U.S. Securities and Exchange Commission
- ------------------------------------------------------
Registration No. 33-90952
811-9012
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[X] Post-Effective Amendment No. 7
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940, Amendment No. 7
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC.
(Exact name of Registrant as Specified in Charter)
388 Greenwich Street, New York, New York 10013
(Address of Principal Executive Offices) (Zip Code)
(800)-451-2010
(Registrant's Telephone Number, including Area Code:)
Christina T. Sydor
388 Greenwich Street, New York, New York 10013(22nd Floor)
(Name and Address of Agent For Service)
Continuous
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective:
It is proposed that this filing will become effective:
immediately upon filing pursuant to Paragraph (b) of Rule 485
XXX On September 28, 1999 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
On Date pursuant to paragraph (a)(1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
On (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common Stock
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC.
PART A
<PAGE>
[LOGO] Smith Barney
Mutual Funds
P R O S P E C T U S
Institutional
Cash
Management
Fund
Cash Portfolio
Government Portfolio
Municipal Portfolio
Class A Shares
----------------------------------------
September 28, 1999
The Securities and Exchange Commission has not approved or disapproved
these securities or determined whether this prospectus is accurate or
complete. Any statement to the contrary is a crime.
<PAGE>
Institutional Cash Management Fund
Contents
<TABLE>
<CAPTION>
<S> <C>
Investments, risks and performance.......................................... 2
Management.................................................................. 9
Buying shares............................................................... 10
Exchanging shares........................................................... 11
Redeeming shares............................................................ 12
Other things to know about share transactions............................... 14
Distributions, dividends and taxes.......................................... 16
Share price................................................................. 17
Financial highlights........................................................ 18
</TABLE>
You should know: An investment in a fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency. There is no
assurance that each fund will be able to maintain a stable net asset value of
$1.00 per share.
Smith Barney Mutual Funds
1
<PAGE>
Investment, risks and performance
Investment objectives
Cash Portfolio and Government Portfolio each seek maximum current income to the
extent consistent with preservation of capital and the maintenance of liquidi-
ty. Municipal Portfolio seeks maximum current income that is exempt from fed-
eral income taxes to the extent consistent with preservation of capital and the
maintenance of liquidity.
Principal investment strategies
Key investments
Government Portfolio This portfolio invests exclusively in short-term U.S. gov-
ernment obligations, including securities issued or guaranteed by the U.S. Gov-
ernment, its agencies and instrumentalities and U.S. Treasury securities and
related repurchase agreements.
Cash Portfolio This portfolio invests in high quality, U.S. dollar denominated
short-term debt securities, primarily commercial paper and obligations of
financial institutions such as certificates of deposit, bankers acceptances,
time deposits of U.S. banks with total assets greater than $1 billion (or the
equivalent in other currencies in the case of foreign banks). Either the prin-
cipal amount of each obligation is fully insured by the FDIC or the issuing
bank has more than $100 million of working capital or more than $1 billion of
total assets. These also may include obligations issued by the U.S. government,
its agencies or instrumentalities, U.S. states and municipalities and U.S. and
foreign corporate issuers. The portfolio will invest at least 25% of its assets
in obligations of domestic and foreign banks.
Cash Portfolio also may invest in money market securities including asset-
backed securities, repurchase agreements and other short term debt securities.
These securities may pay interest at fixed, floating or adjustable rates. The
portfolio limits foreign investments to U.S. dollar denominated securities of
issuers located in major industrialized countries.
Municipal Portfolio This portfolio invests primarily in high quality, short-
term investment grade municipal securities whose interest is exempt from Fed-
eral income tax. These include securities issued by any of the 50 states and
their political subdivisions, agencies and public authorities (together with
certain other governmental issuers such as Puerto Rico, the Virgin Islands and
Guam). As a result, the interest rate on these securities normally is lower
than it would be if the securities were subject to taxation. The municipal
securities in which the fund invests include general obligation
Institutional Cash Management Fund
2
<PAGE>
bonds, revenue bonds and notes, and municipal leases. These securities may pay
interest at fixed, variable or floating rates. The Municipal Portfolio can
invest up to 20% of its assets in securities whose interest is federally tax-
able.
Minimum credit quality The portfolios invest only in high quality securities,
which are those rated by a nationally recognized statistical rating organiza-
tion in one of its two highest short-term rating categories or, if unrated, of
equivalent quality.
Maximum maturity Each portfolio invests exclusively in securities having
remaining maturities of 397 days or less. Each portfolio maintains a dollar-
weighted average portfolio maturity of 90 days or less.
Structured securities Structured securities are a type of derivative instru-
ment. Municipal Portfolio may invest up to 20% of its assets in three types of
structured securities: tender option bonds, partnership interests and swap-
based securities. These securities represent participation interests in a spe-
cial purpose trust or partnership holding one or more municipal bonds and/or
municipal bond interest rate swaps. A typical swap enables the trust or part-
nership to exchange a municipal bond fixed interest rate for a floating or
variable, short-term municipal interest rate.
Selection process
In selecting investments for the portfolios, the manager looks for:
.The best relative values based on an analysis of yield, price, interest rate
sensitivity and credit quality
.Issuers offering minimal credit risk
.Maturities consistent with the manager's outlook for interest rates
Principal risks of investing in the portfolios
All investments involve some degree of risk. However, each portfolio is a
"money market fund" and, as such, seeks income by investing in short-term debt
securities that meet strict standards established by the board of directors
based on special rules for money market funds adopted under federal law.
Although each portfolio seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in a portfolio, or the
portfolios could underperform other short-term debt instruments or money market
funds if:
.Interest rates rise sharply.
Smith Barney Mutual Funds
3
<PAGE>
.An issuer or guarantor of a portfolio's securities defaults, or the security's
credit rating is downgraded.
.The manager's judgment about the value or credit quality of a particular secu-
rity proves to be incorrect.
Cash Portfolio invests at least 25% of its assets in obligations of domestic
and foreign banks and, as a result, is more susceptible to events affecting the
banking industry. The value of the Cash Portfolio's foreign securities may
decline because of unfavorable government actions or political instability.
Some of Municipal Portfolio's income distributions may be, and distributions of
the portfolio's gains will be, subject to federal taxation. The portfolio may
realize taxable gains on the sale of its securities. Some of the portfolio's
income distributions may be subject to the federal alternative minimum tax. In
addition, distributions of the Municipal Portfolio's income and gains generally
will be subject to state income taxation.
Structured Securities, unlike some derivatives, are not designed to leverage
the portfolio or increase its exposure to interest rate risk. Investments in
structured securities raise certain tax, legal, regulatory and accounting
issues which may not be presented by investments in other municipal bonds.
These issues could be resolved in a manner that could hurt the performance of
the portfolios.
Who may want to invest
Cash Portfolio and Government and Municipal Portfolio may be an appropriate
investment if you:
.Are seeking current income
.Are looking for an investment with lower risk than most other types of portfo-
lios
In addition to the above, the Municipal Portfolio may be an appropriate invest-
ment if you:
.Are a taxpayer in a high federal tax bracket seeking current income exempt
from federal taxation
.Are willing to accept the risks of municipal securities
Institutional Cash Management Fund
4
<PAGE>
Risk return bar charts
The bar charts indicate the risks of investing in the portfolios by showing
changes in the portfolios' performance from year to year. Past performance does
not necessarily indicate how a portfolio will perform in the future. The bar
charts show the performance of each of the portfolio's Class A shares for each
of the past 3 calendar years.
Total Return for Cash Portfolio
[BAR GRAPH]
96 4.98%
97 5.12%
98 5.50%
Calendar years ended December 31
Quarterly returns:
Highest: 1.39% in 4th quarter 1997; Lowest: 1.28% in 1st quarter 1997 Year to
date: 2.4% through 6/30/99
Total Return for Government Portfolio
[BAR GRAPH]
96 4.98%
97 5.04%
98 5.36%
Calendar years ended December 31
Quarterly returns:
Highest: 1.38% in 4th quarter 1997; Lowest: 1.26% in 4th quarter 1998 Year to
date: 2.31% through 6/30/99
Smith Barney Mutual Funds
5
<PAGE>
Total Return for Municipal Portfolio
[BAR GRAPH]
96 4.86%
97 5.03%
98 3.39%
Calendar years ended December 31
Quarterly returns:
Highest: 0.91% in 4th quarter 1997; Lowest: 0.80% in 1st quarter 1997 Year to
date: 1.48% through 6/30/99
Risk return table
This table indicates the risks of investing in the portfolios by showing the
average annual total return of Class A shares of the portfolios for the periods
indicated. This table assumes redemption of shares at the end of the period and
reinvestment of distributions and dividends.
Average Annual Total Returns
Calendar Years Ended December 31, 1998
<TABLE>
<CAPTION>
Fund 1 year Since inception Inception Date
<S> <C> <C> <C>
Cash Portfolio 5.50% 5.53% 6/16/95
Government Portfolio 5.36% 5.43% 6/16/95
Municipal Portfolio 3.39% 3.51% 6/16/95
</TABLE>
* Index comparison begins on June 30, 1995.
7 day yield as of December 31, 1998
<TABLE>
<CAPTION>
Cash Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
7 day yield 5.11% 4.75% 3.68%
</TABLE>
Institutional Cash Management Fund
6
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in the
portfolios' shares.
Shareholders fees
<TABLE>
<CAPTION>
Cash Government Municipal
(fees paid directly from your investment) Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases
(as a % of offering price) None None None
Maximum deferred sales charge (load) (as a % of
the lower of net asset value at purchase or
redemption) None None None
</TABLE>
Annual portfolio operating expenses
<TABLE>
<CAPTION>
Cash Government Municipal
(expenses deducted from fund assets) Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management fee(/1/) 0.27% 0.27% 0.27%
Distribution and service (12b-1) fees none none none
Other expenses 0.04% 0.15% 0.12%
----- ----- -----
Total annual portfolio operating expenses(/1/) 0.31% 0.42% 0.39%
</TABLE>
(/1/)The manager has voluntarily agreed to limit total annual operating
expenses to .80% of each portfolio's average daily net assets. Because the man-
ager has also waived a portion of the management fees, actual expenses were:
<TABLE>
<CAPTION>
Cash Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management fee 0.19% 0.08% 0.11%
Total annual fund operating expenses 0.23% 0.23% 0.23%
</TABLE>
Subject to the cap on total expenses, the manager may change or eliminate these
management fee waivers at any time. The manager may terminate the .80% limit on
total operating expenses on fourteen days' prior notice to shareholders.
Smith Barney Mutual Funds
7
<PAGE>
Example
This example helps you compare the costs of investing in each portfolio with
the costs of investing in other mutual funds. Your actual costs may be higher
or lower. The example assumes:
.You invest $10,000 in the portfolio for the period shown
.You redeem all of your shares at the end of the period
.Your investment has a 5% return each year
.You reinvest all distributions and dividends without a sales charge
.Each portfolio's operating expenses remain the same
.Redemption of your shares at the end of the period
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Cash Portfolio $32 $100 $174 $393
Government Portfolio $43 $135 $235 $530
Municipal Portfolio $40 $125 $219 $493
</TABLE>
Institutional Cash Management Fund
8
<PAGE>
Management
Manager The portfolios' investment manager is SSB Citi Fund Management LLC, an
affiliate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New York, New York 10013. The manager selects the funds' investments
and oversees their operations. The manager and Salomon Smith Barney are subsid-
iaries of Citigroup Inc. Citigroup businesses produce a broad range of finan-
cial services--asset management, banking and consumer finance, credit and
charge cards, insurance, investments, investment banking and trading--and use
diverse channels to make them available to consumer and corporate customers
around the world.
Management fee For its services, the manager received a fee during each portfo-
lio's last fiscal year equal to the amount shown below:
<TABLE>
<CAPTION>
Management fee as a percentage of
Fund the fund's average daily net assets
<S> <C>
Cash Portfolio 0.19%
Government Portfolio 0.08%
Municipal Portfolio 0.11%
</TABLE>
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the portfolios' shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the portfolios. The cost of addressing the Year 2000 issue,
if substantial, could adversely affect companies and governments that issue
securities held by the portfolios. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The portfolios have been
informed by other service providers that they are taking similar measures.
Although the portfolios do not expect the Year 2000 issue to adversely affect
them, the portfolios cannot guarantee that the efforts of each portfolio, which
are limited to requesting and receiving reports from its service providers, or
the efforts of its service providers to correct the problem will be successful.
Smith Barney Mutual Funds
9
<PAGE>
Buying shares
Through a
Salomon Smith You should contact your Salomon Smith Barney Financial Con-
Barney sultant or dealer representative to open a brokerage account
Financial and make arrangements to buy shares.
Consultant or
dealer
representative
If you do not provide the following information, your order
will be rejected:
.Specific portfolio being bought
.Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
on the day you place your order. Salomon Smith Barney or your
dealer representative may charge an annual account mainte-
nance fee.
- --------------------------------------------------------------------------------
Through the Certain investors who are clients of the selling group are
Portfolios' eligible to buy shares directly from a portfolio.
transfer
agent
.Call the transfer agent at 1-800-282-3505 for more informa-
tion on establishing an account or purchasing additional
shares.
.Enclose a check to pay for the shares or arrange for
the wiring of federal funds to the transfer agent by call-
ing 1-800-282-3505. For initial purchases, complete and
send an account application.
- --------------------------------------------------------------------------------
Investment The minimum initial investment is $1,000,000; each additional
minimums investment must be $50 or more.
- --------------------------------------------------------------------------------
Effectiveness When purchase orders are paid for in federal funds, or are
of purchase placed by an investor with a sufficient balance in the
orders investor's brokerage account with Salomon Smith Barney or the
dealer representative, the order becomes effective on the day
of receipt if the order is received prior to 12 noon (New
York time) which is the close of business for the Municipal
Portfolio and 2:00 pm (New York time) which is the close of
business with respect to the Cash and Government Portfolios
on any day on
Institutional Cash Management Fund
10
<PAGE>
which the portfolio calculates its net asset value. Purchase
orders received after close of business or with respect to
which federal funds are not available, or when the orders for
the purchase of shares are paid for in other than federal
funds, will not be accepted and a new purchase order will
need to be submitted the next day the fund calculates its net
asset value.
Exchanging shares
You should contact your Salomon Smith Barney Financial Con-
sultant or dealer representative to exchange into another
portfolio. An exchange is a taxable transaction.
.To qualify for the exchange privilege, you must exchange
shares with a current value of at least $1,000
.If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers (documents transferring ownership of
certificates) before the exchange is effective.
- --------------------------------------------------------------------------------
By telephone
If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must com-
plete an authorization form to authorize telephone transfers.
If eligible, you may make telephone exchanges on any day the
New York Stock Exchange is open. Call the transfer agent at
1-800-282-3505 between 9:00 a.m. and 2:00 p.m. Eastern time
(between 9 a.m. and 12 noon for the Municipal Portfolio).
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail
If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on page 13.
Smith Barney Mutual Funds
11
<PAGE>
Redeeming shares
Generally
Redemption requests received in proper form prior to 2 p.m.
Eastern time (12 noon for Municipal Portfolio) are priced at
the net asset value next determined and proceeds paid in fed-
eral funds on the same day. Redemption requests received
after 2 p.m. Eastern time (12 noon for Municipal Portfolio)
will not be accepted and a new redemption request should be
submitted on the next day that the fund calculates its net
asset value.
You may redeem shares by contacting your Salomon Smith Barney
Financial Consultant or dealer representative and have the
proceeds sent by federal funds wired on the same day as the
redemption order was accepted to a bank account previously
designated on your application form. If you change the bank
account designated to receive the proceeds you must submit in
proper form a new account application with a signature guar-
antee.
Your redemption proceeds can be sent by check to your address
of record normally within one but in no event more than three
business days after your request is received in proper form.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers before the redemption is effective.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account in the
form of federal funds on the same day that the redemption
order was accepted and not reinvested without your specific
instruction. In other cases, unless you direct otherwise,
your redemption proceeds will be paid by check mailed to your
address of record.
- --------------------------------------------------------------------------------
By telephone If you have an account application on file with the transfer
agent with the telephone privilege section properly completed
you may request redemptions by telephone on any day the New
York Stock Exchange is
Institutional Cash Management Fund
12
<PAGE>
open. Call the transfer agent at 1-800-282-3505 between 9:00
a.m. and 5:00 p.m. (Eastern time). If, however, you are
unable to contact the transfer agent by telephone you may
contact your Salomon Smith Barney Financial Consultant to
effect such redemption, or request election by mail.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the portfolios, send written
requests to the transfer agent at the following address:
Smith Barney Institutional Cash Management Fund, Inc.
(Specify portfolio)
c/o First Data Investor Services Group, Inc.
P.O. Box 9699
Providence, RI 02940-9699
Your written request must provide the following:
.Your account number
.The class of shares and dollar amount or number of shares to
be redeemed
.Signatures of each owner exactly as the account is
registered
Smith Barney Mutual Funds
13
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
.Name of the portfolio
.Account number
.Dollar amount or number of shares being bought, exchanged or redeemed
.Signature of each owner exactly as the account is registered
A request to purchase shares becomes effective only when Salomon Smith Barney,
a selling group member or the transfer agent receives, or converts the purchase
amount into, federal funds.
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for the account, sending you a written confirmation
or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
.Are sending signed share certificates or stock powers to the transfer agent
.Instruct the transfer agent to mail the check to an address different from the
one on your account
.Changed your account registration
.Want the check paid to someone other than the account owner(s)
.Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
Each portfolio has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
Institutional Cash Management Fund
14
<PAGE>
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
.Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
Small account balances If your account falls below $100,000 because of a
redemption of portfolio shares, a portfolio may ask you to bring your account
up to $100,000. If your account is still below $100,000 after 60 days, the fund
may close your account and send you the redemption proceeds.
Share certificates The portfolios do not issue share certificates unless a
written request signed by all registered owners is made to the transfer agent.
If you hold share certificates, it will take longer to exchange or redeem
shares.
Smith Barney Mutual Funds
15
<PAGE>
Distributions, dividends and taxes
Dividends Each portfolio intends to declare a dividend of substantially all of
its net investment income on each day the New York Stock Exchange is open.
Income dividends are paid monthly. Each portfolio generally makes capital gain
distributions, if any, once a year, typically in December. Each portfolio may
pay additional distributions and dividends at other times if necessary for the
portfolio to avoid a federal tax. Each portfolio expects distributions to be
primarily from income. Dividends and capital gain distributions are reinvested
in additional portfolio shares of the same class you hold. Alternatively, you
can instruct your Salomon Smith Barney Financial Consultant, dealer representa-
tive or the transfer agent to have your distributions and/or dividends paid in
cash. You can change your choice at any time to be effective as of the next
distribution or dividend, except that any change given to the transfer agent
less than five days before the payment date will not be effective until the
next distribution or dividend is paid.
Taxes In general, receiving distributions (whether in cash or additional
shares) is a taxable event.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually no gain or loss
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income (except for
Municipal Portfolio's
distributions
of tax-exempt interest,
which are excludable from
gross income
for Federal income tax
purposes)
</TABLE>
Each portfolio anticipates that it will normally not earn or distribute any
long-term capital gains.
After the end of each year, the portfolio will provide you with information
about the distributions and dividends you received during the previous year. If
you do not provide the portfolio with your correct taxpayer identification num-
ber and any required certifications, you may be subject to back-up withholding
of 31% of your distributions and dividends (other than tax-exempt dividends).
Because each shareholder's circumstances are different and special tax rules
may apply, you should consult your tax adviser about your investment in the
portfolio.
Institutional Cash Management Fund
16
<PAGE>
Share price
You may buy, exchange or redeem shares at their net asset value next determined
after receipt of your request in good order. Each portfolio's net asset value
is the value of its assets minus its liabilities. Municipal Portfolio calcu-
lates its net asset value at noon, Eastern time, every day the New York Stock
Exchange is open. Cash Portfolio and Government Portfolio each calculates its
net asset value at 2 p.m., Eastern time, every day the New York Stock Exchange
is open. The Exchange is closed on certain holidays listed in the Statement of
Additional Information.
Each portfolio uses the amortized cost method to value portfolio securities.
Using this method, a portfolio constantly amortizes over the remaining life of
a security the difference between the principal amount due at maturity and the
cost of the security to the portfolio.
