Registration Nos. 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. 16 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X
Amendment No. 18 X
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
(Exact name of Registrant as specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
(212) 723-9218
(Registrant's telephone number, including Area Code)
Christina T. Sydor
Secretary
Smith Barney New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, New York 10013
(22nd Floor)
(Name and address of agent for service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective.
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
X on June 3, 1996 pursuant to Rule 485(b)
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, 1996
was filed on May 30, 1996 as Accession No. 0000825629-96-000002.
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Information Financial Highlights;
Performance
4. General Description of Registrant Cover Page; Prospectus
Summary;
Purchase of Shares; 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 Purchase of Shares;
Dividends, Distributions and Taxes;
Additional Information
7. Purchase of Securities Purchase of Shares; Valuation
of Shares;
Redemption of Shares; Exchange Privilege;
Distributor; Additional Information
8. Redemption or Repurchase Purchase of Shares; Redemption of
Shares
9. Legal Proceedings Not Applicable
Part B Statement of
Item No. Additional Information Caption
10. Cover Cover Page
11. Table of Contents Table of Contents
12. General Information Additional Information; Distributor
13. Investment Objective and Policies Investment Objective and
Management
Policies
14. Management of the Fund Management of the Fund; Distributor
15. Control Persons and Principal Management of the Fund
Holders of Securities
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 Purchase of Shares; Redemption
of Shares
Securities Being Offered Distributor; Valuation of Shares;
Exchange Privilege
20. Tax Status Taxes
21. Underwriters Distributor
22. Calculation of Performance Data Performance Data
23. Financial Statements Financial Statements
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
PART A
PROSPECTUS
SMITH
BARNEY
New
Jersey
Municipals
Funds
Inc.
JUNE 1,
1996
Prospectus begins on page
one
[Logo] Smith Barney Mutual Funds
Investing for your future.
Every day.
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus June 1,
1996
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388 Greenwich Street
New York, New York 10013
(212) 723-9218
Smith Barney 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 investment management
and the preservation of capital.
This Prospectus concisely sets forth certain information about the Fund,
including sales charges, distribution and service fees and expenses, that
investors will find helpful in making an investment decision. Investors are
encouraged to read this Prospectus carefully and retain it for future
reference.
Additional information about the Fund is contained in a Statement of
Additional
Information dated June 1, 1996, 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 a Smith
Barney Financial Consultant. The Statement of Additional Information has been
filed with the Securities and Exchange Commission (the "SEC") and is
incorporated by reference into this Prospectus in its entirety.
SMITH BARNEY INC.
Distributor
SMITH BARNEY MUTUAL FUNDS MANAGEMENT INC.
Investment Adviser and Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
1
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Table of Contents
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Prospectus Summary
3
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Financial Highlights
10
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Investment Objective and Management Policies
14
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New Jersey Municipal Securities
21
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Valuation of Shares
23
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Dividends, Distributions and Taxes
23
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Purchase of Shares
25
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Exchange Privilege
33
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Redemption of Shares
36
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Minimum Account Size
39
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Performance
40
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Management of The Fund
41
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Distributor
42
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Additional Information
43
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No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Fund
or
the Distributor. This Prospectus does not constitute an offer by the Fund or
the
Distributor to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make
such offer or solicitation in such jurisdiction.
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2
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary
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The following summary is qualified in its entirety by detailed
information
appearing elsewhere in this Prospectus and in the Statement of Additional
Information. Cross references in this summary are to headings in the
Prospectus.
See "Table of Contents."
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 management 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 instrumentalities, 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 purposes and exempt from New Jersey state
personal income taxes. Intermediate- and long-term municipal securities have
remaining maturities at the time of purchase of three to in excess of twenty
years. See "Investment Objective and Management Policies."
ALTERNATIVE PURCHASE ARRANGEMENTS The Fund offers several classes of shares
("Classes") to investors designed to provide them with the flexibility of
selecting an investment best suited to their needs. The general public is
offered three Classes of shares: Class A shares, Class B shares and Class C
shares, which differ principally in terms of sales charges and rate of
expenses
to which they are subject. A fourth Class of shares, Class Y shares, is
offered
only to investors meeting an initial investment minimum of $5,000,000. See
"Purchase of Shares" and "Redemption of Shares."
Class A Shares. Class A shares are sold at net asset value plus an
initial
sales charge of up to 4.00% and are subject to an annual service fee of 0.15%
of
the average daily net assets of the Class. The initial sales charge may be
reduced or waived for certain purchases. Purchases of Class A shares, which
when
combined with current holdings of Class A shares offered with a sales charge
equal or exceed $500,000 in the aggregate, will be made at net asset value
with
no initial sales charge, but will be subject to a contingent deferred sales
charge ("CDSC") of 1.00% on redemptions made within 12 months of purchase. See
"Prospectus Summary -- Reduced or No Initial Sales Charge."
Class B Shares. Class B shares are offered at net asset value subject to
a
maximum CDSC of 4.50% of redemption proceeds, declining by 0.50% the first
year
after purchase and by 1.00% each year thereafter to zero. This CDSC may be
3
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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waived for certain redemptions. Class B shares are subject to an annual
service
fee of 0.15% and an annual distribution fee of 0.50% of the average daily net
assets of this Class. The Class B shares' distribution fee may cause that
Class
to have higher expenses and pay lower dividends than Class A shares.
Class B Shares Conversion Feature. Class B shares will convert
automatically to Class A shares, based on relative net asset value, eight
years
after the date of the original purchase. Upon conversion, these shares will no
longer be subject to an annual distribution fee. In addition, a certain
portion
of Class B shares that have been acquired through the reinvestment of
dividends
and distributions ("Class B Dividend Shares") will be converted at that time.
See "Purchase of Shares -- Deferred Sales Charge Alternatives."
Class C Shares. Class C shares are sold at net asset value with no
initial
sales charge. They are subject to an annual service fee of 0.15% and an annual
distribution fee of 0.55% of the average daily net assets of the Class C
shares,
and investors pay a CDSC of 1.00% if they redeem Class C shares within 12
months
of purchase. This CDSC may be waived for certain redemptions. The Class C
shares' distribution fee may cause that Class to have higher expenses and pay
lower dividends than Class A shares. Purchases of Fund shares, which when
combined with current holdings of Class C shares of the Fund, equal or exceed
$500,000 in the aggregate, should be made in Class A shares at net asset value
with no sales charge, and will be subject to a CDSC of 1.00% on redemptions
made
within 12 months of purchase.
Class Y Shares. Class Y shares are available only to investors meeting an
initial investment minimum of $5,000,000. Class Y shares are sold at net asset
value with no initial sales charge or CDSC. Class Y shares are not subject to
any service or distribution fees.
In deciding which Class of Fund shares to purchase, investors should
consider the following factors, as well as any other relevant facts and
circumstances:
Intended Holding Period. The decision as to which Class of shares is more
beneficial to an investor depends on the amount and intended duration of his
or
her investment. Shareholders who are planning to establish a program of
regular
investment may wish to consider Class A shares; as the investment accumulates
shareholders may qualify for reduced sales charges and the shares are subject
to
lower ongoing expenses over the term of the investment. As an alternative,
Class
B and Class C shares are sold without any initial sales charge so the entire
purchase price is immediately invested in the Fund. Any investment return on
these additional invested amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
4
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, while Class C shares have a shorter CDSC period than Class
B
shares, they do not have a conversion feature and, therefore, are subject to
an
ongoing distribution fee. Thus, Class B shares may be more attractive than
Class
C shares to investors with longer term investment outlooks.
Investors investing a minimum of $5,000,000 must purchase Class Y shares,
which are not subject to any initial sales charge, CDSC or service or
distribution fees. The maximum purchase amount for Class A shares is
$4,999,999,
Class B shares is $249,999 and Class C shares is $499,999. There is no maximum
purchase amount for Class Y shares.
Reduced or No Initial Sales Charge. The initial sales charge on Class A
shares may be waived for certain eligible purchasers, and the entire purchase
price will be immediately invested in the Fund. In addition, Class A share
purchases, which when combined with current holdings of Class A shares offered
with a sales charge equal or exceed $500,000 in the aggregate, will be made at
net asset value with no initial sales charge, but will be subject to a CDSC of
1.00% on redemptions made within 12 months of purchase. The $500,000 aggregate
investment may be met by adding the purchase to the net asset value of all
Class
A shares offered with a sales charge held in funds sponsored by Smith Barney
Inc. ("Smith Barney") listed under "Exchange Privilege." Other Class A share
purchases may also be eligible for a reduced initial sales charge. See
"Purchase
of Shares." Because the ongoing expenses of Class A shares may be lower than
those for Class B and Class C shares, purchasers eligible to purchase Class A
shares at net asset value or at a reduced sales charge should consider doing
so.
Smith Barney Financial Consultants may receive different compensation for
selling different Classes of shares. Investors should understand that the
purpose of the CDSC on the Class B and Class C shares is the same as that of
the
initial sales charge on the Class A shares.
See "Purchase of Shares" and "Management of the Fund" for a complete
description of the sales charges and service and distribution fees for each
Class of shares and "Valuation of Shares," "Dividends, Distributions and
Taxes"
and "Exchange Privilege" for other differences between the Classes of shares.
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor,
Smith
Barney, a broker that clears securities transactions through Smith Barney on a
fully disclosed basis (an "Introducing Broker") or an investment dealer in the
selling group. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors in Class A, Class B and Class C shares may open
an
account by making an initial investment of at least $1,000 for each account.
5
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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Investors in Class Y shares may open an account for an initial investment of
$5,000,000. Subsequent investments of at least $50 may be made for all
Classes.
The minimum initial investment requirement for Class A, Class B and Class C
shares and the subsequent investment requirement for all Classes through the
Systematic Investment Plan described below is $50. There is no minimum
investment requirement in Class A for unitholders who invest distributions
from
a unit investment trust ("UIT") sponsored by Smith Barney. See "Purchase of
Shares."
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic
Investment
Plan under which they may authorize the automatic placement of a purchase
order
each month or quarter for Fund shares in an amount of at least $50. See
"Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed on each day the New York Stock
Exchange, Inc. ("NYSE") is open for business. See "Purchase of Shares" and
"Redemption of Shares."
MANAGEMENT OF THE FUND Smith Barney Mutual Funds Management Inc. ("SBMFM"),
serves as the Fund's investment adviser and administrator. SBMFM provides
investment advisory and management services to investment companies affiliated
with Smith Barney. SBMFM is a wholly owned subsidiary of Smith Barney Holdings
Inc. ("Holdings"). Holdings is a wholly owned subsidiary of Travelers Group
Inc.
("Travelers"), a diversified financial services holding company engaged,
through
its subsidiaries, principally in four business segments: Investment Services,
Consumer Finance Services, Life Insurance Services and Property & Casualty
Insurance Services. See "Management of the Fund."
EXCHANGE PRIVILEGE Shares of a Class may be exchanged for shares of the same
class of certain other Smith Barney Mutual Funds at the respective net asset
values next determined, plus any applicable sales charge differential. See
"Exchange Privilege."
VALUATION OF SHARES Net asset value of the Fund for the prior day generally is
quoted daily in the financial section of most newspapers and is also available
from Smith Barney Financial Consultants. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are paid on
the
last Friday of each calendar month to shareholders of record as of three
business days prior thereto. 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 were earned. See "Dividends, Distributions and
Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares of a
Class
will be reinvested automatically, unless otherwise specified by an investor,
in
additional shares of the same Class at current net asset value. Shares
acquired
by
6
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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dividend and distribution reinvestments will not be subject to any sales
charge
or CDSC. Class B shares acquired through dividend and distribution
reinvestments
will become eligible for conversion to Class A shares on a pro rata basis. See
"Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS 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 Securities,
"Municipal Securities"). Dividends paid by the Fund that are derived 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, however, the Fund is a qualified
investment fund under New Jersey law. Dividends 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 (including New Jersey Municipal Securities),
however, may be a specific tax preference item for Federal alternative minimum
tax purposes. The Fund may invest without limit in securities subject to the
Federal alternative minimum tax. See "Investment Objective and Management
Policies" and "Dividends, Distributions and Taxes."
The Fund is more susceptible to factors adversely affecting issuers of
New
Jersey Municipal Securities than is a municipal bond fund that does not
emphasize these issuers. See "New Jersey Municipal Securities" in the
Prospectus
and "Special Considerations Relating to New Jersey Municipal Securities" 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 assets that
it
may invest in the obligations of a single issuer. The Fund's assumption of
large
positions in the obligations of a small number of issuers may cause the Fund's
share price to fluctuate to a greater extent than that of a diversified
company
as a result of changes in the financial 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
securities
rated as low as C by Moody's Investors Service, Inc. ("Moody's") or D by
Standard & Poor's Corporation ("S&P"), or in unrated obligations of comparable
quality. Securities in
7
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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the fourth highest rating category, though considered to be investment grade,
have speculative characteristics. Securities rated as low as D are extremely
speculative and are in actual default of interest and/or principal payments.
There are several risks in connection with the use of when-issued
securities, municipal bond index and interest rate futures contracts and put
and
call options thereon as hedging devices, and municipal leases. See "Investment
Objective and Management Policies -- Certain Portfolio Strategies."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
an
investor will incur either directly or indirectly as a shareholder of the
Fund,
based on the maximum sales charge or maximum CDSC that may be incurred at the
time of purchase or redemption and, unless otherwise noted, the Fund's
operating
expenses for its most recent fiscal year:
Class A Class B Class C Class
Y
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Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price)...... 4.00% None None
None
Maximum CDSC (as a percentage of original
cost or redemption proceeds, whichever
is lower) .............................. None* 4.50% 1.00%
None
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Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees ........................ 0.50% 0.50% 0.50%
0.50%
12b-1 fees** ........................... 0.15 0.65 0.70
None
Other expenses*** ...................... 0.19 0.21 0.21
0.19
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TOTAL FUND OPERATING EXPENSES ............. 0.84% 1.36% 1.41%
0.69%
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* Purchase of Class A shares which, when combined with current holdings of
Class A shares offered with a sales charge, equal or exceed $500,000 in
the
aggregate, will be made at net asset value with no sales charge, but will
be subject to a CDSC of 1.00% on redemptions made within 12 months.
** Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee. Class C shares do not have a
conversion feature and, therefore, are subject to an ongoing distribution
fee. As a result, long-term shareholders of Class C shares may pay more
than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
*** For Class Y shares, "Other expenses" have been estimated based on
expenses
incurred by Class A shares because no Class Y shares had been purchased
as
of March 31, 1996.
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
actually pay lower or no charges depending on the amount purchased and, in the
case of Class B, Class C and certain Class A shares, the length of time the
shares are held. See "Purchase of Shares" and "Redemption of Shares." Smith
Barney
8
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Prospectus Summary (continued)
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receives an annual 12b-1 service fee of 0.15% 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 0.65% of the value of average daily net assets
of
that Class, consisting of a 0.50% distribution and a 0.15% service fee. With
respect to Class C shares, Smith Barney receives an annual 12b-1 fee of 0.70%
of
the value of average daily net assets of the Class, consisting of a 0.55%
distribution fee and a 0.15% service fee. "Other expenses" in the above table
include fees for shareholder services, custodial fees, legal and accounting
fees, printing costs and registration fees.
EXAMPLE
The following example is intended to assist an investor in understanding
the various costs that an investor in the Fund will bear directly or
indirectly.
The example assumes payment by the Fund of operating expenses at the levels
set
forth in the table above. See "Purchase of Shares," "Redemption of Shares" and
"Management of the Fund."
1 Year 3 Years 5 Years 10
Years*
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An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5.00%
annual return and (2) redemption at the end
of each time period:
Class A.................................. $48 $66 $85 $140
Class B.................................. 59 73 84 150
Class C.................................. 24 45 77 169
Class Y.................................. 7 22 38 86
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An investor would pay the following expenses on the same investment, assuming
the same annual return and no redemption:
Class A................................. $48 $66 $85 $140
Class B................................. 14 43 74 150
Class C................................. 14 45 77 169
Class Y................................. 7 22 38 86
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* 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.
The example also provides a means for the investor to compare expense
levels of funds with different fee structures over varying investment periods.
To facilitate such comparison, all funds are required to utilize a 5.00%
annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. This example should not be considered a
representation of past or future expenses and actual expenses may be greater
or
less than those shown.
9
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
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Financial Highlights
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The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's Annual Report
dated March 31, 1996. The information for the fiscal years ended March 31,
1989
through March 31, 1995 has been audited by Coopers & Lybrand, L.L.P.,
independent auditors. The information set out below should be read in
conjunction with the financial statements and related notes that also appear
in
the Fund's Annual Report, which is incorporated by reference into the
Statement
of Additional Information.
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Shares 1996 1995
1994 1993 1992
==============================================================================
==============================
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Year $ 12.62 $ 12.55 $
13.16 $ 12.44 $ 12.17
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- ------------------------------
Income From Operations:
Net investment income(1) 0.70 0.70
0.70 0.75 0.77
Net realized and unrealized gain/(loss) 0.26 0.07
(0.46) 0.87 0.44
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- ------------------------------
Total Income From Operations 0.96 0.77
0.24 1.62 1.21
==============================================================================
==============================
Less Distributions From:
Net investment income (0.70) (0.70)
(0.69) (0.75) (0.77)
Overdistribution of net investment income -- --
(0.01) -- --
Net realized gains -- (0.00)*
(0.15) (0.14) (0.13)
Capital -- --
(0.00) (0.01) (0.04)
- ------------------------------------------------------------------------------
- ------------------------------
Total Distributions (0.70) (0.70)
(0.85)* (0.90) (0.94)
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- ------------------------------
Net Asset Value, End of Year $ 12.88 $ 12.62 $
12.55 $ 13.16 $ 12.44
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- ------------------------------
Total Return 7.77% 6.37%
1.66% 13.49% 10.22%
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- ------------------------------
Net Assets, End of Year (in 000's) $ 153,690 $ 106,919 $
119,913 $ 115,694 $ 92,797
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- ------------------------------
Ratios to Average Net Assets:
Expenses(1)(2) 0.84% 0.88%
0.83% 0.74% 0.67%
Net investment income 5.41 5.61
5.17 5.76 6.18
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- ------------------------------
Portfolio Turnover Rate 22% 32%
32% 58% 98%
==============================================================================
==============================
</TABLE>
(1) The investment adviser has waived all or part of its fees in the fiscal
years ended March 31, 1992, 1993 and 1994. If such fees had not been
waived, the per share effects on net investment income and expense ratios
would have been as follows:
Per Share Decreases Expense Ratios
of Net Investment Income Without Fee Waivers
------------------------ -------------------
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
Class A $0.01 $0.02 $0.02 0.88% 0.90% 0.83%
(2) Expense ratios exclude interest expense. Expense ratios including
interest
expense would have been 0.89% and 0.68% for the years ended March 31,
1995
and March 31, 1992, respectively.
* Amount represents less than $0.01.
10
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- --
For a share of each class of capital stock outstanding throughout each year:
Class A Shares 1991 1990 1989*
==============================================================================
==
Net Asset Value, Beginning of Year $ 11.92 $ 11.67 $ 11.40
- ------------------------------------------------------------------------------
- --
Income From Operations:
Net investment income*** 0.82 0.83 0.82
Net realized and unrealized gain/(loss) 0.32 0.27 0.28
- ------------------------------------------------------------------------------
- --
Total From Operations 1.14 1.10 1.10
==============================================================================
==
Less Distributions From:
Net investment income (0.83) (0.82) (0.82)
Overdistribution of net investment income -- -- --
Net realized gains (0.05) (0.03) (0.01)
Capital (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%
- ------------------------------------------------------------------------------
- --
Net Assets, End of Year (in 000's) $ 65,378 $38,728 $ 29,265
- ------------------------------------------------------------------------------
- --
Ratios to Average Net Assets:
Expenses 0.57%+ 0.55%
0.52%**
Net investment income 6.74 6.89
7.23**
- ------------------------------------------------------------------------------
- --
Portfolio Turnover Rate 44% 42% 25%
==============================================================================
==
* The Fund commenced operations on April 22, 1988. Those shares in
existence
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 the investment adviser, sub-investment adviser and/or
administrator 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 the 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 the investment adviser and sub-investment
adviser and administrator for the period ended March 31, 1989 were 0.88%,
0.90%, 0.83%, 0.90%, 1.08% and 1.23%, respectively.
++ Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges.
