Registration No. 33-43446
811-6444
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 4
X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 5 X
SMITH BARNEY SHEARSON INCOME TRUST
(Exact name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
(212)720-9218
Francis J. McNamara, III, Esq.
Secretary
Smith Barney Shearson Income Trust
One Exchange Place
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment
becomes effective
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to Rule 485(b)
X on January 29, 1994 pursuant to Rule 485(b)
_____ 60 days after filing pursuant to Rule 485(a)
on pursuant to Rule 485(a)
_____________________________________________________________________________
The Registrant has previously filed a declaration of indefinite registration
of its shares pursuant to Rule 24f-2 under the Investment Company Act of 1940,
as amended. The Registrant's Rule 24f-2 Notice for the fiscal year ended
November 30, 1993 will be filed on or before January 31, 1994.
SMITH BARNEY SHEARSON INCOME TRUST
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(b)
Part A
Item No.
Prospectus Caption
1. Cover Page
Cover Page
2. Synopsis
Prospectus Summary
3. Financial Highlights
Financial Highlights;
The Fund's Performance
4. General Description of
Registrant
Cover Page; Prospectus Summary;
Investment Objective and
Management Policies; Additional
Information
5. Management of the Fund
Management of the Trust and the
Fund; Distributor; Additional
Information; Annual Report
6. Capital Stock and Other
Securities
Investment Objective and
Management Policies; Dividends,
Distributions and Taxes;
Additional Information
7. Purchase of Securities Being
Offered
Purchase of Shares; Valuation of
Shares; Exchange Privilege
8 Redemption or Repurchase
Redemption of Shares; Exchange
Privilege
9. Pending Legal Proceedings
Not applicable
Part B
Item No.
Statement of
Additional Information Caption
10. Cover Page
Cover page
11. Table of Contents
Contents
12. General Information and
History
Organization of the Trust
13. Investment Objectives and
Policies
Investment Objective and
Management Policies
14. Management of the Fund
Management of the Trust;
Distributor
15. Control Persons and Principal
Holders
of Securities
Management of the Trust
16. Investment Advisory and Other
Services
Management of the Trust; Custodian
and Transfer Agent - See in
Prospectuses "Additional
Information"
17. Brokerage Allocation and
Other Services
Investment Objective and
Management Policies
18. Capital Stock and Other
Securities
Investment Objective and
Management Policies; Taxes - See
in Prospectuses "Dividends,
Distributions and Taxes"
19. Purchase, Redemption and
Pricing
of Securities Being
Offered
Purchase of Shares; Redemption of
Shares; Valuation of Shares;
Exchange Privilege; Organization
of the Trust
20. Tax Status
Taxes - See in Prospectuses
"Dividends, Distributions and
Taxes"
21. Underwriters
Purchase of Shares; Distributor
22. Calculation of Performance
Data
Performance Data - See in
Prospectuses "The Fund's
Performance"
23. Financial Statements
Financial Statements
<PAGE>
JANUARY 29, 1994
SMITH BARNEY SHEARSON
LIMITED
MATURITY
MUNICIPALS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS January 29, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Limited Maturity Municipals Fund (the "Fund") seeks as
high a level of current income exempt from Federal income tax as is consistent
with preservation of principal by investing in investment grade obligations
issued by the state and local governments. The Fund is one of a number of
funds,
each having distinct investment objectives and policies making up the Smith
Barney Shearson Income Trust (the "Trust"). The Trust is an open-end
management
investment 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,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. 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, which 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 MUNICIPALS FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
-------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9
-------------------------------------------------------------
THE FUND'S PERFORMANCE 10
-------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 11
-------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 13
-------------------------------------------------------------
PURCHASE OF SHARES 27
-------------------------------------------------------------
REDEMPTION OF SHARES 30
-------------------------------------------------------------
VALUATION OF SHARES 33
-------------------------------------------------------------
EXCHANGE PRIVILEGE 34
-------------------------------------------------------------
DISTRIBUTOR 40
-------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 40
-------------------------------------------------------------
ADDITIONAL INFORMATION 43
-------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - A professionally managed diversified portfolio comprised primarily of
investment-grade municipal obligations.
- - Dividends consisting of tax-exempt income for investors.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
securities.
- - Different methods for purchasing shares that allow investment flexibility
and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is a diversified intermediate-term municipal
bond
fund that seeks as high a level of current income exempt from Federal income
tax
as is consistent with preservation of principal by investing in investment-
grade
obligations issued by state and local governments. 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. See "Investment
Objective and Management Policies."
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 of the Fund's shares will
be at the net asset value per share next determined
3
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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.
See "Purchase of Shares."
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 the Fund's shares made
within
one year of their purchase may 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"). Holdings is a wholly owned subsidiary of The
Travelers Inc. (which was formerly known as Primerica Corporation)
("Travelers"), a diversified financial services holding company principally
engaged in the businesses of providing investment, consumer finance and
insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Trust and the Fund."
4
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXCHANGE PRIVILEGE Shares of the Fund may be exchanged for the 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 The Fund's 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. Distributions
of
net realized 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
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. Shares of the Fund, unlike certain bank
deposit accounts, are not guaranteed or insured by any Federal or state
authority. Changes in interest rates generally will result in increases or
decreases in the market value of the obligations held by the Fund. The yield
of
the Fund 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 tax-exempt money market fund
and therefore its investment portfolio can be expected to experience greater
volatility than that of a tax-exempt money market fund. The net asset value of
the Fund will be subject to greater fluctuation to the extent that the Fund
invests in zero coupon securities. The Fund's net asset value per share will
fluctuate depending on a combination of factors such as current market
interest
rates and the creditworthiness of the issuers in whose securities the Fund
invests. The Fund will not invest in obligations that are rated lower than Baa
by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's
Corporation ("S&P") or BBB by Fitch Investors Service, Inc. ("Fitch"), at the
time of purchase. The ratings of
5
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Moody's, S&P and Fitch represent their opinions as to the quality of the
obligations that they undertake to rate; the ratings are relative and
subjective
and are not absolute standards of quality.
The Fund may invest up to 20% of its total assets in unrated securities that
Greenwich Street Advisors determines to be of comparable quality to the
securities rated investment grade in which the Fund may invest. Dealers may
not
maintain daily markets in unrated securities and retail secondary markets for
many of them may not exist; lack of markets may affect the Fund's ability to
sell these securities when Greenwich Street Advisors deems it appropriate. The
Fund has the right to invest without limitation in state and local obligations
that are "private activity bonds," the income from which may be taxable as a
specific preference item for purposes of the Federal alternative minimum tax.
Thus, the Fund may not be a suitable investment for investors who are subject
to
the alternative minimum tax.
Certain of the instruments held by the Fund, and certain of the investment
techniques that the Fund may employ, might expose the Fund to certain risks.
The
instruments presenting the Fund with risks are municipal leases, zero coupon
securities, custodial receipts, municipal obligation components, floating and
variable rate demand notes and bonds, and participation interests. Entering
into
securities transactions on a when-issued or delayed-delivery basis are
investment techniques involving risks to the Fund. See "Investment Objective
and
Management Policies -- Investment Techniques -- Risk Factors and Special
Considerations" and "Dividends, Distribution and Taxes."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
that an investor will incur, either directly or indirectly, as a
6
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
shareholder of the Fund, based upon the maximum sales charge or maximum CDSC
that may be incurred at the time of purchase or redemption and of the Fund's
current operating expenses:
<TABLE>
<CAPTION>
FEE 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 .33%) .22
12b-1 fees .15%
Other expenses .38%
-----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES
(after waivers) .75%
-----------------------------------------------------------------------------
</TABLE>
The sales charge and CDSC 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 "Purchase of Shares" and
"Redemption of Shares." Management fees paid by the Fund include investment
advisory fees payable monthly to Greenwich Street Advisors at the annual rate
of
.35% of the value of the Fund's average daily net assets, and administration
fees payable to Boston Advisors at the annual rate of .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 .33% of the value of the Fund's average daily net assets. This
has the effect of lowering the Fund's overall expense ratio and
7
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
increasing the returns available to investors. If Greenwich Street Advisors
and
Boston Advisors had not elected to waive fees, the Fund's total operating
expenses for the fiscal year ended November 30, 1993, would have been 1.07% as
a
percentage of the value of the Fund's average daily net assets.
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 $30 $46 $64
$116
A shareholder would pay the following
expenses on the same investment,
assuming no redemption $20 $36 $54
$106
-----------------------------------------------------------------------------
- ---
<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>
8
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION 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 YEAR:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
11/30/93
11/30/92*
<S> <C> <C>
Net Asset Value, beginning of period $ 8.07 $ 7.90
- ------------------------------------------------------------------------------
- ---
Income from investment operations:
Net investment income+ 0.36 0.36
Net realized and unrealized gains on investments 0.19 0.17
- ------------------------------------------------------------------------------
- ---
Total from investment operations 0.55 0.53
Less distributions:
Dividends from net investment income (0.36) (0.36)
Distributions from net realized capital gain (0.00)** --
- ------------------------------------------------------------------------------
- ---
Total distributions (0.36) (0.36)
- ------------------------------------------------------------------------------
- ---
Net Asset Value, end of period $ 8.26 $ 8.07
- ------------------------------------------------------------------------------
- ---
Total return++ 6.98% 6.88%
- ------------------------------------------------------------------------------
- ---
Ratios/Supplemental data:
Net assets, end of period (in 000's) $96,421 $36,379
Ratio of operating expenses to average net
assets+++ 0.75%
0.65%***
Ratio of net investment income to average net
assets 4.24%
4.74%***
Portfolio turnover rate 4% 22%
- ------------------------------------------------------------------------------
- ---
<FN>
*The Fund commenced operations on December 31, 1991.
**Amount represents less than $0.01 per share.
***Annualized.
+Net investment income 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, custodian and
distributor for the period ended November 30, 1992 were $0.33 and $0.31,
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,
custodian and distributor for the period ended November 30, 1992 were 1.07%
and 1.28%, respectively.
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
THE FUND'S PERFORMANCE
TOTAL RETURN
From time to time, the Fund may advertise its "average annual total return"
over various periods of time. This total return figure shows 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 average 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
The Fund may advertise its 30-day "yield" and "equivalent taxable 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 net asset value per share on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the net asset value.
The equivalent taxable yield of the Fund demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Fund's
tax-exempt yield. Equivalent taxable yield is calculated by increasing
10
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
the yield shown for the Fund calculated as described above, to the extent
necessary to reflect the payment of specified tax rates. Thus, the equivalent
taxable yield will always exceed the Fund's yield.
COMPARATIVE PERFORMANCE INFORMATION
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 that monitor the performance of 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, PERSONAL
FINANCE, THE NEW YORK TIMES, USA TODAY and THE WALL STREET JOURNAL. It is
important to note that yield and total return 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 Trust and 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 Trustee of the Trust and the executive
officers of the Fund.
11
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
INVESTMENT ADVISER--GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through its predecessors) has been in the investment counseling business
since
1934 and is a division of Mutual Management Corp. which was incorporated in
1978. Greenwich Street Advisors renders investment advice to investment
companies that had aggregate assets under management as of 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 the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund. For the fiscal year ended November 30, 1993, the Fund paid investment
advisory fees to Greenwich Street Advisors and Shearson Lehman Advisor, the
predecessor to Greenwich Street Advisors in an amount equal to .14% 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 .21% of
the value of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Lawrence T. McDermott, Managing Director of Greenwich Street Advisors, has
served as Vice President and Investment Officer of the Fund since it commenced
operations on December 31, 1991, and manages the day-to-day operations of the
Fund, including making all investment decisions.
Mr. McDermott's management discussion and analysis, and additional
performance
information regarding the Fund during the fiscal year ended 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 page one of this Prospectus.
12
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
ADMINISTRATOR--BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of December 31, 1993,
in
excess of $86.6 billion.
Boston Advisors calculates the net asset value of the Fund's shares and
generally assists in all aspects of the Fund's administration and operation.
For
the fiscal year ended November 30, 1993, Boston Advisors received .08% of the
value of the Fund's average daily net assets and voluntarily waived .12%.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set out below is a description of the investment objective and principal
investment policies of the Fund. 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 a majority of the Fund's outstanding shares.
The investment objective of the Fund is as high a level of current income
exempt from Federal income taxes as is consistent with preservation of
principal. In seeking its objective, the Fund will invest in a diversified
portfolio of investment-grade debt obligations issued by, or on behalf of,
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities or
multistate agencies or authorities, the interest from which debt obligations
is,
in the opinion of bond counsel to the issuer, excluded from gross income for
Federal income tax purposes ("Municipal Obligations"). The Fund will operate
subject to a fundamental investment policy providing that, under normal
conditions, the Fund will invest at least 80% of its net assets in Municipal
Obligations.
The Fund will invest at least 80% of its total assets in Municipal
Obligations
rated investment-grade, that is, rated no lower than Baa, MIG 3 or Prime-1 by
Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20% of the
Fund's
total assets may be invested in unrated securities
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
that are deemed by Greenwich Street Advisors to be of a quality comparable to
investment grade. The Fund will not invest in Municipal Obligations that are
rated lower than Baa by Moody's, BBB by S&P or BBB by Fitch, at the time of
purchase. Although Municipal Obligations rated Baa by Moody's, BBB by S&P or
BBB
by Fitch are considered to be investment grade, they may be viewed as being
subject to greater risks than other investment grade securities. Municipal
Obligations rated Baa by Moody's, for example, are considered medium grade
obligations that lack outstanding investment characteristics and have
speculative characteristics as well. Municipal Obligations rated BBB by S&P
are
regarded as having an adequate capacity to pay principal and interest.
Municipal
Obligations rated BBB by Fitch are deemed to be subject to a higher likelihood
that their rating will fall below investment grade than higher rated bonds.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations that they undertake to rate; the ratings
are relative and subjective and are not absolute standards of quality.
Greenwich
Street Advisors' judgment as to credit quality of a Municipal Obligation,
thus,
may differ from that suggested by the ratings published by a rating service. A
description of Moody's, S&P and Fitch ratings relevant to the Fund's
investments
is included as an appendix to the Statement of Additional Information. The
policies of the Fund described above as to ratings of portfolio investments
will
apply only at the time of the purchase of a security, and the Fund will not be
required to dispose of a security in the event Moody's, S&P or Fitch
downgrades
its assessment of the credit characteristics of the security's issuer.
Municipal Obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge
of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general
taxing
power. Notes are short-term obligations of issuing municipalities or agencies
and are sold in anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations bear fixed, floating and variable rates
of
interest, and variations exist in the security of Municipal Obligations, both
within a particular classification and between classifications.
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The yields on, and values of, Municipal Obligations are dependent on a
variety
of factors, including general economic and monetary conditions, conditions in
the Municipal Obligation markets, size of a particular offering, maturity of
the
obligation and rating of the issue. Consequently, Municipal Obligations with
the
same maturity, coupon and rating may have different yields or values, whereas
obligations of the same maturity and coupon with different ratings may have
the
same yield or value. See "Risk Factors and Special Considerations -- Municipal
Obligations."
Issuers of Municipal Obligations may be subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform
Act
of 1978, affecting the rights and remedies of creditors. In addition, the
obligations of those issuers may become subject to laws enacted in the future
by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of
the
obligations or upon the ability of municipalities to levy taxes. The
possibility
also exists that, as a result of litigation or other conditions, the power or
ability of any issuer to pay, when due, the principal of, and interest on, its
obligations may be materially affected.
MATURITY OF OBLIGATIONS HELD BY THE FUND
The Fund reflects Greenwich Street Advisors' belief that the Fund may offer
an
attractive investment opportunity for investors seeking a higher effective tax
yield than a tax-exempt money market fund or a tax-exempt short-term bond fund
and less fluctuation in net asset value than a longer term tax-exempt bond
fund.
Under normal circumstances, the Fund will invest exclusively in limited
maturity
securities; the weighted average maturity of the Fund's portfolio securities
will normally be not 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.
PRIVATE ACTIVITY BONDS
The Fund may invest without limit in Municipal Obligations that are tax-
exempt
"private activity bonds," as defined in the Internal Revenue Code of 1986, as
amended (the "Code"), which are in most cases revenue bonds. Private activity
bonds generally do not carry the pledge of the credit of the
15
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
issuing municipality, but are guaranteed by the corporate entity on whose
behalf
they are issued. Interest income on certain types of private activity bonds
issued after August 7, 1986 to finance nongovernmental activities is a
specific
tax preference item for purposes of the Federal individual and corporate
alternative minimum taxes. Individual and corporate shareholders may be
subject
to a Federal alternative minimum tax to the extent the Fund's dividends are
derived from interest on these bonds. Dividends derived from interest income
on
Municipal Obligations are a "current earnings" adjustment item for purposes of
the Federal corporate alternative minimum tax. See "Dividends, Distributions
and
Taxes." Private activity bonds held by the Fund will be included in the term
Municipal Obligations for purposes of determining compliance with the Fund's
policy of investing at least 80% of its total assets in Municipal Obligations.
RELATED INSTRUMENTS
The Fund may invest without limit in Municipal Obligations that are
repayable
out of revenues generated from economically related projects or facilities or
debt obligations whose issuers are located in the same state. Sizeable
investments in these obligations could involve an increased risk to a Fund
should any of the related projects or facilities experience financial
difficulties.
OTHER MISCELLANEOUS POLICIES
The Fund may invest up to an aggregate amount equal to 10% of its net assets
in illiquid securities, which term includes securities subject to contractual
or
other restrictions on resale and other instruments that lack readily available
markets. In addition, up to 5% of the value of the Fund's assets may be
invested
in securities of entities that have been in continuous operation for fewer
than
three years.
TYPES OF MUNICIPAL OBLIGATIONS HELD BY THE FUND
MUNICIPAL LEASES. The Fund may invest without limit in "municipal leases."
Municipal leases may take the form of a lease or an installment purchase
contract issued by state and local government authorities to obtain funds to
acquire a wide variety of equipment and facilities such as fire and sanitation
vehicles, computer equipment and other capital assets. Interest
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
payments on qualifying municipal leases are exempt from Federal income taxes
and
state income taxes within the state of issuance. Although lease obligations do
not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation is ordinarily
backed
by the municipality's covenant to budget for, appropriate and make the
payments
due under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless
money is appropriated for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with
more conventional bonds. Although "non-appropriation" lease obligations are
often secured by the underlying property, disposition of the property in the
event of foreclosure might prove difficult. The Fund may invest in municipal
leases without non-appropriation clauses only when the municipality is
required
to continue the lease under all circumstances except bankruptcy. There is no
limitation on the percentage of the Fund's assets that may be invested in
municipal lease obligations. In evaluating municipal lease obligations,
Greenwich Street Advisors will consider such factors as it deems appropriate,
which may include: (a) whether the lease can be canceled; (b) the ability of
the
lease obligee to direct the sale of the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the likelihood that the
municipality
will discontinue appropriating funding for the leased property in the event
such
property is no longer considered essential by the municipality; (e) the legal
recourse of the lease obligee in the event of such a failure to appropriate
funding; (f) whether the security is backed by a credit enhancement such as
insurance; and (g) any limitations which are imposed on the lease obligor's
ability to utilize substitute property or services other than those covered by
the lease obligation.
Municipal leases that the Fund may acquire will be both rated and unrated.
Rated leases include those rated investment grade at the time of investment or
those issued by issuers whose senior debt is rated investment grade at the
time
of investment. The Fund may acquire unrated issues that Greenwich Street
Advisors deems to be comparable in quality to rated issues in which the Fund
is
authorized to invest. A determination that an unrated lease obligation is
comparable in quality to a rated lease obligation will be subject to oversight
and approval by the Trust's Board of Trustees.
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SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Municipal leases held by the Fund will be considered illiquid securities
unless the Trust's Board of Trustees determines on an ongoing basis that the
leases are readily marketable. An unrated municipal lease with a non-
appropriation risk that is backed by an irrevocable bank letter of credit or
an
insurance policy issued by a bank or insurer deemed by Greenwich Street
Advisors
to be of high quality and minimal credit risk, will not be deemed to be
illiquid
solely because the underlying municipal lease is unrated, if Greenwich Street
Advisors determines that the lease is readily marketable because it is backed
by
the letter of credit or insurance policy.
ZERO COUPON SECURITIES. The Fund may invest up to 10% of its assets in zero
coupon Municipal Obligations. Zero coupon Municipal Obligations are generally
divided into two categories: pure zero obligations, which are those that pay
no
interest for their entire life and zero/fixed obligations, which pay no
interest
for some initial period and thereafter pay interest currently. In the case of
a
pure zero obligation, the failure to pay interest currently may result from
the
obligation's having no stated interest rate, in which case the obligation pays
only principal at maturity and is issued at a discount from its stated
principal
amount. A pure zero obligation may, in the alternative, provide for a stated
interest rate, but provide that no interest is payable until maturity, in
which
case accrued, unpaid interest on the obligation may be capitalized as
incremental principal. The value to the investor of a zero coupon Municipal
Obligation consists of the economic accretion either of the difference between
the purchase price and the nominal principal amount (if no interest is stated
to
accrue) or of accrued, unpaid interest during the Municipal Obligation's life
or
payment deferral period.
CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts or certificates
underwritten by securities dealers or banks that evidence ownership of future
interest payments, principal payments, or both, on certain Municipal
Obligations. The underwriter of these certificates or receipts typically
purchases Municipal Obligations and deposits the obligations in an irrevocable
trust or custodial account with a custodian bank, which then issues receipts
or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Custodial receipts
evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described above. Although
under
the terms of a custodial receipt, the Fund would be typically authorized to
assert its rights directly
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SMITH BARNEY SHEARSON
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- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
against the issuer of the underlying obligation, the Fund could be required to
assert through the custodian bank those rights as may exist against the
underlying issuer. Thus, in the event the underlying issuer fails to pay
principal and/or interest when due, the Fund may be subject to delays,
expenses
and risks that are greater than those that would have been involved if the
Fund
had purchased a direct obligation of the issuer. In addition, in the event
that
the trust or custodial account in which the underlying security has been
deposited is determined to be an association taxable as a corporation, instead
of a non-taxable entity, the yield on the underlying security would be reduced
in recognition of any taxes paid.
MUNICIPAL OBLIGATION COMPONENTS. The Fund may invest in Municipal
Obligations,
the interest rate on which has been divided by the issuer into two different
and
variable components, which together result in a fixed interest rate.
Typically,
the first of the components (the "Auction Component") pays an interest rate
that
is reset periodically through an auction process, whereas the second of the
components (the "Residual Component") pays a residual interest rate based on
the
difference between the total interest paid by the issuer on the Municipal
Obligation and the auction rate paid on the Auction Component. The Fund may
purchase both Auction and Residual Components.
Because the interest rate paid to holders of Residual Components is
generally
determined by subtracting the interest rate paid to the holders of Auction
Components from a fixed amount, the interest rate paid to Residual Component
holders will decrease as the Auction Component's rate increases and increase
as
the Auction Component's rate decreases. Moreover, the magnitude of the
increases
and decreases in market value of Residual Components may be larger than
comparable changes in the market value of an equal principal amount of a fixed
rate Municipal Obligation having similar credit quality, redemption provisions
and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Fund may purchase floating and
variable rate demand notes and bonds, which are Municipal Obligations normally
having a stated maturity in excess of one year, but which permit their holder
to
demand payment of principal at any time, or at specified intervals. The
maturity
of a floating or variable rate demand note or bond
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SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
will not be deemed shortened by virtue of a demand feature for purposes of
calculating the Fund's net asset value or determining its weighted average
maturity.
The issuer of floating and variable rate demand obligations normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of these obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time
that
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, floating and
variable
rate obligations are secured by letters of credit or other credit support
arrangements provided by banks. Use of letters of credit or other credit
support
arrangements will not adversely affect the tax-exempt status of these
obligations. Because they are direct lending arrangements between the lender
and
borrower, floating and variable rate obligations will generally not be traded.
In addition, no secondary market generally exists for these obligations,
although their holders may demand their payment at face value. For these
reasons, when floating and variable rate obligations held by the Fund are not
secured by letters of credit or other credit support arrangements, the Fund's
right to demand payment is dependent on the ability of the borrower to pay
principal and interest on demand. Greenwich Street Advisors, on behalf of the
Fund, will consider the creditworthiness of the issuers of floating and
variable
rate demand obligations in the Fund's portfolio on an ongoing basis.
PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
tax-exempt participation interests in Municipal Obligations. A participation
interest gives the Fund an undivided interest in the Municipal Obligation in
the
proportion that the Fund's participation interest bears to the total amount of
the Municipal Obligation. These instruments may have floating or variable
rates
of interest. If the participation interest is unrated, it will be backed by an
irrevocable letter of credit or guarantee of a bank that the Trust's Board of
Trustees has determined meets certain quality standards or the payment
obligation otherwise will be collateralized by obligations of the United
States
government and its agencies and instrumentalities ("U.S. government
securities"). The Fund will have the right, with respect to certain
participation interests, to demand payment, on a specified number of days'
20
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SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
notice, for all or any part of the Fund's interest in the Municipal
Obligation,
plus accrued interest. The Fund intends to exercise its right with respect to
these instruments to demand payment only upon a default under the terms of the
Municipal Obligation or to maintain or improve the quality of its investment
portfolio. In addition, the Fund will invest no more than 5% of its total
assets
in participation interests.
TAXABLE INVESTMENTS
Under normal conditions, the Fund may hold up to 20% of its total assets in
cash or money market instruments, including taxable money market instruments
(collectively, "Taxable Investments"). In addition, when Greenwich Street
Advisors believes that market conditions warrant, the Fund may take a
temporary
defensive posture and invest without limitation in short-term Municipal
Obligations and Taxable Investments. To the extent the Fund holds Taxable
Investments and, under certain market conditions, certain floating and
variable
rate demand obligations or Auction Components, the Fund may not achieve its
investment objective.
Money market instruments in which the Fund may invest include: U.S.
government
securities; tax-exempt notes of municipal issuers rated, at the time of
purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or, if
not
rated, by issuers having outstanding, unsecured debt then rated within the
three
highest rating categories; bank obligations (including certificates of
deposit,
time deposits and bankers' acceptances of domestic banks, domestic savings and
loan associations and similar institutions); commercial paper rated no lower
than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent from another
major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories;
and
repurchase agreements. At no time will the Fund's investments in bank
obligations, including time deposits, exceed 25% of the value of its assets.
U.S. government securities in which the Fund may invest include direct
obligations of the United States and obligations issued by U.S. government
agencies and instrumentalities. Included among direct obligations of the
United
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ
principally in terms of their maturities. Included among the securities issued
by U.S. government agencies and instrumentalities are: securities that
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SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
are supported by the full faith and credit of the United States (such as
Government National Mortgage Association certificates); securities that are
supported by the right of the issuer to borrow from the United States Treasury
(such as securities of Federal Home Loan Banks); and securities that are
supported by the credit of the instrumentality (such as Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation bonds).
INVESTMENT TECHNIQUES
The Fund may employ, among others, the investment techniques described
below,
which may give rise to taxable income:
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. The Fund may purchase
securities
on a when-issued basis, or may purchase or sell securities for delayed
delivery.
In when-issued or delayed-delivery transactions, delivery of the securities
occurs beyond normal settlement periods, but no payment or delivery will be
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 Fund will
establish with Boston Safe a segregated account consisting of cash or U.S.
government securities in an amount equal to the amount of the when-issued and
delayed-delivery purchase commitments. Placing securities rather than cash in
a
segregated account may have a leveraging effect on the Fund's net assets.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with
respect
to Municipal Obligations held in its portfolio. Under a stand-by commitment, a
broker, dealer or bank is obligated to repurchase at the Fund's option
specified
securities at a specified price and, in this way, stand-by commitments are
comparable to put options. Each exercise of a stand-by commitment, therefore,
is
subject to the ability of the seller to make payment on demand. The Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise the rights afforded by the commitments for trading
purposes. The Fund anticipates that stand-by commitments will be available
from
brokers, dealers and banks without the payment of any direct or indirect
consideration. The Fund may pay for stand-by commitments if payment is deemed
necessary, thus increasing to a degree the cost of the underlying Municipal
Obligation and similarly decreasing the security's yield to investors.
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT RESTRICTIONS
The Trust has 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. Included among those fundamental restrictions are the
following:
1. The Fund will not purchase securities other than Municipal Obligations
and
Taxable Investments as those terms are defined in this Prospectus or the
Statement of Additional Information.
2. The Fund will not purchase securities (other than U.S. government
securities) of any issuer if, as a result of the purchase, more than 5% of the
value of the Fund's total assets would be invested in the securities of the
issuer, except that up to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.
3. The Fund will not purchase more than 10% of the voting securities of any
one issuer, except that this limitation is not applicable to the Fund's
investments in U.S. government securities.
4. The Fund will not borrow money, except that the Fund may borrow from
banks
for tempoary 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 will not make any additional
investments.
5. The Fund will not lend money to other persons, except through purchasing
Municipal Obligations or Taxable Investments and entering into repurchase
agreements in a manner consistent with the Fund's investment objective.
6. The Fund will not invest more than 25% of the value of its total assets
in
securities of issuers in any one industry, except that this limitation is not
applicable to the Fund's investments in U.S. government securities.
23
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SMITH BARNEY SHEARSON
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
7. The Fund will 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.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves risk factors and special considerations,
such
as those described below:
MUNICIPAL OBLIGATIONS. Even though Municipal Obligations are interest-
bearing
investments that promise a stable stream of income, their prices are inversely
affected by changes in interest rates and, therefore, are subject to the risk
of
market price fluctuations. The values of Municipal Obligations with longer
remaining maturities typically fluctuate more than those of similarly rated
Municipal Obligations with shorter remaining maturities such as the Fund
intends
to hold. The values of fixed income securities also may be affected by changes
in the credit rating or financial condition of the issuing entities.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from Federal income taxes are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Fund
nor
Greenwich Street Advisors will review the proceedings relating to the issuance
of Municipal Obligations or the basis for opinions of counsel.
POTENTIAL LEGISLATION. In past years, the United States government has
enacted
various laws that have restricted or diminished the income tax exemption on
various types of Municipal Obligations and may enact other similar laws in the
future. If any such laws are enacted that would reduce the availability of
Municipal Obligations for investment by the Fund so as to affect the Fund's
shareholders adversely, the Trust's Trustees will reevaluate the Fund's
investment objective and policies and might submit possible changes in the
Fund's structure to shareholders for their consideration. If legislation were
enacted that would treat a type of Municipal Obligation as taxable for Federal
income tax purposes, the Fund would treat the security as a permissible
Taxable
Investment within the applicable limits set forth in this Prospectus.
24
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SMITH BARNEY SHEARSON
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- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
UNRATED SECURITIES. The Fund may invest in unrated securities that Greenwich
Street Advisors determines to be of comparable quality to the rated securities
in which the Fund may invest. Dealers may not maintain daily markets in
unrated
securities and retail secondary markets for many of them may not exist. As a
result, the Fund's ability to sell these securities when Greenwich Street
Advisors deems it appropriate may be diminished.
MUNICIPAL LEASES. Municipal leases in which the Fund may invest have special
risks not normally associated with Municipal Obligations. These obligations
frequently contain nonappropriation clauses that provide that the governmental
issuer of the obligation need not make future payments under the lease or
contract unless money is appropriated for that purpose by a legislative body
annually or on another periodic basis. Municipal leases have additional risks
because they represent a type of financing that has not yet developed the
depth
of marketability generally associated with other Municipal Obligations.
Moreover, although a municipal lease will be secured by financed equipment or
facilities, the disposition of the equipment or facilities in the event of
foreclosure might prove difficult. In addition, in certain instances the
tax-exempt status of the municipal lease will not be subject to the legal
opinion of a nationally recognized bond counsel, although in all cases the
Fund
will require that a municipal lease purchased by the Fund be covered by a
legal
opinion to the effect that, as of each effective date of the municipal lease,
the lease is the valid and binding obligation of the government issuer.
Municipal leases are also subject to the risk of non-payment. The ability of
issuers of municipal leases to make timely lease payments may be adversely
impacted in general economic downturns and as relative governmental cost
burdens
are allocated and reallocated among federal, state and local governmental
units.
Such non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
Issuers
of municipal securities might seek protection under the bankruptcy laws. In
the
event of bankruptcy of such an issuer, the Fund could experience delays and
limitations with respect to the collection of principal and interest on such
municipal leases and the Fund may not, in all circumstances, be able to
collect
all principal and interest to which it is entitled. To enforce its rights in
the
event of a default in lease payments, the Fund may take possession of and
manage
the assets securing
25
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SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
the issuer's obligations on such securities, which may increase the Fund's
operating expenses and adversely affect the net asset value of the Fund. Any
income derived from the Fund's ownership or operation of such assets may not
be
tax-exempt. In addition, the Fund's intention to qualify as a "regulated
investment company" under the Code may limit the extent to which the Fund may
exercise its rights by taking possession of such assets, because as a
regulated
investment company the Fund is subject to certain limitations on its
investments
and on the nature of its income.
NON-PUBLICLY TRADED SECURITIES. As suggested above, the Fund may, from time
to
time, invest a portion of its assets in non-publicly traded Municipal
Obligations. Non-publicly traded securities may be less liquid than publicly
traded securities. Although non-publicly traded securities may be resold in
privately negotiated transactions, the prices realized from these sales could
be
less than those originally paid by the Fund.
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.
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 the 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 investment objective and policies of the Fund.
26
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
PURCHASE OF SHARES
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 Shearson Group of Funds) for the payment until the settlement
date. The Fund reserves the right to reject any purchase order and to suspend
the offering of shares for a period of time.
Purchase orders for shares of the Fund 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 regular trading on the NYSE are
priced as of the time 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
% OF OFFERING AS % OF NET
AMOUNT OF INVESTMENT PRICE 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 waived. See "Redemption
of Shares -- Contingent Deferred Sales Charge -- Waivers of the
Contingent Deferred Sales Charge."
</TABLE>
27
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 purchases
through
the Fund's Systematic Investment Plan, the minimum initial and subsequent
investment is $100. No minimum investment requirements are imposed on
employees
of Travelers and its affiliates, including Smith Barney Shearson. The Fund
reserves the right at any time to vary the initial and subsequent investment
minimums. Certificates for Fund shares are issued only upon written request to
the Trust's transfer agent, The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation.
REDUCED SALES CHARGES
Reduced sales charges are available to investors who are eligible to combine
their purchases of shares of the Fund 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 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 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 a Fund that have 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
28
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
interested in further information regarding volume discounts and the combined
right of accumulation should contact their Smith Barney Shearson Financial
Consultants.
Shares of the Fund may be offered without a sales charge 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 the
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
29
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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."
- --------------------------------------------------------------------
REDEMPTION OF SHARES
REDEMPTIONS IN GENERAL
Shares may be redeemed on any day that the Fund calculates its net asset
value. See "Valuation of Shares." Redemption requests received in proper form
prior to the close of regular trading on the NYSE will be effected at the net
asset value per share determined on that day. Redemption requests received
after
the close of regular trading on the NYSE will be effected at the net asset
value
as next determined. The Fund normally transmits redemption proceeds for credit
to the shareholder's account at Smith Barney Shearson or the Introducing
Broker
at no charge (other than any applicable CDSC) within seven days after receipt
of
a redemption request. Generally these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for shares of a Fund by personal check will be credited with the proceeds
of a redemption of those shares when 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 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
30
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- ---------------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
power) signed exactly as the shares are registered. Smith Barney Shearson or
the
Introducing Broker will transmit all properly received redemption 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 Municipals Fund
The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written request for redemption 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
signed 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, 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
31
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 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 the
shareholder; (d) redemptions 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
32
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
within 30 days of the redemption; and (g) redemptions of shares in connection
with a combination of any investment company with the Fund by merger,
acquisition of assets or otherwise.
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. 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 days on which the NYSE is closed. The NYSE is currently
scheduled
to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and on the preceding
Friday or subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively.
The 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
33
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
VALUATION OF SHARES (CONTINUED)
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.
same as core]
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
<S> <C>
- ---------------------------------------------------------------------------
MUNICIPAL BOND FUNDS
SMITH BARNEY SHEARSON MANAGED MUNICIPALS FUND INC., an
intermediate- and
long-term municipal bond fund.
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.
</TABLE>
34
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ---------------------------------------------------------------------------
<S> <C>
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.
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.
</TABLE>
35
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ---------------------------------------------------------------------------
<S> <C>
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 LIMITED MATURITY TREASURY FUND, invests
exclusively in
securities issued by the United States Treasury and other U.S.
government
securities.
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 United States 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.
</TABLE>
36
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ---------------------------------------------------------------------------
<S> <C>
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.
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 primarily in the common stocks of foreign and
domestic issuers.
</TABLE>
37
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ---------------------------------------------------------------------------
<S> <C>
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 of money market instruments.
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. Therefore, an exchanging shareholder 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
38
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
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. 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.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Although the
exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Fund's performance and its shareholders. The Fund's
investment adviser may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other shareholders.
In this event, the Fund's investment adviser will notify Smith Barney
Shearson,
and Smith Barney Shearson may, at its discretion, decide to limit additional
purchases and/or exchanges by the shareholder. Upon such a determination,
Smith
Barney Shearson will provide notice in writing or by telephone to the
shareholder at least 15 days prior to suspending the exchange privilege and
during the 15-day period the shareholder will be required to (a) redeem his or
her shares in the Fund or (b) remain invested in the Fund or exchange into any
of the funds in the Smith Barney Shearson Group of Funds ordinarily available,
which position the shareholder would expect to maintain for a significant
period
of time. All relevant factors will be considered in determining what
constitutes
an abusive pattern of exchanges.
Shareholders exercising the exchange privilege with any of the funds in the
Smith Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the
right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders. For further
information regarding the exchange privilege or to obtain current prospectuses
for the funds in the Smith Barney Shearson Group of Funds, shareholders should
contact their Smith Barney Shearson Financial Consultants.
