith Barney or to the Introducing Broker at no charge
(other than any applicable CDSC) within seven days after receipt of a re-
demption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney will
benefit from the use of temporarily uninvested funds. 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 antici-
pates the need for more immediate access to his or her investment should
purchase shares with Federal funds, by bank wire or by certified or cash-
ier'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.
Shares may be redeemed in one of the following ways:
REDEMPTION THROUGH SMITH BARNEY
Redemption requests may be made through Smith Barney or an Introducing
Broker. A shareholder desiring to redeem shares represented by certifi-
cates also must present such certificates to his or her Smith Barney Fi-
nancial Consultant or the Introducing Broker endorsed for transfer (or ac-
companied by an endorsed stock power), signed exactly as the shares are
registered. Redemption requests involving shares represented by certifi-
cates 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 Jersey 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 the Fund's transfer agent, TSSG, or your
Smith Barney Financial Consultant must (a) state the Class and number or
dollar amount of shares to be redeemed, (b) identify the shareholder's ac-
count number and (c) be signed by each registered owner exactly as the
shares are registered. If the shares to be redeemed were issued in certif-
icate form, the certificate must be endorsed for transfer (or 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 redemp-
tion request will not be deemed to be properly received until TSSG re-
ceives 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 CDSC will not be waived or 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, share-
holders should contact their Smith Barney Financial Consultants.
CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES
A CDSC payable to Smith Barney 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 pre-
ceding five years. No charge is imposed to the extent that 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.
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 during a month will be aggregated and deemed to have been made on
the last day of the preceding Smith Barney statement month. The following
table sets forth the rates of the charge for redemptions of Class B shares
by investors:
<TABLE>
<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>
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. Class B shares of Smith Barney Shear-
son Short-Term World Income Fund which are exchanged for Class B shares of
the Fund after April 21, 1994, will automatically convert to Class A
shares four years after the date on which those shares were purchased. 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 A 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 sched-
ules, the shares will be, in all cases, subject to the higher CDSC sched-
ule. 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 invest-
ment 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 days on which the NYSE is closed. The NYSE cur-
rently 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 se-
curities, at fair value as determined by or under the direction of the
Fund's Board of Directors. Short-term investments that mature in 60 days
or less are valued at amortized cost whenever the Board of Directors de-
termines that amortized cost reflects fair value of those investments. Am-
ortized cost valuation involves valuing an instrument at its cost ini-
tially and, thereafter, assuming a constant amortization to maturity of
any discount premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. Further information regarding
the Fund's valuation policies is contained in the Statement of Additional
Information.
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 as indicated,
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 FUNDS
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, B SMITH BARNEY SHEARSON ARIZONA MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
Arizona investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA
MUNICI-
PALS FUND, an intermediate-term municipal bond fund designed
for California 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 de-
signed for Massachusetts investors.
A SMITH BARNEY SHEARSON INTERMEDIATE MATURITY NEW YORK MUNICI-
PALS FUND, an intermediate-term bond fund designed for New
York investors.
A, B SMITH BARNEY SHEARSON NEW YORK MUNICIPALS FUND INC., an
intermediate- and long-term municipal bond fund designed for
New York investors.
A SMITH BARNEY SHEARSON OREGON MUNICIPALS FUND, an
intermediate-
and long-term municipal bond fund designed for Oregon inves-
tors.
Income Funds
A, B SMITH BARNEY SHEARSON ADJUSTABLE RATE GOVERNMENT
INCOME FUND, seeks high current income while limiting the de-
gree of fluctuation in net asset value resulting from
movement
in interest rates.
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 instrumentali-
ties 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.
A, B SMITH BARNEY SHEARSON INVESTMENT GRADE BOND
FUND, seeks maximum current income consistent with prudent
in-
vestment management and preservation of capital by investing
in corporate bonds.
A, B SMITH BARNEY SHEARSON GLOBAL BOND FUND, seeks 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 securi-
ties.
A*, B* SMITH BARNEY SHEARSON UTILITIES FUND, seeks total return by
investing in equity and debt securities of utilities compa-
nies.
A*, B* SMITH BARNEY SHEARSON STRATEGIC INVESTORS FUND, seeks high
total return consisting of current income and capital
appreci-
ation 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
eq-
uity 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.
A*, B* SMITH BARNEY SHEARSON TELECOMMUNICATIONS GROWTH FUND, seeks
capital appreciation, with income as a secondary consider-
ation.
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 prima-
rily 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 bul-
lion.
Money Market Funds
** SMITH BARNEY SHEARSON MONEY MARKET FUND, invests in a
diversi-
fied portfolio of higher quality money market instruments.
*** SMITH BARNEY SHEARSON DAILY DIVIDEND FUND INC., invests in a
variety of money market instruments.
*** SMITH BARNEY SHEARSON GOVERNMENT AND AGENCIES FUND INC., in-
vests in short-term U.S. government and agency securities.
*** SMITH BARNEY SHEARSON MUNICIPAL MONEY MARKET FUND INC., in-
vests in short-term, high quality municipal obligations.
*** SMITH BARNEY SHEARSON CALIFORNIA MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality California municipal
obli-
gations.
*** SMITH BARNEY SHEARSON NEW YORK MUNICIPAL MONEY MARKET FUND,
invests in short-term, high quality New York municipal
obliga-
tions.
<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 funds sold with a higher sales charge. The "sales
charge differential" is limited to a percentage rate no greater than the
excess of the sales charge rate applicable to purchases of shares of the
mutual fund being acquired in the exchange over the sales charge rate(s)
actually paid on the mutual fund shares relinquished in the exchange and
on any predecessor of those shares. For purposes of the exchange privi-
lege, shares obtained through automatic reinvestment of dividends, as de-
scribed below, are treated as having paid the same sales charges applica-
ble 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 ob-
tained through automatic reinvestment will be subject to a sales charge
differential upon exchange.
Class B Exchanges. Class B shareholders of the Fund who wish to exchange
all or a portion of their Class B shares for Class B shares of any of the
funds identified above may do so without imposition of any exchange fee.
In the event a Class B shareholder wishes to exchange all or a portion of
his or her shares for Class B 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 ex-
change privilege is an important benefit, excessive exchange transactions
can be detrimental to the Fund's performance and its shareholders. Green-
wich Street Advisors may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other share-
holders. In this event, Greenwich Street Advisors will notify Smith Bar-
ney, and Smith Barney may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination,
Smith Barney will provide notice in writing or by telephone to the share-
holder 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 ex-
change into any of the funds in the Smith Barney Shearson Group of Funds
ordinarily available, which position the shareholder would expect to main-
tain for a significant period of time. All relevant factors will be con-
sidered 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 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 this exchange privilege, or to obtain
the current prospectuses for the members of the Smith Barney Shearson
Group of Funds, investors should contact their Smith Barney Financial Con-
sultants.
DISTRIBUTOR
Smith Barney is located at 388 Greenwich Street, New York, New York 10013
and serves as distributor of the Fund's shares. Smith Barney 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 is also paid an annual distribution fee
with respect to Class B shares at the rate of .50% of the value of the av-
erage daily net assets attributable to those shares. The fees are autho-
rized 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 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 branch office distribution-related ex-
penses; payments to and expenses of Smith Barney Financial Consultants and
other persons who provide support services in connection with the distri-
bution of the shares; and accruals for interest on the amount of the fore-
going expenses that exceed distribution fees and, in the case of Class B
shares, the CDSC received by Smith Barney. The payments to Smith Barney
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 value of the average daily
net assets of the Class that remain invested in the Fund. Smith Barney Fi-
nancial Consultants may receive different levels of compensation for sell-
ing one Class over another.
Payments under the Plan are not tied exclusively to the distribution and
shareholder service expenses actually incurred by Smith Barney and the
payments may exceed distribution expenses actually incurred. The 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 rel-
evant factors, including expenses borne by Smith Barney and the amounts
received under the Plan and the proceeds of the CDSC.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund declares dividends from its net investment income (that is, in-
come other than 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 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. Unless a
shareholder instructs that dividends or capital gains distributions on
shares of any Class be paid in cash and credited to the shareholder's ac-
count at Smith Barney, 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 Satur-
days, 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. 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 distri-
bution shortly before December 31 in each year of any undistributed ordi-
nary 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 net
investment income and net realized capital gains, 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 ad-
justed basis in his or her shares. Pursuant to the requirements of the
1940 Act, and other applicable laws, a notice will accompany any distribu-
tion 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 decreas-
ing the Fund's total assets, which may increase the Fund's expense ratio.
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 from their gross income for Federal income tax purposes al-
though (a) all or a portion of such exempt-interest dividends will be a
specific preference item for purposes of the Federal individual and corpo-
rate alternative minimum taxes to the extent that 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 alterna-
tive minimum tax. In addition, corporate shareholders may incur a greater
Federal "environmental" tax liability through the receipt of Fund divi-
dends and distributions. With the exception of gains derived from invest-
ments in financial options, futures, forward contracts or similar finan-
cial instruments, distributions paid by the Fund, provided it is a quali-
fied investment fund under New Jersey law, attributable to interest on or
gains from New Jersey Municipal Securities and Tax-Exempt Obligations also
will be exempt from the New Jersey personal income tax (but not the New
Jersey Corporation Business Tax).
Dividends paid from taxable net investment income, if any, and distribu-
tions of net realized short- and long-term capital gains from taxable se-
curities are taxable to shareholders at ordinary income rates, regardless
of how long shareholders have held their Fund shares and whether such div-
idends or distributions are received in cash or reinvested in additional
shares. Distributions of net realized long-term capital gains are taxable
to shareholders as long-term capital gains, regardless of how long they
have held their Fund shares and whether such distributions are received in
cash or reinvested in additional shares. The per share dividends and dis-
tributions 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 capi-
tal gain or loss if the shareholder has held the shares for one year or
less. Gains resulting from the redemption or sales of shares of the Fund,
provided it is a qualified investment fund under New Jersey law, would be
exempt from the New Jersey personal income tax. The Fund's dividends and
distributions will not qualify for the dividends-received deduction for
corporations. Any dividends or distributions paid by the Fund attributable
to investments other than New Jersey Municipal Securities or Tax- Exempt
Obligations will be subject to the New Jersey personal income tax. The per
share dividends and distributions on Class A shares will be higher than
those on Class B shares as a result of lower distribution and transfer
agency fees applicable to Class A shares.
Statements as to the tax status of each shareholder's dividends and dis-
tributions are mailed annually. Each shareholder will also receive, if ap-
propriate, various written notices after the close of the Fund's prior
taxable year as to the Federal income tax status of his or her dividends
and distributions which were received from the Fund during the Fund's
prior taxable year. These statements may set forth the dollar amount of
income excluded or exempt from Federal income or New Jersey state personal
income taxes and the dollar amount, if any, subject to such taxes. More-
over, these statements will designate the amount of exempt-interest divi-
dends that is a specific preference item for purposes of the Federal indi-
vidual and corporate alternative minimum taxes. Shareholders should con-
sult their tax advisors with specific reference to their own tax
situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows New Jersey taxpayers how to translate Federal and
New Jersey state tax savings from investments such as the Fund into an
equivalent return from a taxable investment. The combined effective mar-
ginal tax rate is lower than the sum of the Federal and New Jersey state
marginal rates because the state taxes shareholders pay are deductible
from Federal taxable income. 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.
<TABLE>
<CAPTION>
1994
COMBINED
NEW JERSEY
AND
TAXABLE INCOME* TAX A NEW JERSEY
TAX-EXEMPT INCOME FUND YIELD OF: FEDERAL
SINGLE JOINT BRACKET** 2.0% 3.0% 4.0%
5.0% 6.0% 7.0% 8.0% 9.0%
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
$ 0- 20,000 $ 0- 20,000 16.62% 2.40% 3.60% 4.80%
6.00% 7.20% 8.39% 9.59% 10.79%
20,001- 22,750 20,001- 38,000 17.02 2.41 3.62 4.82
6.03 7.23 8.44 9.64 10.85
22,751- 35,000 38,001- 50,000 29.71 2.85 4.27 5.69
7.11 8.54 9.96 11.38 12.80
50,001- 70,000 30.39 2.87 4.31 5.75
7.18 8.62 10.06 11.49 12.93
35,001- 40,000 70,001- 80,000 31.42 2.92 4.37 5.83
7.29 8.75 10.21 11.67 13.12
40,001- 55,100 80,001-91,850 32.45 2.95 4.44 5.92
7.40 8.38 10.36 11.84 13.32
55,101- 75,000 91,851-140,000 35.26 3.09 4.63 6.18
7.72 9.27 10.81 12.36 13.90
75,001-115,000 35.59 3.11 4.66 6.21
7.76 9.32 10.87 12.42 13.97
140,001-150,000 39.95 3.33 5.00 6.66
8.33 9.99 11.66 13.32 14.99
115,001-250,000 150,001-250,000 40.26 3.35 5.02 6.70
8.37 10.04 11.72 13.39 15.06
250,001 or more 250,001 or more 43.62 3.55 5.32 7.09
8.87 10.64 12.42 14.19 15.96
<FN>
* This amount represents taxable income as defined in the Code. It is as-
sumed that taxable income as defined in the Code is the same as under
the New Jersey personal income tax, however, New Jersey taxable income
may differ due to differences in exemptions, itemized deductions, and
other items.
** For Federal tax purposes, these combined rates reflect the applicable
marginal rates for 1994, including indexing for inflation. These rates
include the effect of deducting state and city taxes on your Federal
return.
</TABLE>
Legislation currently under consideration would increase the number of
federal tax brackets and the top marginal rate. The calculations assume
that no income will be subject to Federal, state or local individual al-
ternate minimum taxes.
ADDITIONAL INFORMATION
The Fund was incorporated on November 12, 1987, under the laws of the
State of Maryland and is registered with the SEC as a non-diversified,
open- end management investment company. The Fund commenced operations on
April 22, 1988 under the name Shearson Lehman New Jersey Municipals Inc.
On December 15, 1988, March 31, 1992 and July 30, 1993, the Fund changed
its name to SLH New Jersey Municipals Fund Inc., Shearson Lehman Brothers
New Jersey Municipals Fund Inc. and Smith Barney Shearson New Jersey Mu-
nicipals 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 $.001 per
share and represents identical interest in the Fund's investment portfo-
lio. As a result, the Classes have the same rights, privileges and prefer-
ences, except with respect to: (a) the designation of each Class; (b) the
effect of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees, if any, borne by each Class; (d) the ex-
penses 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 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 of the Fund will have one vote for each full share owned and a pro-
portionate, fractional vote for any fractional share held of that Class.
Shares of the Fund will be voted generally on a Fund-wide basis on all
matters except matters affecting the interests of one Class. Normally,
there will be no meetings of shareholders for the purpose of electing Di-
rectors unless and until such time as less than a majority of the Direc-
tors holding office have been elected by shareholders. The Directors will
call a meeting for any purpose upon written request of shareholders hold-
ing 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.
The Fund sends to each of its shareholders a semi-annual report and an au-
dited annual report, which include listings of 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 mail-
ing 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 share-
holder 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 Smith Barney Financial Consultant or
TSSG.
Shareholders may make inquiries regarding the Fund to their Smith Barney
Financial Consultants.
No person has been authorized to give any information or to make any rep-
resentations other than those contained in this Prospectus, the Statement
of Additional Information and/or 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 hav-
ing 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.
DIRECTORS
Herbert Barg
Alfred J. Bianchetti
Martin Brody
Dwight B. Crane
James J. Crisona
Robert A. Frankel
Dr. Paul Hardin
Stephen E. Kaufman
Joseph J. McCann
Heath B. McLendon
OFFICERS
Heath B. McLendon
Chairman of the
Board and
Investment Officer
Stephen J. Treadway
President
Richard P. Roelofs
Executive Vice President
Lawrence T. McDermott
Vice President and
Investment Officer
Karen L. Mahoney-Malcomson
Investment Officer
Lewis E. Daidone
Treasurer
Christina T. Sydor
Secretary
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Greenwich Street Advisors
Division of Mutual Management Corp.
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
SMITH BARNEY SHEARSON
New Jersey
Municipals
Fund Inc.
Two World Trade Center
New York, New York 10048
Fund 66,206
FD0231 G4
Smith Barney Shearson
NEW JERSEY MUNICIPALS FUND INC.
Two World Trade Center
New York, New York 10048
(212) 720-9218
STATEMENT OF ADDITIONAL INFORMATION AUGUST 1, 1994
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Smith Barney Shearson
New Jersey Municipals Fund Inc. (the "Fund"), dated August 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 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 incorpo-
rated 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 Jersey Municipal Securities")
10
Purchase of Shares
23
Redemption of Shares
24
Distributor
25
Valuation of Shares
26
Exchange Privilege
26
Performance Data (See in the Prospectus "The Fund's Performance")
27
Taxes (See in the Prospectus "Dividends, Distributions and Taxes")
30
Custodian and Transfer Agent (See in the Prospectus "Additional Information")
33
Financial Statements
33
Appendix
A-1
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain of the organi-
zations that provide services to the Fund. These organizations are as fol-
lows:
<TABLE>
<CAPTION>
NAME SERVICE
<S> <C>
Smith Barney Inc.
("Smith Barney") Distributor
Greenwich Street Advisors, a division of Mutual Management
Corp. ("Greenwich Street Advisors") Investment
Adviser
Smith, Barney Advisers, Inc.
("SBA") Administrator
The Boston Company Advisors, Inc.
("Boston Advisors") Sub-Administrator
Boston Safe Deposit and Trust Company
("Boston Safe") Custodian
The Shareholder Services Group, Inc. ("TSSG"),
a subsidiary of First Data Corporation Transfer Agent
</TABLE>
These organizations and the functions they perform for the 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.
Martin Brody, Director. Vice Chairman of the Board of Restaurant Associ-
ates Corp.; a Director of Jaclyn, Inc. His address is c/o 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 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, Suite One, Pitts-
burgh, Pennsylvania 15243.
*Heath B. McLendon, Chairman of the Board and Investment Officer. Execu-
tive Vice President of Smith Barney and Chairman of Smith Barney Strategy
Advisers Inc.; prior to July 1993, Senior Executive Vice President of
Shearson Lehman Brothers Inc. ("Shearson Lehman Brothers"), Vice Chairman
of Shearson Asset Management, a Director of PanAgora Asset Management,
Inc. and PanAgora Asset Management Limited. His address is Two World Trade
Center, New York, New York 10048.
Stephen J. Treadway, President. Executive Vice President and Director of
Smith Barney; Director and President of Mutual Management Corp. and SBA;
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 and President of Smith Barney Strategy Advisers Inc.; prior to July
1993, Senior Vice President of Shearson Lehman Brothers and Vice President
of Shearson Lehman Investment Strategy Advisors Inc. 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 the predecessor to Greenwich Street 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.
Lewis E. Daidone, Treasurer. Managing Director and Chief Financial Officer
of Smith Barney; Director and Senior Vice President of Mutual Management
Corp. His address is 1345 Avenue of the Americas, New York, New York
10105.