11
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- --
For a share of each class of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
Class B Shares 1996 1995 1994
1993(1)
==============================================================================
=================
<S> <C> <C> <C>
<C>
Net Asset Value, Beginning of Year $ 12.62 $ 12.55 $ 13.16
$ 12.75
- ------------------------------------------------------------------------------
- -----------------
Income From Operations:
Net investment income(2) 0.63 0.63 0.64
0.28
Net realized and unrealized gain/(loss) 0.26 0.06
(0.47) 0.55
- ------------------------------------------------------------------------------
- -----------------
Total Income From Operations 0.89 0.69 0.17
0.83
==============================================================================
=================
Less Distributions From:
Net investment income (0.63) (0.62)
(0.62) (0.27)
Overdistribution of net investment income -- --
(0.01) --
Net realized gains -- (0.00)*
(0.15) (0.14)
Capital -- --
(0.00)* (0.01)
- ------------------------------------------------------------------------------
- -----------------
Total Distributions (0.63) (0.62)
(0.78) (0.42)
- ------------------------------------------------------------------------------
- -----------------
Net Asset Value, End of Year $ 12.88 $ 12.62 $ 12.55
$ 13.16
- ------------------------------------------------------------------------------
- -----------------
Total Return 7.20% 5.76%
1.15% 6.60%++
- ------------------------------------------------------------------------------
- -----------------
Net Assets, End of Year (in 000's) $ 63,272 $ 55,334 $ 48,375
$ 16,293
- ------------------------------------------------------------------------------
- -----------------
Ratios to Average Net Assets:
Expenses(2)(3) 1.36% 1.39%
1.36% 1.33%+
Net investment income 4.90 5.09 4.64
5.17+
- ------------------------------------------------------------------------------
- -----------------
Portfolio Turnover Rate 22% 32%
32% 58%
==============================================================================
=================
</TABLE>
(1) For the period from November 6, 1992 (inception date) to March 31, 1993.
(2) The investment adviser has waived all or part of its fees in each of the
years ended March 31, 1993 and 1994. If such fees had not been waived,
the
per share effects on net investment income and expense ratios would have
been as follows:
Per Share Decreases Expense Ratios
of Net Investment Income Without Fee Waivers
------------------------ -------------------
1994 1993 1994 1993
---- ---- ---- ----
Class B $0.01 $0.01 1.41% 1.49%+
(3) Expense ratios exclude interest expense. The expense ratio including
interest expense would have been 1.40% for the year ended March 31, 1995.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
12
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Financial Highlights (continued)
- ------------------------------------------------------------------------------
- --
For a share of each class of capital stock outstanding throughout each year:
Class C Shares 1996 1995(1)
==============================================================================
==
Net Asset Value, Beginning of Year $ 12.62 $ 11.86
- ------------------------------------------------------------------------------
- --
Income From Operations:
Net investment income 0.62 0.20
Net realized and unrealized gain 0.27 0.74
- ------------------------------------------------------------------------------
- --
Total Income From Operations 0.89 0.94
==============================================================================
==
Less Distributions From:
Net investment income (0.63) (0.18)
Net realized gains -- (0.00)*
- ------------------------------------------------------------------------------
- --
Total Distributions (0.63) (0.18)
- ------------------------------------------------------------------------------
- --
Net Asset Value, End of Year $ 12.88 $ 12.62
- ------------------------------------------------------------------------------
- --
Total Return 7.17% 8.01%++
- ------------------------------------------------------------------------------
- --
Net Assets, End of Year (in 000's) $ 3,812 $ 248
- ------------------------------------------------------------------------------
- --
Ratios to Average Net Assets:
Expenses 1.41% 1.44%+
Net investment income 4.82 5.05
- ------------------------------------------------------------------------------
- --
Portfolio Turnover Rate 22% 32%
==============================================================================
==
(1) For the period from December 13, 1994 (inception date) to March 31, 1995.
* Amount represents less than $0.01.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
13
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
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 outstanding 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 assets
in
Municipal Securities and at least 65% of the aggregate principal amount of the
Fund's investments in New Jersey Municipal Securities. Whenever less than 80%
of
the Fund's assets are invested in New Jersey Municipal Securities, the Fund,
in
order to maintain its status as a "qualified investment fund" under New Jersey
law, will seek to invest in debt obligations which, in the opinion of counsel
to
the issuers, are free from state or local taxation under New Jersey or Federal
laws ("Tax-Exempt Obligations"). The Fund's investments in New Jersey
Municipal
Securities and Tax-Exempt Obligations will represent at least 80% of the
aggregate principal amount of all of its investments, excluding cash and cash
items (including receivables). Subject to these minimum investment
requirements,
the Fund also may acquire intermediate- and long-term debt obligations
consisting of Other Municipal Securities, the interest on which is at least
exempt from Federal income taxation (not including the possible applicability
of
the alternative minimum tax). When SBMFM believes 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 investment grade if
deemed by SBMFM 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 unrated securities. (These securities are sometimes referred to as
"junk bonds.") Securities in the fourth highest rating category, though
considered to be investment grade, have speculative characteristics.
Securities
rated as low as D are extremely speculative and are in actual default of
interest and/or principal payments. A description of the rating systems of
Moody's and S&P is contained in the Statement of Additional Information.
14
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
The Fund's average weighted maturity will vary from time to time based on
the judgment of SBMFM. The Fund intends to focus on intermediate- and long-
term
obligations, that is, obligations with remaining maturities at the time of
purchase of three to in excess of twenty years. Obligations which are rated
Baa
by Moody's or BBB by S&P and those which are rated lower than investment grade
are subject to greater market fluctuation and more uncertainty as to payment
of
principal and interest, and therefore generate higher yields, than obligations
rated above Baa or BBB.
The value of debt securities varies inversely to changes in the direction
of interest rates. When interest rates rise, the value of debt securities
generally falls, and when interest rates fall, the value of debt securities
generally rises.
Low and Unrated Securities. 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
industry 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 generally
present a higher degree of credit risk. During an economic downturn or a
prolonged period of rising interest rates, the ability of issuers of lower-
rated
and comparable unrated securities to service their payment obligations, meet
projected goals or obtain additional financing may be impaired. The risk of
loss
due to default by such issuers is significantly greater because lower-rated
and
comparable unrated securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness. The Fund may incur
additional expenses to the extent it is required to seek recovery upon a
default
in the payment of principal or interest on its portfolio holdings.
While the market for municipal bonds is considered to be generally
adequate, the existence of limited markets for particular lower-rated and
comparable unrated securities may diminish the Fund's ability to (a) obtain
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. A severe economic recession 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
15
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
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.
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 reliant on SBMFM's
judgment, analysis and experience than would be the case if the Fund invested
only in rated obligations.
Municipal Lease Obligations. The Fund may invest without limit in
participations in municipal lease obligations or installment purchase contract
obligations (collectively, "municipal lease obligations") of state and local
governments or authorities 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 interest is solely that of a New Jersey governmental entity.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide
that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. Although
"non-appropriation" lease obligations are often secured by the underlying
property, disposition of the property in the event of foreclosure might prove
difficult. There is no limitation on the percentage of the Fund's assets that
may be invested in municipal lease obligations. In evaluating municipal lease
obligations, SBMFM will consider such factors as it deems appropriate, which
may
include: (a) whether the lease can be canceled; (b) the ability of the lease
obligee to direct the sale of the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the likelihood that the
municipality
will discontinue appropriating funding for the leased property in the event
such
property is no longer considered essential by the municipality; (e) the legal
recourse of the lease obligee in the event of such a failure to appropriate
funding; (f) whether the security is backed by a credit enhancement such as
insurance; and (g) any limitations which are imposed on the lease obligor's
ability to utilize substitute property or services rather than those covered
by
the lease obligation.
16
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
Private Activity Bonds. The Fund may invest without limit in private
activity bonds. Interest income on certain types of private activity bonds
issued after August 7, 1986 to finance non-governmental activities is a
specific
tax preference item for purposes of the Federal individual and corporate
alternative minimum taxes. Individual and corporate shareholders may be
subject
to a Federal alternative minimum tax to the extent the Fund's dividends are
derived from interest on those bonds. Dividends derived from interest income
on
Municipal Securities are a component of the "current earnings" adjustment item
for purposes of the Federal corporate alternative minimum tax.
The Fund is classified as a non-diversified investment company under the
1940 Act, which means that the Fund is not limited by the 1940 Act in the
proportion of its assets that it may invest in the obligations of a single
issuer. The Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve the Fund of any liability
for
Federal income tax to the extent its earnings are distributed to shareholders.
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 securities of a single issuer and (b) with
respect to 50% of the market value of its total assets, not more than 5% of
the
market value of its total assets will be invested in the securities of a
single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. The Fund's assumption of large positions in the
obligations of a small number of issuers may cause the Fund's share price to
fluctuate to a greater extent than that of a diversified company as a result
of
changes in the financial condition or in the market's assessment of the
issuers.
The Fund may invest without limit in debt obligations that are repayable
out of revenue streams generated from economically related projects or
facilities. 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. Sizable investments in such obligations could involve 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 restrictions on resale and other
instruments which are not readily marketable. 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
17
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
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 market 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 Additional
Information.
CERTAIN PORTFOLIO STRATEGIES
In attempting to achieve its investment objective, the Fund may employ,
among others, the following strategies:
When-Issued Securities. New issues of 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 securities 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 accrual of interest and there may be
fluctuations in the price of the securities so that there may be an unrealized
loss at the time of delivery. The Fund will establish a segregated account
with
the Fund's custodian consisting of cash, obligations issued or guaranteed by
the
United States government, its agencies or instrumentalities ("U.S. government
securities") or other high grade debt obligations in an amount equal to the
purchase 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 purchase 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, including
taxable money market instruments ("Temporary Investments"). In addition, when
SBMFM believes that market conditions warrant, including when acceptable New
Jersey Municipal Securities are unavailable, the Fund may take a temporary
defensive posture and invest without limitation in Temporary Investments. To
the
extent the
18
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
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 operations, the Fund has not found it
necessary to invest in taxable Temporary Investments.
Financial Futures and Options Transactions. To hedge against a decline in
the value of Municipal Securities it owns or an increase in the price of
Municipal Securities it proposes to purchase, the Fund may enter into
financial
futures contracts and invest in options on financial futures contracts that
are
traded on a domestic exchange or board of trade. The futures 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 SBMFM to
correlate with the prices of the Municipal 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 contract 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 termination 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
expiration 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 property at
a
specified price, date, time and place. Unlike the direct investment 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
19
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures 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 options
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 addition, 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
requirements of the Code applicable to a regulated investment company, in
addition 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 exchange
or
board of trade only if an active market exists for those instruments, 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 securities 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 movement in the price of
the securities being hedged and movements in the price of
20
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Investment Objective and Management Policies (continued)
- ------------------------------------------------------------------------------
- --
futures contracts, the Fund may enter into financial futures contracts or
options on financial futures contracts in a greater or 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 decrease
instead, the Fund will lose part or all of the benefit of the increased value
of
securities that it has hedged because it will have offsetting losses in its
futures or options position. In addition, in those situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation
margin
requirements on the futures contracts at a time when it may be disadvantageous
to do so. These sales of securities may, but will not necessarily, be at
increased prices that reflect the decline in interest rates.
- ------------------------------------------------------------------------------
- --
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 public
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 income tax
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. Interest income on certain New Jersey
Municipal Securities is a specific tax preference item for purposes of the
Federal individual and corporate alternative 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 facilities or, in some
cases, from the proceeds of a special excise tax or other specific revenue
source, but not from the
21
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
New Jersey Municipal Securities (continued)
- ------------------------------------------------------------------------------
- --
general taxing power. In addition, certain types of "private activity bonds"
issued by or on behalf of public authorities to obtain funds for privately
operated facilities are included in the term New Jersey Municipal Securities,
so
long as the interest paid on the bonds qualifies as excluded from gross income
for Federal 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
Jersey 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, including special
obligation bonds. In general, the State of New Jersey has a diversified
economic
base consisting of, among others, commerce, construction and service
industries,
selective commercial, agriculture, insurance, tourism, petroleum refining and
manufacturing, although New Jersey'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
vulnerable during recessionary periods, a recurrence of high levels of
unemployment 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, financial and other
conditions, which will affect its ability to pay the principal and interest on
its bonds. Similarly, special obligation or revenue bonds payable from
revenues
generated by particular projects or other specific 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 obligations, 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 adversely affected.
22
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Valuation of Shares
- ------------------------------------------------------------------------------
- --
The Fund's net asset value per share is determined as of the close of
regular trading on the NYSE, on each day that the NYSE is open, by dividing
the
value of the Fund's net assets attributable to each Class by the total number
of
shares of that Class outstanding.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value with respect to any securities, at fair value as
determined by or under the direction of the 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 determines that amortized cost is fair
value. Further information regarding the Fund's valuation policies is
contained
in the Statement of Additional Information.
- ------------------------------------------------------------------------------
- --
Dividends, Distributions And Taxes
- ------------------------------------------------------------------------------
- --
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends from its net investment income (that is,
income
other than net realized long- and short-term capital gains) monthly; dividends
ordinarily will be paid on the last Friday of each calendar month to
shareholders of record as of three business days prior thereto. 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.
If a shareholder does not otherwise instruct, dividends or capital gains
distributions will be reinvested automatically in additional shares of the
same
Class at net asset value, subject to no sales charge or CDSC. In addition, in
order to avoid the application of a 4.00% nondeductible excise tax on certain
undistributed amounts of ordinary income and capital gains, the Fund may make
a
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to make any other distributions
as
are necessary to avoid the application of this tax.
If, for any full fiscal year, the Fund's total distributions exceed 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 adjusted basis in his
or
her shares. Pursuant to the requirements of the 1940 Act and other applicable
laws, a notice will accompany any distribution paid from sources other than
net
investment income. In the event
23
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Dividends, Distributions And Taxes (continued)
- ------------------------------------------------------------------------------
- --
the Fund distributes amounts in excess of its net investment income and net
realized capital gains, such distributions may have the effect of decreasing
the
Fund's total assets, which may increase the Fund's expense ratio.
The per share dividends on Class B shares and Class C shares may be lower
than the per share dividends on Class A and Class Y shares principally as a
result of the distribution fee applicable with respect to Class B and Class C
shares. The per share dividends on Class A shares of the Fund may be lower
than
the per share dividends on Class Y shares principally as a result of the
service
fee applicable to Class A shares. Distributions of capital gains, if any, will
be in the same amount for Class A, B, C and Y shares.
TAXES
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code, and will designate and pay exempt
interest dividends derived from interest earned on qualifying tax-exempt
obligations. Such exempt-interest dividends may be excluded by shareholders
from
their gross income for regular Federal income tax purposes although (a) all or
a
portion of such exempt-interest dividends will be a specific preference item
for
purposes of the Federal individual and corporate alternative minimum taxes to
the extent 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 alternative minimum tax. In addition, corporate shareholders may
incur
a greater Federal "environmental" tax liability through the receipt of Fund
dividends and distributions. Distributions paid by the Fund, provided it is a
"qualified investment fund" under New Jersey law, attributable to interest on
or
gains from New Jersey Municipal Securities and Tax-Exempt Obligations 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
distributions of net realized short-term capital gains are taxable to
shareholders at ordinary income rates, regardless of how long shareholders
have
held their Fund shares and whether such dividends 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 Fund 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
24
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
capital 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
do not qualify for the dividends-received deduction for corporations.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Each shareholder will also receive, if
appropriate, various written notices after the close of the Fund's prior
taxable
year as to the Federal income tax status of his or her dividends and
distributions which were 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 regular Federal income or New Jersey state personal income taxes
and
the dollar amount, if any, subject to such taxes. Moreover, these statements
will designate the amount of exempt-interest dividends that is a specific
preference item for purposes of the Federal individual and corporate
alternative
minimum taxes. Shareholders should consult their tax advisors with specific
reference to their own tax situations.
- ------------------------------------------------------------------------------
- --
Purchase of Shares
- ------------------------------------------------------------------------------
- --
GENERAL
The Fund currently offers four Classes of shares. Class A shares are sold
to investors with an initial sales charge and Class B and Class C shares are
sold without an initial sales charge but are subject to a CDSC payable upon
certain redemptions. Class Y shares are sold without an initial sales charge
or
a CDSC and are available only to investors investing a minimum of $5,000,000
(except purchases of Class Y shares by Smith Barney Concert Series Inc., for
which there is no minimum purchase amount). See "Prospectus Summary--
Alternative
Purchase Arrangements" for a discussion of factors to consider in selecting
which Class of shares to purchase.
Purchases of Fund shares must by made through a brokerage account
maintained with Smith Barney, an Introducing Broker or an investment dealer in
the selling group. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class C or Class Y shares. No
maintenance fee will be charged by the Fund in connection with a brokerage
account through which an investor purchases or holds shares.
Investors in Class A, Class B and Class C shares may open an account in
the
25
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
Fund by making an initial investment of at least $1,000. Investors in Class Y
shares may open an account by making an initial investment of $5,000,000.
Subsequent investments of at least $50 may be made for all Classes. For the
Fund's Systematic Investment Plan, the minimum initial investment requirement
for Class A, Class B and Class C shares and the subsequent investment
requirement for all Classes is $50. There are no minimum investment
requirements
for Class A shares for employees of Travelers and its subsidiaries, including
Smith Barney, unitholders who invest distributions from a UIT sponsored by
Smith
Barney, and Directors of the Fund and their spouses and children. The Fund
reserves the right to waive or change minimums, to decline any order to
purchase
its shares and to suspend the offering of shares from time to time. Shares
purchased will be held in the shareholder's account by the Fund's transfer
agent, First Data Investor Services Group, Inc. (the "Transfer Agent"). Share
certificates are issued only upon a shareholder's written request to the
Transfer Agent.
Purchase orders received by the Fund or Smith Barney prior to the close
of
regular trading on the NYSE, on any day the Fund calculates its net asset
value,
are priced according to the net asset value determined on that day (the "trade
date"). Orders received by dealers or Introducing Brokers prior to the close
of
regular trading on the NYSE on any day the Fund calculates its net asset
value,
are priced according to the net asset value determined on that day, provided
the
order is received by the Fund or Smith Barney prior to Smith Barney's close of
business. For shares purchased through Smith Barney or Introducing Brokers
purchasing through Smith Barney, payment for Fund shares is due on the third
business day after the trade date (the "settlement date"). In all other cases,
payment must be made with the purchase order.
SYSTEMATIC INVESTMENT PLAN
Shareholders may make additions to their accounts at any time by
purchasing
shares through a service known as the Systematic Investment Plan. Under the
Systematic Investment Plan, Smith Barney or the Transfer Agent is authorized
through preauthorized transfers of $50 or more to charge the shareholder's
account held with a bank or other financial institution on a monthly or
quarterly basis as indicated by the shareholder to provide for systematic
additions to the shareholder's Fund account. A shareholder who has
insufficient
funds to complete the transfer will be charged a fee of up to $25 by Smith
Barney or the Transfer Agent. The Systematic Investment Plan also authorizes
Smith Barney to apply cash held in the shareholder's Smith Barney brokerage
account or redeem the shareholder's shares of a Smith Barney money market fund
to make additions to the account. Additional information is available from the
Fund or a Smith Barney Financial Consultant.
26
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
The sales charges applicable to purchases of Class A shares of the Fund
are
as follows:
Sales Charge Sales Charge Dealer's
as a % of as a % of Reallowance as %
of
Amount of Investment Transaction Amount Invested Offering Price
==============================================================================
==
Less than - $25,000 4.00% 4.17% 3.60%
$ 25,000 - $49,999 3.50 3.63 3.15
$ 50,000 - $99,999 3.00 3.09 2.70
$ 100,000 - $249,999 2.50 2.56 2.25
$ 250,000 - $499,999 1.50 1.52 1.35
$ 500,000 and over * * *
==============================================================================
==
* Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $500,000 in
the
aggregate, will be made at net asset value without any initial sales
charge, but will be subject to a CDSC of 1.00% on redemptions made within
12 months of purchase. The CDSC on Class A shares is payable to Smith
Barney which compensates Smith Barney Financial Consultants and other
dealers whose clients make purchases of $500,000 or more. The CDSC is
waived in the same circumstances in which the CDSC applicable to Class B
and Class C shares is waived. See "Deferred Sales Charge Alternatives"
and
"Waivers of CDSC."
Members of the selling group may receive up to 90% of the sales charge
and
may be deemed to be underwriters of the Fund as defined in the Securities Act
of
1933, as amended.
