AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 2, 2001.
SECURITIES ACT FILE NO. 333-[______]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
125 Broad Street, New York, New York 10004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 291-3776
(REGISTRANT'S AREA CODE AND TELEPHONE NUMBER)
CHRISTINA T. SYDOR, ESQ.
Smith Barney Fund Management LLC
666 Fifth Avenue
New York, New York 10103
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH A COPY TO:
BURTON M. LEIBERT, ESQ.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Registrant proposes that the
Registration Statement become effective on November 29, 2001 pursuant to Rule
488 under the Securities Act of 1933, as amended.
TITLE OF SECURITIES BEING REGISTERED:
Shares of Beneficial Interest ($.001 par value) of the Registrant
-------------------
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 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).
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PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
ADDITIONAL MATERIALS
The Statement of Additional Information for Smith Barney California, dated
June 28, 2001, which has been incorporated by reference into the Statement of
Additional Information dated November 30, 2001 relating to this Combined Proxy
Statement/Prospectus and the reorganization, will be sent to all shareholders of
Greenwich Street California Municipal Fund Inc. requesting a copy of such
Statement of Additional Information.
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
125 BROAD STREET
NEW YORK, NEW YORK 10004
November 30, 2001
DEAR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders of
Greenwich Street California Municipal Fund Inc. ("Greenwich Street California"
or the "Fund") which will be held on January 14, 2002, at 9:00 a.m. Eastern
time, at Citicorp Center, 153 E. 53rd Street, 14/th/ Floor, Conference Room H,
New York, New York 10017.
You are being asked to vote on an Agreement and Plan of Reorganization
whereby all of the assets of Greenwich Street California would be transferred
in a tax-free reorganization to Smith Barney California Municipals Fund Inc.
("Smith Barney California," and, collectively with Greenwich Street California,
the "Funds"), an open-end non-diversified management investment company, in
exchange for Class A shares of Smith Barney California. If the Agreement and
Plan of Reorganization is approved and consummated, you would become a
shareholder of Smith Barney California, which also is managed by Smith Barney
Fund Management LLC ("SBFM"). Smith Barney California has a substantially
larger asset base, significantly lower expenses, and similar investment
objectives and policies to your Fund, except as described in the Proxy
Statement/Prospectus. Unlike your Fund, Smith Barney California provides its
shareholders with the opportunity to purchase, redeem and exchange shares of
Smith Barney California at net asset value on any business day subject only to
the various limitations set forth in its prospectus and in certain instances to
the payment of a sales charge and other distribution-related charges. Of
course, there would be no sales charges assessed on the issuance or subsequent
redemption of Smith Barney California shares issued as part of the proposed
reorganization.
Other business of the meeting will be (i) to elect three Class III directors
to hold office until the next annual meeting of stockholders, and (ii) to
transact such other business as may come before the meeting.
AFTER CAREFUL REVIEW, GREENWICH STREET CALIFORNIA'S BOARD HAS APPROVED THE
PROPOSED REORGANIZATION AND THE OTHER PROPOSALS TO BE CONSIDERED AT THE ANNUAL
MEETING. THE BOARD OF GREENWICH STREET CALIFORNIA BELIEVES THAT THE PROPOSALS
SET FORTH IN THE NOTICE OF MEETING FOR GREENWICH STREET CALIFORNIA ARE
IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN
VOTE IN FAVOR OF EACH OF THE PROPOSALS AND NOMINEES.
Your vote is important. PLEASE REVIEW THESE PROXY MATERIALS CAREFULLY. IF
YOU DO NOT PLAN TO ATTEND THE SHAREHOLDER MEETING, PLEASE COMPLETE THE PROXY
CARD AND RETURN IT AS SOON AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE. YOU MAY
ALSO CAST YOUR VOTE VIA THE INTERNET, BY TELEPHONE OR BY FACSIMILE AS DESCRIBED
IN THE ENCLOSED PROXY VOTING MATERIALS. For more information, please call
[ ] at [ ].
Respectfully,
/s/ HEATH B. MCLENDON
_____________________________________
Heath B. McLendon
Chairman
Greenwich Street California
Municipal Fund Inc.
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WE URGE YOU TO VOTE BY ONE OF THE FOLLOWING MEANS TO ENSURE A QUORUM AT THE
MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
VOTE:
By phone: Call toll-free 1-800- and follow the automated instructions.
You will need the14-digit control number located on your proxy
card.
By mail: Simply enclose your executed proxy card in the postage-paid
envelope found withinyour proxy package.
By internet: Visit https://vote.proxy-direct.com; once there, enter the
14-digit control numberlocated on your proxy card.
By fax: Simply fax your executed proxy card to 1-888- .
If you have any questions regarding the meeting agenda or the
execution of your proxy,please call 1-888- .
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Please take notice that an Annual Meeting of Shareholders (the "Annual
Meeting") of Greenwich Street California Municipal Fund Inc. ("Greenwich Street
California") will be held at Citicorp Center, 153 E. 53/rd/ Street, 14/th/
Floor, Conference Room H, New York, New York 10017, on January 14, 2002, at
9:00 a.m., Eastern time, for the following purposes:
PROPOSAL 1: To approve an Agreement and Plan of Reorganization for Greenwich Street California
pursuant to which Greenwich Street California will transfer all of its assets and all of its
liabilities, in exchange for Class A voting shares of Smith Barney California Municipals
Fund Inc. ("Smith Barney California" and, together with Greenwich Street California,
the "Funds"), and Greenwich Street California will liquidate and distribute pro rata to
its shareholders Smith Barney California shares received from Smith Barney California,
terminate as a closed-end management investment company under the Investment
Company Act of 1940, as amended, and then dissolve as a corporation under Maryland
law.
PROPOSAL 2: To elect three (3) Class III directors to hold office until the next annual meeting of
stockholders and until their successors shall be elected and shall qualify, as shown in
the enclosed Proxy Statement.
PROPOSAL 3: 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 Annual Meeting or any adjournments thereof.
Holders of record of shares of Greenwich Street California at the close of
business on November 16, 2001 are entitled to notice of and to vote at the
Annual Meeting and at any adjournments thereof.
This Proxy Statement/Prospectus, the Notice of Meeting and proxy card are
first being mailed to shareholders on or about December 1, 2001 or as soon as
practicable thereafter. Any proxy may be revoked at any time prior to exercise
thereof by giving written notice to the Secretary of the Fund at the address
indicated above or by voting in person at the Annual Meeting. All properly
executed proxies received in time for the Annual Meeting will be voted as
specified in the proxy or, if no specification is made, in favor of the
proposal referred to in the Proxy Statement/Prospectus.
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by telephone, telegraph or personal interviews conducted by
officers and employees of the Funds; Salomon Smith Barney Inc., the principal
underwriter of shares of each Fund; Smith Barney Fund Management LLC, and/or
PFPC, Inc., transfer agent or sub-transfer agent of the Fund. Such
representatives and employees will not receive additional compensation for
solicitation activities. Greenwich Street California has retained the services
of Alamo Direct to assist in the solicitation of proxies. The cost of
solicitation of the shareholders of Greenwich Street California is expected to
be approximately $ . The costs of the proxy solicitation and expenses
incurred in connection with the preparation of this Proxy Statement/Prospectus
and its enclosures will be borne by Greenwich Street California. Greenwich
Street California also will reimburse expenses of forwarding solicitation
materials to beneficial owners of shares of the Fund.
SHAREHOLDERS MAY VOTE (1) BY MAIL, BY MARKING, SIGNING, DATING AND RETURNING
THE ENCLOSED PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR VIA
FACSIMILE, (2) BY TOUCH-TONE VOTING OVER THE TELEPHONE, OR (3) BY VOTING VIA
THE INTERNET. If a Fund records votes by telephone, fax or internet, it will
use procedures designed to authenticate shareholders' identities, to allow
shareholders to authorize the voting of their shares in accordance with their
instructions, and to confirm that their instructions have been properly
recorded. Proxies voted by telephone, fax or internet may be revoked at any
time before they are voted in the same manner that proxies voted by mail may be
revoked.
By Order of the Board of Directors
/s/ CHRISTINA T. SYDOR
_____________________________________
Christina T. Sydor
Secretary
December 1, 2001
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING ARE REQUESTED TO
COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
NEEDS NO POSTAGE IF MAILED IN THE CONTINENTAL UNITED STATES. INSTRUCTIONS FOR
THE PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE. YOUR
VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY CARD, WHICH WILL HELP AVOID THE ADDITIONAL EXPENSE
OF A SECOND SOLICITATION. YOU ALSO MAY AUTHORIZE PROXIES BY TOUCH-TONE VOTING
OVER THE TELEPHONE, BY FACSIMILE OR BY VOTING ON THE INTERNET.
2
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration.
For example:
REGISTRATION VALID SIGNATURE
------------ ---------------------------
Corporate Accounts
(1) ABC Corp.......................... ABC Corp.
(2) ABC Corp.......................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer........... John Doe
(4) ABC Corp. Profit Sharing Plan..... John Doe, Trustee
Trust Accounts
(1) ABC Trust......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78.................... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA..... John B. Smith
(2) Estate of John B. Smith........... John B. Smith Jr., Executor
TABLE OF CONTENTS
PAGE
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GENERAL....................................................... 1
VOTING INFORMATION............................................ 2
PROPOSAL 1: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION.. 3
SYNOPSIS...................................................... 4
INTRODUCTION TO THE PROPOSED TRANSACTION...................... 4
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.............. 6
COMPARISON OF CLOSED-END AND OPEN-END INVESTMENT COMPANIES.... 7
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS............... 8
Portfolio Management....................................... 9
INVESTMENT MANAGEMENT FEES AND EXPENSES OF THE FUNDS.......... 9
Smith Barney California.................................... 9
Greenwich Street California................................ 10
Comparative Annual Fund Operating Expenses................. 10
PRINCIPAL RISK FACTORS OF THE FUNDS........................... 11
General Risks.............................................. 11
Concentration in California Municipal Securities........... 12
PRINCIPAL INVESTMENTS OF THE FUNDS............................ 13
ADDITIONAL INFORMATION ABOUT THE FUNDS........................ 16
Distribution Of Shares And Other Services.................. 16
Purchase, Redemption And Exchange Information.............. 16
Dividends And Other Distributions.......................... 17
Taxes...................................................... 18
Portfolio Securities....................................... 18
Portfolio Turnover......................................... 18
Capitalization And Performance............................. 19
THE PROPOSED TRANSACTION...................................... 20
Description of the Plan.................................... 20
Reasons For The Proposed Transaction....................... 21
Other Factors.............................................. 22
Federal Income Tax Consequences of the Reorganization...... 22
Liquidation And Termination Of Greenwich Street California. 23
INFORMATION ON SHAREHOLDERS' RIGHTS........................... 23
Smith Barney California.................................... 23
Greenwich Street California................................ 24
1
ADDITIONAL INFORMATION ABOUT SMITH BARNEY CALIFORNIA AND
GREENWICH STREET CALIFORNIA........................... 25
PROPOSAL 2: ELECTION OF DIRECTORS....................... 26
Election of Three Class III Directors................ 26
Continuing Directors And Officers.................... 28
Committees of The Board of Directors................. 29
BENEFICIAL OWNERSHIP REPORT............................. 30
REPORT OF THE AUDIT COMMITTEE........................... 30
Disclosure of Auditor Fees........................... 31
Investment Advisory Agreement With SBFM.............. 31
Portfolio Transactions And Brokerage................. 32
Executive Compensation............................... 33
Required Vote........................................ 33
ADDITIONAL INFORMATION.................................. 33
General.............................................. 33
Proposals Of Shareholders............................ 34
Other Matters To Come Before The Annual Meeting...... 34
Independent Public Accountants....................... 34
FORM OF AGREEMENT AND PLAN OF REORGANIZATION............ A-1
AUDIT COMMITTEE CHARTER................................. B-1
ADDITIONAL MATERIALS
The Statement of Additional Information for Smith Barney California, dated
June 28, 2001, which has been incorporated by reference into the Statement of
Additional Information dated November 30, 2001 relating to this Combined Proxy
Statement/Prospectus and the reorganization, will be sent to all shareholders
of Greenwich Street California Municipal Fund Inc. requesting a copy of such
Statement of Additional Information.
2
SUBJECT TO COMPLETION, DATED NOVEMBER 2, 2001
PROXY STATEMENT/PROSPECTUS
November 30, 2001
RELATING TO THE ACQUISITION BY
SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.
("SMITH BARNEY CALIFORNIA"),
125 Broad Street
New York, New York 10004
[ ]
OF THE ASSETS OF
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
("GREENWICH STREET CALIFORNIA"),
125 Broad Street
New York, New York 10004
[ ]
GENERAL
This Proxy Statement/Prospectus is furnished to shareholders of Greenwich
Street California in connection with Greenwich Street California's annual
meeting to be held on January 14, 2002 (the "Annual Meeting"). At the Annual
Meeting, one of the proposals to be considered is a proposed reorganization in
which all of the assets of Greenwich Street California would be acquired by
Smith Barney California, in exchange solely for Class A shares of Smith Barney
California and the assumption by Smith Barney California of all of the
outstanding liabilities of Greenwich Street California (the "Reorganization").
Shares of Smith Barney California thereby received would then be distributed to
the shareholders of Greenwich Street California in complete liquidation of
Greenwich Street California. As a result of the Reorganization, each
shareholder of Greenwich Street California would receive that number of full
and fractional shares of Smith Barney California having an aggregate net asset
value equal to the aggregate net asset value of such shareholder's shares of
Greenwich Street California held as of the close of business on the day of the
closing of the Reorganization. Shareholders of Greenwich Street California are
being asked to vote on an Agreement and 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 Smith Barney California
that a prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of
Smith Barney California, see the prospectus for Smith Barney California, dated
June 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 Smith Barney California's annual report to shareholders for the
year ended February 28, 2001 and the semi-annual report for the fiscal period
ended August 31, 2001. For a more detailed discussion of the investment
1
objectives, policies, restrictions and risks of Greenwich Street California,
see the prospectus for Greenwich Street California, dated December 29, 2000,
which is incorporated herein by reference and a copy of which may be obtained
without charge by writing to Greenwich Street California, 125 Broad Street, New
York, New York 10004, or by calling at [ ]. A Statement of Additional
Information of Greenwich Street California and Smith Barney California dated
November 30, 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; it is available at no cost by calling
or by writing to Greenwich Street California at 125 Broad Street, New York,
New York 10004. A copy of Greenwich Street California's Semi-Annual Report for
the period ended February 28, 2001 and Annual Report for the year ended August
31, 2001 are available upon request and without charge by writing to or calling
Greenwich Street California at the address or phone number listed above.
Shareholder inquiries regarding Greenwich Street California or Smith Barney
California may also be made by calling the phone number listed above. The
information contained herein concerning Greenwich Street California has been
provided by, and is included herein in reliance upon, Greenwich Street
California. The information contained herein concerning Smith Barney California
has been provided by, and is included herein in reliance upon, Smith Barney
California.
Smith Barney California is an open-end non-diversified management investment
company organized as a Maryland corporation. Greenwich Street California is a
non-diversified closed-end management investment company organized as a
Maryland corporation. The investment objective of Smith Barney California is to
pay its shareholders as high a level of current income exempt from Federal
income taxes and California state personal income taxes as is consistent with
prudent investment management and the preservation of capital. The investment
objective of Greenwich Street California is to pay its shareholders as high a
level of current income exempt from Federal income taxes and California state
personal income taxes as is consistent with the preservation of principal.
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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 PROXY
STATEMENT/PROSPECTUS 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.
VOTING INFORMATION
This Proxy Statement/Prospectus, the Notice of Annual Meeting and the proxy
card(s) are first being mailed to shareholders on or about December 1, 2001, or
as soon as practicable thereafter. Any Greenwich Street California shareholder
giving a proxy has the power to revoke it by mail (addressed to the Secretary
at the principal executive office of Greenwich Street California at the address
shown at the beginning of this Proxy Statement/Prospectus) or in person at the
Annual Meeting, by executing a superseding proxy or by submitting a notice of
revocation to Greenwich Street California. Proxies voted by telephone, fax or
internet may be revoked
2
at any time before they are voted. All properly executed proxies received in
time for the Annual 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.
The presence at any shareholder meeting, in person or by proxy, of the
holders of a majority of the shares of Greenwich Street California entitled to
vote shall be necessary and sufficient to constitute a quorum for the
transaction of business. In the event that the necessary quorum to transact
business or the vote required to approve any Proposal is not obtained at the
Annual Meeting, the persons named as proxies may propose one or more
adjournments of the Annual 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 Greenwich Street California's shares present in person or by
proxy at the Annual 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 Annual 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 Greenwich Street California 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. Shareholders are urged
to forward their voting instructions promptly.
Proposal 1 (regarding the Reorganization) requires the affirmative vote of
the holders of a majority of the outstanding Greenwich Street California shares
cast at a meeting at which a quorum is present. Proposal 2 (regarding the
election of Directors) requires a plurality of votes cast for the election of a
Director. Abstentions and broker non-votes will have the effect of a "no" vote
on Proposal 1 and will have no effect on Proposal 2.