Christina T. Sydor, Secretary. Managing Director of Smith Barney; General
Counsel and Secretary of Mutual Management Corp. Her address is 1345 Ave-
nue of the Americas, New York, New York 10105.
Each Director also serves as a director, trustee or general partner of
other mutual funds for which Smith Barney serves as distributor. As of
July 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 or of any parent or sub-
sidiary of Smith Barney receives any compensation from the Fund for serv-
ing as an officer or Director of the Fund. The Fund pays each Director who
is not an officer, director or employee of Smith Barney or any of its af-
filiates a fee of $1,000 per annum plus $100 per meeting attended and re-
imburses them for travel and out-of-pocket expenses. For the fiscal year
ended March 31, 1994, such fees and expenses totalled $16,869.
INVESTMENT ADVISER -- GREENWICH STREET ADVISORS
ADMINISTRATOR -- SBA
SUB-ADMINISTRATOR -- BOSTON ADVISORS
Greenwich Street Advisors serves as the Fund's investment adviser pursuant
to a written agreement dated July 30, 1993 (the "Advisory Agreement")
which was first approved by the Board of Directors, including a majority
of the 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 Prospec-
tus. Greenwich Street Advisors pays the salary of any officer and employee
who is employed by both it and the Fund. Greenwich Street Advisors bears
all expenses in connection with the performance of its services. Greenwich
Street Advisors is a division of Mutual Management Corp., which is a
wholly owned subsidiary of Smith Barney which is in turn a wholly owned
subsidiary of Smith Barney Holding Inc. ("Holdings"). Holdings is a wholly
owned subsidiary of The Travelers Inc. ("Travelers"), (formerly Primerica
Corporation).
As compensation for Greenwich Street Advisors' services rendered to the
Fund, the Fund pays a fee computed daily and payable monthly at the fol-
lowing annual rates: .35% of the value of the Fund's average daily net as-
sets up to $500 million and .32% of the value of the Fund's average daily
net assets in excess of $500 million. For the 1992, 1993 and 1994 fiscal
years, investment advisory fees paid to Shearson Lehman Advisors, the pre-
decessor to Greenwich Street Advisors and/or Greenwich Street Advisors,
amounted to $284,515, $378,146 and $559,176, respectively. Shearson Lehman
Advisors and/or Greenwich Street Advisors voluntarily waived investment
advisory fees for the fiscal years ended March 31, 1992, 1993 and 1994 in
the amounts of $76,727, $110,602 and $49,482, respectively.
SBA serves as administrator to the Fund pursuant to a written agreement
(the "Administration Agreement") dated April 20, 1994, which was most re-
cently approved by the Fund's Board of Directors, including a majority of
Directors who are not "interested persons" of the Fund or Smith Barney, on
July 20, 1994. SBA is a wholly owned subsidiary of Holdings.
Prior to April 20, 1994, Boston Advisors served as administrator to the
Fund. Boston Advisors currently serves as sub-administrator to the Fund
under a written agreement (the "Sub-Administration Agreement") dated April
20, 1994, which was most recently approved by the Fund's Board of Direc-
tors, including a majority of Directors who are not "interested persons"
of the Fund or Boston Advisors on April 20, 1994. Prior to the close of
business on May 21, 1993, Boston Advisors acted in the capacity as the
Fund's sub-investment adviser and administrator. 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").
Certain of the services provided to the Fund by SBA and Boston Advisors
are described in the Prospectus under "Management of the Fund." In addi-
tion to those services, SBA and Boston Advisors pay the salaries of all
officers and employees who are employed by either of them and the Fund,
maintains office facilities for the Fund, furnishes the Fund with statis-
tical and research data, clerical help and accounting, data processing,
bookkeeping, internal auditing and legal services and certain other ser-
vices required by the Fund, prepares reports to the Fund's shareholders,
and prepares tax returns, reports to and filings with the Securities and
Exchange Commission (the "SEC") and state blue sky authorities. SBA and
Boston Advisors bear all expenses in connection with the performance of
their services.
As compensation for administrative services rendered to the Fund, the Fund
pays a fee computed daily and payable 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 fiscal years ended March 31, 1992, 1993 and 1994,
such fees amounted to $162,580, $216,083 and $319,529, respectively. Bos-
ton Advisors voluntarily waived sub-investment advisory and/or administra-
tion fees for the fiscal years ended March 31, 1992, 1993 and 1994 in the
amounts of $43,844, $63,201 and $28,275, respectively.
The Fund bears expenses incurred in its operations, including: taxes, in-
terest, brokerage fees and commissions, if any; fees of Directors who are
not officers, directors, shareholders or employees of Smith Barney; SEC
fees and state blue sky qualification fees; charges of custodian; transfer
and dividend disbursing agent's fees; certain insurance premiums; outside
auditing and legal expenses; costs of any independent pricing service;
costs of maintaining corporate existence; costs attributable to investors
services (including allocated telephone and personnel expenses); costs of
preparation and printing of prospectuses for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
shareholder meetings and meetings of the officers or Board of Directors of
the Fund.
Greenwich Street Advisors and SBA have agreed that if in any fiscal year
the aggregate expenses of the Fund (including fees payable pursuant to the
Advisory Agreement and Administration Agreement but excluding 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, Greenwich
Street Advisors and SBA will, to the extent required by state law, reduce
their management fees by the amount of such excess expenses, such amount
to be allocated between them in the proportion that their respective fees
bear to the aggregate of such fees paid by the Fund. Such fee reductions,
if any, will be reconciled on a monthly basis. For the fiscal year ended
March 31, 1994 no such fee reduction was required.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as legal counsel to the Fund. McCarter &
English serves as special New Jersey counsel for the Fund and has reviewed
the portions of the Prospectus and this Statement of Additional Informa-
tion concerning New Jersey taxes and the description of the special con-
siderations relating to investments in New Jersey Municipal Securities (as
defined below). The Directors who are not "interested persons" of the Fund
have selected Stroock & Stroock & Lavan as their counsel.
Coopers and 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 Jersey municipal issuers, the interest on which is at least exempt
from Federal income taxation ("Other Municipal Securities"), and obliga-
tions of the State of New Jersey and its political subdivisions, agencies
and public authorities (together with certain municipal issuers such as
the Commonwealth of Puerto Rico, the Virgin Islands and Guam) that pay in-
terest which is excluded from gross income for Federal income tax purposes
and exempt from New Jersey personal income taxes ("New Jersey 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 lower-rated and comparable unrated securities, the Fund's
achievement 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.
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 such organizations or their
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 invest-
ments in accordance with its investment objective and policies. The Appen-
dix contains information concerning the ratings of Moody's and S&P and
their significance.
TEMPORARY INVESTMENTS
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 agencies or instrumentalities ("U.S. government securi-
ties"), repurchase agreements, 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 certificates of de-
posit of domestic banks with assets of $1 billion or more. The Fund in-
tends to purchase tax-exempt Temporary Investments pending the investment
of the proceeds of the sale of portfolio securities or shares of the
Fund's common stock, or in order to have highly liquid securities avail-
able to meet anticipated redemptions. 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; provided, however, that the
Fund will seek, to the extent that it makes Temporary Investments for de-
fensive purposes, to make such investments in conformity with the require-
ments of a qualified investment fund under New Jersey law.
Repurchase Agreements. As a defensive position only, 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 Fed-
eral Reserve Bank of New York's list of reporting dealers. A repurchase
agreement is a contract under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price on an
agreed-upon date. Under the terms of a typical repurchase agreement, the
Fund would acquire an underlying debt obligation for a relatively short
period (usually not more than seven days) subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-
upon price and time, thereby determining the yield during the Fund's hold-
ing period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period. Under
each repurchase agreement, the selling institution will be required to
maintain the value of the securities subject to the repurchase agreement
at not less than their repurchase price. Repurchase agreements could in-
volve 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 associ-
ated with asserting those rights and the risk of losing all or part of the
income from the agreement. Greenwich Street Advisors, SBA or Boston Advi-
sors acting under the supervision of the Fund's Board of Directors, re-
views on an ongoing basis the value of the collateral and the creditwor-
thiness of those banks and dealers with which the Fund enters into repur-
chase agreements to evaluate potential risks.
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 Board of Directors at any time. The Fund may 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 securi-
ties on a when-issued or delayed-delivery basis; (b) purchasing or selling
futures contracts and options on futures contracts and other similar in-
struments; and (c) issuing separate classes of shares.
2. Invest more than 25% of its total assets in securities, the issuers of
which are in the same industry. For purposes of this limitation, U.S. gov-
ernment 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 temporary
or emergency (not leveraging) purposes, including the meeting of redemp-
tion requests which might otherwise require the untimely disposition of
securities, in an amount not exceeding 10% of the value of the Fund's
total assets (including the amount borrowed) valued at market less liabil-
ities (not including the amount borrowed) at the time the borrowing is
made. Whenever borrowings exceed 5% of the value of the Fund's total as-
sets, the Fund will not make additional investments.
4. Make loans. This restriction does not apply to: (a) the purchase of
debt obligations in which the Fund may invest consistent with its invest-
ment objective and policies; (b) repurchase agreements; and (c) loans of
its portfolio securities.
5. Engage in the business of underwriting securities issued by other per-
sons, 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 in-
vestment 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 re-
ceived 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 credits
as are necessary for the clearance of purchases and sales of portfolio se-
curities) or sell any securities short (except against the box). For pur-
poses of this restriction, the deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts and related op-
tions 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 securi-
ties of issuers having a record, including predecessors, of less than
three years of continuous operation, except U.S. government securities.
(For purposes of this restriction issuers include predecessors, sponsors,
controling persons, general partners, guarantors and originators of under-
lying assets which have less than three years of continuous operation or
relevant business experience.)
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 as-
sets 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 op-
tions or in the writing of such options, except that the Fund may engage
in transactions involving municipal bond index and interest rate futures
contracts and options thereon after approval of these investment strate-
gies by the Board of Directors and notice thereof to the Fund's sharehold-
ers.
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 of Directors ap-
proval and appropriate disclosure to investors.
If a percentage restriction is complied 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 portfolio 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. 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 that the best price or
execution 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
normally are executed at a price between the bid and asked prices. The
Fund has paid no brokerage commissions since its commencement of opera-
tions.
Allocation of transactions, including their frequency, to various dealers
is determined by Greenwich Street Advisors in its best judgment and in the
manner deemed fair and reasonable to shareholders. The primary consider-
ations are the availability of the desired security and prompt execution
of orders in an effective manner at the most favorable prices. Subject to
these considerations, dealers which 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 enables Greenwich Street Advisors to supplement its own research
and analysis with the views and information of other securities firms.
Such information may be useful to Greenwich Street Advisors in serving
both the Fund and its other clients, and, conversely, supplemental infor-
mation obtained by the placement of business of other clients may be use-
ful 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 is a
member, except to the extent permitted by the SEC. Under certain circum-
stances, the Fund may be at a disadvantage because of this limitation in
comparison with other investment companies which have a similar investment
objective but which are not subject to such limitation. The Fund also may
execute portfolio transactions through Smith Barney and its affiliates in
accordance with rules promulgated by the SEC.
While investment decisions for the Fund are made independently from those
of the other accounts managed by Greenwich Street Advisors, investments of
the type that the Fund may make also may be made by such other accounts.
When the Fund and one or more other accounts managed by Greenwich Street
Advisors are prepared to invest in, or desire to dispose of, the same se-
curity, 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 supply of various types of tax-exempt
securities. For the fiscal years ended March 31, 1993 and 1994, the Fund's
portfolio turnover rates were 58% and 32%, 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 finance privately operated facil-
ities 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
factors, the financial condition of the issuer, the general conditions of
the Municipal Bond market, the size of a particular offering, the maturity
of the obligation offered and the rating of the issue. Municipal Bonds are
subject to the provisions of bankruptcy, insolvency and other laws affect-
ing the rights and remedies of creditors, such as the Federal Bankruptcy
Code, and laws, if any that may be enacted by Congress or state legisla-
tures 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. The possibility also exists that
as a result of litigation or other conditions, 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 materially and adversely affected.
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 may actually be higher than those obtained in the
transaction itself. To account for this risk, a segregated 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 daily so that the value of the
account will equal the amount of such commitments by the Fund. Placing se-
curities 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 commit-
ted 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 commitments. Upon the settlement date of the when-issued se-
curities, the Fund will meet its obligations from then-available cash
flow, sale of securities held in the segregated account, sale of other se-
curities or, although it normally would not 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 securities to meet
such obligations may involve the realization of capital gains, which may
not be exempt from New Jersey personal income taxes, and from Federal in-
come 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 JERSEY MUNICIPAL SECURITIES
Some of the significant financial considerations relating to the invest-
ments of the Fund are summarized below. The following information consti-
tutes only a brief summary, does not purport to be a complete description
and is largely based on information drawn from official statements relat-
ing to securities offerings of New Jersey municipal obligations available
as of the date of this Statement of Additional Information. The accuracy
and completeness of the information contained in such offering statements
has not been independently verified.
State Finance/Economic Information. New Jersey is the ninth largest state
in population and the fifth smallest in land area. With an average of
1.062 people per square mile, it is the most densely populated of all the
states. New Jersey's economic base is diversified, consisting of a variety
of manufacturing, construction and service industries, supplemented by
rural areas with selective commercial agriculture. Historically, New Jer-
sey's average per capita income has been well above the national average,
and in 1992 New Jersey ranked second among the states in per capita per-
sonal income ($26,969).
By the beginning of the national recession (which officially started in
July 1990 according to the National Bureau of Economic Research), con-
struction activity had already been declining in New Jersey for nearly two
years. As the rapid acceleration of real estate prices forced many would-
be homeowners out of the market and high non-residential vacancy rates re-
duced new commitments for offices and commercial facilities, construction
employment began to decline; also, growth had tapered off markedly in the
service sectors and the long-term downtrend of factory employment had ac-
celerated, partly because of a leveling off of industrial demand nation-
ally. The onset of recession caused an acceleration of New Jersey's job
losses in construction and manufacturing, as well as an employment down-
turn in such previously growing sectors as wholesale trade, retail trade,
finance, utilities, trucking and warehousing.
Reflecting the economic downturn, the rate of unemployment in New Jersey
rose from 3.6% during the first quarter of 1989 to a recessionary peak of
9.3% during 1992. The unemployment rate fell to 6.7% during the fourth
quarter of 1993.
In 1992, employment in services and government turned around in New Jer-
sey, growing over the year by 0.7% and 0.3%, respectively. These increases
were outweighed by the declines in other sectors -- especially in manufac-
turing, wholesale and retail trade and construction -- resulting in a de-
cline in non-farm employment of 1.7% in 1992. Non-farm employment contin-
ued to decline in 1993, but the rate of decline has tapered off. Employ-
ment in the first nine months of 1993 was 1.0% lower than in the same
period of 1992. Gains were recorded in services, government, finance, in-
surance, real estate and transportation, communications and public utili-
ties. Declines continued in trade, construction and manufacturing.
Just as New Jersey was hurt by the national recession, evidence of its im-
proving economy can be found in increased home-building and other areas of
construction activity. Total construction contracts awarded in New Jersey
rose by 7.0% in 1993 compared with 1992, with the biggest increase being
in residential construction awards, which increased by 26% in 1993 com-
pared to 1992.
New Jersey's Budget and Appropriate System. New Jersey operates on a fis-
cal year ending on June 30. The General Fund is the fund into which all
New Jersey revenues not otherwise restricted by statute are deposited and
from which appropriations are made. The largest part of the total finan-
cial operations of New Jersey is accounted for in the General Fund, which
includes revenues received from taxes and unrestricted by statute, most
Federal revenues, and certain miscellaneous revenue items. The Appropria-
tion Acts enacted by the New Jersey Legislature and approved by the Gover-
nor provide the basic framework for the operation of the General Fund. The
undesignated General Fund balance at year end for fiscal year 1991 was
$1.4 million, for fiscal year 1992 was $760.8 million and for fiscal year
1993 was $937.0 million. For fiscal year 1994, the balance in the undesig-
nated General Fund is projected to be $772.3 million. The fund balances
are available for appropriation in succeeding fiscal years.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may by statutory authority prevent any expendi-
ture under any appropriation. No supplemental appropriation may be enacted
after adoption of an appropriations act except where there are sufficient
revenues on hand or anticipated to meet such appropriation. In the past
when actual revenues have not been less than the amount anticipated in the
budget, the Governor has exercised plenary powers leading to, among other
actions, a hiring freeze for all New Jersey departments and discontinua-
tion of programs for which appropriations were budgeted but not yet spent.
General Obligation Bonds. New Jersey finances capital projects primarily
through the sale of its general obligation bonds. These bonds are backed
by the full faith and credit of New Jersey. Tax revenues and certain other
fees are pledged to meet the principal and interest payments required to
pay the debt fully.
The aggregate outstanding general obligation bonded indebtedness of New
Jersey as of June 30, 1993 was $3.5947 billion. The revised appropriation
for the debt service obligation on outstanding indebtedness is $119.9 mil-
lion for fiscal year 1994.
In addition to payment from bond proceeds, capital construction can also
be funded by appropriation of current revenues on a pay-as-you-go basis.
This amount represents 2.9% of the total fiscal year 1994 budget.
Tax and Revenue Anticipation Notes. In fiscal year 1992 New Jersey initi-
ated a program under which it issued tax and revenue anticipation notes to
aid in providing effective cash flow management to fund imbalances which
occur in the collection and disbursement of the General Fund and Property
Tax Relief Fund revenues. On December 7, 1993, New Jersey issued
$1,300,000,000 Tax and Revenue Anticipation Notes, Series Fiscal 1994A.
Such tax and revenue anticipation notes do not constitute a general obli-
gation of New Jersey or a debt or liability within the meaning of the New
Jersey Constitution. Such notes constitute special obligations of New Jer-
sey payable solely from moneys on deposit in the General Fund and Property
Tax Relief Fund which are attributable to New Jersey's 1994 fiscal year
and are legally available for such payment.
Lease Financing. New Jersey has entered into a number of leases relating
to the financing of certain real property and equipment. New Jersey leases
the Richard J. Hughes Justice Complex in Trenton from the Mercer County
Improvement Authority (the "MCIA"). Under the lease agreements with the
New Jersey Economic Development Authority (the "EDA"), New Jersey leases
(a) office buildings that house the New Jersey Division of Motor Vehicles,
New Jersey Network, a branch of the United States Postal Service and a
parking facility, (b) approximately 13 acres of real property and certain
infrastructure improvements thereon located in the city of Newark, and (c)
two parking lots, certain infrastructure improvements and related elements
located at Liberty State Park in the city of Jersey City. Pursuant to var-
ious leases with the New Jersey Building Authority (the "NJBA"), New Jer-
sey leases several office buildings in the Trenton area, as well as the
State Capital Complex. Rental payments under each of the foregoing leases
are sufficient to pay debt service on the related bonds issued by MCIA,
EDA and NJBA, and in each case are subject to annual appropriation by the
New Jersey Legislature.
