Registration No. 33-_________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __ [ ] Post-Effective Amendment No.
___
Smith Barney Income Trust
(Exact Name of Registrant as Specified in Charter)
Area Code and Telephone Number: (212) 723-9218
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
Christina T. Sydor
Secretary
Smith Barney Income Trust
388 Greenwich Street
New York, New York 10013
_____________________
(Name and Address of Agent for Service)
Approximate date of proposed public offering: As soon as possible after
the effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended.
Registrant's Rule 24f-2 Notice for the fiscal year ended November 30, 1994
will be filed with the Securities and Exchange Commission no later than
January 31, 1995.
SMITH BARNEY INCOME TRUST
CONTENTS
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibit
SMITH BARNEY INCOME TRUST
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Part A Item No. and Caption
Prospectus/Proxy
Statement Caption
Item
1.
Beginning of
Registration
Statement and Outside
Front Cover Page of
Prospectus
Cover Page; Cross Reference
Sheet
Item
2.
Beginning and Outside
Back Cover Page of
Prospectus
Table of Contents
Item
3.
Synopsis Information
and
Risk Factors
Overview; Comparison of
Investment Objectives and
Policies
Item
4.
Information About the
Transaction
Summary; Reasons for the
Reorganization; Information About
the Reorganization; Comparative
Information on Shareholder
Rights; Exhibit A (Agreement and
Plan of Reorganization)
Item
5.
Information About the
Registrant
Cover Page; Summary; Information
About the Reorganization;
Comparison of Investment
Objectives and Policies;
Comparative Information on
Shareholders Rights; Additional
Information About the Acquiring
Fund and the Acquired Fund;
Prospectus of Smith Barney
Intermediate Maturity California
Municipals Fund dated January 29,
1995
Item
6.
Information About the
Company Being Acquired
Summary; Information About the
Reorganization; Comparison of
Investment Objectives and
Policies; Comparative Information
on Shareholder Rights; Additional
Information About the Acquiring
Fund and the Acquired Fund
Item
7.
Voting Information
Summary; Information About the
Reorganization; Comparative
Information on Shareholder
Rights; Voting Information
Item
8.
Interest of Certain
Persons and Experts
Financial Statements and Experts;
Legal Matters
Item
9.
Additional Information
Required for Reoffering
By Persons Deemed to be
Underwriters
Not Applicable
Part B Item No. and Caption
Statement of Additional
Information Caption
Item 10.
Cover Page
Cover Page
Item 11.
Table of Contents
Cover Page
Item 12.
Additional Information
About the Registrant
Cover Page; Statement of
Additional Information of
Smith Barney Income Trust
dated January 29, 1995
Item 13.
Additional Information
About the Company Being
Acquired
Not Applicable
Item 14.
Financial Statements
Annual Report of Smith
Barney Income Trust with
respect to its Smith Barney
Intermediate Maturity
California Municipals Fund;
Annual Report of Smith
Barney Muni Funds-California
Limited Term Portfolio; Pro
Forma Financial Statements
Part C Item No. and Caption
Other Information Caption
Item
15.
Indemnification
Incorporated by reference to
Part A caption "Comparative
Information on Shareholders'
Rights--Liability of
Trustees"
Item
16.
Exhibits
Item 16. Exhibits
Item
17.
Undertakings
Item 17. Undertakings
SMITH BARNEY MUNI FUNDS -
CALIFORNIA LIMITED TERM PORTFOLIO
388 Greenwich Street
New York, New York 10013
February , 1995
Dear Shareholder:
The Board of Trustees of Smith Barney Muni Funds (the
"Trust"), on behalf of the California Limited Term Portfolio (the "Limited
Term Portfolio"), a separate series of the Trust, has recently reviewed and
unanimously endorsed a proposal for the reorganization of the Limited Term
Portfolio, which it judges to be in the best interests of the Limited Term
Portfolio's shareholders.
Under the terms of the proposal, Smith Barney
Intermediate Maturity California Municipals Fund (the "Intermediate
Maturity Fund"), a separate series of the Smith Barney Income Trust (the
"Income Trust"), would acquire substantially all of the assets and
liabilities of the Limited Term Portfolio. After the transaction, the
Limited Term Portfolio would be dissolved and you would become a
shareholder of the Intermediate Maturity Fund, having received shares with
an aggregate net asset value equivalent to the aggregate net asset value of
your Limited Term Portfolio investment at the time of the transaction. The
transaction would, in the opinion of counsel, be free from Federal income
taxes to you and the Limited Term Portfolio.
SPECIAL MEETING OF SHAREHOLDERS: YOUR VOTE IS IMPORTANT
The Board of Trustees of the Trust has determined that
the proposed reorganization should provide benefits to shareholders due, in
part, to savings in expenses borne by shareholders. We have therefore
called a Special Meeting of Shareholders to be held April 13, 1995 to
consider this transaction. We strongly urge your participation by asking
you to review, complete and return your proxy no later than April 12,
1995.
Detailed information about the proposed transaction is
described in the enclosed proxy statement. On behalf of the Board, I thank
you for your participation as a shareholder and urge you to exercise your
right to vote by completing, dating and signing the enclosed proxy card. A
self-addressed, postage-paid envelope has been enclosed for your
convenience. If you sign and date your proxy card, but do not provide
voting instructions, your shares will be voted FOR the proposal.
If you have any questions regarding the proposed
transaction, please feel free to call your Financial Consultant.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE
RECEIVED NO LATER THAN APRIL 12, 1995.
Sincerely,
Stephen
P. Treadway
Chairman
of the Board
SMITH BARNEY MUNI FUNDS - CALIFORNIA LIMITED TERM PORTFOLIO
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On April 13, 1995
___________________
Notice is hereby given that a Special Meeting of Shareholders
of Smith Barney Muni Funds - California Limited Term Portfolio (the
"Limited Term Portfolio"), will be held at 388 Greenwich Street, New York,
New York on April 13, 1995, at 4:30 p.m. for the following purposes:
1. To consider and act upon the Agreement and Plan of
Reorganization (the "Plan") dated as of December 20, 1994 providing for (i)
the acquisition of substantially all of the assets of the Limited Term
Portfolio by the Smith Barney Intermediate Maturity California Municipals
Fund (the "Intermediate Maturity Fund"), a separate series of Smith Barney
Income Trust, in exchange for shares of the Intermediate Maturity Fund and
the assumption by the Intermediate Maturity Fund of certain liabilities of
the Limited Term Portfolio, (ii) the distribution of such shares of the
Intermediate Maturity Fund to shareholders of the Limited Term Portfolio in
liquidation of the Limited Term Portfolio and (iii) the subsequent
dissolution of the Limited Term Portfolio.
2. To transact any other business which may properly come
before the meeting or any adjournment(s) thereof.
The Trustees of Smith Barney Muni Funds have fixed the close of
business on February 23, 1995, as the record date for the determination of
shareholders of the Limited Term Portfolio entitled to notice of and to
vote at this meeting or any adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN AND RETURN WITHOUT
DELAY THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES, SO THAT THEIR SHARES
MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE PROPER EXECUTION
OF PROXIES ARE SET FORTH ON THE FOLLOWING PAGE. PROXIES MAY BE REVOKED AT
ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT EXECUTION AND
SUBMISSION OF A REVISED PROXY BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
LIMITED TERM PORTFOLIO AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY
VOTING IN PERSON AT THE MEETING. YOUR PROMPT ATTENTION TO THE ENCLOSED
PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.
By order of the Board
of Trustees
Christina T. Sydor
Secretary
February ___, 1995
PROSPECTUS/PROXY STATEMENT DATED FEBRUARY , 1995
Acquisition of the Assets Of
SMITH BARNEY MUNI FUNDS - CALIFORNIA LIMITED TERM PORTFOLIO
388 Greenwich Street
New York, New York 10013
(212) 723-9218
By And In Exchange For Shares Of
SMITH BARNEY INCOME TRUST -
SMITH BARNEY INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
388 Greenwich Street
New York, New York 10013
(212) 723-9218
This Prospectus/Proxy Statement is being furnished to shareholders of
the California Limited Term Portfolio (the "Limited Term Portfolio"), a
separate series of Smith Barney Muni Funds (the "Trust"), in connection
with a proposed plan of reorganization, to be submitted to shareholders for
consideration at a Special Meeting of Shareholders to be held on April 13,
1995 at 4:30 p.m., New York City time, at the offices of Smith Barney Inc.,
located at 388 Greenwich Street, 22nd Floor, New York, New York, and any
adjournments thereof (collectively, the "Meeting"). The Plan provides for
all of the assets of the Limited Term Portfolio to be acquired by the Smith
Barney Intermediate Maturity California Municipals Fund (the "Intermediate
Maturity Fund"), a separate series of Smith Barney Income Trust (the
"Income Trust"), in exchange for shares of the Intermediate Maturity Fund
and the assumption by the Intermediate Maturity Fund of certain liabilities
of the Limited Term Portfolio (hereinafter referred to as the
"Reorganization"). (The Limited Term Portfolio and the Intermediate
Maturity Fund are herein referred to individually as a "Fund" and
collectively as the "Funds.") Following the Reorganization, shares of the
Intermediate Maturity Fund will be distributed to shareholders of the
Limited Term Portfolio in liquidation of the Limited Term Portfolio and the
Limited Term Portfolio will be dissolved. As a result of the proposed
Reorganization, each shareholder of the Limited Term Portfolio will receive
that number of shares of the Intermediate Maturity Fund having an aggregate
net asset value equal to the aggregate net asset value of such
shareholder's shares of the Limited Term Portfolio. Holders of Class A,
Class C and Class Y shares of the Limited Term Portfolio will receive Class
A, Class C and Class Y shares, respectively, of the Intermediate Maturity
Fund and no sales charge will be imposed on the shares of the Intermediate
Maturity Fund received by the Limited Term Portfolio shareholders. This
transaction is being structured as a tax-free reorganization.
The Intermediate Maturity Fund and the Limited Term Portfolio
are both open-end diversified management investment companies with similar
investment objectives. The Limited Term Portfolio's investment objective
is to seek as high a level of income exempt from Federal income taxes and
California personal income taxes as is consistent with prudent investing.
The investment objective of the Intermediate Maturity Fund is to provide
California investors with as high a level of current income exempt from
Federal income taxes and California 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. Each Fund invests
primarily, but not exclusively, in California municipal obligations.
Although the investment policies of the Funds are generally similar, there
are certain differences which are described under "Comparison of Investment
Objectives and Policies" in this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the
Intermediate Maturity Fund that a prospective investor should know before
investing. Certain relevant documents listed below, which have been filed
with the Securities and Exchange Commission ("SEC"), are incorporated by
reference. A Statement of Additional Information dated February [ ,
1995] relating to this Prospectus/Proxy Statement and the Reorganization,
has been filed with the SEC and is incorporated by reference into this
Prospectus/Proxy Statement. A copy of such Statement of Additional
Information and the Limited Term Portfolio Prospectus referred to below are
available upon request and without charge by writing to the Limited Term
Portfolio at the address listed on the cover page of this Prospectus/Proxy
Statement or by calling 1-(800)[_________].
1. The Prospectus dated January 29, 1995 of Smith
Barney Intermediate Maturity California Municipals Fund is incorporated in
its entirety by reference and will be filed by amendment.
2. The Prospectus dated November 7, 1994 of Smith
Barney Muni Funds - California Limited Term Portfolio is incorporated in
its entirety by reference.
Also accompanying this Prospectus/Proxy Statement as Exhibit A
is a copy of the Agreement and Plan of Reorganization (the "Plan") for the
proposed transaction.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials
Summary
Risk Factors
Reasons for the Reorganization
Information about the Reorganization
Comparison of Investment Objectives and Policies
Comparative Information on Shareholders' Rights
Additional Information About the Intermediate Maturity Fund and
the Limited Term Portfolio
Other Business
Voting Information
Financial Statements and Experts
Legal Matters
Exhibit A: Agreement and Plan of Reorganization
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information dated February [ ],
1995 relating to this Prospectus/Proxy Statement and the Reorganization, will
be sent to all shareholders requesting a copy of such Statement of Additional
Information.
1. Statement of Additional Information of Smith Barney Muni
Funds dated November 7, 1994.
2. Statement of Additional Information of Smith Barney Income
Trust dated January 29, 1995.
3. Annual Report of Smith Barney Muni Funds - California
Limited Term Portfolio dated March 31, 1994.
4. Semi-Annual Report of Smith Barney Muni Funds - California
Limited Term Portfolio dated September 30, 1994.
5. Annual Report of Smith Barney Intermediate Maturity
California Municipals Fund dated November 30, 1994.
6. Semi-Annual Report of Smith Barney Intermediate Maturity
California Municipals Fund dated May 31, 1994.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy Statement,
the Prospectus of the Intermediate Maturity Fund dated January 29, 1995, the
Statement of Additional Information of Smith Barney Income Trust dated January
29, 1995, the Prospectus of the Limited Term Portfolio and Statement of
Additional Information of the Smith Barney Muni Funds, each dated November 7,
1994, and the Plan, a copy of which is attached to this Prospectus/Proxy
Statement as Exhibit A.
Proposed Reorganization. The Plan provides for the transfer of all of
the assets of the Limited Term Portfolio in exchange for shares of the
Intermediate Maturity Fund and the assumption by the Intermediate Maturity
Fund of certain liabilities of the Limited Term Portfolio. The Plan also
calls for the distribution of shares of the Intermediate Maturity Fund to the
Limited Term Portfolio shareholders in liquidation of the Limited Term
Portfolio. As a result of this Reorganization, each shareholder of the
Limited Term Portfolio will become the owner of that number of full and
fractional shares of the Intermediate Maturity Fund having an aggregate net
asset value equal to the aggregate net asset value of the shareholder's shares
of the Limited Term Portfolio as of the close of business on the date that the
Limited Term Portfolio's assets are exchanged for shares of the Intermediate
Maturity Fund. Class A, Class C and Class Y shareholders of the Limited Term
Portfolio will receive Class A, Class C and Class Y shares, respectively, of
the Intermediate Maturity Fund. See "Information About the Reorganization."
For the reasons set forth below under "Reasons for the Reorganization,"
the Board of Trustees of the Trust, including all of the "non-interested"
Trustees, as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), has unanimously concluded that the Reorganization
would be in the best interests of the shareholders of the Limited Term
Portfolio and that the interests of the Limited Term Portfolio's existing
shareholders would not be diluted as a result of the transaction contemplated
by the Reorganization, and therefore has submitted the Plan for approval by
the Limited Term Portfolio's shareholders. The Board of Trustees of the
Limited Term Portfolio recommends approval of the Plan effecting the
Reorganization.
The Board of Trustees of the Intermediate Maturity Fund has also
approved the Reorganization.
Approval of the Reorganization will require the affirmative vote of a
majority of the outstanding shares of the Limited Term Portfolio. See "Voting
Information."
Tax Consequences. Prior to completion of the Reorganization, the
Limited Term Portfolio will have received from counsel an opinion that, upon
the Reorganization and the transfer of the assets of the Limited Term
Portfolio, no gain or loss will be recognized by the Limited Term Portfolio or
its shareholders for Federal income tax purposes. The holding period and tax
basis of shares of the Intermediate Maturity Fund that are received by each
Limited Term Portfolio shareholder will be the same as the holding period and
tax basis of the shares of the Limited Term Portfolio previously held by such
shareholder. In addition, the holding period and tax basis of the assets of
the Limited Term Portfolio in the hands of the Intermediate Maturity Fund as a
result of the Reorganization will be the same as in the hands of the Limited
Term Portfolio immediately prior to the Reorganization.
Investment Objectives, Policies and Restrictions. The Limited Term
Portfolio and the Intermediate Maturity Fund have generally similar investment
objectives, policies and restrictions. The Intermediate Maturity Fund seeks
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. The Limited Term Portfolio also seeks as high a level of income
exempt from federal income taxes and California personal income taxes as is
consistent with prudent investing. Each Fund attempts to achieve its
objective by investing primarily, but not exclusively, in obligations issued
by the State of California and its political subdivisions, agencies and
instrumentalities the interest from which is, in the opinion of bond counsel,
exempt from Federal income taxes at the time of their issuance.
Although the respective investment objectives and policies of the
Intermediate Maturity Fund and the Limited Term Portfolio are generally
similar, shareholders of the Limited Term Portfolio should consider certain
differences in such objectives and policies. See "Comparison of Investment
Objectives and Policies."
Fees and Expenses. The Intermediate Maturity Fund pays its investment
adviser, Smith Barney Mutual Funds Management Inc. ("SBMFM"), a monthly
advisory fee calculated at an annual rate of 0.35% of the value of the Fund's
average daily net assets and an administration fee calculated at an annual
rate of 0.20% of the Fund's average daily net assets. The Limited Term
Portfolio pays its investment adviser, Mutual Management Corp. ("MMC"), a
monthly fee of 0.45% of the Portfolio's average daily net assets.
The expense ratio of the Intermediate Maturity Fund (without waivers of
any fees) subsequent to the Reorganization is expected to be lower than that
of the Limited Term Portfolio (without waivers of any fees). See "Reasons for
the Reorganization." Total operating expenses for the Limited Term Portfolio
stated as a percentage of average net assets as of October 31, 1994 without
waivers and reimbursements for Class A shares was 0.98%. Total operating
expenses for the Intermediate Term Fund stated as a percentage of average net
assets as of October 31, 1994 were 1.20%. Total expense ratios for Class C
and Class Y shareholders of the Limited Term Portfolio, stated as a percentage
of average net assets as of October 31, 1994 were 1.18% and 0.85%,
respectively. Total annual operating expenses for the Intermediate Maturity
Fund subsequent to the Reorganization stated as a percentage of average net
assets (based upon pro forma financial statements included in the Statement of
Additional Information dated February [__], 1995 and incorporated herein) are
expected to be 0.96%, 1.16% and 0.81% for Class A, Class B and Class Y shares,
respectively.
Shares of the Intermediate Maturity Fund and the Limited Term Portfolio
are both sold subject to distribution plans adopted pursuant to Rule 12b-1
under the 1940 Act. Under their respective plans, Smith Barney Inc. ("Smith
Barney") is paid a service fee calculated at the annual rate of 0.15% of the
value of each Fund's average daily net assets attributable to each Fund's
Class A shares. In addition, each Fund's Class C shares pay a distribution
fee at an annual rate of 0.35% of the value of the respective Fund's average
daily net assets attributable to these shares. The fees are used by Smith
Barney to pay its Financial Consultants for servicing shareholder accounts and
to cover expenses primarily intended to result in the sale of those shares.
Management of the Funds. SBMFM serves as the investment adviser of the
Intermediate Maturity Fund. SBMFM is a wholly owned subsidiary of Smith
Barney Holdings Inc. ("Holdings"), which in turn, is a wholly owned subsidiary
of The Travelers Inc., a diversified financial services company engaged,
through its subsidiaries, principally in four business segments: Investment
Services, Consumer Finance Services, Life Insurance Services and Property &
Casualty Services. Joseph P. Deane, an investment officer of SBMFM, has
served as Vice President and Investment Officer of the Intermediate Maturity
Fund since it commenced operations on December 31, 1991, and manages the day-
to-day operations of the Fund, including making all investment decisions.
MMC serves as the investment adviser of the Limited Term Portfolio. MMC
is a wholly owned subsidiary of Holdings. Peter M. Coffey, an investment
officer of MMC, has served as a Vice President and Investment Officer of the
Portfolio since its inception on April 27, 1993. Mr. Coffey manages the
Portfolio's day-to-day operations, including making all investment decisions
for the Portfolio.
Purchase and Redemption Procedures. Purchases of shares of the
Intermediate Maturity Fund and the Limited Term Portfolio must be made through
a brokerage account maintained with Smith Barney, a broker that clears
securities transactions through Smith Barney on a fully disclosed basis or an
investment dealer in the selling group, at the shares' respective public
offering prices (net asset value next determined plus any applicable sales
charges). Class A shares of each Fund are sold with an initial sales charge
of 2.00% of the public offering price and Class C shares of both Funds are
sold without an initial sales charge but are subject to a contingent deferred
sales charge ("CDSC") of 1.00% payable upon certain redemptions and an annual
distribution fee of 0.20% of the average daily net assets of the Class. Class
Y shares of each Fund are sold without an initial sales charge or CDSC, and
are available only to investors investing a minimum of $5,000,000.
Additionally, Class A and Class C shares of both Funds are subject to an
annual service fee of 0.15% of the average daily net assets of each Class.
Shares of both the Intermediate Maturity Fund and the Limited Term
Portfolio may be redeemed at their net asset value per share next determined
after receipt of written request in proper form at no charge other than any
applicable CDSC. Redemptions made within twelve months of purchase of (i)
certain Class A shares of each Fund and (ii) Class C shares of each Fund may
be subject to a CDSC equal to 1.00% of the amount being redeemed. Redemptions
may be made by forwarding an appropriate written request for redemption with
signature guarantee to the Fund's transfer agent, The Shareholder Services
Group, Inc. ("TSSG"). See also "Redemption of Shares" in the accompanying
Prospectus of the Intermediate Maturity Fund.
Exchange Privileges. The exchange privileges available to shareholders
of the Intermediate Maturity Fund are identical to those available to
shareholders of the Limited Term Portfolio. Shareholders of both the Limited
Term Portfolio and the Intermediate Maturity Fund may exchange at net asset
value all or a portion of their shares for shares of the same or a specified
class in certain funds in the Smith Barney Mutual Funds at the respective net
asset values next determined, plus any applicable sales charge differential.
Any exchange will be a taxable event for which a shareholder may have to
recognize a gain or a loss under Federal income tax provisions. For purposes
of computing the CDSC, if any, that may be payable upon a disposition of the
shares, the holding period for the shares exchanged is added to the holding
period of the new shares. Shareholders of each Fund also may exchange certain
classes of shares for shares of the corresponding class of shares of certain
Smith Barney sponsored mutual funds. (See "Exchange Privilege" in each Fund's
Prospectus.) Exchanges are subject to minimum investment and other
requirements of the fund into which exchanges are made.
Dividends. The policies of each Fund with regard to dividends and
distributions are generally the same. The Limited Term Portfolio declares and
pays dividends of investment income monthly and the Intermediate Maturity Fund
declares dividends of investment income daily and pays them monthly. Each
Fund's policy is to make distributions of any realized capital gains annually.
Shareholders of both the Intermediate Maturity Fund and the Limited Term
Portfolio, if he or she does not otherwise instruct, will have their income
dividends and capital gain distributions reinvested automatically in
additional shares of the same Class of the Fund at net asset value, subject to
no sales charge or CDSC. Whichever distribution option is currently in effect
for a shareholder of the Limited Term Portfolio will remain in effect after
the Reorganization, however, shareholders may change their distribution option
at anytime after the Reorganization by contacting TSSG in writing. See
"Dividends, Distributions and Taxes" in the accompanying Prospectus of the
Intermediate Maturity Fund.
Shareholder Voting Rights. The Intermediate Maturity Fund and the
Limited Term Portfolio are both open-end investment companies organized in
Massachusetts. As permitted by Massachusetts law, there will normally be no
meetings of shareholders for the purpose of electing trustees unless and until
such time as less than a majority of the trustees holding office have been
elected by shareholders. At that time, the trustees then in office will call
a shareholders' meeting for the election of trustees. Shareholders may, at
any meeting called for the purpose, remove a trustee by the affirmative vote
of the holders of record of a majority of the votes entitled to be cast for
the election of trustees. For purposes of voting with respect to the
Reorganization, the Class A, Class C and Class Y shares of the Limited Term
Portfolio shall vote together as a single class. See "Comparative Information
on Shareholder's Rights-Voting Rights."
RISK FACTORS
Due to the similarities of investment objectives and policies of the
Intermediate Maturity Fund and the Limited Term Portfolio, the investment
risks are generally similar. Such risks are generally those typically
associated with investing in municipal obligations of the State of California
and its political subdivisions. Such risks, and certain differences in the
risks associated with investing in the Funds, are discussed under the caption
"Comparison of Investment Objectives and Policies."
REASONS FOR THE REORGANIZATION
The Board of Trustees of the Trust has determined that it is
advantageous to combine the Limited Term Portfolio with the Intermediate
Maturity Fund. The Funds have generally similar investment objectives and
policies and the same distributor and transfer agent.
The Board of Trustees has determined that the Reorganization should
provide certain benefits to the shareholders of the Limited Term Portfolio.
In making such a determination, the Board of Trustees considered, among other
things: (i) the terms and conditions of the Reorganization; (ii) the savings
in expenses borne by shareholders expected to be realized by the
Reorganization; (iii) the fact that the Reorganization will be effected as a
tax-free reorganization; (iv) the comparative investment performance of the
Funds; and (v) the advantages of eliminating duplication inherent in marketing
two funds with similar investment objectives.
In light of the foregoing, the Board of Trustees of the Trust, including
the non-interested Trustees, have decided that it is in the best interests of
the Limited Term Portfolio and its shareholders to combine with the
Intermediate Maturity Fund. The Board of Trustees has also determined that a
combination of the Limited Term Portfolio and the Intermediate Maturity Fund
would not result in a dilution of the interests of the Limited Term
Portfolio's shareholders.
The Board of Trustees of the Income Trust has considered the following
factors, among others, in approving the Reorganization and determining that it
is advantageous for the Intermediate Maturity Fund to acquire the assets of
the Limited Term Portfolio: (i) the terms and conditions of the
Reorganization; (ii) the fact that a portion of the Reorganization will be
effected as a tax-free reorganization; and (iii) the advantages of eliminating
duplication inherent in marketing two funds with similar investment
objectives. Accordingly, the Board of Trustees of the Income Trust, including
a majority of the non-interested Trustees, has determined that the
Reorganization is in the best interests of the Intermediate Maturity Fund's
shareholders and that the interests of the Intermediate Maturity Fund's
shareholders will not be diluted as a result of the Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the Plan is qualified
in its entirety by reference to the Plan (Exhibit A hereto). The Plan
provides that the Intermediate Maturity Fund will acquire substantially all of
the assets of the Limited Term Portfolio in exchange for shares of the
Intermediate Maturity Fund and the assumption by the Intermediate Maturity
Fund of certain liabilities of the Limited Term Portfolio on April 21, 1995,
or such later date as may be agreed upon by the parties (the "Closing Date").
Prior to the Closing Date, the Limited Term Portfolio will endeavor to
discharge all of its known liabilities and obligations. The Intermediate
Maturity Fund will not assume any liabilities or obligations of the Limited
Term Portfolio other than those reflected in an unaudited statement of assets
and liabilities of the Limited Term Portfolio prepared as of the close of
regular trading on the New York Stock Exchange, Inc. (the "NYSE"), currently
4:00 p.m. New York time, on the Closing Date. The number of full and
fractional shares of the Intermediate Maturity Fund to be issued to the
Limited Term Portfolio shareholders will be determined on the basis of the
Intermediate Maturity Fund's and the Limited Term Portfolio's relative net
asset values per their respective classes of shares, computed as of the close
of regular trading on the NYSE on the Closing Date. The net asset value per
share of the affected shares will be determined by dividing assets, less
liabilities, by the total number of such outstanding shares.
Both the Limited Term Portfolio and the Intermediate Maturity Fund will
utilize SBMFM as agent to determine the value of their respective portfolio
securities. The Limited Term Portfolio and the Intermediate Maturity Fund
also will use the same independent pricing service to determine the value of
each security so that Boston Advisors, as agent, can determine the aggregate
value of each Fund's portfolio. The method of valuation employed will be
consistent with Rule 22c-1 under the 1940 Act, and with the interpretation of
such rule by the SEC's Division of Investment Management.
At or prior to the Closing Date, the Limited Term Portfolio shall have
declared a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to the Limited Term
Portfolio's shareholders all taxable income for the taxable year ending on or
prior to the Closing Date (computed without regard to any deduction for
dividends paid) and all of its net capital gains realized in the taxable year
ending on or prior to the Closing Date (after reductions for any capital loss
carry forward).
As soon after the Closing Date as conveniently practicable, the Limited
Term Portfolio will liquidate and distribute pro rata to shareholders of
record as of the close of business on the Closing Date the full and fractional
shares of the Intermediate Maturity Fund received by the Limited Term
Portfolio. Such liquidation and distribution will be accomplished by the
establishment of accounts in the names of the Limited Term Portfolio's
shareholders on the share records of the Intermediate Maturity Fund's transfer
agent. Each account will represent the respective pro rata number of full and
fractional shares of the Intermediate Maturity Fund due to each of the Limited
Term Portfolio's shareholders. After such distribution and the winding up of
its affairs, the Limited Term Portfolio will be dissolved.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval of the Limited Term Portfolio's
shareholders, the Plan may be amended as set forth in the Plan and may be
terminated at any time at or prior to the Closing Date by either party if (i)
a material condition to one party's performance under the Plan or a material
covenant of one party shall not be fulfilled on or before the date specified
for the fulfillment thereof, (ii) a material default or material breach of the
Plan shall be made by one party that is not cured or (iii) the Closing Date
does not occur on or prior to April 19, 1996.
The Funds, in proportion to their assets, shall be liable for the
expenses incurred in connection with the Reorganization, whether or not the
Reorganization is consummated.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares of the Limited Term Portfolio. If the Reorganization is
not approved by shareholders of the Limited Term Portfolio, the Board of
Trustees will consider other possible courses of action, including liquidation
of the Limited Term Portfolio.
Description of the Intermediate Maturity Fund. Full and fractional
shares of the respective Class of shares of common stock of the Intermediate
Maturity Fund will be issued to the Limited Term Portfolio in accordance with
the procedures detailed in the Plan and as described in the Intermediate
Maturity Fund's Prospectus. Generally, the Intermediate Maturity Fund does
not issue share certificates to shareholders unless a specific request is
submitted to the Intermediate Maturity Fund's transfer agent, TSSG. The
shares of the Intermediate Maturity Fund to be issued to the Limited Term
Portfolio's shareholders and registered on the shareholder records of TSSG
will have no pre-preemptive or conversion rights.
Federal Income Tax Consequences. The exchange of assets for shares of
the Intermediate Maturity Fund is intended to qualify for Federal income tax
purposes as a tax-free reorganization under Section 368 (a) of the Internal
Revenue Code of 1986, as amended (the "Code"). As a condition to the closing
of the Reorganization, the Limited Term Portfolio will receive an opinion from
Willkie Farr & Gallagher, counsel to the Intermediate Maturity Fund, to the
effect that, on the basis of the existing provisions of the Code, U.S.
Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for Federal income tax purposes, upon
consummation of the Reorganization:
(1) the Reorganization will constitute a
reorganization within the meaning of Section 368 (a)(1)(C) of the Code, and
the Intermediate Maturity Fund and the Limited Term Portfolio are each a
"party to a reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by either the
Intermediate Maturity Fund or the Limited Term Portfolio upon the transfer of
the Limited Term Portfolio's assets to, and the assumption of the Limited Term
Portfolio's liabilities by, the Intermediate Maturity Fund in exchange for the
Intermediate Maturity Fund's shares, or upon the distribution of the
Intermediate Maturity Fund's shares to the Limited Term Portfolio's
shareholders in exchange for their shares in the Limited Term Portfolio;
(3) no gain or loss will be recognized by shareholders
of the Limited Term Portfolio upon the exchange of their shares for the
Intermediate Maturity Fund shares;
(4) the basis of the Intermediate Maturity Fund shares
received by each Limited Term Portfolio shareholder pursuant to the
Reorganization will be the same as the basis of the Limited Term Portfolio
shares surrendered in exchange therefor;
(5) the holding period of the Intermediate Maturity
Fund shares to be received by each Limited Term Portfolio shareholder will
include the holding period of the shares of the common stock of the Limited
Term Portfolio which are surrendered in exchange therefor (provided the
Limited Term Portfolio shares were held as capital assets on the date of the
Reorganization);
(6) the basis of the Limited Term Portfolio's assets
acquired by the Intermediate Maturity Fund will be the same as the basis of
such assets to the Limited Term Portfolio immediately prior to the
Reorganization; and
(7) the holding period of the assets of the Limited
Term Portfolio acquired by the Intermediate Maturity Fund will include the
period for which such assets were held by the Limited Term Portfolio.
Shareholders of the Limited Term Portfolio should consult their tax
advisers regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Since the foregoing discussion only
relates to the Federal income tax consequences of the Reorganization,
shareholders of the Limited Term Portfolio should also consult their tax
advisers as to state and local tax consequences, if any, of the
Reorganization.
Capitalization. The following table, which is unaudited, shows the
capitalization of the Intermediate Maturity Fund and the Limited Term
Portfolio as of February [___], 1995 and on a pro forma basis as of that date,
giving effect to the proposed acquisition of assets at net asset value (in
thousands, except per share value):
Class A Shares
Net Assets
Net asset value
per share
Shares
outstanding
Class C Shares
Net Assets
Net asset value
per share
Shares
outstanding
Class Y Shares
Net Assets
Net asset value
per share
Shares
outstanding
Limited Term
Portfolio
(Unaudited)
Intermediate
Maturity Fund
(Unaudited)
Pro forma for
Reorganization
(Unaudited)
As of the Record Date, February 23, 1995, there were
outstanding Class A shares, outstanding Class C shares and
outstanding Class Y shares of the Limited Term Portfolio and
outstanding Class A shares, outstanding Class C shares
and
outstanding Class Y shares of the Intermediate Maturity Fund. As of the
Record Date, the officers and trustees of the Limited Term Portfolio
beneficially owned as a group less than 1% of the outstanding shares of the
Limited Term Portfolio. To the best knowledge of the Trustees, as of the
Record Date, no shareholder or "group" (as that term is used in Section 13(d)
of the Securities Exchange Act of 1934 (the "Exchange Act")) owned
beneficially or of record more than 5% of the Limited Term Portfolio. As of
the Record Date, the officers and trustees of the Income Trust beneficially
owned as a group less than 1% of the outstanding shares of the Intermediate
Maturity Fund. To the best knowledge of the Trustees of the Income Trust, as
of the Record Date, no shareholder or "group" (as that term is used in Section
13(d) of the Exchange Act) owned beneficially or of record more than 5% of the
Intermediate Maturity Fund.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies and
restrictions of the Intermediate Maturity Fund and the Limited Term Portfolio
is based upon and qualified in its entirety by the respective investment
objectives, policies and restrictions sections of the Prospectuses of the
Intermediate Maturity Fund and the Limited Term Portfolio. For a full
discussion of the investment objectives, policies and restrictions of the
Intermediate Maturity Fund, refer to the Intermediate Maturity Fund's
Prospectus, which accompanies this Prospectus/Proxy Statement, under the
captions, "Investment Objective and Management Policies," and for a
discussion of these issues as they apply to the Limited Term Portfolio, refer
to the Limited Term Portfolio's Prospectus under the caption, "Investment
Objective and Management Policies."