The reduced sales charges shown above apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person," which includes
an individual, including his or her spouse and children, or a trustee or other
fiduciary of a single trust estate or single fiduciary account. The reduced
sales charge minimums may also be met by aggregating the purchase with the net
asset value of all Class A shares held in funds sponsored by Smith Barney that
are offered with a sales charge listed under "Exchange Privilege."
INITIAL SALES CHARGE WAIVERS
Purchases of Class A shares may be made at net asset value without a
sales
charge in the following circumstances: (a) sales to (i) Board Members and
employees of Travelers and its subsidiaries and any of the Smith Barney Mutual
Funds (including retired Board Members or employees); the immediate families
of
such persons (including the surviving spouse of a deceased Board Member or
employee); and to a pension, profit-sharing or other benefit plan for such
persons and (ii) employees of members of the National Association of
Securities
Dealers,
27
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
Inc., provided such sales are made upon the assurance of the purchaser that
the
purchase is made for investment purposes and that the securities will not be
resold except through redemption or repurchase; (b) offers of Class A shares
to
any other investment company in connection with the combination of such
company
with the Fund by merger, acquisition of assets or otherwise; (c) purchases of
Class A shares by any client of a newly employed Smith Barney Financial
Consultant (for a period up to 90 days from the commencement of the Financial
Consultant's employment with Smith Barney), on the condition the purchase of
Class A shares is made with the proceeds of the redemption of shares of a
mutual
fund which (i) was sponsored by the Financial Consultant's prior employer,
(ii)
was sold to the client by the Financial Consultant and (iii) was subject to a
sales charge; (d) shareholders who have redeemed Class A shares in the Fund
(or
Class A shares of another Smith Barney Mutual Fund that are offered with a
sales
charge equal to or greater than the maximum sales charge of the Fund) and who
wish to reinvest their redemption proceeds in the Fund, provided the
reinvestment is made within 60 calendar days of the redemption; (e) accounts
managed by registered investment advisory subsidiaries of Travelers; and (f)
investments of distributions from a UIT sponsored by Smith Barney. In order to
obtain such discounts, the purchaser must provide sufficient information at
the
time of purchase to permit verification that the purchase would qualify for
the
elimination of the sales charge.
RIGHT OF ACCUMULATION
Class A shares of the Fund may be purchased by "any person" (as defined
above) at a reduced sales charge or at net asset value determined by
aggregating
the dollar amount of the new purchase and the total net asset value of all
Class
A shares of the Fund and of funds sponsored by Smith Barney which are offered
with a sales charge listed under "Exchange Privilege" then held by such person
and applying the sales charge applicable to such aggregate. In order to obtain
such discount, the purchaser must provide sufficient information at the time
of
purchase to permit verification that the purchase qualifies for the reduced
sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
GROUP PURCHASES
Upon completion of certain automated systems, a reduced sales charge or
purchase at net asset value will also be available to employees (and partners)
of the same employer purchasing as a group, provided each participant makes
the
minimum initial investment required. The sales charge applicable to purchases
by
each member of such a group will be determined by the table set forth above
under
28
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
"Initial Sales Charge Alternative--Class A Shares" and will be based upon the
aggregate sales of Class A shares of Smith Barney Mutual Funds offered with a
sales charge to, and share holdings of, all members of the group. To be
eligible
for such reduced sales charges or to purchase at net asset value, all
purchases
must be pursuant to an employee or partnership sanctioned plan meeting certain
requirements. One such requirement is that the plan must be open to specified
partners or employees of the employer and its subsidiaries, if any. Such plan
may, but is not required to, provide for payroll deductions. Smith Barney may
also offer a reduced sales charge or net asset value purchase for aggregating
related fiduciary accounts under such conditions that Smith Barney will
realize
economies of sales efforts and sales related expenses. An individual who is a
member of a qualified group may also purchase Class A shares of the Fund at
the
reduced sales charge applicable to the group as a whole. The sales charge is
based upon the aggregate dollar value of Class A shares offered with a sales
charge that have been previously purchased and are still owned by the group,
plus the amount of the current purchase. A "qualified group" is one which (a)
has been in existence for more than six months, (b) has a purpose other than
acquiring Fund shares at a discount and (c) satisfies uniform criteria which
enable Smith Barney to realize economies of scale in its costs of distributing
shares. A qualified group must have more than 10 members, must be available to
arrange for group meetings between representatives of the Fund and the
members,
and must agree to include sales and other materials related to the Fund in its
publications and mailings to members at no cost to Smith Barney. In order to
obtain such reduced sales charge or to purchase at net asset value, the
purchaser must provide sufficient information at the time of purchase to
permit
verification that the purchase qualifies for the reduced sales charge.
Approval
of group purchase reduced sales charge plans is subject to the discretion of
Smith Barney.
LETTER OF INTENT
Class A Shares. A Letter of Intent for an amount of $50,000 or more
provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13 month period, provided that the investor
refers to such Letter when placing orders. For purposes of a Letter of Intent,
the "Amount of Investment" as referred to in the preceding sales charge table
includes (i) all Class A shares of the Fund and other Smith Barney Mutual
Funds
offered with a sales charge acquired during the term of the Letter plus (ii)
the
value of all Class A shares previously purchased and still owned. Each
investment made during the period receives the reduced sales charge applicable
to the total amount of the investment goal. If the goal is not achieved within
the period, the investor must pay the difference between the sales charges
applicable to the purchases made and the
29
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
charges previously paid, or an appropriate number of escrowed shares will be
redeemed. The term of the Letter will commence upon the date the Letter is
signed, or at the option of the investor, up to 90 days before such date.
Please
contact a Smith Barney Financial Consultant or the Transfer Agent to obtain a
Letter of Intent application.
Class Y Shares. A Letter of Intent may also be used as a way for
investors
to meet the minimum investment requirement for Class Y shares (except
purchases
of Class Y shares by Smith Barney Concert Series Inc., for which there is no
minimum purchase amount). Such investors must make an initial minimum purchase
of $1,000,000 in Class Y shares of the Fund and agree to purchase a total of
$5,000,000 of Class Y shares of the Fund within six months from the date of
the
Letter. If a total investment of $5,000,000 is not made within the six month
period, all Class Y shares purchased to date will be transferred to Class A
shares, where they will be subject to all fees (including a service fee of
0.15%) and expenses applicable to the Fund's Class A shares, which may include
a
CDSC of 1.00%. Please contact a Smith Barney Financial Consultant or the
Transfer Agent for further information.
DEFERRED SALES CHARGE ALTERNATIVES
"CDSC Shares" are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, may be imposed on
certain redemptions of these shares. "CDSC Shares" are: (a) Class B shares;
(b)
Class C shares; and (c) Class A shares which when combined with Class A shares
offered with a sales charge currently held by an investor equal or exceed
$500,000 in the aggregate.
Any applicable CDSC will be assessed on an amount equal to the lesser of
the original cost of the shares being redeemed or their net asset value at the
time of redemption. CDSC Shares that are redeemed will not be subject to a
CDSC
to the extent that the value of such shares represents: (a) capital
appreciation
of Fund assets; (b) reinvestment of dividends or capital gain distributions;
(c)
with respect to Class B shares, shares redeemed more than five years after
their
purchase; or (d) with respect to Class C shares and Class A shares that are
CDSC
Shares, shares redeemed more than 12 months after their purchase.
Class C shares and Class A shares that are CDSC Shares are subject to a
1.00% CDSC if redeemed within 12 months of purchase. In circumstances in which
the CDSC is imposed on Class B shares, the amount of the charge will depend on
the
30
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
number of years since the shareholder made the purchase payment from which the
amount is being redeemed. Solely for purposes of determining the number of
years
since a purchase payment, all purchase payments made during a month will be
aggregated and deemed to have been made on the last day of the preceding Smith
Barney statement month. The following table sets forth the rates of the charge
for redemptions of Class B shares by shareholders.
Year Since Purchase
Payment Was Made CDSC
==============================================================================
==
First 4.50%
Second 4.00
Third 3.00
Fourth 2.00
Fifth 1.00
Sixth and Transfer 0.00
==============================================================================
==
Class B shares will convert automatically to Class A shares eight years
after the date on which they were purchased and thereafter will no longer be
subject to any distribution fees. There will also be converted at that time
such
proportion of Class B Dividend Shares owned by the shareholders as the total
number of his or her Class B shares converting at the time bears to the total
number of outstanding Class B shares (other than Class B Dividend Shares)
owned
by the shareholder. Shareholders who held Class B shares of Smith Barney
Shearson Short-Term World Income Fund (the "Short-Term World Income Fund") on
July 15, 1994 and who subsequently exchanged those shares for Class B shares
of
the Fund will be offered the opportunity to exchange all such Class B shares
for
Class A shares of the Fund four years after the date on which those shares
were
deemed to have been purchased. Holders of such Class B shares will be notified
of the pending exchange in writing approximately 30 days before the fourth
anniversary of the purchase date and, unless the exchange has been rejected in
writing, the exchange will occur on or about the fourth anniversary date. See
"Prospectus Summary--Alternative Purchase Arrangements--Class B Shares
Conversion Feature."
The length of time that CDSC Shares acquired through an exchange have
been
held will be calculated from the date that the shares exchanged were initially
acquired in one of the other Smith Barney Mutual Funds, and Fund shares being
redeemed will be considered to represent, as applicable, capital appreciation
or
dividend and capital gain distribution reinvestments in such other funds. For
Federal income tax purposes, the amount of the CDSC will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
The
amount of any CDSC will be paid to Smith Barney.
31
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Purchase of Shares (continued)
- ------------------------------------------------------------------------------
- --
To provide an example, assume an investor purchased 100 Class B shares at
$10 per share for a cost of $1,000. Subsequently, the investor acquired 5
additional shares through dividend reinvestment. During the fifteenth month
after the purchase, the investor decided to redeem $500 of his or her
investment. Assuming at the time of the redemption the net asset value had
appreciated to $12 per share, the value of the investor's shares would be
$1,260
(105 shares at $12 per share). The CDSC would not be applied to the amount
which
represents appreciation ($200) and the value of the reinvested dividend shares
($60). Therefore, $240 of the $500 redemption proceeds ($500 minus $260) would
be charged at a rate of 4.00% (the applicable rate for Class B shares) for a
total deferred sales charge of $9.60.
WAIVERS OF CDSC
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 1.00% per month of
the value of the shareholder's shares at the time the withdrawal plan
commences
(see "Automatic Cash Withdrawal Plan") (provided, however, that automatic cash
withdrawals in amounts equal to or less than 2.00% per month of the value of
the
shareholder's shares will be permitted for withdrawal plans that were
established prior to November 7, 1994); (c) redemptions of shares within 12
months following the death or disability of the shareholder; (d) involuntary
redemptions; and (e) redemptions of shares in connection with a combination of
the Fund with any investment company by merger, acquisition of assets or
otherwise. In addition, a shareholder who has redeemed shares from other Smith
Barney Mutual Funds may, under certain circumstances, reinvest all or part of
the redemption proceeds within 60 days and receive pro rata credit for any
CDSC
imposed on the prior redemption.
CDSC waivers will be granted subject to confirmation (by Smith Barney in
the case of shareholders who are also Smith Barney clients or by the Transfer
Agent in the case of all other shareholders) of the shareholder's status or
holdings, as the case may be.
32
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege
- ------------------------------------------------------------------------------
- --
Except as otherwise noted below, shares of each Class may be exchanged at
the net asset value next determined for shares of the same Class in the
following Smith Barney Mutual Funds, to the extent shares are offered for sale
in the shareholder's state of residence. Exchanges of Class A, Class B and
Class
C shares are subject to minimum investment requirements and all shares are
subject to other requirements of the fund into which exchanges are made, and a
sales charge differential may apply.
FUND NAME
---------
Growth Funds
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Fundamental Value Fund Inc.
Smith Barney Growth Opportunity Fund
Smith Barney Managed Growth Fund
Smith Barney Natural Resources Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Growth and Income Funds
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Equity Income Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Taxable Fixed-Income Funds
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc. -- Income Return Account Portfolio
+++ Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities Portfolio
Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio
Smith Barney Government Securities Fund
Smith Barney High Income Fund
33
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
Smith Barney Investment Grade Bond Fund
Smith Barney Managed Governments Fund Inc.
Tax-Exempt Funds
* Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds -- Florida Limited Term Portfolio
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
* Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Ohio Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
International Funds
Smith Barney World Funds, Inc. -- Emerging Markets Portfolio
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney World Funds, Inc. -- International Balanced Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
Smith Barney Concert Series Inc.
Smith Barney Concert Series Inc. -- Balanced Portfolio
Smith Barney Concert Series Inc. -- Conservative Portfolio
Smith Barney Concert Series Inc. -- Growth Portfolio
34
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
Smith Barney Concert Series Inc. -- High Growth Portfolio
Smith Barney Concert Series Inc. -- Income Portfolio
Money Market Funds
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc. -- Cash Portfolio
++ Smith Barney Money Funds, Inc. -- Government Portfolio
*** Smith Barney Money Funds, Inc. -- Retirement Portfolio
++ Smith Barney Municipal Money Market Fund, Inc.
++ Smith Barney Muni Funds -- California Money Market Portfolio
++ Smith Barney Muni Funds -- New York Money Market Portfolio
==============================================================================
==
* Available for exchange with Class A, Class C and Class Y shares of the
Fund.
** Available for exchange with Class A, Class B and Class Y shares of the
Fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the Fund.
Class A Exchanges. Class A shares of Smith Barney Mutual Funds sold
without
a sales charge or with a maximum sales charge of less than the maximum charged
by other Smith Barney Mutual Funds will be subject to the appropriate "sales
charge differential" upon the exchange of such shares for Class A shares of a
fund sold with a higher sales charge. The "sales charge differential" is
limited
to a percentage rate no greater than the excess of the sales charge rate
applicable to purchases of shares of the mutual fund being acquired in the
exchange over the sales charge rate(s) actually paid on the mutual fund shares
relinquished in the exchange and on any predecessor of those shares. For
purposes of the exchange privilege, shares obtained through automatic
reinvestment of dividends and capital gains distributions are treated as
having
paid the same sales charges applicable to the shares on which the dividends or
distributions were paid; however, if no sales charge was imposed upon the
initial purchase of the shares, any shares obtained through automatic
reinvestment will be subject to a sales charge differential upon exchange.
Class B Exchanges. In the event a Class B shareholder (unless such
shareholder was a Class B shareholder of the Short-Term World Income Fund on
July 15, 1994) wishes to exchange all or a portion of his or her shares in any
of the funds imposing a higher CDSC than that imposed by 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
35
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Exchange Privilege (continued)
- ------------------------------------------------------------------------------
- --
Class B shares of the Fund that have been exchanged.
Class C Exchanges. Upon an exchange, the new Class C shares will be
deemed
to have been purchased on the same date as the Class C shares of the Fund that
have been exchanged.
Class Y Exchanges. Class Y shareholders of the Fund who wish to exchange
all or a portion of their Class Y shares for Class Y shares in any of the
funds
identified above may do so without imposition of any charge.
Additional Information Regarding the Exchange Privilege. Although the
exchange privilege is an important benefit, excessive exchange transactions
can
be detrimental to the Fund's performance and its shareholders. SBMFM may
determine that a pattern of frequent exchanges is excessive and contrary to
the
best interests of the Fund's other shareholders. In this event, the Fund may,
at
its discretion, decide to limit additional purchases and/or exchanges by a
shareholder. Upon such a determination, the Fund will provide notice in
writing
or by telephone to the shareholder at least 15 days prior to suspending the
exchange privilege and during the 15 day period the shareholder will be
required
to (a) redeem his or her shares of the Fund or (b) remain invested in the Fund
or exchange into any of the Smith Barney Mutual Funds ordinarily available,
which position the shareholder would be expected to maintain for a significant
period of time. All relevant factors will be considered in determining what
constitutes an abusive pattern of exchanges.
Certain shareholders may be able to exchange shares by telephone. See
"Redemption of Shares - Telephone Redemption and Exchange Program." Exchanges
will be processed at the net asset value next determined, plus any applicable
sales charge differential. Redemption procedures discussed below are also
applicable for exchanging shares, and exchanges will be made upon receipt of
all
supporting documents in proper form. If the account registration of the shares
of the fund being acquired is identical to the registration of the shares of
the
fund exchanged, no signature guarantee is required. A capital gain or loss for
tax purposes will be realized upon the exchange, depending upon the cost or
other basis of shares redeemed. Before exchanging shares, investors should
read
the current prospectus describing the shares to be acquired. The Fund reserves
the right to modify or discontinue exchange privileges upon 60 days' prior
notice to shareholders.
- ------------------------------------------------------------------------------
- --
Redemption of Shares
- ------------------------------------------------------------------------------
- --
The Fund is required to redeem the shares of the Fund tendered to it, as
described below, at a redemption price equal to their net asset value per
share
next
36
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Redemption of Shares (continued)
- ------------------------------------------------------------------------------
- --
determined after receipt of a written request in proper form at no charge
other
than any applicable CDSC. Redemption requests received after the close of
regular trading on the NYSE are priced at the net asset value next determined.
If a shareholder holds shares in more than one Class, any request for
redemption must specify the Class being redeemed. In the event of a failure to
specify which Class, or if the investor owns fewer shares of the Class than
specified, the redemption request will be delayed until the Transfer Agent
receives further instructions from Smith Barney, or if the shareholder's
account
is not with Smith Barney, from the shareholder directly. Redemption proceeds
will be remitted on or before the third day following receipt of proper
tender,
except on any days on which the NYSE is closed or as permitted under the 1940
Act in extraordinary circumstances. Generally, if the redemption proceeds are
remitted to a Smith Barney brokerage account, these funds will not be invested
for the shareholder's benefit without specific instruction and Smith Barney
will
benefit from the use of temporarily uninvested funds. Redemption proceeds for
shares purchased by check, other than a certified or official bank check, will
be remitted upon clearance of the check, which may take up to ten days or
more.
Shares held by Smith Barney as custodian must be redeemed by submitting a
written request to a Smith Barney Financial Consultant. Shares other than
those
held by Smith Barney as custodian may be redeemed through an investor's
Financial Consultant, Introducing Broker or dealer in the selling group or by
submitting a written request for redemption to:
Smith Barney New Jersey Municipals Fund Inc.
Class A, B, C or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written redemption request must (a) state the Class and number or
dollar
amount of shares to be redeemed, (b) identify the shareholder's account number
and (c) be signed by each registered owner exactly as the shares are
registered.
If the shares to be redeemed were issued in certificate form, the certificates
must be endorsed for transfer (or be accompanied by an endorsed stock power)
and
must be submitted to the Transfer Agent together with the redemption request.
Any signature required in connection with a share certificate, stock power or
a
written redemption request in excess of $2,000, must be guaranteed by an
eligible guarantor institution such as a domestic bank, savings and loan
institution, domestic credit union, member bank of the Federal Reserve System
or
member firm of a
37
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Redemption of Shares (continued)
- ------------------------------------------------------------------------------
- --
national securities exchange. The Transfer Agent may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees or guardians. A redemption request will not be deemed
properly received until the Transfer Agent receives all required documents in
proper form.
TELEPHONE REDEMPTION AND EXCHANGE PROGRAM FOR SHAREHOLDERS WHO DO NOT
HAVE
A SMITH BARNEY BROKERAGE ACCOUNT
Certain shareholders may be eligible to redeem and exchange Fund shares
by
telephone. To determine if a shareholder is entitled to participate in this
program, he or she should contact the Transfer Agent at (800) 451-2010. Once
eligibility is confirmed, the shareholder must complete and return a
Telephone/Wire Authorization form, including a signature guarantee, that will
be
provided by the Transfer Agent upon request. (Alternatively, an investor may
authorize telephone redemptions on the new account application with a
signature
guarantee when making his/her initial investment in the Fund.)
Redemptions. Redemption requests of up to $10,000 of any class or classes
of the Fund's shares may be made by eligible shareholders by calling the
Transfer Agent at (800) 451-2010. Such requests may be made between 9:00 a.m.
and 4:00 p.m. (New York City time) on any day the NYSE is open. Redemptions of
shares for which certificates have been issued are not permitted under this
program.
A shareholder will have the option of having the redemption proceeds
mailed
to his/her address of record or wired to a bank account predesignated by the
shareholder. Generally, redemption proceeds will be mailed or wired, as the
case
may be, on the next business day following the redemption request. In order to
use the wire procedures, the bank receiving the proceeds must be a member of
the
Federal Reserve System or have a correspondent relationship with a member
bank.