Beginning in April 1984, New Jersey, acting through the Director of the
Division of Purchase and Property, entered into a series of lease purchase
agreements which provide for the acquisition of equipment, services and
real property to be used by various departments and agencies of New Jer-
sey. To date, New Jersey has completed eleven lease purchase agreements
which have resulted in the issuance of Certificates of Participation to-
talling $749,350,000. The agreements relating to these transactions pro-
vide for semi-annual rental payments. New Jersey's obligation to pay rent-
als due under these leases is subject to annual appropriations being made
by the New Jersey Legislature.
State Supported School and County College Bonds. Legislation provides for
future appropriations for New Jersey aid to local school districts equal
to debt service on a maximum principal amount of $280,000,000 of bonds is-
sued by such local school districts for construction and renovation of
school facilities and for New Jersey aid to counties equal to debt service
on up to $80,000,000 of bonds issued by counties for construction of
county college facilities. The New Jersey Legislature is not legally bound
to make such future appropriations, but has done so to date on all out-
standing obligations issued under these laws.
"Moral Obligations" Financing. The authorizing legislation for certain
New Jersey entities provides for specific budgetary procedures with re-
spect to certain obligations issued by such entities. Pursuant to such
legislation, a designated official is required to certify any deficiency
in a debt service reserve fund maintained to meet payments of principal of
and interest on the obligations, and a New Jersey appropriation in the
amount of the deficiency is to be made. However, the New Jersey Legisla-
ture is not legally bound to make such an appropriation. Bonds issued pur-
suant to authorizing legislation of this type are sometimes referred to as
"moral obligation" bonds. There is no statutory limitation on the amount
of "moral obligation" bonds which may be issued by eligible New Jersey en-
tities.
The following table sets forth the "moral obligation" bonded indebtedness
issued by New Jersey entities as of June 30, 1993.
<TABLE>
<CAPTION>
MAXIMUM ANNUAL
DEBT SERVICE
SUBJECT TO
OUTSTANDING
MORAL OBLIGATION
<S> <C>
<C>
New Jersey Housing and Mortgage Finance Agency $576,626,318.78
$54,099,863.41
South Jersey Port Corporation 88,750,000.00
7,374,000.00
Higher Education Assistance Authority 57,519,832.00
2,000,000.00
$722,896,150.78
$63,473,863.41
</TABLE>
Higher Education Assistance Authority. The Higher Education Assistance
Authority ("HEAA") has issued $79,996,064 aggregate principal amount of
revenue bonds. It is anticipated that the HEAA's revenues will be suffi-
cient to cover debt service on its bonds.
New Jersey Housing and Mortgage Finance Agency. Neither the New Jersey
Housing and Mortgage Finance Agency nor its predecessors, the New Jersey
Housing Finance Agency and the New Jersey Mortgage Finance Agency, have
had a deficiency in a debt service reserve fund which required New Jersey
to appropriate funds to meet its "moral obligation." It is anticipated
that this agency's revenues will continue to be sufficient to cover debt
service on its bonds.
South Jersey Port Corporation. New Jersey provides the South Jersey Port
Corporation (the "Corporation") with funds to cover all debt service and
property tax requirements, when earned revenues are anticipated to be in-
sufficient to cover these obligations. From 1986 through June 30, 1993,
New Jersey has made appropriations totalling $31,831,384.25 which covered
deficiencies in revenues of the Corporation, for debt service and property
tax payments.
New Jersey Commission on Science and Technology. In April 1988, the New
Jersey Commission on Science and Technology (the "Science Commission")
agreed pursuant to a grant agreement with Rutgers, the State University,
the University of Medicine and Dentistry of New Jersey and the New Jersey
Institute of Technology (the "Institutions") to provide moneys annually to
said Institutions sufficient to pay the amounts required under separate
lease purchase agreements which resulted in the issuance of Certificates
of Participation in an aggregate amount of $26,460,000. The Science Com-
mission's obligation to make grant payments under the grant agreement is
subject to annual appropriations being made by the New Jersey Legislature.
The Institutions' obligations to pay rentals under the lease purchase
agreements are subject to receipt of moneys from the Science Commission
pursuant to a grant agreement.
New Jersey Sports and Exposition Authority. On March 2, 1992, the New
Jersey Sports and Exposition Authority (the "Sports Authority") issued
$147,490,000 in New Jersey guaranteed bonds and defeased all previously
outstanding New Jersey guaranteed bonds of the Sports Authority. New Jer-
sey officials have stated the belief that the revenue of the Sports Au-
thority will be sufficient to provide for the payment of debt service on
these obligations without recourse to New Jersey's guarantee.
Legislation enacted in 1992 authorizes the Sports Authority to issue bonds
for various purposes payable from New Jersey appropriations. Pursuant to
this legislation, the Sports Authority and the New Jersey Treasurer have
entered into an agreement (the "State Contract") pursuant to which the
Sports Authority will undertake certain projects, including the refunding
of certain outstanding bonds of the Sports Authority, and the New Jersey
Treasurer will credit to the Sports Authority and the New Jersey Treasurer
will credit to the Sports Authority Fund amounts from the General Fund
sufficient to pay debt service and other costs related to the bonds. The
payment of all amounts under the State Contract is subject to and depen-
dent upon appropriations being made by the New Jersey Legislature.
New Jersey Transportation Trust Fund Authority. In July 1984, New Jersey
created the New Jersey Transportation Trust Fund Authority (the "TTFA"),
an instrumentality of New Jersey organized and existing under the New Jer-
sey Transportation Trust Fund Authority Act of 1984, as amended (the
"Act") for the purpose of funding a portion of New Jersey's share of the
cost of improvements to New Jersey's transportation system. The Act autho-
rizes the New Jersey Treasurer to credit to the TTFA a minimum of
$320,250,000 per year. Pursuant to the Act, the TTFA, the New Jersey Trea-
surer and the Commissioner of Transportation executed a contract (the
"Contract") which provides for the payment of these revenues to the TTFA.
The payment of all such amounts is subject to and dependent upon appropri-
ations being made by the New Jersey Legislature and there is no require-
ment that the Legislature make such appropriation. The Act specifies that
the TTFA's legal existence shall not continue beyond 22 years from the
date of enactment of the Act.
Pursuant to the Act, the aggregate principal amount of TTFA's bonds, notes
or other obligations outstanding at any one time may not exceed $1.7 bil-
lion. This amount is reduced by certain payments to the TTFA by New Jersey
in excess of the contract amount. These bonds are special obligations of
the TTFA payable from the payments made by New Jersey pursuant to the Con-
tract.
Economic Recovery Fund Bonds. Legislation enacted during 1992 by New Jer-
sey authorizes the EDA to issue bonds for various economic development
purposes. Pursuant to that legislation, EDA and the New Jersey Treasurer
have entered into an agreement (the "ERF Contract") through which EDA has
agreed to undertake the financing of certain projects and the New Jersey
Treasurer has agreed to credit to the Economic Recovery Fund from the Gen-
eral Fund amounts equivalent to payments due to New Jersey under an agree-
ment with the Port Authority of New York and New Jersey. The payment of
all amounts under the ERF Contract is subject to and dependent upon appro-
priations being made by the New Jersey Legislature.
SUMMARY OF OTHER NEW JERSEY RELATED OBLIGATIONS AS OF JUNE 30, 1993
<TABLE>
<CAPTION>
TYPE OF ISSUE
OUTSTANDING
<S> <C>
<C>
Lease Financing
$ 731,405,017.95
MCIA $94,750,000.00
EDA 140,390,202.20
NJBA 199,534,815.75
State COP 296,730,000.00
State-Supported School and County College Bonds
102,701,186.00
Moral Obligation
722,896,150.78
New Jersey Commission on Science and Technology
9,400,000.00
Sports Authority
626,620,000.00
TTFA
906,165,000.00
Economic Recovery Fund Bonds
235,232,868.90
$3,334,420,223.63
TOTAL
</TABLE>
<TABLE>
<CAPTION>
SUBSEQUENT ISSUES SINCE JUNE 30, 1993 PAR AMOUNT
DATE OF ISSUE
<S> <C>
<C>
HEAA
$20,000,000.00 9/15/93
NJBA
314,970,112.80 1/01/94
TTFA
61,470,000.00 9/15/93
</TABLE>
Municipal Finance. New Jersey's local finance system is regulated by var-
ious statutes designed to assure that all local governments and their is-
suing authorities remain on a sound financial basis. Regulatory and reme-
dial statutes are enforced by the Division of Local Government Services
(the "Division") in the New Jersey State Department of Community Affairs.
Counties and Municipalities. The Local Budget Law (N.J.S.A. 40A:4-1 et
seq.) imposes specific budgetary procedures upon counties and municipali-
ties ("local units"). Every local unit must adopt an operating budget
which is balanced on a cash basis, and items of revenue and appropriation
must be examined by the Director of the Division (the "Director"). The ac-
counts of each local unit must be independently audited by a registered
municipal accountant. New Jersey law provides that budgets must be submit-
ted in a form promulgated by the Division and further provides for limita-
tions on estimates of tax collection and for reserves in the event of any
shortfalls in collections by the local unit. The Division reviews all mu-
nicipal and county annual budgets prior to adoption for compliance with
the Local Budget Law. The Director is empowered to require changes for
compliance with law as a condition of approval; to disapprove budgets not
in accordance with law; and to prepare the budget of a local unit, within
the limits of the adopted budget of the previous year with suitable ad-
justments for legal compliance, if the local unit is unwilling to prepare
a budget in accordance with law. This process insures that every munici-
pality and county annually adopts a budget balanced on a cash basis,
within limitations on appropriations or tax levies, respectively, and mak-
ing adequate provision for principal of and interest on indebtedness fall-
ing due in the fiscal year, deferred charges and other statutory expendi-
ture requirements. The Director also oversees changes to local budgets
after adoption as permitted by law, and enforces regulations pertaining to
execution of adopted budgets and financial administration.
The Local Government Cap Law (N.J.S.A. 40A:4-45.1 et seq.) (the "Cap Law")
generally limits the year-to-year increase of the total appropriations of
any municipality and the tax levy of any county to either 5% or an index
rate determined annually by the Director, whichever is less. However,
where the index percentage rate exceeds 5%, the Cap Law permits the gov-
erning body of any municipality or county to approve the use of a higher
percentage rate up to the index rate. Further, where the index percentage
rate is less than 5%, the Cap Law also permits the governing body of any
municipality or county to approve the use of a higher percentage rate up
to 5%. Regardless of the rate utilized, certain exceptions exist to the
Cap Law's limitation on increases in appropriations. The principal excep-
tions to these limitations are municipal and county appropriations to pay
debt service requirements; to comply with certain other New Jersey or Fed-
eral mandates; amounts approved by referendum; and, in the case of munici-
palities only, to fund the preceding year's cash deficit or to reserve for
shortfalls in tax collections.
New Jersey law also regulates the issuance of debt by local units. The
Local Bond Law limits the amount of tax anticipation notes that may be is-
sued by local units and requires the repayment of such notes within 120
days of the end of the fiscal year (six months in the case of the coun-
ties) in which issued. The Local Bond Law (N.J.S.A. 40A:2-1 et seq.) gov-
erns the issuance of bonds and notes by the local units. No local unit is
permitted to issue bonds for the payment of current expenses (other than
Fiscal Year Adjustment Bonds described more fully below). Local units may
not issue bonds to pay outstanding bonds, except for refunding purposes,
and then only with the approval of the Local Finance Board. Local units
may issue bond anticipation notes for temporary periods not exceeding in
the aggregate approximately ten years from the date of first issue. The
debt that any local unit may authorize is limited to a percentage of its
equalized valuation basis, which is the average of the equalized value of
all taxable real property and improvements within the geographic bound-
aries of the local unit, as annually determined by the Director of the Di-
vision of Taxation, for each of the three most recent years. In the calcu-
lation of debt capacity, the Local Bond Law and certain other statutes
permit the deduction of certain classes of debt ("statutory deductions")
from all authorized debt of the local unit ("gross capital debt") in com-
puting whether a local unit has exceeded its statutory debt limit. Statu-
tory deductions from gross capital debt consist of bonds or notes (a) au-
thorized for school purposes by a regional school district or by a munici-
pality or a school district with boundaries coextensive with such
municipality to the extent permitted under certain percentage limitations
set forth in the School Bond Line (as hereinafter defined); (b) authorized
for purposes which are self-liquidating, but only to the extent permitted
by the Local Bond Law; (c) authorized by a public body other than a local
unit the principal of and interest on which is guaranteed by the local
unit, but only to the extent permitted by law; (d) that are bond anticipa-
tion notes; (e) for which provision for payment has been made or (f) au-
thorized for any other purpose for which a deduction is permitted by law.
Authorized net capital debt (gross capital debt minus statutory deduc-
tions) is limited to 3.5% of the equalized valuation basis in the case of
municipalities and 2% of the equalized valuation basis in the case of
counties. The debt limit of a county or municipality, with certain excep-
tions, may be exceeded only with the approval of the Local Finance Board.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28,
1991, required certain municipalities and permits all other municipalities
to adopt the New Jersey fiscal year in place of existing calendar fiscal
year. Municipalities that change fiscal years must adopt a six month tran-
sition budget for January through June. Since expenditures would be ex-
pected to exceed revenues primarily because state aid for the calendar
year would not be received by the municipality until after the end of the
transition year budget, the act authorizes the issuance of Fiscal Year Ad-
justment Bonds to fund the one-time deficit for the six month transition
budget. The act provides that the deficit in the six month transition bud-
get may be funded initially with bond anticipation notes based on the es-
timated deficit in the six month transition budget. Notes issued in antic-
ipation of Fiscal Year Adjustment Bonds, including renewals, can only be
issued for up to one year unless the Local Finance Board permits the mu-
nicipality to renew them for a further period of time. While the act does
not authorize counties to change their fiscal years, it does provide that
counties with cash flow deficits may issue Fiscal Year Adjustment Bonds as
well.
There are 567 municipalities and 21 counties in New Jersey. During 1990,
1991 and 1992 no county exceeded its statutory debt limitations or in-
curred a cash deficit in excess of 4% of its tax levy. The number of mu-
nicipalities which have a cash deficit greater than 4% of their tax levies
was zero for 1992. The number of municipalities which exceed statutory
debt limits was five as of December 31, 1993. No New Jersey municipality
or county has defaulted on the payment of interest or principal on any
outstanding debt obligation since the 1930s.
School Districts. New Jersey's school districts operate under the same
comprehensive review and regulation as do its counties and municipalities.
Certain exceptions and differences are provided, but New Jersey supervi-
sion of School finance closely parallels that of local governments.
All New Jersey school districts are coterminous with the boundaries of one
or more municipalities. They are characterized by the manner in which the
board of education, the governing body of the school district, takes of-
fice. Type I school districts, most commonly found in cities, have a board
of education appointed by the mayor or the chief executive officer of the
municipality constituting the school district. In a Type II school dis-
trict, the board of education is elected by the voters of the district.
Nearly all regional and consolidated school districts are Type II school
districts.
The New Jersey Department of Education has been empowered with the neces-
sary and effective authority in extreme cases to take over the operation
of local school districts which cannot or will not correct severe and com-
plex educational deficiencies. Pursuant to a 1987 amendment to the Public
School Education Act of 1975 (N.J.S.A. 18A:7A-1 et seq.) (the "School
Act"), the New Jersey Board of Education may direct the removal of the
local district board of education and the creation of a New Jersey oper-
ated school district, which would be under the direction of a New Jersey
appointed superintendent. Pursuant to the authority granted under the
School Act, on October 4, 1989, the New Jersey Board of Education ordered
the creation of a New Jersey operated school district in the city of Jer-
sey City. Similarly, on August 7, 1991, the New Jersey Board of Education
ordered the creation of a New Jersey operated school district in the city
of Paterson.
School Budgets. In every school district having a board of school esti-
mate, the board of school estimate examines the budget request and fixes
the appropriate amounts of the next year's operating budget after a public
hearing at which the taxpayers and other interested persons shall have an
opportunity to raise objections and to be heard with respect to the bud-
get. This board certifies the budget to the municipal governing bodies and
to the local board of education. If either disagrees, they must appeal to
the New Jersey Commissioner of Education (the "Commissioner") to request
the changes.
In Type II school district without a board of school estimate, the elected
board of education develops the budget proposal and, after public hearing,
submits it to the voters of such district for approval. Previously autho-
rized debt service is not subject to referendum in the annual budget pro-
cess. If approved, the budget goes into effect. If defeated, the governing
body of each municipality in the school district has approximately 20 days
to determine the amount necessary to be appropriated for each item appear-
ing in such budget. Should the governing body fail to certify any amount
determined by the board of education to be necessary for any item rejected
at the election, the board of education may appeal the action to the Com-
missioner.
The Quality Education Act of 1990 (N.J.S.A. 18A:7D-1 et seq.) limits the
annual increase of a school district's net current expense budget. The
Commissioner certifies the allowable amount of increase for each school
district but may grant a higher level of increase in certain limited in-
stances. A school district may also submit a proposal to the voters to
raise amounts above the allowable amount of increase. If defeated, such a
proposal is subject to further review or appeal only if the Commissioner
determines that additional funds are required to provide a thorough and
efficient education.
The Commissioner must also review every proposed local school district
budget for the next school year. The Commissioner examines every item of
appropriation for the current expenses and budgeted capital outlay to de-
termine their adequacy in relation to the identified needs and goals of
the school district. If, in his view they are insufficient, the Commis-
sioner must order remedial action. If necessary, the Commissioner is au-
thorized to order changes in the school district's budget.
In New Jersey operated school districts the New Jersey District Superin-
tendent has the responsibility for the development of the budget subject
to appeal by the governing body of the municipality to the Commissioner
and the Director of the Division of Local Government Services in the New
Jersey Department of Community Affairs. Based upon his review, the Direc-
tor is required to certify the amount of revenues which an be raised lo-
cally to support the budget of the New Jersey operated district. Any dif-
ference between the amount which the Director certifies and the total
amount of local revenues required by the budget approved by the Commis-
sioner is to be paid by New Jersey in the fiscal year in which the expen-
ditures are made subject to the availability of appropriations.
School District Bonds. School district bonds and temporary notes are is-
sued in conformity with N.J.S.A. 18A:24-1 et seq. (the "School Bond Law"),
which closely parallels the Local Bond Law (for further information relat-
ing to the Local Bond Law, see "Municipal Finance -- Counties and Munici-
palities" herein). Although school districts are exempted from the 5 per-
cent down payment provision generally applied to bonds issued by munici-
palities and counties, they are subject to debt limits (which vary
depending on the type of school system provided) and to New Jersey regula-
tion of their borrowing. The debt limitation on school district bonds de-
pends upon the classification of the school district, but may be as high
as 4 percent of the average equalized valuation basis of the constituent
municipality. In certain cases involving school districts in cities with
populations exceeded 100,000, the debt limit is 8 percent of the average
equalized valuation basis of the constituent municipality, and in cities
with populations in excess of 80,000 the debt limit is 6 percent of the
aforesaid average equalized valuation.
