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. 6
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940, Amendment No. 6
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
On (date) pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
XXX On September 28, 1999 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
- ----------------------
PROSPECTUS SMITH BARNEY
MUTUAL FUNDS
September 28, 1999 Institutional Cash Management
Fund
Cash Portfolio
Government Portfolio
Municipal Portfolio
Class A 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>
Contents
<TABLE>
<S> <C>
Investments, risks and performance 4
Management 10
Buying shares 11
Deferred sales charges 12
Exchanging shares 13
Redeeming shares 14
Other things to know about
share transactions 16
Dividends, distributions and
taxes 18
Share price 19
Financial highlights 20
</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.
Institutional Cash Management Fund - Class A
- -1-
<PAGE>
Investment, risks and performance
Investment objectives
Cash Portfolio and Government Portfolio each seeks maximum current
income to the
extent consistent with preservation of capital and the maintenance of
liquidity.
Municipal Portfolio seeks maximum current income that is exempt from
federal
income taxes to the extent consistent with preservation of capital and
the
maintenance of liquidity.
Investment objectives
Key investments
Government Portfolio. The fund invests exclusively in short-term U.S.
government
obligations, including mortgage-backed securities and related
repurchase
agreements.
Cash Portfolio. The fund invests in high quality, U.S. dollar
denominated short-
term debt securities. These may include obligations issued by U.S. and
foreign
banks, the U.S. government, its agencies or instrumentalities, U.S.
states and
municipalities and U.S. and foreign corporate issuers. The fund will
invest at
least 25% of its assets in obligations of domestic and foreign banks.
Either the
principal amount of each obligation must be fully insured by the FDIC
or the
issuing bank must have more than $100 million of working capital or
more than $1
billion of total assets.
Cash Portfolio may invest in all types of money market securities
including
commercial paper, certificates of deposit, bankers' acceptances,
mortgage-backed
and asset-backed securities, repurchase agreements and other short term
debt
securities. These securities may pay interest at fixed, floating or
adjustable
rates. The fund limits foreign investments to U.S. dollar denominated
securities
of issuers located in major industrialized countries.
Municipal Portfolio. The fund invests primarily in high quality, short-
term
investment grade municipal securities. 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). The interest on these securities is exempt
from
federal income tax. 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 may
- -2-
<PAGE>
pay interest at fixed, variable or floating rates. The fund can invest
up to 20%
of its assets in securities whose interest is federally taxable.
Minimum credit quality. The funds invest only in high quality
securities, which
are those rated by a nationally recognized rating organization in one
of its two
highest short-term rating categories or, if unrated, of equivalent
quality.
Maximum maturity. Each fund invests exclusively in securities having
remaining
maturities of 397 days or less. Each fund maintains a dollar-weighted
average
portfolio maturity of 90 days or less.
Structured securities. 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 special purpose trust or partnership holding one or more municipal
bonds
and/or municipal bond interest rate swaps. A typical swap enables the
trust or
partnership to exchange a municipal bond interest rate for a floating
or
variable, short-term municipal interest rate.
These structured securities are a type of derivative instrument. Unlike
some
derivatives, these securities are not designed to leverage the fund's
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 fund.
Selection process
In selecting investments for the funds, 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
Risks, performance and expenses
All investments involve some degree of risk. However, each fund 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.
Institutional Cash Management Fund - Class A
- -3-
<PAGE>
Principal risks of investing in the funds
Although each fund seeks to preserve the value of your investment at $1
per
share, it is possible to lose money by investing in the funds, or the
funds
could underperform other short-term debt instruments or money market
funds if:
. Interest rates rise sharply.
. An issuer or guarantor of the funds' securities defaults, or the
security's
credit rating is downgraded.
. The manager's judgment about the value or credit quality of a
particular
security 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 fund'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 fund's gains will be, subject to federal taxation. The fund may
realize
taxable gains on the sale of its securities. Some of the fund's income
distributions may be subject to the federal alternative minimum tax. In
addition, distributions of the fund's income and gains generally will
be subject
to state income taxation.
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 funds
In addition to the above, the Municipal Portfolio may be an appropriate
investment 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
- -4-
<PAGE>
Risk return bar chart
The bar charts indicate the risks of investing in the funds by showing
changes
in the funds' performance from year to year. Past performance does not
necessarily indicate how a fund will perform in the future.
[BAR CHART APPEARS HERE]
Cash Portfolio
4.98% 5.12%
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter
199X Year to date: xx% through 6/30/99
The bar chart shows the performance of the fund's Class A shares for
each of the
past 3 calendar years.
[BAR CHART APPEARS HERE]
Government Portfolio
4.98% 5.04%
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter
199X Year to date: xx% through 6/30/99
The bar chart shows the performance of the fund's Class A shares for
each of the
past 3 calendar years.
[BAR CHART APPEARS HERE]
Municipal Portfolio
4.86% 5.03%
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter
199X Year to date: xx% through 6/30/99
The bar chart shows the performance of the fund's Class A shares for
each of the
past 3 calendar years.
Institutional Cash Management Fund - Class A
- -5-
<PAGE>
Risk return table
This table indicates the risks of investing in the funds by comparing
the
average annual total return of Class A shares of the funds for the
periods shown
with that of the 90 day Treasury bill. 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
Fund 1 year Since inception Inception
Date
Cash Portfolio 6/16/95
Government Portfolio 6/16/95
Municipal Portfolio 6/16/95
90 day T-bill * n/a
* Index comparison begins on June 30, 1995.
- -----------------------------------------------------------------------
- ---------
7 day yield as of December 31, 1998
Cash Portfolio Government Portfolio Municipal
Portfolio
-------------------------------------------------------
- ---------
7 day yield
- -----------------------------------------------------------------------
- ---------
- -6-
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest
in the
funds' shares.
<TABLE>
<CAPTION>
Cash
Government Municipal
Portfolio
Portfolio Portfolio
<S> <C> <C>
<C>
Shareholder fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases None
None None
(as a % of offering price)
Maximum deferred sales charge (load) (as a % of None/1/
None/1/ None/1/
the lower of net asset value at purchase or
redemption)
- -----------------------------------------------------------------------
- ---------------------
Annual fund operating expenses
(expenses deducted from fund assets)
- -----------------------------------------------------------------------
- ---------------------
Management fee 0.19%
0.08% 0.11%
Distribution and service (12b-1) fees none
none none
Other expenses/2/ 0.04%
0.15% 0.12%
----- --
- --- -----
Total annual fund operating expenses2 0.23%
0.23% 0.23%
=====
===== =====
- -----------------------------------------------------------------------
- ---------------------
</TABLE>
/1/ Class A shares exchanged from another Smith Barney fund subject to
a
deferred sales charge remain subject to the original fund's deferred
sales
charge while held in the funds.
/2/ Because the manager has agreed to limit total annual fund operating
expenses
to ___% of the fund's average daily net assets, actual expenses were:
<TABLE>
<CAPTION>
Cash Government
Municipal
Portfolio Portfolio
Portfolio
<S> <C> <C>
<C>
Management fee 0.27% 0.27%
0.27%
Total annual fund operating expenses 0.31% 0.42%
0.35%
===== =====
=====
- -----------------------------------------------------------------------
- ---------------------
</TABLE>
The manager may change or eliminate these expense limits at any time on
fourteen
days' prior notice to shareholders.
Example
This example helps you compare the costs of investing in the funds with
the
costs of investing in other mutual funds. Your actual costs may be
higher or
lower. The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. Each fund's operating expenses remain the same
. Redemption of your shares at the end of the period
<TABLE>
<CAPTION>
Number of years you own your shares 1 year 3 years 5 years
10 years
- -----------------------------------------------------------------------
- ---------------------
<S> <C> <C> <C>
<C>
Cash Portfolio $ $ $
$
Government Portfolio $ $ $
$
Municipal Portfolio $ $ $
$
</TABLE>
Institutional Cash Management Fund - Class A
- -7-
<PAGE>
Management
Manager The funds' investment manager is SSBC Fund Management Inc., an
affiliate
of Salomon Smith Barney Inc. The manager's address is 388 Greenwich
Street, New
York, New York 10013. The manager selects the funds' investments and
oversees
their operations. The manager and Salomon Smith Barney are subsidiaries
of
Citigroup Inc. Citigroup businesses produce a broad range of financial
services--asset management, banking and consumer finance, credit and
charge
cards, insurance, investments, investment banking and trading -- and
use diverse
channels to make them available to consumer and corporate customers
around the
world.
Management fee For its services, the manager received a fee during the
fund'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.xx%
------------------------------------------------------------------
- -----------
Government Portfolio 0.xx%
------------------------------------------------------------------
- -----------
Municipal Portfolio 0.xx%
------------------------------------------------------------------
- -----------
</TABLE>
Distributor The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon
Smith Barney
and other broker-dealers sells fund shares to the public.
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 funds. The cost of addressing the Year 2000
issue, if
substantial, could adversely affect companies and governments that
issue
securities held by the funds. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The funds have been
informed
by other service providers that they are taking similar measures.
Although the
funds do not expect the Year 2000 issue to adversely affect them, the
funds
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.
- -8-
<PAGE>
Buying shares
Through a You should contact your Salomon Smith Barney Financial
or
Salomon Smith Consultant dealer representative to open a brokerage
account and
Barney make arrangements to buy shares.
Financial
Consultant or If you do not provide the following information, your
order will
dealer be rejected
represen-
tative
. Specific fund being bought
. Class of shares being bought
. Dollar amount or number of shares being
bought
You should pay for your shares through your brokerage
account no
later than the third business day after you place your
order.
Salomon Smith Barney or your dealer representative may
charge an
annual account maintenance fee.
- -----------------------------------------------------------------------
- ---------
Through the Certain investors who are clients of the selling group
are
funds' eligible to buy shares directly from the fund.
transfer
agent
. Write the transfer agent at the following address:
Smith Barney Institutional Cash Management
Fund, Inc.
(Specify portfolio and class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
. Enclose a check to pay for the shares. For initial
purchases, complete and send an account application.
. For more information, call the transfer agent at 1-
800-451-
2010.
- -----------------------------------------------------------------------
- ---------
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 placed
by of purchase an investor with a sufficient balance in the investor's
brokerage
orders 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 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 fund
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.
Institutional Cash Management Fund - Class A
- -9-
<PAGE>
Exchanging shares
You should contact your Salomon Smith Barney Financial
Consultant
or dealer representative to exchange into another
portfolio.
. To qualify for the exchange privilege, you must
exchange shares
with a current value of at least $1,000
. You may exchange shares only for shares of the same
class of
another portfolio.
. 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.
. A fund may suspend or terminate your exchange
privilege if you
engage in an excessive pattern of exchanges.
- -----------------------------------------------------------------------
- ---------
By telephone If you do not have a brokerage account, you may be
eligible to
exchange shares through the transfer agent. You must
complete an
authorization form to authorize telephone transfers. If
eligible,
you may make telephone exchanges on any day the New York
Stock
Exchange is open. Call the transfer agent at 1-800-451-
2010
between 9:00 a.m. and 5:00 p.m. (Eastern time).
You can make telephone exchanges only between accounts
that have
identical registrations.
- -----------------------------------------------------------------------
- ---------
By mail If you do not have a Salomon Smith Barney brokerage
account,
contact your dealer representative or write to the
transfer agent
at the address on the opposite page.
- -10-
<PAGE>
Redeeming shares
Generally Contact your Salomon Smith Barney Financial Consultant
or dealer
representative to redeem shares of the funds.
If you hold share certificates, the transfer agent must
receive
the certificates endorsed for transfer or with signed
stock
powers before the redemption is effective.
If the shares are held by a fiduciary or corporation,
other
documents may be required.
Your redemption proceeds will be sent within three
business days
after your request is received in good order. However,
if you
recently purchased your shares by check, your redemption
proceeds
will not be sent to you until your original check
clears, which
may take up to 15 days.
If you have a Salomon Smith Barney brokerage account,
your
redemption proceeds will be placed in your account and
not
reinvested without your specific instruction. In other
cases,
unless you direct otherwise, your redemption proceeds
will be
paid by check mailed to your address of record.
Redemption requests received prior to 2 p.m. New York
time (12
noon for Municipal Portfolio) are priced at the net
asset value
next determined. Redemption requests received after 2
p.m. New
York time (12 noon for Municipal Portfolio)will not be
accepted
and a new redemption request should be submitted on the
following
day that the fund calculates its net asset value.
