As filed with the Securities and Exchange
Commission on May 25, 1999
Registration No. 33-18779
811-5486
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
FORM N-1AREGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 19
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940, as amended
Amendment No. 21 [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)816-6474
(Registrant's telephone number, including Area Code)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013
(Name and address of agent for service)
Continuous(Approximate Date of Proposed Public Offering)It is proposed
that
this filing becomes effective (check appropriate
box):
[ ] Immediately upon filing pursuant to paragraph b
[ ] on (date) pursuant to paragraph b
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] on July 29, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:[ ] This post-effective
amendment designates a new effective date for a previously filed
post-effective amendment
PART A-Prospectus
<PAGE>
[LOGO]
Smith Barney Mutual Funds
Investing for your future.
Every day.
Prospectus Smith Barney
Mutual Funds
- --------------------------------------------------------------
July 29, 1999 New Jersey Municipals Fund Inc.
Class A, B, L and Y Shares
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
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Contents
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Investments, risks and performance........................... 2
More on the fund's investments............................... 8
Management................................................... 9
Choosing a class of shares to buy............................ 10
Comparing the fund's classes................................. 11
Sales charge................................................. 12
More about deferred sales charges............................ 15
Buying shares................................................ 16
Exchanging shares............................................ 17
Redeeming shares............................................. 18
Other things to know about
share transactions.......................................... 20
Dividends, distributions and taxes........................... 22
Share price.................................................. 23
Financial highlights......................................... 24
You should know:
An investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency.
<PAGE>
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Investments, risks and performance
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Investment objective
The fund seeks to provide New Jersey investors with as high a level of current
income exempt from federal income taxes and New Jersey personal income taxes as
is consistent with prudent investment management and the preservation of
capital.
Principal investment strategies
Key investments The fund invests primarily in intermediate-term and
long-term investment grade New Jersey municipal securities. These
include securities issued by the State of New Jersey and certain other
municipal issuers, political subdivisions, agencies and public authorities
that pay interest which is exempt from New Jersey personal income taxes.
Intermediate-term and long-term municipal securities have remaining
maturities at the time of purchase of from three to more than thirty years.
The fund can invest up to 25% of its assets in below investment grade bonds or
in unrated securities of equivalent quality (commonly known as "junk bonds").
Investment grade bonds are those rated in any of the four highest long-term
rating categories, or if unrated, of comparable quality.
Selection process The manager selects securities primarily by
identifying undervalued sectors and individual securities, while also
selecting securities it believes will benefit from changes in market
conditions. In selecting individual securities, the manager:
. Uses fundamental credit analysis to estimate the relative value and
attractiveness of various securities and sectors and to exploit
opportunities in the municipal bond market
. May trade between general obligation and revenue bonds and among various
revenue bond sectors, such as housing, hospital and industrial development,
based on their apparent relative values
. Considers the yield available for securities with different maturities and a
security's maturity in light of the outlook for the issuer and its sector
and interest rates
. Identifies individual securities with the most potential for added value,
such as those involving unusual situations, new issuers, the potential for
credit upgrades, unique structural characteristics or innovative features
2
<PAGE>
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Principal risks of investing in the fund
Investors could lose money on their investment in the fund, or the fund may not
perform as well as other investments, if:
. Interest rates rise, causing the value of the fund's portfolio to decline
. The issuer of a security owned by the fund defaults on its obligation to pay
principal and/or interest or the security's credit rating is downgraded
. New Jersey municipal securities fall out of favor with investors. The fund
will suffer more than a national municipal fund from adverse events affecting
New Jersey municipal issuers
. Unfavorable legislation affects the tax-exempt status of municipal bonds
. The manager's judgment about the attractiveness, value or income potential of
a particular security proves to be incorrect
It is possible that some of the fund's income distributions may be, and
distributions of the fund's gains generally will be, subject to federal and New
Jersey state taxation. The fund may realize taxable gains on the sale of its
securities or on transactions in futures contracts. Some of the fund's income
may be subject to the federal alternative minimum tax. In addition,
distributions of the fund's income and gains will be taxable to investors in
states other than New Jersey.
The fund is classified as "non-diversified," which means it may invest a larger
percentage of its assets in one issuer than a diversified fund. To the extent
the fund concentrates its assets in fewer issuers, the fund will be more
susceptible to negative events affecting those issuers.
Who may want to invest The fund may be an appropriate investment if you:
. Are a New Jersey taxpayer in a high federal tax bracket seeking income exempt
from New Jersey and federal taxation
. Currently have exposure to other asset classes and are seeking to broaden your
investment portfolio
. Are willing to accept the risks of municipal securities, including the risks
of concentrating in a single state
3
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Risk return bar chart
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This bar chart indicates the risks of investing in the fund by showing changes
in the fund's performance from year to year. Past performance does not
necessarily indicate how the fund will perform in the future. This bar
chart shows the performance of the fund's Class A shares for each of the
past 10 years. Class B, L and Y shares would have different performance
because of their different expenses. The performance information in the
chart does not reflect sales charges, which would reduce your return.
[BAR GRAPH]
Total Return: Class A Shares
89 31.86%
90 (11.87)%
91 37.8%
92 0.49%
93 52.78%
94 8.9%
95 2.4%
96 13.6%
97 1.91%
98 11.74%
Calandar years ended December,31
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter 199X
Year to date: xx% through 6/30/99
Risk return table
This table indicates the risks of investing in the fund by comparing the average
annual total return of each class for the periods shown with that of the Lehman
Brothers Municipal Bond Index (the "Lehman Index"), a broad-based unmanaged
index of municipal bonds and the Lipper New Jersey Municipal Fund Average (the
"Lipper Average"), an average composed of the fund's peer group of mutual funds.
This table assumes imposition of the maximum sales charge applicable to the
class, redemption of shares at the end of the period, and reinvestment of
distributions and dividends.
Average Annual Total Returns -- Calendar Years Ended December 31, 1998
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Class 1 year 5 years 10 years Since inception Inception date
A 4/22/88
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B n/a 11/6/92
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L n/a n/a 12/13/94
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Y n/a [xx/xx/xx]
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Lehman Index *
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Lipper *
Average
*Index comparison begins on April 30, 1988.
4
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in fund
shares.
<TABLE>
<CAPTION>
Shareholder fees
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- -----------------------
(fees paid directly from your investment) Class A Class B
Class L Class Y
<S> <C> <C>
<C> <C>
Maximum sales charge (load) imposed on purchases (as 4.00% None
1.00% None
a % of offering price)
Maximum deferred sales charge (load) (as a % of the None* 4.50%
1.00% None
lower of net asset value at purchase or redemption)
Annual fund operating expenses
(expenses deducted from fund assets)
Management fee 0.50% 0.50%
0.50% 0.50%
Distribution and service (12b-1) fees 0.15% 0.65%
0.70% None
Other expenses -- --
-- --
Total annual fund operating expenses -- --
-- --
*You may buy Class A shares in amounts of $500,000 or more at net asset value
(without an initial charge) but if you redeem those shares within 12 months of
their purchase, you will pay a deferred sales charge of 1.00%.
Example
This example helps you compare the costs of investing in the fund with the costs
of investing in other mutual funds. Your actual costs may be higher or lower.
The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. The fund's operating expenses remain the same
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- -------------------------
Number of years you own your shares
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- ----------------------------
1 year 3 years 5 years 10 years
Class A (with or without redemption) $ $ $ $
Class B (redemption at end of period) $ $ $ $
Class B (no redemption) $ $ $ $
Class L (redemption at end of period) $ $ $ $
Class L (no redemption) $ $ $ $
Class Y (with or without redemption) $ $ $ $
</TABLE>
5
<PAGE>
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More on the fund's investments
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New Jersey municipal securities New Jersey municipal securities include debt
obligations issued by certain non-New Jersey governmental issuers such as Puerto
Rico, the Virgin Islands and Guam. The interest on New Jersey municipal
securities is exempt from federal income tax and New Jersey personal income tax.
As a result, the interest rate on these bonds normally is lower than it would be
if the bonds were subject to taxation. The New Jersey municipal securities in
which the fund invests include general obligation bonds, revenue bonds and
municipal leases. The fund may also invest up to 35% of its net assets in
municipal securities of non-New Jersey issuers. These will generally be exempt
from federal, but not New Jersey, income taxes.
Below investment grade securities Below investment grade securities, also known
as "junk bonds", are considered speculative with respect to the issuer's ability
to pay interest and principal, involve a high risk of loss and are susceptible
to default or decline in market value because of adverse economic and business
developments. The market value for these securities lends to be very volatile,
and these securities are less liquid than investment grade debt securities.
Derivative contracts The fund may, but need not, use derivative contracts, such
as financial futures and options on financial futures, for any of the following
purposes:
. To hedge against the economic impact of adverse changes in the market value of
portfolio securities because of changes in interest rates
. As a substitute for buying or selling securities
A futures contract will obligate or entitle the fund to deliver or receive an
asset or cash payment based on the change in value of one or more securities.
Even a small investment in futures can have a big impact on a fund's interest
rate exposure. Therefore, using futures can disproportionately increase losses
and reduce opportunities for gains when interest rates are changing. The fund
may not fully benefit from or may lose money on futures if changes in their
value do not correspond accurately to changes in the value of the fund's
holdings. The other parties to certain futures present the same types of default
risk as issuers of fixed income securities. Futures can also make a fund less
liquid and harder to value, especially in declining markets.
Defensive investing The fund may depart from its principal investment strategies
in response to adverse market, economic or political conditions by taking
temporary defensive positions in all types of money market and short-term debt
securities. If the fund takes a temporary defensive position, it may be unable
to achieve its investment goal.
6
<PAGE>
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Management
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Manager The fund's investment adviser and administrator (the manager) is SSBC
Fund Management Inc., an affiliate of Salomon Smith Barney Inc. The manager's
address is 388 Greenwich Street, New York, New York 10013. The manager selects
the fund's investments and oversees its operations. The manager and Salomon
Smith Barney are subsidiaries of Citigroup Inc. Citigroup businesses produce a
broad range of financial services -- asset management, banking and consumer
finance, credit and charge cards, insurance, investments, investment banking and
trading -- and use diverse channels to make them available to consumer and
corporate customers around the world.
Joseph P. Deane, investment officer of SSBC Fund Management Inc. and senior vice
president and managing director of Salomon Smith Barney, has been responsible
for the day-to-day management of the fund since February 1999. Mr. Deane has 29
years of investment management experience.
Management fees During the fiscal year ended March 31, 1999, the manager
received an advisory fee and an administrative fee equal to 0.30% and ___%,
respectively, of the fund's average daily net assets.
Distributor The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans The fund has adopted Rule 12b-1 distribution plans for its
Class A, B and L shares. Under each plan, the fund pays distribution and service
fees. These fees are an ongoing expense and, over time, may cost you more than
other types of sales charges.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the fund. The cost of addressing the Year 2000 issue, if
substantial, could adversely affect companies and governments that issue
securities held by the fund. The manager and Salomon Smith Barney are addressing
the Year 2000 issue for their systems. The fund has been informed by other
service providers that they are taking similar measures. Although the fund does
not expect the Year 2000 issue to adversely affect it, the fund cannot guarantee
that the efforts of the fund, which are limited to requesting and receiving
reports from its service providers, or the efforts of its service providers to
correct the problem will be successful.
7
<PAGE>
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Choosing a class of shares to buy
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You can choose among four classes of shares: Classes A, B, L and Y. Each class
has different sales charges and expenses, allowing you to choose the class that
best meets your needs. Which class is more beneficial to an investor depends on
the amount and intended length of the investment.
. If you plan to invest regularly or in large amounts, buying Class A shares
may help you reduce sales charges and ongoing expenses.
. For Class B shares, all of your purchase amount and, for Class L shares, more
of your purchase amount (compared to Class A shares) will be immediately
invested. This may help offset the higher expenses of Class B and Class L
shares, but only if the fund performs well.
. Class L shares have a shorter deferred sales charge period than Class B
shares. However, because Class B shares convert to Class A shares, and Class L
shares do not, Class B shares may be more attractive to long-term investors.
You may buy shares from:
. A Salomon Smith Barney Financial Consultant
. An investment dealer in the selling group or a broker that clears through
Salomon Smith Barney -- a dealer representative
. The fund, but only if you are investing through certain qualified plans or
certain dealer representatives
Investment minimums Minimum initial and additional investment amounts vary
depending on the class of shares you buy and the nature of your investment
account.
<TABLE>
<CAPTION>
Initial
Additional
--------------------------------
-------------
Classes A, B, L Class Y
All Classes
<S> <C> <C> <C>
<C>
- ---------------------------------------------------------------------------
- --------------------
General $1,000 $15 million
$50
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- ---------------------
Monthly Systematic Investment Plans $ 25 n/a
$25
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- ----------------------
Monthly Systematic Investment Plans $ 50 n/a
$50
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- -------------------
Uniform Gift to Minor Accounts $ 250 $15 million
$50
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- -------------------
</TABLE>
8
<PAGE>
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Comparing the fund's classes
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Your Salomon Smith Barney Financial Consultant or dealer representative can help
you decide which class meets your goals. They may receive different
compensation depending upon which class you choose.
<TABLE>
<CAPTION>
Class A Class B Class L
Class Y
- ---------------------------------------------------------------------------
- -------------------------------------
<S> <C> <C> <C>
<C>
Key .Initial sales charge . No initial sales Initial sales
. No initial or
features .You may qualify charge charge is lower
deferred sales charge
for reduction or . Deferred sales than Class A
. Must invest at least
waiver of initial charge declines Deferred sales
$15 million
sales charge over time charge for only 1
. Lower annual expenses
.Lower annual . Converts to year
than the other class
expenses than Class Class A after 8 . Does not
B and Class L years convert to
. Higher annual Class A
expenses than . Higher annual
Class A expenses than
Class A
- ---------------------------------------------------------------------------
- -------------------------------------
Initial sales Up to 4.00%; None 1.00% None
charge reduced for large
purchases and
waived for certain
investors. No
charge for
purchases of
$500,000 or more
- ---------------------------------------------------------------------------
- -------------------------------------
Deferred 1% on purchases of Up to 4.50% 1% if you redeem
None
sales charge $500,000 or more if charged when you within 1 year of
you redeem within redeem shares. purchase
1 year of purchase The charge is
reduced over time
and there is no
deferred sales
charge after 6 years
- --------------------------------------------------------------------------
- --------------------------------------
Annual 0.15% of average 0.65% of average 0.70% of
average None
distribution daily net assets daily net assets daily net
assets
and service
fees
- ---------------------------------------------------------------------------
- -------------------------------------
Exchange Class A shares of Class B shares of Class L
shares of Class Y shares of
privilege most Smith Barney most Smith Barney most Smith
most Smith Barney
funds funds Barney
funds funds
- ---------------------------------------------------------------------------
- -------------------------------------
</TABLE>
*Ask your Salomon Smith Barney Financial Consultant or dealer representative or
visit the web site for the Smith Barney funds available for exchange.
9
<PAGE>
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Sales charge:
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Class A shares
You buy Class A shares at the offering price, which is the net asset value plus
a sales charge. You pay a lower sales charge as the size of your investment
increases to certain levels called breakpoints. You do not pay a sales charge on
the fund's distributions or dividends you reinvest in additional Class A shares.
Sales Charge as a % of
Offering Net amount
Amount of purchase price (%) invested (%)
Less than $25,000 4.00 4.17
- -----------------------------------------------------------
$25,000 but less than $50,000 3.50 3.63
$50,000 but less than $100,000 3.00 3.09
- -----------------------------------------------------------
$100,000 but less than $250,000 2.50 2.56
$250,000 but less than $500,000 1.50 1.52
- -----------------------------------------------------------
$500,000 or more -0- -0-
- -----------------------------------------------------------
Investments of $500,000 or more. You do not pay an initial sales charge when you
buy $500,000 or more of Class A shares. However, if you redeem these Class A
shares within one year of purchase, you will pay a deferred sales charge of 1%.
Qualifying for a reduced Class A sales charge There are several ways you can
combine multiple purchases of Class A shares of Smith Barney funds to take
advantage of the breakpoints in the sales charge schedule.
. Accumulation privilege - lets you combine the current value of Class A shares
owned
. by you, or
. by members of your immediate family,
and for which a sales charge was paid, with the amount of your next purchase of
Class A shares for purposes of calculating the initial sales charge. Certain
trustees and fiduciaries may be entitled to combine accounts in determining
their sales charge.
10
<PAGE>
. Letter of intent - lets you purchase Class A shares of the fund and other
Smith Barney funds over a 13-month period and pay the same sales charge, if any,
as if all shares had been purchased at once. You may include purchases on which
you paid a sales charge within 90 days before you sign the letter.
Waivers for certain Class A investors Class A initial sales charges are waived
for certain types of investors, including:
. Employees of members of the NASD
. Clients of newly employed Salomon Smith Barney Financial Consultants, if
certain conditions are met
. Investors who redeemed Class A shares of a Smith Barney fund in the past 60
days, if the investor's Salomon Smith Barney Financial Consultant or dealer
representative is notified
If you want to learn about additional waivers of Class A initial sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the Statement of Additional Information ("SAI").
11
<PAGE>
Class B shares
You buy Class B shares at net asset value without paying an initial sales
charge. However, if you redeem your Class B shares within six years of purchase,
you will pay a deferred sales charge. The deferred sales charge decreases as the
number of years since your purchase increases.
- -----------------------------------------------------------------------
6th
Year after purchase 1st 2nd 3rd 4th 5th through
8th
- -----------------------------------------------------------------------
Deferred sales charge 4.5% 4% 3% 2% 1% 0%
- -----------------------------------------------------------------------
Class B conversion. After 8 years, Class B shares automatically convert
into Class A shares. This helps you because Class A shares have lower
annual expenses. Your Class B shares will convert to Class A
shares as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
- -------------
<S> <C> <C>
Shares issued: Shares issued: Shares issued:
At initial On reinvestment of Upon
exchange from
purchase dividends and another
Smith Barney
distributions fund
- ----------------------------------------------------------------------------
- -------------
Eight years after the In same proportion as the On the date
the shares
date of purchase number of Class B shares originally
acquired would
converting is to total Class B have converted
into Class A
shares you own shares
- ---------------------------------------------------------------------------
- --------------
</TABLE>
Class L shares
You buy Class L shares at the offering price, which is the net asset value plus
a sales charge of 1% (1.01% of the net amount invested). In addition, if you
redeem your Class L shares within one year of purchase, you will pay a deferred
sales charge of 1%. If you held Class C shares of the fund on June 12, 1998, you
will not pay an initial sales charge on Class L shares you buy before June 22,
2001.
Class Y shares
You buy Class Y shares at net asset value with no initial sales charge and no
deferred sales charge when you redeem. You must meet the $15,000,000 initial
investment requirement. You can use a letter of intent to meet this requirement
by buying Class Y shares of the fund over a 13-month period. To qualify, you
must initially invest $5,000,000.
12
<PAGE>
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More about deferred sales charges
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The deferred sales charge is based on the net asset value at the time of
purchase or redemption, whichever is less, and therefore you do not pay a sales
charge on amounts representing appreciation or depreciation.
In addition, you do not pay a deferred sales charge on:
. Shares exchanged for shares of another Smith Barney fund
. Shares representing reinvested distributions and dividends
. Shares no longer subject to the deferred sales charge
If you redeemed shares of a Smith Barney fund in the past 60 days and paid a
deferred sales charge, you may buy shares of the fund at the current net asset
value and be credited with the amount of the deferred sales charge, if you
notify your Salomon Smith Barney Financial Consultant or dealer representative.
Salomon Smith Barney receives deferred sales charges as partial compensation for
its expenses in selling shares, including the payment of compensation to your
Salomon Smith Barney Financial Consultant or dealer representative.
Deferred sales charge waivers
The deferred sales charge for each share class will generally be waived:
. On payments made through certain systematic withdrawal plans
. For involuntary redemptions of small account balances
. For 12 months following the death or disability of a shareholder
If you want to learn more about additional waivers of deferred sales charges,
contact your Salomon Smith Barney Financial Consultant or dealer representative
or consult the SAI.
13
<PAGE>
<TABLE>
<CAPTION>
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- --------------
Buying shares
- ----------------------------------------------------------------------------
- ------------
<S> <C>
Through a You should contact your Salomon Smith Barney Financial
Consultant
Salomon or dealer representative to open a brokerage account and make
Smith arrangements to buy shares.
Barney
Financial If you do not provide the following information, your order
will be
representa- rejected:
tive
. Class of shares being bought
. Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account no
later than the third business day after you place your order.
Salomon Smith Barney or your dealer representative may charge an
annual account maintenance fee.
- --------------------------------------------------------------------------
- --------------
Through the Qualified retirement plans and certain other investors who are
fund's clients of the selling group are eligible to buy shares
directly from
transfer the fund.
agent
. Write the transfer agent at the following address:
Smith Barney New Jersey Municipals Fund, Inc.
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
. Enclose a check to pay for the shares. For initial purchases,
complete and send an account application.
. For more information, call the transfer agent at
1-800-451-2010.
- --------------------------------------------------------------------------
- --------------
Through a You may authorize Salomon Smith Barney, your dealer
systematic representative or the transfer agent to transfer funds
automatically
investment from a regular bank account, cash held in a Salomon Smith Barney
plan brokerage account or Smith Barney money market fund to buy
shares on a regular basis.
. Amounts transferred should be at least: $25 monthly or $50
quarterly
. If you do not have sufficient funds in your account on a
transfer date, Salomon Smith Barney, your dealer representative
or the transfer agent may charge you a fee
For more information, contact your Salomon Smith Barney
Financial Consultant, dealer representative or the transfer
agent or consult the SAI.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- ------------
Exchanging shares
- --------------------------------------------------------------------------
- -------------
<S> <C>
Smith You should contact your Salomon Smith Barney Financial
Consultant
Barney or dealer representative to exchange into other Smith
Barney funds.
offers a Be sure to read the prospectus of the Smith Barney fund you are
distinctive exchanging into. An exchange is a taxable transaction.
family of
funds . You may exchange shares only for shares of the same class of
tailored to another Smith Barney fund. Not all Smith Barney funds
offer all
help meet classes.
the varying
needs of . Not all Smith Barney funds may be offered in your state of
both large residence. Contact your Salomon Smith Barney Financial
Consultant,
and small dealer representative or the transfer agent.
investors
. You must meet the minimum investment amount for each fund.
. If you hold share certificates, the transfer agent must
receive the
certificates endorsed for transfer or with signed stock powers
(documents transferring ownership of certificates) before the
exchange is effective.
. The fund may suspend or terminate your exchange privilege if
you engage in an excessive pattern of exchanges.
- ---------------------------------------------------------------------------
- --------------
Waiver of Your shares will not be subject to an initial sales charge
at the time
additional of sales the exchange.
charges
Your deferred sales charge (if any) will continue to be
measured from
the date of your original purchase. If the fund you
exchange into has
a higher deferred sales charge, you will be subject to
that charge. If
you exchange at any time into a fund with a lower charge,
the sales
charge will not be reduced.
- ---------------------------------------------------------------------------
- --------------
By If you do not have a brokerage account, you may be eligible to
telephone exchange shares through the transfer agent. You must
complete an
authorization form to authorize telephone transfers. If
eligible, you
may make telephone exchanges on any day the New York Stock
Exchange is open. Call the transfer agent at 1-800-451-2010
between
9:00 a.m. and 5:00 p.m. (Eastern time). Requests received
after the
close of regular trading on the Exchange are priced at the
net asset
value next determined.
You can make telephone exchanges only between accounts that
have
identical registrations.
- --------------------------------------------------------------------------
- ---------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on the opposite page.
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
Redeeming shares
- --------------------------------------------------------------------------------
[S] [C]
Generally Contact your Salomon Smith Barney Financial Consultant or
dealer representative to redeem shares of the fund.
If you hold share certificates, the transfer agent must receive
the certificates endorsed for transfer or with signed stock
powers before the redemption is effective.
If the shares are held by a fiduciary or corporation, other
documents may be required.
Your redemption proceeds will be sent within three business
days after your request is received in good order. However, if
you recently purchased your shares by check, your
redemption proceeds will not be sent to you until your
original check clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account and not
reinvested without your specific instruction. In other cases,
unless you direct otherwise, your redemption proceeds will be
paid by check mailed to your address of record.
- -------------------------------------------------------------------------------
By mail For accounts held directly at the fund, send written requests to
the transfer agent at the following address:
Smith Barney New Jersey Municipals Fund, Inc.
(Specify class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
. Your account number
. The class of shares and the dollar amount or number
of shares to be redeemed
. Signatures of each owner exactly as the account is
registered
16
<PAGE>
By If you do not have a brokerage account, you may be eligible to
telephone redeem shares in amounts up to $10,000 per day through the
transfer agent. You must complete an authorization form to
authorize telephone redemptions. If eligible, you may request
redemptions by telephone on any day the New York Stock
Exchange is open. Call the transfer agent at 1-800-451-2010
between 9:00 a.m. and 5:00 p.m. (Eastern time). Requests
received after the close of regular trading on the Exchange are
priced at the net asset value next determined.
Your redemption proceeds can be sent by check to your
address of record or by wire transfer to a bank account
designated on your authorization form. You must submit a
new authorization form to change the bank account
designated to receive wire transfers and you may be asked to
provide certain other documents.
-------------------------------------------------------------------------------
Automatic You can arrange for the automatic redemption of a portion of
cash your shares on a monthly or quarterly basis. To qualify you
withdrawal must own shares of the fund with a value of at least $10,000
plans and each automatic redemption must be at least $50. If your
shares are subject to a deferred sales charge, the sales charge
will be waived if your automatic payments do not exceed 1% per
month of the value of your shares subject to a deferred sales
charge.
The following conditions apply:
. Your shares must not be represented by certificates
. All dividends and distributions must be reinvested
For more information, contact your Salomon Smith Barney
Financial Consultant or dealer representative or consult the
SAI.