Investment Objective. The principal investment objective of the
Intermediate Maturity Fund is a high level of current income exempt from
Federal income taxes and California personal income taxes. The principal
investment objective of the Limited Term Portfolio is also a high level of
income exempt from Federal income taxes and California personal income taxes.
Although the language used by each Fund to define its respective investment
objectives is slightly different, the investment objectives of the Funds are
essentially the same.
Primary Investments. Under normal conditions, Intermediate Maturity
Fund attempts to invest 100%, and invests no less than 80%, of its assets 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 ("California
Obligations"), the interest from which is, in the opinion of bond counsel,
exempt from Federal income taxes and California personal income tax. As a
non-diversified fund under the 1940 Act, the Intermediate Maturity Fund is not
limited in the proportion of its assets that it may invest in the obligations
of a single issuer; however, it has conducted and intends to continue to
conduct its operations so as to qualify as a "regulated investment company"
for purposes of the Code. Up to 20% of the Intermediate Maturity Fund's total
assets may be invested in unrated securities that are deemed by its investment
adviser to be of a quality comparable to investment grade. The weighted
average maturity of the portfolio of the Intermediate Maturity Fund will
normally be no less than three nor more than ten years, and the maximum
remaining maturity of such securities will be no greater than twenty years.
The Intermediate Maturity Fund may also 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 that 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. Up to an aggregate of 10%
of the Fund's assets may be invested in illiquid assets, which includes
securities subject to contractual and other restrictions on resale and may
purchase securities on a when-issued or delayed delivery basis. The types of
California Obligations in which the Fund may invest include municipal leases,
zero coupon securities, custodial receipts, floating and variable rate
instruments and participation interests purchased from financial institutions.
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.
Under normal market conditions, the Limited Term Portfolio seeks to
invest 100%, and invests no less than 80%, of its assets in municipal
obligations the interest from which is, in the opinion of bond counsel, exempt
from Federal income taxes at the time of their issuance. Under normal market
conditions, the Portfolio invests at least 65% of its assets in municipal
obligations issued by the State of California, its political subdivisions and
their agencies and instrumentalities. At least 80% of the Limited Term
Portfolio's assets are invested in obligations with remaining maturities of
less than ten years and the dollar-weighted average maturity of its entire
portfolio will normally not exceed ten years. Municipal bonds purchased by
the Limited Term Portfolio must, at the time of purchase, be investment grade
municipal bonds and at least two-thirds of the municipal bonds must be rated
in the category of A or better. Investment grade bonds are those rated Aaa,
Aa, A and Baa by Moody's Investors Service, Inc. ("Moody's") and AAA, AA, A
and BBB by Standard and Poor's Corporation ("S&P") or have an equivalent
rating by any nationally recognized statistical rating organization (an
"NRSRO"). Up to one-third of the assets of the Portfolio may be invested in
municipal bonds rated Baa or BBB. The Portfolio's short-term municipal
obligations will be limited to high grade obligations (i.e., obligations that
are secured by the full faith and credit of the United States or are rated MIG
1 or MIG 2, VMIG 1 or VMIG 2 or Prime-1 or Aa or better by Moody's or SP-1+,
SP-1, SP-2, or A-1 or AA or better by S&P or have an equivalent rating by any
NRSRO or obligations determined by the Portfolio's investment adviser to be
equivalent). Among the types of short-term instruments in which the Limited
Term Portfolio may invest are floating or variable rate demand instruments,
tax-exempt commercial paper (generally having a maturity of less than nine
months), and other types of notes generally having maturities of less than
three years. The Portfolio will not invest more than 15% of the value of its
net assets in illiquid securities and may purchase new issues of municipal
obligations on a when-issued basis. Under certain conditions, and as a
hedging policy in pursuit of its investment objective, the Limited Term
Portfolio may invest in municipal bond index futures (currently traded on the
Chicago Board of Trade) or in listed contracts based on United States
Government securities.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
General. The Limited Term Portfolio and the Intermediate Maturity Fund
are open-end, management investment companies registered under the 1940 Act,
which continuously offer to sell shares at their current net asset value.
Each is a series of a trust organized under Massachusetts law as a
"Massachusetts business trust" and is governed by the respective trust's
Declaration of Trust, board of trustees and its by-laws. Each Fund is also
governed by applicable state and Federal law. The Intermediate Maturity Fund
is a separate series of the Income Trust. The Income Trust has authorized
capital with a par value of $.001 per share. The Board of Trustees has
authorized the issuance of four series of shares, each representing shares in
one of four separate portfolios, and may authorize the issuance of additional
series of shares in the future. The assets of each portfolio are segregated
and separately managed and a shareholder's interest is in the assets of the
portfolio in which he or she holds shares. The Limited Term Portfolio is a
separate series of the Trust which has authorized share capital with a par
value of $.001 per share. For both of the Funds, Class A shares, Class C
shares and Class Y shares have identical voting, dividend, liquidation, and
other rights on the same terms and conditions except that expenses related to
the distribution of a specific class of shares, are borne solely by that class
and each class of shares has exclusive voting rights with respect to
provisions of the Fund's Rule 12b-1 distribution plan which pertains to a
particular class.
Trustees. The By-Laws of each of the Income Trust and the Trust provide
that the term of office of each trustee shall be from the time of his election
and qualification until the next annual meeting of shareholders or until his
successor shall have been elected and shall have qualified. Any trustee may
be removed by the shareholders by a majority of the votes entitled to be cast
for the election of trustees. Vacancies on the Boards of either the Income
Trust or the Trust may be filled by the trustees remaining in office. A
meeting of shareholders will be required for the purpose of electing
additional trustees whenever fewer than a majority of the Trustees then in
office were elected by shareholders.
Voting Rights. As permitted by Massachusetts law, there will normally
be no meetings of shareholders for the purpose of electing trustees unless and
until such time as less than a majority of the trustees holding office have
been elected by shareholders. At that time, the directors then in office will
call a shareholders' meeting for the election of trustees. Shareholders may,
at any meeting called for the purpose, remove a trustee by the affirmative
vote of the holders of record of a majority of the votes entitled to be cast
for the election of trustees.
Liquidation or Dissolution. In the event of the liquidation or
dissolution of the Intermediate Maturity Fund or the Limited Term Portfolio,
the shareholders of the Funds are entitled to receive, when, and as declared
by the Trustees, the excess of the assets belonging to the Funds over the
liabilities belonging to the Funds. In either case, the assets so distributed
to shareholders of the Funds will be distributed among the shareholders in
proportion to the number of shares of the Funds held by them and recorded on
the books of the Funds.
Liability of Trustees. The Declarations of Trust of the Income Trust
and the Trust provide that each Fund will indemnify Trustees and officers
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their positions with the Fund. However,
nothing in the Declaration of Trust nor the By-Laws of the Income Trust or the
Trust protects or indemnifies a trustee or officer against any liability to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of such person's office.
Rights of Inspection. Shareholders of the Intermediate Maturity Fund
and the Limited Term Portfolio have the same inspection rights. Currently,
each shareholder is permitted to inspect the records, accounts and books of
the trust subject to reasonable regulations of the Board of Trustees, not
contrary to Massachusetts law, as to whether and to what extent, and at what
times and places, and under what conditions and regulations, such right shall
be exercised.
Appraisal Rights. There are no appraisal rights under Massachusetts law
for shareholders of an open-end investment company registered under the 1940
Act if the value placed on the shareholder's stock that is the subject of the
transaction is its net asset value. Because shares of the Limited Term
Portfolio to be exchanged for shares of the Intermediate Maturity Fund in the
Reorganization will be valued at their net asset values, shareholders of the
Limited Term Portfolio will have no appraisal rights under Massachusetts law
and will be bound by the terms of the Plan, if approved.
The foregoing is only a summary of certain characteristics of the
operations of the Intermediate Maturity Fund and the Limited Term Portfolio.
The foregoing is not a complete description of the documents cited.
Shareholders should refer to the provisions of the corporate documents and
state laws governing each Fund for a more thorough description.
ADDITIONAL INFORMATION ABOUT
THE INTERMEDIATE MATURITY FUND
AND THE LIMITED TERM PORTFOLIO
The Limited Term Portfolio. Information about the Limited Term
Portfolio is incorporated herein by reference from its current Prospectus
dated November 7,1994 and in the Statement of Additional Information dated
November 7, 1994 which has been filed with the SEC. A copy of the Prospectus
and the Statement of Additional Information is available upon request and
without charge by writing to the Limited Term Portfolio at 388 Greenwich
Street, New York, New York 10013 or by calling 1-800-____.
The Intermediate Maturity Portfolio. Information concerning the
operation and management of the Intermediate Maturity Fund is incorporated
herein by reference from the Prospectus dated January 29, 1995 a copy of which
is included herein, and in the Statement of Additional Information dated
January 29, 1995 which has been filed with the SEC. A copy of such Statement
of Additional Information is available upon request and without charge by
writing the Intermediate Maturity Fund at 388 Greenwich Street, New York, New
York 10013 or by calling 1-(800) [______].
Both the Intermediate Maturity Fund and the Limited Term Portfolio are
subject to the informational requirements of the Exchange Act and in
accordance therewith file reports and other information including proxy
material, reports and charter documents with the SEC. These reports can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York
Regional Office of the SEC, 75 Park Place, New York, New York 10007. Copies
of such material can also be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549 at
prescribed rates.
OTHER BUSINESS
The Trustees of the Limited Term Portfolio do not intend to present any
other business at the Meeting. If, however, any other matters are properly
brought before the Meeting, the persons named in the accompanying form of
proxy will vote thereon in accordance with their judgement.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of the Limited Term Portfolio
to be used at the Special Meeting of Shareholders to be held at 4:30 p.m. on
April 13, 1995, at 388 Greenwich Street, New York, New York 10013 and at any
adjournments thereof. This Prospectus/Proxy Statement, along with a Notice of
the Meeting and a proxy card, is first being mailed to shareholders of the
Limited Term Portfolio on or about February [_____], 1995. Only shareholders
of record as of the close of business on the Record Date will be entitled to
notice of, and to vote at, the Meeting or any adjournments thereof. The
holders of a majority of the shares of the Limited Term Portfolio outstanding
at the close of business on the Record Date present in person or represented
by proxy will constitute a quorum for the Meeting. If the enclosed form of
proxy is properly executed and returned in time to be voted at the Meeting,
the proxies named therein will vote the shares represented by the proxy in
accordance with the instructions marked thereon. Unmarked proxies will be
voted FOR the proposed Reorganization and FOR any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to Smith Barney Muni Funds - California Limited Term Portfolio,
388 Greenwich Street, New York, New York 10013, 22nd Floor, c/o the Corporate
Secretary. Unless revoked, all valid proxies will be voted in accordance with
the specifications thereon or, in the absence of such specifications, FOR
approval of the Plan and the Reorganization contemplated thereby.
Approval of the Plan will require the affirmative vote of a majority of
the outstanding shares of the Limited Term Portfolio. Shareholders of Class
A, C and Y shares of the Limited Term Portfolio shall vote together as a
single class. Shareholders of the Limited Term Portfolio are entitled to one
vote for each share.
Proxies are solicited by mail. Additional solicitations may be made by
telephone, telegraph or personal contact by officers or employees of Smith
Barney and its affiliates. The cost of solicitation will be borne by the
Funds in proportion to their assets.
In the event that sufficient votes to approve the Reorganization are not
received by April 13, 1995, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares present in person or by proxy and entitled
to vote at the Meeting. The persons named as proxies will vote upon such
adjournment after consideration of the best interests of all shareholders.
The votes of the shareholders of the Intermediate Maturity Fund are not
being solicited by this Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
The audited statements of assets and liabilities of the Limited Term
Portfolio as of March 31, 1994, and the Intermediate Maturity Fund as of
November 30, 1994 and the related statements of operations for the year then
ended and changes in net assets for the two years then ended and selected per
share data and ratios, have been incorporated by reference into the Statement
of Additional Information relating to this Prospectus/Proxy Statement in
reliance on the reports of KPMG Peat Marwick and Coopers and Lybrand,
independent auditors for the Limited Term Portfolio and the Intermediate
Maturity Fund, respectively, given on the authority of such firms as experts
in accounting and auditing. In addition, the unaudited financial statements
for the Limited Term Portfolio and the Intermediate Maturity Fund for the six-
month periods ended September 30, 1994 and May 31, 1994, respectively, are
incorporated by reference into the aforementioned Statement of Additional
Information.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
Intermediate Maturity Fund will be passed upon by Willkie Farr & Gallagher,
153 East 53rd Street, New York, New York 10022.
THE BOARD OF TRUSTEES OF THE LIMITED TERM PORTFOLIO, INCLUDING THE "NON-
INTERESTED" TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN, AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR
OF APPROVAL OF THE PLAN.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made as of this 20th day of December, 1994, by and between Smith Barney Income
Trust ("Income Trust"), a business trust organized under the laws of The
Commonwealth of Massachusetts with its principal place of business at 388
Greenwich Street, New York, New York 10013, on behalf of Smith Barney
Intermediate Maturity California Municipals Fund (the "Acquiring Fund"), an
investment portfolio of Income Trust and Smith Barney Muni Funds (the
"Trust"), a business trust organized under the laws of The Commonwealth of
Massachusetts with its principal place of business at 388 Greenwich Street,
New York, New York 10013, on behalf of the California Limited Term Portfolio,
an investment portfolio of the Trust (the "Acquired Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of
the United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund in exchange for shares of
beneficial interest of the Acquiring Fund (collectively, the "Acquiring Fund
Shares" and each, an "Acquiring Fund Share") and the assumption by the
Acquiring Fund of certain scheduled liabilities of the Acquired Fund and the
distribution, after the Closing Date herein referred to, of Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the Acquired
Fund and the dissolution and termination of the Acquired Fund, all upon the
terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Trust and the Income Trust are registered investment
companies of the management type and the Acquired Fund owns securities that
generally are assets of the character in which the Acquiring Fund is permitted
to invest;
WHEREAS, the Trust and the Income Trust are authorized to issue
shares of beneficial interest on behalf of the Acquired Fund and Acquiring
Fund, respectively;
WHEREAS, the Board of Trustees of the Trust, on behalf of the
Acquired Fund, has determined that the exchange of all or substantially all of
the assets and certain of the liabilities of the Acquired Fund for Acquiring
Fund Shares and the assumption of such liabilities by the Acquiring Fund is in
the best interests of the Acquired Fund's shareholders and that the interests
of the existing shareholders of the Acquired Fund would not be diluted as a
result of this transaction;
WHEREAS, the Board of Trustees of the Trust has determined that
the exchange of all or substantially all of the assets of the Acquired Fund
for Acquiring Fund Shares is in the best interests of the Acquiring Fund's
shareholders and that the interests of the existing shareholders of the
Acquiring Fund would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto covenant
and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING
FUND SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S SCHEDULED LIABILITIES AND
LIQUIDATION, DISSOLUTION AND TERMINATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Trust on
behalf of the Acquired Fund agrees to transfer the Acquired Fund's assets as
set forth in paragraph 1.2 to the Acquiring Fund, and the Income Trust on
behalf of the Acquiring Fund agrees in exchange therefor: (i) to deliver to
the Acquired Fund the number of Acquiring Fund Shares, including fractional
Acquiring Fund Shares, determined by dividing the value of the Acquired Fund's
net assets attributable to its shares, computed in the manner and as of the
time and date set forth in paragraph 2.1, by the net asset value of one
Acquiring Fund Share, computed in the manner and as of the time and date set
forth in paragraph 2.2; and (ii) to assume in respect of the Acquiring Fund
certain scheduled liabilities of the Acquired Fund, as set forth in paragraph
1.3. Such transactions shall take place at the closing provided for in
paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by the
Acquiring Fund shall consist of all or substantially all of its property,
including, without limitation, all cash, securities and dividends or interest
receivables which are owned by the Acquired Fund, and any deferred or prepaid
expenses shown as an asset on the books of the Acquired Fund on the closing
date provided in paragraph 3.1 (the "Closing Date").
(b) The Trust and the Acquired Fund have provided the
Income Trust and Acquiring Fund with a list of all of the Acquired Fund's
assets as of the date of execution of this Agreement. The Acquired Fund
reserves the right to sell any of the securities but will not, without the
prior approval of the Acquiring Fund, acquire any additional securities other
than securities of the type in which the Acquiring Fund is permitted to
invest. The Acquiring Fund will, within a reasonable time prior to the
Closing Date, furnish the Trust and the Acquired Fund with a statement of the
Acquiring Fund's investment objectives, policies and restrictions and a list
of the securities, if any, on the Acquired Fund's list referred to in the
first sentence of this paragraph which do not conform to the Acquiring Fund's
investment objectives, policies and restrictions. In the event that the
Acquired Fund holds any investments which the Acquiring Fund may not hold, the
Acquired Fund will dispose of such securities prior to the Closing Date. In
addition, if it is determined that the portfolios of the Acquired Fund and the
Acquiring Fund, when aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with respect to such
investments, the Acquired Fund, if requested by the Acquiring Fund, will
dispose of and/or reinvest a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
1.3. The Acquired Fund will endeavor to discharge all the
Acquired Fund's known liabilities and obligations prior to the Closing Date.
The Income Trust on behalf of the Acquiring Fund shall assume all liabilities,
expenses, costs, charges and reserves reflected on an unaudited Statement of
Assets and Liabilities of the Acquired Fund prepared by The Boston Company
Advisors, Inc. ("Boston Advisors"), as sub-administrator of the Acquired Fund,
as of the Valuation Date (as defined in paragraph 2.1), in accordance with
generally accepted accounting principles consistently applied from the prior
audited period. The Acquiring Fund shall assume only those liabilities of the
Acquired Fund reflected in that unaudited Statement of Assets and Liabilities
and shall not assume any other liabilities, whether absolute or contingent,
not reflected thereon.
1.4. As provided in paragraph 3.4, as soon after the Closing Date
as is conveniently practicable (the "Liquidation Date"), the Acquired Fund
will liquidate and distribute pro rata to its shareholders of record
determined as of the close of business on the Closing Date (the "Acquired Fund
Shareholders"), the Acquiring Fund Shares it receives pursuant to paragraph
1.1. Such liquidation and distribution will be accomplished by the transfer
of the Acquiring Fund Shares then credited to the account of the Acquired Fund
on the books of the Acquiring Fund to open accounts on the share records of
the Acquiring Fund in the name of the Acquired Fund's shareholders and
representing the respective pro rata number of the Acquiring Fund Shares due
such shareholders. All issued and outstanding shares of the Acquired Fund
will simultaneously be cancelled on the books of the Acquired Fund, although
share certificates representing interests in the Acquired Fund will represent
a number of Acquiring Fund Shares after the Closing Date as determined in
accordance with paragraph 1.1. The Acquiring Fund shall not issue
certificates representing the Acquiring Fund Shares in connection with such
exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Acquiring Fund Shares will be
issued in the manner described in the Acquiring Fund's current prospectus and
statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the Acquired Fund
shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring
Fund Shares are to be issued and transferred.
1.7. Any reporting responsibility of the Trust and the Acquired
Fund is and shall remain the responsibility of the Trust and the Acquired
Fund, respectively, up to and including the Closing Date and such later dates
on which the Acquired Fund is dissolved and deregistered.
2. VALUATION
2.1. The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets computed as of
the close of regular trading on the New York Stock Exchange, Inc. (the "NYSE")
on the Closing Date (such time and date being hereinafter called the
"Valuation Date"), using the valuation procedures set forth in the Acquiring
Fund's then current prospectus or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the
net asset value per share computed as of the close of regular trading on the
NYSE on the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then current prospectus or statement of additional
information.
2.3. All computations of value shall be made by Boston Advisors
in accordance with its regular practice as pricing agent for the Acquired Fund
and the Acquiring Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be __________, 1994, or such later
date as the parties may agree to in writing. All acts taking place at the
Closing shall be deemed to take place simultaneously as of the close of
business on the Closing Date unless otherwise provided. The Closing shall be
held as of 5:00 p.m. at the offices of Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, or at such other time and/or place as the
parties may agree.
3.2. The custodian for the Acquiring Fund (the "Custodian"),
shall deliver at the Closing a certificate of an authorized officer stating
that: (a) the Acquired Fund's portfolio securities, cash and any other assets
shall have been delivered in proper form to the Acquiring Fund within two
business days prior to or on the Closing Date and (b) all necessary transfer
taxes including all applicable federal and state stock transfer stamps, if
any, shall have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets
of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.4. The Acquired Fund shall deliver at the Closing a list of the
names and addresses of its shareholders and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately
prior to the Closing, certified on behalf of the Acquired Fund by the
President of the Trust. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the
Acquired Fund's account on the Closing Date to the Secretary of the Trust, on
behalf of the Acquired Fund, or provide evidence satisfactory to the Trust and
the Acquired Fund that such Acquiring Fund Shares have been credited to the
Acquired Fund's account on the books of the Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks, assignments,
share certificates, if any, receipts or other documents as such other party or
its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Trust and the Acquired Fund represent and warrant to the
Income Trust and the Acquiring Fund as follows:
(a) The Trust is a business trust, duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(b) The Trust is a registered investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") is in
full force and effect;
(c) The Trust is not, and the execution, delivery and performance
of this Agreement will not result, in a material violation of its Master Trust
Agreement or By-laws or of any agreement, indenture, instrument, contract,
lease or other undertaking to which the Trust or the Acquired Fund is a party
or by which it is bound;
(d) The Trust has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Acquired Fund prior to the Closing Date;
(e) Except as otherwise disclosed in writing to and accepted by
the Income Trust on behalf of the Acquiring Fund, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or to its knowledge threatened against
the Trust with respect to the Acquired Fund or any of the Acquired Fund's
properties or assets (other than that previously disclosed to the other party
to the Agreement) which, if adversely determined, would materially and
adversely affect the financial condition or the conduct of the business of the
Acquired Fund. The Trust and the Acquired Fund know of no facts which might
form the basis for the institution of such proceedings and neither is a party
to or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Acquired Fund
as of March 4, 1994 have been audited by KPMG Peat Marwick L.L.P., independent
certified public accountants, and, together with the unaudited Statement of
Assets and Liabilities of the Acquired Fund as of September 30, 1994, are in
accordance with generally accepted accounting principles consistently applied,
and such statements (copies of which have been furnished to the Income Trust
and the Acquiring Fund) fairly reflect the financial condition of the Acquired
Fund as of such dates, and there are no known contingent liabilities of the
Acquired Fund as of such dates not disclosed therein;
(g) At the Closing Date, all federal and other tax returns and
reports of the Trust and the Acquired Fund required by law then to have been
filed by such dates shall have been filed, and all federal and other taxes
shown as due on such returns shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best of the knowledge
of the Acquired Fund and the Trust, no such return is currently under audit
and no assessment has been asserted with respect to such returns;
(h) For the most recent fiscal year of its operation, the
Acquired Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company;
(i) All issued and outstanding shares of the Acquired Fund are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of
the Acquired Fund will, at the time of Closing, be held by the persons and in
the amounts set forth in the records of the transfer agent as provided in
paragraph 3.4. The Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible into any
shares of the Acquired Fund;
(j) At the Closing Date, the Acquired Fund will have good and
marketable title to the assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power and authority to sell, assign,
transfer and deliver such assets hereunder and, upon delivery and payment for
such assets, the Acquiring Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933, as amended
(the "1933 Act"), other than as disclosed to the Income Trust and the
Acquiring Fund;
(k) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action on the part of the Trust's Board
of Trustees, and subject to the approval of the Acquired Fund's shareholders,
this Agreement, assuming due authorization, execution and delivery by the
Income Trust on behalf of the Acquiring Fund, will constitute a valid and
binding obligation of the Trust and the Acquired Fund, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(l) The information to be furnished by the Trust and the Acquired
Fund for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto; and
(m) The proxy statement of the Acquired Fund (the "Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.7 (other than information therein that relates to the Acquiring
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading.
4.2. The Income Trust and the Acquiring Fund represent and
warrant to the Trust and the Acquired Fund as follows:
(a) The Acquiring Fund is a portfolio of the Income Trust, which
is a business trust, duly organized, validly existing and in good standing
under the laws of The Commonwealth of Massachusetts;
(b) The Income Trust is a registered investment company
classified as a management company of the open-end type and its registration
with the Commission as an investment company under the 1940 Act is in full
force and effect;
(c) The current prospectus of the Acquiring Fund and statement of
additional information of the Income Trust conform in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good and
marketable title to its assets;
(e) The Income Trust is not, and the execution, delivery and
performance of this Agreement on behalf of the Acquiring Fund will not result,
in a material violation of its Master Trust Agreement or By-laws or of any
agreement, indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which the Income Trust is a party or by which
it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or threatened against the Income Trust with respect to the Acquiring Fund or
any of the Acquiring Fund's properties or assets, except as previously
disclosed in writing to the Trust and the Acquired Fund. The Income Trust and
the Acquiring Fund know of no facts which might form the basis for the
institution of such proceedings and neither the Income Trust nor the Acquiring
Fund is a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects the Acquiring Fund's business or the Income Trust's ability on behalf
of the Acquiring Fund to consummate the transactions contemplated herein;
(g) The Statements of Assets and Liabilities of the Acquiring
Fund as of November 30, 1994 have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, and are in accordance with generally
accepted accounting principles consistently applied, and such statements
(copies of which have been furnished to the Trust and the Acquired Fund)
fairly reflect the financial condition of the Acquiring Fund as of such date,
and there are no known contingent liabilities of the Acquiring Fund as of such
date not disclosed therein;
(h) At the Closing Date, all federal and other tax returns and
reports of the Income Trust and the Acquiring Fund required by law then to
have been filed by such date shall have been filed, and all federal and other
taxes shown as due on said returns and reports shall have been paid so far as
due, or provision shall have been made for the payment thereof and, to the
best of the knowledge of the Income Trust and the Acquiring Fund, no such
return is currently under audit and no assessment has been asserted with
respect to such returns;
(i) For the most recent fiscal year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and the
Acquiring Fund intends to do so in the future;
(j) At the date hereof, all issued and outstanding shares of the
Acquiring Fund are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The Acquiring Fund does not have
outstanding any options, warrants or other rights to subscribe for or purchase
any shares of the Acquiring Fund, nor is there outstanding any security
convertible into shares of the Acquiring Fund;
(k) The execution, delivery and performance of this Agreement has
been duly authorized by all necessary action, if any, on the part of the
Income Trust's Board of Trustees and assuming due authorization, execution and
delivery by the Trust on behalf of the Acquired Fund, this Agreement
constitutes a valid and binding obligation of the Income Trust and the
Acquiring Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights and to general equity
principles;
(l) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable with no
personal liability attaching to the ownership thereof;
(m) The information to be furnished by the Income Trust and the
Acquiring Fund for use in no-action letters, applications for exemptive
orders, registration statements, proxy materials and other documents which may
be necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund and the Income
Trust) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(o) The Income Trust and the Acquiring Fund agree to use all
reasonable efforts to obtain the approvals and authorizations required by the
1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as
they may deem appropriate in order to continue the Acquiring Fund's operations
after the Closing Date.
5. COVENANTS OF THE ACQUIRED FUND, THE TRUST, THE ACQUIRING FUND AND THE
INCOME TRUST
5.1. The Acquiring Fund and the Acquired Fund each will operate
its business in the ordinary course between the date hereof and the Closing
Date. It is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any other
dividends and distributions deemed advisable, in each case payable either in
cash or in additional shares.
5.2. The Trust, on behalf of the Acquired Funds, will call a
meeting of its shareholders to consider and act upon this Agreement and to
take all other action necessary to obtain approval of the transactions
contemplated herein.
5.3. The Trust and the Acquired Fund covenant that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4. The Trust and the Acquired Fund will assist the Income Trust
and the Acquiring Fund in obtaining such information as the Income Trust and
the Acquiring Fund reasonably request concerning the beneficial ownership of
the Acquired Fund's shares.
5.5. Subject to the provisions of this Agreement, the Trust on
behalf of the Acquired Fund and the Income Trust on behalf of the Acquiring
Fund, each will take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty
days after the Closing Date, the Trust and the Acquired Fund shall furnish to
the Income Trust and the Acquiring Fund, in such form as is reasonably
satisfactory to the Income Trust and the Acquiring Fund, a statement of the
earnings and profits of the Acquired Fund for federal income tax purposes
which will be carried over to the Acquiring Fund as a result of Section 381 of
the Code, and which will be certified by the President and Treasurer of the
Trust.
5.7. The Trust and the Acquired Fund will provide the Income
Trust and the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus") which will include the Proxy
Statement, referred to in paragraph 4.1(m), all to be included in a
Registration Statement on Form N-14 of the Acquiring Fund (the "Registration
Statement"), in compliance with the 1933 Act, the Securities Exchange Act of
1934 (the "1934 Act") and the 1940 Act in connection with the meeting of the
Acquired Fund's shareholders to consider approval of this Agreement and the
transactions contemplated herein.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST AND THE ACQUIRED FUND
The obligations of the Trust and the Acquired Fund to consummate
the transactions provided for herein shall be subject, at their election, to
the performance by Income Trust and the Acquiring Fund of all of the
obligations to be performed by them hereunder on or before the Closing Date
and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Income Trust and
the Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of the Closing
Date with the same force and effect as if made on and as of the Closing Date;
6.2. The Income Trust, on behalf of the Acquiring Fund, shall
have delivered to the Trust and the Acquired Fund a certificate executed in
its name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to the Trust and the Acquired
Fund and dated as of the Closing Date, to the effect that the representations
and warranties of Income Trust and the Acquiring Fund made in this Agreement
are true and correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated by this Agreement; and
6.3. The Trust and the Acquired Fund shall have received on the
Closing Date a favorable opinion from Willkie Farr & Gallagher, counsel to the
Acquiring Fund, dated as of the Closing Date, in a form reasonably
satisfactory to Christina T. Sydor, Esq., Secretary of the Trust, covering the
following points:
That (a) the Income Trust is duly organized and validly existing
under the laws of The Commonwealth of Massachusetts; (b) the Income Trust is
an open-end management investment company registered under the 1940 Act; (c)
this Agreement, the reorganization provided for thereunder and the execution
of this Agreement have been duly authorized and approved by all requisite
action of the Income Trust and the Acquiring Fund, and this Agreement has been
duly executed and delivered by the Income Trust on behalf of the Acquiring
Fund and is a valid and binding obligation of the Income Trust and the
Acquiring Fund enforceable in accordance with its terms against the assets of
the Acquiring Fund; and (d) the Acquiring Fund Shares to be issued to the
Acquired Fund for distribution to its shareholders pursuant to this Agreement
have been, to the extent of the number of Acquiring Fund Shares authorized to
be issued by the Income Trust in respect of the Acquiring Fund in the Master
Trust Agreement of the Income Trust and then unissued, duly authorized and,
subject to the receipt by the Income Trust of consideration equal to the net
asset value thereof (but in no event less than the par value thereof), such
Acquiring Fund Shares, when issued in accordance with this Agreement, will be
validly issued and fully paid and non-assessable. Such opinion may state that
it is solely for the benefit of the Trust, its Trustees and its officers, and
the Acquired Fund. Such counsel may rely, as to matters governed by the laws
of The Commonwealth of Massachusetts, on an opinion of Massachusetts counsel.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INCOME TRUST AND THE
ACQUIRING FUND
The obligations of the Income Trust and the Acquiring Fund to
complete the transactions provided for herein shall be subject, at their
election, to the performance by the Income Trust and the Acquired Fund of all
the obligations to be performed by them hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of the Trust and the
Acquired Fund contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date;
7.2. The Trust, on behalf of the Acquired Fund, shall have
delivered to the Income Trust and the Acquiring Fund a statement of the
Acquired Fund's assets and liabilities, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Closing Date, certified
by the Treasurer or Assistant Treasurer of the Trust in respect of the
Acquired Fund;
7.3. The Trust, on behalf of the Acquired Fund, shall have
delivered to the Income Trust and the Acquiring Fund on the Closing Date a
certificate executed in its name by its President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Income Trust and the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Trust and the Acquired
Fund made in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions contemplated by this
Agreement; and
7.4. The Income Trust on behalf of the Acquiring Fund shall have
received on the Closing Date a favorable opinion of Sullivan & Cromwell,
counsel to the Trust and the Acquired Fund, in a form satisfactory to
Christina T. Sydor, Esq., Secretary of the Income Trust, covering the
following points:
That (a) the Trust is duly organized and validly existing under the laws
of The Commonwealth of Massachusetts; (b) the Trust is an open-end management
investment company registered under the 1940 Act; and (c) this Agreement, the
reorganization provided for thereunder and the execution of this Agreement
have been duly authorized and approved by all requisite action of the Trust
and the Acquired Fund, and this Agreement has been duly executed and delivered
by the Trust on behalf of the Acquired Fund and is a valid and binding
obligation of the Trust and the Acquired Fund enforceable in accordance with
its terms against the assets of the Acquired Fund. Such opinion may state
that it is solely for the benefit of the Income Trust, its Trustees, its
officers and the Acquiring Fund. Such counsel may rely, as to matters
governed by the laws of The Commonwealth of Massachusetts, on an opinion of
Massachusetts counsel.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TRUST, ACQUIRED FUND,
THE ACQUIRING FUND AND THE INCOME TRUST
If any of the conditions set forth below do not exist on or before
the Closing Date with respect to the Income Trust and the Acquiring Fund, or
the Trust and the Acquired Fund, the other parties to this Agreement shall, at
their option, not be required to consummate the transactions contemplated by
this Agreement:
8.1. This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of the
outstanding shares of the Acquired Fund in accordance with the provisions of
the Trust's Master Trust Agreement and By-laws and certified copies of the
votes evidencing such approval shall have been delivered to the Income Trust
and the Acquiring Fund. Notwithstanding anything herein to the contrary,
neither the Income Trust on behalf of the Acquiring Fund nor the Trust on
behalf of the Acquired Fund may waive the conditions set forth in this
paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
8.3. All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities (including
those of the Commission and of state Blue Sky and securities authorities,
including "no-action" positions of and exemptive orders from such federal and
state authorities) deemed necessary by the Income Trust and the Acquiring Fund
or the Trust and the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may,
for itself, waive any of such conditions;
8.4. The Registration Statement shall have become effective under
the 1933 Act and no stop orders suspending the effectiveness thereof shall
have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act;
8.5. A dividend or dividends on the outstanding shares of the
Acquired Fund, shall have been declared and paid which, together with all
previous such dividends, shall have the effect of distributing to the
shareholders of the Acquired Fund all of the investment company taxable income
and exempt-interest income of the Acquired Fund for all taxable years ending
on or prior to the Closing Date. The dividend declared and paid by the
Acquired Fund shall also include all of such fund's net capital gain realized
in all taxable years ending on or prior to the Closing Date (after reduction
for any capital loss carryforward);
8.6. The parties shall have received a favorable opinion of
Willkie Farr & Gallagher, addressed to Income Trust in respect of the
Acquiring Fund and the Trust in respect of the Acquired Fund and satisfactory
to Christina T. Sydor, Esq., as Secretary of each of the Funds, substantially
to the effect that for federal income tax purposes:
(a) the transfer of all or substantially all of the Acquired Fund's
assets in exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of certain scheduled liabilities of the Acquired Fund will
constitute a "reorganization" within the meaning of Section 368(a)(1)(C) of
the Code, and the Acquiring Fund and the Acquired Fund are each a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (b) no gain
or loss will be recognized by the Acquiring Fund upon the receipt of the
assets of the Acquired Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund; (c) no gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund's assets to the Acquiring Fund in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring
Fund of certain scheduled liabilities of the Acquired Fund or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
the Acquired Fund's shareholders; (d) no gain or loss will be recognized by
shareholders of the Acquired Fund upon the exchange of their Acquired Fund
shares for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain scheduled liabilities of the Acquired Fund; (e) the aggregate tax
basis for the Acquiring Fund Shares received by each of the Acquired Fund's
shareholders pursuant to the Reorganization will be the same as the aggregate
tax basis of the Acquired Fund shares held by such shareholder immediately
prior to the Reorganization, and the holding period of the Acquiring Fund
Shares to be received by each Acquired Fund shareholder will include the
period during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund shares were held as capital
assets on the date of the Reorganization); and (f) the tax basis of the
Acquired Fund's assets acquired by the Acquiring Fund will be the same as the
tax basis of such assets to the Acquired Fund immediately prior to the
Reorganization, and the holding period of the assets of the Acquired Fund in
the hands of the Acquiring Fund will include the period during which those
assets were held by the Acquired Fund.