- -----------------------------------------------------------------------
- ---------
Expedited You may redeem shares and have the proceeds sent by
federal funds
redemption wired to a bank account designated on your authorization
form. To
procedures use the expedited procedure:
. all shares must be held in non-certificate form in
your account
. an account application with the expedited section
completed
must be on file with the transfer agent
. you must have designated on your account application a
bank
account to which 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 a signature guarantee
- -----------------------------------------------------------------------
- ---------
Institutional Cash Management Fund - Class A
- -11-
<PAGE>
- -----------------------------------------------------------------------
- ---------
By mail For accounts held directly at the funds, send written
requests to
the transfer agent at the following address:
Smith Barney Institutional Cash Management Fund, Inc.
(Specify portfolio and class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
. Your account number
. The class of shares and the dollar amount or number of
shares
to be redeemed
. Signatures of each owner exactly as the account is
registered
- -----------------------------------------------------------------------
- ---------
By telephone If you do not have a brokerage account, you may be
eligible to
redeem shares in amounts up to $10,000 per day through
the
transfer agent. You must complete an authorization form
to
authorize telephone redemptions. If eligible, you may
request
redemptions by telephone on any day the New York Stock
Exchange
is open. Call the transfer agent at 1-800-451-2010
between 9:00
a.m. and 5:00 p.m. (Eastern time).
Your redemption proceeds can be sent by check to your
address of
record or by wire transfer to a bank account designated
on your
authorization form. You must submit a new authorization
form to
change the bank account designated to receive wire
transfers and
you may be asked to provide certain other documents.
- -12-
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good
order.
This means you have provided the following information, without which
your
request will not be processed:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed M
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
redemption
request is genuine by recording calls, asking the caller to provide a
personal
identification number for the account, sending you a written
confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must
include a
signature guarantee if you:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers to the
transfer agent
. Instruct the transfer agent to mail the check to an address
different from
the one on your account
. Changed your account registration
. Want the check paid to someone other than the account owner(s)
. Are transferring the redemption proceeds to an account with a
different
registration
You can obtain a signature guarantee from most banks, dealers, brokers,
credit
unions and federal savings and loan institutions, but not from a notary
public.
Institutional Cash Management Fund - Class A
- -13-
<PAGE>
Each fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
. Suspend or postpone redemptions of shares on any day when trading on
the New
York Stock Exchange is restricted, or as otherwise permitted by the
Securities
and Exchange Commission
. Pay redemption proceeds by giving you securities. You may pay
transaction
costs to dispose of the securities
Small account balances If your account falls below $100,000 because of
a
redemption of fund shares, a fund 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.
Excessive exchange transactions The manager may determine that a
pattern of
frequent exchanges is detrimental to the funds' performance and other
shareholders. If so, the funds may limit additional purchases and/or
exchanges
by the shareholder.
Share certificates The funds 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.
- -14-
<PAGE>
Distributions, dividends and taxes
Dividends Each fund 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 fund generally makes capital gain
distributions, if any, once a year, typically in December. Each fund
may pay
additional distributions and dividends at other times if necessary for
the fund
to avoid a federal tax. Each fund expects distributions to be primarily
from
income. Dividends and capital gain distributions are reinvested in
additional
fund shares of the same class you hold. Alternatively, you can instruct
your
Salomon Smith Barney Financial Consultant, dealer representative or the
transfer
agent to have your distributions and/or dividends paid in cash. You can
change
your choice at any time to be effective as of the next distribution or
dividend,
except that any change given to the transfer agent less than five days
before
the payment date will not be effective until the next distribution or
dividend
is paid.
Taxes In general, receiving distributions (whether in cash or
additional shares)
is a taxable event.
- -----------------------------------------------------------------------
- ---------
Transaction Federal tax status
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)
- -----------------------------------------------------------------------
- ---------
Each fund anticipates that it will normally not earn or distribute any
long-term
capital gains.
After the end of each year, the fund will provide you with information
about the
distributions and dividends you received during the previous year. If
you do not
provide the fund with your correct taxpayer identification number and
any
required certifications, you may be subject to back-up withholding of
31% of
your distributions 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 funds.
Institutional Cash Management Fund - Class A
- -15-
<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 fund's net asset
value is the
value of its assets minus its liabilities. Net asset value is
calculated
separately for each class of shares. Municipal Portfolio calculates 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 SAI.
Each fund uses the amortized cost method to value its portfolio
securities.
Using this method, a fund 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 fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
- ----------------------
Form of Purchase Payment Purchase Is Effective and Dividends
Begin
Cash
Portfolio and
Municipal Portfolio
Government Portfolio
- -----------------------------------------------------------------------
- ----------------------
<S> <C> <C> <C>
<C>
. Payment in federal If received At noon, If
received At 2 p.m.,
funds before noon, Eastern time, before 2
p.m., Eastern time,
. Having a sufficient Eastern time: on that day Eastern
time: on that day
cash balance in your
account with Salomon If received At noon on If
received At 2 p.m. on
Smith Barney or a after noon: the next after 2
p.m.: the next
selling group member business day*
business day*
- -----------------------------------------------------------------------
- ----------------------
. Other forms of At noon on the next business At 2 p.m.
on the next business
payment, with conversion day day
into, or advance of,
federal funds by Salomon
Smith Barney or a
selling group member
. Other forms of payment
received by the transfer
agent
- -----------------------------------------------------------------------
- ----------------------
</TABLE>
Salomon Smith Barney or members of the selling group must transmit all
orders to
buy, exchange or redeem shares to the fund's agent before the agent's
close of
business.
*If a new purchase order is submitted.
- -16-
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the
performance of Class A shares of each fund for the past 5 years (or
since
inception if less than 5 years). Certain information reflects financial
results
for a single share. Total return represents the rate that a shareholder
would
have earned (or lost) on a fund share assuming reinvestment of all
dividends and
distributions. The information in the following tables was audited by
KPMG LLP,
independent accountants, whose report, along with the funds' financial
statements, 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:
- -----------------------------------------------------------------------
- ---------
1999 1998 1997
1996(1)
- -----------------------------------------------------------------------
- ---------
Net asset value, beginning of year $1.00 $1.00
$1.00
- -----------------------------------------------------------------------
- ---------
Income (loss) from operations:
Net investment income (loss) 0.55 0.37
0.54
(2)
- -----------------------------------------------------------------------
- ---------
Total income (loss) from operations 0.55 0.37
0.54
- -----------------------------------------------------------------------
- ---------
Less distributions from:
Net investment income (0.55) (0.37)
(0.54)
Total distributions (0.55) (0.37)
(0.54)
- -----------------------------------------------------------------------
- ---------
Net asset value, end of year $1.00 $1.00
$1.00
- -----------------------------------------------------------------------
- ---------
Total return 5.58% 5.35%
5.44%(4)
- -----------------------------------------------------------------------
- ---------
Net assets, end of year (000,000)'s $848,383 $216,055
$277,572
- -----------------------------------------------------------------------
- ---------
Ratios to average net assets:
Expenses (2)(3) 0.23% 0.23%
0.15%(5)
Net investment income (loss) 5.43 5.23
5.36 (5)
- -----------------------------------------------------------------------
- ---------
(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 fiscal years
ended May
31, 1998, 1997 and for the period ended May 31, 1996. 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 in
Expense Ratio
Net Investment Income
Without Fee Waiver
--------------------------------- ------------
- ------------------------
1999 1998 1997 1996(1) 1999
1998 1997 1996(1)
------ ------ ------ ------- ------ ---
- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Cash Portfolio $0.001 $0.001 $0.001
0.35% 0.36% 0.39%(5)
</TABLE>
(3) As a result of a voluntary expense limitation, the ratio of
expenses to
average net assets will not exceed 0.80%.
(4) Not annualized.
(5) Annualized.
Institutional Cash Management Fund - Class A
- -17-
<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
- -----------------------------------------------------------------------
- ---------------------
Income (loss) from operations:
Net investment income (loss)(2) 0.53
0.052 0.052
- -----------------------------------------------------------------------
- ---------------------
Total income (loss) from operations 0.53
0.49 0.48
- -----------------------------------------------------------------------
- ---------------------
Less distributions from:
Net investment income (0.53)
(0.052) (0.052)
- -----------------------------------------------------------------------
- ---------------------
Total distributions (0.53)
(0.49) (0.48)
- -----------------------------------------------------------------------
- ---------------------
Net asset value, end of year $1.00
$1.00 $1.00
- -----------------------------------------------------------------------
- ---------------------
Total return 5.46%
5.29% 5.36%(5)
- -----------------------------------------------------------------------
- ---------------------
Net assets, end of year (000)'s $88,383
$151,840 $57,698
- -----------------------------------------------------------------------
- ---------------------
Ratios to average net assets:
Expenses 0.23%
0.21% 0.16%(5)
Net investment income (loss) 5.33
5.18 5.28(5)
- -----------------------------------------------------------------------
- ---------------------
</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 fiscal 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 decrease in net investment
income
and the ratio of expenses to average net assets would have been:
<TABLE>
<CAPTION>
Per Share Decrease
Expense Ratio
Net Investment Income
Without Fee Waiver
-------------------------------- -----------
- -------------------------
1999 1998 1997 1996(1) 1999
1998 1997 1996(1)
------ ------ ------ ------- ------ -
- ----- ------ --------
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Government Portfolio $0.002 $0.001 $0.002
0.39% 0.43% 0.55%(5)
</TABLE>
(3) As a result of a voluntary expense limitation, the ratio of
expenses to
average net assets will not exceed 0.23%. (4) Not annualized.
(5) Annualized.
- -18-
<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
- -----------------------------------------------------------------------
- -----------
Income (loss) from operations:
Net investment income (loss)(2) 0.035 0.034
0.035
- -----------------------------------------------------------------------
- -----------
Total income (loss) from operations 0.035 0.034
0.035
- -----------------------------------------------------------------------
- -----------
Less distributions from:
Net investment income (0.035) (0.034)
(0.035)
- -----------------------------------------------------------------------
- -----------
Total distributions (0.035) (0.034)
(0.035)
- -----------------------------------------------------------------------
- -----------
Net asset value, end of year 1.00 $1.00
$1.00
- -----------------------------------------------------------------------
- -----------
Total return 3.56% 3.40%
3.55%(4)
- -----------------------------------------------------------------------
- -----------
Net assets, end of year (000)'s $85,671 $23,666
$59,308
- -----------------------------------------------------------------------
- -----------
Ratios to average net assets:
Expenses(2)(3) 0.23% 0.21%
0.15%(5)
Net investment income (loss) 3.50 3.34
3.46(5)
- -----------------------------------------------------------------------
- -----------
</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 fiscal years
ended May
31, 1999, 1998, 1997 and for the period ended May 31, 1996. In
addition, the
manager has agreed to reimburse the fund for $63,835 in expenses for
the period
ended May 31, 1996. If the manager had not agreed to the fee waiver,
the per
share decrease in net investment income and the ratio of expenses to
average net
assets would have been:
<TABLE>
<CAPTION>
Per Share Decrease
Expense Ratio
Net Investment Income
Without Fee Waiver
-------------------------------- ----------
- -------------------------
1999 1998 1997 1996(1) 1999
1998 1997 1996(1)
------ ------ ------ ------- ------ -
- ----- ------ --------
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
Government Portfolio $0.001 $0.004 $0.003
0.41% 0.41% 0.69%(5)
</TABLE>
(3) As a result of a voluntary expense limitation, the ratio of
expenses to
average net assets will not exceed 0.23%. (4) Not annualized.
(5) Annualized.
Institutional Cash Management Fund - Class A
- -19-
<PAGE>
SALOMON SMITH BARNEY (SM)
a member of citigroup [Symbol]
Institutional Cash Management Fund
Shareholder reports Annual and semiannual reports to shareholders
provide
additional information about each fund's investments. These reports
discuss the
market conditions and investment strategies that affected the funds'
performance.
The funds 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 funds and is incorporated
by
reference into (is legally part of) this prospectus.
You can make inquiries about the funds 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 funds' shareholder reports, prospectus
and
statement of additional information at the Securities and Exchange
Commission's
Public Reference Room in Washington, D.C. You can get copies of these
materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public
reference
room may be obtained by calling 1-800-SEC-0330. You can get the same
information
free from the Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the funds that is not in this
prospectus, you
should not rely upon that information. Neither the funds nor the
distributor is
offering to sell shares of the funds to any person to whom the funds
may not
lawfully sell their shares.
