<PAGE>
A SPECIAL NOTICE TO SHAREHOLDERS OF
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
YOUR VOTE IS IMPORTANT
Dear Shareholder:
The Board of Trustees of Smith Barney Shearson Worldwide Prime Assets Fund
(the "Trust") has recently reviewed and endorsed a proposal for a reorganization
of the Trust which it judges to be in the best interests of the Trust's
shareholders.
UNDER THE TERMS OF THE PROPOSAL, SMITH BARNEY SHEARSON LIMITED MATURITY
TREASURY FUND ("LIMITED MATURITY TREASURY FUND"), A SEPARATE INVESTMENT
PORTFOLIO OF SMITH BARNEY SHEARSON INCOME TRUST ("INCOME TRUST"), WOULD ACQUIRE
SUBSTANTIALLY ALL OF THE ASSETS AND LIABILITIES OF THE TRUST. After the
transaction, the Trust would be dissolved and you would become a shareholder of
Limited Maturity Treasury Fund, having received shares of Limited Maturity
Treasury Fund with an aggregate value equivalent to the aggregate net asset
value of your investment in the Trust at the time of the transaction.
SPECIAL MEETING OF SHAREHOLDERS: YOUR VOTE IS IMPORTANT
The Board of Trustees of the Trust has determined that the proposed
reorganization should provide benefits to shareholders due, in part, to savings
in expenses borne by shareholders. We have therefore called a Special Meeting of
Shareholders to be held July 5, 1994 to consider this transaction. WE STRONGLY
INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND RETURN YOUR
PROXY NO LATER THAN JULY 5, 1994.
Detailed information about the proposed transaction is described in the
enclosed proxy statement. On behalf of the board, I thank you for your
participation as a shareholder and urge you to please exercise your right to
vote by completing, dating and signing the enclosed proxy card. A
self-addressed, postage-paid envelope has been enclosed for your convenience.
Shareholders of the Trust will recognize a taxable gain or loss on the
exchange of their shares of the Trust for shares of Limited Maturity Treasury
Fund. Shareholders should consult their tax advisors regarding the effect of the
proposed transaction in light of their individual circumstances.
If you have any questions regarding the proposed transaction, please feel
free to call your financial consultant.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE
RECEIVED PROMPTLY.
Sincerely,
HEATH B. McLENDON
Chairman of the Board
June 2, 1994
<PAGE>
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
Two World Trade Center
New York, New York 10048
--------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on July 5, 1994
--------------------------
To our Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Smith Barney Shearson Worldwide Prime Assets Fund (the "Trust")
will be held at Two World Trade Center, 100th Floor, New York, New York on July
5, 1994, commencing at 10:30 A.M. for the following purposes:
1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of June 1, 1994 providing for (i) the acquisition of
substantially all of the assets of the Trust by Smith Barney Shearson Limited
Maturity Treasury Fund ("Limited Maturity Treasury Fund"), a separate investment
series of Smith Barney Shearson Income Trust ("Income Trust"), in exchange for
shares of Limited Maturity Treasury Fund and the assumption by Limited Maturity
Treasury Fund of certain liabilities of the Trust, (ii) the distribution of such
shares of Limited Maturity Treasury Fund to shareholders of the Trust in
liquidation of the Trust and (iii) the subsequent dissolution and termination of
the Trust.
2. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
The Trustees of the Trust have fixed the close of business on May 16, 1994
as the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting and any adjournment or adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED TO SIGN AND RETURN WITHOUT DELAY
THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE SO
THAT THEIR SHARES MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE.
By Order of the Board of Trustees
CHRISTINA T. SYDOR
Secretary
June 2, 1994
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE
OF FURTHER SOLICITATION.
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURES
- ------------------------------------------------------- ----------------------------
<S> <C>
CORPORATE ACCOUNTS
(1) ABC Corp....................................... ABC Corp.
(2) ABC Corp....................................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer....................... John Doe
(4) ABC Corp. Profit Sharing Plan.................. John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust...................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78................................ Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA................. John B. Smith
(2) John B. Smith.................................. John B. Smith, Jr.,
Executor
</TABLE>
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED JUNE 2, 1994
ACQUISITION OF THE ASSETS OF
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 720-9218
BY AND IN EXCHANGE FOR SHARES OF
SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND
A SEPARATE INVESTMENT SERIES OF
SMITH BARNEY SHEARSON INCOME TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 720-9218
This Prospectus/Proxy Statement is being furnished to shareholders of Smith
Barney Shearson Worldwide Prime Assets Fund (the "Acquired Fund") in connection
with a proposed plan of reorganization to be submitted to shareholders of the
Acquired Fund for consideration at a Special Meeting of Shareholders to be held
on July 5, 1994 at 10:30 A.M. (the "Meeting"), at Two World Trade Center, 100th
Floor, New York, New York or any adjournment or adjournments thereof.
The plan provides for all or substantially all of the assets of the Acquired
Fund to be acquired by Smith Barney Shearson Limited Maturity Treasury Fund (the
"Acquiring Fund"), a separate series of Smith Barney Shearson Income Trust
("Income Trust"), in exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of certain liabilities of the Acquired Fund
(hereinafter referred to as the "Reorganization"; the Acquiring Fund and the
Acquired Fund are sometimes referred to hereinafter as the "Funds" and
individually as a "Fund"). The shares of the Acquiring Fund would be distributed
to shareholders of the Acquired Fund in liquidation of the Acquired Fund and the
Acquired Fund would be dissolved and terminated. As a result of the proposed
Reorganization, each shareholder of the Acquired Fund will receive that number
of shares of the Acquiring Fund having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the Acquired Fund.
Holders of Class A shares of the Acquired Fund will receive shares of the
Acquiring Fund, and no sales charge or any contingent deferred sales charge
("CDSC") will be imposed on the shares of the Acquiring Fund received by the
Acquired Fund's Class A shareholders.
1
<PAGE>
The Acquiring Fund is a separate series of Income Trust, an open-end
management investment company. Greenwich Street Advisors ("Greenwich Street
Advisors"), a division of Mutual Management Corp., serves as investment adviser
to the Acquiring Fund. Mutual Management Corp. provides investment advisory and
management services to investment companies affiliated with Smith Barney
Shearson Inc. ("Smith Barney Shearson"). Mutual Management Corp. is a wholly
owned subsidiary of Smith Barney Shearson Holdings Inc., which is itself a
wholly owned subsidiary of The Travelers Inc. PanAgora Asset Management Limited
("PanAgora") serves as investment adviser to the Acquired Fund. Fifty percent of
the outstanding voting stock of PanAgora is owned by Nippon Life Insurance
Company and fifty percent is owned by Lehman Brothers Inc. Lehman Brothers Inc.
is a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("LBHI"), which
until 12:00 midnight on May 31, 1994 was a wholly owned subsidiary of American
Express Company. As of such date, the common stock of LBHI was distributed to
the holders of common stock of American Express Company.
The investment objectives of the Acquiring Fund are generally similar to
those of the Acquired Fund. The Acquiring Fund's investment objective is to
achieve as high a level of current income as is consistent with preservation of
principal. The investment objective of the Acquired Fund is to maximize current
income consistent with the protection of principal and relative stability of net
asset value per share. Notwithstanding the similarity of the investment
objectives, the investment policies of the Funds differ in significant respects.
The Acquiring Fund invests exclusively in United States government securities
while the Acquired Fund invests in high quality debt securities of various
issuers including the United States government, foreign governments,
supranational organizations, corporations, certificates of deposit and bankers'
acceptances and commercial paper. The investment policies of the Acquired Fund
and the Acquiring Fund are described in detail under "Comparison of Investment
Objectives and Policies" in this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the Acquiring Fund that a
prospective investor should know before investing. Certain relevant documents
listed below, which have been filed with the Securities and Exchange Commission
("SEC"), are incorporated in whole or in part by reference. A Statement of
Additional Information dated June 2, 1994, relating to this Prospectus/Proxy
Statement and the Reorganization, has been filed with the SEC and is
incorporated by reference into this Prospectus/Proxy Statement. A copy of such
Statement of Additional Information is available upon request and without charge
by writing to the Acquired Fund at the address listed on the cover page of this
Prospectus/Proxy Statement or by calling toll-free 1-800-221-8806.
2
<PAGE>
1. The Prospectus of Smith Barney Shearson Limited Maturity Treasury Fund
dated January 29, 1994, as supplemented by a Prospectus Supplement dated April
14, 1994, is incorporated in its entirety by reference and a copy is included
herein.
2. The Prospectus of Smith Barney Shearson Worldwide Prime Assets Fund
dated April 1, 1993, as supplemented by Prospectus Supplements dated January 3,
1994, February 1, 1994 and April 1, 1994, is incorporated in its entirety by
reference.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a copy of
the Agreement and Plan of Reorganization (the "Plan") for the proposed
transaction.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Summary...................................................................... 5
Reasons for the Reorganization............................................... 9
Information About the Reorganization......................................... 10
Comparison of Investment Objectives and Policies............................. 14
Information on Shareholders' Rights.......................................... 15
Additional Information About Smith Barney Shearson Worldwide Prime Assets
Fund and Smith Barney Shearson Limited Maturity Treasury Fund............... 17
Other Business............................................................... 18
Voting Information........................................................... 18
Financial Statements and Experts............................................. 20
Legal Matters................................................................ 20
Exhibit A: Agreement and Plan of Reorganization.............................. A-1
</TABLE>
ADDITIONAL MATERIALS
Prospectus of Smith Barney Shearson
Limited Maturity Treasury Fund
dated January 29, 1994, as
supplemented by a Prospectus
Supplement dated April 14, 1994
4
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ADDITIONAL
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT, THE
AGREEMENT AND PLAN OF REORGANIZATION, A COPY OF WHICH IS ATTACHED TO THIS
PROSPECTUS/ PROXY STATEMENT AS EXHIBIT A, THE ACCOMPANYING PROSPECTUS OF THE
ACQUIRING FUND DATED JANUARY 29, 1994, AS SUPPLEMENTED BY A PROSPECTUS
SUPPLEMENT DATED APRIL 14, 1994, AND THE PROSPECTUS OF THE ACQUIRED FUND DATED
APRIL 1, 1994, AS SUPPLEMENTED BY PROSPECTUS SUPPLEMENTS DATED JANUARY 3, 1994,
FEBRUARY 1, 1994 AND APRIL 1, 1994.
PROPOSED REORGANIZATION. The Plan provides for the transfer of all of the
assets of the Acquired Fund to the Acquiring Fund in exchange for shares of the
Acquiring Fund and the assumption by the Acquiring Fund of certain liabilities
of the Acquired Fund. The Plan also calls for the distribution of shares of the
Acquiring Fund to the Acquired Fund's shareholders in liquidation of the
Acquired Fund. As a result of the Reorganization, each holder of Class A shares
of the Acquired Fund will become the owner of that number of full and fractional
shares of the Acquiring Fund having an aggregate net asset value equal to the
aggregate net asset value of the shareholder's shares of the Acquired Fund as of
the close of business on the date that the Acquired Fund's assets are exchanged
for shares of the Acquiring Fund. See "Information About the Reorganization --
Plan of Reorganization."
For the reasons set forth below under "Reasons for the Reorganization," the
Board of Trustees of the Acquired Fund, including the Trustees of the Acquired
Fund who are not "interested persons" (the "Independent Trustees"), as that term
is defined in the Investment Company Act of 1940 (the "1940 Act"), has concluded
that the Reorganization would be in the best interests of the shareholders of
the Acquired Fund and that the interests of the Acquired Fund's existing
shareholders will not be diluted as a result of the transaction contemplated by
the Reorganization and therefore has submitted the Plan for approval by the
Acquired Fund's shareholders. The Board of Trustees of Income Trust has also
reached similar conclusions with respect to the Acquiring Fund and has approved
the Reorganization.
Approval of the Reorganization will require the affirmative vote of a
majority, as defined in the 1940 Act, of the outstanding shares of the Acquired
Fund, which is the lesser of: (i) 67% of the voting securities of the Acquired
Fund present at the Meeting, if the holders of more than 50% of the outstanding
voting securities of the Acquired Fund are present or represented by proxy; or
(ii) more than 50% of the outstanding voting securities of the Acquired Fund.
See "Voting Information."
5
<PAGE>
TAX CONSEQUENCES. The Reorganization will be a taxable event, and gain or
loss will be recognized by both the Acquired Fund and its shareholders. The
Acquired Fund, however, will not be required to pay any tax, but, rather, will
take into account any gain or loss it recognizes in the Reorganization in
setting the amount of its declared ordinary and capital gains dividends and,
accordingly, its net asset value on the Closing Date (as defined herein).
Accordingly, such Fund-level gain or loss will generally reduce shareholder gain
(or increase shareholder loss) in the case of Fund gain, or increase shareholder
gain (or reduce shareholder loss) in the case of Fund loss. Taxable recognition
of gain or loss at the Fund level may, therefore, be offset by changes in the
amount of gain or loss recognized at the shareholder level, although the overall
effect of the tax treatment of the Reorganization on shareholders of the
Acquired Fund may be affected by the character of the gain or loss (as
short-term or long-term gain or loss) to the Fund and the shareholders of the
Acquired Fund. Shareholders of the Acquired Fund will recognize a gain or loss
on the exchange of their shares in the Acquired Fund for shares of the Acquiring
Fund, which will be short-term or long-term gain or loss depending on the
shareholder's holding period for the shares of the Acquired Fund. The Acquired
Fund's shareholders tax basis in the shares of the Acquiring Fund, after the
Reorganization, will be the net asset value of shares of the Acquiring Fund on
the Closing Date, and the Acquired Fund shareholders' holding period for shares
of the Acquiring Fund will begin on the day following the Closing Date.
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives of the
Acquiring Fund are generally similar to those of the Acquired Fund. The
Acquiring Fund's investment objective is to achieve as high a level of current
income as is consistent with preservation of principal. The investment objective
of the Acquired Fund is to maximize current income consistent with the
protection of principal and relative stability of net asset value per share.
Notwithstanding the similarity of the investment objectives, the investment
policies of the Funds differ in significant respects. The Acquiring Fund invests
exclusively in United States government securities while the Acquired Fund
invests in high quality debt securities of various issuers including the United
States government, foreign governments, supranational organizations,
corporations, certificates of deposit and bankers' acceptances and commercial
paper. The differences between the investment policies of the Acquiring Fund and
the Acquired Fund are described in greater detail under "Comparison of
Investment Objectives and Policies."
FEES AND EXPENSES. Total management fees payable by the Acquired Fund are
0.65% of the Acquired Fund's average daily net assets, consisting of a monthly
fee computed at an annual rate of 0.45% which is paid to PanAgora as investment
adviser and a monthly fee computed at an annual rate of 0.20% which is paid to
Smith, Barney Advisors, Inc. ("Smith Barney Advisors") as
6
<PAGE>
administrator (from which The Boston Company Advisors, Inc. ("Boston Advisors")
is compensated for its services as sub-administrator). As a result of a
voluntary agreement between PanAgora and Boston Advisors to waive certain
management fees, the cumulative fees paid by the Acquired Fund to PanAgora and
Boston Advisors was 0.38% of the Acquired Fund's average daily net assets for
the fiscal year ended November 30, 1993. Total management fees payable by the
Acquiring Fund are 0.55% of the Acquiring Fund's average daily net assets,
consisting of a monthly fee computed at an annual rate of 0.35% which is paid to
Greenwich Street Advisors as investment adviser and a monthly fee computed at an
annual rate of 0.20% which is paid to Smith Barney Advisors as administrator
(from which Boston Advisors is compensated for its services as
sub-administrator). Greenwich Street Advisors and Boston Advisors have
voluntarily waived investment advisory and administration fees, respectively, in
the aggregate amount equal to 0.25% of the value of the Acquiring Fund's average
daily net assets for the fiscal year ended November 30, 1993.
The expense ratio of the Acquiring Fund subsequent to the Reorganization is
expected to be lower than that of the Acquired Fund. See "Reasons for the
Reorganization." Total operating expenses for the Acquiring Fund stated as a
percentage of average net assets for the fiscal year ended November 30, 1993
were 0.79% which includes the voluntary fee waiver by Greenwich Street Advisors
and Boston Advisors. If these voluntary waivers had not been in place, total
operating expenses would have been 1.04% for the fiscal year ended November 30,
1993. Total operating expenses for the Acquired Fund stated as a percentage of
average net assets for the fiscal year ended November 30, 1993 were 1.75%, which
includes the voluntary agreements of PanAgora and Boston Advisors to waive a
portion of their fees. If these voluntary agreements had not been in place,
total operating expenses for the fiscal year ended November 30, 1993 would have
been 2.03%. Assuming that the level of net assets of the combined fund remains
the same after the Reorganization as the level of net assets of the Acquiring
Fund and the Acquired Fund as considered by the Board of Trustees of each Fund
in approving the Reorganization, it is estimated that the expense ratio for
shares of the combined fund would be reduced to 0.91%.