39
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- --------------------------------------------------------------------
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 Fund 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 with respect to the Fund
pursuant to Rule 12b-1 under the 1940 Act, will be calculated at the annual
rate
of .15% of the value of the average daily net assets of the Fund and will be
used by Smith Barney Shearson to provide compensation for ongoing servicing
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 will evaluate 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
amounts
it receives under the Plan.
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's policy is to declare daily and distribute monthly,
generally
on the 10th day of each calendar month, substantially all of the Fund's 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
40
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Shearson, such dividends and distributions automatically will be reinvested 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.
In
addition, in order to avoid the application of this tax, and if in the best
interests of the Fund's shareholders, the Fund will declare and pay dividends
of
net investment income and distributions of net capital gains more frequently
than stated above.
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 (other than dividends derived from interest earned on
qualifying tax-exempt obligations as described below) and distributions of the
Fund's net realized short-term capital gains are taxable to shareholders as
ordinary income, regardless of how long shareholders in the Fund have held
their
shares and whether the dividends or distributions are received in cash or
reinvested in additional shares of the Fund. 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 shares of
the
Fund 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 shares of the Fund 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.
Dividends paid by the Fund that are derived from interest earned on
qualifying
tax-exempt obligations are expected to be "exempt-interest" dividends that
shareholders may exclude from their gross incomes for Federal income tax
purposes if the Fund satisfies certain asset percentage requirements. Any
exempt-interest dividends of the Fund derived from interest on Municipal
Obligations, the interest on which is a specific tax preference item for
Federal
income tax purposes, will be a specific tax preference item for purposes of
the
Federal individual and corporate alternative minimum taxes. In addition, all
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the
41
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Federal corporate alternative minimum income tax and corporate shareholders
may
incur a larger Federal environmental tax liability through the receipt of Fund
dividends and distributions from the Fund.
Statements as to the tax status of the dividends and distributions received
by
shareholders of the Fund are mailed annually. These statements set forth the
dollar amount of income excluded from Federal income taxes and the dollar
amount, if any, subject to Federal income taxes. The Fund notifies its
shareholders annually as to the interest excluded from Federal income taxes
earned by the Fund with respect to those states and possessions in which the
Fund has or had investments.
Shareholders of the Fund should consult their tax advisors with specific
reference to their own tax situations. Shareholders of the Fund should in
particular 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 are exempt from any otherwise
applicable state or local income taxes.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows individual taxpayers how to translate the tax savings
from investments such as the Fund into an equivalent return from a taxable
investment. The yields used below are for illustration only and are not
intended
to represent current or future yields for the Fund, which may be higher or
lower
than those shown.
<TABLE>
<CAPTION>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE
SECURITIES
TAXABLE TAXABLE FEDERAL
INCOME INCOME MARGINAL
SINGLE JOINT RATE* 4.00% 4.50% 5.00% 5.50% 6.00%
6.50% 7.00% 7.50% 8.00% 8.50%
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
-----------------------------------------------------------------------------
- ------------------------------------
$ 22,100 $ 36,900 15.00% 4.71% 5.29% 5.88% 6.47%
7.06% 7.65% 8.24% 8.82% 9.41% 10.00%
53,500 89,150 28.00% 5.56% 6.25% 6.94% 7.64%
8.33% 9.03% 9.72% 10.42% 11.11% 11.81%
115,000 140,000 31.00% 5.80% 6.52% 7.25% 7.97%
8.70% 9.42% 10.14% 10.87% 11.59% 12.32%
250,000 250,000 36.00% 6.25% 7.03% 7.81% 8.59%
9.38% 10.16% 10.94% 11.72% 12.50% 13.28%
250,000 and up 250,000 and up 39.60% 6.62% 7.45% 8.28% 9.11%
9.93% 10.76% 11.59% 12.42% 13.25% 14.07%
-----------------------------------------------------------------------------
- --------------------
<FN>
*The Federal tax rates shown are those currently in effect for 1994 and are
subject to change.
</TABLE>
42
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS 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
Intermediate Maturity California Municipals Fund, Smith Barney Shearson
Intermediate Maturity New York Municipals Fund and Smith Barney Shearson
Limited
Maturity Treasury 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 of the Trust 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.
43
<PAGE>
SMITH BARNEY SHEARSON
LIMITED MATURITY MUNICIPALS 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 listing of 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 its semi-annual and annual reports by household.
This
consolidation means that a household having multiple accounts with the
identical
address of record will receive a single copy of each report. In addition, the
Fund also plans to consolidate the mailing of its Prospectus so that a
shareholder having multiple accounts will receive a single Prospectus
annually.
Any shareholder who does not want this consolidation to apply to his or her
account should contact his or her Financial Consultant or TSSG. Shareholders
may
direct inquiries regarding the Fund to their Smith Barney Shearson Financial
Consultants.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF
ADDITIONAL INFORMATION AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
44
<PAGE>
SMITH BARNEY SHEARSON
LIMITED
MATURITY
MUNICIPALS
FUND
Two World Trade Center
New York, New York 10048
Fund 163
FD0246 A4
<PAGE>
JANUARY 29, 1994
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY
NEW YORK
MUNICIPALS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
PROSPECTUS January 29, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Intermediate Maturity New York Municipals Fund (the
"Fund") seeks to provide New York investors with as high a level of current
income exempt from Federal income taxes and New York State and New York City
personal income taxes as is consistent with preservation of principal by
investing in investment grade obligations issued by the State of New York and
its political subdivisions, agencies and public authorities. 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 management investment 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,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. 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, which 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
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
----------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9
----------------------------------------------------------------
THE FUND'S PERFORMANCE 10
----------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 11
----------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 13
----------------------------------------------------------------
PURCHASE OF SHARES 28
----------------------------------------------------------------
REDEMPTION OF SHARES 32
----------------------------------------------------------------
VALUATION OF SHARES 35
----------------------------------------------------------------
EXCHANGE PRIVILEGE 36
----------------------------------------------------------------
DISTRIBUTOR 41
----------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 42
----------------------------------------------------------------
ADDITIONAL INFORMATION 44
----------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION. CROSS REFERENCES IN THIS SUMMARY ARE TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - A professionally managed diversified portfolio comprised primarily of
investment-grade New York municipal obligations.
- - Dividends consisting of tax-exempt income for New York investors.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
securities.
- - Different methods for purchasing shares that allow investment flexibility
and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is a non-diversified intermediate-term municipal
bond fund that seeks to provide New York investors with as high a level of
current income exempt from Federal income taxes and New York State and New
York
City personal income taxes as is consistent with the preservation of principal
by investing in investment-grade obligations issued by the State of New York
and
its political subdivisions, agencies and public authorities. The weighted
average maturity of the Fund's portfolio securities will normally not be less
than three nor more than 10 years. The maximum remaining maturity of the
securities in which the Fund will normally invest will be no greater than 20
years. See "Investment Objective and Management Policies."
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
3
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
a fully disclosed basis (an "Introducing Broker"). The public offering price
of
the Fund's shares 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.
See "Purchase of Shares."
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 the Fund's shares made
within
one year of their purchase may 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"). Holdings is a wholly owned subsidiary of The
Travelers Inc. (which was formerly known as Primerica Corporation)
("Travelers"), a diversified financial services holding company principally
engaged in the businesses of providing investment, consumer finance and
insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors"), serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Trust and the Fund."
4
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXCHANGE PRIVILEGE Shares of the Fund may be exchanged for the 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 The Fund's 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. Distributions
of
net realized 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
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. Shares of the Fund, unlike certain bank
deposit accounts, are not guaranteed or insured by any Federal or state
authority. Changes in interest rates generally will result in increases or
decreases in the market value of the obligations held by the Fund. The yield
of
the Fund 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 tax-exempt money market fund
and therefore its investment portfolio can be expected to experience greater
volatility than that of a tax-exempt money market fund. The net asset value of
the Fund will be subject to greater fluctuation to the extent that the Fund
invests in zero coupon securities. The Fund's net asset value per share will
fluctuate depending on a combination of factors such as current market
interest
rates and the creditworthiness of the issuers in whose securities the Fund
invests. The Fund will not invest in obligations that are rated lower than Baa
by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's
Corporation ("S&P") or BBB by Fitch Investor Service, Inc. ("Fitch"), at the
time of purchase. The ratings of
5
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Moody's, S&P and Fitch represent their opinions as to the quality of the
obligations that they undertake to rate; the ratings are relative and
subjective
and are not absolute standards of quality.
The Fund may invest up to 20% of its total assets in unrated securities that
Greenwich Street Advisors determines to be of comparable quality to the
securities rated investment grade in which the Fund may invest. Dealers may
not
maintain daily markets in unrated securities and retail secondary markets for
many of them may not exist; lack of markets may affect the Fund's ability to
sell these securities when Greenwich Street Advisors deems it appropriate. The
Fund has the right to invest without limitation in state and local obligations
that are "private activity bonds," the income from which may be taxable as a
specific preference item for purposes of the Federal alternative minimum tax.
Thus, the Fund may not be a suitable investment for investors who are subject
to
the alternative minimum tax.
Certain of the instruments held by the Fund, and certain of the investment
techniques that the Fund may employ, might expose the Fund to certain risks.
The
instruments presenting the Fund with risks are municipal leases, zero coupon
securities, custodial receipts, municipal obligation components, floating and
variable rate demand notes and bonds, and participation interests. Entering
into
securities transactions on a when-issued or delayed-delivery basis are
investment techniques involving risks to the Fund. See "Investment Objective
and
Management Policies -- Investment Techniques -- Risk Factors and Special
Considerations" and "Dividends, Distributions and Taxes."
Investment in the Fund, which is classified as a non-diversified fund, may
present a greater risk than an investment in a diversified fund. See
"Investment
Objective and Management Policies -- Risk Factors and Special Considerations."
Investment in the Fund involves risks and special considerations applicable to
the State of New York and the City of New York. See "Investment Objective and
Management Policies -- Risk Factors and Special Considerations."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
that an investor will incur either directly or indirectly, as a
6
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
shareholder of the Fund, based upon the maximum sales charge or maximum CDSC
that may be incurred at the time of purchase or redemption and of the Fund's
current operating expenses:
<TABLE>
<CAPTION>
FEE 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 waiver of .45%) .10%
12b-1 fees .15%
Other expenses .40%
------------------------------------------------------------------
TOTAL OPERATING EXPENSES
(after waivers) .65%
------------------------------------------------------------------
</TABLE>
The sales charge and CDSC 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 "Purchase of Shares" and
"Redemption of Shares." Management fees paid by the Fund include investment
advisory fees payable monthly to Greenwich Street Advisors at the annual rate
of
.35% of the value of the Fund's average daily net assets, and administration
fees payable to Boston Advisors at the annual rate of .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 .45% of the value of the Fund's average daily net assets. This
has the effect of lowering the Fund's overall expense ratio and
7
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
increasing the returns available to investors. If Greenwich Street Advisors
and
Boston Advisors had not elected to waive fees and reimburse expenses, the
Fund's
total operating expenses for the fiscal year ended November 30, 1993, would
have
been 1.10% as a percentage of the value of the Fund's average daily net
assets.
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 $29 $43 $59
$104
A shareholder would pay the following
expenses on the same investment,
assuming no redemption $19 $33 $49 $
94
-----------------------------------------------------------------------------
- --
<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>
8
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION 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 ARE INCORPORATED BY REFERENCE INTO THE STATEMENT OF ADDITIONAL
INFORMATION.
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR
PERIOD
ENDED
ENDED
11/30/93
11/30/92*
<S> <C>
<C>
Net Asset Value, beginning of period $ 8.18
$ 7.90
- ------------------------------------------------------------------------------
- -------
Income from investment operations:
Net investment income+ 0.40
0.38
Net realized and unrealized gains++ 0.38
0.28
- ------------------------------------------------------------------------------
- -------
Total from investment operations 0.78
0.66
- ------------------------------------------------------------------------------
- -------
Less distributions:
Dividends from net investment income (0.40)
(0.38)
Distributions from net realized capital gains on investments (0.02)
- --
- ------------------------------------------------------------------------------
- -------
Total distributions (0.42)
(0.38)
- ------------------------------------------------------------------------------
- -------
Net Asset Value, end of period $ 8.54
$ 8.18
- ------------------------------------------------------------------------------
- -------
Total return+++ 9.76%
8.59%
- ------------------------------------------------------------------------------
- -------
Ratios/Supplemental data:
Net assets, end of period (in 000's) $67,230
$24,543
Ratio of operating expenses to average net assets++++ 0.65%
0.65%**
Ratio of net investment income to average net assets 4.59%
4.95%**
Portfolio turnover rate 22%
68%
- ------------------------------------------------------------------------------
- -------
<FN>
*The Fund commenced operations on December 31, 1991.
**Annualized.
+Net investment income before waiver of fees by investment adviser and
administrator for the
year ended November 30, 1993 and waiver of fees and reimbursement of
expenses by investment
adviser, sub-investment adviser and administrator, custodian and
distributor for the period
ended November 30, 1992 were $0.36 and $0.32, respectively.
++The amount shown at this caption for each share outstanding throughout the
period may not
accord with the change in the aggregate gains and losses in the portfolio
securities for the
period because of the timing of purchases and withdrawals of shares in
relation to
fluctuating market values of the portfolio.
+++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 and
reimbursement of
expenses by investment adviser, sub-investment adviser and administrator,
custodian and
distributor for the period ended November 30, 1992 were 1.10% and 1.45%,
respectively.
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS 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. This average annual total return figure shows
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 a 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 in the Fund 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
The Fund may advertise the 30-day "yield" and "equivalent taxable 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 net asset value per share on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the net asset value.
The equivalent taxable yield of the Fund demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the
10
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
Fund's tax-exempt yield. Equivalent taxable yield is calculated by increasing
the yield shown for the Fund calculated as described above, to the extent
necessary to reflect the payment of specified tax rates. Thus, the equivalent
taxable yield will always exceed the Fund's yield.
COMPARATIVE PERFORMANCE INFORMATION
In reports or other communications to shareholders of the Fund 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 that monitor the performance of 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, PERSONAL FINANCE, THE NEW YORK TIMES, USA TODAY and THE WALL STREET
JOURNAL. It is important to note that yield and total return 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 Trust and 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 Trustee of the Trust and the executive
officers of the Fund.
11
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
INVESTMENT ADVISER -- GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through its predecessors) has been in the investment counseling business
since
1934 and is a division of Mutual Management Corp. which was incorporated in
1978. Greenwich Street Advisors renders investment advice to investment
companies that had aggregate assets under management as of 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 the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund. For the fiscal year ended 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 .06% of the
Fund's average daily net assets. Greenwich Street Advisors and Shearson Lehman
Advisors waived investment advisory fees in an amount equal to .29% of the
value
of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Lawrence T. McDermott, Managing Director of Greenwich Street Advisors, has
served as Vice President and Investment Officer of the Fund since it commenced
operations on December 31, 1991, and manages the day-to-day operations of the
Fund, including making all investment decisions.
Mr. McDermott's management discussion and analysis, and additional
performance
information regarding the Fund during the fiscal year ended 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 page one of this Prospectus.
12
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors is a wholly owned
subsidiary
of TBC, a financial services holding company, which is in turn a wholly owned
subsidiary of Mellon. 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 in all aspects of the Fund's administration and operation.
For
the fiscal year ended November 30, 1993, Boston Advisors received .04% of the
value of the Fund's average daily net assets and voluntarily waived .16%.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set out below is a description of the investment objective and principal
investment policies of the Fund. 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 a majority of the Fund's outstanding shares.
The Fund's investment objective is to provide New York investors with as
high
a level of current income exempt from Federal income taxes and New York State
and New York City personal income taxes as is consistent with preservation of
principal. Under normal market conditions, the Fund attempts to invest 100% in
a
portfolio of investment grade debt obligations issued by or on behalf of the
State of New York and other states, territories and possessions of the United
States, the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations"). For
purposes of this Prospectus, debt obligations issued by the State of New York
and its political subdivisions, agencies and public authorities (together with
certain other governmental issuers such as Guam, Puerto Rico and the Virgin
Islands), the interest from which debt obligations is, in the opinion of bond
counsel to the issuer, excluded from gross income for Federal income tax
purposes and exempt from New York
13
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
State and New York City personal income tax are defined as "New York Exempt
Obligations." The Fund will operate subject to a fundamental investment policy
providing that, under normal market conditions, the Fund will invest at least
80% of its net assets in New York Exempt Obligations.
The Fund will invest at least 80% of its total assets in New York Exempt
Obligations rated investment grade, that is, rated no lower than Baa, MIG 3 or
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20%
of
the Fund's total assets may be invested in unrated securities that are deemed
by
Greenwich Street Advisors to be of a quality comparable to investment grade.
The
Fund will not invest in New York Exempt Obligations that are rated lower than
Baa by Moody's, BBB by S&P or BBB by Fitch, at the time of purchase.
The Fund is classified as a non-diversified fund under the 1940 Act, which
means that the Fund is not limited by the 1940 Act in the proportion of its
assets that it may invest in the obligations of a single issuer. The Fund
intends to conduct its operations, however, so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any liability for Federal
income tax and New York State franchise tax to the extent that its earnings
are
distributed to shareholders. To qualify as a regulated investment company, the
Fund will, among other things, limit its investments so that, at the close of
each quarter of the taxable year (a) not more than 25% of the market value of
the Fund's total assets will be invested in the securities of a single issuer
and (b) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer. In addition, the Fund will not own more than
10%
of the outstanding voting securities of a single issuer.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the New York Exempt Obligations that they undertake to rate; the
ratings are relative and subjective and are not absolute standards of quality.
Greenwich Street Advisors' judgment as to credit quality of a New York Exempt
Obligation, thus, may differ from that suggested by the ratings published by a
rating service. A description of Moody's, S&P and Fitch ratings relevant to
the
Fund's investments is included as an appendix to the Statement of Additional
Information. The policies of the Fund described above as to ratings of
portfolio
investments will apply only at the time of
14
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
the purchase of a security, and the Fund will not be required to dispose of a
security in the event Moody's, S&P or Fitch downgrades its assessment of the
credit characteristics of the security's issuer.
New York Exempt Obligations are classified as general obligation bonds,
revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable from the revenue derived from a
particular facility or class of facilities or, in some cases, from the
proceeds
of a special excise or other specific revenue source, but not from the general
taxing power. Notes are short-term obligations of issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. New York Exempt Obligations bear fixed, floating
and
variable rates of interest, and variations exist in the security of New York
Exempt Obligations, both within a particular classification and between
classifications.
The yields on, and values of, New York Exempt Obligations are dependent on a
variety of factors, including general economic and monetary conditions,
conditions in the New York Exempt Obligation markets, size of a particular
offering, maturity of the obligation and rating of the issue. Consequently,
New
York Exempt Obligations with the same maturity, coupon and rating may have
different yields or values, whereas obligations of the same maturity and
coupon
with different ratings may have the same yield or value. See "Risk Factors and
Special Considerations--New York Exempt Obligations."
Issuers of New York Exempt Obligations may be subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform
Act
of 1978, affecting the rights and remedies of creditors. In addition, the
obligations of those issuers may become subject to laws enacted in the future
by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of
the
obligations or upon the ability of municipalities to levy taxes. The
possibility
also exists that, as a result of litigation or other conditions, the power or
ability of any issuer to pay, when due, the principal of, and interest on, its
obligations may be materially affected.
15
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
MATURITY OF OBLIGATIONS HELD BY THE FUND
The Fund reflects Greenwich Street Advisors' belief that the Fund may offer
an
attractive investment opportunity for investors seeking a higher effective tax
yield than a tax-exempt money market fund or a tax-exempt short-term bond fund
and less fluctuation in net asset value than a longer term tax-exempt bond
fund.
The Fund will normally invest in intermediate maturity securities; the
weighted
average maturity of the portfolio of the Fund will normally be not less than
three nor more than 10 years. The maximum remaining maturity of the securities
in which the Fund will normally invest will be no greater than 20 years.
PRIVATE ACTIVITY BONDS
The Fund may invest without limit in New York Exempt Obligations that are
tax-exempt "private activity bonds," as defined in the Code, which are in most
cases revenue bonds. Private activity bonds generally do not carry the pledge
of
the credit of the issuing municipality, but are guaranteed by the corporate
entity on whose behalf they are issued. Interest income on certain types of
private activity bonds issued after August 7, 1986 to finance nongovernmental
activities is a specific tax preference item for purposes of the Federal
individual and corporate alternative minimum taxes. Individual and corporate
shareholders may be subject to a Federal alternative minimum tax to the extent
the Fund's dividends are derived from interest on these bonds. Dividends
derived
from interest income on New York Exempt Obligations are a "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum tax.
See "Dividends, Distributions and Taxes."
RELATED INSTRUMENTS
The Fund may invest without limit in New York Exempt Obligations that are
repayable out of revenues generated from economically related projects or
facilities or debt obligations whose issuers are located in the same state.
Sizeable investments in these obligations could involve an increased risk to a
Fund should any of the related projects or facilities experience financial
difficulties.
16
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
OTHER MISCELLANEOUS POLICIES
The Fund may invest up to an aggregate amount equal to 10% of its net assets
in illiquid securities, which term includes securities subject to contractual
or
other restrictions on resale and other instruments that lack readily available
markets. In addition, up to 5% of the value of the Fund's assets may be
invested
in securities of entities that have been in continuous operation for fewer
than
three years.
TYPES OF NEW YORK EXEMPT OBLIGATIONS HELD BY THE FUND
MUNICIPAL LEASES. The Fund may invest without limit in "municipal leases."
Municipal leases may take the form of a lease or an installment purchase
contract issued by state and local government authorities to obtain funds to
acquire a wide variety of equipment and facilities such as fire and sanitation
vehicles, computer equipment and other capital assets. Interest payments on
qualifying municipal leases are exempt from Federal income taxes and state
income taxes within the state of issuance. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's
taxing power is pledged, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make the payments due
under, the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless
money is appropriated for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with
more conventional bonds. Although "non-appropriation" lease obligations are
often secured by the underlying property, disposition of the property in the
event of foreclosure might prove difficult. The fund may invest in municipal
leases without non-appropriation clauses only when the municipality is
required
to continue the lease under all circumstances except bankruptcy. There is no
limitation on the percentage of the Fund's assets that may be invested in
municipal lease obligations. In evaluating municipal lease obligations,
Greenwich Street Advisors will consider such factors as it deems appropriate,
which may include: (a) whether the lease can be canceled; (b) the ability of
the
lease obligee to direct the sale of the underlying assets; (c) the general
creditworthiness of the lease obligor; (d) the likelihood that the
municipality
will discontinue
17
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
appropriating funding for the leased property in the event such property is no
longer considered essential by the municipality; (e) the legal recourse of the
lease obligee in the event of such a failure to appropriate funding; (f)
whether
the security is backed by a credit enhancement such as insurance; and (g) any
limitations which are imposed on the lease obligor's ability to utilize
substitute property or services other than those covered by the lease
obligation.
Municipal leases that the Fund may acquire will be both rated and unrated.
Rated leases include those rated investment grade at the time of investment or
those issued by issuers whose senior debt is rated investment grade at the
time
of investment. The Fund may acquire unrated issues that Greenwich Street
Advisors deems to be comparable in quality to rated issues in which the Fund
is
authorized to invest. A determination that an unrated lease obligation is
comparable in quality to a rated lease obligation will be subject to oversight
and approval by the Trust's Board of Trustees.
Municipal leases held by the Fund will be considered illiquid securities
unless the Trust's Board of Trustees determines on an ongoing basis that the
leases are readily marketable. An unrated municipal lease with a non-
appropriation risk that is backed by an irrevocable bank letter of credit or
an
insurance policy issued by a bank or insurer deemed by Greenwich Street
Advisors
to be of high quality and minimal credit risk, will not be deemed to be
illiquid
solely because the underlying municipal lease is unrated, if Greenwich Street
Advisors determines that the lease is readily marketable because it is backed
by
the letter of credit or insurance policy.
ZERO COUPON SECURITIES. The Fund may invest up to 10% of its assets in zero
coupon Municipal and New York Exempt Obligations. Zero coupon Municipal and
New
York Exempt Obligations are generally divided into two categories: pure zero
obligations, which are those that pay no interest for their entire life and
zero/fixed obligations, which pay no interest for some initial period and
thereafter pay interest currently. In the case of a pure zero obligation, the
failure to pay interest currently may result from the obligation's having no
stated interest rate, in which case the obligation pays only principal at
maturity and is issued at a discount from its stated principal amount. A pure
zero obligation may, in the alternative, provide for a stated interest rate,
but
provide that no interest is payable until maturity, in which case accrued,
unpaid interest on the obligation may be capitalized
18
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
as incremental principal. The value to the investor of a zero coupon Municipal
and New York Exempt Obligation consists of the economic accretion either of
the
difference between the purchase price and the nominal principal amount (if no
interest is stated to accrue) or of accrued, unpaid interest during the
Municipal and New York Exempt Obligation's life or payment deferral period.
CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts or certificates
underwritten by securities dealers or banks that evidence ownership of future
interest payments, principal payments, or both, on certain Municipal and New
York Exempt Obligations. The underwriter of these certificates or receipts
typically purchases Municipal and New York Exempt Obligations and deposits the
obligations in an irrevocable trust or custodial account with a custodian
bank,
which then issues receipts or certificates that evidence ownership of the
periodic unmatured coupon payments and the final principal payment on the
obligations. Custodial receipts evidencing specific coupon or principal
payments
have the same general attributes as zero coupon Municipal and New York Exempt
Obligations described above. Although under the terms of a custodial receipt,
the Fund would be typically authorized to assert its rights directly against
the
issuer of the underlying obligation, the Fund could be required to assert
through the custodian bank those rights as may exist against the underlying
issuer. Thus, in the event the underlying issuer fails to pay principal and/or
interest when due, the Fund may be subject to delays, expenses and risks that
are greater than those that would have been involved if the Fund had purchased
a
direct obligation of the issuer. In addition, in the event that the trust or
custodial account in which the underlying security has been deposited is
determined to be an association taxable as a corporation, instead of a
non-taxable entity, the yield on the underlying security would be reduced in
recognition of any taxes paid.
MUNICIPAL AND NEW YORK EXEMPT OBLIGATION COMPONENTS. The Fund may invest in
Municipal and New York Exempt Obligations, the interest rate on which has been
divided by the issuer into two different and variable components, which
together
result in a fixed interest rate. Typically, the first of the components (the
"Auction Component") pays an interest rate that is reset periodically through
an
auction process, whereas the second of the components (the "Residual
Component")
pays a residual interest rate based on the difference between the total
interest
paid by the issuer on the
19
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Municipal and New York Exempt Obligation and the auction rate paid on the
Auction Component. The Fund may purchase both Auction and Residual Components.
Because the interest rate paid to holders of Residual Components is
generally
determined by subtracting the interest rate paid to the holders of Auction
Components from a fixed amount, the interest rate paid to Residual Component
holders will decrease as the Auction Component's rate increases and increase
as
the Auction Component's rate decreases. Moreover, the magnitude of the
increases
and decreases in market value of Residual Components may be larger than
comparable changes in the market value of an equal principal amount of a fixed
rate Municipal and New York Exempt Obligation having similar credit quality,
redemption provisions and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Fund may purchase floating and
variable rate demand notes and bonds, which are Municipal and New York Exempt
Obligations normally having a stated maturity in excess of one year, but which
permit their holder to demand payment of principal at any time, or at
specified
intervals. The maturity of a floating or variable rate demand note or bond
will
not be deemed shortened by virtue of a demand feature for purposes of
calculating the Fund's net asset value or determining its weighted average
maturity.
The issuer of floating and variable rate demand obligations normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of these obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time
that
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, floating and
variable
rate obligations are secured by letters of credit or other credit support
arrangements provided by banks. Use of letters of credit or other credit
support
arrangements will not adversely affect the tax-exempt status of these
obligations. Because they are direct lending arrangements between the lender
and
borrower, floating and variable rate obligations will generally not be traded.
In addition, no secondary market generally exists for these obligations,
although their holders may demand their payment at face value. For these
reasons, when floating and variable rate obligations held by the
20
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Fund are not secured by letters of credit or other credit support
arrangements,
the Fund's right to demand payment is dependent on the ability of the borrower
to pay principal and interest on demand. Greenwich Street Advisors, on behalf
of
the Fund, will consider the creditworthiness of the issuers of floating and
variable rate demand obligations in the Fund's portfolio on an ongoing basis.
PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
tax-exempt participation interests in Municipal and New York Exempt
Obligations.
A participation interest gives the Fund an undivided interest in the Municipal
and New York Exempt Obligation in the proportion that the Fund's participation
interest bears to the total amount of the Municipal and New York Exempt
Obligation. These instruments may have floating or variable rates of interest.
If the participation interest is unrated, it will be backed by an irrevocable
letter of credit or guarantee of a bank that the Trust's Board of Trustees has
determined meets certain quality standards or the payment obligation otherwise
will be collateralized by obligations of the United States government and its
agencies and instrumentalities ("U.S. government securities"). The Fund will
have the right, with respect to certain participation interests, to demand
payment, on a specified number of days' notice, for all or any part of the
Fund's interest in the Municipal and New York Exempt Obligation, plus accrued
interest. The Fund intends to exercise its right with respect to these
instruments to demand payment only upon a default under the terms of the
Municipal and New York Exempt Obligation or to maintain or improve the quality
of its investment portfolio. In addition, the Fund will invest no more than 5%
of its total assets in participation interests.
TAXABLE INVESTMENTS
Under normal conditions, the Fund may hold up to 20% of its total assets in
cash or money market instruments, including taxable money market instruments
(collectively, "Taxable Investments"). In addition, when Greenwich Street
Advisors believes that market conditions warrant, the Fund may take a
temporary
defensive posture and invest without limitation in short-term Municipal and
New
York Exempt Obligations and Taxable Investments. To the extent a Fund holds
Taxable Investments and, under certain market conditions, certain floating and
variable rate demand obligations or Auction Components, the Fund may not
achieve
its investment objective.
21
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
Money market instruments in which the Fund may invest include: U.S.
government
securities; tax-exempt notes of municipal issuers rated, at the time of
purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or, if
not
rated, by issuers having outstanding, unsecured debt then rated within the
three
highest rating categories; bank obligations (including certificates of
deposit,
time deposits and bankers' acceptances of domestic banks, domestic savings and
loan associations and similar institutions); commercial paper rated no lower
than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent from another
major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories;
and
repurchase agreements. At no time will the Fund's investments in bank
obligations, including time deposits, exceed 25% of the value of its assets.
U.S. government securities in which the Fund may invest include direct
obligations of the United States and obligations issued by U.S. government
agencies and instrumentalities. Included among direct obligations of the
United
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ
principally in terms of their maturities. Included among the securities issued
by U.S. government agencies and instrumentalities are: securities that are
supported by the full faith and credit of the United States (such as
Government
National Mortgage Association certificates); securities that are supported by
the right of the issuer to borrow from the United States Treasury (such as
securities of Federal Home Loan Banks); and securities that are supported by
the
credit of the instrumentality (such as Federal National Mortgage Association
and
Federal Home Loan Mortgage Corporation bonds).
INVESTMENT TECHNIQUES
The Fund may employ, among others, the investment techniques described
below,
which may give rise to taxable income:
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. The Fund may purchase
securities
on a when-issued basis, or may purchase or sell securities for delayed
delivery.
In when-issued or delayed-delivery transactions, delivery of the securities
occurs beyond normal settlement periods, but no payment or delivery will be
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
22
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
delivery date. The Fund will establish with Boston Safe a segregated account
consisting of cash or U.S. government securities in an amount equal to the
amount of the when-issued and delayed-delivery purchase commitments. Placing
securities rather than cash in a segregated account may have a leveraging
effect
on the Fund's net assets.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with
respect
to Municipal and New York Exempt Obligations held in its portfolio. Under a
stand-by commitment, a broker, dealer or bank is obligated to repurchase at
the
Fund's option specified securities at a specified price and, in this way,
stand-by commitments are comparable to put options. Each exercise of a stand-
by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise the rights afforded by the
commitments for trading purposes. The Trust anticipates that stand-by
commitments will be available from brokers, dealers and banks without the
payment of any direct or indirect consideration. The Fund may pay for stand-by
commitments if payment is deemed necessary, thus increasing to a degree the
cost
of the underlying Municipal and New York Exempt Obligation and similarly
decreasing the security's yield to investors.
INVESTMENT RESTRICTIONS
The Trust has 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 voting securities as defined in the 1940 Act. Included among those
fundamental restrictions are the following:
1. The Fund will not purchase securities other than Municipal and New York
Exempt Obligations and Taxable Investments as those terms are defined in
this Prospectus or the Statement of Additional Information.
2. The Fund will not borrow money, except that the Fund may borrow
from
banks for temporary or emergency (not leveraging) purposes, including
the
meeting of redemption requests 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
23
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
will not make any additional investments.
3. The Fund will not lend money to other persons, except through
purchasing
Municipal and New York Exempt Obligations or Taxable Investments and
entering into repurchase agreements in a manner consistent with the Fund's
investment objective.
4. The Fund will not invest more than 25% of the value of its total assets
in securities of issuers in any one industry, except that this limitation
is
not applicable to a Fund's investments in U.S. government securities.
5. The Fund will 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.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves risk factors and special considerations,
such
as those described below:
MUNICIPAL AND NEW YORK EXEMPT OBLIGATIONS. Even though Municipal and New
York
Exempt Obligations are interest-bearing investments that promise a stable
stream
of income, their prices are inversely affected by changes in interest rates
and,
therefore, are subject to the risk of market price fluctuations. The values of
New York Exempt Obligations with longer remaining maturities typically
fluctuate
more than those of similarly rated New York Exempt Obligations with shorter
remaining maturities such as the Fund intends to hold. The values of
fixed-income securities also may be affected by changes in the credit rating
or
financial condition of the issuing entities.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from Federal income taxes (and, with respect to
New York Exempt Obligations, to the exemption of interest on them
24
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
from New York State and New York City personal income taxes) are rendered by
bond counsel to the respective issuers at the time of issuance. Neither the
Fund
nor Greenwich Street Advisors will review the proceedings relating to the
issuance of Municipal and New York Exempt Obligations or the basis for
opinions
of counsel.
POTENTIAL LEGISLATION. In past years, the United States government has
enacted
various laws that have restricted or diminished the income tax exemption on
various types of Municipal and New York Exempt Obligations and may enact other
similar laws in the future. If any such laws are enacted that would reduce the
availability of Municipal and New York Exempt Obligations for investment by
the
Fund so as to affect the Fund's shareholders adversely, the Trust's Trustees
will reevaluate the Fund's investment objective and policies and might submit
possible changes in the Fund's structure to shareholders for their
consideration. If legislation were enacted that would treat a type of
Municipal
and New York Exempt Obligation as taxable for Federal income tax purposes, the
Fund would treat the security as a permissible Taxable Investment within the
applicable limits set forth in this Prospectus.
UNRATED SECURITIES. The Fund may invest in unrated securities that Greenwich
Street Advisors determines to be of comparable quality to the rated securities
in which the Fund may invest. Dealers may not maintain daily markets in
unrated
securities and retail secondary markets for many of them may not exist. As a
result, the Fund's ability to sell these securities when Greenwich Street
Advisors deems it appropriate may be diminished.
MUNICIPAL LEASES. Municipal leases in which the Fund may invest have special
risks not normally associated with Municipal Obligations. These obligations
frequently contain non-appropriation clauses that provide that the
governmental
issuer of the obligation need not make future payments under the lease or
contract unless money is appropriated for that purpose by a legislative body
annually or on another periodic basis. Municipal leases have additional risks
because they represent a type of financing that has not yet developed the
depth
of marketability generally associated with other Municipal Obligations.
Moreover, although a municipal lease will be secured by financed equipment or
facilities, the disposition of the equipment or facilities in the event of
foreclosure might prove difficult. In addition, in certain instances the
tax-exempt status of the municipal lease will not be
25
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
subject to the legal opinion of a nationally recognized bond counsel, although
in all cases the Fund will require that a municipal lease purchased by the
Fund
be covered by a legal opinion to the effect that, as of each effective date of
the municipal lease, the lease is the valid and binding obligation of the
government issuer.
Municipal leases are also subject to the risk of non-payment. The ability of
issuers of municipal leases to make timely lease payments may be adversely
impacted in general economic downturns and as relative governmental cost
burdens
are allocated and reallocated among federal, state and local governmental
units.
Such non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
Issuers
of municipal securities might seek protection under the bankruptcy laws. In
the
event of bankruptcy of such an issuer, the Fund could experience delays and
limitations with respect to the collection of principal and interest on such
municipal leases and the Fund may not, in all circumstances, be able to
collect
all principal and interest to which it is entitled. To enforce its rights in
the
event of a default in the lease payments, the Fund may take possession of and
manage the assets securing the issuer's obligations on such securities, which
may increase the Fund's operating expenses and adversely affect the net asset
value of the Fund. Any income derived from the Fund's ownership or operation
of
such assets may not be tax-exempt. In addition, the Fund's intention to
qualify
as a "regulated investment company" under the Code may limit the extent to
which
the Fund may exercise its rights by taking possession of such assets, because
as
a regulated investment company the Fund is subject to certain limitations on
its
investments and on the nature of its income.
NON-PUBLICLY TRADED SECURITIES. As suggested above, the Fund may, from time
to
time, invest a portion of its assets in non-publicly traded Municipal and New
York Exempt Obligations. Non-publicly traded securities may be less liquid
than
publicly traded securities. Although non-publicly traded securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by the Fund.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Securities purchased on a
when-issued or delayed-delivery basis may expose the Fund to risk because
26
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
the securities may experience fluctuations in value prior to their delivery.
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.
NON-DIVERSIFIED CLASSIFICATION. Investment in the Fund, which is classified
as
a non-diversified fund under the 1940 Act, may present greater risks to
investors than an investment in a diversified fund. The investment return on a
non-diversified fund typically is dependent upon the performance of a smaller
number of securities relative to the number of securities held in a
diversified
fund. The Fund's assumption of large positions in the obligations of a small
number of issuers will affect the value of its portfolio to a greater extent
than that of a diversified fund in the event of changes in the financial
condition, or in the market's assessment, of the issuers.