(SM) Salomon Smith Barney is a service mark of Salomon Smith Barney
Inc.
<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>
Contents
<TABLE>
<S> <C>
Investments, risks and performance......... 5
Management................................. 10
Buying shares.............................. 11
Deferred sales charges..................... 12
Exchanging shares.......................... 13
Redeeming shares........................... 14
Other things to know about
share transactions........................ 16
Dividends, distributions and
taxes..................................... 18
Share price................................ 19
Financial highlights....................... 20
</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.
Institutional Cash Management Fund - Class B
- -1-
<PAGE>
Investments, risks and performance
Investment objectives
Cash Portfolio and Government Portfolio each seeks maximum current
income to the
extent consistent with preservation of capital and the maintenance of
liquidity.
Municipal Portfolio seeks maximum current income that is exempt from
federal
income taxes to the extent consistent with preservation of capital and
the
maintenance of liquidity.
Principal investment strategies
Key investments
Government Portfolio. The fund invests exclusively in short-term U.S.
government
obligations, including mortgage-backed securities and related
repurchase
agreements.
Cash Portfolio. The fund invests in high quality, U.S. dollar
denominated short-
term debt securities. These may include obligations issued by U.S. and
foreign
banks, the U.S. government, its agencies or instrumentalities, U.S.
states and
municipalities and U.S. and foreign corporate issuers. The fund will
invest at
least 25% of its assets in obligations of domestic and foreign banks.
Either the
principal amount of each obligation must be fully insured by the FDIC
or the
issuing bank must have more than $100 million of working capital or
more than $1
billion of total assets.
Cash Portfolio may invest in all types of money market securities
including
commercial paper, certificates of deposit, bankers' acceptances,
mortgage-backed
and asset-backed securities, repurchase agreements and other short term
debt
securities. These securities may pay interest at fixed, floating or
adjustable
rates. The fund limits foreign investments to U.S. dollar denominated
securities
of issuers located in major industrialized countries.
Municipal Portfolio. The fund invests primarily in high quality, short-
term
investment grade municipal securities. 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). The interest on these securities is exempt
from
federal income tax. 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 may
- -2-
<PAGE>
pay interest at fixed, variable or floating rates. The fund can invest
up to 20%
of its assets in securities whose interest is federally taxable.
Minimum credit quality. The funds invest only in high quality
securities, which
are those rated by a nationally recognized rating organization in one
of its two
highest short-term rating categories or, if unrated, of equivalent
quality.
Maximum maturity. Each fund invests exclusively in securities having
remaining
maturities of 397 days or less. Each fund maintains a dollar-weighted
average
portfolio maturity of 90 days or less.
Structured securities. 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 special purpose trust or partnership holding one or more municipal
bonds
and/or municipal bond interest rate swaps. A typical swap enables the
trust or
partnership to exchange a municipal bond interest rate for a floating
or
variable, short-term municipal interest rate.
These structured securities are a type of derivative instrument. Unlike
some
derivatives, these securities are not designed to leverage the fund's
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 fund.
Selection process
In selecting investments for the funds, 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
Risks, performance and expenses
All investments involve some degree of risk. However, each fund 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.
Institutional Cash Management Fund - Class B
- -3-
<PAGE>
Principal risks of investing in the funds
Although each fund seeks to preserve the value of your investment at $1
per
share, it is possible to lose money by investing in the funds, or the
funds
could underperform other short-term debt instruments or money market
funds if:
. Interest rates rise sharply.
. An issuer or guarantor of the funds' securities defaults, or the
security's
rating is downgraded.
. The manager's judgment about the value or credit quality of a
particular
security 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 fund'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 fund's gains will be, subject to federal taxation. The fund may
realize
taxable gains on the sale of its securities. Some of the fund's income
distributions may be subject to the federal alternative minimum tax. In
addition, distributions of the fund's income and gains generally will
be subject
to state income taxation.
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 funds
In addition to the above, the Municipal Portfolio may be an appropriate
investment 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
- -4-
<PAGE>
Risk return bar chart
The bar charts indicate the risks of investing in the funds by showing
changes
in the funds' performance from year to year. Past performance does not
necessarily indicate how a fund will perform in the future.
[BAR CHART APPEARS HERE]
Cash Portfolio
4.98%
5.12%
Quarterly returns: Highest: xx% in ___ quarter 199X; Lowest: xx% in ___
quarter
199X Year to date: xx% through 6/30/99
The bar chart shows the performance of the fund's Class B shares for
each full
calendar year since the fund's inception.
No performance information is presented for Class B shares of
Government
Portfolio and Municipal Portfolio since there were no Class B shares
outstanding
for the year ended May 31, 1999.
Institutional Cash Management Fund - Class B
- -5-
<PAGE>
Risk return table
This table indicates the risks of investing in the funds by comparing
the
average annual total return of Class B shares of the funds for the
periods shown
with that of the 90 day Treasury bill. This table assumes redemption of
shares
at the end of the period and reinvestment of distributions and
dividends.
<TABLE>
<CAPTION>
Average Annual Total Returns
Calendar Years Ended December 31, 1998
Fund 1 year Since inception
Inception Date
<S> <C> <C> <C>
Cash Portfolio
10/28/97
Government Portfolio
__/__/__
Municipal Portfolio
__/__/__
90 day T-bill *
n/a
</TABLE>
* Index comparison begins on October 31, 1997.
- -----------------------------------------------------------------------
- --------
7 day yield as of December 31, 1998
Cash Portfolio Government Portfolio Municipal
Portfolio
--------------------------------------------------------
- --------
7 day yield
- -----------------------------------------------------------------------
- --------
- -6-
<PAGE>
Fee table
This table sets forth the fees and expenses you will pay if you invest
in the
funds' shares.
<TABLE>
<CAPTION>
Cash Government
Municipal
Portfolio Portfolio
Portfolio
<S> <C> <C>
<C>
Shareholder fees
(paid directly from your investment)
Maximum sales charge (load) imposed on None None
None
purchases (as a % of offering price)
Maximum deferred sales charge (load) (as a None None
None
% of the lower of net asset value at
purchase or redemption)
- -----------------------------------------------------------------------
- -----------------
Annual fund operating expenses (expenses
deducted from fund assets)
- -----------------------------------------------------------------------
- -----------------
Management fee 0.19% 0.08%
0.11%
Distribution and service (12b-1) fees 0.25% 0.25%
0.25%
Other expenses1 0.04% 0.15%
0.12%
----- -----
- -----
Total annual fund operating expenses/1/ 0.48% 0.48%
0.48%
===== =====
=====
- -----------------------------------------------------------------------
- -----------------
</TABLE>
/1/ Because the manager has agreed to limit total annual fund
operating
expenses to ___% of the fund's average daily net assets, actual
expenses were:
<TABLE>
<CAPTION>
Cash Government
Municipal
Portfolio Portfolio
Portfolio
<S> <C> <C>
<C>
Management fee 0.27% 0.27%
0.27%
Total annual fund operating expenses 0.56% 0.67%
0.64%
===== =====
=====
- -----------------------------------------------------------------------
- -----------------
</TABLE>
The manager may change or eliminate these expense limits at any time on
fourteen
days' prior notice to shareholders.
Example
This example helps you compare the costs of investing in the funds with
the
costs of investing in other mutual funds. Your actual costs may be
higher or
lower. The example assumes:
. You invest $10,000 in the fund for the period shown
. Your investment has a 5% return each year
. You reinvest all distributions and dividends without a sales charge
. Each fund's operating expenses remain the same
. Redemption of your shares at the end of the period
<TABLE>
<CAPTION>
Number of years you own your shares 1 year 3 years 5 years
10 years
- -----------------------------------------------------------------------
- --------
<S> <C> <C> <C>
<C>
Cash Portfolio $ $ $
$
Government Portfolio $ $ $
$
Municipal Portfolio $ $ $
$
Management
</TABLE>
Institutional Cash Management Fund - Class B
- -7-
<PAGE>
Management
Manager. The funds' investment manager is SSBC Fund Management Inc., an
affiliate of Salomon Smith Barney Inc. The manager's address is 388
Greenwich
Street, New York, New York 10013. The manager selects the funds'
investments and
oversees their operations. The manager and Salomon Smith Barney are
subsidiaries
of Citigroup Inc. Citigroup businesses produce a broad range of
financial
services -- asset management, banking and consumer finance, credit and
charge
cards, insurance, investments, investment banking and trading -- and
use diverse
channels to make them available to consumer and corporate customers
around the
world.
Management fee. For its services, the manager received a fee during the
fund'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.xx%
------------------------------------------------------------------
- ------
Government Portfolio 0.xx%
------------------------------------------------------------------
- ------
Municipal Portfolio 0.xx%
------------------------------------------------------------------
- ------
</TABLE>
Distributor. The fund has entered into an agreement with CFBDS, Inc. to
distribute the fund's shares. A selling group consisting of Salomon
Smith Barney
and other broker-dealers sells fund shares to the public.
Distribution plans. Each fund has adopted a Rule 12b-1 distribution
plan for its
Class B shares. Under each plan, the fund pays distribution and service
fees.
These fees are an ongoing expense and, over time, may cost you more
than other
types of sales charges.
Year 2000 issue. Information technology experts are concerned about
computer
systems' ability to process date-related information on and after
January 1,
2000. This situation, commonly known as the "Year 2000" issue, could
have an
adverse impact on the funds. The cost of addressing the Year 2000
issue, if
substantial, could adversely affect companies and governments that
issue
securities held by the funds. The manager and Salomon Smith Barney are
addressing the Year 2000 issue for their systems. The funds have been
informed
by other service providers that they are taking similar measures.
Although the
funds do not expect the Year 2000 issue to adversely affect them, the
funds
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.
- -8-
<PAGE>
Buying shares
Through a You should contact your Salomon Smith Barney
Financial
Salomon Consultant or dealer representative to open a
brokerage
Smith Barney account and make arrangements to buy shares.
Financial
Consultant or If you do not provide the following information,
your order
dealer represen- will be rejected
tative . Specific fund being bought
. Class of shares being bought
. Dollar amount or number of shares being
bought
You should pay for your shares through your
brokerage
account no later than the third business day after
you place
your order. Salomon Smith Barney or your dealer
representative may charge an annual account
maintenance fee.
- -----------------------------------------------------------------------
- ---------
Through the Certain investors who are clients of the selling
group are
funds' transfer eligible to buy shares directly from the fund.
agent
. Write the transfer agent at the following
address:
Smith Barney Institutional Cash Management
Fund, Inc.
(Specify portfolio and class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
. Enclose a check to pay for the shares. For
initial
purchases, complete and send an account
application.
. For more information, call the transfer agent at
1-800-
451-2010.
- -----------------------------------------------------------------------
- ---------
Investment The minimum initial investment is $1,000,000; each
minimums additional investment must be $50 or more.
- -----------------------------------------------------------------------
- ---------
Effectiveness of When purchase orders are paid for in federal funds,
or are
purchase orders placed by an investor with a sufficient 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 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 fund 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.
Institutional Cash Management Fund - Class B
- -9-
<PAGE>
Exchanging shares
You should contact your Salomon Smith Barney
Financial
Consultant or dealer representative to exchange into
another
portfolio.
. To qualify for the exchange privilege, you must
exchange
shares with a current value of at least $1,000
. You may exchange shares only for shares of the same
class of another portfolio.
. 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.
. A fund may suspend or terminate your exchange
privilege
if you engage in an excessive pattern of exchanges.
- -----------------------------------------------------------------------
- ---------
By If you do not have a brokerage account, you may be
eligible to
telephone to exchange shares through the transfer agent. You
must
complete an authorization form to authorize telephone
transfers. If eligible, you may make telephone
exchanges on
any day the New York Stock Exchange is open. Call the
transfer
agent at 1-800-451-2010 between 9:00 a.m. and 5:00
p.m.
(Eastern time).
You can make telephone exchanges only between
accounts that
have identical registrations.
- -----------------------------------------------------------------------
- ---------
By mail If you do not have a Salomon Smith Barney brokerage
account,
contact your dealer representative or write to the
transfer
agent at the address on the next page.
- -10-
<PAGE>
Redeeming shares
Generally Contact your Salomon Smith Barney Financial
Consultant or
dealer representative to redeem shares of the funds.
If you hold share certificates, the transfer agent
must
receive the certificates endorsed for transfer or
with signed
stock powers before the redemption is effective.
If the shares are held by a fiduciary or corporation,
other
documents may be required.
Your redemption proceeds will be sent within three
business
days after your request is received in good order.
However, if
you recently purchased your shares by check, your
redemption
proceeds will not be sent to you until your original
check
clears, which may take up to 15 days.
If you have a Salomon Smith Barney brokerage account,
your
redemption proceeds will be placed in your account
and not
reinvested without your specific instruction. In
other cases,
unless you direct otherwise, your redemption proceeds
will be
paid by check mailed to your address of record.
Redemption requests received prior to 2 p.m. New York
time (12
noon for Municipal Portfolio) are priced at the net
asset
value next determined. Redemption requests received
after 2
p.m. New York time (12 noon for Municipal Portfolio)
will not
be accepted an a new redemption request should be
submitted on
the following day that the fund calculates its net
asset
value.
- -----------------------------------------------------------------------
- ---------
Expedited You may redeem shares and have the proceeds sent by
federal
redemption funds wired to a bank account designated on your
procedures authorization form. To use the expedited procedure:
. all shares must be held in non-certificate form in
your
account
. an account application with the expedited section
completed must be on file with the transfer agent
. you must have designated on your account
application a bank
account to which 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 a signature guarantee
Institutional Cash Management Fund - Class B
- -11-
<PAGE>
- -----------------------------------------------------------------------
- ---------
By mail For accounts held directly at the funds, send written
requests to
the transfer agent at the following address:
Smith Barney Institutional Cash Management Fund, Inc.
(Specify portfolio and class of shares)
c/o First Data Investor Services Group, Inc.
P.O. Box 5128
Westborough, Massachusetts 01581-5128
Your written request must provide the following:
. Your account number
. The class of shares and the dollar amount or number
of shares
to be redeemed
. Signatures of each owner exactly as the account is
registered
- -----------------------------------------------------------------------
- ---------
By telephone If you do not have a brokerage account, you may be
eligible to
redeem shares in amounts up to $10,000 per day through
the
transfer agent. You must complete an authorization form
to
authorize telephone redemptions. If eligible, you may
request
redemptions by telephone on any day the New York Stock
Exchange
is open. Call the transfer agent at 1-800-451-2010
between 9:00
a.m. and 5:00 p.m. (Eastern time).
Your redemption proceeds can be sent by check to your
address of
record or by wire transfer to a bank account designated
on your
authorization form. You must submit a new authorization
form to
change the bank account designated to receive wire
transfers and
you may be asked to provide certain other documents.
- -12-
<PAGE>
Other things to know about share transactions
When you buy, exchange or redeem shares, your request must be in good
order.
This means you have provided the following information, without which
your
request will not be processed:
. Name of the fund
. Account number
. Class of shares being bought, exchanged or redeemed M
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
redemption
request is genuine by recording calls, asking the caller to provide a
personal
identification number for the account, sending you a written
confirmation or
requiring other confirmation procedures from time to time.
Signature guarantees To be in good order, your redemption request must
include a
signature guarantee if you:
. Are redeeming over $10,000 of shares
. Are sending signed share certificates or stock powers to the
transfer agent
. Instruct the transfer agent to mail the check to an address
different from
the one on your account
. Changed your account registration
. Want the check paid to someone other than the account owner(s)
. Are transferring the redemption proceeds to an account with a
different
registration
You can obtain a signature guarantee from most banks, dealers, brokers,
credit
unions and federal savings and loan institutions, but not from a notary
public.
Institutional Cash Management Fund - Class B
- -13-
<PAGE>
Each fund has the right to:
. Suspend the offering of shares
. Waive or change minimum and additional investment amounts
. Reject any purchase or exchange order
. Change, revoke or suspend the exchange privilege
. Suspend telephone transactions
. Suspend or postpone redemptions of shares on any day when trading on
the New
York Stock Exchange is restricted, or as otherwise permitted by the
Securities
and Exchange Commission
. Pay redemption proceeds by giving you securities. You may pay
transaction
costs to dispose of the securities
Small account balances If your account falls below $100,000 because of
a
redemption of fund shares, a fund 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.
Excessive exchange transactions The manager may determine that a
pattern of
frequent exchanges is detrimental to the funds' performance and other
shareholders. If so, the funds may limit additional purchases and/or
exchanges
by the shareholder.
Share certificates The funds 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.
- -14-
<PAGE>
Distributions, dividends and taxes
Dividends Each fund 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 fund generally makes capital gain
distributions, if any, once a year, typically in December. Each fund
may pay
additional distributions and dividends at other times if necessary for
the fund
to avoid a federal tax. Each fund expects distributions to be primarily
from
income. Dividends and capital gain distributions are reinvested in
additional
fund shares of the same class you hold. Alternatively, you can instruct
your
Salomon Smith Barney Financial Consultant, dealer representative or the
transfer
agent to have your distributions and/or dividends paid in cash. You can
change
your choice at any time to be effective as of the next distribution or
dividend,
except that any change given to the transfer agent less than five days
before
the payment date will not be effective until the next distribution or
dividend.
Taxes In general, receiving distributions (whether in cash or
additional shares)
is a taxable event.
- -----------------------------------------------------------------------
- ---------
Transaction Federal tax status
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)
- -----------------------------------------------------------------------
- ---------
Each fund anticipates that it will normally not earn or distribute any
long-term
capital gains.
After the end of each year, the fund will provide you with information
about the
distributions and dividends you received during the previous year. If
you do not
provide the fund with your correct taxpayer identification number and
any
required certifications, you may be subject to back-up withholding of
31% of
your distributions 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 funds.
Institutional Cash Management Fund - Class B
- -15-
<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 fund's net asset
value is the
value of its assets minus its liabilities. Net asset value is
calculated
separately for each class of shares. Municipal Portfolio calculates 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 SAI.
Each fund uses the amortized cost method to value its portfolio
securities.
Using this method, a fund 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 fund.
- -----------------------------------------------------------------------
- ---------
Form of Purchase Purchase Is Effective and Dividends
Begin
Payment
Cash Portfolio
and
Municipal Portfolio Government
Portfolio
- -----------------------------------------------------------------------
- ---------
. Payment in federal If received At noon, If received At 2
p.m.,
funds before noon, Eastern before 2 p.m.,
Eastern time,
. Having a sufficient Eastern time: time, on Eastern time: on
that day
cash balance in your that day
account with Salomon
Smith Barney or a
selling group member
If received At noon on If received At 2
p.m. on
after noon: the next after 2 p.m.: the
next
business day*
business day*
- -----------------------------------------------------------------------
- ---------
. Other forms of At noon on the next At 2 p.m. on the
next
payment, with business day business day
conversion into, or
advance of, federal
funds by Salomon Smith
Barney or a selling
group member
. Other forms of payment
received by the transfer
agent
- -----------------------------------------------------------------------
- ---------
Salomon Smith Barney or members of the selling group must transmit all
orders to
buy, exchange or redeem shares to the fund's agent before the agent's
close of
business.
* If a new purchase order is submitted.
- -16-
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the
performance of Class B shares of each fund for the past 5 years (or
since
inception if less than 5 years). Certain information reflects financial
results
for a single share. Total return represents the rate that a shareholder
would
have earned (or lost) on a fund share assuming reinvestment of all
dividends and
distributions. The information in the following tables was audited by
KPMG LLP,
independent accountants, whose report, along with the funds' financial
statements, is included in the annual report (available upon request).
No financial information is presented for Class B shares of Government
Portfolio
and Municipal Portfolio since there were no Class B shares outstanding
for the
year ended May 31, 1999.
Institutional Cash Management Fund - Class B
- -17-
<PAGE>
Cash Portfolio
For a Class B share of capital stock outstanding throughout each year
ended May
31:
- -----------------------------------------------------------------------
- ---------
1999
1998(1)
- -----------------------------------------------------------------------
- ---------
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
3.19%
- -----------------------------------------------------------------------
- ---------
Net assets, end of year (000)'s
$2,400
- -----------------------------------------------------------------------
- ---------
Ratios to average net assets:
Expenses (2)(3)
0.47%
Net investment income (loss)
5.21
- -----------------------------------------------------------------------
- ---------
(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:
Per Share Decrease in Expense
Ratio
Net Investment Income Without Fee
Waiver
------------------------- ---------------------
- ----
1999 1998(1) 1999
1998(1)
-------- --------- -------- ------
- ---
Cash Portfolio $0.000(6)
0.48%
(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.
- -18-
<PAGE>
SALOMON SMITH BARNEY(SM)
a member of citigroup [Symbol]
Institutional Cash Management Fund
Shareholder reports Annual and semiannual reports to shareholders
provide
additional information about each fund's investments. These reports
discuss the
market conditions and investment strategies that affected the funds'
performance.
The funds 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 funds and is incorporated
by
reference into (is legally part of) this prospectus.
You can make inquiries about the funds 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 funds' shareholder reports, prospectus
and
statement of additional information at the Securities and Exchange
Commission's
Public Reference Room in Washington, D.C. You can get copies of these
materials
for a duplicating fee by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public
reference
room may be obtained by calling 1-800-SEC-0330. You can get the same
information
free from the Commission's Internet web site at http:www.sec.gov
If someone makes a statement about the funds that is not in this
prospectus, you
should not rely upon that information. Neither the funds nor the
distributor is
offering to sell shares of the funds to any person to whom the funds
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)
[FD0958 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 30, 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 SSBC
Funds Management ("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 58). Partner in the law firm of Murov
& Ades. His address is 272 South Wellwood Avenue, Lindenhurst, New
York 11757.
Herbert Barg, Director (Age 75). Private investor. His address is
273 Montgomery Avenue, Bala Cynwyd, Pennsylvania 19004.
Dwight B. Crane, Director (Age 60). 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 65). Managing Director of Salomon Smith
Barney, Chairman of the Board of Smith Barney Strategy Advisors
Inc. and President of SSBC and Travelers Investment Adviser, Inc.
("TIA"). Mr. McLendon is Chairman or Co-Chairman of the Board and
Director of 58 investment companies associated with Salomon Smith
Barney Holdings Inc. His address is 388 Greenwich Street, New
York, New York 10013.
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 41).
Managing Director of Salomon Smith Barney; Director and Senior Vice
President of SSBC and TIA. Mr. Daidone also serves as Senior Vice
President and Treasurer of 41 other funds of the Smith Barney
Mutual Funds. His address is 388 Greenwich Street, New York, New
York 10013.
Christina T. Sydor, Secretary (Age 47). Managing Director of
Salomon Smith Barney. General Counsel and Secretary of SSBC and
TIA. Ms. Sydor also serves as Secretary of 41 other funds of the
Smith Barney Mutual Funds. 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; prior to July 1993, Ms. Zahorodny serves as
Investment Officer of 4 other funds of the Salomon Smith Barney
Mutual Funds. Her address is 388 Greenwich Street, New York, New
York, 10013.
Lawrence T. McDermott, Vice President and Investment Officer (Age
50). Investment Officer of SSBC and Managing Director of Salomon
Smith Barney. Mr. McDermott serves as Investment Officer of 10
other funds of the Smith Barney Mutual Funds. His address is 388
Greenwich Street, New York, New York, 10013.
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 ___, 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 __, 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
9.7955
Horst Rechelbacher
C/O Dennis Ritchie
Ritchie, Luukkonen, Cambell &
Co. LLP
800 TCF Tower
121 S 8th Street
Minneapolis MN 55402
Cash Portfolio
B
99.999
Charybdis Corp.
James L. Rathmann,
President
600 Dorset Road
Devon PA 19333-1813
Municipal Portfolio
A
38.5754
Saxon & Co.
PNC Bank NA
ABC International Court 2
200 Stevens Drive
Lester PA 19113
Attn: ACI/REORG- Lawrence
Lockwood
Municipal Portfolio
A
25.7804
Staples Inc.
C/O Mary Delong
8 Technology Dr.
Westborough MA 01581-6020
Municipal Portfolio
B
100.00
Smith Barney Inst.
Cash Management Fund
Seed account
Attn: Irving David
388 Greenwich Street
22nd Floor
New York, NY 10013
Government
Portfolio
A
17.9352
V. Salandria, Esq.,
E. Colson, Esq. and
M. L. Kameron Personal
Reps.
