AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JULY 18, 2001.
SECURITIES ACT FILE NO.
============================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
SMITH BARNEY SECTOR SERIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
7 World Trade Center, NEW YORK, NY 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(800) 451-2010
(REGISTRANT'S AREA CODE AND TELEPHONE NUMBER)
HEATH B. MCLENDON
SMITH BARNEY FUND MANAGEMENT LLC
7 World Trade Center
NEW YORK, NY 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
BURTON M. LEIBERT, ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NY 10019-6099
CHRISTINA T. SYDOR, ESQ.
SMITH BARNEY FUND
MANAGEMENT LLC
7 WORLD TRADE CENTER
NEW YORK, NY 10048
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
Registrant proposes that the Registration Statement become
effective August 17, 2001 pursuant to Rule 488 under the
Securities Act of 1933, as amended.
TITLE OF SECURITIES BEING REGISTERED:
Shares of common stock ($.001 par value) of the Registrant
___________________
The Registrant has registered an indefinite amount of
securities under the Securities Act of 1933, as amended,
pursuant to Section 24(f) under the Investment Company Act
of 1940, as amended; accordingly, no fee is payable herewith
because of reliance upon Section 24(f).
============================================================
=========
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
SMITH BARNEY SECTOR SERIES INC.
Smith Barney Global Technology Fund
7 World Trade Center
New York, New York 10048
August __, 2001
Dear Shareholders:
You are being asked to vote on a Plan of Reorganization
whereby all of the assets and liabilities of the Smith
Barney Global Technology Fund (the "Fund"), a series of
Smith Barney Sector Series Inc. ("Sector Series"), would be
transferred in a tax-free reorganization to Smith Barney
Technology Fund (the "Acquiring Fund"), also a series of
Sector Series, in exchange for shares of the corresponding
class of common stock of the Acquiring Fund. If the Plan of
Reorganization is approved and consummated, you would no
longer be a shareholder of the Fund, but would become a
holder of shares of the corresponding class of the Acquiring
Fund, which has similar investment objectives and policies
to your Fund, except as described in the Proxy
Statement/Prospectus.
AFTER CAREFUL REVIEW, THE MEMBERS OF YOUR FUND'S BOARD HAVE
APPROVED THE PROPOSED REORGANIZATION. THE BOARD MEMBERS OF
YOUR FUND BELIEVE THAT THE PROPOSAL SET FORTH IN THE NOTICE
OF MEETING FOR YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU
READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR THE
PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT TO SIGN AND
RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE. For more information, please call 1-800-
451-2010. If you prefer, you can fax the proxy card (both
sides) to (800) _________ or vote by telephone by calling
(800) _________ using the xx-digit control number located on
your proxy card or vote through the Internet by going to
www.[website].com using the xx-digit control number on your
proxy card. The Fund may also solicit proxies from
shareholders by letter, telephone and/or telegraph. Voting
by fax, telephone or through the Internet will reduce the
time and costs associated with the proxy solicitation. When
the Fund records proxies by telephone or through the
Internet, it will use procedures designed to (i)
authenticate shareholders' identities, (ii) allow
shareholders to authorize the voting of their shares in
accordance with their instructions and (iii) confirm that
their instructions have been properly recorded.
Whichever voting method you choose please read the full text
of the accompanying Proxy Statement/Prospectus before you
vote.
Respectfully,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board, President and Chief Executive Officer
Smith Barney Sector Series Inc.
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE
ENCLOSED POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE
MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF
SHARES YOU OWN.
SMITH BARNEY SECTOR SERIES INC.
Smith Barney Global Technology Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders
(the "Special Meeting") of Smith Barney Sector Series Inc.
(the "Corporation"), on behalf of its series, the Smith
Barney Global Technology Fund (the "Fund"), will be held at
the offices of Smith Barney Fund Management LLC, 7 World
Trade Center, Mezzanine Level, New York, New York 10048, on
October 9, 2001, at 10:00 a.m., Eastern time, for the
following purposes:
PROPOSAL 1: To approve the Corporation's Plan of
Reorganization providing for (i) the
acquisition of all of the assets and
liabilities of the Fund by Smith Barney
Technology Fund (the "Acquiring Fund"), also a
series of the Corporation, (ii) the amendment
of the Corporation's Charter reclassifying all
shares of the Fund as shares of the
Acquiring Fund, and (iii) the accomplishment
of the reclassification by the issuance of
shares of the Acquiring Fund to shareholders
of the Fund.
PROPOSAL 2: To transact such other business as may
properly come before the meeting or any
adjournment(s) thereof.
The appointed proxies will vote in their discretion on any
other business as may properly come before the Special
Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of
business on August 6, 2001 are entitled to vote at the
Special Meeting and at any adjournments thereof.
If the necessary quorum to transact business or the vote
required approving a Proposal is not obtained at the Special
Meeting, the persons named as proxies may propose one or
more adjournments of the Special Meeting in accordance with
applicable law to permit further solicitation of proxies.
Any such adjournment as to a matter will require the
affirmative vote of the holders of a majority of the Fund's
outstanding shares present in person or by proxy at the
Special Meeting. The persons named as proxies will vote in
favor of such adjournment those proxies which they are
entitled to vote in favor of the Proposal and will vote
against any such adjournment those proxies to be voted
against the Proposal. For more information, please call 1-
800-451-2010.
By Order of the Board of
Directors
/s/ Christina T. Sydor
Christina T. Sydor
Secretary
August __, 2001
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD(S) AND RETURN THE CARD(S) IN THE ENCLOSED ADDRESSED
ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR YOUR
CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY
CARD(S) MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER
SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL MEETING. IF
YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR
SHARES IN PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
TABLE OF CONTENTS
GENERAL...................................................... 1
PROPOSAL: APPROVAL OF PLAN OF
REORGANIZATION............................. 4
SYNOPSIS....................................................
.................................................. 4
INVESTMENT OBJECTIVE AND POLICIES OF BOTH FUNDS.....................
6
INVESTMENT MANAGEMENT FEES AND
EXPENSES..................................... 8
DISTRIBUTION OF SHARES AND OTHER
SERVICES...................................... 12
PURCHASE, REDEMPTION AND EXCHANGE
INFORMATION......................... 13
DIVIDENDS AND OTHER
DISTRIBUTIONS.....................................................
13
TAX
CONSEQUENCES................................................
.................................... 13
PRINCIPAL INVESTMENTS AND RISK
FACTORS........................................... 13
THE PROPOSED
REORGANIZATION............................................................
... 25
REASONS FOR THE PROPOSED
REORGANIZATION....................................... 26
DESCRIPTION OF THE SECURITIES TO BE
ISSUED........................................ 28
FEDERAL INCOME TAX
CONSEQUENCES......................................................
29
LIQUIDATION AND TERMINATION OF
FUND................................................ 30
PORTFOLIO
SECURITIES..........................................................
...................... 30
PORTFOLIO
TURNOVER............................................................
..................... 30
CAPITALIZATION AND
PERFORMANCE.........................................................
31
ADDITIONAL INFORMATION ABOUT THE
FUNDS.......................................... 32
INTERESTS OF CERTAIN
PERSONS.................................................................
32
ADDITIONAL
INFORMATION...........................................................
............... 33
ADDITIONAL MATERIALS
The following additional materials, which have been
incorporated by reference into the Statement of Additional
Information dated August __, 2001 relating to this
Prospectus/Proxy Statement and the Reorganization, will be
sent to all shareholders of the Fund requesting a copy of
such Statement of Additional Information.
1. Statement of Additional Information for the Acquiring
Fund dated February 28, 2001
2. Statement of Additional Information for the Fund dated
February 28, 2001
3. Annual Report of the Acquiring Fund for the year ended
October 31, 2000 and the Semi-Annual Report of the
Acquiring Fund for the six-months ended April 30, 2001
4. Annual Report of the Fund for the year ended October
31, 2000 and the Semi-Annual Report of the Fund for
the six months ended April 30, 2001.
Merger Q&A
Smith Barney Global Technology Fund into Smith Barney
Technology Fund
The enclosed materials include a combined Prospectus/Proxy
Statement containing information you need to make a more
informed decision. However, we thought it would also be
helpful for you to have, at the start, answers to some of
the important questions you might have about the proposed
reorganization.
We hope you find these explanations useful as you review
your materials before voting. For more detailed information
about the proposed reorganization, please refer to the
enclosed combined Prospectus/Proxy Statement.
What will happen to my shares if the proposed reorganization
is approved?
You will become a shareholder of the Smith Barney Technology
Fund on or about October 12, 2001 ("Closing Date") and will
no longer be a shareholder of the Smith Barney Global
Technology Fund, which will be terminated pursuant to the
proposed reorganization. You will receive shares of the
Smith Barney Technology Fund with a total net asset value
equal to the total net asset value of your investment in the
Smith Barney Global Technology Fund at the time of the
transaction.
What is the key reason for this fund reorganization?
Smith Barney Global Technology Fund has been unable to
attract a substantial asset base since its inception. This
Fund's small size has hindered the portfolio management
flexibility of its adviser and resulted in higher total
annual operating expenses for its shareholders. The proposed
reorganization will create one single larger sized fund and
is expected to provide shareholders of the Smith Barney
Global Technology Fund with a fund that has lower total
annual operating expenses (before taking into account
Management fee waivers and/or voluntary expense
limitations). The Fund's manager, Smith Barney Fund
Management LLC ("SBFM"), believes that a larger asset base
could provide portfolio management benefits such as greater
diversification and the ability to command more attention
from brokers and underwriters. The proposed reorganization
is also part of a broader initiative by SBFM to restructure
more efficiently its mutual fund product offerings.
Do the funds have similar investment objectives?
Yes. The principal investment objective of both Funds is to
seek long-term capital appreciation. Both Funds have
substantially similar investment policies and pursue their
objectives in a substantially similar manner. Both Funds
also have the same manager, although their sub-investment
advisers are different.
What are the tax consequences of this proposed
reorganization?
The proposed fund reorganization will not be a taxable
event. Shareholders will not realize any capital gain or
loss as a direct result of the proposed reorganization.
Will I enjoy the same privileges as a shareholder of the
Smith Barney Technology Fund that I currently have as a
shareholder of the Smith Barney Global Technology Fund?
Yes. You will continue to enjoy the same shareholder
privileges, such as systematic investment, automatic cash
withdrawal and dividend reinvestment, as well as access to
your Service Agent.
How does the Board of Directors recommend I vote?
The Directors recommend that you vote FOR the
reorganization. The Directors believe the reorganization is
in the best interest of the Smith Barney Global Technology
Fund and its shareholders.
Why is my vote important?
Shareholders have a responsibility to vote on important
matters affecting their fund investments. No matter how
many shares you own, your vote --- and its timeliness--are
also important. Please complete and sign the enclosed proxy
card today!
Please note if you sign and date your proxy card, but do not
provide voting instructions, your shares will be voted FOR
the proposal. Thank you in advance for your vote.
SUBJECT TO COMPLETION, DATED JULY 18, 2001
PROXY STATEMENT/PROSPECTUS
7 World Trade Center
New York, New York 10048
(800) 451-2010
August __, 2001
RELATING TO THE ACQUISITION BY THE SMITH BARNEY TECHNOLOGY
FUND (THE "ACQUIRING FUND"), A SERIES OF SMITH BARNEY SECTOR
SERIES INC. ("SECTOR SERIES") OF THE ASSETS OF SMITH BARNEY
GLOBAL TECHNOLOGY FUND (THE "FUND"), ALSO A SERIES OF SECTOR
SERIES.
GENERAL
This Proxy Statement/Prospectus is furnished to shareholders
of the Fund in connection with a proposed reorganization in
which all of the assets of the Fund would be acquired by the
Acquiring Fund, in exchange solely for voting shares of the
corresponding class of shares of common stock of the
Acquiring Fund and the assumption by the Acquiring Fund of
all of the liabilities of the Fund (collectively, the
"Reorganization"). The Reorganization will be accomplished
pursuant to an amendment to the Sector Series' Charter that
will reclassify shares of the Acquired Fund into shares of
the Acquiring Fund. As a result of the Reorganization, each
shareholder of the Fund would receive that number of full
and fractional shares of the corresponding class of the
Acquiring Fund having an aggregate net asset value equal to
the aggregate net asset value of such shareholder's shares
of the Fund held as of the close of business on the Closing
Date (as defined herein) of the Reorganization.
Shareholders of the Fund are being asked to vote on a Plan
of Reorganization pursuant to which such transactions, as
described more fully below, would be consummated.
This Proxy Statement/Prospectus, which should be retained
for future reference, sets forth concisely the information
about the Acquiring Fund that a prospective investor should
know before investing. For a more detailed discussion of
the investment objectives, policies, restrictions and risks
of the Acquiring Fund, see the prospectus for the Acquiring
Fund, dated February 28, 2001, as supplemented from time to
time, which is included herewith and incorporated herein by
reference. This Proxy Statement/Prospectus is also
accompanied by the Acquiring Fund's annual report to
shareholders for the year ended October 31, 2000, and the
Acquiring Fund's semi-annual report to shareholders for the
six months ended April 30, 2001, each of which is included
herewith and incorporated herein by reference. For a more
detailed discussion of the investment objectives, policies,
restrictions and risks of the Fund, see the prospectus for
the Fund, dated February 28, 2001, as supplemented from time
to time, the annual report to shareholders for the year
ended October 31, 2000, and the Fund's semi-annual report to
shareholders for the six months ended April 30, 2001, each
of which is incorporated herein by
reference and a copy of which may be obtained without charge
by writing to Smith Barney Mutual Funds, 7 World Trade
Center, New York, New York 10048, or by calling toll-free
(800) 451-2010. A Statement of Additional Information of the
Fund and the Acquiring Fund dated August __, 2001 containing
additional information about the Reorganization and the
parties thereto has been filed with the Securities and
Exchange Commission (the "SEC" or the "Commission") and is
incorporated by reference into this Proxy
Statement/Prospectus. A copy of the Statement of Additional
Information is available upon request and without charge by
writing to or calling Smith Barney Mutual Funds at the
address or phone number listed above. Shareholder inquiries
regarding the Fund or the Acquiring Fund may also be made by
calling the phone number listed above or call your Service
Agent. The information contained herein concerning both
Funds has been provided by, and is included herein in
reliance upon, Sector Series.
Each of the Acquiring Fund and the Fund is a non-diversified
series of Sector Series, an open-end management investment
company organized as a Maryland corporation. The investment
objective of each Fund is to seek long-term capital
appreciation by investing primarily in common stocks. Each
Fund normally invests at least 80% of its assets in
securities of companies principally engaged in offering,
using or developing products, processes or services that
will provide or will benefit significantly from
technological advances and improvements. These companies may
include, for example, companies that develop, produce or
distribute products or services in the computer, semi-
conductor, software, electronics, media, communications,
health care, and biotechnology sectors. The Fund generally
invests in securities of issuers located in at least three
countries including the United States. The Acquiring Fund
does not have a policy that would cause it to invest in
issuers of at least three countries, although it is not
prohibited from investing abroad.
_______________________
In the description of the Proposal below, the word "fund" is
sometimes used to mean investment companies or series
thereof in general, and not the Fund whose proxy statement
this is. The Fund and the Acquiring Fund may each be
referred to as a "Fund" and may also be referred to
collectively as the "Funds." In addition, in this Proxy
Statement/ Prospectus, for simplicity, actions are described
as being taken by the Fund, although all actions are
actually taken by Sector Series, on behalf of the Acquiring
Fund and the Fund.
This Proxy Statement/Prospectus, the Notice of Special
Meeting and the proxy card(s) are first being mailed to
shareholders on or about August 20, 2001 or as soon as
practicable thereafter. Any shareholder of the Fund giving a
proxy has the power to revoke it by mail (addressed to the
Secretary at the principal executive office of Sector Series
at the address shown at the beginning of this Proxy
Statement/Prospectus) or in person at the Special Meeting by
executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies
received in time for the Special Meeting will be voted as
specified in the proxy or, if no specification is made, in
favor of the Proposals referred to in the Proxy Statement.