School bonds are authorized by (a) an ordinance adopted by the governing
body of a municipality within a Type I school district; (b) adoption of a
proposal by resolution by the board of education of a Type II school dis-
trict having a board of school estimate, or (c) adoption of a proposal by
resolution by the board of education and approval of the proposal by the
legal voters of any other Type II school district. If school bonds will
exceed the school district borrowing capacity, a school district (other
than a regional school district) may use the balance of the municipal bor-
rowing capacity. If the total amount of debt exceeds the school district's
borrowing capacity and any available remaining municipal borrowing capac-
ity, the Commissioner and the Local Finance Board must approve the pro-
posed authorization before it is submitted to the voters. All authoriza-
tions of debt in a Type II school district without a board of school esti-
mate require an approving referendum, except where, after hearing, the
Commissioner and the New Jersey Board of Education determine that the is-
suance of such debt is necessary to meet the constitutional obligation to
provide a thorough and efficient system of public schools. When such obli-
gations are issued, they are issued by, and in the name of, the school
district.
In Type I and II school districts with a board of school estimate, that
board examines the capital proposal of the board of education and certi-
fies the amount of bonds to be authorized. When it is necessary to exceed
the borrowing capacity of the municipality, the approval of a majority of
the legally qualified voters of the municipality is required, together
with the approval of the Commissioner and the Local Finance Board. When
such bonds are issued for a Type I school district, they are issued by the
municipality and identified as school bonds. When bonds are issued by a
Type II school district having a board of school estimate, they are issued
by, and in the name of, the school district.
School District Lease Purchase Financings. In 1982, school districts were
given an alternative to the traditional method of bond financing capital
improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase
Law"). The Lease Purchase Law permits school districts to acquire a site
and school building through a lease purchase agreement with a private les-
sor corporation. For Type II school districts, the lease purchase agree-
ment does not require vote approval. The rent payments attributable to the
lease purchase agreement are subject to annual appropriation by the school
district and are required, pursuant to N.J.A.C. 6:22A-1.2(h), to be in-
cluded in the annual current expense budget of the school district. Fur-
thermore, the rent payments attributable to the lease purchase agreement
do not constitute debt of the school district and therefore do not impact
on the school district's debt limitation. Lease purchase agreements in ex-
cess of five years require the approval of the Commissioner and the Local
Finance Board.
Qualified Bonds. In 1976, legislation was enacted (P.L. 1976, c.38 and
c.39) which provides for the issuance by municipalities and school dis-
tricts of "qualified bonds." Whenever a local board of education or the
governing body of a municipality determines to issue bonds, it may file an
application with the Local Finance Board, and, in the case of a local
board of education, the Commissioner, to qualify bonds pursuant to P.L.
1976, c.38 or c.39. Upon approval of such an application and after receipt
of a certificate stating the name and address of the paying agent for such
bonds, the maturity schedule, interest rates and payment dates, the New
Jersey Treasurer shall, in the case of qualified bonds for school dis-
tricts, withhold from the school aid payable to such municipality or
school district and, in the case of qualified bonds for municipalities,
withhold from the amount of business personal property tax replacement
revenues, gross receipts tax revenues, municipal purposes tax assistance
fund distributions, New Jersey urban aid, New Jersey revenue sharing, and
any other funds appropriated as New Jersey aid and not otherwise dedicated
to specific municipal programs, payable to such municipalities, an amount
sufficient to cover debt service on such bonds. These "qualified bonds"
are not direct, guaranteed or moral obligations of New Jersey, and debt
service on such bonds will be provided by New Jersey only if the above-
mentioned appropriations are made by New Jersey. Total outstanding indebt-
edness for "qualified bonds" consisted of $204,255,550 by various school
districts as of June 30, 1993 and $861,123,338 by various municipalities
as of June 30, 1993.
New Jersey School Bond Reserve Act. The New Jersey School Bond Reserve
Act (N.J.S.A. 18A:56-17 et seq.) establishes a school bond reserve within
the constitutionally dedicated Fund for the Support of Free Public
Schools. Under this law the reserve is maintained at an amount equal to
1.5% of the aggregate outstanding bonded indebtedness of counties, munici-
palities or school districts for school purposes (exclusive of bonds whose
debt service is provided by New Jersey appropriations), but not in excess
of monies available in such fund. If a municipality, county or school dis-
trict is unable to meet payment of the principal of or interest on any of
its school bonds, the trustee of the school bond reserve will purchase
such bonds at the face amount thereof or pay the holders thereof the in-
terest due or to become due. At June 30, 1993, the book value of the
Fund's assets aggregate $73,711,364 and the reserve, computed as of June
30, 1993, amounted to $27,361,913. There has never been an occasion to
call upon this fund.
Local Financing Authorities. The Local Authorities Fiscal Control Law
(N.J.S.A. 40A:5A-I et seq.) provides for state supervision of the fiscal
operations and debt issuance practices of independent local authorities
and special taxing districts by the New Jersey Department of Community Af-
fairs. The Local Authorities Fiscal Control Law applies to all autonomous
public bodies created by counties or municipalities, which are empowered
to issue bonds, to impose facility or service charges, or to levy taxes in
their districts. This encompasses most autonomous local authorities (sew-
erage, municipal utilities, parking, pollution control, improvement, etc.)
and special taxing districts (fire, water, etc.). Authorities which are
subject to differing New Jersey or federal financial restrictions are ex-
empted, but only to the extent of that difference.
The Local Finance Board reviews, conducts public hearings and issues find-
ings and recommendations on any proposed project financing of an authority
or district, and on any proposed financing agreement between a municipal-
ity or county and an authority or special district. The Director of the
Division of Local Government Services reviews and approves annual budgets
of authorities and special districts.
As of June 30, 1993, there were 200 locally created authorities with a
total outstanding capital debt of $6,963,564,405 (figures do not include
housing authorities and redevelopment agencies). This amount reflects out-
standing bonds, notes, loans and mortgages payable by the authorities as
of their respective fiscal years ended nearest to June 30, 1993.
Litigation. At any given time, there are various numbers of claims and
cases pending against New Jersey, New Jersey agencies and employees, seek-
ing recovery of monetary damages that are primarily paid out of the fund
created pursuant to the Tort Claims Act, N.J.S.A. 59:1-1 et seq. (the
"Tort Claims Act"). At any given time there are various contract and other
claims against New Jersey and New Jersey agencies; including environmental
claims arising from the alleged disposal of hazardous waste, seeking re-
covery of monetary damages. In addition, at any given time there are vari-
ous number of claims and cases pending against the University of Medicine
and Dentistry of New Jersey and its employees, seeking recovery of mone-
tary damages that are primarily paid out of the Self-Insurance Reserve
Fund created pursuant to the Tort Claims Act. New Jersey is unable to es-
timate its exposure for these claims.
Other lawsuits presently pending or threatened in which New Jersey has the
potential for either a significant loss of revenue or significant unantic-
ipated expenditures include the following: Abbot v. Burke, challenging the
constitutionality of the Quality Education Act of 1990, which is pending
review by the New Jersey Supreme Court; County of Essex v. Waldman, et al.
and similar cases involving eleven other counties, challenging the methods
by which the New Jersey Department of Human Services shares with county
governments and maintenance recoveries and costs for residents in New Jer-
sey psychiatric hospitals and residential facilities for the developmen-
tally disabled, all of which are on appeal in the New Jersey courts;
County of Essex v. Commissioner of Human Services, et al. and similar
cases involving ten other counties, in which the Appellate Division ruled
that all counties were entitled to 100% of Social Security benefits and
other maintenance recoveries received by New Jersey and were entitled to
credits for payments made to New Jersey for the maintenance of Medicare
and Medicaid-eligible county residents of certain New Jersey facilities,
which is on petition for review by the New Jersey Supreme Court; New Jer-
sey Association of Health Care Facilities, Inc., et al. v. Gibbs, et al.,
a class action on behalf of all New Jersey long-term care facilities pro-
viding services to Medicaid patients, seeking a declaration that the New
Jersey Department of Human Services has violated Federal law in the set-
ting and paying of 1990 long-term care facility Medicaid payment rates,
where the Third Circuit affirmed the District Court's denial of plain-
tiff's motion for preliminary injunction; Exxon v. Hunt and related cases,
where taxpayers sought refund of taxes paid to the Spill Compensation Fund
and the New Jersey Supreme Court, on remand from the U.S. Supreme Court,
ruled that plaintiffs would receive refunds only in the event the New Jer-
sey Legislature refused to reimburse the Spill Compensation Fund for ex-
penditures for preempted purposes, where related cases are pending appeal
in the Appellate Division; Fair Automobile Insurance Reform Act ("FAIR
Act") litigation challenging various portions of FAIR Act, including sur-
tax and assessment provisions, is still pending; Counting of Passaic v. State
of New Jersey alleging tort and contractual claims
against New Jersey and the New Jersey Department of Environmental Protec-
tion and Energy in connection with a resource recovery facility plaintiffs
had planned to build in Passaic County, seeking approximately $30 million
in damages; United Wire, Metal and Machine Health and Welfare Fund, et al.
v. Morristown Memorial Hospital, et al., involving a challenge to New Jer-
sey's prior hospital rate-setting system; Pelletier, et al. v. Waldman, et
al. a challenge by seal Medicaid-eligible children to the adequacy of Med-
icaid reimbursement for services rendered by doctors and dentists; Barnett
Memorial Hospital v. Commission of Health, an appeal by several hospitals
of the Commissioner's calculation of the hospital assessment required by
the Health Care Cost Reduction Act of 1991; Robert E. Brennan v. Richard
Barry, et al., a suit filed against two members of the New Jersey Bureau
of Securities alleging causes of action for defamation, injury to reputa-
tion, abuse of process and improper disclosure, based on the Bureau's in-
vestigation of certain publicly-traded securities; Camden Co. v. Waldman,
et al., now consolidated with similar suits filed by Middlesex, Monmouth
and Atlantic Counties, seeking reimbursement of federal funds received by
New Jersey for disproportionate share hospital payments made to county
psychiatric facilities from July 1, 1998 through July 1, 1991; Interfaith
Community Organization v. Fox, et al., a suit filed by a coalition of
churches and church leaders in Hudson County against the Governor, the
Commissioners of the Department of Environmental Protection and Energy and
the Department of Health, concerning chromium contamination in Liberty
State Park in Jersey City; New Jersey State AFL-CIO, et al. v. Crane, in
which the Appellate Division affirmed the Superior Court's grant of New
Jersey's motion for summary judgment as to all claims by various labor
unions challenging New Jersey legislation ("Chapter 41") requiring revalu-
ation of certain public employee pension funds; and American Trucking As-
sociations, Inc. and Tri-State Motor Transit v. State of New Jersey, chal-
lenging the constitutionality of annual hazardous and solid waste licen-
sure fees collected by the Department of Environmental Protection and
Energy, seeking a permanent injunction enjoining future collection of fees
and refund of all renewal fees, fines and penalties collected.
In addition to litigation against New Jersey, at any given time there are
various numbers of claims and cases pending or threatened against the po-
litical subdivisions of New Jersey, including but not limited to New Jer-
sey authorities, counties, municipalities and school districts, which have
potential for either a significant loss of revenue or significant unantic-
ipated expenditures
Ratings. In July 1991, S&P downgraded its rating of New Jersey General
Obligation Bonds from AAA to AA+. Subsequently on June 4, 1992 S&P moved
New Jersey's General Obligation Bonds from Credit Watch and affirmed its
AA+ ratings of New Jersey's general obligation and various lease and ap-
propriation backed debt, but its ratings outlook was revised to negative
for the longer term horizon (beyond four months) for resolution of two
items cited in the Credit Watch listing: (a) the Federal Health Care Fa-
cilities Administration ruling concerning retroactive Medicaid hospital
reimbursements and (b) New Jersey's uncompensated health care funding sys-
tem, which is pending review by the United States Supreme Court. Citing a
developing pattern of reliance on non-recurring measures to achieve bud-
getary balance, four years of financial operations marked by revenue
shortfalls and operating deficits, and the likelihood that financial pres-
sures will persist, on August 24, 1992 Moody's lowered its rating of New
Jersey General Obligation Bonds from Aaa to Aa1. There is no assurance
that the ratings of New Jersey General Obligation Bonds will continue for
any given period of time or that they will not be revised downward or
withdrawn entirely. Any such downward revision or withdrawal could have an
adverse effect on the market prices of the New Jersey's general obligation
bonds.
The various political subdivisions of New Jersey are rated independently
from S&P and/or Moody's. These ratings are based upon information supplied
to the rating agency by the political subdivision. There is no assurance
that such ratings will continue for any given period of time or that they
will not be revised downward or withdrawn entirely. Any such downward re-
vision or withdrawal could have an adverse effect on the market prices of
bonds issued by the political subdivision.
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedule of sales charges on Class A shares described in the Prospec-
tus applies to purchases made by any "purchaser," which is defined to in-
clude the following: (a) an individual; (b) an individual's immediate fam-
ily purchasing shares for his or her own account; (c) a trustee or other
fiduciary purchasing shares for a single trust estate or single fiduciary
account; (d) a pension, profit-sharing or other employee benefit plan
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and qualified employee benefit plans of employers
who are "affiliated persons" of each other within the meaning of the 1940
Act; (e) tax-exempt organizations enumerated in Section 501(c)(3) or (13)
of the Code; (f) any other organized group of persons, provided that the
organization has been in existence for at least six months and was orga-
nized for a purpose other than the purchase of investment company securi-
ties at a discount; or (g) a trustee or other professional fiduciary (in-
cluding a bank or an investment adviser registered with the SEC under the
Investment Advisers Act of 1940) purchasing shares of the Fund for one or
more trust estates or fiduciary accounts. Purchasers who wish to combine
purchase orders to take advantage of volume discounts on Class A shares
should contact their Smith Barney 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 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"), however, is
imposed on certain redemptions of Class B shares and Class A shares when
purchased in amounts equalling or exceeding $1 million. The method of com-
puting the public offering price is shown in the Fund's financial state-
ments incorporated by reference into this Statement of Additional Informa-
tion.
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 and holiday closings), (b)
when trading in markets the Fund normally utilizes is restricted, or an
emergency, as determined by the SEC, exists, making disposal of the Fund's
investments or determination of net asset value not reasonably practicable
or (c) for such other periods as the SEC by order may permit for protec-
tion of the Fund's shareholders.
DISTRIBUTIONS 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 of the Fund 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 ex-
tent withdrawals exceed dividends, distributions and appreciation of a
shareholder's investment in the Fund, the value of the shareholder's in-
vestment will be reduced 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 Financial
Consultants.
DISTRIBUTOR
Smith Barney serves as the Fund's distributor on a best efforts basis pur-
suant to a written agreement dated April 7, 1993 (the "Distribution Agree-
ment") which was most recently approved by the Fund's Board of Directors
on July 20, 1994. For the fiscal years ended March 31, 1992, 1993 and
1994, Shearson Lehman Brothers, the Fund's distributor prior to Smith Bar-
ney and/or Smith Barney received $1,086,608, $749,550 and $586,302, re-
spectively, in sales charges from the sale of the Fund's Class A shares,
and did not reallow any portion thereof to dealers. For the period from
November 6, 1993 through March 31, 1994, Shearson Lehman Brothers and its
successor Smith Barney, received $49,338, representing CDSC on redemptions
of the Fund's Class B shares.
Smith Barney forwards investors' funds for the purchase of shares five
business days after placement of purchase orders (the "settlement date").
When payment is made by the investor before settlement date, unless other-
wise directed by the investor, the funds will be held as a free credit
balance in the investor's brokerage account and Smith Barney may benefit
from the temporary use of the funds. The investor may designate another
use for the funds prior to settlement date, such as an investment in a
money market fund (other than the Smith Barney Shearson Money Market Fund)
in the Smith Barney Shearson Group of Funds. If the investor instructs
Smith Barney to invest the funds in a money market fund in the Smith Bar-
ney 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 which serve the funds in an
investment advisory capacity will benefit by receiving investment manage-
ment fees from both such investment companies, computed on the basis of
their average daily net assets. The Fund's Board of Directors has been ad-
vised of the benefits to Smith Barney resulting from five-day settlement
procedures and will take such benefits into consideration when reviewing
the Advisory, Administration and Distribution Agreements for continuance.
DISTRIBUTION ARRANGEMENTS
Shares of the Fund are distributed on a best efforts basis by Smith Barney
as exclusive sales agent of the Fund pursuant to the Distribution Agree-
ment. To compensate Smith Barney for the services it provides 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 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 the Class
A and Class B shares. In addition, Class B shares pay a distribution fee
primarily intended to compensate Smith Barney for its initial expense of
paying Financial Consultants a commission 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 average net assets attributable to the
shares of the Class. For the period from November 6, 1992 through March
31, 1993. The Fund's Class A and Class B shares paid $65,689, $14,830, re-
spectively, in service fees. For the same period the Fund's Class B shares
paid $16,100 in distribution fees. For the fiscal year ended March 31,
1994, the Fund's Class A and Class B shares paid $186,615 and $53,031, re-
spectively in service fees. For the same period the Fund's Class B shares
paid $176,771 in distribution 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 material
amendments of the Plan also must be approved by the Directors and the In-
dependent Directors in the manner described above. The Plan may be termi-
nated 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 will provide the 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 of the Fund is determined for purposes of sales and redemp-
tions. 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 Board of Directors. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are representative of the
bid side of the market, these investments are valued at the mean between
the quoted bid and asked prices. Investments for which, in the judgment of
the Service, there is no readily obtainable market quotation (which may
constitute a majority of the portfolio securities) 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 determine valuations. The
procedures of the Service are reviewed periodically by the officers of the
Fund under the general supervision and responsibility of the Board of Di-
rectors, 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, as listed in the Prospectus, on the basis of relative net
asset value per share at the time of exchange as follows:
A. Class A shares of any fund purchased with a sales charge may be ex-
changed 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 ap-
plied.
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 another fund
will be subject to the higher applicable CDSC of the two funds and, for
purposes of calculating CDSC rates and conversion periods, will be deemed
to have been held since the date the shares being exchanged were pur-
chased.
Dealers other than Smith Barney must notify TSSG of the investor's prior
ownership of Class A shares of Smith Barney Shearson High Income Fund and
the account number in order to accomplish an exchange of shares of Smith
Barney Shearson 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 residing 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 your Smith Barney Financial Consultant.
Upon receipt of proper instructions and all necessary supporting docu-
ments, shares submitted for exchange are redeemed at the then-current net
asset value 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 reserves the right to reject any exchange request.
The exchange privilege may be modified or terminated at any time after no-
tice 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 described below 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 pe-
riod 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 yield for Class A and Class B shares for the 30-day period
ended March 31, 1994 (reflecting the partial waiver of the investment ad-
visory and administration fees) was 4.93% and 4.58%, respectively. Had
fees not been partially waived the Fund's yield for Class A and Class B
shares for the same period would have been 4.88% and 4.55%, respectively.