Smith Barney Mutual Funds
17
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the perfor-
mance of Class A shares of each portfolio for the past 5 years (or since incep-
tion if less than 5 years). Certain information reflects financial results for
a single share. Total return represents the rate that a shareholder would have
earned (or lost) on a fund share assuming reinvestment of all dividends and
distributions. The information in the following tables was audited by KPMG LLP,
independent accountants, whose report, along with the funds' financial state-
ments, is included in the annual report (available upon request).
Cash Portfolio
For a Class A share of capital stock outstanding throughout each year ended
May 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996(/1/)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------
Net investment income(/2/) 0.051 0.055 0.052 0.053
Distributions from net investment
income (0.051) (0.055) (0.052) (0.053)
Distributions from net realized
gains (0.000)* (0.000)* -- --
- ---------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------
Total Return 5.23% 5.58% 5.35% 5.44%++
- ---------------------------------------------------------------------------------
Net Assets, End of Year (000s) $1,056,505 $848,383 $216,055 $277,572
- ---------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(/2/)(/3/) 0.23% 0.23% 0.23% 0.15%+
Net investment income 5.07 5.43 5.23 5.43+
- ---------------------------------------------------------------------------------
</TABLE>
(/1/For)the period from June 16, 1995 (inception date) to May 31, 1996.
(/2/The)manager has waived a portion of its fees for the portfolio for the
years ended May 31, 1999, 1998, 1997 and for the period ended May 31, 1996.
If the manager had not agreed to the fee waiver, the per share effect on
net investment income and the ratio of expenses to average net assets for
the Class A shares would have been:
<TABLE>
<CAPTION>
Per Share
Decrease to Net Expense Ratio
Investment Income Without Fee Waiver
--------------------------- -----------------------
1999 1998 1997 1996 1999 1998 1997 1996
------ ------ ------ ------ ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.001 $0.001 $0.001 $0.001 0.31% 0.35% 0.36% 0.39%+
</TABLE>
(/3/As)a result of a voluntary expense limitation, the ratio of expenses to
average net assets of the Portfolio will not exceed 0.23%.
* Amount represents less than $0.001.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
Institutional Cash Management Fund
18
<PAGE>
Government Portfolio
For a Class A share of capital stock outstanding throughout each year ended
May 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996(/1/)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Net investment income(/2/) 0.049 0.053 0.052 0.052
Distributions from net investment
income (0.049) (0.053) (0.052) (0.052)
Distributions from net realized
gains -- -- (0.000)* (0.000)*
- ------------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------
Total Return 5.05% 5.46% 5.29% 5.36%++
- ------------------------------------------------------------------------------
Net Assets, End of Year (000s) $146,103 $88,484 $151,840 $57,698
- ------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(/2/)(/3/) 0.23% 0.23% 0.21% 0.16%+
Net investment income 4.86 5.33 5.18 5.28+
- ------------------------------------------------------------------------------
</TABLE>
(/1/For)the period from June 16, 1995 (commencement of operations) to May 31,
1996.
(/2/The)manager has waived a portion of its fees for the portfolio for the
years ended May 31, 1999, 1998, 1997 and the period ended May 31, 1996. If
the manager had not agreed to the fee waiver, the per share effect on net
investment income and the ratio of expenses to average net assets would
have been:
<TABLE>
<CAPTION>
Per Share
Decrease to Net Expense Ratio
Investment Income Without Fee Waiver
---------------------------------- -----------------------------
1999 1998 1997 1996 1999 1998 1997 1996
------ ------ ------ ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.002 $0.002 $0.001 $0.002 0.42% 0.39% 0.43% 0.55%+
</TABLE>
(/3/As)a result of a voluntary expense limitation, the ratio of expenses to
average net assets of the portfolio will not exceed 0.23%.
* Amount represents less than $0.001.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
Smith Barney Mutual Funds
19
<PAGE>
Municipal Portfolio
For a Class A share of capital stock outstanding throughout each year ended
May 31:
<TABLE>
<CAPTION>
1999 1998 1997 1996(/1/)
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------
Net investment income(/2/) 0.031 0.035 0.034 0.035
Distributions from net investment
income (0.031) (0.035) (0.034) (0.035)
Distributions from net realized
gains -- (0.000)* -- --
- -----------------------------------------------------------------------------
Net Asset Value, End of Year $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------
Total Return 3.18% 3.56% 3.40% 3.55%++
- -----------------------------------------------------------------------------
Net Assets, End of Year (000s) $311,543 $85,671 $23,666 $59,308
- -----------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(/2/)(/3/) 0.23% 0.23% 0.21% 0.15%+
Net investment income 3.09 3.50 3.34 3.46+
- -----------------------------------------------------------------------------
</TABLE>
(/1/) For the period from June 16, 1995 (commencement of operations) to May 31,
1996.
(/2/) The manager has waived all or a part of its fees for the portfolio for
the years ended May 31, 1999, 1998, 1997 and the period ended May 31,
1996. In addition, the manager agreed to reimburse the portfolio for
$63,835 in expenses for the period ended May 31, 1996. If the manager had
not agreed to the fee waiver and the expense reimbursement, the per share
effect on net investment income and the ratio of expenses to average net
assets would have been:
<TABLE>
<CAPTION>
Per Share Expense Ratio
Decrease to Net Without Fee Waiver
Investment Income and Reimbursement
--------------------------- ----------------------
1999 1998 1997 1996 1999 1998 1997 1996
------ ------ ------ ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A $0.002 $0.001 $0.004 $0.003 0.39% 0.41% 0.41% 0.69%+
</TABLE>
(/3/) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets of the Portfolio will not exceed 0.23%.
* Amount represents less than $0.001.
++Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
Institutional Cash Management Fund
20
<PAGE>
SalomonSmithBarney
- ---------------------------
A member of citigroup[LOGO]
Institutional Cash Management Fund
Shareholder reports Annual and semiannual reports to shareholders provide addi-
tional information about each portfolio's investments. These reports discuss
the market conditions and investment strategies that affected the portfolios'
performance.
The portfolios send only one report to a household if more than one account has
the same address. Contact your Salomon Smith Barney Financial Consultant,
dealer representative or the transfer agent if you do not want this policy to
apply to you.
Statement of additional information The statement of additional information
provides more detailed information about the portfolios and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the portfolios or obtain shareholder reports or
the statement of additional information (without charge) by contacting your
Salomon Smith Barney Financial Consultant or dealer representative, by calling
the funds at 1-800-451-2010, or by writing to the funds at Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review and copy the portfolios' shareholder reports, prospectus
and statement of additional information at the Securities and Exchange Commis-
sion's Public Reference Room in Washington, D.C. You can get copies of these
materials for a duplicating fee by writing to the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. Information about the public ref-
erence room may be obtained by calling 1-800-SEC-0330. You can get the same
information free from the Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the portfolios that is not in this prospec-
tus, you should not rely upon that information. Neither the portfolios nor the
distributor is offering to sell shares of the portfolios to any person to whom
the portfolios may not lawfully sell their shares.
SMSalomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file
no. 811-9012)
[FD0958 9/99]
<PAGE>
- -----------------------
[Logo]
Smith Barney Mutual
Funds
- -----------------------
PROSPECTUS SMITH BARNEY
MUTUAL FUNDS
- --------------------------------------------------
September 28, 1999 Institutional Cash Management
Fund
Cash Portfolio
Government Portfolio
Municipal Portfolio
Class B Shares
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is accurate or complete. Any
statement to the contrary is a crime.
<PAGE>
Institutional Cash Management Fund
Contents
<TABLE>
<S> <C>
Investments, risks and performance.......................................... 2
Management.................................................................. 7
Buying shares............................................................... 8
Exchanging shares........................................................... 9
Redeeming shares............................................................ 10
Other things to know about share transactions............................... 12
Distributions, dividends and taxes.......................................... 14
Share price................................................................. 15
</TABLE>
You should know: An investment in a fund is not a bank deposit and is not
insured or guaranteed by the FDIC or any other government agency. There is no
assurance that each fund will be able to maintain a stable net asset value of
$1.00 per share.
Smith Barney Mutual Funds
1
<PAGE>
Investment, risks and performance
Investment objectives
Cash Portfolio and Government Portfolio each seek maximum current income to the
extent consistent with preservation of capital and the maintenance of liquidi-
ty. Municipal Portfolio seeks maximum current income that is exempt from fed-
eral income taxes to the extent consistent with preservation of capital and the
maintenance of liquidity.
Principal investment strategies
Key investments
Government Portfolio This portfolio invests exclusively in short-term U.S. gov-
ernment obligations, including securities issued or guaranteed by the U.S. Gov-
ernment, its agencies and instrumentalities and U.S. Treasury securities and
related repurchase agreements.
Cash Portfolio This portfolio invests in high quality, U.S. dollar denominated
short-term debt securities, primarily commercial paper and obligations of
financial institutions such as certificates of deposit, bankers acceptances,
time deposits of U.S. banks with total assets greater than $1 billion (or the
equivalent in other currencies in the case of foreign banks). Either the prin-
cipal amount of each obligation is fully insured by the FDIC or the issuing
bank has more than $100 million of working capital or more than $1 billion of
total assets. These also may include obligations issued by the U.S. government,
its agencies or instrumentalities, U.S. states and municipalities and U.S. and
foreign corporate issuers. The portfolio will invest at least 25% of its assets
in obligations of domestic and foreign banks.
Cash Portfolio also may invest in money market securities including asset-
backed securities, repurchase agreements and other short term debt securities.
These securities may pay interest at fixed, floating or adjustable rates. The
portfolio limits foreign investments to U.S. dollar denominated securities of
issuers located in major industrialized countries.
Municipal Portfolio This portfolio invests primarily in high quality, short-
term investment grade municipal securities whose interest is exempt from Fed-
eral income tax. These include securities issued by any of the 50 states and
their political subdivisions, agencies and public authorities (together with
certain other governmental issuers such as Puerto Rico, the Virgin Islands and
Guam). As a result, the interest rate on these securities normally is lower
than it would be if the securities were subject to taxation. The municipal
securities in which the fund invests include general obligation
bonds, revenue bonds and notes, and municipal leases. These securities
Institutional Cash Management Fund
2
<PAGE>
may pay interest at fixed, variable or floating rates. The Municipal Portfolio
can invest up to 20% of its assets in securities whose interest is federally
taxable.
Minimum credit quality The portfolios invest only in high quality securities,
which are those rated by a nationally recognized statistical rating organiza-
tion in one of its two highest short-term rating categories or, if unrated, of
equivalent quality.
Maximum maturity Each portfolio invests exclusively in securities having
remaining maturities of 397 days or less. Each portfolio maintains a dollar-
weighted average portfolio maturity of 90 days or less.
Structured securities Structured securities are a type of derivative instru-
ment. Municipal Portfolio may invest up to 20% of its assets in three types of
structured securities: tender option bonds, partnership interests and swap-
based securities. These securities represent participation interests in a spe-
cial purpose trust or partnership holding one or more municipal bonds and/or
municipal bond interest rate swaps. A typical swap enables the trust or part-
nership to exchange a municipal bond fixed interest rate for a floating or
variable, short-term municipal interest rate.
Selection process
In selecting investments for the portfolios, the manager looks for:
.The best relative values based on an analysis of yield, price, interest rate
sensitivity and credit quality
.Issuers offering minimal credit risk
.Maturities consistent with the manager's outlook for interest rates
Principal risks of investing in the portfolios
All investments involve some degree of risk. However, each portfolio is a
"money market fund" and, as such, seeks income by investing in short-term debt
securities that meet strict standards established by the board of directors
based on special rules for money market funds adopted under federal law.
Although each portfolio seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in a portfolio, or the
portfolios could underperform other short-term debt instruments or money market
funds if:
.Interest rates rise sharply.
Smith Barney Mutual Funds
3
<PAGE>
.An issuer or guarantor of the portfolios' securities defaults, or the
security's credit rating is downgraded.
.The manager's judgment about the value or credit quality of a particular secu-
rity proves to be incorrect.
Cash Portfolio invests at least 25% of its assets in obligations of domestic
and foreign banks and, as a result, is more susceptible to events affecting the
banking industry. The value of the Cash Portfolio's foreign securities may
decline because of unfavorable government actions or political instability.
Some of Municipal Portfolio's income distributions may be, and distributions of
the portfolio's gains will be, subject to federal taxation. The portfolio may
realize taxable gains on the sale of its securities. Some of the portfolio's
income distributions may be subject to the federal alternative minimum tax. In
addition, distributions of the Municipal Portfolio's income and gains generally
will be subject to state income taxation.
Structured Securities, unlike some derivatives, are not designed to leverage
the portfolio or increase its exposure to interest rate risk. Investments in
structured securities raise certain tax, legal, regulatory and accounting
issues which may not be presented by investments in other municipal bonds.
These issues could be resolved in a manner that could hurt the performance of
the portfolios.
Who may want to invest
Cash Portfolio and Government and Municipal Portfolio may be an appropriate
investment if you:
.Are seeking current income
.Are looking for an investment with lower risk than most other types of portfo-
lios
In addition to the above, the Municipal Portfolio may be an appropriate invest-
ment if you:
.Are a taxpayer in a high federal tax bracket seeking current income exempt
from federal taxation
.Are willing to accept the risks of municipal securities
No performance information is presented for Class B shares of Government Port-
folio and Municipal Portfolio since there were no Class B shares outstanding
for the years ended May 31, 1998 and 1999. No performance is presented for
Class B shares of Cash Portfolio since there were no Class B shares for a full
calendar year since inception.
Institutional Cash Management Fund
4
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest in the
portfolios' shares. Since no Class B shares of the portfolio were outstanding
for the fiscal year ended May 31, 1999, annual portfolio operating expenses are
based on estimated expenses for the fiscal year ending May 31, 2000. Other
expenses are estimated based upon Class A shares' expenses for the fiscal year
ending May 31, 2000.
Shareholder fees
<TABLE>
<CAPTION>
Cash Government Municipal
(fees paid directly from your investment) Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a % of offering price) None None None
Maximum deferred sales charge (load) (as a % of
the lower of net asset value at purchase or
redemption) None None None
</TABLE>
Annual portfolio operating expenses
<TABLE>
<CAPTION>
Cash Government Municipal
(expenses deducted from fund assets) Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management fee/1/ 0.27% 0.27% 0.27%
Distribution and service (12b-1) fees 0.25% 0.25% 0.25%
Other expenses 0.04% 0.15% 0.12%
----- ----- -----
Total annual fund operating expenses/1/ 0.56% 0.67% 0.64%
</TABLE>
/1/The manager has voluntarily agreed to limit total annual operating expenses
to .80% of each portfolio's average daily net assets. Because the manager has
also voluntarily agreed to waive management fees, actual expenses were:
<TABLE>
<CAPTION>
Cash Government Municipal
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management fee 0.19% 0.08% 0.11%
Total annual fund operating expenses 0.48% 0.48% 0.48%
</TABLE>
Subject to the cap on total expenses, the manager may change or eliminate these
management fee waivers at any time. The manager may terminate the .80% limit on
total operating expenses on fourteen days' prior notice to shareholders.
Smith Barney Mutual Funds
5
<PAGE>
Example
This example helps you compare the costs of investing in each portfolio with
the costs of investing in other mutual funds. Your actual costs may be higher
or lower. The example assumes:
.You invest $10,000 in the portfolios for the period shown
.You redeem all of your shares at the end of the period
.Your investment has a 5% return each year
.You reinvest all distributions and dividends without a sales charge
.Each portfolio's operating expenses remain the same
.Redemption of your shares at the end of the period
Number of years you own your shares
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Cash Portfolio $57 $179 $313 $737
Government Portfolio $68 $214 $373 $836
Municipal Portfolio $65 $205 $357 $810
</TABLE>
Institutional Cash Management Fund
6
<PAGE>
Management
Manager The portfolios' investment manager is SSB Citi Fund Management LLC, an
affiliate of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New York, New York 10013. The manager selects the funds' investments
and oversees their operations. The manager and Salomon Smith Barney are subsid-
iaries of Citigroup Inc. Citigroup businesses produce a broad range of finan-
cial services--asset management, banking and consumer finance, credit and
charge cards, insurance, investments, investment banking and trading--and use
diverse channels to make them available to consumer and corporate customers
around the world.
Distributor The fund has entered into an agreement with CFBDS, Inc. to distrib-
ute the portfolios' shares. A selling group consisting of Salomon Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans Each portfolio has adopted a Rule 12b-1 distribution plan
for its Class B shares. Under each plan, the portfolio pays distribution and
service fees. These fees are an ongoing expense and, over time, may cost you
more than other types of sales charges.
Year 2000 issue Information technology experts are concerned about computer
systems' ability to process date-related information on and after January 1,
2000. This situation, commonly known as the "Year 2000" issue, could have an
adverse impact on the portfolios. The cost of addressing the Year 2000 issue,
if substantial, could adversely affect companies and governments that issue
securities held by the portfolios. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The portfolios have been
informed by other service providers that they are taking similar measures.
Although the portfolios do not expect the Year 2000 issue to adversely affect
them, the portfolios cannot guarantee that the efforts of each fund, which are
limited to requesting and receiving reports from its service providers, or the
efforts of its service providers to correct the problem will be successful.
Smith Barney Mutual Funds
7
<PAGE>
Buying shares
Through a You should contact your Salomon Smith Barney Financial
Salomon Smith Consultant or dealer representative to open a brokerage
Barney account and make arrangements to buy shares.
Financial
Consultant or
dealer
representative
If you do not provide the following information, your order
will be rejected
.Specific portfolio being bought
.Dollar amount or number of shares being bought
You should pay for your shares through your brokerage account
on the day you place your order. Salomon Smith Barney or your
dealer representative may charge an annual account mainte-
nance fee.
- --------------------------------------------------------------------------------
Through the Certain investors who are clients of the selling group are
funds' eligible to buy shares directly from the portfolio.
transfer
agent
.Call the transfer agent at 1-800-282-3505 for more informa-
tion on establishing an account or purchasing additional
shares.
.Enclose a check to pay for the shares, or arrange for the
wiring of federal funds to the transfer agent by calling 1-
800-282-3505. For initial purchases, complete and send an
account application.
- --------------------------------------------------------------------------------
Investment The minimum initial investment is $1,000,000; each additional
minimums investment must be $50 or more.
- --------------------------------------------------------------------------------
Effectiveness When purchase orders are paid for in federal funds, or are
of purchase placed by an investor with a sufficient balance in the
orders investor's brokerage account with Salomon Smith Barney or the
dealer representative, the order becomes effective on the day
of receipt if the order is received prior to 12 noon (New
York time) which is the close of business for the Municipal
Portfolio and 2:00 pm (New York time) which is the close of
business with respect to the Cash and Government Portfolios
on any day on which the portfolio calculates its net asset
value. Purchase orders received after close of business or
with respect to which federal funds are not available, or
when the orders for the purchase of shares are paid for
Institutional Cash Management Fund
8
<PAGE>
in other than federal funds, will not be accepted and a new
purchase order will need to be submitted the next day the
fund calculates its net asset value.
Exchanging shares
You should contact your Salomon Smith Barney Financial Con-
sultant or dealer representative to exchange into another
portfolio. An exchange is a taxable transaction.
.To qualify for the exchange privilege, you must exchange
shares with a current value of at least $1,000
.If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with
signed stock powers (documents transferring ownership of
certificates) before the exchange is effective.
- --------------------------------------------------------------------------------
By telephone If you do not have a brokerage account, you may be eligible
to exchange shares through the transfer agent. You must com-
plete an authorization form to authorize telephone transfers.
If eligible, you may make telephone exchanges on any day the
New York Stock Exchange is open. Call the transfer agent at
1-800-282-3505 between 9:00 a.m. and 2:00 p.m. (Eastern time)
(between 9 a.m. and 12 noon for the Municipal Portfolio).
You can make telephone exchanges only between accounts that
have identical registrations.
- --------------------------------------------------------------------------------
By mail If you do not have a Salomon Smith Barney brokerage account,
contact your dealer representative or write to the transfer
agent at the address on page 11.
Smith Barney Mutual Funds
9
<PAGE>
Redeeming shares
Generally
Redemption requests received in proper form prior to 2 p.m.