Shares of the Acquiring Fund and the Acquired Fund are both sold subject to
distribution plans adopted pursuant to Rule 12b-1 under the 1940 Act under which
(i) the Acquired Fund charges its Class A shareholders an annual distribution
fee of 0.90% of the value of the Acquired Fund's average daily net assets and
(ii) the Acquiring Fund charges holders of its shares an annual service fee of
0.15% of the value of the Acquiring Fund's average daily net assets. See
"Distributor" in the accompanying Prospectus of the Acquiring Fund.
7
<PAGE>
EXCHANGE PRIVILEGES. Holders of the Acquired Fund's Class A shares are
entitled to exchange such shares for Class A shares of certain funds in the
Smith Barney Shearson Group of Funds ("Group of Funds") to the extent shares are
offered for sale in the shareholder's state of residence. Shareholders of the
Acquiring Fund are entitled to exchange their shares for Class A shares of
certain other funds in the Group of Funds. After the Reorganization, each
shareholder of the Acquired Fund who becomes the owner of shares of the
Acquiring Fund will be entitled to the exchange privileges offered by those
shares. Any exchange will be a taxable event for which a shareholder may have to
recognize a gain or loss under federal income tax provisions. For the purposes
of any exchange of shares acquired through the Reorganization, the Acquired Fund
shareholders will be deemed to have paid the maximum sales charge currently
applicable for shares of the Acquiring Fund. A "sales charge differential" will
be imposed on any Acquiring Fund shareholder who chooses to exchange shares of
the Acquiring Fund for shares of another fund in the Group of Funds which
imposes a higher sales charge than that imposed on the Acquiring Fund shares.
The Acquiring Fund reserves the right to amend or terminate the exchange
privilege after providing notice to shareholders. See "Exchange Privilege" in
the accompanying Prospectus of the Acquiring Fund.
DIVIDENDS. The policies of each Fund with regard to dividends and
distributions are generally the same. Each Fund's policy is to distribute its
investment income monthly and its net realized capital gains, if any, once a
year, normally at the end of the year in which earned or at the beginning of the
next year. Unless a shareholder instructs that dividends and capital gains
distributions be paid in cash and credited to the shareholder's account at Smith
Barney Shearson, dividends and capital gains distributions will be reinvested
automatically in additional shares of the Acquiring Fund at net asset value,
without a sales charge or CDSC. The Acquired Fund shareholders that have elected
to receive dividends and distributions in cash will continue to receive
distributions in such manner from the Acquiring Fund. Subsequent to the
Reorganization, the Acquired Fund shareholders may elect at any time to have
their dividends and distributions reinvested automatically in additional shares
of the Acquiring Fund by contacting their Smith Barney Shearson Financial
Consultant. See "Dividends, Distributions and Taxes" in the accompanying
Prospectus of the Acquiring Fund.
PURCHASE AND REDEMPTION PROCEDURES. Purchase of shares of the Acquiring
Fund and the Acquired Fund must be made through a brokerage account maintained
with Smith Barney Shearson or with a broker that clears securities transactions
through Smith Barney Shearson on a fully disclosed basis (an "Introducing
Broker"). The Acquiring Fund imposes a maximum sales charge in connection with
the purchase of its shares of 1.25%. The Acquired Fund imposes no sales charge
in connection with the purchase of
8
<PAGE>
its Class A Shares. The Acquiring Fund shares are subject to a maximum CDSC of
1.00% of the amount being redeemed if such redemption occurs within one year of
purchase of the shares. Redemptions may be made by submitting a redemption
request through Smith Barney Shearson or an Introducing Broker or the respective
Fund's transfer agent. Acquiring Fund shares issued to holders of the Acquired
Fund's Class A shares pursuant to the Reorganization will not be subject to the
1.00% CDSC otherwise applicable upon the redemption of the Acquiring Fund shares
within one year of purchase of such shares. See "Redemption of Shares" in the
accompanying Prospectus of the Acquiring Fund.
SHAREHOLDERS' RIGHTS. Shareholders of the Acquiring Fund and the Acquired
Fund have similar voting rights. For example, neither the Acquired Fund nor
Income Trust, on behalf of the Acquiring Fund, holds an annual meeting of
shareholders and there is normally no meeting of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders. In addition, under
the laws of The Commonwealth of Massachusetts and the Master Trust Agreement of
the Acquired Fund, shareholders of the Acquired Fund do not have appraisal
rights in connection with a combination or acquisition of the assets of the
Acquired Fund by another entity. Shareholders of the Acquired Fund may, however,
redeem their shares at net asset value prior to the date of the Reorganization.
See "Information on Shareholder Rights."
RISK FACTORS. The Acquired Fund and the Acquiring Fund share investment
risks which are those generally associated with investing in a managed portfolio
consisting primarily of high-quality debt securities. The Acquiring Fund invests
exclusively in (a) securities issued by the United States Treasury and (b) other
United States government securities that generally provide interest income
exempt from state and local income taxes. The Acquired Fund may invest in
foreign securities, securities denominated in foreign currencies, securities
issued by non-governmental issuers, futures contracts, options and forward
currency contracts. The foregoing investments and investment techniques all have
associated risks that warrant special consideration. For a full description of
the risk factors involved in investing in the Acquiring Fund, refer to "Risk
Factors and Special Considerations" in the accompanying Prospectus of the
Acquiring Fund.
REASONS FOR THE REORGANIZATION
The Board of Trustees of the Acquired Fund has determined that it is
advantageous to combine the Acquired Fund with the Acquiring Fund. The Funds
have generally similar investment objectives and the same administrator,
sub-administrator, custodian and transfer agent.
9
<PAGE>
The Board of Trustees of the Acquired Fund has determined that the
Reorganization should provide certain benefits to shareholders. In making such
determination, the Board of Trustees considered, among other things, the savings
in expenses borne by shareholders expected to be realized by the Reorganization,
the comparative investment performance of the Funds and the advantages of
eliminating duplication inherent in marketing two funds with similar investment
objectives and that, despite the taxable nature of the Reorganization, the
Board's belief that most shareholders would not recognize gain as a result of
the Reorganization.
In light of the foregoing, the Board of Trustees of the Acquired Fund,
including the Independent Trustees, has decided that it is in the best interests
of the Acquired Fund and its shareholders to combine with the Acquiring Fund.
The Board of Trustees of the Acquired Fund has also determined that a
combination of the Acquired Fund and the Acquiring Fund would not result in a
dilution of the interests of the Acquired Fund's shareholders.
The Board of Trustees of Income Trust considered various factors in
approving the Reorganization and it has determined that it is advantageous to
acquire the assets of the Acquired Fund. Among other factors, the Board of
Trustees of Income Trust considered pro forma financial information provided by
Smith Barney Shearson which indicated that the Reorganization is likely to
reduce the expense ratio of Acquiring Fund shares. Accordingly, the Board of
Trustees of Income Trust, including a majority of the non-interested Trustees,
has determined that the Reorganization is in the best interests of the Acquiring
Fund's shareholders and that the interests of the Acquiring Fund's shareholders
will not be diluted as a result of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
PLAN OF REORGANIZATION. The following summary of the Plan is qualified in
its entirety by reference to the Plan (Exhibit A hereto). The Plan provides that
the Acquiring Fund will acquire all or substantially all of the assets of the
Acquired Fund in exchange for shares of the Acquiring Fund and the assumption by
the Acquiring Fund of certain liabilities of the Acquired Fund on July 15, 1994
or such later date as may be agreed upon by the parties (the "Closing Date").
Prior to the Closing Date, the Acquired Fund will endeavor to discharge all
of its known liabilities and obligations. The Acquiring Fund will not assume any
liabilities, or obligations other than those reflected on an unaudited statement
of assets and liabilities of the Acquired Fund prepared as of the close of
regular trading on the New York Stock Exchange, Inc. (the "NYSE"), currently
4:00 p.m. New York time, on the Closing Date. The number of full and fractional
shares of the Acquiring Fund to be issued to the Acquired Fund shareholders will
be determined on the basis of the Acquiring Fund's and the
10
<PAGE>
Acquired Fund's relative net asset values per share, computed as of the close of
regular trading on the NYSE on the Closing Date. In the case of the Acquired
Fund, the net asset value per share of each Class will be determined by dividing
the assets attributable to each Class, less the liabilities attributable to each
Class, by the total number of outstanding shares of each Class. The net asset
value per share of the Acquiring Fund will be determined by dividing the
Acquiring Fund's assets, less liabilities, by the total number of outstanding
shares of the Acquiring Fund.
Both the Acquired Fund and the Acquiring Fund will utilize Boston Advisors
as agent to determine the value of their respective portfolio securities. The
Acquired Fund and the Acquiring Fund also will use the same independent pricing
service to determine the value of each security so that Boston Advisors, as
agent, can determine the aggregate value of each Fund's portfolio. The method of
valuation employed will be consistent with the requirements set forth in the
Prospectus of each Fund, Rule 22c-1 under the 1940 Act and the interpretation of
such rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, each of the Acquired Fund and the Acquiring
Fund shall have declared a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to their
respective shareholders all taxable income for the taxable year ending on or
prior to the Closing Date (computed without regard to any deduction for
dividends paid) and all of the respective Funds' net capital gains realized in
the taxable year ending on or prior to the Closing Date (after reductions for
any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, the Acquired
Fund will liquidate and distribute pro rata to shareholders of record as of the
close of business on the Closing Date the full and fractional shares of the
Acquiring Fund received by the Acquired Fund. Such liquidation and distribution
will be accomplished by the establishment of accounts in the names of the
Acquired Fund's shareholders on the share records of the Acquiring Fund's
transfer agent. Each account will represent the respective pro rata number of
full and fractional shares of the Acquiring Fund due to each of the Acquired
Fund's shareholders. After such distribution and the winding up of its affairs,
the Acquired Fund and its registration under the 1940 Act will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval of the Acquired Fund's shareholders,
the Plan may be terminated at any time at or prior to the Closing Date (1) by
mutual agreement of the Acquired Fund and the Acquiring Fund or (2) by either
party to the Plan upon a material breach by the other party of any
representation, warranty or agreement contained therein.
11
<PAGE>
Approval of the Plan will require the affirmative vote of a majority, as
defined in the 1940 Act, of the outstanding voting securities of the Acquired
Fund. The 1940 Act defines "majority" as the lesser of: (i) 67% of the voting
securities of the Acquired Fund present at the Meeting, if the holders of more
than 50% of the outstanding voting securities of the Acquired Fund are present
or represented by proxy; or (ii) more than 50% of the outstanding voting
securities of the Acquired Fund. If the Reorganization is not approved by
shareholders of the Acquired Fund, the Board of Trustees of the Acquired Fund
will consider other possible courses of action, including liquidation of the
Acquired Fund.
DESCRIPTION OF THE ACQUIRING FUND'S SHARES. Full and fractional shares of
beneficial interest of the Acquiring Fund will be issued to the Acquired Fund's
shareholders in accordance with the procedures detailed in the Plan and as
described in the Acquiring Fund's Prospectus. Generally, the Acquiring Fund does
not issue share certificates to shareholders unless a specific request is
submitted to the Acquiring Fund's transfer agent. The shares of the Acquiring
Fund to be issued to the Acquired Fund shareholders and registered on the
shareholder records of the transfer agent will have no pre-emptive or conversion
rights. See "Information on Shareholder Rights" and the Acquiring Fund's
Prospectus for additional information with respect to the shares of the
Acquiring Fund.
FEDERAL INCOME TAX CONSEQUENCES. The Reorganization will be a taxable
event, and gain or loss will be recognized in accordance with Section 1001 of
the Internal Revenue code of 1986, as amended (the "Code"), by both shareholders
of the Acquired Fund and by the Acquired Fund. The Acquired Fund, however, will
not be required to pay any tax, but, rather, will take into account any gain or
loss it recognizes in the Reorganization in setting the amount of its declared
ordinary and capital gains dividends and, accordingly, its net asset value on
the Closing Date. Accordingly, such Fund-level gain or loss will generally
reduce shareholder gain (or increase shareholder loss) in the case of Fund gain,
or increase shareholder gain (or reduce shareholder loss) in the case of Fund
loss. Taxable recognition of gain or loss at the Fund level may, therefore, be
offset by changes in the amount of gain or loss recognized at the shareholder
level, although the overall effect of the tax treatment of the Reorganization on
shareholders of the Acquired Fund may be affected by the character of the gain
or loss (determined under Code Section 1222 as short-term or long-term gain or
loss) to the Fund and the shareholders of the Acquired Fund. The gain or loss
recognized by the Acquired Fund on the transfer of capital assets will be
long-term or short-term capital
12
<PAGE>
gain or loss, depending on the holding period of the Acquired Fund for each
asset, as determined under Code Section 1223. Dividends of the Acquired Fund
attributable to short-term capital gains will be taxable to shareholders of the
Acquired Fund as ordinary income, and dividends attributable to long-term
capital gains will be taxable to shareholders of the Acquired Fund as long-term
taxable gain regardless of the length of time shareholders of the Acquired Fund
have held their shares in the Acquired Fund. Shareholders of the Acquired Fund
will recognize a gain or loss on the exchange of their shares in the Acquired
Fund for shares of the Acquiring Fund, which will be short-term or long-term
gain or loss depending on the shareholder's holding period for the shares in the
Acquired Fund. Under Code Sections 1011 and 1012, the Acquired Fund
shareholders' tax basis in the shares of the Acquiring Fund received in the
Reorganization will be the net asset value of Acquiring Fund shares on the
Closing Date, and the Acquired Fund's shareholders' holding period for Acquiring
Fund shares will begin on the day following the Closing Date.
Shareholders of the Acquired Fund should consult their tax advisors
regarding the effect of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the federal income
tax consequences of the Reorganization, shareholders of the Acquired Fund should
also consult their tax advisors as to state and local tax consequences, if any,
of the Reorganization.
CAPITALIZATION. The following table shows the capitalization of the
Acquiring Fund and the Acquired Fund as of March 31, 1994, and on a pro forma
basis as of that date, giving effect to the proposed acquisition of assets at
net asset value.
<TABLE>
<CAPTION>
SMITH BARNEY
SHEARSON WORLDWIDE SMITH BARNEY SHEARSON
PRIME ASSETS FUND LIMITED MATURITY PRO FORMA FOR
(CLASS A SHARES) TREASURY FUND REORGANIZATION
(UNAUDITED) (UNAUDITED) (UNAUDITED)
-------------------- ----------------------- ----------------
<S> <C> <C> <C>
Net Assets.............. $ 67,097,534 $ 47,550,461 $ 114,647,995
Net asset value per
share.................. $ 1.70 $ 7.46 $ 7.46
Shares outstanding...... 39,371,814 6,372,289 15,366,597
</TABLE>
As of the Record Date, May 16, 1994, there were 35,415,714 outstanding Class
A shares of the Acquired Fund and 6,163,776 outstanding shares of the Acquiring
Fund. As of the Record Date, the officers and Trustees of the Acquired Fund
beneficially owned as a group less than 1% of the outstanding shares of the
Acquired Fund. As of the Record Date, M.D. Sass Investors Services, Inc. with
its address at 1133 Avenue of the Americas, New York, NY 10036-6710, was record
holder of 12.14% of Class A shares of the Acquired Fund. To the best knowledge
of the Trustees of the Acquired Fund, as of the
13
<PAGE>
Record Date, no shareholder or "group" (as that term is used in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
beneficially owned more than 5% of the Acquired Fund. As of the Record Date, the
officers and Trustees of the Income Trust beneficially owned as a group less
than 1% of the outstanding shares of the Acquiring Fund. To the best knowledge
of the Trustees of Income Trust, as of the Record Date, no shareholder or
"group" (as that term is used in Section 13(d) of the Exchange Act) beneficially
owned more than 5% of the Acquiring Fund.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies and
restrictions of the Acquiring Fund and the Acquired Fund is based upon and
qualified in its entirety by the respective investment objectives, policies and
restrictions sections of the Prospectuses of the Acquiring Fund and the Acquired
Fund. For a full discussion of the investment objectives, policies and
restrictions of the Acquiring Fund, refer to the Acquiring Fund's Prospectus,
which accompanies this Prospectus/Proxy Statement, under the caption "Investment
Objective and Management Policies," and for a discussion of these issues as they
apply to the Acquired Fund, refer to the Acquired Fund's Prospectus under the
caption "Investment Objective and Management Policies."