Estate of Morris
Rodman
11400 Rockville Pike, Ste 800
Rockville MD 20852-3004
Government
Portfolio
B
100.00
Smith Barney Inst.
Cash Management Fund
Seed account
Attn: Irving David
388 Greenwich Street
22nd Floor
New York, NY 10013
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 $_______:
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
$6,200
0
$49,000
5
Herbert Barg
6,200
0
101,600
16
Dwight B. Crane
6,200
0
133,850
22
Frank G. Hubbard
6,200
0
52,000
5
Heath B. McLendon
- --
- --
- --
58
Jerome Miller
6,200
0
12,400
5
Ken Miller
6,200
0
52,000
5
John White*
0**
0
52,000
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 $________.
** Mr. White received $_____, which was the first of 10 deferred
compensation payments.
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 uncon-
ditional, 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)
Cash Portfolio (Class B)
Government Portfolio (Class A)*
Municipal Portfolio+ (Class A)*
* 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 ___%) for the same period for
Class A shares was ___%
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 is a wholly owned subsidiary of Salomon Smith Barney Holdings
Inc., which is a wholly owned subsidiary of Travelers Group, Inc.
("Travelers"), a diversified financial services holding company
engaged, through its subsidiaries, principally in four business
segments: Investment Services, including Asset Management, Consumer
Finance Services, Life Insurance Services and Property & Casualty
Services. Salomon Smith Barney and Salomon Smith Barney Holdings
Inc. are each located at 388 Greenwich Street, New York, New York
10013.
SSBC was incorporated on March 12, 1968 under the laws of Delaware.
As of August 31, 1999 SSBC had aggregate assets under management in
excess of $_________ billion.
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 ____%, ______% and ______% 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 ______%,______% and
______% 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 $__________________,
$__________________ and $___________________, 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.
Distributor
Salomon Smith Barney serves as Principal Underwriter of shares of
the Company. The Company has adopted a Distribution and Shareholder
Servicing Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act. With respect to Class A shares, the Plan permits SSBC to use
its advisors fee to pay a fee to Salomon Smith Barney which in turn
makes payments to securities dealers with which Salomon Smith
Barney has entered into selected dealers agreements. Salomon Smith
Barney may also use a portion of the fee it receives under the Plan
to compensate its Financial Consultants. The purpose of the Plan is
to promote distribution of the Fund's shares and to enhance the
provision of shareholder services. The Plan merely permits the
reallocation of a portion of the advisory fee received to pay for
distribution related and shareholder servicing activities.
The Glass-Steagall Act currently prohibits certain financial
institutions from underwriting securities of open-end investment
companies, such as the Company. Therefore, in connection with the
merger of Travelers and Citicorp and as a consequence of the
applicability of the BHCA and the Glass-Steagall Act, the Company
plans to retain the services of a new entity (which is not
otherwise affiliated with Travelers) to act as distributor of the
fund's shares.
Plan of Distribution
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.
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 filed herewith.
(e)(3) Selling Group Agreement is filed herewith.
(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) To be filed by amendment
(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 filed herein.
(n) To be filed by amendment
(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 -SSBC Fund Management Inc.("SSBC")
formerly Mutual Management Corp.
SSBC was incorporated in December 1968 under the laws
of the State of Delaware. SSBC is a wholly owned
subsidiary of Salomon Smith Barney Holdings Inc.
("Holdings")(formerly known as Smith Barney Holdings
Inc.), which in turn is a wholly owned subsidiary of
Citigroup Inc. SSBC is registered as an
investment adviser under the Investment Advisers Act
of 1940 (the "Advisers Act").The list required by this
Item 26 of officers and directors of SSBC together with
information as to any other business, profession,
vocation or employment of a substantial nature engaged
in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and
D of FORM ADV filed by SSBC pursuant to the Advisers
Act (SEC File No. 801-8314).
Item 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) SSBC Fund Management Inc.
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
Rule 485(b) Certification
The Registrant hereby certifies that it meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, as amended.
SIGNATURES
As required by the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Registrant has duly caused
this Post-Effective Amendment No. 6 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 28th day of
July, 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. 6 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)
July 28, 1999
/s/ Lewis E. Daidone Senior Vice President and
Lewis E. Daidone Treasurer (Chief Financial and
Accounting Officer)
July 28, 1999
Signature Title Date
/s/ Paul R. Ades* Director July 28, 1999
Paul R. Ades
/s/ Herbert Barg* Director July 28, 1999
Herbert Barg
/s/ Dwight B. Crane* Director July 28, 1999
Dwight B. Crane
/s/ Frank G. Hubbard* Director July 28, 1999
Frank G. Hubbard
/s/ Jerome Miller* Director July 28, 1999
Jerome Miller
/s/ Ken Miller* Director July 28, 1999
Ken Miller
* By: /s/ Heath B. McLendon
Heath B. McLendon
Attorney-in-Fact
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
(e)(2) Distribution Agreement
(e)(3) Selling Group Agreement
(m)(2) Amended and Restated Shareholder
Services and Distribution Plan
pursuant to Rule 12b-1.
Cover
SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC.
DISTRIBUTION AGREEMENT
October 8, 1998
CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the
"Fund") has agreed that you shall be, for the period of this
Agreement, the non-exclusive principal underwriter and distributor
of shares of the Fund and each Series of the Fund set forth on
Exhibit A hereto, as such Exhibit may be revised from time to time
(each, including any shares of the Fund not designated by series, a
"Series"). For purposes of this Agreement, the term "Shares" shall
mean shares of the each Series, or one or more Series, as the
context may require.
1. Services as Principal Underwriter and Distributor
1.1 You will act as agent for the distribution of
Shares covered by, and in accordance with, the registration
statement, prospectus and statement of additional information then
in effect under the Securities Act of 1933, as amended (the "1933
Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act"), and will transmit or cause to be transmitted promptly
any orders received by you or those with whom you have sales or
servicing agreements for purchase or redemption of Shares to the
Transfer and Dividend Disbursing Agent for the Fund of which the
Fund has notified you in writing.
1.2 You agree to use your best efforts to solicit
orders for the sale of Shares. It is contemplated that you will
enter into sales or servicing agreements with registered securities
dealers and banks and into servicing agreements with financial
institutions and other industry professionals, such as investment
advisers, accountants and estate planning firms. In entering into
such agreements, you will act only on your own behalf as principal
underwriter and distributor. You will not be responsible for
making any distribution plan or service fee payments pursuant to
any plans the Fund may adopt or agreements it may enter into.
1.3 You shall act as principal underwriter and
distributor of Shares in compliance with all applicable laws,
rules, and regulations, including, without limitation, all rules
and regulations made or adopted from time to time by the Securities
and Exchange Commission (the "SEC") pursuant to the 1933 Act or the
1940 Act or by any securities association registered under the
Securities Exchange Act of 1934, as amended.
1.4 Whenever in their judgment such action is
warranted for any reason, including, without limitation, market,
economic or political conditions, the Fund's officers may decline
to accept any orders for, or make any sales of, any Shares until
such time as those officers deem it advisable to accept such orders
and to make such sales and the Fund shall advise you promptly of
such determination.
2. Duties of the Fund
2.1 The Fund agrees to pay all costs and expenses
in connection with the registration of Shares under the 1933 Act,
and all expenses in connection with maintaining facilities for the
issue and transfer of Shares and for supplying information, prices
and other data to be furnished by the Fund hereunder, and all
expenses in connection with the preparation and printing of the
Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided
however, that nothing contained herein shall be deemed to require
the Fund to pay any of the costs of advertising or marketing the
sale of Shares.
2.2 The Fund agrees to execute any and all
documents and to furnish any and all information and otherwise to
take any other actions that may be reasonably necessary in the
discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states and other U.S.
jurisdictions as the Fund may approve and designate to you from
time to time, and the Fund agrees to pay all expenses that may be
incurred in connection with such qualification. You shall pay all
expenses connected with your own qualification as a securities
broker or dealer under state or Federal laws and, except as
otherwise specifically provided in this Agreement, all other
expenses incurred by you in connection with the sale of Shares as
contemplated in this Agreement.
2.3 The Fund shall furnish you from time to time,
for use in connection with the sale of Shares, such information
reports with respect to the Fund or any relevant Series and the
Shares as you may reasonably request, all of which shall be signed
by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such reports, when so
signed by the Fund's officers, shall be true and correct. The Fund
also shall furnish you upon request with (a) the reports of annual
audits of the financial statements of the Fund for each Series made
by independent certified public accountants retained by the
Fund for such purpose; (b) semi-annual unaudited financial
statements pertaining to each Series; (c) quarterly earnings
statements prepared by the Fund; (d) a monthly itemized list of the
securities in each Series' portfolio; (e) monthly balance sheets as
soon as practicable after the end of each month; (f) the current
net asset value and offering price per share for each Series on
each day such net asset value is computed and (g) from time to time
such additional information regarding the financial condition of
each Series of the Fund as you may reasonably request.
3. Representations and Warranties
The Fund represents to you that all registration statements,
prospectuses and statements of additional information filed by the
Fund with the SEC under the 1933 Act and the 1940 Act with respect
to the Shares have been prepared in conformity with the
requirements of said Acts and the rules and regulations of the SEC
thereunder. As used in this Agreement, the terms "registration
statement", "prospectus" and "statement of additional information"
shall mean any registration statement, prospectus and statement of
additional information filed by the Fund with the SEC and any
amendments and supplements thereto filed by the Fund with the SEC.
The Fund represents and warrants to you that any registration
statement, prospectus and statement of additional information, when
such registration statement becomes effective and as such
prospectus and statement of additional information are amended or
supplemented, will include at the time of such effectiveness,
amendment or supplement all statements required to be contained
therein in conformance with the 1933 Act, the 1940 Act and the
rules and regulations of the SEC; that all statements of material
fact contained in any registration statement, prospectus or
statement of additional information will be true and correct when
such registration statement becomes effective; and that neither any
registration statement nor any prospectus or statement of
additional information when such registration statement becomes
effective will include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a
purchaser of the Fund's Shares. The Fund may, but shall not be
obligated to, propose from time to time such amendment or
amendments to any registration statement and such supplement or
supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the
opinion of the Fund, be necessary or advisable. If the Fund shall
not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of a
written request from you to do so, you may, at your option,
terminate this Agreement or decline to make offers of the Fund's
Shares until such amendments are made. The Fund shall not file any
amendment to any registration statement or supplement to any
prospectus or statement of additional information without giving
you reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the
Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as the
Fund may deem advisable, such right being in all respects absolute
and unconditional.
4. Indemnification
4.1 The Fund authorizes you to use any prospectus
or statement of additional information furnished by the Fund from
time to time, in connection with the sale of Shares. The Fund
agrees to indemnify, defend and hold you, your several officers and
directors, and any person who controls you within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or
liabilities and any such counsel fees incurred in connection
therewith) which you, your officers and directors, or any such
controlling person, may incur under the 1933 Act or under common
law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact
contained in any registration statement, any prospectus or any
statement of additional information or arising out of or based upon
any omission, or alleged omission, to state a material fact
required to be stated in any registration statement, any prospectus
or any statement of additional information or necessary to make the
statements in any of them not misleading; provided, however, that
the Fund's agreement to indemnify you, your officers or directors,
and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any
statements or representations made by you or your representatives
or agents other than such statements and representations as are
contained in any prospectus or statement of additional information
and in such financial and other statements as are furnished to you
pursuant to paragraph 2.3 of this Agreement; and further provided
that the Fund's agreement to indemnify you and the Fund's
representations and warranties herein before set forth in paragraph
3 of this Agreement shall not be deemed to cover any liability to
the Fund or its shareholders to which you would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your
reckless disregard of your obligations and duties under this
Agreement. The Fund's agreement to indemnify you, your officers
and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action
brought against you, your officers or directors, or any such
controlling person, such notification to be given by letter or by
telegram addressed to the Fund at its principal office in New York,
New York and sent to the Fund by the person against whom such
action is brought, within ten days after the summons or other first
legal process shall have been served. The failure so to notify the
Fund of any such action shall not relieve the Fund from any
liability that the Fund may have to the person against whom such
action is brought by reason of any such untrue, or alleged untrue,
statement or omission, or alleged omission, otherwise than on
account of the Fund's indemnity agreement contained in this
paragraph 4.1. The Fund will be entitled to assume the defense of
any suit brought to enforce any such claim, demand or liability,
but, in such case, such defense shall be conducted by counsel of
good standing chosen by the Fund. In the event the Fund elects to
assume the defense of any such suit and retains counsel of good
standing, the defendant or defendants in such suit shall bear the
fees and expenses of any additional counsel retained by any of
them; but if the Fund does not elect to assume the defense of any
such suit, the Fund will reimburse you, your officers and
directors, or the controlling person or persons named as defendant
or defendants in such suit, for the fees and expenses of any
counsel retained by you or them. The Fund's indemnification
agreement contained in this paragraph 4.1 and the Fund's
representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any
investigation made by or on behalf of you, your officers and
directors, or any controlling person, and shall survive the
delivery of any of the Fund's Shares. This agreement of indemnity
will inure exclusively to your benefit, to the benefit of your
several officers and directors, and their respective estates, and
to the benefit of the controlling persons and their successors.
The Fund agrees to notify you promptly of the commencement of any
litigation or proceedings against the Fund or any of its officers
or Board members in connection with the issuance and sale of any of
the Fund's Shares.
4.2 You agree to indemnify, defend and hold the
Fund, its several officers and Board members, and any person who
controls the Fund within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or
defending such claims, demands or liabilities and any counsel fees
incurred in connection therewith) that the Fund, its officers or
Board members or any such controlling person may incur under the
1933 Act, or under common law or otherwise, but only to the extent
that such liability or expense incurred by the Fund, its officers
or Board members, or such controlling person resulting from such
claims or demands shall arise out of or be based upon (a) any
unauthorized sales literature, advertisements, information,
statements or representations or (b) any untrue, or alleged untrue,
statement of a material fact contained in information furnished in
writing by you to the Fund and used in the answers to any of the
items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission,
or alleged omission, to state a material fact in connection with
such information furnished in writing by you to the Fund and
required to be stated in such answers or necessary to make such
information not misleading. Your agreement to indemnify the Fund,
its officers or Board members, and any such controlling person, as
aforesaid, is expressly conditioned upon your being notified of any
action brought against the Fund, its officers or Board members, or
any such controlling person, such notification to be given by
letter or telegram addressed to you at your principal office in
Boston, Massachusetts and sent to you by the person against whom
such action is brought, within ten days after the summons or other
first legal process shall have been served. You shall have the
right to control the defense of such action, with counsel of your
own choosing, satisfactory to the Fund, if such action is based
solely upon such alleged misstatement or omission on your part or
with the Fund's consent, and in any event the Fund, its officers or
Board members or such controlling person shall each have the right
to participate in the defense or preparation of the defense of any
such action with counsel of its own choosing reasonably acceptable
to you but shall not have the right to settle any such action
without your consent, which will not be unreasonably withheld. The
failure to so notify you of any such action shall not relieve you
from any liability that you may have to the Fund, its officers or
Board members, or to such controlling person by reason of any such
untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of your indemnity agreement
contained in this paragraph 4.2. You agree to notify the Fund
promptly of the commencement of any litigation or proceedings
against you or any of your officers or directors in connection with
the issuance and sale of any of the Fund's Shares.
5. Effectiveness of Registration
No Shares shall be offered by either you or the Fund under
any of the provisions of this Agreement and no orders for the
purchase or sale of such Shares under this Agreement shall be
accepted by the Fund if and so long as the effectiveness of the
registration statement then in effect or any necessary amendments
thereto shall be suspended under any of the provisions of the 1933
Act, or if and so long as a current prospectus as required by
Section 5(b) (2) of the 1933 Act is not on file with the SEC;
provided, however, that nothing contained in this paragraph 5 shall
in any way restrict or have an application to or bearing upon the
Fund's obligation to repurchase its Shares from any shareholder in
accordance with the provisions of the Fund's prospectus, statement
of additional information or charter documents, as amended from
time to time.
6. Offering Price
Shares of any class of any Series of the Fund offered for
sale by you shall be offered for sale at a price per share (the
"offering price") equal to (a) their net asset value (determined in
the manner set forth in the Fund's charter documents and the then-
current prospectus and statement of additional information) plus
(b) a sales charge, if applicable, which shall be the percentage of
the offering price of such Shares as set forth in the Fund's then-
current prospectus relating to such Series. In addition to or in
lieu of any sales charge applicable at the time of sale, Shares of
any class of any Series of the Fund offered for sale by you may be
subject to a contingent deferred sales charge as set forth in the
Fund's then-current prospectus and statement of additional
information. You shall be entitled to receive any sales charge
levied at the time of sale in respect of the Shares without
remitting any portion to the Fund. Any payments to a broker or
dealer through whom you sell Shares shall be governed by a separate
agreement between you and such broker or dealer and the Fund's
then-current prospectus and statement of additional information
7. Notice to You
The Fund agrees to advise you immediately in writing:
(a) of any request by the
SEC for amendments to the
registration statement,
prospectus or statement of
additional information then in
effect or for additional
information;
(b) in the event of the
issuance by the SEC of any stop
order suspending the
effectiveness of the registration
statement, prospectus or
statement of additional
information then in effect or the
initiation of any proceeding for
that purpose;
(c) of the happening of
any event that makes untrue any
statement of a material fact made
in the registration statement,
prospectus or statement of
additional information then in
effect or that requires the
making of a change in such
registration statement,
prospectus or statement of
additional
information in order to make the
statements therein not
misleading; and
(d) of all actions of the
SEC with respect to any amendment
to the registration statement, or
any supplement to the prospectus
or statement of additional
information which may from time
to time be filed with the SEC.
8. Term of the Agreement
This Agreement shall become effective on the date hereof,
shall have an initial term of one year from the date hereof, and
shall continue for successive annual periods thereafter so long as
such continuance is specifically approved at least annually by (a)
the Fund's Board or (b) by a vote of a majority (as defined in the
1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a majority
of the Board members of the Fund who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote
cast in person at a meeting called for the purpose of voting on
such approval. This Agreement is terminable, without penalty, on
30 days' notice by the Fund's Board or by vote of holders of a
majority of the relevant Series outstanding voting securities, or
on 90 days' notice by you. This Agreement will also terminate
automatically, as to the relevant Series, in the event of its
assignment (as defined in the 1940 Act and the rules and
regulations thereunder).
9. Arbitration
Any claim, controversy, dispute or deadlock arising
under this Agreement (collectively, a "Dispute") shall be settled
by arbitration administered under the rules of the American
Arbitration Association ("AAA") in New York, New York. Any
arbitration and award of the arbitrators, or a majority of them,
shall be final and the judgment upon the award rendered may be
entered in any state or federal court having jurisdiction. No
punitive damages are to be awarded.
10. Miscellaneous
So long as you act as a principal underwriter and
distributor of Shares, you shall not perform any services for any
entity other than investment companies advised or administered by
Citigroup Inc. or its subsidiaries. The Fund recognizes that the
persons employed by you to assist in the performance of your duties
under this Agreement may not devote their full time to such service
and nothing contained in this Agreement shall be deemed to limit or
restrict your or any of your affiliates right to engage in and
devote time and attention to other businesses or to render services
of whatever kind or nature. This Agreement and the terms and
conditions set forth herein shall be governed by, and construed in
accordance with, the laws of the State of New York.
11. Limitation of Liability (Massachusetts business
trusts only)
The Fund and you agree that the obligations of the Fund
under this Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether
past, present or future, of the Fund, individually, but are binding
only upon the assets and property of the Fund, as provided in the
Master Trust Agreement. The execution and delivery of this
Agreement have been authorized by the Trustees and signed by an
authorized officer of the Fund, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Fund as provided in
its Master Trust Agreement.
If the foregoing is in accordance with your understanding,
kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy, whereupon this Agreement will
become binding on you.
Very truly yours,
SMITH BARNEY
INSTITUTIONAL CASH
MANAGEMENT FUND, INC.
By:
_____________________
Authorized
Officer
Accepted:
CFBDS, INC.
By: __________________________
Authorized Officer
U:\legal\general\forms\dist12b1\SBInstitutionalCashManagement
EXHIBIT A
Smith Barney Institutional Cash Management Fund, Inc.
Cash Portfolio
Government Portfolio
Municipal Portfolio
Page: 3
6
SMITH BARNEY MUTUAL FUNDS
BROKER DEALER CONTRACT
CFBDS, Inc.
21 Milk Street
Boston, Massachusetts 02109
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
We, CFBDS, Inc. ("CFBDS"), have agreements
with certain investment companies for which Mutual
Management Corp. serves as investment adviser and/or
administrator (each a "Fund") pursuant to which we act
as nonexclusive principal underwriter and distributor
for the sale of shares of capital stock ("shares") of
the various series of such Funds, and as such have the
right to distribute shares for resale. Each Fund is
an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940
Act") and the shares being offered to the public are
registered under the Securities Act of 1933, as
amended (the "1933 Act"). Each series of each Fund
covered by a Distribution Agreement from time to time
is referred to in this agreement as a "Series" and
collectively as the "Series." The term "Prospectus",
as used herein, refers to the prospectus and related
statement of additional information (the "Statement of
Additional Information") incorporated therein by
reference (as amended or supplemented) on file with
the Securities and Exchange Commission at the time in
question. As a broker in the capacity of principal
underwriter and distributor for the Trust, we offer to
sell to you, as a broker or dealer, shares of each
Fund upon the following terms and conditions:
1. PRIVATE In all sales to the public
you shall act as broker for your customers or as
dealer for your own account, and in no transaction
shall you have any authority to act as agent for the
Trust, for us or for any other dealer. tc " In all
sales to the public you shall act as dealer for your
own account, and in no transaction shall you have any
authority to act as agent for the Fund, for us or for
any other dealer."
2. PRIVATE Orders received from you
will be accepted through us only at the public
offering price per share (i.e. the net asset value per
share plus the applicable front-end sales charge, if
any) applicable to each order, and all orders for
redemption of any shares shall be executed at the net
asset value per share less any contingent deferred
sales charge, if any, in each case as set forth in the
Prospectus. You will be entitled to receive and
retain any contingent deferred sales charge amounts in
partial consideration of your payment to financial
consultants of commission amounts at the time of sale
and we will obligate any other brokers with whom we
enter into similar agreements to pay such amounts
directly to you. The procedure relating to the
handling of orders shall be subject to paragraph 4
hereof and instructions which we or the Fund shall
forward from time to time to you. All orders are
subject to acceptance or rejection by the applicable
Fund or us in the sole discretion of either. The
minimum initial purchase and the minimum subsequent
purchase of any shares shall be as set forth in the
Prospectus pertaining to the relevant Series. tc "
Orders received from you will be accepted through us
only at the public offering price per share (i.e. the
net asset value per share plus the applicable sales
charge, if any) applicable to each order, and all
orders for redemption of any Fund shares shall be
executed at the net asset value per share less any
contingent deferred sales charge, if any, in each case
as set forth in the Prospectus. The procedure
relating to the handling of orders shall be subject to
paragraph 4 hereof and instructions which we or the
Fund shall forward from time to time to you. All
orders are subject to acceptance or rejection by
Salomon or the Fund in the sole discretion of either.
The minimum initial purchase and the minimum
subsequent purchase shall be as set forth in the
Prospectus of the Fund."
3. PRIVATE You shall not place orders
for any shares unless you have already received
purchase orders for those shares at the applicable
public offering price and subject to the terms hereof.
You agree that you will not offer or sell any shares
except under circumstances that will result in
compliance with the applicable Federal and state
securities laws, the applicable rules and regulations
thereunder and the rules and regulations of applicable
regulatory agencies or authorities and that in
connection with sales and offers to sell shares you
will furnish to each person to whom any such sale or
offer is made, a copy of the Prospectus and, upon
request, the Statement of Additional Information, and
will not furnish to any person any information
relating to shares which is inconsistent in any
respect with the information contained in the
Prospectus or Statement of Additional Information (as
then amended or supplemented). You shall not furnish
or cause to be furnished to any person or display or
publish any information or materials relating to the
shares (including, without limitation, promotional
materials and sales literature, advertisements, press
releases, announcements, statements, posters, signs or
other similar material), except such information and
materials as may be furnished to you by or on behalf
of us or the Funds, and such other information and
materials as may be approved in writing by or on
behalf of us or the Funds. tc " You shall not place
orders for any shares unless you have already received
purchase orders for those shares at the applicable
public offering price and subject to the terms hereof
and of the Distribution Contract. You agree that you
will not"
4. PRIVATE As a broker dealer, you are
hereby authorized (i) to place orders directly with
the applicable Fund or Series for shares subject to
the applicable terms and conditions governing the
placement of orders by us set forth in the Prospectus
and (ii) to tender shares directly to each Fund or its
agent for redemption subject to the applicable terms
and conditions governing the redemption of shares
applicable to us set forth in the Prospectus. tc " As
a dealer, you are hereby authorized (i) to place
orders directly with the Fund for shares to be resold
by us to you subject to the applicable terms and
conditions governing the placement of orders by us set
forth in the Prospectus and the Distribution Contract
and (ii) to tender shares directly to the Fund or its
agent for redemption subject to the applicable terms
and conditions governing the redemption of shares
applicable to us set forth in the Prospectus and the
Distribution Agreement."