17
<PAGE>
- --------------------------------------------------------------------------------
Other things to know about share transactions
- --------------------------------------------------------------------------------
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed
. Dollar amount or number of shares being bought, exchanged or
redeemed
. Signature of each owner exactly as the account is registered
The transfer agent will try to confirm that any telephone exchange or redemption
request is genuine by recording calls, asking the caller to provide a personal
identification number for the account, sending you a written confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include a
signature guarantee if you:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers to the transfer agent
. Instruct the transfer agent to mail the check to an address different from
the one on your account
. Changed your account registration
. Want the check paid to someone other than the account owner(s)
. Are transferring the redemption proceeds to an account with a different
registration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
18
<PAGE>
The fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
. Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securities
and Exchange Commission
. Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
Small account balances If your account falls below $500 because of a redemption
of fund shares, the fund may ask you to bring your account up to $500. If your
account is still below $500 after 60 days, the fund may close your account and
send you the redemption proceeds.
Excessive exchange transactions The manager may determine that a pattern of
frequent exchanges is detrimental to the fund's performance and other
shareholders. If so, the fund may limit additional purchases and/or exchanges by
the shareholder.
Share certificates The fund does not issue share certificates unless a written
request signed by all registered owners is made to the transfer agent. If you
hold share certificates it will take longer to exchange or redeem shares.
19
<PAGE>
- --------------------------------------------------------------------------------
Dividends, distributions and taxes
- --------------------------------------------------------------------------------
Dividends The fund pays dividends each month from its net investment income. The
fund generally makes capital gain distributions, if any, once a year, typically
in December. The fund may pay additional distributions and dividends at other
times if necessary for the fund to avoid a federal tax. Capital gain
distributions and dividends are reinvested in additional fund shares of the same
class you hold. The fund expects distributions to be primarily from income. You
do not pay a sales charge on reinvested distributions or dividends.
Alternatively, you can instruct your Salomon Smith Barney Financial Consultant,
dealer representative or the transfer agent to have your distributions and/or
dividends paid in cash. You can change your choice at any time to be effective
as of the next distribution or dividend, except that any change given to the
transfer agent less than five days before the payment date will not be effective
until the next distribution or dividend is paid.
Taxes In general, redeeming shares, exchanging shares and receiving
distributions (whether in cash or additional shares) are all taxable events.
<TABLE>
<CAPTION>
Transaction Federal tax status New Jersey
tax status
- ---------------------------------------------------------------------------
- -----------------------
<S> <C> <C>
Redemption or exchange Usually capital gain or loss; Usually
capital gain or loss
of shares long-term only if shares
owned more than one year
- ---------------------------------------------------------------------------
- ------------------------
Long-term capital gain Taxable gain Taxable gain
distributions
Short-term capital gain Ordinary income Ordinary income
distributions
- ---------------------------------------------------------------------------
- ------------------------
Dividends Exempt if from interest on tax- Exempt if
from interest on
exempt securities, otherwise New Jersey
municipal securities,
ordinary income otherwise
ordinary income
- ---------------------------------------------------------------------------
- ------------------------
</TABLE>
Any taxable dividends and capital gain distributions are taxable whether
received in cash or reinvested in fund shares. Long-term capital gain
distributions are taxable to you as long-term capital gain regardless of how
long you have owned your shares. You may want to avoid buying shares when the
fund is about to declare a capital gain distribution or a taxable dividend,
because it will be taxable to you even though it may actually be a return of a
portion of your investment.
After the end of each year, the fund will provide you with information about the
distributions and dividends you received and any redemptions of shares during
the previous year. If you do not provide the fund with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends, and redemption
proceeds. Because each shareholder's circumstances are different and special tax
rules may apply, you should consult your tax adviser about your investment in
the fund.
20
<PAGE>
- --------------------------------------------------------------------------------
Share price
- --------------------------------------------------------------------------------
You may buy, exchange or redeem shares at their net asset value, plus any
applicable sales charge, next determined after receipt of your request in good
order. The fund's net asset value is the value of its assets minus its
liabilities. Net asset value is calculated separately for each class of shares.
The fund calculates its net asset value every day the New York Stock Exchange is
open. The Exchange is closed on certain holidays listed in the SAI. This
calculation is done when regular trading closes on the Exchange (normally 4:00
p.m., Eastern time).
Generally, the fund's investments are valued by an independent pricing service.
If market quotations or a valuation from the pricing service is not readily
available for a security or if a security's value has been materially affected
by events occurring after the close of the Exchange or market on which the
security is principally traded, that security may be valued by another method
that the fund's board believes accurately reflects fair value. A fund that uses
fair value to price securities may value those securities higher or lower than
another fund using market quotations to price the same securities. A security's
valuation may differ depending on the method used for determining value.
In order to buy, redeem or exchange shares at that day's price, you must place
your order with your Salomon Smith Barney Financial Consultant or dealer
representative before the New York Stock Exchange closes. If the New York Stock
Exchange closes early, you must place your order prior to the actual closing
time. Otherwise, you will receive the next business day's price.
Salomon Smith Barney or members of the selling group must transmit all orders to
buy, exchange or redeem shares to the fund's agent before the agent's close of
business.
21
<PAGE>
- --------------------------------------------------------------------------------
Financial highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand the
performance of each class for the past 5 years (or since inception if less than
5 years). Certain information reflects financial results for a single share.
Total return represents the rate that a shareholder would have earned (or lost)
on a fund share assuming reinvestment of all dividends and distributions. The
information in the following tables was audited by KPMG LLP, independent
accountants, whose report, along with the fund's financial statements, is
included in the annual report (available upon request).
For a Class A share of capital stock outstanding throughout each year
ended March 31:
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value,
beginning of year $12.92 $12.88 $12.62 $12.55
- --------------------------------------------------------------------------------
Income (loss) from
operations:
Net investment
income (loss) 0.70 0.70 0.70 0.70
Net realized and
unrealized gain (loss) 0.59 0.02 0.26 0.07
- --------------------------------------------------------------------------------
Total income (loss) from
operations 1.29 0.72 0.96 0.77
- --------------------------------------------------------------------------------
Less distributions from:
Net investment
income (0.71) (0.68) (0.70) (0.70)
Net realized gains (0.06) -- -- --
- --------------------------------------------------------------------------------
Total distributions (0.77) (0.68) (0.70) (0.70)
- --------------------------------------------------------------------------------
Net asset value, end of year $13.44 $12.92 $12.88 $12.62
- --------------------------------------------------------------------------------
Total return 10.20% 5.74% 7.77% 6.37%
- --------------------------------------------------------------------------------
Net assets, end of
year (000)'s $ 158 $ 148 $ 154 $ 107
- --------------------------------------------------------------------------------
Ratios to average
net assets:
Expenses 0.75% 0.76% 0.84% 0.88%
Net investment
income (loss) 5.22 5.44 5.41 5.61
- --------------------------------------------------------------------------------
Portfolio turnover rate 55% 36% 22% 32%
- --------------------------------------------------------------------------------
22
<PAGE>
For a Class B share of capital stock outstanding throughout each year
ended March 31:
- --------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net asset value, beginning of year $12.92 $12.88 $12.62 $12.55
- --------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income (loss) 0.63 0.64 0.63 0.63
Net realized and unrealized
gain (loss) 0.59 0.02 0.26 0.06
- --------------------------------------------------------------------------------
Total income (loss) from operations 1.22 0.66 0.89 0.69
- --------------------------------------------------------------------------------
Less distributions from:
Net investment income (0.64) (0.62) (0.63) (0.62)
Net realized gains (0.06) -- -- --
- --------------------------------------------------------------------------------
Total distributions (0.70) (0.62) (0.63) (0.62)
- --------------------------------------------------------------------------------
Net asset value, end of year $13.44 $12.92 $12.88 $12.62
- --------------------------------------------------------------------------------
Total return 9.66% 5.23% 7.20% 5.76%
- --------------------------------------------------------------------------------
Net assets, end of year (000)'s $ 66 $ 62 $ 63 $ 55
- --------------------------------------------------------------------------------
Ratios to average
net assets:
Expenses 1.27% 1.28% 1.36% 1.39%
Net investment income (loss) 4.70 4.92 4.90 5.09
- --------------------------------------------------------------------------------
Portfolio turnover rate 55% 36% 22% 32%
- --------------------------------------------------------------------------------
23
<PAGE>
<TABLE>
<CAPTION>
For a Class L share/(1)/ of capital stock outstanding throughout each year
ended February 28:
- ---------------------------------------------------------------------------
- ----------------
1999 1998 1997 1996
1995/(2)/
- ----------------------------------------------------------------------------
- ---------------
<S> <C> <C> <C> <C>
<C>
Net asset value, beginning of year $12.92 $12.88 $12.62
$ 11.86
- ---------------------------------------------------------------------------
- ----------------
Income (loss) from operations:
Net investment income (loss) 0.61 0.63 0.62
0.20
Net realized and unrealized gain (loss) 0.59 0.02 0.27
0.74
- ---------------------------------------------------------------------------
- ----------------
Total income (loss) from operations 1.20 0.65 0.89
0.94
- ----------------------------------------------------------------------------
- ---------------
Less distributions from:
Net investment (0.63) (0.61)
(0.63) (0.18)
income/(6)/
Net realized gains (0.06) -- --
--
- --------------------------------------------------------------------------
- -----------------
Total distributions (0.69) (0.61)
(0.63) (0.18)
- ----------------------------------------------------------------------------
- ---------------
Net assets value, end of year $13.43 $12.92 $12.88
$ 12.62
- ---------------------------------------------------------------------------
- ----------------
Total return 9.50% 5.17%
7.17% 8.01%/(3)/
- ----------------------------------------------------------------------------
- ---------------
Net assets, end of year (000)'s $ 6 $ 5 $ 4
$ 0.3
- --------------------------------------------------------------------------
- -----------------
Ratios to average net assets:
Expenses 1.39% 1.32%
1.41% 1.44/(4)/
Net investment income
(loss) 4.58 4.88 4.82
5.05/(4)/
- ---------------------------------------------------------------------------
- ----------------
Portfolio turnover rate 55% 36%
22% 32%
- ---------------------------------------------------------------------------
- ----------------
</TABLE>
(1) On June 12, 1998, the former Class C shares were renamed Class L shares
(2) For the period from December 13, 1994 (inception date) to March 31, 1995.
(3) Not annualized.
(4) Annualized.
24
<PAGE>
For a Class Y share of capital stock outstanding throughout each year
ended March 31:
- --------------------------------------------------------------------------------
1999
----
Net asset value, beginning of year
- -------------------------------------------------------------------------------
Income (loss) from operations:
Net investment income
Net realized and unrealized
gain (loss)
- -------------------------------------------------------------------------------
Total income (loss) from
operations
- -------------------------------------------------------------------------------
Less distributions from:
Net investment income
Net realized gains
- -------------------------------------------------------------------------------
Total distributions
- -------------------------------------------------------------------------------
Net asset value, end of year
- -------------------------------------------------------------------------------
Total return
- -------------------------------------------------------------------------------
Net assets, end of year (000)'s
- -------------------------------------------------------------------------------
Ratio to average net assets:
Expenses
Net investment income (loss)
- -------------------------------------------------------------------------------
Portfolio turnover rate
- -------------------------------------------------------------------------------
(1) From the period of [date] (inception date) to March 31, 1999.
(2) Annualized.
25
<PAGE>
Salomon Smith Barney(SM)
a member of citigroup [Symbol]
New Jersey Municipals Fund Inc.
Shareholder reports Annual and semiannual reports to shareholders provide
additional information about the fund's investments. These reports discuss the
market conditions and investment strategies that affected the fund's
performance.
The fund sends only one report to a household if more than one account has the
same address. Contact your Salomon Smith Barney Financial Consultant, dealer
representative or the transfer agent if you do not want this policy to apply to
you.
Statement of additional information The statement of additional information
provides more detailed information about the fund and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the fund or obtain shareholder reports or the
statement of additional information (without charge) by contacting your Salomon
Smith Barney Financial Consultant or dealer representative, by calling the fund
at 1-800-451-2010, or by writing to the fund at Smith Barney Mutual Funds, 388
Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review and copy the fund's shareholder reports, prospectus and
statement of additional information at the Securities and Exchange Commission's
Public Reference Room in Washington, D.C. You can get copies of these materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
information free from the Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the fund that is not in this prospectus, you
should not rely upon that information. Neither the fund nor the distributor is
offering to sell shares of the fund to any person to whom the fund may not
lawfully sell its shares.
(SM) Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file no. 811-05406)
[FD00000 7/99]
PART B-Statement of Additional Information
July 29, 1999
STATEMENT OF ADDITIONAL INFORMATION
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
388 Greenwich Street
New York, New York 10013
(800) 451-2010
This Statement of Additional Information ("SAI") is
not a prospectus and is meant to be read in
conjunction with the prospectus of the Smith Barney
New Jersey Municipals Fund Inc. (the "fund") dated
July 29, 1999, as amended or supplemented from time
to time (the "prospectus"), and is incorporated by
reference in it entirety into the prospectus.
Additional information about the fund's investments
is available in the fund's annual and semi-annual
reports to shareholders that are incorporated herein
by reference. The prospectus and copies of the
reports may be obtained free of charge by contacting
a Salomon Smith Barney Financial Consultant, or by
writing or calling Salomon Smith Barney at the
address or telephone number above.
TABLE OF CONTENTS
Directors and Executive Officers of the Fund 2
Investment Objective and Management Policies 4
Investment
Restrictions.......................................................14
Risk Factors.......................................................16
Special Considerations Relating to New Jersey
Municipal Securities .....................19
Special Considerations Regarding Puerto
Rico......................................................23
Portfolio Transactions........................................29
Portfolio Turnover.............................................30
Purchase of
Shares.........................................................30
Determination of Net Asset
Value.................................................................36
Redemption of Shares 37
Investment Management and Other Services 40
Valuation of Shares 44
Exchange Privilege 45
Performance Information 46
Dividends, Distributions and Taxes 50
Additional Information 54
Financial
Statements..................................................55
Appendix A 56
DIRECTORS AND EXECUTIVE OFFICERS OF THE FUND
The names of the directors of the fund and executive
officers of the fund, together with information as to
their principal business occupations, are set forth
below. The executive officers of the fund are
employees of organizations that provide services to
the fund. Each director who is an "interested
person" of the fund, as defined in the 1940 Act, is
indicated by an asterisk. The address of the "non-
interested" directors and executive officers of the
fund is 388 Greenwich Street, New York, New York
10013.
Herbert Barg (Age 75). Director
Private Investor. Director or trustee of 18
investment companies associated with Citigroup Inc.
("Citigroup") His address is 273 Montgomery Avenue,
Bala Cynwyd, Pennsylvania 19004.
*Alfred J. Bianchetti (Age 76). Director
Retired; formerly Senior Consultant to Dean Witter
Reynolds Inc. Director or trustee of 13 investment
companies associated with Citigroup. His address is
19 Circle End Drive, Ramsey, New Jersey 07466.
Martin Brody (Age 77). Director
Consultant, HMK Associates; Retired Vice Chairman of
the Board of Restaurant Associates Corp. Director or
trustee of 22 investment companies associated with
Citigroup. His address is c/o HMK Associates, 30
Columbia Turnpike, Florham Park, New Jersey 07932.
Dwight B. Crane (Age 61). Director
Professor, Harvard Business School. Director or
trustee of 25 investment companies associated with
Citigroup. His address is c/o Harvard Business
School, Soldiers Field Road, Boston, Massachusetts
02163.
Burt N. Dorsett (Age 68). Director
Managing Partner of Dorsett McCabe Management. Inc.,
an investment counseling firm; Director of Research
Corporation Technologies, Inc., a nonprofit patent
clearing and licensing firm. Director or trustee of
13 investment companies associated with Citigroup.
His address is 201 East 62nd Street, New York, New
York 10021.
Elliot S. Jaffe (Age 72). Director
Chairman of the Board and President of The Dress
Barn, Inc. Director or trustee of 13 investment
companies associated with Citigroup. His address is
30 Dunnigan Drive, Suffern, New York 10901.
Stephen E. Kaufman (Age 67). Director
Attorney. Director or trustee of 15 investment
companies associated with Citigroup. His address is
277 Park Avenue, New York, New York 10172.
Joseph J. McCann (Age 68). Director
Financial Consultant; Retired Financial Executive,
Ryan Homes, Inc. Director or trustee of 13 investment
companies associated with Citigroup. His address is
200 Oak Park Place, Pittsburgh, Pennsylvania 15243.
*Heath B. McLendon (Age 65). Chairman of the Board
and Investment Officer
Managing Director of Salomon Smith Barney Inc.
("Salomon Smith Barney"); President of SSBC and
Travelers Investment Adviser, Inc. ("TIA"); Chairman
or Co-Chairman of the Board and Director or trustee
of 64 investment companies associated with Citigroup.
His address is 388 Greenwich Street, New York, New
York 10013.
Cornelius C. Rose, Jr. (Age 65). Director
President, Cornelius C. Rose Associates, Inc.,
financial consultants, and Chairman and Director of
Performance Learning Systems, an educational
consultant. Director or trustee of 13 investment
companies associated with Citigroup. His address is
Meadowbrook Village, Building 4, Apt 6, West Lebanon,
New Hampshire 03784.
Lewis E. Daidone (Age 41). Senior Vice President and
Treasurer
Managing Director of Salomon Smith Barney; Chief
Financial Officer of the Smith Barney Mutual funds;
Director and Senior Vice President of SSBC and TIA.
Senior Vice President and Treasurer of 59 investment
companies associated with Citigroup.
Peter Coffey (Age 54). Vice President and Investment
Officer
Investment Officer of SSBC; Managing Director of
Salomon Smith Barney.
Paul Brook (Age 45). Controller
Director of Salomon Smith Barney; from 1997-1998
Managing Director of AMT Capital Services Inc.; prior
to 1997 Partner with Ernst & Young LLP. Controller or
Assistane Treasurer of 59 investment companies
associated with Citigroup.
Christina T. Sydor (Age 48). Secretary
Managing Director of Salomon Smith Barney; General
Counsel and Secretary of SSBC and TIA. Secretary of
59 investment companies associated with Citigroup.
As of July , 1999, the directors and officers of
the funds, as a group, owned less than 1% of the
outstanding shares of beneficial interest of the fund.
To the best knowledge of the directors, as of July
, 1999, the following shareholders or "groups" (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 following classes:
No officer, director or employee of Salomon Smith
Barney or any of its affiliates receives any
compensation from the fund for serving as an officer
of the funds or director of the fund. The fund pays
each director who is not an officer, director or
employee of Salomon Smith Barney or any of its
affiliates a fee of $1,000 per annum plus $100 per
in-person meeting and $100 per telephonic meeting.
Each director emeritus who is not an officer,
director or employee of Salomon Smith Barney or its
affiliates receives a fee of $500 per annum plus $50
per in-person meeting and $50 per telephonic meeting.
All directors are reimbursed for travel and out-of-
pocket expenses incurred to attend such meetings.
For the fiscal year ended March 31, 1999, such
expenses totaled $______.
For the fiscal year ended March 31, 1999, the
directors of the fund were paid the following
compensation:
Name of Person
Aggregate
Compensati
on
from Fund
Total
Pension or
Retirement
Benefits
Accrued
as part of
Fund
Expenses
Compensati
on
From Fund
And Fund
Complex
Paid to
Directors
Number of
Funds for
Which
Directors
Serves
Within
Fund Complex
Herbert Barg **
$
$0
$
18
Alfred
Bianchetti * **
0
13
Martin Brody **
0
22
Dwight B. Crane
**
0
25
Burt N. Dorsett
**
0
13
Elliot S. Jaffe
**
0
13
Stephen E.
Kaufman **
0
15
Joseph J. McCann
**
0
13
Heath B.
McLendon *
- -
64
Cornelius C.
Rose, Jr. **
0
13
* Designates an "interested" director.
** Designates member of Audit Committee.
Upon attainment of age 80, fund directors are
required to change to emeritus status.
Directors emeritus are entitled to serve in
emeritus status for a maximum of 10 years. A
director emeritus may attend meetings but has
no voting rights. During the fund's last fiscal
year, aggregate compensation paid by the fund
to directors achieving emeritus status totaled
$.
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The prospectus discusses the fund's investment
objective and the policies. The following discussion
supplements the description of the fund's investment
policies in the prospectus. For purposes of this
SAI, 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." SSBC Fund
Management, Inc. ("SSBC" or the "manager") serves as
investment manager and administrator to the fund.
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 its 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 the manager 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.
Ratings as Investment Criteria. In general, the
ratings of Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P")
and other nationally recognized statistical ratings
organizations ("NRSROs") 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 the manager 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 the manager's credit analysis of such
securities than would be the case for a portfolio
consisting entirely of higher-rated securities. The
Appendix contains information concerning the ratings
of Moody's, S&P and other NRSROs and their
significance.
Subsequent to its purchase by the fund, an issue of
Municipal Bonds may cease to be rated or its rating
may be reduced below the rating given at the time the
securities were acquired by the fund. Neither event
will require the sale of such Municipal Bonds by the
fund, but the manager will consider such event in its
determination of whether the fund should continue to
hold the Municipal Bonds. In addition, to the extent
that 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 or other
NRSRO's, the fund will attempt to use comparable
ratings as standards for its investments in
accordance with its investment objective and
policies.
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 have the equivalent
rating by any NRSRO or in unrated obligations of
comparable quality. Unrated obligations will be
considered to be of investment grade if deemed by the
manager to be comparable in quality to instruments so
rated, or if other outstanding obligations of the
issuers thereof are rated Baa or better by Moody's or
BBB or better by S&P. The balance of the fund's
assets may be invested in securities rated as low as
C by Moody's or D by S&P or have the equivalent
rating by any NRSRO, or deemed by the manager to be
comparable unrated securities, which 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.
Low and Comparable Unrated Securities. While the
market values of low-rated and comparable unrated
securities tend to react less to fluctuations in
interest rate levels than the market values of higher
rated securities, the market values of certain low-
rated and comparable unrated municipal securities
also tend to be more sensitive than higher-rated
securities to short-term corporate and industry
developments and changes in economic conditions
(including recession) in specific regions or
localities or among specific types of issuers. In
addition, low-rated securities and comparable unrated
securities generally present a higher degree of
credit risk. During an economic downturn or a
prolonged period of rising interest rates, the
ability of issuers of low-rated and comparable
unrated securities to service their payment
obligations, meet projected goals or obtain
additional financing may be impaired. The risk of
loss due to default by such issuers is significantly
greater because low-rated and comparable unrated
securities generally are unsecured and frequently are
subordinated to the prior payment of senior
indebtedness. The fund may incur additional expenses
to the extent it is required to seek recovery upon a
default in payment of principal or interest on its
portfolio holdings.
While the market for municipal securities is
considered to be generally adequate, the existence of
limited markets for particular low-rated and
comparable unrated securities may diminish the fund's
ability to (a) 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. The market for certain low-rated and
comparable unrated securities has not fully weathered
a major economic recession. Any such recession,
however, would likely disrupt severely the market for
such securities and adversely affect the value of the
securities and the ability of the issuers of such
securities to repay principal and pay interest
thereon.
Fixed-income securities, including low-rated
securities and comparable unrated securities,
frequently have call or buy-back features that permit
their issuers to call or repurchase the securities
from their holders, such as the fund. If an issuer
exercises these rights during periods of declining
interest rates, the fund may have to replace the
security with a lower yielding security, thus
resulting in a decreased return to the fund.
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 the manager's judgment, analysis and
experience than would be the case if the fund
invested only in rated obligations.
Municipal Bonds. 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 various
privately operated facilities are included within the
term Municipal Bonds if the interest paid thereon
qualifies as excluded 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 yield on Municipal Bonds is dependent upon a
variety of factors, including general economic and
monetary conditions, general money market conditions,
general conditions of the Municipal Bond market, the
financial condition of the issuer, the size of a
particular offering, the maturity of the obligation
offered and the rating of the issue.
Municipal Bonds also 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 such obligations or upon the ability of
municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other
conditions, the power or ability of any one or more
issuers to pay, when due, the principal of and
interest on its or their Municipal Bonds may be
materially affected.
Municipal Leases. The fund may invest without limit
in "municipal leases," which generally are
participations in intermediate-and short-term debt
obligations issued by municipalities consisting of
leases or installment purchase contracts for property
or equipment. 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 that 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, the
manager 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.
Private Activity Bonds. The fund may invest without
limits 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 that the fund's dividends are derived from
interest on those bonds. Dividends derived from
interest income on New Jersey Municipal Securities
are a component of the "current earnings" adjustment
item for purposes of the federal corporate
alternative minimum tax.
The fund may invest without limit in debt obligations
which are repayable out of revenue streams generated
from economically-related projects or facilities or
debt obligations whose issuers are located in the
same state. Sizeable investments in such obligations
could involve an increased risk to the fund should
any of the related projects or facilities experience
financial difficulties. In addition, the fund also
may invest up to an aggregate of 15% of its total
assets in securities with contractual or other
restrictions on resale and other instruments which
are not readily marketable. The fund also is
authorized to borrow 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. 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
issuers. 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 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.
Zero Coupon Securities. Zero coupon securities
involve special considerations. The fund may also
invest in zero coupon bonds. Zero coupon securities
are debt obligations which do not entitle the holder
to any periodic payments of interest prior to
maturity of a specified cash payment date when the
securities begin paying current interest (the "cash
payment date") and therefore are issued and traded at
a discount from their face amounts or par values. The
discount varies depending on the time remaining until
maturity or cash payment date, prevailing interest
rates, liquidity of the security and the perceived
credit quality of the issuer. The discount, in the
absence of financial difficulties of the issuer,
decreases as the final maturity or cash payment date
of the security approaches. The market prices of
zero coupon securities generally are more volatile
than the market prices of other debt securities that
pay interest periodically and are likely to respond
to changes in interest rates to a greater degree than
do debt securities having similar maturities and
credit quality. The credit risk factors pertaining
to low-rated securities also apply to low-rated zero
coupon bonds. Such zero coupon bonds carry an
additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the fund
will realize no cash until the cash payment date
unless a portion of such securities is sold and, if
the issuer defaults, the fund may obtain no return at
all on its investment.
Current federal income tax laws may require the
holder of a zero coupon security to accrue income
with respect to that security prior to the receipt of
cash payments. To maintain its qualification as a
registered investment company and avoid liability for
federal income taxes, the fund may be required to
distribute income accrued with respect to zero coupon
securities and may have to dispose of portfolio
securities under disadvantageous circumstances in
order to generate cash to satisfy these distribution
requirements.