In cases where certain shareholders have purchased their
shares through service agents, these service agents are the
shareholders of record of the Fund. At the special meeting,
a service agent may, as permitted by applicable laws and
regulations, vote any shares of which it is the holder of
record and for which it does not receive voting instructions
proportionately in accordance with the instructions it
receives for all other shares of which that service agent is
the holder of record.
The presence at any shareholders' meeting, in person or by
proxy, of the shareholders entitled to cast a majority of
the votes shall be necessary and sufficient to constitute a
quorum for the transaction of business. If the necessary
quorum to transact business or the vote required to approve
any Proposal is not obtained at the Special Meeting, the
persons named as proxies may propose one or more
adjournments of the Special Meeting in accordance with
applicable law to permit further solicitation of proxies
with respect to the Proposal that did not receive the vote
necessary for its passage or to obtain a quorum. Any such
adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Fund's outstanding
shares present in person or by proxy at the Special Meeting.
The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in
favor of that Proposal and will vote against any such
adjournment those proxies to be voted against that Proposal.
For purposes of determining the presence of a quorum for
transacting business at the Special Meeting, abstentions and
broker "non-votes" will be treated as shares that are
present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when
the broker or nominee has neither received instructions from
the beneficial owner or other persons entitled to vote nor
has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting
instructions promptly.
The Proposal requires the affirmative vote of the holders of
a majority of the Fund's shares outstanding and entitled to
vote thereon. Abstentions and broker non-votes will have the
effect of a "no" vote on the Proposal.
Holders of record of the shares of the Fund at the close of
business on August 6, 2001 (the "Record Date"), as to any
matter on which they are entitled to vote, will be entitled
to one vote per share on all business of the Special
Meeting. As of August 6, 2001, there were ___________
shares of the Fund outstanding.
To the best of knowledge of Sector Series, as of August 6,
2001, except as set forth in Annex A, no person owned
beneficially more than 5% of any class of each Fund's
outstanding shares.
As of August 6, 2001, less than 1% of the outstanding shares
of each of the Fund and the Acquiring Fund were owned
directly or beneficially by the Directors of Sector Series.
Each of the Fund and the Acquiring Fund provides periodic
reports to all of its shareholders which highlight relevant
information, including investment results and a review of
portfolio changes. You may receive an additional copy of
the most recent annual report for the Fund and a copy of any
more recent semi-annual report for each of the Fund and the
Acquiring Fund, without charge, by calling 800-451-2010 or
writing to the Fund or the Acquiring Fund at the address
shown at the beginning of this Proxy Statement/Prospectus.
PROPOSAL: APPROVAL OF PLAN OF REORGANIZATION
The Board of Directors of Sector Series, on behalf of the
Acquiring Fund and the Fund, including all of the Directors
who are not "interested persons" of such Funds (as defined
in the Investment Company Act of 1940, as amended (the "1940
Act")) (the "Non-Interested Board Members"), approved on
July 18, 2001 a Plan of Reorganization (the "Plan").
Subject to its approval by the shareholders of the Fund, the
Plan provides for the acquisition of all of the assets and
the assumption of all of the liabilities of the Fund by the
Acquiring Fund and the issuance of the shares of the
Acquiring Fund to the shareholders of the Fund. (The
foregoing proposed transaction is referred to in this
Prospectus/Proxy Statement as the "Reorganization.") The
Reorganization will be accomplished pursuant to an amendment
to the Charter of the Sector Series that will reclassify
shares of the Fund as shares of the Acquiring Fund,
substantially in the form set forth as Annex I to the Plan
of Reorganization (Exhibit A). As a result of the
Reorganization, each shareholder of the Fund will become a
shareholder of the corresponding class of the Acquiring Fund
and will hold, immediately after the closing of the
Reorganization (the "Closing"), that number of full and
fractional shares of the corresponding class of the
Acquiring Fund having an aggregate net asset value equal to
the aggregate net asset value of such shareholder's shares
held in the Fund as of the close of business on the Closing
Date (as defined below). The Closing is expected to occur on
October 12, 2001, or on such later date as the parties may
agree in writing (the "Closing Date").
SYNOPSIS
The following is a summary of certain information contained
in this Proxy Statement/Prospectus. This summary is
qualified by reference to the more complete information
contained elsewhere in this Proxy Statement/Prospectus, the
Prospectus of the Acquiring Fund, the Prospectus of the Fund
and the Plan, the form of which is attached to this Proxy
Statement/Prospectus as Exhibit A. Shareholders of the Fund
should read this entire Proxy Statement/Prospectus
carefully.
Introduction. Like your Fund, the Acquiring Fund is managed
by Smith Barney Fund Management LLC ("SBFM"), an affiliate
of Salomon Smith Barney Inc. ("Salomon Smith Barney"). Each
Fund's investment objective is to seek long-term capital
appreciation. Moreover, the distributors, custodian,
transfer agent and the sub-transfer agent of each of the
Fund and the Acquiring Fund are identical. Each Fund has
retained KPMG LLP as its independent auditors. The Fund's
subadviser is Citigroup Asset Management Ltd. The Acquiring
Fund's subadviser is Citi Fund Management Inc. Each
subadviser is a wholly-owned subsidiary of Citigroup Inc.
and is responsible for the day-to-day management of the
respective Fund's portfolio,
If the Plan is consummated, shareholders of the Fund will
become shareholders of the corresponding class of the
Acquiring Fund. The Reorganization has been proposed as
part of a broader initiative by SBFM to eliminate
duplication and possible confusion in its mutual fund
product offerings. Specifically, this Reorganization has
been proposed as the Funds have identical investment
objectives and substantially similar policies and the
Acquiring Fund is subject to a lower total annual expense
ratio (without taking into account management fee waivers
and/or voluntary expense limitations). The Fund has not
been successful in attracting investors and its relatively
small size hampers the management of its portfolio
securities and also results in a higher expense ratio than
would be the case for a larger fund. After the
Reorganization, shareholders of the Fund will continue to
enjoy the same shareholder privileges, such as systematic
investment, exchanging shares, automatic cash withdrawal and
automatic dividend reinvestment, and access to professional
service representatives upon becoming shareholders of the
Acquiring Fund. Each of the Fund and the Acquiring Fund
declares dividends from net investment income and pays
distributions of net realized capital gains, if any,
annually. See "Dividends and Other Distributions." It is a
condition of the Reorganization that each Fund receive an
opinion of independent legal counsel that the Reorganization
will be tax-free. This means that shareholders should not
realize any capital gain or loss as a direct result of the
Reorganization.
Proposed Reorganization. The aggregate net asset value of
each class of voting shares of the Acquiring Fund (the
"Shares") issued in exchange for the assets and liabilities
attributable to the corresponding class of the Fund will be
equal to the net asset value of that class of the Fund as of
the Closing Date. Immediately following the transfer of
Shares to the Fund, the Shares received by the Fund will be
distributed pro rata to the shareholders of record of the
Fund on the Closing Date and the shares of the Fund will be
cancelled.
For the reasons described below under "The Proposed
Reorganization-Reasons for the Proposed Reorganization," the
Board of Directors of Sector Series on behalf of the Fund,
including the Non-Interested Directors, has concluded the
following:
? The Reorganization is in the best interests of the
Fund and its shareholders; and
? The interests of the existing shareholders of the Fund
will not be diluted as a result of the Reorganization.
Accordingly, the Directors recommend approval of the Plan.
If the Plan is not approved, the Fund will continue in
existence unless the Directors take other action; such other
action may include resubmitting the Plan for shareholder
approval and termination and liquidation of the Fund.
Comparison of Investment Objectives and Policies.
The Acquiring Fund and the Fund have identical investment
objectives and substantially similar policies and
restrictions. The investment objective of each Fund is to
seek long-term capital appreciation by investing primarily
in common stocks. Each Fund normally invests at least 80% of
its assets in securities of companies principally engaged
in, but not limited to, offering, using or developing
products, processes or services that will provide or will
benefit significantly from technological advances and
improvements. These companies may include companies that
develop, produce or distribute products or services in the
computer, semi-conductor, software, electronics, media,
communications, health care, and biotechnology industries.
The Acquiring Fund may invest its assets in securities of
foreign issuers in addition to securities of domestic
issuers. The Fund may invest without limitation in
securities of foreign issuers and generally invests in
securities of issuers located in at least three countries
including the United States. The Fund compares its
performance against the Morgan Stanley Capital International
All-World Index and the Morgan Stanley Capital International
Information Technology Index, while the Acquiring Fund
compares its performance against the Goldman Sachs
Technology Index.
Each Fund has adopted identical fundamental investment
restrictions with respect to its non-diversified status;
issuing senior securities; underwriting securities; industry
concentration; making loans; borrowing money; purchasing or
selling real estate, real estate mortgages, commodities or
commodity contracts; and purchasing any illiquid securities
except as permitted under the 1940 Act. Each Fund's
fundamental investment restrictions may not be changed
without the approval of the applicable Fund's shareholders.
Each Fund may also invest in securities convertible into
common stocks, rights to subscribe to or purchase such
securities, repurchase and reverse repurchase agreements,
and sponsored or unsponsored American Depositary Receipts
("ADRs") and European Depositary Receipts ("EDRs") and other
depository receipts (collectively, "Depositary Receipts"),
each in accordance with any 1940 Act or other applicable
limitations. Each Fund may lend its portfolio securities
and borrow money for investment purposes (i.e., "leverage"
its portfolio). In addition, each Fund may invest in
securities of developing/emerging markets countries and
enter into transactions in options on securities, stock
index options, foreign currencies, forward foreign currency
contracts, and futures contracts and related options.
Investors should refer to the respective prospectuses and
statements of additional information of the Fund and the
Acquiring Fund for a fuller description of each Fund's
investment policies and restrictions.
The manager of both Funds believes that there are no
differences between the investment policies of the Funds
that would cause the sale of any securities of the Acquired
Fund because of the reorganization. However, if such a sale
were required, the manager would pay all costs associated
with such sale.
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND AND
THE FUND
Investment Objective. Each Fund seeks long-term capital
appreciation.
Key investments. Each Fund normally invests at least 80% of
its assets in securities of companies principally engaged in
offering, using or developing products, processes or
services that will provide or will benefit significantly
from technological advances and improvements. These
companies may include, for example, companies that develop,
produce or distribute products or services in the computer,
semi-conductor, software, electronics, media,
communications, health care, and biotechnology sectors.
While the Acquiring Fund may invest its assets in securities
of foreign issuers in addition to securities of domestic
issuers, the Fund may invest without limitation in
securities of foreign issues and generally invests in
securities of issuers located in at least three countries,
including the United States. Each Fund invests primarily in
companies with medium and large market capitalizations. To a
lesser extent, each Fund also may invest in common stocks of
companies with small market capitalizations. Medium and
large market capitalization companies are those companies
with market capitalizations exceeding $5 billion.
Selection process. Each Fund normally invests at least 80%
of its assets in companies doing business in the technology
sector. The remainder of each Fund's assets are not required
to be invested in that sector. To determine whether a
company is principally doing business in the sector, it must
meet at least one of the following tests:
?At least 50% of its gross income or its net sales must
come from activities
?At least 50% of its assets must be devoted to
producing revenues
? Based on other available information, the relevant
subadviser determines that the company's primary
business is within the sector.
In buying and selling securities, each Fund relies on
fundamental analysis of each issuer and its potential for
success in light of its current financial condition and its
industry position. Factors considered, among other things,
include long-term growth potential, earnings estimates and
quality of management.
Principal risks of investing in the Funds. Investors could
lose money on their investments in the Funds, or the Funds
may not perform as well as other investments, because:
? Stock markets are volatile and can decline
significantly in response to adverse issuer,
political, regulatory, market or economic
developments. Different parts of the market can react
differently to these developments.
? Foreign markets can be more volatile than the U.S.
market because of increased risks of adverse issuer,
political, regulatory, market or economic developments
and can perform differently than the U.S. market.
Currency fluctuations may adversely impact each Fund's
investments. The Fund is required to invest in at
least three foreign countries, including the United
States. The Acquiring Fund can invest without
limitation in securities of foreign issues.
? Technology companies can be significantly affected by
obsolescence of existing technology, short product
cycles, falling prices and profits, and competition
from new market entrants. The technology sector may be
subject to greater governmental regulation than many
other areas, and changes in governmental policies and
the need for regulatory approvals may have a material
adverse effect on the sector. The performance of the
technology sector may differ in direction and degree
from that of the overall stock market.
? The value of an individual security or particular type
of security can be more volatile than the market as a
whole and can perform differently than the market as a
whole. Smaller capitalized companies may involve
greater risks such as limited product lines, markets
and financial or managerial resources.
? Each Fund is "non-diversified," which means it may
invest a larger percentage of its assets in one issuer
than a diversified fund. To the extent each Fund
concentrates its assets in fewer issuers, each Fund
will be more susceptible to negative events affecting
those issuers. Each Fund's investments are spread
across the sector on which it focuses. However,
because those investments are limited to a
comparatively narrow segment of the economy, each
Fund's investments are not as diversified as most
mutual funds, and far less diversified than the broad
securities markets. This means that each Fund tends to
be more volatile than other mutual funds, and the
values of its portfolio investments tend to go up and
down more rapidly. As a result, the value of your
investment in the Funds may rise or fall rapidly.
? The relevant subadviser's judgment about the
attractiveness, growth prospects, value or potential
appreciation of a particular stock may prove to be
incorrect.
Who may want to invest. The Funds may be an appropriate
investment if you:
are seeking to participate in the long-term growth potential
of the technology sector
are seeking capital appreciation and can tolerate
significant short-term volatility
are looking for an investment with potentially greater
return but higher risk
are comfortable with the risks of the stock market and the
special risks of foreign
securities, including emerging market securities
currently have exposure to the stock market and can tolerate
concentrated investment in a single market sector.
INVESTMENT MANAGEMENT FEES AND EXPENSES
Sector Series, on behalf of the Fund and the Acquiring Fund,
retains SBFM, pursuant to separate contracts as each Fund's
investment manager, to oversee each Fund's investment
operations and those of the subadvisers, subject to the
policies established by the Board of Directors. Prior to
April 1, 2001, each Fund was subadvised by Citibank, N.A.,
which transferred its asset management business, including
investment management of each Fund to its affiliates. The
subadviser of the Acquired Fund is Citigroup Asset
Management Ltd., while the subadviser of the Acquiring Fund
is Citi Fund Management Inc. Each subadviser is responsible
for the day-to-day management of the respective Fund's
portfolio. SBFM pays a sub-advisory fee to each subadviser
out of the advisory fees it receives from each Fund. All
expenses of the Funds, including the investment advisory
fees, are paid by each Fund. Shareholders pay no direct
charges or fees for investment services.
The Acquiring Fund. The Acquiring Fund's investment manager
is SBFM. The manager's address is 7 World Trade Center, New
York, New York 10048. The manager oversees the Fund's
investment operations and those of the subadviser. SBFM has
been in the investment counseling business since 1968 and
renders investment management and administration services to
a wide variety of individual, institutional and investment
company clients having aggregate assets under management as
of July 15, 2001 in excess of $125 billion. The manager and
Salomon Smith Barney are subsidiaries of Citigroup Inc.
Citigroup businesses offer 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. Under an investment management agreement, the
Acquiring Fund pays SBFM a fee computed daily and paid
monthly at the annual rate of 0.95% of the value of its
average daily net assets. The total investment management
fee incurred and paid by the Acquiring Fund for the year
ended October 31, 2000 was $1,106,818.00. For the year ended
October 31, 2000, SBFM waived a portion of its management
fee due from the Acquiring Fund in the amount of $96,394.00.