SPECIAL CONSIDERATIONS. The Fund's ability to achieve its investment
objective
is dependent upon the ability of the issuers of Municipal and New York Exempt
Obligations to meet their continuing obligations for the payment of principal
and interest. New York State and New York City face long-term economic
problems
that could seriously affect their ability and that of other issuers of New
York
Exempt Obligations to meet their financial obligations.
Certain substantial issuers of New York Exempt Obligations (including
issuers
whose obligations may be acquired by the Fund) have experienced
serious
financial difficulties in recent years. These difficulties have at
times
jeopardized the credit standing and impaired the borrowing abilities of all
New
York issuers and have generally contributed to higher interest costs for
their
borrowing and fewer markets for their outstanding debt obligations. In
recent
years, several different issues of municipal securities of New York State
and
its agencies and instrumentalities and of New York City have been downgraded
by
S&P and Moody's. On the other hand, strong demand for New York
Exempt
Obligations has more recently had the effect of permitting New York
Exempt
Obligations to be issued with yields relatively lower, and after issuance,
to
trade in the market at prices relatively higher, than comparably rated
municipal
obligations issued by other jurisdictions. A recurrence of the
financial
difficulties previously experienced by certain issuers of New York
Exempt
Obligations could result in defaults or declines in the market values of
those
issuers' existing obligations
27
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
and, possibly, in the obligations of other issuers of New York Exempt
Obligations. Although, as of the date of this Prospectus, no issuers of New
York
Exempt Obligations are in default with respect to the payment of their
municipal
obligations, the occurrence of any such default could affect adversely the
market values and marketability of all New York Exempt Obligations and,
consequently, the net asset value of the Fund's portfolio.
Other considerations affecting the Fund's investment in New York Exempt
Obligations are summarized in the Statement of Additional Information.
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 the 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 investment objective and policies of the Fund.
- --------------------------------------------------------------------
PURCHASE OF SHARES
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
28
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
"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 Shearson Group of
Funds) for the payment until the settlement date. The Fund reserves the right
to
reject any purchase order and to suspend the offering of shares for a period
of
time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE (currently 4:00 p.m., New
York
time) on any day 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 regular trading on the NYSE are priced as of the
time 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
% OF OFFERING % OF NET ASSET
AMOUNT OF INVESTMENT PRICE 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 waived. See "Redemption of Shares --
Contingent Deferred Sales Charge -- 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
29
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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 purchases
through
the Fund's Systematic Investment Plan, the minimum initial and subsequent
investment is $100. No minimum investment requirements are imposed on
employees
of Travelers and its affiliates, including Smith Barney Shearson. The Fund
reserves the right at any time to vary the initial and subsequent investment
minimums. Certificates for Fund shares are issued only upon written request to
the Trust's transfer agent, The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation.
REDUCED SALES CHARGES
Reduced sales charges are available to investors who are eligible to combine
their purchases of shares of the Fund 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 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 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.
30
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Shares of the Fund may be offered without a sales charge 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 the
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."
31
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
REDEMPTION OF SHARES
REDEMPTIONS IN GENERAL
Shares may be redeemed on any day that the Fund calculates its net asset
value. See "Valuation of Shares." Redemption requests received in proper form
prior to the close of regular trading on the NYSE will be effected at the net
asset value per share determined on that day. Redemption requests received
after
the close of regular trading on the NYSE will be effected at the net asset
value
as next determined. The Fund normally transmits redemption proceeds for credit
to the shareholder's account at Smith Barney Shearson or the Introducing
Broker
at no charge (other than any applicable CDSC) within seven days after receipt
of
a redemption request. Generally, these funds will not be invested for the
shareholder's benefit without specific instruction and Smith Barney Shearson
will benefit from the use of temporarily uninvested funds. A shareholder who
pays for Fund shares by personal check will be credited with the proceeds of a
redemption of those shares when 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 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 requests to
TSSG. Redemption requests involving shares represented by certificates will
not
be deemed received until TSSG has received the certificates in proper form.
32
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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
Intermediate Maturity New York Municipals Fund
The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written request for redemption 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
signed 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, 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 Fund 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 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
33
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 a shareholder's shares at the time the withdrawal plan commences (see
above); (c) redemptions of shares following the death or disability of the
shareholder; (d) 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;
and (g) redemptions of shares in connection with a combination of any
investment
company with the Fund by merger, redemptions of shares in connection with a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise.
34
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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. 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 days on which the NYSE is closed. The NYSE is currently
scheduled
to be closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas, and on the preceding
Friday or subsequent Monday when one of these holidays falls on a Saturday or
Sunday, respectively.
The 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
35
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
VALUATION OF SHARES (CONTINUED)
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 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.
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.
</TABLE>
36
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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 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.
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 LIMITED MATURITY TREASURY FUND, invests
exclusively in securities issued by the United States Treasury
and other U.S. government securities.
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.
</TABLE>
37
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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.
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.
</TABLE>
38
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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 primarily 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.
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.
</TABLE>
39
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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. Therefore, an exchanging shareholder 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. 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.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Although the
exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Fund's performance and its shareholders. The Fund's
investment adviser may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other shareholders.
In this event, the Fund's investment adviser 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
40
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
telephone to the shareholder at least 15 days prior to suspending the exchange
privilege and during the 15-day period the shareholder will be required to (a)
redeem his or her shares in the Fund or (b) remain invested in the Fund or
exchange into any of the funds in the Smith Barney Shearson Group of Funds
ordinarily available, which position the shareholder would expect to maintain
for a significant period of time. All relevant factors will be considered in
determining what constitutes an abusive pattern of exchanges.
Shareholders exercising the exchange privilege with any of the other funds
in
the Smith Barney Shearson Group of Funds should review the prospectus of that
fund carefully prior to making an exchange. Smith Barney Shearson reserves the
right to reject any exchange request. The exchange privilege may be modified
or
terminated at any time after written notice to shareholders. For further
information regarding the exchange privilege, or to obtain current
prospectuses
for the funds in 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 Fund 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, will be calculated at the annual rate of .15% of the value of the
average daily net assets of the Fund and will be used by Smith Barney Shearson
to provide compensation for ongoing servicing 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.
41
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
DISTRIBUTOR (CONTINUED)
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 will evaluate 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
amounts
it receives under the Plan.
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's policy to declare daily and distribute monthly, generally
on
the 10th day of each calendar month, substantially all of the Fund's 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 automatically be reinvested in
additional
shares of the Fund at net asset value. The Fund is subject to a 4%
nondeductible
excise tax measured with respect to certain undistributed amounts of net
investment income and capital gains. In addition, in order to avoid the
application of this tax, and if in the best interests of the Fund's
shareholders, the Fund will declare and pay dividends of net investment income
and distributions of net capital gains more frequently than stated above.
TAXES
The Trust intends that the Fund continue to qualify each year as a
regulated
investment company under the Code. Dividends paid from the Fund's net
investment
income (other than dividends derived from interest earned on
qualifying
tax-exempt obligations as described below) and distributions of the Fund's
net
realized short-term capital gains are taxable to shareholders as
ordinary
income,
42
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- ---------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
regardless of how long shareholders in the Fund have held their shares and
whether the dividends or distributions are received in cash or reinvested in
additional shares of the Fund. 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 shares of the Fund 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 shares of the Fund 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.
Dividends paid by the Fund that are derived from interest earned on
qualifying
tax-exempt obligations are expected to be "exempt-interest" dividends that
shareholders may exclude from their gross incomes for Federal income tax
purposes if the Fund satisfies certain asset percentage requirements. Any
exempt-interest dividends of the Fund derived from interest on New York Exempt
Obligations, the interest on which is a specific tax preference item for
Federal
income tax purposes, will be a specific tax preference item for purposes of
the
Federal individual and corporate alternative minimum taxes. In addition, all
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum
income
tax and corporate shareholders may incur a larger Federal environmental tax
liability through the receipt of Fund dividends and distributions from the
Fund.
Exempt interest dividends of the Fund derived from interest on New York Exempt
Obligations will be exempt from New York State and New York City personal
income
(but not corporate franchise) taxes.
Statements as to the tax status of the dividends and distributions received
by
shareholders of the Fund are mailed annually. These statements set forth the
dollar amount of income excluded from Federal income taxes and the dollar
amount, if any, subject to Federal income taxes. Statements from the Fund will
show similar information with respect to New York State and New York City
personal income taxes. These statements will also designate the amount of
exempt-interest dividends that are a specific preference item for purposes of
the Federal individual and corporate alternative minimum taxes and will
indicate
the shareholder's share of the investment expenses of the Fund.
43
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Shareholders of the Fund should consult their tax advisors with specific
reference to their own tax situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows New York taxpayers how to translate the triple tax
savings from investments such as the Fund into an equivalent return from a
taxable investment. The yields used below are for illustration only and are
not
intended to represent current or future yields for the Fund, which may be
higher
or lower than those shown.
<TABLE>
<CAPTION>
NEW YORK
STATE &
NEW YORK COMBINED
FEDERAL CITY COMBINED EFFECTIVE
TAXABLE INCOME* MARGINAL MARGINAL MARGINAL MARGINAL
TAX-EXEMPT YIELDS
SINGLE JOINT RATE RATE RATE RATE 4.0%
5.0% 6.0% 7.0% 8.0% 9.0%
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
- -------------------
<CAPTION>
EQUIVALENT TAXABLE YIELDS
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
$ 22,100 $ 36,900 15.00% 11.625% 26.63% 24.88% 5.32%
6.66% 7.99% 9.32% 10.65% 11.98%
53,500 89,150 28.00% 11.735% 39.74% 36.45% 6.29%
7.87% 9.44% 11.01% 12.59% 14.16%
115,000 140,000 31.00% 11.785% 42.79% 39.13% 6.57%
8.21% 9.86% 11.50% 13.14% 14.79%
250,000 250,000 36.00% 11.785% 47.79% 43.54% 7.08%
8.86% 10.63% 12.40% 14.17% 15.94%
250,001 424,760 39.60% 11.785% 51.39% 46.72% 7.51%
9.38% 11.26% 13.14% 15.01% 16.89%
- ------------------------------------------------------------------------------
- -------------------
<FN>
*Combined effective marginal tax rate represents the combined Federal, New
York State and New York City tax rates adjusted to
account for the Federal deduction of New York State and New York City taxes
paid. The combined marginal income tax rate is lower
than the sum of the Federal, New York State and New York City marginal rates
because the state taxes that shareholders of the
Fund will pay are deductible from Federal taxable income.
</TABLE>
The Federal tax rates and New York State and New York City tax rates shown
are
those in effect for 1994 and are subject to change. The calculations reflected
in the table assume that no income will be subject to the Federal alternative
minimum taxes.
- --------------------------------------------------------------------
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
44
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
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 Limited Maturity Treasury 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 of the Trust 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.
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 listing of 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 its semi-annual and annual reports by household.
This
consolidation means that a household having multiple
45
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
accounts with the identical address of record will receive a single copy of
each
report. In addition, the Fund also plans to consolidate the mailing of its
Prospectus so that a shareholder having multiple accounts will receive a
single
Prospectus annually. Any shareholder who does not want this consolidation to
apply to his or her account should contact his or her Financial Consultant or
TSSG. Shareholders may direct inquiries regarding the Fund to their Smith
Barney
Shearson Financial Consultants.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF
ADDITIONAL INFORMATION AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
46
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
TRUSTEES
Burt N. Dorsett
Elliot S. Jaffe
Harry W. Knight
Heath B. McLendon
Cornelius C. Rose
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
Lawrence T. McDermott
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 ADVISER
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 & Gallagher
153 East 53rd Street
New York, New York 10022
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
47
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE
MATURITY
NEW YORK
MUNICIPALS FUND
Two World Trade Center
New York, New York 10048
Fund 164
FD0247 A4
<PAGE>
JANUARY 29, 1994
SMITH BARNEY SHEARSON
INTERMEDIATE
MATURITY
CALIFORNIA
MUNICIPALS
FUND
PROSPECTUS BEGINS
ON PAGE ONE.
[LOGO]
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
PROSPECTUS January 29, 1994
Two World Trade Center
New York, New York 10048
(212) 720-9218
Smith Barney Shearson Intermediate Maturity California Municipals Fund (the
"Fund") seeks to provide California investors with as high a level of current
income exempt from Federal income taxes and California State personal income
tax
as is consistent with preservation of principal by investing in investment
grade
obligations issued by the State of California and its political subdivisions,
agencies and public authorities. The Fund is one of a number of funds, each
having distinct investment objectives and policies making up the Smith Barney
Shearson Income Trust (the "Trust"). The Trust is an open-end management
investment 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,
which prospective investors will find helpful in making an investment
decision.
Investors are encouraged to read this Prospectus carefully and retain it for
future reference. 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, which 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
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 3
----------------------------------------------------------------
FINANCIAL HIGHLIGHTS 9
----------------------------------------------------------------
THE FUND'S PERFORMANCE 10
----------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND 11
----------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 13
----------------------------------------------------------------
PURCHASE OF SHARES 29
----------------------------------------------------------------
REDEMPTION OF SHARES 32
----------------------------------------------------------------
VALUATION OF SHARES 36
----------------------------------------------------------------
EXCHANGE PRIVILEGE 37
----------------------------------------------------------------
DISTRIBUTOR 42
----------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES 43
----------------------------------------------------------------
ADDITIONAL INFORMATION 45
----------------------------------------------------------------
</TABLE>
2
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- ---------------------------------------------------------------------------
PROSPECTUS SUMMARY
THE FOLLOWING 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 TO HEADINGS IN THE
PROSPECTUS.
SEE "TABLE OF CONTENTS."
BENEFITS TO INVESTORS THE FUND OFFERS INVESTORS SEVERAL IMPORTANT BENEFITS:
- - A professionally managed diversified portfolio comprised primarily of
investment-grade California municipal obligations.
- - Dividends consisting of tax-exempt income for California investors.
- - Investment liquidity through convenient purchase and redemption procedures.
- - A convenient way to invest without the administrative and recordkeeping
burdens normally associated with the direct ownership of municipal
securities.
- - Different methods for purchasing shares that allow investment flexibility
and
a wider range of investment alternatives.
- - Automatic dividend reinvestment feature, plus exchange privilege within the
same class of shares of most other funds in the Smith Barney Shearson Group
of Funds.
INVESTMENT OBJECTIVE The Fund is a non-diversified intermediate-term municipal
bond fund that seeks to provide California investors with as high a level of
current income exempt from Federal income taxes and California State personal
income tax as is consistent with the preservation of principal by investing in
investment-grade obligations issued by the State of California and its
political
subdivisions, agencies and public authorities. The weighted average maturity
of
the Fund's portfolio securities will normally not be less than three nor more
than 10 years. The maximum remaining maturity of the securities in which the
Fund will normally invest will be no greater than 20 years. See "Investment
Objective and Management Policies."
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 of
3
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
the Fund's shares 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.
See "Purchase of Shares."
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 the Fund's shares made
within
one year of their purchase may 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"). Holdings is a wholly owned subsidiary of The
Travelers Inc. (which was formerly known as Primerica Corporation)
("Travelers"), a diversified financial services holding company principally
engaged in the businesses of providing investment, consumer finance and
insurance services.
The Boston Company Advisors, Inc. ("Boston Advisors") serves as the Fund's
administrator. Boston Advisors is a wholly owned subsidiary of The Boston
Company, Inc. ("TBC"), which in turn is a wholly owned subsidiary of Mellon
Bank
Corporation ("Mellon"). See "Management of the Trust and the Fund."
4
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
EXCHANGE PRIVILEGE Shares of the Fund may be exchanged for the 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 The Fund's 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. Distributions
of
net realized 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
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. Shares of the Fund, unlike certain bank
deposit accounts, are not guaranteed or insured by any Federal or state
authority. Changes in interest rates generally will result in increases or
decreases in the market value of the obligations held by the Fund. The yield
of
the Fund 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 tax-exempt money market fund
and therefore its investment portfolio can be expected to experience greater
volatility than that of a tax-exempt money market fund. The net asset value of
the Fund will be subject to greater fluctuation to the extent that the Fund
invests in zero coupon securities. The Fund's net asset value per share will
fluctuate depending on a combination of factors such as current market
interest
rates and the creditworthiness of the issuers in whose securities the Fund
invests. The Fund will not invest in obligations that are rated lower than Baa
by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's
Corporation ("S&P") or BBB by Fitch Investors Service, Inc. ("Fitch"), at the
time of purchase. The ratings of
5
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
Moody's, S&P and Fitch represent their opinions as to the quality of the
obligations that they undertake to rate; the ratings are relative and
subjective
and are not absolute standards of quality.
The Fund may invest up to 20% of its total assets in unrated securities that
Greenwich Street Advisors determines to be of comparable quality to the
securities rated investment grade in which the Fund may invest. Dealers may
not
maintain daily markets in unrated securities and retail secondary markets for
many of them may not exist; lack of markets may affect the Fund's ability to
sell these securities when Greenwich Street Advisors deems it appropriate. The
Fund has the right to invest without limitation in state and local obligations
that are "private activity bonds," the income from which may be taxable as a
specific preference item for purposes of the Federal alternative minimum tax.
Thus, the Fund may not be a suitable investment for investors who are subject
to
the alternative minimum tax.
Certain of the instruments held by the Fund, and certain of the investment
techniques that the Fund may employ, might expose the Fund to certain risks.
The
instruments presenting the Fund with risks are municipal leases, zero coupon
securities, custodial receipts, municipal obligation components, floating and
variable rate demand notes and bonds, and participation interests. Entering
into
securities transactions on a when-issued or delayed-delivery basis are
investment techniques involving risks to the Fund. See "Investment Objective
and
Management Policies -- Investment Techniques -- Risk Factors and Special
Considerations" and "Dividends, Distributions and Taxes."
Investment in the Fund which is classified as a non-diversified fund, may
present a greater risk than an investment in a diversified fund. See
"Investment
Objective and Management Policies -- Risk Factors and Special Considerations."
Investment in the Fund involves risks and special considerations applicable to
the State of California. See "Investment Objective and Management Policies --
Risk Factors and Special Considerations."
THE FUND'S EXPENSES The following expense table lists the costs and expenses
that an investor will incur either directly or indirectly, as a
6
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
shareholder of the Fund, based upon the maximum sales charge or maximum CDSC
that may be incurred at the time of purchase or redemption and the Fund's
current operating expenses:
<TABLE>
<CAPTION>
FEE 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 .55% and reimbursements of .07%) --
12b-1 fees (after waivers of .15%) --
Other expenses
.72%
-----------------------------------------------------------------------------
- ----
TOTAL OPERATING EXPENSES
(after waivers and reimbursements)
.72%
-----------------------------------------------------------------------------
- ----
</TABLE>
The sales charge and CDSC 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 "Purchase of Shares" and
"Redemption of Shares." Management fees paid by the Fund include investment
advisory fees payable monthly to Greenwich Street Advisors at the annual rate
of
.35% of the value of the Fund's average daily net assets, and administration
fees payable to Boston Advisors at the annual rate of .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, Boston Advisors and Smith Barney Shearson have
voluntarily waived investment advisory, administration, and distribution fees,
respectively, and reimbursed expenses in the aggregate amount
7
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
equal to .77% 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, Boston Advisors and
Smith
Barney Shearson had not elected to waive fees and reimburse expenses, the
Fund's
total operating expenses for the fiscal year ended November 30, 1993, would
have
been 1.49% as a percentage of the value of the Fund's average daily net
assets.
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 $ 30 $ 46 $ 63 $
112
A shareholder would pay the following
expenses on the same investment,
assuming no redemption $ 20 $ 36 $ 53 $
102
-----------------------------------------------------------------------------
- ---
<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>
8
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- ------------------------------------------------------------------------------
- --
FINANCIAL HIGHLIGHTS
THE FOLLOWING INFORMATION 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 YEAR:
<TABLE>
<CAPTION>
YEAR
PERIOD
ENDED
ENDED
11/30/93
11/30/92*
<S> <C> <C>
Net Asset Value, beginning of period $ 8.04 $
7.90
- ------------------------------------------------------------------------------
- -----
Income from investment operations:
Net investment income+ 0.39
0.35
Net realized and unrealized gain on investments++ 0.46
0.14
- ------------------------------------------------------------------------------
- -----
Total from investment operations 0.85
0.49
Less distributions:
Dividends from net investment income (0.39)
(0.35)
- ------------------------------------------------------------------------------
- -----
Net Asset Value, end of year $ 8.50 $
8.04
- ------------------------------------------------------------------------------
- -----
Total return+++ 10.70%
6.33%
- ------------------------------------------------------------------------------
- -----
Ratios/supplemental data:
Net assets, end of year (in 000's) $32,514
$10,667
Ratio of operating expenses to average net assets++++ 0.72%
0.65%**
Ratio of net investment income to average net assets 4.45%
4.81%**
Portfolio turnover rate 16%
46%
- ------------------------------------------------------------------------------
- -----
<FN>
*The Fund commenced operations on December 31, 1991.
**Annualized.
+Net investment income before waiver of fees and reimbursement of expenses
by
investment adviser, administrator and distributor for the year ended
November
30, 1993 and waiver of fees and reimbursement of expenses by investment
adviser,
sub-investment adviser and administrator, custodian and distributor for the
period ended November 30, 1992 were $0.32 and $0.24 respectively.
++The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the
portfolio securities for the period because of the timing of purchases and
withdrawals of shares in relation to fluctuating market values of the
portfolio.
+++Total return represents aggregate total returns for the periods indicated
and
does not reflect any applicable sales charges.
++++Annualized operating expense ratio before waiver of fees and reimbursement
of
expenses by investment adviser, administrator and distributor for the year
ended November 30, 1993 and waiver of fees and reimbursement of expenses
by
investment adviser, sub-investments adviser and administrator, custodian
and
distributor for the period ended November 30, 1992 were 1.49% and 2.18%
respectively.
</TABLE>
9
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS 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. This average annual total return figure shows
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 in the Fund 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
The Fund may advertise the 30-day "yield" and "equivalent taxable 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 net asset value per share on the last day of the period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semi-annually. The annualized
income is then shown as a percentage of the net asset value.
The equivalent taxable yield of the Fund demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the
10
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
THE FUND'S PERFORMANCE (CONTINUED)
Fund's tax-exempt yield. Equivalent taxable yield is calculated by increasing
the yield shown for the Fund calculated as described above, to the extent
necessary to reflect the payment of specified tax rates. Thus, the equivalent
taxable yield will always exceed the Fund's yield.
COMPARATIVE PERFORMANCE INFORMATION
In reports or other communications to shareholders of the Fund 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 that monitor the performance of 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, PERSONAL FINANCE, THE NEW YORK TIMES, USA TODAY and THE WALL STREET
JOURNAL. It is important to note that yield and total return 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 Trust and 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 Trustee of the Trust and the executive
officers of the Fund.
11
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
INVESTMENT ADVISER -- GREENWICH STREET ADVISORS
Greenwich Street Advisors, located at Two World Trade Center, New York, New
York 10048, serves as the Fund's investment adviser. Greenwich Street Advisors
(through its predecessors) has been in the investment counseling business
since
1934 and is a division of Mutual Management Corp. which was incorporated in
1978. Greenwich Street Advisors renders investment advice to investment
companies that had aggregate assets under management as of 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 the
Fund's investment objective and policies, makes investment decisions for the
Fund, places orders to purchase and sell securities and employs professional
portfolio managers and securities analysts who provide research services to
the
Fund. For the fiscal year ended November 30, 1993, Greenwich Street Advisors
and
Shearson Lehman Advisors, the predecessor to Greenwich Street Advisors, waived
investment advisory fees and reimbursed expenses in an amount equal to .42% of
the value of the Fund's average daily net assets.
PORTFOLIO MANAGEMENT
Joseph P. Deane, Managing Director of Greenwich Street Advisors, has served
as
Vice President and Investment Officer of the Fund since it commenced
operations,
December 31, 1991, and manages the day-to-day operations of the Fund,
including
making all investment decisions.
Mr. Deane'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 page one of this Prospectus.
ADMINISTRATOR -- BOSTON ADVISORS
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Fund's administrator. Boston Advisors provides
12
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
MANAGEMENT OF THE TRUST AND THE FUND (CONTINUED)
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 in all aspects of the Fund's administration and operation.
For
the fiscal year ended November 30, 1993, Boston Advisors waived administration
fees in an amount equal to .20% of the value of the Fund's average daily net
assets.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set out below is a description of the investment objective and principal
investment policies of the Fund. 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 a majority of the Fund's outstanding shares.
The Fund's investment objective is to provide California investors with as
high a level of current income exempt from Federal income taxes and California
State personal income taxes as is consistent with preservation of principal.
Under normal market conditions, the Fund attempts to invest 100% in a
portfolio
of investment grade debt obligations issued by or on behalf of the State of
California and other states, territories and possessions of the United States,
the District of Columbia and their respective authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations"). For
purposes of this Prospectus, debt obligations issued by the State of
California
and its political subdivisions, agencies and public authorities (together with
certain other governmental issuers such as the Commonwealth of Puerto Rico),
the
interest from which debt obligations is, in the opinion of bond counsel to the
issuer, excluded from gross income for Federal income tax purposes and exempt
from California State personal income tax are defined as "California Exempt
Obligations." The Fund will operate subject to a fundamental investment policy
providing that, under normal market conditions, the Fund will invest at least
80% of its net assets in California Exempt Obligations.
The Fund is classified as a non-diversified fund under the 1940 Act, which
means that the Fund is not limited by the 1940 Act in the proportion
13
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
of its assets that it may invest in the obligations of a single issuer. The
Fund
intends to conduct its operations, however, so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any liability for Federal
income tax and California State franchise tax to the extent that its earnings
are distributed to shareholders. To qualify as a regulated investment company,
the Fund will, among other things, limit its investments so that, at the close
of each quarter of the taxable year (a) not more than 25% of the market value
of
the Fund's total assets will be invested in the securities of a single issuer
and (b) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer. In addition, the Fund will not own more than
10%
of the outstanding voting securities of a single issuer.
The Fund will invest at least 80% of its total assets in California Exempt
Obligations rated investment grade, that is, rated no lower than Baa, MIG 3 or
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20%
of
the Fund's total assets may be invested in unrated securities that are deemed
by
Greenwich Street Advisors to be of a quality comparable to investment grade.
The
Fund will not invest in California Exempt Obligations that are rated lower
than
Baa by Moody's, BBB by S&P or BBB by Fitch, at the time of purchase. Although
California Exempt Obligations rated Baa by Moody's, BBB by S&P or BBB by Fitch
are considered to be investment grade, they may be viewed as being subject to
greater risks than other investment grade securities. California Exempt
Obligations rated Baa by Moody's, for example, are considered medium grade
obligations that lack outstanding investment characteristics and have
speculative characteristics as well. California Exempt Obligations rated BBB
by
S&P are regarded as having an adequate capacity to pay principal and interest.
California Exempt Obligations rated BBB by Fitch are deemed to be subject to a
higher likelihood that their rating will fall below investment grade than
higher
rated bonds.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the California Exempt Obligations that they undertake to rate; the
ratings are relative and subjective and are not absolute standards of quality.
Greenwich Street Advisors' judgment as to credit quality of a California
Exempt
Obligation, thus, may differ from that suggested by the ratings published by a
rating service. A description of Moody's, S&P and Fitch
14
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
ratings relevant to the Fund's investments is included as an appendix to the
Statement of Additional Information. The policies of the Fund described above
as
to ratings of portfolio investments will apply only at the time of the
purchase
of a security, and the Fund will not be required to dispose of a security in
the
event Moody's, S&P or Fitch downgrades its assessment of the credit
characteristics of the security's issuer.
California Exempt Obligations are classified as general obligation bonds,
revenue bonds and notes. General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable from the revenue derived from a
particular facility or class of facilities or, in some cases, from the
proceeds
of a special excise or other specific revenue source, but not from the general
taxing power. Notes are short-term obligations of issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. California Exempt Obligations bear fixed, floating
and variable rates of interest, and variations exist in the security of
California Exempt Obligations, both within a particular classification and
between classifications.
The yields on, and values of, California Exempt Obligations are dependent on
a
variety of factors, including general economic and monetary conditions,
conditions in the California Exempt Obligation markets, size of a particular
offering, maturity of the obligation and rating of the issue. Consequently,
California Exempt Obligations with the same maturity, coupon and rating may
have
different yields or values, whereas obligations of the same maturity and
coupon
with different ratings may have the same yield or value. See "Risk Factors and
Special Considerations--California Exempt Obligations."
Issuers of California Exempt Obligations may be subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform
Act
of 1978, affecting the rights and remedies of creditors. In addition, the
obligations of those issuers may become subject to laws enacted in the future
by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of
the
obligations or upon the ability of municipalities to levy taxes. The
possibility
also exists that, as a result of
15
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
litigation or other conditions, the power or ability of any issuer to pay,
when
due, the principal of, and interest on, its obligations may be materially
affected.
MATURITY OF OBLIGATIONS HELD BY THE FUND
The Fund reflects Greenwich Street Advisors' belief that the Fund may offer
an
attractive investment opportunity for investors seeking a higher effective tax
yield than a tax-exempt money market fund or a tax-exempt short-term bond fund
and less fluctuation in net asset value than a longer term tax-exempt bond
fund.
The Fund will normally invest in intermediate maturity securities; the
weighted
average maturity of the portfolio of the Fund will normally be not less than
three nor more than 10 years. The maximum remaining maturity of the securities
in which the Fund will normally invest will be no greater than 20 years.
PRIVATE ACTIVITY BONDS
The Fund may invest without limit in California Obligations that are tax-
exempt "private activity bonds," as defined in the Code, which are in most
cases
revenue bonds. Private activity bonds generally do not carry the pledge of the
credit of the issuing municipality, but are guaranteed by the corporate entity
on whose behalf they are issued. Interest income on certain types of private
activity bonds issued after August 7, 1986 to finance nongovernmental
activities
is a specific tax preference item for purposes of the Federal individual and
corporate alternative minimum taxes. Individual and corporate shareholders may
be subject to a Federal alternative minimum tax to the extent the Fund's
dividends are derived from interest on these bonds. Dividends derived from
interest income on California Obligations are a "current earnings" adjustment
item for purposes of the Federal corporate alternative minimum tax. See
"Dividends, Distributions and Taxes." Private activity bonds held by the Fund
will be included in the term California Exempt Obligations for purposes of
determining compliance with the Fund's policy of investing at least 80% of its
total assets in California Exempt Obligations.
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
RELATED INSTRUMENTS
The Fund may invest without limit in California Exempt Obligations that are
repayable out of revenues generated from economically related projects or
facilities or debt obligations whose issuers are located in the same state.
Sizeable investments in these obligations could involve an increased risk to
the
Fund should any of the related projects or facilities experience financial
difficulties.
OTHER MISCELLANEOUS POLICIES
The Fund may invest up to an aggregate amount equal to 10% of its net assets
in illiquid securities, which term includes securities subject to contractual
or
other restrictions on resale and other instruments that lack readily available
markets. In addition, up to 5% of the value of the Fund's assets may be
invested
in securities of entities that have been in continuous operation for fewer
than
three years.
TYPES OF CALIFORNIA EXEMPT OBLIGATIONS HELD BY THE FUND
MUNICIPAL LEASES. The Fund may invest without limit in "municipal leases."
Municipal leases may take the form of a lease or an installment purchase
contract issued by state and local government authorities to obtain funds to
acquire a wide variety of equipment and facilities such as fire and sanitation
vehicles, computer equipment and other capital assets. Interest payments on
qualifying municipal leases are exempt from Federal income taxes and state
income taxes within the state of issuance. Although lease obligations do not
constitute general obligations of the municipality for which the
municipality's
taxing power is pledged, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make the payments due
under the lease obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease or installment purchase payments in future years
unless
money is appropriated for such purpose on a yearly basis. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated
with
more conventional bonds. Although "non-appropriation" lease obligations are
often secured by the underlying property, disposition of the property in the
event of foreclosure might prove
17
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
difficult. The Fund may invest in municipal leases without non-appropriation
clauses only when the municipality is required to continue the lease under all
circumstances except bankruptcy. There is no limitation on the percentage of
the
Fund's assets that may be invested in municipal lease obligations. In
evaluating
municipal lease obligations, Greenwich Street Advisors will consider such
factors as it deems appropriate, which may include: (a) whether the lease can
be
canceled; (b) the ability of the lease obligee to direct the sale of the
underlying assets; (c) the general creditworthiness of the lease obligor; (d)
the likelihood that the municipality will discontinue appropriating funding
for
the leased property in the event such property is no longer considered
essential
by the municipality; (e) the legal recourse of the lease obligee in the event
of
such a failure to appropriate funding; (f) whether the security is backed by a
credit enhancement such as insurance; and (g) any limitations which are
imposed
on the lease obligor's ability to utilize substitute property or services
other
than those covered by the lease obligation.
Municipal leases that the Fund may acquire will be both rated and unrated.
Rated leases include those rated investment grade at the time of investment or
those issued by issuers whose senior debt is rated investment grade at the
time
of investment. The Fund may acquire unrated issues that Greenwich Street
Advisors deems to be comparable in quality to rated issues in which the Fund
is
authorized to invest. A determination that an unrated lease obligation is
comparable in quality to a rated lease obligation will be subject to oversight
and approval by the Trust's Board of Trustees.
Municipal leases held by the Fund will be considered illiquid securities
unless the Trust's Board of Trustees determines on an ongoing basis that the
leases are readily marketable. An unrated municipal lease with a non-
appropriation risk that is backed by an irrevocable bank letter of credit or
an
insurance policy issued by a bank or insurer deemed by Greenwich Street
Advisors
to be of high quality and minimal credit risk, will not be deemed to be
illiquid
solely because the underlying municipal lease is unrated, if Greenwich Street
Advisors determines that the lease is readily marketable because it is backed
by
the letter of credit or insurance policy.
ZERO COUPON SECURITIES. The Fund may invest up to 10% of its assets in zero
coupon California Exempt Obligations. Zero coupon California Exempt
Obligations
are generally divided into two categories: pure zero obligations,
18
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
which are those that pay no interest for their entire life and zero/fixed
obligations, which pay no interest for some initial period and thereafter pay
interest currently. In the case of a pure zero obligation, the failure to pay
interest currently may result from the obligation's having no stated interest
rate, in which case the obligation pays only principal at maturity and is
issued
at a discount from its stated principal amount. A pure zero obligation may, in
the alternative, provide for a stated interest rate, but provide that no
interest is payable until maturity, in which case accrued, unpaid interest on
the obligation may be capitalized as incremental principal. The value to the
investor of a zero coupon California Exempt Obligation consists of the
economic
accretion either of the difference between the purchase price and the nominal
principal amount (if no interest is stated to accrue) or of accrued, unpaid
interest during the California Exempt Obligation's life or payment deferral
period.
CUSTODIAL RECEIPTS. The Fund may acquire custodial receipts or certificates
underwritten by securities dealers or banks that evidence ownership of future
interest payments, principal payments, or both, on certain California Exempt
Obligations. The underwriter of these certificates or receipts typically
purchases California Exempt Obligations and deposits the obligations in an
irrevocable trust or custodial account with a custodian bank, which then
issues
receipts or certificates that evidence ownership of the periodic unmatured
coupon payments and the final principal payment on the obligations. Custodial
receipts evidencing specific coupon or principal payments have the same
general
attributes as zero coupon California Exempt Obligations described above.
Although under the terms of a custodial receipt, the Fund would be typically
authorized to assert its rights directly against the issuer of the underlying
obligation, the Fund could be required to assert through the custodian bank
those rights as may exist against the underlying issuer. Thus, in the event
the
underlying issuer fails to pay principal and/or interest when due, the Fund
may
be subject to delays, expenses and risks that are greater than those that
would
have been involved if the Fund had purchased a direct obligation of the
issuer.
In addition, in the event that the trust or custodial account in which the
underlying security has been deposited is determined to be an association
taxable as a corporation, instead of a non-taxable entity, the yield on the
underlying security would be reduced in recognition of any taxes paid.
19
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
CALIFORNIA EXEMPT OBLIGATION COMPONENTS The Fund may invest in California
Exempt Obligations, the interest rate on which has been divided by the issuer
into two different and variable components, which together result in a fixed
interest rate. Typically, the first of the components (the "Auction
Component")
pays an interest rate that is reset periodically through an auction process,
whereas the second of the components (the "Residual Component") pays a
residual
interest rate based on the difference between the total interest paid by the
issuer on the California Exempt Obligation and the auction rate paid on the
Auction Component. The Fund may purchase both Auction and Residual Components.
Because the interest rate paid to holders of Residual Components is
generally
determined by subtracting the interest rate paid to the holders of Auction
Components from a fixed amount, the interest rate paid to Residual Component
holders will decrease as the Auction Component's rate increases and increase
as
the Auction Component's rate decreases. Moreover, the magnitude of the
increases
and decreases in market value of Residual Components may be larger than
comparable changes in the market value of an equal principal amount of a fixed
rate California Exempt Obligation having similar credit quality, redemption
provisions and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Fund may purchase floating and
variable rate demand notes and bonds, which are California Exempt Obligations
normally having a stated maturity in excess of one year, but which permit
their
holder to demand payment of principal at any time, or at specified intervals.
The maturity of a floating or variable rate demand note or bond will not be
deemed shortened by virtue of a demand feature for purposes of calculating the
Fund's net asset value or determining its weighted average maturity.
The issuer of floating and variable rate demand obligations normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of these obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time
that
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently, floating and
variable
rate obligations are secured by letters of credit or other credit
20
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
support arrangements provided by banks. Use of letters of credit or other
credit
support arrangements will not adversely affect the tax-exempt status of these
obligations. Because they are direct lending arrangements between the lender
and
borrower, floating and variable rate obligations will generally not be traded.