For more information, please call [name] at [ ].
Holders of record of the shares of Greenwich Street California at the close
of business on November 16, 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 Annual Meeting. As of November 16, 2001, there were [ ]
shares of Greenwich Street California outstanding.
To the best of Greenwich Street California's knowledge, as of November 16,
2001, except as set forth on Appendix A, no person owned beneficially more than
5% of Greenwich Street California's outstanding shares.
As stated in the Notice of Annual Meeting of Stockholders, attached hereto,
only holders of Greenwich Street California's shares on the Record Date will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
PROPOSAL 1: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
The Board of Directors of Greenwich Street California, including all of the
Directors who are not "interested persons" of Greenwich Street California (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")),
and all of the "Continuing Directors" (as defined in the Fund's Articles of
Incorporation and as
3
described in the "Information About Shareholders' Rights" section), approved on
September 6, 2001 a form of an Agreement and Plan of Reorganization dated as of
December 1, 2001 (the "Plan"). The Board of Directors of Smith Barney
California, including all of the Directors who are not "interested persons" of
Smith Barney California (as defined in the 1940 Act), also approved the Plan on
September 6, 2001.
Subject to its approval by the shareholders of Greenwich Street California,
the Plan provides for (a) the transfer of all of the assets of Greenwich Street
California to Smith Barney California, an open-end non-diversified management
investment company, in exchange for Class A voting shares of Smith Barney
California and the assumption by Smith Barney California of all of Greenwich
Street California's outstanding liabilities; (b) the distribution of such Smith
Barney California shares to the shareholders of Greenwich Street California in
complete liquidation of Greenwich Street California; (c) the termination of
Greenwich Street California as a non-diversified closed-end management
investment company; and (d) the dissolution of Greenwich Street California as a
corporation under Maryland law. As a result of the Reorganization, each
shareholder of Greenwich Street California will become a shareholder of Smith
Barney California and will hold, immediately after the closing of the
Reorganization (the "Closing"), that number of full and fractional shares of
Smith Barney California having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares held in Greenwich Street
California immediately prior to the Closing (the "Valuation Date"). The Closing
is expected to occur on January 18, 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 Smith Barney California, the Prospectus of Greenwich Street
California and the Plan, the form of which is attached to this Proxy
Statement/Prospectus as Exhibit A. Greenwich Street California shareholders
should read this entire Proxy Statement/Prospectus carefully.
INTRODUCTION TO THE PROPOSED TRANSACTION
Smith Barney Fund Management LLC ("SBFM") (successor to SSB Citi Fund
Management LLC), an affiliate of Salomon Smith Barney Inc., located at 125
Broad Street, New York, New York 10004, is the investment manager of each of
Greenwich Street California and Smith Barney California. If the Plan is
consummated, Greenwich Street California shareholders will become shareholders
of Smith Barney California and may benefit from that Fund's similar investment
objective, greater size and lower expense ratio, as well as its status as an
open-end investment company. Shares of Greenwich Street California currently
trade at a discount to their net asset value. Shares of Smith Barney California
trade at net asset value, subject to any applicable sales charges. As
shareholders of Smith Barney California, former Greenwich Street California
shareholders will be able to realize the full value of their shares. While
Greenwich Street California declares and pays quarterly dividends, Smith Barney
California declares and pays dividends monthly. It is a condition of the
Reorganization that each Fund receive an opinion of legal counsel that the
Reorganization will be tax-free. This means that shareholders of Greenwich
Street California will not realize any capital gain or loss as a direct result
of the Reorganization.
The aggregate net asset value of Smith Barney California Class A voting
shares (the "Shares") to be issued in exchange for the assets and liabilities
of Greenwich Street California will be equal to the net asset value of
4
Greenwich Street California as of the Valuation Date. Immediately following the
transfer of Shares to Greenwich Street California, the Shares will be
distributed pro rata to the shareholders of record of Greenwich Street
California on the Closing Date and the shares of Greenwich Street California
will be cancelled.
For the reasons described below under "Reasons for the Proposed
Transaction," the Board of Directors of Greenwich Street California, including
the Directors who are not interested persons, concluded the following:
. the Reorganization is in the best interests of Greenwich Street
California and its shareholders; and
. the interests of the existing shareholders of Greenwich Street
California will not be diluted as a result of the Reorganization.
As discussed in the "Information on Shareholders' Rights" section, since the
Reorganization was approved by at least 75% of the "Continuing Directors" of
Greenwich Street California, the Reorganization will only have to be approved
by a majority of the Fund's shares entitled to vote at the Annual Meeting.
Absent approval by 75% of the Continuing Directors, Greenwich Street
California's Articles of Incorporation would have required a favorable vote of
shareholders holding at least 75% of the Fund's outstanding shares in order to
approve the Reorganization.
THE DIRECTORS OF GREENWICH STREET CALIFORNIA RECOMMEND APPROVAL OF THE PLAN.
IF THE PLAN IS NOT APPROVED, GREENWICH STREET CALIFORNIA WILL CONTINUE IN
EXISTENCE UNLESS OTHER ACTION IS TAKEN BY THE DIRECTORS OF GREENWICH STREET
CALIFORNIA.
In addition, at a meeting held on September 6, 2001, the Board of Directors
of Smith Barney California, including the Directors who are not interested
persons, also concluded the following:
. the Reorganization is in the best interests of Smith Barney California
and its shareholders; and
. the interests of the existing shareholders of Smith Barney California
will not be diluted as a result of the Reorganization.
5
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following table compares the investment objective and policies of Smith
Barney California and Greenwich Street California:
GREENWICH STREET CALIFORNIA ITEM FOR COMPARISON SMITH BARNEY CALIFORNIA
----------------------------------------------------------------------------------------------------
Greenwich Street California seeks as INVESTMENT OBJECTIVE Smith Barney California seeks to
high a level of current income exempt provide California investors with
from federal income tax and California as high a level of current
personal income taxes as is consistent income exempt from federal
with the preservation of principal. income taxes and California
state personal income taxes as
is consistent with prudent
investment management and
the preservation of capital.
----------------------------------------------------------------------------------------------------
In seeking its objective, Greenwich INVESTMENT POLICIES Smith Barney California
Street California invests primarily in invests at least 80% of its net
long-term investment grade debt assets in California municipal
obligations issued by, or on behalf of, securities. "California
the State of California and its political municipal securities" include
subdivisions, agencies and securities issued by the State of
instrumentalities or multistate agencies California and certain other
or authorities, the interest from which municipal issuers, political
is, in the opinion of bond counsel to the subdivisions, agencies and
issuers, excluded from gross income for public authorities that pay
federal income tax purposes and is interest which is excluded from
exempt from California personal gross income for federal
income taxes. Under normal conditions, income tax purposes and is
Greenwich Street California will invest exempt from California
not less than 80% of its net assets in personal income taxes. Smith
municipal obligations the interest on Barney California focuses
which is exempt from federal income primarily on intermediate-term
tax (other than the alternative minimum and long-term municipal
tax ("AMT")) and not less than 65% of securities which have
its net assets in California municipal remaining maturities at the
obligations the interest on which is also time of purchase of from three
exempt from California personal to more than thirty years.
income taxes in the opinion of bond
counsel to the issuers.
----------------------------------------------------------------------------------------------------
SBFM INVESTMENT ADVISER SBFM
----------------------------------------------------------------------------------------------------
Joseph P. Deane PORTFOLIO MANAGER Joseph P. Deane
----------------------------------------------------------------------------------------------------
0.90% (0.65% after voluntary waivers) ADVISORY FEE 0.49%
----------------------------------------------------------------------------------------------------
1.24% (1.08% after voluntary waivers) TOTAL OPERATING EXPENSE 0.68% (Class A shares)
RATIO FOR 2001
----------------------------------------------------------------------------------------------------
6
GREENWICH STREET CALIFORNIA ITEM FOR COMPARISON SMITH BARNEY CALIFORNIA
----------------------------------------------------------------------------------------
1.24% (0.99% after voluntary ESTIMATED TOTAL OPERATING 0.68% (Class A shares)
waivers) EXPENSE RATIO FOR 2002
----------------------------------------------------------------------------------------
$ SHARE PRICE (AS OF RECORD DATE) $
----------------------------------------------------------------------------------------
$ NET ASSET VALUE PER SHARE (AS OF $
RECORD DATE)
----------------------------------------------------------------------------------------
$[50] million NET ASSETS (AS OF RECORD DATE) $[950] million
----------------------------------------------------------------------------------------
Closed-end non-diversified 1940 ACT CLASSIFICATION AND SUB- Open-end non-diversified
management investment company CLASSIFICATION management investment
company
----------------------------------------------------------------------------------------
Maryland STATE OF INCORPORATION Maryland
Investors should refer to the respective prospectuses and statements of
additional information of Greenwich Street California and Smith Barney
California for a fuller description of each Fund's investment policies and
restrictions.
COMPARISON OF CLOSED-END AND OPEN-END INVESTMENT COMPANIES
Generally, closed-end funds, such as Greenwich Street California, neither
redeem their outstanding stock nor engage in the continuous sale of new
securities. Therefore, a closed-end fund operates with a relatively fixed
capitalization. Shares of Greenwich Street California are traded on the
American Stock Exchange. Shareholders who wish to buy or sell shares generally
must do so through a broker-dealer, and pay or receive whatever price the
market may bear. This price may be more or less than the net asset value per
share of the closed-end fund's shares. In contrast, open-end funds, such as
Smith Barney California, issue redeemable securities entitling shareholders to
surrender those securities to the fund and receive in return their
proportionate share of the value of the fund's net assets (less any applicable
deferred sales charge). Also, open-end funds generally issue new shares at the
fund's net asset value, subject to any applicable sales load.
In addition to these structural distinctions between the two types of funds,
several other differences exist. These distinctions can give rise to advantages
and disadvantages to Greenwich Street California if, on the one hand, it
remains a closed-end fund or if, on the other hand, it converts to open-end
status. An advantage of being a closed-end fund is that assets may be fully
invested in accordance with both the fund's investment objective and policies,
whereas open-end funds frequently maintain a portion of their assets in cash or
cash equivalents in order to facilitate meeting redemption requests. Based upon
information provided by SBFM, the Board has considered the advantages and
disadvantages to Greenwich Street California and its shareholders associated
with the Reorganization in general and with remaining closed-end or converting
to open-end form in particular, and found the overall advantages of the
Reorganization to outweigh the disadvantages.
7
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
Smith Barney California seeks to provide California investors with as high a
level of current income exempt from federal income taxes and California state
personal income taxes as is consistent with prudent investment management and
the preservation of capital. Similarly, Greenwich Street California's
investment objective is to seek as high a level of current income exempt from
federal income tax and California personal income taxes as is consistent with
the preservation of principal.
Smith Barney California invests at least 80% of its net assets in California
municipal securities. "California municipal securities" include securities
issued by the State of California and certain other municipal issuers,
political subdivisions, agencies and public authorities that pay interest which
is excluded from gross income for federal income tax purposes and is exempt
from California personal income taxes. In seeking its objective, Greenwich
Street California will invest not less than 80% of its net assets in municipal
obligations the interest on which is exempt from federal income tax (other than
AMT) and not less than 65% of its net assets in California municipal securities.
Smith Barney California focuses primarily on intermediate-term and long-term
municipal securities which have remaining maturities at the time of purchase of
from three to more than thirty years. Under normal conditions, Greenwich Street
California generally invests in long-term municipal obligations; under normal
market conditions, the weighted average maturity of Greenwich Street
California's securities is generally in excess of 20 years.
Each of Smith Barney California and Greenwich Street California can invest
up to 20% of its assets in below investment grade bonds or in unrated
securities of equivalent quality (commonly known as "junk bonds"). Investment
grade bonds are those rated in any of the four highest long-term rating
categories, or if unrated, of comparable quality.
As non-diversified funds, Greenwich Street California and Smith Barney
California are not limited by the 1940 Act in the proportion of their assets
that they may invest in the obligations of a single issuer. Each Fund intends
to qualify as a "regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended ("Code"), which relieves the Funds of any
liability for federal income tax to the extent that their earnings are
distributed to shareholders. To qualify as a regulated investment company, each
Fund, among other things, limits its investments so that, at the close of each
quarter of its taxable year (1) 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
(2) 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.
Generally, neither Fund invests more than 25% of its total assets in any
industry. Governmental issuers of municipal obligations are not considered part
of any "industry." Municipal obligations backed only by non-governmental users
would be subject to this 25% industry limitation.
Each Fund may invest more than 25% of its total assets in a broad segment of
the municipal obligations market, such as revenue obligations of hospitals and
other health care facilities, housing agency revenue obligations, or airport
revenue obligations, if the manager determines that the yields available from
obligations in a particular segment of the market justify the additional risks
associated with a large investment in the segment. Although these municipal
obligations could be supported by the credit of governmental users, or by the
credit of
8
non-governmental users engaged in a number of industries, economic, business,
political and other developments generally affecting the revenues of the users
(for example, proposed legislation or pending court decisions affecting the
financing of projects and market factors affecting the demand for their
services or products) may have a general adverse affect on all municipal
securities in such a market segment.
From time to time, each Fund's investments may include securities as to
which the Fund, by itself or together with other funds or accounts managed by
SBFM, holds a major portion or all of an issue of municipal obligations.
Because relatively few potential purchasers may be available for these
investments and, in some cases, contractual restrictions may apply on resales,
the Funds may find it more difficult to sell these securities at a time when
the manager believes it is advisable to do so.
PORTFOLIO MANAGEMENT
In managing the Funds, Joseph Deane, each Fund's portfolio manager, selects
securities primarily by identifying undervalued sectors and individual
securities, while also selecting securities he believes will benefit from
changes in market conditions. In selecting individual securities, the portfolio
manager:
. Uses fundamental credit analysis to estimate the relative value and
attractiveness of various securities and sectors and to exploit
opportunities in the municipal bond market
. May trade between general obligation and revenue bonds and among various
revenue bond sectors, such as housing, hospital and industrial
development, based on their apparent relative values
. Considers the yield available for securities with different maturities
and a security's maturity in light of the outlook for the issuer and its
sector and interest rates
. Identifies individual securities with the most potential for added
value, such as those involving unusual situations, new issuers, the
potential for credit upgrades, unique structural characteristics or
innovative features
INVESTMENT MANAGEMENT FEES AND EXPENSES OF THE FUNDS
Greenwich Street California and Smith Barney California retain SBFM,
pursuant to separate contracts, to manage the daily investment and business
affairs of Greenwich Street California and Smith Barney California,
respectively, subject to the policies established by each Fund's Board of
Directors. The expenses of each Fund, which are discussed in greater detail
below, are paid out of gross investment income. Shareholders pay no direct
charges or fees for investment services.
SMITH BARNEY CALIFORNIA
Smith Barney California's investment adviser and administrator is SBFM, an
affiliate of Salomon Smith Barney Inc. The manager's address is 125 Broad
Street, New York, New York 10004. The manager selects the Fund's investments
and oversees its operations. SBFM 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.
9
Joseph P. Deane, investment officer of the manager and senior vice president
and managing director of Salomon Smith Barney, has been responsible for the
day-to-day management of the Fund's portfolio since November 1988. Mr. Deane
has 31 years of securities business experience.
During the fiscal year ended February 28, 2001, SBFM received an advisory
fee equal to 0.49% of Smith Barney California's average daily net assets (after
taking into account certain expense limitation arrangements).
GREENWICH STREET CALIFORNIA
Greenwich Street California's investment adviser also is SBFM. SBFM selects
and manages Greenwich Street California's investments in accordance with the
Fund's investment objective and policies. SBFM is also the Greenwich Street
California's administrator and oversees the Fund's non-investment operations
and its relations with its service providers. For its services, SBFM is
entitled to receive on the first business day of each month a fee for the
previous month at the annual rate of .90 of 1.00% of the Fund's average daily
net assets. SBFM has voluntarily agreed to waive certain fees and bear certain
expenses of Greenwich Street California.
Joseph P. Deane also has been responsible for the day-to-day management of
the Fund's portfolio since the Fund's inception.
For the year ended August 31, 2001, Greenwich Street California's annualized
total expense ratio (total annual operating expenses as a percentage of average
net assets) was 1.08%, after waivers and reimbursements. Estimated expenses for
the current fiscal year, after waivers and reimbursements, are expected to be
0.99%. As demonstrated below, even after taking into account certain past and
current expense limitation arrangements, shareholders of Greenwich Street
California may expect to benefit from the lower expense ratio experienced by
Smith Barney California, which will issue the Shares received pursuant to the
Reorganization.