The Acquiring Fund's subadviser, Citi Fund Management Inc.,
is located at 100 Stamford Place, Stamford, Connecticut. The
subadviser is a wholly-owned subsidiary of Citigroup Inc. As
of July 15, 2001, the subadviser had in excess of $28
billion under management.
Under a sub-advisory agreement, SBFM pays the subadviser a
fee, computed daily and paid monthly, at the annual rate of
0.65% of the value of its average daily net assets. The
total sub-advisory fee incurred and paid by SBFM for the
year ended October 31, 2000 was $757,297.00. For the year
ended October 31, 2000, the subadviser waived a portion of
its management fee due from the Acquiring Fund in the amount
of $40,307.00.
The Acquiring Fund's total expense ratio (total annual
operating expenses as a percentage of average net assets)
for each class of its shares for the fiscal year ending
October 31, 2000 is set forth below under "Annual Fund
Operating Expenses." SBFM projects that if the proposed
Reorganization is effected, the expense ratio for each class
of the Acquiring Fund will be unchanged for the year ending
October 31, 2001. The actual expense ratio for the
Acquiring Fund for the year ending October 31, 2001 may be
higher or lower than as set forth below, depending upon the
Acquiring Fund's performance, general stock market and
economic conditions, sales and redemptions of the Acquiring
Fund's shares (including redemptions by former shareholders
of the Fund), and other factors.
The Fund. The Fund's investment manager is also SBFM. SBFM
oversees the Fund's investment operations and those of the
subadviser. Under an investment management agreement, the
Fund pays SBFM a fee computed daily and paid monthly at the
annual rate of 0.95% of the Fund's average daily net assets.
The total investment management fees paid by the Fund for
the fiscal year ended October 31, 2000 were $8,085.00. For
the year ended October 31, 2000, SBFM waived all of its
management fee due from the Fund.
The Fund's subadviser, Citigroup Asset Management Ltd. is
located at 4th Floor, Cottons Centre, Box 200 Hays Lane,
London SE1 2QT. As of July 15, 2001, the subadviser had in
excess of $2 billion under management. Under a sub-advisory
agreement, SBFM pays the subadviser a fee, computed daily
and paid monthly, at the annual rate of 0.65% of the value
of its average daily net assets. The total sub-advisory fee
incurred and paid by SBFM for the year ended October 31,
2000 was $5,532. For the year ended October 31, 2001, the
subadviser waived all of its management fee due from the
Fund.
The actual expenses for the Funds for the fiscal years ended
October 31, 2000, and pro forma expenses following the
proposed restructuring are outlined below. As a result of
the Reorganization, shareholders of the Fund will be
investing in the corresponding class of the Acquiring Fund
with expenses that are projected to be the same as those of
the relevant class of the Fund (before taking into account
Management fee waivers and/or voluntary expense
limitations).
Smith Barney Technology Fund
Class A
Class B
Class L
Class
Y*
Shareholder Fees
Maximum sales charge (load) imposed
on purchases
(as a percentage of offering price)
5.00%
None
1.00%
None
Maximum deferred sales charge (load)
(as a percentage of the lower of
net asset value at purchase or
redemption)
None**
5.00%
1.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.95%
0.95%
0.95%
0.95%
12b-1 fees
0.25%
1.00%
1.00%
None
Other expenses
0.40%
0.40%
0.40%
0.40%
TOTAL ANNUAL FUND OPERATING EXPENSES***
1.60%
2.35%
2.35%
1.35%
Smith Barney Global Technology Fund
Class A
Class B
Class L
Class
Y*
Shareholder Fees
Maximum sales charge (load) imposed
on purchases
(as a percentage of offering price)
5.00%
None
1.00%
None
Maximum deferred sales charge (load)
(as a percentage of the lower of
net asset value at purchase or
redemption)
None**
5.00%
1.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.95%
0.95%
0.95%
0.95%
12b-1 fees
0.25%
1.00%
1.00%
None
Other expenses
9.16%
9.13%
9.13%
9.16%
TOTAL ANNUAL FUND OPERATING
EXPENSES****
10.36%
11.08%
11.08%
10.11%
Smith Barney Technology Fund (Pro
Forma) (Unaudited)
Pro
Forma
Class A
Pro
Forma
Class B
Pro
Forma
Class L
Pro
Forma
Class
Y*
Shareholder Fees
Maximum sales charge (load) imposed
on purchases
(as a percentage of offering price)
5.00%
None
1.00%
None
Maximum deferred sales charge (load)
(as a percentage of the lower of
net asset value at purchase or
redemption)
None**
5.00%
1.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.95%
0.95%
0.95%
0.95%
12b-1 fees
0.25%
1.00%
1.00%
None
Other expenses
0.40%
0.40%
0.40%
0.40%
TOTAL FUND OPERATING EXPENSES***
1.60%
2.35%
2.35%
1.35%
* For Class Y shares, "Other expenses" have been
estimated based upon expenses incurred by Class A shares
because no Class Y shares were outstanding during the most
recent fiscal period.
** You may buy Class A Shares in amounts of $1,000,000 or
more at net asset value (without an initial sales charge)
but if you redeem those shares within 12 months of their
purchase, you will pay a deferred sales charge of 1.00%.
*** Currently, the manager has agreed to voluntarily waive
a portion of the management fees to limit total annual fund
operating expenses as indicated in the table below:
Class A
Class B
Class L
Management fee
0.85%
0.85%
0.85%
Total annual fund operating expenses
1.50%
2.25%
2.25%
The manager may change or eliminate the management fee
waiver at any time.
**** Currently, the manager has agreed to voluntarily waive
a portion of the management fees and reimburse a portion of
"Other expenses" to limit total annual fund operating
expenses as indicated in the table below:
Class A
Class B
Class L
Management fee
0.00%
0.00%
0.00%
Other expenses
1.25%
1.25%
1.25%
Total annual fund operating expenses
1.50%
2.25%
2.25%
The manager may change or eliminate the management fee
waiver and/or voluntary expense limitation at any time.
Example. These examples are intended to help you compare
the cost of investing in each of the Funds. The examples
assume you invest $10,000 in each Fund for the time periods
indicated and then redeem all of your shares at the end of
those periods. The examples also assume your investment has
a 5% return each year and that each Fund's annual operating
expenses remain the same. Although your actual costs maybe
higher or lower, based on these assumptions your costs would
be:
Smith Barney Technology Fund
1 year
3 years
5 years
10 years*
Class A (with or without redemption)
$ 655
$ 980
$ 1,327
$2,305
Class B (redemption at end of period)
$ 738
$ 1,033
$ 1,355
$2,499
Class B (no redemption)
$ 238
$ 733
$ 1,255
$2,499
Class L (redemption at end of period)
$ 436
$ 826
$ 1,343
$2,759
Class L (no redemption)
$ 336
$ 826
$ 1,343
$2,759
Class Y (with or without redemption)
$ 137
$ 428
$ 739
$ 1,624
Smith Barney Global Technology Fund
1 year
3 years
5 years
10 years*
Class A (with or without redemption)
$1,458
$ 3,222
$ 4,803
$8,069
Class B (redemption at end of period)
$1,574
$ 3,331
$ 4,857
$8,160
Class B (no redemption)
$1,074
$ 3,031
$4,757
$8,160
Class L (redemption at end of period)
$ 1,264
$ 3,101
$ 4,809
$8,251
Class L (no redemption)
$1,164
$ 3,101
$4,809
$ 8,251
Class Y (with or without redemption)
$
985
$ 2,807
$4,447
$ 7,869
Smith Barney Technology Fund (Pro
Forma) (Unaudited)
Pro
Forma
1 year
Pro
Forma
3 years
Pro
Forma
5 years
Pro
Forma
10
years*
Class A (with or without redemption)
$ 655
$ 980
$ 1,327
$2,305
Class B (redemption at end of period)
$ 738
$ 1,033
$ 1,355
$2,499
Class B (no redemption)
$ 238
$ 733
$ 1,255
$2,499
Class L (redemption at end of period)
$ 436
$ 826
$ 1,343
$2,759
Class L (no redemption)
$ 336
$ 826
$ 1,343
$2,759
Class Y (with or without redemption)
$ 137
$ 428
$ 739
$ 1,624
* Ten-year figures for Class B shares assume conversion
of Class B shares to Class A shares at the end of the eighth
year following the date of purchase.
The above examples assume reinvestment of all dividends and
distributions. The examples should not be considered
representations of past or future expenses. Actual Fund
expenses can vary from year to year and may be higher or
lower than those shown. Please refer to each Fund's
prospectus and statement of additional information for a
more detailed discussion of the fees and expenses applicable
to each class of shares of a Fund.
DISTRIBUTION OF SHARES AND OTHER SERVICES
Salomon Smith Barney distributes shares of each Fund as
principal underwriter and, as such, conducts a continuous
offering pursuant to a "best efforts" arrangement requiring
Salomon Smith Barney to take and pay for only such
securities as may be sold to the public. Each Fund has
adopted a plan of distribution under Rule 12b-1 under the
1940 Act (the "Plan"), pursuant to which Salomon Smith
Barney is paid a service fee with respect to Class A, Class
B and Class L shares of each Fund at the annual rate of
0.25% of the average daily net assets of the respective
Class. Salomon Smith Barney is also paid a distribution fee
with respect to Class B and Class L shares of each Fund at
the annual rate of 0.75% of the average daily net assets
attributable to those Classes. Class B shares of each Fund
that automatically convert to Class A shares eight years
after the date of original purchase will no longer be
subject to a distribution fee. The fees are used by Salomon
Smith Barney to pay its Service Agents for servicing
shareholder accounts and, in the case of Class B and Class L
shares, to cover expenses primarily intended to result in
the sale of those shares. Class Y shares of the Funds are
not subject to any distribution fees.
Payments under the above Plans are not tied exclusively to
the distribution and shareholder service expenses actually
incurred by Salomon Smith Barney and the payments may exceed
distribution expenses actually incurred. Please refer to
each Fund's prospectus and statement of additional
information for a more detailed discussion of the
distribution and shareholder servicing arrangements
applicable to each class of a Fund.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and
privileges with respect to the Fund are the same as those of
the Acquiring Fund. Please refer to each Fund's prospectus
and statement of additional information for a more detailed
discussion of the purchase, redemption and exchange
procedures and privileges applicable to each class of a
Fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund declares dividends from net investment income and
pays distributions of net realized capital gains, if any,
annually. Each Fund intends to distribute any net realized
capital gains after utilization of capital loss
carryforwards, if any, in November or December to prevent
application of a federal excise tax. An additional
distribution may be made if necessary. Each Fund expects
distributions to be primarily from capital gain. Any
dividends or capital gains distributions declared in
October, November or December with a record date in such
month and paid during the following January will be treated
by shareholders for federal income tax purposes as if
received on December 31 of the calendar year in which it is
declared. Dividends and distributions of each Fund will be
invested in additional shares of the same class of the
applicable Fund at net asset value and credited to the
shareholder's account on the payment date or, at the
shareholder's election, paid in cash.
If the Plan is approved by the Fund's shareholders, then as
soon as practicable before the Closing Date, the Fund will
pay or have paid its shareholders a cash distribution of
substantially all undistributed 2001 net investment income
and undistributed realized net capital gains.
TAX CONSEQUENCES
The Fund and the Acquiring Fund will have received an
opinion of Willkie Farr & Gallagher in connection with the
Reorganization, to the effect that, based upon certain
facts, assumptions and representations, the Reorganization
will constitute a tax-free reorganization within the meaning
of section 368(a)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"). If the Reorganization constitutes
a tax-free reorganization, no gain or loss will be
recognized by the Fund or its shareholders as a direct
result of the Reorganization. See "The Proposed Transaction
- -- Federal Income Tax Consequences."
PRINCIPAL INVESTMENTS AND RISK FACTORS
General. As described above, the Fund and the Acquiring
Fund have identical investment objectives and substantially
similar policies and pursue their objectives in a similar
manner. A more complete description of the investment
practices and limitations of the Acquiring Fund is contained
in the prospectus and statement of additional information of
the Acquiring Fund, dated February 28, 2001, as supplemented
from time to time, a copy of which is included herewith, and
in the Statement of Additional Information of the Fund and
the Acquiring Fund dated August __, 2001 (relating to the
proposed Reorganization) which is incorporated herein by
reference. Please refer to each Fund's prospectus and
statement of additional information for a more detailed
discussion of the specific investment practices and risks of
the applicable Fund.
Because of their substantially similar investment policies,
the Funds are exposed to similar risks. The following
summarizes those principal investment policies and related
risk factors:
Each Fund may invest its assets in securities of domestic
and/or foreign issuers, although the Fund generally will
invest in securities of issuers located in at least three
countries, including the United States. Because each Fund is
considered non-diversified, each Fund may invest a
significant percentage of its assets in a single issuer.
In making decisions to buy or sell securities for a Fund,
the relevant Subadviser relies on fundamental analysis of
each issuer and its potential for success in light of its
current financial condition and its industry position.
Factors considered include long-term growth potential,
earnings estimates and quality of management.
The relevant Subadviser may lend a Fund's securities to
broker-dealers or other institutions to earn income for the
Fund. The Subadviser may, but is not required to, use
various techniques, such as buying and selling futures and
options contracts, to increase or decrease a Fund's exposure
to changing security prices or other factors that affect
security values. If the Subadviser's strategies do not work
as intended, the Fund may not achieve its objective.
Under normal market conditions, the majority of a Fund's
portfolio will consist of equity securities, but it also may
contain money market instruments for cash management
purposes. Each Fund reserves the right, as a defensive
measure, to hold money market securities, including
repurchase agreements or cash, in such proportions as, in
the opinion of management, prevailing market or economic
conditions warrant. If a Fund takes a temporary defensive
position, it may be unable to achieve its investment goal.
Equity Securities. Each Fund will normally invest at least
80% of its assets in equity securities, including primarily
common stocks and, to a lesser extent, securities
convertible into common stock and rights to subscribe for
common stock. Common stocks represent an equity (ownership)
interest in a corporation. Although equity securities have
a history of long-term growth in value, their prices
fluctuate based on changes in a company's financial
condition and on overall market and economic conditions.
When-Issued Securities, Delayed-Delivery Transactions and
Forward Commitments. Each Fund may purchase securities on a
"when-issued" basis, for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated
price and yield) or on a forward commitment basis. A Fund
does not intend to engage in these transactions for
speculative purposes, but only in furtherance of its
investment goal. These transactions occur when securities
are purchased or sold by a Fund with payment and delivery
taking place in the future to secure what is considered an
advantageous yield and price to a Fund at the time of
entering into the transaction. The payment obligation and
the interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into the
commitment. Because of fluctuations in the value of
securities purchased or sold on a when-issued,
delayed-delivery basis or forward commitment basis, the
prices obtained on such securities may be higher or lower
than the prices available in the market on the dates when
the investments are actually delivered to the buyers.
When the Fund agrees to purchase when-issued or delayed-
delivery securities or securities on a forward commitment
basis, the Fund will set aside cash or liquid securities
equal to the amount of the commitment in a segregated
account on the Fund's books. Normally, the custodian will
set aside portfolio securities to satisfy a purchase
commitment, and in such a case the Fund may be required
subsequently to place additional assets in the segregated
account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitment. The
assets contained in the segregated account will be marked-
to-market daily. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than
when it sets aside cash. When the Fund engages in
when-issued, delayed-delivery or forward commitment
transactions, it relies on the other party to consummate the
trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
Foreign Securities. Each Fund may invest in securities of
foreign issuers. Foreign securities involve certain risks
not ordinarily associated with investments in securities of
domestic issuers. Such risks include currency exchange
control regulations and costs, the possibility of
expropriation, seizure, or nationalization of foreign
deposits, less liquidity and volume and more volatility in
foreign securities markets and the impact of political,
social, economic or diplomatic developments or the adoption
of other foreign government restrictions that might
adversely affect the payment of principal and interest on,
or market value, of securities. If it should become
necessary, the Fund might encounter greater difficulties in
invoking legal processes abroad than would be the case in
the United States. In addition, there may be less publicly
available information about a non-U.S. company, and non-U.S.
companies are not generally subject to uniform accounting
and financial reporting standards, practices and
requirements comparable to those applicable to U.S.
companies. Furthermore, some of these securities may be
subject to foreign brokerage and withholding taxes.