In addition, no secondary market generally exists for these obligations,
although their holders may demand their payment at face value. For these
reasons, when floating and variable rate obligations held by the Fund are not
secured by letters of credit or other credit support arrangements, the Fund's
right to demand payment is dependent on the ability of the borrower to pay
principal and interest on demand. Greenwich Street Advisors on behalf of the
Fund, will consider the creditworthiness of the issuers of floating and
variable
rate demand obligations in the Fund's portfolio on an ongoing basis.
PARTICIPATION INTERESTS. The Fund may purchase from financial institutions
tax-exempt participation interests in California Exempt Obligations. A
participation interest gives the Fund an undivided interest in the California
Exempt Obligation in the proportion that the Fund's participation interest
bears
to the total amount of the California Exempt Obligation. These instruments may
have floating or variable rates of interest. If the participation interest is
unrated, it will be backed by an irrevocable letter of credit or guarantee of
a
bank that the Trust's Board of Trustees has determined meets certain quality
standards or the payment obligation otherwise will be collateralized by
obligations of the United States government and its agencies and
instrumentalities ("U.S. government securities"). The Fund will have the
right,
with respect to certain participation interests, to demand payment, on a
specified number of days' notice, for all or any part of the Fund's interest
in
the California Exempt Obligation, plus accrued interest. The Fund intends to
exercise its right with respect to these instruments to demand payment only
upon
a default under the terms of the California Exempt Obligation or to maintain
or
improve the quality of its investment portfolio. In addition, the Fund will
invest no more than 5% of its total assets in participation interests.
TAXABLE INVESTMENTS
Under normal conditions, the Fund may hold up to 20% of its total assets
in
cash or money market instruments, including taxable money
market
21
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
instruments (collectively, "Taxable Investments"). In addition, when Greenwich
Street Advisors believes that market conditions warrant, the Fund may take a
temporary defensive posture and invest without limitation in short-term
California Exempt Obligations and Taxable Investments. To the extent a Fund
holds Taxable Investments and, under certain market conditions, certain
floating
and variable rate demand obligations or Auction Components, the Fund may not
achieve its investment objective.
Money market instruments in which the Fund may invest include: U.S.
government
securities; tax-exempt notes of municipal issuers rated, at the time of
purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or, if
not
rated, by issuers having outstanding, unsecured debt then rated within the
three
highest rating categories; bank obligations (including certificates of
deposit,
time deposits and bankers' acceptances of domestic banks, domestic savings and
loan associations and similar institutions); commercial paper rated no lower
than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent from another
major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories;
and
repurchase agreements. At no time will the Fund's investments in bank
obligations, including time deposits, exceed 25% of the value of its assets.
U.S. government securities in which the Fund may invest include direct
obligations of the United States and obligations issued by U.S. government
agencies and instrumentalities. Included among direct obligations of the
United
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ
principally in terms of their maturities. Included among the securities issued
by U.S. government agencies and instrumentalities are: securities that are
supported by the full faith and credit of the United States (such as
Government
National Mortgage Association certificates); securities that are supported by
the right of the issuer to borrow from the United States Treasury (such as
securities of Federal Home Loan Banks); and securities that are supported by
the
credit of the instrumentality (such as Federal National Mortgage Association
and
Federal Home Loan Mortgage Corporation bonds).
22
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT TECHNIQUES
The Fund may employ, among others, the investment techniques described
below,
which may give rise to taxable income:
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. The Fund may purchase
securities
on a when-issued basis, or may purchase or sell securities for delayed
delivery.
In when-issued or delayed-delivery transactions, delivery of the securities
occurs beyond normal settlement periods, but no payment or delivery will be
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 Fund will
establish with Boston Safe a segregated account consisting of cash or U.S.
government securities in an amount equal to the amount of the when-issued and
delayed-delivery purchase commitments. Placing securities rather than cash in
a
segregated account may have a leveraging effect on the Fund's net assets.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with
respect
to California Exempt Obligations held in its portfolio. Under a stand-by
commitment, a broker, dealer or bank is obligated to repurchase at the Fund's
option specified securities at a specified price and, in this way, stand-by
commitments are comparable to put options. Each exercise of a stand-by
commitment, therefore, is subject to the ability of the seller to make payment
on demand. The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise the rights afforded by the
commitments for trading purposes. The Trust anticipates that stand-by
commitments will be available from brokers, dealers and banks without the
payment of any direct or indirect consideration. The Fund may pay for stand-by
commitments if payment is deemed necessary, thus increasing to a degree the
cost
of the underlying California Exempt Obligation and similarly decreasing the
security's yield to investors.
23
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
INVESTMENT RESTRICTIONS
The Trust has 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 voting securities as defined in the 1940 Act. Included among those
fundamental restrictions are the following:
1. The Fund will not purchase securities other than Municipal and California
Exempt Obligations and Taxable Investments as those terms are defined in
this
Prospectus or the Statement of Additional Information.
2. The Fund will not borrow money, except that the Fund may borrow from
banks
for temporary or emergency (not leveraging) purposes, including the meeting
of
redemption requests 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 will not make any
additional investments.
3. The Fund will not lend money to other persons, except through purchasing
Municipal and California Exempt Obligations or Taxable Investments and
entering into repurchase agreements in a manner consistent with the Fund's
investment objective.
4. The Fund will not invest more than 25% of the value of its total assets
in
securities of issuers in any one industry, except that this limitation is
not
applicable to a Fund's investments in U.S. government securities.
5. The Fund will 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.
24
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Fund involves risk factors and special considerations,
such
as those described below:
CALIFORNIA EXEMPT OBLIGATIONS. Even though California Exempt Obligations are
interest-bearing investments that promise a stable stream of income, their
prices are inversely affected by changes in interest rates and, therefore, are
subject to the risk of market price fluctuations. The values of California
Exempt Obligations with longer remaining maturities typically fluctuate more
than those of similarly rated California Exempt Obligations with shorter
remaining maturities such as the Fund intends to hold. The values of
fixed-income securities also may be affected by changes in the credit rating
or
financial condition of the issuing entities.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from Federal income taxes (and, with respect to
California Exempt Obligations, to the exemption of interest on them from
California state personal income taxes) are rendered by bond counsel to the
respective issuers at the time of issuance. Neither the Fund nor Greenwich
Street Advisors will review the proceedings relating to the issuance of
California Exempt Obligations or the basis for opinions of counsel.
POTENTIAL LEGISLATION. In past years, the United States government has
enacted
various laws that have restricted or diminished the income tax exemption on
various types of California Exempt Obligations and may enact other similar
laws
in the future. If any such laws are enacted that would reduce the availability
of California Exempt Obligations for investment by the Fund so as to affect
the
Fund's shareholders adversely, the Trust will reevaluate the Fund's investment
objective and policies and might submit possible changes in the Fund's
structure
to shareholders for their consideration. If legislation were enacted that
would
treat a type of California Exempt Obligation as taxable for Federal income tax
purposes, the Fund would treat the security as a permissible Taxable
Investment
within the applicable limits set forth in this Prospectus.
UNRATED SECURITIES. The Fund may invest in unrated securities that Greenwich
Street Advisors determines to be of comparable quality to the rated securities
in which the Fund may invest. Dealers may not maintain
25
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
daily markets in unrated securities and retail secondary markets for many of
them may not exist. As a result, the Fund's ability to sell these securities
when Greenwich Street Advisors deems it appropriate may be diminished.
MUNICIPAL LEASES. Municipal leases in which the Fund may invest have special
risks not normally associated with Municipal Obligations. These obligations
frequently contain non-appropriation clauses that provide that the
governmental
issuer of the obligation need not make future payments under the lease or
contract unless money is appropriated for that purpose by a legislative body
annually or on another periodic basis. Municipal leases have additional risks
because they represent a type of financing that has not yet developed the
depth
of marketability generally associated with other Municipal Obligations.
Moreover, although a municipal lease will be secured by financed equipment or
facilities, the disposition of the equipment or facilities in the event of
foreclosure might prove difficult. In addition, in certain instances the
tax-exempt status of the municipal lease will not be subject to the legal
opinion of a nationally recognized bond counsel, although in all cases the
Fund
will require that a municipal lease purchased by the Fund be covered by a
legal
opinion to the effect that, as of each effective date of the municipal lease,
the lease is the valid and binding obligation of the government issuer.
Municipal leases are also subject to the risk of non-payment. The ability of
issuers of municipal leases to make timely lease payments may be adversely
impacted in general economic downturns and as relative governmental cost
burdens
are allocated and reallocated among federal, state and local governmental
units.
Such non-payment would result in a reduction of income to the Fund, and could
result in a reduction in the value of the municipal lease experiencing
non-payment and a potential decrease in the net asset value of the Fund.
Issuers
of municipal securities might seek protection under the bankruptcy laws. In
the
event of bankruptcy of such an issuer, the Fund could experience delays and
limitations with respect to the collection of principal and interest on such
municipal leases and the Fund may not, in all circumstances, be able to
collect
all principal and interest to which it is entitled. To enforce its rights in
the
event of a default in the lease payments, the Fund may take possession of and
manage the assets securing the issuer's obligations on such securities, which
may increase the Fund's operating expenses and adversely affect the net asset
value of the Fund. Any income derived from the Fund's ownership or operation
of
such assets may
26
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
not be tax-exempt. In addition, the Fund's intention to qualify as a
"regulated
investment company" under the Internal Revenue Code of 1986, as amended, may
limit the extent to which the Fund may exercise its rights by taking
possession
of such assets, because as a regulated investment company the Fund is subject
to
certain limitations on its investments and on the nature of its income.
NON-PUBLICLY TRADED SECURITIES. As suggested above, the Fund may, from time
to
time, invest a portion of its assets in non-publicly traded California Exempt
Obligations. Non-publicly traded securities may be less liquid than publicly
traded securities. Although non-publicly traded securities may be resold in
privately negotiated transactions, the prices realized from these sales could
be
less than those originally paid by the Fund.
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.
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.
NON-DIVERSIFIED CLASSIFICATION. Investment in the Fund, which is classified
as
a non-diversified fund under the 1940 Act, may present greater risks to
investors than an investment in a diversified fund. The investment return on a
non-diversified fund typically is dependent upon the performance of a smaller
number of securities relative to the number of securities held in a
diversified
fund. The Fund's assumption of large positions in the obligations of a small
number of issuers will affect the value of its portfolio to a greater extent
than that of a diversified fund in the event of changes in the financial
condition, or in the market's assessment, of the issuers.
SPECIAL CONSIDERATIONS AFFECTING THE FUND. In seeking to achieve its
objective, the Fund may invest without limit in Municipal Obligations which
are
private activity bonds. Moreover, although the Fund does not currently intend
to
do so on a regular basis, it may invest more than 20% of its assets in
Municipal
Obligations which are repayable out of revenue streams generated from
economically related projects or facilities, if such investment is deemed
necessary or appropriate by Greenwich Street Advisors. To the extent the
Fund's
assets are concentrated in Municipal Obligations payable
27
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SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
from revenues on economically related projects and facilities, the Fund will
be
subject to the particular risks presented by such projects to a greater extent
than it would be if the Fund's assets were not so concentrated.
The payment of principal and interest on most securities purchased by the
Fund
will depend on the ability of the issuers to meet their obligations. The
Fund's
portfolio will be affected by general changes in interest rates, which will
result in increases or decreases in the value of the obligations held by the
Fund. The market value of the obligations in the Fund's portfolio can be
expected to vary inversely to changes in prevailing interest rates. On July 6,
1992, Moody's, citing the State's deteriorating financial position, lowered
California's general obligation bond rating from Aa1 to Aa. On July 15, 1992,
S&P, citing the State's deteriorating financial position, lowered California's
general obligations bond ratings from AA to A+.
Investors should be aware that certain California constitutional amendments,
legislative measures, executive orders, administrative regulations and voter
initiatives could result in certain adverse consequences affecting California
Exempt Obligations. For instance, certain provisions of the California
Constitution and statutes that limit the taxing and spending authority of
California governmental entities may impair the ability of the issuers of some
California Exempt Obligations to maintain debt service on their obligations.
Other measures affecting the taxing or spending authority of California or its
political sub-divisions may be approved or enacted in the future. Some of the
significant financial considerations relating to the Fund's investments in
California Exempt Obligations are summarized in the Statement of Additional
Information.
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.
28
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
The Fund cannot accurately predict its portfolio turnover rate, but
anticipates that the 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 investment objective and policies of the Fund.
- --------------------------------------------------------------------
PURCHASE OF SHARES
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 no later than the
fifth
business day (the "settlement date") after the trade date. Investors who make
payment prior to the settlement date may permit the payment to be held in
their
brokerage accounts or may designate a temporary investment (such as a money
market fund in the Smith Barney Shearson Group of Funds) for the payment until
the settlement date. The Fund reserves the right to reject any purchase order
and to suspend the offering of shares for a period of time.
Purchase orders received by Smith Barney Shearson or an Introducing Broker
prior to the close of regular trading on the NYSE (currently 4:00 p.m., New
York
time) on any day 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 regular trading on the NYSE are priced as of the
time the net asset value per share is next determined. See "Valuation of
Shares."
29
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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
% OF OFFERING AS % OF
NET
AMOUNT OF INVESTMENT PRICE 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
waived. See
"Redemption of Shares -- Contingent Deferred Sales Charge -- 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 purchases
through
the Fund's Systematic Investment Plan, the minimum initial and subsequent
investment is $100. No minimum investment requirements are imposed on
employees
of Travelers and its affiliates, including Smith Barney Shearson. The Fund
reserves the right at any time to vary the initial and subsequent investment
minimums. Certificates for Fund shares are issued only upon written request to
the Trust's transfer agent, The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation.
30
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
REDUCED SALES CHARGES
Reduced sales charges are available to investors who are eligible to combine
their purchases of shares of the Fund 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 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 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 a Fund that have 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.
Shares of the Fund may be offered without a sales charge 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 the
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.
31
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
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."
- --------------------------------------------------------------------
REDEMPTION OF SHARES
REDEMPTIONS IN GENERAL
Shares may be redeemed on any day that the Fund calculates its net asset
value. See "Valuation of Shares." Redemption requests received in proper form
prior to the close of regular trading on the NYSE will be effected at the net
asset value per share determined on that day. Redemption requests received
after
the close of regular trading on the NYSE will be effected at the net asset
value
as next determined. The Fund normally transmits redemption proceeds for credit
to the shareholder's account at Smith Barney Shearson or the Introducing
Broker
at no charge (other than any applicable CDSC) within seven days after receipt
of
a redemption request. Generally
32
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 shares of a Fund by personal
check
will be credited with the proceeds of a redemption of those shares when 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 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 requests to
TSSG. A redemption request will not be deemed to have been submitted until
Smith
Barney Shearson or the Introducing Broker receives all documents typically
required to assure the safety of a particular account. Redemption requests for
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
Intermediate Maturity California Municipals Fund
33
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
The Shareholder Services Group, Inc.
P.O. Box 9134
Boston, Massachusetts 02205-9134
A written request for redemption 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
signed 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, 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 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%.
34
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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 the
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;
and (g) redemptions of shares in connection with a combination of any
investment
company with the Fund by merger, redemptions of shares in connection with a
combination of any investment company with the Fund by merger, acquisition of
assets or otherwise.
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
35
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
REDEMPTION OF SHARES (CONTINUED)
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. 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 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.
36
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
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.
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 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.
</TABLE>
37
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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.
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 LIMITED MATURITY TREASURY FUND, invests
exclusively in securities issued by the United States Treasury
and other U.S. government securities.
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.
</TABLE>
38
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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.
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.
</TABLE>
39
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
<TABLE>
<CAPTION>
FUND NAME AND INVESTMENT OBJECTIVE:
- ----------------------------------------------------------------------------
<S> <C>
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 primarily 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.
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>
40
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- ---------------------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
TAX EFFECT. The exchange of shares of one fund for shares of another fund is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder. Therefore, an exchanging shareholder may realize
a
taxable gain or loss in connection with an exchange.
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. 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.
ADDITIONAL INFORMATION REGARDING THE EXCHANGE PRIVILEGE. Although the
exchange
privilege is an important benefit, excessive exchange transactions can be
detrimental to the Fund's performance and its shareholders. The Fund's
investment adviser may determine that a pattern of frequent exchanges is
excessive and contrary to the best interests of the Fund's other shareholders.
In this event, the Fund's investment adviser 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.
41
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
EXCHANGE PRIVILEGE (CONTINUED)
Shareholders exercising the exchange privilege with any of the funds in the
Smith Barney Shearson Group of Funds should review the prospectus of that fund
carefully prior to making an exchange. Smith Barney Shearson reserves the
right
to reject any exchange request. The exchange privilege may be modified or
terminated at any time after written notice to shareholders. For further
information regarding the exchange privilege, or to obtain current
prospectuses
for the funds in 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 the distributor of the Fund's shares. Smith Barney
Shearson
is paid an annual fee by the Fund 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, will be calculated at the annual rate of .15% of the
value of the average daily net assets of the Fund and will be used by Smith
Barney Shearson to provide compensation for ongoing servicing 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 will evaluate 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
amounts
it receives under the Plan.
42
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- --------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's policy to declare daily and distribute monthly, generally
on
the 10th day of each calendar month, substantially all of the Fund's 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. In
addition, in order to avoid the application of this tax, and if in the best
interests of the Fund's shareholders, the Fund will declare and pay dividends
of
net investment income and distributions of net capital gains more frequently
than stated above.
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 (other than dividends derived from interest earned on
qualifying tax-exempt obligations as described below) and distributions of the
Fund's net realized short-term capital gains are taxable to shareholders as
ordinary income, regardless of how long shareholders in the Fund have held
their
shares and whether the dividends or distributions are received in cash or
reinvested in additional shares of the Fund. 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 shares of
the
Fund 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 shares of the Fund 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.
43
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
Dividends paid by the Fund that are derived from interest earned on
qualifying
tax-exempt obligations are expected to be "exempt-interest" dividends that
shareholders may exclude from their gross incomes for Federal income tax
purposes if the Fund satisfies certain asset percentage requirements. Any
exempt-interest dividends of the Fund derived from interest on California
Exempt
Obligations, the interest on which is a specific tax preference item for
Federal
income tax purposes, will be a specific tax preference item for purposes of
the
Federal individual and corporate alternative minimum taxes. In addition, all
exempt-interest dividends will be a component of the "current earnings"
adjustment item for purposes of the Federal corporate alternative minimum
income
tax and corporate shareholders may incur a larger Federal environmental tax
liability through the receipt of Fund dividends and distributions from the
Fund.
Dividends of the Fund derived from interest on California Exempt Obligations
will be exempt from California State personal income (but not corporate
franchise or income) taxes.
Statements as to the tax status of the dividends and distributions received
by
shareholders of the Fund are mailed annually. These statements set forth the
dollar amount of income excluded from Federal income taxes and the dollar
amount, if any, subject to Federal income taxes. Statements from the Fund will
also show the dollar amount of income excluded or exempted from California
State
personal income taxes and the dollar amount, if any, subject to these taxes.
These statements will also designate the amount of exempt-interest dividends
that are a specific preference item for purposes of the Federal individual and
corporate alternative minimum taxes and will indicate the shareholder's share
of
the investment expenses of the Fund.
Shareholders of the Fund should consult their tax advisors with specific
reference to their own tax situations.
TAX-EXEMPT INCOME VS. TAXABLE INCOME
The table below shows California taxpayers how to translate Federal and
California State tax savings from investments such as the Fund into an
equivalent return from a taxable investment. To the extent that the equivalent
taxable yields illustrated in this table are based on an effective tax rate
which combines the Federal and California marginal income tax rates, the table
is not applicable to individuals who do not pay California State
44
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
income tax. The yields used below are for illustration only and are not
intended
to represent current or future yields for the Fund, which may be higher or
lower
than those shown.
<TABLE>
<CAPTION>
COMBINED
FEDERAL CALIFORNIA COMBINED EFFECTIVE
TAXABLE INCOME MARGINAL MARGINAL MARGINAL MARGINAL
TAX-EXEMPT YIELDS
SINGLE JOINT RATE RATE RATE RATE 4.0%
5.0% 6.0% 7.0% 8.0% 9.0%
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
- -------------------
<CAPTION>
EQUIVALENT TAXABLE YIELDS
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
$ 22,100 $ 36,900 15.00% 6.00% 21.00% 20.10% 5.01%
6.26% 7.51% 8.76% 10.01% 11.26%
53,500 89,150 28.00% 9.30% 37.30% 34.70% 6.13%
7.66% 9.19% 10.72% 12.25% 13.78%
106,190 140,000 31.00% 9.30% 40.30% 37.42% 6.39%
7.99% 9.59% 11.19% 12.78% 14.38%
212,380 250,000 36.00% 10.00% 46.00% 42.40% 6.94%
8.68% 10.42% 12.15% 13.89% 15.63%
250,000 424,760 39.60% 11.00% 50.60% 46.24% 7.44%
9.30% 11.16% 13.02% 14.88% 16.74%
- ------------------------------------------------------------------------------
- -------
</TABLE>
The Federal and California State tax rates shown are those in effect for
1994
and are subject to change. The calculations assume that no income will be
subject to the Federal individual alternative minimum tax.
- --------------------------------------------------------------------
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 New York
Municipals Fund and Smith Barney Shearson Limited Maturity Treasury 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
45
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
that shares of the series be voted in the aggregate. Normally, no meetings of
shareholders of the Trust 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.
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 listing of 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 its semi-annual and annual reports by household.
This
consolidation means that a household having multiple accounts with the
identical
address of record will receive a single copy of each report. In addition, the
Fund also plans to consolidate the mailing of its Prospectus so that a
shareholder having multiple accounts will receive a single Prospectus
annually.
Any shareholder who does not want this consolidation to apply to his or her
account should contact his or her Financial Consultant or TSSG. Shareholders
may
direct inquiries regarding the Fund to their Smith Barney Shearson Financial
Consultants.
46
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
- -------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT
OF
ADDITIONAL INFORMATION AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION
WITH THE OFFERING OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN
WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
47
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
TRUSTEES
Burt N. Dorsett
Elliot S. Jaffe
Harry W. Knight
Heath B. McLendon
Cornelius C. Rose
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
Joseph P. Deane
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 ADVISER
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 & Gallagher
153 East 53rd Street
New York, New York 10022
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
48
<PAGE>
SMITH BARNEY SHEARSON
INTERMEDIATE
MATURITY
CALIFORNIA
MUNICIPALS FUND
Two World Trade Center
New York, New York 10048
Fund 165
<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
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
January 29, 1994
SMITH BARNEY SHEARSON
INCOME TRUST
[LOGO]
TWO WORLD TRADE CENTER NEW YORK, NEW YORK 10048 (212) 720-9218
This Statement of Additional Information supplements the
information contained in the current Prospectuses of Smith Barney
Shearson Limited Maturity Treasury Fund (the "Treasury Fund"),
Smith Barney Shearson Limited Maturity Municipals Fund (the
"Municipal Fund"), Smith Barney Shearson Intermediate Maturity
California Municipals Fund (the "California Fund") and Smith
Barney Shearson Intermediate Maturity New York Municipals Fund
(the "New York Fund") dated January 29, 1994, as amended or
supplemented from time to time and should be read in conjunction
with the Prospectuses. The Prospectuses may be obtained by
contacting your Smith Barney Shearson Financial Consultant, or by
writing or calling Smith Barney Shearson Income Trust (the
"Trust"), of which each of the Treasury Fund, Municipal Fund,
California Fund and New York Fund (individually referred to as a
"Fund" and collectively referred to as the "Funds") is a series,
at the address or telephone number set forth above. This Statement
of Additional Information, although not in itself a prospectus, is
incorporated by reference into each Prospectus in its entirety.
The executive officers of the Funds are employees of certain
of the organizations that provide services to the Fund. These
organizations are as follows:
<TABLE>
<CAPTION>
NAME SERVICE
- --------------------------------------------------------- -------------------
- --------------------------------------
<S> <C>
Smith Barney Shearson Inc.
("Smith Barney Shearson").............................. Distributor
Greenwich Street Advisors................................ Investment Adviser
The Boston Company Advisors, Inc.
("Boston Advisors").................................... Administrator
The Boston Safe Deposit and Trust Company
("Boston Safe")........................................ Custodian
The Shareholder Services Group, Inc. ("TSSG"), a
subsidiary of First Data Corporation................... Transfer Agent
</TABLE>
These organizations and the functions that they perform for
the Funds are discussed in the Prospectuses and in this Statement
of Additional Information.
<PAGE>
CONTENTS
For ease of reference, the section headings used in this Statement
of Additional Information are identical to those used in each
Prospectus except as noted in parentheses below.
<TABLE>
<S>
<C>
Management of the Trust and the
Funds............................................ 2
Investment Objectives and Management
Policies.................................... 4
Purchase of
Shares...............................................................
27
Redemption of
Shares............................................................. 28
Distributor...................................................................
... 28
Valuation of
Shares..............................................................
29
Exchange
Privilege...............................................................
30
Performance
Data.................................................................
30
(See in the Prospectuses "The Fund's Performance")
Taxes.........................................................................
... 32
(See in the Prospectuses "Dividends, Distributions and Taxes")
Custodian and Transfer
Agent..................................................... 34
(See in the Prospectuses "Additional Information")
Organization of the
Trust........................................................ 34
Financial
Statements.............................................................
34
Appendix......................................................................
... A-1
</TABLE>
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS OF THE TRUST
The names of the Trustees of the Trust and executive officers of the Funds,
together with information as to their principal business occupations, are set
forth below. The executive officers of the Funds are employees of
organizations
that provide services to the Funds. Each Trustee who is an "interested person"
of the Trust, as defined in the Investment Company Act of 1940, as amended
(the
"1940 Act"), is indicated by an asterisk.
Burt N. Dorsett, Trustee. Managing Partner of Dorsett McCabe Management,
Inc., an investment counselling firm; Director and Treasurer of Research
Corporation, a non-profit patent-clearing and licensing firm. His address is
201
East 62nd Street, New York, New York 10021.
Elliot S. Jaffe, Trustee. Chairman of the Board and President of The Dress
Barn, Inc. His address is 88 Hamilton Avenue, Stamford, Connecticut 06904.
Harry W. Knight, Trustee. Chairman of the Board of Hillsboro Associates,
Inc., a private investment and management firm; formerly Senior Partner with
Booz, Allen & Hamilton Inc.; among the corporations of which he has served in
the past as Director are Burlington Industries, Inc., The Foxboro Company, The
Waldorf-Astoria Hotel and Menlo Ventures. His address is The Dorchester, 110
East 57th Street, New York, New York 10022.
*Heath B. McLendon, Chairman of the Board. Executive Vice President of
Smith
Barney Shearson; Chairman of the Board of Smith Barney Strategy Advisers Inc.;
prior to July 1993, Senior Executive Vice President of Shearson Lehman
Brothers
Inc.; Vice Chairman of the Board of Shearson Asset Management; a Director of
PanAgora Asset Management, Inc. and PanAgora Asset Management Limited. His
address is Two World Trade Center, New York, New York 10048.
Cornelius C. Rose, Jr., Trustee. President, Cornelius C. Rose Associates,
Inc., financial consultants, and Chairman and Director of Performance Learning
Systems, an educational consultant. His address is Fair Oaks, Enfield, New
Hampshire 03748.
Stephen J. Treadway, President. Executive Vice President and Director of
Smith Barney Shearson; Director and President Mutual Management Corp., Smith
Barney Advisers, Inc.; and Trustee of Corporate Income Realty Trust. His
address
is 388 Greenwich Street, New York, New York 10013.
Richard P. Roelofs, Executive Vice President. Managing Director of Smith
Barney Shearson; President of Smith Barney Strategy Advisers Inc.; prior to
July
1993, Senior Vice President of Shearson Lehman Brothers Inc.; Vice President
of
Shearson Lehman Investment Strategy Advisors, Inc. His address is Two World
Trade Center, New York, New York 10048.
James E. Conroy, Vice President and Investment Officer. Managing Director
of
Greenwich Street Advisors; prior to July 1993, Managing Director of Shearson
Lehman Advisors. His address is Two World Trade Center, New York, New York
10048.
Joseph P. Deane, Vice President and Investment Officer. Managing Director
of
Greenwich Street Advisors; prior to July 1993, Managing Director of Shearson
Lehman Advisors. His address is Two World Trade Center, New York, New York
10048.
Lawrence T. McDermott, Vice President and Investment Officer. Managing
Director of Greenwich Street Advisors; prior to July 1993, Managing Director
of
Shearson Lehman Advisors. His address is Two World Trade Center, New York, New
York 10048.
Karen L. Mahoney-Malcomson, Vice President and Investment Officer. Vice
President of Greenwich Street Advisors; prior to July 1993, Senior Vice
President of Shearson Lehman Advisors. Her address is Two World Trade Center,
New York, New York 10048.
Vincent Nave, Treasurer. Senior Vice President of Boston Advisors and
Boston
Safe. His address is One Boston Place, Boston, Massachusetts 02108.
Francis J. McNamara, III, Secretary. Senior Vice President and General
Counsel of Boston Advisors; prior
2
<PAGE>
to June 1989, Vice President and Associate Counsel of Boston Advisors. His
address is One Boston Place, Boston, Massachusetts 02108.
Each of the Trust's Trustees serves as a trustee, general partner and/or
director of other mutual funds for which Shearson Lehman Brothers serves as
distributor. As of January 1, 1994, the Trustees and Officers owned less than
1%
of each Fund's outstanding shares.
No director, officer or employee of Smith Barney Shearson, Greenwich
Street
Advisors or Boston Advisors or any of their affiliates will receive any
compensation from the Trust for serving as an officer or Trustee of the Trust.
The Trust pays each Trustee who is not a director, officer or employee of
Smith
Barney Shearson, Greenwich Street Advisors, Boston Advisors, or any of their
affiliates, a fee of $4,000 per annum plus $500 per meeting attended, and
reimburses them for travel and out-of-pocket expenses. For the fiscal year
ended, November 30, 1993, such fees and expenses totalled $26,395.
INVESTMENT ADVISER AND ADMINISTRATOR
Certain of the services provided to, and the fees paid by, the Trust under its
agreements with Greenwich Street Advisors and Boston Advisors with respect to
the Funds are described in the Prospectuses. Boston Advisors, in addition to
providing the services described in the Prospectuses: furnishes the Trust with
statistical and research data, clerical help and accounting data processing,
bookkeeping, internal auditing and legal services and certain other services
required by the Trust; prepares reports to the Funds' shareholders; and
prepares
tax returns, reports to and filings with, the SEC and state regulatory
authorities.
Greenwich Street Advisors is a division of Mutual Management Corp. and
controlled by Smith Barney Shearson Holdings Inc., which is a wholly owned
subsidiary of The Travelers Inc. ("Travelers"), a diversified financial
services
holding company principally engaged in the business of providing investment,
consumer finance and insurance services. Boston Advisors is a wholly owned
subsidiary of The Boston Company, Inc. ("TBC"), which is in turn a wholly
owned
subsidiary of Mellon Bank Corporation ("Mellon").
Greenwich Street Advisors and Boston Advisors each pays the salaries of
all
officers and employees who serve the Trust, and Boston Advisors maintains
office
facilities for the Trust. Greenwich Street Advisors and Boston Advisors bear
all
expenses in connection with the performance of their respective services under
their agreements with the Trust relating to the Funds.
For the fiscal period from December 31, 1991 through November 30, 1992,
the
Funds paid Shearson Lehman Advisors the Fund's predecessor investment adviser
investment advisory fees and Shearson Lehman Advisors waived fees and
reimbursed
expenses as follows:
<TABLE>
<CAPTION>
FEES WAIVED
AND EXPENSES
FUND FEES PAID REIMBURSED
----------------------------------- --------- ------------
<S> <C> <C>
Treasury Fund...................... $ 6,603 $ 76,000
Municipal Fund..................... $ 0 $ 67,265
California Fund.................... $ 0 $ 58,703
New York Fund...................... $ 0 $ 46,577
</TABLE>
For the fiscal year ended November 30, 1993, the Funds paid Shearson
Lehman
Advisors and Greenwich Street Advisors investment advisory fees and Shearson
Lehman Advisors and Greenwich Street Advisors waived fees and reimbursed
expenses as follows:
<TABLE>
<CAPTION>
FEES WAIVED
AND EXPENSES
FUND FEES PAID REIMBURSED
----------------------------------- --------- ------------
<S> <C> <C>
Treasury Fund...................... $91,652 $ 79,608
Municipal Fund..................... $93,010 $135,127
California Fund.................... $ 0 $ 83,727
New York Fund...................... $28,605 $130,230
</TABLE>
3
<PAGE>
For the fiscal period from December 31, 1991 through November 30, 1992,
the
Funds paid Boston Advisors sub-investment advisory and administration fees and
Boston Advisors waived fees as follows:
<TABLE>
<CAPTION>
FUND FEES PAID FEES WAIVED
----------------------------------- --------- ------------
<S> <C> <C>
Treasury Fund...................... $ 3,537 $ 43,665
Municipal Fund..................... $ 0 $ 38,437
California Fund.................... $ 0 $ 10,927
New York Fund...................... $ 0 $ 23,884
</TABLE>
For the fiscal year ended November 30, 1993 the Funds paid Boston Advisors
administration fees and Boston Advisors waived fees as follows:
<TABLE>
<CAPTION>
FUND FEES PAID FEES WAIVED
----------------------------------- --------- ------------
<S> <C> <C>
Treasury Fund...................... $51,860 $ 46,003
Municipal Fund..................... $52,571 $ 77,793
California Fund.................... $ 0 $ 39,799
New York Fund...................... $16,167 $ 74,596
</TABLE>
Greenwich Street Advisors and Boston Advisors each have agreed that, if in
any fiscal year of a Fund, the aggregate expenses of the Fund (including fees
payable pursuant to the Trust's agreements with Greenwich Street Advisors and
Boston Advisors relating to the Funds, but excluding interest, taxes,
brokerage
fees, fees paid with respect to the Fund pursuant to the Trust's shareholder
servicing plan, and, if permitted by the relevant state securities
commissions,
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Fund, Greenwich Street Advisors and Boston Advisors will
each reduce their management fees for the Fund that excess expense to the
extent
required by state law in the same proportion as their respective fees bear to
the combined fees for investment advice and administration. The most
restrictive
state expense limitation currently applicable to each Fund is 2.5% of the
first
$30 million of the Fund's average net assets, 2% of the next $70 million of
the
Fund's average net assets and 1.5% of the Fund's remaining average net assets.
For the fiscal period ended November 30, 1992 and the 1993 fiscal year the
Funds
were not required to waive fees.
COUNSEL AND AUDITORS
Willkie Farr & Gallagher serves as counsel to the Trust. The Trustees who are
not "interested persons" of the Trust have selected Sullivan & Cromwell as
their
counsel.
Coopers & Lybrand, independent accountants, One Post Office Square,
Boston,
Massachusetts 02109, serves as auditors of the Trust and render an opinion on
the Funds' financial statements annually.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The Prospectuses discuss the investment objective of each Fund and the
principal
policies to be employed to achieve that objective. Supplemental information is
set out below concerning the types of securities and other instruments in
which
the Funds may invest, the investment policies and strategies that the Funds
may
utilize and certain risks attendant to those investments, policies and
strategies.
UNITED STATES GOVERNMENT SECURITIES
Securities issued or guaranteed by the United States government or one of its
agencies, authorities or instrumentalities ("U.S. government securities") in
which each of the Municipal Fund, the California Fund and the New York Fund
(individually referred to as a "Muni Fund" and collectively referred to as the
"Muni Funds") may invest include debt obligations of varying maturities issued
by the United States Treasury or issued or guaranteed by an agency or
instrumentality of the United States government, including the Federal Housing
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association, General Services
Administration, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation,
Federal Intermediate Credit Banks, Federal National Mortgage Association,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory
Board, Student Loan Marketing Association, Resolution Trust Corporation and
various institutions that previously were or currently are part of the Farm
4
<PAGE>
Credit System (which has been undergoing a reorganization since 1987). Direct
obligations of the United States Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Because the
United States government is not obligated by law to provide support to an
instrumentality that it sponsors, none of the Muni Funds will invest in
obligations issued by an instrumentality of the United States government
unless
Greenwich Street Advisors determines that the instrumentality's credit risk
does
not make its securities unsuitable for investment by the Fund.
As noted in the Treasury Prospectus, the Treasury Fund will limit its
investments in U.S. government securities to those issued by the United States
Treasury and those the interest from which is prohibited under Federal law
from
being taxed by the states. A list of obligations coming within the latter
category is set out in the Treasury Prospectus.
MUNICIPAL OBLIGATIONS
Each of the Muni Funds invests principally in debt obligations issued by, or
on
behalf of, states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities or multistate agencies or authorities, the interest from
which
debt obligations is, in the opinion of bond counsel to the issuer, excluded
from
gross income for Federal income tax purposes ("Municipal Obligations").
Municipal Obligations generally are understood to include debt obligations
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities, refunding of outstanding obligations,
payment of general operating expenses and extensions of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance privately operated facilities are
considered to be Municipal Obligations if the interest paid on them qualifies
as
excluded from gross income (but not necessarily from alternative minimum
taxable
income) for Federal income tax purposes in the opinion of bond counsel to the
issuer.
Municipal Obligations may be issued to finance life care facilities, which
are an alternative form of long-term housing for the elderly that offer
residents the independence of a condominium life-style and, if needed, the
comprehensive care of nursing home services. Bonds to finance these facilities
have been issued by various state industrial development authorities. Because
the bonds are secured only by the revenues of each facility and not by state
or
local government tax payments, they are subject to a wide variety of risks,
including a drop in occupancy levels, the difficulty of maintaining adequate
financial reserves to secure estimated actuarial liabilities, the possibility
of
regulatory cost restrictions applied to health care delivery and competition
from alternative health care or conventional housing facilities.