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 separate account of the
fund consisting of cash or liquid debt securities
equal to the amount of the when-issued commitments
will be established at the fund's custodian bank. For
the purpose of determining the adequacy of the
securities in the account, the deposited securities
will be valued at market or fair value. If the market
or fair value of such securities declines, additional
cash or securities will be placed in the account on
a daily basis so 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 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 are not exempt from federal income taxes
or New Jersey state personal income tax.
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.
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 of time
(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. In evaluating
these potential risks, the manager, 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.
Lending of Portfolio Securities. Consistent with
applicable regulatory requirements, the fund may lend
its portfolio securities to brokers, dealers and
other financial organizations. Loans of portfolio
securities by the fund will be collateralized by
cash, letters of credit or obligations of the United
States government or its agencies and
instrumentalities which are maintained at all times
in an amount equal to at least 100% of the current
market value of the loaned securities. By lending
its portfolio securities, the fund will seek to
generate income by continuing to receive interest on
the loaned securities, by investing the cash
collateral in short-term instruments or by obtaining
yield in the form of interest paid by the borrower
when U.S. government securities are used as
collateral. The risks in lending portfolio
securities, as with other extensions of secured
credit, consist of possible delays in receiving
additional collateral or in the recovery of the
securities or possible loss of rights in the
collateral should the borrower fail financially.
Loans will be made to firms deemed by the manager to
be of good standing and will not be made unless, in
the judgment of the manager, the consideration to be
earned from such loans would justify the risk.
Temporary Investments. When the fund is maintaining
a defensive position, the fund may invest in short-
term investments ("Temporary Investments") consisting
of: (a) tax-exempt securities in the form of notes of
municipal issuers having, at the time of purchase, a
rating within the three highest grades of Moody's,
S&P or the equivalent rating from an NRSRO or, if not
rated, having an issue of outstanding Municipal Bonds
rated within the three highest grades by Moody's, S&P
or the equivalent rating from an NRSRO; 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, S&P or
the equivalent rating from an NRSRO, 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 may
invest in Temporary Investments for defensive reasons
in anticipation of a market decline. At no time will
more than 20% of the fund's total assets be invested
in Temporary Investments unless the fund has adopted
a defensive investment policy. The fund intends,
however, to 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. For the
fiscal year ended March 31, 1999, the fund did not
invest in taxable Temporary Investments.
Financial Futures and Options Transactions. 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.
Such investments, if any, by the fund will be made
for the purpose of hedging against changes in the
value of portfolio securities due to anticipated
changes in interest rates and market conditions and
where the transactions are economically appropriate
to the reduction of risks inherent in the management
of the fund. 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 a municipal bond index or related to debt
securities, the prices of which are anticipated by
the manager to correlate with the prices of the New
Jersey 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 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 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 a deposit for the
contracts.
Municipal Bond Index Futures Contracts. A municipal
bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery
of an amount of cash equal to a specific dollar
amount multiplied by the difference between the value
of the index at the close of the last trading day of
the contract and the price at which the index
contract was originally written. No physical delivery
of the underlying municipal bonds in the index is
made. Municipal bond index futures contracts based on
an index of 40 tax-exempt, long-term municipal bonds
with an original issue size of at least $50 million
and a rating of A- or higher by S&P or A or higher by
Moody's began trading in mid-1985. The purpose of
the acquisition or sale of a municipal bond index
futures contract by the fund, as the holder of long-
term municipal securities, is to protect the fund
from fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-
term municipal securities.
There are several risks in connection with the use of
futures contracts as a hedging device. Successful use
of futures contracts by the fund is subject to the
manager's ability to predict correctly movements in
the direction of interest rates. Such predictions
involve skills and techniques which may be different
from those involved in the management of a long-term
municipal bond portfolio. In addition, there can be
no assurance that there will be a correlation between
movements in the price of the municipal bond index
and movements in the price of the Municipal Bonds
that are the subject of the hedge. The degree of
imperfection of correlation depends upon various
circumstances, such as variations in speculative
market demand for futures contracts and municipal
securities, technical influences on futures trading,
and differences between the municipal securities
being hedged and the municipal securities underlying
the futures contracts, in such respects as interest
rate levels, maturities and creditworthiness of
issuers. A decision of whether, when and how to hedge
involves the exercise of skill and judgment and even
a well-conceived hedge may be unsuccessful to some
degree because of market behavior or unexpected
trends in interest rates.
Although the fund intends to purchase or sell futures
contracts only if there is an active market for such
contracts, there is no assurance that a liquid market
will exist for the contracts at any particular time.
Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The
daily limit establishes the maximum amount the price
of a futures contract may vary either up or down from
the previous day's settlement price at the end of a
trading session. Once the daily limit has been
reached in a particular contract, no trades may be
made that day at a price beyond that limit. The daily
limit governs only price movement during a particular
trading day and, therefore, does not limit potential
losses because the limit may prevent the liquidation
of unfavorable positions. It is possible that futures
contract prices could move to the daily limit for
several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders
to substantial losses. In such event, it will not be
possible to close a futures position and, in the
event of adverse price movements, the fund would be
required to make daily cash payments of variation
margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged,
if any, may partially or completely offset losses on
the futures contract. As described above, however,
there is no guarantee that the price of Municipal
Bonds will, in fact, correlate with the price
movements in the municipal bond index futures
contract and thus provide an offset to losses on a
futures contract.
If the fund has hedged against the possibility of an
increase in interest rates adversely affecting the
value of the Municipal Bonds held in its portfolio
and rates decrease instead, the fund will lose part
or all of the benefit of the increased value of the
Municipal Bonds it has hedged because it will have
offsetting losses in its futures positions. In
addition, in such situations, if the fund has
insufficient cash, it may have to sell securities to
meet daily variation margin requirements. Such sales
of securities may, but will not necessarily, be at
increased prices which reflect the decline in
interest rates. The fund may have to sell securities
at a time when it may be disadvantageous to do so.
When the fund purchases municipal bond index futures
contracts, an amount of cash and U.S. government
securities or other high grade debt securities equal
to the market value of the futures contracts will be
deposited in a segregated account with the fund's
custodian (and/or such other persons as appropriate)
to collateralize the positions and thereby insure
that the use of such futures contracts is not
leveraged.
Options on Financial Futures Contracts. The fund may
purchase put and call options on futures contracts
which are traded on a domestic exchange or board of
trade as a hedge against changes in interest rates,
and may enter into closing transactions with respect
to such options to terminate existing positions. The
fund will sell put and call options on interest rate
futures contracts only as part of closing sale
transactions to terminate its options positions.
There is no guarantee that such closing transactions
can be effected.
Options on futures contracts, as contrasted with the
direct investment in such contracts, gives the
purchaser the right, in return for the premium paid,
to assume a position in futures contracts at a
specified exercise price at any time prior to the
expiration date of the options. Upon exercise of an
option, the delivery of the futures 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 contract 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 interest rate futures contracts is limited
to the premium paid for the option (plus transaction
costs). Because the value of the option is fixed at
the point of sale, there are no daily cash payments
to reflect changes in the value of the underlying
contract; however, the value of the option does
change daily and that change would be reflected in
the net asset value of the fund
There are several risks relating to options on
futures contracts. The ability to establish and
close out positions on such options will be subject
to the existence of a liquid market. In addition, the
fund's purchase of put or call options will be based
upon predictions as to anticipated interest rate
trends by the manager, which could prove to be
inaccurate. Even if the manager's expectations are
correct there may be an imperfect correlation between
the change in the value of the options and of the
fund's portfolio securities.
Non-diversified status. The fund is classified as a
non-diversified investment company under the
Investment Company Act of 1940 (the "1940 Act"),
which means that the fund is not limited by the 1940
Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The
fund intends to conduct its operations, however, so
as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the fund of
any liability for federal income tax and New Jersey
state franchise tax to the extent its earnings are
distributed to shareholders. To so qualify, among
other requirements, the fund will limit its
investments so that, at the close of each quarter of
the taxable year, (a) not more than 25% of the market
value of the fund's total assets will be invested in
the securities of a single issuer and (b) with
respect to 50% of the market value of its total
assets, not more than 5% of the market value of its
total assets will be invested in the securities of a
single issuer and the fund will not own more than 10%
of the outstanding voting securities of a single
issuer. 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.
INVESTMENT RESTRICTIONS
The fund has adopted the following investment
restrictions for the protection of shareholders.
Restrictions 1 through 6 below may not be changed
without the approval of the holders of a majority of
the outstanding shares of the fund, defined as the
lesser of (a) 67% of the fund's shares present at a
meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy
or (b) more than 50% of the fund's outstanding
shares. The remaining restrictions may be changed by
the fund's board of directors at any time. The
fund's investment objective is fundamental and may
not be changed without the approval of the holders of
a majority of the outstanding shares of the fund.
The fund may not:
1. Issue "senior securities" as defined in
the 1940 Act and the rules, regulations and orders
thereunder, except as permitted under the 1940 Act
and the rules, regulations and orders thereunder.
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 (a) the fund
may borrow from banks for temporary or emergency (not
leveraging) purposes, including the meeting of
redemption requests which might otherwise require the
untimely disposition of securities, and (b) the fund
may, to the extent consistent with its investment
policies, enter into reverse repurchase agreements,
forward roll transactions and similar investment
strategies and techniques. To the extent that it
engages in transactions described in (a) and (b), the
fund will be limited so that no more than 33 1/3% of
the value of its total assets (including the amount
borrowed), valued at the lesser of cost or market,
less liabilities (not including the amount borrowed)
is derived from such transactions.
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 objectives and policies; (b) repurchase
agreements; and (c) loans of its portfolio
securities, to the fullest extent permitted under the
1940 Act.
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, commodities or commodity contracts, but
this restriction shall not prevent the fund from (a)
investing in securities of issuers engaged in the
real estate business or the business of investing in
real estate (including interests in limited
partnerships owning or otherwise engaging in the real
estate business or the business of investing in real
estate) and securities which are secured by real
estate or interests therein; (b) holding or selling
real estate received in connection with securities it
holds or held; (c) trading in futures contracts and
options on futures contracts (including options on
currencies to the extent consistent with the funds'
investment objective and policies); or (d) investing
in real estate investment trust securities.
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
underlying securities and other assets in escrow and
collateral agreements with respect to initial or
maintenance margin in connection with futures
contracts and related options and options on
securities, indexes or similar items 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 SAI
and any future change in those practices would
require Board approval and appropriate notice to
shareholders. 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.
RISK FACTORS
The following summaries are included for the purpose
of providing certain information regarding the
economic climate and financial condition of the State
of New Jersey and Puerto Rico, and are based
primarily on information from official statements
made available in connection with the issuance of
certain securities and other documents and sources
and does not purport to be complete. The trust has
not undertaken to verify independently such
information and the trust assumes no responsibility
for the accuracy of such information. These
summaries do not provide information regarding most
securities in which the fund is permitted to invest
and in particular do not provide specific information
on the issuers or types of municipal securities in
which the fund invests or the private business
entities whose obligations support the payments on
AMT-Subject bonds in which the fund will invest.
Therefore, the general risk factors as to the credit
of the state or its political subdivisions discussed
herein may not be relevant to the fund. Although
revenue obligations of a state or its political
subdivisions may be payable from a specific project
or source, there can be no assurance that future
economic difficulties and the resulting impact on
state and local government finances will not
adversely affect the market value of the fund or the
ability of the respective obligors to make timely
payments of principal and interest on such
obligations. In addition, a number of factors may
adversely affect the ability of the issuers of
municipal securities to repay their borrowings that
are unrelated to the financial or economic condition
of a state, and that, in some cases, are beyond their
control. Furthermore, issuers of municipal securities
are generally not required to provide ongoing
information about their finances and operations to
holders of their debt obligations, although a number
of cities, counties and other issuers prepare annual
reports.
Alternative Minimum Tax
Under current federal income tax law, (1) interest on
tax-exempt municipal securities issued after August
7, 1986 which are "specified private activity bonds,"
and the proportionate share of any exempt-interest
dividend paid by a regulated investment company which
receives interest from such specified private
activity bonds, will be treated as an item of tax
preference for purposes of the alternative minimum
tax ("AMT") imposed on individuals and corporations,
though for regular Federal income tax purposes such
interest will remain fully tax-exempt, and (2)
interest on all tax-exempt obligations will be
included in "adjusted current earnings" of
corporations for AMT purposes. Such private activity
bonds ("AMT-Subject bonds"), which include industrial
development bonds and bonds issued to finance such
projects as airports, housing projects, solid waste
disposal facilities, student loan programs and water
and sewage projects, have provided, and may continue
to provide, somewhat higher yields than other
comparable municipal securities.
Investors should consider that, in most instances, no
state, municipality or other governmental unit with
taxing power will be obligated with respect to AMT-
Subject bonds. AMT-Subject bonds are in most cases
revenue bonds and do not generally have the pledge of
the credit or the taxing power, if any, of the issuer
of such bonds. AMT-Subject bonds are generally
limited obligations of the issuer supported by
payments from private business entities and not by
the full faith and credit of a state or any
governmental subdivision. Typically the obligation
of the issuer of AMT-Subject bonds is to make
payments to bond holders only out of and to the
extent of, payments made by the private business
entity for whose benefit the AMT-Subject bonds were
issued. Payment of the principal and interest on
such revenue bonds depends solely on the ability of
the user of the facilities financed by the bonds to
meet its financial obligations and the pledge, if
any, of real and personal property so financed as
security for such payment. It is not possible to
provide specific detail on each of these obligations
in which fund assets may be invested.
Risk of Concentration In a Single State
The primary purpose of investing in a portfolio of a
single state's municipal securities is the special
tax treatment accorded the state's resident
individual investors. However, payment of interest
and preservation of principal is dependent upon the
continuing ability of the state's issuers and/or
obligors on state, municipal and public authority
debt obligations to meet their obligations
thereunder. Investors should be aware of certain
factors that might affect the financial condition of
issuers of municipal securities, consider the greater
risk of the concentration of a fund versus the safety
that comes with a less concentrated investment
portfolio and compare yields available in portfolios
of the relevant state's issues with those of more
diversified portfolios, including out-of-state
issues, before making an investment decision.
Municipal securities in which a fund's assets are
invested may include debt obligations of the
municipalities and other subdivisions of the relevant
state issued to obtain funds for various public
purposes, including the construction of a wide range
of public facilities such as airports, bridges,
highways, schools, streets and water and sewer works.
Other purposes for which municipal securities may be
issued include the obtaining of funds to lend to
public or private institutions for the construction
of facilities such as educational, hospital, housing,
and solid waste disposal facilities. The latter,
including most AMT-Subject bonds, are generally
payable from private sources which, in varying
degrees, may depend on local economic conditions, but
are not necessarily affected by the ability of the
state and its political subdivisions to pay their
debts. It is not possible to provide specific
details on each of these obligations in which fund
assets may be invested. However, all such
securities, the payment of which is not a general
obligation of an issuer having general taxing power,
must satisfy, at the time of an acquisition by the
fund, the minimum rating(s). See "Appendix A: Bond
and Commercial Paper Ratings" for a description of
ratings and rating criteria. Some municipal
securities may be rated based on a "moral obligation"
contract which allows the municipality to terminate
its obligation by deciding not to make an
appropriation. Generally, no legal remedy is
available against the municipality that is a party to
the "moral obligation" contract in the event of such
non-appropriation.
Municipal Market Volatility. Municipal securities can
be significantly affected by political changes as
well as uncertainties in the municipal market related
to taxation, legislative changes, or the rights of
municipal security holders. Because many municipal
securities are issued to finance similar projects,
especially those relating to education, health care,
transportation and utilities, conditions in those
sectors can affect the overall municipal market. In
addition, changes in the financial condition of an
individual municipal insurer can affect the overall
municipal market.
Interest Rate Changes. Debt securities have varying
levels of sensitivity to changes in interest rates.
In general, the price of a debt security can fall
when interest rates rise and can rise when interest
rates fall. Securities with longer maturities can be
more sensitive to interest rate changes. In other
words, the longer the maturity of a security, the
greater the impact a change in interest rates could
have on the security's price. In addition, short-term
and long-term interest rates do not necessarily move
in the same amount or the same direction. Short-term
securities tend to react to changes in short-term
interest rates, and long-term securities tend to
react to changes in long-term interest rates.
Issuer-Specific Changes. Changes in the financial
condition of an issuer, changes in specific economic
or political conditions that affect a particular type
of security or issuer, and changes in general
economic or political conditions can affect the
credit quality or value of an issuer's securities.
Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive
to these changes than higher-quality debt securities.
Entities providing credit support or a maturity-
shortening structure also can be affected by these
types of changes. Municipal securities backed by
current or anticipated revenues from a specific
project or specific assets can be negatively affected
by the discontinuance of the taxation supporting the
project or assets or the inability to collect
revenues for the project or from the assets. If the
Internal Revenue Service determines an issuer of a
municipal security has not complied with applicable
tax requirements, interest from the security could
become taxable and the security could decline
significantly in value. In addition, if the structure
of a security fails to function as intended, interest
from the security could become taxable or the
security could decline in value.
SPECIAL CONSIDERATIONS RELATING TO NEW JERSEY
MUNICIPAL SECURITIES
Some of the significant financial considerations
relating to the fund's investments in New Jersey
Exempt Obligations are summarized below. This
summary information is derived principally from
official statements and prospectuses relating to
securities offerings of the State of New Jersey and
various local agencies in New Jersey, available as of
the date of this SAI and does not purport to be a
complete description of any of the considerations
mentioned herein. The accuracy and completeness of
the information contained in such official statements
and disclosure statement has not been independently
verified.
The following is based on information obtained from
an Official Statement, dated February 15, 1998,
relating to $423,120,000 State of New Jersey General
Obligation Bonds, consisting of $418,120,000 State of
New Jersey General Obligation Bonds (tax-exempt)
(various purposes) and $5,000,000 Community
Development Bonds (1982) (Series M) (taxable for
federal income tax purposes), and the Fiscal Year
1999 Budget in Brief dated February 10, 1998.
Economic Climate
New Jersey is the ninth largest state in population
and the fifth smallest in land area. With an average
of 1,077 persons per square mile, it is the most
densely populated of all the states. Between 1980
and 1990 the annual population growth rate was .49
percent and between 1990 and 1996 the growth rate
accelerated to .53 percent. While this rate of
growth compared favorably with other Middle Atlantic
States, it was less than the national rate of
increase. New Jersey is located at the center of the
megalopolis which extends from Boston to Washington,
and which includes over one-fifth of the population.
The extensive facilities of the Port Authority of
New York and New Jersey, the Delaware River Port
Authority and the South Jersey Port Corporation
across the Delaware River from Philadelphia augment
the air, land and water transportation complex which
has influenced much of the State's economy. This
central location in the northeastern corridor, the
transportation and port facilities and proximity to
New York City make the State an attractive location
for corporate headquarters and international business
offices. A number of Fortune Magazine's top 500
companies maintain headquarters or major facilities
in New Jersey, and many foreign-owned firms have
located facilities in the State.
The State's economic base is diversified, consisting
of a variety of manufacturing, construction and
service industries, supplemented by rural areas with
selective commercial agriculture. In 1976, voters
approved casino gambling for Atlantic City, and that
city has again become an important State tourist
attraction.
Total personal income in New Jersey stood at $248.0
billion for 1996, an increase of 4.6 percent from
1995. Personal income increased 5.2 percent between
1996 and 1997, and is expected to increase by
approximated 4.7 percent in both 1998 and 1999.
Historically, New Jersey's average per capita income
has been well above the national average. The
differential narrowed during the 1970s but widened in
the 1980s, and has narrowed slightly in the 1990s.
In 1996, the State ranked second among all states in
per capita personal income ($31,053). Income growth
is anticipated to remain strong, reflecting continued
growth in employment levels.
After experiencing a boom during the mid-1980s, New
Jersey, as well as the rest of the Northeast United
States, slipped into a slowdown well before the onset
of the national recession, which officially began in
July 1990 (according to the National Bureau of
Economic Research). By the beginning of the national
recession, construction activity had already been
declining in the State for nearly two years, growth
had tapered off markedly in the service sectors and
the long-term downtrend of factory employment had
accelerated, partly because of a leveling off of
industrial demand nationally. The onset of recession
caused an acceleration of New Jersey's job losses in
construction and manufacturing, as well as an
employment downturn in such previously growing
sectors as wholesale trade, retail trade, finance,
utilities and trucking and warehousing.
Reflecting the downturn, the rate of unemployment in
New Jersey rose from a low of 3.6 percent during the
first quarter of 1989 to a recessionary peak of 8.5
percent in 1992. Since that time, unemployment has
decreased significantly. The jobless rate fell to an
average of 6.2 percent in 1996 and 5.4 percent during
the first nine months of 1997. The State experienced
strong employment growth of 1.7 percent during 1997,
bringing the employment level to 3.7 million, an
increase of more than 40,000 jobs from a pre-
recession high set in March of 1989. Employment is
projected to grow at a rate of 1.5 percent during
1998 and ease to 0.9 percent in 1999.
Construction jobs started growing again in 1997 after
two weak years and manufacturing declines shrunk from
2-3 percent in 1995-96 to 0.6 percent in 1997.
Aggregate growth in the service sector remained
strong at 2.6 percent but that masks growth rates in
some business service sectors that are above the
comparable national rates. Vehicle registrations grew
steadily through the first three quarters of the year
and should generate the fastest annual pace since
1994.
The rising economic trend experienced in the State
has led to higher retail sales, which showed steady
growth from 1992 through 1996, including a 3.8
percent increase from 1995 to 1996. The higher retail
sales, in turn, produced steady increases in retail
trade jobs (both full and part time). Retail trade
employment has risen by nearly 49,000 since a May
1992 low point. From December 1996 to June 1997, the
number of retail jobs rose by 8,700. The strong
employment and income picture, supplemented by the
three year boom in the financial markets, fueled a
resurgence in consumer spending. Consumer spending
was 3.3 percent during 1997 and is expected to remain
high in 1998 at 2.9 percent. Concern over high
consumer debt levels is beginning to wane. Business
investment in durable equipment is expected to remain
steady in 1998 at a real growth rate of just over 13
percent.
Financial Condition
The State Constitution provides, in part, that no
money may be drawn from the State Treasury except for
appropriations made by law and that no law
appropriating money for any State purpose shall be
enacted if the amount of money appropriated therein,
together with all other prior appropriations made for
the same fiscal year, exceeds the total amount of
revenue on hand and anticipated to be available for
such fiscal year, as certified by the Governor.
Should it appear that revenues will be less than the
amount anticipated in the budget for a fiscal year,
the Governor may take steps to reduce State
expenditures. The State Constitution additionally
provides that no supplemental appropriation may be
enacted after adoption of an appropriations act
except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet
such appropriation.
For the fiscal year ended June 30, 1997, the
undesignated fund balances for all funds were
projected to be $1.11 billion, an increase of $224.2
million from fiscal year 1996. The undesignated fund
balances for all funds are estimated to be $1.02
billion for fiscal year 1998. Revenues for the
General Fund, in which the largest part of the
financial operations of the state is accounted for,
were $10.97 billion for fiscal year 1997 and are
estimated to be $11.15 billion in fiscal year 1998.
State Related Obligations
On March 2, 1992, the New Jersey Sports and
Exposition Authority (the "Sports Authority") issued
$147,490,000 in State guaranteed bonds and defeased
all previously outstanding State guaranteed bonds of
the Sports Authority. The State believes that the
revenue of the Sports Authority will be sufficient to
provide for the payment of debt service on these
obligations without recourse to the State's
guarantee.
Legislation enacted in 1992 by the State authorizes
the Sports Authority to issue bonds for various
purposes payable from State appropriations. Pursuant
to this legislation, the Sports Authority and the
State Treasure have entered into an agreement (the
"State Contract") pursuant to which the Sports
Authority will undertake certain projects, including
the refunding of certain outstanding bonds of the
Sports Authority, and the State Treasurer will credit
to the Sports Authority amounts from the General Fund
sufficient to pay debt service and other costs
related to the bonds. The payment of all amounts
under the State Contract is subject to and dependent
upon appropriations being made by the State
Legislature. As of June 30, 1997 there were
approximately $458,890,000 aggregate principal amount
of Sports Authority bonds outstanding, the debt
service on which is payable from amounts credited to
the Sports Authority Fund pursuant to the State
Contract.
In July 1984, the State created the New Jersey
Transportation Trust Fund Authority (the "TTFA"), an
instrumentality of the State organized and existing
under the New Jersey Transportation Trust Fund
Authority Act of 1984, as amended (the "TTFA Act")
for the purpose of funding a portion of the State's
share of the cost of improvements to the State's
transportation system. Pursuant to the TTFA Act, the
principal amount of the TTFA's bonds, notes or other
obligations which may be issued in any fiscal year
generally may not exceed $700 million plus amounts
carried over from prior fiscal years. These bonds
are special obligations of the TTFA payable from the
payments made by the State pursuant to a contract
between the TTFA, the State Treasurer and the
Commissioner of Transportation. As of December 16,
1997, there were approximately $3,593,245,000
aggregate principal amount of TTFA issues outstanding
including $347,655,000 grant anticipation notes
issued by the New Jersey Transit Corporation ("NJT").
To the extent these notes are not paid by NJT, these
notes are payable by the TTFA pursuant to a Standby
Deficiency Agreement entered into by the TTFA and the
Trustee for the notes. The Standby Deficiency
Agreement was issued on a parity with all bonds
issued by the TTFA.
Legislation enacted during 1992 by the State
authorizes the Economic Development Authority ("EDA")
to issue bonds for various economic development
purposes. Pursuant to that legislation, EDA and the
State Treasurer have entered into an agreement (the
"ERF Contract") through which EDA has agreed to
undertake the financing of certain projects and the
State Treasurer has agreed to credit to the Economic
Recovery Fund from the General Fund amounts
equivalent to payments due to the State under an
agreement with the port Authority of New York and New
Jersey. The payment of all amounts under the ERF
Contract is subject to and dependent upon
appropriations being made by the State Legislature.
As of June 30, 1997 there were approximately
$228,227,868.90 aggregate principal amount of
Economic Recovery Fund Bonds outstanding.