Each Fund may also invest in securities of foreign issuers
in the form of American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs") or similar securities
representing interests in the common stock of foreign
issuers. ADRs are receipts, typically issued by a U.S. bank
or trust company, which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar ownership
arrangement. Generally, ADRs, in registered form, are
designed for use in the U.S. securities markets and EDRs are
designed for use in European securities markets. The
underlying securities are not always denominated in the same
currency as the ADRs or EDRs. Although investment in the
form of ADRs or EDRs facilitates trading in foreign
securities, it does not mitigate the risks associated with
investing in foreign securities. However, by investing in
ADRs or EDRs rather than directly in foreign issuers' stock,
a Fund can avoid currency risks during the settlement period
for either purchases or sales. In general, there is a
large, liquid market in the United States for many ADRs and
EDRs. The information available for ADRs and EDRs is
subject to the accounting, auditing and financial reporting
standards of the domestic market or exchange on which they
are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be
subject.
Investments in foreign securities incur higher costs than
investments in U.S. securities, including higher costs in
making securities transactions as well as foreign government
taxes, which may reduce the investment return of the Fund.
In addition, foreign investments may include additional
risks associated with currency exchange rates, less complete
financial information about individual companies, less
market liquidity and political instability.
Currency Risks. The U.S. dollar value of securities
denominated in a foreign currency will vary with changes in
currency exchange rates, which can be volatile.
Accordingly, changes in the value of the currency in which a
Fund's investments are denominated relative to the U.S.
dollar will affect the Fund's net asset value. Exchange
rates are generally affected by the forces of supply and
demand in the international currency markets, the relative
merits of investing in different countries and the
intervention or failure to intervene of U.S. or foreign
governments and central banks. However, currency exchange
rates may fluctuate based on factors intrinsic to a
country's economy. Some emerging market countries also may
have managed currencies, which are not free floating against
the U.S. dollar. In addition, emerging markets are subject
to the risk of restrictions upon the free conversion of
their currencies into other currencies. Any devaluations
relative to the U.S. dollar in the currencies in which a
Fund's securities are quoted would reduce the Fund's net
asset value per share.
Securities of Developing/Emerging Markets Countries. A
developing or emerging markets country generally is
considered to be a country that is in the initial stages of
its industrialization cycle. Investing in the equity markets
of developing countries involves exposure to economic
structures that are generally less diverse and mature, and
to political systems that can be expected to have less
stability, than those of developed countries. Historical
experience indicates that the markets of developing
countries have been more volatile than the markets of the
more mature economies of developed countries; however, such
markets often have provided higher rates of return to
investors. One or more of the risks discussed above could
affect adversely the economy of a developing market or a
Fund's investments in such a market. The claims of many
property owners against those of governments may remain
unsettled. There can be no assurance that any investments
that a Fund might make in such emerging markets would be
expropriated, nationalized or otherwise confiscated at some
time in the future. In such an event, the Fund could lose
its entire investment in the market involved. Moreover,
changes in the leadership or policies of such markets could
halt the expansion or reverse the liberalization of foreign
investment policies now occurring in certain of these
markets and adversely affect existing investment
opportunities.
Economic and Monetary Union (EMU) EMU began on January 1,
1999 when 11 European countries adopted a single currency-
the Euro. EMU may create new economic opportunities for
investors, such as lower interest rates, easier cross-border
mergers, acquisitions and similar restructurings, more
efficient distribution and product packaging and greater
competition. Budgetary decisions remain in the hands of
each participating country, but are subject to each
country's comitment to avoid "excessive deficits" and other
more specific a budgetary criteria. A European Central Bank
is responsible for setting the official interest rate within
the Euro zone. EMU and the introduction of the Euro,
however, present unique risks and uncertainties for
investors in EMU-participating countries, including: (i)
monetary and economic union on this scale has never before
been attempted; (ii) there is uncertainty whether
participating countries will remain committed to EMU in the
face of changing economic conditions; (iii) instability
within EMU may increase the volatility of European markets
and may adversely affect the prices of securities of
European issuers in the funds' portfolios; (iv) there is
uncertainty concerning the fluctuation of the Euro relative
to non-Euro currencies during the transition period from
January 1, 1999 and beyond; and (v) there is no assurance
that interest rate, tax and labor regimes of EMU-
participating countries will converge onver time. These and
other factors may cause market disruption and could
adversely affect European securities and currencies held by
the funds.
Money Market Instruments. Each Fund may invest for temporary
defensive purposes in short-term corporate and government
bonds and notes and money market instruments. Money market
instruments include: obligations issued or guaranteed by the
United States government, its agencies or instrumentalities
("U.S. government securities"); certificates of deposit,
time deposits and bankers' acceptances issued by domestic
banks (including their branches located outside the United
States and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and
repurchase agreements with respect to the foregoing types of
instruments. Certificates of deposit ("CDs") are short-term,
negotiable obligations of commercial banks. Time deposits
("TDs") are non-negotiable deposits maintained in banking
institutions for specified periods of time at stated
interest rates. Bankers' acceptances are time drafts drawn
on commercial banks by borrowers, usually in connection with
international transactions.
Repurchase Agreements. Each Fund may agree to purchase
securities from a bank or recognized securities dealer and
simultaneously commit to resell the securities to the bank
or dealer at an agreed-upon date and price reflecting a
market rate of interest unrelated to the coupon rate or
maturity of the purchased securities ("repurchase
agreements"). The Fund would maintain custody of the
underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price
on the date agreed to would be, in effect, secured by such
securities. If the value of such securities were less than
the repurchase price, plus interest, the other party to the
agreement would be required to provide additional collateral
so that at all times the collateral is at least 102% of the
repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose the Fund to possible
loss because of adverse market action, expenses and/or
delays in connection with the disposition of the underlying
obligations. The financial institutions with which the Fund
may enter into repurchase agreements will be banks and non-
bank dealers of U.S. government securities on the Federal
Reserve Bank of New York's list of reporting dealers, if
such banks and non-bank dealers are deemed creditworthy by
the Fund's Manager or the relevant Subadviser. The Manager
or the relevant Subadviser will continue to monitor
creditworthiness of the seller under a repurchase agreement,
and will require the seller to maintain during the term of
the agreement the value of the securities subject to the
agreement to equal at least 102% of the repurchase price
(including accrued interest). In addition, the Manager or
the relevant Subadviser will require that the value of this
collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default,
be equal to 102% or greater than the repurchase price
(including accrued premium) provided in the repurchase
agreement or the daily amortization of the difference
between the purchase price and the repurchase price
specified in the repurchase agreement. The Manager or the
relevant Subadviser will mark-to-market daily the value of
the securities. Repurchase agreements are considered to be
loans by the Fund under the Investment Company Act of 1940,
as amended (the "1940 Act").
Reverse Repurchase Agreements. Each Fund may enter into
reverse repurchase agreements which involve the sale of Fund
securities with an agreement to repurchase the securities at
an agreed-upon price, date and interest payment and have the
characteristics of borrowing. Since the proceeds of
borrowings under reverse repurchase agreements are invested,
this would introduce the speculative factor known as
"leverage." The securities purchased with the funds
obtained from the agreement and securities collateralizing
the agreement will have maturity dates no later than the
repayment date. Generally the effect of such a transaction
is that the Fund can recover all or most of the cash
invested in the portfolio securities involved during the
term of the reverse repurchase agreement, while in many
cases it will be able to keep some of the interest income
associated with those securities. Such transactions are
only advantageous if the Fund has an opportunity to earn a
greater rate of interest on the cash derived from the
transaction than the interest cost of obtaining that cash.
Opportunities to realize earnings from the use of the
proceeds equal to or greater than the interest required to
be paid may not always be available, and the Fund intends to
use the reverse repurchase technique only when the relevant
Subadviser believes it will be advantageous to the Fund.
The use of reverse repurchase agreements may exaggerate any
interim increase or decrease in the value of the Fund's
assets. The Fund's custodian bank will maintain a separate
account for the Fund with securities having a value equal to
or greater than such commitments.
Lending of Portfolio Securities. Consistent with applicable
regulatory requirements, each Fund may lend portfolio
securities to brokers, dealers and other financial
organizations that meet capital and other credit
requirements or other criteria established by the Board.
The Fund will not lend portfolio securities to affiliates of
the Manager unless they have applied for and received
specific authority to do so from the Securities and Exchange
Commission ("SEC"). Loans of portfolio securities will be
collateralized by cash, letters of credit or liquid
securities, which are maintained at all times in an amount
equal to at least 102% of the current market value of the
loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of
the loan would be for the account of the Fund. From time to
time, the 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 that is unaffiliated
with the Fund and that is acting as a "finder."
By lending its securities, a Fund can increase its income by
continuing to receive interest and any dividends on the
loaned securities as well as by either investing the
collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid
by the borrower when U.S. government securities are used as
collateral. Although the generation of income is not the
primary investment goal of the Fund, income received could
be used to pay the Fund's expenses and would increase an
investor's total return. The Fund will adhere to the
following conditions whenever its portfolio securities are
loaned: (i) the Fund must receive at least 102% cash
collateral or equivalent securities of the type discussed in
the preceding paragraph from the borrower; (ii) the borrower
must increase such collateral whenever the market value of
the securities rises above the level of such collateral;
(iii) the Fund must be able to terminate the loan at any
time; (iv) the Fund must receive reasonable interest on the
loan, as well as any dividends, interest or other
distributions on the loaned securities and any increase in
market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower, provided,
however, that if a material event adversely affecting the
investment occurs, the Board must terminate the loan and
regain the right to vote the securities. Loan agreements
involve certain risks in the event of default or insolvency
of the other party including possible delays or restrictions
upon a Fund's ability to recover the loaned securities or
dispose of the collateral for the loan.
Borrowing. Each Fund also may borrow for temporary or
emergency purposes, but not for leveraging purposes, in an
amount up to 33 1/3% of its total assets, and may pledge its
assets in connection with such borrowings. If a Fund borrows
money, its share price may be subject to greater fluctuation
until the borrowing is paid off. If a Fund makes additional
investments while borrowings are outstanding, this may be
considered a form of leverage.
Illiquid Securities. Each Fund may invest up to an
aggregate amount of 15% of its net assets in illiquid
securities, which term includes securities subject to
contractual or other restrictions on resale and other
instruments that lack readily available markets.
Technology Sector Risks. Many technological products and
services are subject to rapid obsolescence, which may lower
the market value of the securities of the companies in this
sector. Also, the portfolio may include faster-growing,
more volatile technology companies that the Subadviser
believes to be emerging leaders in their fields. In
addition, technology stocks historically have experienced
unusually wide price swings. The market prices of these
companies tend to rise and fall more rapidly than those of
larger, more established companies The potential for wide
variation in performance reflects the special risks common
to companies in the rapidly changing field of technology.
For example, products or services that at first appear
promising may not prove commercially successful or may
become obsolete quickly. Earnings disappointments and
intense competition for market share can result in sharp
price declines.
Non-Diversified Classification. Each Fund is classified as
a non-diversified fund under the 1940 Act which means the
Fund is not limited by the Act in the proportion of its
assets it may invest in the obligations of a single issuer.
As a result, the Funds may be subject to greater volatility
with respect to their portfolio securities than funds that
are more broadly diversified. Each Fund intends to conduct
its operations, however, so as to qualify as a "regulated
investment company" for purposes of the Code, which will
relieve the Fund of any liability for Federal income tax to
the extent its earnings are distributed to shareholders. To
qualify as a regulated investment company, the Fund will,
among other things, limit its investments so that, at the
close of each quarter of the taxable year (a) not more than
25% of the market value of the Fund's total assets will be
invested in the securities of a single issuer and (b) with
respect to 50% of the market value of its total assets, not
more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Fund
will not own more than 10% of the outstanding voting
securities of a single issuer.
Master/feeder fund structure. The Board of Directors has
the discretion to retain the current distribution
arrangement for the Funds while investing their assets in a
master fund in a master/feeder fund structure. A
master/feeder fund structure is one in which a fund (a
"feeder fund"), instead of investing directly in a portfolio
of securities, invests most or all of its investment assets
in a separate registered investment company (the "master
fund") with substantially the same investment objective and
policies as the feeder fund. Such a structure permits the
pooling of assets of two or more feeder funds, preserving
separate identities or distribution channels at the feeder
fund level. Based on the premise that certain of the
expenses of operating an investment portfolio are relatively
fixed, a larger investment portfolio may eventually achieve
a lower ratio of operating expenses to average net assets.
An existing investment company is able to convert to a
feeder fund by selling all of its investments, which
involves brokerage and other transaction costs and
realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs
and, if proper procedures are followed, the realization of
taxable gain or loss.
Options, Futures and Currency Strategies. Each Fund may,
but is not required to, use forward currency contracts and
certain options and futures strategies for any of the
following purposes: to seek to increase total return or
hedge its portfolio, i.e., reduce the overall level of
investment risk normally associated with a Fund; to settle
transactions in securities quoted in foreign currencies; as
a substitute for buying or selling securities; or as a cash
flow management technique. There can be no assurance that
such efforts will succeed.
In order to assure that a Fund will not be deemed to be a
"commodity pool" for purposes of the Commodity Exchange Act,
regulations of the Commodity Futures Trading Commission
("CFTC") require that a Fund enter into transactions in
futures contracts and options on futures only (i) for bona
fide hedging purposes (as defined in CFTC regulations), or
(ii) for non-hedging purposes, provided the aggregate
initial margin and premiums on such non-hedging positions do
not exceed 5% of the liquidation value of a Fund's assets.
To attempt to hedge against adverse movements in exchange
rates between currencies, a Fund may enter into forward
currency contracts for the purchase or sale of a specified
currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against
the U.S. dollar or may involve two foreign currencies. A
Fund may enter into forward currency contracts either with
respect to specific transactions or with respect to its
portfolio positions. For example, when the relevant
Subadviser anticipates making a purchase or sale of a
security, it may enter into a forward currency contract in
order to set the rate (either relative to the U.S. dollar or
another currency) at which the currency exchange transaction
related to the purchase or sale will be made ("transaction
hedging"). Further, when the relevant Subadviser believes a
particular currency may decline compared to the U.S. dollar
or another currency, a Fund may enter into a forward
contract to sell the currency the relevant Subadviser
expects to decline in an amount approximating the value of
some or all of a Fund's securities denominated in that
currency, or when the relevant Subadviser believes one
currency may decline against a currency in which some or all
of the portfolio securities held by a Fund are denominated,
it may enter into a forward contract to buy the currency
expected to decline for a fixed amount ("position hedging").
In this situation, a Fund may, in the alternative, enter
into a forward contract to sell a different currency for a
fixed amount of the currency expected to decline where the
relevant Subadviser believes the value of the currency to be
sold pursuant to the forward contract will fall whenever
there is a decline in the value of the currency in which
portfolio securities of a Fund are denominated ("cross
hedging"). A Fund places (i) cash, (ii) U.S. government
securities or (iii) equity securities or debt securities (of
any grade) in certain currencies provided such assets are
liquid, unencumbered and marked to market daily, or other
high-quality debt securities denominated in certain
currencies in a separate account of the Fund having a value
equal to the aggregate amount of the Fund's commitments
under forward contracts entered into with respect to
position hedges and cross-hedges. If the value of the
securities placed in a separate account declines, additional
cash or securities are placed in the account on a daily
basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts.