INVESTMENT OBJECTIVE. The investment objective of the Acquiring Fund is to
achieve as high a level of current income as is consistent with preservation of
principal. The investment objective of the Acquired Fund is to maximize current
income consistent with protection of principal and relative stability of net
asset value per share. Both the Acquiring Fund's and the Acquired Fund's
investment objectives are considered fundamental policies which cannot be
changed without shareholder approval.
PRIMARY INVESTMENTS. The Acquiring Fund invests exclusively in (a)
securities issued by the United States Treasury and (b) other United States
government securities that generally provide interest income exempt from state
and local income taxes. For a discussion of the risks involved in investing in
the foregoing types of securities, refer to "Investment Objectives and
Management Policies -- Investment Policies" in the accompanying Prospectus of
the Acquiring Fund.
The Acquired Fund invests in a managed portfolio of high-quality debt
securities that may be denominated in U.S. dollars or selected foreign
currencies with remaining maturities of not more than three years. The Acquired
Fund will at all times maintain at least 30% of its net assets in U.S. dollar-
denominated securities and under normal circumstances, at least 20% of its
14
<PAGE>
net assets in securities denominated in the currencies of the countries
participating in the European Monetary System or denominated in European
Currency Units. Under normal circumstances, the Acquired Fund will invest at
least 65% of its assets in securities of issuers domiciled in at least three
different countries, one of which will be the United States.
The Acquired Fund is a non-diversified investment company which concentrates
its investments in the banking industry. The Acquiring Fund is a diversified
fund and does not have an industry concentration policy. Correspondingly,
shareholders of the Acquired Fund will, after the Reorganization, have a reduced
exposure to the risks associated with such restrictive investment policies as
non-diversification and industry concentration.
INVESTMENT TECHNIQUES. Both the Acquired Fund and the Acquiring Fund
purchase securities on a when-issued basis. The Acquiring Fund may purchase or
sell securities for delayed delivery.
The Acquired Fund may enter into futures contracts and options on futures
contracts and may engage in currency exchange transactions, enter into forward
currency contracts and purchase exchange traded put and call options on foreign
currencies. The Acquired Fund may also engage in repurchase agreement
transactions with respect to instruments in which the Acquired Fund invests and
may purchase and sell put, call and other types of option securities that are
traded on domestic or foreign exchanges or over-the-counter. From time to time,
the Acquired Fund may lend its portfolio securities to brokers, dealers and
other financial organizations. These loans will not exceed 20% of the Acquired
Fund's total assets taken at value. The Acquiring Fund may not invest in any of
the foregoing investments or utilize any of the foregoing investment techniques.
A detailed discussion of the investment practices of the Acquiring Fund and
their associated risks can be found under the caption "Investment Objective and
Management Policies" in the Acquiring Fund's Prospectus, which accompanies this
Prospectus/Proxy Statement.
INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL. Income Trust and the Acquired Fund are open-end management
investment companies registered under the 1940 Act which continuously offer to
sell shares at their current net asset value. The Acquiring Fund is a separate
series of Income Trust, which is organized as a business trust under the laws of
The Commonwealth of Massachusetts and is governed by a Master Trust Agreement,
By-laws and Board of Trustees. The Acquired Fund is also organized as a business
trust under the laws of The Commonwealth of Massachusetts and is also governed
by a Master Trust Agreement, By-laws and Board of Trustees. Both Funds are also
governed by applicable state and federal law.
15
<PAGE>
TRUSTEES. Under the Master Trust Agreement of each of Income Trust and the
Acquired Fund, persons serving as Trustees will continue as Trustees for the
duration of each of the Fund's existence until they resign, die or are removed
by a written instrument, signed by at least two-thirds of the Trustees or by
vote of the shareholders holding not less than two-thirds of the shares then
outstanding, cast in person or by proxy at any meeting called for that purpose
or by a written declaration signed by the shareholders holding not less than
two-thirds of the shares then outstanding and filed with the Fund's custodian.
Vacancies on the Boards of either Income Trust or the Acquired Fund may be
filled by a majority of the Trustees remaining in office. A meeting of
shareholders will be required for the purpose of electing additional Trustees
whenever fewer than a majority of the Trustees then in office were elected by
shareholders.
SHAREHOLDER LIABILITY. Under Massachusetts law, shareholders of Income
Trust and the Acquired Fund may, under certain circumstances, be held personally
liable for the obligations of either Income Trust or the Acquired Fund,
respectively. The Acquired Fund's and Income Trust's Master Trust Agreements,
however, both disclaim shareholder liability for acts or obligations of the
Acquiring Fund or the Acquired Fund, as the case may be, and require that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by Income Trust or the Acquired Fund, as the case may be. The
Master Trust Agreement for each of the Acquired Fund and Income Trust provides
for indemnification out of the Acquired Fund's or a series of Income Trust's
property, as the case may be, for all losses and expenses of any shareholder
held personally liable for the obligations of either the Acquired Fund or the
series of Income Trust, as the case may be. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is considered
remote since it is limited to circumstances in which a disclaimer is inoperative
and the Acquired Fund or the series of Income Trust itself, as the case may be,
would be unable to meet its obligations. A substantial number of mutual funds in
the United States are organized as Massachusetts business trusts.
VOTING RIGHTS. Neither Income Trust nor the Acquired Fund holds annual
meetings of shareholders. However, special meetings of shareholders of each of
the Funds must be called upon the written request of holders of not less than
10% of the then outstanding voting securities of the respective Fund. On each
matter submitted to a vote of the shareholders of either the Acquired Fund or
Income Trust, each shareholder is entitled to one vote for each whole share
owned and a proportionate fractional vote for any fractional share outstanding
in the shareholder's name on the Fund's books. Shares of each series of Income
Trust vote as a separate class except as to the election of
16
<PAGE>
Trustees and as otherwise required by the 1940 Act. As to any matter which does
not affect the interest of a particular series, only the holders of shares of
the one or more affected series are entitled to vote.
LIQUIDATION OR DISSOLUTION. In the event of the liquidation or dissolution
of the Acquiring Fund or the Acquired Fund, the shareholders of either Fund are
entitled to receive, when, and as declared by the Trustees, the excess of the
assets belonging to the Fund over the liabilities belonging to the Fund. In
either case, the assets so distributed to shareholders of the Fund will be
distributed among the shareholders in proportion to the number of shares of the
Fund held by them and recorded on the books of the Fund.
LIABILITY OF TRUSTEES. Under the Master Trust Agreement of each of Income
Trust and the Acquired Fund, a Trustee will be personally liable only for his or
her own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee. The Master Trust
Agreements of each Fund further provide that Trustees and officers will be
indemnified for the expenses of litigation against them unless it is determined
that the person did not act in good faith in the reasonable belief that the
person's actions were in or not opposed to the best interests of the Fund or the
person's conduct is determined to constitute willful misfeasance, bad faith,
gross negligence or reckless disregard of the person's duties.
RIGHTS OF INSPECTION. Shareholders of the Acquiring Fund and the Acquired
Fund have the same inspection rights as are permitted shareholders of a
Massachusetts corporation under Massachusetts corporate law. Currently, each
shareholder of a Massachusetts corporation is permitted to inspect the records,
accounts and books of a corporation for any legitimate business purpose.
The foregoing is only a summary of certain characteristics of the operations
of the Acquired Fund and the Acquiring Fund, the Master Trust Agreements of the
Acquired Fund and Income Trust, their respective By-laws and Massachusetts law.
The foregoing is not a complete description of the documents cited. Shareholders
should refer to the provisions of the corporate documents and state laws
governing each of the Funds for a more thorough description.
ADDITIONAL INFORMATION ABOUT
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND
AND
SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND
SMITH BARNEY SHEARSON WORLDWIDE PRIME ASSETS FUND. Information about the
Acquired Fund is included in its current Prospectus dated April 1, 1994, as
supplemented by Prospectus Supplements dated January 3, 1994,
17
<PAGE>
February 1, 1994 and April 1, 1994, and in the statement of additional
information that has been filed with the SEC, both of which are incorporated
herein by reference. A copy of the Prospectus and the statement of additional
information is available upon request and without charge by writing the Acquired
Fund at the address listed on the cover page of this Prospectus/Proxy Statement
or by calling toll-free 1-800-221-8806.
SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND. Information
concerning the operation and management of the Acquiring Fund is incorporated
herein by reference from its Prospectus dated January 29, 1994, as supplemented
by a Prospectus Supplement dated April 14, 1994, and statement of additional
information for Income Trust dated January 29, 1994. A copy of such statement of
additional information is available upon request and without charge by writing
the Acquiring Fund at the address listed on the cover of this Prospectus/Proxy
Statement or by calling toll-free 1-800-221-8806.
Both the Acquiring Fund and the Acquired Fund are subject to the
informational requirements of the Exchange Act and in accordance therewith file
reports and other information including proxy material, reports and charter
documents with the SEC. These materials can be inspected and copies obtained at
the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the New York Regional Office of the SEC at, 75
Park Place, New York, New York 10007. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at prescribed rates.
OTHER BUSINESS
The Trustees of the Acquired Fund do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of the Acquired Fund to be used
at the Special Meeting of Shareholders to be held at 10:30 a.m. on July 5, 1994,
at Two World Trade Center, New York, New York 10048-0002 and at any adjournment
thereof. This Prospectus/Proxy Statement, along with a Notice of the Meeting and
a proxy card, is first being mailed to shareholders of the Acquired Fund on or
about June 2, 1994. Only shareholders of record as of the close of business on
the Record Date will be entitled to notice of, and to vote at the Meeting or any
adjournment thereof. The holders of a majority of
18
<PAGE>
the shares of the Acquired Fund outstanding at the close of business on the
Record Date present in person or represented by proxy will constitute a quorum
for the Meeting. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstention and broker "non-votes" (that is,
proxies from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote the
shares with respect to which the brokers or nominees do not have discretionary
power) will be treated as shares that are present but which have not been voted.
For this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of the Plan. If the
enclosed form of proxy is properly executed and returned in time to be voted at
the Meeting, the proxies named therein will vote the shares represented by the
proxy in accordance with the instructions marked thereon. Unmarked proxies will
be voted FOR the proposed Reorganization and FOR any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of the Acquired Fund, Christina T. Sydor, 1345
Avenue of the Americas, New York, New York 10105. Unless revoked, all valid
proxies will be voted in accordance with the specifications thereon or, in the
absence of such specifications, for approval of the Plan and the Reorganization
contemplated thereby.
Approval of the Plan will require the affirmative vote of a majority, as
defined in the 1940 Act, of the outstanding voting securities of the Acquired
Fund, which is the lesser of: (i) 67% of the voting securities of the Acquired
Fund present at the Meeting, if the holders of more than 50% of the outstanding
voting securities of the Acquired Fund are present or represented by proxy; or
(ii) more than 50% of the outstanding voting securities of the Acquired Fund.
Shareholders of the Acquired Fund are entitled to one vote for each share.
Fractional shares are entitled to proportional voting rights.
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by telephone, telegraph or personal interviews conducted by
officers and employees of the Acquired Fund, Smith Barney Shearson, PanAgora,
Smith Barney Advisors, Boston Advisors and/or The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation. The aggregate cost of solicitation
of the shareholders of the Acquired Fund is expected to be approximately
$10,000. Expenses incurred in connection with the Reorganization, including the
costs of the proxy solicitation and the preparation of enclosures to the
Prospectus/Proxy Statement (including reimbursement of expenses of forwarding
solicitation material to beneficial owners of shares of the Acquired Fund) and
expenses incurred in connection with the preparation of this Prospectus/Proxy
Statement, will be borne by the Acquiring Fund and the Acquired Fund in
proportion to their assets.
19
<PAGE>
In the event that sufficient votes to approve the Reorganization are not
received by July 5, 1994, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. In
determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require an affirmative vote by the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
Meeting. The persons named as proxies will vote upon a decision to adjourn the
Meeting.
The votes of the shareholders of the Acquiring Fund are not being solicited
by this Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
The statement of assets and liabilities, including the schedule of portfolio
investments and schedule of forward foreign exchange contracts, of the Acquired
Fund as of November 30, 1993, the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
then ended and the financial highlights for each of the two years then ended and
for the period from January 14, 1991 (commencement of operations) to November
30, 1991 and the statement of assets and liabilities, including the schedule of
portfolio investments, of the Acquiring Fund, as of November 30, 1992, the
related statement of operations for the year then ended, the statement of
changes in net assets and the financial highlights for the year then ended and
the period from December 31, 1991 (commencement of operations) to November 30,
1992 have been incorporated by reference into this Prospectus/Proxy Statement in
reliance on the reports of Coopers & Lybrand, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Acquiring
Fund will be passed upon by Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, New York 10022.
THE BOARD OF TRUSTEES OF THE ACQUIRED FUND, INCLUDING THE "INDEPENDENT"
TRUSTEES, RECOMMEND APPROVAL OF THE PLAN, AND ANY UNMARKED PROXIES WITHOUT
INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN.
20
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 1st day of June, 1994, by and between SMITH BARNEY SHEARSON WORLDWIDE PRIME
ASSETS FUND (the "Acquired Fund"), a business trust organized under the laws of
The Commonwealth of Massachusetts, with its principal place of business at Two
World Trade Center, New York, New York 10048, and SMITH BARNEY SHEARSON INCOME
TRUST ("Income Trust"), a business trust organized under the laws of The
Commonwealth of Massachusetts, with its principal place of business at Two World
Trade Center, New York, New York 10048, on behalf of SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND (the "Acquiring Fund"), a series of Income Trust.
The reorganization (the "Reorganization") will consist of the transfer of
all or substantially all of the assets of the Acquired Fund in exchange solely
for shares of beneficial interest of the Acquiring Fund (the "Acquiring Fund
Shares") and the assumption by the Acquiring Fund of certain liabilities of the
Acquired Fund and the distribution, after the Closing Date herein referred to,
of Acquiring Fund Shares to the shareholders of the Acquired Fund in liquidation
of the Acquired Fund and the dissolution and termination of the Acquired Fund,
all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, Income Trust and the Acquired Fund are registered investment
companies of the management type and both Income Trust and the Acquired Fund are
authorized to issue shares of beneficial interest;
WHEREAS, the Board of Trustees of the Acquired Fund has determined that the
exchange of all or substantially all of the assets and certain of the
liabilities of the Acquired Fund for Acquiring Fund Shares and the assumption of
such liabilities by the Acquiring Fund is in the best interests of the Acquired
Fund shareholders and that the interests of the existing shareholders of the
Acquired Fund would not be diluted as a result of this transaction;
WHEREAS, the Board of Trustees of Income Trust has determined that the
exchange of all or substantially all of the assets and certain of the
liabilities of the Acquired Fund for Acquiring Fund Shares and the assumption of
such liabilities by the Acquiring Fund is in the best interests of the Acquiring
Fund shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
A-1
<PAGE>
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S STATED
LIABILITIES AND LIQUIDATION, DISSOLUTION AND TERMINATION OF THE ACQUIRED
FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer the Acquired Fund's assets as set forth in paragraph 1.2 to the
Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of Acquiring Fund Shares, including
fractional Acquiring Fund Shares, determined by dividing the value of the
Acquired Fund's net assets attributable to its Class A shares, computed in the
manner and as of the time and date set forth in paragraph 2.1, by the net asset
value of one Acquiring Fund Share, computed in the manner and as of the time and
date set forth in paragraph 2.2; and (ii) to assume certain liabilities of the
Acquired Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all property, including without limitation, all cash,
securities and dividends or interest receivables which are owned by the Acquired
Fund and any deferred or prepaid expenses shown as an asset on the books of the
Acquired Fund on the closing date provided in paragraph 3.1 (the "Closing
Date").
(b) The Acquired Fund has provided the Acquiring Fund with a list of
all of the Acquired Fund's assets as of the date of execution of this Agreement.
The Acquired Fund reserves the right to sell any of the securities constituting
a part of such assets but will not, without the prior approval of the Acquiring
Fund, acquire any additional securities other than securities of the type in
which the Acquiring Fund is permitted to invest. The Acquiring Fund will, within
a reasonable time prior to the Closing Date, furnish the Acquired Fund with a
statement of the Acquiring Fund's investment objectives, policies and
restrictions and a list of the securities, if any, on the Acquired Fund's list
referred to in the first sentence of this paragraph which do not conform to the
Acquiring Fund's investment objectives, policies and restrictions. In the event
that the Acquired Fund holds any investments which the Acquiring Fund may not
hold, the Acquired Fund will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the portfolios of the Acquired Fund
and the Acquiring Fund, when aggregated, would contain investments exceeding
certain percentage limitations imposed upon the Acquiring Fund with respect to
such investments, the Acquired Fund if requested by the Acquiring Fund will
dispose of and/or reinvest a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
A-2
<PAGE>
1.3. The Acquired Fund will endeavor to discharge all the Acquired Fund's
known liabilities and obligations prior to the Closing Date. The Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves reflected on
an unaudited Statement of Assets and Liabilities of the Acquired Fund prepared
by The Boston Company Advisors, Inc. ("Boston Advisors"), as sub-administrator
of the Acquiring Fund and the Acquired Fund, as of the Valuation Date (as
defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Acquired Fund reflected in and
quantified on the face of that unaudited Statement of Assets and Liabilities and
shall not assume any other liabilities, whether absolute or contingent, not
reflected thereon.