Legislation enacted in June 1997 authorizes the EDA
to issue bonds to pay a portion of the State's
unfunded accrued pension liability for the State's
retirement systems (the "Unfunded Accrued Pension
Liability"), which, together with amounts derived
from the revaluation of pension assets pursuant to
companion legislation enacted at the same time, will
be sufficient to fully fund the Unfunded Accrued
Pension Liability. The Unfunded Accrued Pension
Liability represents pension benefits earned in prior
years which, pursuant to standard actuarial
practices, are not yet fully funded. On June 30,
1997, the EDA issued $2,803,042,498.56 aggregate
principal amount of State Pension Funding Bonds,
Series 1997A-1997C. The EDA and the State Treasurer
have entered into an agreement which provides for the
payment to the EDA of monies sufficient to pay debt
service on the bonds. Such payments are subject to
and dependent upon appropriations being made by the
State Legislature.
The authorizing legislation for certain State
entities provides for specific budgetary procedures
with respect to certain obligations issued by such
entities. Pursuant to such legislation, a designated
official is required to certify any deficiency in a
debt service reserve fund maintained to meet payments
of principal of and interest on the obligations, and
a State appropriation in the amount of the deficiency
is to be made. However, the State legislature is not
legally bound to make such an appropriation. Bonds
issued pursuant to authorizing legislation of this
type are sometimes referred to as "moral obligation"
bonds. There is no statutory limitation on the
amount of "moral obligation" bonds which may be
issued by eligible State entities. "Moral
obligation" bonded indebtedness issued by State
entities as of October 6, 1997 stood at an aggregate
principal amount of $624,324,305.59. Of this total,
$409,224,305.59 was issued by the New Jersey Housing
and Mortgage Finance Agency which has never had a
deficiency in a debt service reserve fund which
required the State to appropriate funds to meet its
"moral obligation" and which is anticipated to earn
revenues which will continue to be sufficient to
cover debt service on its bonds. The Higher
Education Assistance Authority and the South Jersey
Port Corporation were the other two entities which
issued moral obligation indebtedness in aggregate
principal amounts of $136,385,000 and $78,715,000,
respectively. It is anticipated that the Higher
Education Assistance Authority's revenues will be
sufficient to cover debt service on its bonds.
However, the State has periodically provided the
South Jersey Port Corporation with funds to cover all
debt service and property tax requirements, when
earned revenues are anticipated to be insufficient to
cover these obligations.
Litigation
There are a number of suits making monetary claims
against the State, its agencies and employees that
together if decided in favor of the complainants
would significantly increase State expenditures above
those anticipated. There are also individual suits
that could have that effect. The State is unable at
this time to estimate its exposure for these claims
and intends to defend these suits vigorously. Among
them are suits challenging (a) the constitutionality
of annual A-901 hazard and solid waste licensure
renewals fees collected by the Department of
Environmental Protection and Energy; (b) the state's
failure to provide funding to hospitals required by
state law to treat all patients, regardless of
ability to pay; (c) the State's compliance with the
court order in Abbot v. Burke to close the spending
gap between poor urban school districts and wealthy
districts; (d) the State's compliance with the Clean
Water Act and Resource Conservation Recovery Act at
Liberty State Park; (e) the use of monies collected
under the Fair Automobile Insurance Reform Act of
1990 through assessments on insurers licensed or
admitted to write property and casualty insurance in
the State; (f) violations of the Americans with
Disabilities Act of 1990 and discrimination charges
against the State Department of Corrections; (g) the
spousal impoverishment provisions of the Medicare
Catastrophic Coverage Act; (h) Medicaid hospital
reimbursement since February 1995; (i) efforts to
revitalize Atlantic City through the design and
construction of a highway and tunnel; (j)
reimbursement for Medicare co-insurance and
deductibles not paid by the State Medicaid program
from 1998 to February 10, 1995; (k) the Pension Bond
Financing Act of 1997; and (l) the constitutionality,
under the State constitution, of the "family cap"
provisions of the State Work First New Jersey Act.
SPECIAL CONSIDERATIONS REGARDING PUERTO RICO
The following highlights some of the more significant
financial trends and problems affecting the
Commonwealth of Puerto Rico (the "Commonwealth" or
"Puerto Rico"), and is based on information drawn
from official statements and prospectuses relating to
the securities offerings of Puerto Rico, its agencies
and instrumentalities, as available on the date of
this SAI. SSBC has not independently verified any of
the information contained in such official
statements, prospectuses, and other publicly
available documents, but is not aware of any fact
that would render such information materially
inaccurate.
The economy of Puerto Rico is fully integrated with
that of the United States. In fiscal 1997, trade with
the United States accounted for approximately 88% of
Puerto Rico's exports and approximately 62% of its
imports. In this regard, in fiscal 1997 Puerto Rico
experienced a $2.7 billion positive adjusted
merchandise trade balance.
Since fiscal 1985, personal income, both aggregate
and per capita, has increased consistently each
fiscal year. In fiscal 1997, aggregate personal
income was $32.1 billion ($30.0 billion in 1992
prices) and personal per capita income was $8,509
($7,957 in 1992 prices). Gross product in fiscal 1993
was $25.1 billion ($24.5 billion in 1992 prices) and
gross product in fiscal 1997 was $32.1 billion ($27.7
billion in 1992 prices). This represents an increase
in gross product of 27.7% from fiscal 1993 to 1997
(13.0% in 1992 prices).
Puerto Rico's economic expansion, which has lasted
over ten years, continued throughout the five-year
period from fiscal 1993 through fiscal 1997. Almost
every sector of the economy participated, and record
levels of employment were achieved. Factors behind
the continued expansion included Government-sponsored
economic development programs, periodic declines in
the exchange value of the U.S. dollar, increases in
the level of federal transfers, and the relatively
low cost of borrowing funds during the period.
Average employment increased from 999,000 in fiscal
1993 to 1,128,300 in fiscal 1997. Unemployment,
although at relatively low historical levels, remains
above the U.S. average. Average unemployment
decreased from 16.8% in fiscal 1993 to 13.1% in
fiscal 1997.
Manufacturing is the largest sector in the economy
accounting for $19.8 billion or 41.2% of gross
domestic product in fiscal 1997. The manufacturing
sector employed 153,273 workers as of March 1997.
Manufacturing in Puerto Rico is now more diversified
than during earlier phases of industrial development.
In the last two decades industrial development has
tended to be more capital intensive and dependent on
skilled labor. This gradual shift is best exemplified
by heavy investment in pharmaceuticals, scientific
instruments, computers, microprocessors, and
electrical products over the last decade. The service
sector, which includes wholesale and retail trade and
finance, insurance, real estate, hotels and related
services, and other services, ranks second in its
contribution to gross domestic product and is the
sector that employs the greatest number of people.
In fiscal 1997, the service sector generated $18.4
billion in gross domestic product or 38.2% of the
total. Employment in this sector grew from 467,000 in
fiscal 1993 to 551,000 in fiscal 1997, a cumulative
increase of 17.8%. This increase was greater than the
12.9% cumulative growth in employment over the same
period providing 48% of total employment. The
Government sector of the Commonwealth plays an
important role in the economy of the island. In
fiscal year 1997, the Government accounted for $5.2
billion of Puerto Rico's gross domestic product and
provided 10.9% of the total employment. The
construction industry has experienced real growth
since fiscal 1987. In fiscal 1997, investment in
construction rose to $4.7 billion, an increase of
14.7% as compared to $4.1 billion for fiscal 1996.
Tourism also contributes significantly to the island
economy, accounting for $2.0 billion of gross
domestic product in fiscal 1997.
The present administration has developed and is
implementing a new economic development program which
is based on the premise that the private sector
should provide the primary impetus for economic
development and growth. This new program, which is
referred to as the New Economic Model, promotes
changing the role of the Government from one of being
a provider of most basic services to that of a
facilitator for private sector initiatives and
encourages private sector investment by reducing
Government-imposed regulatory restraints.
The New Economic Model contemplates the development
of initiatives that will foster private investment
in, and private management of, sectors that are
served more efficiently and effectively by private
enterprise. One of these initiatives has been the
adoption of a new tax code intended to expand the tax
base, reduce top personal and corporate tax rates,
and simplify the tax system. Another initiative is
the improvement and expansion of Puerto Rico's
infrastructure to facilitate private sector
development and growth, such as the construction of
the water pipeline and cogeneration facilities
described below and the construction of a light rail
system for the San Juan metropolitan area.
The New Economic Model also seeks to identify and
promote areas in which Puerto Rico can compete more
effectively in the global markets. Tourism has been
identified as one such area because of its potential
for job creation and contribution to the gross
product. In 1993, a new Tourism Incentives Act and a
Tourism Development Fund were implemented in order to
provide special tax incentives and financing for the
development of new hotel projects and the tourism
industry. As a result of these initiatives, new
hotels have been constructed or are under
construction which have increased the number of hotel
rooms on the island from 8,415 in fiscal 1992 to
10,877 at the end of fiscal 1997 and to a projected
11,972 by the end of fiscal 1998.
The New Economic Model also seeks to reduce the size
of the Government's direct contribution to gross
domestic product. As part of this goal, the
Government has transferred certain Governmental
operations and sold a number of its assets to private
parties. Among these are: (i) the Government sold the
assets of the Puerto Rico Maritime Authority; (ii)
the Government executed a five-year management
agreement for the operation and management of the
Aqueducts and Sewer Authority by a private company;
(iii) the Aqueducts and Sewer Authority executed a
construction and operating agreement with a private
consortium for the design, construction, and
operation of an approximately 75 million gallon per
day water pipeline to the San Juan metropolitan area
from the Dos Bocas reservoir in Utuado; (iv) the
Electric Power Authority executed power purchase
contracts with private power producers under which
two cogeneration plants (with a total capacity of 800
megawatts) will be constructed; (v) the Corrections
Administration entered into operating agreements with
two private companies for the operation of three new
correctional facilities; (vi) the Government entered
into a definitive agreement to sell certain assets of
a pineapple juice processing business and sold
certain mango growing operations; (vii) the
Government is in the process of transferring to local
sugar cane growers certain sugar processing
facilities; (viii) the Government sold two hotel
properties and is currently negotiating the sale of
a complex consisting of two hotels and a convention
center; and (ix) the Government has announced its
intention to sell the Puerto Rico Telephone Company
and is currently involved in the sale process.
One of the goals of the Rossello administration is to
change Puerto Rico's public health care system from
one in which the Government provides free health
services to low income individuals through public
health facilities owned and administered by the
Government to one in which all medical services are
provided by the private sector and the Government
provides comprehensive health insurance coverage for
qualifying (generally low income) Puerto Rico
residents. Under this new system, the Government
selects, through a bidding system, one private health
insurance company in each of several designated
regions of the island and pays such insurance company
the insurance premium for each eligible beneficiary
within such region. This new health insurance system
is now covering 61 municipalities out of a total of
78 on the island. It is expected that 11
municipalities will be added by the end of fiscal
1998 and 5 more by the end of fiscal 1999. The total
cost of this program will depend on the number of
municipalities included in the program, the number of
participants receiving coverage, and the date
coverage commences. As of December 31, 1997, over 1.1
million persons were participating in the program at
an estimated annual cost to Puerto Rico for fiscal
1998 of approximately $672 million. In conjunction
with this program, the operation of certain public
health facilities has been transferred to private
entities. The Government's current privatization plan
for health facilities provides for the transfer of
ownership of all health
facilities to private entities. The Government sold
six health facilities to private companies and is
currently in negotiations with other private
companies for the sale of thirteen health facilities
to such companies.
One of the factors assisting the development of the
manufacturing sector in Puerto Rico has been the
federal and Commonwealth tax incentives available,
particularly those under the Puerto Rico Industrial
Incentives Program and Sections 30A and 936 of the
Code.
Since 1948, Puerto Rico has promulgated various
industrial incentives laws designed to stimulate
industrial investment. Under these laws, companies
engaged in manufacturing and certain other designated
activities were eligible to receive full or partial
exemption from income, property, and other taxes. The
most recent of these laws is Act No. 135 of December
2, 1997 (the "1998 Tax Incentives Law").
The benefits provided by the 1998 Tax Incentives Law
are available to new companies as well as companies
currently conducting tax-exempt operations in Puerto
Rico that choose to renegotiate their existing tax
exemption grant. Activities eligible for tax
exemption include manufacturing, certain services
performed for markets outside Puerto Rico, the
production of energy from local renewable sources for
consumption in Puerto Rico, and laboratories for
scientific and industrial research. For companies
qualifying thereunder, the 1998 Tax Incentives Law
imposes income tax rates ranging from 2% to 7%. In
addition, it grants 90% exemption from property
taxes, 100% exemption from municipal license taxes
during the first eighteen months of operation and
between 80% and 60% thereafter, and 100% exemption
from municipal excise taxes. The 1998 Tax Incentives
Law also provides various special deductions
designated to stimulate employment and productivity,
research and development, and capital investment in
Puerto Rico.
Under the 1998 Tax Incentives Law, companies are able
to repatriate or distribute their profits free of
tollgate taxes. In addition, passive income derived
from designated investments will continue to be fully
exempt from income and municipal license taxes.
Individual shareholders of an exempted business will
be allowed a credit against their Puerto Rico income
taxes equal to 30% of their proportionate share in
the exempted business' income tax liability. Gain
from the sale or exchange of shares of an exempted
business by its shareholders during the exemption
period will be subject to a 4% income tax rate.
For many years, U.S. companies operating in Puerto
Rico enjoyed a special tax credit that was available
under Section 936 of the Code. Originally, the credit
provided an effective 100% federal tax exemption for
operating and qualifying investment income from
Puerto Rico sources. Amendments to Section 936 made
in 1993 (the "1993 Amendments") instituted two
alternative methods for calculating the tax credit
and limited the amount of the credit that a
qualifying company could claim. These limitations are
based on a percentage of qualifying income (the
"percentage of income limitation") and on qualifying
expenditures on wages and other wage related benefits
(the "economic activity limitation", also known as
the "wage credit limitation"). As a result of
amendments incorporated in the Small Business Job
Protection Act of 1996 enacted by the U.S. Congress
and signed into law by President Clinton on August
20, 1996 (the "1996 Amendments"), the tax credit, as
described below, is now being phased out over a ten-
year period for existing claimants and is no longer
available for corporations that established
operations in Puerto Rico after October 13, 1995
(including existing Section 936 Corporations (as
defined below) to the extent substantially new
operations are established in Puerto Rico). The 1996
Amendments also moved the credit based on the
economic activity limitation to Section 30A of the
Code and phased it out over 10 years. In addition,
the 1996 Amendments eliminated the credit previously
available for income derived from certain qualified
investments in Puerto Rico. The Section 30A credit
and the remaining Section 936 credit are discussed
below.
Section 30A. The 1996 Amendments added a new Section
30A to the Code. Section 30A permits a "qualifying
domestic corporation" ("QDC") that meets certain
gross income tests (which are similar to the 80% and
75% gross income tests of Section 936 of the Code
discussed below) to claim a credit (the "Section 30A
credit") against the federal income tax imposed on
taxable income derived from sources outside the
United States from the active conduct of a trade or
business in Puerto Rico or from the sale of
substantially all the assets used in such business
("possession income").
A QDC is a U.S. corporation which (i) was actively
conducting a trade or business in Puerto Rico on
October 13, 1995, (ii) had a Section 936 election in
effect for its taxable year that included October 13,
1995, (iii) does not have in effect an election to
use the percentage limitation of Section 936(a)(4)(B)
of the Code, and (iv) does not add a "substantial new
line of business."
The Section 30A credit is limited to the sum of (i)
60% of qualified possession wages as defined in the
Code, which includes wages up to 85% of the maximum
earnings subject to the OASDI portion of Social
Security taxes plus an allowance for fringe benefits
of 15% of qualified possession wages, (ii) a
specified percentage of depreciation deductions
ranging between 15% and 65%, based on the class life
of tangible property, and (iii) a portion of Puerto
Rico income taxes paid by the QDC, up to a 9%
effective tax rate (but only if the QDC does not
elect the profit-split method for allocating income
from intangible property).
A QDC electing Section 30A of the Code may compute
the amount of its active business income, eligible
for the Section 30A Credit, by using either the cost
sharing formula, the profit-split formula, or the
cost-plus formula, under the same rules and
guidelines prescribed for such formulas as provided
under Section 936 (see discussion below). To be
eligible for the first two formulas, the QDC must
have a significant presence in Puerto Rico.
In the case of taxable years beginning after December
31, 2001, the amount of possession income that would
qualify for the Section 30A credit would be subject
to a cap based on the QDC's possession income for an
average adjusted base period ending before October
14, 1995.
Section 30A applies only to taxable years beginning
after December 31, 1995 and before January 1, 2006.
Section 936. Under Section 936 of the Code, as
amended by the 1996 Amendments, and as an alternative
to the Section 30A credit, U.S. corporations that
meet certain requirements and elect its application
("Section 936 Corporations") are entitled to credit
against their U.S. corporate income tax, the portion
of such tax attributable to income derived from the
active conduct of a trade or business within Puerto
Rico ("active business income") and from the sale or
exchange of substantially all assets used in the
active conduct of such trade or business. To qualify
under Section 936 in any given taxable year, a
corporation must derive for the three-year period
immediately preceding the end of such taxable year
(i) 80% or more of its gross income from sources
within Puerto Rico and (ii) 75% or more of its gross
income from the active conduct of a trade or business
in Puerto Rico.
Under Section 936, a Section 936 Corporation may
elect to compute its active business income, eligible
for the Section 936 credit, under one of three
formulas: (A) a cost-sharing formula, whereby it is
allowed to claim all profits attributable to
manufacturing intangibles, and other functions
carried out in Puerto Rico, provided it contributes
to the research and development expenses of its
affiliated group or pays certain royalties; (B) a
profit-split formula, whereby it is allowed to claim
50% of the net income of its affiliated group from
the sale of products manufactured in Puerto Rico; or
(C) a cost-plus formula, whereby it is allowed to
claim a reasonable profit on the manufacturing costs
incurred in Puerto Rico. To be eligible for the first
two formulas, the Section 936 Corporation must have
a significant business presence in Puerto Rico for
purposes of the Section 936 rules.
As a result of the 1993 Amendments and the 1996
Amendments, the Section 936 credit is only available
to companies that elect the percentage of income
limitation and is limited in amount to 40% of the
credit allowable prior to the 1993 Amendments,
subject to a five-year phase-in period from 1994 to
1998 during which period the percentage of the
allowable credit is reduced from 60% to 40%.
In the case of taxable years beginning on or after
1998, the possession income subject to the Section
936 credit will be subject to a cap based on the
Section 936 Corporation's possession income for an
average adjusted base period ending on October 14,
1995. The Section 936 credit is eliminated for
taxable years beginning in 2006.
Proposal to Extend the Phaseout of Section 30A.
During 1997, the Government of Puerto Rico proposed
to Congress the enactment of a new permanent federal
incentive program similar to that provided under
Section 30A. Such a program would provide U.S.
companies a tax credit based on qualifying wages paid
and other wage-related expenses, such as fringe
benefits, as well as depreciation expenses for
certain tangible assets and research and development
expenses. Under the Governor's proposal, the credit
granted to qualifying companies would continue in
effect until Puerto Rico shows, among other things,
substantial economic improvements in terms of certain
economic parameters. The fiscal 1998 budget submitted
by President Clinton to Congress in February 1997
included a proposal to modify Section 30A to (i)
extend the availability of the Section 30A credit
indefinitely; (ii) make it available to companies
establishing operations in Puerto Rico after October
13, 1995; and (iii) eliminate the income cap.
Although this proposal, was not included in the final
fiscal 1998 federal budget, President Clinton's
fiscal 1999 budget submitted to Congress again
included these modifications to Section 30A. While
the Government of Puerto Rico plans to continue
lobbying for this proposal, it is not possible at
this time to predict whether the Section 30A credit
will be so modified.
Outlook. It is not possible at this time to
determine the long-term effect on the Puerto Rico
economy of the enactment of the 1996 Amendments. The
Government of Puerto Rico does not believe there will
be short-term or medium-term material adverse effects
on Puerto Rico's economy as a result of the enactment
of the 1996 Amendments. The Government of Puerto Rico
further believes that during the phase-out period
sufficient time exists to implement additional
incentive programs to safeguard Puerto Rico's
competitive
Issuer-Specific Changes. Changes in the financial
condition of an issuer, changes in specific economic
or political conditions that affect a particular type
of security or issuer, and changes in general
economic or political conditions can affect the
credit quality or value of an issuer's securities.
Lower-quality debt securities (those of less than
investment-grade quality) tend to be more sensitive
to these changes than higher-quality debt securities.
Entities providing credit support or a maturity-
shortening structure also can be affected by these
types of changes. Municipal securities backed by
current or anticipated revenues from a specific
project or specific assets can be negatively affected
by the discontinuance of the taxation supporting the
project or assets or the inability to collect
revenues for the project or from the assets. If the
Internal Revenue Service determines an issuer of a
municipal security has not complied with applicable
tax requirements, interest from the security could
become taxable and the security could decline
significantly in value. In addition, if the structure
of a security fails to function as intended, interest
from the security could become taxable or the
security could decline in value.
PORTFOLIO TRANSACTIONS
Newly issued securities normally are purchased
directly from the issuer or from an underwriter
acting as principal. Other purchases and sales
usually are placed with those dealers from which it
appears that the best price or execution will be
obtained; those dealers may be acting as either
agents or principals. The purchase price paid by the
fund to underwriters of newly issued securities
usually includes a concession paid by the issuer to
the underwriter, and purchases of after-market
securities from dealers normally are executed at a
price between the bid and asked prices. For the 1996,
1997 and 1998 fiscal years, the fund has paid no
brokerage commissions.
Allocation of transactions, including their
frequency, to various dealers is determined by the
manager in its best judgment and in a manner deemed
fair and reasonable to shareholders. The primary
considerations are availability of the desired
security and the prompt execution of orders in an
effective manner at the most favorable prices.
Subject to these considerations, dealers that provide
supplemental investment research and statistical or
other services to the manager may receive orders for
portfolio transactions by the fund. Information so
received is in addition to, and not in lieu of,
services required to be performed by the manager, and
the fees of the manager are not reduced as a
consequence of its use of such supplemental
information. Such information may be useful to the
manager in serving both the fund and other clients
and, conversely, supplemental information obtained by
the placement of business of other clients may be
useful to the manager in carrying out its obligations
to the fund.
The fund will not purchase Exempt Obligations during
the existence of any underwriting or selling group
relating thereto of which Salomon Smith Barney 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 Salomon 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 the manager, investments of the type the
fund may make also may be made by those other
accounts. When the fund and one or more other
accounts managed by the manager 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 the
manager 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 for or supply of various types
of tax-exempt securities. For the 1997, 1998 and
1999 fiscal years, the fund's portfolio turnover
rates were 36%, 55% and ___%, respectively.
PURCHASE OF SHARES
Sales Charge Alternatives
The following classes of shares are available for
purchase. See the prospectus for a discussion of
factors to consider in selecting which Class of
shares to purchase.
Class A Shares. Class A shares are sold to investors
at the public offering price, which is the net asset
value plus an initial sales charge as follows:
Amount of
Investment
Sales Charge as
a %
Of Transaction
Sales Charge as
a %
of Amount
Invested
Dealers'
Reallowance as %
of 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 of $500,000 or more
will be made at net asset value without any initial
sales charge, but will be subject to a deferred
sales charge of 1.00% on redemptions made within 12
months of purchase. The deferred sales charge on
Class A shares is payable to Salomon Smith Barney,
which compensates Salomon Smith Barney Financial
Consultants and other dealers whose clients make
purchases of $500,000 or more. The deferred sales
charge is waived in the same circumstances in which
the deferred sales charge applicable to Class B and
Class L shares is waived. See "Purchase of Shares-
Deferred Sales Charge Alternatives" and "Purchase
of Shares-Waivers of Deferred Sales Charge."
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.
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 and his or her immediate family, or a
trustee or other fiduciary of a single trust estate
or single fiduciary account.
Class B Shares. Class B shares are sold without an
initial sales charge but are subject to a deferred
sales charge payable upon certain redemptions. See
"Deferred Sales Charge Provisions" below.
Class L Shares. Class L shares are sold with an
initial sales charge of 1.00% (which is equal to
1.01% of the amount invested) and are subject to a
deferred sales charge payable upon certain
redemptions. See "Deferred Sales Charge Provisions"
below. Until June 22, 2001 purchases of Class L
shares by investors who were holders of Class C
shares of the fund on June 12, 1998 will not be
subject to the 1% initial sales charge.
Class Y Shares. Class Y shares are sold without an
initial sales charge or deferred sales charge and are
available only to investors investing a minimum of
$15,000,000 (except purchases of Class Y shares by
Smith Barney Concert Allocation Series Inc., for
which there is no minimum purchase amount).
General
Investors may purchase shares from a Salomon Smith
Barney Financial Consultant or a Dealer
Representative. In addition, certain investors,
including qualified retirement plans purchasing
through certain Dealer Representatives, may purchase
shares directly from the fund. When purchasing
shares of the fund, investors must specify whether
the purchase is for Class A, Class B, Class L or
Class Y shares. Salomon Smith Barney and Dealer
Representatives may charge their customers an annual
account maintenance fee in connection with a
brokerage account through which an investor purchases
or holds shares. Accounts held directly at First
Data Investor Services Group, Inc. ("First Data" or
"transfer agent") are not subject to a maintenance
fee.
Investors in Class A, Class B and Class L shares may
open an account in the fund by making an initial
investment of at least $1,000 for each account, in
the fund. Investors in Class Y shares may open an
account by making an initial investment of
$15,000,000. Subsequent investments of at least $50
may be made for all Classes. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a monthly basis, the minimum
initial investment requirement for Class A, Class B
and Class L shares and subsequent investment
requirement for all Classes is $25. For shareholders
purchasing shares of the fund through the Systematic
Investment Plan on a quarterly basis, the minimum
initial investment required for Class A, Class B and
Class L shares and the subsequent investment
requirement for all Classes is $50. There are no
minimum investment requirements for Class A shares
for employees of Citigroup and its subsidiaries,
including Salomon Smith Barney, unitholders who
invest distributions from a Unit Investment Trust
("UIT") sponsored by Salomon Smith Barney, and
Directors/Trustees of any of the Smith Barney Mutual
Funds, 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 First Data. Share certificates are issued
only upon a shareholder's written request to First
Data.