MUNICIPAL LEASES
Municipal leases are Municipal Obligations that may take the form of a lease
or
an installment purchase issued by state and local government authorities to
obtain funds to acquire a wide variety of equipment and facilities such as
fire
and sanitation vehicles, computer equipment and other capital assets. These
obligations have evolved to make it possible for state and local government
authorities to acquire property and equipment without meeting constitutional
and
statutory requirements for the issuance of debt. Thus, municipal leases have
special risks not normally associated with Municipal Obligations. These
obligations frequently contain "non-appropriation" clauses that provide that
the
governmental issuer of the municipal lease has no obligation to make future
payments under the lease or contract unless money is appropriated for such
purposes by the legislative body on a yearly or other periodic basis. In
addition to the non-appropriation risk, municipal leases represent a type of
financing that has not yet developed the depth of marketability associated
with
Municipal Obligations; moreover, although the obligations will be secured by
the
leased equipment, the disposition of the equipment in the event of foreclosure
might prove difficult. In order to limit the risks, the Fund will purchase
either (a) municipal leases that are rated in the four highest
5
<PAGE>
categories by Moody's Investor Services, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") or (b) unrated municipal leases that are purchased
principally from domestic banks or other responsible third parties that have
entered into an agreement with the Fund providing the seller will either
remarket or repurchase the municipal leases within a short period after demand
by the Fund.
From time to time, proposals to restrict or eliminate the Federal income
tax
exemption for interest on Municipal Obligations have been introduced before
Congress. Similar proposals may be introduced in the future. In addition, the
Internal Revenue Code of 1986, as amended, (the "Code") currently provides
that
small issue private activity bonds will not be tax-exempt if the bonds were
issued after December 31, 1986, and the proceeds were used to finance projects
other than manufacturing facilities. Interest on certain small issue private
activity bonds used to finance manufacturing facilities will not be tax-exempt
if the bonds are issued after December 31, 1991. If the latter deadline is not
extended, or, if a proposal to restrict or eliminate the Federal tax exemption
for interest on Municipal Obligations were enacted, the availability of
Municipal Obligations for investment by the Muni Funds would be adversely
affected. In such event, the Trust's Board of Trustees would reevaluate the
investment objective and policies of each Muni Fund and submit possible
changes
in its structure for the consideration of its shareholders.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA
EXEMPT OBLIGATIONS
As indicated in the Muni Prospectus, the California Fund seeks its objective
by
investing principally in a portfolio of Municipal Obligations, the interest
from
which is exempt from California State personal income taxes ("California
Exempt
Obligations"). Some of the financial considerations relating to the California
Fund's investing in California Exempt Obligations are summarized below. This
summary is not intended to be a complete description and is principally
derived
from official statements relating to issues of California Exempt Obligations
that were available prior to the date of this Statement of Additional
Information. The accuracy and completeness of the information contained in
those
official statements has not been independently verified.
ECONOMIC FACTORS. The Governor's 1993-1994 Budget, introduced on January 8,
1993, proposed general fund expenditures of $37.3 billion, with projected
revenues of $39.9 billion. It also proposed special fund expenditures of $12.4
billion and special fund revenues of $12.1 billion. To balance the budget in
the
face of declining revenues, the Governor proposed a series of revenue shifts
from local government, reliance on increased Federal aid, and reductions in
state spending.
The Department of Finance of the State of California's May Revision of
General Fund Revenues and Expenditures (the "May Revision"), released on May
20,
1993, indicated that the revenue projections of the January budget proposal
were
tracking well, with the full year 1992-1993 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales
tax was close to target, and bank and corporation taxes were lagging behind
projections. The May Revision projected the State would have an accumulated
deficit of about $2.75 billion by June 30, 1993. The Governor proposed to
eliminate this deficit over an 18-month period. He also agreed to retain the
0.5% sales tax scheduled to expire June 30 for a six-month period, dedicated
to
local public safety purposes, with a November election to determine a
permanent
extension. Unlike previous years, the Governor's Budget and May Revision did
not
calculate a "gap" to be closed, but rather set forth revenue and expenditure
forecasts and proposals designed to produce a balanced budget.
The 1993-1994 budget act (the "1993-94 Budget Act") was signed by the
Governor on June 30, 1993, along with implementing legislation. The Governor
vetoed about $71 million in spending.
The 1993-94 Budget Act is predicated on general fund revenues and
transfers
estimated at $40.6 billion, $400 million below 1992-93 (and the second
consecutive
6
<PAGE>
year of actual decline). The principal reasons for declining revenue are the
continued weak economy and the expiration (or repeal) of three fiscal steps
taken in 1991 -- a half cent temporary sales tax, a deferral of operating loss
carryforwards, and repeal by initiative of a sales tax on candy and snack
foods.
The 1993-94 Budget Act also assumes special fund revenues of $11.9
billion,
an increase of 2.9% over 1992-93.
The 1993-94 Budget Act includes general fund expenditures of $38.5 billion
(a 6.3% reduction from projected 1992-93 expenditures of $41.1 billion), in
order to keep a balanced budget within the available revenues. The 1993-94
Budget Act also includes special fund expenditures of $12.1 billion, a 4.2%
increase. The 1993-94 Budget Act reflects the following major adjustments:
1. Changes in local government financing to shift
about $2.6 billion in property taxes from cities, counties, special districts
and redevelopment agencies to school and community college districts, thereby
reducing general fund support by an equal amount. About $2.5 billion would be
permanent, reflecting termination of the State's "bailout" of local
governments
following the property tax cuts of Proposition 13 in 1978 (See
"Constitutional,
Legislative and Other Factors" below).
The property tax revenue losses for cities and counties are offset in part
by additional sales tax revenues and mandate relief. The temporary 0.5% sales
tax has been extended through December 31, 1993, for allocation to counties
for
public safety programs. A Constitutional amendment will be placed on the
ballot
in a special statewide election in November 1993 to extend the sales tax
permanently for public safety purposes.
Legislation also has been enacted to eliminate state mandates in order to
provide local governments flexibility in making their programs responsive to
local needs. Legislation provides mandate relief for local justice systems
which
affect county audit requirements, court reporter fees, and court
consolidation;
health and welfare relief involving advisory boards, family planning, state
audits and realignment maintenance efforts; and relief in areas such as county
welfare department self-evaluations, noise guidelines and recycling
requirements.
A lawsuit has been filed by Los Angeles County challenging the shift of
property taxes. Other counties or local agencies may join this action or file
separate suits.
2. The 1993-94 Budget Act keeps K-12
Proposition 98 funding on a cash basis at the same per-pupil level as 1992-93
by
providing schools a $609 million loan payable from future years' Proposition
98
funds.
3. President Clinton's Fiscal Year 1994 budget
proposals include about $692 million of aid to the State from the Federal
government to offset health and welfare costs associated with foreign
immigrants
living in the State, which would reduce a like amount of general fund
expenditures. About $411 million of this amount is one-time funding. The
receipt
of this money is dependent upon the inclusion of such funding for the State in
the President's budget that is ultimately approved.
4. Reductions of $600 million in health and
welfare programs, which were agreed upon by the California Legislature and the
Governor.
5. Reductions of $400 million in support for
higher education. These reductions will be partly offset by fee increases at
all
three units of higher education.
6. A 2-year suspension of the renters' tax credit
($390 million expenditure reduction in 1993-94). A constitutional amendment
will
be placed on the June 1994 ballot to restore the renter's tax credit after
1994-95.
7. Various miscellaneous cuts (totalling
approximately $150 million) in State government services in many agencies, up
to
15 percent. The Governor would suspend the 4 percent automatic budget
reduction
"trigger," as was done in 1992-93, so cuts can be focused.
8. Miscellaneous one-time items, including deferral
of payment to the Public Employees Retirement Fund ($339 million) and a change
in accounting for debt service from accrual to cash basis, saving $107
million.
The 1993-94 Budget Act contains no general fund tax/revenue increases
other
than a two year suspension
7
<PAGE>
of the renters' tax credit. The Governor continues to predict that population
growth in the 1990's will keep upward pressure on major State programs, such
as
K-14 education, health and welfare and corrections, outstripping projected
revenue growth in an economy only very slowly emerging from a deep recession.
The October 1993 Bulletin of the Department of Finance reports that
General
Fund revenues for September were $128 million above projections, although the
report indicated $45 million of this represented a scheduled insurance tax
refund which was not processed in September. Through the first three months of
the fiscal year, revenues were $214 million, or 2.3 percent, above
projections,
with all four major taxes (personal income, sales, bank and corporation and
insurance) tracking projections well. Revenues for the first quarter represent
about 20 percent of annual receipts. The Department of Finance also reports
that
the State will only receive approximately $450 million in aid from the Federal
Government to offset the health and welfare costs associated with foreign
immigrants living in the State, substantially less than the $692 million
contemplated by the 1993-94 Budget Act.
Despite the encouraging financial results early in the fiscal year, the
Department's report of sluggish economic activity raises the possibility that
results later in the fiscal year may not meet original projections. A new
projection will be issued with the Governor's Budget in January 1994.
CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS. Certain California
constitutional
amendments, legislative measures, executive orders, administrative regulations
and voter initiatives could result in the adverse effects described below. The
following information constitutes only a brief summary, does not purport to be
a
complete description, and is based on information drawn from official
statements
and prospectuses relating to securities offerings of the State of California
and
various local agencies in California available as of the date of this
Prospectus.
Certain of the California Municipal Obligations in which the Fund may
invest
may be obligations of issuers which rely in whole or in part on California
State
revenues for payment of these obligations. Property tax revenues and a portion
of the State's general fund surplus are distributed to counties, cities and
their various taxing entities the State assumes certain obligations
theretofore
paid out of local funds. Whether and to what extent a portion of the State's
general fund will be distributed in the future to counties, cities and their
various entities, is unclear.
On November 1, 1993 the United States Supreme Court agreed to review the
California court decisions in BARCLAYS BANK INTERNATIONAL, LTD. V. FRANCHISE
TAX
BOARD and COLGATE-PALMOLIVE COMPANY, INC. V. FRANCHISE TAX BOARD which upheld
California's worldwide combined reporting ("WWCR") method of taxing
corporations
engaged in a unitary business operation against challenges under the foreign
commerce and due process clauses. In 1983, in CONTAINER CORPORATION V.
FRANCHISE
TAX BOARD, the Supreme Court held that the WWCR method did not violate the
foreign commerce clause in the case of a domestic-based unitary business group
with foreign-domiciled subsidiaries, but specifically left open the question
of
whether a different result would obtain for a foreign-based multinational
unitary business. BARCLAYS concerns a foreign-based multinational and COLGATE-
PALMOLIVE concerns a domestic-based multinational in light of Federal foreign
policy developments since 1983. In a brief filed at the Supreme Court's
request,
the Clinton Administration had argued that the Court should not hear the
BARCLAYS case, even though there are "serious questions" about the California
Supreme Court's analysis and holdings, because the recent changes in the law
noted below means the issue in BARCLAYS "lacks substantial recurring
importance." The Clinton Administration had previously decided not to become
involved in the BARCLAYS petition. The United States government under the Bush
Administration, along with various foreign governments, had appeared as amicus
on behalf of Barclays before the California Courts. It is
8
<PAGE>
unclear what position, if any, the Clinton Administration will take in the
case
on the merits. The fiscal impact on the State of California has been reported
as
follows: the State would have to refund $1.730 billion to taxpayers ($530
million due to BARCLAYS; $1.2 billion due to Colgate), and cancel another
$2.35
billion of pending assessments ($350 million due to BARCLAYS; $1.9 billion due
to Colgate), if the Supreme Court ultimately strikes down the WWCR method and
rules its decision has retrospective effect.
In 1988, California enacted legislation providing for a water's-edge
combined reporting method if an election fee was paid and other conditions
met.
On October 6, 1993, California Governor Pete Wilson signed Senate Bill 671
(Alquist) which modifies the unitary tax law by deleting the requirements that
a
taxpayer electing to determine its income on a water's-edge basis pay a fee
and
file a domestic disclosure spreadsheet and instead requiring an annual
information return. Significantly, the Franchise Tax Board can no longer
disregard a taxpayer's election. The Franchise Tax Board is reported to have
estimated state revenue losses from the Legislation as growing from $27
million
in 1993-94 to $616 million in 1999-2000, but others, including Assembly
Speaker
Willie Brown, disagree with that estimate and assert that more revenue will be
generated for California, rather than less, because of an anticipated increase
in economic activity and additional revenue generated by the incentives in the
Legislation. The United Kingdom has been encouraged by the legislative
developments in California and threatened retaliatory taxation by the United
Kingdom is on hold.
Certain of the California Municipal Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA is to limit ad
valorem taxes on real property and to restrict the ability of taxing entities
to
increase real property tax revenues. On November 7, 1978, California voters
approved Proposition 8, and on June 3, 1986, California voters approved
Proposition 46, both of which amended Article XIIIA.
Section 1 of Article XIIIA limits the maximum ad valorem tax on real
property to 1% of full cash value (as defined in Section 2), to be collected
by
the counties and apportioned according to law; provided that the 1% limitation
does not apply to ad valorem taxes or special assessments to pay the interest
and redemption charges on (a) any indebtedness approved by the voters prior to
July 1, 1978, or (b) any bonded indebtedness for the acquisition or
improvement
of real property approved on or after July 1, 1978, by two-thirds of the votes
cast by the voters voting on the proposition. Section 2 of the Article XIIIA
defines "full cash value" to mean "the County Assessor's valuation of real
property as shown on the 1975/76 tax bill under 'full cash value' or,
thereafter, the appraised value of real property when purchased, newly
constructed, or a change in ownership has occurred after the 1975 assessment."
The full cash value may be adjusted annually to reflect inflation at a rate
not
to exceed 2% per year, or reduction in the consumer price index or comparable
local data, or reduced in the event of declining property value caused by
damage, destruction or other factors. The California State Board of
Equalization
has adopted regulations, binding on county assessors, interpreting the meaning
of "change in ownership" and "new construction" for purposes of determining
full
cash value of property under Article XIIIA.
Legislation enacted by the California Legislature to implement Article
XIIIA
(Statutes of 1978, Chapter 292, as amended) provides that notwithstanding any
other law, local agencies may not levy any ad valorem property tax except to
pay
debt service on indebtedness approved by the voters prior to July 1, 1978, and
that each county will levy the maximum tax permitted by Article XIIIA of $4.00
per $100 assessed valuation (based on the former practice of using 25%,
instead
of 100%, of full cash value as the assessed value for tax purposes). The
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legislation further provided that, for the 1978/79 fiscal year only, the tax
levied by each county was to be apportioned among all taxing agencies within
the
county in proportion to their average share of taxes levied in certain
previous
years. The apportionment of property taxes for fiscal years after 1978/79 has
been revised pursuant to Statutes of 1979, Chapter 282, which provides relief
funds from State moneys beginning in fiscal year 1979/80 and is designed to
provide a permanent system for sharing State taxes and budget funds with local
agencies. Under Chapter 282, cities and counties receive more of the remaining
property tax revenues collected under Proposition 13 instead of direct State
aid. School districts receive a correspondingly reduced amount of property
taxes, but receive compensation directly from the State and are given
additional
relief. Chapter 282 does not affect the derivation of the base levy ($4.00 per
$100 of assessed valuation) and the bonded debt tax rate.
On November 6, 1979, an initiative known as "Proposition 4" or the "Gann
Initiative" was approved by the California voters, which added Article XIIIB
to
the California Constitution. Under Article XIIIB, State and local governmental
entities have an annual "appropriations limit" and are not allowed to spend
certain monies called "appropriations subject to limitation" in an amount
higher
than the "appropriations limit." Article XIIIB does not affect the
appropriation
of moneys which are excluded from the definition of "appropriations subject to
limitation," including debt service on indebtedness existing or authorized as
of
January 1, 1979, or bonded indebtedness subsequently approved by the voters.
In
general terms, the "appropriations limit" is required to be based on certain
1978/79 expenditures, and is to be adjusted annually to reflect changes in
consumer prices, population and certain services provided by these entities.
Article XIIIB also provides that if these entities' revenues in any year
exceed
the amounts permitted to be spent, the excess is to be returned by revising
tax
rates or fee schedules over the subsequent two years.
At the November 8, 1988 general election, California voters approved an
initiative known as Proposition 98. This initiative amends Article XIIIB to
require that (a) the California Legislature establish a prudent state reserve
fund in an amount as it shall deem reasonable and necessary and (b) revenues
in
excess of amounts permitted to be spent and which would otherwise be returned
pursuant to Article XIIIB by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 4%) to the State School Fund and
be expended solely for purposes of instructional improvement and
accountability.
No such transfer or allocation of funds will be required if certain designated
state officials determine that annual student expenditures and class size meet
certain criteria as set forth in Proposition 98. Any funds allocated to the
State School Fund shall cause the appropriation limits established in Article
XIIIB to be annually increased for any such allocation made in the prior year.
Proposition 98 also amends Article XVI to require that the State of
California provide a minimum level of funding for public schools and community
colleges. Commencing with the 1988-89 fiscal year, state monies to support
school districts and community college districts shall equal or exceed the
lesser of (a) an amount equalling the percentage of state general revenue
bonds
for school and community college districts in fiscal year 1986-87, or (b) an
amount equal to the prior year's state general fund proceeds of taxes
appropriated under Article XIIIB plus allocated proceeds of local taxes, after
adjustment under Article XIIIB. The initiative permits the enactment of
legislation, by a two-thirds vote, to suspend the minimum funding requirement
for one year.
On June 30, 1989, the California Legislature enacted Senate Constitutional
Amendment 1, a proposed modification of the California Constitution to alter
the
spending limit and the education funding provisions of Proposition 98. Senate
Constitutional Amendment 1, on the June 5, 1990 ballot as Proposition 111, was
approved by the voters and look effect on July 1, 1990.
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Among a number of important provisions, Proposition 111 recalculates spending
limits for the State and for local governments, allows greater annual
increases
in the limits, allows the averaging of two years' tax revenues before
requiring
action regarding excess tax revenues, reduces the amount of the funding
guarantee in recession years for school districts and community college
districts (but with a floor of 40.9% of State general fund tax revenues),
removes the provision of Proposition 98 which included excess moneys
transferred
to school districts and community college districts in the base calculation
for
the next year, limits the amount of State tax revenue over the limit which
would
be transferred to school districts and community college districts, and
exempts
increased gasoline taxes and truck weight fees from the State appropriations
limit. Additionally, Proposition 111 exempts from the State appropriations
limit
funding for capital outlays.
Article XIIIB, like Article XIIIA, may require further interpretation by
both the Legislature and the courts to determine its applicability to specific
situations involving the State and local taxing authorities. Depending upon
the
interpretation, Article XIIIB may limit significantly a governmental entity's
ability to budget sufficient funds to meet debt service on bonds and other
obligations.
On November 4, 1986, California voters approved an initiative statute
known
as Proposition 62. This initiative (a) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution
or
ordinance adopted by a two-thirds vote of the governmental entity's
legislative
body and by a majority vote of the electorate of the governmental entity, (b)
requires that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction, (c) restricts the use
of
revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (d) prohibits the imposition of ad valorem taxes on
real property by local governmental entities except as permitted by Article
XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on
the
sale of real property by local governments, (f) requires that any tax imposed
by
a local government on or after August 1, 1985 be ratified by a majority vote
of
the electorate within two years of the adoption of the initiative or be
terminated by November 15, 1988, (g) requires that, in the event a local
government fails to comply with the provisions of this measure, a reduction in
the amount of property tax revenue allocated to such local government occurs
in
an amount equal to the revenues received by such entity attributable to the
tax
levied in violation of the initiative, and (h) permits these provisions to be
amended exclusively by the voters of the State of California.
In September 1988, the California Court of Appeal in CITY OF WESTMINSTER
V.
COUNTY OF ORANGE 204 Cal. App. 3d 623, 215 Cal. Rptr. 511 (Cal. Ct. App.
1988),
held that Proposition 62 in unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and
prior
to the effective date of Proposition 62, to be subject to approval by a
majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is not possible to predict
the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62.
On November 8, 1988, California voters approved Proposition 87.
Proposition
87 amended Article XVI, Section 16, of the California Constitution by
authorizing the California Legislature to prohibit redevelopment agencies from
receiving any of the property tax revenue raised by increased property tax
rates
levied to repay bonded indebtedness of local governments which is approved by
voters on or after January 1, 1989. It is not possible to predict whether the
California Legislature will enact such a prohibition nor is it possible to
predict the impact of Proposition 87 on redevelopment agencies and their
ability
to make payments on outstanding debt obligations.
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Certain California Municipal Obligations in which the Fund may invest may
be
obligations that are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect
such
revenues and, consequently, payment on those California Municipal Obligations.
The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such
hospital
met applicable requirements for participation. California law now provides
that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting
is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only those
hospitals which enter into a Medi-Cal contract with the State of California
will
be paid for non-emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice
under
certain circumstances and is obligated to make contractual payments only to
the
extent the California legislature appropriates adequate funding therefor.
In February 1987, the Governor of the State of California announced that
payments to Medi-Cal providers for certain services (not including hospital
acute inpatient services) would be decreased by 10% through June 1987.
However,
a Federal district court issued a preliminary injunction preventing
application
of any cuts until a trial on the merits can be held. If the injunction is
deemed
to have been granted improperly, the State of California would be entitled to
recapture the payment differential for the intended reduction period. It is
not
possible to predict at this time whether any decreases will ultimately be
implemented.
California enacted legislation in 1982 that authorizes private health
plans
and insurers to contract directly with hospitals for services to beneficiaries
on negotiated terms. Some insurers have introduced plans known as "preferred
provider organizations" ("PPOs"), which offer financial incentives for
subscribers who use only the hospitals which contract with the plan. Under an
exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly
from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO.
It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
Such California Municipal Obligations may also be insured by the State of
California pursuant to an insurance program implemented by the Office of
Statewide Health Planning and Development for health facility construction
loans. If a default occurs on insured California Municipal Obligations, the
State Treasurer will issue debentures payable out of a reserve fund
established
under the insurance program or will pay principal and interest, on an
unaccelerated basis from unappropriated State funds. At the request of the
Office of Statewide Health Planning and Development, Arthur D. Little, Inc.
prepared a study in December 1983 to evaluate the adequacy of the reserve fund
established
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under the insurance program and, based on certain formulations and assumptions
found the reserve fund substantially underfunded. In September of 1986, Arthur
D. Little, Inc. prepared an update of the study and concluded that an
additional
10% reserve be established for "multi-level" facilities. For the balance of
the
reserve fund, the update recommended maintaining the current reserve
calculation
method. In March 1990, Arthur D. Little, Inc. prepared a further review of the
study and recommended that separate reserves continue to be established for
"multi-level" facilities at a reserve level consistent with those that would
be
required by an insurance company.
Certain California Municipal Obligations in the Fund may be obligations
which are secured in whole or in part by a mortgage or deed of trust on real
property. California has five principal statutory provisions which limit the
remedies of a creditor secured by a mortgage or deed of trust. Two limit the
creditor's right to obtain a deficiency judgment, one limitation being based
on
the method of foreclosure and the other on the type of debt secured. Under the
former, a deficiency judgment is barred when the foreclosure is accomplished
by
means of a nonjudicial trustee's sale. Under the latter, a deficiency judgment
is barred when the foreclosed mortgage or deed of trust secures certain
purchase
money obligations. Another California statute, commonly known as the "one form
of action" rule, requires creditors secured by real property to exhaust their
real property security by foreclosure before bringing a personal action
against
the debtor. The fourth statutory provision limits any deficiency judgment
obtained by a creditor secured by real property following a judicial sale of
such property to the excess of the outstanding debt over the fair value of the
property at the time of the sale, thus preventing the creditor from obtaining
a
large deficiency judgment against the debtor as the result of low bids at a
judicial sale. The fifth statutory provision gives the debtor the right to
redeem the real property from any judicial foreclosure sale as to which a
deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to California
real property, the creditor's nonjudicial foreclosure rights under the power
of
sale contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three
full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days
after
expiration of the three-month reinstatement period. Therefore, the effective
minimum period for foreclosing on a mortgage could be in excess of seven
months
after the initial default. Such time delays in collections could disrupt the
flow of revenues available to an issuer for the payment of debt service on the
outstanding obligations if such defaults occur with respect to a substantial
number of mortgages or deeds of trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of
the
issuer in the nonjudicial sale of property securing a mortgage for such
private
sale to constitute "state action," and could hold that the private-right-of-
sale
proceedings violate the due process requirements of the Federal or State
Constitutions, consequently preventing an issuer from using the nonjudicial
foreclosure remedy described above.
Certain California Municipal Obligations in the Fund may be obligations
which finance the acquisition of single family home mortgages for low and
moderate income mortgagors. These obligations may be payable solely from
revenues derived from the home mortgages, and are subject to California's
statutory limitations described above applicable to obligations secured by
real
property. Under California antideficiency legislation, there is no personal
recourse against a mortgagor of a
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single family residence purchased with the loan secured by the mortgage,
regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family owner-
occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage
loans
may be imposed only with respect to voluntary prepayments made during the
first
five years during the term of the mortgage loan, and cannot in any event
exceed
six months' advance interest on the amount prepaid in excess of 20% of the
original principal amount of the mortgage loan. This limitation could affect
the
flow of revenues available to an issuer for debt service on the outstanding
debt
obligations which financed such home mortgages.
ADDITIONAL CONSIDERATIONS. With respect to Municipal Obligations issued by the
State of California and its political sub-divisions, the Fund cannot predict
what legislation, if any, may be proposed in the California State Legislature
as
regards the California State personal income tax status of interest on such
obligations, or which proposals, if any, might be enacted. Such proposals, if
enacted, might materially adversely affect the availability of California
Municipal Obligations for investment by the Fund and the value of the Fund's
portfolio. In such an event, the Trustees would reevaluate the Fund's
investment
objective and policies and consider changes in its structure or possible
dissolution.
SPECIAL CONSIDERATIONS RELATING TO NEW YORK
EXEMPT OBLIGATIONS
As indicated in the Muni Prospectus, the New York Fund seeks its objective by
investing principally in a portfolio of Municipal Obligations, the interest
from
which is exempt from New York State and New York City personal income taxes
("New York Exempt Obligations"). Some of the financial considerations relating
to the New York Fund's investing in New York Exempt Obligations are summarized
below. This summary information is not intended to be a complete description
and
is principally derived from official statements relating to issues of New York
Exempt Obligations that were available prior to the date of this Statement of
Additional Information. The accuracy and completeness of the information
contained in those official statements has not been independently verified.
STATE ECONOMY. New York State (the "State") is the second most populous state
in
the nation and has a relatively high level of personal wealth. The State's
economy is diverse with a comparatively large share of the nation's finance,
insurance, transportation, communications and services employment, and a
comparatively small share of the nation's farming and mining activity. The
State
has a declining proportion of its workforce engaged in manufacturing, and an
increasing proportion engaged in service industries. New York City (the
"City"),
which is the most populous city in the State and nation and is the center of
the
nation's largest metropolitan area, accounts for approximately 41% of both the
State's population and personal income.
The State has historically been one of the wealthiest states in the
nation.
For decades, however, the State has grown more slowly than the nation as a
whole, gradually eroding its relative economic affluence. The recession has
been
more severe in the State, owing to a significant retrenchment in the financial
services industry, cutbacks in defense spending, and an overbuilt real estate
market. There can be no assurance that the State economy will not experience
worse-than-predicted results in the 1993-94 fiscal year, with corresponding
material and adverse effects on the State's projections of receipts and
disbursements.
The unemployment rate in the State dipped below the national rate in the
second half of 1981 and remained lower until 1991. The total employment growth
rate in the State has been below the national average since 1984, and in 1991
and 1992 the unemployment rate rose to 8.5%. State per capital personal income
remains above the national average. State per capital income for 1992 was
$23,534, which is 18.6% above the 1992 national average of $19,841. Between
1970
and 1980, the percentage by which the State's per
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capital income exceeded that of the national average fell from 19.8% to 8.1%,
and the State dropped from fifth to eleventh in the nation in terms of per
capital income. However, since 1980, the State's rate of per capital income
growth was greater than that of the nation generally and the State's rank
improved to fourth in 1990 and remained fourth in 1991 and 1992. Some analysts
believe that the decline in jobs in both the City and the State is the result
of
State and local taxation, which is among the highest in the nation, and which
may cause corporations to locate outside New York. The current high level of
taxes limits the ability of the State and the City to impose higher taxes in
the
event of future difficulties.
STATE BUDGET. The State Constitution requires the Governor to submit to the
Legislature a balanced Executive Budget which contains a complete plan of
expenditures for the ensuing fiscal year and all moneys and revenues estimated
to be available therefor, accompanied by bills containing all proposed
appropriations or reappropriations and any new or modified revenue measures to
be enacted in connection with the Executive Budget. The entire plan
constitutes
the proposed State financial plan for that fiscal year. The Governor submits
to
the Legislature, on at least a quarterly basis, reports of actual receipts,
revenues, disbursements, expenditures, tax refunds and reimbursements, and
repayment of advances in form suitable for comparison with the State financial
plan, together with explanations of deviations from the State financial plan.
At
such time, the Governor is required to submit any amendments to the State's
financial plan necessitated by such deviations. The first quarterly update to
the 1993-94 State Financial Plan was submitted by the Governor on September 1,
1993. Such revision shows a General Fund operating surplus of $12 million,
with
an overall surplus for all governmental funds of $195 million.
The Governor released the recommended Executive Budget for the 1993-94
fiscal year on January 19, 1993 and amended it on February 18, 1993. The
recommended 1993-94 State Financial Plan projects a balanced General Fund.
General Fund receipts and transfers from other funds are projected at $31.556
billion, including $184 million carried over from the 1992-93 fiscal year.
Disbursements and transfers from other funds are projected at $31.489 billion,
not including a $67 million repayment to the State's Tax Stabilization Reserve
Fund.
The 1993-94 State Financial Plan formulated on April 16, 1993 (the "1993-
94
State Financial Plan"), following enactment of the State's 1993-94 budget,
projected General Fund receipts and transfers from other funds at $32.367
billion and disbursements and transfers to other funds at $32.300 billion.
Excess receipts of $67 million will be used for a required repayment to the
State's Tax Stabilization Reserve Fund. In comparison to the recommended 1993-
94
Executive Budget, the 1993-94 State budget, as enacted, reflected increases in
both receipts and disbursements in General Funds of $811 million. On October
29,
1993, the 1993-94 State Financial Plan was revised.
There can be no assurance that the State will not face substantial
potential
budget gaps in future years resulting from a significant disparity between tax
revenues projected from a lower recurring receipts base and the spending
required to maintain State programs at current levels. To address any
potential
budgetary imbalances, the State may need to take significant actions to align
recurring receipts and disbursements in future fiscal years.
The Revised 1993-94 State Financial Plan is based on a number of
assumptions
and projections. Because it is not possible to predict accurately the
occurrence
of all factors that may affect the Revised 1993-94 State Financial Plan,
actual
results may differ and have differed materially in recent years, from
projections made at the outset of a fiscal year. The Revised 1993-94 State
Financial Plan has been prepared on a cash basis and on the basis of generally
accepted accounting principles ("GAAP") using the four GAAP defined
governmental
fund types: the General Fund, Special Revenue Funds, Capital Projects Funds
and
Debt Service Funds.
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The General Fund is the principal operating fund of the State. It receives
all State income that is not required by law to be deposited in another fund
which for the State's 1993-94 fiscal year, comprises approximately 52% of
total
projected governmental fund receipts.
RECENT FINANCIAL RESULTS. During its 1989-90, 1990-91 and 1991-92 fiscal
years,
the State incurred cash-basis operating deficits, prior to the issuance of
short-term tax and revenue anticipation notes, owing to lower-than-projected
receipts, which it believes to have been principally the result of a
significant
slowdown in the New York and regional economy, and with respect to the 1989-90
fiscal year, changes in taxpayer behavior caused by the Federal Tax Reform Act
of 1986.
General Fund receipts, excluding transfers from other funds, totalled
$28.818 billion in the State's 1991-92 fiscal year (before repayment of $1.081
billion in deficit notes issued in its 1990-91 fiscal year and before issuance
of $531 million in deficit notes to close the 1991-92 fiscal year General Fund
cash-basis operating deficit) and $29.95 billion in the State's 1992-93 fiscal
year (before repayment of $531 million in deficit notes issued to close the
State's 1991-92 fiscal year General Fund cash-basis operating deficit. General
Fund receipts in the State's 1993-94 fiscal year are estimated in the 1993-
1994
State Financial Plan at $30.295 billion. Taxes account for 96% of estimated
fiscal year 1993-94 General Fund receipts, with the balance comprised of
miscellaneous receipts.
General Fund disbursements, exclusive of transfers to other funds,
totalled
$28.058 billion in the State's 1991-92 fiscal year and $29.068 billion in the
State's 1992-93 fiscal year and are estimated during the State's 1993-94
fiscal
year.
The State's financial position as shown in its Combined Balance Sheet as
of
March 31, 1993 included an accumulated deficit in its combined governmental
funds of $681 million represented by liabilities of $12.864 billion and assets
of $12.183 billion available to liquidate such liabilities.
DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by which the
State may incur debt. Under the State Constitution, the State may not, with
limited exceptions for emergencies, undertake long-term borrowing (i.e.,
borrowing for more than one year) unless the borrowing is authorized in a
specific amount for a single work or purpose by the Legislature and approved
by
the voters. There is no limitation on the amount of long-term debt that may be
so authorized and subsequently incurred by the State. The total amount of
long-term State general obligation debt authorized but not issued as of
September 30, 1993 was approximately $2.343 billion.
The State may undertake short-term borrowings without voter approval (a)
in
anticipation of the receipt of taxes and revenues, by issuing tax and revenue
anticipation notes, and (b) in anticipation of the receipt of proceeds from
the
sale of duly authorized but unissued bonds, by issuing bond anticipation
notes.
The State may also, pursuant to specific constitutional authorization,
directly
guarantee certain obligations of the State's authorities and public benefit
corporations ("Authorities"). Payments of debt service on State general
obligation and State-guaranteed bonds and notes are legally enforceable
obligations of the State.
The State also employs two other types of long-term financing mechanisms
which are State-supported but are not general obligations of the State: moral
obligation and lease-purchase or contractual-obligation financing.
In 1990, as part of a State fiscal reform program, legislation was enacted
creating the New York Local Government Assistance Corporation ("LGAC"), a
public
benefit corporation empowered to issue long-term obligations to fund certain
payments to local governments traditionally funded through the State's annual
seasonal borrowing. The legislation empowered LGAC to issue its bonds and
notes
in an amount not in excess of $4.7 billion (exclusive of certain refunding
bonds) plus amounts to fund a capital reserve fund, to pay costs of issuance,
and to provide for certain capitalized interest costs. Over a period of years,
the issuance of those long-
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term obligations, which will be amortized over no more than 30 years, is
expected to result in eliminating the need for continuing short-term seasonal
borrowing for those purposes. The legislation also imposed a cap on the annual
seasonal borrowing of the State at $4.7 billion, less net proceeds of bonds
issued by LGAC and bonds issued to provide for capitalized interest, except in
cases where the Governor and the legislative leaders have certified both the
need for additional borrowing and a schedule for reducing it to the cap. If
borrowing above the cap is thus permitted in any fiscal year, it is required
by
law to be reduced to the cap by the fourth fiscal year after the limit was
first
exceeded.
In April 1993, legislation was also enacted providing for significant
changes in the long-term financing practices of the State and the Authorities.
The Legislature passed a proposed constitutional amendment that would
permit
the State, without a voter referendum but within a formula-based cap, to issue
revenue bonds, which would be debt of the State secured solely by a pledge of
certain State tax receipts (including those allocated to State funds dedicated
for transportation purposes), and not by the full faith and credit of the
State.
In addition, the proposed amendment would require that State debt be incurred
only for capital projects included in a multi-year capital financing plan and
would prohibit lease-purchase and contractual-obligation financing mechanisms
for State facilities. Public hearings have been held on the proposed
constitutional amendment. Before becoming effective, the proposed
constitutional
amendment must first be passed again by the next separately elected
Legislature
and then approved by the voters at a general election, so that it could not
become effective until after the general election in November 1995.
On March 26, 1990, Standard & Poor's Corporation ("S&P") downgraded the
State's (a) general obligation bonds from "AA-" to "A" and (b) commercial
paper
from "A-1+" to "A-1." Also downgraded was certain of the State's variously
rated
moral obligation, lease-purchase, guaranteed and contractual-obligation debt,
including debt issued by certain State agencies. On August 27, 1990, S&P
affirmed these ratings without change. On June 6, 1990, Moody's Investors
Services, Inc. ("Moody's") changed its ratings on all the State's outstanding
general obligation bonds from "A1" to "A." On March 26, 1990, S&P changed its
ratings of all the State's outstanding general obligations bonds from "AA-" to
"A." On January 6, 1992, Moody's lowered from "A" to "Baa1" the ratings on
certain appropriation-backed debt of the State and its agencies. Approximately
two-thirds of the State's tax-supported debt is affected by Moody's rating
action. Moody's stated that the more secure general obligation, state-
guaranteed
and LGAC bonds continue to be rated "A," but are placed under review for
possible downgrade over the coming months. On January 13, 1992, S&P lowered
its
rating on $4.8 billion of New York State general obligation bonds to "A-" from
"A." Various agency debt, state moral obligations, contractual obligations,
lease-purchase obligations and state guarantees are also affected by S&P's
action. Additionally, under S&P's minimum-rating approach, New York local
school
district debt will now carry a minimum rating of "A-" rather than "A" and
school
districts, currently rated "A" are placed on CreditWatch with negative
implications. In taking these rating actions, Moody's and S&P variously cited
continued economic deterioration, chronic operating deficits, mounting GAAP
fund
balance deficits and the legislative stalemate in seeking permanent and
structurally sound fiscal operations. On January 15, 1992, S&P took further
action by lowering the rating on the claims-paying ability of the State of New
York Mortgage Agency Mortgage Insurance Fund to "BBB+" from "A-" following the
January 13, 1992 downgrade of New York State's general obligation bond rating
to
"A-."