1.4. As soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Fund will liquidate and distribute pro rata to
the Acquired Fund's shareholders of record determined as of the close of
business on the Closing Date (the "Acquired Fund Shareholders"), the Acquiring
Fund Shares it receives pursuant to paragraph 1.1. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the Acquiring
Fund to open accounts on the share records of the Acquiring Fund in the name of
the Acquired Fund's shareholders and representing the respective pro rata number
of the Acquiring Fund Shares due such shareholders. All issued and outstanding
shares of the Acquired Fund will simultaneously be cancelled on the books of the
Acquired Fund, although share certificates representing interests in the
Acquired Fund will represent a number of Acquiring Fund Shares after the Closing
Date as determined in accordance with paragraph 1.1. The Acquiring Fund shall
not issue certificates representing the Acquiring Fund Shares in connection with
such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in the
manner described in the Acquiring Fund's current prospectus and statement of
additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Acquired Fund shares on the
books of the Acquired Fund as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and shall remain
the responsibility of the Acquired Fund up to and including the Closing Date and
such later dates on which the Acquired Fund is dissolved and deregistered.
A-3
<PAGE>
1.8. The Acquired Fund shall be dissolved and terminated under the relevant
laws of its state of organization and in accordance with its governing
documents, promptly following the Closing Date and the making of all
distributions pursuant to paragraph 1.4.
2. VALUATION
2.1. The value of the Acquired Fund's assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in Income Trust's Master Trust
Agreement and the Acquiring Fund's then current prospectus or statement of
additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the net asset
value per share computed as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures set forth in Income Trust's
Master Trust Agreement and the Acquiring Fund's then current prospectus or
statement of additional information.
2.3. All computations of value shall be made by Boston Advisors in
accordance with its regular practice as pricing agent for the Acquiring Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be July 15, 1994, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m. at the
offices of Boston Advisors, One Boston Place, Boston, Massachusetts 02108, or at
such other time and/or place as the parties may agree.
3.2. Boston Safe Deposit and Trust Company, as custodian for the Acquiring
Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) the Acquired Fund's portfolio securities,
cash and any other assets shall have been delivered in proper form to the
Acquiring Fund within two business days prior to or on the Closing Date and (b)
all necessary transfer taxes including all applicable federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment shall
have been made, in conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Acquiring Fund or the
Acquired Fund shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on the NYSE or elsewhere shall be
disrupted so that accurate appraisal of the value of the net assets of the
A-4
<PAGE>
Acquiring Fund or the Acquired Fund is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.4. The Acquired Fund shall deliver at the Closing a list of the names and
addresses of the Acquired Fund's shareholders and the number, class and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing, certified on behalf of the Acquired Fund by
its President. The Acquiring Fund shall issue and deliver a confirmation
evidencing the Acquiring Fund Shares to be credited on the Closing Date to the
Secretary of the Acquired Fund, or provide evidence satisfactory to the Acquired
Fund that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Fund represents and warrants to Income Trust and the
Acquiring Fund as follows:
(a) The Acquired Fund is a business trust, duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(b) The Acquired Fund is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act") is in full force and effect;
(c) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
its Master Trust Agreement or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Acquired Fund
is a party or by which it is bound;
(d) The Acquired Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to it
prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any of its properties or
assets (other than that previously disclosed to the other party to the
Agreement) which, if adversely determined, would materially
A-5
<PAGE>
and adversely affect its financial condition or the conduct of its business.
The Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Acquired Fund for
the fiscal period from January 14, 1991 (commencement of operations) through
November 30, 1991 and for the fiscal years ended November 30, 1992 through
November 30, 1993 have been audited by Coopers & Lybrand, certified public
accountants, and are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have
been furnished to the Acquiring Fund) fairly reflect the financial condition
of the Acquired Fund as of such dates, and there are no known contingent
liabilities of the Acquired Fund as of such dates not disclosed therein;
(g) Since November 30, 1993, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date that such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (g), a decline in net asset value per share of the Acquired
Fund shall not constitute a material adverse change;
(h) At the Closing Date, all material federal and other tax returns and
reports of the Acquired Fund required by law then to have been filed by such
dates shall have been filed, and all federal and other taxes shown as due on
such returns shall have been paid so far as due, or provision shall have
been made for the payment thereof and, to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to such returns;
(i) For the most recent fiscal year and for the current year of its
operation, the Acquired Fund has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment company;
(j) All issued and outstanding shares of the Acquired Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding shares of the
Acquired Fund will, at the time of Closing, be held by the persons and in
the amounts set forth in the records of the transfer agent as provided in
A-6
<PAGE>
paragraph 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquired
Fund's shares, nor is there outstanding any security convertible into any of
the Acquired Fund's shares;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to its assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.2 and full right, power and authority to sell, assign, transfer
and deliver such assets hereunder and, upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the Securities Act of 1933, as amended
(the "1933 Act"), other than as disclosed to the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action on the part of the Acquired Fund's
Board of Trustees, and subject to the approval of the Acquired Fund's
shareholders, this Agreement will constitute a valid and binding obligation
of the Acquired Fund, enforceable in accordance with its terms, subject as
to enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights and to general equity
principles;
(m) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations thereunder applicable
thereto; and
(n) The proxy statement of the Acquired Fund (the "Proxy Statement") to
be included in the Registration Statement referred to in paragraph 5.7
(other than information therein that relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing Date,
not contain any 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, in light of the circumstances under which such
statements were made, not materially misleading.
4.2. Income Trust and the Acquiring Fund represent and warrant to the
Acquired Fund as follows:
(a) The Acquiring Fund is a series of Income Trust which is a business
trust, duly organized, validly existing and in good standing under the laws
of The Commonwealth of Massachusetts;
A-7
<PAGE>
(b) Income Trust is a registered investment company classified as a
management company of the open-end type and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(c) The current prospectus of the Acquiring Fund and statement of
additional information of Income Trust conform in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and the rules
and regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading;
(d) At the Closing Date, Income Trust will have good and marketable
title to the Acquiring Fund's assets;
(e) Income Trust is not, and the execution, delivery and performance of
this Agreement will not result, in a material violation of its Master Trust
Agreement or By-laws or of any agreement, indenture, instrument, contract,
lease or other undertaking with respect to the Acquiring Fund to which
Income Trust is a party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or threatened against Income Trust with respect to the Acquiring
Fund or any of the Acquiring Fund's properties or assets, except as
previously disclosed in writing to the Acquired Fund. Income Trust and the
Acquiring Fund know of no facts which might form the basis for the
institution of such proceedings and neither Income Trust nor the Acquiring
Fund is a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects the Acquiring Fund's business or Income Trust's ability on behalf of
the Acquiring Fund to consummate the transactions contemplated herein;
(g) The Statement of Assets and Liabilities of the Acquiring Fund for
the fiscal period from December 31, 1991 (commencement of operations)
through November 30, 1992 and for the fiscal year ended November 30, 1993
have been audited by Coopers & Lybrand, certified public accountants, and
are in accordance with generally accepted accounting principles consistently
applied, and such statements (copies of which have been furnished to the
Acquired Fund) fairly reflect the financial condition of the Acquiring Fund
as of such dates, and there are no known contingent liabilities of the
Acquiring Fund as of such dates not disclosed therein;
A-8
<PAGE>
(h) Since November 30, 1993, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or
any incurrence by the Acquiring Fund of indebtedness maturing more than one
year from the date that such indebtedness was incurred. For the purposes of
this subparagraph (h), a decline in net asset value per share of the
Acquiring Fund shall not constitute a material adverse change;
(i) At the Closing Date, all material federal and other tax returns and
reports of the Acquiring Fund required by law then to have been filed by
such dates shall have been filed, and all federal and other taxes shown as
due on said returns shall have been paid so far as due, or provision shall
have been made for the payment thereof and, to the best of the Acquiring
Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(j) For the most recent fiscal year and for the current year of its
operation, the Acquiring Fund has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated investment company
and the Acquiring Fund intends to do so in the future;
(k) At the date hereof, all issued and outstanding Acquiring Fund Shares
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or
purchase any shares of the Acquiring Fund, nor is there outstanding any
security convertible into any shares of the Acquiring Fund;
(l) The execution, delivery and performance of this Agreement has been
duly authorized by all necessary action, on the part of Income Trust's Board
of Trustees and, assuming due authorization, execution and delivery by the
Acquired Fund, this Agreement constitutes a valid and binding obligation of
Income Trust on behalf of the Acquiring Fund, enforceable in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund's Shareholders, pursuant to the
terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued Acquiring
Fund Shares, and will be fully paid and non-assessable with no personal
liability attaching to the ownership thereof;
A-9
<PAGE>
(n) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects
with federal securities and other laws and regulations applicable thereto;
(o) The Proxy Statement to be included in the Registration Statement
(only insofar as it relates to information provided by the Acquiring Fund
and Income Trust specifically for inclusion therein) will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
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,
in light of the circumstances under which such statements were made, not
materially misleading; and
(p) Income Trust, on behalf of the Acquiring Fund, agrees to use all
reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws
as it may deem appropriate in order to continue the Acquiring Fund's
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRED FUND, INCOME TRUST AND
THE ACQUIRING FUND
5.1. The Acquired Fund and Income Trust on behalf of the Acquiring Fund
each will operate its business in the ordinary course between the date hereof
and the Closing Date, if being understood that such ordinary course of business
will include the declaration and payment of customary dividends and
distributions and any other dividends and distributions deemed advisable.
5.2. The Acquired Fund will call a meeting of its shareholders to consider
and act upon this Agreement and to take all other action necessary to obtain
approval of the transactions contemplated herein.
5.3. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.4. The Acquired Fund will assist Income Trust and the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund's shares.
5.5. Subject to the provisions of this Agreement, the Acquired Fund and
Income Trust on behalf of the Acquiring Fund each will take, or cause to be
A-10
<PAGE>
taken, all action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.6. The Acquired Fund will provide the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus (the "Prospectus")
which will include the Proxy Statement, referred to in paragraph 4.1(n), all to
be included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection with the
meeting of the Acquired Fund's shareholders to consider approval of this
Agreement and the transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED
FUND
The obligations of the Acquired Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by Income Trust
and the Acquiring Fund of all of the obligations to be performed by them
hereunder on or before the Closing Date and, in addition thereto, the following
further conditions:
6.1. All representations and warranties of Income Trust and the Acquiring
Fund contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2. Income Trust on behalf of the Acquiring Fund shall have delivered to
the Acquired Fund a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in a form reasonably
satisfactory to the Acquired Fund and dated as of the Closing Date, to the
effect that the representations and warranties of Income Trust and the Acquiring
Fund made in this Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by this
Agreement and as to such other matters as the Acquired Fund shall reasonably
request; and
6.3. The Acquired Fund shall have received on the Closing Date a favorable
opinion from Willkie Farr & Gallagher, counsel to the Acquiring Fund, dated as
of the Closing Date, in a form reasonably satisfactory to Christina T. Sydor,
Esq., Secretary of the Acquired Fund, covering the following points:
That (a) the Acquiring Fund is a series of Income Trust which is a business
trust duly organized, validly existing and in good standing under the laws of
The Commonwealth of Massachusetts and has the power, under its
A-11
<PAGE>
Master Trust Agreement, to own all of its properties and assets and to carry on
its business as presently conducted; (b) this Agreement has been duly
authorized, executed and delivered by Income Trust on behalf of the Acquiring
Fund and, assuming that the Prospectus, Registration Statement and Proxy
Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and the rules
and regulations thereunder and, assuming due authorization, execution and
delivery of the Agreement by the Acquired Fund, is a valid and binding
obligation of Income Trust on behalf of the Acquiring Fund enforceable against
Income Trust in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c) the
Acquiring Fund Shares to be issued to the Acquired Fund's shareholders as
provided by this Agreement are duly authorized and upon such delivery will be
validly issued and outstanding and are fully paid and non-assessable with no
personal liability attaching to ownership thereof, and no shareholder of the
Acquiring Fund has any preemptive rights to subscription or purchase in respect
thereof; (d) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
material violation of Income Trust's Master Trust Agreement or By-laws or any
provision of any agreement (known to such counsel) to which Income Trust is a
party with respect to the Acquiring Fund or by which it is bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or the
imposition of any penalty, under any agreement, judgment, or decree to which
Income Trust is a party with respect to the Acquiring Fund or by which it is
bound; (e) to the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States, the State
of New York or The Commonwealth of Massachusetts is required for the
consummation by Income Trust of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act,
and such as may be required under state securities law; (f) only insofar as they
relate to Income Trust and the Acquiring Fund, the descriptions in the Proxy
Statement of statutes, legal and governmental proceedings and contracts and
other documents, if any, are accurate and fairly present the information
required to be shown; (g) such counsel does not know of any legal or
governmental proceedings, only insofar as they relate to the Acquiring Fund,
existing on or before the effective date of the Registration Statement or the
Closing Date required to be described in the Registration Statement or to be
filed as exhibits to the Registration Statement which are not described as
required; (h) Income Trust is registered as an investment company under the 1940
Act and its registration with the Commission as an investment company under the
1940 Act is in full force and effect; and (i) to the best knowledge of such
counsel, no litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened as
A-12
<PAGE>
to Income Trust with respect to the Acquiring Fund or any of the properties or
assets of the Acquiring Fund and Income Trust is not a party to or subject to
the provisions of any order, decree or judgment of any court or governmental
body, which materially and adversely affects the business of the Acquiring Fund,
other than as previously disclosed in the Registration Statement. In addition,
such counsel also shall state that they have participated in conferences with
officers and other representatives of Income Trust at which the contents of the
Proxy Statement and related matters were discussed and, although they are not
passing upon and do not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Proxy Statement (except to the
extent indicated in paragraph (f) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of Income Trust), no facts have come to their
attention that lead them to believe that the Proxy Statement as of its date, as
of the date of the Acquired Fund shareholders' meeting, and as of the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein regarding Income Trust or the
Acquiring Fund or necessary to make the statements therein regarding Income
Trust or the Acquiring Fund, in the light of the circumstances under which they
were made, not misleading. Such opinion may state that such counsel does not
express any opinion or belief as to the financial statements or other financial
data or as to the information relating to Income Trust or the Acquired Fund
contained in the Proxy Statement or Registration Statement, and that such
opinion is solely for the benefit of the Acquired Fund, its trustees and its
officers. Such counsel may rely, as to matters governed by the laws of The
Commonwealth of Massachusetts, on an opinion of Massachusetts counsel. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby as the Acquired Fund may reasonably request.