The equivalent taxable yield for Class A and Class B shares for that same
period, such yields (reflecting the partial waiver of the investment advi-
sory and administration fees) was 7.89% and 7.33%, respectively, assuming
the payment of Federal income taxes at a rate of 31% and New Jersey taxes
at a rate of 6.50%. Had these fees not been partially waived the Fund's
equivalent taxable yield for Class A and Class B shares for the same pe-
riod would have been 7.81% and 7.28%, respectively.
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 market
rates, and in periods of rising interest rates the Fund's yield for each
Class of shares will tend to be somewhat lower. Also, when interest 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 instruments pro-
ducing lower yields than the balance of the Fund's portfolio, thereby re-
ducing the current yield of the Fund. In periods of rising interest rates,
the opposite can be expected to occur.
AVERAGE ANNUAL TOTAL RETURN
"Average annual total return" figures described below are computed accord-
ing 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 distri-
butions.
The following total return figures assume that the maximum 4.50% sales
charge has been deducted from the investment at the time of purchase. The
average annual total return for Class A shares was as follows for the pe-
riod indicated:
(2.91)% for the one-year period beginning April 1, 1993 through March 31,
1994.
8.31% per annum during the period from the Fund's commencement of opera-
tions on April 22, 1988 through March 31, 1994.
These total return figures assume that the maximum 4.50% sales charge as-
sessed by the Fund has been deducted from the investment at the time of
purchase. Had the investment advisory, sub-investment advisory and/or ad-
ministration fees not been partially waived (and assuming that the maximum
4.50% sales charge had been deducted), the Class A's average annual total
return would have been (2.96)% and 7.98%, respectively, for those same pe-
riods.
The average annual total return for Class B shares was as follows for the
periods indicated:
(3.14)% for the one-year period from April 1, 1993 through March 31, 1994.
2.76% per annum for the period from November 6, 1992 through March 31,
1994.
These average annual total return figures assume that the applicable maxi-
mum CDSC has been deducted from the investment. Had the investment advi-
sory and sub-investment advisory and/or administration fees not been par-
tially waived and the CDSC had not been deducted, the average annual total
return on the Fund's Class B shares would have been 1.09% and 5.44%, re-
spectively, for those same periods.
AGGREGATE TOTAL RETURN
Aggregate total return figures described below represent the cumulative
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 investment
made at the beginning of the 1-, 5- or 10-year period at
the end of the 1-, 5- or 10-year period (or fractional por-
tion thereof), assuming reinvestment of all dividends and
distributions.
The aggregate total return for Class A shares was as follows for the peri-
ods indicated (reflecting the partial waiver of the investment advisory
and sub-investment advisory and/or administration fees):
(2.91)% for the one-year period beginning April 1, 1993 through March 31,
1994.
46.28% for the five-year period from April 1, 1989 through March 31, 1994;
and
60.68% for the period from the Fund's commencement of operations on April
22, 1988 through March 31, 1994.
These aggregate total return figures assume that the maximum 4.50% sales
charge assessed by the Fund has been deducted from the investment at the
time of purchase. If the maximum sales charge had not been deducted at the
time of purchase, the Fund's aggregate total return reflecting the partial
waiver of the investment advisory and sub-investment advisory and adminis-
tration fees for those same periods would have been 1.66%, 53.18% and
68.25%, respectively. Had the investment advisory and sub-investment advi-
sory fees not been partially waived (and assuming that the maximum 4.50%
sales charge had not been deducted), the Fund's aggregate total return
would have been 1.61%, 51.39% and 65.21%, respectively, for those same pe-
riods.
The Fund's aggregate total return for Class B shares was as follows for
the periods indicated:
1.15% for the one-year period from April 1, 1993 through March 31, 1994.
7.82% for the period beginning on November 6, 1992 through March 31, 1994.
These figures do not assume that the maximum 4.50% sales charge has been
deducted from the investment at the time of purchase. If the investment
advisory and administration fees had not been partially waived and the
maximum CDSC had been deducted at the time of purchase the Fund's aggre-
gate total returns for the same period would have been (3.19)% and 3.75%.
It is important to note that the total return figures set forth above are
based on historical earnings and are not intended to indicate future per-
formance. A Class' performance will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and its operat-
ing expenses and the expenses exclusively attributable to the Class. Con-
sequently, any given performance quotation should not be considered repre-
sentative of the Class' performance for any specified period in the fu-
ture. In addition, because the 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' performance with that of other mutual funds
should give consideration to the quality and maturity of the respective
investment companies' portfolio securities.
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 Jersey 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 accounts since such inves-
tors 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 succeeding
year as a "regulated investment company" under the Code. Provided the Fund
(a) qualifies as a regulated investment company and (b) distributes at
least 90% of the sum of its taxable net investment income and net realized
short-term capital gains, and 90% of its tax-exempt interest income (re-
duced by certain expenses), the Fund will not be liable for Federal income
taxes to the extent its taxable net investment income and net realized
long-term and short-term capital gains, if any, are distributed to its
shareholders. Although the Fund expects to be relieved of 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 Jersey personal income tax pur-
poses. If a shareholder receives an exempt-interest dividend with respect
to any share and if the share is held by the shareholder for six months or
less, then, for Federal income tax purposes, any loss on the sale or ex-
change of such share may, to the extent of the exempt-interest dividend,
be disallowed. In addition, the Code may require a shareholder, if he or
she receives exempt-interest dividends, to treat as Federal taxable in-
come, a portion of certain otherwise non-taxable social security and rail-
road retirement benefit payments. Furthermore, that portion of any divi-
dend paid by the Fund which represents income derived from private activ-
ity bonds held by the Fund may not retain its Federal tax-exempt status in
the hands of a shareholder who is a "substantial user" of a facility fi-
nanced by such bonds, or a "related person" thereof. Moreover, as noted in
the Fund's Prospectus, (a) some or all of the Fund's dividends and distri-
butions may be a specific tax preference item, or a component of an ad-
justment item, for purposes of the Federal individual and corporate alter-
native minimum taxes, and (b) the receipt of Fund dividends and distribu-
tions may affect a corporate shareholder's Federal "environmental" tax
liability. In addition, the receipt of Fund dividends and distributions
may affect a foreign corporate shareholder's Federal "branch profits" tax
liability and a Subchapter S corporation shareholder's Federal "excess net
passive income" tax liability. Shareholders should consult their own tax
advisors to determine whether they are (a) "substantial users" with re-
spect to a facility or related to such users within the meaning of the
Code and (b) subject to a Federal alternative minimum tax, the Federal en-
vironmental tax, the Federal "branch profits" tax and the Federal "excess
net passive income" tax.
As described above and in the Prospectus, the Fund may invest in municipal
bond index and interest rate futures contracts and options on these fu-
tures contracts. The Fund anticipates that these investment activities
would not prevent the Fund from qualifying as a regulated investment com-
pany. As a general rule, these investment activities would increase or de-
crease the amount of long-term and short-term capital gains or losses re-
alized by the Fund and, accordingly, would affect the amount of capital
gains distributed to the Fund's shareholders.
For Federal income tax purposes, gain or loss on municipal bond index and
interest rate futures contracts and options on these futures contracts
(collectively referred to as "section 1256 contracts") is taxed pursuant
to a special "mark-to-market" system, these instruments are treated as if
sold at the Fund's fiscal year end for their fair market value. As a re-
sult, the Fund will be recognizing gains or losses before they are actu-
ally realized. Gain or loss on section 1256 contracts generally is treated
as 60% long-term capital gain or loss and 40% short-term capital gain or
loss, and, accordingly, the mark-to-market system will generally affect
the amount of capital gains or losses taxable to the Fund and the amount
of distributions to a shareholder. Moreover, if the Fund invests in both
section 1256 contracts and offsetting positions in those contracts, which
together constitute a straddle, then the Fund may be required to defer re-
ceiving the benefit of certain recognized losses. The Fund expects that
its activities with respect to section 1256 contracts and offsetting posi-
tions in those contracts will not cause it to be treated as recognizing a
materially greater amount of capital gains than actually realized and will
permit it to use substantially all of the losses of the Fund for the fis-
cal years in which the losses actually occur.
While the Fund does not expect to realize a significant amount of net
long-term capital gains, any such gains will be distributed annually as
described in the Prospectus. Such distributions ("capital gain divi-
dends"), if any, may be taxable to shareholders as long-term capital
gains, regardless of how long they have held Fund shares, and will be des-
ignated as capital gain dividends in a written notice mailed by the Fund
to shareholders after the close of the Fund's prior taxable year. If a
shareholder receives a capital gain dividend with respect to any share and
if such 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) on the sale or exchange of such share will be
treated as a long-term capital loss to the extent of the capital gain div-
idend.
When a shareholder incurs a sales charge when acquiring shares of the
Fund, disposes of those shares within 90 days and 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 the otherwise applicable sales charge for the second
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 ac-
quired 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 or CDSC 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 Jersey personal income
tax status of his or her dividends and distributions from the Fund for the
prior calendar year. These statements also will designate the amount of
exempt-interest dividends that is a preference item for purposes of the
Federal individual and corporate alternative minimum taxes. Each share-
holder also will receive, if appropriate, various written notices after
the close of the Fund's prior taxable year as to the Federal income tax
status of his or her dividends and distributions which were received from
the Fund during the Fund's prior taxable 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 ex-
cluded or exempt from Federal income taxation or New Jersey personal in-
come taxation and the dollar amount of dividends subject to Federal income
taxation or New Jersey personal income taxation, if any, will vary for
each shareholder depending upon the size and duration of each sharehold-
er's investment in the Fund. To the extent that the Fund earns 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 in-
come bears to its total net investment income earned on that day. There-
fore, the percentage of each day's dividend designated as taxable, if any,
may vary from day-to-day.
Investors considering buying shares of the Fund just prior to a record
date for a capital gain distribution should be aware that, regardless of
whether the price of the Fund shares to be purchased reflects the amount
of the forthcoming distribution payment, any such payment will be a tax-
able distribution payment.
If a shareholder fails to furnish the Fund with a correct taxpayer identi-
fication number, fails to report fully dividend or interest income, or
fails to certify that he or she has provided a correct taxpayer identifi-
cation 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, if any, and (b) pro-
ceeds of any redemption of Fund shares. An individual's taxpayer identifi-
cation number is his or her social security number. The "backup withhold-
ing" tax is not an additional tax and may be credited against a sharehold-
er's Federal income tax liability.
In the opinion of the Fund's New Jersey counsel, income distributions, in-
cluding interest income and gains realized by the Fund upon disposition of
investments paid from a "qualified investment fund" are exempt from the
New Jersey personal income tax to the extent attributable to New Jersey
Municipal Securities or to obligations that are free from state or local
taxation under New Jersey or Federal laws ("Tax-Exempt Obligations"). A
"qualified investment fund" is any investment or trust company, or series
of such investment company or trust registered with the SEC, which for the
calendar year in which a distribution is paid, has no investments other
than interest-bearing obligations, obligations issued at a discount, fi-
nancial options, futures, forward contracts or other similar financial in-
struments related to interest-bearing obligations, obligations issued at a
discount or related bond indexes and cash and cash items, including re-
ceivables, and which has, at the close of each quarter of the taxable
year, at least 80% of the aggregate principal amount of all of its invest-
ments, excluding financial options, futures, forward contracts, or other
similar financial instruments related to interest-bearing obligations, ob-
ligations issued at a discount or bond indexes related there to as autho-
rized under the Code, cash and cash items, such as receivables, invested
in New Jersey Municipal Securities or in Tax-Exempt Obligations. Further-
more, gains resulting from the redemption or sale of shares of the Fund to
the extent attributable to interest or gain from obligations issued by New
Jersey or its local government entities or obligations which are free from
state or local taxes under New Jersey or Federal law, are exempt from the
New Jersey personal income tax.
The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, divi-
dends and distributions from a "qualified investment fund" are included in
the net income tax base for purposes of computing the Corporation Business
Tax. Furthermore, any gain upon the redemption or sale of Fund shares by a
corporate shareholder is also included in the net income tax base for pur-
poses of computing the Corporation Business Tax.
The foregoing is only a summary of certain Federal and New Jersey tax con-
siderations generally affecting the Fund and its shareholders, and is not
intended as a substitute for careful tax planning. Shareholders are urged
to consult their tax advisors with specific reference to their own 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
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 serves
as the Fund's transfer agent. Under the transfer agency agreement, TSSG
maintains the shareholder account records for the Fund, handles certain
communications between shareholders 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 March 31, 1994, accom-
panies this Statement of Additional Information and is incorporated herein
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 that 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 that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
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 ele-
ments present which make the long-term risks appear somewhat larger than
in Aaa securities.
A
Bonds that 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 that are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protec-
tive elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment charac-
teristics and in fact have speculative characteristics as well.
BA
Bonds that are rated Ba are judged to have speculative elements; their fu-
ture cannot be considered as well assured. Often the protection of inter-
est and principal payments may be very moderate and thereby not well safe-
guarded during both good and bad times over the future. Uncertainty of po-
sition characterizes bonds in this class.
B
Bonds that are rated B generally lack characteristics of the desirable in-
vestment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the secu-
rity ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
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 that 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 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 de-
mand 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 desig-
nation MIG 1 or VMIG 1 are of the best quality, enjoying strong protection
by established cash flows of funds for their servicing or from established
and broad-based access to the market for refinancing, or both. Loans bear-
ing the designation MIG 2 or VMIG 2 are of high quality, with ample mar-
gins 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 undeniable strength of
the preceding grades. Liquidity and cash flow may be tight and market ac-
cess for refinancing, in particular, is likely to be less well estab-
lished.
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 JERSEY MUNICIPALS FUND INC.
Two World Trade Center
New York, New York 10048 Fund 66, 206
Smith Barney Shearson
NEW JERSEY
MUNICIPALS FUND INC.
STATEMENT OF
ADDITIONAL INFORMATION
AUGUST 1, 1994
SMITH BARNEY SHEARSON
SMITH BARNEY SHEARSON NEW JERSEY 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 year ended March 31, 1994 and the
report of Independent Accountants dated May 10, 1994, are incorporated by
reference to the Definitive 30b2-1 filed on May 27, 1994 as Assession
#0000053798-94-000278.
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
Exhibit No. Description of Exhibit
All references are to the Registrant's Registration Statement on Form N-1A as
filed with the Securities and Exchange Commission on December 1, 1987 File
Nos. 33-18779 and 811-5486 (the "Registration Statement").
(1)(a) Registrant's Articles of Incorporation dated November 12, 1987
is filed herein.
(b) Articles of Amendment dated December 15, 1988, to Articles of
Incorporation is filed herein.
(c) Articles of Revival dated March 31, 1992, to the Articles of
Incorporation is filed herein.
(d) Articles Supplementary dated November 5, 1992, to the Articles
of Incorporation is filed herein.
(e) Articles of Amendment dated July 30, 1993, to Articles of
Incorporation is filed herein.
(2) Registrant's By-Laws dated November 23, 1987 are incorporated
by reference to the Registration Statement.
(3) Not Applicable
(4) Registrant's form of stock certificate for Class A and B shares is
incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement ("Post-Effective Amendment No. 9").
(5) Investment Advisory Agreement dated July 30, 1993 between the
Registrant
and Greenwich Street Advisors is filed herein.
(6) Distribution Agreement dated July 30, 1993 between the Registrant
and Smith Barney Shearson Inc. is filed herein.
(7) Not Applicable.
(8) Custody Agreement between the Registrant and Boston Safe Deposit and
Trust Company dated April 1, 1988 is incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration Statement ("Pre-Effective
Amendment
No. 1").
(9) (a) Transfer Agency Agreement dated August 2, 1993 between the
Registrant and The Shareholder Services Group, Inc. is filed herein.
(b) Form of Administration Agreement dated April 20, 1994 between
the Registrant and Smith, Barney Advisers, Inc. is filed herein.
(c) Form of Sub-Administration dated April 20, 1994 between the
Registrant and The Boston Company Advisors, Inc. is filed herein.
(10) Opinion of New Jersey Counsel is filed herein.
(11) Consent of Independent Accountants and Report of Independent Accountants
is filed herein.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Services and Distribution Plan pursuant to Rule 12b-1 dated July 30,
1993 is filed herein.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 3 to the Registrant Statement filed on May 27, 1989 (Post-
Effective Amendment No. 3"). </R
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class by Class as of
June 3, 1994
Common Stock, par Class A 3,135
value $.001 per share Class B 1,893
Item 27. Indemnification
Response to this item is incorporated by reference to Post-Effective
Amendment No. 9.
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 Shearson Inc.
acquired the domestic retail brokerage and asset management business of
Shearson Lehman Brothers, which included the business of the Registrant's
prior investment adviser. Shearson Lehman Brothers was a wholly owned
subsidiary of Shearson Lehman Brothers Holdings Inc. ("Shearson Holdings").
All of the issued and outstanding common stock of Shearson Holdings
(representing 92% of the voting stock) was held by American Express Company.
Information as to any past business vocation or employment of a substantial
nature engaged in by officers and directors of Shearson Lehman 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)
3/15/94
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 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 Muni Funds, Smith
Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney Tax
Free Money Fund, Inc., Smith Barney Variable Account Funds, Smith Barney U.S.
Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), Smith Barney International Fund (Luxembourg)
and various series of unit investment trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of The
Travelers Inc. (formerly known as Primerica Corporation) ("Travelers"). 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).
3/15/94
Item 30. Location of Accountants and Record
(1) Smith Barney Shearson New Jersey 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 Shareholders Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
None.
Item 32. Undertakings
None
Rule 485(b) Certification
The Registrant hereby certifies that it meets all of the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act of 1933, as
amended.
The Registrant further represents pursuant to Rule 485(b)(2)(iv)
that the resignations of Robert Borgesen and Peter Gallary as Directors of the
Registrant was not due to any disagreement with the Registrant on any matter
relating to its operation, policies or practices. Mr. Borgesen resigned
because of health and age considerations and Mr. Gallary resigned because he
is no longer employed by The Boston Company.
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 JERSEY 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 New York, State of
New York on the 29th day of July, 1994.
SMITH BARNEY SHEARSON
NEW JERSEY MUNICIPALS FUND INC.
By:/s/ Heath B.
McLendon*
Heath B. McLendon, Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement and the above Power of Attorney
has been signed below by the following persons in the capacities and on the
dates indicated.
Signature Title Date
/s/ Heath B. McLendon*
Heath B. McLendon Director
Chairman of the Board
(Chief Executive Officer)
7/29/94
/s/ Lewis E. Daidone
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer) 7/29/94
/s/ Alfred J. Bianchetti*
Alfred J. Bianchetti Director
7/29/94
/s/ Herbert Barg*
Herbert Barg Director
7/29/94
/s/ Martin Brody*
Martin Brody Director
7/29/94
/s/ Dwight B. Crane*
Dwight B. Crane Director
7/29/94
/s/ James J. Crisona*
James J. Crisona Director
7/29/94
/s/ Robert A. Frankel*
Robert A. Frankel Director 7/29/94
Signature Title Date
/s/ Dr. Paul Hardin*
Dr. Paul Hardin Director
7/29/94
/s/ Stephen E. Kaufman
Stephen E. Kaufman Director
7/29/94
/s/ Joseph J. McCann*
Joseph J. McCann Director 7/29/94
*Signed by Lee D. Augsburger, their
duly authorized attorney-in-fact,
pursuant to power of attorney dated
October 20, 1992
/s/ Lee D. Augsburger______
Lee D. Augsburger
g:/shared/domestic/clients/shearson/funds/njmu/sigpg
EXHIBIT 99.1(a)
ARTICLES OF INCORPORATION
OF
SHEARSON LEHMAN NEW JERSEY MUNICIPALS INC.