The State anticipates that its borrowings for capital purposes in 1992-93
will consist of approximately $770 million in general obligation bonds and in
new commercial paper issuances. The State also expects to issue approximately
$178 million in general obligation bonds
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for the purpose of redeeming outstanding bond anticipation notes. The
Legislature has also authorized the issuance of up to $105 million in
certificates of participation during the State's 1992-93 fiscal year for
equipment purchases and real property purposes. The Governor has recommended
the
issuance of $761 million in borrowings for capital purposes during the State's
1993-94 fiscal years. In addition, the State expects to issue $140 million in
bonds for the purpose of redeeming outstanding bond anticipation notes. The
Governor has also recommended the issuance of up to $70 million in
certificates
of participation during the State's 1993-94 fiscal year for personal property
acquisitions. He has also recommended the continuation of the authorization to
issue up to approximately $15 million in certificates of participation for
real
property acquisitions during the State's 1993-94 fiscal year. The projection
of
the State regarding its borrowings for the 1992-93 and 1993-94 fiscal years
may
change if actual receipts fall short of State projections or if other
circumstances require.
Payments for principal and interest due on general obligation bonds,
interest due on bond anticipation notes and on tax and revenue anticipation
notes, and contractual-obligation and lease-purchase commitments were $1.783
billion and $2.045 billion in the aggregate, for the State's 1991-92 and 1992-
93
fiscal years, respectively, and are estimated to be $2.181 billion for the
State's 1993-94 fiscal year. These figures do not include interest payable on
either State General Obligation Refunding Bonds issued on July 30, 1992, to
the
extent that such interest is to be paid from an escrow fund established with
the
proceeds of such bonds or the State's installment payments relating to the
issuance of certificates of participation.
The State has never defaulted on any of its general obligation
indebtedness
or its obligations under lease-purchase or contractual-obligation financing
arrangements and has never been called upon to make any direct payments
pursuant
to its guarantees. There has never been a default on any moral obligation debt
of any Authority.
LITIGATION. Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on the State
finances. Among the more significant of these cases are those that involve (a)
the validity of agreements and treaties by which various Indian tribes
transferred title to the State certain land in central and upstate New York;
(b)
certain aspects of the State's Medicaid rates regulations and policies,
including reimbursements to providers of mandatory and optional Medicaid
services; (c) contamination in the Love Canal area of Niagara Falls; (d) an
action against State and City officials alleging inadequate shelter allowances
to maintain proper housing; employment discrimination by the State and its
agencies; (e) challenges to the practice of reimbursing certain Office of
Mental
Health patient care expenses from the client's Social Security benefits; (f)
alleged responsibility of State officials to assist in remedying racial
segregation in the City of Yonkers; (g) a challenge to the methods by which
the
State reimburses localities for the administrative costs of food stamp
programs;
(h) an action, for injunctive or other appropriate relief, concerning
liability
for the maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (i) action by school districts and their employees
challenging the constitutionality of Chapter 175 of the Laws of 1990 which
deferred school district contributions to the public retirement system and
reduced by like amount state aid to the school districts; (j) challenges to
portions of Public Health Law, which imposed a 13% surcharge on inpatient
hospital bills paid by commercial insurers and employee welfare benefit plans
and portions of Chapter 55 of the Laws of 1992 requiring hospitals to impose
and
remit to the State an 11% surcharge on hospital bills paid by commercial
insurers, and which required health maintenance organizations to remit to the
State a surcharge of up to 9%; and (k) a challenge to provisions of the Public
Health Law and implementing regulations that imposed a bad debt and charity
care
allowance on all hospital bills and a 13% surcharge on inpatient bills paid by
employee welfare benefit plans.
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A number of cases have also been instituted against the State challenging
the constitutionality of various public authority financing programs. In
SCHULZ,
ET AL. V. STATE OF NEW YORK, a proceeding was commenced on April 29, 1991 in
the
Supreme Court, Albany County, challenging the constitutionality of certain
state
bonding and financing programs authorized by Chapter 190 of the Laws of 1990.
By
opinion dated May 11, 1993, the Court of Appeals held that petitioners have
standing as voters pursuant to Section 11 of Article VII of the State but
affirmed the order dismissing the proceeding on the ground of laches.
In a proceeding commenced on August 6, 1991 (SCHULZ, ET AL. V. STATE OF
NEW
YORK, ET AL., Supreme Court, Albany County), petitioners challenge the
constitutionality of two bonding programs of the New York State Thruway
Authority authorized by Chapters 166 and 410 of the Laws of 1991. In addition,
petitioners challenge the fiscal year 1991-92 judiciary budget as having been
enacted in violation of Sections 1 and 2 of Article VII of the State
Constitution. The defendants' motion to dismiss the action on procedural
grounds
was denied by order of the Supreme Court dated January 2, 1992. By order dated
November 5, 1992, the Appellate Division, Third Department, reversed the order
of the Supreme Court and granted defendants' motion to dismiss on grounds of
standing and mootness. By order dated September 16, 1993, on motion to
reconsider, the Appellate Division, Third Department, ruled that plaintiffs
have
standing to challenge the bonding program authorized by Chapter 166 of the
laws
of 1991. The proceeding is presently pending in Supreme Court, Albany County.
In an action commenced on February 6, 1992 (SCHULZ, ET AL. V. STATE OF NEW
YORK, ET AL., Supreme Court, Albany County) plaintiffs seek a judgment
declaring
unconstitutional sections 1, 2, 3 and 10 of Chapter 220 of the Laws of 1990
which relate to the creation and operation of LGAC. On March 3, 1992 the
Supreme
Court, Albany County, granted defendants' motion for summary judgment in all
respects and dismissed the complaint. On July 23, 1992 the Appellate Division,
Third Department, modified and affirmed the judgment of the Supreme Court,
holding that the plaintiffs lacked standing. By opinion dated May 11, 1993,
the
Court of Appeals denied plaintiffs' motion for leave to appeal and dismissed
the
litigation. The Court noted that plaintiffs had failed to plead standing as
voters pursuant to Section 11 of Article VII of the State Constitution, and,
thus, the motion for leave to appeal did not directly involve a substantial
constitutional question.
In SCHULZ, ET AL. V. STATE OF NEW YORK, ET AL., commenced May 24, 1993,
Supreme Court, Albany County, petitioners challenge, among other things, the
constitutionality of, and seek to enjoin certain highway, bridge and mass
transportation bonding programs of the New York State Thruway Authority and
the
Metropolitan Transportation Authority authorized by Chapter 56 of the Laws of
1993. Petitioners contend that the application of State tax receipts held in
dedicated transportation funds to pay debt service on bonds of the Thruway
Authority and of the Metropolitan Transportation Authority violates Sections 8
and 11 of Article VII and Section 5 of Article X of the State Constitution and
due process provisions of the State and Federal Constitutions. By order dated
July 27, 1993, the Supreme Court granted defendants' motions for summary
judgment, dismissed the complaint, and vacated the temporary restraining order
previously issued. By decision dated October 21, 1993, the Appellate Division,
Third Department, affirmed the judgment of the Supreme Court. Plaintiffs'
appeal
of the decision of the Appellate Division is pending in the Court of Appeals.
Several actions challenging the constitutionality of legislation enacted
during the 1990 legislative session which changed actuarial funding methods
for
determining state and local contributions to state employee retirement systems
have been decided against the State. The U.S. Supreme Court's decision in a
case
challenging the State's possession of certain property taken pursuant
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to the State's Abandoned Property Law may result in the State having to make
certain payments during the 1993-94 fiscal year.
The legal proceedings noted above involve State finances, State programs
and
miscellaneous tort, real property and contract claims in which the State is a
defendant and the monetary damages sought are substantial. These proceedings
could affect adversely the financial condition of the State in the 1993-1994
fiscal year or thereafter. Adverse developments in these proceedings or the
initiation of new proceedings could affect the ability of the State to
maintain
a balanced 1993-94 State Financial Plan. An adverse decision in any of these
proceedings could exceed the amount of the 1993-94 State Financial Plan
reserve
for the payment of judgments and, therefore, could affect the ability of the
State to maintain a balanced 1993-94 State Financial Plan. In its audited
financial statements for the 1991-92 fiscal year, the State has reported its
estimate for awarded and anticipated unfavorable judgments to be $489 million.
Although other litigation is pending against the State, except as described
above, no current litigation involves New York State's authority, as a matter
of
law, to contract indebtedness, issue its obligations, or pay such indebtedness
when it matures, or affects the State's power or ability, as a matter of law,
to
impose or collect significant amounts of taxes and revenues.
AUTHORITIES. The fiscal stability of the State is related to the fiscal
stability of its Authorities, which generally have responsibility for
financing,
constructing and operating revenue-producing public benefit facilities.
Authorities are not subject to the constitutional restrictions on the
incurrence
of debt which apply to the State itself, and may issue bonds and notes within
the amounts of, and as otherwise restricted by, their legislative
authorization.
As of September 30, 1992, the latest data available, there were 18 Authorities
that had outstanding debt of $100 million or more. The aggregate outstanding
debt, including refunding bonds, of these 18 Authorities was $62.2 billion as
of
September 30, 1992, of which approximately $8.2 billion was moral obligation
debt and approximately $17.1 billion was financed under lease-purchase or
contractual-obligation financing arrangements.
Authorities are generally supported by revenues generated by the projects
financed or operated, such as fares, user fees on bridges, highway tolls and
rentals for dormitory rooms and housing. In recent years, however, New York
State has provided financial assistance through appropriations, in some cases
of
a recurring nature, to certain of the 18 Authorities for operating and other
expenses and, in fulfillment of its commitments on moral obligation
indebtedness
or otherwise, for debt service. This operating assistance is expected to
continue to be required in future years. The State provided $947.4 million and
$955.5 million in financial assistance to the 18 Authorities during the
State's
1991-92 and 1992-93 fiscal years, respectively, and expects to provide
approximately $1,096.6 million in financial assistance to these Authorities in
its 1993-94 fiscal year. The amounts set forth above exclude, however, amounts
provided for capital construction and pursuant to lease-purchase or
contractual-obligation (including service contract debt) financing
arrangements.
Experience has shown that if an Authority suffers serious financial
difficulties, both the ability of the State and the Authorities to obtain
financing in the public credit markets and the market price of the State's
outstanding bonds and notes may be adversely affected. The New York State
Housing Finance Agency and the New York State Urban Development Corporation
have
in the past required substantial amounts of assistance from the State to meet
debt service costs or to pay operating expenses. Further assistance, possibly
in
increasing amounts, may be required for these, or other, Authorities in the
future. In addition, certain statutory arrangements provide for State local
assistance payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid to Authorities
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under these arrangements. However, in the event that such local assistance
payments are so diverted, the affected localities could seek additional State
funds.
NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State is closely
related to the fiscal health of its localities, particularly the City, which
has
required and continues to require significant financial assistance from the
State. The City's independently audited operating results for each of its 1981
through 1993 fiscal years, which end on June 30, show a General Fund surplus
reported in accordance with GAAP. The City has eliminated the cumulative
deficit
in its net General Fund position. In addition, the City's financial statements
for the 1993 fiscal year received an unqualified opinion from the City's
independent auditors, the eleventh consecutive year the City has received such
an opinion.
In 1975, the City suffered a fiscal crisis that impaired the borrowing
ability of both the City and State. In that year the City lost access to
public
credit markets. The City was not able to sell short-term notes to the public
again until 1979. Since 1981, the City has fully satisfied its seasonal
financing needs with sales of short-term notes in the public credit markets
ranging from $850 million in fiscal year 1985 to $1.2 billion in fiscal year
1989.
On February 11, 1991, Moody's lowered their rating on the City's general
obligation bonds to "Baa1" from "A." Moody's expressed doubts about whether
the
City's January 16, 1991 financial plan presents "reasonable program to achieve
budget balance in fiscal 1991 and 1992 and assure long-term structural
integrity." Moody's stated "the enormity of the current problem, the severity
of
required expenditure cuts, the substantial revenue enhancements that will be
required to achieve balance, the vulnerability to exogenous factors, and the
extremely short time frame within which all this must be accomplished
introduce
substantial new risk to the City's short-and long-term credit outlook." On
November 6, 1991, commenting on New York City's 1992-1996 Financial Plan, S&P
stated that "at first glance, the proposals fall short of a structural change
in
[C]ity finances and operations, and represent only a timetable for potential
balancing actions, dependent on future decisions by [C]ity and [S]tate
officials
for implementation." S&P noted that "without early commitments to the longer
term actions in the plan, the use of debt refinancing by the Municipal
Assistance Corporation for a two-year tax freeze would be little more than
deficit financing, and negative for the City's current single 'A' minus
rating."
On April 29, 1991, S&P downgraded the City's outstanding $1.3 billion of
general
obligation revenue and anticipation notes from "SP-1" to "SP-2." S&P also
announced a rating of "SP-2" for the City's offering of $1.25 billion of
general
obligation revenue anticipation notes. The lower ratings of S&P "reflect the
City's aggravated short-term cash position for fiscal 1991, the unusually high
level of total revenue anticipation note exposure resulting from the State's
delay in passing its budget and distributing fiscal aid, and continued
pressure
on revenues and expenditures due to prevailing economic conditions." On April
30, 1991, Moody's assigned a rating of "MIG-2" to the same offering of $1.25
billion of general obligation revenue anticipation notes. Moody's stated that
"although an increasingly strained financial outlook for both the City and the
State complicates the State budget adoption process, this rating on revenue
anticipation notes relies explicitly on the expectation that the State is
fully
cognizant of the consequences of further untimely delays in state budget
adoption and will act responsibly. Failure of the State to find a timely
resolution to the budget process will have severe implications for the normal
financial performance of the City and other local governments in the State."
On
October 7, 1991, Moody's again assigned a "MIG-2" rating to the City's $1.25
billion of revenue anticipation notes, fiscal 1992, Series A.
Moody's stated in its January 6, 1992 downgrade of certain State
obligations
that while such action did not directly affect the bond ratings of local
governments in the State, the impact of its fiscal stringency on local
government bond ratings will be assessed on a
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case-by-case basis. On June 22, 1992, Moody's gave its "MIG-1" rating to the
City's $1.4 billion revenue anticipation notes and tax anticipation notes
citing
the City's "markedly improved" short-term credit position.
On July 6, 1993, S&P reaffirmed the City's "A-" rating on $20.4 billion of
general obligation bonds stating that "[t]he City has identified additional
gap-
closing measures that have recurring value and will reduce next year's budget
gap...by approximately $400 million." Officials at Moody's also indicated that
there were no plans to alter its "Baa1" rating on the City's general
obligation
bonds.
The City is heavily dependent on the State and Federal assistance to cover
insufficiencies in its revenues. There can be no assurance that in the future
federal and State assistance will enable the City to make up its budget
deficits. To help alleviate the City's financial difficulties, the Legislature
created the Municipal Assistance Corporation ("MAC") in 1975. MAC is
authorized
to issue bonds and notes payable from certain stock transfer tax revenues,
from
the City's portion of the State sales tax derived in the City and from State
per
capita aid otherwise payable by the State to the City. Failure by the State to
continue the imposition of such taxes, the reduction of the rate of such taxes
to rates less than those in effect on July 2, 1975, failure by the State to
pay
such aid revenues and the reduction of such aid revenues below a specified
level
are included among the events of default in the resolutions authorizing MAC's
long-term debt. The occurrence of an event of default may result in the
acceleration of the maturity of all or a portion of MAC's debt. As of
September
30, 1993, MAC had outstanding an aggregate of approximately $5.304 billion of
its bonds. MAC bonds and notes constitute general obligations of MAC and do
not
constitute an enforceable obligation or debt of either the State or the City.
Under its enabling legislation, MAC's authority to issue bonds and notes
(other
than refunding bonds and notes) expired on December 31, 1984. Legislation has
been passed by the legislature which would, under certain conditions, permit
MAC
to issue up to $1.465 billion of additional bonds, which are not subject to a
moral obligation provision.
Since 1975, the City's financial condition has been subject to oversight
and
review by the New York State Financial Control Board (the "Control Board") and
since 1978 the City's financial statements have been audited by independent
accounting firms. To be eligible for guarantees and assistance, the City is
required during a "control period" to submit annually for Control Board
approval, and when a control period is not in effect for Control Board review,
a
financial plan for the next four fiscal years covering the City and certain
agencies showing balanced budgets determined in accordance with GAAP. The
State
also established the Office of the State Deputy Comptroller for New York City
("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
requirements for termination of the control period. This means that the
Control
Board's powers of approval are suspended, but the Board continues to have
oversight responsibilities.
On November 23, 1993, the City submitted to the Control Board a
modification
to its 1994-1997 Financial Plan (the "November Modification")
incorporating
various re-estimates of revenues and expenditures. For fiscal year 1994,
the
November Modification includes additional resources stemming primarily from
the
City comptroller's fiscal year 1993 annual audit, savings from a reduction
in
prior years' accrued expenditures, and higher State and federal aid
resulting
from claims by the City for reimbursement of various social services
costs.
These resources were used to offset new risks to the November
Modification
including higher costs in the uniformed agencies, at the Board of
Education
("BOE") and for certain social services, the unlikelihood of the sale of
certain
City assets, and lower estimates of miscellaneous and other revenues.
After
taking these adjustments into account, the November Modification projects
a
balanced budget for fiscal year 1994, based upon revenues of $31.585
billion.
For fiscal years 1995,
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1996 and 1997, the November Modification projects budget gaps of $1.730
billion,
$2.513 billion and $2.699 billion, respectively. These gaps are higher by
about
$450 million in fiscal year 1995 and by about $700 million in each of fiscal
years 1996 and 1997 than in the 1994-97 Financial Plan, primarily on account
of
the recurring value of the fiscal year 1994 revenue and expenditure
adjustments,
the loss of certain one-time resources funding BOE fiscal year 1994 spending
needs, and the reclassification of anticipated State aid from the baseline
revenue estimates to the gap-closing program. To offset these larger gaps, the
November Modification relies on additional City, State and other actions.
OSDC and the staff of the Control Board are examining the November
Modification and are expected to report on the results of their review.
Estimates of the City's revenues and expenditures are based on numerous
assumptions and are subject to various uncertainties. If expected federal or
State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City should
negotiate wage increases for its employees greater than the amounts provided
for
in the City's financial plan or if other uncertainties materialize that reduce
expected revenues or increase projected expenditures, then, to avoid operating
deficits, the City may be required to implement additional actions, including
increases in taxes and reductions in essential City services. The City might
also seek additional assistance from the State.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City has issued $1.75 billion of notes for seasonal
financing purposes during its 1994 fiscal year. The City's capital financing
program projects long-term financing requirements of approximately $16.3
billion
for the City's fiscal years 1994 through 1997 for the construction and
rehabilitation of the City's infrastructure and other fixed assets. The major
capital requirements include expenditures for the City's water supply system,
sewage and waste disposal systems, roads, bridges, mass transit, schools and
housing. In addition to financing for new purposes, the City and the New York
City Municipal Water Finance Authority have issued refunding bonds totalling
$1.5 billion in fiscal year 1994.
Certain localities, in addition to the City, could have financial problems
leading to requests for additional State assistance during the State's 1993-94
fiscal year and thereafter. The potential impact on the State of such actions
by
localities is not included in the projections of the State receipts and
disbursements in the State's 1993-94 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted
in the creation of the Financial Control Board for the City of Yonkers (the
"Yonkers Board") by the State in 1984. The Yonkers Board is charged with
oversight of the fiscal affairs of Yonkers. Future actions taken by the
Governor
or the Legislature to assist Yonkers could result in allocation of State
resources in amounts that cannot yet be determined.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1991, the total indebtedness of all localities in
the State was approximately $32.2 billion, of which $16.8 billion was debt of
the City (excluding $6.7 billion in MAC debt); a small portion (approximately
$39.0 million) of the $32.2 billion of indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to enabling the State
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than the City authorized by State law to issue debt to finance deficits during
the period that such deficit financing is outstanding. Fifteen localities had
outstanding indebtedness for deficit financing at the close of their fiscal
year
ending in 1991.
In 1992, an unusually large number of local government units requested
authorization for deficit financings. According to the State's comptroller,
ten
local government units have been authorized to issue deficit financing in the
aggregate amount of $131.1 million. The current
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session of the Legislature may receive as many or more requests for
deficit-financing authorizations as a result of deficits previously incurred
by
local governments. Although the comptroller has indicated that the level of
deficit financing requests is unprecedented, such developments are not
expected
to have a material adverse effect on the financial condition of the State.
Certain proposed Federal expenditure reductions would reduce, or in some
cases eliminate, federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities
to
increase local revenues to sustain those expenditures. If the State, City or
any
of the Authorities were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes
and bonds issued by localities within the State could be adversely affected.
Localities also face anticipated and potential problems resulting from certain
pending litigation, judicial decisions and long-range economic trends. The
longer-range potential problems of declining urban population, increasing
expenditures and other economic trends could adversely affect certain
localities
and require increasing State assistance in the future.
RATINGS AS INVESTMENT CRITERIA
In general, the ratings of Moody's, S&P and Fitch Investors Service, Inc.
("Fitch") represent the opinions of those agencies as to the quality of debt
obligations that they rate. These ratings, however, are relative and
subjective,
are not absolute standards of quality and do not evaluate the market risk of
securities. Ratings will be used with respect to the Muni Funds as initial
criteria for the selection of portfolio securities; the Muni Funds will also
rely upon the independent advice of Greenwich Street Advisor to evaluate
potential investments. Among the factors that will be considered by Greenwich
Street Advisors are the long-term ability of the issuer to pay principal and
interest and general economic trends. The Appendix to this Statement of
Additional Information contains further information concerning the ratings of
Moody's, S&P and Fitch, together with a brief discussion of the significance
of
those ratings.
An issue of debt obligations may, subsequent to its purchase by a Muni
Fund,
cease to be rated or its ratings may be reduced below the minimum required for
purchase by the Muni Fund. Neither event will require the sale of the debt
obligation by a Muni Fund, but Greenwich Street Advisors will consider the
event
in its determination of whether the Muni Fund should continue to hold the
obligation. In addition, to the extent that ratings change as a result of
changes in rating organizations or their rating systems or as a result of a
corporate restructuring of Moody's, S&P or Fitch, Greenwich Street will
attempt
to use comparable ratings as standards for each Muni Fund's investments.
MISCELLANEOUS INVESTMENT POLICIES
Each Fund may invest up to an aggregate amount equal to 10% of its net assets
in
illiquid securities, which term includes securities subject to contractual or
other restrictions on resale and other instruments that lack readily available
markets. None of the Funds will lend its portfolio securities.
REPURCHASE AGREEMENTS
Each Muni Fund may engage in repurchase agreement transactions with banks
which
are the issuers of instruments acceptable for purchase by the Fund and certain
dealers on the Federal Reserve Bank of New York's list of reporting dealers. A
repurchase agreement is a contract under which the buyer of a security
simultaneously commits to resell the security to the seller at an agreed-upon
price on an agreed-upon date. Under the terms of a typical repurchase
agreement,
a Fund would acquire an underlying debt obligation for a relatively short
period
subject to an obligation of the seller to repurchase, and the Fund to resell,
the obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. This arrangement results in a fixed rate of
return that is not subject to market fluctuations during the Fund's holding
period.
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Under each repurchase agreement, the selling institution will be required to
maintain the value of the securities subject to the repurchase agreement at
not
less than their repurchase price. Although the amount of a Fund's assets that
may be invested in purchase agreements terminable in less than seven days is
not
limited, repurchase agreements maturing in more than seven days, together with
other securities lacking readily available markets held by the Fund, will not
exceed 10% of the Fund's net assets.
The value of the securities underlying a repurchase agreement of a Fund
will
be monitored on an ongoing basis by Greenwich Street Advisors or Boston
Advisors
to ensure that the value is at least equal at all times to the total amount of
the repurchase obligation, including interest. Greenwich Street Advisors or
Boston Advisors will also monitor, on an ongoing basis to evaluate potential
risks, the creditworthiness of the banks and dealers with which a Fund enters
into repurchase agreements.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
When a Fund engages in when-issued or delayed delivery securities
transactions,
it will rely on the other party to consummate the trade. Failure of the seller
to do so may result in a Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 14 below have been adopted by
the
Trust as fundamental policies of the Funds. Under the 1940 Act, a fundamental
policy may not be changed with respect to a Fund without the vote of a
majority
of the outstanding voting securities of the Fund. Majority is defined in the
1940 Act as the lesser of (a) 67% or more of the shares present at a Trust
meeting, if the holders of more than 50% of the outstanding shares of the
Trust
are present or represented by proxy, or (b) more than 50% of outstanding
shares.
Investment restrictions 15 through 19 may be changed by a vote of a majority
of
the Trust's Board of Trustees at any time.
Under the investment restrictions adopted by the Trust with respect to the
Funds:
1. No Muni Fund will purchase securities other than Municipal Obligations
and Taxable Investments as those terms are defined in the Muni Prospectus
or
this Statement of Additional Information.
2. Neither the Treasury Fund nor the Municipal Fund will purchase
securities (other than U.S. government securities) of any issuer if, as a
result of the purchase, more than 5% of the value of the Fund's total
assets
would be invested in the securities of the issuer, except that up to 25%
of
the value of the Fund's total assets may be invested without regard to
this
5% limitation.
3. Neither the Treasury Fund nor the Municipal Fund will purchase more
than
10% of the voting securities of any one issuer, except that this
limitation
is not applicable to a Fund's investments in U.S. government securities,
and
up to 25% of a Fund's assets may be invested without regard to this 10%
limitation.
4. No Fund will invest more than 25% of the value of its total assets in
securities of issuers in any one industry, except that this limitation is
not applicable to a Fund's investments in U.S. government securities.
5. No Fund will borrow money, except that a Fund may borrow from banks
for
temporary or emergency (not leveraging) purposes, including the meeting of
redemption requests 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 a Fund's borrowings exceed 5% of the value of its total assets,
the
Fund will not make any additional investments.
25
<PAGE>
6. No Fund will pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
7. No Fund will lend money to other persons, except, with respect to the
Treasury Fund, through purchasing debt obligations, and, except, with
respect to each of the Muni Funds, through purchasing Municipal
Obligations
or Taxable Investments and entering into repurchase agreements, each in a
manner consistent with the Muni Fund's investment objective and policies.
8. No Fund will purchase securities on margin, except that a Fund may
obtain any short-term credits necessary for the clearance of purchases and
sales of securities.
9. No Fund will make short sales of securities or maintain a short
position.
10. No Fund will purchase or sell real estate or real estate limited
partnership interests.
11. No Fund will purchase or sell commodities or commodity contracts.
12. No Fund will act as an underwriter of securities, except that a Fund
may
acquire securities under circumstances in which, if the securities were
sold, the Fund could be deemed to be an underwriter for purposes of the
Securities Act of 1933, as amended.
13. No Fund will invest in oil, gas or other mineral leases or exploration
or development programs.
14. No Fund may write or sell puts, calls, straddles, spreads or
combinations of those transactions, except as permitted under the Fund's
investment objective and policies.
15. No Fund will purchase any security if, as a result (unless the
security
is acquired pursuant to a plan of reorganization or an offer of exchange),
the Fund would own any securities of an open-end investment company or
more
than 3% of the total outstanding voting stock of any closed-end investment
company, or more than 5% of the value of the Fund's total assets would be
invested in securities of any one or more closed-end investment companies.
16. No Fund will purchase a security if, as a result, the Fund would then
have more than 5% of its total assets invested in securities of issuers
(including predecessors) that have been in continuous operation for fewer
than three years, except that this limitation will be deemed to apply to
the
entity supplying the revenues from which the issue is to be paid, in the
case of private activity bonds purchased on behalf of any of the Muni
Funds.
17. No Fund may make investments for the purpose of exercising control of
management.
18. No Fund will purchase or retain securities of any issuer if, to the
knowledge of the Trust, any of the Trust's officers or Trustees or any
officer or director of Greenwich Street Advisors or Boston Advisors
individually owns more than 1/2 of 1% of the outstanding securities of the
issuer and together they own beneficially more than 5% of the securities.
19. No Fund will lend its portfolio securities.
The Trust may make commitments more restrictive than the restrictions
listed
above to enable the sale of shares of any Fund in certain states. Should the
Trust determine that a commitment is no longer in the best interests of a Fund
and its shareholders, the Trust will revoke the commitment by terminating the
sale of shares of the Fund in the state involved. The percentage limitations
contained in the restrictions listed above apply at the time of purchases of
securities.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for each Fund are made by the Greenwich
Street Advisors, subject to the overall review of the Trust's Board of
Trustees.
Although investment decisions for each Fund are made independently from those
of
the other accounts managed by Greenwich Street Advisors, investments of the
type
that a Fund may make also may be made by those other accounts. When a Fund and
one or more other accounts managed by Greenwich Street Advisors are prepared
to
invest in, or desire to dispose of, the same security, available investments
or
opportunities for sales will be
26
<PAGE>
allocated in a manner believed by Greenwich Street Advisors to be equitable to
each. In some cases, this procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or disposed of by a
Fund. The Trust has paid no brokerage commissions since its commencement of
operations.
Allocation of transactions on behalf of the Funds, including their
frequency, to various dealers is determined by Greenwich Street Advisors in
its
best judgment and in a manner deemed fair and reasonable to the Funds'
shareholders. The primary considerations of Greenwich Street Advisors in
allocating transactions are availability of the desired security and the
prompt
execution of orders in an effective manner at the most favorable prices.
Subject
to these considerations, dealers that provide supplemental investment research
and statistical or other services to Greenwich Street Advisors may receive
orders for portfolio transactions by a Fund. Information so received is in
addition to, and not in lieu of, services required to be performed by
Greenwich
Street Advisors, and the fees of Greenwich Street Advisors are not reduced as
a
consequence of their receipt of the supplemental information. The information
may be useful to Greenwich Street Advisors in serving both a Fund and other
clients, and conversely, supplemental information obtained by the placement of
business of other clients may be useful to Greenwich Street Advisors in
carrying
out their obligations to a Fund.
No Fund will purchase U.S. government securities or Municipal Obligations
during the existence of any underwriting or selling group relating to the
securities, of which Greenwich Street Advisors is a member, except to the
extent
permitted by the SEC. Under certain circumstances, a Fund may be at a
disadvantage because of this limitation in comparison with other funds that
have
similar investment objectives but that are not subject to a similar
limitation.
PORTFOLIO TURNOVER
A Fund's portfolio turnover rate (the lesser of purchases or sales of
portfolio
securities during the year, excluding purchases or sales of short-term
securities, divided by the monthly average value of portfolio securities)
generally is not expected to exceed 100%, but the portfolio turnover rate will
not be a limiting factor whenever a Fund deems it desirable to sell or
purchase
securities. Securities may be sold in anticipation of a rise in interest rates
(market decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. In addition, a security may be sold and another
security of comparable quality may be purchased at approximately the same time
in order to take advantage of what the Fund believes to be a temporary
disparity
in the normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the investment
quality
of particular issues or the general movement of interest rates, such as
changes
in the overall demand for supply of (in the case of the Muni Funds) various
types of tax-exempt securities.
The portfolio turnover rates are as follows:
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
FUND 11/30/93 11/30/92
- ----------------------------------------- ---------- ----------
<S> <C> <C>
Treasury Fund............................ 104% 188%
Municipal Fund........................... 4% 22%
California Fund.......................... 16% 46%
New York Fund............................ 22% 68%
</TABLE>
PURCHASE OF SHARES
VOLUME DISCOUNTS
The schedules of sales charges described in the Prospectuses applies to
purchases of shares of each Fund made by any "purchaser," which term is
defined
to include the following: (a) an individual; (b) an individual, his or her
immediate family purchasing shares for his or her own account; (c) a trustee
or
other professional fiduciary purchasing shares for one or more trust estates
or
fiduciary accounts even though more than one beneficiary is involved; (d) a
pension, profit-sharing or other employee benefit plan qualified under Section
401 of the Code and qualified employee benefit plans of employers who are
"affiliated persons" of each other within the meaning of the 1940 Act; (e)
tax-exempt organizations enumerated in Section 501(c)(3) or (13) of the Code;
or
27
<PAGE>
(f) any other organized group of persons, provided that the organization has
been in existence for at least six months and was organized for a purpose
other
than the purchase of investment company securities at a discount. Purchasers
who
wish to combine purchase orders to take advantage of volume discounts should
contact their Smith Barney Shearson Financial Consultants.
COMBINED RIGHT OF ACCUMULATION
Reduced sales charges, in accordance with the schedules in the Prospectuses,
apply to any purchase of shares of a Fund by any "purchaser" (as defined
above).
The reduced sales charge is subject to confirmation of the shareholder's
holdings through a check of appropriate records. The Trust reserves the right
to
terminate or amend the combined right of accumulation at any time after notice
to shareholders.
REDEMPTION OF SHARES
Detailed information on how to redeem shares of the Funds is included in the
Prospectuses. The right of redemption of shares of each Fund may be suspended,
or the date of payment postponed (a) for any periods during which the New York
Stock Exchange, Inc. (the "NYSE") is closed (other than for customary weekend
and holiday closings), (b) when trading in the markets the Fund normally
utilizes is restricted, or an emergency, as defined by the rules and
regulations
of the SEC, exists making disposal of the Fund's investments or determination
of
its net asset value not reasonably practicable or (c) for any other periods as
the SEC by order may permit for the protection of the Fund's shareholders.
AUTOMATIC CASH WITHDRAWAL PLAN
An automatic cash withdrawal plan (the "Withdrawal Plan") is available to a
shareholder of any Fund who owns shares of the Fund with a value of at least
$10,000 ($5,000 for retirement plan accounts) and who wishes to receive
specific
amounts of cash periodically. Withdrawals of at least $50 monthly may be made
under the Withdrawal Plan by redeeming as many shares of the Fund as may be
necessary to cover the stipulated withdrawal payment. Any applicable CDSC will
not be waived on amounts withdrawn by shareholders that exceed 2% per month of
the value of a shareholder's shares at the time the Withdrawal Plan commences.
To the extent that withdrawals exceed dividends, distributions and
appreciation
of a shareholder's investment in a Fund, the shareholder will experience a
reduction in the value of his or her investment and continued withdrawal
payments may reduce the shareholder's investment and ultimately exhaust it.
Withdrawal payments should not be considered as income from investment in a
Fund. In addition, because making an additional investment in a Fund at the
same
time a shareholder is participating in the Withdrawal Plan generally would not
be advantageous to the shareholder, purchases by a participating shareholder
of
additional shares in the Fund in amounts less than $5,000 will not ordinarily
be
permitted.
A shareholder of a Fund who wishes to participate in the Withdrawal Plan
and
who holds his or her shares of the Fund in certificate form must deposit the
certificates with TSSG, as agent for Withdrawal Plan participants. All
dividends
and distributions on shares in the Withdrawal Plan are reinvested
automatically
at net asset value in additional shares of the Fund involved. All applications
for participation in the Withdrawal Plan must be received by TSSG as plan
agent
no later than the eighth day of each month to ensure eligibility for
participation beginning with that month's withdrawal. The Withdrawal Plan will
not be carried over on exchanges between Funds; a new Withdrawal Plan
application is required to establish the Plan with respect to the new Fund.
For
additional information regarding the Withdrawal Plan, investors should contact
their Smith Barney Shearson Financial Consultants.
DISTRIBUTOR
Smith Barney Shearson serves as the Trust's distributor on a best efforts
basis
pursuant to a distribution agreement (the "Distribution Agreement").
Smith Barney Shearson forwards investors' funds for the purchase of
shares
five business days after placement
28
<PAGE>
of purchase orders (i.e., the "settlement date"). When payment is made by the
investor before the settlement date, unless otherwise directed by the
investor,
the funds will be held as a free credit balance in the investor's brokerage
account, and Smith Barney Shearson may benefit from the temporary use of the
funds. The investor may designate another use for the funds prior to
settlement
date, such as an investment in a money market fund (other than the Smith
Barney
Shearson Money Market Fund) in the Smith Barney Shearson Group of Funds. If
the
investor instructs Smith Barney Shearson to invest the funds in a money market
fund, the amount of the investment will be included as part of the average
daily
net assets of both the relevant Fund and the money market fund, and affiliates
of Smith Barney Shearson which serve the funds in an investment advisory
capacity will benefit from the fact that they are receiving fees from both
such
investment companies for managing these assets computed on the basis of their
average daily net assets. The Trust's Board of Trustees has been advised of
the
benefits to Smith Barney Shearson resulting from five-day settlement
procedures
and will take such benefits into consideration when reviewing the Advisory and
Distribution Agreements for continuance.
DISTRIBUTION ARRANGEMENTS
Shares of the Trust are distributed on a best efforts basis by Smith Barney
Shearson as exclusive sales agent of the Trust pursuant to the Distribution
Agreement. To compensate Smith Barney Shearson for the services it provides
and
for the expense it bears under the Distribution Agreement, the Trust has
adopted
a services and distribution plan (the "Plan") pursuant to Rule 12b-1 under the
1940 Act. Under the Plan, each Fund pays Smith Barney Shearson a service fee,
accrued daily and paid monthly, calculated at the annual rate of .15% of the
value of the Fund's average daily net assets attributable to the Fund's
shares.
During the period from December 31, 1991 through November 30, 1992,
Shearson
Lehman Brothers Inc. ("Shearson Lehman Brothers"), the Trust's distributor
prior
to Smith Barney Shearson, received $90,238 in the aggregate from the Trust
under
the Plan. For the same period, Smith Barney Shearson also received $10,561
representing CDSC on redemptions of shares of the Trust. For the fiscal year
ended November 30, 1993, Shearson Lehman Brothers and Smith Barney Shearson
received $269,091 in the aggregate from the Plan and $126,806 representing
CDSC.