The Fund reserves the right to charge shareholders a nominal fee for each wire
redemption. Such charges, if any, will be assessed against the shareholder's
account from which shares were redeemed. In order to change the bank account
designated to receive redemption proceeds, a shareholder must complete a new
Telephone/Wire Authorization Form and, for the protection of the shareholder's
assets, will be required to provide a signature guarantee and certain other
documentation.
Exchanges. Eligible shareholders may make exchanges by telephone if the
account registration of the fund being acquired is identical to the
registration
of the shares of the fund exchanged. Such exchange requests may be made by
calling the Transfer Agent at (800) 451-2010 between 9:00 a.m. and 4:00 p.m.
(New York City time) on any day on which the NYSE is open.
38
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Redemption of Shares (continued)
- ------------------------------------------------------------------------------
- --
Additional Information Regarding Telephone Redemption and Exchange
Program.
Neither the Fund nor its agents will be liable for following instructions
communicated by telephone that are reasonably believed to be genuine. The Fund
and its agents will employ procedures designed to verify the identity of the
caller and legitimacy of instructions (for example, a shareholder's name and
account number will be required and phone calls may be recorded). The Fund
reserves the right to suspend, modify or discontinue the telephone redemption
and exchange program or to impose a charge for this service at any time
following at least seven (7) days' prior notice to shareholders.
AUTOMATIC CASH WITHDRAWAL PLAN
The Fund offers shareholders an automatic cash withdrawal plan, under
which
shareholders who own shares with a value of at least $10,000 many elect to
receive cash payments of at least $50 monthly or quarterly. The withdrawal
plan
will be carried over on exchanges between funds or Classes of the Fund. Any
applicable CDSC will not be waived on amounts withdrawn by a shareholder that
exceed 1.00% per month of the value of the shareholder's shares subject to the
CDSC at the time the withdrawal plan commences. (With respect to withdrawal
plans in effect prior to November 7, 1994, any applicable CDSC will be waived
on
amounts withdrawn that do not exceed 2.00% per month of the shareholder's
shares
subject to the CDSC.) For further information regarding the automatic cash
withdrawal plan, shareholders should contact a Smith Barney Financial
Consultant.
- ------------------------------------------------------------------------------
- --
Minimum Account Size
- ------------------------------------------------------------------------------
- --
The Fund reserves the right to involuntarily liquidate any shareholder's
account in the Fund if the aggregate net asset value of the shares held in the
Fund account is less than $500. (If a shareholder has more than one account in
this Fund, each account must satisfy the minimum account size.) The Fund,
however, will not redeem shares based solely on market reductions in net asset
value. Before the Fund exercises such right, shareholders will receive written
notice and will be permitted 60 days to bring accounts up to the minimum to
avoid automatic redemption.
39
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Performance
- ------------------------------------------------------------------------------
- --
YIELD
From time to time, the Fund may advertises the 30-day "yield" and
"equivalent taxable yield" of each Class of shares. The yield refers to the
income generated by an investment in those shares of the Fund over the 30-day
period identified in the advertisement and is computed by dividing the net
investment income per share earned by the Class during the period by the
maximum
public offering price per share on the last day of the period. This income is
"annualized" by assuming that the amount of income is generated each month
over
a one-year period and is compounded semi-annually. The annualized income is
then
shown as a percentage of the net asset value.
The equivalent taxable yield demonstrates the yield on a taxable
investment
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 include its total return, average annual
total return and current dividend return in advertisements and/or other types
of
sales literature. These figures are computed separately for Class A, Class B,
Class C and Class Y shares of the Fund. These figures are based on historical
earnings and are not intended to indicate future performance. Total return is
computed for a specified period of time assuming deduction of the maximum
sales
charge, if any, from the initial amount invested and reinvestment of all
income
dividends and capital gain distributions on the reinvestment dates at prices
calculated as stated in this Prospectus, then dividing the value of the
investment at the end of the period so calculated by the initial amount
invested
and subtracting 100%. The standard average annual total return, as prescribed
by
the SEC, is derived from this total return, which provides the ending
redeemable
value. Such standard total return information may also be accompanied with
nonstandard total return information for differing periods computed in the
same
manner but without annualizing the total return or taking sales charges into
account. The Fund calculates current dividend return for each Class by
annualizing the most recent monthly distribution and then dividing by the net
asset value or the maximum public offering price (including sales charge) on
the
last day of the period for which current dividend return is presented. The
current dividend return for each Class may vary from time to time
40
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Performance (continued)
- ------------------------------------------------------------------------------
- --
depending on market conditions, the composition of the Fund's investment
portfolio and operating expenses. These factors and possible differences in
the
methods used in calculating current dividend return should be considered when
comparing a Class' current return to yields published for other investment
companies and other investment vehicles. The Fund may also include comparative
performance information in advertising or marketing its shares. Such
performance
information may include data from Lipper Analytical Services, Inc. or similar
independent services that monitor the performance of mutual funds, or other
industry publications.
- ------------------------------------------------------------------------------
- --
Management of the Fund
- ------------------------------------------------------------------------------
- --
BOARD OF DIRECTORS
Overall responsibility for management and supervision of the Fund rests
with the Fund's Board of Directors. The Directors approve all significant
agreements between the Fund and the companies that furnish services to the
Fund,
including agreements with the Fund's distributor, investment adviser and
administrator, custodian and Transfer Agent. The day-to-day operations of the
Fund are delegated to the Fund's investment adviser and administrator. The
Statement of Additional Information contains general background information
regarding each Director and executive officer of the Fund.
INVESTMENT ADVISER AND ADMINISTRATOR -- SBMFM
SBMFM, located at 388 Greenwich Street, New York, New York 10013, serves
as
the Fund's investment adviser pursuant to a transfer of the advisory
agreement,
effective November 7, 1994, from its affiliate, Mutual Management Corp.
("MMC").
The agreement was most recently approved by the Fund's Board of Directors on
July 19, 1995. MMC and SBMFM are both wholly owned subsidiaries of Holdings.
SBMFM (through predecessor entities) has been in the investment counseling
business since 1934 and is a registered investment adviser. SBMFM renders
investment advice to a wide variety of individual, institutional and
investment
company clients that had aggregate assets under management as of April 30,
1996
in excess of $75.6 billion.
Subject to the supervision and direction of the Fund's Board of
Directors,
SBMFM 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
41
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Management of the Fund (continued)
- ------------------------------------------------------------------------------
- --
securities analysts who provide research services to the Fund. For investment
advisory services rendered, the Fund pays SBMFM an investment advisory fee at
the annual rate of 0.30% of the Fund's average daily net assets. Prior to
November 17, 1995, the Fund paid SBMFM investment advisory fees at the
following
annual rates: 0.35% of average daily net assets up to $500 million and 0.32%
of
average daily net assets in excess of $500 million. For the fiscal year ended
March 31, 1996, SBMFM was paid investment advisory fees equal to 0.33% of the
value of the average daily net assets of the Fund.
SBMFM also serves as the Fund's administrator and oversees all aspects of
the Fund's administration. For administration services rendered, the Fund pays
SBMFM a fee at the following annual rates of average daily net assets: 0.20%
to
$500 million; and 0.18% in excess of $500 million. For the fiscal year ended
March 31, 1996, the Fund paid administration fees equal to 0.20% of its
average
daily net assets.
PORTFOLIO MANAGEMENT
Lawrence T. McDermott, an Investment Officer of SBMFM, has served as Vice
President and Investment Officer of the Fund since it commenced operations,
and
manages the day-to-day operations of the Fund, including making all investment
decisions.
Management's discussion and analysis, and additional performance
information regarding the Fund during the fiscal year ended March 31, 1996,
are
included in the Annual Report dated March 31, 1996. A copy of the Annual
Report
may be obtained upon request and without charge from a Smith Barney Financial
Consultant or by writing or calling the Fund at the address or telephone
number
listed on page one of this Prospectus.
- ------------------------------------------------------------------------------
- --
Distributor
- ------------------------------------------------------------------------------
- --
Smith Barney is located at 388 Greenwich Street, New York, New York
10013.
Smith Barney distributes shares of the Fund as principal underwriter New
Jersey
Municipals Fund Inc. and as such conducts a continuous offering pursuant to a
"best efforts" arrangement requiring Smith Barney to take and pay for only
such
securities as may be sold to the public. Pursuant to a plan of distribution
adopted by the Fund under Rule 12b-1 under the 1940 Act (the "Plan"), Smith
Barney is paid a service fee with respect to Class A, Class B and Class C
shares
of the Fund at the annual rate of 0.15% of the average daily net assets of the
respective Class. Smith Barney is also paid a
42
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Distributor (continued)
- ------------------------------------------------------------------------------
- --
distribution fee with respect to Class B and Class C shares at the annual rate
of 0.50% and 0.55%, respectively, of the average daily net assets attributable
to those Classes. Class B shares which automatically convert to Class A shares
eight years after the date of original purchase will no longer be subject to a
distribution fee. The fees are used by Smith Barney to pay its Financial
Consultants for servicing shareholder accounts and, in the case of Class B and
Class C shares, to cover expenses primarily intended to result in the sale of
those shares. These expenses include: advertising expenses; the cost of
printing
and mailing prospectuses to potential investors; payments to and expenses of
Smith Barney Financial Consultants and other persons who provide support
services in connection with the distribution of shares; interest and/or
carrying
charges; and indirect and overhead costs of Smith Barney associated with the
sale of Fund shares, including lease, utility, communications and sales
promotion expenses.
The payments to Smith Barney Financial Consultants for selling shares of
a
Class include a commission or fee paid by the investor or Smith Barney at the
time of sale and, with respect to Class A, Class B and Class C shares, a
continuing fee for servicing shareholder accounts for as long as a shareholder
remains a holder of that Class. Smith Barney Financial Consultants may receive
different levels of compensation for selling different Classes of shares.
Payments under the Plan with respect to Class B and Class C shares 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 relevant factors, including expenses borne by Smith
Barney, amounts received under the Plan and proceeds of the CDSC.
- ------------------------------------------------------------------------------
- --
Additional Information
- ------------------------------------------------------------------------------
- --
The Fund was incorporated under the laws of the State of Maryland on
November 12, 1987, and is registered with the SEC as a non-diversified, open-
end
management investment company.
The Fund offers shares of common stock currently classified into four
Classes--A, B, C and Y. Each Class of the Fund's shares has a par value of
$.001
per share and represents an identical interest in the Fund's investment
portfolio. As a result, the Classes have the same rights, privileges and
preferences, except with
43
<PAGE>
Smith Barney
New Jersey Municipals Fund Inc.
- ------------------------------------------------------------------------------
- --
Additional Information (continued)
- ------------------------------------------------------------------------------
- --
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 expenses allocable exclusively to each
Class; (e) voting rights on matters exclusively affecting a single Class; (f)
the exchange privilege of each Class; and (g) the conversion feature of the
Class B shares. The 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, will take appropriate action.
The Fund does not hold annual shareholder meetings. There normally will
be
no meetings of shareholders for the purpose of electing Directors unless and
until such time as less than a majority of the Directors holding office have
been elected by shareholders. The Directors will call a meeting for any
purpose
upon written request of shareholders holding at least 10% of the Fund's
outstanding shares, and the Fund will assist shareholders in calling such a
meeting as required by the 1940 Act. When matters are submitted for
shareholder
vote, shareholders of each Class will have one vote for each full share owned
and a proportionate, fractional vote for any fractional share held of that
Class. Generally, shares of the Fund will be voted on a Fund-wide basis on all
matters except matters affecting only the interests of one Class.
PNC, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19103, serves as custodian of the Fund's investments.
The Transfer Agent, located at Exchange Place, Boston, Massachusetts
02109,
serves as the Fund's transfer agent.
The Fund sends to each of its shareholders a semi-annual report and an
audited annual report, which include listings of investment securities held by
the Fund at the end of each reporting period. In an effort to reduce the New
Jersey Municipals Fund Inc. Fund's printing and mailing costs, the Fund plans
to
consolidate the mailing of its semi-annual and annual reports by household.
This
consolidation means that a household having multiple accounts with the
identical
address of record will receive a single copy of each report. Shareholders who
do
not want this consolidation to apply to their account should contact their
Smith
Barney Financial Consultant or the Transfer Agent.
44
<PAGE>
SMITH
BARNEY
----------
- --
A Member of Travelers Group
{Logo}
Smith
Barney
New
Jersey
Municipals
Fund
Inc.
388 Greenwich
Street
New York, New York
10013
FD0231
5/96
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
PART B
Smith Barney
New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, New York 10013
(212) 723-9218
Statement of Additional
Information May 29, 1996
June 1, 1996
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Smith Barney New Jersey
Municipals Fund Inc. (the "Fund''), dated June 1, 1996, as amended or
supplemented from time to time, and should be read in conjunction with the
Fund's Prospectus. The Fund's Prospectus may be obtained from a 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 incorporated by reference into the
Prospectus in its entirety.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
For ease of reference the same section headings are used in both the
Prospectus and the Statement of Additional Information, except where shown
below:
<S> <C>
Management of the Fund 1
Investment Objective and Management Policies 5
Municipal Bonds (See in the Prospectus "New Jersey Municipal Securities'')
9
Purchase of Shares 15
Redemption of Shares 15
Distributor 16
Valuation of Shares 18
Exchange Privilege 18
Performance Data (See in the Prospectus "Performance'') 19
Taxes (See in the Prospectus "Dividends, Distributions and Taxes'')
22
Additional Information 25
Financial Statements 25
Appendix A1
</TABLE>
MANAGEMENT OF THE FUND
The executive officers of the Fund are employees of certain of the
organizations that provide services to the Fund. These organizations are as
follows:
Name Service
Smith Barney Inc.
("Smith Barney'') Distributor
Smith Barney Mutual Funds Management Inc.
("SBMFM'') Investment Adviser
and
Administrator
PNC Bank, National Association
("PNC") Custodian
First Data Investor Services Group, Inc. (the "Transfer Agent"),
a subsidiary of First Data Corporation Transfer Agent
These organizations and the functions they perform for the Fund are
discussed in the Prospectus and in this Statement of Additional Information.
Directors and Executive Officers of the Fund
The names of the Directors and executive officers of the Fund, together with
information 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 (Age 73). Private Investor. His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
*Alfred J. Bianchetti, Director (Age 73). Retired; formerly Senior
Consultant to Dean Witter Reynolds Inc. His address is 19 Circle End Drive,
Ramsey, New Jersey 07466.
Martin Brody, Director (Age 74). Vice Chairman of the Board of Restaurant
Associates Industries Corp.; Inc. His address is HMK Associates, Three ADP
Boulevard, Roseland, New Jersey 07068.
Dwight B. Crane, Director (Age 58). Professor, Graduate School of Business
Administration, Harvard University; Business Consultant. His address is
Graduate School of Business Administration, Harvard University, Boston,
Massachusetts 02163.
Burt N. Dorsett, Director (Age 65). Managing Partner of Dorsett, McCabe
Capital Management, Inc., an investment counseling firm; Director of Research
Corporation Technologies, Inc., a non-profit patent-clearing and licensing
firm. His address is 540 Madison Avenue, New York, New York 10021.
Elliot S. Jaffe, Director (Age 70). Chairman of the Board and President of
The Dress Barn, Inc. His address is 30 Dunnigan Drive, Suffern, New York
10901.
Stephen E. Kaufman, Director (Age 64). Attorney. His address is 277 Park
Avenue, New York, New York 10017.
Joseph J. McCann, Director (Age 65). Financial Consultant. His address is
200 Oak Park Place, Pittsburgh, Pennsylvania 15243.
*Heath B. McLendon, Chairman of the Board and Investment Officer (Age 63).
Managing Director of Smith Barney, Chairman of the Board of Smith Barney
Strategy Advisers Inc. and President of SBMFM; prior to July 1993, Senior
Executive Vice President of Shearson Lehman Brothers Inc. ("Shearson Lehman
Brothers''), Vice Chairman of Asset Management Division of Shearson Lehman
Brothers; a Director of PanAgora Asset Management, Inc. and PanAgora Asset
Management Limited. Mr. McLendon is Chairman of 41 Smith Barney Mutual Funds.
His address is 388 Greenwich Street, New York, New York 10013.
Cornelius C. Rose, Jr., Director (Age 62). President, Cornelius C. Rose
Associates, Inc., financial consultants, and Chairman and Director of
Performance Learning Systems, an educational consultant. His address is P.O.
Box 355, Fair Oaks, Enfield, New Hampshire 03748.
James J. Crisona, Director emeritus (Age 88). 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.
Jessica M. Bibliowicz, President (Age 36). Executive Vice President of
Smith Barney; prior to 1994, Director of Sales and Marketing for Prudential
Mutual Funds; prior to 1990, First Vice President, Asset Management Division
of Shearson Lehman Brothers. Ms. Bibliowicz serves as President of 40 Smith
Barney Mutual Funds. Her address is 388 Greenwich Street, New York, New York
10013.
Lewis E. Daidone, Senior Vice President and Treasurer (Age 38). Managing
Director of Smith Barney; Director and Senior Vice President of SBMFM. Mr.
Daidone serves as Senior Vice President and Treasurer of 42 Smith Barney
Mutual Funds. His address is 388 Greenwich Street, New York, New York 10013.
Lawrence T. McDermott, Vice President and Investment Officer (Age 47).
Investment Officer of SBMFM; prior to July 1993, Managing Director of Shearson
Lehman Advisors, the predecessor to Greenwich Street Advisors. Mr. McDermott
serves as Investment Officer of 11 Smith Barney Mutual Funds. His address is
388 Greenwich Street, New York, New York 10013.
Karen L. Mahoney-Malcomson, Investment Officer (Age 38). Investment Officer
of SBMFM; prior to July 1993, Vice President of Shearson Lehman Advisors. Ms.
Mahoney-Malcomson serves as Investment Officer of 10 Smith Barney Mutual
Funds. Her address is 388 Greenwich Street, New York, New York 10013.
Christina T. Sydor, Secretary (Age 45). Managing Director of Smith Barney;
General Counsel and Secretary of SBMFM. Ms. Sydor also serves as Secretary of
42 Smith Barney Mutual Funds. Her address is 388 Greenwich Street, New York,
New York 10013.
As of May 14, 1996, the Directors and officers of the Fund as a group owned
less than 1.00% of the outstanding common stock of the Fund. To the best
knowledge of the Directors, as of May 10, 1996, no shareholder or "group" (as
such term is defined in Section 13(d) of the Securities Exchange Act of 1934,
as amended) owned beneficially or of record more than 5% of the shares of the
Funds.
No Director, officer or employee of Smith Barney or of any of its
affiliates receives any compensation from the Fund for serving as an officer
or Director of the Fund. The Fund pays each Director who is not an officer,
director or employee of Smith Barney or any of its affiliates a fee of $1,000
per annum plus $100 per in-person meeting. Each Director emeritus who is not
an officer, director or employee of Smith Barney or any of its affiliates
receives a fee of $500 per annum plus $50 per in-person meeting. The Fund
reimburses all Directors for travel and out-of-pocket expenses incurred to
attend meetings. For the fiscal year ended March 31, 1996, such fees and
expenses totaled $18,900.
For the fiscal year ended March 31, 1996, the Directors of the Fund were
paid the following compensation:
<TABLE>
<CAPTION>
<S>
<C>
<C>
Aggregate
Compensation
Aggregate
Compensation
from the Smith
Barney
Director(*)
from the Fund
Mutual Funds**
Herbert Barg (18)
$1,500
$83,700
Alfred J. Bianchetti
(13)
1,500
39,350
Martin Brody (21)
1,500
95,150
Dwight B. Crane (24)
1,500
121,100
Burt N. Dorsett (13)
1,500+
52,500+
Elliot S. Jaffe (13)
1,500
51,750
Stephen E. Kaufman
(15)
1,500
58,850
Joseph J. McCann
(13)
1,500
39,250
Heath B. McLendon
(41)
--
--
Cornelius C. Rose
(13)
1,500
52,600
James J. Crisona***
750
32,800
_____________________
<FN>
* Number of directorships/trusteeships held with Smith Barney Mutual
Funds.
** Aggregate compensation for all Smith Barney Mutual Funds is for
calendar year ended December 31, 1995.
*** Director emeritus. A Director emeritus may attend meetings of the
Fund's Board of Directors but has no voting rights at such
meetings. Mr. Crisona became a Director emeritus as of July 20,
1994.