Notwithstanding anything herein to the contrary, neither the
Income Trust on behalf of the Acquiring Fund nor the Trust on behalf of the
Acquired Fund may waive the conditions set forth in this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1. The Income Trust and the Acquiring Fund represent and
warrant to the Trust and the Acquired Fund, and the Trust and the Acquired
Fund hereby represent and warrant to the Income Trust and the Acquiring Fund,
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. (a) Except as may be otherwise provided herein, the
Acquiring Fund and the Acquired Fund shall each be liable, in proportion to
their assets, for the expenses incurred in connection with entering into and
carrying out the provisions of this Agreement, including the expenses of: (i)
counsel and independent accountants associated with the Reorganization; (ii)
printing and mailing the Prospectus/Proxy Statement and soliciting proxies in
connection with the meeting of shareholders of the Acquired Fund referred to
in paragraph 5.2 hereof; (iii) any special pricing fees associated with the
valuation of the Acquired Fund's of the Acquiring Fund's portfolio on the
Closing Date; (iv) expenses associated with preparing this Agreement and
preparing and filing the Registration Statement under the 1933 Act covering
the Acquiring Fund Shares to be issued in the Reorganization; (v) registration
or qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the Acquiring Fund
Shares to be issued in connection with the Reorganization. The Acquired Fund
shall be liable for: (i) all fees and expenses related to the liquidation,
dissolution and termination of the Acquired Fund; and (ii) fees and expenses
of the Acquired Fund's custodian and transfer agent incurred in connection
with the Reorganization. The Acquiring Fund shall be liable for any fees and
expenses of the Acquiring Fund's custodian and transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Acquired
Fund, prior to the Closing, shall pay for or include in the unaudited
Statement of Assets and Liabilities prepared pursuant to paragraph 1.3 all of
its known and reasonably estimated expenses associated with the transactions
contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any
representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
10.2. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time prior to the
Closing Date by: (1) the mutual agreement of the Trust, on behalf of the
Acquired Fund, and the Income Trust, on behalf of the Acquiring Fund; (2) the
Trust on behalf of the Acquired Fund in the event that the Income Trust in
respect of the Acquiring Fund shall, or the Income Trust in respect of the
Acquiring Fund in the event that the Trust in respect of the Acquired Fund
shall, materially breach any representation, warranty or agreement contained
herein to be performed at or prior to the Closing Date; or (3) a condition
herein expressed to be precedent to the obligations of the terminating party
has not been met and it reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no
liability for damages on the part of the Trust on behalf of the Acquired Fund
or the Income Trust on behalf of the Acquiring Fund or their respective
Trustees or officers to the other party, but each shall bear the expenses
incurred by it incidental to the preparation and carrying out of this
Agreement as provided in paragraph 9.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Trust on behalf of the Acquired Fund and the Income Trust on behalf of the
Acquiring Fund; provided, however, that following the meeting of the Acquired
Fund shareholders called by the Acquired Fund pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of the Acquiring Fund Shares to be
issued to the Acquired Fund's shareholders under this Agreement to the
detriment of such shareholders without their further approval.
13. NOTICES
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Trust on behalf
of the Acquired Fund, 388 Greenwich Street, New York, New York 10013,
Attention: Stephen P. Treadway; or to the Income Trust on behalf of the
Acquiring Fund, 388 Greenwich Street, New York, New York 10013, Attention:
Heath B. McLendon.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
14.1 The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no assignment
or transfer hereof or of any rights or obligations hereunder shall be made by
any party without the written consent of the other parties. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto
and their respective successors and assigns, any rights or remedies under or
by reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Trust in
respect of the Acquired Fund and the Income Trust in respect of the Acquired
Fund shall not be binding upon any of their respective Trustees, shareholders,
nominees, officers, agents or employees personally, but bind only the trust
property of the Acquired Fund or the Acquiring Fund as provided in the trust
instruments of the Trust and the Income Trust. The execution and delivery of
this Agreement have been authorized by the Trustees of each of the Trust on
behalf of the Acquired Fund and the Income Trust on behalf of the Acquiring
Fund and this Agreement has been executed by authorized officers of the Trust
on behalf of the Acquired Fund and the Income Trust on behalf of the Acquiring
Fund, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officers shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Acquired Fund or the Acquiring
Fund as provided in the Trust's or Income Trust's Master Trust Agreement, as
the case may be.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its Chairman of the Board, President or Vice
President and attested by its Secretary or Assistant Secretary.
Attest: SMITH BARNEY INCOME TRUST
on behalf of the SMITH BARNEY INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND
By:
Name: Christina T. Sydor Name: Heath B. McLendon
Title: Secretary Title: Chairman of the Board
Attest: SMITH BARNEY MUNI FUNDS
on behalf of the CALIFORNIA
LIMITED TERM PORTFOLIO
By:
Name: Christina T. Sydor Name: Stephen P. Treadway
Title: Secretary Title: Chairman of the Board
u:\cunningham\imcareorg.agt
<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
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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
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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
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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
<PAGE>
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.
16
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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>
SMITH BARNEY
ADJUSTABLE RATE GOVERNMENT INCOME FUND
ARIZONA MUNICIPALS FUND INC.
EUROPEAN FUND
FLORIDA MUNICIPALS FUND
GLOBAL OPPORTUNITIES FUND
GROWTH AND INCOME FUND
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
INTERMEDIATE MATURITY NEW YORK
MUNICIPALS FUND
INVESTMENT GRADE BOND FUND
LIMITED MATURITY MUNICIPALS FUND
LIMITED MATURITY TREASURY FUND
MASSACHUSETTS MUNICIPALS FUND
OREGON MUNICIPALS FUND
PRECIOUS METALS AND MINERALS FUND INC.
TELECOMMUNICATIONS GROWTH FUND
SUPPLEMENT DATED NOVEMBER 7, 1994 TO PROSPECTUSES*
INTRODUCTION. To complete the consolidation of the Smith Barney
Shearson
and the Smith Barney mutual fund complexes, on November 7, 1994, the above
funds
(each a "Fund") implemented a uniform class and sales charge structure.
This
pricing system, which is based on a recently completed, comprehensive
study by
Smith Barney Inc. ("Smith Barney") of both the Smith Barney mutual
funds and
their competitors, entails adding and reclassifying certain share classes
and
minor adjustments of certain sales charges.
Under the new system, almost every Fund now offers Class A, B, C
and Y
shares to the public. The Class A and Class B shares under the new
pricing
structure are identical to the former Class A and Class B shares of the
Funds.
Class D shares have been reclassified as "Class C" shares and have
the
distribution fee and service fee shown below. Class C shares purchased
under the
universal pricing system are subject to a one-year, 1% contingent deferred
sales
charge ("CDSC"). Shares of Smith Barney Global Opportunities Fund that
were
classified as "Class C" shares prior to the universal pricing system have
been
reclassified as "Class Z" shares and are not subject to any sales
charges or
distribution or service fee. These shares, which are offered pursuant
to a
separate prospectus, are available exclusively to (a) tax-exempt
employee
benefit plans of Smith Barney and its affiliates and (b) unit investment
trusts
("UITs") sponsored by Smith Barney and its affiliates. In addition, a new
class
of shares, Class Y shares, is offered to purchasers who invest at
least $5
million. These shares are not subject to any sales charges,
distribution or
service fees.
<PAGE>
Effective as of November 7, 1994, the following changes to the disclosure
in the
Fund's prospectus apply:
EQUITY FUNDS
------------
EUROPEAN FUND
GLOBAL OPPORTUNITIES FUND
GROWTH AND INCOME FUND
PRECIOUS METALS AND MINERALS FUND
TELECOMMUNICATIONS GROWTH FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 5.00% 0.25%
$25,000 to $49,999 4.00 0.25
$50,000 to $99,999 3.50 0.25
$100,000 to $249,999 3.00 0.25
$250,000 to $499,999 2.00 0.25
$500,000 and over* 0.00 0.25
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 5.00% 0.25% 0.75%
Year 2 4.00 0.25 0.75
Year 3 3.00 0.25 0.75
Year 4 2.00 0.25 0.75
Year 5 1.00 0.25 0.75
Year 6 0.00 0.25 0.75
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.25% 0.75%
Year 2 0.00 0.25 0.75
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only.
Smith
Barney, at its own expense, provides a "finder's fee" to Financial
Consultants
in respect of these sales.
</TABLE>
-2-
<PAGE>
TAXABLE FIXED INCOME
--------------------
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 4.50% 0.25%
$25,000 to $49,999 4.00 0.25
$50,000 to $99,999 3.50 0.25
$100,000 to $249,999 2.50 0.25
$250,000 to $499,999 1.50 0.25
$500,000 and over* 0.00 0.25
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 4.50% 0.25% 0.50%
Year 2 4.00 0.25 0.50
Year 3 3.00 0.25 0.50
Year 4 2.00 0.25 0.50
Year 5 1.00 0.25 0.50
Year 6 0.00 0.25 0.50
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ----------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.25% 0.45%
Year 2 0.00 0.25 0.45
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only.
Smith
Barney, at its own expense, provides a "finder's fee" to Financial
Consultants
in respect of these sales.
</TABLE>
MUNICIPAL FUNDS
----------------
ARIZONA MUNICIPALS FUND
FLORIDA MUNICIPALS FUND
MASSACHUSETTS MUNICIPALS FUND
OREGON MUNICIPALS FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $25,000 4.00% 0.15%
$25,000 to $49,999 3.50 0.15
$50,000 to $99,999 3.00 0.15
$100,000 to $249,999 2.50 0.15
$250,000 to $499,999 1.50 0.15
$500,000 and over* 0.00 0.15
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
CLASS B CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 4.50% 0.15% 0.50%
Year 2 4.00 0.15 0.50
Year 3 3.00 0.15 0.50
Year 4 2.00 0.15 0.50
Year 5 1.00 0.15 0.50
Year 6 0.00 0.15 0.50
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.15% 0.55%
Year 2 0.00 0.15 0.55
<FN>
- ------------------------
* These shares are subject to a 1.00% CDSC for the first year only.
Smith
Barney, at its own expense, provides a "finder's fee" to Financial
Consultants
in respect of these sales.
</TABLE>
SMITH BARNEY INCOME TRUST
-------------------------------
INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
INTERMEDIATE MATURITY NEW YORK MUNICIPALS FUND
LIMITED MATURITY MUNICIPALS FUND
LIMITED MATURITY TREASURY FUND
<TABLE>
<CAPTION>
FRONT-END
CLASS A SALES CHARGE SERVICE FEE
- --------- ------------- ------------------
<S> <C> <C> <C>
Less than $500,000 2.00% 0.15%
$500,000 and over* 0.00 0.15
<CAPTION>
CLASS C CDSC SERVICE FEE DISTRIBUTION FEE
- --------- ------------- ------------- ------------------
<S> <C> <C> <C>
Year 1 1.00% 0.15% 0.20%
Year 2 0.00 0.15 0.20
<FN>
- ------------------------
*These shares are subject to a 1.00% CDSC for the first year
only. The
investment adviser, at its own expense, provides a "finder's fee" to
Financial
Consultants in respect of these sales.
</TABLE>
-4-
<PAGE>
ADJUSTABLE RATE GOVERNMENT INCOME FUND
-------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION
FRONT-END AND
CLASS SALES CHARGE CDSC SERVICE FEE
- ----------- ------------- ------------- --------------
<S> <C> <C> <C>
Class A 0.00% 0.00% 0.75%
Class B* 0.00 0.00 0.25
Class C** 0.00 1.00 0.25
<FN>
- ------------------------
*Investors in the Smith Barney 401(k) Program may purchase Class B shares
of the
Fund; all other investors may acquire Class B shares of the Fund
through
exchange only. Upon an exchange, the new Class B shares will be subject
to the
same CDSC, and will be deemed to have been purchased on the same date,
as the
Class B shares of the fund that have been exchanged. Class B shares
acquired by
participating plans will be subject to an eight year 3.00% CDSC, payable
upon a
participating plan's withdrawal from the Smith Barney 401(k) Program. See
"Smith
Barney 401(k) Program," below.
**Only investors in the Smith Barney 401(k) Program may purchase Class C
shares
of the Fund. Class C shares acquired by participating plans will be
subject to a
four year 1.00% CDSC, payable upon a participating plan's withdrawal
from the
Smith Barney 401(k) Program. See "Smith Barney 401(k) Program," below.
</TABLE>
Each share of Class A, B, C, Y and Z represents an identical pro
rata
interest in the investment portfolio of the respective Funds. The
only
difference between the Classes is the varying expenses that will be
incurred for
distribution fees, transfer agency fees and certain other expenses
clearly
identifiable to a single Class. To the extent those expenses differ,
investment
returns of the Classes will vary. All other expenses, including
investment
advisory and administrative fees, custody fees and other generally
applicable
fund expenses, will continue to be incurred at the portfolio level and
would
therefore be reflected in each shareholder's investment return
equally,
regardless of Class.
MODIFICATION OF SERVICES AND DISTRIBUTION PLANS. Under the
universal
pricing system, the newly-identified Class C shares are subject to an
annual
service fee equal to 0.25% of the average daily net assets of the
Class for
Smith Barney Adjustable Rate Government Income Fund and the equity and
taxable
fixed income funds and 0.15% for municipal funds and Smith Barney Income
Trust.
In addition, Class C shares are subject to an annual distribution fee
equal to
0.75% of the average daily net assets of the Class for equity funds,
0.45% for
taxable fixed income funds, 0.55% for municipal funds and 0.20% for Smith
Barney
Income Trust. The distribution fee is intended to compensate Smith Barney
over
time for its expenses in paying Financial Consultants upon the sale of
those
shares, thus allowing an investor to have all of his or her funds
invested
immediately and to spread the sales cost over time.
The Class B and Class C distribution fees are paid as
compensation for
services, and not as reimbursement for specific expenses incurred. Thus,
even if
the distributor's actual expenses exceed the 12b-1 fee, a Fund would
not be
obligated to pay more than that fee. Conversely, if the distributor's
expenses
are less than the
-5-
<PAGE>
12b-1 fee, it would be entitled to retain the full fee and realize a
profit,
which would be subject to the Board's regular review and
consideration in
connection with the annual renewal of the Fund's amended Services
and
Distribution Plan.
SMITH BARNEY 401(K) PROGRAM. Investors may be eligible to
participate in
the Smith Barney 401(k) Program (the "Smith Barney 401(k) Program"),
which is
generally designed to assist plan sponsors in the creation and
operation of
retirement plans under Section 401(a) of the Internal Revenue Code of
1986, as
amended (collectively, the "Participating Plans"). Class A, Class B, Class
C and
Class Y shares may be available as investment alternatives to
Participating
Plans.
Under the universal pricing system, Class A shares are offered
without
any sales charge to any Participating Plan that purchases from
$500,000 to
$4,999,999 of Class A shares of one or more funds of the Smith Barney
Mutual
Funds that are offered with a sales charge. Class A shares acquired through
the
Smith Barney 401(k) Program are subject to an annual service fee of 0.25%
of the
average daily net assets of the Class (0.15% in the case of the Smith
Barney
Income Trust and 0.75% in the case of Smith Barney Adjustable Rate
Government
Income Fund). In addition, if a Participating Plan withdraws from the
Smith
Barney 401(k) Program within four years from the date of its enrollment in
the
Program a CDSC of 1.00% will be assessed on all redeemed Class A shares
that
were subject to a sales charge upon initial purchase. Class A shares held
by a
Participating Plan upon implementation of the universal pricing system
will not
be subject to any CDSC.
Class B shares are offered to any Participating Plan that purchases
less
than $250,000 of one or more funds of the Smith Barney Mutual Funds.
Class B
shares acquired through the Smith Barney 401(k) Program are subject to an
annual
service fee of 0.25% of the average daily net assets of the Class, an
annual
distribution fee of 0.75% (0.50% in the case of taxable fixed income
funds and
0.25% in the case of Smith Barney Adjustable Rate Government Income Fund)
and a
3.00% CDSC payable if the Participating Plan terminates within eight
years of
the date the Participating Plan first enrolled in the Smith Barney
401(k)
Program. After eight years from the date of a Plan's enrollment, all
Class B
shares held by such Plan shall be eligible for conversion to Class A
shares of
the Fund.
Class C shares are offered to Participating Plans that purchase
from
$250,000 to $499,999 of one or more funds of the Smith Barney Mutual Funds
that
are offered with a sales charge. Class C shares acquired through the
Smith
Barney 401(k) Program after the implementation of the universal pricing
system
are subject to an annual service fee of 0.25% of the average daily net
assets of
the Class (0.15% in the case of Smith Barney Income Trust), a
distribution fee
of 0.75%, (0.45% in the case of taxable fixed income funds and 0.20% in the
case
of Smith Barney Income Trust) and a CDSC of 1.00% if the Participating
Plan
terminates within four years from the date of its enrollment in the Smith
Barney
401(k) Program. Class C shares (formerly Class D shares) held by a
Participating
Plan upon implementation of the universal pricing system will not be
subject to
any
-6-
<PAGE>
CDSC. In any year that the Class C shares held by a Participating Plan of
any
funds of the Smith Barney Mutual Funds offered with a sales charge (except
Smith
Barney Adjustable Rate Government Income Fund) equal $500,000 at year
end, the
Class C shares shall be eligible to be exchanged for Class A shares of the
Fund.
Class Y shares are offered without any service or distribution
fees,
sales charges or CDSC to any Participating Plan that purchases
$5,000,000 or
more of Class Y shares of one or more funds of the Smith Barney Mutual
Funds.
The CDSC will be waived on redemptions of Class A, Class B and
Class C
shares in connection with lump-sum or other distributions made
by a
Participating Plan as a result of: (a) the retirement of an employee in
the
Participating Plan; (b) the termination of employment of an employee
in the
Participating Plan; (c) the death or disability of an employee in
the
Participating Plan; (d) the attainment of age 59 1/2 by an employee
in the
Participating Plan; (e) hardship of an employee in the Participating Plan
to the
extent permitted under Section 401(k) of the Internal Revenue Code of
1986, as
amended (the "Code"); or (f) redemptions of shares in connection with a
loan
made by the Participating Plan to an employee.
Participating Plans wishing to acquire shares of a Fund through the
Smith
Barney 401(k) Program must purchase such shares directly from The
Shareholder
Services Group, Inc., a subsidiary of First Data Corporation
("TSSG"). For
further information regarding the Smith Barney 401(k) Program, investors
should
contact a Smith Barney Financial Consultant.
PURCHASE OPTIONS CONSIDERATIONS. The decision as to which
Class of
shares is more beneficial to an investor depends on the amount and
intended
length of his or her investment. Shareholders who are planning to
establish a
program of regular investment may wish to consider Class A shares; as
the
investment accumulates shareholders may qualify for reduced sales
charges and
the shares are subject to lower ongoing expenses over the term of
the
investment. As an alternative, Class B and Class C shares are sold
without any
initial sales charge so the entire purchase price is immediately invested
in the
Fund. Any investment return on these additional invested amounts may
partially
or wholly offset the higher annual expenses of these Classes. Because the
Fund's
future return cannot be predicted, however, there can be no assurance that
this
would be the case.
Finally, investors should consider the effect of the CDSC period and
any
conversion rights of the Classes in the context of their own investment
time
frame. For example, while Class C shares have a shorter CDSC period than
Class B
shares, they do not have a conversion feature, and therefore, are subject
to an
ongoing distribution fee. Thus, Class B shares may be more attractive than
Class
C shares to investors with longer term investment outlooks.
-7-
<PAGE>
Investors investing a minimum of $5,000,000 must purchase Class Y
shares,
which are not subject to an initial sales charge, CDSC or
service or
distribution fee. The maximum purchase amount for Class A shares is
$4,999,999,
Class B shares is $249,999 and Class C shares is $499,999. There is no
maximum
purchase amount for Class Y shares.
INVESTMENT MINIMUMS. Investors in Class A, Class B and Class C
shares
may open an account by making an initial investment of at least $1,000 for
each
account, or $250 for an IRA or Self-Employed Retirement Plan in the
Fund.
Investors in Class Y shares may open an account for an initial
investment of
$5,000,000. Subsequent investments of at least $50 may be made for all
Classes.
For participants in retirement plans qualified under Section
403(b)(7) or
Section 401(a) of the Code, the minimum initial investment requirement for
Class
A, Class B and Class C shares and the subsequent investment requirement for
all
Classes is $25. The minimum initial investment requirement for Class A,
Class B
and Class C shares and subsequent investment requirement for all Classes
through
the Systematic Investment Plan described below is $100. There are no
minimum
investment requirements for (a) employees of The Travelers Inc.
("Travelers")
and its subsidiaries, including Smith Barney, (b) board members of a Fund
and
their spouses and children, and (c) with respect to Smith Barney
Global
Opportunities Fund and Smith Barney Limited Maturity Municipals
Fund,
unitholders who invest distributions from a UIT.
SYSTEMATIC INVESTMENT PLAN. Shareholders may make additions to
their
accounts at any time by purchasing shares through a service known as
the
Systematic Investment Plan. Under the Systematic Investment Plan, Smith
Barney
or TSSG is authorized through pre-authorized transfers of $100 or more to
charge
the regular bank account or other financial institution indicated by
the
shareholder on a monthly or quarterly basis to provide systematic
additions to
the shareholder's account. A shareholder who has insufficient funds to
complete
the transfer will be charged a fee of up to $25 by Smith Barney or
TSSG. The
Systematic Investment Plan also authorizes Smith Barney to apply cash
held in
the shareholder's Smith Barney brokerage account or redeem the
shareholder's
shares of a Smith Barney money market fund to make additions to the
account.
Additional information is available from a Fund or a Financial Consultant.
INITIAL SALES CHARGE WAIVERS -- CLASS A SHARES. Purchases of
Class A
shares may be made at net asset value without a sales charge in the
following
circumstances: (a) sales of Class A shares to board members of a
Fund and
employees of Travelers and its subsidiaries, or the spouses and children of
such
persons (including the surviving spouse of a deceased board member or
employee,
and retired board members or employees), or sales to any trust, pension,
profit-
sharing or other benefit plan for such persons provided such sales are made
upon
the assurance of the purchaser that the purchase is made for investment
purposes
-8-
<PAGE>
and that the securities will not be re-sold except through
redemption or
repurchase; (b) offers of Class A shares to any other investment
company in
connection with the combination of such company with a Fund by
merger,
acquisition of assets or otherwise; (c) purchases of Class A shares by
any
client of a newly-employed Smith Barney Financial Consultant (for a period
up to
90 days from the commencement of the Financial Consultant's employment
with
Smith Barney), on the condition the purchase of Class A shares is made with
the
proceeds of the redemption of shares of a mutual fund which (i) was
sponsored by
the Financial Consultant's prior employer, (ii) was sold to the client
by the
Financial Consultant and (iii) was subject to a sales charge; (d)
shareholders
who have redeemed Class A shares in a Fund (or Class A shares of another
fund of
the Smith Barney Mutual Funds that are offered with a sales charge equal
to or
greater than the maximum sales charge of the Fund) and who wish to
reinvest
their redemption proceeds in the Fund, provided the reinvestment is made
within
60 calendar days of the redemption; (e) accounts managed by
registered
investment advisory subsidiaries of Travelers; and (f) with respect to
Smith
Barney Global Opportunities Fund and Smith Barney Limited Maturity
Municipals
Fund, investments of distributions from a UIT sponsored by Smith
Barney. In
order to obtain such discounts, the purchaser must provide
sufficient
information at the time of purchase to permit verification that the
purchase
would qualify for the elimination of the sales charge.
RIGHT OF ACCUMULATION. Class A shares of a Fund may be purchased by
"any
person" (as defined above) at a reduced sales charge or at net asset
value
determined by aggregating the dollar amount of the new purchase and the
total
net asset value of all Class A shares of the Fund and of funds
sponsored by
Smith Barney, which are offered with a sales charge listed under
"Exchange
Privilege," then held by such person and applying the sales charge
applicable to
such aggregate. In order to obtain such discount, the purchaser must
provide
sufficient information at the time of purchase to permit verification
that the
purchase qualifies for the reduced sales charge. The right of
accumulation is
subject to modification or discontinuance at any time with respect to all
shares
purchased thereafter.
GROUP PURCHASES. Upon completion of certain automated systems, a
reduced
sales charge or purchase at net asset value will also be available to
employees
(and partners) of the same employer purchasing as a group, provided
each
participant makes the minimum initial investment required. The sales
charge
applicable to purchases by each member of such a group will be determined
by the
tables set forth above and will be based upon the aggregate sales of
Class A
shares of Smith Barney Mutual Funds offered with a sales charge to, and
share
holdings of, all members of the group. To be eligible for such reduced
sales
charges or to purchase at net asset value, all purchases must be pursuant
to an
employer- or partnership-sanctioned plan meeting certain requirements. One
such
requirement is that the plan must be open to specified partners or
employees of
the employer and its subsidiaries, if any. Such plan may, but is not
required
to, provide for payroll deductions, IRAs or investments pursuant to
retirement
plans under Sections 401
-9-
<PAGE>
or 408 of the Code. Smith Barney may also offer a reduced sales charge or
net
asset value purchase for aggregating related fiduciary accounts under
such
conditions that Smith Barney will realize economies of sales efforts and
sales
related expenses. An individual who is a member of a qualified group may
also
purchase Class A shares of a Fund at the reduced sales charge applicable to
the
group as a whole. The sales charge is based upon the aggregate dollar
value of
Class A shares offered with a sales charge that have been previously
purchased
and are still owned by the group, plus the amount of the current
purchase. A
"qualified group" is one which (a) has been in existence for more than
six
months, (b) has a purpose other than acquiring Fund shares at a discount
and (c)
satisfies uniform criteria which enables Smith Barney to realize
economies of
scale in its costs of distributing shares. A qualified group must have more
than
10 members, must be available to arrange for group meetings
between
representatives of the Fund and the members, and must agree to include
sales and
other materials related to the Fund in its publications and mailings to
members
at no cost to Smith Barney. In order to obtain such reduced sales charge
or to
purchase at net asset value, the purchaser must provide sufficient
information
at the time of purchase to permit verification that the purchase qualifies
for
the reduced sales charge. Approval of group purchase reduced sales charge
plans
is subject to the discretion of Smith Barney.
LETTER OF INTENT. A Letter of Intent for amounts of $50,000 or
more
provides an opportunity for an investor to obtain a reduced sales
charge by
aggregating the investment in Class A shares over a 13 month period,
provided
that the investor refers to such Letter when placing orders. For purposes
of a
Letter of Intent, the amount of investment in the above sales charge
tables
includes purchases of all Class A shares of a Fund and other funds of the
Smith
Barney Mutual Funds offered with a sales charge over the 13 month period
based
on the total amount of intended purchases plus the value of all Class A
shares
offered with a sales charge that have been previously purchased and are
still
owned. An alternative is to compute the 13 month period starting up to 90
days
before the date of execution of a Letter of Intent. Each investment made
during
the period receives the reduced sales charge applicable to the total
amount of
the investment goal. If the goal is not achieved within the period, the
investor
must pay the difference between the sales charges applicable to the
purchases
made and the charges previously paid, or an appropriate number of
escrowed
shares will be redeemed. New Letters of Intent will be accepted
beginning
January 1, 1995. Please contact a Smith Barney Financial Consultant or
TSSG to
obtain a Letter of Intent application.
WAIVERS OF CDSC -- CLASS A, CLASS B AND CLASS C SHARES. "CDSC
Shares"
are sold at net asset value next determined without an initial sales
charge so
that the full amount of an investor's purchase payment may be
immediately
invested in a Fund. A CDSC, however, may be imposed on certain
redemptions of
these shares. "CDSC Shares" are: (a) Class B shares; (b) Class C shares;
and (c)
Class A shares which when combined with Class A shares offered with a
sales
charge
-10-
<PAGE>
currently held by an investor, equal or exceed $500,000 in the
aggregate. The
CDSC on CDSC Shares will be waived on: (a) exchanges; (b) automatic
cash
withdrawals in amounts equal to or less than 1.00% per month of the value
of the
shareholder's shares at the time the withdrawal plan commences (see
below)
(provided, however, that automatic cash withdrawals in amounts equal to or
less
than 2.00% per month of the value of the shareholder's shares will be
permitted
for withdrawal plans that were established prior to November 7, 1994);
(c)
redemptions of shares within twelve months following the death or
disability of
the shareholder; (d) redemption of shares made in connection with
qualified
distributions from retirement plans or IRAs upon attainment of age 59
1/2; (e)
involuntary redemptions; and (f) redemptions of shares in connection
with a
combination of a Fund with any investment company by merger,
acquisition of
assets or otherwise. In addition, a shareholder who has redeemed shares
from
other funds of the Smith Barney Mutual Funds may, under certain
circumstances,
reinvest all or part of the redemption proceeds within 60 days and receive
PRO
RATA credit for any CDSC imposed on the prior redemption.
EXCHANGE PRIVILEGE. Except as otherwise noted below, shares of
each
Class may be exchanged at the net asset value next determined for shares of
the
same Class in the following funds of the Smith Barney Mutual Funds,
to the
extent shares are offered for sale in the shareholder's state of
residence.
Exchanges of Class A, Class B and Class C shares are subject to
minimum
investment requirements and all shares are subject to the other
requirements of
the fund into which exchanges are made and a sales charge
differential may
apply.
<TABLE>
<C> <S>
Fund Name
--------------------------------------------------------------------------
- -------
GROWTH FUNDS
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney European Fund
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc. -- Capital Appreciation Portfolio
Smith Barney Global Opportunities Fund
Smith Barney Precious Metals and Minerals Fund Inc.
Smith Barney Special Equities Fund
Smith Barney Telecommunications Growth Fund
Smith Barney World Funds, Inc. -- European Portfolio
Smith Barney World Funds, Inc. -- International Equity Portfolio
Smith Barney World Funds, Inc. -- Pacific Portfolio
GROWTH AND INCOME FUNDS
Smith Barney Convertible Fund
Smith Barney Funds, Inc. -- Income and Growth Portfolio
Smith Barney Funds, Inc. -- Utility Portfolio
Smith Barney Growth and Income Fund
Smith Barney Premium Total Return Fund
</TABLE>
-11-
<PAGE>
<TABLE>
<C> <S>
Smith Barney Strategic Investors Fund
Smith Barney Utilities Fund
Smith Barney World Funds, Inc. -- International Balanced Portfolio
INCOME FUNDS
** Smith Barney Adjustable Rate Government Income Fund
Smith Barney Diversified Strategic Income Fund
* Smith Barney Funds, Inc. -- Income Return Account Portfolio
Smith Barney Funds, Inc. -- Monthly Payment Government Portfolio
+++ Smith Barney Funds, Inc. -- Short-Term U.S. Treasury Securities
Portfolio
Smith Barney Funds, Inc. -- U.S. Government Securities Portfolio
Smith Barney World Funds, Inc. -- Global Government Bond Portfolio
Smith Barney Global Bond Fund
Smith Barney Government Securities Fund
Smith Barney High Income Fund
Smith Barney Investment Grade Bond Fund
* Smith Barney Limited Maturity Treasury Fund
Smith Barney Managed Governments Fund Inc.
MUNICIPAL BOND FUNDS
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Florida Municipals Fund
* Smith Barney Intermediate Maturity California Municipals Fund
* Smith Barney Intermediate Maturity New York Municipals Fund
* Smith Barney Limited Maturity Municipals Fund
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
* Smith Barney Muni Funds -- California Limited Term Portfolio
Smith Barney Muni Funds -- California Portfolio
* Smith Barney Muni Funds -- Florida Limited Term Portfolio
Smith Barney Muni Funds -- Florida Portfolio
Smith Barney Muni Funds -- Georgia Portfolio
* Smith Barney Muni Funds -- Limited Term Portfolio
Smith Barney Muni Funds -- National Portfolio
Smith Barney Muni Funds -- New Jersey Portfolio
Smith Barney Muni Funds -- New York Portfolio
Smith Barney Muni Funds -- Ohio Portfolio
Smith Barney Muni Funds -- Pennsylvania Portfolio
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney New York Municipals Fund Inc.
Smith Barney Oregon Municipals Fund
Smith Barney Tax-Exempt Income Fund
</TABLE>
-12-
<PAGE>
<TABLE>
<C> <S>
MONEY MARKET FUNDS
+ Smith Barney Exchange Reserve Fund
++ Smith Barney Money Funds, Inc. -- Cash Portfolio
++ Smith Barney Money Funds, Inc. -- Government Portfolio
*** Smith Barney Money Funds, Inc. -- Retirement Portfolio
+++ Smith Barney Municipal Money Market Fund, Inc.
+++ Smith Barney Muni Funds -- California Money Market Portfolio
+++ Smith Barney Muni Funds -- New York Money Market Portfolio
<FN>
- ------------------------
* Available for exchange with Class A, Class C and Class Y shares of the
Fund.
** Available for exchange with Class A, Class B and Class Y shares of the
Fund.
In addition, shareholders who own Class C shares of the Fund
through the
Smith Barney 401(k) Program may exchange those shares for Class C
shares of
this fund.
*** Available for exchange with Class A shares of the Fund.
+ Available for exchange with Class B and Class C shares of the Fund.
++ Available for exchange with Class A and Class Y shares of the
Fund. In
addition, shareholders who own Class C shares of the Fund through the
Smith
Barney 401(k) Program may exchange those shares for Class C shares of
this
fund.
+++ Available for exchange with Class A and Class Y shares of the Fund.
</TABLE>
Investors who held Class B shares of the Smith Barney Shearson
Short-Term
World Income Fund on July 15, 1994 and who subsequently exchange those
shares
for Class B shares of a Fund will be offered the opportunity to exchange
all
such Class B shares for Class A shares of the Fund four years after the
date on
which those shares were deemed to have been purchased. Holders of such
Class B
shares will be notified of the pending exchange in writing approximately 30
days
before the fourth anniversary of the purchase date and, unless the
exchange is
rejected in writing, the exchange will occur on or about the fourth
anniversary
date.
AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers
shareholders an
automatic cash withdrawal plan, under which shareholders who own shares
with a
value of at least $10,000 may elect to receive periodic cash payments
of at
least $100 monthly or quarterly. Retirement plan accounts are eligible
for
automatic cash withdrawal plans only where the shareholder is
eligible to
receive qualified distributions and has an account value of at least
$5,000. The
withdrawal plan will be carried over on exchanges between funds or Classes
of a
Fund. Any applicable CDSC will not be waived on amounts withdrawn
by a
shareholder that exceed 1.00% per month of the value of the shareholder's
shares
subject to the CDSC at the time the withdrawal plan commences. (With
respect to
withdrawal plans in effect prior to November 7, 1994, any applicable CDSC
will
be waived on amounts withdrawn that do not exceed 2.00% per month of
the
shareholder's shares subject to the CDSC.) For further information
regarding the
automatic cash withdrawal plan, shareholders should contact a Smith
Barney
Financial Consultant.
MINIMUM ACCOUNT SIZE. Each Fund reserves the right to
involuntarily
liquidate any shareholder's account in the Fund if the aggregate net asset
value
of the shares held in the Fund account is less than $500. (If a
shareholder has
more than one account in the Fund, each account must satisfy the minimum
account
-13-
<PAGE>
size.) The Fund, however, will not redeem shares based solely on
market
reductions in net asset value. Before the Fund exercises such
right,
shareholders will receive written notice and will be permitted 60 days to
bring
accounts up to the minimum to avoid automatic redemption.
MANAGEMENT OF THE FUND. The day-to-day operations of each
Fund are
delegated to the Fund's investment adviser, administrator and sub-
administrator.
The investment adviser of each Fund is:
<TABLE>
<CAPTION>
ASSETS UNDER
MANAGEMENT
FUND INVESTMENT ADVISER AS OF SEPTEMBER 30,
1994
- -------------------------- ------------------------- --------------------
- ----
<S> <C> <C>
Adjustable Rate Government Smith Barney Strategy
Income Fund Advisers Inc. ("SBSA") $3.03 billion
Arizona Municipals Fund Smith Barney Mutual Funds
Management Inc.
("SBMFM")* $52.4 billion
European Fund SBMFM** $52.4 billion
Florida Municipals Fund SBMFM* $52.4 billion
Global Opportunities Fund SBMFM** $52.4 billion
Growth and Income Fund SBMFM* $52.4 billion
Intermediate Maturity SBMFM* $52.4 billion
California Municipals
Fund
Intermediate Maturity New SBMFM* $52.4 billion
York Municipals Fund
Investment Grade Bond Fund SBMFM* $52.4 billion
Limited Maturity SBMFM* $52.4 billion
Municipals Fund
Limited Maturity Treasury SBMFM* $52.4 billion
Fund
Massachusetts Municipals SBMFM* $52.4 billion
Fund
Oregon Municipals Fund SBMFM* $52.4 billion
Precious Metals and SBSA $3.03 billion
Minerals Fund
Telecommunications Growth SBSA $3.03 billion
Fund
<FN>
- ------------------------------
* The fund's advisory agreement was transferred to SBMFM effective
November 7,
1994, from its affiliate, Mutual Management Corp. (Mutual Management
Corp.
and SBMFM are both wholly owned subsidiaries of Smith Barney Holdings
Inc.)
** The adviser of this fund has changed its name from "Smith, Barney
Advisers,
Inc." to "Smith Barney Mutual Funds Management Inc."
</TABLE>
ADMINISTRATOR. The Funds' administrator has changed its name
from
"Smith, Barney Advisers, Inc." to "Smith Barney Mutual Funds Management
Inc."
FINANCIAL HIGHLIGHTS. The information set forth in Appendix A
should be
read in conjunction with the financial statements and related notes that
appear
in the Fund's Semi-Annual Report.
-14-
<PAGE>
- ------------------------
*Prospectuses dated:
<TABLE>
<S> <C>
Adjustable Rate Government
Income Fund 07/30/94
Arizona Municipals Fund Inc. 07/30/94
European Fund 03/01/94
Florida Municipals Fund 12/30/93
Global Opportunities Fund 06/29/94
Growth and Income Fund 04/01/94
Intermediate Maturity California
Municipals Fund 01/29/94
Intermediate Maturity New York
Municipals Fund 01/29/94
Investment Grade Bond Fund 03/01/94
Limited Maturity Municipals Fund 01/29/94
Limited Maturity Treasury Fund 01/29/94
Massachusetts Municipals Fund 01/29/94
Oregon Municipals Fund 05/23/94
Precious Metals and Minerals
Fund Inc. 12/30/93
Telecommunications Growth Fund 03/01/94
</TABLE>
-15-
<PAGE>
APPENDIX A
SMITH BARNEY
FOR A CLASS A SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
PRECIOUS
INVESTMENT
METALS
FLORIDA GRADE MASSACHUSETTS
AND TELECOMMUNICATIONS
EUROPEAN MUNICIPALS BOND MUNICIPALS
MINERALS GROWTH
FUND# FUND FUND FUND
FUND INC. FUND
<S> <C> <C> <C> <C>
<C> <C>
-----------------------------------------------------
- ------------------------
<CAPTION>
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
ENDED ENDED
6/30/94 4/30/94 6/30/94 5/31/94
4/30/94 6/30/94
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value,
beginning of
period............. $14.47 $ 10.53 $ 13.01 $ 13.26
$ 18.89 $ 12.86
Income from
investment
operations:
Net investment
income/(loss)...... 0.05 0.25+ 0.42 0.35+
(0.03) (0.02)
Net realized and
unrealized
gain/(loss) on
investments........ (0.41) (0.83) (1.69) (0.87)
0.75 (1.34)
--------------------------------------------------------------------------
- ----------------------------------
Total from
investment
operations......... (0.36) (0.58) (1.27) (0.52)
0.72 (1.36)
--------------------------------------------------------------------------
- ----------------------------------
Distributions:
Dividends from net
investment
income........... -- (0.26) (0.44) (0.36)
- -- --
Distributions from
net realized
capital gains.... -- (0.03) -- (0.05)
- -- --
--------------------------------------------------------------------------
- ----------------------------------
Total
distributions...... 0.00 (0.29) (0.44) (0.41)
0.00 0.00
--------------------------------------------------------------------------
- ----------------------------------
Net asset value, end
of period.......... $14.11 $ 9.66 $ 11.30 $ 12.33
$ 19.61 $ 11.50
--------------------------------------------------------------------------
- ----------------------------------
Total return++...... (2.49)% (5.67)% (9.82)% (4.04)%
3.81% (10.58)%
--------------------------------------------------------------------------
- ----------------------------------
Ratios to average
net
assets/supplemental
data:
Net assets, end of
period (in
000's)............. $2,041 $14,764 $12,381 $30,452
$24,404 $74,838
Ratio of operating
expenses to average
net assets......... 2.20%** 0.99%**+++ 1.08%**
0.81%**+++ 1.81%** 1.24%**
Ratio of net
investment
income/(loss) to
average net
assets............. 0.80%** 4.94%** 7.06%** 5.44%**
(0.25)%** (0.28)%**
--------------------------------------------------------------------------
- ----------------------------------
Portfolio turnover
rate............... 50% 20% 12% 26%
12% 5%
--------------------------------------------------------------------------
- ----------------------------------
<FN>
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for six months ended April 30, 1994 and May 31, 1994 were
$0.24
and $0.33, respectively.
++ Total return represents aggregate total return for the period
indicated and
does not reflect any applicable sales charges.
+++ Annualized expense ratio before waiver of fees by investment adviser
and
administrator for the six months ended April 30, 1994 and May 31, 1994
were
1.26% and 1.07%, respectively.
# As of May 10, 1994, the Fund changed its investment adviser from Lehman
Brothers Global Asset Management Limited to its current adviser.
</TABLE>
<PAGE>
SMITH BARNEY
FOR A CLASS B SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
PRECIOUS
INVESTMENT
METALS
FLORIDA GRADE
MASSACHUSETTS AND TELECOMMUNICATIONS
EUROPEAN MUNICIPALS BOND
MUNICIPALS MINERALS GROWTH
FUND# FUND FUND FUND
FUND INC. FUND
<S> <C> <C> <C> <C>
<C> <C>
-----------------------------------------------------
- ---------------------------
<CAPTION>
SIX MONTHS SIX MONTHS SIX MONTHS SIX
MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
ENDED ENDED
6/30/94 4/30/94 6/30/94
5/31/94 4/30/94 6/30/94
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value,
beginning of
period............. $ 14.40 $ 10.53 $ 13.01 $ 13.26
$ 18.75 $ 12.77
Income from
investment
operations:
Net investment
income/(loss)...... 0.01 0.23+ 0.39 0.32+
(0.09) (0.06)
Net realized and
unrealized
gain/(loss) on
investments........ (0.43) (0.83) (1.69) (0.87)
0.73 (1.34)
--------------------------------------------------------------------------
- --------------------------------------
Total from
investment
operations......... (0.42) (0.60) (1.30) (0.55)
0.64 (1.40)
--------------------------------------------------------------------------
- --------------------------------------
Distributions:
Dividends from net
investment
income........... -- (0.24) (0.41) (0.33)
- -- --
Distributions from
net realized
capital gains.... -- (0.03) -- (0.05)
- -- --
--------------------------------------------------------------------------
- --------------------------------------
Total
distributions...... 0.00 (0.27) (0.41) (0.38)
0.00 0.00
--------------------------------------------------------------------------
- --------------------------------------
Net asset value, end
of period.......... $ 13.98 $ 9.66 $ 11.30 $ 12.33
$ 19.39 $ 11.37
--------------------------------------------------------------------------
- --------------------------------------
Total return++...... (2.92)% (5.87)% (10.05)% (4.26)%
3.41% (10.96)%
--------------------------------------------------------------------------
- --------------------------------------
Ratios to average
net
assets/supplemental
data:
Net assets, end of
period (in
000's)............. $38,029 $36,661 $401,515 $24,388
$57,005 $185,419
Ratio of operating
expenses to average
net assets......... 2.89%** 1.49%**+++ 1.58%**
1.33%**+++ 2.57%** 2.07%**
Ratio of net
investment
income/(loss) to
average net
assets............. 0.11%** 4.44%** 6.56%**
4.92%** (1.01)%** (1.10)%**
--------------------------------------------------------------------------
- --------------------------------------
Portfolio turnover
rate............... 50% 20% 12% 26%
12% 5%
--------------------------------------------------------------------------
- --------------------------------------
<FN>
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for six months ended April 30, 1994 and May 31, 1994 were
$0.21
and $0.30, respectively.
++ Total return represents aggregate total return for the period
indicated and
does not reflect any applicable sales charges.
+++ Annualized expense ratios before waiver of fees by investment adviser
and
administrator for the six months ended April 30, 1994 and May 31, 1994
were
1.77% and 1.59%, respectively.
# As of May 10, 1994, the Fund changed its investment adviser from Lehman
Brothers Global Asset Management Limited to its current adviser.
</TABLE>
<PAGE>
SMITH BARNEY
FOR A FUND SHARE OUTSTANDING FOR THE PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS ENDED 5/31/94
(UNAUDITED)
<S> <C> <C> <C>
<C>
INTERMEDIATE
INTERMEDIATE
LIMITED LIMITED MATURITY
MATURITY
MATURITY MATURITY CALIFORNIA
NEW YORK
MUNICIPALS TREASURY MUNICIPALS
MUNICIPALS
FUND FUND FUND
FUND
Net asset value,
beginning of period..... $ 8.26 $ 8.14 $ 8.50
$ 8.54
Income from investment
operations:
Net investment income+... 0.17 0.16 0.19
0.20
Net realized and
unrealized gain/(loss)
on investments.......... (0.17) (0.49) (0.32)
(0.32)
--------------------------------------------------------------------------
- --------------
Total from investment
operations.............. 0.00* (0.33) (0.13)
(0.12)
--------------------------------------------------------------------------
- --------------
Distributions:
Dividends from net
investment income..... (0.17) (0.16) (0.19)
(0.20)
Distributions from net
realized capital
gains................. -- (0.33) (0.01)
(0.01)
--------------------------------------------------------------------------
- --------------
Total distributions...... (0.17) (0.49) (0.20)
(0.21)
--------------------------------------------------------------------------
- --------------
Net asset value, end of
period.................. $ 8.09 $ 7.32 $ 8.17
$ 8.21
--------------------------------------------------------------------------
- --------------
Total return++........... (0.05)% (4.29)% (1.52)%
(1.45)%
--------------------------------------------------------------------------
- --------------
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's).............. $94,135 $44,293 $32,242
$69,765
Ratio of operating
expenses to average net
assets+++............... 0.80%** 0.90%** 0.75%**
0.65%**
Ratio of net investment
income/(loss) to average
net assets.............. 4.05%** 4.21%** 4.56%**
4.66%**
--------------------------------------------------------------------------
- --------------
Portfolio turnover
rate.................... 16% 95% 21%
49%
--------------------------------------------------------------------------
- --------------
<FN>
* Amounts represent less than $0.01 per share.
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for the six months ended May 31, 1994 were $0.16, $0.16,
$0.18
and $0.18, respectively.
++ Total return represents aggregate total return for the periods
indicated and
does not reflect any applicable sales charges.
+++ Annualized operating expense ratio before waiver of fees and/or
reimbursement by investment adviser and administrator for the six
months
ended May 31, 1994 were 0.91%, 1.06%, 1.13% and 0.94%, respectively.
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY --, 1995
Acquisition Of The Assets Of
CALIFORNIA LIMITED TERM PORTFOLIO
a separate series of
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York 10013
(800) -
By And In Exchange For Class A, Class C and Class Y Shares Of
SMITH BARNEY INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
a separate series of
SMITH BARNEY INCOME TRUST
388 Greenwich Street
New York, New York 10013
(800) -
This Statement of Additional Information, relating specifically to
the proposed transfer of all or substantially all of the assets of
California Limited Term Portfolio (the "Acquired Fund"), a separate series
of Smith Barney Muni Funds (the "Trust") to Smith Barney Income Trust
("Income Trust") on behalf of Smith Barney Intermediate Maturity California
Municipals Fund (the "Acquiring Fund") in exchange for Class A, Class C and
Class Y shares of the Acquiring Fund and the assumption by the Income Trust
on behalf of the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund, consists of this cover page and the following described
documents, each of which accompanies this Statement of Additional
Information and is incorporated herein by reference.
1. Statement of Additional Information of Smith Barney Muni Funds
dated November 7, 1994.
2. Statement of Additional Information of Smith Barney Income
Trust dated January 29, 1995.
3. Annual Report of Smith Barney Muni Funds - California Limited
Term Portfolio dated March 31, 1994.
4. Semi-Annual Report of Smith Barney Muni Funds - California
Limited Term Portfolio dated September 30, 1994.
5. Annual Report of Smith Barney Intermediate Maturity California
Municipals Fund dated November 30, 1994.
6. Semi-Annual Report of Smith Barney Intermediate Maturity
California Municipals Fund dated May 31, 1994.
7. Pro Forma Financial Statements.
This Statement of Additional Information is not a prospectus.
A Prospectus/Proxy Statement, dated February --, 1995, relating to the
above-referenced matter may be obtained without charge by calling or
writing either the Acquiring Fund or the Acquired Fund at the telephone
numbers or addresses set forth above or by contacting any Smith Barney
Financial Consultant or by calling toll-free 1-800- - . This
Statement of Additional Information should be read in conjunction with the
Prospectus/Proxy Statement dated February --, 1995.
The date of this Statement of Additional Information is
February --, 1995.
cunningham\n14sai.imca
<PAGE>
[GRAPHIC]
SMALL BOX ABOVE FUND NAME
SHOWING PALM TREES IN FRONT
OF A HIGH-RISE BUILDING.
SEMI- Smith Barney Shearson
ANNUAL INTERMEDIATE
REPORT MATURITY
CALIFORNIA
MUNICIPALS
FUND
.......................................
MAY 31, 1994
[LOGO]
<PAGE>
Intermediate Maturity California Municipals Fund
DEAR SHAREHOLDER:
We are pleased to provide you with the Semi-Annual
Report
which includes the portfolio of investments for Smith
Barney
Shearson Intermediate Maturity California Municipals
Fund for
the six-month period ended May 31, 1994. During the past six
months
the Fund paid tax-exempt distributions of $0.19 per share and a
capital gains distribution of $0.01 per share, which largely
offset
the decline in the Fund's net asset value to $8.17 from $8.50 per
share and resulted in a total return of (1.52%).
A TALE OF TWO BOND MARKETS:
"IT WAS THE BEST OF TIMES, IT WAS THE WORST OF TIMES . . ."
After becoming accustomed to the best of times in an extremely
bullish
bond market, beginning in November of 1993, investors found
themselves
embroiled in a very bearish bond market and facing the winter of
despair. For the first time in close to five years, market
participants confronted a classic environment that if in fact was
not
the worst of times, it came very close. There was a tremendous
decline
in bond prices, and as important as it was during 1993 to be
offensively positioned in terms of security holdings, it now was
equally as important to be defensively positioned.
The Federal Reserve's increase in short-term rates was perhaps
the
catalyst for the municipal market decline, but all of the fixed
income
markets reacted much more powerfully than could have been
anticipated,
perhaps even overreacted. The intermediate-
term market was and continues to be under some real pressure because it's
more
directly impacted by Federal Reserve activity, short-term rates and the
performance of two-and three-year government securities. And since there
has
been a tremendous reversal in that market, the impact on the intermediate-
maturity market has been pretty substantial. This is clearly seen in the
decline
in the Fund's net asset value per share during the past six months.
Over the next year and a half to two years, we think that the yield curve
(the
difference in yield between securities of varying maturities) will flatten.
Looking at the segment of the yield curve that encompasses maturities
between
one and ten years, we anticipate that there will be less pressure on
1
<PAGE>
the eight-to-ten-year range as the Fed continues to raise short-term
interest
rates than there will be on the two-, three-, or four-year range. We
consequently have been trying to keep the Fund's average maturity closer to
nine
years because there should be less pressure in that area.
We also attribute the market's exaggerated response on both the upside and
the
downside to the winding and unwinding of some very large leverage trades
that
were put on by hedge funds. And it is no secret that some of these trades
did
not work out as anticipated, forcing investors to quickly unwind their
trades
sooner than expected, and thereby exacerbating the municipal bond market's
downturn. Now that this has passed, the market should once again react to
the
fundamentals of the environment more than anything else. As long as the
economic
numbers continue to indicate that inflation is still a threat, we think
that the
Federal Reserve will raise short-term interest rates until the American
economy
begins to lose some steam. And as strong as the economy looks right now, it
could be some time before it begins to slow.
"IT WAS THE AGE OF WISDOM, IT WAS THE AGE OF FOOLISHNESS . . ."
Unlike many other investors who believed the bull market for bonds
seemingly
would never end, we took an incredibly cautious stance last fall towards
the
marketplace. We shortened the average life of the Fund's holdings and
raised the
percentage of cash holdings. In sum, we took about as defensive a position
as we
could.
During market declines, the area that usually declines the most is the
high-grade area of the market because it is the most liquid. So in April,
when
we decided that the market had adjusted enough and consequently presented
some
good investment opportunities, we were able to buy AA and AAA-rated
securities
at very attractive prices. Most of our purchases were in the general
obligation
and essential service revenue sectors because we think they offer the best
value
at this time, defining value as the highest yield relative to their credit
risk.
We are still wary of uninsured health care bonds for two reasons: the 1986
tax
act materially changed the way hospitals are reimbursed by Medicare and
Medicaid; and the current health care package has too many uncertainties
associated with it. Although the California economy is very close to
bottoming,
we are still avoiding state general obligations and any issues backed by
the
state's credit such as state lease securities. California potentially could
be
downgraded to an A rating; if this
2
<PAGE>
happens, we may finally after several years begin to look at buying that
credit
again. The average maturity of the Fund currently is 7.9 years, and we have
kept
a fairly small cash position of 3.4%.
"GREAT EXPECTATIONS . . ."
By the end of May the worst of the volatility and downside in the bond
market
was over. Could it go down from here? Yes, but if it does, we doubt that it
will
be dramatic; it is far more likely to be a minor correction. We're a little
bit
more aggressive on the municipal market right now because it's a much more
benign investment climate than it was and we think that current interest
rates
represent very fair value.
We also think that the supply and demand characteristics are very positive
for
the municipal market and will moderate its volatility. In terms of demand,
the
Clinton tax package makes tax-exempt income for the individual investor
even
more valuable than it was in the past. And there is also a great deal of
institutional participation in our marketplace, which we haven't seen for a
long
time.
In terms of supply, we anticipate a tremendous cutback in the supply of
municipals coming in the market as a result of the rise in interest rates.
Over
the next couple of years the supply of municipal bonds could decline by 50%
of
1993's record level. And because of this, we think that tax-exempt
securities
will perform substantially better than taxable issues.
The past six months were a difficult investment environment, but we believe
we
have been successful in meeting our stated investment objective of
providing
investors with a high level of current income exempt from Federal income
taxes*
and California personal income taxes and attempting to preserve principal.
During the next six months we will endeavor to do the same and look forward
to
reporting to you in the Fund's Annual Report.
Sincerely,
Heath B. McLendon Joseph P. Deane
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
JULY 18, 1994
- --------------------------------------------------------------------
*Income may be subject to Federal alternative minimum tax and state or
local
taxes.
3
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ------------------------------------------
PORTFOLIO HIGHLIGHTS (UNAUDITED) MAY 31,
1994
INDUSTRY BREAKDOWN
Pie chart depicting the allocation of the Income Trust Intermediate
Maturity
California Municipals Fund investment securities held at May 31, 1994 by
industry classification. The pie is broken in pieces representing
industries in
the following percentages:
<TABLE>
<CAPTION>
INDUSTRY PERCENTAGE
<S> <C>
Education 26.0%
Housing 2.0%
Transportation 14.9%
Water/Sewer 9.3%
Other Municipal Bonds and Notes 34.9%
Hospital 5.3%
Utility Revenue 3.3%
Short-Term Municipal Bonds and Notes
and Net Other Assets and Liabilities 4.3%
</TABLE>
SUMMARY OF MUNICIPAL BONDS AND SHORT-TERM
TAX-EXEMPT INVESTMENTS BY COMBINED RATINGS
<TABLE>
<CAPTION>
Standard & Percent
Moody's Poor's of Value
<S> <C> <C>
- -----------------------------------
AAA OR AAA 24.8%
- -----------------------------------
AA AA 5.7
- -----------------------------------
A A 37.9
- -----------------------------------
BAA BBB 28.2
- -----------------------------------
VMIG1 A-1 0.6
- -----------------------------------
P-1 NR 2.8
- -----------------------------------
100.0%
---------------
</TABLE>
AVERAGE MATURITY 7.9 years
4
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) MAY 31,
1994
-------------------------------------------------------------
<TABLE>
<S> <C>
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Federal Guaranty Insurance Corporation
MBIA -- Municipal Bond Investor Assurance
</TABLE>
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
<C> <S> <C> <C> <C>
--------------------------------------------------------------------------
- -
MUNICIPAL BONDS AND NOTES -- 95.7%
CALIFORNIA -- 93.1%
$ 500,000 Bakersfield, California,
Hospital Revenue,
(Adventist Health
Systems/West Agency), (MBIA
Insured),
5.100% due 3/1/03 Aaa AAA $ 490,000
Belmont, California,
Redevelopment Agency, Tax
Allocation Project, (Los
Costanos Community
Development), Series A:
150,000 5.850% due 8/1/02 A A- 149,063
160,000 5.950% due 8/1/03 A A- 158,800
California Educational
Facilities Authority:
1,000,000 Pooled College and
University Financing,
Series B,
5.800% 6/1/02 Baa NR 976,250
320,000 6.300% due 10/1/03 A1 NR 334,800
985,000 (Saint Mary's College),
4.900% due 10/1/03 A NR 924,669
35,000 (Loyola Marymount
University),
5.500% due 10/1/00 A1 NR 35,350
200,000 (Mills College),
6.500% due 9/1/02 Baa1 NR 209,000
500,000 (University of Southern
California),
5.300% due 10/1/04 Aa AA 495,625
100,000 California, General
Obligation Bonds,
9.800% due 10/1/00 Aa AA 123,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 200,000 California Health
Facilities Financing
Authority, (Sisters of
Providence),
6.200% due 10/1/03 A1 AA- $ 202,500
400,000 California Health
Facilities, (St.
Elizabeth's Hospital
Project),
5.900% due 11/15/03 A1 A+ 401,500
200,000 California Health
Facilities Revenue,
(Adventist Health
System/West Agency), Series
B, (MBIA Insured),
6.150% due 3/1/99 Aaa AAA 209,250
10,000 California Housing Finance
Agency Revenue, Home
Mortgage,
10.000% due 2/1/02 Aa A+ 10,113
200,000 California State, General
Obligation Bonds,
6.000% due 9/1/03 Aa A+ 208,000
200,000 California State,
Department of Water
Resources, Series J,
5.600% due 12/1/02 Aa AA 205,750
305,000 Cucamonga, California,
County Water District,
Certificates of
Participation, (FGIC
Insured),
6.000% due 9/1/03 Aaa AAA 312,625
Desert Sands, California,
Unified School District,
Certificates of
Participation:
(Measure O Project), Series
C:
500,000 4.650% due 3/1/00 A NR 473,125
1,000,000 4.900% due 3/1/02 A NR 931,250
200,000 Escondido, California,
Joint Powers Financing
Authority, (AMBAC Insured),
5.500% due 9/1/00 Aaa AAA 204,000
190,000 Escondido, California,
Unified School District,
Certificates of
Participation, Series A,
5.400% due 7/1/03 A A- 182,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$1,000,000 Foothill, California,
Transportation Zone,
Certificates of
Participation, Series A,
5.050% due 5/1/00 Baa1 NR $ 956,250
1,500,000 Fresno, California, Joint
Powers Financing Authority:
Series A,
5.750% due 9/2/98 NR BBB 1,488,750
355,000 Certificates of
Participation, (Street
Light Acquisition Project),
Series A,
5.375% due 8/1/03 A A+ 340,356
855,000 Garden Grove, California,
Agency Tax Allocation
Revenue, (Garden Grove
Community Project),
5.375% due 10/1/03 NR A+ 805,838
1,620,000 Hawthorne, California,
Community Redevelopment
Agency,
6.200% due 9/1/05 Baa NR 1,569,375
Irvine Ranch, California,
Water District, Joint
Powers Agency, Local Pool
Revenue, Issue II,
800,000 7.200% due 8/15/96 NR BBB 834,000
480,000 7.800% due 8/15/01 NR BBB 520,200
285,000 Kern, California, High
School District, Series C,
(MBIA Insured),
8.750% due 8/1/03 Aaa AAA 346,631
230,000 Kings River Conservation
District, (California Pine
Flat Power Project), Series
D,
5.375% due 2/1/00 Aa AA 232,588
45,000 Los Angeles County
Transportation Commission,
Certificates of
Participation, Series G,
6.100% due 1/1/00 A NR 46,744
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 30,000 Los Angeles County,
California, Multiple
Capital Facilities,
Certificates of
Participation, (Project
III),
5.800% due 11/1/98 A A $ 30,488
Los Angeles County,
California, Transportation
Authority, Transportation
Commission, Certificates of
Participation:
500,000 Series B,
6.200% due 7/1/03 A1 NR 519,375
30,000 Series G,
6.300% due 1/1/02 A NR 31,313
375,000 Marysville, California,
Hospital Revenue, (Fremont
Rideout Health Group),
Group A, (AMBAC Insured),
5.900% due 1/1/03 Aaa AAA 386,719
500,000 Modesto, California, High
School District,
(Stanislaus Company), (FGIC
Insured),
5.300% due 8/1/04 Aaa AAA 493,125
Mojave, California, Water
District, California
Improvement District,
(Moronogo Basin):
250,000 6.250% due 9/1/02 Baa BBB+ 254,062
280,000 6.375%, due 9/1/03 Baa BBB+ 285,600
Orange County, Cailfornia,
Development Agency Tax
Allocation, (Santa Ana
Heights Project):
500,000 5.500% due 9/1/00 Baa1 BBB 484,375
500,000 5.600% due 9/1/01 Baa1 BBB 482,500
30,000 Padre Dam Municipal Water
District, California
Improvement District,
Series C,
6.200% due 11/1/02 A A- 31,350
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Palm Springs, California,
Financing Authority,
Airport Revenue, (Palm
Springs Regional Airport),
(MBIA Insured):
$ 200,000 5.400% due 11/1/03 Aaa AAA $ 200,750
400,000 5.500% due 1/1/04 Aaa AAA 400,000
75,000 Pasadena, California,
Certificates of
Participation,
6.750% due 8/1/00 A1 A+ 81,280
385,000 Pinole, California,
Redevelopment Agency,
Series A, (Pinole Vista
Redevelopment Project Tax
Allocation), (MBIA
Insured),
5.500% due 8/1/03 Aaa AAA 391,256
200,000 Rancho, California, Revenue
Refunding, Water District
Financing Authority, (FGIC
Insured),
5.600% due 8/1/00 Aaa AAA 206,500
795,000 Redding, California, Joint
Powers Financing Authority,
Solid Waste and Corporate
Yard, Series A,
5.000% due 1/1/04 A BBB+ 737,362
150,000 Riverside County,
California, Transportation
Commission, Sales Tax
Revenue, Series A,
6.500% due 6/1/00 A A+ 159,938
Sacramento, California,
Regional Transportation,
Certificates of
Participation, Series A:
300,000 6.375% due 3/1/02 A1 NR 312,375
350,000 6.400% due 3/1/03 A1 NR 364,000
1,240,000 San Bernardino County,
California, Certificates of
Participation, Unified
School District,
4.900% due 5/1/04 NR A- 1,131,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 200,000 San Bernardino County,
California, Certificates of
Participation, Airport
Improvement Project, (MBIA
Insured),
5.700% due 1/1/01 Aaa AAA $ 204,250
100,000 San Diego, California,
Certificates of
Participation, Unified
School District, Series B,
6.000% due 7/1/03 Aa AA- 102,625
25,000 San Diego County,
California, Regional
Transportation Commission,
Sales Tax Revenue, Series
A,
6.400% due 4/1/01 A1 AA- 26,437
San Francisco, California,
City and County Public
Utilities Commission,
Series A:
500,000 Sewer Revenue, (AMBAC
Insured),
5.600% due 10/1/03 Aaa AAA 507,500
200,000 Water Revenue,
6.000% due 11/1/01 Aa AA 209,500
San Francisco, California,
City and County Revenue,
340,000 4.750% due 3/1/02 Aaa NR 325,125
305,000 4.900% due 3/1/03 Aaa NR 290,512
San Francisco, California,
Downtown Parking, Series R:
450,000 6.000% due 4/1/02 A NR 445,500
280,000 6.150% due 4/1/03 A NR 277,550
San Jose, California,
Airport Revenue:
800,000 (FGIC Insured),
5.400% due 3/1/04 Aaa AAA 779,000
500,000 (MBIA Insured),
5.750% due 3/1/03 Aaa AAA 511,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
Santa Barbara, California,
Certificates of
Participation, (Harbor
Refunding Project):
$ 270,000 6.400% due 10/1/02 A NR $ 280,125
285,000 6.500% due 10/1/03 A NR 295,688
200,000 Santa Fe Springs,
California, Redevelopment
Agency, Redevelopment
Project Tax Allocation,
Series A, (MBIA Insured),
5.600% due 9/1/00 Aaa AAA 206,500
Sierra Sands Unified School
District, California,
Sierra Sands School
Financing Corporation,
Certificates of
Participation:
450,000 5.250% due 3/1/00 Baa NR 434,250
470,000 5.350% due 3/1/01 Baa NR 451,200
1,000,000 South Napa, California,
Waste Management
Facilities,
6.000% due 2/15/04 Baa1 NR 970,000
200,000 Southern California, Public
Power Authority, (Palo
Verde Project), Series C,
(AMBAC Insured),
5.700% due 7/1/02 Aaa AAA 205,750
450,000 Southern California Rapid
Transit Authority, District
A2, Special Benefit
Assessment,
6.100% due 9/1/03 Baa A- 451,688
105,000 Tehachapi, California,
Unified School District,
School Facilities
Corporation, Certificates
of Participation,
5.900% due 8/1/03 Baa NR 98,962
Tulare County, California,
Certificates of
Participation, (Financing
Project), (MBIA Insured),
Series A:
200,000 5.700% due 11/15/03 Aaa AAA 204,250
250,000 5.800% due 11/15/04 Aaa AAA 255,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
$ 500,000 Ukiah, California, Unified
School District,
Certificates of
Participation, (Measure A
Capital Projects),
5.625% due 9/1/02 Baa1 BBB $ 480,000
University of California,
Multiple Purpose Projects,
(MBIA Insured),
200,000 Series A,
6.100% due 9/1/00 Aaa AAA 210,000
205,000 Upland, California,
Certificates of
Participation, (Police
Building Refunding
Project), (AMBAC Insured),
6.200% due 8/1/02 Aaa AAA 215,762
200,000 Walnut Valley, California,
Water District,
Certificates of
Participation,
(Badillo/Grand Transmission
Project), (FGIC Insured),
5.800% due 2/1/02 Aaa AAA 206,500
--------------------------------------------------------------------------
- -
30,008,094
--------------------------------------------------------------------------
- -
GUAM -- 2.6%
900,000 Guam Power Authority
Revenue, Series A,
5.200% due 10/1/04 NR BBB 839,250
--------------------------------------------------------------------------
- -
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $31,227,793) 30,847,344
--------------------------------------------------------------------------
- -
SHORT-TERM MUNICIPAL BONDS AND NOTES -- 3.4%
CALIFORNIA -- 3.4%
California Pollution
Control Project:
100,000 (Burney Forest Project),
Class A,
2.900%, due 9/1/20+ P-1 NR 100,000
100,000 (Delano Project),
3.250% due 8/1/19+ P-1 NR 100,000
700,000 (Honey Lake Power Company
Project),
3.200%, due 9/1/18+ P-1 NR 700,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (UNAUDITED) (CONTINUED) MAY 31,
1994
<TABLE>
<CAPTION>
MARKET
RATINGS VALUE
FACE VALUE MOODY'S S&P (NOTE 1)
--------------------------------------------------------------------------
- -
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL BONDS AND NOTES -- (CONTINUED)
CALIFORNIA -- (CONTINUED)
California Pollution Control Project --
(continued):
$ 100,000 Irvine Ranch, California,
Water District,
2.950% due 10/1/00+ NR A-1+ $ 100,000
100,000 Shell Oil Company
Project-A,
2.900%, due 10/1/10+ VMIG1 A-1+ 100,000
--------------------------------------------------------------------------
- -
TOTAL SHORT-TERM
MUNICIPAL BONDS AND NOTES
(Cost $1,100,000) 1,100,000
--------------------------------------------------------------------------
- -
TOTAL INVESTMENTS (Cost $32,327,793*) 99.1% 31,947,344
OTHER ASSETS AND LIABILITIES (NET) 0.9 295,057
--------------------------------------------------------------------------
- -
NET ASSETS 100.0%
$32,242,401
--------------------------------------------------------------------------
- -
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds and notes are payable upon not more than one
business day's notice.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) MAY 31,
1994
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost
$32,327,793) (Note 1)
See accompanying schedule $ 31,947,344
Interest receivable 474,213
Receivable for Fund shares sold 271,479
Receivable from investment advisor 41,508
Unamortized organization costs (Note 6) 31,109
- ------------------------------------------------------------------------
TOTAL ASSETS 32,765,653
- ------------------------------------------------------------------------
LIABILITIES:
Payable for Fund shares redeemed $387,582
Dividends payable 88,581
Due to custodian 19,254
Distribution fee payable (Note 3) 4,110
Custodian fees payable (Note 2) 3,400
Transfer agent fees payable (Note 2) 1,150
Accrued expenses and other payables 19,175
- ------------------------------------------------------------------------
TOTAL LIABILITIES 523,252
- ------------------------------------------------------------------------
NET ASSETS $ 32,242,401
- ------------------------------------------------------------------------
NET ASSETS consist of:
Accumulated net realized loss on
investments sold $ (188,441)
Unrealized depreciation of investments (380,449)
Par value 3,947
Paid-in capital in excess of par value 32,807,344
- ------------------------------------------------------------------------
TOTAL NET ASSETS $ 32,242,401
- ------------------------------------------------------------------------
NET ASSET VALUE per share
($32,242,401 DIVIDED BY 3,946,599 shares of
beneficial interest outstanding)+ $8.17
- ------------------------------------------------------------------------
MAXIMUM OFFERING PRICE PER SHARE ($8.17 DIVIDED BY
0.9875)
(based on sales charge of 1.25% of the offering
price at May 31, 1994) $8.27
- ------------------------------------------------------------------------
<FN>
+ Redemption price per share is equal to Net Asset Value less any
applicable
contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------
FOR THE SIX MONTHS ENDED MAY 31,
1994
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
888,783
- ---------------------------------------------------------------------------
- -------
EXPENSES:
Investment advisory fee (Note 2) $ 58,534
Administration fee (Note 2) 33,268
Distribution fee (Note 3) 25,086
Shareholder reports expense 20,614
Legal and audit fees 12,916
Custodian fees (Note 2) 10,448
Transfer agent fees (Note 2) 6,203
Amortization of organization costs (Note 6) 6,021
Trustees' fees and expenses (Note 2) 2,288
Other 13,695
Fees waived by investment adviser and
administrator (Note 2) (63,652)
- ---------------------------------------------------------------------------
- -------
TOTAL EXPENSES
125,421
- ---------------------------------------------------------------------------
- -------
NET INVESTMENT INCOME
763,362
- ---------------------------------------------------------------------------
- -------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTES 1 AND 4):
Net realized loss on investments during the
period
(165,015)
Net unrealized depreciation of investments
during the period
(1,162,911)
- ---------------------------------------------------------------------------
- -------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(1,327,926)
- ---------------------------------------------------------------------------
- -------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $
(564,564)
- ---------------------------------------------------------------------------
- -------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR
5/31/94
ENDED
(UNAUDITED)
11/30/93
<S> <C>
<C>
Net investment income $ 763,362
$ 886,464
Net realized gain/(loss) on investments during the
period (165,015)
25,380
Net unrealized appreciation/(depreciation) of
investments during the period (1,162,911)
673,107
- ---------------------------------------------------------------------------
- ----------
Net increase/(decrease) in net assets resulting from
operations (564,564)
1,584,951
Distributions to shareholders from:
Net investment income (763,362)
(886,464)
Net realized gain on investments (44,755)
- --
Net increase in net assets from Fund share transactions
(Note 5) 1,101,200
21,148,865
- ---------------------------------------------------------------------------
- ----------
Net increase/(decrease) in net assets (271,481)
21,847,352
NET ASSETS:
Beginning of period 32,513,882
10,666,530
- ---------------------------------------------------------------------------
- ----------
End of period $32,242,401
$ 32,513,882
- ---------------------------------------------------------------------------
- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
PERIOD
5/31/94 ENDED
ENDED
(UNAUDITED) 11/30/93
11/30/92*
<S> <C> <C> <C>
Net Asset Value, beginning of period $ 8.50 $ 8.04 $
7.90
- ---------------------------------------------------------------------------
- -------
Income from investment operations:
Net investment income+ 0.19 0.39
0.35
Net realized and unrealized gain/(loss) on
investments (0.32) 0.46
0.14
- ---------------------------------------------------------------------------
- -------
Total from investment operations (0.13) 0.85
0.49
- ---------------------------------------------------------------------------
- -------
Less distributions:
Distributions from net investment income (0.19) (0.39)
(0.35)
Distributions from net realized capital
gains (0.01) -- -
- -
- ---------------------------------------------------------------------------
- -------
Total distributions (0.20) (0.39)
(0.35)
- ---------------------------------------------------------------------------
- -------
Net asset value, end of year $ 8.17 $ 8.50 $
8.04
- ---------------------------------------------------------------------------
- -------
Total return++ (1.52)% 10.70%
6.33%
- ---------------------------------------------------------------------------
- -------
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's) $32,242 $32,514
$10,667
Ratio of operating expenses to average net
assets+++ 0.75%** 0.72%
0.65%**
Ratio of net investment income to average
net assets 4.56%** 4.45%
4.81%**
Portfolio turnover rate 21% 16%
46%
- ---------------------------------------------------------------------------
- -------
<FN>
* The Fund commenced operations on December 31, 1991.