Under its terms, the Plan continues from year to year provided such
continuance is approved annually by vote of the Board of Trustees, including a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan
(the
"Independent Trustees"). The Plan may not be amended to increase the amount to
be spent for the services provided by Smith Barney Shearson without
shareholder
approval, and all amendments of the Plan also must be approved by the Trustees
in the manner described above. The Plan may be terminated at any time, without
penalty, by vote of a majority of the Independent Trustees or, with respect to
any Fund, by vote of a majority of the outstanding voting securities of a Fund
(as defined in the 1940 Act). Pursuant to the Plan, Smith Barney Shearson will
provide the Board of Trustees with periodic reports of amounts expended under
the Plan and the purpose for which such expenditures were made.
VALUATION OF SHARES
As noted in the Prospectuses, a Fund's net asset value will not be calculated
on
certain holidays. In carrying out valuation policies adopted by the Trust's
Board of Trustees, Boston Advisors, as administrator, may consult with an
independent pricing service (the "Pricing Service") retained by the Trust.
Debt
securities of domestic issuers (other than U.S. government securities and
short-
term investments), including Municipal Obligations, are valued by Boston
Advisors after consultation with the Pricing Service. When, in the judgment of
the Pricing Service, quoted bid prices for investments are readily available
and
are representative of the bid side of the
29
<PAGE>
market, these investments are valued at the mean between the quoted bid prices
and asked prices. Investments for which no readily obtainable market
quotations
are available, in the judgment of the Pricing Service, are carried at fair
value
as determined by the Pricing Service. The procedures of the Pricing Service
are
reviewed periodically by the officers of the Trust under the general
supervision
and responsibility of the Board of Trustees.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange their shares for Class A shares of
certain
other funds in the Smith Barney Shearson Group of Funds, as indicated in the
Prospectus, to the extent such shares are offered for sale in the shareholders
state of residence.
Except as noted below, shareholders of any fund in the Smith Barney
Shearson
Group of Funds may exchange all or part of their shares for shares of the
other
funds in the Smith Barney Shearson Group of Funds, on the basis of relative
net
asset value per share at the time of exchange as follows:
A. Class A shares of any fund purchased with
a sales charge may be exchanged for Class A shares of any of the other
funds, and the sales charge differential, if any, will be applied. Class A
shares of any fund may be exchanged without a sales charge for shares of
the
funds that are offered without a sales charge. Class A shares of any fund
purchased without a sales charge may be exchanged for shares sold with a
sales charge, and the appropriate sales charge will be applied.
B. Class A shares of any fund acquired by a
previous exchange of shares purchased with a sales charge may be exchanged
for Class A shares of any of the other funds, and the sales charge
differential, if any, will be applied.
Dealers other than Smith Barney Shearson must notify the Fund's transfer
agent of the investor's prior ownership of shares of Smith Barney Shearson
High
Income Fund and their account number in order to accomplish an exchange of
shares of High Income Fund under paragraph B above.
The exchange privilege enables shareholders in any fund in the Smith
Barney
Shearson Group of Funds to acquire shares in a fund with different investment
objectives when they believe a shift between funds is an appropriate
investment
decision. This privilege is available to shareholders resident in any state in
which the fund shares being acquired may be legally sold. Prior to any
exchange,
the investor should obtain and review a copy of the current prospectus of each
fund into which an exchange is to be made. Prospectuses may be obtained from
your Smith Barney Shearson Financial Consultant.
Upon receipt of proper instructions and all necessary supporting
documents,
shares submitted for exchange are redeemed at the then-current net asset value
and the proceeds are immediately invested, at the price described above, in
shares of the fund being acquired. Smith Barney Shearson reserves the right to
reject any exchange request. Upon written notice, the exchange privilege may
be
modified or terminated at any time.
PERFORMANCE DATA
From time to time, the Trust may quote a Fund's yield or total return in
advertisements or in reports and other communications to shareholders.
YIELD AND EQUIVALENT TAXABLE YIELD
A Fund's 30-day yield figure described in the Prospectuses is calculated
according to a formula prescribed by the SEC, expressed as follows:
<TABLE>
<S> <C> <C>
YIELD = 2 [(a-b + 1)6 - 1]
cd
</TABLE>
<TABLE>
<S> <C> <C>
Where: a = dividends and interest earned
during the period.
b = expenses accrued for the period
(net of reimbursement).
c = the average daily number of
shares outstanding during the
period that were entitled to
receive dividends.
d = the maximum offering price per
share on the last day of the
period.
</TABLE>
30
<PAGE>
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by a Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
A Muni Fund's "equivalent taxable 30-day yield" is computed by dividing
that
portion of the Fund's 30-day yield that is tax-exempt by one minus a stated
income tax rate and adding the product to any portion of the Fund's yield that
is not tax-exempt. The yields for the 30-day period ended November 30, 1993
were
as follows: Treasury Fund 3.97%, Municipal Fund 3.47%, California Fund 4.11%,
and New York Fund 4.18%.
The equivalent taxable yields for the 30-day period ended November 30,
1993
assuming payment of Federal income taxes at the rate of 31%; California income
taxes at the rate of 9.3% for the California Fund; and New York State and City
income taxes at a rate of 11.785% for the New York Fund would have been as
follows: Municipal Fund 5.03%; California Fund 6.57%, and New York Fund
6.87%.
Investors should recognize that in periods of declining interest rates, a
Fund's yield will tend to be somewhat higher than prevailing market rates, and
in periods of rising interest rates will tend to be somewhat lower. In
addition,
when interest rates are falling, the inflow of net new money to a Fund from
the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of its portfolio of securities, thereby reducing
the current yield of the Fund. In periods of rising interest rates, the
opposite
can be expected to occur.
AVERAGE ANNUAL TOTAL RETURN
A Fund's "average annual total return" figures are computed according to a
formula prescribed by the SEC, expressed as follows:
P(1 + T)n = ERV
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial
payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a
hypothetical $1,000
investment made at the
beginning of a 1-, 5- or
10-year period at the end of
a 1-, 5- or 10-year period
(or fractional portion
thereof), assuming
reinvestment of all dividends
and distributions.
</TABLE>
The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period. A Fund's net investment income changes in
response
to fluctuations in interest rates and the expenses of the Fund.
The average annual total return figures for the Funds were as follows:
<TABLE>
<CAPTION>
ONE YEAR PERIOD
ENDED
NOVEMBER 30, 1993
----------------------------
TOTAL RETURN TOTAL RETURN
(WITH FEE (WITHOUT FEE
FUND NAME WAIVERS) WAIVERS)
---------------------------- ------------ ------------
<S> <C> <C>
Treasury Fund............... 9.22% 6.88%
Municipal Fund.............. 6.59% 4.27%
California Fund............. 9.79% 7.44%
New York Fund............... 9.25% 6.90%
</TABLE>
<TABLE>
<CAPTION>
PER ANNUM FOR
THE PERIOD OF
COMMENCEMENT OF
OPERATIONS (DECEMBER 31,
1991)
THROUGH NOVEMBER 30, 1993
----------------------------
TOTAL RETURN TOTAL RETURN
(WITH FEE (WITHOUT FEE
WAIVERS) WAIVERS)
------------ ------------
<S> <C> <C>
Treasury Fund............... 6.89% 6.19%
Municipal Fund.............. 6.69% 6.00%
California Fund............. 7.67% 6.97%
New York Fund............... 8.92% 8.21%
</TABLE>
31
<PAGE>
AGGREGATE TOTAL RETURN
A Fund's "aggregate total return" figures represent the cumulative change in
the
value of an investment in the Fund for the specified period and are computed
by
the following formula:
ERV - P
------------
P
<TABLE>
<S> <C> <C>
Where: P = a hypothetical initial
payment of $10,000.
ERV = Ending Redeemable Value of a
hypothetical $10,000
investment made at the
beginning of the 1-, 5- or
10-year period at the end of
the 1-, 5- or 10-year period
(or fractional portion
thereof), assuming
reinvestment of all dividends
and distributions.
</TABLE>
The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period.
The aggregate total return figures for the Funds were as follows:
<TABLE>
<CAPTION>
ONE YEAR PERIOD
ENDED
NOVEMBER 30, 1993
----------------------------
TOTAL RETURN TOTAL RETURN
(WITH FEE (WITHOUT FEE
FUND NAME WAIVERS) WAIVERS)
---------------------------- ------------ ------------
<S> <C> <C>
Treasury Fund............... 9.22% 6.88%
Municipal Fund.............. 6.59% 4.27%
California Fund............. 9.79% 7.44%
New York Fund............... 9.25% 6.90%
</TABLE>
<TABLE>
<CAPTION>
PER ANNUM FOR
THE PERIOD OF
COMMENCEMENT OF
OPERATIONS (DECEMBER 31,
1991)
THROUGH NOVEMBER 30, 1993
----------------------------
TOTAL RETURN TOTAL RETURN
(WITH FEE (WITHOUT FEE
WAIVERS) WAIVERS)
------------ ------------
<S> <C> <C>
Treasury Fund............... 13.62% 12.20%
Municipal Fund.............. 13.22% 11.82%
California Fund............. 15.22% 13.78%
New York Fund............... 17.79% 16.32%
</TABLE>
A Fund's net investment income changes in response to fluctuations in
interest rates and the expenses of the Fund. Consequently, the given
performance
quotations should not be considered as representative of the Fund's
performance
for any specified period in the future.
A Fund's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis
for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time. Investors
comparing a Fund's performance with that of other mutual funds should give
consideration to the quality and maturity of the respective investment
companies' portfolio securities.
TAXES
As described above and in the Muni Prospectus, each Muni Fund is designed to
provide investors with current income that is excluded from gross income for
Federal income tax purposes, and the California Fund and the New York Fund are
designed to provide investors with current income exempt from otherwise
applicable state and/or local taxes. None of the Muni Funds is intended to be
a
balanced investment program and none is designed for investors seeking capital
gains or maximum tax-exempt income irrespective of fluctuations in principal.
Investment in a Muni Fund would not be suitable for tax-exempt institutions,
qualified retirement plans, H.R. 10 plans and individual retirement accounts
because those investors would not gain any additional tax benefit from the
receipt of tax-exempt income.
The Trust intends that each Fund continue to qualify in each year as a
"regulated investment company" under the Code. If a Fund (a) is a regulated
investment company and (b) distributes to its shareholders at least 90% of its
taxable net investment income (including, for this purpose, its net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced
by
certain expenses), it will not be liable for Federal income taxes to the
extent
its taxable net investment income and its net realized long-term and short-
term
capital gains, if any, are distributed to its shareholders.
32
<PAGE>
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of a Muni Fund will not be deductible for Federal income tax purposes.
In
addition, the indebtedness is not deductible by a shareholder of the
California
Fund for California State income tax purposes, nor by a New York Fund
shareholder for New York State and New York City personal income tax purposes.
If a shareholder receives exempt-interest dividends with respect to any share
of
a Muni Fund and if the share is held by the shareholder for six months or
less,
then any loss on the sale or exchange of the share may, to the extent of the
exempt-interest dividends, be disallowed. In addition, the Code may require a
shareholder that receives exempt-interest dividends to treat as taxable income
a
portion of certain otherwise non-taxable social security and railroad
retirement
benefit payments. Furthermore, the portion of any exempt-interest dividend
paid
by a Muni Fund that represents income derived from private activity bonds held
by the Fund may not retain its tax-exempt status in the hands of a shareholder
who is a "substantial user" of a facility financed by the bonds, or a "related
person" of the substantial user. Moreover, as noted in the Muni Prospectus (a)
some or all of a Muni Fund's exempt-interest dividends may be a specific
preference item, or a component of an adjustment item, for purposes of the
Federal individual and corporate alternative minimum taxes and (b) the receipt
of a Muni Fund's dividends and distributions may affect a corporate
shareholder's Federal "environmental" tax liability. In addition, the receipt
of
a Muni Fund's dividends and distributions may affect a foreign corporate
shareholder's Federal "branch profits" tax liability and the Federal and
California "excess net passive income" tax liability of a Subchapter S
corporation. Shareholders should consult their own tax advisors to determine
whether they are (a) "substantial users" with respect to a facility or
"related"
to those users within the meaning of the Code or (b) subject to a Federal
alternative minimum tax, the Federal "environmental" tax, the Federal "branch
profits" tax, or the Federal or California "excess net passive income" tax. As
a
general rule, a Fund's gain or loss on a sale or exchange of an investment
will
be a long-term capital gain or loss if the Fund has held the investment for
more
than one year and will be a short-term capital gain or loss if it has held the
investment for one year or less. Furthermore, as a general rule, a
shareholder's
gain or loss on a sale or redemption of shares of a Fund will be a long-term
capital gain or loss if the shareholder has held his or her Fund shares for
more
than one year and will be a short-term capital gain or loss if he or she has
held his or her Fund shares for one year or less.
Shareholders of each Fund will receive, as more fully described in the
Prospectuses, an annual statement as to the income tax status of his or her
dividends and distributions for the prior calendar year. Each shareholder will
also receive, if appropriate, various written notices after the close of a
Fund's prior taxable year as to the Federal income tax status of certain
dividends or distributions which were received from the Fund during the Fund's
prior taxable year.
The dollar amount of dividends paid by a Muni Fund that is excluded from
Federal income taxation and the dollar amount of dividends paid by a Muni Fund
that is subject to federal income taxation, if any, will vary for each
shareholder depending upon the size and duration of each shareholder's
investment in a Muni Fund.
Investors considering buying shares of a Fund on or just prior to the
record
date for a capital gain distribution should be aware that the amount of the
forthcoming distribution payment will be a taxable distribution payment.
If a shareholder fails to furnish a correct taxpayer identification
number,
fails to report fully dividend or interest income or fails to certify that he
or
she has provided a correct taxpayer identification number and that he or she
is
not subject to "backup withholding," then the shareholder may be subject to a
31% "backup withholding" tax with respect to (a) taxable dividends and
distributions and (b) the proceeds of any redemptions of shares of a Fund. An
individual's taxpayer identification number is his or her social security
number. The backup withholding tax is not an additional tax and may be
credited
against a taxpayer's regular Federal income tax liability.
33
<PAGE>
The discussion above is only a summary of certain tax considerations
generally affecting a Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their
tax
advisors with specific reference to their own tax situations, including their
state and local tax liabilities.
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 for the Trust. The assets
of the Funds are held under bank custodianship in accordance with the 1940
Act.
Under its custody agreement with the Trust, Boston Safe is authorized to
establish separate accounts and securities depositories as sub-custodians of
assets owned by the Funds. For its custody services, Boston Safe receives
monthly fees charged to a Fund based upon the month-end, aggregate net asset
value of the Fund plus certain charges for securities transactions. Boston
Safe
is also reimbursed by each Fund for out-of-pocket expenses, including the
costs
of any sub-custodians.
TSSG is located at Exchange Place, Boston, Massachusetts 02109, and serves
as the Trust's transfer agent. Under the transfer agency agreement, TSSG
maintains the shareholder account records for the Trust, handles certain
communications between shareholders and the Trust and distributes dividends
and
distributions payable by each Fund. For these services TSSG receives from each
Fund a monthly fee computed on the basis of the number of shareholder accounts
maintained during the year for each Fund and is reimbursed for certain out-of-
pocket expenses.
ORGANIZATION OF THE TRUST
The Trust was organized as an unincorporated business trust under the laws of
The Commonwealth of Massachusetts pursuant to a Master Trust Agreement dated
October 17, 1991, as amended from time to time (the "Trust Agreement"). On
November 20, 1991 the trust changed its name from Shearson Lehman Brothers
Intermediate-Term Trust to Shearson Lehman Brothers Income Trust. On July 30,
1993 the Trust changed its name from Shearson Lehman Brothers Income Trust to
Smith Barney Shearson Income Trust. In the interest of economy and
convenience,
certificates representing shares in the Funds are not physically issued.
Boston
Safe maintains a record of each shareholder's ownership of Fund shares. Shares
of the Funds do not have cumulative voting rights, which means that holders of
more than 50% of the shares voting for the election of Trustees of the Trust
can
elect all Trustees. Shares of the Funds are transferable, but have no
preemptive, conversion or subscription rights.
Massachusetts law provides that shareholders of the Funds could, under
certain circumstances, be held personally liable for the obligations of the
Trust. The Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust, however, and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed
by
the Trust or a Trustee of the Trust. The Trust Agreement provides for
indemnification from the property of a Fund for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder's Fund incurring financial loss on account of
shareholder
liability is limited to circumstances in which the Fund would be unable to
meet
its obligations, a possibility that the Trust's management believes is remote.
Upon payment of any liability incurred by the Fund, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Fund.
The Trustees intend to conduct the operations of the Trust and the Funds in a
manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Funds.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended November 30, 1993,
accompanies this Statement of Additional Information and are incorporated
herein
by reference in their entirety.
34
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:
Aaa -- Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge."
Interest payments are protected by a large or by an exceptionally stable
margin,
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of these issues.
Aa -- Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities, or fluctuation of protective
elements
may be of greater amplitude, or there may be other elements present that make
the long term risks appear somewhat larger than in Aaa securities.
A -- Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds rated Baa are considered as medium grade obligations, that
is
they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification below Aaa. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:
Moody's ratings for state and municipal notes and other short term loans are
designated Moody's Investment Grade (MIG) and for variable demand obligations
are designated Variable Moody's Investment Grade (VMIG). This distinction
recognizes the differences between short term credit risk and long term risk.
Loans bearing the designation MIG 1/VMIG 1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or
both.
Loans bearing the designation MIG 2/VMIG 2 are of high quality, with margins
of
protection ample, although not as large as the preceding group. Loans bearing
the designation MIG 3/VMIG 3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the preceding
grades. Market access for refinancing, in particular, is likely to be less
well
established.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short term promissory obligations.
This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
A-1
<PAGE>
DESCRIPTION OF S&P MUNICIPAL BOND RATINGS:
AAA -- These are the obligations of the highest quality. They have the
strongest
capacity for timely payment of debt service.
General Obligation Bonds rated AAA -- In a period of economic stress, the
issuers will suffer the smallest declines in income and will be least
susceptible to autonomous decline. Debt burden is moderate. A strong
revenue
structure appears more than adequate to meet future expenditure
requirements. Quality of management appears superior.
Revenue Bonds rated AAA -- Debt service coverage has been, and is expected
to remain, substantial. Stability of the pledged revenues is also
exceptionally strong due to the competitive position of the municipal
enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds
and
debt service reserve requirements) are rigorous. There is evidence of
superior management.
AA -- The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA
have
the second strongest capacity for payment of debt service.
A -- Principal and interest payments on bonds in this category are
regarded
as safe, although the bonds are somewhat more susceptible to the adverse
effects
of changes in circumstances and economic conditions than bonds in higher rated
categories. This rating describes the third strongest capacity for payment of
debt service.
General Obligation Bonds rated A -- There is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the
issuer
to meet debt obligations at some future date.
Revenue Bonds rated A -- Debt service coverage is good, but not
exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB -- The bonds in this group are regarded as having an adequate capacity
to pay interest and repay principal. Whereas bonds in this group normally
exhibit adequate protection parameters, adverse economic conditions or
changing
circumstances are more likely to lead to a weakened capacity to pay interest
and
repay principal for debt in this category than in higher rated categories.
Bonds
rated BBB have the fourth strongest capacity for payment of debt service.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating
categories, except in the AAA category.
DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS:
Municipal notes with maturities of three years or less are usually given note
ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given the designation of SP-
1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding
timely payment is either overwhelming or very strong. Those issues determined
to
possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative
degree
of safety is not as high as for issues designated A-1.
DESCRIPTION OF FITCH MUNICIPAL BOND RATINGS:
AAA -- Bonds rated AAA are considered to be investment grade and of the
highest
credit quality. The obligor
A-2
<PAGE>
has an exceptionally strong ability to pay interest and repay principal, which
is unlikely to be affected by reasonably foreseeable events.
AA -- Bonds rated AA are considered to be investment grade and of very
high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short term debt of these issues is generally
rated F-1+ by Fitch.
A -- Bonds rated A are considered to be investment grade and of high
credit
quality. The obligor's ability to pay interest and repay principal is
considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
Plus and minus signs are used by Fitch with a rating symbol to indicate
the
relative position of a credit within the rating category. Plus and minus
signs,
however, are not used in the AAA category.
DESCRIPTION OF FITCH SHORT TERM RATINGS:
Fitch's short term ratings apply to debt obligations that are payable on
demand
or have original maturities of generally up to three years, including
commercial
paper, certificates of deposit, medium term notes, and municipal and
investment
notes.
The short term rating places greater emphasis than a long term rating on
the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short term ratings are as follows:
F-1+ -- Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 -- Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+.
F-2 -- Issues assigned this rating have a satisfactory degree of assurance
for timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3 -- Issues assigned this rating have characteristics suggesting that
the
degree of assurance for timely payment is adequate, however, near term adverse
changes could cause these securities to be rated below investment grade.
LOC -- The symbol LOC indicates that a Fitch rating is based on a letter
of
credit issued by a commercial bank.
A-3
SMITH BARNEY SHEARSON INCOME TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
Financial Highlights
Included in Part B:
The Fund's Annual Report for the fiscal year ended November 30, 1993 is
incorportated herein by reference to the Rule 30(b)2-1 filing made with the
Securities and Exchange Commission ("SEC") on behalf of the Fund on January
26, 1994. This filing was accepted by the SEC on January 26, 1994 Accession
Number 53798-94-000032.
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants
Tax Information
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
All references are to the Registrant's Registration Statement on Form N-
1A (the "Registration Statement") as filed with the Securities and
Exchange Commission (the "SEC") on October 21, 1991 (File Nos. 33-43446
and 811-6444).
(1) (a) Registrant's Master Trust Agreement dated October 17, 1991
is filed herewith.
(b) Amendment to the Master Trust Agreement dated November 5,
1992 is filed herewith.
(c) Amendment to the Master Trust Agreement dated July 30, 1993
is filed herewith.
(2) Registrant's By-Laws are incorporated by reference to the
Registration Statement.
(3) Inapplicable.
(4) Registrant's form of stock certificate is incorporated by
reference to Pre-Effective Amendment No. 1.
(5) Investment Advisory Agreement between Registrant and Greenwich
Street Advisors dated July 30, 1993 is incorporated by reference to Post-
Effective Amendment No. 3 to the Registration Statement filed on December 1,
1993 ("Post-Effective Amendment No. 3").
(6) Distribution Agreement between Registrant and Smith Barney
Shearson Inc.
dated July 30, 1993 is incorporated by reference to Post-
Effective Amendment No. 3.
(7) Inapplicable.
(8) Custody Agreement with Boston Safe Deposit and Trust Company is
incorporated by reference to Pre-Effective Amendment No. 1.
(9) (a) Administration Agreement between the Registrant and The
Boston Company Advisors, Inc. dated May 21, 1993 is incorporated by reference
to Post-Effective Amendment No. 3.
(b) Transfer Agency Agreement with The Shareholders Services
Group, Inc. is incorporated by reference to Post-Effective Amendment No. 3.
(10) Not Applicable.
(11) Consent of Independent Accountants is filed herewith.
(12) Inapplicable
(13) Purchase Agreement between the Registrant and Shearson Lehman
Brothers Inc. is incorporated by reference to Pre-Effective Amendment No. 1.
(14) Inapplicable
(15) Shareholder Servicing Plan dated July 30, 1993 is incorporated
by reference to Post-Effective Amendment No. 3.
(16) Performance Data is incorporated by reference to Post-Effective
Amendment No. 2 to the Registration Statement as filed on April
1, 1993.
Item 25. Persons Controlled by or Under common Control with Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders as of December 31, 1993
Beneficial Interest
par value $.001 per share
Limited Maturity Treasury Fund 2,541
Limited Maturity Municipals Fund 2,418
Intermediate Maturity California 722
Municipals Fund
Intermediate Maturity New York 1,719
Municipals Fund
Item 27. Indemnification
The response to this item is incorporated by reference to Pre-Effective
Amendment No. 1.
Item 28(a). Business and Other Connections of Investment Adviser
Investment Adviser - - Greenwich Street Advisors
Greenwich Street Advisors, through its predecessors, has been in the
investment counseling business since 1934 and is a division of Mutual
Management Corp. ("MMC"). MMC was incorporated in 1978 and is a wholly owned
subsidiary of Smith Barney Shearson Holdings Inc. ("Holdings"), which is in
turn a wholly owned subsidiary of The Travelers Inc. formerly known as
Primerica Corporation ("Travelers").
The list required by this Item 28 of officers and directors of MMC and
Greenwich Street Advisors, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by MMC on behalf of Greenwich
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
Prior to the close of business on July 30, 1993 (the "Closing"), Shearson
Lehman Advisors, a member of the Asset Management Group of Shearson Lehman
Brothers Inc. ("Shearson Lehman Brothers"), served as the Registrant's
investment adviser. On the Closing, Travelers and Smith Barney, Harris Upham
& Co. Incorporated acquired the domestic retail brokerage and asset management
business of Shearson Lehman Brothers, which included the business of the
Registrant's prior investment adviser. Shearson Lehman Brothers was a wholly
owned subsidiary of Shearson Lehman Brothers Holdings Inc. ("Shearson
Holdings"). All of the issued and outstanding common stock of Shearson
Holdings (representing 92% of the voting stock) was held by American Express
Company. Information as to any past business vocation or employment of a
substantial nature engaged in by officers and directors of Shearson Lehman
Advisors can be located in Schedules A and D of FORM ADV filed by Shearson
Lehman Brothers on behalf of Shearson Lehman Advisors prior to July 30, 1993.
(SEC FILE NO. 801-3701)
1/27/94
Item 29. Principal Underwriters
Smith Barney Shearson Inc. ("Smith Barney Shearson") currently acts as
distributor for Smith Barney Shearson Managed Municipals Fund Inc., Smith
Barney Shearson New York Municipals Fund Inc., Smith Barney Shearson
California Municipals Fund Inc., Smith Barney Shearson Massachusetts
Municipals Fund, Smith Barney Shearson Global Opportunities Fund, Smith Barney
Shearson Aggressive Growth Fund Inc., Smith Barney Shearson Appreciation Fund
Inc., Smith Barney Shearson Small Capitalization Fund, Smith Barney Shearson
Worldwide Prime Assets Fund, Smith Barney Shearson Short-Term World Income
Fund, Smith Barney Shearson Principal Return Fund, Smith Barney Shearson
Municipal Money Market Fund Inc., Smith Barney Shearson Daily Dividend Fund
Inc., Smith Barney Shearson Government and Agencies Fund Inc., Smith Barney
Shearson Managed Governments Fund Inc., Smith Barney Shearson New York
Municipal Money Market Fund, Smith Barney Shearson California Municipal Money
Market Fund, Smith Barney Shearson Income Funds, Smith Barney Shearson Equity
Funds, Smith Barney Shearson Investment Funds Inc., Smith Barney Shearson
Precious Metals and Minerals Fund Inc., Smith Barney Shearson
Telecommunications Trust, Smith Barney Shearson Arizona Municipals Fund Inc.,
Smith Barney Shearson New Jersey Municipals Fund Inc., The USA High Yield Fund
N.V., Garzarelli Sector Analysis Portfolio N.V., The Advisors Fund L.P., Smith
Barney Shearson Fundamental Value Fund Inc., Smith Barney Shearson Series
Fund, The Trust for TRAK Investments, Smith Barney Shearson Income Trust,
Smith Barney Shearson FMA R Trust, Smith Barney Shearson Adjustable Rate
Government Income Fund, Smith Barney Shearson Florida Municipals Fund, Smith
Barney Funds, Inc., Smith Barney Equity Funds, Inc., Smith Barney Muni Funds,
Smith Barney World Funds, Inc., Smith Barney Money Funds, Inc., Smith Barney
Tax Free Money Fund, Inc., Smith Barney Variable Account Funds, Smith Barney
U.S. Dollar Reserve Fund (Cayman), Worldwide Special Fund, N.V., Worldwide
Securities Limited, (Bermuda), and various series of unit investment trusts.
Smith Barney Shearson is a wholly owned subsidiary of Smith Barney
Shearson Holdings Inc., which in turn is a wholly owned subsidiary of
The
Travelers Inc. . The information required by this Item 29 with respect to
each director, officer and partner of Smith Barney Shearson is incorporated by
reference to Schedule A of FORM BD filed by Smith Barney Shearson pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-8510).
1/27/94
Item 30. Location of Accounts and Records
(1) Smith Barney Shearson Income Trust
Two World Trade Center
New York, New York 10048
(2) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(3) Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
(4) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(5) The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant undertakes to call a meeting of its shareholders of the Series
for the purpose of voting upon the question of removal of a trustee or
trustees of Registrant when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares. Registrant undertakes further,
in connection with the meeting, to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940, as amended, relating to communications
with the shareholders of certain common-law trusts.
485(b) Certification
The Registrant hereby certifies that it meets all of the requirements
for effectiveness pursuant to Rule 485(b) under the Securities Act of 1933, as
amended.
The Registrant further represents pursuant to 485(b)(2)(iv) that the
resignation of Peter H. Gallary as Trustee of the Registrant was not due to
any disagreement with the Registrant on any matter relating to its operations,
policies or practices. Mr. Gallary resigned his position with the Fund due to
the conditions of an order issued by the Federal Reserve Board in connection
with the approval of the acquisition of the holding company of the
Registrant's Administrator, The Boston Company Advisors, Inc., by Mellon Bank
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant, Smith Barney Shearson Income
Trust, has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York, State of New York on the 28th day of January, 1994.
Smith Barney Shearson Income
Trust
By: /s/ Heath B. McLendon*
Heath B. McLendon
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement and has been signed below by the
following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Heath B. McLendon*
Chairman of the Board
1/28/94
Heath B. McLendon
Chief Executive Officer
/s/ Vincent Nave*
Vincent Nave
Treasurer (Chief Financial
and Accounting Officer
1/28/94
/s/ Burt N. Dorsett*
Burt N. Dorsett
Trustee
1/28/94
/s/ Elliot S. Jaffe*
Elliot S. Jaffe
Trustee
1/28/94
/s/ Harry W. Knight*
Harry W. Knight
Trustee
1/28/94
/s/ Cornelius C. Rose*
Cornelius C. Rose
Trustee
1/28/94
* Signed by Lee D. Augsburger, their duly
authorized attorney-in-fact, prusuant to power
of attorney dated June 26, 1992.
* By: /s/ Lee D. Augsburger
Lee D. Augsburger
funds/slit/pea4.doc
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
Smith Barney Shearson Income Trust:
We hereby consent to the following with respect to Post-Effective
Amendment No.
4 to the Registration Statement on Form N-1A (File No. 33-43446) under the
Securities
Act of 1933, as amended, of Limited Maturity Treasury Fund, Limited Maturity
Municipals
Fund, Intermediate Maturity California Municipals Fund, Intermediate Maturity
New York
Municipals Fund of Smith Barney Shearson Income Trust:
1. The incorporation by reference of our report dated January
10, 1994
accompanying the Annual Report for the year ended November
30, 1993
of Smith Barney Shearson Income Trust, in the Statement of
Additional
Information.
2. The reference to our firm under the heading "Condensed
Financial
Information" in the Prospectuses.
3. The reference to our firm under the heading "Counsel and
Auditors" in the
Statement of Additional Information.
COOPERS & LYBRAND
Boston, Massachusetts
January 24, 1994
SHEARSON LEHMAN BROTHERS
INTERMEDIATE-TERM TRUST
MASTER TRUST AGREEMENT
October 17, 1991
SHEARSON LEHMAN BROTHERS INTERMEDIATE-TERM TRUST
CROSS-REFERENCE SHEET
Pursuant to CMR 109.00:
109.03 (a) Name of organization or trust:
SHEARSON LEHMAN BROTHERS
INTERMEDIATE-TERM TRUST
(b) Date of organization:
October 17, 1991
(c) Names and addresses of the trustees:
Lee D. Augsburger
One Boston Place
Boston, MA 02108
Mary E. Moran
One Boston Place
Boston, MA 02108
(d) Original signatures of all trustees:
See page 26.
(e) Principal place of business:
Two World Trade Center
New York, New York 10048
(f) Statement that beneficial interest is divided into transferable
certificates of participation or shares;
See Section 4.1, pages 10-11.
(g) Ability to merge:
See Section 7.2, page 24.
SHEARSON LEHMAN BROTHERS
INTERMEDIATE-TERM TRUST
MASTER TRUST AGREEMENT
PAGE
ARTICLE I. NAME AND DEFINITIONS 2
Section 1.1 Name 2
Section 1.2 Definitions 2
a) "Trust" 2
b) "Trustees" 2
c) "Shares" 2
d) "Series" 2
e) "Shareholder" 2
f) "1940 Act" 2
g) "Commission" 2
h) "Declaration of Trust" 2
i) "By-Laws" 2
ARTICLE II. PURPOSE OF THE TRUST 2
ARTICLE III. THE TRUSTEES 3
Section 3.1 Number, Designation, Election, Term, etc. 3
a) Initial Trustees 3
b) Number 3
c) Election and Term 3
d) Resignation and Retirement 3
e) Removal 3
f) Vacancies 4
g) Effect of Death, Resignation, etc. 4
h) No Accounting 4
i) Retirement Policy 4
j) Trustees Emeritus 5
Section 3.2 Powers of Trustees 5
a) Investments 6
b) Disposition of Assets 6
c) Ownership Powers 6
d) Subscription 6
e) Form of Holding 6
f) Reorganization, etc. 6
g) Voting Trusts, etc. 7
h) Compromise 7
i) Partnerships, etc. 7
j) Borrowing and Security 7
k) Guarantees, etc. 7
1) Insurance 7
m) Pensions, etc. 7
( i j
Section 3.3 Certain Contracts 8
a) Advisory 8
b) Administration 8
c) Distribution 8
d) Custodian and Depository 8
e) Transfer and Dividend 9
Disbursing Agency
f) Shareholder Servicing 9
g) Accounting 9
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees 10
Section 3.5 Ownership of Assets of the Trust 10
ARTICLE IV. SHARES 10
Section 4.1 Description of Shares 10
Section 4.2 Establishment and Designation of
Sub-Trusts 11
a) Assets Belonging to Sub-Trusts 12
b) Liabilities Belonging to 12
Sub-Trusts
c) Dividends 13
d) Liquidation 13
e) Voting 13
f) Redemption by Shareholder 14
g) Redemption by Trust 14
h) Net Asset Value 14
i) Transfer 15
j) Equality 15
k) Fractions 15
1) Conversion of Rights 15
Section 4.3 Ownership of Shares 15
Section 4.4 Investment in the Trust 16
Section 4.5 No Pre-emptive Rights 16
Section 4.6 Status of Shares and Limitation of 16
Personal Liability
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS 17
Section 5.1 Voting Powers 17
Section 5.2 Meetings 17
Section 5.3 Record Dates 18
( ii)
Section 5.4 Quorum and Required Vote
Section 5.5 Action by Written Consent
Section 5.6 Inspection of Records
Section 5.7 Additional Provisions
Section 5.8 Shareholder Communications
ARTICLE VI. LIMITATION OF LIABILITY: INDEMNIFICATION
Section 6.1 Trustees, Shareholders, etc. Not
Personally Liable; Notice
Section 6.2 Trustee's Good Faith Action; Expert
Advice; No Bond of Surety
Section 6.3 Indemnification of Shareholders
Section 6.4 Indemnification of Trustees, Officers, etc.
Section 6.5 Compromise Payment
Section 6.6 Indemnification Not Exclusive, etc.
Section 6.7 Liability of Third Persons Dealing with
Trustees
ARTICLE VII.
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust
Section 7.2 Reorganization
Section 7.3 Amendments
Section 7.4 Resident Agent
Section 7.5 Filing of Copies; References; Headings
Section 7.6 Applicable Law
( iii)
SHEARSON LEHMAN BROTHERS
INTERMEDIATE-TERM TRUST
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts this
17th day of October, 1991, by the Trustees hereunder, and by the
holders of shares of beneficial interest to be issued hereunder as
hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate series, each separate series to be a Sub-Trust
hereunder, all in accordance with the provisions hereinafter set forth:
and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Massachusetts business trust in accordance
with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and
dispose of the same upon the following terms and conditions for the
benefit of the holders from time to time of shares of beneficial
interest in this Trust or Sub-Trusts created hereunder as hereinafter
set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1 Name. This Trust shall be known as "Shearson Lehman
Brothers Intermediate-Term Trust" and the Trustees shall conduct the
business of the Trust under that name or any other name or names as
they may from time to time determine.
Section 1.2 Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established
by this Trust Agreement, as amended from time to time, inclusive of
each and every Sub-Trust established hereunder;
(b) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article
III;
(c) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust and each Sub-Trust of the Trust
(as the context may require) shall be divided from time to time:
(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV, each of which
Series shall be a Sub-Trust of the Trust;
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time.
(q) The term "Commission" shall have the meaning given it in the 1940
Act;
(h) "Declaration of Trust" shall mean this Agreement And Declaration of
Trust as amended or restated from time to time: and
(i) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust and each Sub-Trust of the Trust one or
more investment programs primarily in securities and debt instruments.
ARTICLE III
THE TRUSTEES
Section 3.1 Number. Designation. Election. Term. etc.
(a) Initial Trustees. Upon the execution of this Declaration of Trust
or a counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, each of Lee D.
Augsburger and Mary E. Moran, shall become a Trustee hereof and of each
Sub-Trust hereunder.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease (to not less
than two) the number of Trustees to a number other than the number
theretofore determined. No decrease in the number of Trustees shall
have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of Trustee pursuant to subsection (e) of
this Section 3.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders
following the initial public offering of shares of the Trust. Each
Trustee, whether named above or hereafter becoming a Trustee, shall
serve as a Trustee of the Trust and of each Sub-Trust hereunder during
the lifetime of this Trust and until its termination as hereinafter
provided except as such Trustee sooner dies, resigns or is removed.