+ Pursuant to the Fund's deferred compensation plan, Mr. Dorsett
elected, with effect from December 22, 1995, to defer the payment
of some or all of the compensation due to him from the Fund.
</FN>
</TABLE>
Investment Adviser and Administrator -- SBMFM
SBMFM serves as investment adviser to the Fund pursuant to a transfer of the
investment advisory agreement effective November 7, 1994, which was most
recently approved by the Board of Directors, including a majority of those
Directors who are not "interested persons" of the Fund or Smith Barney
("Independent Directors"), on July 19, 1995. The advisory agreement was
transferred from Mutual Management Corp. Mutual Management Corp. and SBMFM
are both wholly owned subsidiaries of Smith Barney Holdings Inc.
("Holdings''). Holdings is a wholly owned subsidiary of Travelers Group Inc.
("Travelers''). The advisory agreement is dated July 30, 1993 (the "Advisory
Agreement'') and was first approved by the Board of Directors, including a
majority of the Independent Directors , on April 7, 1993. The services
provided by SBMFM under the Advisory Agreement are described in the Prospectus
under "Management of the Fund.'' SBMFM pays the salary of any officer or
employee who is employed by both it and the Fund.
As compensation for investment advisory services, the Fund pays SBMFM a fee
computed daily and paid monthly at the annual rate of 0.30% of the Fund's
average daily net assets. Prior to November 17, 1995, the Fund paid SBMFM
investment advisory fees computed at the following annual rates of the Fund's
average daily net assets: 0.35% up to $500 million; and 0.32% in excess of
$500 million. For the 1994, 1995 and 1996 fiscal years, the investment
advisory fees paid to SBMFM and its predecessors amounted to $559,176,
$579,652 and $612,606, respectively. Shearson Lehman Advisors, Mutual
Management Corp. and/or SBMFM voluntarily waived investment advisory fees for
the fiscal year ended March 31, 1994 in the amount of $49,482.
SBMFM also serves as administrator to the Fund pursuant to a written
agreement dated April 20, 1994 (the "Administration Agreement'') which was
most recently approved by the Fund's Board of Directors, including a majority
of the Independent Directors, on July 19, 1995. The services provided by SBMFM
under the Administration Agreement are described in the Prospectus under
"Management of the Fund.'' SBMFM pays the salary of any officer and employee
who is employed by both it and the Fund and bears all expenses in connection
with the performance of its services.
As compensation for administration services rendered to the Fund, SBMFM
receives a fee paid at the following annual rates: 0.20% of average daily net
assets up to $500 million; and 0.18% of average daily net assets in excess of
$500 million. For the fiscal year ended March 31, 1996, administration fees
paid to SBMFM equaled $307,393.
Prior to June 12, 1995, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly-owned subsidiary of Mellon Bank Corporation,
served as the Fund's sub-administrator. Prior to April 20, 1994, Boston
Advisors served as the Fund's sub-investment advisor and/or administrator. For
the fiscal years ended March 31, 1994, 1995 and 1996 the Fund paid Boston
Advisors $319,529, $331,230 and $65,523, respectively, in sub-investment
advisory and/or administration fees. Boston Advisors voluntarily waived sub-
investment advisory and/or administration fees for the fiscal year ended March
31, 1994 in the amount of $28,275.
SBMFM maintains office facilities for the Fund, furnishes the Fund with
statistical and research data, clerical help and accounting, data processing,
bookkeeping, internal auditing and legal services and certain other services
required by the 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.
The Fund bears expenses incurred in its operations, including: taxes,
interest, brokerage fees and commissions, if any; fees of Directors who are
not officers, directors, shareholders or employees of Smith Barney or SBMFM;
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 investor 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.
SBMFM has 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 fees paid
pursuant to the Fund's services and distribution plan, and, with the prior
written consent of the necessary state securities commissions, extraordinary
expenses) exceed the expense limitation of any state having jurisdiction over
the Fund, SBMFM will, to the extent required by state law, reduce its
management fees by the amount of such excess expenses. Such fee reductions, if
any, will be reconciled on a monthly basis. For the fiscal year ended March
31, 1996 no such fee reduction was required.
Counsel and Auditors
Willkie Farr & Gallagher serves as legal counsel to the Fund. The
Independent Directors of the Fund have selected Stroock & Stroock & Lavan as
their legal counsel.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, New York 10154, has been
selected as the Fund's independent auditors to examine and report on the
Fund's financial statements for the fiscal year ending March 31, 1997.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The Prospectus discusses the Fund's investment objective and the policies it
employs to achieve that objective. The following discussion supplements the
description of the Fund's investment 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 obligations 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 interest 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 invested
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,
instrumentality 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 security and would be treated
as an issue of such government or other entity.
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 investments
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 SBMFM to evaluate potential
investments. Among the factors that will be considered are the long-term
ability of the issuer to pay principal and interest and general economic
trends. To the extent the Fund invests in lower-rated and comparable unrated
securities, the Fund's achievement of its investment objective may be more
dependent on SBMFM's 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 require the
sale of such Municipal Bonds by the Fund, but SBMFM 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 investments in accordance with its investment objective and
policies. The Appendix 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 securities''),
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 deposit of domestic banks
with assets of $1 billion or more. The Fund intends 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 available 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 defensive purposes, to make such investments in
conformity with the requirements 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 Federal
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 holding 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 involve certain risks in the
event of default or insolvency of the other party, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities, the risk of a possible decline in the value of the underlying
securities during the period in which the Fund seeks to assert its rights to
them, the risk of incurring expenses associated with asserting those rights
and the risk of losing all or part of the income from the agreement. SBMFM,
acting under the supervision of the Fund's Board of Directors, reviews on an
ongoing basis the value of the collateral and the creditworthiness of those
banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks.
Investment Restrictions
The Fund has adopted the following investment restrictions for the protection
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
securities on a when-issued or delayed-delivery basis; (b) purchasing or
selling futures contracts and options on futures contracts and other
similar instruments; and (c) issuing separate classes of shares.
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.
government securities and securities of state or municipal governments and
their political subdivisions are not considered to be issued by members of
any industry.
3. Borrow money, except that the Fund may borrow from banks for 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 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 investment
objective and policies; (b) repurchase agreements; and (c) loans of its
portfolio securities.
5. Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed to be
an underwriter under the Securities Act of 1933, as amended, in disposing
of portfolio securities.
6. Purchase or sell real estate, real estate mortgages, real estate
investment trust securities, commodities or commodity contracts, but this
shall not prevent the Fund from: (a) investing in securities of issuers
engaged in the real estate business and securities which are secured by
real estate or interests therein; (b) holding or selling real estate
received in connection with securities it holds; or (c) trading in futures
contracts and options on futures contracts.
7. Purchase any securities on margin (except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box). For
purposes of this restriction, the deposit or payment by the Fund of initial
or maintenance margin in connection with futures contracts and related
options and options on securities is not considered to be the purchase of a
security on margin.
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 securities
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,
controlling persons, general partners, guarantors and originators of
underlying assets.)
11. Invest in companies for the purpose of exercising control.
12. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets and
except to the extent permitted by Section 12 of the 1940 Act (currently, up
to 5% of the total assets of the Fund and no more than 3% of the total
outstanding voting stock of any one investment company).
13. Engage in the purchase or sale of put, call, straddle or spread options
or in 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 strategies
by the Board of Directors and notice thereof to the Fund's shareholders.
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 described
in the Prospectus and this Statement of Additional Information and any future
change in those practices would require Board of Directors' approval 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
Decisions to buy and sell securities for the Fund are made by SBMFM subject to
the overall supervision and review of the Fund's Board of Directors.
Portfolio securities transactions are effected by or under the supervision of
SBMFM.
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 operations.
Allocation of transactions, including their frequency, to various dealers
is determined by SBMFM in its best judgment and in the manner deemed fair and
reasonable to shareholders. The primary considerations 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 research and statistical or other services to
SBMFM may receive orders for portfolio transactions by the Fund. Information
so received enables SBMFM to supplement its own research and analysis with the
views and information of other securities firms. Such information may be
useful to SBMFM in serving both the Fund and its other clients, and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to SBMFM in carrying out its obligations to the
Fund.
The Fund will not purchase Municipal Bonds during the existence of any
underwriting or selling group relating thereto of which SBMFM is a member,
except to the extent permitted by the SEC. Under certain circumstances, 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 SBMFM, 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 SBMFM are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by SBMFM to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
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 desirable to sell or
purchase securities. Securities may be sold in anticipation of a rise in
interest rates (market decline) or purchased in anticipation of a decline in
interest rates (market rise) and later sold. In addition, a security may be
sold and another security of comparable quality may be purchased at
approximately the same time in order to take advantage of what the Fund
believes to be a temporary disparity in the normal 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 or supply of various
types of tax-exempt securities. For each of the fiscal years ended March 31,
1995 and 1996, the Fund's portfolio turnover rate was 32% and 22%,
respectively.
MUNICIPAL BONDS
General Information
Municipal Bonds generally are understood to include debt obligations issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, refunding of outstanding obligations, 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 facilities are included within the
term Municipal Bonds if the interest paid thereon qualifies as excludable from
gross income (but not necessarily from alternative minimum taxable income) for
Federal income tax purposes in the opinion of bond counsel to the issuer.
The yields on Municipal Bonds are dependent upon a variety of factors,
including 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 affecting the rights
and remedies of creditors, such as the Federal Bankruptcy Code, and laws, if
any that may be enacted by Congress or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of the obligations or upon the ability of municipalities to
levy taxes. 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 strategy.
Municipal Bonds are subject to changes in value based upon the public's
perception of the creditworthiness of the issuers and changes, real or
anticipated, in the level of interest rates. In general, Municipal Bonds tend
to appreciate when interest rates decline and depreciate when interest rates
rise. Purchasing Municipal Bonds on a when-issued basis, therefore, 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 securities rather than cash in the
segregated account may have a leveraging effect on the Fund's net assets. That
is, to the extent the Fund remains substantially fully invested in securities
at the same time it has committed to purchase securities on a when-issued
basis, there will be greater fluctuations in its net assets than if it had set
aside cash to satisfy its purchase commitments. Upon the settlement date of
the when-issued securities, the Fund will meet its obligations from then-
available cash flow, sale of securities held in the segregated account, sale
of other securities or, although it 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 income
taxes.
When the Fund engages in when-issued transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
Special Considerations Relating to New Jersey Municipal Securities
Some of the significant financial considerations relating to the investments
of the Fund are summarized below. The following information constitutes only a
brief summary, does not purport to be a complete description and is largely
based on information drawn from official statements relating 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.
Risk Factors: Prospective investors should consider the recent financial
difficulties and pressures which the State of New Jersey (the "State") and
certain of its public authorities have undergone.
The State's 1996 fiscal year budget became law on June 30, 1995.
Effective January 1, 1994, New Jersey personal income tax rates were cut by
5% for all taxpayers. Effective January 1, 1995, the personal income tax
rates were cut by an additional 10% for most taxpayers. By a bill signed into
law on July 4, 1995, New Jersey personal income tax rates have been further
reduced so that coupled with the prior rate reductions, beginning with tax
year 1996, personal income tax rates will be , depending on a taxpayer's level
of income and filing status, 30%, 15% or 9% lower than 1993 rates. At this
time, the effect of the tax reductions cannot be evaluated.
Reflecting the downturn, the rate of unemployment in the State rose from a
low of 3.6% during the first quarter of 1989 to a recessionary peak of 9.3%
during 1992. Since then, the unemployment rate fell to 6.7% during the fourth
quarter of 1993. The jobless rate averaged 7.1% during the first nine months
of 1994, but this estimate is not comparable to those prior to January 1994
because of major changes in the federal survey from which these statistics are
obtained. Since then, the unemployment rate fell to 6.9% during the first
quarter.
In the first nine months of 1994, relative to the same period a year ago,
job growth took place in services (3.5%) and construction (5.7%), more
moderate growth took place in trade (1.9%), transportation and utilities
(1.2%) and finance/insurance/real estate (1.4%), while manufacturing and
government declined by 1.5% and 0.1%, respectively. The net result was a 1.6%
increase in average employment during the first nine months of 1994 compared
to the first nine months of 1993.
The economic recovery is likely to be slow and uneven in New Jersey. Some
sectors, like commercial and industrial construction, will undoubtedly lag
because of continued excess capacity. Also, employers in rebounding sectors
can be expected to remain cautious about hiring until they become convinced
that improved business will be sustained. Other firms will continue to merge
or downsize to increase profitability. As a result, job gains will probably
come grudgingly and unemployment will recede at a corresponding slow pace.
Pursuant to the State Constitution, no money may be drawn from the State
Treasury except for appropriations made by law. In addition, all monies for
the support of State purposes must be provided for in one general
appropriation law covering one and the same fiscal year.
In addition to the Constitutional provisions, the New Jersey statutes
contain provisions concerning the budget and appropriation system. Under
these provisions, each unit of the State requests an appropriation from the
Director of Division of Budget and Accounting, who reviews the budget requests
and forwards them with his recommendation to the Governor. The Governor then
transmits recommended expenditures and sources of anticipated revenue to the
legislature, which reviews the Governor's Budget Message and submits an
appropriations bill to the Governor for signing by July 1 of each year. At
the time of signing the bill, the Governor may revise appropriations or
anticipated revenues. That action can be reversed by a two-thirds vote of
each House. No supplemental appropriation may be enacted after adoption of
the act, except where there are sufficient revenues on hand or anticipated, as
certified by the Governor, to meet the appropriation. Finally, the Governor
may, during the course of the year, prevent the expenditure of various
appropriations when revenues are below those anticipated or when the Governor
determines that such expenditure is not in the best interest of the State.
One of the major reasons for cautious optimism is found in the construction
industry. Total construction contracts awarded in New Jersey have turned
around, rising by 11.8% in first two months of 1995 compared with 1994. By
far, the largest boost came from residential construction awards which
increased by 32.8% in 1995 compared with 1994. In addition, non-residential
building construction awards have turned around, posting a 2.3% gain.
Nonbuilding construction awards increased approximately 4% in the first two
months of 1995 compared with the same period in 1994.
In addition to increases in construction contract awards, another reason
for cautious optimism is rising new light truck registrations. New passenger
car registrations issued during 1994 were virtually unchanged in New Jersey
from a year earlier. However, registrations of new light trucks and vans (up
to 10,000 lbs.) advanced strongly in 1994 increasing 19% during 1994. Retail
sales for 1994 were up 7.5% compared to 1993. Retailers, such as those
selling appliances and home furnishings should benefit from increased
residential construction. Car, light truck and van dealers should also
benefit from the high (eight years) average age of autos on the road.
State Aid to Local Governments is the largest portion of fiscal year 1996
appropriations. In fiscal year 1996, $6,423.5 million of the State's
appropriations consisted of funds which are distributed to municipalities,
counties and school districts. The largest State Aid appropriation, in the
amount of $4,750.8 million, was provided for local elementary and secondary
education programs. Of this amount, $2,731.1 million is provided as
foundation aid to school districts by formula based upon the number of
students and the ability of a school district to raise taxes from its own
base. In addition, the State provided $601.0 million for special education
programs for children with disabilities. A $292.9 million program was also
funded for pupils at risk of educational failure, including basic skills
improvement. The State appropriated $612.9 million on behalf of school
districts as the employer share of the teachers' pension and benefits
programs, $249.48 million to pay for the cost of pupil transportation and
$38.2 million for transition aid, which guaranteed school districts a 6.5%
increase over the aid received in fiscal year 1991 and is being phased out
over six years.
Appropriations to the Department of Community Affairs ("DCA") total $837.9
million in State Aid monies for fiscal year 1996. Many of the DCA State Aid
programs and many Treasury State Aid appropriations to the State Department of
the Treasury total $85.1 million in State Aid monies for fiscal year 1996.
The principal programs funded by these appropriations: the cost of senior
citizens, disabled and veterans property tax deductions and exemptions ($57.9
million); aid to densely populated municipalities ($17.0 million).
Other appropriations of State aid in fiscal year 1996 include: welfare
programs ($467.1 million); aid to county colleges ($128.0 million); and aid to
county mental hospitals ($88.8 million).
The second largest portion of appropriations in fiscal 1996 is applied to
Direct State Services: the operation of State government's 17 departments,
the Executive Office, several commissions, the State Legislature and the
Judiciary. In fiscal 1996, appropriations for Direct State Services aggregate
$5,179.6 million. Some of the major appropriations for Direct State Services
during fiscal 1996 are detailed below.
$606.6 million was appropriated for programs administered by the Department
of Human Services. The Department of Labor is appropriated $57.9 million for
the administration of programs for workers' compensation, unemployment and
disability insurance, manpower development, and health safety inspection.
The Department of Health was appropriated $33.3 million for the prevention
and treatment of diseases, alcohol and drug abuse programs, regulation of
health care facilities, and the uncompensated care program.
$76.1 million was appropriated to the Department of Higher Education for
the support of nine State colleges, Rutgers University, the New Jersey
Institute of Technology, and the University of Medicine and Dentistry of New
Jersey.
$869.9 million was appropriated to the Department of Law and Public Safety
and the Department of Corrections.
$184.3 million was appropriated to the Department of Transportation for the
various programs it administers, such as the maintenance and improvement of
the State highway systems and subsidies for railroads and bus companies.
$182.2 million was appropriated to the Department of Environmental
Protection for the protection of air, land, water, forest, wildlife and
shellfish resources and for the provision of outdoor recreational facilities.
The primary method for State financing of capital projects is through the
sale of the general obligation bonds of the State. These bonds are backed by
the full faith and credit of the State. State tax revenues and certain other
fees are pledged to meet the principal and interest payments required to pay
the debt fully. No general obligation debt can be issued by the State without
prior voter approval, except that no voter approval is required for any law
authorizing the creation of a debt for the purpose of refinancing all or a
portion of outstanding debt of the State, so long as such law requires that
the refinancing provide a debt service savings.
Litigation. At any given time, there are various numbers of claims and cases
pending against New Jersey, New Jersey agencies and employees, seeking
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 recovery of monetary
damages or other relief which would require the expenditure of funds. In
addition, at any given time there are various numbers of claims and cases
pending against the University of Medicine and Dentistry of New Jersey and its
employees, seeking recovery of monetary damages that are primarily paid out of
the Self-Insurance Reserve Fund created pursuant to the Tort Claims Act, and
various numbers of contract and other claims against the University of
Medicine and Dentistry, seeking recovery of monetary damages or other relief
which would require the expenditure of funds. New Jersey is unable to estimate
its exposure for these claims.
As of August, 1994, the following cases are presently pending or threatened
in which New Jersey has the potential for either a significant loss of revenue
or significant unanticipated expenditures: Abbot v. Burke, challenging the
constitutionality of the Quality Education Act of 1990, which was found to be
unconstitutional by the Trial Court and was recently affirmed by the New
Jersey Supreme Court and requires that a funding formula be adopted by
September, 1996 which will achieve by the 1997-98 school year the mandated
parity in spending and will address the special educational needs of children
in poor and urban school districts; 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 Jersey
psychiatric hospitals and residential facilities for the developmentally
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 Jersey 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 providing services to Medicaid patients, seeking a declaration
that the New Jersey Department of Human Services has violated Federal law in
the setting and paying of 1990 long-term care facility Medicaid payment rates,
where the Third Circuit affirmed the District Court's denial of plaintiff's
motion for preliminary injunction, and the parties are currently negotiating
the form of an order to dismiss the action with prejudice; 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 Jersey Legislature refused to reimburse the Spill Compensation Fund
for expenditures for preempted purposes and, after exhaustion of appeals and
other legal avenues, a motion by the State for dismissal of all such claims is
pending before the Tax Court; Fair Automobile Insurance Reform Act ("FAIR
Act'') litigation challenging various portions of FAIR Act, including surtax
and assessment provisions, is still pending; County of Passaic v. State of New
Jersey alleging tort and contractual claims against New Jersey and the New
Jersey Department of Environmental Protection in connection with a resource
recovery facility plaintiffs had planned to build in Passaic County, seeking
approximately $30 million in damages; Pelletier, et al., v. Waldman, et al., a
challenge by State Medicaid-eligible children to the adequacy of Medicaid
reimbursement for services rendered by doctors and dentists, is currently in
mediation; Barnett Memorial Hospital v. Commissioner 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, was decided against
the Commission and successful claimants were refunded the amount of their
overpayment in April, 1994, which amount totaled $4,636,576; New Jersey
Hospital Association, et al. v. Leonard Fishman, seeking the same relief as in
Barnett; 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 reputation, abuse of process and improper disclosure,
based on the Bureau's investigation of certain publicly-traded securities to
which the state has filed a motion to dismiss and/or for summary judgment;
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 has
been transferred to the Appellate Division; 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; American Trucking
Associations, Inc. and Tri-State Motor Transit v. State of New Jersey,
challenging the constitutionality of annual hazardous and solid waste
licensure fees collected by the Department of Environmental Protection,
seeking a permanent injunction enjoining future collection of fees and refund
of all renewal fees, fines and penalties collected; and Waste Management of
Pennsylvania, et al. v. Shinn, et al., an action filed in federal district
court seeking declaratory and injunctive relief and compensatory damages from
Department of Environmental Protection Commissioner Shinn and Acting
Commissioner Fox, alleging violations of the Commerce Clause and the Contracts
Clause of the United States Constitution based on emergency redirection orders
and a draft permit.