5. PRIVATE You shall not withhold
placing orders received from your customers so as to
profit yourself as a result of such withholding, e.g.,
by a change in the "net asset value" from that used in
determining the offering price to your customers. tc "
You shall not withhold placing orders received from
your customers so as to profit yourself as a result of
such withholding, e.g., by a change in the \"net asset
value\" from that used in determining the offering
price to your customers."
6. PRIVATE In determining the amount
of any sales concession payable to you hereunder, we
reserve the right to exclude any sales which we
reasonably determine are not made in accordance with
the terms of the Prospectus and the provisions of this
Agreement. Unless at the time of transmitting an
order we advise you or the transfer agent to the
contrary, the shares ordered will be deemed to be the
total holdings of the specified investor. tc " In
determining the amount of any sales concession payable
to you hereunder, we reserve the right to exclude any
sales which we reasonably determine are not made in
accordance with the terms of the Prospectus and the
provisions of this Agreement. Unless at the time of
transmitting an order we advise you or the transfer
agent to the contrary, the shares ordered will be
deemed to be the total holdings of the specified
investor."
7. PRIVATE (a) You agree that payment
for orders from you for the purchase of shares will be
made in accordance with the terms of the Prospectus.
On or before the business day following the settlement
date of each purchase order for shares, you shall
transfer same day funds to an account designated by us
with the transfer agent in an amount equal to the
public offering price on the date of purchase of the
shares being purchased less your sales concession, if
any, with respect to such purchase order determined in
accordance with the Prospectus. If payment for any
purchase order is not received in accordance with the
terms of the Prospectus, we reserve the right, without
notice, to cancel the sale and to hold you responsible
for any loss sustained as a result thereof. tc " (a)
You agree that payment for orders from you for the
purchase of shares will be made in accordance with the
terms of the Prospectus. On or before the business
day following the settlement date of each purchase
order for shares, you shall transfer same day funds to
an account designated by us with the transfer agent an
amount equal to the public offering price on the date
of purchase of the shares being purchased less your
sales concession, if any, with respect to such
purchase order determined in accordance with the
Prospectus. If payment for any purchase order is not
received in accordance with the terms of the
Prospectus, we reserve the right, without notice, to
cancel the sale and to hold you responsible for any
loss sustained as a result thereof."
(b) PRIVATE If any shares sold under the
terms of this Agreement are sold with a sales charge
and are redeemed or are tendered for redemption within
seven (7) business days after confirmation of your
purchase order for such shares: (i) you shall
forthwith refund to us the full sales concession
received by you on the sale; and (ii) we shall
forthwith pay to the applicable Series our portion of
the sales charge on the sale which has been retained
by us, if any, and shall also pay to the applicable
Series the amount refunded by you. tc " If any shares
sold under the terms of this Agreement are sold with a
sales charge and are redeemed or are tendered for
redemption within seven (7) business days after
confirmation of your purchase order for such shares\:
(i) you shall forthwith refund to us the full sales
concession received by you on the sale; and (ii) we
shall forthwith pay to the applicable Series our
portion of the sales charge on the sale which has been
retained by us, if any, and shall also pay to the
Series the amount refunded by you."
(c) PRIVATE We will not be obligated to
pay or cause to be paid to you any ongoing trail
commission or shareholder service fees with respect to
shares of the Series purchased through you and held by
or for your customers, which you shall collect
directly from the Funds. tc " We will pay you an
ongoing trail commission with respect to holdings by
you of shares of the Funds at such rates and in such
manner as may be described in the Prospectus."
(d) PRIVATE Certificates evidencing
shares shall be available only upon request. Upon
payment for shares in accordance with paragraph 7(a)
above, the transfer agent will issue and transmit to
you or your customer a confirmation statement
evidencing the purchase of such shares. Any
transaction in uncertificated shares, including
purchases, transfers, redemptions and repurchases,
shall be effected and evidenced by book-entry on the
records of the transfer agent. tc " Certificates
evidencing shares shall be available only upon
request. Upon payment for shares in accordance with
paragraph 7(a) above, the transfer agent will issue
and transmit to you a confirmation statement
evidencing the purchase of such shares. Any
transaction in uncertificated shares, including
purchases, transfers, redemptions and repurchases,
shall be effected and evidenced by book-entry on the
records of the transfer agent."
8. PRIVATE No person is authorized to
make any representations concerning shares except
those contained in the current Prospectus and
Statement of Additional Information and in printed
information subsequently issued by us or the Funds as
information supplemental to the Prospectus and the
Statement of Additional Information. In purchasing or
offering shares pursuant to this Agreement you shall
rely solely on the representations contained in the
Prospectus, the Statement of Additional Information
and the supplemental information above mentioned. tc "
No person is authorized to make any representations
concerning shares except those contained in the
current Prospectus and Statement of Additional
Information and in printed information subsequently
issued by us or the Fund as information supplemental
to the Prospectus and the Statement of Additional
Information. In purchasing sor offering shares
pursuant to this Agreement you shall rely solely on
the representations contained in the Prospectus, the
Statement of Additional Information and the
supplemental information above mentioned."
9. PRIVATE You agree to deliver to
each purchaser making a purchase of shares from or
through you a copy of the Prospectus at or prior to
the time of offering or sale, and, upon request, the
Statement of Additional Information. You may instruct
the transfer agent to register shares purchased in
your name and account as nominee for your customers.
You agree thereafter to deliver to any purchaser whose
shares you or your nominee are holding as record
holder copies of the annual and interim reports and
proxy solicitation materials and any other information
and materials relating to the Trust and prepared by or
on behalf of us, the Funds or the investment adviser,
custodian, transfer agent or dividend disbursing agent
for distribution to beneficial holders of shares. The
Funds shall be responsible for the costs associated
with forwarding such reports, materials and other
information and shall reimburse you in full for such
costs. You further agree to make reasonable efforts
to endeavor to obtain proxies from such purchasers
whose shares you or your nominee are holding as record
holder. You further agree to obtain from each
customer to whom you sell shares any taxpayer
identification number certification required under
Section 3406 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated
thereunder, and to provide us or our designee with
timely written notice of any failure to obtain such
taxpayer identification number certification in order
to enable the implementation of any required backup
withholding in accordance with Section 3406 of the
Code and the regulations thereunder. Additional
copies of the Prospectus, Statement of Additional
Information, annual or interim reports, proxy
solicitation materials and any such other information
and materials relating to the Trust will be supplied
to you in reasonable quantities upon request. tc "
You agree to deliver to each purchaser making a
purchase of shares from you a copy of the Prospectus
at or prior to the time of offering or sale, and, upon
request, the Statement of Additional Information. You
may instruct the transfer agent to register shares
purchased in your name and account as nominee for your
customers. You agree thereafter to deliver to any
purchaser whose shares you are holding as record
holder copies of the annual and interim reports and
proxy solicitation materials and any other information
and materials relating to the Fund and prepared by or
on behalf of us, the Fund or its investment adviser,
custodian, transfer agent or dividend disbursing agent
for distribution to such customer. The Fund shall be
responsible for the costs associated with forwarding
such reports, materials and other information and
shall reimburse you in full for such costs. You
further agree to make reasonable efforts to endeavor
to obtain proxies from such purchasers whose shares
you are holding as record holder. You further agree
to obtain from each customer to whom you sell shares
any taxpayer identification number certification
required under Section 3406 of the Internal Revenue
Code of 1986, as amended (the \"Code\"), and the
regulations promulgated thereunder, and to provide us
or our designee with timely written notice of any
failure to obtain such taxpayer identification number
certification in order to enable the implementation of
any required backup withholding in accordance with
Section 3406 of the Code and the regulations
thereunder. Additional copies of the Prospectus,
Statement of Additional Information, annual or interim
reports, proxy solicitation materials and any such
other information and materials relating to the Fund
will be supplied to you in reasonable quantities upon
request."
10. PRIVATE (a) In accordance with the
terms of the Prospectus, a reduced sales charge may be
available to customers, depending on the amount of the
investment or proposed investment. In each case where
a reduced sales charge is applicable, you agree to
furnish to the transfer agent sufficient information
to permit confirmation of qualification for a reduced
sales charge, and acceptance of the purchase order is
subject to such confirmation. Reduced sales charges
may be modified or terminated at any time in the sole
discretion of each Fund. tc " (a) In accordance
with the terms of the Prospectus, a reduced sales
charge may be available to customers, depending on the
amount of the investment. In each case where a
reduced sales charge is applicable, you agree to
furnish to the transfer agent sufficient information
to permit confirmation of qualification for a reduced
sales charge, and acceptance of the purchase order is
subject to such confirmation. Reduced sales charges
may be modified or terminated at any time in the sole
discretion of the Fund."
(b) PRIVATE You acknowledge that
certain classes of investors may be entitled to
purchase shares at net asset value without a sales
charge as provided in the Prospectus and Statement of
Additional Information. tc " You acknowledge that
certain classes of investors may be entitled to
purchase shares at net asset value without a sales
charge as provided in the Prospectus and Statement of
Additional Information."
(c) PRIVATE You agree to advise us
promptly as to the amount of any and all sales by you
qualifying for a reduced sales charge or no sales
charge. tc " You agree to advise us promptly as to
the amount of any and all sales by you qualifying for
a reduced sales charge or no sales charge."
(d) PRIVATE Exchanges (i.e., the
investment of the proceeds from the liquidation of
shares of one Series in the shares of another Series,
each of which is managed by the same or an affiliated
investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus. tc "
Exchanges (i.e., the investment of the proceeds from
the liquidation of shares of one fund in the shares of
another fund, each of which is managed by the Fund's
investment adviser) shall, where available, be made in
accordance with the terms of each Prospectus."
11. PRIVATE We and each Fund reserve
the right in our discretion, without notice, to
suspend sales or withdraw the offering of any shares
entirely. Each party hereto has the right to cancel
the portions of this Agreement to which it is party
upon notice to the other parties; provided, however,
that no cancellation shall affect any party's
obligations hereunder with respect to any transactions
or activities occurring prior to the effective time of
cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to
you. tc " We reserve the right in our discretion,
without notice, to suspend sales or withdraw the
offering of shares entirely. Each party hereto has
the right to cancel this agreement upon notice to the
other part parties; provided; however, that no
cancellation shall affect any party's obligations
hereunder with respect to any transactions or
activities occurring prior to the effective time of
cancellation. We reserve the right to amend this
Agreement in any respect effective on notice to you."
12. PRIVATE We shall have full authority
to take such action as we may deem advisable in respect
of all matters pertaining to the continuous offering of
shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed
by us herein. Nothing contained in this paragraph 12 is
intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever constitute a
waiver by you of compliance with, any provisions of the
1933 Act or of the rules and regulations of the
Securities and Exchange Commission issued thereunder.
tc " We shall have full authority to take such action
as we may deem advisable in respect of all matters
pertaining to the continuous offering of shares. We
shall be under no liability to you except for lack of
good faith and for obligations expressly assumed by us
herein. Nothing contained in this paragraph 12 is
intended to operate as, and the provisions of this
paragraph 12 shall not in any way whatsoever constitute a
waiver by you of compliance with, any provisions of the
1933 Act or of the rules and regulations of the
Securities and Exchange Commission issued thereunder."