Subject to Section 16(a) of the 1940 Act, the Trustees may elect their
own successors and may, pursuant to Section 3.1(f) hereof, appoint
Trustees to fill vacancies .
(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument and shall be
effective as to the Trust and each Sub-Trust hereunder.
(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds of the Shares then
outstanding, cast in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by Shareholders
holding not less than two-thirds of the Shares then outstanding and
filed with the Trust's Custodian. Any such removal shall be effective
as to the Trust and each Sub-Trust hereunder.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation,
retirement, removal or incapacity of any of the Trustees, or resulting
from an increase in the number of Trustees by the other Trustees may
(but 50 long as there are at least two remaining Trustees, need not
unless required by the 1940 Act) be filled by a majority of the
remaining Trustees, subject to the provisions of Section 16(a) of the
1940 Act, through the appointment in writing of such other person a6
such remaining Trustees in their discretion shall determine and such
appointment shall be effective upon the written acceptance of the
person named therein to serve as a Trustee and agreement by such person
to be bound by the provisions of this Declaration of Trust, except that
any such appointment in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees to be
effective at a later date shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment is effective, the Trust estate
shall vest in the new Trustee, together with the continuing Trustees,
without any further act or conveyance.
(g) Effect of Death. Resignation. etc. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them,
shall not operate to annul or terminate the Trust or any Sub-Trust
hereunder or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration of
Trust.
(h) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his or her removal for cause,
no person ceasing to be a Trustee as a result of his or her death,
resignation, retirement, removal or incapacity (nor the estate of any
such person) shall be required to make an accounting to the
Shareholders or remaining Trustees upon such cessation.
(i) Retirement Policy. Except for those individuals who (a) are
Trustees as of the date that the Commission declares the Trust's
initial Registration Statement on Form N-lA effective or (b) were
members of the Board of Directors or Trustees of on investment company
having an investment adviser or principal underwriter under common
control with the Trust's investment adviser or principal underwriter
immediately prior to such investment company's combination with the
Trust by merger, acquisition of assets or similar transaction, and of
which Trustees may continue to be nominated as Trustees and to serve as
Trustees if elected or appointed in accordance with Section 3.1 (c) of
this Article III, an individual who has reached the age of seventy-two
(72) years may not be elected, re-elected or appointed to serve as a
Trustee.
(j) Trustees Emeritus. An individual who has served as a Trustee for
minimum of five years (5) and who retires voluntarily or who may not
stand for re-election because of age may be designated by the remaining
Trustees as a Trustee Emeritus.
An individual designated as a Trustee Emeritus may, upon his or her
request, be permitted to attend meetings of the Trustees and to receive
all materials sent to active Trustees. A Trustee Emeritus shall not
have voting rights at meetings of the Trustees and shall not be under a
duty to manage or direct the business and affairs of the Trust. A
Trustee Emeritus shall not be deemed to stand in a fiduciary relation
to the Trust and shall not be responsible to discharge the duties of a
Trustee or to exercise that diligence, care or skill which a Trustee
would ordinarily be required to exercise under the laws of the
Commonwealth of Massachusetts; provided, however, that a Trustee
Emeritus may be held liable to the Trust for any action amounting to
bad faith, willful misconduct or gross negligence, disclosure of any
confidential information of the Trust or appropriation of any
opportunity of the Trust.
A stipend, the amount to be determined by the Trustees from time to
time, which shall not exceed the basis upon which Trustees of the Trust
are compensated, shall be paid to each Trustee Emeritus. A Trustee
Emeritus shall be indemnified to the full extent that an officer or
Trustee of the Trust may be indemnified under any provision of this
Declaration of Trust or the By-Laws
Section 3.2. Powers of Trustees. Subject to the provision of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to
carry out that responsibility and the purpose of the Trust. Without
limiting the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them to the
extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section
4.1 hereof establish Sub-Trust's, each such Sub-Trust to operate as a
separate and distinct investment medium and with separately defined
investment objectives and policies and distinct investment purpose:
they may as they consider appropriate elect and remove officers and
appoint and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may
appoint from their own number, and terminate, any one or more
committees consisting of two or more Trustees, including without
implied limitation an executive committee, which may, when the Trustees
are not in session and subject to the 1940 Act, exercise some or all of
the power and authority of the Trustees as the Trustees may
determine; in accordance with Section 3.3 they may employ one or more
advisers, administrators, distributor, depositories and custodians and
may authorize any depository or custodian to employ subcustodians or
agents and to deposit all or any part of such assets in a system or
systems for the central handling of securities and debt instruments,
retain transfer, dividend, accounting or Shareholder servicing agent or
any of the foregoing, provide for the distribution of Shares by the
Trust-t through one or more distributors, principal underwriters or
otherwise, set record dates or times for the determination of
Shareholders or various of them with respect to various matters; they
may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents,
consultants and employees of the Trust or the Trustees on such terms as
they deem appropriate; and in general they may delegate to any officer
of the Trust, to any committee of the Trustees and to any employee,
adviser, administrator, distributor, depository, custodian, transfer
and dividend disbursing agent, or any other agent or consultant of the
Trust, such authority, powers, functions and duties as they consider
desirable or appropriate for the conduct of the business and affairs of
the Trust, including without implied limitation the power and authority
to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with
the 1940 Act or other applicable law, the Trustees shall have power and
authority for and on behalf of the Trust and each separate Sub-Trust
established hereunder:
(a) Investments. To invest and reinvest cash and other property and to
hold cash or other property uninvested without in any event being bound
or limited by any present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the
Trust:
(c) Ownership Powers. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments
or property; and to execute and deliver proxies or powers of attorney
to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to
securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or
debt instruments;
(e) Form of Holding. To hold any security, debt instrument or property
in a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust
or of any Sub-Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(f) Reorganization. etc.. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or
issuer, any security or debt instrument of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or sale of
property by such corporation or issuer; and to pay calls or
subscriptions with respect to any security or debt instrument held in
the Trust:
(g) Voting Trusts. etc.. To join with other holders of any securities
or debt instruments in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any security or
debt instrument with, or transfer any security or debt instrument to,
any committee, depository or trustee, and to delegate to them such
power and authority with relation to any security or debt instrument
(whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depository or trustee as the
Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust of any matter in
controversy, including but not limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations
arising in connection with such borrowing;
(k) Guarantees. etc.. To endorse or guarantee the payment of any notes
or other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;
(1) Insurance. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment
advisers, managers, administrators, distributors, principal
underwriters or independent contractors, or any thereof (or any person
connected therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person in any such
capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power
to indemnify such person against such liability; and
(m) Pensions. etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust.
Except as otherwise provided by the 1940 Act or other applicable law,
this Declaration of Trust or the By-Laws, any action to be taken by the
Trustees on behalf of the Trust or any Sub-Trust may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a majority of the Trustees then in office, being
present), within or without Massachusetts, including any meeting held
by means of a conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall constitute
presence in person at a meeting, or by written consents of a majority
of the Trustees then in office (or such larger or different number as
may be required by the 1940 Act or other applicable law).
Section 3.3 Certain Contracts. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of
present and future law or custom in regard to delegation of powers by
trustees generally, the Trustees may, at any time and from time to time
and without limiting the generality of their powers and authority
otherwise set forth herein, enter into one or more contracts with any
one or more corporations, trusts, associations, partnerships, limited
partnerships, other types of organizations or individual ("Contracting
Party") to provide for the performance and assumption of one or all of
the following services, duties and responsibilities to, for or on
behalf of the Trust and/or any Sub-Trust and/or the Trustees, and to
provide for the performance and assumption of such other services,
duties and responsibilities in addition to those set forth below as the
Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of
the Trust (as that phrase is defined in subsection (a) of Section 4.2),
to manage such investments and assets, make investment decisions with
respect thereto and to place purchase and sale orders for portfolio
transactions relating to such investments and assets:
(b) Administration. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust, to supervise all or any
part of the operations of the Trust and each Sub-Trust and to provide
all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust:
(c) Distribution. To distribute the Shares of the Trust and each
Sub-Trust, to be principal underwriter of such Shares, and/or to act as
agent of the Trust and each Sub-Trust in the sale of Shares and the
acceptance or rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting
records in connection therewith:
(e) Transfer and Dividend Disbursing Agency. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or the
instructions of any particular Shareholder to reinvest any such
dividends:
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares and similar matters: and
(q) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or
the Trustees, and the contracts with respect thereto may contain such
terms interpretive of or in addition to the delineation of the
services, duties and responsibilities provided for, including
provisions that are not inconsistent with the 1940 Act relating to the
standard of duty of and the rights to indemnification of the
Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent or limit
the Trust or a Contracting Party from entering into sub-contractual
arrangements relative to any of the matters referred to in Sections
3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or Officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any
Contracting Party, or that the Contracting Party or any parent or
affiliate thereof is a Shareholder or has an interest in the Trust or
any Sub-Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the
Trust or any Sub-Trust and/or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same or create any liability or accountability to the
Trust, any Sub-Trust or its Shareholders, provided that in the case of
any relationship or interest referred to in the preceding clause (i) on
the part of any Trustee or officer of the Trust either (x) the material
facts as to such relationship or interest have been disclosed to or are
known by the Trustees not having any such relationship or interest and
the contract involved is approved in good faith by a majority of such
Trustees not having any such relationship or interest (even though such
unrelated or disinterested Trustees are less than a quorum of all of
the Trustees), (y) the material facts as to such relationship or
interest and as to the contract have been disclosed to or are known by
the Shareholders entitled to vote thereon and the contract involved is
specifically approved in good faith by vote of the Shareholders or (z)
the specific contract involved is fair to the Trust as of the time it
is authorized, approved or ratified by the Trustees or by the
Shareholders.
Section 3.4 Payment of Trust Expenses and Compensation of Trustees. The
Trustees are authorized to pay or to cause to be paid out of the
principal or income of the Trust or any Sub-Trust, or partly out of
principal and partly out of income, and to charge or allocate the same
to, between or among such one or more of the Sub-Trusts that may be
established and designated pursuant to Article IV, as the Trustees deem
fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust or any Sub-Trust, or in connection
with
the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser, administrator,
distributor, principal underwriter, auditor, counsel, depository,
custodian, transfer agent, dividend disbursing agent, accounting agent,
shareholder servicing agent, and such other agents, consultants, and
independent contractor and such other expenses and charges as the
Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be
entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
Section 3.5 Ownership of Assets of the Trust. Title to all of the
assets of the Trust shall at all times be considered as vested in the
Trustees.
ARTICLE IV
SHARES
Section 4.1 Description of Shares. The beneficial interest in the Trust
shall be divided into Shares, all par value S.001 per share and of one
class, but the Trustees shall have the authority from time to time to
divide the class of Shares into two or more Series of Shares (each of
which Series of Shares shall be a separate and distinct Sub-Trust of
the Trust, including without limitation those Sub-Trusts specifically
established and designated in Section 4.2), as they deem necessary or
desirable. Each Sub-Trust shall be deemed to be a separate trust
established under, and subject to the terms of, this Declaration of
Trust. The Trustees shall have exclusive power without the requirement
of shareholder approval to establish and designate such separate and
distinct Sub-Trusts, and to fix and determine the relative rights and
preferences as between the shares of the separate Sub-Trusts as to
right of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and
on liquidation, sinking or purchase fund provisions, conversion rights
and conditions under which the several Sub-Trusts shall have separate
voting rights or no voting rights.
The number of authorized Shares and the number of Shares of each Sub-
Trust that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust for such consideration and on such terms as
they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in subsection (h)
of Section 4.2). The Trustees may classify or reclassify any unissued
Shares or any
- --11--
Shares previously issued and reacquired of any Sub-Trust into one or
more Sub-Trusts that may be established and designated from time to
time. The Trustees may hold as treasury Shares, reissue for such
consideration and on such terms as they may determine, or cancel, at
their discretion from time to time, any Shares of any Sub-Trust as
reacquired by the Trust.
The Trustees may from time to time close the transfer books or
establish record dates and times for the purposes of determining the
holders of Shares entitled to be treated as such, to the extent
provided or referred to in Section 5.3.
The establishment and designation of any Sub-Trust in addition to that
established and designated in Section 4.2 shall be effective upon the
execution by a majority of the then Trustees of an instrument setting
forth such establishment and designation and the relative rights and
preferences of the Shares of such Sub-Trust or as otherwise provided in
such instrument. At any time that there are no Shares outstanding of
any particular Sub-Trust previously established and designated, the
Trustees may by an instrument executed by a majority of their number
abolish that Sub-Trust and the establishment and designation thereof.
Each instrument referred to in this paragraph shall have the status of
an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested, may acquire, own, hold and
dispose of Shares of any Sub-Trust of the Trust to the same extent as
if such person were not a Trustee, officer or other agent of the Trust;
and the Trust may issue and sell or cause to be issued and sold and may
purchase Shares of any Sub-Trust from any such person or any such
organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such
Sub-Trust generally.
Section 4.2 Establishment and Designation of Sub-Trust. Without
limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate the following Sub-Trusts: "Shearson Lehman
Brothers Intermediate-Term Municipal Fund", "Shearson Lehman Brothers
California Intermediate-Term Municipal Fund", "Shearson Lehman Brothers
New York Intermediate-Term Municipal Fund" and "Shearson Lehman
Brothers Intermediate-Term Treasury Fund." The Trust and any Shares of
any further Sub-Trusts that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Sub-Trust at the time of
establishing and designating the same) have the following relative
rights and preferences:
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(a) Assets Belonging to Sub-Trusts. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of that
Sub-Trust, shall irrevocably belong to that Sub-Trust for all purpose
and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment
of such proceeds, in whatever form the same may be, together with any
General Items allocated to that Sub-Trust as provided in the following
sentence, are herein referred to as "assets belonging to" that
Sub-Trust. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Sub-Trust (collectively
"General Items"), the Trustees shall allocate such General Items to and
among any one or more of the Sub-Trusts established and designated from
time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable; and any General Items so allocated
to a particular Sub-Trust shall belong to that Sub-Trust. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Sub-Trusts for all purposes.
(b) Liabilities Belonging to Sub-Trusts. The assets belonging to each
particular Sub-Trust shall be charged with the liabilities in respect
of that Sub-Trust and all expenses, costs, charges and reserves
attributable to that Sub-Trust, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Sub-Trust shall be
allocated and charged by the Trustees to and among any one or more of
the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The liabilities, expenses, costs, charges and
reserves allocated and so charged to a Sub-Trust are herein referred to
as "liabilities belonging to" that Sub-Trust. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Sub-Trusts
for all purposes. Any creditor of any Sub-Trust may look only to the
assets of that Sub-Trust to satisfy such creditor's debt.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income
and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders
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(c) Dividends. Dividends and distributions on Shares of a particular
Sub-Trust may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, to the holders of Shares of that Sub-Trust,
from such of the income and capital gains, accrued or realized, from
the assets belonging to that Sub-Trust, as the Trustees may determine,
after providing for actual and accrued liabilities belonging to that
Sub-Trust. All dividends and distributions on Shares of a particular
Sub-Trust shall be distributed pro rata to the holders of Shares of
that Sub-Trust in proportion to the number of Shares of that Sub-Trust
held by such holders at the date and time of record established for the
payment of such dividends or distributions, except that in connection
with any dividend or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Shares
as to which the Shareholder's purchase order and/or payment have not
been received by the time or times established by the Trustees under
such program or procedure. Such dividends and distributions may be made
in cash or Shares of that Sub-Trust or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
subsection (h) of Section 4.2.
(d) Liquidation. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Sub-Trust that has been established and
designated shall be entitled to receive, when and as declared by the
Trustees, the excess of the assets belonging to that Sub-Trust over the
liabilities belonging to that Sub-Trust. The assets so distributable to
the Shareholders of any particular Sub-Trust shall be distributed among
such Shareholders in proportion to the number of Shares of that
Sub-Trust held by them and recorded on the books of the Trust. The
liquidation of any particular Sub-Trust may be authorized by vote of a
majority of the Trustees then in office subject to the approval of a
majority of the outstanding voting Shares of that Sub-Trust, as defined
in the 1940 Act.
(e) Voting. On each matter submitted to a vote of the Shareholders,
each holder of a Share of each Sub-Trust shall be entitled to one vote
for each whole Share and to a proportionate fractional Vote for each
fractional Share standing in his name on the books of the Trust. The
Trustees shall cause each matter required or permitted to be voted upon
at a meeting or by written consent of Shareholders to be submitted to a
vote of all classes of outstanding Shares entitled to vote thereon
(irrespective of class), unless the 1940 Act or other applicable laws
or regulations require that the actions of the Shareholders be taken by
a
- -14-
separate vote of one or more classes, or the Trustees determine that
any matter to be submitted to a vote of Shareholders affects only the
rights or interests of one or more (but not all) classes of outstanding
Shares, in which case only the Shareholders of the class or classes so
affected shall be entitled to vote thereon.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Sub-Trust shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the Trust
to redeem all or any part of his Shares of that Sub-Trust at a
redemption price equal to the net asset value per Share of that
Sub-Trust next determined in accordance with subsection (h) of this
Section 4.2 after the Shares are properly tendered for redemption.
Payment of the redemption price shall be in cash; provided, however,
that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash
unwise or undesirable, the Trust may make payment wholly or partly in
securities or other assets belonging to the Sub-Trust of which the
Shares being redeemed are part at the value of such securities or
assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Sub-Trust to require the Trust to redeem Shares of that Sub-Trust
during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) Redemption by Trust. Each Share of each Sub-Trust that has been
established and designated is subject to redemption by the Trust at the
redemption price which would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (f) of this Section
4.2: (a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or any Sub-Trust
thereof or (b) upon such other conditions as may from time to time be
determined by the Trustees and set forth in the then current Prospectus
of the Trust with respect to maintenance of Shareholder accounts of
minimum amount. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto other than to
receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of any Sub-Trust
shall be the quotient obtained by dividing the value of the net assets
of that Sub-Trust (being the value of the assets belonging to that
Sub-Trust less the liabilities belonging to that Sub-Trust) by the
total number of Shares of that Sub-Trust outstanding, all determined in
accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the Trustees
from time to time.
- -15-
The Trustees may determine to maintain the net asset value per Share
of any Sub-Trust at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the
1940 Act for the continuing declarations of income attributable to
that Sub-Trust as dividends payable in additional Shares of that
Sub-Trust at the designated constant dollar amount and for the
handling of any losses attributable to that Sub-Trust. Such procedures
may provide that in the event of any loss each Shareholder shall be
deemed to have contributed to the capital of the Trust attributable to
that Sub-Trust his pro rata portion of the total number of Shares
required to be canceled in order to permit the net asset value per
Share of that Sub-Trust to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Shareholder of the
Trust shall be deemed to have agreed, by his or her investment in any
Sub-Trust with respect to which the Trustees shall have adopted any
such procedure, to make the contribution referred to in the preceding
sentence in the event of any such loss.
(i) Transfer. All Shares of each particular Sub-Trust shall be
transferable, but transfers of Shares of a particular Sub-Trust will
be recorded on the Share transfer records of the Trust applicable to
that Sub-Trust only at such times as Shareholders shall have the right
to require the Trust to redeem Shares of that Sub-Trust and at such
other times as may be permitted by the Trustees.
(j) Equality. All Shares of each particular Sub-Trust shall represent
an equal proportionate interest in the assets belonging to that
Sub-Trust (subject to the liabilities belonging to that Sub-Trust),
and each Share of any particular Sub-Trust shall be equal to each
other Share of that Sub-Trust; but the provisions of this sentence
shall not restrict any distinctions permissible under subsection (c)
of this Section 4.2 that may exist with respect to dividends and
distributions on Shares of the same Sub-Trust. The Trustees may from
time to time divide or combine the Shares of any particular Sub-Trust
into a greater or lesser number of Shares of that Sub-Trust without
thereby changing the proportionate beneficial interest in the assets
belonging to that Sub-Trust or in any way affecting the rights of
Shares of any other Sub-Trust.
(k) Fractions. Any fractional Share of any Sub-Trust, if any such
fractional Share is outstanding, shall carry proportionately all of
the rights and obligations of a whole Share of that Sub-Trust,
including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares and liquidation of
the Trust.
(1) Conversion Rights. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Sub-Trust shall have the right to convert
said Shares into Shares of one or
- -;6-
more other Sub-Trusts in accordance with such requirements and
procedures as may be established by the Trustees.
Section 4.3 Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a transfer or similar agent
for the Trust, which books shall be maintained separately for the
Shares of each Sub-Trust that has been established and designated. No
certificates certifying the ownership of Shares need be issued except
as the Trustees may otherwise determine from time to time. The Trustees
may make such rules as they consider appropriate for the issuance of
Shares certificates, the use of facsimile signatures, the transfer of
Shares and similar matters. The record books of the Trust as kept by
the Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders and as to the number of
Shares of each Sub-Trust held from time to time by each such
Shareholder.
Section 4.4 Investments in the Trust. The Trustees may accept
investments in the Trust and each Sub-Trust thereof from such persons
and on such terms and for such consideration, not inconsistent with the
provisions of the 1940 Act, as they from time to time authorize. The
Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the
purchase of Shares that conform to such authorized terms and to reject
any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 No Pre-emptive Rights. Shareholders shall have no pre-
emptive or other right to subscribe to any additional Shares or other
securities issued by the Trust.
Section 4.6 Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the sights
provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and
agreed to the terms hereof and to have become a party hereto. The death
of a Shareholder during the continuance of the Trust shall not operate
to terminate the Trust or any Sub-Trust thereof or entitle the
representative of any deceased Shareholder to an accounting or to take
any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a
partition or division of the same or for An accounting, nor shall the
ownership of Shares constitute the Shareholders partners. Neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor except as
specifically provided herein to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as
the Shareholder may at any time personally agree to pay.
- -17-
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 Voting Powers. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Section
3.1, (ii) with respect to any contract with Contracting Party as
provided in Section 3.3 as to which Shareholder approval is required by
the 1940 Act, (ii) with respect to any termination or reorganization of
the Trust or any Sub-Trust to the extent and as provided in Section 7.1
and 7.2, (iv) with respect to any amendment of this Declaration of
Trust to the extent and as provided in Section 7.3, (v) to the same
extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should
not be brought or maintained derivatively or as a class action on
behalf of the Trust or any Sub-Trust thereof or the Shareholders
(provided, however, that a shareholder of a particular Sub-Trust shall
not be entitled to a derivative or class action on behalf of any other
Sub-Trust (or shareholder of any other Sub-Trust) of the Trust) and
(vi) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, this Declaration of Trust, the By-Laws
or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary
from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the
challenger. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any
matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of Shareholders
shall be given or caused to be given the Trustees by mailing such
notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder
at the Shareholder's address as it appears on the records of the Trust.
- -18-
The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of
the Trust when requested to do 60 in writing by Shareholders holding
not less than 10% of the Shares then outstanding. If the Trustees fail
to call or give notice of any meeting of Shareholders for a period of
30 days after written application by Shareholders holding at least 10%
of the Shares then outstanding requesting a meeting be called for any
other purpose requiring action by the Shareholders as provided herein
or in the By-Laws, then Shareholders holding at least 10% of the Shares
then outstanding may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for herein
in case of call thereof by the Trustees.
Section 5.3 Record Dates. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof, or who are entitled to participate in any dividend
or distribution, or for the purpose of any other action, the Trustees
may from time to time close the transfer books for such period, not
exceeding 30 days (except at or in connection with the termination of
the Trust), as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date and time not more than 60
days prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to be
treated as Shareholders of record for purposes of such other action,
and any shareholder who was a Shareholder at the date and time so fixed
shall be entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other
action, even though he has since that date ; any time disposed of his
Shares, and no Shareholder becoming such after that date and time shall
be so entitled to vote at such meeting or any adjournment thereof or to
be treated as a Shareholder of record for purposes of such other
action.
Section 5.4 Quorum and Required Vote. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, but any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice. A majority of the Shares voted, at a
meeting at which a quorum is present, shall decide any questions and a
plurality shall elect a Trustee, except when a different vote if
required or permitted by any provision of the 1940 Act or other
applicable law or by this Declaration of Trust or the By-Laws.
Section 5.5. Action by Written Consent. Subject to the provisions of
the 1940 Act and other applicable law, any action taken by Shareholders
may be taken without a meeting if a majority of Shareholders entitled
to vote on the matter (or such
- --1 9--
larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws)
consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall be
treated for all purposes a6 vote taken at a meeting of Shareholders.
Section 5.6 Inspection of Records. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the
Massachusetts Business Corporation Law.
Section 5.7 Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 Shareholder Communications. Whenever ten or more
Shareholders of record who have been such for at least six months
preceding the date of application, and who hold in the aggregate either
Shares having a net asset value of at least $2,000 or at least 1% of
the outstanding Shares, whichever $s less, shall apply to the Trustees
in writing, stating that they wish to communicate with other
Shareholders with a view to obtaining signatures to a request for a
Shareholder meeting and accompanied by a form of communication and
request which they wish to transmit, the Trustees shall within five
business days after receipt of such application either (i) afford to
such applicants access to a list of the names and addresses of all
Shareholders as recorded on the books of the Trust or (ii) inform such
applicants as to the approximate number of Shareholders of record, and
the approximate cost of mailing to them the proposed communication and
form of request.
If the Trustees elect to follow the course specified in item (ii)
above, the Trustees, upon the written request of such applications,
accompanied by a tender of the material to be mailed and of the
reasonable expense of mailing, shall, with reasonable promptness, mail
such material to all Shareholders of record at their addresses as
recorded on the books unless within five business days after such
tender the Trustees shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a
written statement signed by at least a majority of the Trustees to the
effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation
of applicable law, and specifying the basis of such opinion. The
Trustees shall thereafter comply with the requirements of the 1940 Act.
- -20-
ARTICLE VI
LIMITATION OF LIABILITY: INDEMNIFICATION
Section 6.1 Trustees. Shareholders. etc. Not Personally Liable:
Notice. All persons extending credit to, contracting with or having
any claim against the Trust shall look only to the assets of the
Sub-Trust with which such person dealt for payment under such credit,
contract or claim; and neither the Shareholders of any Sub-Trust nor
the Trustees nor any of the Trust's officers, employees or agents,
whether past, present or future, nor any other Sub-Trust shall be
personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust, any Sub-Trust or the
Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only by or for the
Trust (or the Sub-Trust) or the Trustees and not personally. Nothing
in this Declaration of Trust shall protect any Trustee or officer
against any liability to the Trust or the Shareholders to which such
Trustee or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee or by such
officer.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officers or officer shall
give notice that this Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and shall recite to
the effect that the same was executed or made by or on behalf of the
Trust or by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are
binding only upon the assets and property of the Trust, or the
particular Sub-Trust in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.
Section 6.2 Trustee's Good Faith Action: Expert Advice: No Bond or
Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. A Trustee shall
be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (i) the Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend disbursing,
shareholder servicing or accounting agent of the Trust, nor shall any
Trustee be
- -21-
responsible for the act or omission of any other Trustee: (ii) the
Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such
advice; and (iii) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of
account of the Trust and upon written reports made to the Trustees by
any officer appointed by them, any independent public accountant and
(with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of a Contracting Party
appointed by the Trustees pursuant to Section 3.3. The Trustees as
such shall not be required to give any bond or surety or any other
security for the performance of their duties.
Section 6.3 Indemnification of Shareholders. In case any Shareholder
(or former Shareholder) of any Sub-Trust of the Trust shall be charged
or held to be personally liable for any obligation or liability of the
Trust solely by reason of being or having been a Shareholder and not
because of such Shareholder's acts or omissions or for some other
reason, said Sub-Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such charge and satisfy
any judgment thereon, and the Shareholder or former Shareholder (or
his or her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled out of the
assets of said Sub-Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
Section 6.4 Indemnification of Trustees. Officers, etc. The Trust
shall indemnify (from the assets of the Sub-Trust or Sub-Trusts in
question) each of its Trustees and officers (including persons who
serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person")) against all liabilities, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee,
except with respect to any matter as to which it has been determined
that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not
opposed to the
- -22-
best interests of the Trust or (ii) had acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either
and both of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of Disabling Conduct, (ii) dismissal of a court
action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct or (iii) A reasonable
determination, based upon a review of the facts, that the indemnity
was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 2(a)(19) of the 1940 Act nor
parties to the proceeding or (b) an independent legal counsel in a
written opinion. Expenses, including accountants' and counsel fees so
incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties),
may be paid from time to time by the Sub-Trust in question in advance
of the final disposition of any such action, suit or proceeding,
provided that the Covered Person shall have undertaken to repay the
amounts so paid to the Sub-Trust in question if it is ultimately
determined that indemnification of such expenses is not authorized
under this Article VI and (i) the Covered Person shall have provided
security for such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances or (iii) a majority of
a quorum of the disinterested Trustees who are not parties to the
proceeding, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled to
indemnification.
Section 6.5 Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section
6.4, pursuant to a consent decree or otherwise, no such
indemnification either for said payment or for any other expenses
shall be provided unless such indemnification shall be approved (i) by
a majority of the disinterested Trustees who are not a party to the
proceeding or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by
independent legal counsel pursuant to clause (ii) shall not prevent
the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with any of such clauses as
indemnification if such Covered Person is subsequently adjudicated by
a court of competent jurisdiction not to have acted in good faith in
the reasonable belief that such Covered Person's action was in or not
opposed to the best
- -23-
interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
Section 6.6 Indemnification Not Exclusive. etc. The right of
indemnification provided by this Article VI shall not be exclusive of
or affect any other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators, an "interested
Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on
the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom
none of such actions, suits or other proceedings or another action,
suit or other proceeding on the same or similar grounds is then or
has been pending or threatened. nothing contained in this article
shall affect any rights to indemnification to which personnel of the
Trust, other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of any
such person.
Section 6.7 Liability of Third Persons Dealing with Trustees. No
person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the
Trustees or to see to the application of any payments made or
property transferred to the Trust or upon its order.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time
and, without limiting the generality of the foregoing, no change,
alteration or modification with respect to any Sub-Trust shall
operate to terminate the Trust. The Trust may be terminated at any
time by a majority of the Trustees then in office subject to a
favorable vote of a majority of the outstanding voting securities, as
defined in the 1940 Act, Shares of each Sub-Trust voting separately
by Sub-Trust.
Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or
anticipated as may be determined by the Trustees, the Trust shall in
accordance with such procedures as the Trustees consider appropriate
reduce the remaining assets to distributable form in cash, securities
or other property, or any combination thereof, and distribute the
proceeds to the Shareholders, in conformity with the provisions of
subsection (d) of Section 4.2.
- -24-
Section 7.2 Reorganization. The Trust may merge or consolidate with
any other corporation, partnership, association, trust or other
organization and the Trustees may well, convey, and transfer the
assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the
Trust to be held as assets belonging to another Sub-Trust, in exchange
for cash, shares or other securities (including, in the case of a
transfer to another Sub-Trust of the Trust, Shares of such other
Sub-Trust) with such transfer being made subject to, or with the
assumption by the transferee of, the liabilities belonging to each
Sub-Trust the assets of which are so transferred; provided, however,
that no assets belonging to any particular Sub-Trust shall be so
transferred unless the terms of such transfer shall have first been
approved at a meeting called for the purpose by the affirmative vote
of the holders of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of that Sub-Trust. Any such consolidation or
merger shall require approval by the affirmative vote of the holders
of a majority of the outstanding voting Shares, as defined in the 1940
Act, of the Trust (or each Sub-Trust affected thereby, as the case may
be), except that such affirmative vote of the holders of Shares shall
not be required if the Trust (or Sub-Trust affected thereby, as the
case may be) shall be the survivor of such consolidation or merger.
Section 7.3 Amendments. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of
the right to amend this Declaration of Trust as herein provided,
except that no amendment shall repeal the limitations on personal
liability of any Shareholder or Trustee or repeal the prohibition of
assessment upon the Shareholders without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the
provisions of this Declaration of Trust (whether or not related to the
rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with
respect to which such amendment is or purports to be applicable and so
long as such amendment is not in contravention of applicable law,
including the 1940 Act, by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant
to the vote of a majority of such Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of Shareholders
may be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant
to a vote of a majority of such Trustees) when authorized to do so by
the vote in accordance with subsection (e) of Section 4.2 of
Shareholders holding a majority of the Shares entitled to vote.
Subject to the foregoing, any such amendment shall be effective
- -25-
as provided in the instrument containing the terms of such amendment
or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate which may
be a part of such instrument) executed by a Trustee or officer of the
Trust to the effect that such amendment has been duly adopted.
Section 7.4 Resident Agent. The Trust may appoint and maintain a
resident agent in the Commonwealth of Massachusetts.
Section 7.5 Filing of Copies: References: Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at
the office of the Trust where it may be inspected by any Shareholder.
A copy of this instrument and of each amendment hereto shall be filed
by the Trust with the Secretary of the Commonwealth of Massachusetts
and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required, but the
failure to make any such filing shall not impair the effectiveness of
this instrument or any such amendment. Anyone dealing with the Trust
may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the
Trustees and officers, and as to any matters in connection with the
Trust hereunder: and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such amendments. In this instrument and
in any such amendment, references to this instrument, and all
expressions like "herein", "hereof" and "hereunder" shall be deemed to
refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for
convenience if reference only and shall not be taken as a part hereof
or control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 7.6 Applicable Law. This Declaration of Trust is made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of
said Commonwealth, including the Massachusetts Business Corporation
Law as the same may be amended from time to time, to which reference
is made with the intention that matters not specifically covered
herein or as to which an ambiguity may exist shall be resolved as if
the Trust were a business corporation organized in Massachusetts, but
the reference to said Business Corporation Law is not intended to
give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in
connection with an entity organized in corporate form. The Trust
shall be of the type referred to in Section 1 of Chapter 182 of the
Massachusetts General Laws and of the type commonly called a
Massachusetts business trust and, without limiting the provisions
hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust. -26
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of Boston, Massachusetts for themselves and their
assigns, as of the day and year first above written.
1914m
Lee D. Augsburger
as Trustee and not individually
Mary E. Moran
as Trustee and not individually
SHEARSON LEHMAN BROTHERS INCOME TRUST
AMENDMENT NO. 1 TO THE MASTER TRUST AGREEMENT
(Change of Name of the Fund and Change of Names of Existing Sub-
Trusts)
The undersigned, Assistant Secretary of Shearson Series Fund (the
"Fund"), does hereby certify that pursuant to Article I, Section 1.1
and Article VII, Section 7.3 of the Master Trust Agreement dated
October 17, 1991, the following votes were duly adopted
by the Board of Trustees at a Special Meeting of the Board held on
April 1, 1993:
VOTED: That the name of the Fund previously established and designated
pursuant to the Fund's Master Trust Agreement be modified and amended
as set forth below:
Current Name: Name as Amended:
Shearson Lehman Brothers Smith Barney Shearson
Income Trust Income Trust
; and further
VOTED: That the names of the Sub-Trusts previously established and
designated pursuant to Section 4.2 be modified and amended as set
forth below:
Current Name: Name as Amended:
Shearson Lehman Brothers Smith Barney Shearson
Limited Maturity Municipals Fund Limited Maturity Municipals Fund
Shearson Lehman Brothers Smith Barney Shearson
Intermediate Maturity Intermediate Maturity
California Municipals Fund California Municipals Fund
Shearson Lehman Brothers Smith Barney Shearson
intermediate Maturity Intermediate Maturity
New York Municipals Fund New York Municipals Fund
Shearson Lehman Brothers Smith Barney Shearson
Limited Maturity Limited Maturity
Treasury Fund Treasury Fund
; and further
VOTED: That the appropriate officers of the Fund be, and each hereby
is, authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the Fund's
Master Trust Agreement and By-Laws reflecting the foregoing change;
and to execute and file all requisite certificates, documents and
instruments and to take such other actions required to cause said
amendment to become effective and to pay all requisite fees and
expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
30th day of July, 1993.
Lee D. Augsburger
Assistant Secretary
SHEARSON LEHMAN BROTHERS INTERMEDIATE-TERM TRUST
AMENDMENT NO. 1 TO MASTER TRUST AGREEMENT
(Change of Name of Trust)
The undersigned, Assistant Secretary of Shearson Lehman Brothers
Intermediate-Term Trust ("Trust"), does hereby certify that pursuant
to Article I, Section 1.1 and Article VII, Section 7.3 of the Master
Trust Agreement of the Trust dated October 17, 1991, the following
votes were duly adopted at meeting of the Board of Trustees which was
attended by majority of the Trustees on November 19, 1991:
VOTED: That the name of the Trust previously established and
designated pursuant to the Trust's Master Trust Agreement be modified
and amended as set forth below:
Current Name: Name as Amended:
FURTHER VOTED:
Shearson Lehman Brothers Shearson Lehman Brothers
Intermediate-Term Trust Income Trust
: and
That the introductory paragraph of Section 4.2 of Article IV of the
Trust's Master Trust Agreement be, and it hereby is, amended to read
as follows
"Section 4.2 Establishment and Designation of Sub-Trusts. Without
limiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby
establish and designate the following Sub-Trusts: "Shearson Lehman
Brothers Limited Maturity Municipals Fund," "Shearson Lehman Brothers
Limited Maturity Treasury Fund," "Shearson Lehman Brothers
Intermediate Maturity California Municipals Fund" and "Shearson
Lehman Brothers Intermediate Maturity New York Municipals Fund." The
Trust and any Shares of any further Sub-Trusts that may from time to
time be established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to same future Sub-Trust at
the time of establishing or designating the same) have the following
relative rights and preferences.
FURTHER VOTED:
That the appropriate officers of the Trust be, and each hereby is,
authorized to execute and file any notices required to be filed
reflecting the foregoing changes; to execute amendments to the
Trust's Master Trust Agreement and By-Laws reflecting the foregoing
change; and to execute and file all requisite certificates, documents
and instruments and to take such other actions required to cause said
amendment to become effective and to pay all requisite fees and
expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
20th day of November, 1991.
Lee D. Augsburger
Assistant Secretary