Eastern time (12 noon for Municipal Portfolio) are priced at
the net asset value next determined and proceeds paid in fed-
eral funds on the same day. Redemption requests received
after 2 p.m. Eastern time (12 noon for Municipal Portfolio)
will not be accepted and a new redemption request should be
submitted on the next day that the fund calculates its net
asset value.
You may redeem shares by contacting your Salomon Smith Barney
Financial Consultant or dealer representative and have the
proceeds sent by federal funds wired on the same day as the
redemption order was accepted to a bank account previously
designated on your application form. If you change the bank
account designated to receive the proceeds you must submit in
proper form a new account application with a signature guar-
antee.
Your redemption proceeds can be sent by check to your address
of record normally within one but in no event more than three
business days after your request is received in proper form.
If you hold share certificates, the transfer agent must
receive the certificates endorsed for transfer or with signed
stock powers before the redemption is effective.
If you have a Salomon Smith Barney brokerage account, your
redemption proceeds will be placed in your account in the
form of federal funds on the same day that the redemption
order was accepted and not reinvested without your specific
instruction. In other cases, unless you direct otherwise,
your redemption proceeds will be paid by check mailed to your
address of record.
Institutional Cash Management Fund
10
<PAGE>
- --------------------------------------------------------------------------------
By telephone If you have an account application on file with the transfer
agent with the telephone privilege section properly completed
you may request redemptions by telephone on any day the New
York Stock Exchange is open. Call the transfer agent at 1-
800-282-3505 between 9:00 a.m. and 5:00 p.m. (Eastern time).
If, however, you are unable to contact the transfer agent by
telephone you may contact your Salomon Smith Barney Financial
Consultant to effect such redemption, or request election by
mail.
- --------------------------------------------------------------------------------
By mail For accounts held directly at the portfolios, send written
requests to the transfer agent at the following address:
Smith Barney Institutional Cash Management Fund, Inc.
(Specify portfolio)
c/o First Data Investor Services Group, Inc.
P.O. Box 9699
Providence, RI 02940-9699
Your written request must provide the following:
.Your account number
.The class of shares and dollar amount or number of shares to
be redeemed
.Signatures of each owner exactly as the account is
registered
Smith Barney Mutual Funds
11
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good order.
This means you have provided the following information, without which your
request will not be processed:
.Name of the portfolio
.Account number
.Dollar amount or number of shares being bought, exchanged or redeemed
.Signature of each owner exactly as the account is registered
A request to purchase shares becomes effective only when Salomon Smith Barney,
a selling group member or the transfer agent receives, or converts the purchase
amount into, federal funds.
The transfer agent will try to confirm that any telephone exchange or redemp-
tion request is genuine by recording calls, asking the caller to provide a per-
sonal identification number for the account, sending you a written confirmation
or requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must include
a signature guarantee if you:
.Are sending signed share certificates or stock powers to the transfer agent
.Instruct the transfer agent to mail the check to an address different from the
one on your account
.Changed your account registration
.Want the check paid to someone other than the account owner(s)
.Are transferring the redemption proceeds to an account with a different regis-
tration
You can obtain a signature guarantee from most banks, dealers, brokers, credit
unions and federal savings and loan institutions, but not from a notary public.
Each portfolio has the right to:
.Suspend the offering of shares
.Waive or change minimum and additional investment amounts
Institutional Cash Management Fund
12
<PAGE>
.Reject any purchase or exchange order
.Change, revoke or suspend the exchange privilege
.Suspend telephone transactions
.Suspend or postpone redemptions of shares on any day when trading on the New
York Stock Exchange is restricted, or as otherwise permitted by the Securi-
ties and Exchange Commission
.Pay redemption proceeds by giving you securities. You may pay transaction
costs to dispose of the securities
Small account balances If your account falls below $100,000 because of a
redemption of portfolio shares, a portfolio may ask you to bring your account
up to $100,000. If your account is still below $100,000 after 60 days, the fund
may close your account and send you the redemption proceeds.
Share certificates The portfolios do not issue share certificates unless a
written request signed by all registered owners is made to the transfer agent.
If you hold share certificates, it will take longer to exchange or redeem
shares.
Smith Barney Mutual Funds
13
<PAGE>
Distributions, dividends and taxes
Dividends Each portfolio intends to declare a dividend of substantially all of
its net investment income on each day the New York Stock Exchange is open.
Income dividends are paid monthly. Each portfolio generally makes capital gain
distributions, if any, once a year, typically in December. Each portfolio may
pay additional distributions and dividends at other times if necessary for the
portfolio to avoid a federal tax. Each portfolio expects distributions to be
primarily from income. Dividends and capital gain distributions are reinvested
in additional portfolio shares of the same class you hold. Alternatively, you
can instruct your Salomon Smith Barney Financial Consultant, dealer representa-
tive or the transfer agent to have your distributions and/or dividends paid in
cash. You can change your choice at any time to be effective as of the next
distribution or dividend, except that any change given to the transfer agent
less than five days before the payment date will not be effective until the
next distribution or dividend is paid.
Taxes In general, receiving distributions (whether in cash or additional
shares) is a taxable event.
<TABLE>
<CAPTION>
Transaction Federal tax status
<S> <C>
Redemption or exchange of shares Usually no gain or loss
Long-term capital gain distributions Long-term capital gain
Short-term capital gain distributions Ordinary income
Dividends Ordinary income (except for
Municipal Portfolio's distributions
of tax-exempt interest,
which are excludable
from gross income
for Federal income tax purposes)
</TABLE>
Each portfolio anticipates that it will normally not earn or distribute any
long-term capital gains.
After the end of each year, the portfolio will provide you with information
about the distributions and dividends you received during the previous year. If
you do not provide the portfolio with your correct taxpayer identification num-
ber and any required certifications, you may be subject to back-up withholding
of 31% of your distributions and dividends (other than tax-exempt dividends).
Because each shareholder's circumstances are different and special tax rules
may apply, you should consult your tax adviser about your investment in the
portfolio.
Institutional Cash Management Fund
14
<PAGE>
Share price
You may buy, exchange or redeem shares at their net asset value next determined
after receipt of your request in good order. Each portfolio's net asset value
is the value of its assets minus its liabilities. Municipal Portfolio calcu-
lates its net asset value at noon, Eastern time, every day the New York Stock
Exchange is open. Cash Portfolio and Government Portfolio each calculates its
net asset value at 2 p.m., Eastern time, every day the New York Stock Exchange
is open. The Exchange is closed on certain holidays listed in the Statement of
Additional Information.
Each portfolio uses the amortized cost method to value portfolio securities.
Using this method, a portfolio constantly amortizes over the remaining life of
a security the difference between the principal amount due at maturity and the
cost of the security to the portfolio.
Smith Barney Mutual Funds
15
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the perfor-
mance of Class B shares of each portfolio for the past 5 years (or since incep-
tion if less than 5 years). Certain information reflects financial results for
a single share. Total return represents the rate that a shareholder would have
earned (or lost) on a portfolio share assuming reinvestment of all dividends
and distributions. The information in the following tables was audited by KPMG
LLP, independent accountants, whose report, along with the funds' financial
statements, is included in the annual report (available upon request).
No financial information is presented for Class B shares of Government Portfo-
lio and Municipal Portfolio since there were no Class B shares outstanding for
the years ended May 31, 1998 or 1999 and in the case of Cash Portfolio for the
year ended May 31, 1999 since there were no Cash Portfolio shares outstanding
for the year ended May 31, 1999.
Cash Portfolio
For a Class B share of capital stock outstanding throughout each year ended
May 31:
<TABLE>
<CAPTION>
1998(/1/)
- -------------------------------------------------
<S> <C>
Net asset value, beginning of year $ 1.00
- -------------------------------------------------
Income (loss) from operations:
Net investment income (loss)(/2/) 0.31
- -------------------------------------------------
Total income (loss) from operations 0.31
- -------------------------------------------------
Less distributions from:
Net investment income (0.31)
Total distributions (0.31)
- -------------------------------------------------
Net asset value, end of year $ 1.00
- -------------------------------------------------
Total return 3.13%(4)
- -------------------------------------------------
Net assets, end of year (000)'s $2,400
- -------------------------------------------------
Ratios to average net assets:
Expenses(/2/)(/3/) 0.47%(5)
Net investment income (loss) 5.21
- -------------------------------------------------
</TABLE>
Institutional Cash Management Fund
16
<PAGE>
(/1/) For the period from October 28, 1997 (commencement of operations) to May
31, 1998.
(/2/) The manager has waived a portion of its fees for the fiscal year ended
May 31, 1999 and for the period ending May 31, 1998. If the manager had
not agreed to the fee waiver, the per share decrease in net investment
income and ratio of expenses to average net assets would have been:
<TABLE>
<CAPTION>
Per Share Decrease Expense Ratio
In Net Investment Income Without Fee Waiver
1998(/1/) 1998(/1/)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Cash Portfolio $0.000(/6/) 0.48%
- --------------------------------------------------------------------------------------
</TABLE>
(/3/) As a result of a voluntary expense limitation, the ratio of expenses to
average net assets will not exceed 0.48%.
(/4/) Not annualized.
(/5/) Annualized.
(/6/) Amount represents less than $0.01.
Smith Barney Mutual Funds
17
<PAGE>
(This page is intentionally left blank.)
<PAGE>
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
Institutional Cash
Management Fund
Shareholder reports Annual and semiannual reports to shareholders provide addi-
tional information about each portfolio's investments. These reports discuss
the market conditions and investment strategies that affected the portfolios'
performance.
The portfolios send only one report to a household if more than one account
has the same address. Contact your Salomon Smith Barney Financial Consultant,
dealer representative or the transfer agent if you do not want this policy to
apply to you.
Statement of additional information The statement of additional information
provides more detailed information about the portfolios and is incorporated by
reference into (is legally part of) this prospectus.
You can make inquiries about the portfolios or obtain shareholder reports or
the statement of additional information (without charge) by contacting your
Salomon Smith Barney Financial Consultant or dealer representative, by calling
the funds at 1-800-451-2010, or by writing to the funds at Smith Barney Mutual
Funds, 388 Greenwich Street, MF2, New York, New York 10013.
Visit our web site. Our web site is located at www.smithbarney.com
You can also review and copy the portfolios' shareholder reports, prospectus
and statement of additional information at the Securities and Exchange Commis-
sion's Public Reference Room in Washington, D.C. You can get copies of these
materials for a duplicating fee by writing to the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. Information about the public ref-
erence room may be obtained by calling 1-800-SEC-0330. You can get the same
information free from the Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the portfolios that is not in this prospec-
tus, you should not rely upon that information. Neither the portfolios nor the
distributor is offering to sell shares of the portfolios to any person to whom
the portfolios may not lawfully sell their shares.
(SM)Salomon Smith Barney is a service mark of Salomon Smith Barney Inc.
(Investment Company Act file
no. 811-09012)
FD0959 9/99
PART B
SMITH BARNEY
INSTITUTIONAL CASH MANAGEMENT FUND, INC.
388 Greenwich Street
New York, NY 10013
800-451-2010
STATEMENT OF ADDITIONAL INFORMATION
September 28, 1999
The Cash Portfolio, the Government Portfolio and the Municipal Portfolio.
Smith Barney Institutional Cash Management Fund, Inc. (the "Company") is a
money market fund that invests in high quality money market instruments.
The Company is a no-load, open-end management investment company that
offers shares in three funds: the Cash Portfolio, the Government Portfolio
and the Municipal Portfolio (individually, a "fund" and collectively, the
"funds").
The investment objective of each of the Cash Portfolio and the Government
Portfolio is to maximize current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The investment
objective of the Municipal Portfolio is to maximize current income exempt
from federal income taxes to the extent consistent with the preservation
of capital and the maintenance of liquidity.
An investment in a fund is neither insured nor guaranteed by the U.S.
government. There is no assurance that a fund will be able to maintain a
stable net asset value of $1.00 per share.
Each fund is designed primarily for institutions as an economical and
convenient means for the investment of short-term funds. Each fund
currently offers two classes of shares. Class A shares may be purchased
by institutional investors on their own behalf. Class B shares may be
purchased by institutional investors on behalf of their clients.
This statement of additional information ("SAI") expands upon and
supplements the information contained in the current prospectuses of Class
A shares and Class B shares each dated September 28, 1999, as amended or
supplemented from time to time (the "prospectuses"), and should be read in
conjunction with the prospectuses. The prospectuses may be obtained from
a Salomon Smith Barney Financial Consultant or by writing or calling the
Company at the address or telephone number set forth above. This SAI,
although not in itself a prospectus, is incorporated by reference into the
prospectuses in its entirety.
TABLE OF CONTENTS
Management of the Company 2
Investment Objectives 4
Types of Securities and Investment Techniques 4
Risk Factors 17
Investment Restrictions 17
Yield Information 21
Determination of Net Asset Value 23
Purchase of Shares 23
Exchange Privilege 24
Redemption of Shares 25
Management Agreement, Plan of Distribution and Other Services 26
Taxes 28
Additional Information About the Company 30
Financial Statements 31
Appendix A Description of Securities Ratings A-
1
Appendix B Description of Municipal Securities B-
1
MANAGEMENT OF THE COMPANY
Directors and Executive Officers of the Company
Overall responsibility for management and supervision of the Company rests
with its Directors. The Directors approve all significant agreements
between the Company and the companies that furnish services to the
Company, including agreements with the Company's distributor, investment
adviser, custodian and transfer agent. The day-to-day operations of each
fund are delegated to SSB Citi Fund Management LLC ("SSBC" or the
"Manager") (formerly Mutual Management Corp.).
The following are the names of the Directors and executive officers of the
Company together with a brief description of their principal occupations
during the last five years. Each Director who is an "interested person"
of the Company, as defined in the Investment Company Act of 1940 as
amended (the "1940 Act"), is indicated by an asterisk.
Paul R. Ades, Director (Age 59). Partner in the law firm of Murov & Ades.
His address is 272 South Wellwood Avenue, Lindenhurst, New York 11757.
Herbert Barg, Director (Age 76). Private investor. His address is 273
Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Dwight B. Crane, Director (Age 62). Professor, Graduate School of
Business Administration, Harvard University. His address is Graduate
School of Business Administration, Harvard University, Boston,
Massachusetts 02163.
Frank G. Hubbard, Director (Age 63). Vice President of S&S Industries;
Former Corporate Vice President, Materials Management and Marketing
Services of Huls America, Inc. His address is 80 Centennial Avenue P.O.
Box 456, Piscataway, New Jersey 08855-0456.
*Heath B. McLendon, Chairman of the Board, President and Chief Executive
Officer (Age 66). Managing Director of Salomon Smith Barney Inc. ("Salomon
Smith Barney) and President if SSBC Fund Management Inc. ("SSBC")(formerly
known as Mutual Management Corp.) and Travelers Investment Advisers, Inc.
("TIA"); Chairman and Co-Chairman of the Board of 64 investment companies
associated with Citigroup, Inc. ("Citigroup") formerly Chairman of the
Board of Smith Barney Strategy Advisers Inc.
Jerome Miller, Director (Age 61). Retired, Former President, Asset
Management Group of Shearson Lehman Brothers. His address is 27 Hemlock
Road, Manhasset, New York, New York 11030.
Ken Miller, Director (Age 56). President of Young Stuff Apparel Group,
Inc. His address is 1407 Broadway, 6th Floor, New York, New York 10018.
Joseph Benevento (Age 31), Vice President and Investment Officer of
Salomon Smith Barney and Vice President of the Fund and four investment
companies associated with Salomon Smith Barney.
Lewis E. Daidone, Senior Vice President and Treasurer (Age 42). Managing
Director of Salomon Smith Barney; Senior Vice President and Treasurer of
59 investment companies affiliated with Citigroup, Director and Senior
Vice President of SSBC and TIA. His address is 388 Greenwich Street, New
York, New York 10013.
Christina T. Sydor, Secretary (Age 48). Managing Director of Salomon
Smith Barney; General Counsel and Secretary of SSBC and TIA. Ms. Sydor
also serves as Secretary of 59 investment companies associated with
Citigroup. Her address is 388 Greenwich Street, New York, New York 10013.
Phyllis M. Zahorodny, Vice President and Investment Officer (Age 40).
Investment Officer of SSBC and Managing Director of Salomon Smith Barney
and Investment Officer of four investment companies associated with
Salomon Smith Barney. Her address is 388 Greenwich Street, New York, New
York, 10013.
Joseph Deane, Vice President and Investment Officer (Age 50). Managing
Director of Salomon Smith Barney and Investment Officer of other
investment companies associated with Salomon Smith Barney.
Each Director also serves as a director, trustee and/or general partner of
certain other mutual funds for which Salomon Smith Barney serves as
distributor. As of September 7, 1999, the Directors and officers of the
Company, as a group, owned less than 1.00% of the outstanding shares of
common stock of each fund.
To the best knowledge of the Directors, as of September 7, 1999, the
following shareholders or "groups" (as such term is defined in section
13(d) of the Securities Exchange Act of 1934, as amended) owned
beneficially or of record more than 5% of the shares of the following
funds:
FUND
CLASS
PERCENT
NAME
ADDRESS
Cash Portfolio
A
6.0350
Software.Com
Attn: Amy Brown
525 Anacapa Street
Santa Barbara CA 93101-
1603
Municipal
Portfolio
A
12.8329
Joe E Taylor Jr.
47 Mahalo Lane
Columbia SC 29204-3380
Municipal
Portfolio
A
12.5496
Blair B Mohm
1431 Hunsicker Road
Lancaster PA 17601-5311
Municipal
Portfolio
A
9.3893
First Omedia
"1995" Limited
Partnership
SBAM Municipal
Account
Belfint, Lyons &
Shuman CPA's
P.O Box 2105
Wilmington DE 19899-
2105
Municipal
Portfolio
A
9.1029
First Omedia
"1995" Limited
Partnership
SBAM Municipal
Account
Belfint, Lyons &
Shuman CPA's
P.O Box 2105
Wilmington DE 19899-
2105
Municipal
Portfolio
A
7.4148
T.M. Equity
Attn: Jim Clarke
Rt. 23 box 577-A
Hendersonville NC
28792-8928
Municipal
Portfolio
A
6.0525
Saxon & Co.
C/o PNC Bank
Attn: ACI/Reorg
Lawrence Lockwood or
Maleka Young
200 Stevens Drive
Suite 260A
Lester PA 19113
FUND
CLASS
PERCENT
NAME
ADDRESS
Municipal
Portfolio
A
5.7943
SEI Trust Co.
C/o Smith Barney
One Freedom Valley
Drive
Oaks PA 19456
Government
Portfolio
A
18.2474
Computer Mgt.
Sciences, Inc. ESOP
Plan
8133 Baymeadows
Jacksonville FL 32256-
8218
Government
Portfolio
A
8.4257
Giant Industries
Inc.
Attn: Mark Cox
23733 North Scottsdale
Road
Scottsdale AZ 85255-
3465
Government
Portfolio
A
8.1962
J Ralph Beaird
Receiver
For DTC & DCL
Corporations
440 North College Ave
Athens GA 30601-2773
Government
Portfolio
A
6.0215
Ramp Networks
Attn: Scott Gordon
3100 De La Cruz Blvd.
Santa Clara CA 95054-
2402
For the fiscal year ended May 31, 1999, the Directors were paid the
following compensation as a director of the Company and as trustee and/or
general partner of other Smith Barney Mutual Funds.
No officer, director or employee of Salomon Smith Barney or any parent or
subsidiary receives any compensation from the Company for serving as an
officer or Director of the Company. The Company pays each Director who is
not an officer, director or employee of Salomon Smith Barney or any of its
affiliates a fee of $3,000 per annum plus $750 per meeting attended and
reimburses travel and out-of-pocket expenses. For the fiscal year ended
May 31, 1999, such expenses totaled $9,443.