For hedging purposes, a Fund may write covered call options
and purchase put and call options on currencies to hedge
against movements in exchange rates and on debt securities
to hedge against the risk of fluctuations in the prices of
securities held by the Fund or which the relevant Subadviser
intends to include in its portfolio. A Fund also may use
interest rates futures contracts and options thereon to
hedge against changes in the general level in interest
rates.
A Fund may write call options on securities and currencies
only if they are covered, and such options must remain
covered so long as the Fund is obligated as a writer. A
call option written by a Fund is "covered" if the Fund owns
the securities or currency underlying the option or has an
absolute and immediate right to acquire that security or
currency without additional cash consideration (or for
additional cash consideration held in a segregated account
on the Fund's books) upon conversion or exchange of other
securities or currencies held in its portfolio. A call
option is also covered if the Fund holds on a share-for-
share basis a call on the same security or holds a call on
the same currency as the call written where the exercise
price of the call held is equal to less than the exercise
price of the call written or greater than the exercise price
of the call written if the difference is maintained by the
Fund in cash, Treasury bills or other high-grade, short-term
obligations in a segregated account on the Fund's books.
A Fund may purchase put and call options in anticipation of
declines in the value of portfolio securities or increases
in the value of securities to be acquired. If the expected
changes occur, the Fund may be able to offset the resulting
adverse effect on its portfolio, in whole or in part,
through the options purchased. The risk assumed by a Fund in
connection with such transactions is limited to the amount
of the premium and related transaction costs associated with
the option, although the Fund may lose such amounts if the
prices of securities underlying the options do not move in
the direction or to the extent anticipated.
Although a Fund may not use forward currency contracts,
options and futures, the use of any of these strategies
would involve certain investment risks and transaction
costs. These risks include: dependence on the relevant
Subadviser's ability to predict movements in the prices of
individual securities, fluctuations in the general fixed-
income markets and movements in interest rates and currency
markets, imperfect correlation between movements in the
price of currency, options, futures contracts or options
thereon and movements in the price of the currency or
security hedged or used for cover; the fact that skills and
techniques needed to trade options, futures contracts and
options thereon or to use forward currency contracts are
different from those needed to select the securities in
which a Fund invests; and lack of assurance that a liquid
market will exist for any particular option, futures
contract or option thereon at any particular time.
Over-the-counter options in which a Fund may invest differ
from exchange traded options in that they are two-party
contracts, with price and other terms negotiated between
buyer and seller, and generally do not have as much market
liquidity as exchange-traded options. A Fund may be
required to treat as illiquid over-the-counter options
purchased and securities being used to cover certain written
over-the-counter options.
Options on Securities. As discussed more generally above,
each Fund may engage in writing covered call options. Each
Fund may also purchase put options and enter into closing
transactions. The principal reason for writing covered call
options on securities is to attempt to realize, through the
receipt of premiums, a greater return than would be realized
on the securities alone. In return for a premium, the writer
of a covered call option forgoes the right to any
appreciation in the value of the underlying security above
the strike price for the life of the option (or until a
closing purchase transaction can be effected). Nevertheless,
the call writer retains the risk of a decline in the price
of the underlying security. Similarly, the principal reason
for writing covered put options is to realize income in the
form of premiums. The writer of a covered put option accepts
the risk of a decline in the price of the underlying
security. The size of the premiums the Fund may receive may
be adversely affected as new or existing institutions,
including other investment companies, engage in or increase
their option-writing activities.
Options written by the Fund will normally have expiration
dates between one and six months from the date written. The
exercise price of the options may be below, equal to, or
above the current market values of the underlying securities
when the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money,"
"at-the-money" and "out-of-the-money," respectively.
A Fund may write (a) in-the-money call options when the
Subadviser expects the price of the underlying security to
remain flat or decline moderately during the option period,
(b) at-the-money call options when the Subadviser expects
the price of the underlying security to remain flat or
advance moderately during the option period and (c) out-of-
the-money call options when the Subadviser expects that the
price of the security may increase but not above a price
equal to the sum of the exercise price plus the premiums
received from writing the call option. In any of the
preceding situations, if the market price of the underlying
security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly
or in part by the premium received. Out-of-the-money, at-
the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market
price) may be utilized in the same market environments as
such call options are used in equivalent transactions.
So long as the obligation of a Fund as the writer of an
option continues, the Fund may be assigned an exercise
notice by the broker-dealer through which the option was
sold, requiring it to deliver, in the case of a call, or
take delivery of, in the case of a put, the underlying
security against payment of the exercise price. This
obligation terminates when the option expires or the Fund
effects a closing purchase transaction. The Fund can no
longer effect a closing purchase transaction with respect to
an option once it has been assigned an exercise notice. To
secure its obligation to deliver the underlying security
when it writes a call option, or to pay for the underlying
security when it writes a put option, the Fund will be
required to deposit in escrow the underlying security or
other assets in accordance with the rules of the Options
Clearing Corporation ("Clearing Corporation") or similar
clearing corporation and the securities exchange on which
the option is written.
An option position may be closed out only where there exists
a secondary market for an option of the same series on a
recognized securities exchange or in the over-the-counter
market. A Fund expects to write options only on national
securities exchanges or in the over-the-counter market. A
Fund may purchase put options issued by the Clearing
Corporation or in the over-the-counter market.
A Fund may realize a profit or loss upon entering into a
closing transaction. In cases in which the Fund has written
an option, it will realize a profit if the cost of the
closing purchase transaction is less than the premium
received upon writing the original option and will incur a
loss if the cost of the closing purchase transaction exceeds
the premium received upon writing the original option.
Similarly, when the Fund has purchased an option and engages
in a closing sale transaction, whether it recognizes a
profit or loss will depend upon whether the amount received
in the closing sale transaction is more or less than the
premium the Fund initially paid for the original option plus
the related transaction costs.
Although a Fund generally will purchase or write only those
options for which the Manager and/or the relevant Subadviser
believes there is an active secondary market so as to
facilitate closing transactions, there is no assurance that
sufficient trading interest to create a liquid secondary
market on a securities exchange will exist for any
particular option or at any particular time, and for some
options no such secondary market may exist. A liquid
secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other
unforeseen events, have at times rendered certain of the
facilities of the Clearing Corporation and national
securities exchanges inadequate and resulted in the
institution of special procedures, such as trading
rotations, restrictions on certain types of orders or
trading halts or suspensions in one or more options. There
can be no assurance that similar events, or events that may
otherwise interfere with the timely execution of customers'
orders, will not recur. In such event, it might not be
possible to effect closing transactions in particular
options. If, as a covered call option writer, a Fund is
unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the
underlying security upon exercise.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class
which may be held or written, or exercised within certain
periods, by an investor or group of investors acting in
concert (regardless of whether the options are written on
the same or different securities exchanges or are held,
written or exercised in one or more accounts or through one
or more brokers). It is possible that the Funds and other
clients of the Manager and/or the relevant Subadviser and
certain of their affiliates may be considered to be such a
group. A securities exchange may order the liquidation of
positions found to be in violation of these limits, and it
may impose certain other sanctions.
In the case of options written by a Fund that are deemed
covered by virtue of the Fund's holding convertible or
exchangeable preferred stock or debt securities, the time
required to convert or exchange and obtain physical delivery
of the underlying common stocks with respect to which the
Fund has written options may exceed the time within which
the Fund must make delivery in accordance with an exercise
notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any
market risk because the Fund will have the absolute right to
receive from the issuer of the underlying security an equal
number of shares to replace the borrowed stock, but the Fund
may incur additional transaction costs or interest expenses
in connection with any such purchase or borrowing.
Although the relevant Subadviser will attempt to take
appropriate measures to minimize the risks relating to a
Fund's writing of call options and purchasing of put and
call options, there can be no assurance that the Fund will
succeed in its option-writing program.
Stock Index Options. As described generally above, each
Fund may purchase put and call options and write call
options on domestic stock indexes listed on domestic
exchanges in order to realize its investment objective of
long-term capital appreciation or for the purpose of hedging
its portfolio. A stock index fluctuates with changes in the
market values of the stocks included in the index. Some
stock index options are based on a broad market index such
as the New York Stock Exchange Composite Index or the
Canadian Market Portfolio Index, or a narrower market index
such as the Standard & Poor's 100. Indexes also are based on
an industry or market segment such as the American Stock
Exchange Oil and Gas Index or the Computer and Business
Equipment Index.
Options on stock indexes are generally similar to options on
stock except that the delivery requirements are different.
Instead of giving the right to take or make delivery of
stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed
exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by
(b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of
a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be
equal to such difference between the closing price of the
index and the exercise price of the option expressed in
dollars or a foreign currency, as the case may be, times a
specified multiple. The writer of the option is obligated,
in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire
unexercised.
The effectiveness of purchasing or writing stock index
options as a hedging technique will depend upon the extent
to which price movements in the portion of the securities
portfolio of the Fund correlate with price movements of the
stock index selected. Because the value of an index option
depends upon movements in the level of the index rather than
the price of a particular stock, whether the Fund will
realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of
stock prices in the stock market generally or, in the case
of certain indexes, in an industry or market segment, rather
than movements in the price of a particular stock.
Accordingly, successful use by a Fund of options on stock
indexes will be subject to the Su's ability to predict
correctly movements in the direction of the stock market
generally or of a particular industry. This requires
different skills and techniques than predicting changes in
the price of individual stocks.
Futures Contracts and Options on Futures Contracts. As
described generally above, each Fund may invest in stock
index futures contracts and options on futures contracts
traded on a domestic exchange or board of trade. Futures
contracts provide for the future sale by one party and
purchase by another party of a specified amount of a
specific security at a specified future time and at a
specified price. A Fund may enter into futures contracts
for any of the following purposes: as a substitute for
buying or selling securities; as a cash flow management
technique; to hedge against adverse changes in the market
value of its securities; and to settle transactions in
securities quoted in foreign currencies. A Fund may enter
into futures contracts and options on futures to seek higher
investment returns when a futures contract is priced more
attractively than stocks comprising a benchmark index, to
facilitate trading or to reduce transaction costs. The Fund
will enter into futures contracts and options only on
futures contracts that are traded on a domestic exchange and
board of trade. Assets committed to futures contracts will
be segregated on the Fund's books to the extent required by
law.
The purpose of entering into a futures contract by a Fund is
to protect it from fluctuations in the value of securities
without actually buying or selling the securities. For
example, in the case of stock index futures contracts, if
the Fund anticipates an increase in the price of stocks it
intends to purchase at a later time, the Fund could enter
into contracts to purchase the stock index (known as taking
a "long" position) as a temporary substitute for the
purchase of stocks. If an increase in the market occurs that
influences the stock index as anticipated, the value of the
futures contracts increases and thereby serves as a hedge
against the Fund's not participating in a market advance.
The Fund then may close out the futures contracts by
entering into offsetting futures contracts to sell the stock
index (known as taking a "short" position) as it purchases
individual stocks. The Fund can accomplish similar results
by buying securities with long maturities and selling
securities with short maturities. But by using futures
contracts as an investment tool to reduce risk, given the
greater liquidity in the futures market, it may be possible
to accomplish the same result more easily and more quickly.
No consideration will be paid or received by a Fund upon the
purchase or sale of a futures contract. Initially, the Fund
will be required to deposit with the broker an amount of
cash or cash equivalents equal to approximately 1% to 10% of
the contract amount (this amount is subject to change by the
exchange or board of trade on which the contract is traded
and brokers or members of such board of trade may charge a
higher amount). This amount is known as "initial margin" and
is in the nature of a performance bond or good faith deposit
on the contract which is returned to the Fund upon
termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent
payments, known as "variation margin," to and from the
broker, will be made daily as the price of the index or
securities underlying the futures contract fluctuates,
making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-
market." In addition, when the Fund enters into a long
position in a futures contract or an option on a futures
contract, it must deposit into a segregated account with the
Fund's custodian an amount of cash or cash equivalents equal
to the total market value of the underlying futures
contract, less amounts held in the Fund's commodity
brokerage account at its broker. At any time prior to the
expiration of a futures contract, the Fund may elect to
close the position by taking an opposite position, which
will operate to terminate the Fund's existing position in
the contract.
There are several risks in connection with the use of
futures contracts as a hedging device. Successful use of
futures contracts by a Fund is subject to the ability of the
relevant Subadviser to predict correctly movements in the
stock market or in the direction of interest rates. These
predictions involve skills and techniques that may be
different from those involved in the management of
investments in securities. In addition, there can be no
assurance that there will be a favorable correlation between
movements in the price of the securities underlying the
futures contract and movements in the price of the
securities that are the subject of the hedge. A decision of
whether, when and how to hedge involves the exercise of
skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of market behavior or
unexpected trends in market behavior or interest rates.
Positions in futures contracts may be closed out only on the
exchange on which they were entered into (or through a
linked exchange) and no secondary market exists for those
contracts. In addition, although each Fund intends to enter
into futures contracts only if there is an active market for
the contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most
futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a
price beyond that limit. It is possible that futures
contract prices could move to the daily limit for several
consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In
such event, and in the event of adverse price movements, a
Fund would be required to make daily cash payments of
variation margin; in such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any,
may partially or completely offset losses on the futures
contract. As described above, however, no assurance can be
given that the price of the securities being hedged will
correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
THE PROPOSED REORGANIZATION
Description of the Plan. As stated above, the Plan provides
for the transfer of all of the assets of the Fund to the
Acquiring Fund in exchange for that number of full and
fractional shares of the corresponding class of the
Acquiring Fund having an aggregate net asset value equal to
the aggregate net asset value of the shareholder's shares
held in the Fund as of the close of regular trading on the
New York Stock Exchange Inc. on the Closing Date. The
Acquiring Fund will assume all of the liabilities of the
Fund. The Reorganization will be accomplished pursuant to
an amendment to the Charter of the Sector Series that will
reclassify shares of the Fund as shares of the Acquiring
Fund, substantially in the form set forth as Annex I to the
Plan of Reorganization (Exhibit A).
Upon completion of the Reorganization, each shareholder of
the Fund will own that number of full and fractional shares
of the corresponding class of the Acquiring Fund having an
aggregate net asset value equal to the aggregate net asset
value of such shareholder's shares held in the Fund as of
the close of business on the Closing Date. Each Fund
shareholder's account with the Acquiring Fund will be
substantially similar in all material respects to the
accounts currently maintained by the Fund's sub-transfer
agent for such shareholder.
Some of the outstanding shares of the Fund are represented
by physical certificates; however, in the interest of
economy and convenience, shares of the Fund generally are
not represented by physical certificates, and shares of the
Acquiring Fund issued to Fund shareholders similarly will be
in uncertificated form.
Until the Closing, shareholders of the Fund will, of course,
continue to be able to redeem their shares at the net asset
value next determined after receipt by the Fund's sub-
transfer agent of a redemption request in proper form.
Redemption requests received by the sub-transfer agent
thereafter will be treated as requests received for the
redemption of shares of the Acquiring Fund received by the
shareholder in connection with the Reorganization.
The obligations of the Fund and the Acquiring Fund under the
Plan are subject to various conditions, as stated therein.
Among other things, the Plan requires that all filings be
made with, and all authority be received from, the SEC and
state securities commissions as may be necessary in the
opinion of counsel to permit the parties to carry out the
transactions contemplated by the Plan. The Fund and the
Acquiring Fund are in the process of making the necessary
filings. To provide against unforeseen events, the Plan may
be terminated or amended at any time prior to the Closing by
action of the Directors of the Sector Series,
notwithstanding the approval of the Plan by the shareholders
of the Fund. However, no amendment may be made that
materially adversely affects the interests of the
shareholders of the Fund without obtaining the approval of
the Fund's shareholders. The Fund and the Acquiring Fund
may at any time waive compliance with certain of the
covenants and conditions contained in the Plan. For a
complete description of the terms and conditions of the
Reorganization, see the Plan at Exhibit A.