In addition to litigation against New Jersey, at any given time there are
various numbers of claims and cases pending or threatened against the
political subdivisions of New Jersey, including but not limited to New Jersey
authorities, counties, municipalities and school districts, which have
potential for either a significant loss of revenue or significant
unanticipated 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 appropriation
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 Facilities Administration
ruling concerning retroactive Medicaid hospital reimbursements and (b) New
Jersey's uncompensated health care funding system, which is pending review by
the United States Supreme Court. Citing a developing pattern of reliance on
non-recurring measures to achieve budgetary balance, four years of financial
operations marked by revenue shortfalls and operating deficits, and the
likelihood that financial pressures 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 by
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 revision 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 Prospectus
applies to purchases made by any "purchaser,'' which is defined to include the
following: (a) an individual; (b) an individual's spouse and his or her
children purchasing shares for his or her own account; (c) a trustee or other
fiduciary purchasing shares for a single trust estate or single fiduciary
account; (d) a pension, profit-sharing or other employee benefit plan
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code''), and qualified employee benefit plans of employers who
are "affiliated persons'' of each other within the meaning of the 1940 Act;
(e) tax-exempt organizations enumerated in Section 501(c)(3) or (13) of the
Code; and (f) a trustee or other professional fiduciary (including a bank, or
an investment adviser registered with the SEC under the Investment Advisers
Act of 1940, as amended) purchasing shares of the Fund for one or more trust
estates or fiduciary accounts. Purchasers who wish to combine purchase orders
to take advantage of volume discounts should contact a Smith Barney Financial
Consultant.
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 Smith Barney Mutual Funds
that are offered with a sales charge, including the purchase being made, of
any purchaser 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 accumulation at any time after written notice to shareholders. For further
information regarding the right of accumulation, shareholders should contact a
Smith Barney Financial Consultant.
Determination of Public Offering Price
The Fund offers its shares to the public on a continuous basis. The public
offering price for a Class A and Class Y share of the Fund is equal to the net
asset value per share at the time of purchase, plus for Class A shares an
initial sales charge based on the aggregate amount of the investment. The
public offering price for a Class B and Class C share (and Class A share
purchases, including applicable rights of accumulation, equaling or exceeding
$500,000), is equal to the net asset value per share at the time of purchase
and no sales charge is imposed at the time of purchase. A contingent deferred
sales charge ("CDSC''), however, is imposed on certain redemptions of Class B
and Class C shares, and Class A shares when purchased in amounts exceeding
$500,000. The method of computation of the public offering price is shown in
the Fund's financial statements, incorporated by reference in their entirety
into this Statement of Additional Information.
REDEMPTION OF SHARES
The right of redemption may be suspended or the date of payment postponed (a)
for any period during which the New York Stock Exchange, Inc. ("NYSE'') is
closed (other than for customary weekend and holiday closings), (b) when
trading in markets the Fund normally utilizes is restricted, or an emergency
exists, as determined by the SEC, so that disposal of the Fund's investments
or determination of net asset value is not reasonably practicable or (c) for
such other periods as the SEC by order may permit for protection of the Fund's
shareholders.
Distribution in Kind
If the Board of Directors of the Fund determines that it would be detrimental
to the best interests of the remaining shareholders of the Fund to make a
redemption payment wholly in cash, the Fund may pay, in accordance with SEC
rules, any portion of a redemption in excess of the lesser of $250,000 or 1%
of the Fund's net assets by a distribution in kind of portfolio securities in
lieu of cash. Securities issued as a distribution in kind may incur brokerage
commissions when shareholders subsequently sell those securities.
Automatic Cash Withdrawal Plan
An automatic cash withdrawal plan (the "Withdrawal Plan'') is available to
shareholders who own shares with a value of at least $10,000 and who wish to
receive specific amounts of cash monthly or quarterly. Withdrawals of at least
$100 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 1.00% per month of the value of a shareholder's shares at the time the
Withdrawal Plan commences. (With respect to Withdrawal Plans in effect prior
to November 7, 1994, any applicable CDSC will be waived on amounts withdrawn
that do not exceed 2.00% per month of the value of a shareholder's shares at
the time the Withdrawal Plan commences.) To the extent withdrawals exceed
dividends, distributions and appreciation of a shareholder's investment in the
Fund, there will be a reduction in the value of the shareholder's investment,
and continued withdrawal payments will reduce the shareholder's investment and
may ultimately exhaust it. Withdrawal payments should not be considered as
income from investment in the Fund. Furthermore, 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 participating in the Withdrawal Plan, purchases by
such shareholders in amounts of less than $5,000 ordinarily will not be
permitted.
Shareholders who wish to participate in the Withdrawal Plan and who hold
their shares in certificate form must deposit their share certificates with
the Transfer Agent as agent for Withdrawal Plan members. All dividends and
distributions on shares in the Withdrawal Plan are reinvested automatically at
net asset value in additional shares of the Fund. Effective November 7, 1994,
Withdrawal Plans should be set up with a Smith Barney Financial Consultant. A
shareholder who purchases shares directly through the Transfer Agent may
continue to do so and applications for participation in the Withdrawal Plan
must be received by the Transfer Agent no later than the eighth day of the
month to be eligible for participation beginning with that month's withdrawal.
For additional information, shareholders should contact a Smith Barney
Financial Consultant.
DISTRIBUTOR
Smith Barney serves as the Fund's distributor on a best efforts basis pursuant
to a written agreement dated July 30, 1993 (the "Distribution Agreement'')
which was most recently approved by the Fund's Board of Directors on July 19,
1995. For the fiscal years ended March 31, 1994, 1995 and 1996, Smith Barney
and/or Shearson Lehman Brothers, the Fund's distributor prior to Smith Barney,
received $586,302, $199,930 and $154,000, respectively, 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, and
the fiscal years ended March 31, 1995 and 1996, Shearson Lehman Brothers and
its successor, Smith Barney, received $49,338, $178,656 and $117,000,
respectively, representing CDSC on redemptions of the Fund's Class B shares.
For the fiscal year ended March 31, 1996, Smith Barney incurred
distribution expenses totaling approximately $819,669, consisting of
approximately $50,138 for advertising, $7,365 for printing and mailing of
Prospectuses, $416,884 for support services, $336,751 to Smith Barney
Financial Consultants, and $8,531 in accruals for interest on the excess of
Smith Barney expenses incurred in distributing the Fund's shares over the sum
of the distribution fees and CDSC received by Smith Barney from the Fund.
When payment is made by the investor before settlement date, unless
otherwise requested in writing by the investor, the funds will be held as a
free credit balance in the investor's brokerage account and Smith Barney may
benefit from the temporary use of the funds. The investor may designate
another use for the funds prior to settlement date, such as an investment in a
money market fund (other than Smith Barney Exchange Reserve Fund) of the Smith
Barney Mutual Funds. If the investor instructs Smith Barney to invest the
funds in a Smith Barney money market fund, the amount of the investment will
be included as part of the average daily net assets of both the Fund and the
money market fund, and affiliates of Smith Barney that serve the funds in an
investment advisory or administrative capacity will benefit from the fact that
by receiving fees from both such investment companies for managing these
assets, computed on the basis of their average daily net assets. The Fund's
Board of Directors has been advised of the benefits to Smith Barney resulting
from these settlement procedures and will take such benefits into
consideration when reviewing the Advisory, Administration and Distribution
Agreements for continuance.
Distribution Arrangements
To compensate Smith Barney for the services it provides and for the 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 0.15% of the value of the
Fund's average daily net assets attributable to the Class A, Class B and Class
C shares. In addition, the Fund pays Smith Barney 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 fee is calculated at the annual rate of 0.50% of the
value of the Fund's average net assets attributable to the shares of the
Class. The Class C distribution fee is calculated at the annual rate of 0.55%
of the value of the Fund's average net assets attributable to the shares of
the Class.
The following service and distribution fees were incurred during the fiscal
years ended as indicated:
<TABLE>
<CAPTION>
<S>
<C>
Service Fees
3/31/96
3/31/95
3/31/94
Class A
$185,007
$170,371
$186,615
Class B
89,476
77,993
53,031
Class C
2,101
58
*
<S>
<C>
Distribution Fees
3/31/96
3/31/95
3/31/94
Class B
298,253
$259,976
176,771
Class C
7,704
214
*
<FN>
_______________________
* The inception date for Class C shares was December 13, 1994
</TABLE>
For the 1994, 1995 and 1996 fiscal years, Smith Barney and/or its
predecessor, Shearson Lehman Brothers, received $416,417, $508,612 and
$582,541, respectively, in the aggregate from the Plan.
Under its terms, the Plan continues from year to year, provided such
continuance is approved annually by vote of the Fund's Board of Directors,
including a majority of the Independent Directors who have no direct or
indirect financial interest in the operation of the Plan or in the
Distribution Agreement. The Plan may not be amended to increase the amount of
the service and distribution fees without shareholder approval, and all
material amendments of the Plan also must be approved by the Directors and the
Independent Directors in the manner described above. The Plan may be
terminated with respect to a Class at any time, 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
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 currently is
scheduled to be closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on
the preceding Friday or subsequent Monday when one of these holidays falls on
a Saturday or Sunday, respectively. Because of the differences in distribution
fees and Class-specific expenses, the per share net asset value of each Class
may differ. The following is a description of the procedures used by the Fund
in valuing its assets.
The valuation of the Fund's assets is made by SBMFM after consultation 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 Directors, which may replace
any such Service at any time if it determines it to be in the best interests
of the Fund to do so.
EXCHANGE PRIVILEGE
Except as noted below, shareholders of any Smith Barney Mutual Fund may
exchange all or part of their shares for shares of the same Class of other
Smith Barney Mutual 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
exchanged for Class A shares of any of the other funds, and the sales
charge differential, if any, will be applied. Class A shares of any fund
may be exchanged without a sales charge for shares of the funds that are
offered without a sales charge. Class A shares of any fund purchased
without a sales charge may be exchanged for shares sold with a sales
charge, and the appropriate sales charge differential will be applied.
B. Class A shares of any fund acquired by a previous exchange of shares
purchased with a sales charge may be exchanged for Class A shares of any of
the other funds, and the sales charge differential, if any, will be
applied.
C. Class B shares of any fund may be exchanged without a sales charge.
Class B shares of the Fund exchanged for Class B shares of 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 deemed to
be purchased.
Dealers other than Smith Barney must notify the Transfer Agent of the
investor's prior ownership of Class A shares of Smith Barney High Income
Fund and the account number in order to accomplish an exchange of shares of
Smith Barney High Income Fund under paragraph B above.
The exchange privilege enables shareholders to acquire shares of the same
Class in a fund with different investment objectives when they believe that a
shift between funds is an appropriate investment decision. This privilege is
available to shareholders 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 a Smith Barney
Financial Consultant.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
and subject to any applicable CDSC, the proceeds are immediately invested, at
a price as described above, in shares of the fund being acquired. Smith Barney
reserves the right to reject any exchange request. The exchange privilege may
be modified or terminated at any time after written notice to shareholders.
PERFORMANCE DATA
From time to time, the Fund may quote yield or total return of a Class in
advertisements or in reports and other communications to shareholders. The
Fund may include comparative performance information in advertising or
marketing the Fund's shares. Such performance information may include the
following industry and financial publications: Barron's, Business Week, CDA
Investment Technologies, Inc., Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money Morningstar Mutual Fund Values, The New York
Times, USA Today and The Wall Street Journal. To the extent any advertisement
or sales literature of the Fund describes the expenses or performance of any
Class, it will also disclose such information for the other Classes.
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 +1)6-1]
cd
Where: a = Dividends and interest earned during the period.
b = Expenses accrued for the period (net of reimbursement).
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = The maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable "a'' in the
formula) on debt obligations that were purchased by the Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium. The amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
The Fund's equivalent taxable 30-day yield for a Class of shares is
computed 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 yields on municipal securities are dependent upon a variety of factors,
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 recognize 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 producing lower yields than the balance of
the Fund's portfolio, thereby reducing the current yield of the Fund. In
periods of rising interest rates, the opposite can be expected to occur.
The Fund's yield for Class A, Class B and Class C shares for the 30-day
period ended March 31, 1996 was 5.14%, 4.84% and 4.77%, respectively. The
equivalent taxable yield for Class A, Class B and Class C shares for that same
period, was 3.31%, 3.12 and 3.07%, respectively, assuming the payment of
Federal income taxes at a rate of 31% and New Jersey taxes at a rate of 6.65%.
Average Annual Total Return
"Average annual total return'' figures described below are computed according
to a formula prescribed by the SEC. The formula can be expressed as follows:
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000 investment
made at the beginning of a 1-, 5- or 10-year period at the end
of the 1-, 5- or 10-year period (or fractional portion
thereof), assuming reinvestment of all dividends and
distributions.
The following total return figures for Class A shares assume that the
maximum 4.00% sales charge has been deducted from the investment at the time
of purchase and have been restated to show the change in the maximum sales
charge. The average annual total return for Class A shares was as follows for
the period indicated:
3.43% for the one-year period beginning April 1, 1995 through March 31, 1996.
6.94% per annum during the five-year period beginning on April 1, 1991 through
March 31, 1996.
8.07% per annum during the period from the Fund's commencement of operations
on April 22, 1988 through March 31, 1996.
These total return figures assume that the maximum 4.00% sales charge
assessed by the Fund on purchases of Class A shares has been deducted from the
investment at the time of purchase. Had the investment advisory, sub-
investment advisory and/or administration fees not been partially waived (and
assuming that the maximum 4.00% sales charge had not been deducted), the Class
A's average annual total return would have been 7.77%, 7.83% and 8.62%,
respectively, for those same periods.
The Fund's average annual total return for Class B shares was as follows for
the periods indicated:
2.70% for the one-year period from April 1, 1995 through March 31, 1996.
5.57% per annum for the period from November 6, 1992 (commencement of
operations) through March 31, 1996.
These average annual total return figures assume that the applicable
maximum CDSC has been deducted from the investment. Had the investment
advisory and sub-investment advisory and/or administration fees not been
partially waived and the CDSC had not been deducted, the average annual total
return on the Fund's Class B shares would have been 7.20% and 6.09%,
respectively, for those same periods.
The Fund's average annual total return for Class C shares was as follows for
the periods indicated:
6.17% for the one year period from April 1, 1995 through March 31, 1996; and
11.93% per annum for the period from December 13, 1994 (commencement of
operations) through March 31, 1996.
These average annual total return figures assume that the applicable CDSC has
been deducted from the investment. Had the CDSC not been deducted, the
average annual total return on the Fund's Class C shares would have been 7.17%
and 11.93%, respectively, 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 portion
thereof), assuming reinvestment of all dividends and
distributions.
The aggregate total return for Class A shares was as follows for the periods
indicated (reflecting the partial waiver of the investment advisory and sub-
investment advisory and/or administration fees):
3.43% for the one-year period beginning April 1, 1995 through March 31, 1996.
39.89% for the five-year period from April 1, 1991 through March 31, 1996; and
85.26% for the period from the Fund's commencement of operations on April 22,
1988 through March 31, 1996.
These aggregate total return figures assume that the maximum 4.00% sales
charge assessed by the Fund on purchases of Class A shares 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/or administration fees for those same periods would have been
7.77%, 45.76% and 92.84%, respectively.
The Fund's aggregate total return for Class B shares was as follows for the
periods indicated:
2.70% for the one-year period from April 1, 1995 through March 31, 1996; and.
20.24% for the period beginning on November 6, 1992 (commencement of
operations) through March 31, 1996.
These figures assume that the applicable maximum 4.50% CDSC has been
deducted from the investment at the time of purchase. If the investment
advisory and sub-investment advisory and/or administration fees had not been
partially waived and the maximum CDSC had not been deducted at the time of
purchase, the Fund's aggregate total returns for the same period would have
been 7.20% and 22.24%, respectively, for those same periods.
The Fund's aggregate total return for Class C shares was as follows for the
periods indicated:
6.17% for the one year period from April 1, 1995 through March 31, 1996; and
15.76% per annum for the period from December 13, 1994 (commencement of
operations) through March 31, 1996.
These aggregate total return figures assume that the applicable CDSC has been
deducted from the investment. Had the CDSC not been deducted, the average
annual total return on the Fund's Class C shares would have been 7.17% and
15.76%, respectively, for those same periods.
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
performance. Each Class' net investment income changes in response to
fluctuation in interest rates and the expenses of the Fund. Performance will
vary from time to time depending upon market conditions, the composition of
the Fund's portfolio and its operating expenses and the expenses exclusively
attributable to the Class. Consequently, any given performance quotation
should not be considered representative of the Class' performance for any
specified period in the future. 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
The following is a summary of selected Federal income tax considerations
that may affect the Fund and its shareholders. The summary is not intended as
a substitute for individual tax advice and investors are urged to consult
their own tax advisors as to the tax consequences of an investment in the
Fund.
As described above and in the Prospectus, the Fund is designed to provide
investors with current income which is excluded from gross income for regular
Federal 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 investors would not gain
any additional tax benefit from the receipt of tax-exempt income.
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 90% of its tax-exempt
interest income (reduced by certain expenses), the Fund will not be liable for
Federal income taxes to the extent of all of 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
maintained, 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 receive
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 purposes. 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 exchange 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 income, a portion of certain
otherwise non-taxable social security and railroad retirement benefit
payments. Furthermore, that portion of any dividend paid by the Fund which
represents income derived from private activity 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 financed 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 distributions may be a specific tax preference
item, or a component of an adjustment item, for purposes of the Federal
individual and corporate alternative minimum taxes, and (b) the receipt of
Fund dividends and distributions 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
respect 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
environmental 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 futures
contracts. The Fund anticipates that these investment activities would not
prevent the Fund from qualifying as a regulated investment company. As a
general rule, these investment activities would increase or decrease the
amount of long-term and short-term capital gains or losses realized 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 result, the Fund
will be recognizing gains or losses before they are actually 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 net capital gains or
losses recognized by 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 receiving the benefit of certain
recognized losses. The Fund expects that its activities with respect to
section 1256 contracts and offsetting positions 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 fiscal 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 dividends''), if any, may
be taxable to shareholders as long-term capital gains, regardless of how long
they have held Fund shares, and will be designated as capital gain dividends
in a written notice mailed by the Fund to shareholders within 60 days 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 dividend.
No loss will be allowed on the sale, exchange or redemption of shares in
the Fund to the extent that the shareholder acquired other shares in the Fund
within a period beginning 30 days before the sale or disposition of the loss
shares and ending 30 days after such date (Fund shareholders should note that
such acquisitions may occur through the automatic dividend reinvestment plan
or the Systematic Investment Plan described in the Prospectus).
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 mutual 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 acquired shares. Furthermore, the
same rule also applies to a disposition of the newly acquired shares made
within 90 days of the second acquisition. This provision prevents a
shareholder from immediately deducting 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
annual 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 shareholder
also will receive, if appropriate, various written notices after the close of
the Fund's prior taxable year as to the Federal income tax status of his or
her dividends and distributions which were received from the Fund during 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 excluded or exempt from regular
Federal income taxation or New Jersey personal income taxation and the dollar
amount of dividends subject to regular Federal income taxation or New Jersey
personal income taxation, if any, will vary for each shareholder depending
upon the size and duration of each shareholder's investment in the Fund.
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 taxable
distribution payment.