Name of Person
Aggregate
Compensation
from Company
Total Pension
or Retirement
Benefits
Accrued as
part of
Company
Expenses
Compensation
from Company
and Fund
Complex Paid
to Directors
Number of
Funds for
Which
Director
Serves Within
Fund Complex
Paul R. Ades
$7,700
0
$54,225
5
Herbert Barg
7,700
0
105,425
16
Dwight B. Crane
6,950
0
139,975
22
Frank G. Hubbard
7,700
0
54,125
5
Heath B. McLendon
- ---
- ---
- ---
58
Jerome Miller
6,950
0
44,925
5
Ken Miller
6,850
0
53,625
5
* Director Emeritus. Upon attainment of age 80 Directors are required to
change to emeritus status. Directors Emeritus are entitled to serve in
emeritus status for a maximum of 10 years during which time they are paid
50% of the annual retainer fee and meeting fees otherwise applicable to
the Company Directors together with reasonable out-of-pocket expenses for
each meeting attended. During the Company's last fiscal year aggregate
compensation paid by the Company to Directors Emeritus totaled $4,690.
INVESTMENT OBJECTIVES
As discussed in the prospectuses, the investment objective of each of the
Cash Portfolio and the Government Portfolio is to seek maximum current
income to the extent consistent with preservation of capital and the
maintenance of liquidity. The investment objective of the Municipal
Portfolio is to seek maximum current income that is exempt from federal
income taxes to the extent consistent with preservation of capital and the
maintenance of liquidity. There can be no assurance that a fund will
achieve its investment objective or maintain a stable net asset value of
$1.00 per share. The investment objectives of the funds are fundamental
and may not be changed without shareholder approval. Shareholders will be
notified of material changes in investment policies.
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES
The funds will invest only in eligible high-quality, short-term money
market instruments that present minimal credit risks determined by the
Manager pursuant to procedures adopted by the Directors.
Each of the funds may invest only in "eligible securities" as defined in
Rule 2a-7 adopted under the 1940 Act. Generally, an eligible security is a
security that (i) is denominated in U. S. dollars and has a remaining
maturity of 13 months or less (as calculated pursuant to Rule 2a-7); (ii)
is rated, or is issued by an issuer with short-term debt outstanding that
is rated, in one of the two highest rating categories by any two
nationally recognized statistical rating organizations ("NRSROs") or, if
only one NRSRO has issued a rating, by that NRSRO (the "Requisite
NRSROs"), or is unrated and of comparable quality to a rated security, as
determined by SSBC; and (iii) has been determined by SSBC to present
minimal credit risks pursuant to procedures approved by the Directors. In
addition, the funds will maintain a dollar-weighted average portfolio
maturity of 90 days or less. The NRSROs currently designated as such by
the SEC are Standard & Poor's Ratings Group ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), FitchIBCA, Inc., Duff and Phelps Credit Rating
Co. and Thomson BankWatch. A description of the ratings of some NRSROs
appears in Appendix A.
Except to the limited extent permitted by Rule 2a-7 and except for U.S.
government securities (as described below), the Cash and Municipal
Portfolios will not invest more than 5% of their total assets in the
securities of any one issuer, except when the securities are subject to
demand features and/or guarantees that meet the requirements of Rule 2a-7
(as to diversification and other requirements of the Rule). To ensure
adequate liquidity, no fund may invest more than 10% of its net assets in
illiquid securities, including repurchase agreements maturing in more than
seven days and time deposits that mature in more than two business days.
Because the funds are typically used as a cash management vehicle, they
intend to maintain a high degree of liquidity. SSBC determines and
monitors the liquidity of portfolio securities under the supervision of
the Directors.
If the funds acquire securities that are unrated (other than U.S.
government securities, as described below), the acquisition must be
approved under the procedures adopted by the Board of Directors.
Under Rule 2a-7, each fund may invest more than 5% (but no more than 25%)
of the then-current value of its total assets in the securities of a
single issuer for a period of up to three business days, provided that (a)
the securities either are rated by the Requisite NRSROs in the highest
short-term rating category or are securities of issuers that have received
such rating with respect to other short-term debt securities or are
comparable unrated securities, and (b) the fund does not make more than
one such investment at any one time.
Pursuant to Rule 2a-7, each fund invests in ''first-tier" securities.
First-tier securities are U.S. government securities, shares of other
money market funds, and securities that are rated, or are issued by an
issuer with short-term debt outstanding that is rated, in the highest
short-term rating category by the Requisite NRSROs, or are unrated and of
comparable quality to a rated security. In addition, a fund may invest in
"second-tier" securities, which are defined as eligible securities that
are not first-tier securities. However, a fund may not invest in a
second-tier security (in the case of the Municipal Portfolio, second tier
conduit securities), if immediately after the acquisition thereof the fund
would have invested more than (i) the greater of one percent of its total
assets or $1,000,000 in second-tier securities (in the case of the
Municipal Portfolio, second tier conduit securities) issued by that
issuer, or (ii) five percent of its total assets in second-tier securities
(in the case of the Municipal Portfolio, second tier conduit securities).
In addition, the Cash Portfolio and the Government Portfolio may not
invest more than 5% of their respective total assets in Eligible
Securities that have not received the highest rating from the Requisite
NRSROs and comparable unrated securities ("Second Tier Securities") and
may not invest more than the greater of 1% of their respective total
assets or $1,000,000 in the Second Tier Securities of any one issuer.
U.S. Government Securities. Each fund invests in securities issued or
guaranteed by the U.S. government or one of its agencies, authorities or
instrumentalities. Securities in which the funds may invest include debt
obligations of varying maturities issued by the U.S. Treasury or issued or
guaranteed by an agency or instrumentality of the U.S. government,
including the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, General Services Administration,
Central Bank for Cooperatives, Federal Farm Credit Banks, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage Association,
Maritime Administration, Tennessee Valley Authority, District of Columbia
Armory Board, Student Loan Marketing Association and Resolution Trust
Corporation. Direct obligations of the U.S. Treasury include a variety of
securities that differ in their interest rates, maturities and dates of
issuance. Because the U.S. government is not obligated by law to provide
support to an instrumentality that it sponsors, none of the funds will
invest in obligations issued by an instrumentality of the U.S. government
unless SSBC determines that the instrumentality's credit risk does not
make its securities unsuitable for investment by the fund.
Ratings as Investment Criteria. In general, the ratings of NRSROs
represent the opinions of those organizations as to the quality of the
securities that they rate. It should be emphasized, however, that such
ratings are relative and subjective, are not absolute standards of quality
and do not evaluate the market risk of securities. These ratings will be
used by the funds as initial criteria for the selection of portfolio
securities, but the funds also will rely upon the independent advice of
SSBC to evaluate potential investments.
Subsequent to the purchase of a particular security by a fund, its rating
may be reduced below the minimum required for purchase by the fund or the
issuer of the security may default on its obligations with respect to the
security. In that event, the fund will dispose of the security as soon as
practicable, consistent with achieving an orderly disposition of the
security, unless the Directors determine that disposal of the security
would not be in the best interest of the fund. In addition, it is
possible that a security may cease to be rated or an NRSRO might not
timely change its rating of a particular security to reflect subsequent
events. Neither of these events will necessarily require the sale of the
security by the fund, but the Directors will promptly consider such event
in their determination of whether the fund should continue to hold the
security. In addition, to the extent that the ratings change as a result
of changes in such organizations or their rating systems, the fund will
attempt to use comparable ratings as standards for its investments in
accordance with its investment objective and policies.
Repurchase Agreements. Each fund may engage in repurchase agreement
transactions with banks which are issuers of instruments acceptable for
purchase by such fund and with certain dealers listed on the Federal
Reserve Bank of New York's list of reporting dealers. Repurchase
agreements are transactions in which a fund purchases securities (normally
U.S. government securities) and simultaneously commits to resell those
securities to the seller at an agreed upon price on an agreed upon future
date, normally one to seven days later. The resale price reflects a market
rate of interest that is not related to the coupon rate or maturity of the
securities. If the seller of the securities underlying a repurchase
agreement fails to pay the agreed resale price on the agreed delivery
date, a fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. The
Company's custodian maintains possession of the underlying collateral,
which is maintained at not less than 100% of the repurchase price. SSBC,
acting under the supervision of the Directors, reviews the
creditworthiness of those banks and dealers with which a fund enters into
repurchase agreements to evaluate potential risks.
Reverse Repurchase Agreements. Each fund may enter into reverse
repurchase agreements. Reverse repurchase agreements are transactions in
which a fund sells a security and simultaneously commits to repurchase
that security from the buyer at an agreed upon price on an agreed upon
future date. This technique will be used only for temporary or emergency
purposes, such as meeting redemption requests or to earn additional income
on portfolio securities.
Lending of Portfolio Securities. Each fund has the ability to lend
securities from its portfolio to brokers, dealers and other financial
organizations. Such loans, if and when made, will not exceed 20% of the
fund's total assets, taken at value. A fund may not lend its portfolio
securities to SSBC or its affiliates without specific authorization from
the SEC. Loans of portfolio securities by a fund will be collateralized
by cash [letters of credit] or securities issued or guaranteed by the U.S.
government or its agencies which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. From time to time, a fund may return a part of the interest
earned from the investment of collateral received for securities loaned to
the borrower and/or a third party, which is unaffiliated with the fund or
with SSBC, and which is acting as a "finder."
By lending portfolio securities, each fund can increase its income by
continuing to receive interest on the loaned securities as well as by
either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when
government securities are used as collateral. Requirements of the SEC,
which may be subject to future modifications, currently provide that the
following conditions must be met whenever portfolio securities are loaned:
(a) the fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (b) the borrower must increase such
collateral whenever the market value of the securities rises above the
level of such collateral; (c) the fund must be able to terminate the loan
at any time; (d) the fund must receive reasonable interest on the loan, as
well as an amount equal to any dividends, interest or other distributions
on the loaned securities and any increase in market value; (e) the fund
may pay only reasonable custodian fees in connection with the loan; and
(f) voting rights on the loaned securities may pass to the borrower;
however, if a material event adversely affecting the investment occurs,
the Directors of the Company must terminate the loan and regain the right
to vote the securities.
The limit of 20% of each fund's total assets to be committed to securities
lending is a fundamental policy of each fund, which means that it cannot
be changed without approval of a majority of a fund's outstanding shares.
However, the funds do not currently intend to engage in securities
lending.
Floating Rate and Variable Rate Obligations. Each fund may purchase
floating rate and variable rate obligations, including participation
interests therein. These securities pay interest at rates that are
adjusted periodically according to a specified formula, usually with
reference to some interest rate index or market interest rate. Variable
rate obligations provide for a specified periodic adjustment in the
interest rate, while floating rate obligations have an interest rate which
changes whenever there is a change in the external interest rate. Each
fund may purchase floating rate and variable rate obligations which carry
a demand feature that would permit the fund to tender them back to the
issuer or remarketing agent at par value prior to maturity. Each fund
currently is permitted to purchase floating rate and variable rate
obligations with demand features in accordance with requirements
established by the SEC, which, among other things, permit such instruments
to be deemed to have remaining maturities of 13 months or less,
notwithstanding that they may otherwise have a stated maturity in excess
of 13 months. Securities with ultimate maturities of greater than 13
months may be purchased only pursuant to Rule 2a-7. Frequently, floating
rate and variable rate obligations are secured by letters of credit or
other credit support arrangements provided by banks. As determined by
SSBC, under the supervision of the Directors, the quality of the
underlying creditor or of the bank, as the case may be, also must be
equivalent to the quality standards set forth above. In addition, SSBC
will monitor on an ongoing basis the earning power, cash flow and other
liquidity ratios of the issuers of the obligations, and similarly will
monitor the creditworthiness of the institution responsible for paying the
principal amount of the obligation under the demand feature.
Participation Interests. The funds may invest in participation interests
in any type of security in which the funds may invest. Each fund may
invest in participation interests in floating rate or variable rate
obligations owned by banks. A participation interest gives the purchaser
an undivided interest in the obligation in the proportion that the fund's
participation interest bears to the total principal amount of the
obligation and provides the demand repurchase feature. Each participation
is backed by an irrevocable letter of credit or guarantee of a bank that
SSBC, under the supervision of the Directors, has determined meets the
prescribed quality standards of the fund. Each fund has the right to sell
the instrument back to the issuing bank or draw on the letter of credit on
demand for all or any part of the fund's participation interest in the
obligation, plus accrued interest. Each fund currently is permitted to
invest in participation interests when the demand provision complies with
conditions established by the SEC. Banks will retain or receive a service
fee, letter of credit fee and a fee for issuing repurchase commitments in
an amount equal to the excess of the interest paid on the obligations over
the negotiated yield at which the instruments were purchased by the fund.
Participation interests in the form to be purchased by the Municipal
Portfolio are relatively new instruments, and no ruling of the Internal
Revenue Service has been secured relating to their tax-exempt status.
Each of the Cash Portfolio and the Municipal Portfolio intends to purchase
participation interests based upon opinions of counsel.
When-Issued Securities. Each fund may purchase securities on a
when-issued basis, in which case delivery of and payment for the
securities normally take place within 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate to
be received on the securities purchased on a when-issued basis are each
fixed when the buyer enters into a commitment. Although each fund will
purchase securities on a when-issued basis only with the intention of
actually acquiring the securities, the fund may sell these securities
before the settlement date if it is deemed advisable as a matter of
investment strategy.
Securities purchased on a when-issued basis and the securities held in a
fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates (which generally will
result in similar changes in value, i.e., both experiencing appreciation
when interest rates decline and depreciation when interest rates rise).
Therefore, to the extent a fund remains substantially fully invested at
the same time it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the fund's assets
will vary from $1.00 per share. Interest will not accrue on fixed income
securities purchased by a fund until delivery and payment for the
securities take place. Purchasing securities on a when-issued basis can
involve a risk that the yields available in the market when the delivery
takes place may actually be higher than those obtained in the transaction.
A separate account consisting of cash or other liquid securities equal to
the amount of the when-issued commitments will be established with the
Company's custodian with respect to a fund's when-issued obligations.
When the time comes to pay for when-issued securities, a fund will meet
its obligations from then-available cash flow, sale of securities held in
the separate account, sale of other securities or, although it normally
would not expect to do so, from the sale of the when-issued securities
themselves (which may have a value greater or less than the fund's payment
obligations). Sales of securities to meet such obligations carries with
it a greater potential for the realization of capital gains, which are not
exempt from federal income tax.
Municipal Leases. The Cash Portfolio and the Municipal Portfolio may
invest in municipal leases. Municipal leases frequently have special risks
not normally associated with general obligation or revenue bonds. Leases
and installment purchase or conditional sales contracts (which normally
provide for title to the leased asset to pass eventually to the government
issuer) have evolved as a means for governmental issuers to acquire
property and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt-issuance limitations of
many state constitutions and statutes are deemed to be inapplicable
because of the inclusion in many leases or contracts of "non-
appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other periodic basis. The funds will only purchase
municipal leases subject to a non-appropriation clause when the payment of
principal and accrued interest is backed by an unconditional, irrevocable
letter of credit, or guarantee of a bank or other entity that meets the
criteria described in the section "Obligations of Financial Institutions,"
below.
In evaluating municipal lease obligations, SSBC will consider such factors
as it deems appropriate, including: (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. If a lease is backed by an unconditional letter of credit or
other unconditional credit enhancement, then SSBC may determine that a
lease is an eligible security solely on the basis of its evaluation of the
credit enhancement.
Municipal leases, like other municipal debt obligations, are 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.
Demand Features -- The funds may invest in securities that are subject to
puts and standby commitments, also known as demand features. Demand
features give the fund the right to resell securities at specified periods
prior to their maturity dates to the seller or to some third party at an
agreed upon price or yield. Securities with demand features may involve
certain expenses and risks, including the inability of the issuer of the
instrument to pay for the securities at the time the instrument is
exercised, non-marketability of the instrument and differences between the
maturity of the underlying security and the maturity of the instrument.
Securities may cost more with demand features than without them. Demand
features can serve three purposes: (i) to shorten the maturity of a
variable or floating rate security, (ii) to enhance the instrument's
credit quality, and (iii) to provide a source of liquidity. Demand
features are often issued by third party financial institutions, generally
domestic and foreign banks. Accordingly, the credit quality and liquidity
of the funds' investments may be dependent in part on the credit quality
of the banks supporting the funds' investments and changes in the credit
quality of these financial institutions could cause losses to the funds
and affect their share prices. This will result in exposure to risks
pertaining to the banking industry, including the foreign banking
industry. Brokerage firms and insurance companies also provide certain
liquidity and credit support.
The Cash Portfolio
The Cash Portfolio pursues its objective by investing primarily in high
quality commercial paper and obligations of financial institutions. The
fund may also invest in U.S. government securities and municipal
securities, although the fund expects to invest in such securities to a
lesser degree.
Debt Securities -- The fund may invest in debt obligations of domestic and
foreign issuers, including commercial paper (short-term promissory notes
issued by companies to finance their, or their affiliates', current
obligations), notes and bonds and variable amount master demand notes.
The fund may invest in privately issued commercial paper that is
restricted as to disposition under the federal securities laws. In
general, any sale of this paper may not be made without registration under
the Securities Act of 1933, as amended (the "1933 Act"), or the
availability of an appropriate exemption therefrom. Pursuant to the
provisions of Section 4(2) of the 1933 Act, however, some privately issued
commercial paper ("Section 4(2) paper") is eligible for resale to
institutional investors, and accordingly, SSBC may determine that a liquid
market exists for that paper pursuant to guidelines adopted by the
Directors. If a particular investment in Section 4(2) paper is not
determined to be liquid, that investment will be included within the 10%
limitation on illiquid securities.
Bank Obligations. Domestic commercial banks organized under federal law
("national banks") are supervised and examined by the U.S. Comptroller of
the Currency and are required to be members of the Federal Reserve System
and to be insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the Federal
Reserve System only if they elect to join. Most state banks are insured
by the FDIC (although such insurance may not be of material benefit to the
fund, depending upon the principal amount of certificates of deposit
("CDs") of each bank held by the fund) and are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of government regulations, domestic branches of domestic banks are,
among other things, generally required to maintain specified levels of
reserves, and are subject to other supervision and regulation designed to
promote financial soundness.
Obligations of Financial Institutions -- The fund may invest in
obligations of financial institutions. Examples of obligations in which
the fund may invest include negotiable certificates of deposit, bankers'
acceptances and time deposits of U.S. banks having total assets in excess
of $1 billion or the equivalent of $1 billion in other currencies (in the
case of foreign banks) and securities backed by letters of credit of U.S.
banks or other U.S. financial institutions that are members of the Federal
Reserve System or the FDIC (including obligations of foreign branches of
such members), if either: (a) the principal amount of the obligation is
insured in full by the FDIC, or (b) the issuer of such obligation has
capital, surplus and undivided profits in excess of $100 million or total
assets of $1 billion (as reported in its most recently published financial
statements prior to the date of investment). Under current FDIC
regulations, the maximum insurance payable as to any one certificate of
deposit is $100,000; therefore, certificates of deposit in denominations
greater than $100,000 that are purchased by the fund will not be fully
insured. The Cash Portfolio may purchase fixed time deposits maturing
from two business days to seven calendar days up to 10% of its total
assets. The Cash Portfolio may also purchase fixed time deposits maturing
in more than seven calendar days but in less than one year, provided,
however, that such fixed time deposits shall be considered illiquid
securities.
The Cash Portfolio intends to maintain at least 25% of its total assets
invested in obligations of domestic and foreign banks, subject to the
above-mentioned size criteria. The fund may invest in instruments issued
by domestic banks, including those issued by their branches outside the
United States and subsidiaries located in Canada, and in instruments
issued by foreign banks through their branches located in the United
States and the United Kingdom. In addition, the Cash Portfolio may invest
in fixed time deposits of foreign banks issued through their branches
located in Grand Cayman Island, Nassau, Tokyo and Toronto. The fund may
also invest in Eurodollar and Yankee bank obligations.
Obligations of foreign branches of domestic banks and of foreign branches
of foreign banks, such as CDs and time deposits ("TDs"), may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation or by governmental
regulation. Such obligations are subject to different risks than are
those of domestic banks or domestic branches of foreign banks. These
risks include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of principal
and interest on the obligations, foreign exchange controls and foreign
withholding and other taxes on interest income. Foreign branches of
domestic banks and foreign branches of foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan limitations,
and accounting, auditing and financial record keeping requirements. In
addition, less information may be publicly available about a foreign
branch of a domestic bank or about a foreign bank than about a domestic
bank.