** Annualized.
+ Net investment income before waiver of fees by investment adviser and
administrator for the six months ended May 31, 1994 was $0.18. Net
investment income before waiver of fees and reimbursement of expenses
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
period ended November 30, 1992 were $0.32 and $0.24, respectively.
++ Total return represents aggregate total return for the periods
indicated and
does not reflect any applicable sales charges.
+++ Annualized operating expense ratio before waiver of fees and/or
reimbursement by investment adviser and administrator for the six
months
ended May 31, 1994 and year ended November 30, 1993 and before waiver
of
fees and reimbursement of expenses by investment adviser, sub-
investment
adviser and/or administrator, custodian and distributor for the
period ended
November 30, 1992 were 1.13%, 1.49% and 2.18%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Smith Barney Shearson Income Trust (the "Trust") was organized as a
"Massachusetts business trust" under the laws of the Commonwealth of
Massachusetts on October 17, 1991. The Trust is registered with the
Securities
and Exchange Commission under the Investment Company Act of 1940, as
amended
(the "1940 Act"), as an open-end management investment company. The Trust
consists of the following four funds: Smith Barney Shearson Limited
Maturity
Treasury Fund, Smith Barney Shearson Limited Maturity Municipals Fund,
Smith
Barney Shearson Intermediate Maturity California Municipals Fund (the
"Fund")
and Smith Barney Shearson Intermediate Maturity New York Municipals Fund.
The
following is a summary of significant accounting policies consistently
followed
by the Fund in the preparation of its financial statements.
PORTFOLIO VALUATION: Securities are valued by The Boston Company Advisors,
Inc.
("Boston Advisors") after consultation with an independent pricing service
(the
"Service") approved by the Board of Trustees. When, in the judgment of the
Service, quoted bid prices for securities are readily available and are
representative of the bid side of the market, these investments are valued
at
the mean between the quoted bid prices and asked prices. Securities for
which,
in the judgment of the Service, there are no readily obtainable market
quotations (which may constitute a majority of the portfolio securities)
are
carried at fair value as determined by the Service, based on methods, which
include consideration of: yields or prices of municipal securities of
comparable
quality, coupon, maturity and type; indications as to values from dealers;
and
general market conditions. Securities, not valued by the Service, for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Trustees.
Short-term investments that mature in 60 days or less are valued at
amortized
cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-
issued or
delayed-delivery basis may be settled a month or more after the trade date.
Interest income is recorded on the accrual basis. Realized gains and losses
from
securities sold are recorded on the identified cost basis.
18
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund
to
declare dividends from net investment income daily and to pay such
dividends
monthly. Distributions from net realized capital gains, if any, are
declared and
paid annually, after the end of the calendar year in which earned. In
addition,
in order to avoid the application of a 4% nondeductible excise tax on
certain
undistributed amounts of ordinary income and capital gains, the Fund may
make an
additional distribution shortly before December 31 in each year of any
undistributed ordinary income or capital gains and expects to make any
other
distributions as are necessary to avoid this tax. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and
gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
FEDERAL INCOME TAXES: The Trust intends that the Fund separately qualify as
a
regulated investment company, if such qualification is in the best interest
of
its shareholders, which distributes exempt-interest dividends, by complying
with
the requirements of the Internal Revenue Code of 1986, as amended,
applicable to
regulated investment companies and by distributing substantially all of its
earnings to its shareholders. Therefore, no Federal income tax provision is
required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION
FEE AND OTHER TRANSACTIONS
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Management
Corp., which is controlled by Smith Barney Holdings Inc. ("Holdings").
Holdings
is a wholly owned subsidiary of The Travelers Inc. Under the Advisory
Agreement,
the Fund pays a monthly fee at the annual rate of 0.35% of the value of its
average daily net assets.
19
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Prior to April 20, 1994, the Fund was a party to an administration
agreement
with Boston Advisors, an indirect wholly owned subsidiary of Mellon Bank
Corporation ("Mellon"). Under this agreement, the Fund paid a monthly fee
at the
annual rate of 0.20% of the value of its average daily net assets.
As of the close of business on April 20, 1994, Smith, Barney Advisers, Inc.
("SBA"), which is controlled by Holdings, succeeded Boston Advisors as the
Fund's administrator. The new administration agreement contains
substantially
the same terms and conditions, including the level of fees, as the
predecessor
agreement.
As of the close of business on April 20, 1994, the Fund also entered into a
sub-adminstration agreement (the "Sub-Administration Agreement") with
Boston
Advisors. Under the Sub-Administration Agreement, Boston Advisors is paid a
portion of the fee paid by the Fund to SBA at a rate agreed upon from time
to
time between SBA and Boston Advisors.
From time to time, Greenwich Street Advisors and the Fund's administrator
may
voluntarily waive a portion or all of their respective fees otherwise
payable to
them. For the six months ended May 31, 1994, Greenwich Street Advisors and
Boston Advisors, the Fund's prior administrator, voluntarily waived fees of
$40,802 and $22,850, respectively.
For the six months ended May 31, 1994, Smith Barney Inc. ("Smith Barney")
received $58,540 from investors representing commissions (sales charges) on
sales of Fund shares.
A contingent deferred sales charge is generally payable by a shareholder in
connection with the redemption of shares within one year after the date of
purchase. For the six months ended May 31, 1994, Smith Barney received from
shareholders $8,483 in contingent deferred sales charges.
No officer, director or employee of Smith Barney or of any parent or
subsidiary
of Smith Barney receives any compensation from the Trust for
20
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
serving as a Trustee or officer of the Trust. The Trust pays each Trustee
who is
not an officer, director or employee of Smith Barney or any of its
affiliates
$4,000 per annum plus $500 per meeting attended and reimburses each such
Trustee
for travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company an indirect wholly owned subsidiary
of
Mellon, serves as the Trust's custodian. The Shareholder Services Group
Inc., a
subsidiary of First Data Corporation, serves as the Trust's transfer agent.
3. DISTRIBUTION PLAN
The Trust has adopted a plan of distribution (the "Plan") under Rule 12b-1
of
the 1940 Act. Under the Plan, the Fund pays Smith Barney a monthly fee at
the
annual rate of 0.15% of the value of its average daily net assets for
activities
primarily intended to result in the sale of its shares.
Under its terms, the Plan shall remain in effect from year to year,
provided
that such continuance is approved annually by vote of the Trust's Trustees,
including a majority of those Trustees who are not "interested persons" of
the
Trust and who have no direct or indirect financial interest in the
operation of
the Plan.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding short-
term
investments, for the six months ended May 31, 1994 were $6,670,347 and
$7,657,606, respectively.
At May 31, 1994, aggregate gross unrealized appreciation for all securities
in
which there was an excess of value over tax cost was $294,240 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of
tax cost over value was $674,689.
21
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- -------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. SHARES OF BENEFICIAL INTEREST
The Trust may issue an unlimited number of shares of beneficial interest
with a
$.001 par value. Changes in shares of beneficial interest in the Fund were
as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
5/31/94
11/30/93
Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
- ---------------------------------------------------------------------------
- ----------
Sold 781,221 $ 6,610,290
2,773,792 $23,473,658
Issued as reinvestment of dividends 76,362 641,472
81,600 688,363
Redeemed (738,050) (6,150,562)
(355,224) (3,013,156)
- ---------------------------------------------------------------------------
- ----------
Net increase 119,533 $ 1,101,200
2,500,168 $21,148,865
- ---------------------------------------------------------------------------
- ----------
</TABLE>
6. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including the
fees
and expenses of registering and qualifying its shares for distribution
under
Federal and state securities regulations. All such cost are being amortized
on
the straight-line method over a period of five years from the commencement
of
operations of the Fund. In the event that any of the initial shares of the
Fund
are redeemed during such amortization period, the Fund will be reimbursed
for
any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of
California, its political subdivisions, agencies and public authorities to
obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issuers of California municipal securities than
is a
municipal bond fund that is not concentrated in these issuers to the same
extent.
22
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
PARTICIPANTS
DISTRIBUTOR
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
INVESTMENT ADVISER
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
SUB-ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
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
23
<PAGE>
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
- ---------------------------------------------------------------------------
GLOSSARY OF COMMONLY USED MUTUAL FUND TERMS
CAPITAL GAIN (OR LOSS): This is the increase (or decrease) in the market
value
(price) of a security in your portfolio. If a stock or bond appreciates in
price, there is a capital gain; if it depreciates there is a capital loss.
A
capital gain or loss is "realized" upon the sale of a security; if net
capital
gains exceed net capital losses, there may be a capital gain distribution
to
shareholders.
CDSC (CONTINGENT DEFERRED SALES CHARGE): One kind of back-end load, a CDSC
is
imposed if shares are redeemed during the first few years of ownership. The
CDSC
may be expressed as a percentage of either the original purchase price or
the
redemption proceeds. Most CDSCs decline over time, and some will not be
charged
if shares are redeemed after a certain period of time.
DISTRIBUTION RATE: This is the rate at which a mutual fund pays out (or
distributes) interest, dividends and realized capital gains to
shareholders. A
fund's distribution rate is usually expressed as an annualized percent of
the
fund's offering price.
DIVIDEND: This is income generated by securities in a portfolio and
distributed
after expenses to shareholders.
FRONT-END SALES CHARGE: This is the sales charge applied to an investment
at the
time of initial purchase.
NET ASSET VALUE (NAV): Net asset value is the total market value of all
securities held by a fund, minus any liabilities, divided by the number of
shares outstanding. It is the value of a single share of a mutual fund on a
given day. The total value of your investment would be the NAV multiplied
by the
number of shares you own.
SEC YIELD: This standardized calculation of a mutual fund's yield is based
on a
formula developed by the Securities and Exchange Commission (SEC) to allow
funds
to be compared on an equal basis. It is an annualized yield based on the
portfolio's potential earnings from dividends, interest and yield to
maturity of
its holdings, and it reflects the payments of all portfolio expenses for
the
most recent 30-day period. Mutual funds are required to use this figure
when
stating yield.
TOTAL RETURN: Total return measures a fund's performance, taking into
account
the combination of dividends paid and the gain or loss in the value of the
securities held in the portfolio. It may be expressed on an AVERAGE ANNUAL
basis
or CUMULATIVE basis (total change over a given period). In addition, total
return may be expressed with or without the effects of sales charges or the
reinvestment of dividends and capital gains.
Whenever a fund reports any type of performance, it must also report the
average
annual total return according to the standardized calculation developed by
the
SEC. This standardized calculation was introduced to insure that investors
can
compare different funds on an equal basis. The SEC AVERAGE ANNUAL TOTAL
RETURN
calculation includes the effects of all fees and sales charges and assumes
the
reinvestment of all dividends and capital gains.
24
<PAGE>
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
Lewis E. Daidone
TREASURER
Christina T. Sydor
SECRETARY
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND. IT
IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS ACCOMPANIED
OR
PRECEDED BY AN EFFECTIVE PROSPECTUS FOR THE FUND, WHICH CONTAINS
INFORMATION
CONCERNING THE FUND'S INVESTMENT POLICIES, FEES AND EXPENSES AS WELL AS
OTHER
PERTINENT INFORMATION.
[LOGO]
SMITH BARNEY SHEARSON
MUTUAL FUNDS
Two World Trade Center
New York, New York 10048
Fund 165
FD2230 G4
Dear Shareholder: We are pleased to present the semi-annual report and
unaudited financial statements for the six-month period ended September 30,
1994 for the Smith Barney Muni Funds: California Portfolio, California
Limited Term Portfolio and California Money Market Portfolio. Below we have
provided a summary of economic and market conditions, as well as a brief
review of the investment strategy used by each Portfolio. Following these
Portfolio Highlights, you will find a more detailed summary of holdings in
the Schedule of Investments. We hope you find this information useful as
you
evaluate your investments.
Portfolio Highlights Economic Overview Since our last report in May, the
U.S.
economy has continued to exhibit strong economic growth. Consumer spending
has been growing at more than a 3% rate and job growth statistics suggest
that we are near or at full employment. Capital spending is also strong and
should continue to be so given a high measurement of capacity utilization.
Another indicator of economic expansion is the 20% increase in raw
commodity
prices over the past 12 months, as measured by the Journal of Commerce
Index.
As with earlier recoveries, a rapidly expanding economy also has brought
about the fear of returning inflation. In an effort to curb its resurgence,
the Federal Reserve Board has implemented a series of increases in the
benchmark for short-term interest rates, the Federal Funds Rate. This
policy
of monetary tightening, with six increases from 3.00% to a current 5.50%,
has
caused extreme volatility in fixed income markets, along with a marked
erosion in the value of municipal bonds.
At this point, the latest move by the Federal Reserve may not be sufficient
to calm the markets and an additional tightening may be necessary.
Ultimately, however, we believe their policy of monetary restraint will
succeed in slowing the economy to a more sustainable rate of growth.
The California Economy In July of 1994, Moodys downgraded Californias debt
rating for the third time in two years, this time from Aa to A1. Standard
&Poors also cut its rating to A from A+. Despite some signs of economic
recovery, the State continues to grapple with a structurally imbalanced
budget, an accumulated deficit of over $3 billion and short-term borrowings
of $7 billion. One widely publicized outcome of the November elections was
the approval by voters of the proposition barring illegal aliens from
receiving state benefits. However, most observers view the resulting
benefits
as uncertain and anticipate they will be slow in implementation, given
anticipated legal challenges.
California Portfolio The performance of the California Portfolio reflects
the
difficult market conditions discussed in the Economic Overview above. The
one-year total return for the period ended September 30, 1994 was -2.55% on
net asset value for Class A shares. Though this return was negative, the
Portfolio was ranked #14 of 74 California Municipal bond funds included in
the September survey by Lipper Anlaytical Services, Inc. Performance was
also
strong on a three- and five- year basis, as your Fund ranked in the top
quartile for each period.
In part, our performance relative to other long-term municipal bond funds
was
aided by significant commitment to pre-refunded bonds. These issues, which
comprise approximately 20% of the Portfolio, are bonds that have been
advance
refunded prior to their initial call date. Pre-refunded bonds tend to
reduce
overall credit risk, because they are backed by investments in U.S.
Government Securities. They also have less interest rate sensitivity than
longer-dated bonds (since the life of the bond has been permanently
shortened
to the refunding date).
The performance of the Portfolio was also enhanced by our position in other
high-coupon premium bonds that are callable before their stated maturity.
This positioning had the effect of shortening the average effective
maturity
of the Portfolio and reduced its sensitivity to rising interest rates.
However, many of these defensive characteristics have been diminished or
lost
over the past month. During late October and the first half of November,
municipal bond yields have increased substantially, and many issues are no
longer trading at a premium. At this juncture, it is our view that much of
the increase in long-term interest rates is behind us; thus, we have begun
to
replace many of these holdings with issues of similar stated maturities,
but
with greater call protection. Though this strategy may result in some
sacrifice to current yield, it will enhance performance should rates begin
to
decline next year, while not adding to downside risk should rates rise
further.
Although the municipal market could come under additional pressure from
year-end tax loss selling and swap activity, we will endeavor to stay as
close to fully invested as practicable. Considering our view that the
Federal
Reserve will be successful in slowing the economy to a more sustainable
rate
of growth, we believe that current yield levels are extremely attractive
and
that municipal bonds are offering excellent value.
California Limited Term Portfolio Reflecting the volatile municipal bond
market conditions discussed above, the Portfolios total return in this
period
was 0.39%. As a result, the Portfolio was ranked the #1 fund among the
California intermediate municipal funds included in the September survey by
Lipper Analytical Services, Inc.
Our relative performance was primarily the result of an emphasis on higher
quality issues that are trading at a premium to face value. In particular,
we
have concentrated on those bonds that have a shorter effective maturity
(e.g.
bonds that are priced to a call date earlier than their stated maturity
date,
and issues with sinking funds designed to retire a portion of the issue
prior
to maturity.) However, the defensive characteristics of many of these
issues
have been diminished or lost over the past month. During late October and
the
first half of November, municipal bond yields have increased substantially,
and many issues are no longer trading at a premium. Even though much of the
rise in long-term interest rates is probably behind us, the prospect of
continued tightening of monetary policy by the Federal Reserve Board is
likely to sustain at least some upward pressure on the yields of shorter-
term
securities. Accordingly, we intend to increase the use of short-term
floating
rate securities and continue to favor higher quality bonds trading at a
premium to face value. Though this strategy may result in some sacrifice to
current yield, it will reduce volatility if rates rise further, while
providing reasonable performance should rates begin to decline.
California Money Market Portfolio As of September 30, 1994, the seven-day
yield for the Fund was 2.60%, which translates into a 4.84%
taxable-equivalent yield for California residents in the maximum combined
effective marginal tax brackets. The average maturity target for the
Portfolio is in the 30-50 day range, which is where we have been positioned
throughout most of 1994. Given an uncertain interest rate environment and
the
current high demand for tax-exempt cash equivalent investments, we expect
to
remain in this somewhat defensive maturity range over the near term.
***** We hope that you have found this summary on the California and
California Limited Term Portfolios, as well as the California Money Market
Portfolio, informative. A further description of the individual holdings in
each Portfolio can be found in the Schedule of Investments that follows.
We appreciate your confidence and pledge our best efforts on your behalf.
Sincerely yours,
Stephen Treadway Chairman and Chief Executive Officer November 15, 1994
California Money Market California Limited Term and California Portfolios
Smith Barney Muni Funds California Limited Term Portfolio
Historical Performance Class A Shares (unaudited)
Net Asset Value Period Beginning End Income Capital Gain
Total
Ended of Period of Period Dividends Distributions Returns(1)
9/30/94 $6.41 $6.39 $0.16 $ 2.24% 4/27/93 -
3/31/94 6.50 6.41 0.24 2.29 Cumulative Total
Return -
Class A Shares (4/27/93* through 9/30/94) 4.58%
It is the Funds policy to distribute dividends monthlyand capital gains, if
any, annually.
Average Annual Total Return Class A Shares (unaudited)
Without Sales Charge(1) With Sales Charge(2) 4/27/93* through
9/30/94 3.18% 1.68%
Without Sales Charge(1) With Sales Charge(2) 5/18/93* through
9/30/94 2.88% 2.16% Cumulative Total Return 3.97
Without Sales Charge(1) With Sales Charge(2) 6/23/94* through
9/30/94 1.62% 0.44% Cumulative Total Return 2.06
*Inception
Average Annual Total Return Class B Shares (unaudited)
Average Annual Total Return Class C Shares (unaudited)
Schedule of Investments September 30, 1994
Smith Barney Muni Funds California Portfolio
Historical Performance Class A Shares (unaudited)
Net Asset Value ddddd Period Beginning End Income Capital
Gain Total Ended of Period of
Period Dividends Distributions Returns(1)
9/30/94 $12.27 $12.08 $ 0.38 $ 1.54%
3/31/94 12.78 12.27 0.77 0.03 2.15
3/31/93 12.05 12.78 0.78 12.93
3/31/92 11.62 12.05 0.80 11.11
3/31/91 11.47 11.62 0.84 8.90
3/31/90 11.17 11.47 0.85 10.44
3/31/89 10.96 11.17 0.86 10.07 4/3/87 -
3/31/88 12.50 10.96 0.88 (5.79)
Total $6.16 $0.03 Cumulative Total Return - Class A
Shares (4/3/87* through 9/30/94) 57.42%
It is the Funds policy to distribute dividends monthlyand capital gains, if
any, annually.
Average Annual Total Return Class A Shares (unaudited)
Without Sales Charge(1) With Sales Charge(2) Five Years Ended
9/30/94 7.09% 6.06% 4/3/87* through 9/30/94 6.46 5.80
Without Sales Charge(1) With Sales Charge(2) 1/5/93* through
9/30/94 3.79% 3.23% Cumulative Total Return 6.67
Without Sales Charge(1) With Sales Charge(2) 1/12/93* through
9/30/94 4.82% 3.97% Cumulative Total Return 8.42
*Inception
Growth of $10,000 Invested in Class A Shares of the California Limited Term
Portfolio vs.Lehman Ten Year General Obligation Index (unaudited) April
1993
September 1994
Hypothetical illustration of $10,000 invested in Class A shares at
inception
on April 27, 1993, assuming deduction of the maximum 2.00% sales charge at
the time of investment and reinvestment of dividends (after deduction of
applicable sales charges) and capital gains (at net asset value) through
September 30, 1994. The Index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Portfolios other classes may be greater or less than the Class A shares
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
(1) Assumes reinvestment of all dividends at maximum offering price and
capital gain distributions at net asset value and does not reflect
deduction
of the applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges (CDSC) with respect to Class B
and Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions
at net asset value. In addition, the deduction of the maximum initial sales
charge of 2.00% with respect to Class A shares and a deduction of the CDSC
of
1.00% with respect to Class B shares and 1.50% with respect to Class C
shares
has been factored into these calculations.
Average Annual Total Return Class B Shares (unaudited)
Average Annual Total Return Class C Shares (unaudited)
Smith Barney Muni Funds California Limited Term Portfolio
Historical Performance September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Schedules of Investments (unaudited) September 30, 1994
$ 250,000 AAA Association of Bay Area Government Tax
Allocation Series A 4.20% due 12/15/94 $250,476
1,100,000 A-1+ Burbank Redevelopment Agency Issue A
2.60%(b) 1,100,000 California Alternate Energy Source Finance Authority
5,000,000 VMIG 1 (Hydroelectric Revenue) 1986
3.40%(a)(b) 5,000,000 California Health Facilities Authority:
5,500,000 A-1+ Memorial Health Services 3.75%(b) 5,500,000
2,200,000 VMIG 1 Pooled Loan Program Series 90A
3.55%(b) 2,200,000 California Pollution Control Financial Authority:
1,000,000 A-1+ PCR (Chevron USA Inc. Project) 2.85% due
11/15/94 1,000,121 300,000 P-1 PCR (Honey Lake Project)
3.75%(a) 300,000 PCR (Pacific Gas & Electric):
1,000,000 A-1+ 1988A 3.05% due 12/13/94**(a) 1,000,000
8,000,000 A-1+ 1988C 2.85% to 3.05% due by
12/16/94** 8,000,000 3,000,000 A-1+ 1988E 2.90% and
3.35%
due by 12/19/94** 3,000,000 3,500,000 Aaa PCR (San Diego Gas &
Electric) 4.25% due by 9/1/95 3,500,000
6,300,000 A-1+ PCR (Southdown Inc. Project) 3.05%(b) 6,300,000
5,700,000 P-1 Resource Recovery: Burney-Forest Delmarva Power &
Light 1988 3.55%(a)(b) 5,700,000
200,000 P-1 Delano Project Series 1990 3.75%(a)(b)
200,000
4,600,000 P-1 Delano Project Series 1991
3.75%(a)(b) 4,600,000 Southern California Edison:
3,550,000 P-1 1985C 2.80% and 3.00% due by 12/14/94** 3,550,000
2,600,000 P-1 1985D 3.10% and 3.15% due by 11/29/94** 2,600,000
7,000,000 MIG1 California School Cash Reserve Program
Authority Series A 3.75% due 7/5/95 7,038,355
2,000,000 P-1 California State Department of Water Resources
Water Revenue Series 1, 2.85% due 10/26/94 2,000,000
2,000,000 A-1+ California State Department of Water TOB
(BT-83) 3.65%(b) 2,000,000 6,000,000 A-1+ California State GO
FRTC 92-E, 3.95%(b) 6,000,000 2,000,000 P-1 Chula Vista IDR Bonds
(San Diego Gas & Electric) Series 1992 B 3.85%(a)(b) 2,000,000
6,600,000 VMIG 1 Contra Costa Transportation Authority Series A
3.55%(b) 6,600,000 3,500,000 A-1+ Delmar Race Track Authority 3.00%
due 12/20/94 3,500,000 2,000,000 P-1 East Bay Muni Utility
District
Water Revenue 2.65% due 10/18/94 2,000,000 2,000,000 VMIG
1 Fairfield IDA (R. Dakin & Company Project)
3.10%(b) 2,000,000$ 500,000 A-1+ Fontana Multi-Family Housing
Revenue Bonds (Apartments PJ) Series A 3.55%(a)(b) $500,000
1,000,000 VMIG 1 Garden Grove Multi-Family Housing (Valley
View Senior Villas) 4.05%(a)(b) 1,000,000 2,800,000 A-1+ Glendale
Public Parking (Reliance Development Co.) 1984 A 3.05%(b) 2,800,000
2,000,000 AAA Hemet (City of) Multi-Family Housing Revenue (Sunwest
Resort) 3.80%(b) 2,000,000 700,000 A-1 Irvine Ranch Water
3.55%(b) 700,000 Irvine Ranch Water District: 800,000 A-1
Series
B 3.50%(b) 800,000 300,000 VMIG 1 Assessment No. 94-15
3.50%(b) 300,000 2,900,000 VMIG 1 Series 1993A
3.50%(b) 2,900,000 1,200,000 VMIG 1 San Rafael
(Apartments
Project-A) 3.55%(a)(b) 1,200,000 1,000,000 A-1 Series 1985 B
3.50%(b) 1,000,000 1,600,000 A-1 No. 282 Series A
3.50%(b) 1,600,000 600,000 A-1 No. 284 Series A
3.50%(b) 600,000 3,600,000 VMIG 1 Long Beach Health Facilities
Authority (Memorial Health Services) 1991 3.75%(b) 3,600,000
1,700,000 VMIG 1 Los Angeles Community Redevelopment Agency
(Academy
Village Apartments) 3.90%(a)(b) 1,700,000 1,500,000 MIG1 Los
Angeles
County TRAN 3.85% due 6/30/95 1,506,995 4,400,000 VMIG 1 Los
Angeles
County Riverpark (Apartment #90) 3.60%(b) 4,400,000
3,400,000 AAA Los Angeles MTA Sales Tax Revenues 1993 A
3.50%(b) 3,400,000 1,500,000 VMIG 1 Los Angeles COP (Simon
Wiesenthal Center Project) 3.50%(b) 1,500,000 3,000,000 P-1 Los
Angeles Department of Water & Power TECP 3.10% due 11/22/94 3,000,000
Los Angeles Multi-Family Housing: 6,600,000 A-1+ Series K
3.10%(b) 6,600,000 1,200,000 VMIG 1 Skyline at Southpark
Apartments Series 85 3.60%(b) 1,200,000 Los Angeles Wastewater System:
2,000,000 Aaa TECP 2.90% due 10/12/94 2,000,000
465,000 Aaa Series 1993D 8.70% due 11/1/94 467,198
7,600,000 P-1 Metropolitan Water District of Southern
California TECP 3.05% to 3.30% due by 11/30/94 7,600,000
3,000,000 A-1+ Oakland Childrens Hospital Center 1984 B
3.70%(b) 3,000,000 Orange County Apartment Development Revenue:
1,700,000 VMIG 1 Wood Canyon Villas 3.85%(a)(b) 1,700,000
4,000,000 VMIG 1 WLCO LF Partners C3 TOB (BTV-1 & 2)
3.70%(b) 4,000,000 100,000 Aa2 Orange County Water District 1990
Project B 3.45% (b) 100,000 $1,200,000 AAA Paramount (City of)
Multi-Family Housing (Triangle Development Project)
4.00%(a)(b) $1,200,000 500,000 A-1+ Rancho Mirage Redevelopment
Agency COP 3.65%(a)(b) 500,000 2,000,000 A-1+ Riverside Sewer
Revenue TOB Custody Receipt (MGT-21) 3.85%(b) 2,000,000
1,000,000 A-1+ Roseville Financial Authority, Placer County
(Hospital Lease) Revenue Series 1989 A 3.55%(b) 1,000,000 Sacramento
Municipal Utility District: 1,000,000 P-1 Series A 3.00% due
12/14/94 1,000,000 1,600,000 P-1 Series H 3.10% due
11/17/94 1,600,000 San Bernadino County IDA IDR:
2,225,000 P-1 Master Halco Series 1986 II 3.75% (a)(b) 2,225,000
300,000 P-1 Ring Can Co. Series 1986 III 3.75% (a)(b) 300,000
1,130,000 P-1 Tower Industries Series IV 3.75%(a)(b) 1,130,000
3,000,000 MIG1 San Diego (City of) TAN 3.61% due 6/30/95 3,014,011
1,500,000 AAA San Diego La Hoya Point Multi-Family Housing 3.25%
(b) 1,500,000 3,000,000 Aaa San Dimas Redevelopment Agency (San
Dimas Community Center) 3,00% (b) 3,000,000 San Francisco Multi-Family
Housing: 2,940,000 A-1+ Cathedral Hill 3.95%(b) 2,940,000
4,385,000 VMIG 1 Sutter/Post Apartment 3.65%(a)(b) 4,385,000
1,135,000 AAA San Jose Airport Revenue 3.50% due 3/1/95 1,137,273
2,000,000 MIG 1 Santa Ana Housing Authority 1985 Series C (Harbor
Point Apartments) 3.80%(b) 2,000,000 2,100,000 A-1+ Simi
Valley
(City of) Redevelopment Agency Multi- Family Housing Revenue 1985 A
3.35%(b) 2,100,000 600,000 A-1+ Triunfo County District (Wastewater
Reclamation Facility Project) 1988 3.30%(b) 600,000 500,000
VMIG
1 Vacaville Multi-Family Housing (Western Properties Sycamore)
3.20%(b) 500,000 6,800,000 A-1+ Vista Multi-Family Housing 1985 A
3.70%(b) 6,800,000 3,490,000 VMIG 1 West Covina Lease Revenue
Refunding (The Lake Public Parking Project) 3.50%(b) 3,490,000
1,000,000 AAA Whittier Health Facilities Revenue
(Presbyterian Intercommunity) 3.68% Pre-Refunded 6/1/95 @
102(g) 1,057,188 TOTAL INVESTMENT100% (Cost$191,591,617)(c)
$191,591,617 WEIGHTED AVERAGE DAYS TO MATURITY: 41 Education 14.2%
$375,000 A* Fresno Unified School District COP Refunding, Measure A
Capital Project, Series A,5.40% due 4/1/03 $356,250 150,000 A* Los
Angeles Unified School District COP,6.60% due 12/15/97 154,125
300,000 A- New Haven Unified School District, Alameida County,1993
Refunding COP, 5.30% due 7/1/01 294,000 400,000 A Sulphur Springs
USD GO, 6.15% due 3/1/00 410,500 1,214,875 Escrowed to Maturity 5.0%
110,000 AAA Arlington Community Hospital Corporation,Parkview
Community Hospital 1st Mortgage Revenue, (Escrowed to Maturity with U.S.
Government Securities), 8.00% due 6/1/04 117,975 285,000 AAA
Virgin Islands Territory GO, (Escrowed to Maturity withU.S.
Government
Securities), 8.00% due 3/1/98 313,144 431,119 Finance 5.6%
500,000 A- Foster City, California Public Financing
AuthorityRevenue,
Foster City Community Development PJ LN-A,5.20% due 9/1/00 483,750 General
Obligation 2.5% 200,000 Aa* California State GO, 7.00% due
3/1/04 215,250 Hospital 9.7% 100,000 A+ California Health
Facilities Finance AuthorityRevenue, La Palma Hospital, California
HealthFacilities Construction Loan Program,6.875% due 2/1/02 104,500
345,000 AAA City of Marysville Hospital Revenue Refunding Bonds (The
Fremont-Rideout Health Group),1993 Series A, AMBAC-Insured, 5.10% due
1/1/03 332,494 400,000 NR Valley Health Systems California COP
RefundingProject, 6.25% due 5/15/99 395,000 831,994 Housing: Multi-Family
17.0% 500,000 AAA Housing Authority of Riverside Multi-Family Revenue
Bonds, FNMA Pass-Through Program(El Dorado Pointe Apartments), 1993 Series
A,5.40% due 6/1/03 484,375Housing: Multi-Family 17.0% (continued)
$500,000 AAA San Luis Obispo Housing Authority Multi-Family Housing
Revenue, Parkwood ApartmentsProject, Series A, FNMA-Collateralized, 5.70%
due
8/1/08 $468,125 525,000 Aaa* City of Santa Rosa, California Mortgage
RevenueRefunding, Marlow Apartments Project, FHA-Insured,5.60% due
9/1/05 505,969 1,458,469 Housing: Single-Family 3.5% 300,000
Aa* California HFA Home Mortgage Series B-1,5.90% due
8/1/04 297,000 Industrial Development 6.2% 530,000 AA- Simi
Valley
Community Development Agency COP, Simi Valley Business Center
Remarket,6.05%
due 10/1/18 534,638 Public Facilities 11.0% 400,000 AA Berkeley
Revenue, Berkeley YMCA, LOC Banque Nationale De Paris, 4.80% mandatoryput
6/1/98 388,500 345,000 A* Mendocino County Public Facilities
AuthorityCorporation COP 1993, 5.50% due 8/15/03 325,162
250,000 A San Francisco City & County COP,San Francisco Permit
Center,
5.00% due 3/1/03 232,188 945,850 Tax Allocation 21.6%
500,000 A- Burbank Redevelopment Agency Tax Allocation,1993 Series A
(City Center RedevelopmentProject), 5.30% due 12/1/02 473,750 690,000
AAA Lynwood Redevelopment Agency TaxAllocation, Project Area,
Series
A, AMBAC-Insured,5.125% due 7/1/03 663,262 750,000 A- Paramount
Redevelopment Agency Tax Allocation Refunding, Redevelopment Project Area
No.
1, 5.80% due 8/1/03 717,188 1,854,200 Utility 3.7%
325,000 BBB- Trinity County, Public Utilities District CTF Partn-Elec
District Facilities, 5.60% due 4/1/00(a) 313,218 TOTAL INVESTMENTS100%
(Cost$8,843,981)(c) $8,580,363
Education 7.1% $2,000,000 AAA Adelanto, School District Series-B,
FGIC-Insured,6.70% due 9/1/18 $415,000 1,000,000 Baa* California
Educational Facilities Authority Revenue,Pooled College & University
Financing Series B,Refunding, 6.125% due 6/1/09 936,250 2,000,000
AAA California Public School District Financing
AuthorityConvertible
Capital Appreciation Bonds, PalmdaleSchool District, FSA-Insured, Series
1993B, SteppedCoupon zero coupon to 9/30/99 then 6.20% to maturity, due
10/1/23 1,310,000 1,000,000 A1* California State Public Works
Board
High TechnologyFacility Revenue, San Jose Facility Series-A,7.75% due
8/1/06 1,086,250 1,000,000 AAA Gilroy Unified School District,
COP
Refunding,FSA-Insured, 6.25% due 9/1/12 981,250 1,020,000
AAA Pomona Unified School District, Series B, FGIC-Insured,6.25%
due
8/1/14 1,005,975 1,185,000 AAA Rio Linda Unified School
District,
Sacramento County,1992 Government Obligation Bonds,AMBAC-Insured, 7.40% due
8/1/10 1,282,762 4,000,000 AAA San Dieguito Union High School
District COP, FSA-Insured, zero coupon due 4/1/23 2,815,000 2,500,000
Baa1* Yuba City Unified School District COP, Andors KarperosSchool
Construction Project, 6.70% due 2/1/13 2,350,000 12,182,487 Escrowed To
Maturity 4.5% 270,000 AAA Contra Costa County Home Mortgage,
GNMA-Collateralized, (Escrowed with U.S. GovernmentSecurities), 7.75% due
5/1/22(a) 309,487 6,000,000 AAA Pleasanton - Suisun City Home
Finance AuthorityHome Mortgage Revenue, MBIA-Insured (Escrowedwith U.S.
Government Securities), zero coupondue 10/1/16 1,350,000 2,140,000
AAA Riverside County Single Family Mortgage RevenueSeries-A, 8.30%
due
11/1/12(a) 2,541,250 1,500,000 AAA Sacramento County Single Family
Mortgage Revenue Issue A, 8.125% due 7/1/16 1,805,625 4,310,000
Aaa* San Marcos Public Facilities Authority Public
FacilitiesRevenue,
(Escrowed with U.S. Government Securities),zero coupon due
1/1/19 835,062Escrowed To Maturity 4.5% (continued) $700,000
AAA Santa Rosa Hospital Revenue, Santa Rosa MemorialHospital
Project,
10.30% due 3/1/11 (Escrowed with U.S. Government Securities to 3/1/11
maturity @ par) $921,375 7,762,799 Finance 3.6% 1,000,000
AAA Anaheim Public Financing Tax Allocation 1992,MBIA-Insured,
9.32%
due 12/28/18(f) 1,001,250 Association of Bay Area Governments: 765,000
A* Municipal Financing Pool, 8.05% due 9/1/10 822,375
1,000,000
A Finance Corp. California COP, ABAG XXVI-Series A,
6.25% due
6/1/11 941,250 500,000 A1* Peninsula Family YMCA, LOC Daiwa
Bank, 6.80% due 10/1/11 486,875 150,000 A- Concord Santa Cruz
South Gate COP, 7.625% due 6/1/11 150,000 750,000 AAA Public
Capital Improvements Financing Authority,BIG-Insured, 8.50% due
3/1/18 806,250 500,000 Baa* Special District Financing Authority,
COP, 8.50%due 7/1/18 546,250 1,405,000 A+ Contra Costa County,
COP,
MerrithewMemorial Hospital, 6.50% due 11/1/06 1,413,781 6,168,031
Government Facilities 3.2% State Public Works Board Lease Revenue:
2,500,000
A1* Franchise Tax Board, Series A, 6.25% due 9/1/11 2,403,125
2,000,000 A1* Various California State University Projects,
Series A, 6.70% due 10/1/17 1,997,500 1,300,000 BBB Murrieta,
Financing Authority Police & CivicCenter Lease Revenue, Series A, 6.375%
due
8/1/18 1,176,500 5,577,125 Government Obligation 1.0% 1,500,000
AAA Santa Margarita/Dana Point Authority Revenue B,MBIA-Insured,
7.25%
due 8/1/14 1,668,750 Hospital 14.7% 1,500,000 A+ Association of
Bay Area Governments Finance AuthorityNonprofit Corps, California-Insured
COP, RehabilitationMental Health Services Inc. Project, 6.55% due
6/1/22 1,470,000 1,500,000 A Bakersfield Hospital Revenue,
Bakersfield MemorialHospital, Series A, 6.50% due 1/1/22 1,423,125
Hospital 14.7% (continued) California Health Facilities Financing
Authority
Revenue: $1,450,000 A+ St. Elizabeth Hospital Project, 6.20%
due
11/15/09 $1,402,875 1,985,000 Aa1* County Program, Series B,
LOC Swiss Bank Corporation, 7.20% due 1/1/12 2,027,181 2,015,000
Aa* Hospital Revenue Bonds (Daughters of Charity National
Health System), Series 1994A, 5.65% due 10/1/14 1,795,869 1,250,000
A+ South Coast Medical Center, CHFCLI-Insured, 7.25% due
7/1/15 1,262,500 1,150,000 A+ Episcopal Homes Foundation
Project, CHFCLI- Insured, 7.70% due 7/1/18 1,224,750 1,000,000
A Pacific Presbyterian Medical Center Series 1989A,
6.85% due
6/1/19 921,250 465,000 Aaa* Community Provider Pooled Loan
Program Series 1990A, LOC Swiss Bank Corporation, 7.35% due
6/1/20 484,762 1,000,000 AA- Fresno Health Facilities Revenue
(Holy
Cross System-St. Agnes), 6.625% due 6/1/21 1,002,500 250,000
BB+ Glendale Hospital Revenue Refunding (GlendaleMemorial
Hospital),
9.00% due 11/1/17 250,313 1,200,000 A+ California Statewide
Community DevelopmentCorporation, COP (Villaview Hospital), CHFCLI-Insured,
7.00% due 9/1/09 1,227,000 2,000,000 A+ County of Riverside Asset
Leasing Corp. LeaseholdRevenue Bonds 1993A , Riverside Hospital
Project,6.375% due 6/1/09 1,935,000 1,000,000 A+ Inglewood
Insured
Hospital Revenue Bonds (DanielFreeman Hospital Inc.), Series 1991,
CHFCLI-Insured,6.75% due 5/1/13 1,005,000 1,000,000 A Rancho
Mirage
Joint Powers FinanceAuthority COP Eisenhower Memorial Hospital, 7.00%due
3/1/22 1,001,250 1,000,000 AA San Bernardino Health Care
Systems
Revenue (Sisters of Charity of the Incarnate Word), Series 1991A, 7.00% due
7/1/21 1,046,250 2,000,000 A San Bernardino Capital Facilities
Project, COP Series B,6.875% due 8/1/24 2,180,000 2,750,000 A* San
Joaquin County COP, General Hospital Project 1993,6.25% due
9/1/13 2,591,875 910,000 A Torrance Hospital Revenue (Little
Co. of
Mary Hospital), 6.875% due 7/1/15 903,175 25,154,675
Housing:
Multi-Family 4.7% California Housing Finance Agency Revenue: $530,000
AAA Multi-Family Housing Revenue, MBIA-Insured, 8.75% due
8/1/10(d) $559,813 1,750,000 A1* Multi-Unit Rental Housing
Series A, 6.625% due 2/1/24 1,739,063 1,050,000 AAA Fontana
Redevelopment Agency Multi-FamilyRevenue Refunding, FHA & FNMA-Insured,
7.15%due 5/1/28 1,069,687 2,400,000 Aaa* San Francisco City &
County Redevelopment AgencyMulti-Family Revenue Refunding South Beach
Project,GNMA-Collateralized, 5.70% due 3/1/29 2,133,000 1,500,000
A2* San Jose Multi-Family Housing Senior Revenue(Timberwood
Apartments), Series A, LOC Wells FargoBank, 7.50% due 2/1/20 1,524,375
1,100,000 A+ California Statewide Community Development Corp.COP
Solheim Lutheran Home, 6.50% due 11/1/17 1,049,125 8,075,063 Housing:
Single-Family 3.3% California Housing Finance Agency Home Mortgage
Revenue:
70,000 Aa* 9.125% due 12/1/07(d) 72,275 615,000
Aa* 8.25% due 8/1/08(a) 640,369 445,000
Aa* zero coupon due 8/1/15 56,737 770,000
Aa* 8.30% due 8/1/19(a) 799,837 525,000
Aa* Series E, 8.35%, due 8/1/19(a) 547,969 240,000
Aa* 8.60% due 8/1/19(a) 251,400 750,000
AAA California Housing Finance Agency RevenueHousing Series C,
MBIA-Insured, 7.00% due 8/1/23(a) 760,313 865,000 AAA Los Angeles
Single-Family Home Mortgage Revenue, GNMA-Collateralized Mortgage Backed
SecuritiesProgram Issue A, 7.55% due 12/1/23(a) 886,625 295,000
Baa* Riverside County Housing Authority, 7.90% due 8/1/18 307,906
115,000 AAA San Francisco City & County Single-Family MortgageRevenue
GNMA & FNMA Mortgage Backed SecuritiesProgram Series 1990, 7.45% due
1/1/24(a) 119,744 40,000 A- Sonoma County Home Mortgage Revenue,
9.125%due 6/1/15(d) 40,900Housing: Single-Family 3.3% (continued)
Southern California Home Financing Authority Single-Family Mortgage Revenue
GNMA & FNMA MortgageBacked Securities Program: $195,000
AAA 1990 Issue B, 7.75% due 3/1/24(a) $ 206,213
1,000,000
AAA 6.90% due 10/1/24(a) 1,030,000 5,720,288
Industrial
Development 2.7% 1,000,000 Aa3* Los Angeles County Industrial
Development Authority,IDA Revenue (Altshule Properties Project) LOCSecurity
Pacific, 7.20% due 10/1/11 1,011,250 1,100,000 Aa3* San Diego IDA
Revenue (San Diego Gas & Electric Co.),7.625% due 7/1/21 1,163,250
2,470,000 AA- Simi Valley California Community Development AgencyCOP,
Simi Valley Business Center Remarket,6.05% due 10/1/18 2,491,613
4,666,113
Miscellaneous 3.8% 1,000,000 A1* COP County of Los Angeles, 1991
Master RefundingProject-RIBS, 9.646% due 5/1/15(f) 991,250 1,000,000
A1* COP County of Los Angeles, For Multiple CapitalFacilities
Projects
III SYCC, 7.77% due 11/1/11 1,018,750 Orange County Community Facilities
District Special Tax: 1,000,000 A- #87-5A Rancho Santa
Margarita,
7.80% due 8/15/13 1,115,000 1,500,000 AAA Rancho Santa
Margarita, CGIC-Insured, 7.125% due 8/15/17 1,580,625 1,000,000
A* Orange County (Mission Viejo) Series A 1990, SpecialTax Bonds
Community Facilities District (Mello Roos),7.80% due 8/15/15 1,145,000
700,000 AAA Pleasant Hill Redevelopment Agency Pleasant HillCommons
Redevelopment Project Tax Allocation BondSeries 1991 (County of Contra
Costa)
CGIC-Insured,6.90% due 7/1/21 728,875 6,579,500 Pollution Control 4.7%
California Pollution Control Financing Authority: 2,000,000
A1* PCR (Pacific Gas & Electric Co.), 6.35% due
6/1/09(a) 1,997,500 800,000 AAA PCR (Pacific Gas & Electric
Co.), 8.20% due 12/1/18 869,000 500,000 AA Resource Recovery
Revenue Bonds (Waste Management Inc.), 1991 Corporate Series A,
7.15%
due 2/1/11(a) 540,625Pollution Control 4.7% (continued) $1,500,000
Aa3* San Diego Gas & Electric Co. Series A, 6.80% due
6/1/15(a) $1,535,625 1,000,000 AAA Southern California Edison
Series-A, 6.90% due 9/1/06(a) 1,060,000 2,125,000
AAA Southern California Edison Series-B, 6.40% due
12/1/24(a) 2,071,875 8,074,625 Power 2.0% 1,000,000 BBB- Central
Valley Financing Authority Cogeneration ProjectRevenue Carson Ice General
Project, 6.00% due 7/1/09 925,000 1,110,000 A* Northern
California
Power Agency (Geothermal Project),5.00% due 7/1/09 950,438 1,000,000
AAA Redding COP Electric System Revenue, 9.106%due 7/1/22(f)
Southern
California Public Power Authority: 985,000 600,000 A Multiple
Project Revenue 1989 Series, 5.50% due 7/1/20 513,000 3,373,438
Pre-Refunded(e) 20.3% 705,000 AAA Brea Public Finance Authority Tax
Allocation, MBIA-Insured, 7.00% due 8/1/15 (Escrowed with U.S. Government
Securities to 8/1/01 Call @ 102) 785,194 1,500,000 AAA
California
COP Lease Finance Authority, CSAC-NevadaCounty, 7.60% due 10/1/19 (Escrowed
with U.S.Government Securities to 10/1/98 Call @ 101) 1,638,750 1,245,000
AAA Concord Redevelopment Agency Tax Allocation Bonds(Central
Concord
Redevelopment Project) BIG-Insured,8.00% due 7/1/18 (Escrowed with U.S.
GovernmentSecurities to 7/1/98 Call @ 102) 1,394,400 1,500,000
AAA Desert Hospital Corporation Project, COP Series 1990,8.10% due
7/1/20 (Escrowed with U.S. GovernmentSecurities to 7/1/00 Call @
102) 1,736,250 320,000 AAA Dublin COP, Public Facilities Project
No. 1, 9.25%due 2/1/10 (Escrowed with U.S. Government Securities to 2/1/96
Call @ par) 340,000 750,000 AAA El Camino Hospital Revenue COP,
8.50% due 9/1/17(Escrowed with U.S. Government Securities to 9/1/97Call @
102) 829,687Pre-Refunded(e) 20.3% (continued) $550,000
AAA Grossmont Hospital District, MBIA-Insured, 8.00%due 11/15/17
(Escrowed with U.S. Government Securities to 11/15/97 Call @ 102) $609,812
1,200,000 AAA Huntington Beach COP, Civic Center Project, 7.90%due
8/1/16 (Escrowed with U.S. Government Securities to 8/1/95 Call @
102) 1,260,000 1,500,000 AAA Kings River Conservation District,
Pine Flat PowerRevenue Series C, 7.90% due 1/1/20 (Escrowed with U.S.
Government Securities to 1/1/97 Call @ 102)(d) 1,631,250 640,000
BBB Loma Linda Water Revenue, 9.25% due 12/1/10 687,200 500,000
AAA Los Angeles County Transportation Commission SalesTax Revenue
Series A, 8.00% due 7/1/18 (Escrowedwith U.S. Government Securities to
7/1/98
Call @ 102) 560,000 450,000 AAA Los Angeles Convention and
Exhibition Center AuthorityCOP, 9.00% due 12/1/20 (Escrowed with
U.S.Government Securities to 12/1/05 Call @ par) 572,063 Los Angeles
Department of Water and Power: 1,000,000 AAA Electric Revenue,
7.90% due 5/1/28 (Escrowed with U.S. Government Securities to 5/1/98
Call
@ 102) 1,112,500 1,950,000 AAA Electric Revenue, 7.10% due
1/15/31 (Escrowed with U.S. Government Securities to 1/15/01
Call @
102) 2,154,750 1,550,000 AAA Water Works Revenue, 7.20% due
2/15/19 (Escrowed with U.S. Government Securities to 2/15/99 Call @
102) 1,703,063 1,200,000 AAA Los Angeles Waste Water System
Revenue, 8.125%due 11/1/17 (Escrowed with U.S. Government Securities to
11/1/97 Call @ 102) 1,333,500 425,000 AAA Norwalk Redevelopment
Agency (Norwalk RedevelopmentArea 1), 9.10% due 12/1/15 (Escrowed with U.S.
Government Securities to 12/1/95 Call @ 102) 452,094 500,000
AAA Oceanside County COP, AMBAC-Insured, 7.30%due 8/1/21 (Escrowed
with U.S. Government Securitiesto 8/1/02 Call @ 102) 568,125 2,385,000
AAA Pasadena COP, (Capital Improvements Project), 6.75%due 8/1/15
(Escrowed with U.S. Government Securitiesto 8/1/00 Call @ 102) 2,602,631
1,000,000 AAA Pittsburg Public Financing Authority Waste WaterRevenue,
FGIC-Insured, 6.80% due 6/1/22 1,100,000Pre-Refunded(e) 20.3%
(continued)
$400,000 Baa* Pleasanton Public Facilities Corporation, COP forCapital
Projects I (Sycamore Water Reservoir) and II(City Office Building), 8.75%
due
10/1/08 $450,000 1,000,000 AAA Rancho Water District Finance
Authority Revenue Bonds, Series 1991, RITES, AMBAC-Insured, 9.25% due
8/17/21(Escrowed with U.S. Government Securities to 8/17/01 Call @
104)(f) 1,155,000 2,500,000 AAA Riverside County Asset Leasing
Corp. Leasehold Revenue (Riverside County Hospital Project) 7.40% due
6/1/14
(Escrowed with U.S. Government Securities to 6/1/99 Call @ 102) 2,775,000
1,500,000 AAA Sacramento COP Community Center and ExecutiveAirport
Project, 6.50% due 11/1/09 (Escrowed withU.S. Government Securities to
11/1/98 Call @ 100) 1,582,500 1,000,000 AAA Sacramento Municipal
Utilities District Electric Revenue,Series P, 8.625% due 7/1/10 (Escrowed
with U.S.Government Securities to 7/1/95 Call @ 102) 1,052,880 1,000,000
AAA San Bernardino County, COP (West Valley DetentionCenter
Project),
7.70% due 11/1/18 (Escrowed withU.S. Government Securities to 11/1/98 Call
@
102) 1,116,250 250,000 AAA San Diego Redevelopment Agency
(MarinaRedevelopment Project), 8.75% due 12/1/08 (Escrowed with U.S.
Government Securities to 12/1/97 Call @ 101.5) 281,875 500,000
AAA Santa Clara County, 1986 COP Capital Project I (Courthouse and
Detention Center), 8.00% due 10/1/16 (Escrowed with U.S. Government
Securities to 10/1/96 Call @ 102) 542,500 1,000,000 AAA State
Public Works Board Lease Revenue, Department ofCorrections (State
Prison-Madera County), 7.00% due 9/1/09 (Escrowed with U.S. Government
Securitiesto 9/1/00 Call @ 102) 1,107,500 500,000 AAA Upland
COP,
(Police Building Construction Project),8.20% due 8/1/16 (Escrowed with U.S.
GovernmentSecurities to 8/1/98 Call @ 102) 541,250 1,000,000
AAA University of California Regents Revenue Refunding,Multiple
Purpose, Series A, 6.875% due 9/1/16(Escrowed with U.S. Government
Securities
to 9/1/02Call @ 102) 1,107,500 34,783,524 Public Facilities 7.2%
$1,000,000 AAA Anaheim COP, Convention Center RITES,
MBIA-Insured,9.32% due 7/16/23(f) $925,000 1,025,000 Baa* Azusa COP
Refunding Capital Improvement RefiningProject, 6.625% due 8/1/13 964,781
2,000,000 A- Burbank Redevelopment Agency Tax Allocation Series A,
6.00% due 12/1/23 1,762,500 1,000,000 AAA California Fairs
Financing Authority California-FairsRevenue Bonds Series 1991, CGIC-
Insured,
6.50%due 7/1/11 1,013,750 1,500,000 Baa* Corona Public Finance
Authority 1993 PublicImprovement Refunding Revenue Bonds, 6.00% due
7/1/14 1,327,500 2,000,000 A* Mendocino County Public
Facilities
AuthorityCorporation COP, Series 1993, 6.00% due 8/15/23 1,767,500
500,000
AAA San Diego County, COP 1991 (Mts Tower RefundingProject) San
Diego
Building Authority RITES, MBIA-Insured, 8.896% due 11/18/19(f) 484,375
2,875,000 AAA Santa Anna Finance Authority LeaseRevenue Police
Administration and Holding Facility,MBIA-Insured, 6.25% due
7/1/24 2,817,500 1,500,000 NR Valley Health System COP
Refunding
Project, 6.875%due 5/15/23 1,338,750 12,401,656 Short-Term 0.2% 400,000
P-1* California Pollution Control Revenue - Burney ForestProds B,
VRDD, LOC National Westminster,3.55% due 9/1/20(a)(b) 400,000 Solid Waste
2.0% 1,300,000 A+ Orange County COP, Orange County Public Facilities
Corp. (Solid Waste Management), 7.875% due 12/1/07 1,417,000 375,000
AAA Santa Cruz COP, Public Improvement Financing Corp., 8.30% due
12/1/07 383,906 750,000 Baa* Southeast Resource Recovery Facilities
Authority, LeaseRevenue, 9.00% due 12/1/08 789,375 1,000,000
A- West Nevada County, COP, Solid Waste, 7.50% due 6/1/21
902,500
3,492,781 Tax Allocation 3.7% 1,000,000 Baa* Azusa Redevelopment
Agency Tax Allocation RefundingMerged Project Area, Series A, 6.75% due
8/1/23 950,000Tax Allocation 3.7% (continued) $295,000 AAA
Brea
Public Finance Authority Tax Allocation, MBIA-Insured, 7.00% due
8/1/15 $310,119 1,000,000 AAA Carson Redevelopment Agency
Redevelopment Project Area No. 2, 6.00% due 10/1/13 901,250 30,000
AAA Concord Redevelopment Agency Tax Allocation Bonds(Central
Concord
Redevelopment Project), BIG-Insured, 8.00% due 7/1/18 33,075 1,000,000
AAA La Quinta Redevelopment Agency TaxAllocation
RefundingRedevelopment Project AreaNo. 1, MBIA-Insured, 7.30% due
9/1/12 1,115,000 1,000,000 Baa* Pomona Public Finance Authority
Revenue RefundingSouthwest Pomona Redevelopment, 5.50%due 2/1/08 887,500
2,000,000 AAA South Orange Public Finance AuthoritySpecial Tax Revenue
SR Lien Series-A, MBIA Insured, 7.00% due 9/1/10 2,177,500 6,374,444
Transportation 5.7% 1,000,000 AAA Burbank-Glendale-Pasadena Airport
Authority, Airport Revenue Refunding, AMBAC-Insured, 6.40% due
6/1/10 1,011,250 2,000,000 Aa* Long Beach Harbor, 7.25% due
5/15/19(a) 2,135,000 2,500,000 AAA Sacramento County Airport System
Revenue, Series A,FGIC-Insured, 6.00% due 7/1/12(a) 2,387,500 3,000,000
AAA San Francisco City & County Arpts SecondSeries Issue 5,
FGIC-Insured, 6.50% due 5/1/19 2,981,250 1,250,000 A* Santa
Barbara
COP Harbor Refunding Project,6.75% due 10/1/27 1,246,875 9,761,875
Utilities 1.0% 1,760,000 BBB- Trinity County Public Utilities
District COP Electric District Facilities, 6.75% due 4/1/23(a) 1,691,800
Water & Sewer 4.6% 1,200,000 A1* Bakersfield COP (Waste Water
Treatment Plant 3 Projects), 8.00% due 1/1/10 1,302,000 1,000,000
AAA Eastern Municipal Water District, Water & SewerRevenue COP,
FGIC-Insured, 6.75% due 7/1/12 1,057,500 Water & Sewer
4.6% (continued) Irvine Ranch Water District Joint Powers Agency,Local
Agency Pool Revenue Bonds: $1,750,000 A 7.875% due
2/15/23(d) $1,852,812 1,000,000 A 8.25% due
8/15/23(d) 1,078,750 1,000,000 AAA San Buenaventura COP (1990 Water
EnterpriseFinancing) AMBAC-Insured, 7.50% due 10/1/20 1,135,000 1,300,000
AAA Yolo County Flood Control & Water ConservationDistrict COP,
FGIC-Insured, 7.125% due 7/15/15 1,446,250 7,872,312 TOTAL
INVESTMENT100%
(Cost$168,714,194)(c) $171,781,286
(a) Income from these issues is considered a preference item for purposes
of calculating the alternative minimum tax. (b) Variable rate obligations
payable at par on demand at any time on no more than seven days notice.
(c) The cost for Federal income tax purposes is substantially the same.
(d) Securities segregated by Custodian for open purchase commitment.
(e) Pre-refunded bonds escrowed by U.S. Government Securities are
considered by manager to be triple-A rated even if issuer has not applied
for
new ratings. (f) Residual interest bonds-coupon varies inversely with
level of short-term tax-exempt interest rates. (g) The Fund will receive
the indicated percentage of par on the specified date. Equivalent rating as
determined by manager non-rated securities.
**Variable rate obligations payable at par on demand on the date indicated.
See pages 25 and 26 for definitions of ratings and certain security
descriptions.
Smith Barney Muni Funds
CALIFORNIA money market PORTFOLIO FACE
AMOUNT RATING SECURITY VALUE
Historical Performance September 30, 1994
Hypothetical illustration of $10,000 invested in Class A shares at
inception
on April 3, 1987, assuming deduction of the maximum 4.00% sales charge at
the
time of investment and reinvestment of dividends (after deduction of
applicable sales charges) and capital gains (at net asset value) through
September, 1994. The Index is unmanaged and is not subject to the same
management and trading expenses of a mutual fund. The performance of the
Portfolios other classes may be greater or less than the Class A shares
performance indicated on this chart, depending on whether greater or lesser
sales charges and fees were incurred by shareholders investing in the other
classes.
All figures represent past performance and are not a guarantee of future
results. Investment returns and principal value will fluctuate, and
redemption values may be more or less than the original cost. No adjustment
has been made for shareholder tax liability on dividends or capital gains.
(1) Assumes reinvestment of all dividends at maximum offering price and
capital gain distributions at net asset value and does not reflect
deduction
of the applicable sales charge with respect to Class A shares or the
applicable contingent deferred sales charges (CDSC) with respect to Class B
and Class C shares.
(2) Assumes reinvestment of all dividends and capital gain distributions
at net asset value. In addition, the deduction of the maximum initial sales
charge of 4.00% with respect to Class A shares and a deduction of the CDSC
of
1.00% with respect to Class B shares and 1.50% with respect to Class C
shares
has been factored into these calculations.
Smith Barney Muni Funds California Portfolio
Growth of $10,000 Invested in Class A Shares of the California Portfolio
vs.
Lehman Long Bond Index(unaudited) April 1987 September 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA money market PORTFOLIO FACE
AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA money market PORTFOLIO FACE
AMOUNT RATING SECURITY VALUE
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA limited term PORTFOLIO FACE
AMOUNT RATING SECURITY VALUE
Schedules of Investments (unaudited) (continued) September 30, 1994
Smith Barney Muni Funds
CALIFORNIA limited term PORTFOLIO FACE
AMOUNT RATING SECURITY VALUE
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Schedules of Investments (unaudited) (continued) September 30, 1994
Smith Barney Muni Funds
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Schedules of Investments (unaudited) (continued) September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Smith Barney Muni Funds
Schedules of Investments (unaudited) (continued) September 30, 1994
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Schedule of Investments September 30, 1994
All ratings are by Standard & Poors Corporation, except those identified by
an asterisk (*) are rated by Moodys Investors Service. The definitions of
the
applicable rating symbols are set forth below: Standard & Poors Rating
from
AA to BB may be modified by the addition of a plus (+) or minus () sign to
show relative standings within the major rating categories. AAA
Debt
rated AAA has the highest rating assigned by Standard & Poors. Capacity to
pay interest and repay principal is extremely strong. AA Debt
rated
AA has a very strong capacity to pay interest and repay principal and
differs
from the highest rated issue only in a small degree. ADebt rated A has a
strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB
Debt
rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits 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. BB Debt rated BB has
less
near-term vulnerability to default than other speculative issues. However,
it
faces major ongoing uncertainties or exposure to adverse business,
financial,
or economic conditions which could lead to inadequate capacity to meet
timely
interest and principal payments. Moodys Numerical modifiers 1, 2
and
3 may be applied to each generic rating from Aa to Baa, where 1 is the
highest and 3 the lowest ranking within its generic category. Aaa
Bonds that are 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 such issues. Aa
Bonds
that are rated Aa are judged to be of high quality by all standards.