If a shareholder fails to furnish the Fund with a correct taxpayer
identification number, fails to report fully dividend or interest income, or
fails to certify that he or she has provided a correct taxpayer identification
number and that he or she is not subject to "backup withholding,'' then the
shareholder may be subject to a 31% "backup withholding'' tax with respect to
(a) taxable dividends and distributions, if any, and (b) proceeds of any
redemption of Fund shares. An individual's taxpayer identification number is
his or her social security number. The "backup withholding'' tax is not an
additional tax and may be credited against a shareholder's Federal income tax
liability.
Income distributions, including interest income and gains realized by the
Fund upon disposition of investments paid from a "qualified investment fund''
should be 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, financial options, futures, forward contracts or other similar
financial instruments related to interest-bearing obligations, obligations
issued at a discount or related bond indexes and cash and cash items,
including receivables, 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
investments, excluding financial options, futures, forward contracts, or other
similar financial instruments related to interest-bearing obligations,
obligations issued at a discount or bond indexes related there to as
authorized under the Code, cash and cash items, such as receivables, invested
in New Jersey Municipal Securities or in Tax-Exempt Obligations. Furthermore,
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, dividends
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 purposes
of computing the Corporation Business Tax.
The foregoing is only a summary of certain Federal and New Jersey tax
considerations 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.
ADDITIONAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on November
12, 1987. The Fund commenced operations on April 22, 1988 under the name
Shearson Lehman New Jersey Municipals Inc. On December 15, 1988, March 31,
1992, July 30, 1993 and October 14, 1994, the Fund changed its name to SLH New
Jersey Municipals Fund Inc., Shearson Lehman Brothers New Jersey Municipals
Fund Inc., Smith Barney Shearson New Jersey Municipals Fund Inc. and Smith
Barney New Jersey Municipals Fund Inc., respectively.
PNC, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19101, serves as the Fund's custodian pursuant to a custody agreement. Under
the custody agreement, PNC holds the Fund's portfolio securities and keeps all
necessary accounts and records. For its services, PNC 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.
First Data Investor Services Group, Inc., located at Exchange Place,
Boston, Massachusetts 02109, serves as the Fund's transfer agent. Under the
transfer agency agreement, the Transfer Agent 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, the Transfer Agent 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, 1996, accompanies
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 definitions 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
particularly the competitive position of the municipal enterprise under review
and the basic security covenants. Although a rating reflects S&P's judgment 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. Quality of
management appears superior.
Revenue Bonds -- Debt service coverage has been, and is expected to remain,
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 covenant, earnings
test for issuance of additional bonds, and debt service reserve requirements)
are rigorous. There is evidence of superior management.
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 capacity 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 because:
General Obligation Bonds -- There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and
expenditures, 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.
Stability of the pledged revenues could show some variations because of
increased 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
revenues 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
categories, 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 elements
are likely to change, such changes as can be visualized are most unlikely 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 elements
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 security 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 protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
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 security
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
default 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 demand
obligations are designated Variable Moody's Investment Grade ("VMIG''). This
distinction is in recognition of the differences between short-term credit
risk and long-term credit risk. Loans bearing the designation MIG 1 or VMIG 1
are of the best quality, enjoying strong protection by established cash flows
of funds for their servicing or from established and broad-based access to the
market for refinancing, or both. Loans bearing the designation MIG 2 or VMIG 2
are of high quality, with ample margins of protection although not as large as
the preceding group. Loans bearing the designation MIG 3 or VMIG 3 are of
favorable quality, with all security elements accounted for, but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow may be
tight and market access for refinancing, in particular, is likely to be less
well established.
Description of S&P A-1+ and A-1 Commercial Paper Rating
The rating A-1+ is the highest, and A-1 the second highest, commercial paper
rating assigned by S&P. Paper rated A-1+ must have either the direct credit
support of an issuer or guarantor that possesses excellent long-term operating
and financial strengths combined with strong liquidity characteristics
(typically, such issuers or guarantors would display credit quality
characteristics which would warrant a senior bond rating of "AA\-'' or
higher), or the direct credit support of an issuer or guarantor that possesses
above average long-term fundamental operating and financing capabilities
combined with ongoing excellent liquidity characteristics. Paper rated A-1 by
S&P has the following characteristics: liquidity ratios are adequate to meet
cash requirements; long-term senior debt is rated "A'' or better; the issuer
has access to at least two additional channels of borrowing; basic earnings
and cash flow have an upward trend with allowance made for unusual
circumstances; typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and the reliability and
quality of management are unquestioned.
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) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (c) evaluation
of the issuer's products in relation to competition and customer acceptance;
(d) liquidity; (e) amount and quality of long-term debt; (f) trend of earnings
over a period of ten years; (g) financial strength of a parent company and the
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
New Jersey
Municipals
Fund Inc.
Statement of
Additional
Information
June 1, 1996
Smith Barney
New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, NY 10013
SMITH BARNEY
A Member of Travelers Group
SMITH BARNEY 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 fiscal year ended March 31,
1996 and the Report of Independent Accountants dated May 21, 1996 are
incorporated by reference to the Definitive 30b2-1 filed on May 31, 1996
as Accession #0000091155-96-000210.
Included in Part C:
Consent of Independent Accountants is filed herein.
(b) Exhibits
Exhibit No. Description of Exhibits
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 No. 33-18779 and 811-5486 (the "Registration
Statement").
(1)(a) Registrant's Articles of Incorporation dated November 12,
1987, Articles of Amendment dated December 15, 1988 to Articles of
Incorporation, Articles of Revival dated March 31, 1992 to
Articles of Incorporation, Articles Supplementary dated November
5, 1992 to Articles of Incorporation, and Articles of Amendment
dated July 30, 1993, to Articles of Incorporation are incorporated
by reference to Post-Effective Amendment No. 12 to the
Registration Statement filed on August 1, 1994 ("Post-Effective
Amendment No. 12").
(b) Form of Articles of Amendment dated October 14, 1994 to the
Articles of Incorporation are incorporated by reference to Post-
Effective Amendment No. 13 to the Registration Statement filed on
November 7, 1994 ("Post-Effective Amendment No. 13").
(c) Form of Articles Supplementary and Form of Articles of Amendment
dated November 7, 1994 to the Articles of Incorporation are
incorporated by reference to Post-Effective Amendment No. 13.
(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 is incorporated by
reference to Post-Effective Amendment No. 9 to the Registration
Statement filed on October 23, 1992 ("Post-Effective Amendment No.
9").
(5) (a) Investment Advisory Agreement dated July 30, 1993 between the
Registrant and Greenwich Street Advisors is incorporated by
reference to Post-Effective Amendment No. 12.
(b) Form of Transfer of Investment Advisory Agreement dated as of
November 7, 1994, among Registrant, Mutual Management Corp. and
SBMFM is incorporated by reference to Post-Effective Amendment No.
14 to the Registration Statement filed on June 2, 1995 ("Post-
Effective Amendment No. 14") .
(6) Form of Distribution Agreement dated July 30, 1993 between the
Registrant and Smith Barney Shearson Inc. is incorporated by
reference to Post-Effective Amendment No. 12.
(7) Not Applicable.
(8) Custody Agreement dated June 12, 1995 between the Registrant
and PNC Bank, National Association is filed herein .
(9)(a) Transfer Agency Agreement dated August 2, 1993 between the
Registrant and The Shareholder Services Group, Inc. is
incorporated by reference to Post-Effective Amendment No. 12.
(b) Form of Administration Agreement dated April 20, 1994 between the
Registrant and Smith, Barney Advisers, Inc. ("SBA") is
incorporated by reference to Post-Effective Amendment No. 13.
(10) Opinion of Counsel as to Legality of Securities being Offered is
incorporated by reference to Post-Effective Amendment No. 14.
(11)
Consent of KPMG Peat Marwick LLP is filed herein
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15) Amended and Restated Services and Distribution Plan pursuant to
Rule 12b-1 dated as of November 7, 1994 is incorporated by
reference to Post-Effective Amendment No. 13.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement filed on May 27,
1989.
(17) A Financial Data Schedule is filed herein.
(18) Form of Rule 18f-3(d) Multiple Class Plan of the Registrant is
incorporated by reference to Post-Effective Amendment No. 15 to
the Registration Statement filed on March 28, 1996.
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 May 14,
1996
Common stock, par Class A 3,739
value $.001 per share Class B
2,091
Class C 130
Class Y 0.00
Item 27. Indemnification
Response to this item is incorporated by reference to Post-
Effective Amendment No. 9.
Item 28 Business and Other Connections of Investment Adviser
Investment Adviser - - Smith Barney Mutual Funds Management Inc.,
formerly known as Smith, Barney Advisers, Inc. ("SBMFM")
SBMFM, through its predecessors, has been in the investment
counseling business since 1934 and was incorporated in December
1968 under the laws of the State of Delaware. SBMFM is a wholly
owned subsidiary of Smith Barney Holdings Inc. (formerly known as
Smith Barney Shearson Holdings Inc.), which in turn is a wholly
owned subsidiary of Travelers Group Inc. (formerly known as
Primerica Corporation) ("Travelers"). SBMFM is registered as an
investment adviser under the Investment Advisers Act of 1940 (the
"Advisers Act").
The list required by this Item 28 of the officer and directors of
SBMFM together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officer and directors during the past two fiscal years,
is incorporated by reference to Schedules A and D of FORM ADV
filed by SBMFM pursuant to the Advisers Act (SEC File No. 801-
8314).
Item 29. Principal Underwriter
Smith Barney Inc. ("Smith Barney") currently acts as distributor
for Smith Barney Managed Municipals Fund Inc., Smith Barney
California Municipals Fund Inc., Smith Barney Massachusetts
Municipals Fund, Smith Barney Aggressive Growth Fund Inc., Smith
Barney Appreciation Fund Inc., Smith Barney Concert Series Inc.,
Smith Barney Principal Return Fund, Smith Barney Managed
Governments Fund Inc., Smith Barney Income Funds, Smith Barney
Equity Funds, Smith Barney Investment Funds Inc., Smith Barney
Natural Resources Fund Inc., Smith Barney Telecommunications
Trust, Smith Barney Arizona Municipals Fund Inc., Smith Barney New
Jersey Municipals Fund Inc., The USA High Yield Fund N.V.,
Garzarelli Sector Analysis Portfolio N.V., Smith Barney
Fundamental Value Fund Inc., Smith Barney Series Fund, Consulting
Group Capital Markets Funds, Smith Barney Investment Trust, Smith
Barney Adjustable Rate Government Income Fund, Smith Barney Oregon
Municipals Fund, Smith Barney Funds, Inc., Smith Barney Muni
Funds, Smith Barney World Funds, Inc., Smith Barney Money Funds,
Inc., Smith Barney Tax-Free Money Fund, Inc., Smith Barney
Variable Account Funds, Smith Barney U.S. Dollar Reserve Fund
(Cayman), Worldwide Special Fund, N.V., Worldwide Securities
Limited, (Bermuda), Smith Barney International Fund (Luxembourg)
and various series of unit investment trusts.
Smith Barney is a wholly owned subsidiary of Holdings.
On June 1, 1994, Smith Barney changed its name from Smith Barney
Shearson Inc. to its current name. The information required by
this Item 29 with respect to each director, officer and partner of
Smith Barney is incorporated by reference to Schedule A of FORM BD
filed by Smith Barney pursuant to the Securities Exchange Act of
1934 (SEC File No. 812-8510).
Item 30. Location of Accounts and Records
(1) Smith Barney New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, New York, 10013
(2) Smith Barney Mutual Funds Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA 19103
(4) First Data Investor Services Group, Inc.
One Boston 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York, on the 31st day of May, 1996.
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
By: /s/ Heath B. McLendon
Health B. McLendon
Chairman of the Board
We, the undersigned, hereby severally constitute and appoint Heath B.
McLendon, Christina T. Sydor and Caren Cunningham and each of them singly, our
true and lawful attorneys, with full power to them and each of them to sign
for us, and in our hands and in the capacities indicated below, any and all
Amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents therewith, with the Securities and
Exchange Commission, granting unto said attorneys and each of them, acting
alone, full authority and power to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys or any of them may lawfully do or cause to be done by
virtue thereof.
WITNESS our hands on the date set forth below.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement and the above Power of Attorney
has been signed below by the following persons in the capacities and as of the
dates indicated.
Signature:
Title:
Date:
/s/ Heath B. McLendon
Chairman of the
Board
May 31, 1996
Heath B. McLendon
(Chief Executive
Officer)
/s/ Lewis E. Daidone
Senior Vice
President and
May 31,
1996
Lewis E. Daidone
Treasurer (Chief
Financial
and Accounting
Officer)
Signature:
Title:
Date:
/s/ Herbert Barg
Director
May 31,
1996
Herbert Barg
/s/ Alfred J.
Bianchetti
Director
May 31,
1996
Alfred J. Bianchetti
/s/ Martin Brody
Director
May 31,
1996
Martin Brody
/s/ Dwight B. Crane
Director
May 31,
1996
Dwight B. Crane
/s/ Burt N. Dorsett
Director
May 31,
1996
Burt N. Dorsett
/s/ Elliot S. Jaffe
Director
May 31,
1996
Elliot S. Jaffe
/s/ Stephen E.
Kaufman
Director
May 31,
1996
Stephen E. Kaufman
/s/ Joseph J. McCann
Director
May 31,
1996
Joseph J. McCann
/s/ Cornelius C. Rose
Director
May 31,
1996
Cornelius C. Rose,
Jr.
50
A-4
g:\funds\njmu\1996\secdocs\pea16.doc
CUSTODIAN SERVICES AGREEMENT
This Agreement is made as of June 12, 1995 by and between SMITH BARNEY
NEW JERSEY MUNICIPALS FUND INC., a Maryland corporation (the "Fund") and PNC
BANK, NATIONAL ASSOCIATION, a national banking association ("PNC Bank").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund wishes
to retain PNC Bank to provide custodian services and PNC Bank wishes to
furnish such services, either directly or through an affiliate or affiliates,
as more fully described herein. In consideration of the premises and mutual
covenants herein contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean any
officer of the Fund and any other person, who is duly authorized by the Fund's
Governing Board, to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Certificate attached hereto as the Authorized
Persons Appendix, as such Appendix may be amended in writing by the Fund's
Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means Federal
Reserve Treasury book-entry system for United States and federal agency
securities, its successor or successors, and its nominee or nominees and any
book-entry system maintained by an exchange registered with the SEC under the
1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(d) "Governing Board". The term "Governing Board" shall mean the
Fund's Board of Directors if the Fund is a corporation or the Fund's Board of
Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean oral
instructions received by PNC Bank from an Authorized Person or from a person
reasonably believed by PNC Bank to be an Authorized Person.
(f) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.
(g) "Securities and Commodities Laws". The term "Securities and
Commodities Laws" shall mean the "1933 Act" which shall mean the Securities
Act of 1933, the "1934 Act" which shall mean the Securities Exchange Act of
1934, the 1940 Act, and the "CEA" which shall mean the Commodities Exchange
Act, each as amended.
(h) "Shares". The term "Shares" shall mean the shares of stock of any
series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
(i) "Property". The term "Property" shall mean:
(i) any and all securities and other investment items which
the Fund may from time to time deposit, or cause to be
deposited, with PNC Bank or which PNC Bank may from
time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to time,
from or on behalf of the Fund.
(j) "Written Instructions". The term "Written Instructions" shall mean
written instructions signed by one Authorized Person and received by PNC Bank.
The instructions may be delivered by hand, mail, tested telegram, cable, telex
or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund, and PNC Bank accepts such appointment and agrees to
furnish such services.
3. Delivery of Documents. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Governing Board, approving the appointment of PNC Bank or its affiliates to
provide services;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreements if PNC Bank is not
providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect of
the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PNC Bank undertakes
to comply with all applicable requirements of the Securities and Commodities
Laws and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to all duties to be performed by PNC Bank hereunder.
Except as specifically set forth herein, PNC Bank assumes no responsibility
for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral and Written Instructions. PNC Bank shall be entitled
to rely upon any Oral and Written Instructions it receives from an Authorized
Person (or from a person reasonably believed by PNC Bank to be an Authorized
Person) pursuant to this Agreement. PNC Bank may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent with
the provisions of organizational documents or this Agreement or of any vote,
resolution or proceeding of the Fund's Governing Board or of the Fund's
shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming
Oral Instructions so that PNC Bank receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PNC
Bank shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the
Fund in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it
should or should not take, PNC Bank may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PNC
Bank may request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's advisor or PNC Bank, at the
option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PNC Bank receives from the Fund, and
the advice it receives from counsel, PNC Bank shall be entitled to rely upon
and follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel and which PNC
Bank believes, in good faith, to be consistent with those directions, advice
or Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PNC Bank (i) to seek such directions, advice or oral or
Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PNC Bank's properly
taking or not taking such action.
7. Records. The books and records pertaining to the Fund which are in the
possession of PNC Bank, shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
Authorized Persons, shall have access to such books and records at all time
during PNC Bank's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PNC Bank to
the Fund or to an Authorized Person of the Fund, at the Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of
the Fund and information relative to the Fund and its shareholders (past,
present and potential), unless the release of such records or information is
otherwise consented to, in writing, by the Fund. The Fund agrees that such
consent shall not be unreasonably withheld and may not be withheld where PNC
Bank may be exposed to civil or criminal contempt proceedings or when required
to divulge. The Fund further agrees that, should PNC Bank be required to
provide such information or records to duly constituted authorities (who may
institute civil or criminal contempt proceedings for failure to comply), PNC
Bank shall not be required to seek the Fund's consent prior to disclosing such
information.
9. Cooperation with Accountants. PNC Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect
thereto.
11. Compensation. As compensation for custody services rendered by PNC
Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or
fees as may be agreed to from time to time in writing by the Fund and PNC
Bank.
12. Indemnification. The Fund agrees to indemnify and hold harmless PNC
Bank and its nominees from all taxes, charges, expenses, assessment, claims
and liabilities (including, without limitation, liabilities arising under the
Securities and Commodities Laws and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PNC Bank takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PNC Bank, nor any of its nominees, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PNC Bank's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
13. Responsibility of PNC Bank. PNC Bank shall be under no duty to take
any action on behalf of the Fund except as specifically set forth herein or as
may be specifically agreed to by PNC Bank, in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best effort, within reasonable
limits, in performing services provided for under this Agreement. PNC Bank
shall be responsible for its own negligent failure to perform its duties under
this Agreement. Notwithstanding the foregoing, PNC Bank shall not be
responsible for losses beyond its control, provided that PNC Bank has acted in
accordance with the standard of care set forth above; and provided further
that PNC Bank shall only be responsible for that portion of losses or damages
suffered by the Fund that are attributable to the negligence of PNC Bank.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PNC Bank, in connection with its duties under
this Agreement, shall not be under any duty or obligation to inquire into and
shall not be liable for (a) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which PNC Bank
reasonably believes to be genuine; or (b) delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, labor difficulties,
fire, flood or catastrophe, acts of God, insurrection, war, riots or failure
of the mails, transportation, communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PNC Bank
shall have no liability to the Fund for any consequential, special or indirect
losses or damages which the Fund may incur or suffer by or as a consequence of
PNC Bank's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PNC Bank, all the property owned by the Fund, including cash
received as a result of the distribution of its Shares, during the period that
is set forth in this Agreement. PNC Bank will not be responsible for such
property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate account(s) in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank
shall open separate custodial accounts for each separate series, class or
portfolio of the Fund and shall hold in such account(s) all cash received from
or for the accounts of the Fund specifically designated to each separate
series, class or portfolio. PNC Bank shall make cash payments from or for the
account of the Fund only for:
(i) purchases of securities in the name of the Fund or PNC
Bank or PNC Bank's nominee as provided in sub-paragraph
j and for which PNC Bank has received a copy of the
broker's or dealer's confirmation or payee's invoice,
as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered
to PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution,
advisory, management fees or similar expenses which are
to be borne by the Fund;
(iv) payment to, subject to receipt of Written Instructions,
the Fund's transfer agent, as agent for the
shareholders, an amount equal to the amount of
dividends and distributions stated in the Written
Instructions to be distributed in cash by the transfer
agent to shareholders, or, in lieu of paying the Fund's
transfer agent, PNC Bank may arrange for the direct
payment of cash dividends and distributions to
shareholders in accordance with procedures mutually
agreed upon from time to time by and among the Fund,
PNC Bank and the Fund's transfer agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Fund and
held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short; payments made to a
sub-custodian pursuant to provisions in sub-paragraph c
of this Paragraph; and
(vii) payments, upon Written Instructions made for other
proper Fund purposes. PNC Bank is hereby authorized to
endorse and collect all checks, drafts or other orders
for the payment of money received as custodian for the
account of the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities received by it for
the account of the Fund in a separate account that
physically segregates such securities from those of any
other persons, firms or corporations, except for
securities held in a Book-Entry System. All such
securities shall be held or disposed of only upon
Written Instructions of the Fund pursuant to the terms
of this Agreement. PNC Bank shall have no power or
authority to assign, hypothecate, pledge or otherwise
dispose of any such securities or investment, except
upon the express terms of this Agreement and upon
Written Instructions, accompanied by a certified
resolution of the Fund's Governing Board, authorizing
the transaction. In no case may any member of the
Fund's Governing Board, or any officer, employee or
agent of the Fund withdraw any securities. At PNC
Bank's own expense and for its own convenience, PNC
Bank may enter into sub-custodian agreements with other
banks or trust companies to perform duties described in
this sub-paragraph c. Such bank or trust company shall
have an aggregate capital, surplus and undivided
profits, according to its last published report, of at
least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PNC Bank, or at least twenty
million dollars ($20,000,000) if such bank or trust
company is not a subsidiary or affiliate of PNC Bank.