In this paragraph 6.3, references to the Proxy Statement include and relate
only to the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF INCOME TRUST
AND THE ACQUIRING FUND
The obligations of Income Trust and the Acquiring Fund to complete the
transactions provided for herein shall be subject, at its election, to the
performance by the Acquired Fund of all the obligations to be performed by it
hereunder on or before the Closing Date and, in addition thereto, the following
conditions:
7.1. All representations and warranties of the Acquired Fund contained in
this Agreement shall be true and correct in all material respects as of the
A-13
<PAGE>
date hereof and, except as they may be affected by the transactions contemplated
by this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, certified by the
Treasurer or Assistant Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or Vice
President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Acquired Fund made in this
Agreement are true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement, and as to such
other matters as the Acquiring Fund shall reasonably request; and
7.4. The Acquiring Fund shall have received on the Closing Date a favorable
opinion of Willkie Farr & Gallagher, counsel to the Acquired Fund, in a form
satisfactory to Christina T. Sydor, Esq., Secretary of the Acquiring Fund,
covering the following points:
That (a) the Acquired Fund is a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts and has the power, under its Master Trust Agreement, to own all of
its properties and assets and to carry on its business as presently conducted;
(b) this Agreement has been duly authorized, executed and delivered by the
Acquired Fund and, assuming that the Prospectus, the Registration Statement and
the Proxy Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and, assuming due authorization, execution
and delivery of the Agreement by Income Trust on behalf of the Acquiring Fund,
is a valid and binding obligation of the Acquired Fund enforceable against the
Acquired Fund in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights generally and to general equity principles; (c) the
execution and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, result in a material violation of the
Acquired Fund's Master Trust Agreement or By-laws or any provision of any
agreement (known to such counsel) to which the Acquired Fund is a party or by
which it is bound or, to the knowledge of such counsel, result in the
acceleration of any obligation or the imposition of any penalty, under any
agreement, judgment or decree to which the Acquired Fund is a party or by which
it is bound; (d) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the United
States, the State of New York or
A-14
<PAGE>
The Commonwealth of Massachusetts is required for the consummation by the
Acquired Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and such as may be
required under state securities laws and except for an order of the Commission
under Section 8(f) of the 1940 Act declaring that the Acquired Fund has ceased
to be an investment company; (e) only insofar as they relate to the Acquired
Fund, the descriptions in the Proxy Statement of statutes, legal and
governmental proceedings and contracts and other documents, if any, are accurate
and fairly present the information required to be shown; (f) such counsel does
not know of any legal or governmental proceedings, only insofar as they relate
to the Acquired Fund existing on or before the effective date of the
Registration Statement or the Closing Date, required to be described in the
Proxy Statement or to be filed as exhibits to the Registration Statement which
are not described and filed as required; (g) the Acquired Fund is registered as
an investment company under the 1940 Act and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect; and (h) to the best knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Acquired Fund or
any of its properties or assets and the Acquired Fund is neither a party to nor
subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business other
than as previously disclosed in the Proxy Statement. Such counsel also shall
state that they have participated in conferences with officers and other
representatives of the Acquired Fund at which the contents of the Proxy
Statement and related matters were discussed and, although they are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Proxy Statement (except to the
extent indicated in paragraph (e) of their above opinion), on the basis of the
foregoing (relying as to materiality to a large extent upon the opinions of
officers and other representatives of the Acquired Fund), no facts have come to
their attention that lead them to believe that the Proxy Statement as of its
date, as of the date of the Acquired Fund shareholders' meeting, and as of the
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding the Acquired Fund
or necessary in the light of the circumstances under which they were made, to
make the statements therein regarding the Acquired Fund not misleading. Such
opinion may state that such counsel does not express any opinion or belief as to
the financial statements or other financial data, or as to the information
relating to the Acquiring Fund, contained in the Proxy Statement or Registration
Statement, and that such opinion is solely for the benefit of Income Trust, its
trustees and its officers. Such counsel may rely, as to matters governed by the
laws of the Commonwealth of Massachusetts, on an opinion of Massachusetts
counsel. Such opinion also
A-15
<PAGE>
shall include such other matters incident to the transaction contemplated hereby
as Income Trust on the behalf of the Acquiring Fund may reasonably request.
In this paragraph 7.4, references to the Proxy Statement include and relate
to only the text of such Proxy Statement and not to any exhibits or attachments
thereto or to any documents incorporated by reference therein.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRED FUND, INCOME TRUST AND THE ACQUIRING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to Income Trust on behalf of the Acquiring Fund or the
Acquired Fund, the other party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1. The Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Acquired Fund in accordance with the provisions of its Master Trust Agreement
and By-laws and certified copies of the votes evidencing such approval shall
have been delivered to the Acquiring Fund. Notwithstanding anything herein to
the contrary, neither the Acquired Fund nor Income Trust on behalf of the
Acquiring Fund may waive the conditions set forth in this paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including "no-
action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or the Acquired Fund to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Acquired Fund, provided
that either party hereto may for itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
A-16
<PAGE>
8.5. The Acquired Fund and Income Trust on behalf of the Acquiring Fund,
shall have declared and paid a dividend or dividends on the outstanding shares
of the Acquired Fund and the Acquiring Fund, respectively, which, together with
all previous such dividends, shall have the effect of distributing to the
shareholders of the Acquired Fund and the Acquiring Fund all of the investment
company taxable income of the Acquired Fund and the Acquiring Fund for all
taxable years ending on or prior to the Closing Date (computed without regard to
any deduction for dividends paid) and all of each fund's net capital gain
realized in all taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry forward);
9. BROKERAGE FEES AND EXPENSES
9.1. The Acquired Fund and Income Trust on behalf of the Acquiring Fund
each represents and warrants to the other that there are no brokers or finders
entitled to receive any payments in connection with the transactions provided
for herein.
9.2. (a) Except as may be otherwise provided herein, the Acquiring Fund and
the Acquired Fund shall each be liable, in proportion to their assets, for the
expenses incurred in connection with entering into and carrying out the
provisions of this Agreement, including the expenses of: (i) counsel and
independent accountants associated with the Reorganization; (ii) printing and
mailing the Prospectus/Proxy Statement and soliciting proxies in connection with
the meeting of shareholders of the Acquired Fund referred to in paragraph 5.2
hereof; (iii) any special pricing fees associated with the valuation of the
Acquired Fund's or the Acquiring Fund's portfolio on the Closing Date; (iv)
expenses associated with preparing this Agreement and preparing and filing the
Registration Statement under the 1933 Act covering the Acquiring Fund Shares to
be issued in the Reorganization; and (v) registration or qualification fees and
expenses of preparing and filing such forms, if any, necessary under applicable
state securities laws to qualify the Acquiring Fund Shares to be issued in
connection with the Reorganization. The Acquired Fund shall be liable for (i)
all fees and expenses related to the liquidation and termination of the Acquired
Fund; and (ii) fees and expenses of the Acquired Fund's custodian and transfer
agent incurred in connection with the Reorganization. The Acquiring Fund shall
be liable for any fees and expenses of the Acquiring Fund's custodian and
transfer agent incurred in connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired Fund,
prior to the Closing, shall pay for or include in the unaudited Statement of
Assets and Liabilities prepared pursuant to paragraph 1.3 all of its known and
reasonably estimated expenses associated with the transactions contemplated by
this Agreement.
A-17
<PAGE>
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The Acquired Fund and Income Fund on behalf of the Acquiring Fund
agree that neither party has made any representation, warranty or covenant not
set forth herein and that this Agreement constitutes the entire agreement
between the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the Closing
Date by: (1) the mutual agreement of the Acquired Fund and Income Trust; (2) the
Acquired Fund in the event Income Trust or the Acquiring Fund shall, or Income
Trust in the event the Acquired Fund shall, materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) a condition herein expressed to be precedent
to the obligations of the terminating party has not been met and it reasonably
appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability for
damages on the part of either the Acquired Fund or Income Trust, or their
respective trustees or officers, to the other party, but each shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement as provided in paragraph 9.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of Income
Trust and the Acquired Fund; provided, however, that following the meeting of
the Acquired Fund shareholders called by the Acquired Fund pursuant to paragraph
5.2 of this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Acquiring Fund Shares to be issued
to the Acquired Fund's shareholders under this Agreement to the detriment of
such shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Acquired Fund, Two World
Trade Center, 100th Floor, New York, New York 10048, Attention: Heath
A-18
<PAGE>
B. McLendon; or to Income Trust on behalf of the Acquiring Fund, Two World Trade
Center, 100th Floor, New York, New York 10048, Attention: Heath B. McLendon.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm, corporation or other entity, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5. (a) It is expressly agreed that the obligations of the Acquired Fund
hereunder shall not be binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of the Acquired Fund personally, but bind only the
trust property of the Acquired Fund, as provided in its Master Trust Agreement.
The execution and delivery of this Agreement have been authorized by the
trustees of the Acquired Fund and this Agreement has been executed by authorized
officers of the Acquired Fund, acting as such, and neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Acquired Fund
as provided in its Master Agreement.
(b) It is expressly agreed that the obligations of Income Trust
hereunder shall not be binding upon any of the trustees, shareholders, nominees,
officers, agents or employees of Income Trust personally, but bind only the
trust property of Income Trust and the Acquiring Fund, as provided in the Master
Trust Agreement of Income Trust. The execution and delivery of this Agreement
have been authorized by the trustees of Income Trust and this Agreement has been
executed by authorized officers of Income Trust on behalf of the Acquiring Fund,
acting as such, and neither such authorization by such trustees nor such
execution and delivery by such officers shall be
A-19
<PAGE>
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of the
Acquiring Fund as provided in the Master Trust Agreement of Income Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its Chairman of the Board, President or Vice President and its
seal to be affixed thereto and attested by its Secretary or Assistant Secretary.
<TABLE>
<S> <C>
Attest: SMITH BARNEY SHEARSON WORLDWIDE
PRIME ASSETS FUND
/s/ CHRISTINA T. SYDOR By: /s/ HEATH B. MCLENDON
________________________________________ ____________________________________
Name: Christina T. Sydor Name: Heath B. McLendon
Title: Secretary Title: Chairman of the Board
Attest: SMITH BARNEY SHEARSON INCOME TRUST,
on behalf of SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
/s/ CHRISTINA T. SYDOR By: /s/ HEATH B. MCLENDON
________________________________________ ____________________________________
Name: Christina T. Sydor Name: Heath B. McLendon
Title: Secretary Title: Chairman of the Board
</TABLE>
A-20
<PAGE>
SMITH BARNEY SHEARSON LIMITED MATURITY TREASURY FUND
SMITH BARNEY SHEARSON LIMITED MATURITY MUNICIPALS FUND
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY
CALIFORNIA MUNICIPALS FUND
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY
NEW YORK MUNICIPALS FUND
SUPPLEMENT TO PROSPECTUSES DATED JANUARY 29, 1994
The following information modifies the disclosure in the Prospectus of each of
the funds listed above (each a "Fund") under "Exchange Privilege:"
Shares of the Fund may be exchanged with the following funds only upon
completion of certain automated systems:
Smith Barney Shearson Daily Dividend Fund Inc.
Smith Barney Shearson Government and Agencies Fund Inc.
Smith Barney Shearson Municipal Money Market Fund Inc.
Smith Barney Shearson California Municipal Money Market Fund
Smith Barney Shearson New York Municipal Money Market Fund
Smith Barney Shearson Adjustable Rate Government Income Fund
Shareholders will be notified when such automated systems are complete. Until
such time shareholders will not be able to exchange their shares for shares of
the above-referenced funds.
- -------------------
April 14, 1994
<PAGE>
JANUARY 29, 1994
SMITH BARNEY SHEARSON
LIMITED
MATURITY
TREASURY
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
PROSPECTUS January 29, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Limited Maturity Treasury Fund (the "Fund") seeks as
high a level of current income as is consistent with preservation of principal
by investing exclusively in securities issued by the United States Treasury and
other United States government securities. Dividends paid by the Fund that
represent interest derived from securities held by the Fund may be exempt from
MANY, BUT NOT ALL, state and local income taxes. The weighted average maturity
of the Fund's portfolio securities will normally not be less than two nor more
than five years. The Fund is one of a number of funds, each having distinct
investment objectives and policies making up Smith Barney Shearson Income Trust
(the "Trust"). The Trust is an open-end investment management company commonly
referred to as a mutual fund.
This Prospectus briefly sets forth certain information about the Fund,
including applicable sales charges and operating and distribution expenses, that
prospective investors will find helpful in making an investment decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. Shares of the other funds offered by the Trust are described
in separate prospectuses that may be obtained by calling or writing the Trust at
the telephone number or address set forth above or by contacting your Smith
Barney Shearson Financial Consultant.
Additional information about the Fund and the Trust is contained in a
Statement of Additional Information dated January 29, 1994, as amended or
supplemented from time to time, that is available upon request and without
charge by calling or writing the Trust at the telephone number or address listed
above or by contacting your Smith Barney Shearson Financial Consultant. The
Statement of Additional Information has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety.
SMITH BARNEY SHEARSON INC.
Distributor
GREENWICH STREET ADVISORS
Investment Adviser
THE BOSTON COMPANY ADVISORS, INC.
Administrator
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
1
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary 3
-------------------------------------------------------------
Financial Highlights 8
-------------------------------------------------------------
The Fund's Performance 9
-------------------------------------------------------------
Management of the Trust and the Fund 10
-------------------------------------------------------------
Investment Objective and Management Policies 12
-------------------------------------------------------------
Purchase of Shares 16
-------------------------------------------------------------
Redemption of Shares 21
-------------------------------------------------------------
Valuation of Shares 24
-------------------------------------------------------------
Exchange Privilege 25
-------------------------------------------------------------
Distributor 30
-------------------------------------------------------------
Dividends, Distributions and Taxes 31
-------------------------------------------------------------
Additional Information 33
-------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING PROSPECTUS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF
ADDITIONAL INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE HEADINGS IN THE
PROSPECTUS. SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - A professionally managed diversified portfolio of primarily obligations
issued or guaranteed by the United States Treasury and other United States
government securities.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of securities.
- - Different methods for purchasing shares that allow investment flexibility and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
PURCHASE OF SHARES Shares may be purchased through the Fund's distributor, Smith
Barney Shearson Inc. ("Smith Barney Shearson"), or a broker that clears
securities transactions through Smith Barney Shearson on a fully disclosed basis
(an "Introducing Broker"). The public offering price will be at the net asset
value per share next determined after a purchase order is received, subject to a
maximum sales charge of 1.25%. Smith Barney Shearson receives a shareholder
servicing fee pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "1940 Act"), at the annual rate of .15% of the value of the
Fund's average daily net assets. See "Purchase of Shares."
INVESTMENT MINIMUMS Investors are subject to a minimum initial investment
requirement of $2,500 and a minimum subsequent investment requirement of $1,000,
except that, for certain employee benefit plans, the minimum purchase is $250.
See "Purchase of Shares."
3
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
SYSTEMATIC INVESTMENT PLAN The Fund offers shareholders a Systematic Investment
Plan under which shareholders may authorize the automatic placement of a
purchase order each month or quarter for Fund shares in an amount not less than
$100. See "Purchase of Shares."
REDEMPTION OF SHARES Shares may be redeemed at the Fund's next determined net
asset value per share on each day on which the New York Stock Exchange, Inc.
(the "NYSE") is open for business. Redemptions of shares made within one year of
their purchase will be subject to a contingent deferred sales charge ("CDSC")
equal to 1.00% of the amount being redeemed. See "Redemption of Shares" and
"Valuation of Shares."
MANAGEMENT OF THE TRUST AND THE FUND Greenwich Street Advisors, a division of
Mutual Management Corp. ("Greenwich Street Advisors"), serves as the Fund's
investment adviser. Mutual Management Corp. provides investment advisory and
management services to investment companies affiliated with Smith Barney
Shearson. Mutual Management Corp. is controlled by Smith Barney Shearson
Holdings Inc. ("Holdings"), which is a wholly owned subsidiary of The Travelers
Inc. ("Travelers") (formerly Primerica Corporation), a diversified financial
services holding company principally engaged in the business of providing
investment, consumer finance and insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), a financial services holding company which in turn is a
wholly owned subsidiary of Mellon Bank Corporation ("Mellon"). See "Management
of the Trust and the Fund."
EXCHANGE PRIVILEGE Shares of the Fund may be exchanged for Class A shares of
certain other funds in the Smith Barney Shearson Group of Funds. Certain
exchanges may be subject to a sales charge differential. See "Exchange
Privilege."
VALUATION OF SHARES Net asset value per share is quoted daily in the financial
section of most newspapers and is also available from your Smith Barney Shearson
Financial Consultant. See "Valuation of Shares."
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income are declared
daily and generally paid on the 10th day of the calendar month.
4
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Distributions of net realized long-and short-term capital gains, if any, are
declared and paid annually after the end of the fiscal year in which they were
earned. See "Dividends, Distributions and Taxes."
REINVESTMENT OF DIVIDENDS Dividends and distributions paid on shares will be
reinvested automatically, unless otherwise specified by an investor, in
additional shares of the Fund at current net asset value. Shares acquired by
dividend and distribution reinvestments will not be subject to any sales charge
or CDSC. See "Dividends, Distributions and Taxes."
RISK FACTORS AND SPECIAL CONSIDERATIONS No assurance can be given that the Fund
will achieve its investment objective. Although the Fund will limit its
investments to United States government securities, shares of the Fund, unlike
certain bank deposit accounts, are not insured or guaranteed by the United
States government. Changes in interest rates generally will result in increases
or decreases in the market value of the obligations held by the Fund. The Fund's
yield may not be as high as those of other funds that invest in lower quality
and/or longer term securities. The Fund is not a money market fund; the Fund's
net asset value per share will fluctuate and will be subject to greater
fluctuation to the extent that the Fund invests in zero coupon United States
Treasury securities. The Fund may be subject to certain risks in entering into
securities transactions on a when-issued or delayed-delivery basis. INVESTORS
SHOULD CONSULT THEIR TAX ADVISORS TO DETERMINE WHETHER DIVIDENDS PAID BY THE
FUND THAT REPRESENT INTEREST DERIVED FROM UNITED STATES GOVERNMENT SECURITIES
ARE EXEMPT FROM ANY OTHERWISE APPLICABLE STATE OR LOCAL INCOME TAXES. See
"Investment Objective and Management Policies -- Risk Factors and Special
Considerations" and "Dividends, Distributions and Taxes."
5
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
THE FUND'S EXPENSES THE FOLLOWING EXPENSE TABLE LISTS THE COSTS AND EXPENSES
THAT AN INVESTOR WILL INCUR, EITHER DIRECTLY OR INDIRECTLY, AS A SHAREHOLDER OF
THE FUND, BASED UPON THE FUND'S CURRENT ANNUAL OPERATING EXPENSES:
- --------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases (as a percentage of
offering price) 1.25%
Maximum CDSC (as a percentage of redemption proceeds) 1.00%
-----------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (after waivers of 0.25%) 0.30%
12b-1 fees 0.15%
Other expenses 0.34%
-----------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
(after waivers) 0.79%
-----------------------------------------------------------------------------------
</TABLE>
The sales charge set forth in the above table is the maximum charge imposed on
purchases and redemptions of Fund shares and investors may pay less than those
charges above, as described under "Purchases of Shares." Management fees paid by
the Fund include investment advisory fees payable monthly to Greenwich Street
Advisors at the annual rate of 0.35% of the value of the Fund's average daily
net assets, and administration fees payable to Boston Advisors at the annual
rate of 0.20% of the value of the Fund's average daily net assets. The nature of
the services for which the Fund pays management fees is described under
"Management of the Trust and the Fund." "Other expenses" includes fees for
shareholder services not provided by Smith Barney Shearson, custodial fees,
legal and accounting fees, printing costs and registration fees, the costs of
regulatory compliance, the costs associated with maintaining the Trust's legal
existence and the costs involved in communicating with shareholders of the Fund.
Greenwich Street Advisors and Boston Advisors have voluntarily waived
investment advisory and administration fees, respectively, in the aggregate
amount equal to 0.25% of the value of the Fund's average daily net assets. This
has the effect of lowering the Fund's overall expense ratio and increasing the
returns available to investors. If Greenwich Street Advisors
6
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
and Boston Advisors had not elected to waive fees, the Fund's total operating
expenses for the period from December 1, 1992 through November 30, 1993, would
have been as a percentage of the value of the Fund's average daily net assets
1.04%.
EXAMPLE *
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Fund. These amounts are based upon (a) payment
by an investor of the maximum sales charge and the applicable CDSC, (b) payment
by the Fund of operating expenses at the levels set forth in the table above and
(c) the following assumptions:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------
A shareholder would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and (2)
redemption at the end of each time
period................................. $31 $48 $66 $120
A shareholder would pay the following
expenses on the same investment,
assuming no redemption................. $21 $38 $56 $110
-------------------------------------------------------------------------------
<FN>
*This example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
Moreover, while this example assumes a 5% annual return, the Fund's actual
performance will vary and may result in an actual return greater or less than
5%.
</TABLE>
7
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE HAS BEEN AUDITED BY COOPERS & LYBRAND, INDEPENDENT
ACCOUNTANTS, WHOSE REPORT THEREON APPEARS IN THE FUND'S ANNUAL REPORT DATED
NOVEMBER 30, 1993. THIS INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND RELATED NOTES THAT ALSO APPEAR IN THE FUND'S ANNUAL
REPORT, WHICH IS INCORPORATED BY REFERENCE INTO THE STATEMENT OF ADDITIONAL
INFORMATION.
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
11/30/93 11/30/92*
<S> <C> <C>
Net Asset Value, beginning of period $ 7.88 $ 7.90
- ------------------------------------------------------------------------------
Income from investment operations:
Net investment income+ 0.38 0.37
Net realized and unrealized gain/loss on
investments 0.35 (0.02)
- ------------------------------------------------------------------------------
Total from investment operations 0.73 0.35
Less distributions:
Dividends from net investment income (0.38) (0.37)
Distributions from net realized capital gains (0.09) --
- ------------------------------------------------------------------------------
Total distributions (0.47) (0.37)
- ------------------------------------------------------------------------------
Net Asset Value, end of period $ 8.14 $ 7.88
- ------------------------------------------------------------------------------
Total return++ 9.49% 4.54%
- ------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000's) $52,026 $44,967
Ratio of operating expenses to average net
assets+++ 0.79% 0.65%**
Ratio of net investment income to average net
assets 4.58% 4.96%**
Portfolio turnover rate 104% 188%
- ------------------------------------------------------------------------------
<FN>
*The Fund commenced operations on December 31, 1991.
**Annualized.
+Net investment income per share before waiver of fees by investment adviser
and administrator for the year ended November 30, 1993 and waiver of fees by
investment adviser, administrator, and custodian for the period ended
November 30, 1992 was $0.36 and $0.33, respectively.
++Total return represents aggregate total returns for the periods indicated
and does not reflect any applicable sales charges.
+++Annualized operating expense ratios before waiver of fees by investment
adviser and administrator for the year ended November 30, 1993 and waiver
of fees by investment adviser, sub-investment adviser and administrator and
custodian for the period ended November 30, 1992 were 1.04% and 1.19%,
respectively.
</TABLE>
8
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise the "average annual total return"
over various periods of time. Such total return figure show the average
percentage change in value of an investment in the Fund from the beginning date
of the measuring period to the ending date of the period. The figure reflects
changes in the price of the Fund's shares and assumes that any income, dividends
and/or capital gains distributions made by the Fund during the period are
reinvested in shares of the Fund. Figures will be given for recent one-, five-
and 10-year periods (if applicable), and may be given for other periods as well
(such as from commencement of the Fund's operations, or on a year-by-year
basis). When considering average annual total return figures for periods longer
than one year, investors should note that the Fund's annual total return for any
one year in the period might have been greater or less than the average for the
entire period. The Fund may also use "aggregate" total return figures for
various periods, representing the cumulative change in value of an investment
for the specific period (again reflecting changes in the Fund's share price and
assuming reinvestment of dividends and distributions). Aggregate total returns
may be calculated either with or without the effect of the maximum sales charge
or CDSC and may be shown by means of schedules, charts or graphs, and may
indicate subtotals of the various components of total return (that is, the
change in value of initial investment, income dividends and capital gains
distributions).
YIELD
From time to time, the Fund may advertise the 30-day "yield." The yield of the
Fund refers to the income generated by an investment in the Fund over the 30-day
period identified in the advertisement and is computed by dividing the net
investment income per share earned by the Fund during the period by the public
offering price on the last day of the period. This income is "annualized" by
assuming that the amount of income is generated each month over a one-year
period and is compounded semi-annually. The annualized income is then shown as a
percentage of the net asset value.
In reports or other communications to shareholders or in advertising
materials, the Fund may compare its performance with that of other mutual funds
as listed in the rankings prepared by Lipper Analytical Services, Inc. or
similar independent services which monitor the performance of
9
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
mutual funds. The performance information may also include evaluations of the
Fund published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as BARRON'S, BUSINESS WEEK,
CDA INVESTMENT TECHNOLOGIES, INC., FORBES, FORTUNE, INSTITUTIONAL INVESTOR,
INVESTORS DAILY, KIPLINGER'S PERSONAL FINANCE, MONEY, MORNINGSTAR MUTUAL FUND
VALUES, THE NEW YORK TIMES, THE WALL STREET JOURNAL and USA TODAY. Performance
figures are based on historical earnings and are not intended to indicate future
performance. The Statement of Additional Information further describes the
methods used to determine performance. Performance figures may be obtained from
your Smith Barney Shearson Financial Consultant.
- --------------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND
BOARD OF TRUSTEES
Overall responsibility for management and supervision of the Fund rests with
the Trust's Board of Trustees. The Trustees approve all significant agreements
between the Trust and the persons and companies that furnish services to the
Fund, including agreements with the Fund's investment adviser, administrator,
distributor, custodian and transfer agent. The day-to-day operations of the Fund
have been delegated to Greenwich Street Advisors and Boston Advisors. The
Statement of Additional Information contains background information regarding
each of the Trust's Trustees and executive officers of the Fund.
INVESTMENT ADVISER
Greenwich Street Advisors located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through its predecessors), has been in the investment counseling business since
1934 and is a division of Mutual Management Corp., which was incorporated in
1978. Greenwich Street Advisors renders investment advice to investment
companies that had aggregate assets under management as of December 31, 1993 in
excess of $42.8 billion.
Subject to the supervision and direction of the Trust's Board of Trustees,
Greenwich Street Advisors manages the Fund's portfolio in accordance with
10
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
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. For the fiscal year ended November 30, 1993 the Fund paid
investment advisory fees to Greenwich Street Advisors and Shearson Lehman
Advisors, the predecessor to Greenwich Street Advisors, in an amount equal to
0.19% of the value of the Fund's average daily net assets. Greenwich Street
Advisors and Shearson Lehman Advisors waived investment advisory fees in an
amount equal to 0.16% of the value of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
James E. Conroy, Managing Director of Greenwich Street Advisors, has served as
Vice President of the Fund since it commenced operations on December 31, 1991,
and manages the day-to-day operations of the Fund, including making all
investment decisions.
Mr. Conroy's management discussion and analysis, and additional performance
information regarding the Fund during the fiscal year ended November 30, 1993 is
included in the Annual Report dated November 30, 1993. A copy of the Annual
Report may be obtained upon request without charge from your Smith Barney
Shearson Financial Consultant or by writing or calling the Fund at the address
or phone number listed on pages one of this Prospectus.
ADMINISTRATOR
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management, as of December 31, 1993,
in excess of $86.6 billion.
Boston Advisors calculates the net asset value of the Fund's shares and
generally assists all aspects of the Fund's administration and operation. For
the fiscal year ended November 30, 1993, Boston Advisors received 0.11% of the
value of the Fund's average daily net assets and voluntarily waived 0.09%.
11
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
INVESTMENT OBJECTIVE
The investment objective of the Fund is as high a level of current income as
is consistent with preservation of principal. No assurance can be given that the
Fund will be able to achieve its investment objective, which may be changed only
with the approval of the holders of a majority of the Fund's outstanding shares.
INVESTMENT POLICIES
GENERAL. In seeking its investment objective, the Fund invests exclusively in
(a) securities issued by the United States Treasury and (b) other United States
government securities that generally provide interest income exempt from state
and local income taxes. Among the Treasury securities in which the Fund invests
are Treasury Bills, Treasury Notes, Treasury Bonds and other debt instruments
issued by the United States Treasury. Treasury securities are direct obligations
of the United States government that differ among themselves in interest rates,
maturities, call provisions and the times of their issuances. Treasury Bills
have initial maturities of one year or less, Treasury Notes have initial
maturities of from one to 10 years, and Treasury Bonds have initial maturities
of greater than 10 years.
The Fund will limit its investments in United States government securities,
other than Treasury securities, to those the interest from which is prohibited
under Federal law from being taxed by the states. Among the obligations to which
this prohibition may currently apply are those issued by the Federal Financing
Bank, Federal Home Loan Banks, the General Services Administration, the Student
Loan Marketing Association, the Tennessee Valley Authority, the U.S. Postal
Service and various institutions that previously were or currently are part of
the Farm Credit System (which has been undergoing a reorganization since 1987).
The Fund may purchase zero coupon securities issued by the United States when
yields on those securities are attractive, to enhance portfolio liquidity or for
a combination of both of these purposes. Zero coupon securities are debt
obligations that are issued or purchased at a significant discount from face
value that approximates the total amount of interest the security will accrue
and compound over the period until maturity or the particular interest payment
date at a rate of interest reflecting the market rate of the security at the
time of issuance or purchase. Zero coupon securities, which
12
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
do not require the periodic payment of interest, benefit the issuer by
mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of cash.
These investments experience greater volatility in market value than fixed
income securities that make regular payments of interest. The Fund may invest in
zero coupon securities issued by the United States Treasury as component parts
of Treasury Bonds that represent scheduled interest and principal payments on
the bonds. The Fund will accrue income on zero coupon securities it holds for
tax and accounting purposes, which income is distributable to shareholders and
which, because no cash is received at the time of accrual, may require the
liquidation of portfolio securities to satisfy the Fund's distribution
obligations.
INVESTING IN LIMITED MATURITY OBLIGATIONS. The weighted average maturity of
the Fund's portfolio securities will normally not be less than two nor more than
five years. The maximum remaining maturity of the securities in which the Fund
will normally invest will be no greater than 10 years.
Greenwich Street Advisors believes that the Fund, by virtue of holding United
States government securities with maturities as described above, may offer an
attractive investment opportunity for investors seeking a higher yield than a
short-term fund investing principally in United States government securities and
less fluctuation in net asset value than a longer term fund investing
principally in United States government securities. Intermediate-term government
bonds enjoyed higher returns, compounded annually over the period 1973 through
1991, than did long-term government bonds or 90-day Treasury Bills over the same
period, the better performance of the intermediate-term bonds reflecting a
combination of their price stability and relatively high yield.
Intermediate-term bonds out-performed longer-term issues over the period because
intermediate-term bonds did not suffer the large capital losses experienced by
long-term bonds when bond yields rose. Intermediate-term bonds outperformed
short-term bills because the yield on intermediate-term obligations during the
period was typically higher than the yield on short-term obligations. Although
Greenwich Street Advisors believes that the history of government bonds from
1973 through 1991 should be indicative of the future performance of the
securities in which the Fund invests, no assurance can be given that those
securities will perform as well in the future as intermediate-term government
bonds have performed in the past.
13
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT TECHNIQUES. The Fund purchases securities on a when-issued basis,
or purchases or sells securities for delayed delivery. In when-issued or
delayed-delivery transactions, delivery of the securities occurs beyond normal
settlement periods, and no payment or delivery is made by the Fund prior to the
actual delivery or payment by the other party to the transaction. The Fund will
not accrue income with respect to a when-issued or delayed delivery security
prior to its stated delivery date. The Trust will establish with its custodian,
Boston Safe, a segregated account consisting of cash or United States government
securities in an amount equal to the amount of the Fund's when-issued and
delayed delivery purchase commitments.
INVESTMENT RESTRICTIONS
The Trust adopted certain fundamental investment restrictions with respect to
the Fund that may not be changed without approval of a majority of the Fund's
outstanding shares as defined in the 1940 Act. Included among those fundamental
restrictions are the following:
1. The Fund does not borrow money, except that the Fund may borrow from banks
for temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests and cash payments of dividends and distributions that
might otherwise require the untimely disposition of securities, in an amount
not to exceed 10% of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities (not including the amount
borrowed) at the time the borrowing is made. Whenever the Fund's borrowings
exceed 5% of the value of its total assets, the Fund does not make any
additional investments.
2. The Fund does not lend money to other persons, except through purchasing
debt obligations.
3. The Fund does not pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
Certain other investment restrictions adopted by the Fund are described in the
Statement of Additional Information.
14
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investing in the Fund involves risk factors and special considerations, such
as those described below:
DESIGN OF THE FUND. Although the Fund is designed as an alternative to fixed
income investments seeking to maintain stable principal values, such as money
market mutual funds and bank deposit accounts, the Fund differs in certain
respects from those instruments. Unlike the net asset value per share of a money
market fund, for example, the Fund's net asset value will fluctuate, the degree
of fluctuation increasing to the extent that the Fund invests in zero coupon
Treasury securities. In addition, unlike certain bank deposit accounts, an
investment in the Fund is not insured.
INTEREST RATE RISK. The Fund's portfolio securities will be affected by
general changes in interest rates, which changes will result in increases or
decreases in the market value of the Fund's investments. The market value of the
obligations in which the Fund will invest can be expected to vary inversely to
changes in prevailing interest rates. Investors should also recognize that, in
periods of declining interest rates, the Fund's yield will tend to be somewhat
higher than prevailing market rates, and in periods of rising interest rates,
the Fund's yield will tend to be somewhat lower. In addition, when interest
rates are falling, the inflow of net new money to the Fund from the continuous
sale of its shares will likely be invested in instruments producing lower yields
than the balance of its investments, thereby reducing the Fund's current yield.
In periods of rising interest rates, the opposite result can be expected to
occur. The Fund's yield may not be as high as those of other funds that invest
in lower quality and/or longer term securities.
STATE AND LOCAL TAXATION. Many, but not all, states will permit the Fund's
shareholders to treat dividends from the Fund that represent interest derived
from Treasury and certain United States government securities as income that is
exempt from state income taxes. As a result, the state and local tax benefits
intended to be offered by the Fund may be unavailable to certain investors.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Securities purchased on a
when-issued or delayed-delivery basis may expose the Fund to risk because the
securities may experience fluctuations in value prior to their delivery.