Purchase orders received by the fund or a Salomon
Smith Barney Financial Consultant 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 a Dealer
Representative 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 the fund's agent prior to its
close of business. For shares purchased through
Salomon Smith Barney or a Dealer Representative
purchasing through Salomon Smith Barney, payment for
shares of the fund is due on the third business day
after the trade 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, Salomon Smith Barney or First Data is
authorized through preauthorized transfers of at
least $25 on a monthly basis or at least $50 on a
quarterly basis 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 Salomon Smith Barney or
First Data. The Systematic Investment Plan also
authorizes Salomon Smith Barney to apply cash held in
the shareholder's Salomon 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 Salomon Smith Barney Financial Consultant
or a Dealer Representative.
Sales Charge Waivers and Reductions
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 Citigroup and its
subsidiaries and any Citigroup affiliated funds
including the Smith Barney Mutual Funds (including
retired Board Members and 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, 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 to effect 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 Salomon Smith Barney
Financial Consultant (for a period up to 90 days from
the commencement of the Financial Consultant's
employment with Salomon 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) purchases by
shareholders who have redeemed Class A shares in the
fund (or Class A shares of another Smith Barney
Mutual Fund that is offered with a sales charge) and
who wish to reinvest their redemption proceeds in the
fund, provided the reinvestment is made within 60
calendar days of the redemption; (e) purchases by
accounts managed by registered investment advisory
subsidiaries of Citigroup; (f) purchases by a
separate account used to fund certain unregistered
variable annuity contracts; (g) investments of
distributions from a UIT sponsored by Salomon Smith
Barney; and (h) purchases by investors participating
in a Salomon Smith Barney fee-based arrangement. 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 other Smith Barney
Mutual Funds that are offered with a sales charge as
currently 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.
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 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 options of the investor, up to 90 days before
such date. Please contact a Salomon Smith Barney
Financial Consultant or First Data to obtain a Letter
of Intent application.
Letter of Intent - 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 Allocation Series Inc., for which
there is no minimum purchase amount). Such investors
must make an initial minimum purchase of $5,000,000
in Class Y shares of the fund and agree to purchase
a total of $15,000,000 of Class Y shares of the fund
within 13 months from the date of the Letter. If a
total investment of $15,000,000 is not made within
the 13-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 0.25%) and expenses applicable to the fund's
Class A shares, which may include a deferred sales
charge of 1.00%. Please contact a Salomon Smith
Barney Financial Consultant or First Data for further
information.
Deferred Sales Charge Provisions
''Deferred Sales Charge Shares'' are: (a) Class B
shares; (b) Class L shares; and (c) Class A shares
that were purchased without an initial sales charge
but are subject to a deferred sales charge. A
deferred sales charge may be imposed on certain
redemptions of these shares.
Any applicable deferred sales charge 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. Deferred Sales Charge
Shares that are redeemed will not be subject to a
deferred sales charge to the extent 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 L shares and
Class A shares that are Deferred Sales Charge Shares,
shares redeemed more than 12 months after their
purchase.
Class L shares and Class A shares that are Deferred
Sales Charge Shares are subject to a 1.00% deferred
sales charge if redeemed within 12 months of
purchase. In circumstances in which the deferred
sales charge is imposed on Class B shares, the amount
of the charge will depend on the number of years
since the shareholder made the purchase payment from
which the amount is being redeemed. Solely for
purposes of determining the number of years since a
purchase payment, all purchase payments made during
a month will be aggregated and deemed to have been
made on the last day of the preceding Salomon 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
Deferred sales charge
First
4.50%
Second
4.00
Third
3.00
Fourth
2.00
Fifth
1.00
Sixth and thereafter
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 shareholder 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.
The length of time Deferred Sales Charge Shares
acquired through an exchange have been held will be
calculated from the date 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
deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount
realized on redemption. The amount of any deferred
sales charge will be paid to Salomon Smith Barney.
To provide an example, assume an investor purchased
100 Class B shares of the fund at $10 per share for
a cost of $1,000. Subsequently, the investor
acquired 5 additional shares of the fund 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
deferred sales charge 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 Deferred Sales Charge
The deferred sales charge 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'') (however,
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 established prior to November 7, 1994); (c)
redemptions of shares within 12 months following the
death or disability of the shareholder; (d)
redemptions of shares made in connection with
qualified distributions from retirement plans or IRAs
upon the attainment of age 591/2; (e) involuntary
redemptions; and (f) redemptions of shares to effect
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 deferred sales charge imposed on the prior
redemption.
Deferred sales charge waivers will be granted subject
to confirmation (by Salomon Smith Barney in the case
of shareholders who are also Salomon Smith Barney
clients or by First Data in the case of all other
shareholders) of the shareholder's status or
holdings, as the case may be.
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
their own account; (c) a trustee or other fiduciary
purchasing shares for a single trust estate or single
fiduciary account; and (d) 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 on Class A shares should contact a
Salomon Smith Barney Financial Consultant.
DETERMINATION OF NET ASSET VALUE
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, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas, and on the preceding
Friday or subsequent Monday when one of these
holidays falls on a Saturday or Sunday, respectively.
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.
Generally, the fund's investments are valued at
market value or, in the absence of a market value
with respect to any securities, at fair value as
determined by or under the direction of the Board of
Directors. A security that is primarily traded on a
domestic or foreign exchange is valued at the last
sale price on that exchange or, if there were no
sales during the day, at the mean between the bid and
asked price. Over-the-counter securities are valued
at the mean between the bid and asked price. If
market quotations for those securities are not
readily available, they are valued at fair value, as
determined in good faith by the fund's Board of
Directors. An option is generally valued at the last
sale price or, in the absence of a last sale price,
the last offer price.
U.S. government securities will be valued at the mean
between the closing bid and asked prices on each day,
or, if market quotations for those securities are not
readily available, at fair value, as determined in
good faith by the fund's Board of Directors.
Short-term investments maturing in 60 days or less
are valued at amortized cost whenever the Board of
Directors determines that amortized cost reflects
fair value of those investments. Amortized cost
valuation involves valuing an instrument at its cost
initially and thereafter assuming a constant
amortization to maturity of any discount or premium,
regardless of the effect of fluctuating interest
rates on the market value of the instrument.
All other securities and other assets of the fund
will be valued at fair value as determined in good
faith by the fund's Board of Directors.
Determination of Public Offering Price
The fund offers its shares to the public on a
continuous basis. The public offering price per 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 per Class B and Class L 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. The method of computing the public
offering price is shown in the fund's financial
statements, incorporated by reference in their
entirety into this SAI.
REDEMPTION OF SHARES
The fund is required to redeem the shares of the fund
tendered to it, as described below, at a redemption
price equal to their net asset value per share next
determined after receipt of a written request in
proper form at no charge other than any applicable
deferred sales charge. 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 Salomon Smith Barney, or if the
shareholder's account is not with Salomon Smith
Barney, from the shareholder directly. The
redemption proceeds will be remitted on or before the
third business 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 Salomon Smith
Barney brokerage account, these funds will not be
invested for the shareholder's benefit without
specific instruction and Salomon 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 Salomon Smith Barney as custodian must
be redeemed by submitting a written request to a
Salomon Smith Barney Financial Consultant. Shares
other than those held by Salomon Smith Barney as
custodian may be redeemed through an investor's
Financial Consultant, Dealer Representative or by
submitting a written request for redemption to:
Smith Barney New Jersey Municipals Fund Inc.
Class A, B, L or Y (please specify)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
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 appearing on a share certificate, stock
power or written redemption request in excess of
$10,000 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
national securities exchange. Written redemption
requests of $10,000 or less do not require a
signature guarantee unless more than one such
redemption request is made in any 10-day period.
Redemption proceeds will be mailed to an investor's
address of record. The transfer agent may require
additional supporting documents for redemptions made
by corporations, executors, administrators, directors
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.
Shareholders who do not have a brokerage account may
be eligible to redeem and exchange shares by
telephone. To determine if a shareholder is entitled
to participate in this program, he or she should
contact the transfer agent at 1-800-451-2010. Once
eligibility is confirmed, the shareholder must
complete and return a Telephone/Wire Authorization
Form, along with a signature guarantee, that will be
provided by the transfer agent upon request.
(Alternatively, an investor may authorize telephone
redemptions on the new account application with the
applicant's signature guarantee when making his/her
initial investment in a fund.)
Redemptions. Redemption requests of up to $10,000
of any class or classes of shares of a fund may be
made by eligible shareholders by calling the transfer
agent at 1-800-451-2010. Such requests may be made
between 9:00 a.m. and 5:00 p.m. (Eastern time) on any
day the NYSE is open. Redemptions of shares (i) by
retirement plans or (ii) for which certificates have
been issued are not permitted under this program.
A shareholder will have the option of having the
redemption proceeds mailed to his/her address of
record or wired to a bank account predesignated by
the shareholder. Generally, redemption proceeds will
be mailed or wired, as the case may be, on the next
business day following the redemption request. In
order to use the wire procedures, the bank receiving
the proceeds must be a member of the Federal Reserve
System or have a correspondent relationship with a
member bank. The fund reserves the right to charge
shareholders a nominal fee for each wire redemption.
Such charges, if any, will be assessed against the
shareholder's account from which shares were
redeemed. In order to change the bank account
designated to receive redemption proceeds, a
shareholder must complete a new Telephone/Wire
Authorization Form and, for the protection of the
shareholder's assets, will be required to provide a
signature guarantee and certain other documentation.
Exchanges. Eligible shareholders may make exchanges
by telephone if the account registration of the
shares of the fund being acquired is identical to the
registration of the shares of the fund exchanged.
Such exchange requests may be made by calling the
transfer agent at 1-800-451-2010 between 9:00 a.m.
and 5:00 p.m. (Eastern time) on any day on which the
NYSE is open.
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.
Redemptions in Kind. In conformity with applicable
rules of the SEC, redemptions may be paid in
portfolio securities, in cash or any combination of
both, as the Board of Directors may deem advisable;
however, payments shall be made wholly in cash unless
the Board of Directors believes economic conditions
exist that would make such a practice detrimental to
the best interests of the fund and its remaining
shareholders. If a redemption is paid in portfolio
securities, such securities will be valued in
accordance with the procedures described under
"Determination of Net Asset Value" in the Prospectus
and a shareholder would incur brokerage expenses if
these securities were then converted to cash.
Distributions in Kind
If the fund's Board of Directors determines that it
would be detrimental to the best interests of the
remaining shareholders of the fund to make a
redemption payment wholly in cash, the fund may pay,
in accordance with SEC rules, any portion of a
redemption in excess of the lesser of $250,000 or
1.00% of the fund's net assets by a distribution in
kind of portfolio securities in lieu of cash.
Securities issued as a distribution in kind may incur
brokerage commissions when shareholders subsequently
sell those securities.
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 $50 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
deferred sales charge 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 deferred sales charge 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 shareholder 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. For additional
information, shareholders should contact a Salomon
Smith Barney Financial Consultant. Withdrawal Plans
should be set up with a Salomon 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 withdrawals. For additional
information, shareholders should contact a Salomon
Smith Barney Financial Consultant.
The fund offers shareholders an automatic cash
withdrawal plan, under which shareholders who own
shares with a value of at least $10,000 may elect to
receive cash payments of at least $50 monthly or
quarterly. Retirement plan accounts are eligible for
automatic cash withdrawal plans only where the
shareholder is eligible to receive qualified
distributions and has an account value of at least
$5,000. The withdrawal plan will be carried over on
exchanges between Classes of a fund. Any applicable
deferred sales charge 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 deferred sales charge at the time the
withdrawal plan commences. (With respect to
withdrawal plans in effect prior to November 7, 1994,
any applicable deferred sales charge will be waived
on amounts withdrawn that do not exceed 2.00% per
month of the value of the shareholder's shares
subject to the deferred sales charge.) For further
information regarding the automatic cash withdrawal
plan, shareholders should contact a Salomon Smith
Barney Financial Consultant.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Adviser and Administrator - SSBC
SSBC (formerly known as Mutual Management Corp.)
serves as investment adviser to the fund pursuant to
an investment advisory agreement (the "Investment
Advisory Agreement") with the fund which was approved
by the Board of Directors, including a majority of
directors who are not "interested persons" of the
fund or the manager. The manager is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings"), which in turn, is a wholly owned
subsidiary of Citigroup Inc. ("Citigroup"). Subject
to the supervision and direction of the fund's Board
of Directors, the manager manages the fund's
portfolio in accordance with the fund's stated
investment objective and policies, makes investment
decisions for the fund, places orders to purchase and
sell securities, and employs professional portfolio
managers and securities analysts who provide research
services to the fund. The manager pays the salary of
any officer and employee who is employed by both it
and the fund. The manager bears all expenses in
connection with the performance of its services.
SSBC (through its predecessor entities) has been in
the investment counseling business since 1968 and
renders investment advice to a wide variety of
individual, institutional and investment company
clients that had aggregate assets under management as
of March 31, 1999 in excess of $114 billion.
As compensation for investment advisory services, the
fund pays the manager a fee computed daily and
payable monthly at 0.30% of the value of the fund's
average daily net assets. For the fiscal years ended
March 31, 1997, 1998 and 1999, the fund paid the
manager net of fee waivers and expense
reimbursements, $651,616, $665,651 and $ ,
respectively, in investment advisory fees. For the
fiscal years ended March 31, 1997, the manager
voluntarily waived investment advisory fees of $
, respectively.
The manager also serves as administrator to the fund
pursuant to a written agreement (the "Administration
Agreement"). The services provided by the manager
under the Administration Agreement are described in
the prospectus under "Management.'' The manager pays
the salary of all officers and employees who are
employed by both it and the fund and bears all
expenses in connection with the performance of its
services.
As administrator SSBC: (a) assists in supervising all
aspects of the fund's operations; b) supplies the
fund with office facilities (which may be in SSBC's
own offices), statistical and research data, data
processing services, clerical, accounting and
bookkeeping services, including, but not limited to,
the calculation of (i) the net asset value of shares
of the fund, (ii) applicable contingent deferred
sales charges and similar fees and charges and (iii)
distribution fees, internal auditing and legal
services, internal executive and administrative
services, and stationary and office supplies; and (c)
prepares reports to shareholders of the fund, tax
returns and reports to and filings with the SEC and
state blue sky authorities.
As compensation for administrative services rendered
to the fund, the manager receives a fee computed
daily and payable monthly at the following annual
rates of average daily net assets: 0.20% up to $500
million; and 0.18% in excess of $500 million. For
the fiscal year ended March 31, 1997, the fund paid
$434,410 (net of fee waivers amounting to $ ) in
administration fees. For the fiscal year ended March
31, 1998, the fund paid the manager $443,768 (net of
fee waivers amounting to $ ) in administration
fees. For the fiscal year ended March 31, 1999, the
fund paid the manager $ in administration
fees.
The fund bears expenses incurred in its operations
including: taxes, interest, brokerage fees and
commissions, if any; fees of directors of the fund
who are not officers, directors, shareholders or
employees of Salomon Smith Barney or the manager; SEC
fees and state Blue Sky notice fees; charges of
custodians; transfer and dividend disbursing agent's
fees; certain insurance premiums; outside auditing
and legal expenses; costs of maintaining corporate
existence; costs of investor services (including
allocated telephone and personnel expenses); costs of
preparing 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.
Auditors
KPMG LLP, independent auditors, 345 Park Avenue, New
York, New York 10154, have been selected to serve as
auditors of the fund and to render opinions on the
fund's financial statements for the fiscal year ended
March 31, 2000.
Custodian and Transfer Agent
PNC Bank, National Association, located at 17th and
Chestnut Streets, Philadelphia, Pennsylvania 19103,
serves as the fund's custodian. 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
Federal Street, Boston, Massachusetts 02110, serves
as the fund's transfer agent. Under the transfer
agency agreement, First Data 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, First Data
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.
Distributor
CFBDS, Inc., located at 20 Milk Street, Boston,
Massachusetts 02109-5408 serves as the fund's
distributor pursuant to a written agreement dated
October 8, 1998 (the "Distribution Agreement") which
was approved by the fund's Board of Directors,
including a majority of the Independent Directors on
July 15, 1998. Prior to the merger of Travelers
Group, Inc. and Citicorp Inc. on October 8, 1998,
Salomon Smith Barney served as the fund's
distributor. For the 1997 and 1998 fiscal years,
Salomon Smith Barney, received $ and $
respectively, in sales charges from the sale
of Class A shares, and did not reallow any portion
thereof to dealers. For the period April 1, 1998
through October 7, 1998 the aggregate dollar amount
of sales charges on Class A shares was $ all
of which was paid to Salomon Smith Barney. For the
period October 8, 1998 through March 31, 1999 the
aggregate dollar amount of sales charges on Class A
shares was $ , $ of which was paid to Salomon
Smith Barney.
For the period June 12, 1998 through October 7, 1998
the aggregate dollar amount of sales charges on Class
L shares was $ , all of which was paid to Salomon
Smith Barney. For the period October 8, 1998 through
March 31, 1999 the aggregate dollar amount of sales
charges on Class L shares was $ , $ of which
was paid to Salomon Smith Barney.
For the fiscal years ended March 31, 1997, 1998 and
1999, Salomon Smith Barney or its predecessor
received from shareholders $ , $ and $
, respectively, in deferred sales charges on
the redemption of Class B shares. For the fiscal
years ended March 31, 1997, 1998 and 1999, Salomon
Smith Barney or its predecessor received from $
, $ and $ , respectively, in
deferred sales charges on redemption of Class L
shares.
When payment is made by the investor before the
settlement date, unless otherwise noted by the
investor, the funds will be held as a free credit
balance in the investor's brokerage account and
Salomon Smith Barney may benefit from the temporary
use of the funds. The fund's Board of Directors has
been advised of the benefits to Salomon Smith Barney
resulting from these settlement procedures and will
take such benefits into consideration when reviewing
the Investment Management Agreement for continuance.
Distribution Arrangements. To compensate Salomon
Smith Barney for the service it provides and for the
expense it bears, 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
Salomon 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 L
shares. In addition, the fund pays Salomon Smith
Barney a distribution fee with respect to Class B and
Class L shares primarily intended to compensate
Salomon Smith Barney for its initial expense of
paying Financial Consultants a commission upon sales
of those shares. The Class B and Class L
distribution fee is calculated at the annual rate of
0.50% and 0.55%, respectively, of the value of the
fund's average net assets attributable to the shares
of each Class.
For the fiscal year ended March 31, 1999, Salomon
Smith Barney incurred distribution expenses totaling
$ consisting of approximately $ for
advertising, $ for printing and mailing of
prospectuses, $ for support services, $
to Salomon Smith Barney Financial Consultants,
and $ in accruals for interest on the excess of
Salomon Smith Barney expenses incurred in
distributing the fund's shares over the sum of the
distribution fees and deferred sales charge received
by Salomon Smith Barney from the fund.
The following service and distribution fees were
incurred pursuant to a Distribution Plan during the
periods indicated:
Distribution Plan Fees
Fiscal Year
Ended 3/31/99
Fiscal Year
Ended 3/31/98
Fiscal Year
Ended 3/31/97
Class A
$
$ 228,814
$ 224,109
Class B
$
$ 415,461
$ 393,386
Class L*
$
$ 37,970
$ 30,638
* Class L shares were called Class C shares
until June 12, 1998.
Under its terms, the Plan continues from year to
year, provided such continuance is approved annually
by vote of the Board of Directors, including a
majority of the Independent Directors. 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 Independent Directors
in the manner described above. The Plan may be
terminated with respect to a Class of the fund 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,
Salomon Smith Barney will provide the fund's Board of
Directors with periodic reports of amounts expended
under the Plan and the purpose for which such
expenditures were made.
VALUATION OF SHARES
The fund's net asset value per share is determined as
of close of regular trading on the NYSE, on each day
that the NYSE is open, by dividing value of the
fund's net assets attributable to each Class by the
total number of shares of that Class outstanding.
When, in judgement of the pricing 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
judgement of the pricing service, there is no readily
obtainable market quotation (which may contribute a
majority of the portfolio securities) are carried at
fair value of securities of similar type, yield
maturity. Pricing services generally determine value
by reference to transactions in municipal
obligations, quotations from municipal bond dealers,
market transaction in comparable securities and
various relationships between securities. 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.
Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the
instrument. Securities and other assets that are not
available will be valued in good faith at fair value
by or under the direction of the fund's Board of
Directors.
EXCHANGE PRIVILEGE
Shares of each Class of the fund may be exchanged for
shares of the same Class of certain 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 L shares are
subject to minimum investment requirements and all
shares are subject to the other requirements of the
fund into which exchanges are made.
Class B Exchanges. If a Class B shareholder wishes
to exchange all or a portion of his or her shares in
any of the funds imposing a higher deferred sales
charge than that imposed by the fund, the exchanged
Class B shares will be subject to the higher
applicable deferred sales charge. Upon an exchange,
the new Class B shares will be deemed to have been
purchased on the same date as the Class B shares of
the fund that have been exchanged.
Class L Exchanges. Upon an exchange, the new Class
L shares will be deemed to have been purchased on the
same date as the Class L shares of the fund that have
been exchanged.
Class A and Class Y Exchanges. Class A and Class Y
shareholders of the fund who wish to exchange all or
a portion of their shares for shares of the
respective Class 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. The manager 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 the shareholder. Upon such a
determination, the fund will provide notice in
writing or by telephone to the shareholder at least
15 days prior to suspending the exchange privilege
and during the 15 day period the shareholder will be
required to (a) redeem his or her shares in the fund
or (b) remain invested in the fund or exchange into
any of the funds of the Smith Barney Mutual Funds
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
Redemptions and Exchange Program.'' Exchanges will be
processed at the net asset value next determined.
Redemption procedures discussed below are also
applicable for exchanging shares, and exchanges will
be made upon receipt of all supporting documents in
proper form. If the account registration of the
shares of the fund being acquired is identical to the
registration of the shares of the fund exchanged, no
signature guarantee is required. An exchange
involves a taxable redemption of shares, subject to
the tax treatment described in "Dividends,
Distributions and Taxes" below, followed by a
purchase of shares of a different fund. 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.
PERFORMANCE INFORMATION
From time to time, the fund may quote 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 data from the following
industry and financial publications: Barron's,
Business Week, CDA Investment Technologies, Inc.,
Changing Times, Forbes, Fortune, Institutional
Investor, Investors Daily, Money, Morningstar Mutual
Fund Values, The New York Times, USA Today and The
Wall Street Journal.
Yield and Equivalent Taxable 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 L
shares for the 30-day period ended March 31, 1999 was
%, % and %, respectively. The equivalent
taxable yield for Class A, Class B and Class L shares
for that same period was %, % and %,
respectively, assuming the payment of Federal income
taxes at a rate of 39.6% and New Jersey taxes at a
rate of %.
Average Annual Total Return
"Average annual total return," as described below, is
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
a 1-, 5-, or 10-year period
(or fractional portion
thereof), assuming
reinvestment of all
dividends and distributions.
The fund's average annual total return for Class A
shares assuming the maximum applicable sales charge
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
% for the one-year period ended March 31,
1999.
% for the five-year period ended March
31, 1999.
% for the ten-year period ended March 31,
1999.
% per annum from April 22, 1988
(commencement of operations) through
March 31, 1999.
A Class' average annual total return assumes that the
maximum applicable sales charge or deferred sales
charge assessed by the fund has been deducted from
the hypothetical investment. Had the maximum 4.00%
sales charge had not been deducted, Class A's average
annual total return would have been %, % and
%, respectively, for those same periods.
The fund's average annual total return for Class B
shares assuming the maximum applicable deferred sales
charge was as follows for the periods indicated
(reflecting the waiver of the fund's investment
advisory and administration fees and reimbursement of
expenses):
% for the one-year period ended March 31,
1999.
% for the five-year period ended March
31, 1999.
% per annum from November 6, 1992
(commencement of operations) through
March 31, 1999.
Had the maximum applicable deferred sales charge had
not been deducted at the time of redemption,
Class B's average annual total return would have been
%, % and %, respectively, for the same
periods.
The fund's average annual total return for Class L
shares assuming the maximum applicable deferred sales
charge was as follows for the periods indicated
(reflecting the waiver of the fund's investment
advisory and administration fees and reimbursement of
expenses):
% for the one-year period ended March 31,
1999.
% per annum from December 13, 1994
(commencement of operations) through
March 31, 1999.
Had the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class
L's average annual total return for the one-year
period ended March 31, 1999 would have been %.
Aggregate Total Return
"Aggregate total return" represents the cumulative
change in the value of an investment in the Class for
the specified period and is 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 a 1-, 5-,
or 10-year period at the end of a
1-, 5-, or 10-year period (or
fractional portion thereof),
assuming reinvestment of all
dividends and distributions.
The fund's aggregate total return for Class A shares
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
% for the one-year period ended March 31,
1999.
% for the five-year period ended March
31, 1999.
% for the ten-year period ended March 31,
1999.
% for the period from April 22, 1988
(commencement of operations) through
March 31, 1999.
Class A's aggregate total return assumes that the
maximum applicable sales charge or maximum applicable
deferred sales charge has been deducted from the
investment. If the maximum sales charge had not been
deducted at the time of purchase, Class A's aggregate
total return for the same periods would have been
%, % and %, respectively.
The fund's aggregate total return for Class B shares
was as follows for the periods indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
% for the one-year period ended March 31,
1999.
% for the five-year period ended March
31, 1999.
% for the period from November 6, 1992
(commencement of operations) through
March 31, 1999.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class
B's aggregate total return for the same periods would
have been %, % and %, respectively.
The fund's aggregate total return for Class L shares
was as follows for the period indicated (reflecting
the waiver of the fund's investment advisory and
administration fees and reimbursement of expenses):
% for the one-year period ended March 31,
1999.
% for the period from December 13, 1994
(commencement of operations) through
March 31, 1999.
If the maximum applicable deferred sales charge had
not been deducted at the time of redemption, Class
L's aggregate total return for the one-year period
ended March 31, 1999 would have been %.
Performance will vary from time to time depending on
market conditions, the composition of the fund's
portfolio and operating expenses and the expenses
exclusively attributable to the Class. Consequently,
any given performance quotation should not be
considered as representative of the Class'
performance for any specified period in the future.
Because performance will vary, it may not provide a
basis for comparing an investment in the Class with
certain bank deposits or other investments that pay
a fixed yield for a stated period of time. Investors
comparing a Class' performance with that of other
mutual funds should give consideration to the quality
and maturity of the respective investment companies'
portfolio securities.
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 fluctuations in interest rates and the expenses of
the fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distributions. The fund's policy is to
declare and pay exempt-interest dividends monthly.
Dividends from net realized capital gains, if any,
will be distributed annually. The fund may also pay
additional dividends shortly before December 31 from
certain amounts of undistributed ordinary income and
capital gains, in order to avoid a Federal excise tax
liability. If a shareholder does not otherwise
instruct, exempt-interest dividends and capital gain
distributions will be reinvested automatically in
additional shares of the same Class at net asset
value, with no additional sales charge or deferred
sales charge.
The per share amounts of the exempt-interest
dividends on Class B and Class L shares may be lower
than on Class A and Class Y shares, mainly as a
result of the distribution fees applicable to Class
B and Class L shares. Similarly, the per share
amounts of exempt-interest dividends on Class A
shares may be lower than on Class Y shares, as a
result of the service fee attributable to Class A
shares. Capital gain distributions, if any, will be
the same across all Classes of fund shares (A, B, L
and Y).
Taxes. The following is a summary of the material
United States federal income tax considerations
regarding the purchase, ownership and disposition of
shares of the fund. Each prospective shareholder is
urged to consult his own tax adviser with respect to
the specific federal, state and local consequences of
investing in the fund. The summary is based on the
laws in effect on the date of this SAI, which are
subject to change.
The fund and its investments
As described in the fund's prospectus, the fund is
designed to provide shareholders with current income
which is excluded from gross income for federal
income tax purposes and which is 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 because such investors
would not gain any additional tax benefit from the
receipt of tax-exempt income.
The fund intends to continue to qualify to be treated
as a regulated investment company each taxable year
under the Code. To so qualify, the fund must, among
other things: (a) derive at least 90% of its gross
income in each taxable year from dividends, interest,
payments with respect to securities loans, and gains
from the sale or other disposition of stock or
securities or foreign currencies, or other income
(including, but not limited to, gains from options,
futures or forward contracts) derived with respect to
its business of investing in such stock, securities
or currencies; and (b) diversify its holdings so
that, at the end of each quarter of the fund's
taxable year, (i) at least 50% of the market value of
the fund's assets is represented by cash, securities
of other regulated investment companies, United
States government securities and other securities,
with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the
fund's assets and not greater than 10% of the
outstanding voting securities of such issuer and (ii)
not more than 25% of the value of its assets is
invested in the securities (other than United States
government securities or securities of other
regulated investment companies) of any one issuer or
any two or more issuers that the fund controls and
are determined to be engaged in the same or similar
trades or businesses or related trades or businesses.
As a regulated investment company, the fund will not
be subject to United States federal income tax on its
net investment income (i.e., income other than its
net realized long- and short-term capital gains) and
its net realized long- and short-term capital gains,
if any, that it distributes to its shareholders,
provided that an amount equal to at least 90% of the
sum of its investment company taxable income (i.e.,
90% of its taxable income minus the excess, if any,
of its net realized long-term capital gains over its
net realized short-term capital losses (including any
capital loss carryovers), plus or minus certain other
adjustments as specified in the Code) and its net
tax-exempt income for the taxable year is distributed
in compliance with the Code's timing and other
requirements but will be subject to tax at regular
corporate rates on any taxable income or gains that
it does not distribute. Furthermore, the fund will
be subject to a United States corporate income tax
with respect to such distributed amounts in any year
that it fails to qualify as a regulated investment
company or fails to meet this distribution
requirement.
The Code imposes a 4% nondeductible excise tax on the
fund to the extent it does not distribute by the end
of any calendar year at least 98% of its net
investment income for that year and 98% of the net
amount of its capital gains (both long-and short-
term) for the one-year period ending, as a general
rule, on October 31 of that year. For this purpose,
however, any income or gain retained by the fund that
is subject to corporate income tax will be considered
to have been distributed by year-end. In addition,
the minimum amounts that must be distributed in any
year to avoid the excise tax will be increased or
decreased to reflect any underdistribution or
overdistribution, as the case may be, from the
previous year. The fund anticipates that it will pay
such dividends and will make such distributions as
are necessary in order to avoid the application of
this tax.
If, in any taxable year, the fund fails to qualify as
a regulated investment company under the Code or
fails to meet the distribution requirement, it would
be taxed in the same manner as an ordinary
corporation and distributions to its shareholders
would not be deductible by the fund in computing its
taxable income. In addition, in the event of a
failure to qualify, the fund's distributions, to the
extent derived from the fund's current or accumulated
earnings and profits would constitute dividends
(eligible for the corporate dividends-received
deduction) which are taxable to shareholders as
ordinary income, even though those distributions
might otherwise (at least in part) have been treated
in the shareholders' hands as tax-exempt interest.
If the fund fails to qualify as a regulated
investment company in any year, it must pay out its
earnings and profits accumulated in that year in
order to qualify again as a regulated investment
company. In addition, if the fund failed to qualify
as a regulated investment company for a period
greater than one taxable year, the fund may be
required to recognize any net built-in gains (the
excess of the aggregate gains, including items of
income, over aggregate losses that would have been
realized if it had been liquidated) in order to
qualify as a regulated investment company in a
subsequent year.
The fund's transactions in municipal bond index and
interest rate futures contracts and options on these
futures contracts (collectively "section 1256
contracts") will be subject to special provisions of
the Code (including provisions relating to "hedging
transactions" and "straddles") that, among other
things, may affect the character of gains and losses
realized by the fund (i.e., may affect whether gains
or losses are ordinary or capital), accelerate
recognition of income to the fund and defer fund
losses. These rules could therefore affect the
character, amount and timing of distributions to
shareholders. These provisions also (a) will require
the fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if
they were closed out) and (b) may cause the fund to
recognize income without receiving cash with which to
pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements
for avoiding income and excise taxes. The fund will
monitor its transactions, will make the appropriate
tax elections and will make the appropriate entries
in its books and records when it engages in these
transactions in order to mitigate the effect of these
rules and prevent disqualification of the fund as a
regulated investment company.
All section 1256 contracts held by the fund at the
end of its taxable year are required to be marked to
their market value, and any unrealized gain or loss
on those positions will be included in the fund's
income as if each position had been sold for its fair
market value at the end of the taxable year. The
resulting gain or loss will be combined with any gain
or loss realized by the fund from positions in
section 1256 contracts closed during the taxable
year. Provided such positions were held as capital
assets and were not part of a "hedging transaction"
nor part of a "straddle," 60% of the resulting net
gain or loss will be treated as long-term capital
gain or loss, and 40% of such net gain or loss will
be treated as short-term capital gain or loss,
regardless of the period of time the positions were
actually held by the fund.
Taxation of Shareholders
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 tax purposes and New
Jersey personal income tax purposes. If a
shareholder receives exempt-interest dividends with
respect to any share and if such share is held by the
shareholder for six months or less, then, for Federal
income tax purposes, any loss on the sale or exchange
of such share may, to the extent of exempt-interest
dividends, 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 exempt-
interest 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, some or all of
the fund's dividends may be a specific preference
item, or a component of an adjustment item, for
purposes of the Federal individual and corporate
alternative minimum taxes. In addition, the receipt
of the fund's dividends and distributions may affect
a foreign corporate shareholder's Federal "branch
profits" tax liability and Federal "excess net
passive income" tax liability of a shareholder of a
Subchapter S corporation. 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
or (b) subject to a federal alternative minimum tax,
the Federal branch profits tax or the Federal "excess
net passive income" tax.
The fund does not expect to realize a significant
amount of capital gains. Net realized short-term
capital gains are taxable to a United States
shareholder as ordinary income, whether paid in cash
or in shares. Distributions of net-long-term capital
gains, if any, that the fund designates as capital
gains dividends are taxable as long-term capital
gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares
of the fund.
Upon the sale or exchange of his shares, a
shareholder will realize a taxable gain or loss equal
to the difference between the amount realized and his
basis in his shares. Such gain or loss will be
treated as capital gain or loss, if the shares are
capital assets in the shareholder's hands, and will
be long-term capital gain or loss if the shares are
held for more than one year and short-term capital
gain or loss if the shares are held for one year or
less. Any loss realized on a sale or exchange will
be disallowed to the extent the shares disposed of
are replaced, including replacement through the
reinvesting of dividends and capital gains
distributions in the fund, within a 61-day period
beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis
of the shares acquired will be increased to reflect
the disallowed loss. Any loss realized by a
shareholder on the sale of a fund share held by the
shareholder for six months or less (to the extent not
disallowed pursuant to the six-month rule described
above relating to exempt-interest dividends) will be
treated for United States federal income tax purposes
as a long-term capital loss to the extent of any
distributions or deemed distributions of long-term
capital gains received by the shareholder with
respect to such share.
If a shareholder incurs a sales charge in acquiring
shares of the fund, disposes of those shares within
90 days and then acquires shares in a mutual fund for
which the otherwise applicable sales charge is
reduced by reason of a reinvestment right (e.g., an
exchange privilege), the original sales charge will
not be taken into account in computing gain or loss
on the original shares to the extent the subsequent
sales charge is reduced. Instead, the disregarded
portion of the original sales charge will be added to
the 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 by shifting his or her investment in a
family of mutual funds.
Backup Withholding. The fund may be required to
withhold, for United States federal income tax
purposes, 31% of (a) taxable dividends and
distributions and (b) redemption proceeds payable to
shareholders who fail to provide the fund with their
correct taxpayer identification number or to make
required certifications, or who have been notified by
the IRS that they are subject to backup withholding.
Certain shareholders are exempt from backup
withholding. Backup withholding is not an additional
tax and any amount withheld may be credited against
a shareholder's United States federal income tax
liabilities.
Notices. Shareholders will be notified annually by
the fund as to the United States federal income tax
and New Jersey personal income tax status of the
dividends and distributions made by the fund to its
shareholders. 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.
The dollar amount of dividends excluded or exempt
from Federal income taxation and New Jersey personal
income taxation and the dollar amount of dividends
subject to Federal income taxation and 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. To the
extent the fund earns taxable net investment income,
it intends to designate as taxable dividends the same
percentage of each day's dividend as its taxable net
investment income bears to its total net investment
income earned on that day.
The foregoing is only a summary of certain material
tax consequences affecting the fund and its
shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular
tax consequences to them of an investment in the
fund.
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
commenced operations on April 22, 1988 under the
name Shearson Lehman New Jersey Municipals Inc. On
October 14, 1994, the fund changed its name to
Smith Barney New Jersey Municipals Fund Inc.
Each Class of the fund represents an identical
interest in the fund's investment portfolio. As a
result, the Classes have the same rights, privileges
and preferences, except with respect to: (a) the
designation of each Class; (b) the effect of the
respective sales charges for each Class; (c) the
distribution and/or service fees borne by each Class;
(d) the expenses allocable exclusively to each Class;
(e) voting rights on matters exclusively affecting a
single Class; (f) the exchange privilege of each
Class; and (g) the conversion feature of the Class B
shares. The Board of Directors does not anticipate
that there will be any conflicts among the interests
of the holders of the different Classes. The
Directors, on an ongoing basis, will consider whether
any such conflict exists and, if so, take appropriate
action.
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 on vote for each
full share owned and proportionate, fractional vote
for any fractional share held of that Class.
Generally, shares of the fund will be voted on a
fund-wide basis on all matters except matters
affecting only the interests of one Class.
The fund sends to each of its shareholders a semi-
annual report and an audited annual report, which
include listings of the investment securities held by
the fund at the end of the reporting period. In an
effort to reduce the fund's printing and mailing
costs, the fund plans to consolidate the mailing of
its semi-annual and annual reports by household.
This consolidation means that a household having
multiple accounts with the identical address of
record will receive a single copy of each report.
Shareholders who do not want this consolidation to
apply to their account should contact their Financial
Consultants or the Transfer Agent.
FINANCIAL STATEMENTS
The fund's annual report for the fiscal year ended
March 31, 1999 will be filed on or about July 1,
1999 and will be incorporated by reference in its
entirety Accession Number .
APPENDIX A
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.
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- 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, 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 margins of protection ample 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 narrow and
market access for refinancing is likely to be less
well established.
Description of S&P A-1+ and A-1 Commercial Paper
Rating
The rating A-1+ is the highest, and A-1 the second
highest, commercial paper rating assigned by S&P.
Paper rated A-1+ must have either the direct credit
support of an issuer or guarantor that possesses
excellent long-term operating and financial strengths
combined with strong liquidity characteristics
(typically, such issuers or guarantors would display
credit quality characteristics which would warrant a
senior bond rating of "AA-'' or higher), or the
direct credit support of an issuer or guarantor that
possesses above-average long-term fundamental
operating and financing capabilities combined with
ongoing excellent liquidity characteristics. Paper
rated A-1 by S&P has the following characteristics:
liquidity ratios are adequate to meet cash
requirements; long-term senior debt is rated "A'' or
better; the issuer has access to at least two
additional channels of borrowing; basic earnings and
cash flow have an upward trend with 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: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's
industry or industries and an appraisal of
speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's
products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of
long-term debt; (6) trend of earnings over a period
of ten years; (7) financial strength of a parent
company and the relationships which exist with the
issuer; and (8) 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
July 29, 1999
Smith Barney New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, NY 10013
SALOMON SMITH BARNEY
A
Member of Citigroup [Symbol]
12
FUNDACCOUNTING\LEGAL\FUNDS\NJMU\NJMU SAI 1999
Part C-Other Information
Item 23.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 Nos. 33-18779 and 811-5486 (the "Registration Statement").
(a)(1) 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").
(2) 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").
(3) 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.
(4) Articles of Amendment dated June 1, 1998 of the Articles of
Incorporation is filed herein.
(b) Registrant's By-Laws dated November 23, 1987 are
incorporated by reference to the Registration Statement.
(c) 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").
(d)(1) Investment Advisory Agreement dated July 30, 1993 between
the Registrant and Greenwich Street Advisors is incorporated by reference
to Post-Effective Amendment No. 12.
(2) 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").
(e)(1) 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.
(2) Distribution Agreement between CFBDS, Inc. and the Registrant dated
October 8, 1998 is filed herein.
(3) Selling Group Agreement is filed herein.
(f) Not Applicable.
(g) Custody Agreement dated June 12, 1995 between the Registrant
and PNC Bank, National Association is incorporated by reference to
Post-Effective Ammendment No. 16.
(h)(1) 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.
(2) 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.
(h) Opinion of Counsel as to Legality of Securities being
offered is incorporated by reference to Post-Effective Amendment
No. 14.
(j) Consent of KPMG Peat Marwick LLP to be filed by amendment.
(k) Not Applicable.
(l) Not Applicable.
(m)(1) 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.
(2) Form of Amended Service and Distribution Plan pursuant to Rule
12b-1 between the Registrant and Salomon Smith Barney Inc. is filed herein.
(n) Financial Data Schedule to be filed by amendment.
(o)(1) 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.
(2) Form of Registrant's Rule 18f-3(d) Multiple Class Plan is filed herein.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification
Response to this item is incorporated by reference to
Post-Effective Amendment No. 9.
Item 26. Business and Other Connections of Investment Adviser
Investment Adviser - - SSBC Fund Management Inc. (SSBC)(formerly
known as Mutual Management Corp.)
SSBC was incorporated in December 1968 under the laws of the State
of Delaware. SSBC is a wholly owned subsidiary of Salomon Smith
Barney Holdings Inc. ("Holdings") (formerly known as Smith Barney
Holdings Inc.) which in turn is a wholly owned subsidiary of Citigroup
Inc. ("Citigroup"). SSBC is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 26 of officers and directors of
SSBC together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by
reference to Schedules A and D of FORM ADV filed by SSBC pursuant to
the Advisers Act (SEC File No. 801-8314).
Item 29. Principal Underwriters
(a)
CFBDS, Inc., ("CFBDS") the Registrant's Distributor, is also the
distributor for the following Smith Barney funds: Concert Investment
Series, Consulting Group Capital Markets Funds, Greenwich Street Series
Fund, Smith Barney Adjustable Rate Government Income Fund, Smith
Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund Inc.,
Smith Barney Arizona Municipals Fund Inc., Smith Barney California
Municipals Fund Inc., Smith Barney Concert Allocation Series Inc.,
Smith Barney Equity Funds, Smith Barney Fundamental Value Fund Inc.,
Smith Barney Funds, Inc., Smith Barney Income Funds, Smith Barney
Institutional Cash Management Fund, Inc., Smith Barney Investment
Funds Inc., Smith Barney Investment Trust, Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals Fund Inc.,
Smith Barney Massachusetts Municipals Fund, Smith Barney Money
Funds, Inc., Smith Barney Muni Funds, Smith Barney Municipal Money
Market Fund, Inc., Smith Barney New Jersey Municipals Fund Inc.,
Smith Barney Oregon Municipals Fund Inc., Smith Barney Principal
Return Fund, Smith Barney Small Cap Blend Fund, Inc., Smith
Barney Telecommunications Trust, Smith Barney Variable Account Funds,
Smith Barney World Funds, Inc., Travelers Series Fund Inc., and
various series of unit investment trusts.
CFBDS also serves as the distributor for the following funds: The
Travelers Fund UL for Variable Annuities, The Travelers Fund VA for
Variable Annuities, The Travelers Fund BD for Variable Annuities,
The Travelers Fund BD II for Variable Annuities, The Travelers Fund
BD III for Variable Annuities, The Travelers Fund BD IV for
Variable Annuities, The Travelers Fund ABD for Variable Annuities,
The Travelers Fund ABD II for Variable Annuities, The Travelers
Separate Account PF for Variable Annuities, The Travelers Separate
Account PF II for Variable Annuities, The Travelers Separate Account
QP for Variable Annuities, The Travelers Separate Account TM for
Variable Annuities, The Travelers Separate Account TM II for Variable
Annuities, The Travelers Separate Account Five for Variable Annuities,
The Travelers Separate Account Six for Variable Annuities, The
Travelers Separate Account Seven for Variable Annuities, The Travelers
Separate Account Eight for Variable Annuities, The Travelers Fund UL
for Variable Annuities, The Travelers Fund UL II for Variable Annuities,
The Travelers Variable Life Insurance Separate Account One, The
Travelers Variable Life Insurance Separate Account Two, The Travelers
Variable Life Insurance Separate Account Three, The Travelers Variable
Life Insurance Separate Account Four, The Travelers Separate Account MGA,
The Travelers Separate Account MGA II, The Travelers Growth and Income
Stock Account for Variable Annuities, The Travelers Quality Bond Account
for Variable Annuities, The Travelers Money Market Account for
Variable Annuities, The Travelers Timed Growth and Income Stock Account
for Variable Annuities, The Travelers Timed Short-Term Bond Account
for Variable Annuities, The Travelers Timed Aggressive Stock Account
for Variable Annuities, The Travelers Timed Bond Account for Variable
Annuities.
In addition, CFBDS, the Registrant's Distributor, is also the distributor
for CitiFunds Multi-State Tax Free Trust, CitiFunds Premium Trust,
CitiFunds Institutional Trust, CitiFunds Tax Free Reserves, CitiFunds
Trust I, CitiFunds Trust II, CitiFunds Trust III, CitiFunds
International Trust, CitiFunds Fixed Income Trust, CitiSelect VIP
Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400,
CitiSelect VIP Folio 500, CitiFunds Small Cap Growth VIP Portfolio.
CFBDS is also the placement agent for Large Cap Value Portfolio,
Small Cap Value Portfolio, International Portfolio, Foreign Bond
Portfolio, Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, U.S. Fixed Income Portfolio, Large Cap
Growth Portfolio, Small Cap Growth Portfolio, International Equity
Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury
Reserves Portfolio.
In addition, CFBDS is also the distributor for the following Salomon
Brothers funds: Salomon Brothers Opportunity Fund Inc., Salomon
Brothers Investors Fund Inc., Salomon Brothers Capital Fund Inc.,
Salomon Brothers Series Funds Inc., Salomon Brothers Institutional
Series Funds Inc., Salomon Brothers Variable Series Funds Inc.
In addition, CFBDS is also the distributor for the Centurion Funds, Inc.
(b) The information required by this Item 27 with respect to each
director and officer of CFBDS is incorporated by reference to Schedule A
of Form BD filed by CFBDS pursuant to the Securities and Exchange Act
of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accountants and Records
(1) Smith Barney New Jersey Municipals Fund Inc.
388 Greenwich Street
New York, New York 10013
(2) SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(4) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(5) CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, as amended, the Registrant,
Smith Barney New Jersey Municipals Fund Inc. has duly caused this
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 25th day of May, 1999.
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
By: /s/ Heath B. McLendon
Health B. McLendon
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement 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 25, 1999
Heath B. McLendon President and Chief
Executive Officer/s/ Lewis E. Daidone
Senior Vice President and May 25, 1999
Lewis E. Daidone Treasurer, Chief Financial
and Accounting Officer
/s/Herbert Barg* Director May 25, 1999
Herbert Barg
/s/Alfred J. Bianchetti* Director May 25, 1999
Alfred J. Bianchetti
/s/Martin Brody* Director May 25, 1999
Martin Brody
/s/Dwight B. Crane* Director May 25, 1999
Dwight B. Crane
/s/Burt N. Dorsett* Director May 25, 1999
Burt N. Dorsett
/s/Elliot S. Jaffe* Director May 25, 1999
Elliot S. Jaffe
/s/Stephen E. Kaufman* Director May 25, 1999
Stephen E. Kaufman
/s/Joseph J. McCann* Director May 25, 1999
Joseph J. McCann
/s/Cornelius C. Rose, Jr.* Director May 25, 1999
Cornelius C. Rose, Jr.
Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to power of attorney dated June 26, 1997.
/s/ Heath B. McLendonHeath B. McLendon
EXHIBIT INDEX
Exhibit No. Exhibit
(a)(4) Articles of Amendment dated June 1, 1998
(e)(2) CFBDS Distribution Agreement
(e)(3) Selling Group Agreement
(j) Consent of KPMG +
(m)(2) Form of Rule 12b-1 Plan
(n) Financial Data Schedule +
(o)(2) Rule 18f-3 Multiple Class Plan
cover
+ To be filed by further amendment
U:\legal\funds\njmu\1998\secdocs\n1a18
SMITH BARNEY NEW JERSEY MUNICIPALS FUND
INC. PRIVATE
ARTICLES OF AMENDMENT
Smith Barney New Jersey Municipals Fund
Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland
(the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of
Maryland that:
FIRST: The Charter of the Corporation is
hereby amended to provide that the name of all
of the issued and unissued Class C Common Stock
of the Corporation is hereby changed to Class L
Common Stock.
SECOND: The foregoing amendment to the
Charter of the Corporation has been approved by
a majority of the entire Board of Directors and
is limited to a change expressly permitted by
Section 2-605 of the Maryland General
Corporation Law to be made without action of the
stockholders.
THIRD: The Corporation is registered as
an open-end investment company under the
Investment Company Act of 1940.
FOURTH: The amendment to the Charter of
the Corporation effected hereby shall become
effective at 9:00 a.m. on June 12, 1998.
IN WITNESS WHEREOF, Smith Barney New
Jersey Municipals Fund Inc. has caused these
presents to be signed in its name and on its
behalf by its President and witnessed by its
Assistant Secretary as of June 1, 1998.
WITNESS: SMITH
BARNEY NEW
JERSEY
MUNICIPALS
FUND INC.
/s/ Michael Kocur
By: /s/ Heath B. McLendon
Michael Kocur
Heath B. McLendon
Assistant Secretary
President
THE UNDERSIGNED, President of Smith Barney New
Jersey Municipals Fund Inc., who executed on
behalf of the Corporation Articles of Amendment
of which this Certificate is made a part, hereby
acknowledges in the name and on behalf of said
Corporation the foregoing Articles of Amendment
to be the corporate act of said Corporation and
hereby certifies that the matters and facts set
forth herein with respect to the authorization
and approval thereof are true in all material
respects under the penalties of perjury.
/s/
Heath B. McLendon
Heath
B. McLendon, President
LEGAL\FUNDS\NJMU\NJMUAMND.DOC
SMITH BARNEY MUTUAL FUNDS
BROKER DEALER CONTRACT
CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
We, CFBDS, Inc. ("CFBDS"), have
agreements with certain investment companies
for which Mutual Management Corp. serves as
investment adviser and/or administrator (each a
"Fund") pursuant to which we act as
nonexclusive principal underwriter and
distributor for the sale of shares of capital
stock ("shares") of the various series of such
Funds, and as such have the right to distribute
shares for resale. Each Fund is an open-end
investment company registered under the
Investment Company Act of 1940, as amended (the
"1940 Act") and the shares being offered to the
public are registered under the Securities Act
of 1933, as amended (the "1933 Act"). Each
series of each Fund covered by a Distribution
Agreement from time to time is referred to in
this agreement as a "Series" and collectively
as the "Series." The term "Prospectus", as
used herein, refers to the prospectus and
related statement of additional information
(the "Statement of Additional Information")
incorporated therein by reference (as amended
or supplemented) on file with the Securities
and Exchange Commission at the time in
question. As a broker in the capacity of
principal underwriter and distributor for the
Trust, we offer to sell to you, as a broker or
dealer, shares of each Fund upon the following
terms and conditions:
1. PRIVATE In all sales to the
public you shall act as broker for your
customers or as dealer for your own account,
and in no transaction shall you have any
authority to act as agent for the Trust, for us
or for any other dealer. tc " In all sales to
the public you shall act as dealer for your own
account, and in no transaction shall you have
any authority to act as agent for the Fund, for
us or for any other dealer."
2. PRIVATE Orders received from
you will be accepted through us only at the
public offering price per share (i.e. the net
asset value per share plus the applicable
front-end sales charge, if any) applicable to
each order, and all orders for redemption of
any shares shall be executed at the net asset
value per share less any contingent deferred
sales charge, if any, in each case as set forth
in the Prospectus. You will be entitled to
receive and retain any contingent deferred
sales charge amounts in partial consideration
of your payment to financial consultants of
commission amounts at the time of sale and we
will obligate any other brokers with whom we
enter into similar agreements to pay such
amounts directly to you. The procedure
relating to the handling of orders shall be
subject to paragraph 4 hereof and instructions
which we or the Fund shall forward from time to
time to you. All orders are subject to
acceptance or rejection by the applicable Fund
or us in the sole discretion of either. The
minimum initial purchase and the minimum
subsequent purchase of any shares shall be as
set forth in the Prospectus pertaining to the
relevant Series. tc " Orders received from you
will be accepted through us only at the public
offering price per share (i.e. the net asset
value per share plus the applicable sales
charge, if any) applicable to each order, and
all orders for redemption of any Fund shares
shall be executed at the net asset value per
share less any contingent deferred sales
charge, if any, in each case as set forth in
the Prospectus. The procedure relating to the
handling of orders shall be subject to
paragraph 4 hereof and instructions which we or
the Fund shall forward from time to time to
you. All orders are subject to acceptance or
rejection by Salomon or the Fund in the sole
discretion of either. The minimum initial
purchase and the minimum subsequent purchase
shall be as set forth in the Prospectus of the
Fund."