Obligations of domestic branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation and by governmental
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank may
or may not be subject to reserve requirements imposed by the Federal
Reserve System or by the state in which the branch is located if the
branch is licensed in that state. In addition, branches licensed by the
Comptroller of the Currency and branches licensed by certain states
("State Branches") may or may not be required to: (a) pledge to the
regulator by depositing assets with a designated bank within the state, an
amount of its assets equal to a specific percentage of its total
liabilities; and (b) maintain assets within the state in an amount equal
to a specified percentage of the aggregate amount of liabilities of the
foreign bank payable at or through all of its agencies or branches within
the state. The deposits of State Branches may not necessarily be insured
by the FDIC. In addition, there may be less publicly available
information about a domestic branch of a foreign bank than about a
domestic bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks, by domestic branches of
foreign banks or by foreign branches of foreign banks, SSBC will carefully
evaluate such investments on a case-by-case basis.
Eurodollar or Yankee Obligations -- Eurodollar bank obligations are dollar
denominated certificates of deposit or time deposits issued outside the
U.S. capital markets by foreign branches of U.S. banks and by foreign
banks. Yankee bank obligations are dollar denominated obligations issued
in the U.S. capital markets by foreign banks. Eurodollar (and to a
limited extent, Yankee) bank obligations are subject to certain sovereign
risks. One such risk is the possibility that a foreign government might
prevent dollar denominated funds from flowing across its borders. Other
risks include: adverse political and economic developments in a foreign
country; the extent and quality of government regulation of financial
markets and institutions; the imposition of foreign withholding taxes; and
expropriation or nationalization of foreign issuers.
U.S. Government Securities -- The fund may invest without limit in U.S.
government securities as described under "The Government Portfolio."
Municipal Securities -- The fund may invest in obligations of states,
territories or possessions of the United States and their subdivisions,
authorities and corporations as described under "The Municipal Portfolio."
These obligations may pay interest that is exempt from federal income
taxation, but only the Municipal Portfolio's distributions of tax-exempt
interest will be tax-exempt for shareholders.
Custodial Receipts. The Cash Portfolio may acquire custodial receipts
that evidence ownership of future interest payments, principal payments or
both on certain U.S. government notes or bonds. These notes and bonds are
held in custody by a bank on behalf of the owners. These custodial
receipts are known by various names, including "Treasury Receipts,"
"Treasury Investors Growth Receipts" ("TIGRs"), "Certificates of Accrual
on Treasury Securities" ("CATS") and FICO Strips. The underwriters of
these certificates or receipts purchase a U.S. government security and
deposit the security 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 U.S. government security. Custodial receipts
evidencing specific coupon or principal payments have the same general
attributes as zero coupon U.S. government securities but are not U.S.
government securities. Although typically under the terms of a custodial
receipt the Cash Portfolio is authorized to assert its rights directly
against the issuer of the underlying obligation, the Cash Portfolio may be
required to assert through the custodian bank such 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 Cash Portfolio may be
subject to delays, expenses and risks that are greater than those that
would have been involved if the Cash Portfolio 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
nontaxable entity, the yield on the underlying security would be reduced
in respect of any taxes paid.
Asset-Backed and Receivable-Backed Securities. The Cash Portfolio may
invest in asset-backed and receivable-backed securities. Several types of
asset-backed and receivable-backed securities have been offered to
investors, including "Certificates for Automobile Receivables" ("CARs")
and interests in pools of credit card receivables. CARs represent
undivided fractional interests in a trust, the assets of which consist of
a pool of motor vehicle retail installment sales contracts and security
interests in the vehicles securing the contracts. Payments of principal
and interest on CARs are passed through monthly to certificate holders and
are guaranteed up to certain amounts and for a certain time period by a
letter of credit issued by a financial institution unaffiliated with the
trustee or originator of the trust. An investor's return on CARs may be
affected by early prepayment of principal on the underlying vehicle sales
contracts. If the letter of credit is exhausted, the trust may be
prevented from realizing the full amount due on a sales contract because
of state law requirements and restrictions relating to foreclosure sales
of vehicles and the availability of deficiency judgments following such
sales, because of depreciation, damage or loss of a vehicle, because of
the application of federal and state bankruptcy and insolvency laws or
other factors. As a result, certificate holders may experience delays in
payment if the letter of credit is exhausted. Consistent with the fund's
investment objective and policies and, subject to the review and approval
of the Company's Board of Directors, the fund also may invest in other
types of asset-backed and receivable-backed securities.
Participation Interests. The Cash Portfolio may purchase participation
interests in loans with remaining maturities of 13 months or less. These
loans must be made to issuers in whose obligations the fund may invest.
Any participation purchased by the fund must be issued by a bank in the
United States with assets exceeding $1 billion. Because the issuing bank
does not guarantee the participation in any way, they are subject to the
credit risks generally associated with the underlying corporate borrower.
In addition, because it may be necessary under the terms of the loan
participation for the fund to assert through the issuing bank such rights
as may exist against the underlying corporate borrower, in the event the
underlying corporate borrower fails to pay principal and 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, such as commercial paper, of the borrower. Moreover,
under the terms of the loan participation, the fund may be regarded as a
creditor of the issuing bank, rather than of the underlying corporate
borrower, so that the fund may also be subject to the risk that the
issuing bank may become insolvent. Further, in the event of the
bankruptcy or insolvency of the corporate borrower, the loan participation
may be subject to certain defenses that can be asserted by the borrower as
a result of improper conduct by the issuing bank. The secondary market,
if any, for these loan participation interests is limited and any
participation interest may be regarded as illiquid.
In the event that SSBC does not believe that price quotations currently
obtainable from banks, dealers or pricing services consistently represent
the market values of participation interests, SSBC will, following
guidelines established by the Board of Directors, value the participation
interests held by the Cash Portfolio at fair value, which approximates
market value. In valuing a participation interest, SSBC will consider the
following factors, among others: (i) the characteristics of the
participation interest, including the cost, size, interest rate, period
until next interest rate reset, maturity and base lending rate of the
participation interest, the terms and conditions of the loan and any
related agreements and the position of the loan in the borrower's debt
structure; (ii) the nature, adequacy and value of the collateral,
including the Company's rights, remedies and interests with respect to the
collateral; (iii) the creditworthiness of the borrower based on an
evaluation of its financial condition, financial statements and
information about the borrower's business, cash flows, capital structure
and future prospects; (iv) the market for the participation interest,
including price quotations for and trading in the participation interest
and similar participation interests or instruments and the market
environment and investor attitudes toward the participation interest or
participation interests generally; (v) the quality and creditworthiness of
any intermediary participants; and (vi) general economic or market
conditions.
The Government Portfolio pursues its objective by investing exclusively in
obligations issued and/or guaranteed, as to payment of principal and
interest, by the United States government or by its agencies and
instrumentalities and repurchase agreements secured by such obligations.
The Government Portfolio will be rated from time to time by S&P and
Moody's.
U.S. Government Securities -- U.S. government securities are securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities and include, for the purpose of describing permitted
investments, repurchase agreements collateralized and municipal securities
refunded with escrowed U.S. government securities ("U.S. Government
Securities"). U.S. Government Securities in which the fund may invest
include U.S. Treasury securities and obligations issued or guaranteed by
U.S. government agencies and instrumentalities that are backed by the full
faith and credit of the U.S. government, such as those guaranteed by the
Small Business Administration or issued by the Government National
Mortgage Association. In addition, U.S. Government Securities in which
the fund may invest include securities supported by the right of the
issuer to borrow from the U.S. Treasury, such as securities of Federal
Home Loan Banks; and securities supported primarily or solely by the
creditworthiness of the issuer, such as securities of the Federal National
Mortgage Association, the Federal Home Loan Mortgage Corporation and the
Tennessee Valley Authority. There is no guarantee that the U.S.
government will support securities not backed by its full faith and
credit. Accordingly, although these securities have historically involved
little risk of loss of principal if held to maturity, they may involve
more risk than securities backed by the full faith and credit of the U.S.
government.
The Municipal Portfolio
The Municipal Portfolio pursues its objective by investing primarily in
municipal securities whose interest is exempt from federal income tax.
Under normal market conditions, the fund will invest at least 80% of its
assets in municipal securities whose interest is exempt from federal
income tax. However, the fund reserves the right to invest up to 20% of
the value of its assets in securities whose interest is federally taxable.
In addition, the fund may invest without limit in private activity bonds.
Interest income on certain types of private activity bonds issued after
August 7, 1986 to finance non-governmental activities is a specific tax
preference item for purposes of the Federal individual and corporate
alternative minimum taxes. Individual and corporate shareholders may be
subject to a federal alternative minimum tax to the extent the fund's
dividends are derived from interest on these bonds. These private
activity bonds are included in the term "municipal securities" for
purposes of determining compliance with the 80% test described above.
Dividends derived from interest income on all municipal securities are a
component of the "current earnings" adjustment item for purposes of the
federal corporate alternative minimum tax. Additionally, when SSBC is
unable to locate investment opportunities with desirable risk/reward
characteristics, the fund may invest without limit in cash and cash
equivalents, including obligations that may be federally taxable.
Description of Municipal Obligations. Municipal obligations in which the
Municipal Portfolio may invest are short-term debt obligations of states,
cities, counties, municipalities, municipal agencies and regional
districts (generally referred to as "municipalities") that pay interest
which is excluded from gross income for federal income tax purposes
("Municipal Obligations"). The three principal classifications of
Municipal Obligations are Municipal Bonds, Municipal Commercial Paper and
Municipal Notes.
At times, the fund may invest more than 25% of the value of its total
assets in tax-exempt securities that are related in such a way that an
economic, business, or political development or change affecting one such
security could similarly affect the other securities; for example,
securities whose issuers are located in the same state, or securities
whose interest is derived from revenues of similar type projects. The
fund may also invest more than 25% of its assets in industrial development
bonds or participation interests therein.
The Municipal Portfolio (and each of the other funds) intends to conduct
its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"),
which will relieve the fund of any liability for federal income tax to the
extent that its earnings are distributed to shareholders. In order to so
qualify, among other things, the fund generally must ensure that, at the
close of each quarter of the taxable year, (i) not more than 25% of the
market value of the fund's total assets will be invested in the securities
(other than U.S. Government Securities) of a single issuer or of two or
more issuers that the fund controls and that are engaged in the same,
similar or related trades or businesses and (ii) at least 50% of the
market value of the fund's total assets is represented by (a) cash and
cash items, (b) U.S. Government Securities and (c) other securities
limited in respect of any one issuer to an amount not greater in value
than 5% of the market value of the fund's total assets and to not more
than 10% of the outstanding voting securities of the issuer.
Yields on municipal securities are dependent on a variety of factors,
including the general conditions of the money market and of the municipal
bond and municipal note markets, the size of a particular offering, the
maturity of the obligation and the rating of the issue. The achievement
of the fund's investment objective is dependent in part on the continuing
ability of the issuers of municipal securities in which the fund invests
to meet their obligations for the payment of principal and interest when
due. Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors, such as the Bankruptcy Reform Act of 1978, as
amended. Therefore, the possibility exists that as a result of litigation
or other conditions, the ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
Municipal Bonds. Municipal Bonds, which generally have a maturity of more
than one year when issued, have two principal classifications: General
Obligation Bonds and Revenue Bonds. A private activity bond is a
particular kind of Revenue Bond. The classifications of Municipal Bonds
and private activity bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide variety
of capital projects, including electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and
universities; and hospitals. The principal security for a Revenue Bond is
generally the net revenues derived from a particular facility, group of
facilities or, in some cases, the proceeds of a special excise or other
specific revenue source. Although the principal security behind these
bonds may vary, many provide additional security in the form of a debt
service reserve fund whose money may be used to make principal and
interest payments on the issuer's obligations. Some authorities provide
further security in the form of a state's ability (without obligation) to
make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private activity bonds are considered
Municipal Bonds if the interest paid on them is excluded from gross income
for federal income tax purposes and are issued by or on behalf of public
authorities to raise money to finance, for example, various privately
operated facilities for manufacturing and housing. These bonds also are
used to finance facilities such as airports, docks, wharves and mass
commuting facilities. The payment of the principal and interest on these
bonds is dependent solely on the ability of the facility's user to meet
its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment.
Municipal Commercial Paper. Issues of Municipal Commercial Paper
typically represent short-term, unsecured, negotiable promissory notes.
These obligations are issued by agencies of state and local governments to
finance seasonal working capital needs of municipalities or are refinanced
with long-term debt. These obligations generally have maturities of
thirteen months or less. In most cases, Municipal Commercial Paper is
backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenues, such as income,
sales, use and business taxes and are payable from these specific future
taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued
in expectation of receipt of other kinds of revenue, such as federal
revenues available under the Federal Revenue Sharing Program.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds provide the money for the repayment of the
Notes.
4. Construction Loan Notes. Construction Loan Notes are sold to
provide construction financing. Permanent financing, the proceeds of
which are applied to the payment of Construction Loan Notes, is sometimes
provided by a commitment by the Government National Mortgage Association
("GNMA") to purchase the loan, accompanied by a commitment by the Federal
Housing Administration to insure mortgage advances thereunder. In other
instances, permanent financing is provided by commitments of banks to
purchase the loan. The Municipal Portfolio will purchase only
construction Loan Notes that are subject to GNMA or bank purchase
commitments.
There are a number of other types of Municipal Commercial Paper issued for
specified purposes and secured in manners that may vary from those
described above.
Taxable Investments. Because the Municipal Portfolio's objective is to
provide income exempt from federal income taxes, the fund generally will
invest in taxable obligations only if and when the Directors believe it
would be in the best interests of the fund's shareholders to do so.
Situations in which the Municipal Portfolio may invest up to 20% of its
total assets in taxable securities include: (a) pending investment of
proceeds of sales of fund shares or of portfolio securities, (b) pending
settlement of purchases of portfolio securities or (c) when the fund is
attempting to maintain liquidity for the purpose of meeting anticipated
redemptions. The fund temporarily may invest more than 20% of its total
assets in taxable securities to maintain a defensive posture when, in the
opinion of Salomon Smith Barney, it is advisable to do so because of
adverse market conditions affecting the market for Municipal Obligations.
Purchase of Securities with Stand-By Commitments. The Municipal Portfolio
may acquire stand-by commitments with respect to Municipal Obligations
held in its portfolio. Under a stand-by commitment, a broker-dealer,
dealer or bank would agree to purchase at the fund's option a specified
Municipal Obligation at a specified price. Thus, a stand-by commitment
may be viewed as the equivalent of a "put" option acquired by the fund
with respect to a particular Municipal Obligation held in the Portfolio's
portfolio.
The amount payable to the Municipal Portfolio upon its exercise of a
stand-by commitment normally would be (a) the acquisition cost of the
Municipal Obligation (excluding any accrued interest the fund paid on the
acquisition), less any amortization of market premium or plus any
amortization of market or original issue discount during the period the
fund owned the security, plus (b) all interest accrued on the security
since the last interest payment date during the period that the security
was owned by the fund. Absent unusual circumstances, the fund would value
the underlying Municipal Obligation at amortized cost. As a result, the
amount payable by the broker-dealer, dealer or bank during the time a
stand-by commitment is exercisable would be substantially the same as the
value of the underlying Municipal Obligation.
The Municipal Portfolio's right to exercise a stand-by commitment would be
unconditional and unqualified. Although the fund could not transfer a
stand-by commitment, the fund could sell the underlying Municipal
Obligation to a third party at any time. It is expected that stand-by
commitments generally will be available to the fund without the payment of
any direct or indirect consideration. The fund may pay for stand-by
commitments, however, if such action is deemed necessary. In any event,
the total amount paid for outstanding stand-by commitments held by the
fund would not exceed 1/2 of 1% of the value of the fund's total assets
calculated immediately after each stand-by commitment is acquired.
The Municipal Portfolio intends to enter into stand-by commitments only
with broker-dealers, dealers or banks that Salomon Smith Barney believes
present minimum credit risks. The fund's ability to exercise a stand-by
commitment will depend on the ability of the issuing institution to pay
for the underlying securities at the time that the stand-by commitment is
exercised. The credit of each institution issuing a stand-by commitment
to the fund will be evaluated on an ongoing basis by SSBC in accordance
with procedures established by the Board of Directors.
The Municipal Portfolio intends to acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a stand-by commitment
would not affect the valuation of the underlying Municipal Obligation,
which will continue to be valued in accordance with the amortized cost
method. Each stand-by commitment will be valued at zero in determining
net asset value. Should the fund pay directly or indirectly for a
stand-by commitment, its costs will be reflected in realized gain or loss
when the commitment is exercised or expires. The maturity of a Municipal
Obligation purchased by the fund will not be considered shortened by any
stand-by commitment to which the obligation is subject. Thus, stand-by
commitments will not affect the dollar-weighted average maturity of the
fund's portfolio.
The Municipal Portfolio understands that the Internal Revenue Service has
issued a revenue ruling to the effect that, in specific factual
circumstances, a registered investment company will be treated for federal
income tax purposes as the owner of Municipal Obligations acquired subject
to a stand-by commitment and the interest on the Municipal Obligations
will be tax-exempt to the fund. There can be no assurance that all of the
fund's stand-by commitments will be factually the same as those described
in this ruling or governed by its conclusions.
Municipal Leases -- The fund may invest in municipal leases or
participation interests therein. Municipal leases are municipal securities
which may take the form of a lease or an installment purchase or
conditional sales contract. Municipal leases are issued by state and
local governments and authorities to acquire a wide variety of equipment
and facilities.
Lease obligations may not be backed by the issuing municipality's credit
and may involve risks not normally associated with general obligation
bonds and other revenue bonds. For example, their interest may become
taxable if the lease is assigned and the holders may incur losses if the
issuer does not appropriate funds for the lease payment on an annual
basis, which may result in termination of the lease and possible default.
SSBC may determine that a liquid market exists for municipal lease
obligations pursuant to guidelines established by the Directors.
Taxable Investments -- As discussed above, although the fund will attempt
to invest substantially all of its assets in municipal securities whose
interest is exempt from federal income tax, the fund may, under certain
circumstances, invest in certain securities whose interest is subject to
such taxation. These securities include: (i) short-term obligations of
the U.S. government, its agencies or instrumentalities, (ii) certificates
of deposit, bankers' acceptances and interest bearing savings deposits of
banks having total assets of more than $1 billion and whose deposits are
insured by the FDIC, (iii) commercial paper and (iv) repurchase agreements
as described below covering any of the securities described in items (i)
and (iii) above or any other obligations of the U.S. government, its
agencies or instrumentalities. Income from securities lending
transactions is also taxable.
Derivative Products -- The Municipal Portfolio may invest up to 20% of the
value of its assets in one or more of the three principal types of
derivative product structures described below. Derivative products are
typically structured by a bank, broker-dealer or other financial
institution. A derivative product generally consists of a trust or
partnership through which the fund holds an interest in one or more
underlying bonds coupled with a conditional right to sell ("put") the
fund's interest in the underlying bonds at par plus accrued interest to a
financial institution (a "Liquidity Provider"). Typically, a derivative
product is structured as a trust or partnership which provides for
pass-through tax-exempt income. There are currently three principal types
of derivative structures: (1) "Tender Option Bonds", which are
instruments which grant the holder thereof the right to put an underlying
bond at par plus accrued interest at specified intervals to a Liquidity
Provider; (2) "Swap Products", in which the trust or partnership swaps the
payments due on an underlying bond with a swap counterparty who agrees to
pay a floating municipal money market interest rate; and (3)
"Partnerships", which allocate to the partners income, expenses, capital
gains and losses in accordance with a governing partnership agreement.
Investments in derivative products raise certain tax, legal, regulatory
and accounting issues which may not be presented by investments in other
municipal obligations. There is some risk that certain issues could be
resolved in a manner which could adversely impact the performance of the
fund. For example, the tax-exempt treatment of the interest paid to
holders of derivative products is premised on the legal conclusion that
the holders of such derivative products have an ownership interest in the
underlying bonds. While the fund receives an opinion of legal counsel to
the effect that the income from each derivative product is tax-exempt to
the same extent as the underlying bond, the Internal Revenue Service (the
"IRS") has not issued a ruling on this subject. Were the IRS to issue an
adverse ruling, there is a risk that the interest paid on such derivative
products would be deemed taxable.
The fund intends to limit the risk of derivative products by purchasing
only those derivative products that are consistent with the fund's
investment objective and policies. The fund will not use such instruments
to leverage securities. Hence, derivative products' contributions to the
overall market risk characteristics of a fund will not materially alter
its risk profile and will be fully consistent with the fund's maturity
guidelines.
RISK FACTORS
Although each fund only invests in high quality money market instruments,
an investment in a fund is subject to risk even if all securities in a
fund's portfolio are paid in full at maturity. All money market
instruments, including U.S. Government Securities, can change in value as
a result of changes in interest rates, the issuer's actual or perceived
creditworthiness or the issuer's ability to meet its obligations.
Each fund will be affected by general changes in interest rates which will
result in increases or decreases in the value of the obligations held by
such fund. The market value of the obligations in each fund can be
expected to vary inversely to changes in prevailing interest rates.
Investors should recognize that, in periods of declining interest rates,
the yield of each fund will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the yield of each
fund will tend to be somewhat lower. Also, when interest rates are
falling, the inflow of net new money to each fund from the continuous sale
of its shares will likely be invested in portfolio instruments producing
lower yields than the balance of the fund, thereby reducing the current
yield of the fund. In periods of rising interest rates, the opposite can
be expected to occur. In addition, securities in which the funds will
invest may not yield as high a level of current income as might be
achieved by investing in securities with less liquidity and safety and
longer maturities.
Investments in securities issued by foreign banks or foreign issuers
present certain risks, including those resulting from fluctuations in
currency exchange rates, revaluation of currencies, future political and
economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions and reduced
availability of public information. Foreign issuers generally are not
subject to uniform accounting, auditing and financial reporting standards
or to other regulatory practices and requirements applicable to domestic
issuers. In addition, there may be less publicly available information
about a foreign bank than about a domestic bank.
INVESTMENT RESTRICTIONS
As indicated in the prospectus, each fund has adopted certain fundamental
investment restrictions that cannot be changed without shareholder
approval. Shareholder approval means approval by the lesser of (i) more
than 50% of the outstanding voting securities of the Company (or a
particular fund if a matter affects just that fund), or (ii) 67% or more
of the voting securities present at a meeting if the holders of more than
50% of the outstanding voting securities of the Company (or a particular
fund) are present or represented by proxy.
As used in the restrictions set forth below and as used elsewhere in this
SAI, the term "U.S. government securities" shall have the meaning set
forth in the 1940 Act. The 1940 Act defines U.S. government securities as
securities issued or guaranteed by the United States government, its
agencies or instrumentalities and has been interpreted (other than for tax
purposes) to include repurchase agreements collateralized and municipal
securities refunded with escrowed U.S. government securities.
If a percentage restriction described below is complied with at the time
of an investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation of such
restriction. The identification of the issuer of a Municipal Obligation
depends on the terms and conditions of the obligation. If the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the issuing
entity and a security is backed only by the assets and revenues of the
entity, the entity would be deemed to be the sole issuer of the security.
Similarly, in the case of a private activity bond, if that bond is backed
only by the assets and revenues of the non-governmental user, then the
non-governmental user would be deemed to be the sole issuer. If, however,
in either case, the creating government or some other entity guarantees a
security, such a guarantee would be considered a separate security and
would be treated as an issue of such government or other entity.
Each fund may make commitments more restrictive than the fundamental
restrictions listed below so as to permit the sale of fund shares in
certain states. Should a fund determine that any such commitment is no
longer in the best interests of the fund and its shareholders, it will
revoke the commitment by terminating sales of its shares in the state
involved.
The funds have adopted the following fundamental policies:
(1) With respect to 75% of its assets, a fund may not purchase a
security other than a U.S. Government Security, if, as a result, more than
5% of the fund's total assets would be invested in the securities of a
single issuer or the fund would own more than 10% of the outstanding
voting securities of any single issuer.
(2) A fund may not purchase securities if more than 25% of the value of
a fund's total assets would be invested in the securities of issuers
conducting their principal business activities in the same industry;
provided that: (i) there is no limit on investments in U.S. Government
Securities or in obligations of domestic or foreign commercial banks
(including U.S. branches of foreign banks subject to regulations under
U.S. laws applicable to domestic banks and, to the extent that its parent
is unconditionally liable for the obligation, foreign branches of U.S.
banks); (ii) this limitation shall not apply to the Municipal Portfolio's
investments in municipal securities; (iii) there is no limit on
investments in issuers domiciled in a single country; (iv) financial
service companies are classified according to the end users of their
services (for example, automobile finance, bank finance and diversified
finance are each considered to be a separate industry); and (v) utility
companies are classified according to their services (for example, gas,
gas transmission, electric, and telephone are each considered to be a
separate industry).
(3) A fund may not act as an underwriter of securities issued by others,
except to the extent that a fund may be deemed an underwriter in
connection with the disposition of portfolio securities of such fund.
(4) A fund may not make loans, except that this restriction shall not
prohibit (a) purchase and holding of a portion of an issue of publicly
distributed debt securities, (b) the lending of portfolio securities, or
(c) entry into repurchase agreements. A fund may not lend any security if,
as a result, more than 20% of a fund's total assets would be lent to other
parties.
(5) A fund may not purchase or sell real estate or any interest therein,
except that the fund may invest in debt obligations secured by real estate
or interests therein or securities issued by companies that invest in real
estate or interests therein.
(6) A fund may borrow money for emergency purposes (not for leveraging)
in an amount not exceeding 33 1/3% of the value of its total assets
(including the amount borrowed) less liabilities (other than borrowings).
If borrowings exceed 5% of the value of a fund's total assets by reason of
a decline in net assets, the fund will reduce its borrowings within three
business days to the extent necessary to comply with the 33 1/3%
limitation. Reverse repurchase agreements or the segregation of assets in
connection with such agreements shall not be considered borrowing for the
purposes of this limit.
(7) Each fund may, notwithstanding any other investment policy or
restriction (whether or not fundamental), invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as that fund.
Each fund has adopted the following nonfundamental investment restrictions
that may be changed by the Board of Directors of the Company without
shareholder approval:
(1) A fund may not invest in securities or enter into repurchase
agreements with respect to any securities if, as a result, more than 10%
of the fund's net assets would be invested in repurchase agreements not
entitling the holder to payment of principal within seven days and in
other securities that are not readily marketable ("illiquid securities").
The directors, or the fund's investment adviser acting pursuant to
authority delegated by the directors, may determine that a readily
available market exists for certain securities such as securities eligible
for resale pursuant to Rule 144A under the Securities Act of 1933, as
amended, or any successor to such rule, Section 4(2) commercial paper and
municipal lease obligations. Accordingly, such securities may not be
subject to the foregoing limitation.
(2) A fund may not purchase the securities of an issuer if one or more
of the Directors or Officers of the fund individually own beneficially
more than 1/2 of 1% of the outstanding securities of such issuer or
together own beneficially more than 5% of such securities.
(3) A fund may not invest more than 15% of its assets in the securities
of any unseasoned issuer or in illiquid securities. Solely for the
purposes of this paragraph, illiquid securities include securities
eligible for resale pursuant to Rule 144A.
(4) A fund may not invest in the securities of another investment
company except in connection with a merger, consolidation, reorganization
or acquisition of assets.
(5) A fund may not purchase securities on margin, or make short sales of
securities, except for short sales against the box and the use of
short-term credit necessary for the clearance of purchases and sales of
portfolio securities.
(6) A fund may not invest more than 5% of the value of its total assets
in the securities of any issuer that has conducted continuous operations
for less than three years, including operations of predecessors, except
that this shall not affect the fund's ability to invest in US. Government
Securities, fully collateralized debt obligations, municipal obligations,
securities that are rated by at least one nationally recognized
statistical rating organization and securities guaranteed as to principal
and interest by an issuer in whose securities the fund could invest.
(7) A fund may not pledge, mortgage, hypothecate or encumber any of its
assets except to secure permitted borrowings or in connection with
permitted short sales.
(8) A fund may not invest directly in interests in oil and gas or
interests in other mineral exploration or development programs or leases;
however, the fund may own debt securities of companies engaged in those
businesses.
(9) A fund may not invest in companies for the purpose of exercising
control of management.
Portfolio Turnover
The funds do not intend to seek profits through short-term trading.
Nevertheless, the funds will not consider turnover rate a limiting factor
in making investment decisions. Because the funds invest in securities
with relatively short-term maturities, each fund is expected to have a
high portfolio turnover rate. However, a high turnover rate should not
increase a fund's costs because brokerage commissions are not normally
charged on the purchase and sale of money market instruments.
Under certain market conditions, a fund may experience increased portfolio
turnover as a result of its options activities. For instance, the exercise
of a substantial number of options written by a fund (due to appreciation
of the underlying security in the case of call options or depreciation of
the underlying security in the case of put options) could result in a
turnover rate in excess of 100%. The portfolio turnover rate of a fund is
calculated by dividing the lesser of purchases or sales of portfolio
securities for the year by the monthly average value of portfolio
securities. Securities with remaining maturities of one year or less on
the date of acquisition are excluded from the calculation.
Portfolio Transactions
Most of the purchases and sales of securities for a fund, whether
transacted on a securities exchange or in the over-the-counter market,
will be effected in the primary trading market for the securities. The
primary trading market for a given security generally is located in the
country in which the issuer has its principal office. Decisions to buy and
sell securities for a fund are made by SSBC which also is responsible for
placing these transactions, subject to the overall review of the Company's
Board of Directors.
Although investment decisions for each fund are made independently from
those of the other accounts managed by its Investment Manager, investments
of the type the fund may make also may be made by those other accounts.
When a fund and one or more other accounts managed by its SSBC are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a
manner believed by the Investment Manager to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received by a
fund or the size of the position obtained or disposed of by the fund.
Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated,
the cost of transactions may vary among different brokers. There is
generally no stated commission in the case of securities traded in
domestic or foreign over-the-counter markets, but the prices of those
securities include undisclosed commissions or mark-ups. The cost of
securities purchased from underwriters includes an underwriting commission
or concession, and the prices at which securities are purchased from and
sold to dealers include a dealer's mark-up or mark-down. U.S. government
securities are generally purchased from underwriters or dealers, although
certain newly issued U.S. government securities may be purchased directly
from the United States Treasury or from the issuing agency or
instrumentality, respectively.
In selecting brokers or dealers to execute portfolio transactions on
behalf of a fund, the fund's Investment Manager seeks the best overall
terms available. In assessing the best overall terms available for any
transaction, the Manager will consider the factors it deems relevant,
including the breadth of the market in the security, the price of the
security, the financial condition and the execution capability of the
broker or dealer and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, each advisory
agreement between the Company and the Manager relating to a fund
authorizes the Manager, in selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available,
to consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided
to the fund, the other funds and/or other accounts over which the Manager
or its affiliates exercise investment discretion. The fees under the
advisory agreements relating to the funds between the Company and the
Managers are not reduced by reason of their receiving such brokerage and
research services. The Company's Board of Directors periodically will
review the commissions paid by the funds to determine if the commissions
paid over representative periods of time were reasonable in relation to
the benefits inuring to the funds.
To the extent consistent with applicable provisions of the 1940 Act and
the rules and exemptions adopted by the SEC thereunder, the Board of
Directors has determined that transactions for a fund may be executed
through Salomon Smith Barney and other affiliated broker-dealers if, in
the judgment of the fund's Investment Manager, the use of such broker-
dealer is likely to result in price and execution at least as favorable as
those of other qualified broker-dealers, and if, in the transaction, such
broker-dealer charges the fund a rate consistent with that charged to
comparable unaffiliated customers in similar transactions. Salomon Smith
Barney may directly execute such transactions for the Portfolios on the
floor of any national securities exchange, provided (a) the Board of
Directors has expressly authorized Salomon Smith Barney to effect such
transactions, and (b) Salomon Smith Barney annually advises the Fund of
the aggregate compensation it earned on such transactions. Over-the-
counter purchases and sales are transacted directly with principal market
makers except in those cases in which better prices and executions may be
obtained elsewhere.
YIELD INFORMATION
The funds may measure performance in several ways, including "yield",
"effective yield" and "tax equivalent yield" (for the Municipal Portfolio
only). A fund's yield is a way of showing the rate of income the fund
earns on its investments as a percentage of the fund's share price. Yield
represents the income, less expenses generated by the investments, in the
fund over a seven-day period expressed as an annual percentage rate.
Effective yield is similar in that it is calculated over the same time
frame, but instead the net investment income is compounded and then
annualized. Due to the compounding effect, the effective yield will
normally be higher than the yield. The Municipal Portfolio may also quote
its tax-equivalent yield, which shows the taxable yield an investor would
have to earn before taxes to equal the fund's tax-free yield. Fund yield
figures are based upon historical earnings and are not intended to
indicate future performance. A fund may provide current annualized and
effective annualized yield quotations based on its daily dividends. These
quotations may from time to time be used in advertisements, shareholder
reports or other communications to shareholders. All performance
information supplied by the funds in advertising is historical and is not
intended to indicate future returns.
In performance advertising, the funds may compare any of their performance
information with data published by independent evaluators such as
Morningstar, Inc., Lipper Analytical Services, Inc., CDA/Wiesenberger, IBC
Money Fund Report or other companies which track the investment
performance of investment companies ("Fund Tracking Companies"). The funds
may also compare their performance information with the performance of
recognized stock, bond and other indexes, including but not limited to the
Municipal Bond Buyers Indices, the Salomon Brothers Bond Index, the Lehman
Bond Index, the Standard & Poor's 500 Composite Stock Price Index, the Dow
Jones Industrial Average, U.S. Treasury bonds, bills or notes and changes
in the Consumer Price Index as published by the U.S. Department of
Commerce. The funds may refer to general market performance over past time
periods such as those published by Ibbotson Associates (for instance, its
"Stocks, Bonds, Bills and Inflation Yearbook"). The funds may also refer
in such materials to mutual fund performance rankings and other data
published by Fund Tracking Companies. Performance advertising may also
refer to discussions of the funds and comparative mutual fund data and
ratings reported in independent periodicals, such as newspapers and
financial magazines.
Any current yield quotation of a fund which is used in such a manner as to
be subject to the provisions of Rule 482(d) under the Securities Act of
1933, as amended, shall consist of an annualized historical yield, carried
at least to the nearest hundredth of one percent, based on a specific
seven calendar day period. The fund's current yield shall be calculated by
(a) determining the net change during a seven calendar day period in the
value of a hypothetical account having a balance of one share at the
beginning of the period, (b) dividing the net change by the value of the
account at the beginning of the period to obtain a base period return, and
(c) multiplying the quotient by 365/7 (i.e., annualizing). For this
purpose, the net change in account value would reflect the value of
additional shares purchased with dividends declared on the original share
and dividends declared on both the original share and any such additional
shares, but would not reflect any realized gains or losses from the sale
of securities or any unrealized appreciation or depreciation on portfolio
securities. In addition, the fund may advertise effective yield
quotations. Effective yield quotations are calculated by adding 1 to the
base period return, raising the sum to a power equal to 365/7, and
subtracting 1 from the result (i.e., compounding).
The Municipal Portfolio's tax equivalent yield is the rate an investor
would have to earn from a fully taxable investment in order to equal the
fund's yield after taxes. Tax equivalent yields are calculated by dividing
the Municipal Portfolio's yield by one minus the stated federal tax rate.
If only a portion of the fund's yield is tax-exempt, only that portion is
adjusted in the calculation.
Although published yield information is useful to investors in reviewing a
fund's performance, investors should be aware that the fund's yield
fluctuates from day to day and that the fund's yield for any given period
is not an indication or representation by the Portfolio of future yields
or rates of return on the fund's shares. Also, Processing Organizations
may charge their customers direct fees in connection with an investment in
a fund, which will have the effect of reducing the fund's net yield to
those shareholders. The yield of a fund is not fixed or guaranteed, and an
investment in a fund is not insured. Accordingly, a fund's yield
information may not necessarily be used to compare fund shares with
investment alternatives which, like money market instruments or bank
accounts, may provide a fixed rate of interest. In addition, because
investments in the funds are not insured or guaranteed, a fund's yield
information may not necessarily be used to compare the fund with
investment alternatives which are insured or guaranteed.
For the seven-day period ended May 31, 1999, the yield and effective yield
for Class A shares of the Cash Portfolio, Government Portfolio and
Municipal Portfolio were as follows:
Portfolio
Yield
Effective
Yield
Cash Portfolio (Class A)*
4.71%
4.82%
Government Portfolio (Class A)*
4.59
4.69
Municipal Portfolio+ (Class A)*
3.07
3.12
* As at May 31, 1999, (No Class B shares of were outstanding,
accordingly, no comparable information is available on that class.)
+ The Municipal Portfolio's tax-equivalent yield (assuming a federal
income tax rate of 36%) for the same period for Class A shares was
4.80% and its tax-equivalent effective yield (assuming a federal
income tax rate of 36%) for the same period was 4.88%.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Cash Portfolio and the Government
Portfolio is determined as of 2 pm New York City time on each day that the
New York Stock Exchange ("NYSE") and the Company's custodian are open. The
net asset value per share of the Municipal Portfolio is determined as of
12 noon, New York City time on each day that the NYSE and the Company's
custodian are open. The net asset value per share of each fund is
determined by dividing the fund's net assets attributable to the class
(i.e., the value of its assets less liabilities) by the total number of
shares of the class outstanding. Each fund may also determine net asset
value per share on days when the NYSE is not open, but when the settlement
of securities may otherwise occur. The New York Stock Exchange is closed
on the following holidays: New Year's Day, Martin Luther King Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Each fund uses the "amortized cost method" for valuing portfolio
securities pursuant to Rule 2a-7 under the 1940 Act. The amortized cost
method of valuation of the fund's securities involves valuing a security
at its cost at the time of purchase and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
instrument. The market value of portfolio securities will fluctuate on
the basis of the creditworthiness of the issuers of such securities and
with changes in interest rates generally. While the amortized cost method
provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price
the fund would receive if it sold the instrument. During such periods the
yield to investors in the fund may differ somewhat from that obtained in a
similar company that uses mark-to-market values for all its portfolio
securities. For example, if the use of amortized cost resulted in a lower
(higher) aggregate portfolio value on a particular day, a prospective
investor in the fund would be able to obtain a somewhat higher (lower)
yield than would result from investment in such similar company, and
existing investors would receive less (more) investment income. The
purpose of this method of valuation is to attempt to maintain a constant
net asset value per share, and it is expected that the price of the fund's
shares will remain at $1.00; however, shareholders should be aware that
despite procedures that will be followed to have a stabilized price,
including maintaining a maximum dollar-weighted average portfolio maturity
of 90 days and investing in securities with remaining maturities of only
13 months or less, there is no assurance that at some future date there
will not be a rapid change in prevailing interest rates, a default by an
issuer or some other event that could cause the fund's price per share to
change from $1.00.
PURCHASE OF SHARES
Purchases of fund shares may be made directly through the Company's
transfer agent, First Data Investor Services Group, Inc. ("First Data"),
through a brokerage account maintained with Salomon Smith Barney or with a
broker that clears securities transactions through Salomon Smith Barney on
a fully disclosed basis (an "Introducing Broker"). Salomon Smith Barney
and other broker/dealers may charge their customers an annual account
maintenance fee in connection with a brokerage account through which an
investor purchases or holds shares. Accounts held directly at First Data
are not subject to a maintenance fee. The Company reserves the right to
waive or change minimums, to decline any order to purchase its shares and
to suspend the offering of shares from time to time. Class A shares are
available for purchase by institutional investors on their own behalf.
Class B shares are available for purchase by institutional investors on
behalf of their clients.
The minimum initial investment in each fund is $1,000,000. The minimum
subsequent investment is $50.
The issuance of shares of a fund is recorded on the books of the Company,
and, to avoid additional operating costs and for investor convenience,
stock certificates will not be issued unless expressly requested in
writing by a shareholder. Certificates will not be issued for fractional
shares.