ARTICLE I
The undersigned, Carmen Leon, whose post office address is c/o Willkie
Farr & Gallagher, 153 East 53rd Street, New York, New York 10022 being at
least 18 years of age, does hereby act as an incorporator and forms a
corporation, under and by virtue of the Maryland General Corporation Law.
ARTICLE II
The name of the Corporation is Shearson Lehman New Jersey Municipals
Inc.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company
registered as an open-end company under the Investment Company Act of 1940, as
amended.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration as may now or hereafter be permitted by law.
(4) To redeem, purchase or acquire in any other manner, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by law and by this
Charter.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in the State of Maryland is c/o CT Corporation System, 32 South Street,
Baltimore, Maryland 21202. The name and address of the resident agent
of the corporation in the State of Maryland is CT Corporation System, 32
South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the
Corporation shall have authority to issue is one hundred million
(100,000,000) shares, of the par value of one tenth of one cent ($.001)
per share and of the aggregate par value of one hundred thousand dollars
($100,000), all of which one hundred million (1000,000,000) shares are
designated Common Stock.
(2) Any fractional share shall carry proportionately the rights
of a whole share including, without limitation, the right to vote and
the right to receive dividends. A fractional share shall not, however,
have the right to receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of this Charter and the By-
laws of the Corporation.
(4) No holder of stock of the Corporation by virtue of being
such a holder shall have any right to purchase or subscribe for any
shares of the Corporation's capital stock or any other security that the
Corporation may issue or sell (whether out of the number of shares
authorized by this Charter or out of any shares of the Corporation's
capital stock that the Corporation may acquire) other than a right that
the Board of Directors in its discretion may determine to grant.
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital
stock from time to time by setting or changing in any one or more
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any action to
be taken or authorized by the affirmative vote of a greater proportion
of the votes of all classes or of any class of stock of the Corporation,
such action shall be effective and valid if taken or authorized by the
affirmative vote of a majority of the total number of votes entitled to
e cast thereon, except as otherwise provided in this Charter.
ARTICLE VI
REDEMPTION
Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem all or any part of the
shares of capital stock of the Corporation standing in the name of the
holder on the books of the Corporation, and all shares of capital stock
issued by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of the shares as in effect from
time to time as may be determined by or pursuant to the direction of the
Board of Directors of the Corporation in accordance with the provisions
of this Article VI, subject to the right of the Board of Directors of
the Corporation to suspend the right of redemption or postpone the date
of payment of the redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the
right at any time to redeem the shares owned by any holder of capital
stock of the Corporation (i) if the redemption is, in the opinion of the
Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the
meaning of the Internal Revenue Code of 1986 or (ii) if the value of the
shares in the account maintained by the Corporation or its transfer
agent for any class of stock for the stockholder is $250 (two hundred
fifty dollars) or less and the stockholder has been given at least 30
(thirty) days' written notice of the redemption and has failed to make
additional purchases of shares in an amount sufficient to bring the
value in his account to $250 (two hundred fifty dollars) or more before
the redemption is effected by the Corporation. Payment of the
redemption price shall be made in cash by the Corporation at the time
and in the manner as may be determined from time to time by the Board of
Directors of the Corporation unless, in the opinion of the Board of
Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may
make payment wholly or partly by securities or other property, the value
of which shall be determined as provided in this Charter. The Board of
Directors may establish procedures for redemption of shares.
ARTICLE VIII
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors
shall be two or such other number as may be set forth in the By-laws or
determined by the Board of Directors pursuant to the By-laws. The
number of Directors shall at no time be less than the minimum number
required under the Maryland General Corporation Law. The name of the
directors who shall act until the first annual meeting of stockholders
or until his successor is duly chosen and qualified are Heath B.
McLendon and William J. Nutt.
(2) In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors
is expressly authorized:
(i) To make, alter or repeal the By-laws of the
Corporation, except where such power is reserved by the By-laws to the
stockholders, and except as otherwise required by the Investment Company
Act of 1940, as amended.
(ii) From time to time to determine whether and to what
extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them
other than the stock ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to inspect any
account or book or document of the Corporation, except as conferred by
law or authorized by resolution of the Board of Directors or of the
stockholders.
(iii) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and
unsecured, as the Board of Directors may determine, and to authorize and
cause to be executed mortgages and liens upon the real or personal
property of the Corporation.
(iv) Notwithstanding anything in this Charter to the
contrary, to establish in its absolute discretion the basis or method
for determining the value of the asset belonging to any class, the value
of the liabilities belonging to any class and the net value of each
share of any class of the Corporation's stock.
(v) To determine in accordance with generally accepted
accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine
what accounting periods shall be used by the Corporation for any
purpose; to set apart out of any funds of the Corporation reserves for
such purposes as it shall determine and to abolish the same; to declare
and pay any dividends and distributions in cash, securities or other
property from surplus or any funds legally available therefor, at such
intervals as it shall determine; to declare dividends or distributions
by means of a formula or other method of determination, at meetings held
less frequently than the frequency of the effectiveness of such
declarations; and to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently
than the effectiveness of declarations thereof.
(vi) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all powers and do all acts that my
be exercised or done by the Corporation pursuant to the provisions of
the laws of the State of Maryland, this Charter and the By-laws of the
Corporation.
(3) Any determination made in good faith, and in accordance with
accepted accounting practices, if applicable, by or pursuant to the
direction of the Board of Directors, with respect to the amount of
assets, obligations or liabilities of the Corporation, as to the amount
of net income of the Corporation from dividends and interest for any
periods or amounts at any time legally available for the payment of
dividends, as to the amount of any reserves or charges set up and the
propriety of such reserves or charges, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any
reserves or charges (whether or not any obligation or liability for
which the reserves or charges have been created has been paid or
discharged or is then or thereafter required to be paid or discharged),
as to the value of any security owned by the Corporation, the net asset
value of shares of any class of the Corporation's capital stock, or as
to any other matters relating to the issuance, sale, redemption or other
acquisition or disposition of securities or shares of capital stock of
the Corporation, and any reasonable determination made in good faith by
the Board of Directors whether any transaction constitutes a purchase of
securities on "margin," a sale of securities "short," or an underwriting
of the sale of, or a participation in any underwriting or selling group
in connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of
the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of
capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as indicted above. No provision of this
Charter of the Corporation shall be effective to (i) require a waiver of
compliance with any provision of the Securities Act of 1933, as amended,
or the Investment Company Act of 1940 as amended, or of any valid rule,
regulation or order of the Securities and Exchange Commission under
those Acts or (ii) protect or purport to protect any director or officer
of the Corporation against any liability to the Corporation or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including
any amendment that alters the contract rights, as expressly set forth in
this Charter, of any outstanding stock.
* * *
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge tat the adoption and signing are
my act.
By:
Incorporator
Dated the 11th day of November, 1987
EXHIBIT 99.1(b)
SHEARSON LEHMAN NEW JERSEY MUNICIPALS INC.
ARTICLES OF AMENDMENT
Shearson Lehman New Jersey Municipals Inc., a Maryland corporation
having its principal office in the state of Maryland in Baltimore City,
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland, that:
FIRST: The Charter of the Corporation is hereby amended by striking
out Article II and inserting in lieu thereof the following:
ARTICLE II
NAME
The name of the Corporation is SLH New Jersey Municipals Fund Inc.
SECOND: The foregoing amendment to the Charter of the Corporation
has been advised by a majority of the entire Board of Directors of the
Corporation and approved by vote of the holders of a majority of the
outstanding shares of stock of the Corporation.
\
THIRD: The Charter of the Corporation is further amended with the
addition of Article IX as follows:
Article IX:
To the fullest extent permitted by Maryland General Corporation Law, as
amended from time to time, no director or officer of the Corporation shall be
personally liable to the Corporation or its stockholders for money damages,
except to the extent such exemption from liability or limitation thereof is
not permitted by the Investment Company Act of 1940, as amended from time to
time. No amendment to these Articles of Incorporation or repeal of any of its
provisions shall limit or eliminate the benefits provided to directors and
officers under this provision with respect to any act or omission which
occurred prior to such amendment or repeal.
FOURTH: The foregoing amendment to the Charter of the Corporation
has been advised by a majority of the entire Board of Directors of the
Corporation and approved by vote of the holders of a majority of the
outstanding shares of stock of the Corporation.
IN WITNESS WHEREOF, Shearson Lehman Managed Municipals Inc. has caused
these present to be signed in its name and on its behalf by its President,
Thomas A Belshe, attested by its Secretary, Stephen E. Cavan, on November 4,
1988.
The President acknowledges these Articles of Amendment to be the
corporate act of the Corporation and states that to the best of his knowledge,
information and belief the matters of facts set forth in these Articles with
respect to the authorization and approval of the amendment of the
Corporation's Charter are true in all material respects and that this
statement is made under the penalties of perjury.
SHEARSON LEHMAN NEW JERSEY MUNICIPALS INC.
By: /s/ Thomas A Belshe
Thomas A Belshe, President
ATTEST:
/s/ Stephen E Cavan
Stephen E. Cavan, Secretary
EXHIBIT 99.1(c)
ARTICLES OF REVIVAL
FOR
SLH NEW JERSEY MUNICIPALS FUND INC. #D 2448371
(Insert exact name of corporation as it appears on records of the State
Department
of Assessments and Taxation)
FIRST: The name of the corporation at the time the charter was forfeited
was
SLH New Jersey Municipals Fund Inc.
SECOND: The name which the corporation will use after revival is
Shearson Lehman Brothers New Jersey Municipals Fund Inc.
THIRD: The address of the principal office in this state is
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, MD 21202
FOURTH: The name and address of the resident agent is
The Corporation Trust Incorporated
32 South Street
Baltimore, MD 21202
FIFTH: These Articles of Revival are for the purpose of reviving the
charter of the corporation.
SIXTH: At or prior to the filing of these Articles of Revival, the
corporation has (a) Paid all fees required by law; (b) Filed all annual
reports which should have been filed by the corporation if its charter had not
been forfeited: (c) Paid all state and local taxes, except taxes on real
estate, and all interest and penalties due by the corporation or which would
have become due if the charter had not been forfeited whether or not barred by
limitations.
(Use A for signatures. If that procedure is unavailable, Use B. If A & B are
not available, use C. ONLY SIGN UNDER ONE SECTION.)
A. The undersigned who were respectively the last acting president (or vice
president) and secretary (or treasurer) of the corporation severally
acknowledge the Articles to be their act.
/s/ Christina
Haage
Vice President
/s/ Lee D.
Augsburger
Assistant Secretary/Treasurer
(Use if A cannot be signed/acknowledged)
B. The last acting president, vice president, secretary, and treasurer are
unwilling or unable to sign and acknowledge these Articles; therefore, the
undersigned who represent the lessor of a majority or 3 of the last acting
directors of the corporation severally acknowledge the Articles to be their
act.
Last Acting Director
Last Acting Director
Last Acting Director
(Use if A and B cannot be signed/acknowledged)
C. The last acting president, vice president, secretary, and treasurer of
the corporation are unable or unwilling to sign the Articles. There are less
than the required number of directors able and willing to sign the Articles
therefore, the undersigned who were elected as directors for the purpose of
reviving the charter of the corporation severally acknowledge the Articles to
be their act.
Director
Director
Director
AFFIDAVIT FOR REVIVAL OF A CHARTER
I, Lee D. Augsburger, Vice President and Associate General Counsel of
The Boston Company hereby declare that the previously mentioned corporation
has paid all State and local taxes except on real estate, and all interest and
penalties due by the corporation or which would have become due if the charter
had not be forfeited whether or not barred by limitations.
/s/ Lee D
Augsburger
Lee D Augsburger
I hereby certify that on 3/30/92 before me the subsriber, a notary
public of the State of Maryland, in and for Massachusetts, Suffolk personally
appeared Christina Haage and Lee D. Augsburger and made oath under the
penalties of perjury that the matter of fact set forth in this affidavit are
true to the best of his knowledge, information and belief.
As witness my hand and notarial seal
/s/ Mary A Bucci
My Commission expires 7/31/92.
EXHIBIT 99.1(d)
ARTICLES SUPPLEMENTARY
SHEARSON LEHMAN BROTHERS NEW JERSEY MUNICIPALS FUND INC.
Shearson Lehman Brothers New Jersey Municipals Fund Inc., a Maryland
corporation having its principal office in the State of Maryland in Baltimore
City (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors hereby reclassifies 60,000,000 shares
of authorized but unissued Common Stock as 30,000,000 shares of Class B Common
Stock and 30,000,000 shares of Class D Common Stock.
SECOND: The shares of Common Stock reclassified hereby shall have
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth below and shall be subject to all provisions of the
charter relating to stock of the Corporation generally:
(1) All consideration received by the Corporation for the issue or
sale of stock of any class reclassified hereby, together with all income,
earnings, profits and proceeds thereof, including any proceeds derived from
the sale, exchange or liquidation thereof, and any funds or payments derived
from any reinvestment of the proceeds in whatever form the same may be, shall
irrevocably belong to the class of shares of stock reclassified hereby with
respect to which the assets, payments or funds were received by the
Corporation for all purpose, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Corporation. Such
assets, income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any assets derived
from any reinvestment of the proceeds in whatever form, are herein referred to
as "assets belonging to" such class.
(2) In the event of the liquidation or dissolution of the Corporation,
shareholders of each class reclassified hereby shall be entitled to receive,
as a class, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
class of stock, the assets belonging to the class; and the assets so
distributable to the stockholders of any class reclassified hereby shall be
distributed among the stockholders in proportion to the number of shares of
the class held by them and recorded on the books of the Corporation. In the
event that there are any general assets not belonging to any particular class
of stock, whether an existing class of stock or a class reclassified hereby,
and such assets are available for distribution, the distribution shall be made
to the holders of stock of all classes in proportion to the asset value of the
respective classes.
(3) The assets belonging to any class of stock reclassified hereby
shall be charged with the liabilities of such class, and shall also be charged
with such class's share of the general liabilities of the Corporation, in
proportion to the net asset value of the respective classes before taking into
account general liabilities. The determination of the Board of Directors
shall be conclusive (i) as to the amount of such liabilities, including the
amount of accrued expenses and reserves; (ii) as to any allocation of the same
to a given class reclassified hereby; and (iii) whether the same, or general
assets of the Corporation, are allocable to one or more classes reclassified
hereby. The liabilities so allocated to a class reclassified hereby are
herein referred to as "liabilities belonging to" such class.
(4) The assets belonging to each of the Class B Common Stock and Class
D Common Stock shall be invested in the same investment portfolio of the
Corporation as the assets belonging to the unclassified Common Stock.
(5) The dividends and distributions of investment income and capital
gains with respect to each of the Class B Common Stock and Class D Common
Stock shall be in such amounts as may be declared from time to time by the
Board of Directors, and such dividends and distributions with respect to each
such Common Stock may vary from dividends and distributions with respect to
each other class of Common Stock to reflect differing allocation of the
expenses of the Corporation among the holders of each such class and any
resultant differences among the net asset value per share of each such class,
to such extent and for such purposes as the Board of Directors may deem
appropriate.
(6) The holders of each of Class B Common Stock and Class D Commons
Stock shall have (i) exclusive voting rights with respect to any matter,
including any distribution plan adopted by the Corporation pursuant to 12b-1
under the Investment Company Act of 1940 (a "Plan") which affects only holders
of such class, and (ii) no voting rights whit respect to any matter, including
any Plan, which does not affect holders of such class.
(7) (a) Each share of Class B Common Stock, other than a share
purchased through the automatic reinvestment of a dividend or a distribution
with respect to the Class B Common Stock, shall be converted automatically,
and without any action or choice on the part of the holder thereof, into
shares of the unclassified Common Stock on the later of (A) September 30, 1994
(or such later date determined by the Board of Directors of the Corporation to
be the date as of which the Corporation's transfer agent has in place the
systems necessary to calculate the timing and amount of the conversions
described below) or (B) the date that is the first Corporation business day in
the month following the month in which the eighth anniversary date of the date
of issuance of the share falls ( the "Conversion Date"). With respect to
shares of Class B Common Stock issued in an exchange or series of exchanges
for shares of capital stock of another Investment Company or class or series
thereof registered under the Investment Company Act of 1940 pursuant to an
exchange privilege granted by the Corporation, other than for shares of such
capital stock purchased through the automatic reinvestment of a dividend or a
distribution with respect to such capital stock, the date of issuance of the
shares of Class B Common Stock for purposes of the immediately preceding
sentence shall be the date of issuance of the original shares of capital stock
of such other investment Company, or the first such investment company in the
event of a series of exchanges.
(b) Each share of Class B Common Stock (A) purchased through the
automatic reinvestment of a dividend or a distribution with respect to the
Class B Common Stock, or (B) issued pursuant to an exchange privilege granted
by the Corporation in an exchange or series of exchanged for shares originally
purchased through the automatic reinvestment of a dividend or distribution
with respect to shares of capital stock of another investment company or class
or series thereof registered under the Investment Company Act of 1940, shall
be segregated in a separate sub-account on the stock records of the
Corporation for each of the holders of record thereof. On any Conversion
Date, a number of shares held in the sub-account of the holder of record of
the share or shares being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and without any action
or choice on the part of the holder, into shares of the unclassified Common
Stock. The number of shares in the holder's sub-account so converted shall
bear the same relation to the total number of shares maintained in the sub-
account on the Conversion Date (immediately prior to conversion) as the number
of shares of the holder converted on the Conversion Date pursuant to paragraph
(7)(a) hereof bears to the total number of shares on the Conversion Date
(immediately prior to conversion) of the Class B Common Stock of the holder
after subtracting the shares then maintained in the holder's sub-account.
(c) The number of shares of the unclassified Common Stock into
which a share of Class B Common Stock is converted pursuant to paragraphs
(7)(a) and (7)(b) hereof shall equal the number (including for this purpose
fractions of a share) obtained by dividing the net asset value per share of
the Class B Common Stock for purposes of sales and redemptions thereof on the
Conversion Date by the net asset value per share of the unclassified Common
Stock for purposes of sales and redemption's thereof on the Conversion Date.