SBFM will assume and pay all of the expenses that are solely
and directly related to the Reorganization, which expenses
are estimated to be approximately $_______. Shareholders
have no rights of appraisal.
REASONS FOR THE PROPOSED REORGANIZATION
Prior to a meeting of Sector Series' Board of Directors held
on July 18, 2001, the Directors, including all of the Non-
Interested Directors, were presented with materials
discussing the benefits which would accrue to the
shareholders of the Fund if the Fund were to reorganize with
and into the Acquiring Fund. These materials were discussed
at the meeting to the satisfaction of the Directors, who
were advised by independent counsel. For the reasons
discussed below, the Board of Directors of Sector Series,
including all of the Non-Interested Directors, has
determined that the proposed Reorganization is in the best
interests of the Fund and its shareholders and that the
interests of the shareholders of the Fund will not be
diluted as a result of the proposed Reorganization.
The proposed combination of the Fund and the Acquiring Fund
will allow the shareholders of the Fund to continue to
participate in a portfolio governed by identical investment
objectives and substantially similar policies that is
professionally managed by SBFM. The Board of Directors of
Sector Series believes that shareholders of the Fund will
benefit from the proposed Reorganization because the
Acquiring Fund offers the following benefits:
Enhanced Flexibility with Respect to Portfolio Investments.
As stated previously, the Fund has been unable to attract a
substantial asset base since its inception. The Fund's
small size has hindered the portfolio management flexibility
of SBFM and the subadviser and resulted in higher total
annual operating expenses for its shareholders. The
Reorganization is also being proposed as part of a broader
initiative by SBFM to eliminate duplication and possible
confusion in its mutual fund product offerings. SBFM
believes that the combination of the Funds which have
identical investment objectives and substantially similar
policies into a single larger fund may increase economic and
other efficiencies for investors, SBFM and the subadviser,
and may ultimately result in a lower total annual expense
ratio for investors. SBFM and the subadviser also believe
that a larger asset base could provide portfolio management
benefits such as greater diversification and the ability to
command more attention from brokers and underwriters. While
past performance is not necessarily indicative of future
results, the Acquiring Fund has generally outperformed the
Fund. See "Capitalization and Performance".
Lower Fees and Expenses. If the proposed transaction is
approved, shareholders of the Fund may benefit from lower
total fund expenses. See "Investment Management Fees and
Expenses" and "Annual Fund Operating Expenses".
As set forth above, as of their most recent fiscal year end,
each class of shares of the Fund has higher total annual
operating expenses than the corresponding class of the
Acquiring Fund (before management fee waivers and voluntary
expense limitations). As a result of the Reorganization,
shareholders of the Fund will be investing in the
corresponding class of the Acquiring Fund with expenses that
are projected to be the same as those of the relevant class
of the Fund after fee waivers. Going forward, shareholders
should benefit from economies of scale through lower expense
ratios and higher net income distributions over time since
some of the fixed expenses currently paid by the Acquiring
Fund, such as accounting, legal and printing costs, would
also be spread over a larger asset base.
Due to a combination of factors, including the relatively
small size of the Fund, past and prospective sales of the
Fund and current market conditions, the Directors and
management of Sector Series believe the Fund and its
shareholders would benefit from a tax-free reorganization
with a larger fund with identical investment objectives and
substantially similar policies and with a lower total annual
expense ratio (before management fee waivers and voluntary
expense limitations). Accordingly, it is recommended that
the shareholders of the Fund approve the Reorganization with
the Acquiring Fund.
The Board of Directors of Sector Series, in recommending the
proposed transaction, considered a number of factors,
including the following:
(1) the lower total annual expense ratio of the Acquiring
Fund (before the management fee waivers and voluntary
expense limitations);
(2) the Reorganization will result in a single larger
fund, which may increase economic and other efficiencies
(e.g., eliminating one of the two sets of prospectuses,
annual reports and other documents required for two Funds),
and result in a further lower expense ratio reduction;
(3) a larger asset base could provide portfolio management
benefits, such as greater diversification and the ability to
command more attention from brokers and underwriters;
(4) the compatibility of the Acquiring Fund's investment
objectives, policies and restrictions with those of the
Fund;
(5) the tax-free nature of the Reorganization;
(6) the terms and conditions of the Reorganization and
that it should not result in a dilution of Fund shareholder
interests; and
(7) costs and expenses of the proposed Reorganization will
be borne by SBFM.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
General. Each of the Fund and the Acquiring Fund is a non-
diversified series of Sector Series, a corporation
incorporated under the laws of the State of Maryland on July
16, 1986. Sector Series is registered with the SEC as a
diversified, open-end management investment company. Except
as addressed below, each Fund currently offers shares of
common stock classified into four Classes: A, B, L and Y.
Each Class of shares represents an identical pro rata
interest in the relevant Fund's investment portfolio. As a
result, the Classes of each Fund have the same rights,
privileges and preferences, except with respect to: (a) the
designation of each Class; (b) the amount of the respective
sales charges, if any, for each Class; (c) the distribution
and/or service fees borne by each Class; (d) the expenses
allocable exclusively to each Class; (e) voting rights on
matters exclusively affecting a single Class; (f) the
exchange privilege of each Class; and (g) the conversion
feature of the Class B Shares.
Each share of each Class of a Fund represents an interest in
that Class of the Fund that is equal to and proportionate
with each other share of that Class of the Fund.
Shareholders are entitled to one vote per share (and a
proportionate fractional vote per each fractional share)
held on matters on which they are entitled to vote.
Voting Rights. Neither Fund is required to hold shareholder
meetings annually, although shareholder meetings may be
called for purposes such as electing or removing Directors,
as applicable, changing fundamental policies or approving an
investment management contract. In the event that
shareholders of a Fund wish to communicate with other
shareholders concerning the removal of any Director, such
shareholders shall be assisted in communicating with other
shareholders for the purpose of obtaining signatures to
request a meeting of shareholders, all in the manner
provided in Section 16(c) of the 1940 Act as if Section
16(c) were applicable.
Board. The By-Laws of Sector Series provide that the term
of office of each Director shall be from the time of his or
her election and qualification until his or her successor
shall have been elected and shall have qualified. Any
Director of Sector Series may be removed by the vote of at
least a majority of the outstanding shares then entitled to
be cast for the election of Directors. Vacancies on the
Board of Sector Series may be filled by the Directors
remaining in office. A meeting of shareholders will be
required for the purpose of electing additional Directors
whenever fewer than a majority of the Directors then in
office were elected by shareholders and to fill vacancies if
less than two-thirds of the Directors then holding office
have been elected by the shareholders.
Liquidation or Termination. In the event of the liquidation
or termination of the Acquiring Fund or the Fund, the
shareholders of each Fund are entitled to receive, when and
as declared by the Directors, the excess of the assets over
the liabilities belonging to the relevant Fund. In either
case, the assets so distributed to shareholders will be
distributed among the shareholders in proportion to the
number of shares of the class held by them and recorded on
the books of the relevant Fund. The net asset value of the
classes of shares would differ due to differences in expense
ratios.
Rights of Inspection. Maryland law permits any shareholder
of each Fund or any agent of such shareholders to inspect
and copy, during usual business hours, the By-Laws, minutes
of shareholder proceedings, annual statements of the affairs
and voting trust agreements (if any) of the relevant Fund on
file at its principal office.
Shareholder Liability. Under Maryland law, shareholders of
each Fund do not have personal liability for corporate acts
and obligations.
Shares of the Acquiring Fund issued to the holders of shares
of the Fund pursuant to the Reorganization will be fully
paid and nonassessable when issued, transferable without
restrictions and will have no preemptive rights.
The foregoing is only a summary of certain characteristics
of the operations of Sector Series. The foregoing is not a
complete description of the documents cited. Shareholders
should refer to the provisions of corporate documents and
state laws governing each Fund for a more thorough
description.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by the
Fund and the Acquiring Fund of an opinion from Willkie Farr
& Gallagher, substantially to the effect that, based upon
certain facts, assumptions and representations of the
parties, for federal income tax purposes: (i) the transfer
to the Acquiring Fund of all of the assets of the Fund in
exchange solely for Acquiring Fund Shares and the assumption
by the Acquiring Fund of all of the liabilities of the Fund,
followed by the distribution of such Acquiring Fund Shares
to Fund shareholders in exchange for their shares of the
Fund in complete liquidation of the Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of
the Code, and the Acquiring Fund and the Fund will each be
"a party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized
by the Fund upon the transfer of the Fund's assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares and
the assumption by the Acquiring Fund of all of the
liabilities of the Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to the
Fund's shareholders in exchange for their shares of the
Fund; (iii) the basis of the assets of the Fund in the hands
of the Acquiring Fund will be the same as the basis of such
assets of the Fund immediately prior to the transfer; (iv)
the holding period of the assets of the Fund in the hands of
the Acquiring Fund will include the period during which such
assets were held by the Fund; (v) no gain or loss will be
recognized by the Acquiring Fund upon the receipt of the
assets of the Fund in exchange for Acquiring Fund Shares and
the assumption by the Acquiring Fund of all of the
liabilities of the Fund; (vi) no gain or loss will be
recognized by the shareholders of the Fund upon the receipt
of Acquiring Fund Shares solely in exchange for their shares
of the Fund as part of the transaction; (vii) the basis of
the Acquiring Fund Shares received by the shareholders of
the Fund will be the same as the basis of the shares of the
Fund exchanged therefor; and (viii) the holding period of
Acquiring Fund Shares received by each shareholder of the
Fund will include the holding period during which the shares
of the Fund exchanged therefore were held, provided that at
the time of the exchange such shares of the Fund were held
as capital assets in the hands of such shareholder of the
Fund.
While Sector Series is not aware of any adverse state or
local tax consequences of the proposed Reorganization, it
has not requested any ruling or opinion with respect to such
consequences and shareholders should consult their own tax
advisers with respect to such matters.
LIQUIDATION AND TERMINATION OF FUND
If the Reorganization is effected, the Fund will be
liquidated and terminated as a series of Sector Series, and
the Fund's outstanding shares will be cancelled.
PORTFOLIO SECURITIES
If the Reorganization is effected, SBFM and the subadviser
will analyze and evaluate the portfolio securities of the
Fund being transferred to the Acquiring Fund. Consistent
with the Acquiring Fund's investment objective and policies,
any restrictions imposed by the Code and the best interests
of the Acquiring Fund's shareholders (including former
shareholders of the Fund), SBFM and the Acquiring Fund's
subadviser will determine the extent and duration to which
the Fund's portfolio securities will be maintained by the
Acquiring Fund. It is possible that there may be a
significant rebalancing of the Fund's portfolio securities
in connection with the Reorganization. Subject to market
conditions at the time of any such rebalancing, the
disposition of the Fund's portfolio securities may result in
a capital gain or loss. The actual tax consequences of any
disposition of portfolio securities will vary depending upon
the specific security(ies) being sold.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Acquiring Fund (i.e.,
the ratio of the lesser of annual sales or purchases to the
monthly average value of the portfolio (excluding from both
the numerator and the denominator securities with maturities
at the time of acquisition of one year or less)), for the
year ended October 31, 2000 was 24%. The portfolio turnover
rate for the Fund for the year ended October 31, 2000 was
5%.
CAPITALIZATION AND PERFORMANCE
Pro Forma Capitalization (Unaudited). The following table
sets forth the unaudited capitalization of each class of
each of the Acquiring Fund and the Fund as of June 30, 2001
as adjusted giving effect to the Reorganization discussed
herein:
ACQUIRING
FUND
THE
FUND
PRO FORMA
ADJUSTMENTS
PRO FORMA
COMBINED
(Actual)
(Actual)
Class A Shares
Net Assets
Net Assets value
per share
Shares
outstanding
$37,738,794
$5.66
6,789,613
$1,245,100
$5.50
226,181
(2,441)
$38,983,894
$5.66
7,013,353
Class B Shares
Net Assets
Net Assets value
per share
Shares
outstanding
$57,607,388
$5.50
10,469,381
$1,535,836
$5.48
280,276
(1,019)
$59,143,224
$5.50
10,748,638
Class L Shares
Net Assets
Net Assets value
per share
Shares
outstanding
$52,305,934
$5.50
9,505,807
$2,017,911
$5.48
368,257
(1,339)
$54,323,845
$5.50
9,872,725
1 Assumes the Reorganization had been consummated on June
30, 2001, and is for information purposes only. No assurance
can be given as to how many shares of the Acquiring Fund
will be received by shareholders of the Fund on the date the
Reorganization takes place, and the foregoing should not be
relied upon to reflect the number of shares of the Acquiring
Fund that actually will be received on or after such date.
Total return is a measure of the change in value of an
investment in a fund over the period covered, which assumes
that any dividends or capital gains distributions are
automatically reinvested in shares of the fund rather than
paid to the investor in cash. The formula for total return
used by a fund is prescribed by the SEC and includes three
steps: (1) adding to the total number of shares of the fund
that would be purchased by a hypothetical $1,000 investment
in the fund all additional shares that would have been
purchased if all dividends and distributions paid or
distributed during the period had been automatically
reinvested; (2) calculating the redemption value of the
hypothetical initial investment as of the end of the period
by multiplying the total number of shares owned at the end
of the period by the net asset value per share on the last
trading day of the period; and (3) dividing this account
value for the hypothetical investor by the amount of the
initial investment, and annualizing the result for periods
of less than one year. Total return may be stated with or
without giving effect to any expense limitations in effect
for a fund.
The following table reflects the average annual total
returns of Class A Shares of the Fund and the Acquiring Fund
(including sales charges) since inception for the period
ending October 31, 2000:
THE FUND THE ACQUIRING FUND
Average Annual Total Return: (1)
Since Inception........ (26.83)% (23.83)%
Inception Date 8/31/00 2/28/00
__________________
(1) The average annual total returns for other classes of
each Fund's shares would be similar to the returns of the
Class A Shares of the relevant Fund, but would differ to the
extent that the other class of shares had a higher or lower
total annual expense ratio during the relevant periods.
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about Sector Series,
with respect to the Fund and the Acquiring Fund, and the
Reorganization has been filed with the SEC and may be
obtained without charge by writing to Smith Barney Mutual
Funds, 7 World Trade Center, New York, New York 10048, or by
calling (800) 451-2010.
Each Fund is subject to the informational requirements of
the Securities Exchange Act of 1934 and the 1940 Act, and in
accordance therewith, files reports, proxy material and
other information about the applicable Fund with the
Commission.
Such reports, proxy material and other information can be
inspected and copied at the Public Reference Room (202-942-
8090) maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of such material can
also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and
Exchange Commission 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates or without charge from the
Commission at publicinfo@sec.gov. Copies of such material
can also be obtained from Smith Barney Mutual Funds, 7 World
Trade Center, New York, New York 10048, or by calling (800)
451-2010.
INTERESTS OF CERTAIN PERSONS
SBFM and certain of the Acquiring Fund's service providers
have a financial interest in the Reorganization, arising
from the fact that their respective fees under their
respective agreements with the Acquiring Fund will increase
as the amount of the Acquiring Fund's assets increases; the
amount of those assets will increase by virtue of the
Reorganization.
THE BOARD MEMBERS OF SECTOR SERIES RECOMMEND THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THIS PROPOSAL.
ADDITIONAL INFORMATION
General. The cost of preparing, printing and mailing the
enclosed proxy card(s) and Proxy Statement/Prospectus and
all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by
letter, telephone or telegraph, will be paid by SBFM. In
addition to solicitation by mail, certain officers and
representatives of Sector Series, officers and employees of
SBFM and certain financial services firms and their
representatives, who will receive no extra compensation for
their services, may solicit proxies by telephone, telegram
or personally.