The Company's shares are sold continuously at their net asset value next
determined after a purchase order is received and becomes effective. A
purchase order becomes effective when First Data, Salomon Smith Barney or
an Introducing Broker receives, or converts the purchase amount into
federal funds (i.e., monies of member banks within the Federal Reserve
Board) that are either in the client's brokerage account at Salomon Smith
Barney or the Introducing Broker before the fund's close of business. When
orders for the purchase of Company shares are paid for in federal funds,
or are placed by an investor with sufficient federal funds or cash balance
in the investor's brokerage account with Salomon Smith Barney or the
Introducing Broker, the order becomes effective on the day of receipt if
the order is received prior to 12 noon (New York time) which is the close
of business with respect to orders for the Municipal Portfolio and 2:00
p.m. (New York time) which is the close of business with respect to orders
for the Cash and Government Portfolios, on any day the Company calculates
its net asset value. Purchase orders received after the close of business
or with respect to which federal funds are not available, or when orders
for the purchase of shares are paid for other than in federal funds, will
not be accepted and a new purchase order will need to be submitted on the
next day the Company calculates the fund's net asset value. Shares
purchased begin to accrue income dividends on the business day the
purchase order becomes effective.
EXCHANGE PRIVILEGE
Shareholders of a fund may exchange their shares for shares of any other
fund on the basis described below. To qualify for the exchange privilege,
a shareholder must exchange shares with a current value of at least
$1,000. Under the exchange privilege, each of the funds offers to exchange
its shares for shares of any other fund, on the basis of relative net
asset value per share. Since all of the funds seek to maintain a constant
$1.00 net asset value per share, it is expected that any exchange with
those funds would be on a share-for-share basis. If in utilizing the
exchange privilege the shareholder exchanges all his shares of a fund, all
dividends accrued on such shares for the month to date will be invested in
shares of the fund into which the exchange is being made. An exchange
between funds pursuant to the exchange privilege is treated as a
potentially taxable transaction for shareholders for federal income tax
purposes.
To exercise the exchange privilege, shareholders should contact First Data
or their Salomon Smith Barney Financial Consultant, who will advise the
applicable fund of the exchange. A shareholder may make exchanges by
telephone, provided that (i) he has elected the telephone exchange option
on the account application, (ii) the registration of the account for the
new fund will be the same as for the fund from which it is exchanged, and
(iii) the shares to be exchanged are not in certificate form. To make
exchanges by telephone, a shareholder should call the telephone number
listed above. The shareholder should identify himself by name and account
number and give the name of the fund into which he wishes to make the
exchange, the name of the fund and the number of shares he wishes to
exchange. The shareholder also may write to First Data requesting that the
exchange be effected. Such letter must be signed exactly as the account is
registered with signature(s) guaranteed by a commercial bank which is a
member of the FDIC, a trust company or a member firm of a domestic
securities exchange. The Company reserves the right to require a properly
completed exchange application.
These exchange privileges may be modified or terminated at any time.
REDEMPTION OF SHARES
Shareholders may redeem their shares without charge on any day the Company
calculates its net asset value. Redemption requests received in proper
form prior to 2:00 p.m. (12:00 noon in the case of the Municipal
Portfolio), New York time, are priced at the net asset value as next
determined. Redemption requests received after 2:00 p.m. (12:00 noon in
the case of the Municipal Portfolio), New York time, will not be accepted
and a new redemption request should be submitted on the following day that
the Company calculates its net asset value. Redemption requests must be
made through Salomon Smith Barney, an introducing broker or the securities
dealer in the selling group through whom the shares were purchased, except
that shareholders who purchased shares of the Company from First Data may
also redeem shares directly through First Data. A shareholder desiring to
redeem shares represented by certificates also must present the
certificates to Salomon Smith Barney, the Introducing Broker or First Data
endorsed for transfer (or accompanied by an endorsed stock power), signed
exactly as the shares are registered. Redemption requests involving shares
represented by certificates will not be deemed received until certificates
are received by First Data in proper form.
Shares held at Salomon Smith Barney. A redemption request received by
Salomon Smith Barney in proper form before 2:00 p.m. (12:00 noon in the
case of the Municipal Portfolio) will not earn a dividend on the day the
request is received and redemption proceeds will be credited to a
shareholder's account on the same day.
Shares held at First Data. A shareholder who purchased shares of the
Company directly through First Data may redeem shares through First Data
in the manner described under "Expedited Redemption Procedures" and
"Ordinary Redemption Procedures".
Expedited Redemption Procedures
Shareholders meeting the requirements stated below may initiate
redemptions by submitting their redemption requests by telephone at
800-451-2010 or mail to First Data and have the proceeds sent by a Federal
funds wire to a previously designated bank account. A redemption request
received prior to 2:00 p.m. (12:00 noon in the case of the Municipal
Portfolio) (New York time) will not earn a dividend on the day the request
is received and payment will be made in Federal funds wired on the same
business day. If an expedited redemption request for which the redemption
proceeds will be wired is received after 2:00 p.m. (12:00 noon in the case
of the Municipal Portfolio) (New York time), and prior to the close of
regular trading on a day on which First Data is open for business, the
redemption proceeds will be wired on the next business day following the
redemption request that First Data is open for business. A redemption
request received after 2:00 p.m. (12:00 noon in the case of the Municipal
Portfolio) (New York time) will earn a dividend on the day the request is
received. If an expedited redemption request is received after the regular
close of trading on the NYSE or on a day that Salomon Smith Barney or
First Data is closed, the redemption proceeds will be wired on the next
business day following receipt of the redemption request. Therefore, a
redeeming shareholder will receive a dividend on the day the request is
received, but not on the day that shares are redeemed out of his account.
The Company or First Data will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine. In
this regard, the Fund and First Data will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. Telephone
redemptions and exchanges are not available for shares for which
certificates have been issued.
To utilize the expedited redemption procedure, all shares must be held in
non-certificate form in the shareholder's account. In addition, an account
application with the expedited section properly completed must be on file
with First Data before an expedited redemption request is submitted. This
form requires a shareholder to designate the bank account to which its
redemption proceeds should be sent. Any change in the bank account
designated to receive the proceeds must be submitted in proper form on a
new account application with signature guaranteed. In making a telephone
redemption request, a shareholder must provide the shareholder's name and
account number, the dollar amount of the redemption requested, the name of
the fund, and the name of the bank to which the redemption proceeds should
be sent. If the information provided by the shareholder does not
correspond to the information on the application, the transaction will not
be approved. If, because of unusual circumstances, a shareholder is unable
to contact First Data at the telephone number listed on the preceding page
to make an expedited redemption request, he may contact his Salomon Smith
Barney Financial Consultant to effect such a redemption, or request
redemption in writing as described under "Ordinary Redemption Procedures"
below.
Ordinary Redemption Procedures
If this method of redemption is used, the shareholder may submit his
redemption request in writing to First Data. A fund will make payment for
shares redeemed pursuant to the ordinary redemption procedures by check
sent to the shareholder at the address on such shareholder's account
application. Such checks will normally be sent out within one business
day, but in no event more than three business days after receipt of the
redemption request in proper form. If certificates have been issued
representing the shares to be redeemed, prior to effecting a redemption
with respect to such shares, First Data must have received such
certificates. A shareholder's signature must be guaranteed by an "eligible
guarantor institution", as such term is defined by Rule 17Ad-15 of the
Securities Exchange Act of 1934, as amended, the existence and validity of
which may be verified by First Data through use of industry publications.
A notary public is not an acceptable guarantor. In certain instances,
First Data may request additional documentation which it believes
necessary to insure proper authorization such as, but not limited to:
trust instruments, death certificates, appointment of executor or
administrator, or certificates of corporate authority. Shareholders having
questions regarding proper documentation should contact First Data.
MANAGEMENT AGREEMENT, PLAN OF DISTRIBUTION AND OTHER SERVICES
Manager
SSBC serves as investment adviser to the Funds pursuant to a separate
investment management agreement (the "Management Agreement"). SSBC is an
affiliate of Salomon Smith Barney and an indirect, wholly owned
subsidiary of Citigroup. The Management Agreement was most recently
approved by the Board of Directors, including a majority of the Directors
who are not "interested persons" of the Company or the investment advisers
(the "Independent Directors"), and by shareholders of the respective Funds
on July 22, 1999. SSBC provides investment advisory and management
services to investment companies affiliated with Salomon Smith Barney.
SSBC manages the day-to-day operations of each fund pursuant to management
agreements entered into by the Company on behalf of each fund. Under the
management agreements, the Manager offers each fund advice and assistance
with respect to the acquisition, holding or disposal of securities and
recommendations with respect to other aspects of the business and affairs
of each fund. It also furnishes each fund with executive and other
personnel; management, bookkeeping, accounting and administrative
services; office space and equipment; and the services of the officers and
employees of the Company.
Each fund's management agreement provides that all other expenses not
specifically assumed by the Manager under each management agreement are
borne by the Company. Expenses payable by the Company include, but are
not limited to, all charges of custodian (including amounts as custodian
and amounts for keeping books, performing portfolio valuations, and for
rendering other services to the Company) and shareholder servicing agents,
filing fees and expenses relating to the registration and qualification of
the Company's shares under federal or state securities laws and
maintaining such registrations and qualifications (including the printing
of the Company's registration statements and prospectuses), expenses of
preparing, printing and distributing all proxy material, reports and
notices to shareholders, out-of-pocket expenses of directors and fees of
directors who are not "interested persons" as defined in the 1940 Act,
fees of auditors and legal counsel, interest, taxes, fees and commissions
of every kind, expenses of issue, repurchase or redemption of shares, and
all other costs incident to the Company's corporate existence and
extraordinary expenses such as litigation and indemnification expenses.
Direct expenses are charged to each fund; the management fee and general
corporate expenses are allocated on the basis of relative net assets. No
sales or promotion expenses are incurred by the Company, but expenses
incurred in complying with laws regulating the issue or sale of the
Company's shares are not deemed sales or promotion expenses.
The Manager has agreed that if in any fiscal year the total expenses of
any fund, exclusive of taxes, brokerage, interest and extraordinary
expenses exceed 0.80% of the average daily net assets for that fiscal year
of the fund, the Manager will reduce its fee to the extent of such excess.
The 0.80% voluntary expense limitation shall be in effect until it is
terminated by 14 days' written notice to shareholders and by supplement to
the then current prospectus.
As compensation for SSBC's services to the funds, each fund pays a monthly
fee at the annual rate of 0.27% of the value of that fund's average daily
net assets.
SSBC waived a portion of its management fee for the Company for the fiscal
year ended May 31, 1999, and the effective rate of the management fee was
0.23%, 0.23% and 0.23% of the daily net assets for the Cash Portfolio,
Government Portfolio and Municipal Portfolio, respectively. For the past
fiscal year, total operating expenses without the management fee waiver
were 0.31%, 0.42% and 0.39% of the average daily net assets for the Cash
Portfolio, Government Portfolio and Municipal Portfolio, respectively.
For the fiscal year ended May 31, 1997, SSBC waived a portion of the
management fees due to it. Absent this fee waiver, the management fees
for the Portfolio's Class A shares would have been $585,305, $227,516 and
$117,100, respectively, for the Cash Portfolio, Government Portfolio and
Municipal Portfolio.
For the fiscal year ended May 31, 1998, SSBC waived a portion of the
management fees due to it. Absent this fee waiver, the management fees
for the funds would have been $1,505,040, $325,002 and $186,349,
respectively, for the Cash Portfolio, Government Portfolio and Municipal
Portfolio.
No Class B shares were outstanding for the Government Portfolio or the
Municipal Portfolio during the period, however management estimates that
total operating expenses without the management fee waiver would have been
0.64% and 0.66% of average daily net assets, respectively.
For the fiscal year ended May 31, 1999, SSBC waived a portion of the
management fees due to it. Absent this fee waiver, the management fees
for the funds would have been $2,641,152, $304,826 and $368,395,
respectively, for the Cash Portfolio, Government Portfolio and Municipal
Portfolio.
No Class B shares were outstanding for the Government Portfolio or the
Municipal Portfolio during the period, however management estimates that
total operating expenses without the management fee waiver would have been
0.64% and 0.66% of average daily net assets, respectively.
Plan of Distribution
CFBDS, Inc. ("CFBDS or the "distributor"), located at 20 Milk Street,
Boston, Massachusetts 02109-5408, serves as the Company's distributor on
a best efforts basis pursuant to a distribution agreement (the
"Distribution Agreement").
Service Organizations. Institutional investors who are purchasing shares
on behalf of their customers, such as banks, savings and loans
institutions and other financial institutions ("service organizations")
may purchase Class B shares. These shares are identical in all respects
to Class A shares except that they bear certain additional service fees
described in the Company's prospectus relating to Class B shares and enjoy
certain exclusive voting rights on matters relating to these service fees.
The Company will enter into an agreement with each service organization
that purchases Class B shares to provide certain services to the
beneficial owners of such shares. Such services include aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with Salomon Smith Barney; processing
dividend payments from the Fund on behalf of their customers; providing
information periodically to customers showing the positions in shares;
arranging for bank wires; responding to customer inquiries relating to the
services provided by the service organization and handling correspondence:
and acting as shareholder of record and nominee. Under terms of the
agreements, service organizations are required to provide to their
customers a schedule of any fees that they may charge customers in
connection with their investment in Class B shares.
Class A shares are sold to institutions that have not entered into
servicing agreements with the Company in connection with their
investments.
Brokerage
The Manager places orders for the purchase and sale of securities for the
portfolios of the fund. All of each fund's transactions have been
principal transactions with major dealers in money market instruments, on
which no brokerage commissions are paid. Purchases from or sales to
dealers serving as market-makers include the spread between the bid and
asked prices. No portfolio transactions are handled by Salomon Smith
Barney.
TAXES
The following is a summary of the material federal tax considerations
affecting the separate funds and their shareholders. In addition to the
considerations described below, there may be other federal, state, local,
and/or foreign tax applications to consider. Because taxes are a complex
matter, prospective shareholders are urged to consult their tax advisors
for more detailed information with respect to the tax consequences of any
investment.
Each fund of the Company will be treated as a separate entity for tax
purposes. The funds intend to qualify, as in prior years, under Subchapter
M of the Internal Revenue Code (the "Code") for tax treatment as regulated
investment companies so long as such qualification is in the best
interests of shareholders. In each taxable year that the separate funds
so qualify, the funds will pay no federal income tax on the investment
company taxable income and net capital gain that is distributed to
shareholders. The Municipal Portfolio also intends to satisfy conditions
that will enable it to pay "exempt-interest dividends" to its
shareholders. Exempt-interest dividends are generally not subject to
regular federal income taxes, although they may be considered taxable for
certain state and local income tax purposes.
Dividends paid from net investment income (other than "exempt-interest
dividends") and net realized short-term capital gain, are subject to
federal income tax as ordinary income. Distributions, if any, from net
realized long-term capital gains are taxable as long-term capital gains,
regardless of the length of time a shareholder has owned fund shares.
Losses, if any, on the redemption, exchange or other sale of shares held
for six months or less may be disallowed or recharacterized to the extent
of any exempt-interest dividends or capital gain dividends paid with
respect to such shares.
Shareholders are required to pay tax on all taxable distributions, even if
those distributions are automatically reinvested in additional shares.
None of the dividends paid will qualify for the corporate dividends
received deduction. Dividends consisting of interest from U.S. government
securities may be exempt from state and local income taxes. Shareholders
will be informed of the source and tax status of all distributions
promptly after the close of each calendar year.
The funds are required to withhold ("backup withholding") 31% of all
taxable dividends and capital gain distributions for shareholders who do
not provide the funds with a correct taxpayer identification number
(social security or employer identification number and any required
certifications). Withholding from taxable dividends and capital gain
distributions also is required for shareholders who otherwise are subject
to backup withholding. Any tax withheld as a result of backup withholding
does not constitute an additional tax, and may be claimed as a credit on
the shareholders' federal income tax return.
Dividends and Distributions
Each fund declares a dividend from its net investment income daily, for
each day the NYSE is open to conduct business, and pays dividends monthly.
If a shareholder redeems an account in full between monthly dividend
payment dates, all dividends declared up to and including the date of
liquidation will be paid with the redemption proceeds. Dividends from net
realized capital gains, if any, will be distributed annually. The funds
may also pay additional dividends shortly before December 31 from certain
amounts of undistributed ordinary income and capital gains, in order to
avoid a Federal excise tax liability. If a shareholder does not otherwise
instruct, monthly income dividends and capital gain distributions will be
reinvested automatically in additional shares of the same class at net
asset value, with no additional sales charge or CDSC.
The per share amounts of dividends from net investment income on Class B
shares may be lower than that of Class A shares, mainly as a result of the
service fees applicable to the Class B shares. Capital gain distributions,
if any, will be the same across both Classes of Fund shares.
The Municipal Portfolio
Exempt-interest dividends attributable to interest received by the fund on
certain "private activity" bonds will be treated as a specific tax
preference item to be included in a shareholder's alternative minimum tax
computation. In addition to the alternative minimum tax, corporate
shareholders must include this percentage as a component in the corporate
environmental tax computation if such tax is reinstated, as has been
proposed. Exempt-interest dividends derived from the interest earned on
private activity bonds will not be exempt from federal income tax for
those shareholders who are "substantial users" (or persons related to
"substantial users") of the facilities financed by these bonds.
Shareholders who receive social security or equivalent railroad retirement
benefits should note that exempt-interest dividends are one of the items
taken into consideration in determining the amount of these benefits that
may be subject to federal income tax.
The interest expense incurred by a shareholder on borrowing made to
purchase or carry Portfolio shares, is not deductible for federal income
tax purposes to the extent related to the exempt-interest dividends
received on such shares.
Dividends paid by the fund from interest income on taxable investments,
net short-term capital gains, and all, or a portion of, any gains realized
from the sale or other disposition of certain market discount bonds are
subject to federal income tax as ordinary income. Distributions, if any,
from net long-term capital gains are taxable as long-term capital gains,
regardless of the length of time a shareholder has
owned Company shares.
ADDITIONAL INFORMATION ABOUT THE COMPANY
The Company, an open-end, management investment company, was organized
under the laws of the State of Maryland on March 28, 1995. The Directors
have authorized the issuance of three series of shares, each representing
shares in one of three separate funds, and may also authorize the creation
of additional series of shares. Each share of a fund represents an equal
proportionate interest in the net assets of that fund or class with each
other share of the same fund or class and is entitled to such dividends
and distributions out of the net income of that fund or class as are
declared in the discretion of the Directors.
Voting Rights
Shareholders are entitled to one vote for each share held and will vote in
the aggregate and not by fund or class, except as otherwise required by
the 1940 Act or Maryland General Corporation Law. The fund ordinarily
will not hold shareholder meetings; however, shareholders have the right
to call a meeting upon a vote of 10% of the fund's outstanding shares for
the purpose of voting to remove Directors and the Company will assist
shareholders in calling such a meeting as required by the 1940 Act.
Each share of each series of the Company has one vote (and fractional
votes for fractional shares). Shares of all series of the Company have
noncumulative voting rights, which means that the holders of more than 50%
of the shares of all series of the Company voting for the election of
Directors can elect 100% of the Directors if they choose to do so and, in
such event, the holders of the remaining shares will not be able to elect
any Directors. Each series of the Company will vote separately only with
respect to those matters that affect only that series.
The present Directors of the Company were elected at a meeting of
shareholders held on April 27, 1995. Under the by-laws, each Director will
continue in office until the dissolution of the Company or his earlier
death, resignation, bankruptcy, incapacity or removal. Vacancies will be
filled by a majority of the remaining Directors, subject to the 1940 Act.
Therefore, no annual or regular meetings of shareholders normally will be
held, unless otherwise required by the by-laws or the 1940 Act. Subject to
the foregoing, shareholders have the power to vote to elect or remove
Directors, to terminate or reorganize their fund, to amend the By-Laws, to
bring certain derivative actions and on any other matters on which a
shareholder vote is required by the 1940 Act, the by-laws or the
Directors.
Counsel
Willkie Farr & Gallagher serves as legal counsel to the Company. The
Directors who are not "interested persons" of the Company have selected
Stroock & Stroock & Lavan LLP as their counsel.
Auditors
KPMG LLP, 345 Park Avenue, New York, New York 10154, has been selected as
independent auditors for the Company for its fiscal year ending May 31,
2000, to examine and report on the financial statements and financial
highlights of the Company.