(d) On the Conversion Date, the shares of the Class B Common
Stock converted into shares of the unclassified Common Stock will cease to
accrue dividends and will no longer be deemed outstanding and the rights of
the holders thereof (except the right to receive the number of shares of
unclassified Common Stock into which the shares of Class B Common Stock have
been converted and declared but unpaid dividends to the Conversion Date) will
cease. Certificates representing shares of the unclassified Common Stock
resulting from the conversion need not be issued until certificates
representing shares of the Class B Common Stock converted, if issued, have
been received by the Corporation or its agent duly endorsed for transfer.
THIRD: The Board of Directors of the Corporation has reclassified
the shares of Common Stock pursuant to authority provided in the Corporation's
charter.
The undersigned Heath B. McLendon acknowledges these
Articles supplementary to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief the matters and
facts set forth in the Articles with respect to authorization and approval are
true in all material respects and that this statement is made under penalties
of perjury.
IN WITNESS WHEREOF, Shearson Lehman Brothers New Jersey Municipals Fund
Inc. has caused these Articles Supplementary to be signed and filed in its
name and on its behalf by its Chairman of the Board and witnessed by
its Assistant Secretary on November 2, 1992
SHEARSON LEHMAN BROTHERS NEW JERSEY
MUNICIPALS FUND INC.
By:/s/ Heath B. McLendon
Chairman of the Board
WITNESS:
/s/ Lee D Augsburger
Assistant Secretary
EXHIBIT 99.1(e)
SHEARSON LEHMAN BROTHERS NEW JERSEY MUNICIPALS FUND INC.
ARTICLES OF AMENDMENT
Shearson Lehman Brothers New Jersey Municipals Fund Inc., a Maryland
corporation having its principal office in the State of Maryland in Baltimore
City (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Articles Of Incorporation of the Corporation are hereby
amended by deleting Article II and inserting in lieu thereof the following:
ARTICLE II
NAME
The name of the corporation (hereinafter called the "Corporation")
is Smith
Barney Shearson New Jersey Municipals Fund Inc.
SECOND: The foregoing amendment to the charter was advised by the board of
directors and approved by the stockholders.
The undersigned Chairman acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states to the best of his knowledge
information and belief that the matters and facts set forth in these Articles
with respect to authorization and approval are true in all material respects
and that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, Shearson Lehman Brothers New Jersey Municipals Fund
Inc. has caused these Articles of Amendment to be signed in its name and on
its behalf by its Chairman and witnessed by its Assistant Secretary on
_______________, 1993.
Shearson Lehman Brothers New Jersey
Municipals Fund Inc.
/s/ Heath B. McLendon
Heath B McLendon, Chairman
WITNESS:
/s/ Lee D. Augsburger
Lee D. Augsburger, Assistant Secretary
EXHIBIT 99.5
ADVISORY AGREEMENT
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
July 30, 1993
The Greenwich Street Advisors Division of
Mutual Management Corp.
Two World Trade Center
New York, New York 10048
Dear Sirs:
Smith Barney Shearson New Jersey Municipals Fund Inc. (the "Company"), a
corporation organized under the laws of the state of Maryland, confirms its
agreement with the Greenwich Street Advisors Division of Mutual Management
Corp. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Company desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the investment objective(s),
policies and limitations specified in its Articles of Incorporation, as
amended from time to time (the "Articles of Incorporation"), in the prospectus
(the "Prospectus") and the statement of additional information (the
"Statement") filed with the Securities and Exchange Commission as part of the
Company's Registration Statement on Form N-1A, as amended from time to time,
and in the manner and to the extent as may from time to time be approved by
the Board of Directors of the Company (the "Board"). Copies of the
Prospectus, the Statement and the Articles of Incorporation have been or will
be submitted to the Adviser. The Company agrees to provide copies of all
amendments to the Prospectus, the Statement and the Articles of Incorporation
to the Adviser on an on-going basis. The Company desires to employ and hereby
appoints the Adviser to act as the investment adviser to the Company. The
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board of the
Company, the Adviser will (a) manage the Company's holdings in accordance with
the Company's investment objective(s) and policies as stated in the Articles
of Incorporation, the Prospectus and the Statement; (b) make investment
decisions for the Company; (c) place purchase and sale orders for portfolio
transactions for the Company; and (d) employ professional portfolio managers
and securities analysts who provide research services to the Company. In
providing those services, the Adviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of the
Company's assets.
3. Brokerage
In selecting brokers or dealers to execute transactions on behalf of the
Company, the Adviser will seek the best overall terms available. In assessing
the best overall terms available for any transaction, the Adviser will
consider factors it deems relevant, including, but not limited to, the breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934), provided
to the Company and/or other accounts over which the Adviser or its affiliates
exercise investment discretion.
4. Information Provided to the Company
The Adviser will keep the Company informed of developments materially
affecting the Company's holdings, and will, on its own initiative, furnish the
Company from time to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2 and 3 above. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Company or to its shareholders to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay the Adviser on the first business day of each month a fee
for the previous month at the annual rate of: .35 of 1.00% of the first $500
million of the Company's average daily net assets; and .32 of 1.00% of the
Company's average daily net assets in excess of $500 million. The fee for the
period from the Effective Date (defined below) of the Agreement to the end of
the month during which the Effective Date occurs shall be prorated according
to the proportion that such period bears to the full monthly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Adviser, the value of the Company's net assets shall be computed at the
times and in the manner specified in the Prospectus and/or the Statement.
7. Expenses
The Adviser will bear all expenses in connection with the performance of
its services under this Agreement. The Company will bear certain other
expenses to be incurred in its operation, including, but not limited to,
investment advisory and administration fees; fees for necessary professional
and brokerage services; fees for any pricing service; the costs of regulatory
compliance; and costs associated with maintaining the Company's legal
existence and shareholder relations.
8. Reduction of Fee
If in any fiscal year the aggregate expenses of the Company (including
fees pursuant to this Agreement and the Company's administration agreements,
but excluding interest, taxes, brokerage and extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the Company, the
Adviser will reduce its fee to the Company by the proportion of such excess
expense equal to the proportion that its fee thereunder bears to the aggregate
of fees paid by the Company for investment advice and administration in that
year, to the extent required by state law. A fee reduction pursuant to this
paragraph 8, if any, will be estimated, reconciled and paid on a monthly
basis.
9. Services to Other Companies or Accounts
The Company understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Company has no objection to the Adviser's so acting, provided that whenever
the Company and one or more other investment companies advised by the Adviser
have available funds for investment, investments suitable and appropriate for
each will be allocated in accordance with a formula believed to be equitable
to each company. The Company recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the Company. In
addition, the Company understands that the persons employed by the Adviser to
assist in the performance of the Adviser's duties under this Agreement will
not devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of the Adviser or any
affiliate of the Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the "Closing Date" as that
term is defined in that certain Asset Purchase Agreement executed among Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc., dated March 12, 1993 (the "Effective Date") and shall
continue for an initial two-year term and shall continue thereafter so long as
such continuance is specifically approved at least annually by (i) the Board
of the Company or (ii) a vote of a "majority" (as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Company's
outstanding voting securities, provided that in either event the continuance
is also approved by a majority of the Board who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days' written notice, by the
Board of the Company or by vote of holders of a majority of the Company's
shares, or upon 90 days' written notice, by the Adviser. This Agreement will
also terminate automatically in the event of its assignment (as defined in the
1940 Act and the rules thereunder).
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
SMITH BARNEY SHEARSON
NEW JERSEY MUNICIPALS FUND INC.
By:/s/ Heath B. McLendon
Name:
Title:
Accepted:
THE GREENWICH STREET ADVISORS DIVISION
OF MUTUAL MANAGEMENT CORP.
By:/s/ Christina Sydor
Name:
Title:
4
shared/domestic/clients/shearson/funds/njmu/advis.doc
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
July 30, 1993
Smith Barney Shearson Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Smith Barney Shearson New Jersey Municipals Fund
Inc., a Corporation organized under the laws of the State of Maryland has
agreed that Smith Barney Shearson Inc.("SBS") shall be, for the period of this
Agreement, the distributor of shares (the "Shares") of the Fund.
1. Services as Distributor
1.1 SBS will act as agent for the distribution of Shares covered
by the registration statement, prospectus and statement of additional
information then in effect under the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended (the "1940
Act").
1.2 SBS agrees to use its best efforts to solicit orders for the
sale of Shares and will undertake such advertising and promotion as it
believes is reasonable in connection with such solicitation.
1.3 All activities by SBS as distributor of the Shares shall
comply with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934.
1.4 SBS will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
1.5 SBS will transmit any orders received by it for purchase or
redemption of Shares to The Shareholder Services Group, Inc. ("TSSG"), the
Fund's transfer and dividend agent, or any successor to TSSG of which the Fund
has notified SBS in writing.
1.6 Whenever in their judgment such action is warranted for any
reason, including, without limitation, market, economic or political
conditions, the Fund's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable
to accept such orders and to make such sales.
1.7 SBS will act only on its own behalf as principal should it
choose to enter into selling agreements with selected dealers or others.
1.8 The Fund will pay to SBS an annual fee in connection with the
offering and sale of the Shares under this Agreement. The annual fee paid to
SBS, will be calculated daily and paid monthly by the Fund at an annual rate
set forth in the Services and Distribution Plan (the "Plan") based on the
average daily net assets of the Fund; provided that payment shall be made in
any month only to the extent that such payment shall not exceed the sales
charge limitations established by the National Association of Securities
Dealers, Inc.
The annual fee paid to SBS under this Section 1.8 maybe used by SBS to
cover any expenses primarily intended to result in the sale of Shares,
including, but not limited to, the following:
(a) cost of payments made to SBS Financial Consultants and other
employees of SBS or other broker-dealers that engage in the distribution of
the Fund's Shares;
(b) payments made to, and expenses of, persons who provide
support services in connection with the distribution of the Fund's Shares,
including, but not limited to, office space and equipment, telephone
facilities, answering routine inquiries regarding the Fund, processing
shareholder transactions and providing any other shareholder services;
(c) costs relating to the formulation and implementation of
marketing and promotional activities, including, but not limited to, direct
mail promotions and television, radio, newspaper, magazine and other mass
media advertising;
(d) costs of printing and distributing prospectuses and reports
of the Fund to prospective shareholders of the Fund;
(e) costs involved in preparing, printing and distributing sales
literature pertaining to the Fund; and
(f) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional activities that the Fund
may, from time to time, deem advisable;
except that distribution expenses shall not include any expenditures in
connection with services which SBS, any of its affiliates, or any other person
have agreed to bear without reimbursement.
1.9 SBS shall prepare and deliver reports to the Treasurer of the Fund
and to the sub-investment advisor and/or administrator of the Fund on a
regular, at least quarterly, basis, showing the distribution expenses incurred
pursuant to this Agreement and the Plan and the purposes therefor, as well as
any supplemental reports as the Trustees, from time to time, may reasonably
request.
2. Duties of the Fund
2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that SBS may designate.
2.2 The Fund shall furnish from time to time for use in
connection with the sale of the Shares, such information reports with respect
to the Fund and its Shares as SBS may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such reports, when so signed by
the Fund's officers, shall be true and correct. The Fund shall also furnish
SBS upon request with (a) annual audits of the Fund's books and accounts made
by independent certified public accountants regularly retained by the Fund;
(b) semi-annual unaudited financial statements pertaining to the Fund; (c)
quarterly earnings statements prepared by the Fund; (d) a monthly itemized
list of the securities in the Fund's portfolio; (e) monthly balance sheets as
soon as practicable after the end of each month; and (f) from time to time
such additional information regarding the Fund's financial condition as SBS
may reasonably request.
3. Representations and Warranties
The Fund represents to SBS that all registration statements,
prospectuses and statements of additional information filed by the Fund with
the SEC under the 1933 Act and the 1940 Act with respect to the Shares have
been carefully prepared in conformity with the requirements of the 1933 Act,
the 1940 Act and the rules and regulations of the SEC thereunder. As used in
this Agreement, the terms "registration statement", "prospectus" and
"statement of additional information" shall mean any registration statement,
prospectus and statement of additional information filed by the Fund with the
SEC and any amendments and supplements thereto which at any time shall have
been filed with the SEC. The Fund represents and warrants to SBS that any
registration statement, prospectus and statement of additional information,
when such registration statement becomes effective, will include all
statements required to be contained therein in conformance with the 1933 Act,
the 1940 Act and the rules and regulations of the SEC; that all statements of
fact contained in any registration statement, prospectus or statement of
additional information will be true and correct when such registration
statement becomes effective; and that neither any registration statement nor
any prospectus or statement of additional information when such registration
statement becomes effective will include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Fund's Shares. The Fund may, but shall not be obligated to, propose from time
to time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of
the Fund's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from SBS to do so, SBS
may, at its option, terminate this Agreement. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving SBS reasonable notice
thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any time such
amendments to any registration statement and/or supplements to any prospectus
or statement of additional information, of whatever character, as the Fund may
deem advisable, such right being in all respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes SBS and dealers to use any prospectus or
statement of additional information furnished by the Fund from time to time,
in connection with the sale of the Shares. The Fund agrees to indemnify,
defend and hold SBS, its several officers and directors, and any person who
controls SBS within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any such counsel fees incurred in connection
therewith) which SBS, its officers and directors, or any such controlling
person, may incur under the 1933 Act or under common law or otherwise, arising
out of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement, any prospectus or any
statement of additional information or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated
in any registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any thereof not misleading;
provided, however, that the Fund's agreement to indemnify SBS, its officers or
directors, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations made by SBS or its representatives or agents other than such
statements and representations as are contained in any prospectus or statement
of additional information and in such financial and other statements as are
furnished to SBS pursuant to paragraph 2.2 of this Agreement; and further
provided that the Fund's agreement to indemnify SBS and the Fund's
representations and warranties herein before set forth in paragraph 3 of this
Agreement shall not be deemed to cover any liability to the Fund or its
shareholders to which SBS would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of SBS's reckless disregard of its obligations and duties under
this Agreement. The Fund's agreement to indemnify SBS, its officers and
directors, and any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action brought against SBS,
its officers or directors, or any such controlling person, such notification
to be given by letter or by telegram addressed to the Fund at its principal
office in New York, New York and sent to the Fund by the person against whom
such action is brought, within ten days after the summons or other first legal
process shall have been served. The failure so to notify the Fund of any such
action shall not relieve the Fund from any liability that the Fund may have to
the person against whom such action is brought by reason of any such untrue,
or alleged untrue, statement or omission, or alleged omission, otherwise than
on account of the Fund's indemnity agreement contained in this paragraph 4.1.
The Fund will be entitled to assume the defense of any suit brought to enforce
any such claim, demand or liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the Fund and approved by SBS.
In the event the Fund elects to assume the defense of any such suit and
retains counsel of good standing approved by SBS, the defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel
retained by any of them; but if the Fund does not elect to assume the defense
of any such suit, or if SBS does not approve of counsel chosen by the Fund,
the Fund will reimburse SBS, its officers and directors, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by SBS or them. The Fund's
indemnification agreement contained in this paragraph 4.1 and the Fund's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
SBS, its officers and directors, or any controlling person, and shall survive
the delivery of any of the Fund's Shares. This agreement of indemnity will
inure exclusively to SBS's benefit, to the benefit of its several officers and
directors, and their respective estates, and to the benefit of the controlling
persons and their successors. The Fund agrees to notify SBS promptly of the
commencement of any litigation or proceedings against the Fund or any of its
officers or trustees in connection with the issuance and sale of any of the
Fund's Shares.
4.2 SBS agrees to indemnify, defend and hold the Fund, its
several officers and Directors, and any person who controls the Fund within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or
Directors or any such controlling person may incur under the 1933 Act, or
under common law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its officers or Directors, or such controlling
person resulting from such claims or demands shall arise out of or be based
upon any untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by SBS to the Fund and used in the answers to
any of the items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional information, or
shall arise out of or be based upon any omission, or alleged omission, to
state a material fact in connection with such information furnished in writing
by SBS to the Fund and required to be stated in such answers or necessary to
make such information not misleading. SBS's agreement to indemnify the Fund,
its officers or Directors, and any such controlling person, as aforesaid, is
expressly conditioned upon SBS being notified of any action brought against
the Fund, its officers or Directors, or any such controlling person, such
notification to be given by letter or telegram addressed to SBS at its
principal office in New York, New York and sent to SBS by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have been served. SBS shall have the right to control the
defense of such action, with counsel of its own choosing, satisfactory to the
Fund, if such action is based solely upon such alleged misstatement or
omission on SBS's part, and in any other event the Fund, its officers or
Directors or such controlling person shall each have the right to participate
in the defense or preparation of the defense of any such action. The failure
to so notify SBS of any such action shall not relieve SBS from any liability
that SBS may have to the Fund, its officers or Directors, or to such
controlling person by reason of any such untrue, or alleged untrue, statement
or omission, or alleged omission, otherwise than on account of SBS's indemnity
agreement contained in this paragraph 4.2. SBS agrees to notify the Fund
promptly of the commencement of any litigation or proceedings against SBS or
any of its officers or directors in connection with the issuance and sale of
any of the Fund's Shares.
4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party
and the indemnified party shall have agreed to the retention of such counsel
or (ii) the indemnified party shall have concluded reasonably that
representation of the indemnifying party and the indemnified party by the same
counsel would be inappropriate due to actual or potential differing interests
between them in the conduct of the defense of such action.
5. Effectiveness of Registration
None of the Fund's Shares shall be offered by either SBS or the Fund
under any of the provisions of this Agreement and no orders for the purchase
or sale of the Shares under this Agreement shall be accepted by the Fund if
and so long as the effectiveness of the registration statement then in effect
or any necessary amendments thereto shall be suspended under any of the
provision of the 1933 Act or if and so long as a current prospectus as
required by Section 5(b) (2) of the 1933 Act is not on file with the SEC;
provided, that nothing contained in this paragraph 5 shall in any way restrict
or have an application to or bearing upon the Fund's obligation to repurchase
its Shares from any shareholder in accordance with the provisions of the
Fund's prospectus, statement of additional information or Articles of
Incorporation dated Date of Articles of Incorporation, as amended from time to
time.
6. Notice to SBS
The Fund agrees to advise SBS immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect or
for additional information;
(b) In the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
or a material fact made in the registration statement, prospectus or statement
of additional information then in effect or that requires the making of a
change in such registration statement, prospectus or statement of additional
information in order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to
any registration statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
7. Term of the Agreement
This Agreement shall become effective as of the "Closing Date" as that
term is defined in that certain Asset Purchase Agreement executed among SBS,
Primerica Corporation and Shearson Lehman Brothers Inc., dated March 12, 1993
and continues for successive annual periods thereafter so long as such
continuance is specifically approved at least annually by (a) the Fund's Board
of Directors or (b) by a vote of a majority (as defined in the 1940 Act) of
the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Directors of the Fund who
are not interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' notice by the Fund's Board of Directors, by vote of the holders of a
majority of the Fund's Shares, or on 90 days' notice by SBS. This Agreement
will also terminate automatically in the event of its assignment (as defined
in the 1940 Act).