Together
with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of
protection
may not be as large in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which
make
the long-term risks appear somewhat larger than in Aaa securities. ABonds
that are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds that are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well. NR Indicates that the bond is not rated by Standard & Poors
Corporation or Moodys Investors Service. SP-1 Standard & Poors
highest
rate rating indicating very strong or strong capacity to pay principal and
interest; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign. A-1 Standard &
Poors
highest commercial paper and variable-rate demand obligation (VRDO) rating
indicating that the degree of safety regarding timely payment is either
overwhelming or very strong; those issues determined to possess
overwhelming
safety characteristics are denoted with a plus (+) sign. VMIG 1
Moodys
highest rating for issues having a demand feature (VRDO) P-1
Moodys
highest rating for commercial paper and for VRDO prior to the advent of the
VMIG 1 rating. MIG 1 Moodys highest rating for short-term
municipal
obligations
ABAG Association of Bay Area Governors
AIG American International Guaranty AMBAC AMBAC Indemnity
Corporation BAN Bond Anticipation Notes BIG Bond Investors
Guaranty CGIC Capital Guaranty Insurance Company
CHFCLI California Health Facility Construction Loan Insurance
COP Certificate of Participation EDA Economic Development
Authority ETM Escrowed To Maturity FAIRS Floating
Adjustable
Interest Rate Securities FGIC Financial Guaranty Insurance Company
FHA Federal Housing Administration FHLMC Federal Home
Loan
Mortgage Corporation FAIRS Floating Adjustable Interest Rate
Securities FNMA Federal National Mortgage Association
FRTC Floating Rate Trust Certificates FSA Federal Savings
Association GIC Guaranteed Investment Contract GNMA
Government
National Mortgage Association GO General Obligation HDC
Housing
Development Corporation HFA Housing Finance Authority
IDA Industrial Development Authority IDB Industrial
Development
Board IDR Industrial Development Revenue INFLOS Inverse
Floaters LOC Letter of Credit MBIA Municipal Bond
Investors
Assurance Corporation MVRICS Municipal Variable Rate Inverse Coupon
Security PCR Pollution Control Revenue RAN Revenue
Anticipation
Notes RIBS Residual Interest Bonds RITES Residual Interest
Tax-Exempt Securities TAN Tax Anticipation Notes TECP Tax
Exempt Commercial Paper TOB Tender Option Bonds TRAN Tax
and
Revenue Anticipation Notes SYCC Structured Yield Curve
Certificate
VA Veterans Administration VRWE Variable Rate Wednesday
Demand
Note
Smith Barney Muni Funds California Money Market, California Limited Term
and
California Portfolios
Bond Ratings September 30, 1994
See Notes to Financial Statements.
Schedules of Investments (unaudited) (continued) September 30, 1994
Smith Barney Muni Funds
CALIFORNIA PORTFOLIO FACE AMOUNT RATING SECURITY VALUE
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Security Descriptions (continued) March 31, 1994
Statements of Assets and Liabilities (unaudited) September 30, 1994
California California Money Market Limited Term California
Portfolio Portfolio Portfolio ASSETS: Investments, at value
(Cost$191,591,617 $8,843,981 and
$168,714,194) $ 191,591,617 $ 8,580,363 $ 171,781,286
Cash
134,509 8,288 Receivable for
investment
securities sold 10,000 30,000 Receivable for
Fund
shares sold 367,998 Interest
receivable 925,250 131,577 3,057,213 Prepaid
expenses 560 Other receivables
10,992
Total Assets 192,516,867 8,867,441 175,245,345
LIABILITIES: Payable for Fund shares
reacquired 81,969 475,564 Management fees
payable 2,633 787 2,152 Distribution costs
payable 5,129 1,075 8,547 Dividends
payable 210,225 Accrued expenses and other
liabilities 123,486 6,287 37,520 Total
Liabilities 341,473 90,118 523,783 Total Net
Assets $ 192,175,394 $ 8,777,323 $ 174,721,562 NET
ASSETS:
Par value of capital shares $ 191,462 $ 1,373 $ 14,460
Capital paid in excess of par
value 191,995,376 9,007,241 171,664,553 Undistributed
net investment income 49,094 256,140
Accumulated net
realized loss on security
transactions (11,444) (16,766) (280,683) Net
unrealized
appreciation (depreciation) of
investments (263,619) 3,067,092 Total Net
Assets $ 192,175,394 $ 8,777,323 $ 174,721,562 Shares
Outstanding: Class
A 192,186,838 978,660 13,308,201
Class
B 315,481 628,119 Class
C 78,958 523,855 Net Asset
Value: Class A (and
redemption price) $1.00 $6.39 $12.08 Class
B* $6.39 $12.07 Class
C* $6.39 $12.10 Class A Maximum Public
Offering
Price Per Share ($6.39 plus 2.04% and $12.08 plus 4.17% of net asset
value per share, respectively) $6.52 $12.58
*Redemption
price is NAV for Class B and Class C shares reduced by 1.00% or 1.50%,
respectively,if shares are redeemed within 18 months of purchase.
Smith Barney Muni Funds California Money Market, California Limited Term
and
California Portfolios
Portfolio of Investments September 30, 1994
Short-Term Security Ratings September 30, 1994
See Notes to Financial Statements.
Security Descriptions
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
See Notes to Financial Statements.
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
For the six months ended September 30, 1994 (unaudited) and the year ended
March 31, 1994
California California Money Market Limited
Term California Portfolio Portfolio Portfolio
bbbbbb bbbbb bbbbb Sept. 30 March 31 Sept. 30 March
31(a) Sept. 30 March 31 OPERATIONS: Net investment
income $2,075,539 $3,268,439 $242,884 $457,146
$5,483,508 $10,731,905
Net realized gain (loss) on security
transactions (2,020) 4,258 (28,110) 11,343
(209,436) 483,893
Increase in net unrealized depreciation
of
investments (6,851) (256,768) (2,499,909) (7,814,856)
Increase In Net Assets From
Operations 2,073,519 3,272,697 207,923 211,721 2,774,163
3,400,942
DISTRIBUTIONS TO SHAREHOLDERS FROM (Note 3): Net investment
income (2,075,539) (3,268,439) (240,940) (409,996)
(5,461,471) (10,789,706)
Net realized gain from security
transactions (545,063)
Decrease In Net
Assets From Distributions To
Shareholders (2,075,539) (3,268,439) (240,940) (409,996)
(5,461,471) (11,334,769)
FUND SHARE TRANSACTIONS: Net proceeds from sales of
shares 483,006,791 1,043,269,466 685,799 15,494,663
15,765,801 53,466,294
Net value of shares issued for reinvestment of
dividends
1,908,577 3,127,064 160,978 283,108 1,864,232 4,422,622
Cost of shares reacquired
(482,520,990) (1,016,298,261) (2,911,451) (4,704,482)
(16,939,026) (38,954,545)
Increase (Decrease) In Net Assets From Fund Share
Transactions 2,394,378 30,098,269 (2,064,674)
11,073,289 691,007 18,934,371
Increase (Decrease) In Net
Assets 2,392,358 30,102,527 (2,097,691) 10,875,014 (1,996,301)
11,000,544
NET ASSETS Beginning of
period 189,783,036 159,680,509 10,875,014 176,717,863
165,717,319
End of
period* $192,175,394 $189,783,036 $8,777,323 $10,875,014
$174,721,562 $176,717,863
*Includes undistributed net investment income
of $ $ $49,094 $47,150 $256,142 $234,105 (a)For the
period
from April 27, 1993 (commencement of operations) to March 31, 1994.
Statements of Changes in Net Assets
Smith Barney Muni Funds
Statements of Operations (unaudited)
For the six months ended September 30, 1994 California California
Money
Market Limited Term California Portfolio Portfolio Portfolio
INVESTMENT INCOME:
Interest $ 2,677,795 $ 263,370 $ 5,977,077
EXPENSES: Management fees (Note
4) 476,603 21,663 400,826 Distribution costs
(Note
4) 95,321 4,099 29,614 Shareholder servicing
agent
fees 13,029 900 14,040 Audit and legal
fees 4,523 6,000 4,463 Registration
fees 4,036 600 6,017 Shareholder
communications 4,011 1,000 13,037 Custodian
fees 700 9,527 Trustees
fees 2,489 3,200 3,009 Pricing
service 1,800 11,533
Other 2,244 1,400 1,503 Total
Expenses 602,256 41,362 493,569 Less:
Management Fee
Waiver 20,876 Expenses Net of Management Fee
Waiver 602,256 20,486 493,569 Net
Investment
Income 2,075,539 242,884 5,483,508 REALIZED
AND
UNREALIZED LOSS ON INVESTMENTS: Realized Loss From Security Transactions
(excluding short-term securities*): Proceeds from
sales 9,599,270 926,763 29,307,326 Cost of
securities
sold 9,601,290 954,873 29,516,762 Net Realized
Loss (2,020) (28,110) (209,436) Change in Net
Unrealized
Appreciation/ (Depreciation) of Investments: Beginning of
period (256,768) 5,567,001 End of
period (263,619) 3,067,092 Increase in Net
Unrealized
Depreciation (6,851) (2,499,909) Net Gain
(Loss) On
Investments (2,020) (34,961) (2,709,345)
Increase In
Net Assets Resulting From
Operations $2,073,519 $ 207,923 $ 2,774,163 *Represents
only short-term securities for the California Money Market Portfolio.
Portfolio of Investments September 30, 1993
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Notes to Financial Statements (unaudited) (continued)
Smith Barney Muni Funds
Notes to Financial Statements (unaudited)
1. Significant Accounting Policies
The California Money Market, California Limited Term and California
Portfolios (Portfolios) are separate investment portfolios of the Smith
Barney Muni Funds (Fund). The Fund, a Massachusetts business trust, is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, open-end management investment company and consists of
these
Portfolios and ten other separate investment portfolios: Florida, Georgia,
New Jersey, New York, National, Ohio, Pennsylvania, Limited Term, Florida
Limited Term and New York Money Market Portfolios. The financial statements
and financial highlights for the other portfolios are presented in separate
annual reports. The significant accounting policies consistently followed
by
the Portfolios are: (a) security transactions are accounted for on the
trade
date; (b) securities are valued at bid prices provided by an independent
pricing service that are based on transactions in municipal obligations,
quotations from municipal bond dealers, market transactions in comparable
securities and various relationships between securities; short-term
securities maturing within 60 days are valued at cost plus (minus) accreted
discount (amortized premium), if any, which approximates value; (c) gains
or
losses on the sale of securities are calculated by using the specific
identification method; (d) interest income, adjusted for amortization of
premiums and accretion of market and original issue discounts, is recorded
on
the accrual basis; (e) direct expenses are charged to each portfolio and
each
class; management fees and general fund expenses are allocated on the basis
of relative net assets; and (f) the Fund intends to comply with the
requirements of the Internal Revenue Code pertaining to regulated
investment
companies and to make the required distributions to shareholders;
therefore,
no provision for Federal income taxes has been made.
2. Portfolio Concentration
Since each Portfolio invests primarily in obligations of issuers within
California, it is subject to possible concentration risks associated with
economic, political, or legal developments or industrial or regional
matters
specifically affecting California.
3. Exempt-Interest Dividends and Other Distributions
California Money Market Portfolio declares and records a dividend of
substantially all its net investment income on each business day. Such
dividends are paid or reinvested monthly in fund shares on the payable
date.
Furthermore, all Portfolios intend to satisfy conditions that will enable
interest from municipal securities, which is exempt from Federal income tax
and from designated state income taxes, to retain such tax-exempt status
when
distributed to the shareholders of the Portfolio.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually. At March 31, 1994 the California Money
Market and California Portfolios had net capital loss carryovers of $9,425
and $71,246, respectively, available to offset future capital gains. To the
extent that this carryover loss is used to offset capital gains it is
probable that any gains so offset will not be distributed. The amount and
expiration of the carryovers are indicated below. Expiration occurs on
March
31 of the year indicated. 1999 2001 2002 California Money Market
Portfolio $7,369 $2,056 California Portfolio $71,246
4. Management Agreements and Transactions with Affiliated Persons
Mutual Management Corp. (MMC), a subsidiary of Smith Barney Holdings Inc.
(SBH) acts as investment manager to the Fund. As compensation for its
services, the California Money Market, California Limited Term and
California
Portfolios pay MMC a daily management fee calculated at the annual rate of
0.50%, 0.45% and 0.45%, respectively, of their average daily net assets.
MMC
waived $20,876 of its management fees for California Limited Term for the
six
months ended September 30, 1994.
Smith Barney Inc. (SB), another subsidiary of Smith Barney Holdings Inc.,
acts as Distributor of Fund shares. SB advised the Fund that it received
sales charges of approximately $176,460 (paid by purchasers of California
Limited Term and California Class A shares) for the six months ended
September 30, 1994. A contingent deferred sales charge of 1.00% and 1.50%
is
imposed on Class B and Class C shares, respectively, and remitted to SB if
redemptions occur within 18 months from the date such investment was made.
For the six months ended September 30, 1994, $4,717 was paid with respect
to
such redemptions. All officers and one Trustee of the Fund are employees of
Smith Barney Inc. Pursuant to Distribution Plans, the California and
California Limited Term Portfolios make payments to SB for distribution
related services on Class B shares at an annual rate of 0.70% and 0.35% of
the average daily net assets, respectively, and on Class C shares at an
annual rate of 0.15% of the average daily net assets. The California Money
Market Portfolio makes payments to SB for distribution related services at
an
annual rate of 0.10% of average daily net assets.
5. Investments
During the six months ended September 30, 1994, the aggregate cost of
purchases and proceeds from sales (including maturities, but excluding
short-term securities) of investments were as follows:
California California Money Market Limited Term California
Portfolio Portfolio Portfolio
Purchases $1,043,049 $33,306,260 Sales (including
maturities) 926,763 29,307,326 At September 30, 1994, the
gross
unrealized appreciation and depreciation of investments for Federal income
tax purposes were as follows: California California Money
Market Limited Term California Portfolio Portfolio Portfolio
Gross unrealized appreciation $ 8,673 $ 6,239,761 Gross
unrealized depreciation (272,292) (3,172,669) Net
unrealized appreciation
(depreciation) $ (263,619) $ 3,067,092
6. Capital Shares
At September 30, 1994, there were an unlimited amount of shares of $.001
par
value capital stock authorized. The Fund has multiple classes of shares
within each Portfolio of the Fund. Each share of a class represents an
identical interest in its respective Portfolio and has the same rights,
except that each class bears certain expenses specifically related to the
distribution of its shares. At March 31, 1994, paid in capital amounted to
the following for each class and respective Portfolio:Portfolio Class
A Class B Class C California Money Market $192,186,838
California
Limited Term 6,423,543 $2,101,486 $ 483,585
California 156,967,959 8,015,498 6,695,556 Transactions in shares of
each class were as follows: Six Months Ended Year Ended California
Money September 30, 1994 March 31, 1994 dddd dddd Market
Portfolio Shares Amount Shares Amount Class AShares
sold 483,006,791 $483,006,791 1,043,269,466 $1,043,269,466 Shares
issued on reinvestment 1,908,577 1,908,577 3,127,064 3,127,064
Shares
redeemed (482,520,990) (482,520,990) (1,016,298,261)
(1,016,298,261)
Net Increase 2,394,378 $2,394,378 30,098,269 $30,098,269
California Limited Term Portfolio (a) Class A Shares
sold 77,273 $493,683 1,698,497 $11,136,992 Shares issued on
reinvestment 17,023 109,318 37,037 246,457 Shares
redeemed (367,123) (2,343,881) (484,046) (3,219,025) Net Increase
(Decrease) (272,827) $(1,740,880) 1,251,488 $8,164,424 Class B
Shares sold 29,938 $192,116 386,889 $2,558,573 Shares issued on
reinvestment 6,129 39,346 4,738 31,447 Shares
redeemed (89,196) (567,570) (23,016) (152,426) Net Increase
(Decrease) (53,129) $(336,108) 368,611 $2,437,594 Class C Shares
sold $ 274,912 $1,799,098 Shares issued on
reinvestment 1,916 12,314 793 5,204 Shares
redeemed (198,663) (1,333,031) Net
Increase 1,916 $12,314 77,042 $471,271
(a)For the period from April 27, 1993 (commencement of operations) to March
31, 1994. Six Months Ended Year Ended September 30, 1994 March 31,
1994 dddd dddd California
Portfolio Shares Amount Shares Amount Class A Shares
sold 775,225 $9,453,452 2,938,814 $38,173,347 Shares issued
on reinvestment 141,094 1,723,595 313,867 4,066,011
Shares
redeemed (1,042,459) (12,695,511) (2,305,447) (29,781,514) Net
Increase (Decrease) (126,140) $(1,518,464) 947,234
$12,457,844
Class B Shares sold 139,599 $1,696,567 457,886 $ 5,950,014
Shares issued on reinvestment 8,547 104,293 8,761 113,273
Shares redeemed (31,541) (384,510) (94,684) (1,212,861) Net
Increase 116,605 $1,416,350 371,963 $ 4,850,426 Class C
Shares
sold 379,464 $4,615,782 717,140 $ 9,342,933 Shares issued on
reinvestment 2,967 36,344 18,708 243,338 Shares
redeemed (315,923) (3,859,005) (614,734) (7,960,170) Net Increase
66,508 $793,121 121,114 $ 1,626,101
Schedule of Investments September 30, 1994
Schedule of Investments September 30, 1994
Smith Barney Muni Funds
Notes to Financial Statements (unaudited) (continued)
Smith Barney Muni Funds
Notes to Financial Statements (unaudited) (continued)
Schedule of Investments September 30, 1994
Schedule of Investments September 30, 1994
Smith Barney Muni Funds California Money Market Portfolio
For a share of each class of capital stock outstanding throughout each
period:
Class A Shares: 1994(a) 1994 1993 1992 1991(b) Net Asset
Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00
Income from Investment Operations: Net investment
income 0.011 0.018 0.021 0.035 0.044 Total Income from
Investment Operations 0.011 0.018 0.021 0.035 0.044 Less
Distributions: Dividends from net investment
income (0.011) (0.018) (0.021) (0.035) (0.044) Total
Distributions (0.011) (0.018) (0.021) (0.035) (0.044)
Net
Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 Total
Return 1.09% 1.84% 2.05% 3.51% 4.49% Net Assets, End of Period
(000s) $192,175 $189,783 $159,681 $167,172 $135,608 Ratios
to
Average Net Assets: Expenses 0.63% 0.64% 0.67% 0.60% 0.46% Net
Investment Income 2.18% 1.82 2.05 3.46 4.73 (a) For the six
months ended September 30, 1994 (unaudited). (b) From May 10, 1990
(inception date) to March 31, 1991. Annualized. Not annualized, as the
result
may not be representative of the total return for the year. For a share of
each class of capital stock outstanding throughout each period:
Class A Class B Class C bbbb bbbb bbb
9/30/94(a) 3/31/94(b) 9/30/94(a) 3/31/94(c) 9/30/94(a) 3/31/94(d)
Net Asset Value, Beginning of
Period $6.41 $6.50 $6.41 $6.51 $6.41 $6.57 Income from
Investment Operations: Net investment
income 0.17 0.27 0.15 0.25 0.16 0.15 Net realized and
unrealized loss on
investments (0.03) (0.12) (0.02) (0.12) (0.02)
(0.15) Total
Income from Investment
Operations 0.14 0.15 0.13 0.13 0.14 0.00 Less
Distributions: Dividends from net investment
income (0.16) (0.24) (0.15) (0.23) (0.16)
(0.16)
Distributions from net realized gains on security transactions
Total
Distributions (0.16) (0.24) (0.15) (0.23) (0.16)
(0.16) Net
Asset Value, End of Period $6.39 $6.41 $6.39 $6.41 $6.39 $
6.41 Total Return 2.24% 2.29% 2.06 1.87% 2.17 N.A. Net
Assets, End of Period
(000s) $6,256 $8,020 $2,016 $2,361 $505 $494
Ratios to
Average Net Assets:
Expenses 0.29% 0.19% 0.59% 0.53% 0.43% 0.35% Net Investment
Income 4.37 4.99 4.08 4.52 4.37 4.84 Portfolio Turnover
Rate 8.49% 47.91% 8.49% 47.91% 8.49% 47.91%
(a) For the six months ended September 30, 1994 (unaudited). (b)
From
April 27, 1993 (inception date) to March 31, 1994. (c) From May 18,
1993
(inception date) to March 31, 1994. (d) From June 23, 1993 (inception
date) to March 31, 1994. Annualized. Not annualized, as the result may not
be
representative of the total return for the year.
Financial Highlights
Smith Barney Muni Funds
Notes to Financial Statements (unaudited) (continued)
Schedule of Investments September 30, 1994
Smith Barney Muni Funds California Portfolio
For a share of each class of capital stock outstanding throughout each
period:
Class A Shares: 1994(a) 1994 1993 1992 1991 1990 Net Asset
Value, Beginning of
Period $12.27 $2.78 $12.05 $11.62
$11.47 $11.17
Income from Investment Operations: Net Investment
Income 0.38 0.76 0.78 0.81 0.84
0.84
Net realized and unrealized gain (loss) on
investments (0.19) (0.47) 0.73 0.42
0.15 0.81
Total Income from Investment
Operations 0.19 0.29 1.51 1.23 0.99
1.15
Less Distributions: Dividends from net investment
income (0.38) (0.77) (0.78) (0.80)
(0.84) (0.85)
Distributions from net realized gains on security transactions
(0.03) Total
Distributions (0.38) (0.80) (0.78)
(0.80) (0.84) (0.85)
Net Asset Value, End of
Period $12.08 $12.27 $12.78
$12.05 $11.62 $11.47
Total
Return 1.54% 2.15% 12.93% 11.11%
8.90% 10.44%
Net Assets, End of Period
(000s) $160,801 $164,833 $159,635 $ 123,268 $
98,740 $78,135
Ratios to Average Net Assets:
Expenses 0.52% 0.51% 0.53% 0.38% 0.21%
0.20%
Net Investment
loss 6.20 5.90 6.32 6.78 7.25
7.16
Portfolio Turnover
Rate 16.97% 38.68% 24.28% 44.03%
45.37% 23.87%
Financial Highlights (continued)
Class B Shares: 1994(a) 1994 1993(b) Net Asset Value, Beginning of
Period $12.26 $12.77 $12.46 Income from
Investment
Operations: Net investment income 0.34 0.68 0.20 Net
realized and unrealized gain on security
transactions (0.19) (0.48) 0.29 Total
Income from
Investment Operations 0.15 0.20 0.49 Less
Distributions:
Dividends from net investment
income (0.33) (0.68) (0.18) Distributions
from net
realized gains on security transactions
(0.03) Total
Distributions (0.33) (0.71) (0.18) Net
Asset Value, End
of Period $12.07 $12.26 $12.77 Total
Return 1.16% 1.45% 3.95% Net Assets, End of Period
(000s) $7,584 $6,269 $1,784 Ratios to Average Net Assets:
Expenses 1.22% 1.22% 1.20% Net Investment
loss 5.49 5.15 5.44 Portfolio Turnover
Rate 16.97% 38.68% 24.28% (a) For the six
months
ended September 30, 1994 (unaudited). (b) From January 5, 1993 (inception
date) to March 31, 1993. Annualized. Not annualized, as the result may not
be
representative of the total return for the year.
Schedule of Investments September 30, 1994
Financial Highlights
Smith Barney Muni Funds California Limited Term Portfolio
On November 7, 1994, the Smith Barney mutual funds and the Smith Barney
Shearson mutual funds were combined into a unified Smith Barney Family of
Funds. In order to provide more consistent service within the Family, as
well
as exchange flexibility among funds, the use of a single transfer agent for
all funds is necessary. Therefore, The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation (TSSG) of Boston, MA, which has served
as a transfer agent of the Smith Barney Shearson Funds since 1983, replaced
PFPC, Inc. of Wilmington, DE, as transfer agent for the Smith Barney Funds.
If you have any questions regarding this information, please contact your
Financial Consultant.
Administrative Update
Financial Highlights (continued)
Smith Barney Muni Funds California Portfolio
For a share of each class of capital stock outstanding throughout each
period:
Class C Shares: 1994(a) 1994 1993(b) Net Asset Value, Beginning of
Period $12.28 $12.78 $12.34 Income from
Investment
Operations: Net investment income 0.39 0.73 0.16 Net
realized and unrealized gain (loss) on
investments (0.20) (0.45) 0.41 Total Income
from
Investment Operations 0.19 0.28 0.57 Less
Distributions:
Dividends from net investment
income (0.37) (0.75) (0.13) Distributions
from net
realized gains on security transactions
(0.03) Total
Distributions (0.37) (0.78) (0.13) Net
Asset Value, End
of Period $12.10 $12.28 $12.78 Total
Return 1.54% 2.09% 4.59% Net Assets, End of Period
(000s) $6,336 $5,616 $4,298 Ratios to
Average Net
Assets: Expenses(1) 0.69% 0.66% 0.65% Net investment
income 6.36% 5.83 5.81 Portfolio Turnover
Rate 16.97% 38.68% 24.28% (a) For the six
months
ended September 30, 1994 (unaudited). (b) From January 12, 1993 (inception
date) to March 31, 1993. Annualized. Not annualized, as the result may not
be
representative of the total return for the year.
(1) The manager has waived all or part of its fees in the five year
period
ended March 31, 1994. If such fees were not waived, the per share effect on
expenses and the ratios of expenses to average net assets would be as
follows: Portfolio Per Share Increase in Expense Ratios
1994 1993 1992 1991 1990 California Money
Market $ $ $ $0.001 $ California Limited Term
Class
A .. 0.032 California Limited Term Class B . 0.041
California
Limited Term Class C .. 0.011 California Class
A 0.017 0.029 0.029
Portfolio Expense Ratios Without Fee Waivers
1994 1993 1992 1991 1990 California Money
Market 0.60% California Limited Term Class
A .. 0.75% California Limited Term Class B . 1.18 California
Limited Term Class C .. 0.011 California Class
A 0.51% 0.46% 0.45%
Smith Barney Muni Funds California Money Market, California Limited Term
and
California Portfolios
[This page intentionally left blank]
SMITH BARNEY INCOME TRUST
PART C
OTHER INFORMATION
Item
15.
Indemnification
The response to this item is incorporated by reference to
"Liability of Trustees" under the caption "Comparative
Information on Shareholders' Rights" in Part A of this
Registration Statement.
Item
16.
Exhibits
All References are to Registrant's Registration Statement on
Form N-1A (the "Registration Statement") as filed with the
Securities and Exchange Commission on October 21, 1991 (File
Nos. 33-43446 and 811-6444)
(1)(a)
Registrant's Master Trust Agreement dated October 17, 1991 and
Amendments to the Master Trust Agreement dated November 20, 1991
and July 30, 1993, respectively, are incorporated by reference
to Post-Effective Amendment No. 4.
(b)
Amendment Nos. 2 and 3 dated October 14, 1994 and November 7,
1994, respectively, to the Master Trust Agreement are filed
herein.
(2)
Registrant's By-laws are incorporated by reference to the
Registration Statement.
(3)
Not Applicable.
(4)
Agreement and Plan of Reorganization is filed herein as Exhibit
A to Registrant's Prospectus/Proxy Statement contained in Part A
of this Registration Statement.
(5)
Registrant's form of stock certificate is incorporated by
reference to Pre-Effective Amendment No. 1 to the Registration
Statement ("Pre-Effective Amendment No. 1").
(6) (a)
Investment Advisory Agreement between the Registrant and
Greenwich Street Advisors dated July 30, 1993 is incorporated by
reference to Post-Effective Amendment No. 3 ("Post-Effective
Amendment No. 3").
(b)
Form of Transfer of Investment Advisory Agreement dated November
7, 1994 is filed herein.
(7)
Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. dated July 30, 1993 is incorporated by reference
to Post-Effective Amendment No. 3.
(8)
Not Applicable.
(9) (a)
Administration Agreement dated April 20, 1994 between the
Registrant and Smith, Barney Advisers, Inc. ("SBA") is filed
herein.
(b)
Sub-Administration Agreement dated April 20, 1994 between the
Registrant, SBA and The Boston Company Advisors, Inc. is filed
herein.
(c)
Custodian Agreement between the Registrant and Boston Safe
Deposit and Trust Company is incorporated by reference to Pre-
Effective Amendment No. 1.
(d)
Transfer Agency Agreement between the Registrant and Boston Safe
Deposit and Trust Company is incorporated by reference to Pre-
Effective Amendment No. 1.
(10)
Amended Services and Distribution Plan pursuant to Rule 12b-1
between the Registrant and Smith Barney is filed herein.
(11)
Opinion and Consent of Willkie Farr & Gallagher with respect to
legality will be filed by amendment.
(12)
Opinion and Consent of Willkie Farr & Gallagher with respect to
tax matters will be filed by amendment.
(13)
Not Applicable.
(14)
Consent of Cooper's & Lybrand will be filed by amendment.
(15)
Not Applicable.
(16)
Not Applicable.
(17)
Proxy Card and Instructions will be filed by amendment.
Item
17.
Undertakings
(1)
The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through the
use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended, the reoffering
prospectus will contain the information called for by the
applicable registration form for reofferings by persons
who may be deemed underwriters, in addition to the
information called for by the other items of the
applicable form.
(2)
The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as a
part of an amendment to the Registration Statement and
will not be used until the amendment is effective, and
that, in determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment
shall be deemed to be a new registration statement for the
securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial
bona fide offering of them.
EXHIBIT INDEX
Exhibit Number
Description
(1) (a)
Amendments to the Master Trust Agreement
(4)
Agreement and Plan of Reorganization*
(6) (b)
Form of Transfer of Investment Advisory
Agreement
(9) (a)
Administration Agreement between the
Registrant and SBA
(b)
Sub-Administration Agreement between the
Registrant, SBA and The Boston Company
Advisors, Inc.
(10)
Amended Services and Distribution
Agreement pursuant to Rule 12b-1 between
the Registrant and Smith Barney
______________________________
* Filed herein as Exhibit A to Registrant's Prospectus/Proxy
Statement
contained in Part A of this Registration Statement.
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed on behalf of the registrant, in
the City of New York and State of New York on the 4th day of January,
1995.
Smith Barney Income
Trust
By: /s/ Heath B.
McLendon
Heath B. McLendon
Chief Executive
Officer
We, the undersigned, hereby severally constitute and appoint Heath
B. McLendon, Christina T. Sydor and Lee D. Augsburger and each of them
singly, our true and lawful attorneys, with full power to them and each
of them to sign for us, and in our hands and in the capacities indicated
below, any and all Amendments to this Registration Statement and to file
the same, with all exhibits thereto, and other documents therewith, with
the Securities and Exchange Commission, granting unto said attorneys,
and each of them, acting alone, full authority and power to do and
perform each and every act and thing requisite or necessary to be done
in the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys or any of them may lawfully do or cause to be done by virtue
thereof.
WITNESS our hands on the date set forth below.
As required by the Securities Act of 1933, this Registration
Statement on Form
N-14 and the above Power of Attorney has been signed by the following
persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Heath B. McLendon
Chairman of the Board
1/4/95
Heath B. McLendon
Chief Executive Officer
/s/ Lewis E. Daidone
Lewis E. Daidone
Senior Vice President and
Treasurer (Chief Financial
and Accounting Officer)
1/4/95
/s/ James J. Crisona
James J. Crisona
Trustee
1/4/95
/s/ Burt N. Dorsett
Burt N. Dorsett
Trustee
1/4/95
/s/Elliot S. Jaffe
Elliot S. Jaffe
Trustee
1/4/95
/s/ Cornelius C. Rose, Jr.
Cornelius C. Rose, Jr.
Trustee
1/4/95
domestic\clients\shearson\funds\slit\imca\n-14.doc
EXHIBIT 16.1B
SMITH BARNEY SHEARSON INCOME TRUST
AMENDMENT NO. 3 TO THE MASTER TRUST AGREEMENT
(Change of Name of the Trust, Change of Names of Existing Sub-Trusts and
Change of Emeritus Policy )
The undersigned, Assistant Secretary of Smith Barney Shearson Income
Trust (the "Trust"), 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 Regular Meeting of the Board held on July 20, 1994:
(Change of Name of the Trust)
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:
Smith Barney Shearson Smith Barney
Income Trust Income Trust
; and further
(Change of Names of Existing Sub-Trusts)
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:
Smith Barney Shearson Smith Barney
Limited Maturity Municipals Fund Limited Maturity Municipals
Fund
Smith Barney Shearson Smith Barney
Intermediate Maturity Intermediate Maturity
California Municipals Fund California Municipals Fund
Smith Barney Shearson Smith Barney
Intermediate Maturity Intermediate Maturity
New York Municipals Fund New York Municipals Fund
Smith Barney Shearson Smith Barney
Limited Maturity Limited Maturity
Treasury Fund Treasury Fund
; and further
(Change of Emeritus Policy)
VOTED: That Article III, Sections 3.1(i) and 3.1(j) of the Trust's
Master Trust Agreement be and are hereby amended and restated in their
entirety as follows:
Section 3.1(i)
A Trustee who has reached the age of seventy two (72) years may elect
the status of Trustee Emeritus provided that the Trustee has served for ten
(10) years as a member of the Board of the Trust or of the Board of
Trustees of another investment company distributed, advised or administered
by an entity under common control with the Trust's distributor, investment
adviser or administrator. Upon reaching eighty (80) years of age, a
Trustee must elect status as a Trustee Emeritus. (The foregoing provisions
shall not be deemed to restrict a Trustee's ability to resign.)
Section 3.1(j)
A Board Member designated as a Trustee Emeritus may attend meetings
of the Board of Trustees, however, he or she shall have no voting rights
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 applicable laws.