15
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Purchasing securities on a when-issued or delayed-delivery basis can involve the
additional risk that the yield available in the market when the delivery takes
place may be higher than that obtained in the transaction itself.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Fund's portfolio securities ordinarily are purchased from and sold to
parties acting as either principal or agent. Newly issued securities ordinarily
are purchased directly from the issuer or from an underwriter; other purchases
and sales usually are placed with those dealers from which it appears that the
best price or execution will be obtained. Usually no brokerage commissions, as
such, are paid by the Fund for purchases and sales undertaken through principal
transactions, although the price paid usually includes an undisclosed
compensation to the dealer acting as agent.
The Fund cannot accurately predict its portfolio turnover rate, but
anticipates that its annual turnover will not exceed 100%. An annual turnover
rate of 100% would occur when all of the securities held by the Fund are
replaced once during a period of one year. Greenwich Street Advisors will not
consider turnover rate a limiting factor in making investment decisions
consistent with the Fund's investment objective and policies.
- --------------------------------------------------------------------
PURCHASE OF SHARES
GENERAL
Purchases of shares must be made through a brokerage account maintained with
Smith Barney Shearson or with an Introducing Broker. No maintenance fee will be
charged in connection with a brokerage account through which an investor
purchases shares of the Fund. Purchases are effected at the net asset value per
share next determined after a purchase order is received by Smith Barney
Shearson or an Introducing Broker (the "trade date"). Payment is generally due
at Smith Barney Shearson or at the Introducing Broker on the fifth business day
(the "settlement date") after the trade date. Investors who make payment prior
to the settlement date may permit the payment to be held in their brokerage
accounts or may designate a temporary investment (such as a money market fund in
the Smith Barney
16
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Shearson Group of Funds) for the payment until the settlement date. The Fund
reserves the right to reject any purchase order for shares and to suspend the
offering of shares for a time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE (currently 4:00 p.m., New York
time) on any day that the Fund's net asset value is calculated are priced
according to the net asset value determined on that day. Purchase orders
received after the close of the NYSE are priced as of the time that the net
asset value per share is next determined. See "Valuation of Shares."
The public offering price is the net asset value per share plus a sales
charge, which is imposed in accordance with the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS %
AMOUNT OF INVESTMENT* OF OFFERING PRICE OF NET ASSET VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Less than $50,000 1.25% 1.27%
$50,000 but less than $250,000 1.00% 1.01%
$250,000 but less than $500,000 .75% .76%
$500,000 but less than $1,000,000 .50% .50%
$1,000,000 or more* 0% 0%
- -------------------------------------------------------------------------------------
<FN>
*No sales charge is imposed on purchases of $1 million or more; however, a CDSC of .75% is
imposed for the first year after purchase. The CDSC is payable to Smith Barney Shearson
which, with Boston Advisors, compensates Smith Barney Shearson Financial Consultants upon
the sale of these shares. The CDSC is waived in the same circumstances in which the CDSC
applicable to all other Fund shares is currently waived. See "Redemption of Shares --
Contingent Deferred Sales Charges -- Waivers of the Contingent Deferred Sales Charge."
</TABLE>
SYSTEMATIC INVESTMENT PLAN. The Fund offers a Systematic Investment Plan under
which a shareholder may authorize Smith Barney Shearson to place a purchase
order each month or quarter for Fund shares in an amount not less than $100. The
purchase price is paid automatically from cash held in the shareholder's Smith
Barney Shearson brokerage account or through the automatic redemption of the
shareholder's shares of a Smith Barney Shearson money market fund. For further
information regarding the Systematic Investment Plan, shareholders should
contact their Smith Barney Shearson Financial Consultants.
INVESTMENT MINIMUMS. The minimum initial investment in the Fund is $2,500 and
the minimum subsequent investment is $1,000, except that, for
17
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
(a) employee benefit plans such as individual retirement accounts ("IRAs"),
self-employed retirement plans and retirement plans qualified under Section
403(b)(7) of the Internal Revenue Code of 1986, as amended (the "Code"), the
minimum investment is $250 and (b) purchases through the Fund's Systematic
Investment Plan, the minimum initial and subsequent investments are both $100.
No minimum investment requirements are imposed on employees of Travelers and its
affiliates, including Smith Barney Shearson. The Trust reserves the right at any
time to vary the initial and subsequent investment minimums applicable to the
purchase of shares of any Fund. Certificates evidencing shares of a Fund will be
issued only upon written request to the Trust's transfer agent, The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First Data Corporation.
SMITH BARNEY SHEARSON 401(K) PROGRAM
Shareholders investing in the Fund may be eligible to participate in the Smith
Barney Shearson 401(k) Program (the "401(k) Program"), which is generally
designed to assist employers or plan sponsors in the creation and operation of
retirement plans qualified under Section 401(a) of the Code. The same terms and
conditions offered to 401(k) plans, to the extent applicable, are also available
through the 401(k) Program to other types of participant directed, tax-qualified
employee benefit plans (collectively, "Participating Plans").
The sales charge for shares acquired by Participating Plans are as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS % SALES CHARGE AS %
AMOUNT OF INVESTMENT OF OFFERING PRICE OF NET ASSET VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Less than $50,000 1.25% 1.27%
$50,000 but less than $250,000 1.00% 1.01%
$250,000 but less than $500,000 .75% .76%
$500,000 but less than $750,000 .50% .50%
$750,000 or more .00% .00%
- -------------------------------------------------------------------------------------
</TABLE>
Shares of the Fund acquired by Participating Plans will not be subject to a
CDSC.
Participating Plans eligible to purchase Class B and Class D shares of other
funds in the Smith Barney Shearson Group of Funds may not acquire shares of the
Fund. Under the 401(k) Program, Class B shares are offered to
18
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Participating Plans that: (a) purchase less than $250,000 of Class B shares of
one or more funds in the Smith Barney Shearson Group of Funds that are sold
subject to a CDSC; and (b) that have less than 100 employees eligible to
participate in the Participating Plan. Class D shares are offered to
Participating Plans that: (a) purchase less than $750,000 but more than $250,000
of Class D shares of one or more funds in the Smith Barney Shearson Group of
Funds that offer one or more classes of shares subject to a sales charge and/or
CDSC; or (b) have more than 100 but less than 250 employees eligible to
participate in the Participating Plan.
Participating Plans wishing to acquire shares of the Fund through the 401(k)
Program must purchase such shares directly from the Trust's transfer agent. For
further information regarding the 401(k) Program, investors should contact their
Smith Barney Shearson Financial Consultants.
REDUCED SALES CHARGES
Reduced sales charges are available to investors who are eligible to combine
their purchases of Fund shares to receive volume discounts. Investors eligible
to receive volume discounts include individuals and their immediate families,
tax-qualified employee benefit plans and trustees or other professional
fiduciaries (including banks and investment advisers registered with the SEC
under the Investment Advisers Act of 1940, as amended) purchasing shares for one
or more trust estates or fiduciary accounts even though more than one
beneficiary is involved. Reduced sales charges are also available under a
combined right of accumulation, under which an investor who is purchasing shares
of the Fund and any other fund in the Smith Barney Shearson Group of Funds
listed below under "Exchange Privilege" and sold with a sales charge may combine
the value of the shares of those series and funds with the value of the Fund
shares being purchased to qualify for a reduced sales charge in accordance with
the schedule shown above. If, for example, an investor holds shares of the Fund
that has an aggregate value of $40,000, and makes an additional investment in
the Fund of $20,000, the sales charge applicable to the additional investment
would be 1.00%, rather than the 1.25% normally charged on a $20,000 purchase.
Investors interested in further information regarding volume discounts and the
combined right of accumulation should contact their Smith Barney Shearson
Financial Consultants.
19
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Shares of the Fund may be offered without any applicable sales charges to (a)
employees of Travelers and its subsidiaries, including Smith Barney Shearson,
employee benefit plans for those employees and their immediate families when
orders on their behalf are placed by the employees; (b) accounts managed by
investment advisory subsidiaries of Travelers; (c) directors, trustees or
general partners of any investment company for which Smith Barney Shearson
serves as distributor; (d) any other investment company in connection with the
combination of such company with the Fund by merger, acquisition of assets or
otherwise; (e) any person investing the proceeds of a redemption of shares of
any series of the Trust within 180 days of the redemption; and (f) any person
investing the proceeds of a redemption of shares of any fund in the Smith Barney
Shearson Group of Funds listed below under "Exchange Privilege" within 30 days
of the redemption.
REINSTATEMENT PRIVILEGE
An investor who redeems shares of the Fund and who reinvests all or part of
the redemption proceeds within 180 days of the redemption in shares of any
series of the Trust will not be assessed any sales charge upon the subsequent
purchase of shares made with the redemption proceeds. An investor who redeems
shares of the Fund and who reinvests all or part of the redemption proceeds
within 30 days of the redemption in shares of any fund in the Smith Barney
Shearson Group of Funds listed below under "Exchange Privilege" also will not be
assessed any sales charge upon the subsequent purchase of shares made with the
redemption proceeds.
An investor who has redeemed shares of the Fund and who reinvests all or part
of the redemption proceeds in shares of any of the Trust's series within 180
days of the redemption will receive a proportionate credit (in the form of
additional shares of the series into which the reinvestment is being made) for
any CDSC imposed on the prior redemption. An investor who has redeemed shares of
the Fund and who reinvests all or any part of the redemption proceeds within 30
days of the redemption in shares of any fund in the Smith Barney Shearson Group
of Funds listed below under "Exchange Privilege" will receive a proportionate
credit (in the form of additional shares of the fund into which the reinvestment
is being made). The CDSC applicable to redemption of shares of the Fund is
described below under "Redemption of Shares -- Contingent Deferred Sales
Charge."
20
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
REDEMPTION OF SHARES
REDEMPTIONS IN GENERAL
Shares of the Fund may be redeemed on any day on which the Fund's net asset
value is calculated as described below under "Valuation of Shares." Redemption
requests received in proper form prior to the close of regular trading on the
NYSE are priced at the net asset value per share determined on that day, subject
to any applicable CDSC. Redemption requests received after the close of regular
trading on the NYSE are priced at the net asset value as next determined,
subject to any applicable CDSC. The Fund normally transmits redemption proceeds
for credit to the shareholder's account at Smith Barney Shearson or at an
Introducing Broker at no charge (other than any applicable CDSC) within seven
days after receipt of a redemption request. Generally, these funds will not be
invested for the shareholder's benefit without specific instruction and Smith
Barney Shearson will benefit from the use of temporarily uninvested funds. A
shareholder who pays for Fund shares by personal check will be credited with the
proceeds of a redemption of those shares only after the purchase check has been
collected, which may take up to 10 days or more. Shareholders who anticipate the
need for more immediate access to their investment should purchase shares with
Federal funds, by bank wire or by a certified or cashier's check.
INVOLUNTARY REDEMPTIONS
A Fund account that is reduced to a value of $1,000 or less may be subject to
redemption by the Fund, but only after the shareholder has been given at least
30 days in which to increase the account balance to more than $1,000.
Shares of the Fund may be redeemed in either of the following two ways:
REDEMPTIONS THROUGH SMITH BARNEY SHEARSON
Redemption requests may be made through Smith Barney Shearson or an
Introducing Broker. A shareholder desiring to redeem Fund shares represented by
certificates must present the certificates to Smith Barney Shearson or the
Introducing Broker endorsed for transfer (or accompanied by a stock power),
signed exactly as the shares are registered. Smith Barney Shearson or the
Introducing Broker will transmit all properly received redemption
21
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
requests to TSSG. Redemption requests involving shares represented by
certificates will not be deemed received until TSSG has received the
certificates in proper form.
REDEMPTIONS BY MAIL
Shares held by Smith Barney Shearson as custodian must be redeemed by
submitting a written request to your Smith Barney Shearson Financial Consultant.
All other shares may be redeemed by submitting a written request for redemption
to:
Smith Barney Shearson Limited Maturity Treasury Fund
The Shareholder Services Group, Inc.,
Exchange Place, P.O. Box 9134,
Boston, Massachusetts 02205-9134
A written request for redemption to TSSG or your Smith Barney Shearson
Financial Consultant must (a) state the number of shares to be redeemed, (b)
identify the shareholder's account number and (c) be signed by each registered
owner of the shares exactly as the shares are registered. If the shares to be
redeemed are represented by certificates, the certificates also must be
submitted to TSSG endorsed for transfer or accompanied by a stock power endorsed
exactly as the shares are registered. Any signature appearing on a redemption
request, share certificate or stock power must be guaranteed by a domestic bank,
a savings and loan institution, domestic credit union, member bank of the
Federal Reserve System or a member firm of a national securities exchange. TSSG
may require additional supporting documents for redemptions made by
corporations, executors, administrators, trustees or guardians. A redemption
request will not be deemed properly received until TSSG receives all required
documents in proper form.
CONTINGENT DEFERRED SALES CHARGE
The CDSC is payable to Smith Barney Shearson and is imposed on that portion of
a redemption by the shareholder that causes the current value of shares of the
Fund held by the shareholder to fall below the total dollar amount of payments
for the purchase of shares of the Fund (less any applicable sales charge upon
purchase) ("Purchase Payments") made by the shareholder during the preceding
year. No CDSC would be imposed to the extent that the net asset value of the
shares of the Fund redeemed by a
22
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
shareholder does not exceed (a) the current net asset value of shares of the
Fund purchased more than one year prior to the redemption ("Old Shares Value"),
plus (b) the current net asset value of shares of the Fund purchased through
reinvestment of dividends or capital gains distributions ("Reinvestment Shares
Value"), plus (c) increases in the net asset value of the shares of the Fund
above Purchase Payments made during the preceding year ("Appreciation Value").
The amount by which a redemption exceeds the total of Appreciation Value,
Reinvestment Shares Value and Old Shares Value would be subject to the CDSC,
which would be imposed at the rate of 1.00%.
All Purchase Payments for shares of the Fund made by a shareholder during a
particular Smith Barney Shearson statement month will be aggregated and deemed
to have been made on the last day of the current Smith Barney Shearson statement
month for purposes of determining the amount of time that has elapsed since the
Purchase Payments were made. The Smith Barney Shearson statement month, which is
the period of time covered by the monthly statements Smith Barney Shearson
provides to its clients, ends on the last Friday of a month, so long as Smith
Barney Shearson is open for business on that day. For purposes of the CDSC, when
shares of the Fund are exchanged for shares of another series of the Trust or
any of the funds listed below under "Exchange Privilege," the purchase date for
the shares of the series exchanged into, will be assumed by the Trust to be the
date on which the Fund shares were initially purchased.
WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE
The CDSC will be waived on: (a) exchanges (see "Exchange Privilege"); (b)
automatic cash withdrawals in amounts equal to or less than 2% per month of the
value of the shareholder's shares at the time the withdrawal plan commences (see
above); (c) redemptions of shares following the death or disability of a
shareholder; (d) redemption of shares in connection with certain post-retirement
distributions and withdrawals from retirement plans or IRAs; (e) involuntary
redemptions; (f) redemption proceeds from other funds in the Smith Barney
Shearson Group of Funds that are reinvested within 30 days of the redemption;
(g) redemptions of shares in connection with a combination of any investment
company with the Fund by merger, acquisition of assets or otherwise; and (h)
certain redemptions of shares of
23
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
the Fund in connection with lump-sum or other distributions made by a
Participating Plan in the 401(k) Program. See "Purchase of Shares -- Smith
Barney Shearson 401(k) Program."
DISTRIBUTIONS IN KIND
If the Trust's Board of Trustees determines that it would be detrimental to
the best interests of the Fund's shareholders to make a redemption payment
wholly in cash, the Fund may pay, in accordance with rules adopted by the SEC,
any portion of a redemption in excess of the lesser of $250,000 or 1% of the
Fund's net assets by a distribution in kind of readily marketable portfolio
securities in lieu of cash. Shareholders receiving distributions in kind of
portfolio securities may incur brokerage commissions when subsequently disposing
of those securities.
AUTOMATIC CASH WITHDRAWALS
The Fund offers shareholders an automatic cash withdrawal plan, under which a
shareholder who owns shares with a value of at least $10,000 may elect to
receive periodic cash payments of at least $50 monthly. A shareholder investing
in the Fund through a retirement plan account is eligible for the automatic cash
withdrawal plan if the shareholder is eligible to receive qualified
distributions under the retirement plan and owns, through the retirement plan,
shares with a value of at least $5,000. As noted above under "Waivers of the
Contingent Deferred Sales Charge," no CDSC will be imposed on automatic cash
withdrawals in amounts no greater than 2% per month of the value of a
shareholder's shares at the time that the shareholder's participation in the
withdrawal plan commences. For further information regarding the Fund's
automatic cash withdrawal plan, shareholders should contact their Smith Barney
Shearson Financial Consultants.