13. PRIVATE You agree that: (a) you
shall not effect any transactions (including, without
limitation, any purchases and tc " You agree that\:
(a) you shall not effect any transactions (including,
without limitation, any purchases and" redemptions)
in any shares registered in the name of, or
beneficially owned by, any customer unless such
customer has granted you full right, power and
authority to effect such transactions on his behalf,
(b) we shall have full authority to act upon your
express instructions to sell, repurchase or exchange
shares through us on behalf of your customers under
the terms and conditions provided in the Prospectus
and (c) we, the Funds, the investment adviser, the
administrator, the transfer agent and our and their
respective officers, directors or trustees, agents,
employees and affiliates shall not be liable for, and
shall be fully indemnified and held harmless by you
from and against, any and all claims, demands,
liabilities and expenses (including, without
limitation, reasonable attorneys' fees) which may be
incurred by us or any of the foregoing persons
entitled to indemnification from you hereunder arising
out of or in connection with (i) the execution of any
transactions in shares registered in the name of, or
beneficially owned by, any customer in reliance upon
any oral or written instructions believed to be
genuine and to have been given by or on behalf of you,
(ii) any statements or representations that you or
your employees or representatives make concerning the
Funds that are inconsistent with the applicable Fund's
Prospectus, (iii) any written materials used by you or
your employees or representatives in connection with
making offers or sales of shares that were not
furnished by us, the Funds or the investment adviser
or an affiliate thereof and (iv) any sale of shares of
a Fund where the Fund or its shares were not properly
registered or qualified for sale in any state, any
U.S. territory or the District of Columbia, when we
have indicated to you that the Fund or its shares were
not properly registered or qualified. The
indemnification agreement contained in this Paragraph
13 shall survive the termination of this Agreement.
14. PRIVATE You represent that: (a) you
are a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"),
or, if a foreign dealer who is not eligible for
membership in the NASD, that (i) you will not make any
sales of shares in, or to nationals of, the United
States of America, its territories or its possessions,
and (ii) in making any sales of shares you will comply
with the NASD's Conduct Rules and (b) you are a member
in good standing of the Securities Investor Protection
Corporation ("SIPC"). You agree that you will provide
us with timely written notice of any change in your
NASD or SIPC status. tc " You represent that you are
a member in good standing of the National Association
of Securities Dealers, Inc. (the \"NASD\"), or, if a
foreign dealer who is not eligible for membership in
the NASD, that (a) you will not make any sales of
shares in, or to nationals of, the United States of
America, its territories or its possessions, and (b)
in making any sales of shares you will comply with the
NASD's Rules of Fair Practice."
15. PRIVATE We shall inform you as to
the states or other jurisdictions in which the Fund has
advised us that shares have been qualified for sale
under, or are exempt from the requirements of, the
respective securities laws of such states, but we
assume no responsibility or obligation as to your
qualification to sell shares in any jurisdiction.
16. Any claim, controversy, dispute or
deadlock arising under this Agreement (collectively, a
"Dispute") shall be settled by arbitration administered
under the rules of the American Arbitration Association
("AAA") in New York, New York. Any arbitration and
award of the arbitrators, or a majority of them, shall
be final and the judgment upon the award rendered may
be entered in any state or federal court having
jurisdiction. No punitive damages are to be awarded.
17. PRIVATE All communications to us
should be sent, postage prepaid, to 21 Milk Street,
Boston, Massachusetts 02109 Attention: Philip
Coolidge. Any notice to you shall be duly given if
mailed, telegraphed or telecopied to you at the
address specified by you below. Communications
regarding placement of orders for shares should be
sent, postage prepaid, to First Data Investor Services
Group, Inc., P.O. Box 5128, Westborough, Massachusetts
01581-5128. tc " All communications to us should be
sent, postage prepaid, to 7 World Trade Center, New
York, New York 10048. Attention\: Robert J. Leonard.
Any notice to you shall be duly given if mailed,
telegraphed or telecopied to you at the address
specified by you below. Communications regarding
placement of orders for shares should be sent, postage
prepaid, to The Shareholder Services Group, Inc., P.O.
Box 9109, Boston, Massachusetts 02205-9109."
18. PRIVATE This Agreement shall be
binding upon both parties hereto when signed by us and
accepted by you in the space provided below tc " This
Agreement shall be binding upon both parties hereto
when signed by us and accepted by you in the space
provided below until July 14, 1995 or such earlier
date upon negotiation of section 3 and 12 of this
agreement. " .
19. PRIVATE This Agreement and the
terms and conditions set forth herein shall be
governed by, and construed in accordance with, the
laws of the State of New York. tc " This Agreement and
the terms and conditions set forth herein shall be
governed by, and construed in accordance with, the
laws of the State of New York."
CFBDS, INC.
By:/s/
(Authorized
Signature)
Accepted:
Firm Name:
Address:
Accepted By (signature):
Name (print):
Title: Date:
u:\legal\funds\inst\1999\secdocs\dealagr
FORM OF
AMENDED AND RESTATED
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN PRIVATE
This Amended and Restated Shareholder Services and
Distribution Plan (the "Plan") is adopted in accordance with
Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), by [Name of Fund], a
[business trust organized under the laws of the Commonwealth of
Massachusetts (the "Trust") on behalf of its sub-trust] / [a
corporation organized under the laws of the State of Maryland
(the "Fund")], subject to the following terms and conditions:
Section 1. Annual Fee.
(a) Service Fee for Class A shares. The [Trust/Fund] will
pay to Salomon Smith Barney Inc., a corporation
organized under the laws of the State of Delaware
("Salomon Smith Barney"), a service fee under the
Plan at an annual rate of [ %] of the average
daily net assets of the Fund attributable to the
Class A shares sold and not redeemed (the "Class A
Service Fee").
(b) Service Fee for Class B shares. The [Trust/Fund] will
pay to Salomon Smith Barney a service fee under the
Plan at the annual rate of [ %] of the average
daily net assets of the Fund attributable to the
Class B shares sold and not redeemed (the "Class B
Service Fee").
(c) Distribution Fee for Class B shares. In addition to
the Class B Service Fee, the [Trust/Fund] will pay
Salomon Smith Barney a distribution fee under the
Plan at the annual rate of [ %] of the average
daily net assets of the Fund attributable to the
Class B shares sold and not redeemed (the "Class B
Distribution Fee").
(d) Service Fee for Class L shares. The [Trust/Fund]
will pay to Salomon Smith Barney a service fee under
the plan at the annual rate of [ %] of the average
daily net assets of the Fund attributable to the
Class L shares sold and not redeemed (the "Class L
Service Fee").
(e) Distribution Fee for Class L shares. In addition to
the Class L Service Fee, the [Trust/Fund] will pay
Salomon Smith Barney a distribution fee under the
Plan at the annual rate of [ %] of the average
daily net assets of the Fund attributable to the
Class L shares sold and not redeemed (the "Class L
Distribution Fee").
(f) Payment of Fees. The Service Fees and Distribution
Fees will be calculated daily and paid monthly by the
[Trust/Fund] with respect to the foregoing classes of
the Fund's shares (each a "Class" and together, the
"Classes") at the annual rates indicated above.
Section 2. Expenses Covered by the Plan.
With respect to expenses incurred by each Class, its
respective Service Fee and/or Distribution Fee may be used by
Salomon Smith Barney for: (a) costs of printing and
distributing the [Trust's/Fund's] prospectuses, statements of
additional information and reports to prospective investors in
the [Trust/Fund]; (b) costs involved in preparing, printing and
distributing sales literature pertaining to the [Trust/Fund];
(c) an allocation of overhead and other branch office
distribution-related expenses of Salomon Smith Barney; (d)
payments made to, and expenses of, Salomon Smith Barney's
financial consultants and other persons who provide support
services to [Trust/Fund] shareholders in connection with the
distribution of the [Trust's/Fund's] shares, including but not
limited to, office space and equipment, telephone facilities,
answering routine inquires regarding the [Trust/Fund] and its
operation, processing shareholder transactions, forwarding and
collecting proxy material, changing dividend payment elections
and providing any other shareholder services not otherwise
provided by the [Trust's/Fund's] transfer agent; and (e)
accruals for interest on the amount of the foregoing expenses
that exceed the Distribution Fee for that Class and, in the
case of Class B and Class L shares, any contingent deferred
sales charges received by Salomon Smith Barney; provided,
however, that (i) the Distribution Fee for a particular Class
may be used by Salomon Smith Barney only to cover expenses
primarily intended to result in the sale of shares of that
Class, including, without limitation, payments to the financial
consultants of Salomon Smith Barney and other persons as
compensation for the sale of the shares, and (ii) the Service
Fees are intended to be used by Salomon Smith Barney primarily
to pay its financial consultants for servicing shareholder
accounts, including a continuing fee to each such financial
consultant, which fee shall begin to accrue immediately after
the sale of such shares.
Section 3. Approval by Shareholders
The Plan will not take effect, and no fees will be
payable in accordance with Section 1 of
the Plan, with respect to a Class until the Plan has been
approved by a vote of at least a majority
of the outstanding voting securities of the Class. The Plan
will be deemed to have been approved
with respect to a Class so long as a majority of the
outstanding voting securities of the Class votes
for the approval of the Plan, notwithstanding that: (a) the
Plan has not been approved by a majority of the outstanding
voting securities of any other Class, or (b) the Plan has not
been
approved by a majority of the outstanding voting securities of
the [Trust/Fund].
Section 4. Approval by [Trustees/Directors.]
Neither the Plan nor any related agreements will take effect
until approved by a majority vote of both (a) the Board of
[Trustees/Directors] and (b) those [Trustees/Directors] who are
not interested persons of the [Trust/Fund] and who have no
direct or indirect financial interest in the operation of the
Plan or in any agreements related to it (the "Qualified
[Trustees/Directors]"), cast in person at a meeting called for
the purpose of voting on the Plan and the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect with respect to each Class
until [ , 1999] and thereafter for successive twelve-month
periods with respect to each Class; provided, however, that
such continuance is specifically approved at least annually by
the [Trustees/Directors] of the [Trust/Fund] and by a majority
of the Qualified [Trustees/Directors].
Section 6. Termination.
The Plan may be terminated at any time with respect to a
Class (i) by the [Trust/Fund] without the payment of any
penalty, by the vote of a majority of the outstanding voting
securities of such Class or (ii) by a majority vote of the
Qualified [Trustees/Directors]. The Plan may remain in effect
with respect to a particular Class even if the Plan has been
terminated in accordance with this Section 6 with respect to
any other Class.
Section 7. Amendments.
The Plan may not be amended with respect to any Class so as
to increase materially the amounts of the fees described in
Section 1 above, unless the amendment is approved by a vote of
holders of at least a majority of the outstanding voting
securities of that Class. No material amendment to the Plan may
be made unless approved by the [Trust's/Fund's] Board of
[Trustees/Directors] in the manner described in Section 4
above.
Section 8. Selection of Certain [Trustees/Directors].
While the Plan is in effect, the selection and nomination of
the [Trust's/Fund's] [Trustees/Directors] who are not
interested persons of the [Trust/Fund] will be committed to the
discretion of the [Trustees/Directors] then in office who are
not interested persons of the [Trust/Fund].
Section 9. Written Reports
In each year during which the Plan remains in effect, any
person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to the Plan or any related
agreement will prepare and furnish to the [Trust's/Fund's]
Board of [Trustees/Directors] and the Board will review, at
least quarterly, written reports complying with the
requirements of the Rule, which set out the amounts expended
under the Plan and the purposes for which those expenditures
were made.
Section 10. Preservation of Materials.
The [Trust/Fund] will preserve copies of the Plan, any
agreement relating to the Plan and any report made pursuant to
Section 9 above, for a period of not less than six years (the
first two years in an easily accessible place) from the date of
the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and
"majority of the outstanding voting securities" will be deemed
to have the same meaning that those terms have under the rules
and regulations under the 1940 Act, subject to any exemption
that may be granted to the [Trust/Fund] under the 1940 Act, by
the Securities and Exchange Commission.
Section 12. Limitation of Liability. (Massachusetts
business trusts only)
The obligations of the Trust under this Agreement shall
not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present
or future, of the Trust, individually, but are binding only
upon the assets and property of the Trust, as provided in the
Master Trust Agreement. The execution of this Plan has been
authorized by the Trustees and signed by an authorized officer
of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution by such officer shall be
deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind
only the trust property of the Trust as provided in its Master
Trust Agreement.
IN WITNESS WHEREOF, the Fund has executed the Plan as of
July _____, 1998.
[NAME OF TRUST/FUND]
On behalf of
By:
____________________________________
Heath B. McLendon
Chairman of the
Board
g:\legal\general\forms\agreemts\dist12b1\12b1Plan