8. Miscellaneous
The Fund recognizes that directors, officers and employees of SBS may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies) and
that such other corporations and trusts may include the name "Smith Barney
Shearson" as part of their name, and that SBS or its affiliates may enter into
distribution or other agreements with such other corporations and trusts. If
SBS ceases to act as the distributor of the Shares, the Fund agrees that, at
SBS's request, the Fund's license to use the word ""Smith Barney Shearson""
will terminate and that the Fund will take all necessary action to change the
name of the Fund to a name not including the words "Smith Barney Shearson."
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance
of this Agreement by signing and returning to us the enclosed copy of this
Agreement.
Very truly yours,
SMITH BARNEY SHEARSON NEW JERSEY
MUNICIPALS FUND INC.
By: /s/ Heath B. McLendon
Accepted:
SMITH BARNEY SHEARSON INC.
By: /s/ Christina Sydor
Authorized Officer
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Page: 3
7
EXHIBIT 99.9(a)
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of August 2, 1993, between Smith Bareny Shearson New
Jersey 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 Jersey 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 NEW JERSEY MUNICIPALS FUND INC.
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.
- -10-
g/shared/domestic/clients/shearson/funds/njmu/transag
g/shared/domestic/clients/shearson/funds/nymu/tranag
EXHIBIT 99.9(b)
ADMINISTRATION AGREEMENT
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
April 20, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Smith Barney Shearson New Jersey Municipals Fund Inc. (the "Fund"), a
corporation organized under the laws of the State of Maryland, confirms its
agreement with Smith, Barney Advisors, Inc. ("SBA") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Charter dated November 12, 1987, as amended from time to time
(the "Charter"), in its Prospectus and Statement of Additional Information as
from time to time in effect and in such manner and to such extent as may from
time to time be approved by the Board of Directors of the Fund (the "Board").
Copies of the Fund's Prospectus, Statement of Additional Information and
Charter have been or will be submitted to SBA. Greenwich Street Advisors, a
division of Mutual Management Corp. ("Greenwich Street Advisors") serves as
the Fund's investment adviser and the Fund desires to employ and hereby
appoints SBA to act as its administrator. SBA accepts this appointment and
agrees to furnish the services to the Fund for the compensation set forth
below. SBA is hereby authorized to retain third parties and is hereby
authorized to delegate some or all of its duties and obligations hereunder to
such persons provided that such persons shall remain under the general
supervision of SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA will:
(a) assist in supervising all aspects of the Fund's operations except those
performed by the Fund's investment adviser under its investment advisory
agreement; (b) supply the Fund with office facilities (which may be in SBA's
own offices), statistical and research data, data processing services,
clerical, accounting and bookkeeping services, including, but not limited to,
the calculation of (i) the net asset value of shares of the Fund, (ii)
applicable contingent deferred sales charges and similar fees and charges and
(iii) distribution fees, internal auditing and legal services, internal
executive and administrative services, and stationary and office supplies; and
(c) prepare reports to shareholders of the Fund, tax returns and reports to
and filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this Agreement,
the Fund will pay SBA on the first business day of each month a fee for the
previous month at an annual rate of .20 of 1.00% of the Fund's average daily
net assets. The fee for the period from the date the Fund's initial
registration statement is declared effective by the SEC to the end of the
month during which the initial registration statement is declared effective
shall be prorated according to the proportion that such period bears to the
full monthly period. Upon any termination of this Agreement before the end of
any month, the fee for such part of a month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to SBA, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
4. Expenses
SBA will bear all expenses in connection with the performance of
its services under this Agreement. The Fund will bear certain other expenses
to be incurred in its operation, including: taxes, interest, brokerage fees
and commissions, if any; fees of the members of the Board of the Fund who are
not officers, directors or employees of Smith Barney Shearson Inc. or its
affiliates or any person who is an affiliate of any person to whom duties may
be delegated hereunder; SEC fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the Fund's
and Board members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal expenses;
costs of maintaining the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses;
costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of the officers or
Board and any extraordinary expenses. In addition, the Fund will pay all
distribution fees pursuant to a Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment advisory
agreement (s), but excluding distribution fees, interest, taxes, brokerage
and, if permitted by state securities commissions, extraordinary expenses)
exceed the expense limitations of any state having jurisdiction over the Fund,
SBA will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the combined
fees for investment advice and administration. The expense reimbursement
obligation of SBA will be limited to the amount of its fees hereunder. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates, provided that nothing herein
shall be deemed to protect or purport to protect SBA against liability to the
Fund or to its shareholders to which SBA would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of SBA's reckless disregard of its
obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive annual
periods, provided such continuance is specifically approved at least annually
by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act and
may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBA so acting. In addition, the
Fund understands that the persons employed by SBA or its affiliates to assist
in the performance of its duties hereunder will not devote their full time to
such service and nothing contained herein shall be deemed to limit or restrict
the right of SBA or its affiliates to engage in and devote time and attention
to other businesses or to render services of whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to whom
responsibilities are delegated hereunder) ("indemnitees") against any loss,
claim, expense or cost of any kind (including reasonable attorney's fees)
resulting or arising in connection with this Agreement or from the performance
or failure to perform any act hereunder, provided that no such indemnification
shall be available if the indemnitee violated the standard of care in
paragraph 6 above. This indemnification shall be limited by the 1940 Act, and
relevant state law. Each indemnitee shall be entitled to advancement of its
expenses in accordance with the requirements of the 1940 Act and the rules,
regulations and interpretations thereof as in effect from time to time.
10. Limitation of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon the
assets and property of the Fund, as provided in the Charter and Bylaws. The
execution and delivery of this Agreement has been duly authorized by the Fund,
SBA and Boston Advisors, and signed by an authorized officer of each, acting
as such. Neither the authorization by the Board members of the Fund, nor the
execution and delivery by the officer of the Fund shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Fund as
provided in the Charter and Bylaws.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by singing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson
New Jersey Municipals Fund Inc.
By:
Name: Heath B. McLendon
Title: Chairman of the Board
Accepted:
Smith, Barney Advisers, Inc.
By:
Name: Christina Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
o Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
o Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
o Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
o Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
o Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
o Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
o Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
o Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
o Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
o Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
o Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
o System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
o Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
o Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
o Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
o Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
o Total return reporting;
o SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
o Prepare dividend summary;
o Prepare quarter-end reports;
o Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
o Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
o Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
o Provide a Treasurer and Assistant Treasurer for the
Fund;
o Determine expenses properly chargeable to the Fund;
o Authorize payment of bills for expenses of the Fund;
o Establish and monitor the rate of expense accruals;
o Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
o Recommend dividends to be voted by the Fund's Board;
o Monitor mark-to-market comparisons for money market
funds;
o Recommend valuation to be used for securities which
are not readily saleable;
o Function as a liaison with the Fund's outside auditors
and arrange for audits;
o Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
o Prepare and file forms with the Internal Revenue
Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
o File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
o File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
o Prepare and file proxy statements;
o Review marketing material for SEC and NASD clearance;
o Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
o Provide a Secretary and an Assistant Secretary for the
Fund;
o Maintain general corporate calendar;
o Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
o Organize, attend and keep minutes of shareholder
meetings;
o Maintain Articles of Incorporation and By-Laws of the
Fund.
Legal Consultation and Business Planning
o Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
o Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
o Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
o Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
shared\domestic\clients\shearson\fund\njmu\admin1
EXHIBIT 99.9(c)
SUB-ADMINISTRATION AGREEMENT
SMITH BARNEY SHEARSON NEW JERSEY MUNICIPALS FUND INC.
April 20, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02210
Dear Sirs:
Smith Barney Shearson New Jersey Municipals Fund Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland and
Smith, Barney Advisers, Inc. ("SBA") confirm their agreement with The Boston
Company Advisors, Inc. ("Boston Advisors") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Charter dated November 12, 1987, as amended from time to time
(the "Charter"), in its Prospectus and Statement of Additional Information as
from time to time in effect, and in such manner and to such extent as may from
time to time be approved by the Board of Directors of the Fund (the "Board").
Copies of the Fund's Prospectus, Statement of Additional Information and
Charter have been or will be submitted to you. The Fund employs SBA as its
administrator, and the Fund and SBA desire to employ and hereby appoint Boston
Advisors as the Fund's sub-administrator. Boston Advisors accepts this
appointment and agrees to furnish the services to the Fund, for the
compensation set forth below, under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and SBA,
Boston Advisors will: (a) assist in supervising all aspects of the Fund's
operations except those performed by the Fund's investment adviser under the
Fund's investment advisory agreement; (b) supply the Fund with office
facilities (which may be in Boston Advisor's own offices), statistical and
research data, data processing services, clerical, accounting and bookkeeping
services, including, but not limited to, the calculation of (i) the net asset
value of shares of the Fund, (ii) applicable contingent deferred sales charges
and similar fees and changes and (iii) distribution fees, internal auditing
and legal services, internal executive and administrative services, and
stationery and office supplies; and (c) prepare reports to shareholders of the
Fund, tax returns and reports to and filings with the Securities and Exchange
Commission (the "SEC") and state blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this Agreement,
SBA will pay Boston Advisors on the first business day of each month a fee for
the previous month calculated in accordance with the terms set forth in
Appendix B, and as agreed to from time to time by the Fund, SBA and Boston
Advisors. Upon any termination of this Agreement before the end of any month,
the fee for such part of a month shall be prorated according to the proportion
which such period bears to the full monthly period and shall be payable upon
the date of termination of this Agreement. For the purpose of determining
fees payable to Boston Advisors, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the Board members of the Fund
who are not officers, directors or employees of Smith Barney Shearson Inc.,
Boston Advisors of their affiliates; SEC fees and state blue sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; the
Fund's and its Board members' proportionate share of insurance premiums,
professional association dues and/or assessments; outside auditing and legal
expenses; costs of maintaining the Fund's existence; costs attributable to
investor services, including, without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
officers or Board and any extraordinary expenses. In addition, the Fund will
pay all distribution fees pursuant to a Distribution Plan adopted under Rule
12b-1 of the Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment advisory
agreement(s) and administration agreement, but excluding distribution fees,
interest, taxes, brokerage and, if permitted by state securities commissions,
extraordinary expenses) exceed the expense limitations of any state having
jurisdiction over the Fund, Boston Advisory will reimburse the Fund for that
excess expense to the extent required by state law in the same proportion as
its respective fees bear to the combined fees for investment advice and
administration. The expense reimbursement obligation of Boston Advisors will
be limited to the amount of its fees hereunder. Such expense reimbursement,
if any, will be estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Boston Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement
relates, provided that nothing herein shall be deemed to protect or purport to
protect Boston Advisors against liability to the Fund or to its shareholders
to which Boston Advisors would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of Boston Advisor's reckless disregard of its
obligations and duties under this Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive annual
periods, provided that it may be terminated by 90 days' written notice to the
other parties by any of the Fund, SBA or Boston Advisors. This Agreement
shall extend to and shall be binding upon the parties hereto, and their
respective successors and assigns, provided, however, that this agreement may
not be assigned, transferred or amended without the written consent of all the
parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will continue
to act and may act in the future as administrator to one or more other
investment companies, and the Fund has no objection to Boston Advisors so
acting. In addition, the Fund understands that the persons employed by Boston
Advisors to assist in the performance of its duties hereunder may or may not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of Boston Advisors or its affiliates to
engage in and devote time and attention to other businesses or to render
services of whatever kind of nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the Fund,
and Boston Advisors agrees to indemnify SBA and its indemnitees, against any
loss, claim, expenses or cost of any kind (including reasonable attorney's
fees) resulting or arising in connection with this Agreement or from the
performance or failure to perform any act hereunder, provided that not such
indemnification shall be available if the indemnitee violated the standard of
care in paragraph 6 above. This indemnification shall be limited by the 1940
Act, and relevant state law. Each indemnitee shall be entitled to advancement
of its expenses in accordance with the requirements of the 1940 Act and the
rules, regulations and interpretations thereof as in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Fund individually, but are binding only upon the
assets and property of the Fund, as provided in the Charter and Bylaws. The
execution and delivery of this Agreement has been duly authorized by the Fund,
SBA and Boston Advisors, and signed by an authorized officer of each, acting
as such. Neither the authorization by the Board Members of the Fund, nor the
execution and delivery by the officer of the Fund shall be deemed to have been
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the assets and property of the Fund as
provided in the Charter.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson
New Jersey Municipals Fund Inc.
By:
Heath B. McLendon
Title: Chairman of the Board
Smith, Barney Advisers, Inc.
By:
Christina Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By:
Joseph W. Dello Russo
Title: Senior Vice President
Appendix A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act" ), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
- Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
- Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
- Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
- Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
- Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
- Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
- Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
- Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
- Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
- Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
- Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
- System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
- Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
- Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
- Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
- Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
- Total return reporting;
- SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
- Prepare dividend summary;
- Prepare quarter-end reports;
- Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
- Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
- Provide an Assistant Treasurer for the Fund;
- Authorize payment of bills for expenses of the Fund;
- Establish and monitor the rate of expense accruals;
- Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
- Monitor mark-to-market comparisons for money market funds;
- Recommend valuations to be used for securities which are not
readily saleable;
- Function as a liaison with the Fund's outside auditors and
arrange for audits;
- Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
- Prepare and file forms with the Internal Revenue Service
* Form 8613
* Form 1120-RIC
* Board Members' and Shareholders' 1099s
* Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
- File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
- File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
- Prepare and file proxy statements;
- Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
- Provide an Assistant Secretary for the Fund;
- Maintain general corporate calendar;
- Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
- Organize, attend and keep minutes of shareholder meetings;
- Maintain Articles of Incorporation or Master Trust
Agreements and By-Laws of the Fund.
Legal Consultation and Business Planning
- Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
- Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
- Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
- Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
shared\domestic\clients\shearson\fund\njmu\admin1
A-5
shared\domestic\clients\shearson\fund\njmu\admin1
shared\domestic\clients\shearson\fund\njmu\admin1
July 27, 1994
To: The Board of Directors of
Smith Barney Shearson New Jersey Municipals Fund, Inc.
With respect to the Registration Statement on Form N-1A under the
Securities Act of 1933, as amended, of Smith Barney Shearson New Jersey
Municipals Fund, Inc., we consent to the reference to our firm in such
Registration Statement, Prospectus and the Statement of Additional Information
included therein.
/s/ McCarter & English
McCARTER & ENGLISH
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Smith Barney Shearson New Jersey Municipals Fund Inc.:
We hereby consent to the following with respect to Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A (File No. 33-
18779) under the Securities Act of 1933, as amended, of Smith Barney Shearson
New Jersey Municipals Fund Inc.:
1. The incorporation by reference of our report dated May 10, 1994
accompanying the Annual Report for the fiscal year ended March 31, 1994 of
Smith Barney Shearson New Jersey 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 Informaion.
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Boston, Massachusetts
July 28, 1994
EXHIBIT 99.15
SERVICES AND DISTRIBUTION PLAN
Smith Barney Shearson New Jersey Municipals Fund Inc.
This Services and Distribution Plan dated July 30, 1993 (the "Plan"),
is adopted in accordance with Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940 Act"), by Smith Barney Shearson New
Jersey Municipals Fund Inc., a corporation organized under the laws of the
State of Maryland (the "Fund"), subject to the following terms and conditions:
Section 1. Annual Fee.
(a) Class A Service Fee. The Fund will pay to the distributor of its
shares, Smith Barney Shearson Inc., a corporation organized under the laws of
the State of Delaware ("Distributor"), a service fee under the Plan at the
annual rate of .15% of the average daily net assets of the Fund attributable
to the Class A shares (the "Class A Service Fee").
(b) Service Fee for Class B shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .15% of the
average daily net assets of the Fund attributable to the Class B shares (the
"Class B Service Fee").
(c) Distribution Fee for Class B shares. In addition to the Class B
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .50% of the average daily net assets of the Fund
attributable to the Class B shares (the "Class B Distribution Fee").
(d) Payment of Fees. The Service Fees and Distribution Fee will be
calculated daily and paid monthly by the Fund with respect to the foregoing
classes of the Fund's shares (each a "Class" and together the "Classes") at
the annual rates indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its respective
Service Fees and/or Distribution Fees may be used for: (a) costs of printing
and distributing the Fund's prospectus, statement of additional information
and reports to prospective investors in the Fund; (b) costs involved in
preparing, printing and distributing sales literature pertaining to the Fund;
(c) an allocation of overhead and other branch office distribution-related
expenses of the Distributor; (d) payments made to, and expenses of, Smith
Barney Shearson Financial Consultants and other persons who provide support
services in connection with the distribution of the Fund's shares, including
but not limited to, office space and equipment, telephone facilities,
answering routine inquires regarding the Fund, processing shareholder
transactions and providing any other shareholder services not otherwise
provided by the Fund's transfer agent; and (e) accruals for interest on the
amount of the foregoing expenses that exceed the Distribution Fee and, in the
case of Class B shares, the contingent deferred sales charge received by the
Distributor; provided, however, that the Distribution Fees may be used by the
Distributor only to cover expenses primarily intended to result in the sale of
the Fund's Class B shares, including without limitation, payments to
Distributor's financial consultants at the time of the sale of Class B shares.
In addition, Service Fees are intended to be used by the Distributor primarily
to pay its financial consultants for servicing shareholder accounts, including
a continuing fee to each such financial consultant, which fee shall begin to
accrue immediately after the sale of such shares.
Section 3. Approval of Shareholders.
The Plan will not take effect, and no fees will be payable in accordance
with Section 1 of the Plan, with respect to a Class until the Plan has been
approved by a vote of at least a majority of the outstanding voting securities
of the Class. The Plan will be deemed to have been approved with respect to a
Class so long as a majority of the outstanding voting securities of the Class
votes for the approval of the Plan, notwithstanding that: (a) the Plan has
not been approved by a majority of the outstanding voting securities of any
other Class, or (b) the Plan has not been approved by a majority of the
outstanding voting securities of the Fund.
Section 4. Approval of Directors.
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Directors of the Fund and
(b) those Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related
agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class until July
31, 1994, and thereafter for successive twelve-month periods with respect to
each Class; provided, however, that such continuance is specifically approved
at least annually by the Directors of the Fund and by a majority of the
Qualified Directors.
Section 6. Termination.
The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of such Class or (ii) by a vote of the Qualified
Directors. The Plan may remain in effect with respect to a particular Class
even if the Plan has been terminated in accordance with this Section 6 with
respect to any other Class.
Section 7. Amendments.
The Plan may not be amended with respect to any Class so as to increase
materially the amounts of the fees described in Section 1 above, unless the
amendment is approved by a vote of the holders of at least a majority of the
outstanding voting securities of that Class. No material amendment to the
Plan may be made unless approved by the Fund's Board of Directors in the
manner described in Section 4 above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of
the Fund.
Section 9. Written Reports.
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by the Fund
pursuant to the Plan or any related agreement will prepare and furnish to the
Fund's Board of Directors and the Board will review, at least quarterly,
written reports, complying with the requirements of the Rule, which sets out
the amounts expended under the Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 9 above, for a period of not less
than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act by the Securities and Exchange Commission.
IN WITNESS WHEREOF, the Fund executed the Plan as of July 30, 1993.
SMITH BARNEY SHEARSON
NEW JERSEY MUNICIPALS FUND INC.
By:/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board
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