The expenses of Greenwich Street California and Smith Barney California for
the fiscal years ended August 31, 2001 and February 28, 2001, respectively, and
pro forma expenses following the proposed Reorganization are outlined below:
COMPARATIVE ANNUAL FUND OPERATING EXPENSES
(EXPENSES DEDUCTED FROM FUND ASSETS FOR THE MOST RECENT FISCAL YEAR)
GREENWICH SMITH
STREET BARNEY PRO
CALIFORNIA CALIFORNIA FORMA
---------- ---------- -----
Management Fee................................... 0.90% 0.49% 0.49%
Distribution (12b-1) Fees........................ -- 0.15% 0.15%
Other Expenses................................... 0.34% 0.04% 0.04%
----- ----- -----
Total Annual Fund Operating Expenses............. 1.24%/1/ 0.68% 0.68%
--------
/1 /After waivers and reimbursements, total net operating expenses for the most
recent fiscal year were 1.08%. Total net operating expenses, after waivers
and reimbursements, are estimated to be 0.99% for the current fiscal year.
10
EXAMPLE. This Example is intended to help you compare the cost of investing
in each of the Funds. The Example assumes that you invest $10,000 in each Fund
for the time periods indicated. The Example also assumes that 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:
WITH OR
WITHOUT SMITH BARNEY SMITH BARNEY
REDEMPTION AT GREENWICH CALIFORNIA (CLASS A CALIFORNIA (CLASS A PRO FORMA (AFTER
THE END OF STREET SHARES) (WITH FRONT-END SHARES) (WITHOUT FRONT- GIVING EFFECT TO THE
EACH PERIOD: CALIFORNIA SALES CHARGE) END SALES CHARGE) REORGANIZATION
------------- ---------- ----------------------- ----------------------- --------------------
1 Year $ 126 $ 467 $ 69 $ 69
3 Years $ 393 $ 609 $218 $218
5 Years $ 681 $ 764 $379 $379
10 Years $1500 $1213 $847 $847
This example assumes reinvestment of all dividends and distributions. This
example should not be considered a representation of past or future expenses.
Actual Fund expenses can vary from year to year and may be higher or lower than
those shown.
PRINCIPAL RISK FACTORS OF THE FUNDS
GENERAL RISKS
Investors could lose money on their investment in a Fund, or a Fund may not
perform as well as other investments, if:
. Interest rates rise, causing the value of a Fund's portfolio to decline
. The issuer of a security owned by a Fund defaults on its obligation to
pay principal and/or interest or the security's credit rating is
downgraded
. California municipal securities fall out of favor with investors. A Fund
will suffer more than a national municipal fund from adverse events
affecting California municipal issuers
. Unfavorable legislation affects the tax-exempt status of municipal bonds
. The portfolio manager's judgment about the attractiveness, value or
income potential of a particular security proves to be incorrect
It is possible that some of a Fund's income distributions may be, and
distributions of a Fund's gains generally will be, subject to federal and
California state taxation. A Fund may realize taxable gains on the sale of its
securities or on transactions in futures contracts. Some of a Fund's income may
be subject to the federal alternative minimum tax. In addition, distributions
of a Fund's income and gains will generally be taxable to investors in states
other than in California.
Each Fund is classified as "non-diversified," which means it may invest a
larger percentage of its assets in one issuer than a diversified fund. To the
extent a Fund invests its assets in fewer issuers, the Fund will be more
susceptible to negative events affecting those issuers.
11
CONCENTRATION IN CALIFORNIA MUNICIPAL SECURITIES
Both Funds concentrate their investments in California municipal securities
that involve additional risks that you should consider. The following
information constitutes only a brief summary and does not purport to be a
complete description of these risks. It is based on information drawn from
official statements relating to securities offerings of the State of California
and various local agencies in California available as of the date hereof. While
the Funds have not independently verified such information, they have no reason
to believe that this information is not correct in all material respects.
The California economy and general financial condition affect the ability of
the State and local governments to raise and redistribute revenues to assist
issuers of municipal securities to make timely payments on their obligations.
From the late 1980s through the early 1990s, an economic recession eroded
California's revenue base. At the same time, rapid population growth caused
State expenditures to exceed budget appropriations. As a result, California
experienced a period of sustained budget imbalance. Since that time the
California economy has improved and the extreme budgetary pressures have
lessened, until recently.
During the past year, California has experienced difficulties with the
prices and supplies of electricity in much of the State. There can be no
assurance that there will not be future disruptions in power supplies or
related developments which could adversely affect the State's economy, and
which in turn affect State revenues. In addition, U.S. economic growth has been
slower than expected since the Spring of 2001. This situation has worsened
through the late Summer and Fall of 2001. The terrorist attacks of September
11, 2001 may adversely affect the State's economy and the expenditures and
revenues of the State. As of October 17, 2001, California's general obligation
bonds were rated Aa3 by Moody's, A+ by S&P and AA by Fitch. The ratings merely
reflect the opinions of the rating agencies and can change at any time.
The 2001-02 Budget Act, signed into law on July 26, 2001, includes General
Fund expenditures of approximately $78.8 billion, a reduction of $1.3 billion
from the prior year. The spending plan utilizes more than half of the budget
surplus as of June 30, 2001. However, this budget was approved prior to the
terrorist attacks of September 11, 2001, and may not have fully accounted for
the State's current worsening economic condition.
In addition to recent events which have affected and continue to affect the
California economy, the State is also subject to unforeseeable events that may
occur in the future. For example, in December, 1994, Orange County and its
investment pool filed for bankruptcy. In addition, California's economy is
dependent to some extent on the ability of its local businesses to export goods
to foreign markets. Global events that adversely affect foreign markets may
adversely affect the California economy. California also faces constant
fluctuations in other expenses (including health and welfare caseloads,
property tax receipts, federal funding and natural disaster relief) that will
undoubtedly create new budgetary pressure and reduce issuers' ability to pay
their debts.
An issuer's ability to make payments on bonds (and the remedies available to
bondholders) could also be adversely affected by the following constraints:
. Certain provisions of California's Constitution, laws and regulatory
system contain tax, spending and appropriations limits and prohibit
certain new taxes.
. Certain other California laws subject the users of bond proceeds to
strict rules and limits regarding revenue repayment.
12
. Bonds of healthcare institutions which are subject to the strict rules
and limits regarding reimbursement payments of California's Medi-Cal
program for healthcare services to welfare recipients and bonds secured
by liens on real property are two of the types of bonds affected by
these provisions.
PRINCIPAL INVESTMENTS OF THE FUNDS
Greenwich Street California and Smith Barney California may engage in
certain investments and investment techniques that are substantially the same.
The following is a brief description of these investment practices.
CALIFORNIA MUNICIPAL SECURITIES. California municipal securities include
debt obligations issued by certain non-California governmental issuers such as
Puerto Rico, the Virgin Islands and Guam. The interest on California municipal
securities is exempt from regular federal income taxes and California personal
income taxes. As a result, the interest rate on these bonds normally is lower
than it would be if the bonds were subject to taxation. The California
municipal securities in which each Fund invests include general obligation
bonds, revenue bonds and municipal leases. These securities may pay interest at
fixed, variable or floating rates. Each Fund may also hold zero coupon
securities which pay no interest during the life of the obligation but trade at
prices below their stated maturity value. Smith Barney California may also
invest up to 20% of its net assets in municipal securities of non-California
issuers. The interest on these securities will generally be exempt from regular
federal income taxes, but not from California income taxes. Greenwich Street
California can invest up to 35% of its net assets in securities that are not
California municipal securities.
MUNICIPAL OBLIGATIONS. In general, municipal obligations are debt
obligations (bonds or notes) issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies and
instrumentalities the interest on which is exempt from Federal income tax in
the opinion of bond counsel to the issuer. Municipal obligations are issued to
obtain funds for various public purposes, many of which may enhance the quality
of life, including the construction of a wide range of public facilities, such
as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets, water and sewer works, gas, and electric utilities. They may
also be issued to refund outstanding obligations, to obtain funds for general
operating expenses, or to obtain funds to loan to other public institutions and
facilities and in anticipation of the receipt of revenue or the issuance of
other obligations. In addition, the term "municipal obligations" includes
certain types of industrial development bonds ("IDBs") issued by public
authorities to obtain funds to provide various privately-operated facilities
for business and manufacturing, housing, sports, convention or trade show
facilities, airport, mass transit, port and parking facilities, air or water
pollution control facilities, and certain facilities for water supply, gas,
electricity or sewerage or solid waste disposal.
The two principal classifications of municipal obligations are "general
obligation" and "revenue." General obligations are secured by a municipal
issuer's pledge of its full faith, credit, and taxing power for the payment of
principal and interest. Revenue obligations are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source.
Although IDBs are issued by municipal authorities, they are generally secured
by the revenues derived from payments of the industrial user. The payment of
the principal and interest on IDBs is dependent solely on the ability of the
user of the facilities financed by the bonds to meet its financial obligations
and the pledge, if any, of real and personal property so financed as security
for such payment.
13
ILLIQUID SECURITIES. Each Fund may invest a portion of its assets in
securities for which there is not an active trading market, or which have
resale restrictions. These types of securities generally offer a higher return
than more readily marketable securities, but carry the risk that a Fund may be
not be able to dispose of them at an advantageous time or price.
MUNICIPAL LEASES. Each Fund may invest in "municipal leases," which
generally are participations in intermediate- and short-term debt obligations
issued by municipalities consisting of leases or installment purchase contracts
for property or equipment. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for
such purpose on a yearly basis. In addition to the "non-appropriation" risk,
these securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds.
Although "non-appropriation" lease obligations are often secured by the
underlying property, disposition of the property in the event of foreclosure
might prove difficult.
PRIVATE ACTIVITY BONDS. Each Fund may invest in private activity bonds.
Interest income on certain types of private activity bonds issued after August
7, 1986 to finance non-governmental activities is a specific tax preference
item for purposes of the federal individual and corporate alternative minimum
taxes. Individual and corporate shareholders may be subject to a federal AMT to
the extent the applicable Fund's dividends are derived from interest on those
bonds.
ZERO COUPON SECURITIES. Each Fund may invest in zero coupon bonds. Zero
coupon securities are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a specified cash payment
date when the securities begin paying current interest (the "cash payment
date") and therefore are issued and traded at a discount from their face
amounts or par values. The discount varies depending on the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of
the security and the perceived credit quality of the issuer. The discount, in
the absence of financial difficulties of the issuer, decreases as the final
maturity or cash payment date of the security approaches. The market prices of
zero coupon securities generally are more volatile than the market prices of
other debt securities that pay interest periodically and are likely to respond
to changes in interest rates to a greater degree than do debt securities having
similar maturities and credit quality. The credit risk factors pertaining to
low-rated securities also apply to low-rated zero coupon bonds. Such zero
coupon bonds carry an additional risk in that, unlike bonds which pay interest
throughout the period to maturity, a Fund will realize no cash until the cash
payment date unless a portion of such securities is sold and, if the issuer
defaults, the applicable Fund may obtain no return at all on its investment.
BELOW INVESTMENT GRADE SECURITIES. Each Fund may invest in below investment
grade securities, also known as "junk bonds", which are considered speculative
with respect to the issuer's ability to pay interest and principal, involve a
high risk of loss and are susceptible to default or decline in market value
because of adverse economic and business developments. The market value for
these securities tends to be very volatile, and these securities are less
liquid than investment grade debt securities.
DERIVATIVE CONTRACTS. Each Fund may, but need not, use derivative contracts,
such as financial futures and options on financial futures, for any of the
following purposes:
14
. To hedge against the economic impact of adverse changes in the market
value of portfolio securities because of changes in interest rates.
. As a substitute for buying or selling securities.
A futures contract will obligate or entitle a Fund to deliver or receive an
asset or cash payment based on the change in value of one or more securities.
Even a small investment in futures can have a big impact on a Fund's interest
rate exposure. Therefore, using futures can disproportionately increase losses
and reduce opportunities for gains when interest rates are changing. A Fund may
not fully benefit from or may lose money on futures if changes in their value
do not correspond accurately to changes in the value of the Fund's holdings.
The other parties to certain futures present the same types of default risk as
issuers of fixed income securities. Futures can also make a fund less liquid
and hard to value, especially in declining markets.
DEFENSIVE INVESTING. Each Fund may depart from its principal investment
strategies in response to adverse market, economic or political conditions by
taking temporary defensive positions in all types of money market and
short-term debt securities. If a Fund takes a temporary defensive position it
may be unable to achieve its investment goal.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Fund may use when-issued
and delayed delivery transactions to purchase securities. The value of
securities purchased in these transactions may decrease before they are
delivered to the Fund. Also, the yield on securities purchased in these
transactions may be higher in the market when the delivery takes place.
MUNICIPAL OBLIGATION COMPONENTS. Each Fund may invest in municipal
obligations, the interest rate on which has been divided into two different and
variable components, which together result in a fixed interest rate. Typically
the first of the components (auction component) pays an interest rate that is
reset periodically through an auction process, whereas the second of the
components (residual component) pays a residual interest rate based on the
difference between the total interest paid by the issuer on the municipal
obligation and the auction rate paid on the auction component. Each Fund may
purchase both auction and residual components.
Because the interest rate paid to holders of residual components, which are
also sometimes referred to as "inverse floaters," is generally determined by
subtracting the interest rate paid to the holders of auction components from a
fixed amount, the interest rate paid to residual component holders will
decrease as the auction component's rate increases and increase as the auction
component's rate decreases. Moreover, the extent of the increases and decreases
in market value of residual components may be larger than comparable changes in
the market value of an equal principal amount of a fixed rate municipal
obligation having similar credit quality, redemption provisions and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS. Each Fund may purchase floating and
variable rate demand notes and bonds, which are municipal obligations normally
having a stated maturity in excess of one year, but which permit their holder
to demand payment of principal at any time, or at specified intervals. The
issuer of floating and variable rate demand obligations normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of the obligations. The
interest rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time that
rate is adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals. Frequently
15
floating and variable rate obligations are secured by letters of credit or
other credit support arrangements provided by banks. Use of letters of credit
or other credit support arrangements will not adversely affect the tax-exempt
status of these obligations.
PARTICIPATION INTERESTS. Each Fund may purchase from financial institutions
tax-exempt participation interests in municipal obligations. A participation
interest gives a Fund an undivided interest in the municipal obligation in the
proportion that the Fund's participation interest bears to the total amount of
the municipal obligation. These instruments may have floating or variable rates
of interest. If the participation interest is unrated, it will be backed by an
irrevocable letter of credit or guarantee of a bank that a Fund's board of
directors has determined meets certain quality standards or the payment
obligation otherwise will be collateralized by obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (U.S. Government
securities). Each Fund will have the right, with respect to certain
participation interests, to demand payment, on a specified number of days'
notice, for all or any part of the Fund's interest in the municipal obligation,
plus accrued interests.
TAXABLE INVESTMENTS. Under normal conditions, each Fund may hold up to 20%
of its total assets in cash or money market instruments, including taxable
money market instruments (collectively, taxable investments).
STAND-BY COMMITMENTS. Each Fund may acquire "stand-by commitments" with
respect to municipal obligations it holds. Under a stand-by commitment, which
resembles a put option, a broker, dealer or bank is obligated to repurchase at
the Fund's option specified securities at a specified price. Each exercise of a
stand-by commitment, therefore, is subject to the ability of a Fund's
counterparty to make payment on demand. Each Fund will acquire stand-by
commitments solely to facilitate liquidity and does not intend to exercise the
rights afforded by the commitments for trading purposes.
LENDING SECURITIES. Each Fund is authorized to lend securities it holds to
brokers, dealers and other financial organizations, but it will not lend
securities to any affiliate of SBFM, including Salomon Smith Barney, unless a
Fund applies for and receives specific authority to do so from the SEC. Loans
of a Fund's securities, if and when made, may not exceed 33 1/3% of the Fund's
assets taken at value.
ADDITIONAL INFORMATION ABOUT THE FUNDS
DISTRIBUTION OF SHARES AND OTHER SERVICES
Salomon Smith Barney Inc., a registered broker-dealer, is the principal
underwriter and distributor of Smith Barney California. A selling group
consisting of Salomon Smith Barney and other broker-dealers sells shares of
Smith Barney California to the public. Smith Barney California has adopted Rule
12b-1 distribution plans for its Class A, B and L shares. Under each plan,
Smith Barney California pays distribution and service fees. These fees are an
ongoing expense and, over time, may cost shareholders more than other types of
sales charges.
Greenwich Street California does not engage in a continuous offering of its
shares.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and privileges with respect
to Greenwich Street California are materially different than those of Smith
Barney California. Greenwich Street California is a
16
closed-end fund that is not offering new shares for sale, and therefore, does
not impose sales charges or Rule 12b-1 fees; Smith Barney California is an
open-end fund that imposes sales charges on purchases (other than on
reinvestment of dividends and distributions) and certain redemptions and Rule
12b-1 fees. The sales charges and the Rule 12b-1 fees are used to pay for the
distribution and shareholder services provided to shareholders of Smith Barney
California. NO SALES CHARGES WILL BE ASSESSED ON THE ISSUANCE (OR THE
REDEMPTION) OF SMITH BARNEY CALIFORNIA SHARES RECEIVED AS PART OF THE
REORGANIZATION. Additionally, while there is no exchange privilege available to
Greenwich Street California shareholders, shareholders of Smith Barney
California may exchange their shares for a corresponding class of shares of a
fund in the Smith Barney fund complex. Investors should refer to the respective
prospectuses and statements of additional information of Greenwich Street
California and Smith Barney California for a fuller description of each Fund's
policies and restrictions with respect to the purchase, redemption and exchange
of shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
Smith Barney California pays dividends each month from its net investment
income. Smith Barney California generally makes capital gain distributions, if
any, once a year, typically in December. Net investment income is income
(including tax-exempt income and accrued original issue discount income) other
than net realized capital gains. Smith Barney California may pay additional
distributions and dividends at other times if necessary for Smith Barney
California to avoid a federal tax. Capital gain distributions and dividends may
be reinvested in additional fund shares of the same class held. Shareholders do
not pay a sales charge on reinvested distributions or dividends. Alternatively,
shareholders can instruct their Service Agent, the transfer agent or the
applicable sub-transfer agent to have their distributions and/or dividends paid
in cash. Shareholders can change their choice at any time to be effective as of
the next distribution or dividend, except that any change given to the transfer
agent less than five days before the payment date will not be effective until
the next distribution or dividend is paid.
Greenwich Street California pays monthly dividends of substantially all net
investment income to the holders of the common stock. From time to time, when
Greenwich Street California makes a capital gains distribution, it may do so in
lieu of paying its regular monthly dividend. Net income of Greenwich Street
California consists of all interest income accrued to Greenwich Street
California's assets less all expenses of Greenwich Street California. Expenses
of Greenwich Street California are accrued each day. Net realized capital
gains, if any, will be distributed to the shareholders at least once per year.
17
TAXES
In general, redeeming shares, exchanging shares and receiving distributions
from a Fund (whether in cash or additional shares) are all taxable events.
TRANSACTION FEDERAL TAX STATUS CALIFORNIA TAX STATUS
----------- ------------------ ---------------------
Long-term capital gain Long-term capital gain Long-term capital gain
distributions
Short-term capital gain Ordinary income Ordinary income
distributions
Dividends Excluded from gross income if Exempt from personal income
from interest on tax-exempt taxes if from interest on California
securities, otherwise ordinary municipal securities, otherwise
income ordinary income.
Any taxable dividends and capital gain distributions are taxable whether
received in cash or reinvested in Fund shares. Long-term capital gain
distributions are taxable to you as long-term capital gain regardless of how
long you have owned your shares. Unlike the federal income tax treatment of
such gains, California taxes long-term capital gains at the same rates as
ordinary income. You may want to avoid buying shares when a Fund is about to
declare a capital gain distribution or a taxable dividend, because it will be
taxable to you even though it may actually be a return of a portion of your
investment. After the end of each year, each Fund will provide you with
information about the distributions and dividends you received and any
redemptions of shares during the previous year. If you do not provide a Fund
with your correct taxpayer identification number and any required
certifications, you may be subject to back-up withholding of 30.5% (30% after
December 31, 2001) of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules
may apply, you should consult your tax adviser about your investment in a Fund.
PORTFOLIO SECURITIES
If the Reorganization is effected, SBFM will analyze and evaluate the
portfolio securities of Greenwich Street California being transferred to Smith
Barney California. Consistent with Smith Barney California's investment
objective and policies, any restrictions imposed by the Code and the best
interests of Smith Barney California's shareholders (including former Greenwich
Street California shareholders), SBFM will determine the extent and duration to
which the Greenwich Street California portfolio securities will be retained by
Smith Barney California. Since both Greenwich Street California and Smith
Barney California are managed by the same portfolio manager, Joseph Deane, it
is not currently anticipated that there would be a significant rebalancing of
the Greenwich Street California portfolio securities following the consummation
of the Reorganization. Subject to market conditions at the time of any such
rebalancing, the disposition of Greenwich Street California 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 Smith Barney California (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
18
denominator securities with maturities at the time of acquisition of one year
or less--for the year ended February 28, 2001 was 29%. The portfolio turnover
rate for Greenwich Street California for the year ended August 31, 2001 was 2%.
CAPITALIZATION AND PERFORMANCE
PRO FORMA CAPITALIZATION (UNAUDITED)
The following table sets forth the unaudited capitalization of Smith Barney
California and Greenwich Street California as of [August 31], 2001 as adjusted
giving effect to the Reorganization discussed herein:/1/
SMITH BARNEY
SMITH BARNEY GREENWICH STREET PRO FORMA CALIFORNIA
CALIFORNIA CALIFORNIA ADJUSTMENTS COMBINED
---------------- ---------------- ----------- ----------------
(ACTUAL) (ACTUAL)
Net Assets...................... $ 951,501,510 $51,665,924 -- $ 1,003,167,434
Net Asset Value Per Share....... $17.11 (Class A) $ 14.39 -- $17.11 (Class A)
Shares Outstanding (all classes) 55,611,598 3,591,034 3,019,633 58,631,231
--------
/1/ Assumes the Reorganization had been consummated on [August 31], 2001, and
is for information purposes only. No assurance can be given as to how many
shares of Smith Barney California will be received by shareholders of
Greenwich Street California on the date the Reorganization takes place, and
the foregoing should not be relied upon to reflect the number of shares of
Smith Barney California that actually will be received on or after such date.
PERFORMANCE
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 redeemable 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.
19
The following table reflects the average annual total return for the 1, 5
and 10 year periods ending August 31, 2001 for Greenwich Street California and
February 28, 2001 for Smith Barney California, and the 30-day SEC yield for
Smith Barney California as of October 31, 2001:
GREENWICH STREET SMITH BARNEY
CALIFORNIA/1/ CALIFORNIA
---------------- ------------
Average Annual Total Return:
1-year......................................... % 10.09%
5-year......................................... % 5.34%
10-year/Since inception........................ % 6.94%/8.12%
30-day SEC Yield................................. N/A %
--------
/1/ The average annual return on a market price basis for Greenwich Street
California was %, % and % for the 1-year, 5-year and since inception
periods, respectively.
THE PROPOSED TRANSACTION
DESCRIPTION OF THE PLAN
As stated above, the Plan provides for the transfer of all of the assets of
Greenwich Street California to Smith Barney California in exchange for that
number of full and fractional Class A shares of Smith Barney California having
an aggregate net asset value equal to the aggregate net asset value of each
Greenwich Street California shareholder's shares held in Greenwich Street
California as of the close of business on the date of the Closing. Smith Barney
California will assume all of the outstanding liabilities of Greenwich Street
California. In connection with the Closing, Greenwich Street California will
distribute Class A shares of Smith Barney California received in the exchange
to the shareholders of Greenwich Street California in complete liquidation of
Greenwich Street California. Greenwich Street California will then be
terminated as a non-diversified closed-end management investment company and
dissolved as a corporation under Maryland law. The description of the Plan in
this Proxy Statement/Prospectus is qualified in its entirety by reference to
Exhibit A.
Upon completion of the Reorganization, each shareholder of Greenwich Street
California will own that number of full and fractional Class A shares of Smith
Barney California having an aggregate net asset value equal to the aggregate
net asset value of such shareholder's shares held in Greenwich Street
California as of the close of business on the day of the Closing. Shares of
Greenwich Street California are represented by physical certificates. However,
in the interest of economy and convenience, shares of Smith Barney California
issued to Greenwich Street California shareholders will be in uncertificated
form.
The obligations of Greenwich Street California and Smith Barney California
under the Plan are subject to various conditions, as stated therein. To provide
against unforeseen events, the Plan may be terminated or amended at any time
prior to the Closing by action of the Board of Directors of either Fund,
notwithstanding the approval of the Plan by the shareholders of Greenwich
Street California. However, no amendment may be made that materially adversely
affects the interests of the shareholders of Greenwich Street California
without obtaining the approval of Greenwich Street California's shareholders.
Greenwich Street California and Smith Barney California may at any time waive
compliance with certain of the covenants and conditions contained in the Plan.
20
Smith Barney California and Greenwich Street California will have received
the opinion of Willkie Farr & Gallagher, counsel to Smith Barney California and
Greenwich Street California, dated as of the Closing Date and 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 Code. If the
Reorganization constitutes a tax-free reorganization, no gain or loss will be
recognized by Greenwich Street California or its shareholders as a direct
result of the Reorganization.
For a complete description of the terms and conditions of the
Reorganization, see the Plan at Exhibit A.
Greenwich Street California will bear all of the expenses of carrying out
the Plan, including the solicitation of proxies and preparing this Proxy
Statement/Prospectus.
REASONS FOR THE PROPOSED TRANSACTION
At a meeting held on September 6, 2001, the Board of Directors of Greenwich
Street California considered its strategic alternatives, including a business
combination with an open-end management investment company. At that meeting,
the Board of Directors of Greenwich Street California, including all of the
Directors who are not interested persons, unanimously determined that the
interests of the shareholders of Greenwich Street California will not be
diluted as a result of the proposed Reorganization, and that the proposed
Reorganization is in the best interests of Greenwich Street California and its
shareholders.
The Directors of Greenwich Street California believe that Greenwich Street
California shareholders will benefit from the proposed Reorganization because
Smith Barney California is guided by similar investment objectives and policies
as the Fund, and offers the following benefits:
. LOWER FEES AND EXPENSES. If the proposed transaction is approved,
Greenwich Street California shareholders may benefit from lower fees and
lower total fund expenses (even after taking into account certain
expense limitation arrangements currently in place for Greenwich Street
California). Greenwich Street California has higher gross operating
expenses due, in part, to its relatively small level of assets. As of
August 31, 2001, Greenwich Street California had net annual operating
expenses of 1.08% after fee waivers. If no fee waivers were in place,
Greenwich Street California's expense ratio would have been 1.24%. Going
forward, Greenwich Street California's net annual operating expenses are
expected to be 0.99%. As of the same date, Smith Barney California had
gross annual operating expenses of 0.68%. As a result of the
Reorganization, Greenwich Street California shareholders will be
investing in a Fund with expenses that are currently 31% lower than
Greenwich Street California's expense ratio, even after waivers and
reimbursements. If the Reorganization is approved by Greenwich Street
California shareholders, Smith Barney California's net expense ratio is
expected to remain unchanged for the year ending February 28, 2002.
. INCREASED LIQUIDITY. As shareholders of Smith Barney California, former
Greenwich Street California shareholders will be able to purchase and
redeem their shares at net asset value on any business day subject only
to the various charges and limitations set forth in the Smith Barney
California prospectus (including, if applicable, any sales charges on
new purchases of shares). In addition, Smith Barney California
shareholders can exchange their shares for shares of the same class of
other Smith Barney Funds.
21
. ELIMINATION OF DISCOUNT. An immediate benefit to shareholders of
Greenwich Street California is the elimination of the discount. The
discount applicable to Greenwich Street California shares has varied
from % to % over the past years. Once shares of Greenwich Street
California are exchanged for shares of Smith Barney California at their
relative net asset value, Greenwich Street California shareholders will
realize the full value of their investment. As of November 16, 2001, the
discount applicable to shares of Greenwich Street California was % or
$0. .
OTHER FACTORS
The Board of Directors of Greenwich Street California, in recommending the
proposed transaction, considered a number of additional factors, including the
following:
(1) the tax-free nature of the Reorganization;
(2) the lower expense ratio of Smith Barney California;
(3) the positive compatibility of Smith Barney California's investment
objectives, policies and restrictions with those of Greenwich Street
California;
(4) the terms and conditions of the Reorganization and that it should not
result in a dilution of Greenwich Street California shareholder interests;
and
(5) the fact that each Fund shares the same investment adviser and
portfolio manager.
The Reorganization was approved by a majority of the Board of Directors of
Greenwich Street California, a majority of the members of the Board who are not
"interested persons" of Greenwich Street California, and by more than 75% of
the Fund's "Continuing Directors." See the "Information on Shareholders'
Rights" section for a discussion of the Continuing Directors.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Reorganization is conditioned upon the receipt by Greenwich Street
California and Smith Barney California of an opinion from Willkie Farr &
Gallagher, dated as of the Closing Date, substantially to the effect that,
based upon certain facts, assumptions and representations of the parties
(including the principal shareholders of Greenwich Street California), for
federal income tax purposes: (i) the transfer to Smith Barney California of all
of the assets of Greenwich Street California in exchange solely for Shares of
Smith Barney California and the assumption by Smith Barney California of all of
the outstanding liabilities of Greenwich Street California, followed by the
distribution of such Shares to Greenwich Street California shareholders in
exchange for their shares of Greenwich Street California in complete
liquidation of Greenwich Street California, will constitute a "reorganization"
within the meaning of Section 368(a)(1) of the Code, and Smith Barney
California and Greenwich Street California 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 Greenwich Street California upon the transfer of
all of its assets to Smith Barney California in exchange solely for Shares of
Smith Barney California and the assumption by Smith Barney California of all of
the outstanding liabilities of Greenwich Street California, or upon the
distribution of such Shares to the shareholders of Greenwich Street California;
(iii) the basis of the assets of Greenwich Street California in the hands of
Smith Barney California will be the same as the basis of such assets of
Greenwich Street California immediately prior to the transfer; (iv) the holding
period of the assets of Greenwich Street California in the hands of Smith
Barney California will include the period during which such
22
assets were held by Greenwich Street California; (v) no gain or loss will be
recognized by Smith Barney California upon the receipt of the assets of
Greenwich Street California in exchange for shares of Smith Barney California
and the assumption by Smith Barney California of all of the outstanding
liabilities of Greenwich Street California; (vi) no gain or loss will be
recognized by the shareholders of Greenwich Street California upon the receipt
of Shares of Smith Barney California solely in exchange for their shares of
Greenwich Street California as part of the transaction; (vii) the aggregate
basis of Shares of Smith Barney California received by each shareholder of
Greenwich Street California will be the same as the aggregate basis of the
shares of Greenwich Street California exchanged therefor; and (viii) the
holding period of Shares of Smith Barney California received by each
shareholder of Greenwich Street California will include the holding period
during which the shares of Greenwich Street California exchanged therefor were
held, provided that at the time of the exchange the shares of Greenwich Street
California were held as capital assets by such shareholder.
While neither Greenwich Street California nor Smith Barney California is
aware of any adverse state or local tax consequences of the proposed
Reorganization, they have not requested any ruling or opinion with respect to
such consequences and shareholders may wish to consult their own tax advisers
with respect to such matters. The dividend(s) required by the Plan to be
declared and distributed by Greenwich Street California to its shareholders
prior to the Closing of the Reorganization will be taxable or tax-exempt, as
the case may be, to Greenwich Street California shareholders in the same manner
as if the Reorganization had not been contemplated or entered into by Greenwich
Street California and Smith Barney California.
LIQUIDATION AND TERMINATION OF GREENWICH STREET CALIFORNIA
If the Reorganization is effected, Greenwich Street California will be
liquidated and terminated as a non-diversified closed-end management investment
company and dissolved as a corporation under Maryland law.
INFORMATION ON SHAREHOLDERS' RIGHTS
SMITH BARNEY CALIFORNIA
GENERAL. Smith Barney California is a non-diversified open-end investment
company under the 1940 Act. Smith Barney California was organized on February
17, 1984 under the laws of the State of Maryland. Smith Barney California is
governed by its Articles of Incorporation and By-Laws, and its operations are
subject to oversight by its Board of Directors.
Shares of Smith Barney California have a par value of $0.01 per share. The
number of authorized shares of Smith Barney California that may be issued is
500,000,000 million. The Board of Directors of Smith Barney California has
created Class A shares, Class B shares, Class L shares, Class Y shares and
Class Z shares, which represent interests in the assets of the Fund and have
identical voting, dividend, liquidation and other rights on the same terms and
conditions except that expenses related to the distribution of a particular
class of shares are borne solely by such class of shares. Each class has
exclusive voting rights with respect to provisions of the Fund's Rule 12b-1
plan, if any, which pertains to that class (except that Class B shareholders
can vote on the Class A Rule 12b-1 plan since Class B shares convert to Class A
shares).
DIRECTORS. The By-Laws of Smith Barney California provide that the term of
office of each Director shall be from the time of his or her election until his
successor is elected and qualifies or until such Director sooner
23
dies, resigns or is removed. A Director may be removed by shareholders by the
vote of a majority of the votes entitled to be cast for the election of
directors. Vacancies on the Board of Directors may be filled by a majority of
the Directors remaining in office.
VOTING RIGHTS. Smith Barney California does not hold a meeting of
shareholders annually, and there normally is no meeting of shareholders for the
purpose of electing Directors unless and until such time as less than
two-thirds of the Directors holding office have been elected by shareholders. A
meeting of shareholders of Smith Barney California, for any purpose, may be
called upon the written request of shareholders holding at least 25% (10% for
removal of Directors) of the Fund's outstanding shares. On each matter
submitted to a vote of the shareholders of Smith Barney California, each
shareholder is entitled to one vote for each whole share owned and a
proportionate, fractional vote for each fractional share outstanding in the
shareholder's name on the Fund's books.
LIQUIDATION OR TERMINATION. In the event of the liquidation or termination
of Smith Barney California, the shareholders of the Fund are entitled to
receive, when, and as declared by the Directors, the excess of its assets over
its liabilities. The assets so distributed to shareholders of Smith Barney
California will be distributed among the shareholders in proportion to the
number of shares of the particular class held by them and recorded on the books
of the Fund.
LIABILITY OF DIRECTORS. Under the By-Laws of Smith Barney California, a
Director will be entitled to indemnification except in connection with his or
her own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Director. The By-Laws of
Smith Barney California further provides that Directors and officers may be
entitled to receive an advance of the expenses of litigation against them in
certain enumerated circumstances.
RIGHTS OF INSPECTION. Shareholders of Smith Barney California have the
inspection rights that are permitted shareholders of a Maryland corporation
under Maryland corporate law.
GREENWICH STREET CALIFORNIA
GENERAL. Greenwich Street California is a non-diversified closed-end
management investment company under the 1940 Act. Greenwich Street California
was organized as a corporation on July 8, 1994 under the laws of the State of
Maryland. Greenwich Street California is governed by its Articles of
Incorporation and By-Laws, and its operations are subject to oversight by its
Board of Directors.
STOCK. Greenwich Street California's Articles of Incorporation provide that
it is authorized to issue 500,000,000 shares of Common Stock, $0.001 par value.
Holders of Greenwich Street California's Common Stock have no preemptive rights.
DIRECTORS. The Articles of Incorporation and By-Laws of Greenwich Street
California provide that there shall be from three to twelve Directors in three
classes, and each Director in each class is elected for a term of three years,
and until his or her successor shall be elected and shall qualify. A Director
may be removed with or without cause by a seventy-five percent vote of
Greenwich Street California's stockholders at a meeting of stockholders duly
called for that purpose in compliance with Greenwich Street California's
By-Laws. Vacancies on the Board of Directors may be filled by the Directors
remaining in office.
24
VOTING RIGHTS. Greenwich Street California holds annual stockholders
meetings for the purpose of electing Directors and for the transaction of other
business as may be properly brought before the meeting. A special meeting of
Greenwich Street California stockholders may be called by the Board of
Directors, the President or upon the written request of stockholders holding at
least 25% of Greenwich Street California's outstanding shares. On each matter
submitted to a vote of the Greenwich Street California stockholders, each
stockholder is entitled to one vote for each whole share owned and a
proportionate fractional vote for each fractional share outstanding in the
stockholder's name on Greenwich Street California's books.
Greenwich Street California's Articles of Incorporation provide that certain
transactions, including the Reorganization, must be approved by Shareholders
owning at least 75% of the Fund's outstanding shares, unless the transaction
has been approved by at least 75% of the Fund's "Continuing Directors," in
which case the transaction need only be approved by a majority of the shares
entitled to vote at the meeting. "Continuing Director" is defined in the
Articles as "any member of the Board of Directors of the Corporation who is not
an [interested party to the transaction] and has been a member of the Board of
Directors for a period of at least 12 months... or is a successor of a
Continuing Director who is unaffiliated with an [interested party] and is
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on the Board of Directors."
DISSOLUTION. In the event of the dissolution of Greenwich Street California,
the stockholders of Greenwich Street California are entitled to receive, after
Greenwich Street California has made arrangements to pay all claims and
obligations in accordance with Maryland law, any remaining assets. The assets
so distributed to stockholders of Greenwich Street California will be
distributed among the stockholders in proportion to the number of shares held
by them and recorded on the books of Greenwich Street California.
LIABILITY OF DIRECTORS. The By-laws of Greenwich Street California provide
that each director or officer, whether or not then in office, shall be
indemnified against all costs and expenses reasonably incurred by or imposed
upon him or her in connection with or arising out of any action, suit, or
proceeding in which he or she may be involved by reason of his or her being or
having been a director or officer of the corporation, such expenses to include
the cost of reasonable settlements. The foregoing right of indemnification
shall not be exclusive of other rights to which any director or officer may be
entitled as a matter of law.
The foregoing is only a summary of certain characteristics of the operations
of Smith Barney California and Greenwich Street California and is not a
complete description of the documents cited. Shareholders should refer to the
provisions of the corporate documents and Maryland law governing Smith Barney
California and Greenwich Street California for a more thorough description.
ADDITIONAL INFORMATION ABOUT SMITH BARNEY CALIFORNIA AND
GREENWICH STREET CALIFORNIA
As noted above, additional information about Greenwich Street California,
Smith Barney California and the Reorganization has been filed with the SEC and
may be obtained without charge by writing to Greenwich Street California
Municipal Fund Inc., 125 Broad Street, New York, New York 10004, or by calling
[ ].
25
Greenwich Street California and Smith Barney California are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and the 1940 Act, and in accordance therewith, file reports, proxy material
and/or other information about the applicable Fund with the Securities and
Exchange Commission.
Such reports, proxy material and/or other information can be inspected and
copied at the Public Reference Room maintained by the Securities and Exchange
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 and without
charge from Greenwich Street California or Smith Barney California at the
address set forth above.
THE BOARD OF DIRECTORS OF GREENWICH STREET CALIFORNIA RECOMMENDS THAT THE
SHAREHOLDERS
OF THE FUND VOTE IN FAVOR OF THIS PROPOSAL.
PROPOSAL 2: ELECTION OF DIRECTORS
ELECTION OF THREE CLASS III DIRECTORS
Three individuals, each of whom is currently a Director of Greenwich Street
California, have been nominated to serve an additional term as Class III
Directors of Greenwich Street California. The proxyholders intend to vote for
the three nominees named below as Class III Directors for a three-year term of
office. The Directors are being put forth for election and will continue to
serve on the Board of Directors of Greenwich Street California in the event the
Reorganization is not approved by Greenwich Street California's shareholders.
Management recommends that the three nominees named below be elected to the
Board of Directors for three-year terms of office. The three nominees have
consented to being named in the proxy statement and to serve if elected. Unless
otherwise directed in the proxy form, the proxyholders intend to vote in favor
of electing the three Class III nominees as Directors for three-year terms of
office and until their respective successors are elected and shall qualify.
Although management does not contemplate the possibility, in the event any
nominee is unable to serve as a Director at the time of the election, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill such vacancy.
26
The name and age of each nominee, the term of office for which he is
proposed to be elected, his principal occupation, the period during which he
has served as a director, the number of shares of Greenwich Street California
Common Stock beneficially owned directly or indirectly by each nominee as of
the close of business on November 16, 2001, and the percentage of outstanding
shares of Greenwich Street California's Common Stock such ownership represented
at November 16, 2001 (according to information received by Greenwich Street
California) are as set out below.
SHARES OF
COMMON
STOCK
BENEFICIALLY
OWNED AS OF PERCENT OF
DIRECTOR TERM NOVEMBER 16, OUTSTANDING
NAME PRINCIPAL OCCUPATION AGE SINCE EXPIRES 2001/1/ SHARES
---- -------------------- --- -------- ------- ------------ -----------
Donald R. Foley Retired; Director of 12 investment [78] [ ] 2001 [ ] [ ]
3668 Freshwater Dr., companies associated with
Jupiter, FL 33477.... Citigroup. Formerly Vice President
of Edwin Bird Wilson, Incorporated
(advertising).
Paul Hardin Professor of Law at the University [70] [ ] 2001 [ ] [ ]
60134 Davie St. of North Carolina at Chapel Hill;
Chapel Hill, NC 27599 Director of 14 investment
companies associated with
Citigroup; Director of The Summit
Bancorporation. Formerly,
Chancellor of the University of
North Carolina at Chapel Hill.
Jane Dasher Investment Officer of Korsant [50] [ ] 2001 [ ] [ ]
283 Greenwich Ave., Partners, a family investment
Greenwich, CT 06830.. company; Director or trustee of 12
investment companies associated
with Citigroup. Prior to 1997, an
Independent Financial Consultant.
All Officers and
Directors as a Group
(13 persons)......... [ ] [ ]
Fees for Directors who are not "interested persons" of the Fund, all of whom
are board members of a group of funds sponsored by Salomon Smith Barney, are
set at $ per annum for an aggregate of [12] funds, and are allocated based on
relative net assets of each fund in the group. In addition, these Directors
receive $ for each board meeting attended and $ for each telephone meeting
plus reimbursement for travel and out-of-pocket expenses incurred in connection
with board meetings.
27
The remainder of the Board constitutes Class I and Class II Directors, none
of whom will stand for election at the Meeting, as their terms will expire in
2002 and 2003, respectively.
CONTINUING DIRECTORS AND OFFICERS
PRINCIPAL OCCUPATIONS NUMBER OF SHARES AND
DURING PAST FIVE YEARS, % BENEFICIALLY OWNED
NAME OTHER DIRECTORSHIPS, AND AGE AS OF NOVEMBER 16, 2001
---- ---------------------------- -----------------------
*Heath B. McLendon, Director ............ Managing Director of Salomon Smith [ ]
125 Broad Street Barney; Managing Director of Smith
New York, NY 10004 Barney Asset Management Inc.;
Chairman or Co-Chairman of seventy-
seven investment companies affiliated
with Citigroup. President and Director of
SBFM and Travelers Investment Adviser,
Inc. ("TIA"); 68.
+Lee Abraham, Director................... Retired; Director or trustee of twelve [ ]
13732 LeHavre Drive investment companies associated with
Frenchman's Creek Citigroup; Director of R.G. Barry Corp.,
Palm Beach Gardens, FL 33410 and of Signet Group plc; formerly
Chairman and Chief Executive Officer of
Associated Merchandising Corporation;
formerly Director of Galey & Lord and of
Liz Claiborne; 73.
+Allan J. Bloostein, Director............ Consultant; Director or trustee of 19 [ ]
425 Park Avenue, 27th Fl. investment companies associated with
New York, NY 10022 Citigroup; formerly Vice Chairman and
Director of The May Department Stores
Company; Director of CVS Corp. and of
Taubman Centers; 71.
+Richard E. Hanson, Jr., Director........ Retired; formerly Head of The New [ ]
2751 Vermont Route 140 Atlanta Jewish Community High School,
Poultney, CT 05764 Atlanta Georgia; formerly Headmaster
Lawrence Country Day School --
Woodmere Academy; Director or trustee
of 14 investment companies associated
with Citigroup; 59.
+Roderick C. Rasmussen, Director......... Investment Counselor; Director of twelve [ ]
9 Cadence Court investment companies associated with
Morristown, NJ 07960 Citigroup. Formerly Vice President of
Dresdner and Company Inc. (Investment
counselors); 74.
28
PRINCIPAL OCCUPATIONS NUMBER OF SHARES AND
DURING PAST FIVE YEARS, % BENEFICIALLY OWNED
NAME OTHER DIRECTORSHIPS, AND AGE AS OF NOVEMBER 16, 2001
---- ---------------------------- -----------------------
John P. Toolan, Director............... Retired; Director of twelve investment [ ]
13 Chadwell Place companies associated with Citigroup.
Morristown, NJ 07960 Trustee of John Hancock Funds. Formerly
Director and Chairman of Smith Barney
Trust Company and Director of Smith
Barney Inc. and SBFM; 70.
Lewis F. Daidone, Senior Vice President Managing Director of Salomon Smith [ ]
and Treasurer........................ Barney, Senior Vice President and
125 Broad Street Treasurer of 61 investment companies
New York, NY 10004 associated with Citigroup; Director and
Senior Vice President of SBFM and TIA;
43.
Joseph P. Deane, Vice President and Managing Director of Salomon Smith [ ]
Investment Officer................... Barney, Investment Officer of SBFM, and
investment officer of other investment
New York, NY companies associated with Citigroup; 53.
Paul Brook, Controller................. Director of Salomon Smith Barney and [ ]
125 Broad Street Controller and Assistant Treasurer of 43
New York, NY 10004 investment companies associated with
Citigroup; prior to 1998, Managing
Director of AMT Capital Services Inc.;
prior to 1997, Partner with Ernst & Young
LLP; 47.
Christina T. Sydor, Secretary.......... Managing Director of Salomon Smith [ ]
125 Broad Street Barney; Secretary of 61 investment
New York, NY 10004 companies associated with Citigroup;
Secretary and General Counsel of SBFM
and TIA; 50.
--------
* Director who is an "interested person" of the Fund as defined in the 1940 Act.
+ Directors or trustees of other investment companies registered under the 1940
Act with which Salomon Smith Barney is affiliated.
COMMITTEES OF THE BOARD OF DIRECTORS
Greenwich Street California has no Compensation or Standing Nominating
Committee of the Board, or any committee performing similar functions. The Fund
has an Audit Committee comprised of those directors who are not "interested
persons" of the Fund as defined in the 1940 Act ("Independent Directors"), a
Pricing Committee of the Board comprised of the Chairman of the Board and one
independent director, and an Administration Committee comprised of four
Independent Directors. The Audit Committee is responsible for recommending the
29
selection of the Fund's independent accountants and reviewing all audit as well
as nonaudit accounting services performed for the Fund as set forth in the
Audit Committee's charter, which is attached hereto as Appendix B. During the
fiscal year ended August 31, 2001, five meetings of the Board of Directors of
the Fund were held, four of which were regular meetings; in addition two Audit
Committee meetings were held. In the last fiscal year no director attended less
than 75% of these meetings.
BENEFICIAL OWNERSHIP REPORT
Section 16(a) of the Securities Exchange Act of 1934 requires Greenwich
Street California's officers and directors, and persons who beneficially own
more than ten percent of a registered class of Greenwich Street California's
common stock, to file reports of ownership with the SEC, the New York Stock
Exchange, Inc. and Greenwich Street California. Based solely upon its review of
the copies of such forms received by it and written representations from
certain such persons, Greenwich Street California believes that during the
fiscal year ended August 31, 2001, all filing requirements applicable to such
persons were satisfied.
REPORT OF THE AUDIT COMMITTEE
The purposes of the Greenwich Street California's Audit Committee are set
forth in the Audit Committee Charter included as Appendix B. The purposes
include assisting the Board of Directors in its oversight of the Fund's
financial reporting process and internal controls, the Fund's financial
statements and the selection of the Fund's independent accountants. Management,
however, is responsible for the preparation, presentation and integrity of the
Fund's financial statements, and the independent accountants are responsible
for planning and carrying out proper audits and reviews.
In connection with the audited financial statements as of and for the year
ended August 31, 2001 included in Greenwich Street California's Annual Report
for the year ended August 31, 2001 (the "Annual Report"), at a meeting held on
October 24, 2001, the Audit Committee considered and discussed the audited
financial statements with management and the independent accountants, and
discussed the audit of such financial statements with the independent
accountants.
In addition, the Audit Committee discussed with the independent accountants
the quality, and not just the acceptability under generally accepted accounting
principles, of the accounting principles applied by Greenwich Street
California, and such other matters brought to the attention of the Audit
Committee by the independent accountants required by Statement of Auditing
Standards No. 61, as currently in effect. The Audit Committee also received
from the independent accountants the written statement required by Independence
Standards Board Statement No. 1, as currently in effect, delineating
relationships between the independent accountants and the Fund and discussed
the impact that any such relationships may have on the objectivity and
independence of the independent accountants. The Audit Committee also
considered whether the provision of non-audit services by the independent
accountants is compatible with maintaining the accountants' independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing including auditor independence. Moreover, the Committee
relies on and makes no independent verification of the facts presented to it or
representations made by management or the independent accountants. Accordingly,
the Audit Committee's oversight does not provide an independent basis to
determine that management has maintained appropriate accounting and financial
30
reporting principles or appropriate internal controls and procedures, designed
to assure compliance with accounting standards and applicable laws and
regulations. Furthermore, the Audit Committee's considerations and discussions
referred to above do not provide any assurance that the audit of the Fund's
financial statements has been carried out in accordance with generally accepted
accounting standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the Fund's auditors are
in fact "independent."
The Audit Committee also met on March 14, 2001 (to consider and discuss the
audit committee charter for the year ended August 31, 2001) with management and
the independent accountants.
Based on its consideration of the audited financial statements and the
discussions referred to above with management and the independent accountants
and subject to the limitations on the responsibilities and role of the Audit
Committee set forth in the Charter and those discussed above, the Committee
recommended to the Board of Directors that the audited financial statements be
included in the Fund's Annual Report.
DISCLOSURE OF AUDITOR FEES
AUDIT FEES. Audit fees paid by Greenwich Street California to KPMG in
connection with Greenwich Street California's annual audit for the year ended
August 31, 2001 totaled $30,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION. KPMG was not
engaged by Greenwich Street California, its investment adviser, or any entity
controlling, controlled by, or under common control with the investment adviser
that provides services to Greenwich Street California, to provide financial
information systems design or implementation services.
ALL OTHER FEES. The aggregate fees billed to Greenwich Street California for
non-audit services by KPMG and paid by Greenwich Street California, its
investment adviser, or any entity controlling, controlled by or under common
control with the investment adviser that provides services to Greenwich Street
California totaled approximately $2,000 (tax services). KPMG serves as auditor
for Citigroup and all significant subsidiaries, including Salomon Smith Barney,
as well as for over 180 registered investment companies managed by subsidiaries
of Citigroup.
INVESTMENT ADVISORY AGREEMENT WITH SBFM
On [ ], the stockholders approved the Investment Advisory Agreement (the
"Advisory Agreement") between Greenwich Street California and SBFM.
SBFM serves as investment adviser for other "investment companies" as
defined in the 1940 Act, as amended, including Smith Barney California, and is
responsible for the management of investments of private investment portfolios.
Under the Advisory Agreement, SBFM furnishes Greenwich Street California
investment advice with respect to the investment and reinvestment of the assets
comprising Greenwich Street California's investment portfolio. The Advisory
Agreement further provides that SBFM, as agent and attorney-in-fact with
respect to Greenwich Street California's investment portfolio, may, when it
deems appropriate, without prior consultation with Greenwich Street California
and at the risk of Greenwich Street California, buy, sell, exchange, convert or
otherwise trade in, retain or reinvest in securities and other investments,
place orders for the execution of such
31
investment transactions with or through such brokers, dealers, issuers or other
persons as SBFM may select, and take any action or decline to act in any manner
that SBFM reasonably deems appropriate. All services provided Greenwich Street
California pursuant to the Advisory Agreement are furnished by SBFM.
Under the Advisory Agreement, Greenwich Street California is required to pay
SBFM for its services furnished under the Advisory Agreement, on the first
business day of each month, a fee for the previous month at the annual rate of
0.90 of 1.00% of the Fund's average daily net assets. In addition, Greenwich
Street California has agreed to indemnify SBFM in the absence of willful
misfeasance, bad faith or gross negligence. During fiscal 2001, Greenwich
Street California paid advisory fees aggregating $373,077 (after waivers) to
SBFM pursuant to the Advisory Agreement.
The Advisory Agreement was entered into and became effective on [ ],
1994, and shall continue thereafter so long as continuance is specifically
approved at least annually by the Board of Directors of Greenwich Street
California or by vote of the holders of a majority of the voting securities of
Greenwich Street California. In addition, under the provisions of the Advisory
Agreement and of the 1940 Act the Advisory Agreement may not be extended unless
such extension is approved annually by a majority of the directors of Greenwich
Street California who are not parties to the contract or "interested persons"
of any such party at a meeting called for the purpose of considering approval
of the Adviser's Agreement. On June 18, 2001, the Board of Directors of
Greenwich Street California unanimously approved an extension of the Advisory
Agreement through June, 2002.
The Advisory Agreement further provides that each party has the right to
terminate the Advisory Agreement without penalty upon sixty (60) days' written
notice to the other party, and that the Advisory Agreement will automatically
terminate in the event of its "assignment" as that term is defined under the
1940 Act, unless an order is issued by the SEC conditionally or unconditionally
exempting such assignment from the provisions of Section 15(a) of the 1940 Act
in which event the Advisory Agreement shall remain in full force and effect.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreement provides that SBFM will recommend and implement
investment decisions for Greenwich Street California. Subject to the written
direction of the Directors and President of Greenwich Street California, SBFM
will select the brokerage firms which effect securities transactions for
Greenwich Street California. [Greenwich Street California paid no commissions
during its last fiscal year.]
The Advisory Agreement provides that in placing orders for the execution of
portfolio transactions for Greenwich Street California, SBFM may allocate such
transactions to such brokers and dealers for execution on such markets, at such
prices and at such commission rates as in the good faith judgment of SBFM will
be in the best interests of Greenwich Street California. SBFM may take into
consideration in the selection of brokers and dealers not only available prices
and rates of brokerage commissions but also other relevant factors (including
execution capabilities, research and other services such as account evaluation,
analysis and reporting and market information services), which are expected to
enhance the general portfolio management capabilities of SBFM. Accordingly,
transactions in securities may be effected on behalf of Greenwich Street
California with brokers and dealers at prices and rates of commissions that may
be in excess of those which another broker might have charged for effecting the
same transaction, in recognition of the value of brokerage, research or other
services provided by the executing broker. Moreover, research services
furnished by brokers through whom securities transactions are effected on
behalf of Greenwich Street California may be used by SBFM in servicing all of
its accounts generally, and not all of such services may be used by SBFM in
connection with Greenwich Street California.
32
EXECUTIVE COMPENSATION
Directors who are not "interested persons" of Greenwich Street California,
as defined in the 1940 Act, receive $[ ] per year plus $[ ] per Directors
meeting attended in person. The following table shows the compensation paid by
the Fund to each Director during the Fund's last fiscal year ended August 31,
2001 and by the Fund complex for the calendar year ended December 31, 2000:
COMPENSATION
AGGREGATE PENSION OR FROM FUND AND TOTAL NUMBER OF
COMPENSATION RETIREMENT FUND COMPLEX FUNDS FOR
FROM FUND* BENEFITS ACCRUED PAID TO DIRECTORS WHICH DIRECTOR
FISCAL YEAR AS PART OF FUND CALENDAR YEAR SERVES WITHIN
NAME OF PERSON** ENDED 8/31/01 EXPENSES ENDED 12/31/00 FUND COMPLEX
---------------- ------------- ---------------- ----------------- ---------------
Lee Abraham.......... $ 0 $ 12
Allan J. Bloostein... $ 0 19
Jane F. Dasher....... $ 0 12
Donald R. Foley...... $ ** 0 12
Richard E. Hanson.... $ 0 14
Paul Hardin.......... $ 0 14
Heath B. McLendon*... 0 0 0 78
Roderick C. Rasmussen $ ** 0 12
John P. Toolan....... $ ** 0 12
--------
* Designates a Director who is an "interested person" of the Fund as defined
under the 1940 Act.
** Pursuant to the Fund's deferred compensation plan, the indicated Directors
elected to defer the following amounts of their compensation from the Fund;
Donald R. Foley--$ , Roderick C. Rasmussen--$ and John P. Toolan--$ and
the following amounts of their total compensation from the Fund complex:
Donald R. Foley--$ , Roderick C. Rasmussen--$ and John P. Toolan--$ .
Upon attainment of age 72 the Fund's current Directors may elect to change
to emeritus status. Any Directors elected or appointed to the Board of
Directors in the future will be required to change to emeritus status upon
attainment of age 80. Directors Emeritus are entitled to serve in emeritus
status for a maximum of 10 years during which time they are paid 50% of that
annual retainer fee and meeting fees otherwise applicable to the Fund's
Directors, together with reasonable out-of-pocket expenses for each meeting
attended. During the Fund's last fiscal year, compensation paid by the Fund to
Directors Emeritus totaled $ .
REQUIRED VOTE
Election of each of the listed nominees for Director requires the
affirmative vote of a plurality of the votes cast at the Meeting in person or
by proxy.
THE BOARD OF DIRECTORS OF GREENWICH STREET CALIFORNIA, INCLUDING THE
INDEPENDENT DIRECTORS, RECOMMEND THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES TO THE BOARD.
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
33
by letter, telephone or telegraph, will be paid by Greenwich Street California.
In addition to solicitation by mail, certain officers, employees and
representatives of Greenwich Street California and certain financial services
firms and their representatives, who will receive no extra compensation for
their services, may solicit proxies [by telegram or] personally.
To participate in the Annual Meeting, the shareholder may submit the proxy
card originally sent with the Proxy Statement/Prospectus or attend in person.
Any proxy given by a shareholder is revocable until voted at the Annual Meeting.
PROPOSALS OF SHAREHOLDERS
If the Reorganization is not completed and Greenwich Street California holds
the 2002 annual meeting of stockholders in 2002, appropriate proposals of
stockholders intended to be at such meeting must be received by Greenwich
Street California by September , 2002 for inclusion in its proxy statement and
form of proxy relating to that meeting. If the date of the next annual meeting
is advanced by more than 30 calendar days or delayed by more than 90 calendar
days from the date of the annual meeting to which the proxy statement relates,
Greenwich Street California shall, in a timely manner, inform its stockholders
of the change, and the date by which proposals of stockholders must be received.
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
No Board member is aware of any matters that will be presented for action at
the Annual 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 Greenwich Street California.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accountants selected by the Directors to
audit the financial statements of Greenwich Street California for fiscal 2002
is KPMG LLP. KPMG LLP was recommended to the Directors by the Audit Committee
of Greenwich Street California, which consists of all of the Directors of the
Fund who are not interested persons of 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 Boards of Directors,
/s/ CHRISTINA T. SYDOR
_____________________________________
Christina T. Sydor
Secretary
34
INDEX OF EXHIBITS AND APPENDICES
Exhibit A: Form of Agreement and Plan of Reorganization
Appendix A: 5% Shareholders of Smith Barney California
Appendix B: Audit Committee Charter
35
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of November, 2001, by and between Smith Barney California Municipals
Fund Inc., a Maryland corporation with its principal place of business at 125
Broad Street, New York, New York 10004 (the "Acquiring Fund"), and Greenwich
Street California Municipal Fund Inc., a Maryland corporation, with its
principal place of business at 125 Broad Street, New York, New York 10004 (the
"Fund").
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the Fund
in exchange for Class A shares of the Acquiring Fund (collectively, the
"Acquiring Fund Shares" and each, an "Acquiring Fund Share") and the assumption
by the Acquiring Fund of all of the outstanding liabilities of the Fund and the
distribution, after the Closing Date herein referred to, of Acquiring Fund
Shares to the shareholders of the Fund in liquidation of the Fund and the
subsequent dissolution of the Fund, all upon the terms and conditions
hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Fund and the Fund are registered investment companies
of the management type and the Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue shares of common stock;
WHEREAS, the Board of Directors of the Fund has determined that the exchange
of all of the assets and outstanding liabilities of the Fund for Acquiring Fund
Shares and the assumption of such liabilities by the Acquiring Fund is in the
best interests of the Fund's shareholders and that the interests of the
existing shareholders of the Fund would not be diluted as a result of this
transaction;
WHEREAS, the Board of Directors of the Acquiring Fund has determined that
the exchange of all the assets and outstanding liabilities of the Fund for
Acquiring Fund Shares and the assumption of such liabilities by the Acquiring
Fund is in the best interests of the Acquiring Fund's shareholders and that the
interests of the existing shareholders of the Acquiring Fund would not be
diluted as a result of this transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE FUND IN EXCHANGE FOR ACQUIRING FUND SHARES AND
ASSUMPTION OF LIABILITIES OF THE FUND AND LIQUIDATION AND DISSOLUTION OF THE
FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Fund agrees to
transfer the Fund's assets as set forth in paragraph 1.2 to the Acquiring Fund,
and the Acquiring Fund agrees in exchange therefor: (i) to deliver to the Fund
the number of Class A Acquiring Fund Shares, including fractional Class A
Acquiring Fund Shares, determined by dividing the value of the Fund's net
assets attributable to the Fund's shares, computed in the manner and as of the
time and
A-1
date set forth in paragraph 2.1, by the net asset value of one Class A
Acquiring Fund Share, computed in the manner and as of the time and date set
forth in paragraph 2.2; and (ii) to assume all of the outstanding liabilities
of the Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Fund to be acquired by the Acquiring Fund shall
consist of all property, including, without limitation, all cash, securities
and dividends or interest receivables which are owned by the Fund and any
deferred or prepaid expenses shown as an asset on the books of the Fund on the
closing date provided in paragraph 3.1 (the "Closing Date").
(b) The Fund has provided the Acquiring Fund with a list of the Fund's
assets as of the date of execution of this Agreement. The Fund reserves the
right to sell any securities but will not, without the prior approval of the
Acquiring Fund, acquire any additional securities other than securities of the
type in which the Acquiring Fund is permitted to invest. The Acquiring Fund
will, within a reasonable time prior to the Closing Date, furnish the Fund with
a statement of the Acquiring Fund's investment objectives, policies and
restrictions and a list of the securities, if any, on the Fund's list referred
to in the first sentence of this paragraph which do not conform to the
Acquiring Fund's investment objectives, policies and restrictions. In the event
that the Fund holds any investments which the Acquiring Fund may not hold, the
Fund will dispose of such securities prior to the Closing Date. In addition, if
it is determined that the portfolios of the Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage limitations
imposed upon the Acquiring Fund with respect to such investments, the Fund, if
requested by the Acquiring Fund, will dispose of and/or reinvest a sufficient
amount of such investments as may be necessary to avoid violating such
limitations as of the Closing Date.
1.3. The Fund will endeavor to discharge all the Fund's known liabilities
and obligations prior to the Closing Date. The Acquiring Fund shall assume all
liabilities, expenses, costs, charges and reserves of the Fund as of the
Valuation Date (as defined in Section 2.1).
1.4. As provided in paragraph 3.3, either on or as soon after the Closing
Date as is conveniently practicable (the "Liquidation Date"), the Fund will
liquidate and distribute pro rata to the Fund's shareholders of record
determined as of the close of business on the Closing Date (the "Fund
Shareholders"), the Acquiring Fund Shares it receives pursuant to paragraph
1.1. Shareholders of the Fund shall receive Class A shares of the Acquiring
Fund. Such liquidation and distribution will be accomplished by the transfer of
the Acquiring Fund Shares then credited to the account of the Fund on the books
of the Acquiring Fund to open accounts on the share records of the Acquiring
Fund in the name of the Fund Shareholders and representing the respective pro
rata number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Fund will simultaneously be canceled on the books of
the Fund, although any outstanding share certificates representing interests in
the Fund will represent a number of Acquiring Fund Shares after the Closing
Date as determined in accordance with paragraph 1.1.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in the
manner described in the Acquiring Fund's current prospectus and statement of
additional information. The Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares in connection with such exchange.
A-2
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund Shares
in a name other than the registered holder of the Fund Shares on the books of
the Fund as of that time shall, as a condition of such issuance and transfer,
be paid by the person to whom such Acquiring Fund Shares are to be issued and
transferred.
1.7. Any reporting responsibility of the Fund is and shall remain the
responsibility of the Fund up to and including the Closing Date and such later
date on which the Fund is terminated.
1.8. The Fund shall, following the Closing Date and the making of all
distributions pursuant to paragraph 1.4, be dissolved under the laws of the
State of Maryland and in accordance with its governing documents.
2. VALUATION
2.1. The value of the Fund's assets to be acquired by the Acquiring Fund
hereunder shall be the value of such assets computed as of the close of regular
trading on the New York Stock Exchange, Inc. (the "NYSE") on the Closing Date
(such time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Acquiring Fund's then current prospectus
or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the net asset
value per share computed as of the close of regular trading on the NYSE on the
Valuation Date, using the valuation procedures set forth in the Acquiring
Fund's then current prospectus or statement of additional information.
2.3. All computations of value shall be made by Smith Barney Fund Management
LLC (the "Manager"), as adviser of the Fund, in accordance with its regular
practice as pricing agent for the Fund and the Acquiring Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be January 18, 2002, or such later date as the
parties may agree to in writing. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the Closing
Date unless otherwise provided. The Closing shall be held as of 5:00 p.m. at
the offices of Salomon Smith Barney Inc., , New York, New York , or
at such other time and/or place as the parties may agree.
3.2. In the event that on the Valuation Date (a) the NYSE or another primary
trading market for portfolio securities of the Acquiring Fund or the Fund shall
be closed to trading or trading thereon shall be restricted or (b) trading or
the reporting of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Fund is impracticable, the Closing Date shall be postponed until the first
business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.3. The Fund shall deliver at the Closing a list of the names and addresses
of the Fund's Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing, certified on behalf of the Fund by the Chairman of the Board of the
Fund. The Acquiring Fund shall issue and deliver a confirmation evidencing the
Acquiring Fund Shares to be credited to the Fund's account on the Closing Date
to the Secretary of the Fund, or provide evidence satisfactory to the Fund that
such
A-3
Acquiring Fund Shares have been credited to the Fund's account on the books of
the Acquiring Fund. At the Closing, each party shall deliver to the other such
bills of sale, checks, assignments, share certificates, if any, receipts or
other documents as such other party or its counsel may reasonably request.
3.4. The Fund and the Acquiring Fund shall file Articles of Transfer with
the Maryland State Department of Assessments and Taxation, effective as of the
Closing Date.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Fund represents and warrants to the Acquiring Fund as follows:
(a) The Fund is a corporation which is duly organized, validly existing
and in good standing under the laws of the State of Maryland;
(b) The Fund is a registered investment company classified as a
management company of the closed-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), is in full force and effect;
(c) The Fund is not, and the execution, delivery and performance of this
Agreement will not result, in a material violation of its Articles of
Incorporation or By-laws or of any agreement, indenture, instrument,
contract, lease or other undertaking to which the Fund is a party or by
which it is bound;
(d) The Fund has no material contracts or other commitments (other than
this Agreement) which will be terminated with liability to the Fund prior to
the Closing Date;
(e) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or to the Fund's
knowledge threatened against the Fund or any of the Fund's properties or
assets (other than that previously disclosed to the other party to the
Agreement) which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business. The Fund
knows of no facts which might form the basis for the institution of such
proceedings and is not party to or subject to the provisions of any order,
decree or judgment of any court or governmental body which materially and
adversely affects the Fund's business or the ability of the Fund to
consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Fund for each of the
fiscal years in the five year period ended , have been audited by KPMG
LLP, independent auditors, and are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of
which have been furnished to the Acquiring Fund) fairly reflect the
financial condition of the Fund as of such dates, and there are no known
contingent liabilities of the Fund as of such dates not disclosed therein;
(g) The Fund will file its final federal and other tax returns for the
period ending on the Closing Date in accordance with the Code. At the
Closing Date, all federal and other tax returns and reports of the Fund
required by law then to have been filed prior to the Closing Date shall have
been filed, and all federal and other taxes shown as due on such returns
shall have been paid so far as due, or provision shall have been made for
the payment thereof and, to the best of the Fund's knowledge, no such return
is currently under audit and no assessment has been asserted with respect to
such returns;
(h) For the most recent taxable year of its operation and for the taxable
year that will end on the Closing Date, the Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company;
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(i) All issued and outstanding shares of the Fund are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
nonassessable. All of the issued and outstanding shares of the Fund will, at
the time of Closing, be held by the persons and in the amounts set forth in
the records of the transfer agent as provided in paragraph 3.3. The Fund
does not have outstanding any options, warrants or other rights to subscribe
for or purchase any shares of the Fund, nor is there outstanding any
security convertible into any shares of the Fund;
(j) At the Closing Date, the Fund will have good and marketable title to
its assets to be transferred to the Fund pursuant to paragraph 1.2 and full
right, power and authority to sell, assign, transfer and deliver such assets
hereunder and, upon delivery and payment for such assets, the Acquiring Fund
will acquire good and marketable title thereto, subject to no restrictions
on the full transfer thereof, including such restrictions as might arise
under the Securities Act of 1933, as amended (the "1933 Act"), other than as
disclosed to the Acquiring Fund;
(k) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Fund's Board of
Directors, and subject to the approval of the Fund's shareholders, this
Agreement, assuming due authorization, execution and delivery by the
Acquiring Fund, will constitute a valid and binding obligation of the Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
(l) The information to be furnished by the Fund for use in no-action
letters, applications for exemptive orders, registration statements, proxy
materials and other documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations thereunder applicable thereto; and
(m) The proxy statement of the Fund (the "Proxy Statement") to be
included in the Registration Statement referred to in paragraph 5.7 (other
than information therein that relates to the Acquiring Fund) will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were
made, not misleading.
4.2. The Acquiring Fund represents and warrants to the Fund as follows:
(a) The Acquiring Fund is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland;
(b) The Acquiring Fund is a registered investment company classified as a
management company of the open-end type and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets;
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(e) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation of
its Articles of Incorporation or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking with respect to the
Acquiring Fund to which the Acquiring Fund is a party or by which it is
bound;
(f) No litigation or administrative proceeding or investigation of or
before any court or governmental body is presently pending or threatened
against the Acquiring Fund or any of the Acquiring Fund's properties or
assets. The Acquiring Fund knows of no facts which might form the basis for
the institution of such proceedings and the Acquiring Fund is not a party to
or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects the Acquiring
Fund's business or ability to consummate the transactions contemplated
herein;
(g) The Statement of Assets and Liabilities of the Acquiring Fund for the
fiscal year ended February 28, 2001, have been audited by KPMG LLP,
independent auditors, and are in accordance with generally accepted
accounting principles consistently applied, and such statements (copies of
which have been furnished to the Fund) fairly reflect the financial
condition of the Acquiring Fund as of such dates, and there are no known
contingent liabilities of the Acquiring Fund as of such dates not disclosed
therein;
(h) At the Closing Date, all federal and other tax returns and reports of
the Acquiring Fund required by law then to have been filed by such date
shall have been filed, and all federal and other taxes shown as due on said
returns and reports shall have been paid so far as due, or provision shall
have been made for the payment thereof and, to the best of the Acquiring
Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(i) For the most recent fiscal year of its operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and the Acquiring Fund intends
to do so in the future;
(j) At the date hereof, all issued and outstanding shares of the
Acquiring Fund are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable. The Acquiring Fund does not
have outstanding any options, warrants or other rights to subscribe for or
purchase any shares of the Acquiring Fund, nor is there outstanding any
security convertible into shares of the Acquiring Fund (other than Class B
shares of the Acquiring Fund which, under certain circumstances, are
convertible into Class A shares of the Acquiring Fund);
(k) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action, if any, on the part of the
Acquiring Fund's Board of Directors, and this Agreement, assuming due
authorization, execution and delivery by the Fund, constitutes a valid and
binding obligation of the Acquiring Fund, enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to the Fund, for
the account of the Fund Shareholders, pursuant to the terms of this
Agreement, will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly issued Acquiring Fund Shares,
and will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof;
(m) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material
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respects and shall comply in all material respects with federal securities
and other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration Statement
(only insofar as it relates to the Acquiring Fund) will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading; and
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order
to continue the Acquiring Fund's operations after the Closing Date.
5. COVENANTS OF THE FUND AND THE ACQUIRING FUND
5.l. The Acquiring Fund and the Fund each will operate its business in the
ordinary course between the date hereof and the Closing Date. It is understood
that such ordinary course of business will include the declaration and payment
of customary dividends and distributions and any other dividends and
distributions deemed advisable, in each case payable either in cash or in
additional shares.
5.2. The Fund will call a meeting of its shareholders to consider and act
upon this Agreement and to take all other action necessary to obtain approval
of the transactions contemplated herein.
5.3. The Fund covenants that the Acquiring Fund Shares to be issued
hereunder are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.4. The Fund will assist the Acquiring Fund in obtaining such information
as the Acquiring Fund reasonably requests concerning the beneficial ownership
of the Fund's shares.
5.5. Subject to the provisions of this Agreement, the Acquiring Fund and the
Fund, each will take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty days after the
Closing Date, the Fund shall furnish the Acquiring Fund, in such form as is
reasonably satisfactory to the Acquiring Fund, a statement of the earnings and
profits of the Fund for federal income tax purposes which will be carried over
to the Acquiring Fund as a result of Section 381 of the Code and which will be
certified by the Chairman of the Board or President and the Treasurer of the
Fund.
5.7. The Fund will provide the Acquiring Fund with information reasonably
necessary for the preparation of a prospectus (the "Prospectus") which will
include the Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act") and the 1940 Act in connection with the
meeting of the Fund's shareholders to consider approval of this Agreement and
the transactions contemplated herein.
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6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND
The obligations of the Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by the Acquiring
Fund of all of the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Acquiring Fund contained in
this Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
6.2. The Acquiring Fund shall have delivered to the Fund a certificate
executed in its name by its Chairman of the Board, President or Vice President
and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
the Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct in all material respects at and as of the Closing Date, except
as they may be affected by the transactions contemplated by this Agreement; and
6.3. The Fund shall have received on the Closing Date a favorable opinion
from Willkie Farr & Gallagher, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to Christina T. Sydor, Esq.,
Secretary of the Fund, covering the following points:
That (a) the Acquiring Fund is a corporation duly organized and validly
existing under the laws of the State of Maryland; (b) the Acquiring Fund is an
open-end management investment company registered under the 1940 Act; (c) this
Agreement, the Reorganization provided for hereunder and the execution of this
Agreement have been duly authorized and approved by all requisite action of the
Acquiring Fund, and this Agreement has been duly executed and delivered by the
Acquiring Fund and, assuming due authorization by the Fund, is a valid and
binding obligation of the Acquiring Fund, enforceable in accordance with its
terms against the assets of the Acquiring Fund, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; and (d) the Acquiring Fund Shares to be issued to the Fund
for distribution to its shareholders pursuant to this Agreement have been, to
the extent of the number of Acquiring Fund Shares of the particular class
authorized to be issued by the Acquiring Fund in its Articles of Incorporation
and then unissued, duly authorized and, subject to the receipt by the Acquiring
Fund of consideration equal to the respective net asset values thereof (but in
no event less than the par value thereof), such Acquiring Fund Shares, when
issued in accordance with this Agreement, will be validly issued and fully paid
and non-assessable.
Such opinion may state that it is solely for the benefit of the Fund, its
Directors and its officers. Such counsel may rely, as to matters governed by
the laws of the State of Maryland, on an opinion of Maryland counsel.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:
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7.1. All representations and warranties of the Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if
made on and as of the Closing Date;
7.2. The Fund shall have delivered to the Acquiring Fund a statement of the
Fund's assets and liabilities, together with a list of the Fund's portfolio
securities showing the tax basis of such securities by lot and the holding
periods of such securities, as of the Closing Date, certified by the Treasurer
or Assistant Treasurer of the Fund;
7.3. The Fund shall have delivered to the Acquiring Fund on the Closing Date
a certificate executed in its name by its Chairman of the Board, President or
Vice President and its Treasurer or Assistant Treasurer, in form and substance
satisfactory to the Acquiring Fund and dated as of the Closing Date, to the
effect that the representations and warranties of the Fund made in this
Agreement are true and correct in all material respects at and as of the
Closing Date, except as they may be affected by the transactions contemplated
by this Agreement; and
7.4. The Acquiring Fund shall have received on the Closing Date a favorable
opinion of Willkie Farr & Gallagher, counsel to the Fund, in a form
satisfactory to Christina T. Sydor, Esq., Secretary of the Acquiring Fund,
covering the following points:
That (a) the Fund is a corporation duly organized and validly existing under
the laws of the State of Maryland; (b) the Fund is a closed-end management
investment company registered under the 1940 Act; and (c) this Agreement, the
Reorganization provided for hereunder and the execution of this Agreement have
been duly authorized and approved by all requisite action of the Fund, and this
Agreement has been duly executed and delivered by the Fund and, assuming due
authorization, execution and delivery by the Acquiring Fund, is a valid and
binding obligation of the Fund enforceable in accordance with its terms against
the Fund, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles.
Such opinion may state that it is solely for the benefit of the Acquiring
Fund, its Directors and its officers. Such counsel may rely, as to matters
governed by the laws of the State of Maryland, on an opinion of Maryland
counsel.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE FUND AND THE ACQUIRING
FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquiring Fund or the Fund, the other party to
this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Fund in accordance with the provisions of its Articles of Incorporation and
By-laws and certified copies of the votes evidencing such approval shall have
been delivered to the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Fund may waive the conditions set
forth in this paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or the transactions contemplated herein;
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8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state Blue Sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) (and including the filing of Articles of Transfer with the
Maryland State Department of Assessments and Taxation) deemed necessary by the
Acquiring Fund or the Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of
a material adverse effect on the assets or properties of the Acquiring Fund or
the Fund, provided that either party hereto may for itself waive any of such
conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act;
8.5. The Fund shall have declared and paid a dividend or dividends on the
outstanding shares of the Fund which, together with all previous such
dividends, shall have the effect of distributing to the shareholders of the
Fund all of the investment company taxable income of the Fund for all taxable
years ending on or prior to the Closing Date. The dividend declared and paid by
the Fund shall also include all of such Fund's net capital gain realized in all
taxable years ending on or prior to the Closing Date (after reduction for any
capital loss carry forward);
8.6. The parties shall have received a favorable opinion of Willkie Farr &
Gallagher, addressed to the Acquiring Fund and the Fund and satisfactory to
Christina T. Sydor, Esq., as Secretary of each of the Funds, substantially to
the effect that for federal income tax purposes:
(a) the transfer of all of the Fund's assets in exchange for Acquiring
Fund Shares and the assumption by the Acquiring Fund of all of the
outstanding liabilities 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 are each a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (b) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Fund in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of all of
the outstanding liabilities of the Fund; (c) 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 Acquiring Fund Shares and the assumption by
the Acquiring Fund of all of the outstanding liabilities of the Fund or upon
the distribution (whether actual or constructive) of Acquiring Fund Shares
to Fund's shareholders; (d) no gain or loss will be recognized by
shareholders of the Fund upon the exchange of their Fund shares for the
Acquiring Fund Shares; (e) the aggregate tax basis for the Acquiring Fund
Shares received by each of the Fund's shareholders pursuant to the
Reorganization will be the same as the aggregate tax basis of the Fund
shares held by such shareholder immediately prior to the Reorganization, and
the holding period of Acquiring Fund Shares to be received by each Fund
shareholder will include the period during which the Fund shares exchanged
therefor were held by such shareholder (provided that such Fund shares were
held as capital assets on the date of the Reorganization); and (f) the tax
basis to the Acquiring Fund of the Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Fund
immediately prior to the Reorganization, and the holding period of the
assets of the Fund in the hands of the Acquiring Fund will include the
period during which those assets were held by the Fund.
Notwithstanding anything herein to the contrary, neither the Acquiring Fund
nor the Fund may waive the conditions set forth in this paragraph 8.6.
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9. BROKERAGE FEES AND EXPENSES
9.1. The Acquiring Fund represents and warrants to the Fund, and the Fund
represents and warrants to the Acquiring Fund, that there are no brokers or
finders entitled to receive any payments in connection with the transactions
provided for herein.
9.2. (a) Except as may be otherwise provided herein, the Fund shall be
liable for the expenses incurred in connection with entering into and carrying
out the provisions of this Agreement, including the expenses of: (i) counsel
and independent accountants associated with the Reorganization; (ii) printing
and mailing the Prospectus/Proxy Statement and soliciting proxies in connection
with the meeting of shareholders of the Fund referred to in paragraph 5.2
hereof, (iii) any special pricing fees associated with the valuation of the
Fund's or the Acquiring Fund's portfolio on the Closing Date; (iv) expenses
associated with preparing this Agreement and preparing and filing the
Registration Statement under the 1933 Act covering the Acquiring Fund Shares to
be issued in the Reorganization; (v) registration or qualification fees and
expenses of preparing and filing such forms, if any, necessary under applicable
state securities laws to qualify the Acquiring Fund Shares to be issued in
connection with the Reorganization. The Fund shall be liable for: (x) all fees
and expenses related to the liquidation and dissolution of the Fund; and (y)
fees and expenses of the Fund's custodian and transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the Fund, prior to the
Closing, shall pay for or include in the unaudited Statement of Assets and
Liabilities prepared pursuant to paragraph 1.3 all of its known and reasonably
estimated expenses associated with the transactions contemplated by this
Agreement.
10.ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The parties hereto agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall not survive the consummation of the transactions contemplated
hereunder.
11.TERMINATION
11.1. This Agreement may be terminated at any time prior to the Closing Date
by: (i) the mutual agreement of the Fund and the Acquiring Fund; (ii) the Fund
in the event that the Acquiring Fund shall, or the Acquiring Fund in the event
that the Fund shall, materially breach any representation, warranty or
agreement contained herein to be performed at or prior to the Closing Date; or
(iii) the Fund or by the Acquiring Fund, if a condition herein expressed to be
precedent to the obligations of the terminating party has not been met and it
reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability for
damages on the part of either the Fund or the Acquiring Fund or their
respective Directors or officers to the other party, but each shall bear the
expenses incurred by it incidental to the preparation and carrying out of this
Agreement as provided in paragraph 9.
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12.AMENDMENTS; WAIVERS
12.1. This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Fund and the Acquiring Fund; provided, however, that following the meeting of
the Fund shareholders called by the Fund pursuant to paragraph 5.2 of this
Agreement, no such amendment may have the effect of changing the provisions for
determining the number of Acquiring Fund Shares to be issued to the Fund's
shareholders under this Agreement to the detriment of such shareholders without
their further approval.
12.2. At any time prior to the Closing Date either party hereto may by
written instrument signed by it (i) waive any inaccuracies in the
representations and warranties made to it contained herein and (ii) waive
compliance with any of the covenants or conditions (other than those contained
in paragraph 8.1 of this Agreement) made for its benefit contained herein.
13.NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by hand
delivery, fax, or certified mail addressed to Greenwich Street Municipal Fund
Inc., 125 Broad Street, New York, New York 10004, Attention: Heath B. McLendon;
or to Smith Barney California Municipals Fund Inc., 125 Broad Street, New York,
New York 10004, Attention: Heath B. McLendon.
14.HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.l. The article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm, corporation or other entity, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its Chairman of the Board, President or Vice President and
attested by its Secretary or Assistant Secretary.
Attest: GREENWICH STREET CALIFORNIA MUNICIPAL
FUND INC.
By:
Name: Christina T. Sydor Name: Heath B. McLendon
Title: Secretary Title: Chairman of the Board/President
Attest: SMITH BARNEY CALIFORNIA MUNICIPALS
FUND INC.
By:
Name: Christina T. Sydor Name: Heath B. McLendon
Title: Secretary Title: Chairman of the Board/President
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APPENDIX A
5% SHAREHOLDERS OF SMITH BARNEY CALIFORNIA
As of November 16, 2001 the following shareholders beneficially owned 5% or
more of a class of shares of Smith Barney California:
A-1
APPENDIX B
AUDIT COMMITTEE CHARTER OF GREENWICH STREET CALIFORNIA
I. Composition of the Audit Committee: The Audit Committee shall be comprised
of at least three directors, each of whom shall have no relationship to the
Company that may interfere with the exercise of their independence from
management and the Company and shall otherwise satisfy the applicable
membership requirements under the rules of the New York Stock Exchange, Inc.
as such requirements are interpreted by the Board of Directors in its
business judgment.
II.Purposes of the Audit Committee: The purposes of the Audit Committee are to
assist the Board of Directors:
1. in its oversight of the Company's accounting and financial reporting
principles, policies and controls, and audit processes;
2. in its oversight of the Company's financial statements and the
independent audit thereof;
3. in selecting, evaluating and, where deemed appropriate, replacing the
outside auditors; and
4. in evaluating the independence of the outside auditors.
The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements. Management and the internal auditing department
are responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit
of the Company's annual financial statement in accordance with Generally
Accepted Auditing Standards. In fulfilling their responsibilities hereunder, it
is recognized that members of the Audit Committee are not full-time employees
of the Company and are not, and do not represent themselves to be, accountants
or auditors by profession or experts in the fields of accounting or auditing
including the issue of auditor independence. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures or to set auditor
independence standards, and each member of the Audit Committee shall be
entitled to rely on (i) the integrity of those persons and organizations within
and outside the Company from which it receives information (ii) the accuracy of
the financial and other information provided to the Audit Committee by such
persons and organizations absent actual knowledge to the contrary (which shall
be promptly reported to the Board of Directors) and (iii) representations made
by management of the Company or of Smith Barney Fund Management LLC ("SBFM") as
to any information technology, internal audit and other non-audit services
provided by the outside auditors of the Company to the Company, SBFM and any
entity controlling, controlled by or under common control with SBFM that
provides services to the Company ("SBFM Affiliates").
The outside auditors for the Company are ultimately accountable to the Board
of Directors (as assisted by the Audit Committee). The Board of Directors, with
the assistance of the Audit Committee, has the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the outside
auditors.
The outside auditors shall submit to the Audit Committee annually a formal
written statement delineating all relationships between the outside auditors
and the Company ("Statement as to Independence") which, in the
B-1
auditor's professional judgement may be reasonably thought to bear on
independence, addressing each non-audit service provided to the Company, SBFM
and the SBFM Affiliate and at least the matters set forth in Independence
Standards Board No. 1. The Statement as to Independence shall also identify any
audit, tax or consulting services to the custodian, or other service providers
to the Company, and to other investment companies advised by the Company's
investment adviser or administered by the Company's administrator, as the Audit
Committee and the outside auditors may agree. These professional services may
include those relating to the services provided by such service providers to
the Company or any other services that the outside auditors or the Committee
believe may bear on the outside auditor independence with respect to the
Company. The Audit Committee acknowledges that the disclosure of such services
provided by the outside auditors may be limited by the Code of Professional
Conduct of the American Institute of Certified Public Accountants.
The outside auditors shall submit to the Company annually a formal written
statement of the fees billed for each of the following categories of services
rendered by the outside auditors: (i) the audit of the Company's financial
statements; (ii) information technology consulting services provided to the
Company, SBFM, and the SBFM Affiliates for the most recent fiscal year, in the
aggregate and, (iii) all other services provided to the Company, SBFM, and the
SBFM Affiliates by the outside auditors for the most recent fiscal year, in the
aggregate.
III.Meetings of the Audit Committee: The Audit Committee shall meet at least
annually with the outside auditors to discuss the annual audited financial
statements and results of their audit. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or
outside auditors to attend a meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee.
IV.Duties and Powers of the Audit Committee: To carry out its purposes, the
Audit Committee shall have the following duties and powers:
1. to provide advice to the Board of Directors in selecting, evaluating or
replacing outside auditors;
2. to review the fees charged by the outside auditors for audit and
non-audit services;
3. to ensure that the outside auditors prepare and deliver annually a
Statement as to Independence (it being understood that the outside
auditors are responsible for the accuracy and completeness of this
Statement), to discuss with the outside auditors any relationships or
services disclosed in this Statement that may impact the objectivity and
independence of the Company's outside auditors and to recommend that the
Board of Directors take appropriate action in response to this Statement
to satisfy itself of the outside auditors' independence;
4. If applicable, to consider whether the outside auditors' provision to
the Company, SBFM Affiliates of (a) information technology consulting
services relating to financial information systems design and
implementation and (b) other non-audit services is compatible with
maintaining the independence of the outside auditors; and
5. to instruct the auditors that the outside auditors are ultimately
accountable to the Board of Directors and Audit Committee;
6. to advise management and the outside auditors that they are expected to
provide to the Audit Committee a timely analysis of significant
financial reporting issues and practices;
B-2
7. to consider any reports or communications (and management's responses
thereto) submitted to the Audit Committee by the outside auditors
required by or referred to in SAS 61 (as codified by AU Section 380), as
may be modified or supplemented, including reports and communications
related to:
. deficiencies noted in the audit in the design or operation of
internal controls;
. consideration of fraud in a financial statement audit;
. detection of illegal acts;
. the outside auditors' responsibility under generally accepted
auditing standards;
. significant accounting policies;
. management judgments and accounting estimates;
. adjustments arising from the audit;
. the responsibility of the outside auditors for other information in
documents containing audited financial statements;
. disagreements with management;
. consultation by management with other accountants;
. major issues discussed with management prior to retention of the
outside auditors;
. difficulties encountered with management in performing the audit;
. the outside auditors' judgments about the quality of the entity's
accounting principles; and
. reviews of interim financial information conducted by the outside
auditors; (not applicable) and
8. with respect to reporting and recommendations, to discuss with the
Company's General Counsel any significant legal matters that may have a
material effect on the financial statements, the Company's compliance
policies, including material notices to or inquiries received from
governmental agencies;
9. to prepare any report or other disclosures, including any recommendation
of the Audit Committee, required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement;
10.to review this Charter at least annually and recommend any changes to
the full Board of Directors; and
11.to report its activities to the full Board of Directors on a regular
basis and to make such recommendations with respect to the above and
other matters as the Audit Committee may deem necessary or appropriate.
V. Resources and Authority of the Audit Committee: The Audit Committee shall
have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage outside auditors for
special audits, reviews and other procedures and to retain special counsel
and other experts or consultants.
B-3
PROSPECTUS OF SMITH BARNEY CALIFORNIA DATED
JUNE 28, 2001 IS INCORPORATED BY REFERENCE
TO SMITH BARNEY CALIFORNIA'S N-1A REGISTRATION
STATEMENT
PART B
INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 30, 2001
Acquisition of the Assets of
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
("Greenwich Street California")
125 Broad Street
New York, New York 10004
[________]
By and in Exchange for Shares of
SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.
("Smith Barney California")
125 Broad Street
New York, New York 10004
[________]
This Statement of Additional Information, relating specifically to the
proposed transfer of all of the assets of Greenwich Street California to Smith
Barney California, in exchange for Class A shares of Smith Barney California and
the assumption by Smith Barney California of all of the outstanding liabilities
of Greenwich Street California, 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 Smith Barney California, dated
June 28, 2001.
2. Annual Report of Smith Barney California for the year ended February 28,
2001.
3. Semi-Annual Report of Smith Barney California for the period ended
August 31, 2001.
4. Annual Report of Greenwich Street California for the year ended August
31, 2001.
This Statement of Additional Information is not a prospectus. A combined
Prospectus/Proxy Statement, dated November 30, 2001, relating to the
above-referenced matter may be obtained without charge by calling or writing
Greenwich Street California or Smith Barney California at the applicable
telephone number or address set forth above. This Statement of Additional
Information should be read in conjunction with the combined Prospectus/Proxy
Statement.
SCHEDULE OF INVESTMENTS
Portfolio of Investments at November 16, 2001 (Unaudited)
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GREENWICH STREET CALIFORNIA SMITH BARNEY CALIFORNIA
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THE ANNUAL REPORT AND STATEMENT OF ADDITIONAL INFORMATION OF
SMITH BARNEY CALIFORNIA DATED FEBRUARY 28, 2001 AND JUNE 28, 2001,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY
SMITH BARNEY CALIFORNIA
THE ANNUAL REPORT AND PROSPECTUS OF GREENWICH STREET CALIFORNIA
DATED AUGUST 31, 2001 AND DECEMBER 29, 2000,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY
GREENWICH STREET CALIFORNIA
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Reference is made to ARTICLE IX of Registrant's Articles of Incorporation.
ARTICLE IX provides: "To the fullest extent permitted by Maryland General
Corporation Law, as amended from time to time, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages, except to the extent such exemption from liability or
limitation thereof is not permitted by the Investment Company Act of 1940, as
amended from time to time. No amendment to these Articles of Incorporation or
repeal of any of its provisions shall limit or eliminate the benefits provided
to directors or officers under this provision with respect to any act or
omission which occurred prior to such amendment or repeal." [see also ARTICLE V
--- ----
of BY-LAWS]
ITEM 16. EXHIBITS
1. (a) Registrant's Articles of Incorporation dated February 16, 1984 are
incorporated by reference to the Registrant's Registration Statement on Form
N-1A as filed with the Securities and Exchange Commission on February 21, 1984.
File Nos. 2-89548 and 811-3970 (the "N-1A Registration Statement").
(b) Articles of Amendment dated August 26, 1987, December 14, 1988,
November 4, 1992 and July 30, 1993, respectively, to Articles of Incorporation
are incorporated by reference to Post-Effective Amendment No. 18 to the N-1A
Registration Statement ("Post-Effective Amendment No. 18").
(c) Articles of Amendment dated October 14, 1994 are incorporated by
reference to Post-Effective Amendment No. 21 to the N-1A Registration Statement
("Post-Effective Amendment No. 21").
(d) Form of Articles of Amendment to the Articles of Incorporation are
incorporated by reference to Post-Effective Amendment No. 21.
(e) Articles Supplementary dated November 2, 1992, to Articles of
Incorporation are incorporated by reference to Post-Effective Amendment No. 18.
(f) Form of Articles Supplementary to the Articles of Incorporation are
incorporated by reference to Post-Effective Amendment No. 21.
(g) Amendment to Registrant's Articles of Incorporation dated June 1,
1998 is incorporated by reference to Post-Effective Amendment No. 25 to the
Registration Statement filed on June 26, 1998 ("Post-Effective Amendment No.
25").
2. (a) Registrant's By-Laws dated March 21, 1984 are incorporated by
reference to Pre-Effective Amendment No. 1 to the N-1A Registration Statement
("Pre-Effective Amendment No. 1")
(b) Amendments to Registrant's By-Laws dated March 21, 1987 are
incorporated by reference to Post-Effective Amendment No. 5 to the N-1A
Registration Statement ("Post-Effective Amendment No. 5").
(c) Amendment to Registrant's By-Laws dated July 20, 1994 is
incorporated by reference to Post-Effective Amendment No. 22 to the N-1A
Registration Statement ("Post-Effective Amendment No. 22")
3. Not applicable
4. Form of Agreement and Plan of Reorganization is filed herewith as
Exhibit 4.
5. Not applicable.
6. (a) Investment Advisory Agreement between the Registrant and Greenwich
Street Advisors dated July 30, 1993 is incorporated by reference to
Post-Effective Amendment No. 18.
(b) Form of Transfer and Assumption of Investment Advisory Agreement
dated as of November 7, 1994 is incorporated by reference to Post-Effective
Amendment No. 21.
(c) Amendment to Investment Advisory Agreement dated November 17, 1995
is incorporated by reference to Post-Effective Amendment No. 23 to the N-1A
Registration Statement ("Post-Effective Amendment No. 23").
7. (a) Distribution Agreement between the Registrant and Smith Barney
Shearson Inc. dated July 30, 1993 is incorporated by reference to Post-Effective
Amendment No. 18.
(b) Distribution Agreement between CFBDS, Inc. and the Registrant dated
October 8, 1998 is incorporated by reference to Post-Effective Amendment No. 26
to the N-1A Registration Statement ("Post-Effective Amendment No. 26").
(c) Form of Distribution Agreement with Salomon Smith Barney Inc. is
incorporated by reference to Post-Effective Amendment No. 28 to the N-1A
Registration Statement ("Post-Effective Amendment No. 28").
(d) Form of Distribution Agreement with PFS Distributors, Inc. is
incorporated by reference to Post-Effective Amendment No. 28.
(e) Selling Group Agreement is incorporated by reference to
Post-Effective Amendment No. 26.
8. Not applicable.
9. Form of Custodian Agreement between the Registrant and PNC Bank,
National Association is incorporated by reference to Post-Effective Amendment
No. 22.
10. (a) Amended Service and Distribution Plan pursuant to Rule 12b-1
between the Registrant and Smith Barney Inc. is incorporated by reference to
Post-Effective Amendment No. 21.
(b) Form of Amended Service and Distribution Plans pursuant to Rule
12b-1 with Salomon Smith Barney Inc. and PFS Distributors, Inc. is incorporated
by reference to Post-Effective Amendment No. 28.
(c) Form of Amended Service and Distribution Plan pursuant to Rule
12b-1 between the Registrant and PFS Distributors, Inc., ("PFS") is incorporated
by reference to Post-Effective Amendment No. 28.
11. Opinion and Consent of Willkie Farr & Gallagher. Filed herewith.
12. (a) Form of Opinion and Consent of Willkie Farr & Gallagher supporting
the tax matters and consequences to shareholders discussed in the prospectus.
Filed herewith.
(b) Form of Opinion and Consent of Willkie Farr & Gallagher relating to
certain issues discussed in the prospectus. Filed herewith.
(c) Form of Opinion and Consent of Willkie Farr & Gallagher relating to
certain issues discussed in the prospectus. Filed herewith.
13. (a) Transfer Agency Agreement between the Registrant and The
Shareholders Services Group, Inc. dated August 2, 1993 is incorporated by
reference to Post-Effective Amendment No. 18.
(b) Transfer Agency Agreement dated October 1, 1999 between the
Registrant and Smith Barney Private Trust Company is incorporated by reference
to Post-Effective Amendment No. 28.
(c) Administration Agreement dated April 20, 1994 between the
Registrant and Smith Barney Advisers, Inc. is incorporated by reference to
Post-Effective Amendment No. 21.
(d) Sub-transfer Agency Agreement with PFPC Global Fund Services is
incorporated by reference to Post-Effective Amendment No. 29.
(e) Sub-transfer Agency Agreement with Primerica Shareholder Services
is incorporated by reference to Post-Effective Amendment No. 29.
14. Consent of KPMG LLP. Filed herewith.
15. Not Applicable.
16. Powers of Attorney. Filed herewith.
17. Form of proxy card. Filed herewith.
ITEM 17. UNDERTAKINGS
1. The undersigned registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [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 the other items of
the applicable form.
2. The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the Registration Statement on Form N-14 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 1st day of November, 2001.
SMITH BARNEY CALIFORNIA MUNICIPALS FUND INC.
By: /s/ Heath B. McLendon
-----------------------------------------
Heath B. McLendon
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Heath B. McLendon President, November 1, 2001
---------------------- Chief Executive Officer and
Heath B. McLendon Chairman
/s/ Herbert Barg* Director November 1, 2001
------------------
Herbert Barg
/s/ Alfred J. Bianchetti* Director November 1, 2001
-------------------------
Alfred J. Bianchetti
/s/ Martin Brody* Director November 1, 2001
------------------
Martin Brody
/s/ Dwight B. Crane* Director November 1, 2001
---------------------
Dwight B. Crane
/s/ Burt N. Dorsett* Director November 1, 2001
---------------------
Burt N. Dorsett
/s/ Elliot S. Jaffe* Director November 1, 2001
---------------------
Elliot S. Jaffe
/s/ Stephen E. Kaufmann* Director November 1, 2001
------------------------
Stephen E. Kaufmann
/s/ Joseph J. McCann* Director November 1, 2001
---------------------
Joseph J. McCann
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Cornelius C. Rose, Jr.* Director November 1, 2001
---------------------------
Cornelius C. Rose, Jr.
/s/ Lewis E. Daidone* Senior Vice President November 1, 2001
---------------------- and Treasurer
Lewis E. Daidone
*By: /s/ Heath B. McLendon Secretary November 1, 2001
---------------------
Heath B. McLendon
Pursuant to Power of Attorney
EXHIBIT INDEX
Exhibit 4 Form of Agreement and Plan of Reorganization.
Exhibit 11 Form of Opinion and Consent of Willkie Farr & Gallagher
Exhibit 12(a) Form of Opinion and Consent of Willkie Farr & Gallagher as
to certain tax matters
Exhibit 12(b) Form of Opinion and Consent of Willkie Farr & Gallagher as
to certain matters discussed in the prospectus/proxy
statement
Exhibit 12(c) Form of Opinion and Consent of Willkie Farr & Gallagher as
to certain matters discussed in the prospectus/proxy
statement
Exhibit 14 Consent of KPMG LLP
Exhibit 16 Power of Attorney
Exhibit 17 Form of Proxy Card