3. PRIVATE You shall not place
orders for any shares unless you have already
received purchase orders for those shares at
the applicable public offering price and
subject to the terms hereof. You agree that
you will not offer or sell any shares except
under circumstances that will result in
compliance with the applicable Federal and
state securities laws, the applicable rules and
regulations thereunder and the rules and
regulations of applicable regulatory agencies
or authorities and that in connection with
sales and offers to sell shares you will
furnish to each person to whom any such sale or
offer is made, a copy of the Prospectus and,
upon request, the Statement of Additional
Information, and will not furnish to any person
any information relating to shares which is
inconsistent in any respect with the
information contained in the Prospectus or
Statement of Additional Information (as then
amended or supplemented). You shall not
furnish or cause to be furnished to any person
or display or publish any information or
materials relating to the shares (including,
without limitation, promotional materials and
sales literature, advertisements, press
releases, announcements, statements, posters,
signs or other similar material), except such
information and materials as may be furnished
to you by or on behalf of us or the Funds, and
such other information and materials as may be
approved in writing by or on behalf of us or
the Funds. tc " You shall not place orders
for any shares unless you have already received
purchase orders for those shares at the
applicable public offering price and subject to
the terms hereof and of the Distribution
Contract. You agree that you will not"
4. PRIVATE As a broker dealer,
you are hereby authorized (i) to place orders
directly with the applicable Fund or Series for
shares subject to the applicable terms and
conditions governing the placement of orders by
us set forth in the Prospectus and (ii) to
tender shares directly to each Fund or its
agent for redemption subject to the applicable
terms and conditions governing the redemption
of shares applicable to us set forth in the
Prospectus. tc " As a dealer, you are hereby
authorized (i) to place orders directly with
the Fund for shares to be resold by us to you
subject to the applicable terms and conditions
governing the placement of orders by us set
forth in the Prospectus and the Distribution
Contract and (ii) to tender shares directly to
the Fund or its agent for redemption subject to
the applicable terms and conditions governing
the redemption of shares applicable to us set
forth in the Prospectus and the Distribution
Agreement."
5. PRIVATE You shall not
withhold placing orders received from your
customers so as to profit yourself as a result
of such withholding, e.g., by a change in the
"net asset value" from that used in determining
the offering price to your customers. tc " You
shall not withhold placing orders received from
your customers so as to profit yourself as a
result of such withholding, e.g., by a change
in the \"net asset value\" from that used in
determining the offering price to your
customers."
6. PRIVATE In determining the
amount of any sales concession payable to you
hereunder, we reserve the right to exclude any
sales which we reasonably determine are not
made in accordance with the terms of the
Prospectus and the provisions of this
Agreement. Unless at the time of transmitting
an order we advise you or the transfer agent to
the contrary, the shares ordered will be deemed
to be the total holdings of the specified
investor. tc " In determining the amount of
any sales concession payable to you hereunder,
we reserve the right to exclude any sales which
we reasonably determine are not made in
accordance with the terms of the Prospectus and
the provisions of this Agreement. Unless at
the time of transmitting an order we advise you
or the transfer agent to the contrary, the
shares ordered will be deemed to be the total
holdings of the specified investor."
7. PRIVATE (a) You agree that
payment for orders from you for the purchase of
shares will be made in accordance with the
terms of the Prospectus. On or before the
business day following the settlement date of
each purchase order for shares, you shall
transfer same day funds to an account
designated by us with the transfer agent in an
amount equal to the public offering price on
the date of purchase of the shares being
purchased less your sales concession, if any,
with respect to such purchase order determined
in accordance with the Prospectus. If payment
for any purchase order is not received in
accordance with the terms of the Prospectus, we
reserve the right, without notice, to cancel
the sale and to hold you responsible for any
loss sustained as a result thereof. tc " (a)
You agree that payment for orders from you for
the purchase of shares will be made in
accordance with the terms of the Prospectus.
On or before the business day following the
settlement date of each purchase order for
shares, you shall transfer same day funds to an
account designated by us with the transfer
agent an amount equal to the public offering
price on the date of purchase of the shares
being purchased less your sales concession, if
any, with respect to such purchase order
determined in accordance with the Prospectus.
If payment for any purchase order is not
received in accordance with the terms of the
Prospectus, we reserve the right, without
notice, to cancel the sale and to hold you
responsible for any loss sustained as a result
thereof."
(b) PRIVATE If any shares sold
under the terms of this Agreement are sold with
a sales charge and are redeemed or are tendered
for redemption within seven (7) business days
after confirmation of your purchase order for
such shares: (i) you shall forthwith refund to
us the full sales concession received by you on
the sale; and (ii) we shall forthwith pay to
the applicable Series our portion of the sales
charge on the sale which has been retained by
us, if any, and shall also pay to the
applicable Series the amount refunded by
you. tc " If any shares sold under the terms
of this Agreement are sold with a sales charge
and are redeemed or are tendered for redemption
within seven (7) business days after
confirmation of your purchase order for such
shares\: (i) you shall forthwith refund to us
the full sales concession received by you on
the sale; and (ii) we shall forthwith pay to
the applicable Series our portion of the sales
charge on the sale which has been retained by
us, if any, and shall also pay to the Series
the amount refunded by you."
(c) PRIVATE We will not be
obligated to pay or cause to be paid to you any
ongoing trail commission or shareholder service
fees with respect to shares of the Series
purchased through you and held by or for your
customers, which you shall collect directly
from the Funds. tc " We will pay you an
ongoing trail commission with respect to
holdings by you of shares of the Funds at such
rates and in such manner as may be described in
the Prospectus."
(d) PRIVATE Certificates
evidencing shares shall be available only upon
request. Upon payment for shares in accordance
with paragraph 7(a) above, the transfer agent
will issue and transmit to you or your customer
a confirmation statement evidencing the
purchase of such shares. Any transaction in
uncertificated shares, including purchases,
transfers, redemptions and repurchases, shall
be effected and evidenced by book-entry on the
records of the transfer agent. tc "
Certificates evidencing shares shall be
available only upon request. Upon payment for
shares in accordance with paragraph 7(a) above,
the transfer agent will issue and transmit to
you a confirmation statement evidencing the
purchase of such shares. Any transaction in
uncertificated shares, including purchases,
transfers, redemptions and repurchases, shall
be effected and evidenced by book-entry on the
records of the transfer agent."
8. PRIVATE No person is
authorized to make any representations
concerning shares except those contained in the
current Prospectus and Statement of Additional
Information and in printed information
subsequently issued by us or the Funds as
information supplemental to the Prospectus and
the Statement of Additional Information. In
purchasing or offering shares pursuant to this
Agreement you shall rely solely on the
representations contained in the Prospectus,
the Statement of Additional Information and the
supplemental information above mentioned. tc "
No person is authorized to make any
representations concerning shares except those
contained in the current Prospectus and
Statement of Additional Information and in
printed information subsequently issued by us
or the Fund as information supplemental to the
Prospectus and the Statement of Additional
Information. In purchasing sor offering shares
pursuant to this Agreement you shall rely
solely on the representations contained in the
Prospectus, the Statement of Additional
Information and the supplemental information
above mentioned."
9. PRIVATE You agree to deliver
to each purchaser making a purchase of shares
from or through you a copy of the Prospectus at
or prior to the time of offering or sale, and,
upon request, the Statement of Additional
Information. You may instruct the transfer
agent to register shares purchased in your name
and account as nominee for your customers. You
agree thereafter to deliver to any purchaser
whose shares you or your nominee are holding as
record holder copies of the annual and interim
reports and proxy solicitation materials and
any other information and materials relating to
the Trust and prepared by or on behalf of us,
the Funds or the investment adviser, custodian,
transfer agent or dividend disbursing agent for
distribution to beneficial holders of shares.
The Funds shall be responsible for the costs
associated with forwarding such reports,
materials and other information and shall
reimburse you in full for such costs. You
further agree to make reasonable efforts to
endeavor to obtain proxies from such purchasers
whose shares you or your nominee are holding as
record holder. You further agree to obtain
from each customer to whom you sell shares any
taxpayer identification number certification
required under Section 3406 of the Internal
Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder, and
to provide us or our designee with timely
written notice of any failure to obtain such
taxpayer identification number certification in
order to enable the implementation of any
required backup withholding in accordance with
Section 3406 of the Code and the regulations
thereunder. Additional copies of the
Prospectus, Statement of Additional
Information, annual or interim reports, proxy
solicitation materials and any such other
information and materials relating to the Trust
will be supplied to you in reasonable
quantities upon request. tc " You agree to
deliver to each purchaser making a purchase of
shares from you a copy of the Prospectus at or
prior to the time of offering or sale, and,
upon request, the Statement of Additional
Information. You may instruct the transfer
agent to register shares purchased in your name
and account as nominee for your customers. You
agree thereafter to deliver to any purchaser
whose shares you are holding as record holder
copies of the annual and interim reports and
proxy solicitation materials and any other
information and materials relating to the Fund
and prepared by or on behalf of us, the Fund or
its investment adviser, custodian, transfer
agent or dividend disbursing agent for
distribution to such customer. The Fund shall
be responsible for the costs associated with
forwarding such reports, materials and other
information and shall reimburse you in full for
such costs. You further agree to make
reasonable efforts to endeavor to obtain
proxies from such purchasers whose shares you
are holding as record holder. You further
agree to obtain from each customer to whom you
sell shares any taxpayer identification number
certification required under Section 3406 of
the Internal Revenue Code of 1986, as amended
(the \"Code\"), and the regulations promulgated
thereunder, and to provide us or our designee
with timely written notice of any failure to
obtain such taxpayer identification number
certification in order to enable the
implementation of any required backup
withholding in accordance with Section 3406 of
the Code and the regulations thereunder.
Additional copies of the Prospectus, Statement
of Additional Information, annual or interim
reports, proxy solicitation materials and any
such other information and materials relating
to the Fund will be supplied to you in
reasonable quantities upon request."
10. PRIVATE (a) In accordance
with the terms of the Prospectus, a reduced
sales charge may be available to customers,
depending on the amount of the investment or
proposed investment. In each case where a
reduced sales charge is applicable, you agree
to furnish to the transfer agent sufficient
information to permit confirmation of
qualification for a reduced sales charge, and
acceptance of the purchase order is subject to
such confirmation. Reduced sales charges may
be modified or terminated at any time in the
sole discretion of each Fund. tc " (a) In
accordance with the terms of the Prospectus, a
reduced sales charge may be available to
customers, depending on the amount of the
investment. In each case where a reduced sales
charge is applicable, you agree to furnish to
the transfer agent sufficient information to
permit confirmation of qualification for a
reduced sales charge, and acceptance of the
purchase order is subject to such confirmation.
Reduced sales charges may be modified or
terminated at any time in the sole discretion
of the Fund."
(b) PRIVATE You acknowledge that
certain classes of investors may be entitled to
purchase shares at net asset value without a
sales charge as provided in the Prospectus and
Statement of Additional Information. tc " You
acknowledge that certain classes of investors
may be entitled to purchase shares at net asset
value without a sales charge as provided in the
Prospectus and Statement of Additional
Information."
(c) PRIVATE You agree to advise
us promptly as to the amount of any and all
sales by you qualifying for a reduced sales
charge or no sales charge. tc " You agree to
advise us promptly as to the amount of any and
all sales by you qualifying for a reduced sales
charge or no sales charge."
(d) PRIVATE Exchanges (i.e., the
investment of the proceeds from the liquidation
of shares of one Series in the shares of
another Series, each of which is managed by the
same or an affiliated investment adviser)
shall, where available, be made in accordance
with the terms of each Prospectus. tc "
Exchanges (i.e., the investment of the proceeds
from the liquidation of shares of one fund in
the shares of another fund, each of which is
managed by the Fund's investment adviser)
shall, where available, be made in accordance
with the terms of each Prospectus."
11. PRIVATE We and each Fund
reserve the right in our discretion, without
notice, to suspend sales or withdraw the
offering of any shares entirely. Each party
hereto has the right to cancel the portions of
this Agreement to which it is party upon notice
to the other parties; provided, however, that
no cancellation shall affect any party's
obligations hereunder with respect to any
transactions or activities occurring prior to
the effective time of cancellation. We reserve
the right to amend this Agreement in any
respect effective on notice to you. tc " We
reserve the right in our discretion, without
notice, to suspend sales or withdraw the
offering of shares entirely. Each party hereto
has the right to cancel this agreement upon
notice to the other part parties; provided;
however, that no cancellation shall affect any
party's obligations hereunder with respect to
any transactions or activities occurring prior
to the effective time of cancellation. We
reserve the right to amend this Agreement in
any respect effective on notice to you."
12. PRIVATE We shall have full
authority to take such action as we may deem
advisable in respect of all matters pertaining to
the continuous offering of shares. We shall be
under no liability to you except for lack of good
faith and for obligations expressly assumed by us
herein. Nothing contained in this paragraph 12 is
intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever
constitute a waiver by you of compliance with, any
provisions of the 1933 Act or of the rules and
regulations of the Securities and Exchange
Commission issued thereunder. tc " We shall
have full authority to take such action as we may
deem advisable in respect of all matters
pertaining to the continuous offering of shares.
We shall be under no liability to you except for
lack of good faith and for obligations expressly
assumed by us herein. Nothing contained in this
paragraph 12 is intended to operate as, and the
provisions of this paragraph 12 shall not in any
way whatsoever constitute a waiver by you of
compliance with, any provisions of the 1933 Act or
of the rules and regulations of the Securities and
Exchange Commission issued thereunder."
13. PRIVATE You agree that:
(a) you shall not effect any transactions
(including, without limitation, any purchases
and tc " You agree that\: (a) you shall not
effect any transactions (including, without
limitation, any purchases and" redemptions) in
any shares registered in the name of, or
beneficially owned by, any customer unless such
customer has granted you full right, power and
authority to effect such transactions on his
behalf, (b) we shall have full authority to act
upon your express instructions to sell,
repurchase or exchange shares through us on
behalf of your customers under the terms and
conditions provided in the Prospectus and (c)
we, the Funds, the investment adviser, the
administrator, the transfer agent and our and
their respective officers, directors or
trustees, agents, employees and affiliates
shall not be liable for, and shall be fully
indemnified and held harmless by you from and
against, any and all claims, demands,
liabilities and expenses (including, without
limitation, reasonable attorneys' fees) which
may be incurred by us or any of the foregoing
persons entitled to indemnification from you
hereunder arising out of or in connection with
(i) the execution of any transactions in shares
registered in the name of, or beneficially
owned by, any customer in reliance upon any
oral or written instructions believed to be
genuine and to have been given by or on behalf
of you, (ii) any statements or representations
that you or your employees or representatives
make concerning the Funds that are inconsistent
with the applicable Fund's Prospectus, (iii)
any written materials used by you or your
employees or representatives in connection with
making offers or sales of shares that were not
furnished by us, the Funds or the investment
adviser or an affiliate thereof and (iv) any
sale of shares of a Fund where the Fund or its
shares were not properly registered or
qualified for sale in any state, any U.S.
territory or the District of Columbia, when we
have indicated to you that the Fund or its
shares were not properly registered or
qualified. The indemnification agreement
contained in this Paragraph 13 shall survive
the termination of this Agreement.
14. PRIVATE You represent that:
(a) you are a member in good standing of the
National Association of Securities Dealers,
Inc. (the "NASD"), or, if a foreign dealer who
is not eligible for membership in the NASD,
that (i) you will not make any sales of shares
in, or to nationals of, the United States of
America, its territories or its possessions,
and (ii) in making any sales of shares you will
comply with the NASD's Conduct Rules and (b)
you are a member in good standing of the
Securities Investor Protection Corporation
("SIPC"). You agree that you will provide us
with timely written notice of any change in
your NASD or SIPC status. tc " You represent
that you are a member in good standing of the
National Association of Securities Dealers,
Inc. (the \"NASD\"), or, if a foreign dealer
who is not eligible for membership in the NASD,
that (a) you will not make any sales of shares
in, or to nationals of, the United States of
America, its territories or its possessions,
and (b) in making any sales of shares you will
comply with the NASD's Rules of Fair
Practice."
15. PRIVATE We shall inform you
as to the states or other jurisdictions in which
the Fund has advised us that shares have been
qualified for sale under, or are exempt from the
requirements of, the respective securities laws
of such states, but we assume no responsibility
or obligation as to your qualification to sell
shares in any jurisdiction.
16. Any claim, controversy,
dispute or deadlock arising under this Agreement
(collectively, a "Dispute") shall be settled by
arbitration administered under the rules of the
American Arbitration Association ("AAA") in New
York, New York. Any arbitration and award of
the arbitrators, or a majority of them, shall be
final and the judgment upon the award rendered
may be entered in any state or federal court
having jurisdiction. No punitive damages are to
be awarded.
17. PRIVATE All communications
to us should be sent, postage prepaid, to 21
Milk Street, Boston, Massachusetts 02109
Attention: Philip Coolidge. Any notice to you
shall be duly given if mailed, telegraphed or
telecopied to you at the address specified by
you below. Communications regarding placement
of orders for shares should be sent, postage
prepaid, to First Data Investor Services Group,
Inc., P.O. Box 5128, Westborough, Massachusetts
01581-5128. tc " All communications to us
should be sent, postage prepaid, to 7 World
Trade Center, New York, New York 10048.
Attention\: Robert J. Leonard. Any notice to
you shall be duly given if mailed, telegraphed
or telecopied to you at the address specified
by you below. Communications regarding
placement of orders for shares should be sent,
postage prepaid, to The Shareholder Services
Group, Inc., P.O. Box 9109, Boston,
Massachusetts 02205-9109."
18. PRIVATE This Agreement
shall be binding upon both parties hereto when
signed by us and accepted by you in the space
provided below tc " This Agreement shall be
binding upon both parties hereto when signed by
us and accepted by you in the space provided
below until July 14, 1995 or such earlier date
upon negotiation of section 3 and 12 of this
agreement. " .
19. PRIVATE This Agreement
and the terms and conditions set forth herein
shall be governed by, and construed in
accordance with, the laws of the State of New
York. tc " This Agreement and the terms and
conditions set forth herein shall be governed
by, and construed in accordance with, the laws
of the State of New York."
CFBDS, INC.
By:
(Authorized
Signature)
Accepted:
Firm Name:
Address:
Accepted By (signature):
Name (print):
Title: Date:
G:\fundac\legal\funds\njmu\1999\secdocs\dealrag1
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
FORM OF
DISTRIBUTION AGREEMENT
October 8, 1998
CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Dear Sirs:
This is to confirm that, in consideration of
the agreements hereinafter contained, the above-
named investment company (the "Fund") has agreed
that you shall be, for the period of this
Agreement, the non-exclusive principal underwriter
and distributor of shares of the Fund and each
Series of the Fund set forth on Exhibit A hereto,
as such Exhibit may be revised from time to time
(each, including any shares of the Fund not
designated by series, a "Series"). For purposes
of this Agreement, the term "Shares" shall mean
shares of the each Series, or one or more Series,
as the context may require.
1. Services as Principal Underwriter and
Distributor
1.1 You will act as agent for the
distribution of Shares covered by, and in
accordance with, the registration statement,
prospectus and statement of additional information
then in effect under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"),
and will transmit or cause to be transmitted
promptly any orders received by you or those with
whom you have sales or servicing agreements for
purchase or redemption of Shares to the Transfer
and Dividend Disbursing Agent for the Fund of which
the Fund has notified you in writing.
1.2 You agree to use your best
efforts to solicit orders for the sale of Shares.
It is contemplated that you will enter into sales
or servicing agreements with registered securities
brokers and banks and into servicing agreements
with financial institutions and other industry
professionals, such as investment advisers,
accountants and estate planning firms. In entering
into such agreements, you will act only on your own
behalf as principal underwriter and distributor.
You will not be responsible for making any
distribution plan or service fee payments pursuant
to any plans the Fund may adopt or agreements it
may enter into.
1.3 You shall act as the non-
exclusive principal underwriter and distributor of
Shares in compliance with all applicable laws,
rules, and regulations, including, without
limitation, all rules and regulations made or
adopted from time to time by the Securities and
Exchange Commission (the "SEC") pursuant to the
1933 Act or the 1940 Act or by any securities
association registered under the Securities
Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such
action is warranted for any reason, including,
without limitation, market, economic or political
conditions, the Fund's officers may decline to
accept any orders for, or make any sales of, any
Shares until such time as those officers deem it
advisable to accept such orders and to make such
sales and the Fund shall advise you promptly of
such determination.
2. Duties of the Fund
2.1 The Fund agrees to pay all costs
and expenses in connection with the registration of
Shares under the 1933 Act, and all expenses in
connection with maintaining facilities for the
issue and transfer of Shares and for supplying
information, prices and other data to be furnished
by the Fund hereunder, and all expenses in
connection with the preparation and printing of the
Fund's prospectuses and statements of additional
information for regulatory purposes and for
distribution to shareholders; provided however,
that nothing contained herein shall be deemed to
require the Fund to pay any costs of advertising or
marketing the sale of Shares.
2.2 The Fund agrees to execute any
and all documents and to furnish any and all
information and otherwise to take any other actions
that may be reasonably necessary in the discretion
of the Fund's officers in connection with the
qualification of Shares for sale in such states and
other U.S. jurisdictions as the Fund may approve
and designate to you from time to time, and the
Fund agrees to pay all expenses that may be
incurred in connection with such qualification.
You shall pay all expenses connected with your own
qualification as a securities broker or dealer
under state or Federal laws and, except as
otherwise specifically provided in this Agreement,
all other expenses incurred by you in connection
with the sale of Shares as contemplated in this
Agreement.
2.3 The Fund shall furnish you from
time to time, for use in connection with the sale
of Shares, such information reports with respect to
the Fund or any relevant Series and the Shares as
you may reasonably request, all of which shall be
signed by one or more of the Fund's duly authorized
officers; and the Fund warrants that the statements
contained in any such reports, when so signed by
the Fund's officers, shall be true and correct.
The Fund also shall furnish you upon request with
(a) the reports of the annual audits of the
financial statements of the Fund for each Series
made by independent certified public
accountants retained by the Fund for such
purpose; (b) semi-annual unaudited financial
statements pertaining to each Series; (c) quarterly
earnings statements prepared by the Fund for any
Series; (d) a monthly itemized list of the
securities in each Series' portfolio; (e) monthly
balance sheets as soon as practicable after the end
of each month; (f) the current net asset value and
offering price per share for each Series on each
day such net asset value is computed and (g) from
time to time such additional information regarding
the financial condition of each Series of the Fund
as you may reasonably request.
3. Representations and Warranties
The Fund represents to you that all
registration statements, prospectuses and
statements of additional information filed by the
Fund with the SEC under the 1933 Act and the 1940
Act with respect to the Shares have been prepared
in conformity with the requirements of said Acts
and the rules and regulations of the SEC
thereunder. As used in this Agreement, the terms
"registration statement", "prospectus" and
"statement of additional information" shall mean
any registration statement, prospectus and
statement of additional information filed by the
Fund with the SEC and any amendments and
supplements thereto filed by the Fund with the SEC.
The Fund represents and warrants to you that any
such registration statement, prospectus and
statement of additional information, when such
registration statement becomes effective and as
such prospectus and statement of additional
information are amended and supplemented, includes
at the time of such effectiveness, amendment or
supplement all statements required to be contained
therein in conformance with the 1933 Act, the 1940
Act and the rules and regulations of the SEC; that
all statements of material fact contained in any
registration statement, prospectus or statement of
additional information will be true and correct
when such registration statement becomes effective;
and that neither any registration statement nor any
prospectus or statement of additional information
when such registration statement becomes effective
will include an untrue statement of a material fact
or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading to a purchaser of the Fund's
Shares. The Fund may, but shall not be obligated
to, propose from time to time such amendment or
amendments to any registration statement and such
supplement or supplements to any prospectus or
statement of additional information as, in the
light of future developments, may, in the opinion
of the Fund, be necessary or advisable. If the
Fund shall not propose such amendment or amendments
and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request
from you to do so, you may, at your option,
terminate this Agreement or decline to make offers
of the Fund's Shares until such amendments are
made. The Fund shall not file any amendment to any
registration statement or supplement to any
prospectus or statement of additional information
without giving you reasonable notice thereof in
advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Fund's
right to file at any time such amendments to any
registration statement and/or supplements to any
prospectus or statement of additional information,
of whatever character, as the Fund may deem
advisable, such right being in all respects
absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes you to use
any prospectus or statement of additional
information furnished by the Fund from time to
time, in connection with the sale of Shares. The
Fund agrees to indemnify, defend and hold you, your
several officers and directors, and any person who
controls you within the meaning of Section 15 of
the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities and
expenses (including the cost of investigating or
defending such claims, demands or liabilities and
any such counsel fees incurred in connection
therewith) which you, your officers and directors,
or any such controlling person, may incur under the
1933 Act or under common law or otherwise, arising
out of or based upon any untrue statement, or
alleged untrue statement, of a material fact
contained in any registration statement, any
prospectus or any statement of additional
information or arising out of or based upon any
omission, or alleged omission, to state a material
fact required to be stated in any registration
statement, any prospectus or any statement of
additional information or necessary to make the
statements in any of them not misleading; provided,
however, that the Fund's agreement to indemnify
you, your officers or directors, and any such
controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising
out of any statements or representations made by
you or your representatives or agents other than
such statements and representations as are
contained in any prospectus or statement of
additional information and in such financial and
other statements as are furnished to you pursuant
to paragraph 2.3 of this Agreement; and further
provided that the Fund's agreement to indemnify you
and the Fund's representations and warranties
herein before set forth in paragraph 3 of this
Agreement shall not be deemed to cover any
liability to the Fund or its shareholders to which
you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your
reckless disregard of your obligations and duties
under this Agreement. The Fund's agreement to
indemnify you, your officers and directors, and any
such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any
action brought against you, your officers or
directors, or any such controlling person, such
notification to be given by letter or by telegram
addressed to the Fund at its principal office in
New York, New York and sent to the Fund by the
person against whom such action is brought, within
ten days after the summons or other first legal
process shall have been served. The failure so to
notify the Fund of any such action shall not
relieve the Fund from any liability that the Fund
may have to the person against whom such action is
brought by reason of any such untrue, or alleged
untrue, statement or omission, or alleged omission,
otherwise than on account of the Fund's indemnity
agreement contained in this paragraph 4.1. The
Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be
conducted by counsel of good standing chosen by the
Fund. In the event the Fund elects to assume the
defense of any such suit and retains counsel of
good standing, the defendant or defendants in such
suit shall bear the fees and expenses of any
additional counsel retained by any of them; but if
the Fund does not elect to assume the defense of
any such suit, the Fund will reimburse you, your
officers and directors, or the controlling person
or persons named as defendant or defendants in such
suit, for the reasonable fees and expenses of any
counsel retained by you or them. The Fund's
indemnification agreement contained in this
paragraph 4.1 and the Fund's representations and
warranties in this Agreement shall remain operative
and in full force and effect regardless of any
investigation made by or on behalf of you, your
officers and directors, or any controlling person,
and shall survive the delivery of any of the Fund's
Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your
several officers and directors, and their
respective estates, and to the benefit of the
controlling persons and their successors. The Fund
agrees to notify you promptly of the commencement
of any litigation or proceedings against the Fund
or any of its officers or Board members in
connection with the issuance and sale of any of the
Fund's Shares.
4.2 You agree to indemnify, defend
and hold the Fund, its several officers and Board
members, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all
claims, demands, liabilities and expenses
(including the costs of investigating or defending
such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the
Fund, its officers or Board members or any such
controlling person may incur under the 1933 Act, or
under common law or otherwise, but only to the
extent that such liability or expense incurred by
the Fund, its officers or Board members, or such
controlling person resulting from such claims or
demands shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material
fact contained in information furnished in writing
by you to the Fund and used in the answers to any
of the items of the registration statement or in
the corresponding statements made in the prospectus
or statement of additional information, or shall
arise out of or be based upon any omission, or
alleged omission, to state a material fact in
connection with such information furnished in
writing by you to the Fund and required to be
stated in such answers or necessary to make such
information not misleading. Your agreement to
indemnify the Fund, its officers or Board members,
and any such controlling person, as aforesaid, is
expressly conditioned upon your being notified of
any action brought against the Fund, its officers
or Board members, or any such controlling person,
such notification to be given by letter or telegram
addressed to you at your principal office in
Boston, Massachusetts and sent to you by the person
against whom such action is brought, within ten
days after the summons or other first legal process
shall have been served. You shall have the right
to control the defense of such action, with counsel
of your own choosing, satisfactory to the Fund, if
such action is based solely upon such alleged
misstatement or omission on your part or with the
Fund's consent, and in any event the Fund, its
officers or Board members or such controlling
person shall each have the right to participate in
the defense or preparation of the defense of any
such action with counsel of its own choosing
reasonably acceptable to you but shall not have the
right to settle any such action without your
consent, which will not be unreasonably withheld.
The failure to so notify you of any such action
shall not relieve you from any liability that you
may have to the Fund, its officers or Board
members, or to such controlling person by reason of
any such untrue, or alleged untrue, statement or
omission, or alleged omission, otherwise than on
account of your indemnity agreement contained in
this paragraph 4.2. You agree to notify the Fund
promptly of the commencement of any litigation or
proceedings against you or any of your officers or
directors in connection with the issuance and sale
of any of the Fund's Shares.
5. Effectiveness of Registration
No Shares shall be offered by either you or
the Fund under any of the provisions of this
Agreement and no orders for the purchase or sale of
such Shares under this Agreement shall be accepted
by the Fund if and so long as the effectiveness of
the registration statement then in effect or any
necessary amendments thereto shall be suspended
under any of the provisions of the 1933 Act, or if
and so long as a current prospectus as required by
Section 5(b) (2) of the 1933 Act is not on file
with the SEC; provided, however, that nothing
contained in this paragraph 5 shall in any way
restrict or have any application to or bearing upon
the Fund's obligation to repurchase its Shares from
any shareholder in accordance with the provisions
of the Fund's prospectus, statement of additional
information or charter documents, as amended from
time to time.
6. Offering Price
Shares of any class of any Series of the Fund
offered for sale by you shall be offered for sale
at a price per share (the "offering price") equal
to (a) their net asset value (determined in the
manner set forth in the Fund's charter documents
and the then-current prospectus and statement of
additional information) plus (b) a sales charge, if
applicable, which shall be the percentage of the
offering price of such Shares as set forth in the
Fund's then-current prospectus relating to such
Series. In addition to or in lieu of any sales
charge applicable at the time of sale, Shares of
any class of any Series of the Fund offered for
sale by you may be subject to a contingent deferred
sales charge as set forth in the Fund's then-
current prospectus and statement of additional
information. You shall be entitled to receive any
sales charge levied at the time of sale in respect
of the Shares without remitting any portion to the
Fund. Any payments to a broker or dealer through
whom you sell Shares shall be governed by a
separate agreement between you and such broker or
dealer and the Fund's then-current prospectus and
statement of additional information. Any payments
to any provider of services to you shall be
governed by a separate agreement between you and
such service provider.
7. Notice to You
The Fund agrees to advise you immediately in
writing:
(a) of any
request by the SEC for
amendments to the
registration statement,
prospectus or statement
of additional
information then in
effect or for additional
information;
(b) in the event
of the issuance by the
SEC of any stop order
suspending the
effectiveness of the
registration statement,
prospectus or statement
of additional
information then in
effect or the initiation
of any proceeding for
that purpose;
(c) of the
happening of any event
that makes untrue any
statement of a material
fact made in the
registration statement,
prospectus or statement
of additional
information then in
effect or that requires
the making of a change
in such registration
statement, prospectus or
statement of additional
information in order to
make the statements
therein not misleading;
and
(d) of all
actions of the SEC with
respect to any amendment
to the registration
statement, or any
supplement to the
prospectus or statement
of additional
information which may
from time to time be
filed with the SEC.
8. Term of the Agreement
This Agreement shall become effective on the
date hereof, shall have an initial term of one year
from the date hereof, and shall continue for
successive annual periods thereafter so long as
such continuance is specifically approved at least
annually by (a) the Fund's Board or (b) by a vote
of a majority (as defined in the 1940 Act) of the
Fund's outstanding voting securities, provided that
in either event the continuance is also approved by
a majority of the Board members of the Fund who are
not interested persons (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of
voting on such approval. This Agreement is
terminable with or without cause, without penalty,
on 60 days' notice by the Fund's Board or by vote
of holders of a majority of the relevant Series
outstanding voting securities, or on 90 days'
notice by you. This Agreement will also terminate
automatically, as to the relevant Series, in the
event of its assignment (as defined in the 1940 Act
and the rules and regulations thereunder).
9. Arbitration
Any claim, controversy, dispute or
deadlock arising under this Agreement
(collectively, a "Dispute") shall be settled by
arbitration administered under the rules of the
American Arbitration Association ("
AAA") in New
York, New York. Any arbitration and award of the
arbitrators, or a majority of them, shall be final
and the judgment upon the award rendered may be
entered in any state or federal court having
jurisdiction. No punitive damages are to be
awarded.
10. Miscellaneous
So long as you act as a principal underwriter
and distributor of Shares, you shall not perform
any services for any entity other than investment
companies advised or administered by Citigroup Inc.
or its subsidiaries. The Fund recognizes that the
persons employed by you to assist in the
performance of your duties under this Agreement may
not devote their full time to such service and
nothing contained in this Agreement shall be deemed
to limit or restrict the persons employed by you or
any of your affiliates right to engage in and
devote time and attention to other businesses or to
render services of whatever kind or nature,
provided, however, that in conducting such business
or rendering such services your employees and
affiliates would take reasonable steps to assure
that the other parties involved are put on notice
as to the legal entity with which they are dealing.
This Agreement and the terms and conditions set
forth herein shall be governed by, and construed in
accordance with, the laws of the State of New York
without giving effect to its conflict of interest
principles.
If the foregoing is in accordance with your
understanding, kindly indicate your acceptance of
this Agreement by signing and returning to us the
enclosed copy, whereupon this Agreement will become
binding on you.
Very truly
yours,
SMITH BARNEY
NEW JERSEY
MUNICIPALS FUND
INC.
By:
_____________________
Authorized Officer
Accepted:
CFBDS, INC.
By: __________________________
Authorized Officer
Page: 3
4
G:\fundac\legal\funds\njmu\1999\secdocs\distribution
SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC.
FORM OF AMENDED SHAREHOLDER
SERVICES AND DISTRIBUTION PLAN
This Shareholder Services and Distribution
Plan (the "Plan") is adopted in accordance with
Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940, as amended (the "1940
Act"), by Smith Barney New Jersey Municipals
Fund Inc., a corporation organized under the
laws of the State of Maryland (the "Fund")
subject to the following terms and conditions:
Section 1. Annual Fee.
(a) Service Fee for Class A shares. The Fund
will pay to Smith Barney Inc., a
corporation organized under the laws of
the State of Delaware (("Smith
Barney"), a service fee under the Plan
at an annual rate of 0.15% of the
average daily net assets of the Fund
attributable to the Class A shares sold
by Smith Barney (the "Class A Service
Fee").
(b) Service Fee for Class B shares. The Fund
will pay to Smith Barney a service fee
under the Plan at the annual rate of
0.15% of the average daily net assets of
the Fund attributable to the Class B
shares sold by Smith Barney (the "Class
B Service Fee").
(c) Distribution Fee for Class B shares. In
addition to the Class B Service Fee, the
Fund will pay Smith Barney a
distribution fee under the Plan at the
annual rate of 0.50% of the average
daily net assets of the Fund
attributable to the Class B shares sold
by Smith Barney (the "Class B
Distribution Fee").
(d) Service Fee for Class L shares. The
Fund will pay to Smith Barney a service
fee under the plan at the annual rate of
0.15% of the average daily net assets of
the Fund attributable to the Class L
shares sold by Smith Barney (the "Class
L Service Fee").
(e) Distribution Fee for Class L shares. In
addition to the Class L Service Fee, the
Fund will pay Smith Barney a
distribution fee under the plan at the
annual rate of 0.55% of the average
daily net assets of the Fund
attributable to the Class L shares sold
by Smith Barney (the "Class L
Distribution Fee").
(f) Payment of Fees. The Service Fees and
Distribution Fees will be calculated
daily and paid monthly by the Fund with
respect to the foregoing classes of the
Fund's shares (each a "Class" and
together, the "Classes") at the annual
rates indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each
Class, its respective Service Fee and/or
Distribution Fee may be used by Smith Barney
for: (a) costs of printing and distributing the
Fund's prospectuses, statements of additional
information and reports to prospective investors
in the Fund; (b) costs involved in preparing,
printing and distributing sales literature
pertaining to the Fund; (c) an allocation of
overhead and other branch office distribution-
related expenses of Smith Barney; (d) payments
made to, and expenses of, Smith Barney's
financial consultants and other persons who
provide support services to Fund shareholders in
connection with the distribution of the Fund's
shares, including but not limited to, office
space and equipment, telephone facilities,
answering routine inquires regarding the Fund
and its operation, processing shareholder
transactions, forwarding and collecting proxy
material, changing dividend payment elections
and providing any other shareholder services not
otherwise provided by the Fund's transfer
agent; and (e) accruals for interest on the
amount of the foregoing expenses that exceed the
Distribution Fee for that Class and, in the case
of Class B and Class L shares, any contingent
deferred sales charges received by Smith Barney;
provided, however, that the Distribution Fees
may be used by Smith Barney only to cover
expenses primarily intended to result in the
sale of those shares, including, without
limitation, payments to Smith Barney's financial
consultants at the time of the sale of the
shares. In addition, Service Fees are intended
to be used by Smith Barney primarily to pay its
financial consultants for servicing shareholder
accounts, including a continuing fee to each
such financial consultant, which fee shall begin
to accrue immediately after the sale of such
shares.
Section 3. Approval by Shareholders
The Plan will not take effect, and no fees
will be payable in accordance with Section 1 of
the Plan, with respect to a Class until the Plan
has been approved by a vote of at least a
majority of the outstanding voting securities of
the Class. The Plan will be deemed to have been
approved with respect to a Class, so long as a
majority of the outstanding voting securities of
the Class votes for the approval of the Plan,
notwithstanding that: (a) the Plan has not been
approved by a majority of the outstanding voting
securities of any other Class; or (b) the Plan
has not been approved by a majority of the
outstanding voting securities of the Fund.
Section 4. Approval by Directors
Neither the Plan nor any related agreements
will take effect until approved by a majority
vote of both (a) the Board of Directors and (b)
those Directors who are not interested persons
of the Fund and who have no direct or indirect
financial interest in the operation of the Plan
or in any agreements related to it (the
"Qualified Trustees"), cast in person at a
meeting called for the purpose of voting on the
Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect
to each Class until July 15, 1999 and thereafter
for successive twelve-month periods with respect
to each Class; provided, however, that such
continuance is specifically approved at least
annually by the Directors of the Fund and by a
majority of the Qualified Directors.
Section 6. Termination.
The Plan may be terminated at any time with
respect to a Class (i) by the Fund without the
payment of any penalty, by the vote of a
majority of the outstanding voting securities of
such Class or (ii) by a majority vote of the
Qualified Directors. The Plan may remain in
effect with respect to a particular Class even
if the Plan has been terminated in accordance
with this Section 6 with respect to any other
Class.
Section 7. Amendments.
The Plan may not be amended with respect to
any Class so as to increase materially the
amounts of the fees described in Section 1
above, unless the amendment is approved by a
vote of holders of at least a majority of the
outstanding voting securities of that Class. No
material amendment to the Plan may be made
unless approved by the Fund's Board of Directors
in the manner described in Section 4 above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and
nomination of the Fund's Directors who are not
interested persons of the Fund will be committed
to the discretion of the Directors then in
office who are not interested persons of the
Fund.
Section 9. Written Reports
In each year during which the Plan remains in
effect, any person authorized to direct the
disposition of monies paid or payable by the
Fund pursuant to the Plan or any related
agreement will prepare and furnish to the
Trust's Board of Directors and the Board will
review, at least quarterly, written reports
complying with the requirements of the Rule,
which set out the amounts expended under the
Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials.
The Fund will preserve copies of the Plan, any
agreement relating to the Plan and any report
made pursuant to Section 9 above, for a period
of not less than six years (the first two years
in an easily accessible place) from the date of
the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested
person" and "majority of the outstanding voting
securities" will be deemed to have the same
meaning that those terms have under the rules
and regulations under the 1940 Act, subject to
any exemption that may be granted to the Fund
under the 1940 Act, by the Securities and
Exchange Commission.
IN WITNESS WHEREOF, the Fund has executed the
Plan as of July 15, 1998.
SMITH BARNEY NEW JERSEY
MUNICIPALS FUND INC.
By: /s/ Heath B.
McLendon____________
Heath B. McLendon
Chairman of the Board
G:\fundac\legal\funds\njmu\12b1amnd
Rule 18f-3 (d) Multiple Class Plan for Smith Barney
Mutual Funds
Introduction
This plan (the "Plan") is adopted pursuant to Rule
18f-3 (d) of the Investment Company Act of 1940, as
amended (the "1940 Act"). The purpose of the Plan
is to restate the existing arrangements previously
approved by the Boards of Directors and Trustees of
certain of the open-end investment companies set
forth on Schedule A (the "Funds" and each a "Fund")
under the Funds' existing order of exemption
(Investment Company Act Release Nos. 20042 (January
28, 1994) (notice) and 20090 (February 23, 1994)).
Shares of the Funds are distributed pursuant to a
system (the "Multiple Class System") in which each
class of shares (a "Class") of a Fund represents a
pro rata interest in the same portfolio of
investments of the Fund and differs only to the
extent outlined below.
I. Distribution Arrangements and Service Fees
One or more Classes of shares of the Funds are
offered for purchase by investors with the following
sales load structure. In addition, pursuant to Rule
12b-1 under the 1940 Act (the "Rule"), the Funds
have each adopted a plan (the "Services and
Distribution Plan") under which shares of the
Classes are subject to the
services and distribution fees described below.
1. Class A Shares
Class A shares are offered with a front-end sales
load and under the Services and Distribution Plan
are subject to a service fee of up to 0.25% of
average daily net assets. In addition, the Funds
are permitted to assess a contingent deferred sales
charge ("CDSC") on certain redemptions of Class A
shares sold pursuant to a complete waiver of front-
end sales loads applicable to large purchases, if
the shares are redeemed within one year of the date
of purchase. This waiver applies to sales of Class
A shares where the amount of purchase is equal to or
exceeds $500,000 although this amount may be changed
in the future.
2. Class B Shares
Class B shares are offered without a front-end sales
load, but are subject to a five-year declining CDSC
and under the Services and Distribution Plan are
subject to a service fee at an annual rate of up to
0.25% of average daily net assets and a distribution
fee at an annual rate of up to 0.75% of average
daily net assets.
3. Class D Shares
Class D shares are offered without a front-end sales
load, CDSC, service fee or distribution fee.
4. Class L Shares
Class L shares are offered with a front-end load,
are subject to a one-year CDSC and under the
Services and Distribution Plan are subject to a
service fee at an annual rate of up to 0.25% of
average daily net assets and a distribution fee at
an annual rate of up to 0.75% of average daily net
assets. Unlike Class B shares, Class L shares do
not have the conversion feature as discussed below
and accordingly, these shares are subject to a
distribution fee for an indefinite period of time.
The Funds reserve the right to impose these fees at
such higher rates as may be determined.
5. Class I Shares
Class I shares are offered without a front-end sales
load, but are subject under the Services and
Distribution Plan to a service fee at an annual rate
of up to 0.25% of average daily net assets.
6. Class O Shares
Class O shares are offered without a front-end load,
but are subject to a one-year CDSC and under the
Services and Distribution Plan are subject to a
service fee at an annual rate of up to 0.25% of
average daily net assets and a distribution fee at
an annual rate of up to 0.50% of average daily net
assets. Unlike Class B
shares, Class O shares do not have the conversion
feature as discussed below and accordingly, these
shares are subject to a distribution fee for an
indefinite period of time. The Funds reserve the
right to impose these fees at such higher rates as
may be determined.
Effective June 28, 1999, Class O shares will be
offered with a front-end load and will continue to
be subject to a one year CDSC, a service fee at an
annual rate of up to 0.25% of average daily net
assets and a distribution fee at an annual rate of
up to 0.50% of average daily net assets.
7. Class Y Shares
Class Y shares are offered without imposition of
either a sales charge or a service or distribution
fee for investments where the amount of purchase is
equal to or exceeds a specific amount as specified
in each Fund's prospectus.
8. Class Z Shares
Class Z shares are offered without imposition of
either a sales charge or a service or distribution
fee for purchase (i) by employee benefit and
retirement plans of Salomon Smith Barney Inc.
("Salomon Smith Barney") and its affiliates, (ii) by
certain unit investment trusts sponsored by Salomon
Smith Barney and its affiliates, and (iii) although
not currently authorized by the governing boards of
the Funds, when and if authorized, (x) by employees
of Salomon Smith Barney and its affiliates and (y)
by directors, general partners or trustees of any
investment company listed on Schedule A and, for
each of (x) and (y), their
spouses and minor children.
9. Additional Classes of Shares
The Boards of Directors and Trustees of the Funds
have the authority to create additional classes, or
change existing Classes, from time to time, in
accordance with Rule 18f-3 of the 1940 Act.
II. Expense Allocations
Under the Multiple Class System, all expenses
incurred by a Fund are allocated among the various
Classes of shares based on the net assets of the
Fund attributable to each Class, except that each
Class's net asset value and expenses reflect the
expenses associated with that Class under the Fund's
Services and
Distribution Plan, including any costs associated
with obtaining shareholder approval of the Services
and Distribution Plan (or an amendment thereto) and
any expenses specific to that Class. Such expenses
are limited to the following:
(i) transfer agency fees as identified by
the transfer agent as being attributable to a
specific Class;
(ii) printing and postage expenses related to
preparing and distributing materials such as
shareholder reports, prospectuses and proxies to
current shareholders;
(iii) Blue Sky registration fees incurred by a
Class of shares;
(iv) Securities and Exchange Commission
registration fees incurred by a Class of shares;
(v) the expense of administrative personnel
and services as required to support the shareholders
of a specific Class;
(vi) litigation or other legal expenses
relating solely to one Class of shares; and
(vii) fees of members of the governing boards
of the funds incurred as a result of issues relating
to one Class of shares.
Pursuant to the Multiple Class System, expenses of a
Fund allocated to a particular Class of shares of
that Fund are borne on a pro rata basis by each
outstanding share of that Class.
III. Conversion Rights of Class B Shares
All Class B shares of each Fund will automatically
convert to Class A shares after a certain holding
period, expected to be, in most cases, approximately
eight years but may be shorter. Upon the expiration
of the holding period, Class B shares (except those
purchases through the reinvestment of dividends and
other
distributions paid in respect of Class B shares)
will automatically convert to Class A shares of the
Fund at the relative net asset value of each of the
Classes, and will, as a result, thereafter be
subject to the lower fee under the Services and
Distribution Plan. For purposes of calculating the
holding period required for conversion, newly
created Class B shares issued after the date of
implementation of the Multiple Class
System are deemed to have been issued on (i) the
date on which the issuance of the Class B shares
occurred or (ii) for Class B shares obtained through
an exchange, or a series of exchanges, the date on
which the issuance of the original Class B shares
occurred.
Shares purchased through the reinvestment of
dividends and other distributions paid in respect of
Class B shares are also Class B shares. However,
for purposes of conversion to Class A, all Class B
shares in a shareholder's Fund account that were
purchased through the reinvestment of dividends and
other distributions paid in respect of Class B
shares (and that have not converted to Class A
shares as provided in the following sentence) are
considered to be held in a separate sub-account.
Each time any Class B shares
in the shareholder's Fund account (other than those
in the sub-account referred to in the preceding
sentence) convert to Class A, a pro rata portion of
the Class B shares then in the sub-account also
converts to Class A. The portion is determined by
the ratio that the shareholder's Class B shares
converting to Class A bears to the shareholder's
total Class B shares not acquired through dividends
and distributions.
The conversion of Class B shares to Class A shares
is subject to the continuing availability of a
ruling of the Internal Revenue Service that payment
of different dividends on Class A and Class B shares
does not result in the Fund's dividends or
distributions constituting "preferential dividends"
under the Internal Revenue
Code of 1986, as amended (the "Code"), and the
continuing availability of an opinion of counsel to
the effect that the conversion of shares does not
constitute a taxable event under the Code. The
conversion of Class B shares to Class A shares may
be suspended if this opinion is no longer available,
In the event that conversion of Class B shares does
not occur, Class B shares would continue to be
subject to the distribution fee and any
incrementally higher transfer agency costs attending
the Class B shares for an indefinite period.
IV. Exchange Privileges
Shareholders of a Fund may exchange their shares at
net asset value for shares of the same Class in
certain other of the Smith Barney Mutual Funds as
set forth in the prospectus for such Fund. Funds
only permit exchanges into shares of money market
funds having a plan under the Rule if, as permitted
by paragraph (b) (5) of Rule 11a-3 under the 1940
Act, either (i) the time period during which the
shares of the money market funds are held is
included in the calculations of the CDSC or (ii) the
time period is not included but the amount of the
CDSC is reduced by the amount of any payments made
under a plan adopted pursuant to the
Rule by the money market funds with respects to
those shares. Currently, the Funds include the time
period during which shares of the money market fund
are held in the CDSC period. The exchange
privileges applicable to all Classes of shares must
comply with Rule 11a-3 under the 1940 Act.
Smith Barney Sponsored Investment Companies
Operating under Rule 18f-3 - Schedule A
(as of October 31, 1998)
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund
Smith Barney Concert Allocation Series Inc.
Conservative Portfolio
Balanced Portfolio
Global Portfolio
Growth Portfolio
Income Portfolio
High Growth Portfolio
Smith Barney Equity Funds -
Concert Social Awareness Fund
Smith Barney Large Cap Blend Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -
Large Cap Value Fund
Short-Term High Grade Bond Fund
U.S. Government Securities Fund
Smith Barney Income Funds -
Smith Barney Balanced Fund
Smith Barney Convertible Fund
Smith Barney Diversified Strategic Income Fund
Smith Barney Exchange Reserve Fund
Smith Barney High Income Fund
Smith Barney Municipal High Income Fund
Smith Barney Premium Total Return Fund
Smith Barney Total Return Bond Fund
Smith Barney Investment Trust -
Smith Barney Intermediate Maturity California
Municipals Fund
Smith Barney Intermediate Maturity New York
Municipals Fund
Smith Barney Large Capitalization Growth Fund
Smith Barney S&P 500 Index Fund
Smith Barney Mid Cap Blend Fund
Smith Barney Investment Funds Inc. -
Concert Peachtree Growth Fund
Smith Barney Contrarian Fund
Smith Barney Government Securities Fund
Smith Barney Hansberger Global Small Cap Value
Fund
Smith Barney Hansberger Global Value Fund
Smith Barney Investment Grade Bond Fund
Smith Barney Special Equities Fund
Smith Barney Institutional Cash Management Fund,
Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc. -
Cash Portfolio
Government Portfolio
Retirement Portfolio
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Muni Funds -
California Money Market Portfolio
Florida Portfolio
Georgia Portfolio
Limited Term Portfolio
National Portfolio
New York Portfolio
New York Money Market
Pennsylvania Portfolio
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust -
Smith Barney Telecommunications Income Fund
Smith Barney World Funds, Inc. -
International Equity Portfolio
International Balanced Portfolio
European Portfolio
Pacific Portfolio
Global Government Bond Portfolio
Emerging Markets Portfolio
G:\fundac\legal\funds\njmu\1999\secdocs\18f3plan