When the Fund records proxies by telephone or through the
Internet, it will use procedures designed to (i)
authenticate shareholders' identities, (ii) allow
shareholders to authorize the voting of their shares in
accordance with their instructions and (iii) confirm that
their instructions have been properly recorded.
To participate in the Special Meeting, the shareholder may
submit the proxy card sent with the Proxy
Statement/Prospectus or attend in person. Any proxy given by
a shareholder is revocable until voted at the Special
Meeting.
Proposals of Shareholders. Shareholders wishing to submit
proposals for inclusion in a proxy statement for a
shareholder meeting subsequent to the Special Meeting, if
any, should send their written proposals to the Secretary of
Sector Series, c/o Smith Barney Mutual Funds, 7 World Trade
Center, New York, New York 10048, within a reasonable time
before the solicitation of proxies for such meeting. The
timely submission of a proposal does not guarantee its
inclusion.
Other Matters to Come Before the Special Meeting. No Board
member is aware of any matters that will be presented for
action at the Special Meeting other than the matters set
forth herein. Should any other matters requiring a vote of
shareholders arise, the proxy in the accompanying form will
confer upon the person or persons entitled to vote the
shares represented by such proxy the discretionary authority
to vote the shares as to any such other matters in
accordance with their best judgment in the interest of
Sector Series and/or the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By order of the Board of Directors,
Christina T. Sydor
Secretary
INDEX OF EXHIBITS
Annex: 5% Shareholders
Exhibit A: Form of Plan of Reorganization
EXHIBIT A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Plan") is dated as of
this 18th day of July, 2001, and has been adopted by the
Board of Directors of Smith Barney Sector Series Inc. (the
"Corporation") to provide for the reorganization of its
Smith Barney Global Technology Fund (the "Acquired Fund")
into its Smith Barney Technology Fund (the "Acquiring
Fund").
A. BACKGROUND
The Acquired Fund and the Acquiring Fund (individually,
a Fund and collectively, the "Funds") are separate series of
the Corporation. The Corporation is organized as a Maryland
corporation and is an open-end management investment Company
registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Board of Directors of the Corporation
has determined that it is in the best interests of the
Acquired Fund and its shareholders to be reorganized through
the transfer of all of the Acquired Fund's assets and
liabilities to the Acquiring Fund upon the terms set forth
in this Plan (the "Reorganization").
B. THE REORGANIZATION
1. Prior to the Closing Date (as defined below in
Section 6 of this Article B), the Corporation will execute
and file Articles of Amendment to the Corporation's Charter
with the Maryland State Department of Assessments and
Taxation in substantially the form attached hereto as Annex
I, which Articles of Amendment will, effective as of the
Closing Date: (a) reclassify all of the Corporation's issued
and outstanding shares of Common Stock of the Acquired Fund
as outstanding shares of Common Stock of the comparable
class of equal aggregate value of the Acquiring Fund; and
(b) reclassify all of the authorized and unissued Common
Stock of the Acquired Fund as authorized Common Stock of the
Acquiring Fund.
2. At the Closing Date, all property of every
description, and all interests, rights, privileges and
powers of the Acquired Fund, subject to all liabilities of
the Acquired Fund, whether accrued, absolute, contingent or
otherwise (such assets subject to such liabilities are
herein referred to as the "Assets") will be transferred and
conveyed by the Acquired Fund to the Acquiring Fund and will
be assumed by the Acquiring Fund, such that at and after the
Closing Date, the Assets of the Acquired Fund will become
and be the Assets of the Acquiring Fund. In exchange for the
transfer of the Assets of the Acquired Fund and in order to
accomplish the reclassification of shares as described above
in Section 1 of this Article B, the Acquiring Fund will
contemporaneously issue to shareholders of the Acquired Fund
full and fractional shares of the Acquiring Fund (as
contemplated by Section 4 of this Article B) having an
aggregate net asset value equal to the value of the Assets
of the Acquired Fund. For purposes of effecting such
exchange, the value of the Assets of the Acquired Fund and
the net asset value of the shares of the Acquiring Fund
shall be determined as of the close of regular trading on
the New York Stock Exchange on October 12, 2001 or at such
other time as may be determined by the Board of Directors or
an authorized officer of the Corporation. Such values shall
be computed in the manner set forth in the applicable Fund's
then current prospectus under the Securities Act of 1933, as
amended. At and after the Closing Date, all debts,
liabilities, obligations and duties of the Acquired Fund
will attach to the Acquiring Fund as aforesaid and may
thenceforth be enforced against the Acquiring Fund to the
same extent as if the same had been incurred by the
Acquiring Fund.
3. On or as soon as practicable prior to the Closing
Date as defined in section 6, the Acquired Fund will declare
and pay to its shareholders of record one or more dividends
and/or other distributions so that it will have distributed
substantially all of its investment company taxable income
(computed without regard to any deduction for dividends
paid) and realized net capital gain, if any, for the current
taxable year through the Closing Date.
4. At the Closing Date, the Corporation will liquidate
the Acquired Fund and issue full and fractional shares of
the Acquiring Fund to the Acquired Fund's shareholders, such
that the shares of the Acquiring Fund of each class that are
distributed to a shareholder of the Acquired Fund will have
an aggregate net asset value equal to the aggregate net
asset value of the corresponding class of shares of the
Acquired Fund held by such shareholder immediately prior to
the Closing Date. In addition, each shareholder of the
Acquired Fund will have the right to receive any unpaid
dividends or other distributions that were declared before
the Closing Date with respect to the shares of the Acquired
Fund held by such shareholder immediately prior to the
Closing Date.
5. The stock transfer books of the Corporation with
respect to the Acquired Fund will be permanently closed as
of the close of business on the day immediately preceding
the Closing Date. Redemption requests received thereafter by
the Corporation with respect to the Acquired Fund will be
deemed to be redemption requests for shares of the Acquiring
Fund issued pursuant to this Plan.
6. The Closing Date for purposes of this Plan shall be
the close of business on October 12, 2001, or at such other
time as may be determined by the Board of Directors or an
authorized officer of the Corporation.
C. ACTIONS BY SHAREHOLDERS OF THE ACQUIRED FUND
Prior to the Closing Date and as a condition thereto,
the Board of Directors of the Corporation will call, and the
Corporation will hold, a meeting of the shareholders of the
Acquired Fund to consider and vote upon:
1. Approval of this Plan and the implementing charter
amendment reclassifying shares of the Acquired Fund into
shares of the Acquiring Fund and the transactions
contemplated hereby.
2. Such other matters as may be determined by the
Board of Directors of the Corporation.
D. CONDITIONS OF THE REORGANIZATION
Consummation of this Plan will be subject to:
1. The approval of the matters referred to in Article
C of this Plan by the shareholders of the Acquired Fund in
the manner required by law and otherwise deemed necessary or
advisable by the Board of Directors of the Corporation; and
2. The following additional conditions:
(a) The Corporation will have received opinions
of Willkie Farr & Gallagher based upon customary
representations and assumptions and to the effect that:
(i) the shares of the Acquiring Fund issued
pursuant to this Plan will, when issued in accordance with
the provisions hereof, be validly issued, fully paid and
non-assessable; and
(ii) for federal income tax purposes: (A)
the acquisition of the assets and assumption of the
liabilities of the Acquired Fund by the Acquiring Fund in
return for shares of the Acquiring Fund followed by the
distribution of such shares to the shareholders of the
Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code (the
"Code") and the Acquiring Fund and the Acquired Fund will
each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code; (B) no gain or loss will be
recognized by the Acquired Fund upon the transfer of its
assets and liabilities to the Acquiring Fund; (C) no gain or
loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for
shares of the Acquiring Fund and the assumption by the
Acquiring Fund of the liabilities of the Acquired Fund; (D)
no gain or loss will be recognized by the shareholders of
the Acquired Fund upon the receipt of the shares of the
Acquiring Fund in exchange for their shares of the Acquired
Fund; (E) the tax basis of the shares of the Acquiring Fund
received by the shareholders of the Acquired Fund will be
the same as the tax basis of the shares of the Acquired Fund
exchanged therefor; (F) the tax basis of the assets of the
Acquired Fund in the hands of the Acquiring Fund will be the
same as the tax basis of such assets in the hands of the
Acquired Fund immediately prior to the transfer; (G) the
holding period of the shares of the Acquiring Fund
received by the shareholders of the Acquired Fund will
include the holding period of the shares of the Acquired
Fund exchanged therefor, provided that at the time of the
exchange the shares of the Acquired Fund were held as
capital assets; and (H) the holding period of the
Acquiring Fund for the assets of the Acquired Fund
transferred to it will include the period during which such
assets were held by the Acquired Fund.
(b) All necessary approvals, registrations and
exemptions required under federal and state laws will have
been obtained.
E. MISCELLANEOUS
1. This Plan and the transactions contemplated hereby
will be governed and construed in accordance with the laws
of the State of Maryland.
2. This Plan and the transactions contemplated hereby
may be abandoned at any time for any reason prior to the
Closing Date upon the vote of a majority of the Board of
Directors of the Corporation.
3. At any time prior to or (to the fullest extent
permitted by law) after approval of this Plan by the
shareholders of the Acquired Fund, the Corporation may, upon
authorization by the Board of Directors and with or without
the approval of shareholders of the Acquired Fund, amend any
of the provisions of this Plan.
4. The expenses incurred in connection with the
Reorganization will be borne by Smith Barney Fund
Management, LLC, the Funds' investment manager.
5. The Corporation, by consent of its Board of
Directors, or an officer authorized by such Board of
Directors, may waive any condition to the obligations of the
Acquired Fund or the Acquiring Fund hereunder if, in its or
such officer's judgment, such waiver will not have a
material adverse effect on the interests of the shareholders
of the Acquired Fund or the shareholders of the Acquiring
Fund.
ANNEX I
SMITH BARNEY SECTOR SERIES, INC.
ARTICLES OF AMENDMENT
SMITH BARNEY SECTOR SERIES INC., a Maryland
corporation, having its principal office in the City of
Baltimore, Maryland (the "Corporation"), certifies to the
State Department of Assessments and Taxation that:
FIRST: The Charter of the Corporation is amended by (i)
reclassifying all of the shares of the Corporation's Smith
Barney Global Technology Fund ("Global Technology Fund") as
shares of the Corporation's Smith Barney Technology Fund
("Technology Fund"), and (ii) increasing the aggregate
number of authorized shares of the Technology Fund by
400,000,000 shares.
SECOND: Upon effectiveness of these Articles of
Amendment:
(a) All of the assets and liabilities belonging to the
Corporation's Global Technology Fund and attributable to its
Class A, B and L shares, respectively, shall be conveyed,
transferred and delivered to the Corporation's Technology
Fund, and shall thereupon become and be assets and
liabilities belonging to the Technology Fund and
attributable to its Class A, B and L shares, respectively.
(b) Each of the issued and outstanding shares (and
fractions thereof) of the Corporation's Global Technology
Fund and its Class A, B and L shares, respectively, will
automatically, and without the need of any further act or
deed, be reclassified and changed to that number of full and
fractional issued and outstanding shares of the
Corporation's Technology Fund and of its Class A, B, and L
shares, respectively, having an aggregate net asset value
equal to the aggregate net asset value of a Global
Technology Fund share of the comparable class (and fractions
thereof) being reclassified and changed, such net asset
values to be determined as of the close of regular trading
on the New York Stock Exchange on the effective date of
these Articles of Amendment.
(c) Each unissued Class A, B, L, Y or Z share (or
fraction thereof), respectively, of the Corporation's Global
Technology Fund will automatically, and without the need for
any further act or deed, be reclassified and changed to such
number of unissued Class A, B, L, Y or Z shares (or
fractions thereof), respectively, of the Corporation's
Technology Fund as shall result, as of the effective time of
these Articles of Amendment and as a result hereof, in the
total number of unissued shares of the Corporation's
Technology Fund being increased by 400,000,000 shares less
the number of issued and outstanding shares of the
Corporation's Technology Fund resulting from paragraph (b)
of this Article SECOND.
(d) Open accounts on the share records of the
Corporation's Technology Fund owned by each former holder of
its Global Technology Fund shares shall be established
representing the appropriate number of the Technology Fund
shares, of the appropriate class, deemed to be owned by each
such stockholder as a result of the reclassification.
THIRD: This amendment does not increase the authorized
capital stock of the Corporation or the aggregate par value
thereof. This amendment reclassifies and changes the
400,000,000 authorized shares of the Global Technology Fund
to 400,000,000 additional authorized shares of the
Technology Fund but does not amend the description of any
class of stock as set forth in the Charter. As a result of
this amendment, the Corporation is authorized to issue up to
800,000,000 shares of each of the Class A Common Stock,
Class B Common Stock, Class L Common Stock, Class Y Common
Stock and Class Z Common Stock of the Technology Fund less,
at any time, the total number of shares of all such other
classes of capital stock of the Technology Fund then issued
and outstanding. The shares of the Technology Fund and of
each class within such Fund shall have all of the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or
terms or conditions of redemption of such Fund and such
class as set forth in the Charter of the Corporation.
FOURTH: This amendment has been duly authorized and
advised by the Board of Directors of the Corporation and
approved by the stockholders of the Corporation entitled to
vote thereon.
FIFTH: These Articles of Amendment shall be effective
as of October ___, 2001 at ____p.m..
IN WITNESS WHEREOF, SMITH BARNEY SECTOR SERIES INC. has
caused these Articles of Amendment to be signed in its name
and on its behalf by its , and witnessed by its
[Assistant] Secretary, as of the day of , 2001.
WITNESS:
SMITH BARNEY
SECTOR SERIES INC.
By: _____________________________ By:
_____________________________
Name: Name:
[Assistant] Secretary
Office:
THE UNDERSIGNED, , of Smith Barney Sector Series
Inc., who executed on behalf of the Corporation the
foregoing Articles of Amendment of which this certificate is
made a part, hereby acknowledges in the name and on behalf
of said Corporation the foregoing Articles of Amendment to
be the corporate act of said Corporation and hereby
certifies that to the best of his knowledge, information and
belief, the matters and facts set forth therein with respect
to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
____________________________
Name:
Office:
EXHIBIT A
THE PROSPECTUS, ANNUAL AND SEMI-ANNUAL REPORTS OF THE
ACQUIRING FUND DATED FEBRUARY 28, 2001, OCTOBER 31, 2000 AND
APRIL 30, 2001, RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY THE ACQUIRING FUND
PART B
INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL
INFORMATION
SUBJECT TO COMPLETION, DATED JULY 18, 2001
STATEMENT OF ADDITIONAL INFORMATION
7 World Trade Center
New York, New York 10048
(800) 451-2010
RELATING TO THE ACQUISITION BY THE SMITH BARNEY TECHNOLOGY
FUND, INC. (THE "ACQUIRING FUND"), A SERIES OF SMITH BARNEY
SECTOR SERIES INC. ("SECTOR SERIES") OF THE ASSETS OF SMITH
BARNEY GLOBAL TECHNOLOGY FUND (THE "FUND"), ALSO A SERIES OF
SECTOR SERIES.
Dated: August , 2001
This Statement of Additional Information, relating
specifically to the proposed transfer of all of the assets
of the Fund, a series of Sector Series, to the Acquiring
Fund in exchange for shares of the corresponding class of
the Acquiring Fund and the assumption by the Acquiring Fund
of the liabilities of the Fund, consists of this cover page
and the following described documents, each of which
accompanies this Statement of Additional Information and is
incorporated herein by reference.
1. Statement of Additional Information for the Acquiring
Fund dated February 28, 2001
2. Statement of Additional Information for the Fund dated
February 28, 2001
3. Annual Report of the Acquiring Fund for the year ended
October 31, 2000 and the Semi-Annual Report of the
Acquiring Fund for the six-months ended April 30, 2001
4. Annual Report of the Fund for the year ended October
31, 2000 and the Semi-Annual Report of the Fund for
the six months ended April 30, 2001.