- --------------------------------------------------------------------
VALUATION OF SHARES
The Fund's net asset value per share is calculated on each day, Monday through
Friday, except on days on which the NYSE is closed. The NYSE is currently
scheduled to be closed on New Year's Day, Presidents' Day, Good
24
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
VALUATION OF SHARES (CONTINUED)
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas,
and on the preceding Friday or subsequent Monday when one of these holidays
falls on a Saturday or Sunday, respectively.
The Fund's net asset value per share is determined as of the close of regular
trading on the NYSE, and is computed by dividing the value of the Fund's net
assets by the total number of its shares outstanding. In general, the Fund's
investments will be valued at market value or, in the absence of market value,
at fair value as determined by or under the direction of the Trust's Board of
Trustees. Short-term investments that mature in 60 days or less are valued on
the basis of amortized cost (which involves valuing an investment at its cost
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 investment) when the Trust's Board of Trustees has determined that
amortized cost is fair value.
- --------------------------------------------------------------------
EXCHANGE PRIVILEGE
Shareholders in the Fund may exchange their shares for Class A shares of
certain other mutual funds in the Smith Barney Shearson Group of Funds then
offering shares for sale in the shareholder's state of residence. Exchanges of
shares may be made at any time without payment of any exchange fee. Shares of
the Fund acquired through the exchange of Class A shares of other funds will
have the same class designations as the shares from which the exchange was made.
Based on these class designations, shares of the Fund may be subsequently
exchanged for Class A shares of the following funds in the Smith Barney Shearson
Group of Funds.
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- -------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUNDS
Smith Barney Shearson Limited Maturity Municipals Fund, an intermediate-term municipal bond fund
investing in investment-grade obligations.
Smith Barney Shearson Managed Municipals Fund Inc., an intermediate- and long-term municipal bond
fund.
</TABLE>
25
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- -------------------------------------------------------------------------------------------------
<S> <C>
Smith Barney Shearson Tax-Exempt Income Fund, an intermediate- and long-term municipal bond fund
investing in medium- and lower-rated securities.
Smith Barney Shearson Arizona Municipals Fund Inc., an intermediate- and long-term municipal bond
fund designed for Arizona investors.
Smith Barney Shearson Intermediate Maturity California Municipals Fund, an intermediate-term
municipal bond fund designed for California investors.
Smith Barney Shearson California Municipals Fund Inc., an intermediate- and long-term municipal
bond fund designed for California investors.
Smith Barney Shearson Florida Municipals Fund, an intermediate- and long-term municipal bond fund
designed for Florida investors.
Smith Barney Shearson Massachusetts Municipals Fund, an intermediate- and long-term municipal bond
fund designed for Massachusetts investors.
Smith Barney Shearson New Jersey Municipals Fund Inc., an intermediate- and long-term municipal
bond fund designed for New Jersey investors.
Smith Barney Shearson Intermediate Maturity New York Municipals Fund, an intermediate-term
municipal bond fund designed for New York investors.
Smith Barney Shearson New York Municipals Fund Inc., an intermediate- and long-term municipal bond
fund designed for New York investors.
INCOME FUNDS
Smith Barney Shearson Adjustable Rate Government Income Fund, seeks high current income while
limiting the degree of fluctuation in net asset value resulting from movement in interest rates.
</TABLE>
26
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- -------------------------------------------------------------------------------------------------
<S> <C>
Smith Barney Shearson Worldwide Prime Assets Fund, invests in a portfolio of high quality debt
securities that may be denominated in U.S. dollars or selected foreign currencies and that have
remaining maturities of not more than one year.
Smith Barney Shearson Short-Term World Income Fund, invests in high quality, short-term debt
securities denominated in U.S. dollars as well as a range of foreign currencies.
Smith Barney Shearson Diversified Strategic Income Fund, seeks high current income primarily by
allocating and reallocating its assets among various types of fixed-income securities.
Smith Barney Shearson Managed Governments Fund Inc., invests in obligations issued or guaranteed
by the U.S. government and its agencies and instrumentalities with emphasis on mortgage-backed
government securities.
Smith Barney Shearson Government Securities Fund, seeks a high current return by investing in U.S.
government securities.
Smith Barney Shearson Investment Grade Bond Fund, seeks maximum current income consistent with
prudent investment management and preservation of capital by investing in corporate bonds.
Smith Barney Shearson High Income Fund, seeks high current income by investing in high-yielding
corporate bonds, debentures and notes.
Smith Barney Shearson Global Bond Fund, seeks current income and capital appreciation by investing
in bonds, debentures and notes of foreign and domestic issuers.
GROWTH AND INCOME FUNDS
Smith Barney Shearson Convertible Fund, seeks current income and capital appreciation by investing
in convertible securities.
Smith Barney Shearson Utilities Fund, seeks total return by investing in equity and debt
securities of utilities companies.
Smith Barney Shearson Strategic Investors Fund, seeks high total return consisting of current
income and capital appreciation by investing in a combination of equity, fixed-income and money
market securities.
</TABLE>
27
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- -------------------------------------------------------------------------------------------------
<S> <C>
Smith Barney Shearson Premium Total Return Fund, seeks total return by investing in
dividend-paying common stocks.
Smith Barney Shearson Growth and Income Fund, seeks income and long-term capital growth by
investing in income-producing equity securities.
GROWTH FUNDS
Smith Barney Shearson Appreciation Fund Inc., seeks long-term appreciation of capital.
Smith Barney Shearson Fundamental Value Fund Inc., seeks long-term capital growth with current
income as a secondary objective.
Smith Barney Shearson Sector Analysis Fund, seeks capital appreciation by following a sector
strategy.
Smith Barney Shearson Telecommunications Growth Fund, seeks capital appreciation, with income as a
secondary consideration.
Smith Barney Shearson Aggressive Growth Fund Inc., seeks above-average capital growth.
Smith Barney Shearson Special Equities Fund, seeks long-term capital appreciation by investing in
equity securities primarily of emerging growth companies.
Smith Barney Shearson Global Opportunities Fund, seeks long-term capital growth by investing
principally in the common stocks of foreign and domestic issuers.
Smith Barney Shearson European Fund, seeks long-term capital appreciation by investing primarily
in securities of issuers based in European countries.
Smith Barney Shearson Precious Metals and Minerals Fund Inc., seeks long-term capital appreciation
by investing primarily in precious metal- and mineral-related companies and gold bullion.
MONEY MARKET FUNDS
Smith Barney Shearson Daily Dividend Fund Inc., invests in a diversified portfolio of high quality
money market instruments.
</TABLE>
28
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- -------------------------------------------------------------------------------------------------
<S> <C>
Smith Barney Shearson Government and Agencies Fund Inc., invests in short-term U.S. government and
agency securities.
Smith Barney Shearson Municipal Money Market Fund Inc., invests in short-term, high quality
municipal obligations.
Smith Barney Shearson California Municipal Money Market Fund, invests in short-term, high quality
California municipal obligations.
Smith Barney Shearson New York Municipal Money Market Fund, invests in short-term, high quality
New York municipal obligations.
</TABLE>
TAX EFFECT. The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder, and an exchanging shareholder, therefore, may
realize a taxable gain or loss in connection with an exchange.
EXCHANGES. Shareholders of the Fund or shareholders holding Class A shares of
any of the funds in the Smith Barney Shearson Group of Funds sold without a
sales charge or with a maximum sales charge of less than 5% will be subject to
the appropriate "sales charge differential" upon the exchange of their shares
for Class A shares of any of the funds sold with a higher sales charge. The
sales charge differential is limited to a percentage rate no greater than the
excess of the sales charge rate applicable to purchases of shares of the mutual
fund being acquired in the exchange over the sales charge rate(s) actually paid
on the mutual fund shares relinquished in the exchange and on any predecessor of
those shares. For purposes of the exchange privilege, shares obtained through
automatic reinvestment of dividends are treated as having paid the same sales
charges applicable to the shares on which the dividends were paid. However,
except in the case of the 401(k) Program, if no sales charge was imposed upon
the initial purchase of the shares, any shares obtained through automatic
reinvestment will be subject to a sales charge differential upon exchange. In
addition, Smith Barney Shearson receives an annual service fee ranging from .15%
to .25% of the value of average daily net assets attributable to the Class A
shares of each fund, except the money market funds listed above.
29
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- ---------------------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Shareholders
exercising the exchange privilege with any of the other funds in the Smith
Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders.
Although the exchange privilege is an important benefit, excessive exchange
transactions can be detrimental to the Fund's performance and its shareholders.
Greenwich Street Advisors may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other shareholders.
In this event, Greenwich Street Advisors will notify Smith Barney Shearson, and
Smith Barney Shearson may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination, Smith
Barney Shearson will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege and
during the 15-day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds in the Smith Barney Shearson Group of Funds ordinarily available,
which position the shareholder would expect to maintain for a significant period
of time. All relevant factors will be considered in determining what constitutes
an abusive pattern of exchanges. For further information regarding this exchange
privilege, or to obtain current prospectuses for the funds of the Smith Barney
Shearson Group of Funds, shareholders should contact their Smith Barney Shearson
Financial Consultants.
- --------------------------------------------------------------------
DISTRIBUTOR
Smith Barney Shearson is located at 388 Greenwich Street, New York, New York
10013, and serves as distributor of the Fund's shares. Smith Barney Shearson is
paid an annual fee by the Trust in connection with the servicing of shareholder
accounts with the Fund. The annual fee, authorized pursuant to a Shareholder
Servicing Plan (the "Plan") adopted by the Fund pursuant to Rule 12b-1 under the
1940 Act, is calculated at the annual rate of .15% of the value of the average
daily net assets of the Fund and is used by Smith Barney Shearson to provide
compensation for ongoing servicing
30
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
and/or maintenance of shareholder accounts with the Fund. Compensation will be
paid by Smith Barney Shearson to persons, including Smith Barney Shearson
Financial Consultants, who respond to inquiries of shareholders of the Fund
regarding their ownership of shares or their accounts with the Fund or who
provide other similar services not otherwise required to be provided by the
Fund's investment adviser, administrator, or transfer agent.
Payments under the Plan are not tied exclusively to the shareholder servicing
expenses actually incurred by Smith Barney Shearson, and the payments may exceed
expenses actually incurred by Smith Barney Shearson. The Trust's Board of
Trustees evaluates the appropriateness of the Plan and its payment terms with
respect to the Fund on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by Smith Barney Shearson and the
amount received under the Plan.
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to declare daily and distribute monthly, generally on the
10th day of each calendar month, substantially all of its net investment income
(that is, its income other than net realized capital gains) and declare and
distribute the Fund's net realized capital gains, if any, annually, normally at
the end of the calendar year in which earned or at the beginning of the
subsequent year. Dividends and distributions payable on an investor's shares
will begin to accrue on settlement date and, unless a shareholder instructs that
dividends and capital gains distributions should be paid in cash and credited to
the shareholder's account at Smith Barney Shearson, such dividends and
distributions will be reinvested automatically in additional shares of the Fund
at net asset value, subject to no sales charge or CDSC. The Fund is subject to a
4% nondeductible excise tax measured with respect to certain undistributed
amounts of net investment income and capital gains. If necessary to avoid the
imposition of this tax, and if in the best interests of the shareholders, the
Fund will declare and pay dividends of its net investment income and
distributions of the Fund's net capital gains more frequently than stated above.
31
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
TAXES
The Fund has qualified and intends to continue to qualify each year as a
regulated investment company under the Code. Dividends paid from the Fund's net
investment income and distributions of the Fund's net realized short-term
capital gains are taxable to shareholders (other than IRAs, self-employed
retirement plans and other tax-exempt investors) as ordinary income, regardless
of how long shareholders have held their Fund shares and whether the dividends
or distributions are received in cash or reinvested in additional Fund shares.
Distributions of the Fund's net realized long-term capital gains will be taxable
to shareholders as long-term capital gains, regardless of how long shareholders
have held their Fund shares and whether the distributions are received in cash
or are reinvested in additional Fund shares. In addition, as a general rule, a
shareholder's gain or loss on a sale or redemption of Fund shares will be a
long-term capital gain or loss if the shareholder has held the shares for more
than one year and will be a short-term capital gain or loss if the shareholder
has held the shares for one year or less. The Fund's dividends and distributions
will not qualify for the dividends-received deduction for corporations. Subject
to the Fund's meeting certain asset and diversification requirements,
shareholders of the Fund will be permitted by many, but not all, states to treat
dividends from the Fund that represent interest derived from United States
Treasury and certain U.S. government securities as income that is exempt from
applicable state income taxes.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. These statements will, among other things,
inform shareholders of the portion of their dividends that are attributable to
Treasury securities and each type of U.S. government securities.
Shareholders should consult their tax advisors with specific reference to
their own tax situations. In particular, shareholders should consult their tax
advisors about the status of the Fund's dividends and distributions for state
and local tax purposes in order to assess the consequences of investing in the
Fund under state and local laws generally and to determine whether dividends
paid by the Fund that represent interest derived from U.S. government securities
are exempt from any otherwise applicable state or local taxes.
32
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- --------------------------------------------------------------------
ADDITIONAL INFORMATION
The Trust was organized on October 17, 1991 under the laws of the Commonwealth
of Massachusetts and is a business entity commonly known as a "Massachusetts
business trust." Under the Trust's master trust agreement, as amended from time
to time, the Trust's Board of Trustees is authorized to create separate series
of an unlimited number of shares of beneficial interest, par value $.001 per
share. As of the date of this Prospectus, the Trustees have established four
such series, representing interests in the Fund, Smith Barney Shearson Limited
Maturity Municipals Fund, Smith Barney Shearson Intermediate Maturity California
Municipals Fund and Smith Barney Shearson Intermediate Maturity New York
Municipals Fund.
When matters are submitted for shareholder vote, each shareholder of each
series will have one vote for each full share held and a proportionate,
fractional vote for any fractional share held. In general, shares of each series
vote by individual series on all matters except (a) a matter affecting the
interests of one or more of the series, in which case only shares of the
affected series would be entitled to vote or (b) when the 1940 Act requires that
shares of the series be voted in the aggregate. Normally, no meetings of
shareholders will be held for the purpose of electing Trustees of the Trust
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
Shareholders of record of no less than two-thirds of the outstanding shares of
the Trust may remove a Trustee through a declaration in writing or by vote cast
in person or by proxy at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Trustee at the written
request of holders of 10% of the Trust's outstanding shares. Shareholders who
satisfy certain criteria will be assisted by the Trust in communicating with
other shareholders in seeking the holding of the meeting.
CUSTODIAN AND TRANSFER AGENT
Boston Safe, a wholly owned subsidiary of TBC, is located at One Boston Place,
Boston, Massachusetts 02108, and serves as custodian of the Fund's investments.
33
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves as
the Trust's transfer agent.
The Fund sends shareholders a semi-annual report and an audited annual report,
each of which includes a list of the investment securities held by the Fund. In
an effort to reduce the Fund's printing and mailing costs, the Fund plans to
consolidate the mailing of the Fund's semi-annual and annual reports by
household. This consolidation means that a household having multiple accounts
with the identical address of record will receive a single copy of each report.
In addition, the Fund also plans to consolidate the mailing of the Fund's
Prospectus so that a shareholder having multiple accounts (e.g., individual, IRA
and/or Self-Employed Retirement Plan accounts) will receive a single Prospectus
annually. Any shareholder who does not want this consolidation to apply to his
or her account should contact his or her Financial Consultant or the Fund's
transfer agent. Shareholders may seek information regarding the Fund, including
the current performance of the Fund, from their Smith Barney Shearson Financial
Consultants.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND/OR THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFERING OF THE FUND'S SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER
MAY NOT LAWFULLY BE MADE.
34
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY TREASURY FUND
TRUSTEES
Burt N. Dorsett
Peter H. Gallary
Elliot S. Jaffe
Harry W. Knight
Heath B. McLendon
Cornelius C. Rose
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Richard P. Roelofs
PRESIDENT
James C. Conroy
VICE PRESIDENT AND
INVESTMENT OFFICER
Vincent Nave
TREASURER
Francis J. McNamara, III
SECRETARY
DISTRIBUTOR
Smith Barney Shearson Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISORS
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallaher
153 East 53rd Street
New York, New York 1002
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
35
<PAGE>
SMITH BARNEY SHEARSON
LIMITED
MATURITY
TREASURY
FUND
Two World Trade Center
New York, New York 10048
Fund 162
FD0245 A4