Custodian
PNC is located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19103, and serves as custodian for the funds. Under its custodial
agreement with the Company, PNC is authorized to appoint one or more
foreign or domestic banking institutions as sub-custodians of assets owned
by a fund. For its custody services, PNC receives monthly fees charged to
each fund based upon the month-end, aggregate net asset value of the
Company, plus certain charges for securities transactions. The assets of
the Company are held under bank custodianship in accordance with the 1940
Act.
Transfer Agent
First Data is located at Exchange Place, Boston, Massachusetts 02109, and
serves as the Company's transfer agent and dividend disbursing agent. For
its services as transfer agent and dividend disbursing agent, First Data
receives fees charged to the funds at an annual rate based upon the number
of shareholder accounts maintained during the year. First Data also is
reimbursed by the funds for its out-of-pocket expenses.
Minimum Account Size
The Company reserves the right to redeem involuntarily any shareholder's
account if the aggregate net asset value of the shares of a fund held in
the account is less than $100,000 (if a shareholder has more than one
account in a fund, each account must satisfy the minimum account size.)
Before the Directors of the Company elect to exercise such right,
shareholders will receive prior written notice and will be permitted 60
days to bring accounts up to the minimum to avoid involuntary redemption.
Annual Reports
The Company sends to each shareholder a semi-annual report and an audited
annual report, each of which includes a list of the investment securities
held by the Company at the end of the period covered.
FINANCIAL STATEMENTS
The funds' Annual Reports for the fiscal year ended May 31, 1999 are
incorporated into this Statement of Additional Information by reference in
their entirety.
Appendix A Description of Securities Ratings
Moody's and Standard and Poor's
Municipal and Corporate Bonds and Municipal Loans
The two highest ratings of Standard & Poor's Rating Group ("S&P") for
municipal and corporate bonds are AAA and AA. Bonds rated AAA have the
highest rating assigned by S&P to a debt obligation. Capacity to pay
interest and repay principal is extremely strong. Bonds rated AA have a
very strong capacity to pay interest and repay principal and differ from
the highest rated issues only in a small degree. The AA rating may be
modified by the addition of a plus (+) or minus (-) sign to show relative
standing within that rating category
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal and corporate bonds are Aaa and Aa. Bonds rated Aaa are judged
by Moody's to be of the best quality. Bonds rated Aa are judged to be of
high quality by all standards. Together with the Aaa group, they comprise
what are generally known as high-grade bonds. Moody's states that Aa bonds
are rated lower than the best bonds because margins of protection or other
elements make long-term risks appear somewhat larger than Aaa securities.
The generic rating Aa may be modified by the addition of the numerals 1, 2
or 3. The modifier 1 indicates that the security ranks in the higher end
of the Aa rating category; the modifier 2 indicates a mid-range ranking;
and the modifier 3 indicates that the issue ranks in the lower end of such
rating category.
Short-Term Municipal Loans
S&P's highest rating for short-term municipal loans is SP-1. S&P states
that short-term municipal securities bearing the SP-1 designation have a
strong capacity to pay principal and interest. Those issues rated SP- 1
which are determined to possess a very strong capacity to pay debt service
will be given a plus (+) designation. Issues rated SP-2 have satisfactory
capacity to pay principal and interest with some vulnerability to adverse
financial and economic changes over the term of the notes.
Moody's highest rating for short-term municipal loans is MIG-1/VMIG-1.
Moody's states that short-term municipal securities rated MIG-1/VMIG-1 are
of the best quality, enjoying strong protection from established cash
flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both. Loans bearing the
MIG-2/1/MIG-2 designation are of high quality, with margins of protection
ample although not so large as in the MIG-1/1/MIG-1 group.
Other Short-Term Debt Securities
Prime-1 and Prime-2 are the two highest ratings assigned by Moody's for
other short-term debt securities and commercial paper, and A-1 and A-2 are
the two highest ratings for commercial paper assigned by S&P. Moody's uses
the numbers 1, 2 and 3 to denote relative strength within its highest
classification of Prime, while S&P uses the numbers 1, 2 and 3 to denote
relative strength within its highest classification of A. Issuers rated
Prime-1 by Moody's have a superior ability for repayment of senior
short-term debt obligations and have many of the following
characteristics: leading market positions in well-established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal
cash generation, and well established access to a range of financial
markets and assured sources of alternate liquidity. Issuers rated Prime-2
by Moody's have a strong ability for repayment of senior short-term debt
obligations and display many of the same characteristics displayed by
issuers rated Prime-1, but to a lesser degree. Issuers rated A-1 by S&P
carry a strong degree of safety regarding timely repayment Those issues
determined to possess extremely strong safety characteristics are denoted
with a plus (+) designation. Issuers rated A-2 by S&P carry a satisfactory
degree of safety regarding timely repayment
Appendix B Description of Municipal Securities
Municipal Notes generally are used to provide for short-term capital needs
and usually have maturities of one year or less. They include the
following:
1. Project Notes, which carry a U.S. government guarantee, are issued by
public bodies (called "local issuing agencies") created under the laws of
a state, territory, or U.S. possession. They have maturities that range up
to one year from the date of issuance. Project Notes are backed by an
agreement between the local issuing agency and the Federal Department of
Housing and Urban Development. These Notes provide financing for a wide
range of financial assistance programs for housing, redevelopment, and
related needs (such as low-income housing programs and renewal programs).
2. Tax Anticipation Notes are issued to finance working capital needs of
municipalities. Generally, they are issued in anticipation of various
seasonal tax revenues, such as income, sales, use and business taxes, and
are payable from these specific future taxes.
3. Revenue Anticipation Notes are issued in expectation of receipt of
other types of revenues, such as Federal revenues available under the
Federal Revenue Sharing Programs.
4. Bond Anticipation Notes are issued to provide interim financing until
long-term financing can be arranged. In most cases, the long-term bonds
then provide the money for the repayment of the Notes.
5. Construction Loan Notes are sold to provide construction financing.
After successful completion and acceptance, many projects receive
permanent financing through the Federal Housing Administration under the
Federal National Mortgage Association ("Fannie Mae") or the Government
National Mortgage Association ("Ginnie Mae").
6. Tax-exempt Commercial Paper is a short-term obligation with a stated
maturity of 365 days or less. It is issued by agencies of state and local
governments to finance seasonal working capital needs or as short-term
financing in anticipation of longer term financing.
Municipal Bonds, which meet longer term capital needs and generally have
maturities of more than one year when issued, have three principal
classifications:
1. General Obligation Bonds are issued by such entities as states,
counties, cities, towns and regional districts. The proceeds of these
obligations are used to fund a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. The basic security behind General Obligation Bonds is the
issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. The taxes that can be levied for the
payment of debt service may be limited or unlimited as to the rate or
amount of special assessments.
2. Revenue Bonds in recent years have come to include an increasingly
wide variety of types of municipal obligations. As with other kinds of
municipal obligations, the issuers of revenue bonds may consist of
virtually any form of state or local governmental entity, including
states, state agencies, cities, counties, authorities of various kinds,
such as public housing or redevelopment authorities, and special
districts, such as water, sewer or sanitary districts. Generally, revenue
bonds are secured by the revenues or net revenues derived from a
particular facility group of facilities, or, in some cases, the proceeds
of a special excise or other specific revenue source. Revenue bonds are
issued to finance a wide variety of capital projects including electric,
gas, water and sewer systems; highways, bridges, and tunnels; port and
airport facilities; colleges and universities; and hospitals. Many of
these bonds provide additional security in the form of a debt service
reserve fund to be used to make principal and interest payments. Various
forms of credit enhancement, such as a bank letter of credit or municipal
bond insurance, may also be employed in revenue bond issues. Housing
authorities have a wide range of security, including partially or fully
insured mortgages, rent subsidized and/or collateralized mortgages, and/or
the net revenues from housing or other public projects. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
In recent years, revenue bonds have been issued in large volumes for
projects that are privately owned and operated (see below).
Private Activity Bonds are considered municipal bonds if the interest paid
thereon is exempt from Federal income tax and are issued by or on behalf
of public authorities to raise money to finance various privately operated
facilities for business and manufacturing, housing and health. These bonds
are also used to finance public facilities such as airports, mass transit
systems and ports. The payment of the principal and interest on such bonds
is dependent solely on the ability of the facility's user to meet its
financial obligations and the pledge, if any, of real and personal
property as security for such payment.
While, at one time, the pertinent provisions of the Internal Revenue Code
permitted private activity bonds to bear tax-exempt interest in connection
with virtually any type of commercial or industrial project (subject to
various restrictions as to authorized costs, size limitations, state per
capita volume restrictions, and other matters), the types of qualifying
projects under the Code have become increasingly limited, particularly
since the enactment of the Tax Reform Act of 1986. Under current
provisions of the Code, tax-exempt financing remains available, under
prescribed conditions, for certain privately owned and operated rental
multi-family housing facilities, nonprofit hospital and nursing home
projects, airports, docks and wharves, mass commuting facilities and solid
waste disposal projects, among others, and for the refunding (that is, the
tax-exempt refinancing) of various kinds of other private commercial
projects originally financed with tax-exempt bonds. In future years, the
types of projects qualifying under the Code for tax-exempt financing are
expected to become increasingly limited.
Because of terminology formerly used in the Internal Revenue Code,
virtually any form of private activity bond may still be referred to as an
"industrial development bond", but more and more frequently revenue bonds
have become classified according to the particular type of facility being
financed, such as hospital revenue bonds, nursing home revenue bonds,
multi-family housing revenues bonds, single family housing revenue bonds,
industrial development revenue bonds, solid waste resource recovery
revenue bonds, and so on.
Other Municipal Obligations, incurred for a variety of financing purposes,
include: municipal leases, which may take the form of a lease or an
installment purchase or conditional sale contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment
and facilities such as fire and sanitation vehicles, telecommunications
equipment and other capital assets. Municipal leases frequently have
special risks not normally associated with general obligation or revenue
bonds. Leases and installment purchase or conditional sale contracts
(which normally provide for title to the leased asset to pass eventually
to the government issuers have evolved as a means for governmental issuers
to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt-issuance
limitations of many state constitutions and statutes are deemed to be
inapplicable because of the inclusion in many leases or contracts of
"non-appropriation" clauses that provide that the governmental issuer has
no obligation to make future payments under the lease or contract unless
money is appropriated for such purpose by the appropriate legislative body
on a yearly or other periodic basis. To reduce this risk, the Fund will
only purchase municipal leases subject to a non-appropriation clause when
the payment of principal and accrued interest is backed by an
unconditional irrevocable letter of credit, or guarantee of a bank or
other entity that meets the criteria described in the Prospectus.
Tax-exempt bonds are also categorized according to whether the interest is
or is not includible in the calculation of alternative minimum taxes
imposed on individuals, according to whether the costs of acquiring or
carrying the bonds are or are not deductible in part by banks and other
financial institutions, and according to other criteria relevant for
Federal income tax purposes. Due to the increasing complexity of Internal
Revenue Code and related requirements governing the issuance of tax-exempt
bonds, industry practice has uniformly required, as a condition to the
issuance of such bonds, but particularly for revenue bonds, an opinion of
nationally recognized bond counsel as to the tax-exempt status of interest
on the bonds.
3
G:\Fund Accounting\Legal\FUNDS\INST\1999\SECDOCS\instsai99.doc
A-1
B-1
PART C
OTHER INFORMATION
(b) Exhibits
All references are to the Registrant's registration statement on Form N-
1A (the "Registration Statement") as filed with the SEC on April 5, 1995
(File Nos. 33-90952 and 811-9012)
Exhibit No. Description of Exhibits
(a) Articles of Incorporation of Registrant are
incorporated by reference to the Fund's Registration Statement
(b) By-Laws of Registrant are incorporated by
reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed on
June 19, 1995 ("Pre-Effective Amendment No. 1")
(c) Specimen Stock Certificate are incorporated by reference
to Post-Effective Amendment No. 4
(d) Investment Advisory Agreement between the
Registrant and Smith Barney Mutual Funds Management Inc. is
incorporated by reference to Pre-Effective Amendment No. 1
(e)(1) Distribution Agreement between the Registrant
and Smith Barney Inc. is incorporated by reference to Pre-
Effective Amendment No. 1
(e)(2) Form of Distribution Agreement between the Registrant and CFBDS, Inc.
is incorporated by reference to Post-Effective Amendement No. 6.
(e)(3) Selling Group Agreement is incorporated by reference
to Post-Effective Amendement No. 6
(f) Not applicable(g) Custody Agreement between the Registrant and
PNC Bank,National Association is incorporated by reference to
Pre-Effective Amendment No 1(h) Form of Transfer Agency Agreement between the
Registrant and First Data Investor Services, Group Inc.
is incorporated by reference to Pre-Effective Amendment No. 1
(i) (1) Opinion and consent of Willkie Farr &
Gallagher is incorporated by reference to Pre-Effective
Amendment No. 1
(i) (2) Opinion and consent of Venable, Baetjer &
Howard is incorporated by reference to Pre-Effective
Amendment No. 1.
(j) Filed herewith
(k) Not applicable
(l) Not applicable
(m)(1)Distribution and Service Plan under Rule 12b-1
is incorporated by reference to Pre-Effective
Amendment No. 1
(m)(2) Form of Amended and Restated Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 between
the Registrant on behalf of each of its series
is incorporated by reference to Post-Effective
Amendement No. 6
(n) Filed Herewith
(o) Form of Rule 18f-3(d) Multiple Class Plan of
the Registrant is incorporated by reference to Post-
Amendement No. 2
Item 24. None
Item 25. Indemnification
The response to this item is incorporated by reference to Registrant's
Pre-Effective Amendment No. 1 to the Registration Statement.
Item 26. Business and Other Connections of
Investment Adviser
Investment Adviser -SSB Citi Fund Management LLC("SSB Citi")
formerly known as SSBC Fund Management Inc.("SSBC")
SSBC was incorporated in December 1968 under the laws
of the State of Delaware. On September 21, 1999, SSBC was
converted into a Delaware Limited Liability Company.
SSB Citi is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings")(formerly known as Smith Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of
Citigroup Inc. SSB Citi is registered as an
investment adviser under the Investment Advisers Act
of 1940 (the "Advisers Act").The list required by this
Item 26 of officers and directors of SSB Citi together with
information as to any other business, profession,
vocation or employment of a substantial nature engaged
in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and
D of FORM ADV filed by SSB Citi pursuant to the Advisers
Act (SEC File No. 801-8314).
Item 27. Principal Underwriters
(a) CFBDS, Inc. the Registrant's Distributor, is also
the distributor for
CitiFundsSM International Growth & Income Portfolio,
CitiFundsSM International Equity Portfolio, CitiFundsSM Large Cap
Growth
Portfolio, CitiFundsSM Intermediate Income Portfolio,
CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM Emerging Asian Markets Equity Portfolio,
CitiFundsSM U.S. Treasury Reserves, CitiFundsSM Cash Reserves,
CitiFundsSM Premium U.S. Treasury Reserves,
CitiFundsSM Premium Liquid Reserves, CitiFundsSM Institutional U.S.
Treasury Reserves, CitiFundsSM Institutional Liquid Reserves,
SM Institutional Cash Reserves, CitiFundsSM Tax Free Reserves,
CitiFundsSM Institutional Tax Free Reserves,
CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves,
CitiFundsSM New York Tax Free Reserves, CitiFundsSM Balanced Portfolio,
CitiFundsSM Small Cap Value Portfolio, CitiFundsSM Growth & Income
Portfolio,
CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM National
Tax Free Income Portfolio, CitiFundsSM New York Tax Free Income
Portfolio,
CitiSelect VIP Folio 200, Citiselect VIP Folio 300,
CitiSelect (VIP Folio 400, CitiSelect (VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect (Folio 200,
CitiSelect (Folio 300, CitiSelect (Folio 400, and CitiSelect (Folio
500.
CFBDS is also the placement agent for Large Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio,
Intermediate Income Portfolio, Short-Term Portfolio,
Growth & Income Portfolio, Large Cap Growth Portfolio,
Small Cap Growth Portfolio, International Equity Portfolio,
Balanced Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.
CFBDS, Inc. is also the distributor for the following
Smith Barney Mutual Fund registrants:
Concert Investment Series
Consulting Group Capital Markets Funds
Greenwich Street Series Fund
Smith Barney Adjustable Rate Government Income Fund
Smith Barney Aggressive Growth Fund Inc.
Smith Barney Appreciation Fund Inc.
Smith Barney Arizona Municipals Fund Inc.
Smith Barney California Municipals Fund Inc.
Smith Barney Concert Allocation Series Inc.
Smith Barney Equity Funds
Smith Barney Fundamental Value Fund Inc.
Smith Barney Funds, Inc.
Smith Barney Income Funds
Smith Barney Investment Funds Inc.
Smith Barney Investment Trust
Smith Barney Managed Governments Fund Inc.
Smith Barney Managed Municipals Fund Inc.
Smith Barney Massachusetts Municipals Fund
Smith Barney Money Funds, Inc.
Smith Barney Muni Funds
Smith Barney Municipal Money Market Fund, Inc.
Smith Barney Natural Resources Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.
Smith Barney Oregon Municipals Fund Inc.
Smith Barney Principal Return Fund
Smith Barney Small Cap Blend Fund, Inc.
Smith Barney Telecommunications Trust
Smith Barney Variable Account Funds
Smith Barney World Funds, Inc.
Travelers Series Fund Inc.
And various series of unit investment trusts.
CFBDS, Inc. is also the distributor for the following
Salomon Brothers funds;
Salomon Brothers Opportunity Fund Inc
Salomon Brothers Investors Fund Inc
Salomon Brothers Capital Fund Inc
Salomon Brothers Series Funds Inc
Salomon Brothers Institutional Series Funds Inc
Salomon Brothers Variable Series Funds Inc
The information required by this Item 27 with respect
to each director, officer and partner of CFBDS, Inc.
is incorporated by reference to Schedule A of Form BD
filed by CFBDS, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-32417).
Item 28. Location of Accounts and Records
(1) Smith Barney Investment Funds Inc.
388 Greenwich Street
New York, New York 10013
(2) SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013
(3) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, PA
(4) The Chase Manhattan Bank
Chase Metrotech Center
Brooklyn, New York 11245
(5) First Data Investor Services Group, Inc.
One Exchange Place
Boston, Massachusetts 02109
(6) CFBDS Inc.
21 Milk Street, 5th floor
Boston, Massachusetts 02109
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
(a) None
SIGNATURES
As required by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b)under the 1933 Act and has duly caused
this Post-Effective Amendment No. 7 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
the City of New York, State of New York, on the
27th day of
September, 1999 .
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC.
By: /s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board,
President
(Chief Executive Officer)
As required by the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 7 to the Registration Statement on Form N-
1A has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
/s/ Heath B. McLendon Chairman of the Board,
President and
Heath B. McLendon Director
(Chief Executive Officer)
September 27, 1999
/s/ Lewis E. Daidone Senior Vice President and
Lewis E. Daidone Treasurer (Chief Financial and
Accounting Officer)
September 27, 1999
Signature Title Date
/s/ Paul R. Ades* Director September 27, 1999
Paul R. Ades
/s/ Herbert Barg* Director September 27, 1999
Herbert Barg
/s/ Dwight B. Crane* Director September 27, 1999
Dwight B. Crane
/s/ Frank G. Hubbard* Director September 27, 1999
Frank G. Hubbard
/s/ Jerome Miller* Director September 27, 1999
Jerome Miller
/s/ Ken Miller* Director September 27, 1999
Ken Miller
* By: /s/ Heath B. McLendon
Heath B. McLendon
Attorney-in-Fact
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
(j) Auditors Consent(n) Financial Data Schedule
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Smith Barney Institutional Cash Management Fund, Inc.:
We consent to the incorporation by reference, in this Prospectus and
Statement of Additional Information, of our report dated July 15, 1999,
on the statement of assets and liabilities of the Smith Barney Adjustable
Institutional Cash Management Fund, Inc. (the Fund) as of May 31, 1999
and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the three-year period then ended and for the period from June 16, 1995
(commencement of operations) to May 31, 1996. These financial statements
and financial highlights and our report thereon are included in the
Annual Report of the Fund as filed on Form N-30D.
We also consent to the references to our firm under the headings
"Financial Highlights" in the Prospectus and "Auditors" in the Statement
of Additional Information.
KPMG LLP
New York, New York
September 21 , 1999
Page
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<RECEIVABLES> 4,826
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