In addition, such bank or trust company must agree to
comply with the relevant provisions of the 1940 Act and
other applicable rules and regulations. PNC Bank shall
remain responsible for the performance of all of its
duties as described in this Agreement and shall hold
the Fund harmless from PNC Bank's own (or any sub-
custodian chosen by PNC Bank under the terms of this
sub-paragraph c) acts or omissions, under the standards
of care provided for herein.
(d) Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, PNC Bank, directly or through the use
of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may
be designated in such Oral or Written Instructions,
proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner
of any securities may be exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be
delivered to PNC Bank;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in
connection with the 1iquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of
any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or other
person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or
sale of assets of any corporation, and receive and hold
under the terms of this Agreement such certificates of
deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such
delivery;
(vi) make such transfer or exchanges of the assets of the
Fund and take such other steps as shall be stated in
said Oral or Written Instructions to be for the purpose
of effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or
recapitalization of the Fund;
(vii) release securities belonging to the Fund to any bank or
trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released
only upon payment to PNC Bank of the monies borrowed,
except that in cases where additional collateral is
required to secure a borrowing already made subject to
proper prior authorization, further securities may be
released for that purpose; and repay such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into
on behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection
with such repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange securities owned by the
Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
(x) release and deliver securities owned by the Fund for
the purpose of redeeming in kind shares of the Fund
upon delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by the
Fund for other corporate purposes. PNC Bank must also
receive a certified resolution describing the nature of
the corporate purpose and the name and address of the
person(s) to whom delivery shall be made when such
action is pursuant to sub-paragraph d above.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Governing Board approving, authorizing and
instructing PNC Bank on a continuous and on-going basis, to deposit in the
Book-Entry System all securities belonging to the Fund eligible for deposit
therein and to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by the Fund,
and deliveries and returns of securities loaned, subject to repurchase
agreements or used as collateral in connection with borrowings. PNC Bank shall
continue to perform such duties until it receives Written or Oral Instructions
authorizing contrary actions(s).
To administer the Book-Entry System properly, the following provisions
shall apply:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry system, established
pursuant to this sub-paragraph e hereof, the records of
PNC Bank shall identify by Book-Entry or otherwise
those securities belonging to the Fund. PNC Bank shall
furnish the Fund a detailed statement of the Property
held for the Fund under this Agreement at least monthly
and from time to time and upon written request.
(ii) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated from
any assets and cash controlled by PNC Bank in other
than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities.
PNC Bank and its sub-custodian, if any, will pay out
money only upon receipt of securities and will deliver
securities only upon the receipt of money.
(iii) All books and records maintained by PNC Bank which
relate to the Fund's participation in the Book-Entry
System will at all times during PNC Bank's regular
business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will
be furnished with all information in respect of the
services rendered to it as it may require.
(iv) PNC Bank will provide the Fund with copies of any
report obtained by PNC Bank on the system of internal
accounting control of the Book-Entry System promptly
after receipt of such a report by PNC Bank. PNC Bank
will also provide the Fund with such reports on its own
system of internal control as the Fund may reasonably
request from time to time.
(f) Registration of Securities. All Securities held for the Fund which
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name of the Fund; PNC
Bank; the Book-Entry System; a sub-custodian; or any duly appointed nominee(s)
of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund reserves
the right to instruct PNC Bank as to the method of registration and
safekeeping of the securities of the Fund. The Fund agrees to furnish to PNC
Bank appropriate instruments to enable PNC Bank to hold or deliver in proper
form for transfer, or to register its registered nominee or in the name of the
Book-Entry System, any securities which it may hold for the account of the
Fund and which may from time to time be registered in the name of the Fund.
PNC Bank shall hold all such securities which are not held in the Book-Entry
System in a separate account for the Fund in the name of the Fund physically
segregated at all times from those of any other person or persons.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the
account of the Fund, except in accordance with Written Instructions. PNC Bank,
directly or through the use of the Book-Entry System, shall execute in blank
and promptly deliver all notice, proxies, and proxy soliciting materials to
the registered holder of such securities. If the registered holder is not the
Fund then Written or Oral Instructions must designate the person(s) who owns
such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund,
all income, dividends, distributions, coupons,
option premiums, other payments and similar
items, included or to be included in the
Property, and, in addition, promptly advise the
Fund of such receipt and credit such income, as
collected, to the Fund's custodian account;
(B) endorse and deposit for collection, in the name
of the Fund, checks, drafts, or other orders for
the payment of money;
(C) receive and hold for the account of the Fund all
securities received as a distribution on the
Fund's portfolio securities as a result of a
stock dividend, share split-up
or reorganization, recapitalization, readjustment
or other rearrangement or distribution of rights
or similar securities issued with respect to any
portfolio securities belonging to the Fund held
by PNC Bank hereunder;
(D) present for payment and collect the amount
payable upon all securities which may mature or
be called, redeemed, or retired, or otherwise
become payable on the date such securities become
payable; and
(E) take any action which may be necessary and proper
in connection with the collection and receipt of
such income and other payments and the
endorsement for collection of checks, drafts, and
other negotiable instruments.
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver or cause to be
delivered Property against payment or other
consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer
selling for the account of the Fund in
accordance with street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive
securities; and
(3) for transfer of securities into the name of
the Fund or PNC Bank or nominee of either,
or for exchange of securities for a
different number of bonds, certificates, or
other evidence, representing the same
aggregate face amount or number of units
bearing the same interest rate, maturity
date and call provisions, if any; provided
that, in any such case, the new securities
are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral or
Written Instructions to the contrary, PNC Bank
shall:
(1) pay all income items held by it which call
for payment upon presentation and hold the
cash received by it upon such payment for
the account of the Fund;
(2) collect interest and cash dividends
received, with notice to the Fund, to the
Fund's account;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities
issued with respect to any securities held
by PNC Bank; and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required
by the Internal Revenue Code or the Income
Tax Regulations of the United States
Treasury Department or under the laws of
any State now or hereafter in effect,
inserting the Fund's name, such certificate
as the owner of the securities covered
thereby, to the extent it may lawfully do
so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral
Instructions establish and maintain segregated
account(s) on its records for and on behalf of the
Fund. Such account(s) may be used to transfer cash and
securities, including securities in the Book-Entry
System:
(A) for the purposes of compliance by the Fund with
the procedures required by a securities or option
exchange, providing such procedures comply with
the 1940 Act and any releases of the SEC relating
to the maintenance of segregated accounts by
registered investment companies; and
(B) Upon receipt of Written Instructions, for other
proper corporate purposes.
(ii) PNC Bank may enter into separate custodial agreements
with various futures commission merchants ("FCMs") that
the Fund uses ("FCM Agreement"). Pursuant to an FCM
Agreement, the Fund's margin deposits in any
transactions involving futures contracts and options on
futures contracts will be held by PNC Bank in accounts
("FCM Account") subject to the disposition by the FCM
involved in such contracts and in accordance with the
customer contract between FCM and the Fund ("FCM
Contract"), SEC rules and the rules of the applicable
commodities exchange. Such FCM Agreements shall only be
entered into upon receipt of Written Instructions from
the Fund which state that:
(A) a customer agreement between the FCM and the Fund
has been entered into; and
(B) the Fund is in compliance with all the rules and
regulations of the CFTC. Transfers of initial
margin shall be made into a FCM Account only upon
Written Instructions; transfers of premium and
variation margin may be made into a
FCM Account pursuant to Oral Instructions.
Transfers of funds from a FCM Account to the FCM
for which PNC Bank holds such an account may only
occur upon certification by the FCM to PNC Bank
that pursuant to the FCM Agreement and the FCM
Contract, all conditions precedent to its right
to give PNC Bank such instructions have been
satisfied.
(iii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code (including
regulations), and with such other procedures as are
mutually agreed upon from time to time by and among the
Fund, PNC Bank and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the Fund or its
investment advisor(s) that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased
and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through
whom the purchase was made. PNC Bank shall upon receipt
of securities purchased by or for the Fund pay out of
the moneys held for the account of the Fund the total
amount payable to the person from whom or the broker
through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth
in such Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon
receipt of Oral or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to
whom the sale was made; and
(vii) the location to which the security must be delivered
and delivery deadline, if any. PNC Bank shall deliver
the securities upon receipt of the total amount payable
to the Fund upon such sale, provided that the total
amount payable is the same as was set forth in the Oral
or Written Instructions. Subject to the foregoing, PNC
Bank may accept payment in such form as shall be
satisfactory to it, and may deliver securities and
arrange for payment in accordance with the customs
prevailing among dealers in securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions
and entries for the account of the Fund, listing
the portfolio securities belonging to the Fund
with the adjusted average cost of each issue and
the market value at the end of such month, and
stating the cash account of the Fund including
disbursement;
(C) the reports to be furnished to the Fund pursuant
to Rule 17f-4; and
(D) such other information as may be agreed upon from
time to time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or
conversion or similar communication received by it as
custodian of the Property. PNC Bank shall be under no
other obligation to inform the Fund as to such actions
or events.
(m) Collections. All collections of monies or other property, in
respect, or which are to become part of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and telephonic demands thereto, and await instructions from the
Fund. PNC Bank shall not be obliged to take legal action for collection unless
and until reasonably indemnified to its satisfaction. PNC Bank shall also
notify the Fund as soon as reasonably practicable whenever income due on
securities is not collected in due course.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or
other property), PNC Bank shall not deliver cash, securities or other property
of the Fund to the Fund. It may deliver them to a bank or trust company of PNC
Bank's choice, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against Property in the Fund's
possession as security for the payment of such fees, compensation, costs and
expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address: Airport Business Center, International Court 2, 200 Stevens
Drive, Lester, Pennsylvania 19113, marked for the attention of the Custodian
Services Department (or its successor); (b) if to the Fund, at the address of
the Fund; or (c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
five days after it has been mailed. If notice is sent by messenger, it shall
be deemed to have been given on the day it is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. Delegation. PNC Bank may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PNC Bank gives the
Fund thirty (30) days prior written notice; (ii) the delegate agrees with PNC
Bank to comply with all relevant provisions of the 1940 Act; and (iii) PNC
Bank and such delegate promptly provide such information as the Fund may
request, and respond to such questions as the Fund may ask, relative to the
assignment, including (without limitation) the capabilities of the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if any,
with respect to delegated duties and/or Oral Instructions. The captions in
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.
This Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law, without regard to principles of conflicts of
law. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By:
Title: Vice President
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
By: /s/ Lewis E. Daidone
Title: Senior Vice President/Treasurer
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
June 12, 1995
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
Re: Custodian Services Fees
Dear Sir/Madam:
This letter constitutes the agreement between us with respect to
compensation to be paid to PNC Bank, National Association ("PNC Bank") under
the terms of a Custodian Services Agreement dated June 12, 1995 between PNC
Bank and you (the "Fund"). Pursuant to Paragraph 11 of that agreement, and in
consideration of the services to be provided to you, you will pay PNC Bank the
following:
1. An annual custody fee in the amount of the Fund's pro rata share of the
total fees that would be payable with respect to the aggregate gross assets of
the portfolios listed on Appendix A attached hereto, as such Appendix A may be
revised from time to time, pursuant to the following schedule: .007% of the
first $1 billion of aggregate average gross assets; .006% of the next $4
billion of aggregate average gross assets; .004% of the next $5 billion of
aggregate average gross assets; and .0035% of the aggregate average gross
assets in excess of $10 billion. Such fees are exclusive of out-of-pocket
expenses and transaction charges. Custody fees shall be calculated daily and
paid monthly.
2. A transaction charge of $7.50 for each purchase or sale of a physical
security or delivery of a physical security upon its maturity date or delivery
of a physical security for reissuance; for each purchase, sale, free receive
or free deliver, or maturity of a book-entry security or DTC eligible security
or other book-entry transaction; for each purchase, sale, exercise or
expiration of an option contract position (round trip); and for each sale,
purchase, exercise or expiration of a futures contract position (round trip).
A transaction charge of $4.50 for each repurchase trade collateral tranche
received from PNC Bank or an institution other than PNC Bank (round trip). A
prorated transaction charge for participation in a Smith Barney Joint
Repurchase agreement, which is executed on a master level at $50 per broker
(round trip).
3. PNC Bank's out-of-pocket expenses related to global sub-custody fees.
The fee for the period from the day of the year this fee letter is
entered into until the end of that year shall be prorated according to the
proportion which such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it
to us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:
Title: Vice President
Accepted:
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
By: /s/ Lewis E. Daidone
Title: Senior Vice President/Treasurer
APPENDIX A
Smith Barney/Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio
Alliance Growth Portfolio
TBC Managed Income Portfolio
Putnam Diversified Income Portfolio
Smith Barney High Income Portfolio
Smith Barney Money Market Portfolio
MFS Total Return Portfolio
American Capital Enterprise Portfolio
Smith Barney Money Funds, Inc.
All portfolios except as listed
Smith Barney Tax Free Money Fund, Inc.
All portfolios except as listed
Smith Barney Muni Funds
California Money Market Portfolio
New York Money Market Portfolio
Smith Barney Fundamental Value Fund Inc.
Smith Barney Adjustable Rate Government Income Fund
Managed Municipals Portfolio Inc.
Managed Municipals Portfolio II Inc.
Municipal High Income Fund Inc.
Greenwich Street Municipal Fund Inc.
Smith Barney Zenix Income Fund
Smith Barney Income Funds
The Consulting Group Capital Markets Fund
Smith Barney Appreciation Fund Inc.
Managed High Income Portfolio Inc.
Smith Barney Managed Governments Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Arizona Municipals Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Florida Municipals Fund
Smith Barney New York Municipals Fund Inc.
Dated as of June 12, 1995
AUTHORIZED PERSONS APPENDIX
(NJMU)
NAME (Type) SIGNATURE
Kenneth A. Egan /s/ Kenneth A Egan
Thomas B. Stiles, II /s/ Thomas B. Stiles, II
Sean Sullivan /s/ Sean Sullivan
Lou Ann Ruggiero /s/ Lou Ann Ruggiero
John Wilson /s/ John Wilson
Karen Mahoney-Malcomson /s/ Karen Mahoney-Malcomson
Vera Sanducci-Dendy /s/ Vera Sanducci-Dendy
g:\funds\njmu\agreements\pnc-cust.doc
g:\funds\njmu\agreements\pnc-cust.doc
Independent Auditors' Consent
To the Shareholders and Directors of Smith Barney New Jersey Municipals Fund
Inc.:
We consent to the use of our report dated May 21, 1996 incorporated herein
by reference and to the references to our Firm under the headings "Financial
Highlights" in the Prospectus and "Counsel and Auditors" in the Statement of
Additional Information.
KPMG PEAT MARWICK LLP
New York, New York
May 30, 1996
[ARTICLE] 6
[CIK] 0000825629
[NAME] SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[INVESTMENTS-AT-COST] 210,106,444
[INVESTMENTS-AT-VALUE] 218,502,298
[RECEIVABLES] 4,517,054
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 223,019,352
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,245,714
[TOTAL-LIABILITIES] 2,245,714
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 214,849,916
[SHARES-COMMON-STOCK] 11,928,594
[SHARES-COMMON-PRIOR] 8,474,514
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 75,277
[ACCUMULATED-NET-GAINS] (2,396,855)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220,773,638
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 11,477,894
[OTHER-INCOME] 0
[EXPENSES-NET] 1,853,293
[NET-INVESTMENT-INCOME] 9,624,601
[REALIZED-GAINS-CURRENT] 1,429,693
[APPREC-INCREASE-CURRENT] 380,803
[NET-CHANGE-FROM-OPS] 11,435,097
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 6,631,728
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,920,076
[NUMBER-OF-SHARES-REDEEMED] 1,770,314
[SHARES-REINVESTED] 304,318
[NET-CHANGE-IN-ASSETS] 58,271,763
[ACCUMULATED-NII-PRIOR] (111,297)
[ACCUMULATED-GAINS-PRIOR] (3,197,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 612,606
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,853,293
[AVERAGE-NET-ASSETS] 183,695,759
[PER-SHARE-NAV-BEGIN] 12.62
[PER-SHARE-NII] 0.70
[PER-SHARE-GAIN-APPREC] 0.26
[PER-SHARE-DIVIDEND] 0.70
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.88
[EXPENSE-RATIO] 0.84
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000825629
[NAME] SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[INVESTMENTS-AT-COST] 210,106,444
[INVESTMENTS-AT-VALUE] 218,502,298
[RECEIVABLES] 4,517,054
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 223,019,352
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,245,714
[TOTAL-LIABILITIES] 2,245,714
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 214,849,916
[SHARES-COMMON-STOCK] 4,910,353
[SHARES-COMMON-PRIOR] 4,384,740
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 75,277
[ACCUMULATED-NET-GAINS] (2,396,855)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220,773,638
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 11,477,894
[OTHER-INCOME] 0
[EXPENSES-NET] 1,853,293
[NET-INVESTMENT-INCOME] 9,624,601
[REALIZED-GAINS-CURRENT] 1,429,693
[APPREC-INCREASE-CURRENT] 380,803
[NET-CHANGE-FROM-OPS] 11,435,097
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,887,752
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 899,864
[NUMBER-OF-SHARES-REDEEMED] 521,676
[SHARES-REINVESTED] 147,425
[NET-CHANGE-IN-ASSETS] 58,271,763
[ACCUMULATED-NII-PRIOR] (111,297)
[ACCUMULATED-GAINS-PRIOR] (3,197,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 612,606
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,853,293
[AVERAGE-NET-ASSETS] 183,695,759
[PER-SHARE-NAV-BEGIN] 12.62
[PER-SHARE-NII] 0.63
[PER-SHARE-GAIN-APPREC] 0.26
[PER-SHARE-DIVIDEND] 0.63
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.88
[EXPENSE-RATIO] 1.35
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[CIK] 0000825629
[NAME] SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC - CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[INVESTMENTS-AT-COST] 210,106,444
[INVESTMENTS-AT-VALUE] 218,502,298
[RECEIVABLES] 4,517,054
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 223,019,352
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 2,245,714
[TOTAL-LIABILITIES] 2,245,714
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 214,849,916
[SHARES-COMMON-STOCK] 295,934
[SHARES-COMMON-PRIOR] 19,666
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 75,277
[ACCUMULATED-NET-GAINS] (2,396,855)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 220,773,638
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 11,477,894
[OTHER-INCOME] 0
[EXPENSES-NET] 1,853,293
[NET-INVESTMENT-INCOME] 9,624,601
[REALIZED-GAINS-CURRENT] 1,429,693
[APPREC-INCREASE-CURRENT] 380,803
[NET-CHANGE-FROM-OPS] 11,435,097
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 69.101
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 291,134
[NUMBER-OF-SHARES-REDEEMED] 18,777
[SHARES-REINVESTED] 3,911
[NET-CHANGE-IN-ASSETS] 58,271,763
[ACCUMULATED-NII-PRIOR] (111,297)
[ACCUMULATED-GAINS-PRIOR] (3,197,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 612,606
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,853,293
[AVERAGE-NET-ASSETS] 183,695,759
[PER-SHARE-NAV-BEGIN] 12.62
[PER-SHARE-NII] 0.63
[PER-SHARE-GAIN-APPREC] 0.26
[PER-SHARE-DIVIDEND] 0.63
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.88
[EXPENSE-RATIO] 1.41
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