In addition, a Trustee Emeritus shall be indemnified to the full extent
that an officer or Trustee of the Trustee may be indemnified under the
Trust's governing documents and applicable state and federal laws.
As long as a Board Member is a Trustee Emeritus, but in no event for
more than a period of ten (10) years, provided the Trust has net assets in
excess of $100 million, a Trustee Emeritus will receive 50% of the annual
retainer and annual meeting fees paid to active Board Members. In any
event, a Trustee Emeritus shall be entitled to reasonable out-of-pocket
expenses for each meeting attended; 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 14th day of October, 1994.
/s/Lee D. Augsburger
Lee D. Augsburger
Assistant Secretary
SMITH BARNEY INCOME TRUST
AMENDMENT NO. 4 TO THE MASTER TRUST AGREEMENT
WHEREAS, Section 4.1 of the Master Trust Agreement of Smith Barney
Income
Trust (the "Trust") dated October 17, 1991, as amended, authorizes the
Trustees of the Trust
to issue classes of shares of any Sub-Trust or divide the Shares of any
Sub-Trust into classes,
having different dividend, liquidation, voting and other rights as the
Trustees may determine;
WHEREAS, the Trustees have not previously established and designated
any classes
of shares for the four Sub-Trusts of the Trust: Smith Barney Limited
Maturity Treasury
Fund, Smith Barney Limited Maturity Municipals Fund, Smith Barney
Intermediate Maturity
New York Municipals Fund, and Smith Barney Intermediate Maturity California
Municipals
Fund;
WHEREAS, the Trustees unanimously voted on July 20, 1994 to establish
and
designate the existing class of shares of each Sub-Trust as Class A shares,
such change to be
effective concurrently with the effectiveness of the Supplement to the
Prospectus of each
Sub-Trust describing said Class A shares; and
WHEREAS, the Trustees unanimously voted on July 20, 1994 to establish
and
designate the exisitng class of shares of each Sub-Trust as Class C shares.
NOW, THEREFORE, the undersigned Assistant Secretary of the Trust
hereby states
as follows:
1. That, pursuant to the vote of the Trustees, the existing shares
of each of the
aforementioned Sub-Trusts be designated as Class A shares. Such class of
shares shall have
the rights and preferences as set forth in the Supplement to the Prospectus
of each Sub-Trust
dated November 7, 1994, as such Prospectus may be further amended from time
to time.
2. That, pursuant to the vote of the Trustees, each of the
aforementioned Sub-
Trusts be divided into an additional class of shares established and
designated as Class C
shares. Such class of shares shall have the rights and preferences as set
forth in the
Supplement to the Prospectus of each Sub-Trust dated November 7, 1994, as
such Prospectus
may be further amended from time to time.
IN WITNESS WHEREOF, the undersigned hereby sets his hand this 7th day
of
November, 1994.
SMITH BARNEY INCOME TRUST
/s/Lee D. Augsburger
By: Lee D. Augsburger
Title: Assistant Secretary
123779.c1
EXHIBIT 16.6B
TRANSFER AND ASSUMPTION OF
INVESTMENT ADVISORY AGREEMENT
for
SMITH BARNEY INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND, A SERIES OF
SMITH BARNEY INCOME TRUST
TRANSFER AND ASSUMPTION OF INVESTMENT ADVISORY AGREEMENT, made as of
the 7th day of November, 1994, by and among Smith Barney Intermediate
Maturity California Municipals Fund, a Massachusetts business trust (the
"Trust"), Mutual Management Corp., a New York corporation ("MMC"), and
Smith Barney Mutual Funds Management Inc. ("SBMFM") a Delaware corporation.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Trust consists of several distinct investment portfolios
or series (collectively, the "Funds"); and
WHEREAS, the Trust, on behalf of the Funds, and MMC entered into an
Investment Advisory Agreement on July 30, 1993, under which MMC serves as
the investment adviser (the "Investment Adviser") for the Funds of the
Trust; and
WHEREAS, MMC desires that its interest, rights, responsibilities and
obligations in and under the Investment Advisory Agreement be transferred
to SBMFM and SBMFM desires to assume MMC's interest, rights,
responsibilities and obligations in and under the Investment Advisory
Agreement; and
WHEREAS, this Agreement does not result in a change of actual control
or management of the Investment Adviser to the Trust and, therefore, is not
an "assignment" as defined in Section 2(a)(4) of the Act nor an
"assignment" for the purposes of Section 15(a)(4) of the Act.
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Assignment. Effective as of November 7, 1994 (the "Effective
Date"), MMC hereby transfers to SBMFM all of MMC's interest, rights,
responsibilities and obligations in and under the Investment Advisory
Agreement dated July 30, 1993, to which MMC is a party with the Trust.
2. Assumption and Performance of Duties. As of the Effective
Date, SBMFM hereby accepts all of MMC's interest and rights, and assumes
and agrees to perform all of MMC's responsibilities and obligations in, and
under the Investment Advisory Agreement; SBMFM agrees to subject to all of
the terms and conditions of said Agreement; and SBMFM shall indemnify and
hold harmless MMC from any claim or demand made thereunder arising or
incurred after the Effective Date.
3. Representation of SBMFM. SBMFM represents and warrants that:
(1) it is registered as an investment adviser under the Investment Advisers
Act of 1940, as amended; and (2) Smith Barney Holdings Inc. is its sole
shareholder.
4. Consent. The Trust hereby consents to this transfer by MMC to
SBMFM of MMC's interest, rights, responsibilities and obligations in and
under the Investment Advisory Agreement and to the acceptance and
assumption by SBMFM of the same. The Trust agrees, subject to the terms
and conditions of said Agreement, to look solely to SBMFM for the
performance of the Investment Adviser's responsibilities and obligations
under said Agreement from and after the Effective Date, and to recognize as
inuring solely to SBMFM the interest and rights heretofore held by MMC
thereunder.
5. Limitation of Liability of Trustees, Officers and Shareholders.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Trust, personally, but shall bind only the
trust property of the Trust, as provided in the Declaration of Trust of the
Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by the President of the Trust,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually of to impose any liability on any of them,
personally, but shall bond only the trust property of the Trust as provided
in its Declaration of Trust.
6. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers hereunto duly attested.
Attest:
By:
Secretary Smith Barney Intermediate Maturity
California Municipals Fund
Attest:
By:
Secretary Mutual Management Corp.
Attest:
By:
Secretary Smith Barney Mutual Funds
Management Inc.
shared/domestic/clients/shearosn/fund/slit/imca
EXHIBIT 16.9A
SMITH BARNEY SHEARSON INCOME TRUST
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY
CALIFORNIA MUNICIPALS FUND
ADMINISTRATION AGREEMENT
April 20, 1994
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Smith Barney Shearson Income Trust, a business trust organized under
the laws of the Commonwealth of Massachusetts, confirms its agreement with
Smith, Barney Advisers, Inc. ("SBA") and its sub-trust Smith Barney
Shearson Intermediate Maturity California Municipals Fund (the "Fund") as
follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Amended and Restated Master Trust Agreement
dated November 27, 1991 as amended from time to time (the "Master Trust
Agreement"), in its Prospectus and Statement of Additional Information as
from time to time in effect and in such manner and to such extent as may
from time to time be approved by the Board of Trustees of the Fund (the
"Board"). Copies of the Fund's Prospectus, Statement of Additional
Information and Master Trust Agreement have been or will be submitted to
SBA. Greenwich Street Advisors, a division of Mutual Management Corp.
("Greenwich Street Advisors") serves as the Fund's investment adviser, and
the Fund desires to employ and hereby appoints SBA to act as its
administrator. SBA accepts this appointment and agrees to furnish the
services to the Fund for the compensation set forth below. SBA is hereby
authorized to retain third parties and is hereby authorized to delegate
some or all of its duties and obligations hereunder to such persons
provided that such persons shall remain under the general supervision of
SBA.
2. Services as Administrator
Subject to the supervision and direction of the Board, SBA
will: (a) assist in supervising all aspects of the Fund's operations except
those performed by the Fund's investment adviser under its investment
advisory agreement; (b) supply the Fund with office facilities (which may
be in SBA's own offices), statistical and research data, data processing
services, clerical, accounting and bookkeeping services, including, but not
limited to, the calculation of (i) the net
asset value of shares of the Fund, (ii) applicable contingent deferred
sales charges and similar fees and charges and (iii) distribution fees,
internal auditing and legal services, internal executive and administrative
services, and stationary and office supplies; and (c) prepare reports to
shareholders of the Fund, tax returns and reports to and filings with the
Securities and Exchange Commission (the "SEC") and state blue sky
authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, the Fund will pay SBA on the first business day of each month a
fee for the previous month at an annual rate of .20 of 1.00% of the Fund's
average daily net assets. The fee for the period from the date the Fund's
initial registration statement is declared effective by the SEC to the end
of the month during which the initial registration statement is declared
effective shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to SBA, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
SBA will bear all expenses in connection with the performance
of its services under this Agreement. The Fund will bear certain other
expenses to be incurred in its operation, including: taxes, interest,
brokerage fees and commissions, if any; fees of the members of the Board of
the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc. or its affiliates or any person who is an affiliate of any
person to whom duties may be delegated hereunder; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement (s), but excluding distribution fees, interest, taxes,
brokerage and, if permitted by state securities commissions, extraordinary
expenses) exceed the expense limitations of any state having jurisdiction
over the Fund, SBA will reimburse the Fund for that excess expense to the
extent required by state law in the same
proportion as its respective fees bear to the combined fees for investment
advice and administration. The expense reimbursement obligation of SBA
will be limited to the amount of its fees hereunder. Such expense
reimbursement, if any, will be estimated, reconciled and paid on a monthly
basis.
6. Standard of Care
SBA shall exercise its best judgment in rendering the services
listed in paragraph 2 above, and SBA shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect SBA against
liability to the Fund or to its shareholders to which SBA would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or by reason of SBA's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This Agreement shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by the Board.
8. Service to Other Companies or Accounts
The Fund understands that SBA now acts, will continue to act
and may act in the future as administrator to one or more other investment
companies, and the Fund has no objection to SBA so acting. In addition,
the Fund understands that the persons employed by SBA or its affiliates to
assist in the performance of its duties hereunder will not devote their
full time to such service and nothing contained herein shall be deemed to
limit or restrict the right of SBA or its affiliates to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
9. Indemnification
The Fund agrees to indemnify SBA and its officers, directors,
employees, affiliates, controlling persons, agents (including persons to
whom responsibilities are delegated hereunder) ("indemnitees") against any
loss, claim, expense or cost of any kind (including reasonable attorney's
fees) resulting or arising in connection with this Agreement or from the
performance or failure to perform any act hereunder, provided that no such
indemnification shall be available if the indemnitee violated the standard
of care in paragraph 6 above. This indemnification shall be limited by the
1940 Act, and relevant state law. Each indemnitee shall be entitled to
advancement of its expenses in accordance with the requirements of the 1940
Act and the rules, regulations and interpretations thereof as in effect
from time to time.
10. Limitation of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement has been duly
authorized by the Fund, SBA and Boston Advisors, and signed by an
authorized officer of each, acting as such. Neither the authorization by
the Board members of the Fund, nor the execution and delivery by the
officer of the Fund shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Fund as provided in the
Master Trust Agreement.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed
copy hereof.
Very truly yours,
Smith Barney Shearson
Income Trust
Smith Barney Shearson
Intermediate Maturity
California Municipals Fund
By: /s/Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
Accepted:
Smith, Barney Advisers, Inc.
By: /s/Christina T. Sydor
Name: Christina t. Sydor
Title: Secretary
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act"), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
Formal Reconciliations - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
Calculate Net Income, Mil Rate and Yield for Daily
Distribution Funds - Calculate income on purchase and sales, calculate
change in income due to variable rate change, combine all daily income
less expenses to arrive at net income, calculate mil rate and yields (1
day, 7 day and 30 day);
Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian records;
Pricing - Determine N.A.V. for Fund using market value of
all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
Reporting of Price to Transfer Agent- N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio managers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board members, tax authorities, statistical and performance
reporting companies and the Fund's auditors; interface with the Fund's
auditors; prepare monthly reconciliation packages, including expense pro
forma; prepare amortization schedules for premium and discount bonds
based on the effective yield method; prepare vault reconciliation
reports to indicate securities currently "out-for-transfer;" and
calculate daily expenses based on expense ratios supplied by Fund's
treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
Coordinate the preparation and review of the annual,
semi-annual and quarterly portfolio of investments and financial
statements included in the Fund's shareholder reports.
Statistical Reporting
Total return reporting;
SEC 30-day yield reporting and 7-day yield reporting
(for money market funds);
Prepare dividend summary;
Prepare quarter-end reports;
Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.)
Publications
Coordinate the printing and mailing process with
outside printers for annual and semi-annual reports, prospectuses,
statements of additional information, proxy statements and special
letters or supplements;
Provide graphics and design assistance relating to the
creation of marketing materials and shareholder reports.
Treasury. The following is a summary of the treasury services available
to the Fund:
Provide a Treasurer and Assistant Treasurer for the
Fund;
Determine expenses properly chargeable to the Fund;
Authorize payment of bills for expenses of the Fund;
Establish and monitor the rate of expense accruals;
Prepare financial materials for review by the Fund's
Board (e.g., Rule 2a-7, 10f-3, 17a-7 and 17e-1 reports, repurchase
agreement dealer lists, securities transactions);
Recommend dividends to be voted by the Fund's Board;
Monitor mark-to-market comparisons for money market
funds;
Recommend valuation to be used for securities which
are not readily saleable;
Function as a liaison with the Fund's outside auditors
and arrange for audits;
Provide accounting, financial and tax support relating
to portfolio management and any contemplated changes in the Fund's
structure or operations;
Prepare and file forms with the Internal Revenue
Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and
related regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
File annual and semi-annual shareholder reports with
the appropriate regulatory agencies;
Prepare and file proxy statements;
Review marketing material for SEC and NASD clearance;
Provide legal assistance for shareholder
communications.
Corporate and Secretarial Services
Provide a Secretary and an Assistant Secretary for the
Fund;
Maintain general corporate calendar;
Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
Organize, attend and keep minutes of shareholder
meetings;
Maintain Master Trust Agreement and By-Laws of the
Fund.
Legal Consultation and Business Planning
Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
Develop or assist in developing guidelines and
procedures to improve overall compliance by the Fund and its various
agents;
Manage Fund litigation matters and assume full
responsibility for the handling of routine Fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing
compliance manuals, conducting seminars for fund accounting and advisory
personnel and performing on-going testing of the Fund's portfolio to
assist the Fund's investment adviser in complying with prospectus
guidelines and limitations, 1940 Act requirements and Internal Revenue
Code requirements. The Department may also act as liaison to the SEC
during its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully
automated environment using blue sky registration software developed by
Price Waterhouse. In addition to being responsible for the initial and
on-going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
SHARED DOMESTIC CLIENTS SHEARSON FUNDS SLIT IMCA ADMN2.DOC
A-4
SHARED DOMESTIC CLIENTS SHEARSON FUNDS SLIT IMCA ADMN2.DOC
EXHIBIT 16.9B
SMITH BARNEY SHEARSON INCOME TRUST
SMITH BARNEY SHEARSON INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
SUB-ADMINISTRATION AGREEMENT
April 20, 1994
The Boston Company Advisors, Inc.
One Exchange Place
Boston, MA 02109
Dear Sirs:
Smith Barney Shearson Income Trust, a business trust organized
under the laws of the Commonwealth of Massachusetts and Smith, Barney
Advisers, Inc. ("SBA") confirm their agreement with The Boston Company
Advisors, Inc. ("Boston Advisors") and its sub-trust Intermediate Maturity
California Municipals Fund (the "Fund") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
limitations specified in its Amended and Restated Master Trust Agreement
dated November 27, 1991 as amended from time to time (the "Master Trust
Agreement"), in its Prospectus and Statement of Additional Information as
from time to time in effect, and in such manner and to such extent as may
from time to time be approved by the Board of Trustees of the Fund (the
"Board"). Copies of the Fund's Prospectus, Statement of Additional
Information and Master Trust Agreement have been or will be submitted to
you. The Fund employs SBA as its administrator, and the Fund and SBA
desire to employ and hereby appoint Boston Advisors as the Fund's sub-
administrator. Boston Advisors accepts this appointment and agrees to
furnish the services to the Fund, for the compensation set forth below,
under the general supervision of SBA.
2. Services as Sub-Administrator
Subject to the supervision and direction of the Board and SBA,
Boston Advisors will: (a) assist in supervising all aspects of the Fund's
operations except those performed by the Fund's investment adviser under
the Fund's investment advisory agreement; (b) supply the Fund with office
facilities (which may be in Boston Advisor's own offices), statistical and
research data, data processing services, clerical, accounting and
bookkeeping services, including, but not limited to, the calculation of (i)
the net asset value of shares of the Fund, (ii) applicable contingent
deferred sales charges and similar fees and changes and (iii) distribution
fees, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; and (c)
prepare reports to shareholders of the Fund, tax returns and reports to and
filings with the Securities and Exchange Commission (the "SEC") and state
blue sky authorities.
3. Compensation
In consideration of services rendered pursuant to this
Agreement, SBA will pay Boston Advisors on the first business day of each
month a fee for the previous month calculated in accordance with the terms
set forth in Appendix B, and as agreed to from time to time by the Fund,
SBA and Boston Advisors. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly
period and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Boston Advisors, the value
of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect.
4. Expenses
Boston Advisors will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of the Board members
of the Fund who are not officers, directors or employees of Smith Barney
Shearson Inc., Boston Advisors of their affiliates; SEC fees and state blue
sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's and its Board members' proportionate share of
insurance premiums, professional association dues and/or assessments;
outside auditing and legal expenses; costs of maintaining the Fund's
existence; costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the officers or Board and any
extraordinary expenses. In addition, the Fund will pay all distribution
fees pursuant to a Distribution Plan adopted under Rule 12b-1 of the
Investment Company Act of 1940, as amended (the "1940 Act").
5. Reimbursement of the Fund
If in any fiscal year the aggregate expenses of the Fund
(including fees pursuant to this Agreement and the Fund's investment
advisory agreement(s) and administration agreement, but excluding
distribution fees, interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense
limitations of any state having jurisdiction over the Fund, Boston Advisory
will reimburse the Fund for that excess expense to the extent required by
state law in the same proportion as its respective fees bear to the
combined fees for investment advice and administration. The expense
reimbursement obligation of Boston Advisors will be limited to the amount
of its fees hereunder. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
6. Standard of Care
Boston Advisors shall exercise its best judgment in rendering
the services listed in paragraph 2 above. Boston Advisors shall not be
liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement
relates, provided that nothing herein shall be deemed to protect or purport
to protect Boston Advisors against liability to the Fund or to its
shareholders to which Boston Advisors would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of Boston Advisor's reckless
disregard of its obligations and duties under this Agreement.
7. Term of Agreement
This agreement shall continue automatically for successive
annual periods, provided that it may be terminated by 90 days' written
notice to the other parties by any of the Fund, SBA or Boston Advisors.
This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns, provided, however,
that this agreement may not be assigned, transferred or amended without the
written consent of all the parties hereto.
8. Service to Other Companies or Accounts
The Fund understands that Boston Advisors now acts, will
continue to act and may act in the future as administrator to one or more
other investment companies, and the Fund has no objection to Boston
Advisors so acting. In addition, the Fund understands that the persons
employed by Boston Advisors to assist in the performance of its duties
hereunder may or may not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Boston
Advisors or its affiliates to engage in and devote time and attention to
other businesses or to render services of whatever kind of nature.
9. Indemnification
SBA agrees to indemnify Boston Advisors and its officers,
directors, employees, affiliates, controlling persons and agents
("indemnitees") to the extent that indemnification is available from the
Fund, and Boston Advisors agrees to indemnify SBA and its indemnitees,
against any loss, claim, expenses or cost of any kind (including reasonable
attorney's fees) resulting or arising in connection with this Agreement or
from the performance or failure to perform any act hereunder, provided that
not such indemnification shall be available if the indemnitee violated the
standard of care in paragraph 6 above. This indemnification shall be
limited by the 1940 Act, and relevant state law. Each indemnitee shall be
entitled to advancement of its expenses in accordance with the requirements
of the 1940 Act and the rules, regulations and interpretations thereof as
in effect from time to time.
10. Limitations of Liability
The Fund, SBA and Boston Advisors agree that the obligations of
the Fund under this Agreement shall not be binding upon any of the Board
members, shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund individually, but are binding only
upon the assets and property of the Fund, as provided in the Master Trust
Agreement and Bylaws.
The execution and delivery of this Agreement has been duly authorized by
the Fund, SBA and Boston Advisors, and signed by an authorized officer of
each, acting as such. Neither the authorization by the Board Members of
the Fund, nor the execution and delivery by the officer of the Fund shall
be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the Fund as provided in the Master Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance hereof by signing and returning to us the
enclosed copy hereof.
Very truly yours,
Smith Barney Shearson
Income Trust
Smith Barney Shearson Intermediate
Maturity California Municipals Fund
By: /s/Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board
Smith, Barney Advisers, Inc.
By: /s/Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary
Accepted:
The Boston Company Advisors, Inc.
By: _______________________
Name:
Title: Senior Vice President
APPENDIX A
ADMINISTRATIVE SERVICES
Fund Accounting. Fund accounting services involve comprehensive
accrual-based recordkeeping and management information. They include
maintaining a fund's books and records in accordance with the Investment
Company Act of 1940, as amended (the "1940 Act" ), net asset value
calculation, daily dividend calculation, tax accounting and portfolio
accounting.
The designated fund accountants interact with the Fund's
custodian, transfer agent and investment adviser daily. As required,
the responsibilities of each fund accountant may include:
- Cash Reconciliation - Reconcile prior day's ending cash
balance per custodian's records and the accounting system to the prior
day's ending cash balance per fund accounting's cash availability
report;
- Cash Availability - Combine all activity affecting the
Fund's cash account and produce a net cash amount available for
investment;
- Formal Reconciliation - Reconcile system generated reports
to prior day's calculations of interest, dividends, amortization,
accretion, distributions, capital stock and net assets;
- Trade Processing - Upon receipt of instructions from the
investment adviser review, record and transmit buys and sells to the
custodian;
- Journal Entries - Input entries to the accounting system
reflecting shareholder activity and Fund expense accruals;
- Reconcile and Calculate N.O.A. (net other assets) - Compile
all activity affecting asset and liability accounts other than
investment account;
- Calculate Net Income, Mil Rate and Yield for Daily
Distribution
Funds - Calculate income on purchases and sales, calculate
change in income due to variable rate change; combine all daily income
less expenses to arrive at net income; calculate mil rate and yields (1
day, 7 day and 30 day);
- Mini-Cycle (except for Money Market Funds) - Review intra
day trial balance and reports, review trial balance N.O.A.;
- Holdings Reconciliation - Reconcile the portfolio holdings
per the system to custodian reports;
- Pricing - Determine N.A.V. for the Fund using market value
of all securities and currencies (plus N.O.A.), divided by the shares
outstanding, and investigate securities with significant price changes
(over 5%);
- Money Market Fund Pricing - Monitor valuation for compliance
with Rule 2a-7;
- System Check-Back - Verify the change in market value of
securities which saw trading activity per the system;
- Net Asset Value Reconciliation - Identify the impact of
current day's Fund activity on a per share basis;
- Reporting of Price to NASDAQ - 5:30 P.M. is the final
deadline for Fund prices being reported to the newspaper;
- Reporting of Price to Transfer Agent - N.A.V.s are reported
to transfer agent upon total completion of above activities.
In addition, fund accounting personnel: communicate corporate
actions of portfolio holdings to portfolio mangers; initiate
notification to custodian procedures on outstanding income receivables;
provide information to the Fund's treasurer for reports to shareholders,
SEC, Board, tax authorities, statistical and performance reporting
companies and the Fund's auditors; interface with Fund's auditors;
prepare monthly reconciliation packages, including expense pro forma;
prepare amortization schedules for premium and discount bonds based on
the effective yield method; prepare vault reconciliation reports to
indicate securities currently "out-for-transfer;" and calculate daily
expenses based on expense ratios supplied by Fund's treasurer.
Financial Administration. The financial administration services made
available to the Fund fall within three main categories: Financial
Reporting; Statistical Reporting; and Publications. The following is a
summary of the services made available to the Fund by the Financial
Administration Division:
Financial Reporting
- Coordinate the preparation and review of the annual, semi-
annual and quarterly portfolio of investments and financial statements
included in the Fund's shareholder reports.
Statistical Reporting
- Total return reporting;
- SEC 30-day yield reporting and 7-day yield reporting (for
money market funds);
- Prepare dividend summary;
- Prepare quarter-end reports;
- Communicate statistical data to the financial media
(Donoghue, Lipper, Morningstar, et al.).
Publications
- Coordinate the printing and mailing process with outside
printers for annual and semi-annual reports, prospectuses, statements of
additional information, proxy statements and special letters or
supplements;
Treasury. The following is a summary of the treasury services available
to the Fund:
- Provide an Assistant Treasurer for the Fund;
- Authorize payment of bills for expenses of the Fund;
- Establish and monitor the rate of expense accruals;
- Prepare financial materials for review by the Fund's Board
(e.g., Rule 2a-7, 10f-3 17a-7 and 17e-1 reports, repurchase agreement
dealer lists, securities transactions);
- Monitor mark-to-market comparisons for money market funds;
- Recommend valuations to be used for securities which are not
readily saleable;
- Function as a liaison with the Fund's outside auditors and
arrange for audits;
- Provide accounting, financial and tax support relating to
portfolio management and any contemplated changes in the fund's
structure or operations;
- Prepare and file forms with the Internal Revenue Service
Form 8613
Form 1120-RIC
Board Members' and Shareholders' 1099s
Mailings in connection with Section 852 and related
regulations.
Legal and Regulatory Services. The legal and regulatory services made
available to the Fund fall within four main areas: SEC and Public
Disclosure Assistance; Corporate and Secretarial Services; Compliance
Services; and Blue Sky Registration. The following is a summary of the
legal and regulatory services available to the Fund:
SEC and Public Disclosure Assistance
- File annual amendments to the Fund's registration
statements, including updating the prospectus and statement of
additional information where applicable;
- File annual and semi-annual shareholder reports with the
appropriate regulatory agencies;
- Prepare and file proxy statements;
- Provide legal assistance for shareholder communications.
Corporate and Secretarial Services
- Provide an Assistant Secretary for the Fund;
- Maintain general corporate calendar;
- Prepare agenda and background materials for Fund board
meetings, make presentations where appropriate, prepare minutes and
follow-up matters raised at Board meetings;
- Organize, attend and keep minutes of shareholder meetings;
- Maintain Master Trust Agreement and By-Laws of the Fund.
Legal Consultation and Business Planning
- Provide general legal advice on matters relating to
portfolio management, Fund operations and any potential changes in the
Fund's investment policies, operations or structure;
- Maintain continuing awareness of significant emerging
regulatory and legislative developments which may affect the Fund,
update the Fund's Board and the investment adviser on those developments
and provide related planning assistance where requested or appropriate;
- Develop or assist in developing guidelines and procedures to
improve overall compliance by the Fund and its various agents;
- Manage Fund litigation matters and assume full
responsibility for the handling of routine fund examinations and
investigations by regulatory agencies.
Compliance Services
The Compliance Department is responsible for preparing compliance
manuals, conducting seminars for fund accounting and advisory personnel
and performing on-going testing of the Fund's portfolio to assist the
Fund's investment adviser in complying with prospectus guidelines and
limitations, 1940 Act requirements and Internal Revenue Code
requirements. The Department may also act as liaison to the SEC during
its routine examinations of the Fund.
State Regulation
The State Regulation Department operates in a fully automated
environment using blue sky registration software development by Price
Waterhouse. In addition to being responsible for the initial and on-
going registration of shares in each state, the Department acts as
liaison between the Fund and state regulators, and monitors and reports
on shares sold and remaining registered shares available for sale.
Schedule B
Fee
SHARED DOMESTIC CLIENTS SHEARSON FUNDS SLIT IMCA SUBADMN.DOC
A-4
SHARED DOMESTIC CLIENTS SHEARSON FUNDS SLIT IMCA SUBADMN.DOC
SHARED DOMESTIC CLIENTS SHEARSON FUNDS SLIT IMCA SUBADMN.DOC
EXHIBIT 16.10
AMENDED SERVICES AND DISTRIBUTION PLAN
SMITH BARNEY INTERMEDIATE MATURITY CALIFORNIA MUNICIPALS FUND
This Services and Distribution Plan (the "Plan") is adopted in
accordance with rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), by Smith Barney Intermediate Maturity
California Municipals Fund, a business trust organized under the laws of
the Commonwealth of Massachusetts (the "Fund"), subject to the following
terms and conditions:
Section 1. Annual Fee
(a) Class A Service Fee. The Fund will pay to the distributor of its
shares, Smith Barney Inc., a corporation organized under the laws of the
State of Delaware ("Distributor"), a service fee under the Plan at the
annual rate of .15% of the average daily net assets of the Fund
attributable to the Class A shares (the "Class A Service Fee").
(b) Service Fee for Class C shares. The Fund will pay to the
Distributor a service fee under the Plan at the annual rate of .15% of the
average daily net assets of the Fund attributable to the Class C shares
(the "Class C Service Fee," and collectively with the Class A Service Fee
and the Class B Service Fee, the "Service Fees").
(c) Distribution Fee for Class C shares. In addition to the Class C
Service Fee, the Fund will pay the Distributor a distribution fee under the
Plan at the annual rate of .20% of the average daily net assets of the Fund
attributable to the Class C shares (the "Class C Distribution Fee," and
collectively with the Class B Distribution Fee, the "Distribution Fees").
(d) Payment of Fees. The Service Fees and Distribution Fees will be
calculated daily and paid monthly by the Fund with respect to the foregoing
classes of the fund's shares (each a "Class" and together the "Classes") at
the annual rates indicated above.
Section 2. Expenses Covered by the Plan
With respect to expenses incurred by each Class its respective
Service Fees and/or Distribution Fees may be used for; (a) costs of
printing and distributing the Fund's prospectus, statement of additional
information and reports to prospective investors in the Fund; (b) costs
involved in preparing, printing and distributing sales literature
pertaining o the Fund; (c) an allocation of overhead and other branch
office distribution-related expenses of the Distributor; (d) payments made
to, and expenses of Smith Barney Financial Consultants and other persons
who provide support services in connection with the distribution of the
Fund's shares, including but not limited to, office space and equipment,
telephone facilities, answering routine inquires regarding the Fund,
processing shareholder transactions and providing any other shareholder
services not otherwise provided by the Fund's Transfer agent; and (e)
accruals for interest on the amount of the foregoing expenses that exceed
the Distribution Fee and, in the case of Class B shares, the contingent
deferred sales charge received by the Distributor; provided, however, that
the Distribution Fees may be used by the Distributor only to cover expenses
primarily intended to result in the sale of the Fund's Class B and C
shares, including without limitation, payments to Distributor's financial
consultants ant the time of the sale of Class B and C shares. In addition,
Service Fees are intended to be used by the Distributor primarily to pay
its financial consultants for servicing shareholder accounts, including a
continuing fee to each such financial consultant, which fee shall begin to
accrue immediately after the sale of such shares.
Section 3. Approval of Shareholders
The Plan will not take effect, and no fees will be payable in
accordance with Section 1 of the Plan, with respect to a Class until the
Plan has been approved by a vote of a least a majority of the outstanding
voting securities of the Class. The Plan will be deemed to have been
approved with respect to a class so longer as a majority of the outstanding
voting securities of the Class votes for the approval of the Plan,
notwithstanding that: (a) the Plan has not been approved by a major of the
outstanding voting securities of any other Class, or (b) the Plan has not
been approved by a majority of the outstanding voting securities of the
Fund.
Section 4. Approval of Trustees
Neither the Plan nor any related agreements will take effect until
approved by a majority of both (a) the full Board of Trustees of the Fund
and (b) those Trustees who are not interested persons of the Fund and who
have not direct or indirect financial interest in the operation of the Plan
or in any agreements related to it (the "Qualified Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan and the
related agreements.
Section 5. Continuance of the Plan
The Plan will continue in effect with respect to each Class until
November 7, 1995, and thereafter for successive twelve-month periods with
respect to each Class; provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Fund and by
a majority of the Qualified Trustees.
Section 6. Termination
The Plan may be terminated at any time with respect to a Class (i) by
the Fund without the payment of any penalty, by the vote of a majority of
the outstanding voting securities of such Class or (ii) by a vote of the
Qualified Trustees. The Plan may remain in effect with respect to a
particular Class even if the Plan has been terminated in accordance with
this Section 6 with respect to any other Class.
Section 7. Amendments
The Plan may to be amended with respect to any Class so as to
increase materially the amounts of the Fees described in Section 1 above,
unless the amendment is approved by a vote of the holders of at least a
majority of the outstanding voting securities of that class. No material
amendment to the Plan may be made unless approved by the Fund's Board of
Trustees in the manner described in Section 4 above.
Section 8. Selection of Certain Trustees
While the Plan is in effect, the selection and nomination of the
Fund's Trustees who are not interested persons of the Fund will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Fund.
Section 9. Written Reports
In each year during which the Plan remains in effect, a person
authorized to direct the disposition of monies paid or payable by the Fund
pursuant to the Plan or any related agreement will prepare and furnish to
the Fund's Board of Trustees and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule, which sets out
the amounts expended under the Plan and the purposes for which those
expenditures were made.
Section 10. Preservation of Materials
The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period of
not less than six years (the first two years in an easily accessible place)
from the date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms
As used in the Plan, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have the same meaning
that those terms have under the 1940 Act by the Securities and Exchange
Commission.
Section 12. Limitation of Liability
It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon of the Trustees, shareholders, nominees,
officers, employees or agents, whether past, present or future, of the
Fund, individually, but are binding only upon the assets and property of
the Fund, as provided, as provided in the Master Trust Agreement of the
Fund. The execution and delivery of this Plan has been authorized by the
Trustees and by shareholders of the Fund holding at least a majority of the
outstanding voting securities and signed by an authorized officer of the
Fund, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officer be deemed to
have made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property or the Fund as
provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the Fund execute the Plan as of November 7, 1994.
SMITH BARNEY
INTERMEDIATE MATURITY CALIFORNIA
MUNICIPALS FUND
By:/s/Heath B.McLendon
Heath B. McLendon
Chairman of the Board
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