This Statement of Additional Information is not a
prospectus. A Prospectus/Proxy Statement, dated August __,
2001, relating to the above-referenced matter may be
obtained without charge by calling or writing the Acquiring
Fund at the telephone number or address set forth above.
This Statement of Additional Information should be read in
conjunction with the Prospectus/Proxy Statement.
FINANCIAL STATEMENTS
The Annual and Semi-Annual Reports of the Acquiring Fund and
the Fund for the year ended October 31, 2000 and the six
months ended April 30, 2001, including audited financial
statements, notes to the financial statements and report of
the independent auditors, are incorporated by reference
herein. To obtain a copy of the Annual and Semi-Annual
Reports without charge, please call 1-800-451-2010.
PRO FORMA FINANCIAL STATEMENTS
Because the net asset value of the Fund is less than 10% of
the Acquiring Fund's net asset value, pro forma financial
statements are not required to be and have not been prepared
for inclusion in the Statement of Additional Information
filed in connection with the Reorganization.
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION,
ANNUAL AND SEMI-ANNUAL REPORTS OF THE ACQUIRING FUND DATED
FEBRUARY 28, 2001, OCTOBER 31, 2000, AND APRIL 30, 2001,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE TO THE MOST
RECENT FILINGS THEREOF BY SMITH BARNEY SECTOR SERIES INC.
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION,
ANNUAL AND SEMI-ANNUAL REPORTS OF THE FUND DATED FEBRUARY
28, 2001, OCTOBER 31, 2000 AND APRIL 30, 2001, RESPECTIVELY,
ARE INCORPORATED BY REFERENCE TO THE MOST RECENT FILINGS
THEREOF BY SMITH BARNEY SECTOR SERIES INC.
Part C.
Other Information
Item 15. Indemnification -Registrant is named assured on a
joint insured bond pursuant to Rule 17g-1 of the Investment
Company Act of 1940. Other assureds include Smith Barney
Fund Management LLC (Registrant's Manager) and affiliated
investment companies. The response to this item is further
incorporated by reference to Post - Effective Amendment No.
1 to the Registration Statement filed on May 28, 1987.
Item 16. Exhibits
(1)(a) Registrant's Articles of Incorporation are
incorporated by reference to Post-Effective Amendment No.
12 to the Registration Statement filed on October 27,1993
("Post-Effective Amendment No. 12").
1(b) Articles of Amendment dated October 30, 1986 to
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No. 12.
1(c) Articles of Amendment dated November 17, 1989 to
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No.12.
1(d) Articles Supplementary dated November 5, 1992 to
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No.12.
1(e) Articles of Amendment dated November 19, 1992 to
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No.12.
1(f) Articles of Amendment dated July 30, 1993 to Articles
of Incorporation are incorporated by reference to Post-
Effective Amendment No.12.
1(g) Articles of Amendment dated October 14, 1994 and
November 7, 1994, respectively and Articles Supplementary
dated November 7, 1994 are incorporated by reference to
Post-Effective Amendment No. 15 to the Registration
Statement filed on December 29, 1994 ("Post- Effective
Amendment No. 15").
1(h) Articles of Amendment dated December 18, 1995 to the
Articles of Incorporation are incorporated by reference to
Post Effective Amendment No. 20 to the Registration
Statement filed on January 23, 1996 ("Post-Effective
Amendment No. 20").
1(i) Articles of Amendment dated June 1, 1998 to the
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No. 23 to the Registration
Statement filed on December 24, 1998 ("Post-Effective
Amendment No. 23").
1(j) Articles of Amendment dated November 29, 1999 to the
Articles of Incorporation are incorporated by reference to
Post-Effective Amendment No. 25 to the Registration
Statement filed on December 1, 1999 ("Post-Effective
Amendment No. 25").
1(k) Articles Supplementary dated November 29, 1999 are
incorporated by reference to Post-Effective Amendment No.
25.
1(l) Certificate of Correction dated November 29, 1999 is
incorporated by reference to Post-Effective Amendment No.
25.
1(m) Certificate of Correction dated November 29, 1999 is
incorporated by reference to Post-Effective Amendment No.
25.
1(n) Articles Supplementary dated July 12, 2000 is filed
herein.
1(o) Articles of Amendment dated December 11, 2000 to the
Articles of Incorporation is filed herein.
2(a) Registrant's By-Laws are incorporated by reference to
the Registration Statement.
2(b) Amendment to Registrant's By-Laws is incorporated by
reference to Post-Effective Amendment No. 4 to the
Registration Statement filed on January 3, 1989 ("Post-
Effective Amendment No. 4").
3. Not applicable.
4. Form of Plan of Reorganization is included in Part A
to the Registration Statement on Form N-14.
5 Specimen form of common stock certificate is
incorporated by reference to Post-Effective Amendment No.
23 to the Registration Statement filed on December 24, 1998
("Post-Effective Amendment No. 23").
6(a) Form of Management Agreement between the Registrant
and Mutual Management Corp. (formerly known as Smith Barney
Mutual Funds Management Inc.) is incorporated by reference
to Post-Effective Amendment No. 19 to the Registration
Statement filed on December 18, 1995 ("Post-Effective
Amendment No. 19").
6(b) Form of Investment Management Agreement between the
Registrant and SSB Citi Fund Management LLC ("SSB Citi") on
behalf of the Financial Services Fund is incorporated by
reference to Post-Effective Amendment No. 26 to the
Registration Statement filed on February 11, 2000 ("Post-
Effective Amendment No. 26").
6(c) Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Health Sciences
Fund is incorporated by reference to Post-Effective
Amendment No. 26.
6(d) Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Technology Fund is
incorporated by reference to Post-Effective Amendment No.
26.
6(e) Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Financial Services
Fund, SSB Citi and Citibank, N.A. ("Citibank") is
incorporated by reference to Post-Effective Amendment No.
26.
6(f) Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Health Sciences Fund,
SSB Citi and Citibank is incorporated by reference to Post-
Effective Amendment No. 26.
6(g) Form of Subadvisory Agreement between Smith Barney
Sector Series Inc. on behalf of the Technology Fund, SSB
Citi and Citibank is incorporated by reference to Post-
Effective Amendment No. 26.
6(h) Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Global
Biotechnology Fund is filed herein.
6(i) Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Global Media and
Telecommunications Fund is filed herein.
6(j) Form of Investment Management Agreement between the
Registrant and SSB Citi on behalf of the Global Technology
Fund is filed herein.
6(k) Form of Subadvisory Agreement between the Registrant
on behalf of the Global Biotechnology Fund, SSB Citi and
Citibank, N.A. ("Citibank") is filed herein.
6(l) Form of Subadvisory Agreement between the Registrant
on behalf of the Global Media and Telecommunications Fund,
SSB Citi and Citibank N.A is filed herein.
6(m) Form of Subadvisory Agreement between the Registrant
on behalf of the Global Technology Fund, SSB Citi and
Citibank is filed herein.
7(a) Distribution Agreement between the Registrant and
Smith Barney Shearson Inc. is incorporated by reference to
Post-Effective Amendment No. 12.
7(b) Amended Distribution Agreement between Registrant and
CFBDS, Inc. is incorporated by reference to Post-Effective
Amendment No. 23 to the Registration Statement filed on
December 24, 1998 ("Post-Effective Amendment No. 23").
7(c) Selling Group Agreement is incorporated by reference
to Post-Effective Amendment No. 24 to the Registration
Statement filed on February 25,1999 ("Post-Effective
Amendment No. 24").
7(d) Form of Distribution Agreement between Registrant and
CFBDS, Inc. is incorporated by reference to Post-Effective
Amendment No. 26.
7(e) Form of Distribution Agreement between Registrant and
Salomon Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 30 to the Registration
Statement filed on February 28, 2001 ("Post-Effective
Amendment No. 30").
7(f) Form of Distribution Agreement between Registrant and
PFS Distributors Inc. incorporated by reference to Post-
Effective Amendment No. 30.
8 Not Applicable.
9(a) Form of Custodian Agreement between the Registrant
and The Chase Manhattan Bank N.A. is incorporated by
reference to Post-Effective Amendment No. 21 filed on
February 20, 1997.
10(a) Amended Service and Distribution Plan pursuant to
Rule 12b-1 between the Registrant and Salomon Smith Barney
Inc. is incorporated by reference to Post-Effective
Amendment No. 15.
10(b) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between the Registrant and Salomon
Smith Barney Inc. is incorporated by reference to Post-
Effective Amendment No. 23 to the Registration Statement
filed on December 24, 1998 ("Post-Effective Amendment No.
23").
10(c) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Financial Services Fund and Salomon Smith
Barney Inc. ("Salomon Smith Barney") is incorporated by
reference to Post-Effective Amendment No. 26.
10(d) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Health Sciences Fund and Salomon Smith
Barney is incorporated by reference to Post-Effective
Amendment No. 26.
10(e) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Technology Fund and Salomon Smith Barney
is incorporated by reference to Post-Effective Amendment
No. 26.
10(f) Form of Amended Service and Distribution Plan
pursuant to Rule 12b-1 between Smith Barney Sector Series
Inc. on behalf of Financial Services Fund, Health Sciences
Fund and Technology Fund and Salomon Smith Barney is filed
herein.
11 Opinion and consent of Counsel as to the legality of
the securities being registered is filed herewith.
12 Form of Opinion of Counsel supporting tax matters and
consequences to shareholders discussed in the
prospectus is filed herewith.
13(a) Transfer Agency Agreement dated August 2, 1993
between the Registrant and First Data Investor Services
Group is incorporated by reference to Post-Effective
Amendment No. 14 to the Registration Statement filed on
December 30, 1993.
13(b) Form of Transfer Agency Agreement between the
Registrant and Citi Fiduciary Trust Company is filed
herein.
13(c) Form of Sub-Transfer Agency Agreement between the
Registrant and PFPC Global Fund Services is filed herein.
13(d) Form of Sub-Transfer Agency Agreement between the
Registrant and PFS Shareholder Services is filed herein.
14 Independent Auditor's Consent is filed herein.
15 Not Applicable.
16 Powers of Attorney are incorporated by reference to
Registrant's registration statement filed on Form N-
1A.
17(a) Form of Proxy Card is filed herewith.
17(b) Annual and Semi-Annual Reports of Registrant,
dated October 31, 2000 and April 30, 2001, respectively,
are incorporated herein by reference.
17(c) Prospectus and statement of additional information of
Registrant, dated February 28, 2001, are incorporated
herein by reference.
17(d) Code of Ethics is incorporated by reference to Post-
Effective Amendment
No. 27.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to
any public offering of the securities
registered through the use of a prospectus
which is part of this registration statement by
any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c)
of the Securities Act [17 CFR 230.145c], the
reoffering prospectus will contain the
information called for by the applicable
registration form for reofferings by persons
who may be deemed underwriters, in addition to
the information called for by other terms of
the applicable form.
(2) The undersigned registrant agrees that every
prospectus that is filed under paragraph (1)
above will be filed as a part of an amendment
to the registration statements and will not be
used until the amendment is effective, and
that, in determining any liability under the
1933 Act, each post-effective amendment shall
be determined to be a new registration
statement for the securities offered therein,
and the offering of the securities at that time
shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
(the "Securities Act") and the Investment Company Act of
1940, as amended, the Registrant, Smith Barney Sector
Series Inc. certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the 1933 Act and the Registrant has
duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in
the City of New York and State of New York, on the 18th day
of July, 2001.
SMITH BARNEY SECTOR SERIES INC.
By: /s/ Heath B. McLendon
Health B. McLendon
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the
capacities and as of the dates indicated.
Signature Title
Date
/s/Heath B. McLendon Chairman of the Board,
July 18, 2001
Heath B. McLendon President and Chief Executive
Officer
/s/ Lewis E. Daidone Senior Vice President
July 18, 2001
Lewis E. Daidone and Treasurer, Chief
Financial and Accounting
Officer
/s/Herbert Barg* Director
July 18, 2001
Herbert Barg
/s/Alfred J. Bianchetti* Director
July 18, 2001
Alfred J. Bianchetti
/s/Martin Brody* Director
July 18, 2001
Martin Brody
/s/Dwight B. Crane* Director
July 18, 2001
Dwight B. Crane
/s/Burt N. Dorsett* Director
July 18, 2001
Burt N. Dorsett
/s/Elliot S. Jaffe* Director
July 18, 2001
Elliot S. Jaffe
/s/Stephen E. Kaufman* Director
July 18, 2001
Stephen E. Kaufman
/s/Joseph J. McCann* Director
July 18, 2001
Joseph J. McCann
/s/Cornelius C. Rose, Jr.* Director
July 18, 2001
Cornelius C. Rose, Jr.
? Signed by Heath B. McLendon their duly authorized
attorney-in-fact, pursuant to power of attorney dated
July 12, 2000.
EXHIBIT INDEX
Exhibit No. Exhibit
11 Opinion and consent of Counsel as to the legality of
the securities being registered
12 Form of Opinion of Counsel supporting tax matters and
consequences to shareholders discussed in the
prospectus
13 Independent Auditor's Consent
17 Proxy Card
EXHIBITS
(11)(a) Opinion and consent of Counsel as to the legality of
the securities being registered
(11)(b) Opinion of Maryland Counsel as to legality of the
securities being registered
(12) Form of Opinion of Counsel supporting tax matters and
consequences to shareholders discussed in the
prospectus
(13) Independent Auditor's Consent
(17) Proxy Card
VOTE THIS PROXY CARD TODAY! YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing
.........................................................................
.........................................................................
............................................
SMITH BARNEY SECTOR SERIES INC. - GLOBAL TECHNOLOGY FUND
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of Smith Barney Global Technology Fund
(the "Global Technology Fund"), a series of Smith Barney Sector Series
Inc., (the "Corporation") hereby appoints Heath B. McLendon, Christina T.
Sydor, Lewis E. Daidone and Michael Kocur, attorneys and proxies for the
undersigned with full powers of substitution and revocation, to represent
the undersigned and to vote on behalf of the undersigned all shares of
the Global Technology Fund that the undersigned is entitled to vote at
the Special Meeting of Shareholders of the Global Technology Fund to be
held at the offices of the Global Technology Fund, 7 World Trade Center,
New York, New York on October 9, 2001 at 10:00 a.m. and any adjournment
or adjournments thereof. The undersigned hereby acknowledges receipt of
the Notice of Special Meeting and Prospectus /Proxy Statement dated
August , 2001 and hereby instructs said attorneys and proxies to
vote said shares as indicated herein. In their discretion, the proxies
are authorized to vote upon such other business as may properly come
before the Special Meeting. A majority of the proxies present and acting
at the Special Meeting in person or by substitute (or, if only one shall
be so present, then that one) shall have and may exercise all of the
power and authority of said proxies hereunder. The undersigned hereby
revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Date:
Note: Please sign exactly as your name appears
on this Proxy. If joint owners, EITHER may sign
this Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate
officer, please give your full title.
Signature(s) (Title(s), if applicable
Please fold and detach card at perforation before mailing
Please indicate your vote by an "X" in the appropriate box below. This
proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF THE PROPOSAL.
1. To approve the Corporation's Plan of Reorganization providing for:
(i) the acquisition of all of the assets and liabilities of the
Global Technology Fund by the Smith Barney Technology Fund (the
"Technology Fund"), also a series of the Corporation (ii) the
amendment of the Corporation's Charter reclassifying all shares of
the Global Technology Fund as shares of the Technology Fund, and
(iii) the accomplishment of the reclassification by the issuance of
such shares of the Technology Fund to shareholders of the Global
Technology Fund.
For Against Abstain
? ? ?
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED ON THE
REVERSE SIDE
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES NOR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY
INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS.