As filed with the Securities and Exchange Commission on June 15, 2001.
File Nos. 333- ________
811-5034
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
CITIFUNDS TAX FREE INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
Seven World Trade Center
New York, New York 10048
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Area Code: 800-995-0134
HEATH B. MCLENDON
CITI FUND MANAGEMENT INC.
Seven World Trade Center
New York, New York 10048
(Name and Address of Agent for Service)
WITH COPIES TO:
Robert I. Frenkel, Esq. Christina T. Sydor, Esq. Roger P. Joseph, Esq. Sarah Cogan, Esq.
Citi Fund Management Inc. Citi Fund Management Inc. Bingham Dana LLP Simpson Thacher & Bartlett
Seven World Trade Center Seven World Trade Center 150 Federal Street 425 Lexington Avenue
New York, NY 10048 New York, NY 10048 Boston, MA 02110 New York, NY 10017
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: as soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933
TITLE OF SECURITIES BEING REGISTERED:
Shares of Beneficial Interest (without 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; accordingly, no fee is payable herewith because of reliance upon
Section 24(f).
It is proposed that this filing will become effective on July 16, 2001 pursuant
to Rule 488 under the Securities Act of 1933.
EXPLANATORY NOTE
Prior to the date that the attached Proxy Statement/Prospectus is to be
delivered to shareholders, CitiFunds Tax Free Income Trust intends to change its
name to "Salomon Funds Trust" and Citi National Tax Free Income Fund intends to
change its name to "Salomon Brothers National Tax Free Income Fund". Those name
changes are contemplated by the attached Proxy Statement/Prospectus, Statement
of Additional Information and exhibits.
CITIFUNDS TAX FREE INCOME TRUST
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
ITEM NO. HEADING
- -------- -------
PART A
- ------
1. Beginning of Registration
Statement and Outside Front
Cover Page of Prospectus ....... Cover Page
2. Beginning and Outside Back Cover
Page of Prospectus ............. Table of Contents
3. Fee Table, Synopsis Information Synopsis; Principal Investments,
and Risk Factors ................ Risk Factors, and Investment
Restrictions
4. Information About the Transaction Synopsis; The Proposed Transaction
5. Information About the Registrant Synopsis; The Proposed
Transaction; Additional
Information About the Funds
6. Information About the Company Synopsis; The Proposed Transaction;
Being Acquired ................. Additional Information About the
Funds
7. Voting Information ............. Synopsis; Voting Information
8. Interest of Certain Persons and
Experts ........................ Voting Information
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters ............. Inapplicable
PART B
- ------
10. Cover Page ..................... Statement of Additional Information;
Cover Page
11. Table of Contents .............. Table of Contents
12. Additional Information ......... Statement of Additional Information
13. Additional Information About the
Company Being Acquired ......... Inapplicable
14. Financial Statements ........... Pro Forma Financial Statements
PART C
- ------
Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
Seven World Trade Center, New York, New York 10048
July 20, 2001
Dear Shareholders:
You are being asked to vote on an Agreement and Plan of Reorganization
whereby substantially all of the assets and liabilities of the Salomon Brothers
National Intermediate Municipal Fund (the "Acquired Fund"), a series of Salomon
Brothers Series Funds Inc, will be transferred in a tax-free reorganization to
the Salomon Brothers National Tax Free Income Fund (the "Acquiring Fund"), a
series of Salomon Funds Trust, in exchange for shares of the Acquiring Fund.
If the Agreement and Plan of Reorganization is approved and consummated,
you will no longer be a shareholder of the Acquired Fund; you will become a
shareholder of the Acquiring Fund. You will receive shares of the corresponding
class of the Acquiring Fund with an aggregate net asset value equal to the
aggregate net asset value of your shares of the Acquired Fund.
The Acquiring Fund is advised by Citi Fund Management Inc. ("CFM"). CFM,
like Salomon Brothers Asset Management Inc ("SBAM"), the adviser of the Acquired
Fund, is a subsidiary of Citigroup Inc. Citigroup has proposed the
reorganization of the Acquired Fund into the Acquiring Fund in order to
eliminate duplication in the mutual fund investment advisory operations of CFM
and SBAM.
After carefully studying the merits of the proposal, the Board of
Directors of the Acquired Fund has determined that the reorganization of the
Acquired Fund with the Acquiring Fund will benefit the shareholders of the
Acquired Fund.
The Acquiring Fund will offer Acquired Fund shareholders a mutual fund
with investment objectives and policies that are similar to those of the
Acquired Fund. The Directors of the Acquired Fund believe that combining the
assets of the Acquired Fund with the Acquiring Fund could result in more
efficient mutual fund operations due to economies of scale without substantially
changing the investment profile of the Acquired Fund. As a result of the
reorganization, Acquired Fund shareholders will be part of a large fund family
offering a wide array of mutual funds. Acquired Fund shareholders will be able
to exchange their shares among most or all of those funds.
The Board of Directors of the Acquired Fund believes that the proposal set
forth in the enclosed notice of meeting is important and recommends that you
read the enclosed materials carefully and then vote for the proposal. PLEASE
TAKE A MOMENT NOW TO SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOU MAY ALSO CAST YOUR VOTE BY FAX, THE INTERNET OR
TELEPHONE AS DESCRIBED IN THE ENCLOSED MATERIALS. Additional information
regarding voting is included with the enclosed proxy card.
Respectfully,
Heath B. McLendon
President
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, OR CAST YOUR VOTE BY FAX, THE INTERNET OR TELEPHONE AS
DESCRIBED IN THE ENCLOSED MATERIALS, TO ENSURE A QUORUM AT THE MEETING. YOUR
VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
QUESTIONS AND ANSWERS ABOUT THIS TRANSACTION
WHY IS THE REORGANIZATION BEING PROPOSED?
The Reorganization is being proposed because each Fund's board believes that
it is in the best interest of its shareholders.
IF THE REORGANIZATION IS APPROVED, WHAT WILL HAPPEN?
The Acquired Fund will transfer all of its assets and liabilities to the
Acquiring Fund and will receive, in exchange, shares of the Acquiring Fund. The
Acquired Fund will then be liquidated, and each shareholder of each class of the
Acquired Fund will receive that number of full and fractional shares of the
corresponding class of the Acquiring Fund having a net asset value equal to the
aggregate net asset value of the shareholder's shares of the Acquired Fund held
on the Closing Date. After the Reorganization, you will own shares of the
Acquiring Fund rather than shares of the Acquired Fund.
WHAT WILL BE THE EFFECT ON THE INVESTMENT STRATEGIES ASSOCIATED WITH MY
INVESTMENT IF THE PROPOSED CHANGES ARE APPROVED?
The Acquiring Fund has similar investment objectives and policies to those of
the Acquired Fund. Each of the Acquired Fund and the Acquiring Fund invests
primarily in fixed income securities consisting primarily of obligations issued
by state and municipal governments and other qualifying issuers that pay
interest that is exempt from regular federal income tax.
HOW WILL THE FEES AND EXPENSES ASSOCIATED WITH MY INVESTMENT BE AFFECTED?
The contractual (or pre-waiver) and actual (or post-waiver) total annual
operating expenses will be the same or less in the Acquiring Fund than they are
for the Acquired Fund.
WILL THERE BE ANY CHANGE WITH RESPECT TO THE MANAGEMENT OF MY INVESTMENT?
Yes. The Acquired Fund's investment manager is Salomon Brothers Asset
Management Inc. ("SBAM"), a wholly-owned subsidiary of Citigroup Inc. Citi
Fund Management Inc. ("CFM") is the investment manager of the Acquiring Fund,
and will continue to serve as the investment manager of the Acquiring Fund
after the consummation of the Reorganization. CFM is also a wholly-owned
subsidiary of Citigroup Inc.
WHO WILL BE RESPONSIBLE FOR THE COSTS OF THE REORGANIZATION?
The costs and expenses associated with the Reorganization, including costs of
soliciting proxies, will be the responsibility of Citigroup Inc. and its
affiliates, not the Fund or their shareholders.
WHAT IF I DO NOT VOTE OR VOTE AGAINST THE REORGANIZATION, YET APPROVAL OF THE
REORGANIZATION IS OBTAINED?
You will automatically receive shares of the Acquiring Fund.
AS A HOLDER OF SHARES OF THE ACQUIRED FUND, WHAT DO I NEED TO DO?
Please read the enclosed Proxy Statement/Prospectus and vote. Your vote is
important! Accordingly, please promptly sign, date and mail the proxy card(s)
promptly in the enclosed return envelope as soon as possible.
MAY I ATTEND THE SHAREHOLDERS MEETING IN PERSON?
Yes, you may attend the Meeting in person.
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
Seven World Trade Center
New York, New York 10048
Telephone: (800) 725-6666
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders of the Salomon
Brothers National Intermediate Municipal Fund (the "Acquired Fund"), a series of
Salomon Brothers Series Funds Inc, will be held at the offices of Citigroup
Asset Management, Seven World Trade Center, 40th Floor, Conference Room B, New
York, New York 10048 on Tuesday, September 4, 2001 at 9:15 a.m., Eastern time,
for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement
and Plan of Reorganization that provides for and
contemplates: (1) the transfer of substantially all of the
assets and liabilities of the Acquired Fund to Salomon
Brothers National Tax Free Income Fund (the "Acquiring
Fund"), a series of Salomon Funds Trust, solely in exchange
for shares of the Acquiring Fund; (2) the distribution of
the shares of the Acquiring Fund to the shareholders of the
Acquired Fund in liquidation of the Acquired Fund; and (3)
the termination of the Acquired Fund.
ITEM 2. To transact such other business as may properly come before
the Special Meeting of Shareholders and any adjournments
thereof.
Item 1 is described in the attached Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF THE ACQUIRED FUND RECOMMENDS THAT YOU VOTE IN
FAVOR OF ITEM 1.
If you were a shareholder of record on July 13, 2001 you are entitled to
vote at the Special Meeting of Shareholders and at any adjournments thereof.
Robert I. Frenkel, Secretary
July 20, 2001
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 ADDITIONAL SOLICITATIONS. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE. YOU ALSO MAY RETURN YOUR PROXY BY
FAX, TELEPHONE OR THE INTERNET.
PROXY STATEMENT/PROSPECTUS
July 16, 2001
Relating to the acquisition by
SALOMON BROTHERS NATIONAL TAX FREE INCOME FUND, a series of
SALOMON FUNDS TRUST
Seven World Trade Center
New York, New York 10048
Telephone: (800) 995-0134
of the assets of
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND, a series of
SALOMON BROTHERS SERIES FUNDS INC
Seven World Trade Center
New York, New York 10048
Telephone: (800) 725-6666
This Proxy Statement/Prospectus is furnished to shareholders of the
Salomon Brothers National Intermediate Municipal Fund (the "Acquired Fund "), a
series of Salomon Brothers Series Funds Inc ("SBSF"), in connection with the
solicitation of proxies for a Special Meeting of Shareholders of the Acquired
Fund at which shareholders will be asked to consider and approve a proposed
Agreement and Plan of Reorganization (the "Plan") between SBSF, on behalf of the
Acquired Fund, and Salomon Funds Trust ("SFT"), on behalf of its series the
Salomon Brothers National Tax Free Income Fund (the "Acquiring Fund").
The Plan provides that substantially all of the assets and liabilities of
the Acquired Fund will be transferred to the Acquiring Fund. In exchange for the
transfer of these assets and liabilities, the Acquired Fund will receive shares
of the Acquiring Fund. Shares of the Acquiring Fund so received will then be
distributed to the shareholders of the Acquired Fund in complete liquidation of
the Acquired Fund, and the Acquired Fund will be terminated. There will be no
sales load charged to shareholders of the Acquired Fund when they receive shares
of the Acquiring Fund in the reorganization. As a result of this reorganization
transaction, each shareholder of each class of the Acquired Fund will receive
that number of full and fractional shares of the corresponding class of the
Acquiring Fund having an aggregate net asset value equal to the aggregate net
asset value of the shareholder's shares of the Acquired Fund held on the closing
date of the reorganization transaction (the "Reorganization").
The Acquired Fund and the Acquiring Fund are each series of open-end
management investment companies. The investment objectives and policies of the
Acquiring Fund are compared to those of the Acquired Fund in this Proxy
Statement/Prospectus. The investment objective of the Acquired Fund is to seek a
high level of income which is exempt from regular federal income taxes. The
investment objective of the Acquiring Fund is to generate high levels of current
income exempt from federal income taxes and preserve the value of its
shareholders' investment. Both the Acquiring Fund and the Acquired Fund invest
primarily in municipal securities. Municipal securities are debt obligations
issued by states, cities, towns and other public entities and qualifying issuers
that pay interest that is exempt from federal income tax.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely the information about the Acquiring Fund that a
prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of the
Acquiring Fund, see the Prospectus for the Acquiring Fund, dated July 12,
2001, which is included herewith and incorporated herein by reference. This
Proxy Statement/Prospectus is also accompanied by the Acquiring Fund's Annual
Report to shareholders for the year ended December 31, 2000, which is
incorporated herein by reference. Additional information is set forth in the
Statement of Additional Information of the Acquiring Fund, dated July 12,
2001, which is incorporated herein by reference. The Statement of Additional
Information is on file with the Securities and Exchange Commission and is
available without charge upon request by writing or calling the Acquiring Fund
at the address or telephone number indicated above.
Additional information is set forth in (a) the Statement of Additional
Information relating to this Proxy Statement/Prospectus, dated July 16, 2001,
(b) the Prospectus and Statement of Additional Information of the Acquired Fund
dated April 30, 2001, and (c) the Acquired Fund's Annual Report for the fiscal
year ended December 31, 2000. Each of these documents is incorporated herein by
reference and is on file with the Securities and Exchange Commission. You may
obtain a copy of any of these documents without charge upon request by writing
or calling the Acquired Fund at the address or telephone number indicated above.
This Proxy Statement/Prospectus is expected to be first sent to
shareholders on or about July 20, 2001.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE 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 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 ACQUIRED FUND OR THE ACQUIRING FUND.
TABLE OF CONTENTS
SYNOPSIS............................................................
Proposed Transaction.............................................
Comparison of Investment Objectives and Policies.................
Investment Advisory Services and Management Fees.................
Overall Expenses.................................................
Distribution of Shares and Other Services........................
Sales Charges, Purchase Policies and Redemption and Exchange
Information...................................................
Dividends and Other Distributions................................
Tax Consequences.................................................
PRINCIPAL INVESTMENTS, RISK FACTORS AND INVESTMENT RESTRICTIONS
Principal Investments and Risk Factors...........................
Fundamental Investment Restrictions..............................
Non-Fundamental Investment Restrictions..........................
THE PROPOSED TRANSACTION............................................
Description of the Plan..........................................
Reasons for the Proposed Transaction.............................
Description of the Securities to be Issued.......................
Federal Income Tax Consequences..................................
Liquidation and Termination of the Acquired Fund.................
Portfolio Securities.............................................
Portfolio Turnover...............................................
Pro Forma Capitalization.........................................
Performance......................................................
VOTING INFORMATION..................................................
General Information..............................................
Quorum; Vote Required to Approve Proposal........................
Outstanding Shareholders.........................................
ADDITIONAL INFORMATION ABOUT THE FUNDS..............................
OTHER MATTERS.......................................................
EXHIBIT A - AGREEMENT AND PLAN OF REORGANIZATION
SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus regarding the Acquired Fund and the Acquiring Fund (each a
"Fund", and collectively, the "Funds") and the proposed Reorganization. This
summary is qualified by reference to the more complete information contained
elsewhere in this Proxy Statement/Prospectus, the Prospectus of the Acquiring
Fund, the Prospectus of the Acquired Fund, and the Plan. The Plan is attached to
this Proxy Statement/Prospectus as Exhibit A. Shareholders of the Acquired Fund
should read this entire Proxy Statement/Prospectus carefully.
Proposed Transaction
The Board of Directors of SBSF, on behalf of the Acquired Fund, including
a majority of the Directors who are not "interested persons" of the Acquired
Fund (as defined in the Investment Company Act of 1940, as amended (the "1940
Act")) (the "Non-Interested Directors"), approved the Plan on May 21, 2001. The
Plan provides that substantially all of the assets and liabilities of the
Acquired Fund will be transferred to the Acquiring Fund. In exchange for the
transfer of those assets and liabilities, the Acquired Fund will receive shares
of the Acquiring Fund. Shares of the Acquiring Fund so received will then be
distributed to the shareholders of the Acquired Fund in complete liquidation of
the Acquired Fund, and the Acquired Fund will be terminated. There will be no
sales load charged to shareholders of the Acquired Fund when they receive shares
of the Acquiring Fund in connection with the Reorganization. As a result of the
Reorganization, each shareholder of each class of the Acquired Fund will receive
that number of full and fractional shares of the corresponding class of the
Acquiring Fund having an aggregate net asset value equal to the aggregate net
asset value of the shareholder's shares of the Acquired Fund held as of the
close of business on the closing date of the Reorganization (the "Closing
Date"). The Closing Date is expected to be on or about September 14, 2001 or
such other date as the parties may agree in writing.
For the reasons described below under "The Proposed Transaction - Reasons
for the Proposed Transaction," the Board of Directors of SBSF, including a
majority of the Non-Interested Directors, has concluded that the Reorganization
is in the best interests of the Acquired Fund and its shareholders and that the
interests of the existing shareholders of the Acquired Fund will not be diluted
as a result of the Reorganization.
Accordingly, the Directors recommend approval of the Plan. If the Plan is
not approved, the Acquired Fund will continue in existence unless other action
is taken by the Directors. Such other action may potentially include, but not be
limited to, resubmission of the Plan to shareholders, maintaining the status quo
or the termination and liquidation of the Acquired Fund.
Comparison of Investment Objectives and Policies
Investment Objectives
The investment objective of the Acquired Fund is to seek a high level of
income which is exempt from regular federal income taxes.
The investment objective of the Acquiring Fund is to generate high levels
of current income exempt from federal income taxes and to preserve the value of
its shareholders' investment.
Each of the Acquired Fund and the Acquiring Fund seeks its investment
objective by investing primarily in municipal securities.
PLEASE NOTE THAT ALTHOUGH THE FUNDS' INVESTMENT OBJECTIVES ARE SIMILAR,
THERE ARE DIFFERENCES IN THE FUNDS' INVESTMENT POLICIES AND THE MANNER IN WHICH
THE FUNDS SEEK TO ACHIEVE THEIR GOALS. THESE DIFFERENCES ARE DISCUSSED IN MORE
DETAIL BELOW.
Investment Policies
Debt Securities. Each of the Acquired Fund and the Acquiring Fund invests
primarily in fixed income securities consisting primarily of obligations issued
by state and municipal governments and other qualifying issuers that pay
interest that is exempt from regular federal income tax. These may include
obligations of Puerto Rico and other U.S. territories. These types of fixed
income securities are called "municipal securities" or "municipal obligations".
Each of the Acquired Fund and the Acquiring Fund will invest under normal
circumstances at least 80% of its net assets in municipal obligations the
interest on which is exempt from federal personal income taxes. For the
Acquiring Fund this is a fundamental policy that cannot be changed without
shareholder consent. Each of the Acquired Fund and the Acquiring Fund may invest
up to 20% of its assets in securities that pay interest which is not exempt from
federal income tax. All or a portion of the Acquired Fund's dividends paid in
respect of its shares may, however, be subject to the federal alternative
minimum tax. By contrast, no more than 20% of the Acquiring Fund's net assets
will be invested in debt securities that pay interest subject to federal income
tax, including the federal alternative minimum tax, except for temporary
defensive purposes.
The Acquired Fund invests exclusively in municipal obligations that are
investment-grade, which means they are rated in one of the four highest rating
categories by a national rating organization at the time of purchase or, if
unrated, of equivalent quality as determined by the portfolio manager. The
Acquiring Fund invests primarily in such investment-grade municipal obligations.
The Acquired Fund is a "diversified" fund, which means that it is limited
by the 1940 Act in the amount of its assets that can be invested in the
obligations of a single issuer. By contrast, the Acquiring Fund is a
"non-diversified" fund. This means that the Acquiring Fund may invest a
relatively high percentage of its assets in the obligations of a limited number
of issuers. The Acquired Fund may invest more than 25% of its assets in
obligations whose payments are from revenues of similar projects (such as
utilities or hospitals) or whose issuers share the same geographic location. The
Acquiring Fund may, from time to time, invest over 25% of its assets in
municipal securities from one state or region.
When acceptable municipal obligations are not available, both the
Acquiring Fund and the Acquiring Fund may invest in short-term debt securities
that pay interest that is subject to federal personal income taxes, including
those issued by companies, the U.S. Government or agencies of the U.S.
Government.
Each of the Acquired Fund and the Acquiring Fund may purchase securities
for which there is no readily available market. These securities are known as
illiquid securities. The Acquired Fund will not invest more than 15% of the
value of its total assets in illiquid securities. The Acquiring Fund will not
invest more than 15% of its net assets in illiquid securities.
The Acquired Fund normally maintains a market weighted average portfolio
maturity of between three and ten years. However, the Acquired Fund may invest
in individual securities of any maturity. The Acquiring Fund is permitted to
invest in bonds with any maturity. However, the Acquiring Fund's dollar-weighted
average maturity is normally expected to be in a long-term range (between 10 and
30 years). For strategic purposes, however, the Acquiring Fund may invest so
that the dollar-weighted average maturity of the securities held by the
Acquiring Fund is under 10 years.
See "Principal Investments, Risk Factors and Investment Restrictions"
below for more information on the risks of fixed income securities, municipal
securities and the other types of assets the Funds can purchase.
Derivative Securities. The Acquired Fund is currently authorized to
purchase or sell futures contracts on U.S. debt securities and municipal bond
indices. In addition, the Acquired Fund will only enter into futures contracts
traded on recognized domestic exchanges. The Acquired Fund does not intend to
enter into futures contracts on a regular basis, and will not do so if, as a
result, the Acquired Fund will have more than 25% of the value of its total
assets committed to the completion of such contracts. The Acquired Fund will not
engage in futures transactions for leveraging purposes.
The Acquiring Fund may invest in futures contracts in order to protect (or
"hedge") against changes in interest rates. The Acquiring Fund may also,
however, use futures contracts to manage the maturity or duration of the fixed
income securities in the Fund's portfolio in an effort to reduce potential
losses or enhance potential gain. The Acquiring Fund's use of futures contracts
may expose the Fund to the effects of leveraging.
See "Principal Investments, Risk Factors and Investment Restrictions"
below for more information on the risks of futures contracts.
Management Style and Security Selection Process
The investment manager of the Acquired Fund is Salomon Brothers Asset
Management Inc ("SBAM"). In selecting securities for the Acquired Fund, SBAM
focuses upon developing a portfolio that is diversified among states and types
of municipal securities and also the appropriate maturity allocation for the
Acquired Fund within a given market environment. In managing the Acquired Fund,
SBAM:
(i) emphasizes investments in revenue bonds for essential services
(i.e., water, electric, power, sewer and select transportation authority) and
in general obligation bonds of high-quality issuers;
(ii) uses credit analysis to evaluate the relative attractiveness of
various securities and sectors; and
(iii) seeks geographic and issuer diversification.
The investment manger of the Acquiring Fund is Citi Fund Management Inc.
("CFM"). CFM manages the Acquiring Fund by using a combination of qualitative
and quantitative analysis. The portfolio managers decide which securities to
purchase by first developing an interest rate forecast and an analysis of
general economic conditions throughout the United States. Then the portfolio
managers compare specific regions and sectors to identify broad segments of the
municipal market poised to benefit in this environment. The portfolio managers
also closely study the yields and other characteristics of specific issues to
identify attractive opportunities. CFM uses a geographically diversified
approach, seeking a portfolio of bonds representing a wide range of sectors,
maturities and regions. The portfolio managers use this same approach when
deciding which securities to sell. Securities are sold when the Acquiring Fund
needs cash to meet redemptions, or when the portfolio managers believe that
better opportunities exist or that the security no longer fits within the
portfolio managers' overall strategies for achieving the Acquiring Fund's goals.
Investment Advisory Services and Management Fees
SBAM, a wholly-owned subsidiary of Citigroup Inc., serves as the
investment manager of the Acquired Fund. CFM, also a wholly owned subsidiary of
Citigroup, Inc., serves as the investment manager of the Acquiring Fund. CFM was
established in January 2001 to take over the mutual fund investment advisory
operations of Citibank, N.A. CFM will continue to serve as the investment
manager of the Acquiring Fund after the consummation of the Reorganization.
Thomas A. Croak, a vice president of SBAM, and Robert E. Amodeo, a
director of SBAM, have been responsible for the day-to-day operation of the
Acquired Fund since 1998.
John C. Mooney, CFA, a Senior Portfolio Manager at CFM, has been
responsible for the day-to-day operation of the Acquiring Fund since 1997 and
will continue as the portfolio manager of the Fund after the consummation of the
Reorganization. Mr. Mooney has been a Senior Portfolio Manager at Citibank, N.A.
responsible for managing tax-exempt fixed income funds since 1997.
The Acquired Fund pays an aggregate management fee of 0.50% of the
Acquired Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. The Acquiring Fund pays an aggregate management fee of
0.50% of the Fund's average daily net assets on an annual basis for the Fund's
then current fiscal year. For a comparison of the total annual operating
expenses, both before and after waivers, for all classes of shares of the
Acquired Fund and the Acquiring Fund, please review the expense tables under
"Overall Expenses" below.
Overall Expenses
After taking into account waivers and reimbursements by service providers
to the Acquired Fund and the Acquiring Fund, the total annual operating expenses
for Class A, Class B, Class 2 and Class O shares of the Acquiring Fund are the
same (on a pro forma basis) as the total annual operating expenses of Class A,
Class B, Class 2 and Class O shares, respectively, of the Acquired Fund.
However, the total annual operating expenses of Class A, Class B, Class 2 and
Class O shares of the Acquiring Fund are lower than those of the Acquired Fund
if waivers and reimbursements by the Acquired Fund's service providers, which
can be terminated at any time, are not taken into account.
Further information about the expenses of Acquired Fund and the Acquiring
Fund and pro forma expenses following the proposed Reorganization are outlined
in the tables below.
PRO FORMA
ACQUIRED ACQUIRING ACQUIRING
SHAREHOLDER FEES FUND FUND FUND
(PAID DIRECTLY FROM
YOUR INVESTMENT)
Maximum Sales Charge
(Load) Imposed on
Purchases
Class A(1) 4.75% 4.75% 4.75%
Class B None None None
Class 2 1.00% 1.00% 1.00%
Class O None None None
Maximum Deferred Sales
Charge (Load)
Class A(2) None None None
Class B 5.00% 5.00% 5.00%
Class 2 1.00% 1.00% 1.00%
Class O None None None
ANNUAL FUND
OPERATING EXPENSES
(PAID BY THE FUND AS A %
OF NET ASSETS)
Management Fees (all 0.50% 0.50% 0.50%
classes)
Distribution and Service
(12b-1) Fees
Class A 0.25% 0.25% 0.25%
Class B 1.00% 1.00% 1.00%
Class 2 0.75% 0.75% 0.75%
Class O None None None
Other Expenses
(administrative,
shareholder servicing
and other expenses)
Class A 1.59% 0.32% 0.32%
Class B 1.60% 0.32%(3) 0.32%(3)
Class 2 1.60% 0.32%(3) 0.32%(3)
Class O 1.58% 0.32%(3) 0.32%(3)
Total Annual Fund
Operating Expenses(4)
Class A 2.34% 1.07% 1.07%
Class B 3.10% 1.82% 1.82%
Class 2 2.85% 1.57% 1.57%
Class O 2.08% 0.82% 0.82%
(1) If you buy Class A shares of either Fund in amounts of $50,000 or more the
sales charge is lower.
(2) You do not pay an initial sales charge when you buy $1 million or more of
Class A shares of either Fund, but if you redeem those shares within one
year of purchase, you will pay a deferred sales charge of 1.00%.
(3) Because Class B, Class 2 and Class O shares are newly offered by the
Acquiring Fund, "Other Expenses" have been estimated based on expenses
incurred by Class A shares.
(4) Because the manager of each Fund voluntarily agreed to waive its fee and
reimbursed certain expenses for the fiscal year ended December 31, 2000, the
actual total operating expenses for each class of each Fund were (in the
case of the Acquired Fund and the Class A shares of the Acquiring Fund) or
would have been (in the case of the Class B, 2 and O shares of the Acquiring
Fund) and will be (in the case of the pro forma Acquiring Fund):
PRO FORMA
ACQUIRED ACQUIRING ACQUIRING
FUND FUND FUND
Class A 0.75% 0.80% 0.75%
Class B 1.50% 1.50% 1.50%
Class 2 1.25% 1.25% 1.25%
Class O 0.50% 0.50% 0.50%
The manager of either Fund may discontinue this waiver or reimbursement at
any time.
This example is intended to help you compare the cost of investing in each
of the Funds. The example assumes you invest $10,000 in each Fund for the time
periods indicated and then redeem all of your shares at the end of those periods
(unless otherwise indicated). The example also assumes your investment has a 5%
return each year and that each Fund's annual operating expenses (before waivers
and reimbursements) remain the same. Your actual costs may be higher or lower.
ACQUIRED FUND
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Your costs would be:
Class A $701 $1,171 $1,666 $3,024
Class B (redemption
at end of period) $813 $1,257 $1,825 $3,074
Class B (no $313 $957 $1,625 $3,074
redemption)
Class 2 (redemption
at end of period) $485 $974 $1,589 $3,244
Class 2 (no $385 $974 $1,589 $3,244
redemption)
Class O $211 $652 $1,119 $2,410
ACQUIRING FUND
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Your costs would be:
Class A $579 $799 $1,037 $1,719
Class B (redemption
at end of period) $685 $873 $1,185 $1,760
Class B (no $185 $573 $985 $1,760
redemption)
Class 2 (redemption
at end of period) $358 $591 $947 $1,949
Class 2 (no $258 $591 $947 $1,949
redemption)
Class O $82 $262 $455 $1,014
PRO FORMA ACQUIRING FUND
NUMBER OF YEARS YOU
OWN YOUR SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Your costs would be:
Class A $579 $799 $1,037 $1,719
Class B (redemption
at end of period) $685 $873 $1,185 $1,760
Class B (no $185 $573 $985 $1,760
redemption)
Class 2 (redemption
at end of period) $358 $591 $947 $1,949
Class 2 (no $258 $591 $947 $1,949
redemption)
Class O $ 82 $262 $455 $1,014
Distribution of Shares and Other Services
Distributor
The distributor of both the Acquired Fund and the Acquiring Fund is
Salomon Smith Barney, Inc. ("SSB"). Each of the Fund's shares are
continuously sold by SSB.
Both the Acquired Fund and the Acquiring Fund have adopted Rule 12b-1
distribution plans for their Class A, Class B and Class 2 shares. Under the
plans, each Fund pays distribution and service fees. The distribution and
service fees as a percentage of net assets for Class A, Class B and Class 2
shares of the Acquired Fund and the Acquiring Fund are the same. See "Overall
Expenses" above for a comparison of the total fees and expenses for the Acquired
Fund and the Acquiring Fund.
Administrator
Smith Barney Fund Management LLC ("SBFM"), an affiliate of SBAM, serves as
administrator for the Acquired Fund. For its services as administrator, the
Acquired Fund pays SBFM a fee at an annual rate of 0.05% of the Fund's average
daily net assets.
Other Service Providers
As indicated below, the Acquired Fund and the Acquiring Fund generally
have different service providers. Upon completion of the Reorganization, the
Acquiring Fund will continue to engage its existing service providers. In all
cases, the types of services provided to the Funds under these service
arrangements are substantially similar.
SERVICE PROVIDER ACQUIRED FUND ACQUIRING FUND
Custodian PNC Bank, N.A. State Street Bank and
Trust Company
Auditors PricewaterhouseCoopers KPMG LLP
LLP
Transfer Agent PFPC Global Fund Citi Fiduciary Trust
Services, Inc. Company
Sub-Transfer Agent N/A Boston Financial Data
Services (through July
27, 2001)
PFPC Global Fund
Services, Inc. (beginning
July 30, 2001)
Sales Charges, Purchase Policies and Redemption and Exchange Information
Class A shares of the Acquired Fund and the Acquiring Fund are sold at net
asset value plus a front-end sales charge. There will be no sales load charged
to Class A shareholders of the Acquired Fund when they receive Class A shares of
the Acquiring Fund in the Reorganization. See "Overall Expenses" for tables
comparing sales charges and other expenses of the Funds.
The front-end sales charge on purchases of Class A shares of the Acquired
Fund is the same as the front-end sales charge on purchases of Class A shares of
the Acquiring Fund. You do not pay an initial sales charge when you buy $1
million or more of Class A shares of either the Acquired Fund or the Acquiring
Fund, but if you redeem these Class A shares within one year of purchase you
will pay a deferred sales charge of 1%. For purposes of determining the one-year
holding period, an Acquired Fund shareholder will be deemed to have held the
shares of the Acquiring Fund received in the Reorganization since the date of
the original purchase of shares of the Acquired Fund.
The Acquired Fund and the Acquiring Fund have established policies,
including rights of accumulation and letter of intent privileges, waiving the
Class A initial sales charge for certain classes of investors under certain
circumstances. Shareholders who wish to make purchases of Class A shares of the
Acquiring Fund after the Reorganization should review the Prospectus of the
Acquiring Fund for additional information about these waivers. As stated above,
the Acquiring Fund will not impose any initial sales charge on the Class A
shares of the Acquiring Fund that Acquired Fund shareholders receive in the
Reorganization.
Class B shares of the Acquired Fund and Acquiring Fund are sold without a
front-end sales charge. However, if you redeem your Class B shares of either
Fund within six years of purchase, you will pay a deferred sales charge. For
each of the Funds, the rate of the deferred sales charge goes down the longer
you hold your shares. For purposes of determining the holding period, an
Acquired Fund shareholder will be deemed to have held the shares of the
Acquiring Fund received in the Reorganization since the date of the original
purchase of shares of the Acquired Fund (or, if the shares of the Acquired Fund
were received in an exchange from an earlier purchase, the date of that earlier
purchase). Shareholders of the Acquired Fund are subject to the same deferred
sales charge schedule as shareholders of the Acquiring Fund.
After 7 years, Class B shares of each Fund automatically convert into
Class A shares. For each Fund, Class A shares have lower annual expenses than
Class B shares.
Each Fund has established policies waiving the Class B deferred sales
charge for certain classes of investors under certain circumstances. Class B
shareholders should review the deferred sales charge waiver policies of the
Acquiring Fund to determine whether a waiver may be applicable when they redeem
their Class B shares of the Acquiring Fund received in the Reorganization. The
deferred sales charge on Class B shares of the Acquiring Fund will generally be
waived following the death or disability of a shareholder. The deferred sales
charge will also be waived on certain distributions from a retirement plan. You
should review the Prospectus and Statement of Additional Information of the
Acquiring Fund for a more complete description of the waiver policies that may
be applicable. These policies are generally the same as the waiver policies in
effect for the Acquired Fund.
Class 2 shares of the Acquired Fund and the Acquiring Fund are sold at net
asset value plus a sales charge of 1% (1.01% of net amount invested). In
addition, if you redeem Class 2 shares of either the Acquired Fund or the
Acquiring Fund within one year of purchase, you will pay a deferred sales charge
of 1%. For purposes of determining the one-year holding period, an Acquired Fund
shareholder will be deemed to have held the shares of the Acquiring Fund
received in the Reorganization since the date of the original purchase of shares
of the Acquired Fund.
Shares of either the Acquired Fund or the Acquiring Fund acquired as a
result of an exchange of shares of certain other Salomon Funds purchased prior
to September 14, 1998 will be subject to the deferred sales charge schedules and
conversions features, if any, in effect at the time the original shares were
purchased. Shares of the Acquiring Fund received in the Reorganization by an
Acquired Fund shareholder that acquired shares of the Acquired Fund as a result
of an exchange of certain other Salomon Funds purchased prior to September 14,
1998 will remain subject to the deferred sales charge schedule and conversion
features, if any, in effect at the time the original shares were purchased.
Purchase Policies
You may purchase shares of each Fund through its transfer agent by
completing a purchase application. Shares of each Fund may also be purchased
from selected dealers in accordance with procedures established by the dealer.
Investment Minimums
Each Fund offers Class A, Class B, Class 2 and Class O shares. Minimum
initial investment amounts vary depending on the nature of your investment
account. The minimum investment amounts for each Fund are the same and are set
forth in the table below.
INITIAL ADDITIONAL
INVESTMENT INVESTMENTS
CLASSES A, B, 2, O CLASSES A, B, 2, O
General $250 $50
Individual Retirement Accounts, Self $ 50 $50
Employed Retirement Plans, Uniform Gift
to Minor Accounts
Qualified Retirement Plans $ 50 $50
Monthly Systematic Investment Plans $ 25 $25
Pre-authorized Check Plan $ 25 $25
Redemptions
Shares of each Fund are redeemable on any business day at a price equal to
the net asset value of the shares the next time it is calculated after receipt
of your redemption request in good order, as adjusted for any applicable sales
charge. Each Fund has the right to pay redemption proceeds by distributing
securities instead of cash. In that case, you may incur costs (such as brokerage
commissions) converting the securities into cash.
The redemption procedures for the Acquired Fund and the Acquiring Fund are
the same and are outlined in the table below.
REDEMPTION
PROCEDURES AND ACQUIRED FUND/
POLICIES ACQUIRING FUND
Through an To redeem shares, you may contact the Fund's transfer agent
Appropriate Contact or a selected dealer with which the distributor has entered
Person into sales agreements for the purchase of the shares of
the Fund.
By Mail You may send written redemption requests to the Fund's
transfer agent.
By Fax You may redeem shares by fax only if a signature
guarantee or other documentary evidence is not required.
Redemption requests should be faxed to the Fund's transfer
agent.
By Telephone You may make redemption requests by telephone if you elect
the telephone redemption option on your purchase
application.
By Wire You can redeem by wire in amounts of $500 or more if
redemption by wire has been elected on your purchase
application. To redeem by wire either call the Fund's
transfer agent or mail the redemption request to the Fund's
transfer agent.
Systematic You can arrange for automatic withdrawal of a
Withdrawal Plan portion of your shares on a monthly or quarterly
basis. To qualify you must own shares with a value of at
least $10,000 for monthly withdrawals and $5,000 for
quarterly withdrawals and each automatic redemption must be
at least $250 if made monthly.
Automatic If your account falls below $500 ($250 in the
Redemptions case of an IRA or self-employed retirement plan)
because of redemption of Fund shares, the Fund may ask you
to bring your account up to the minimum requirement. If
your account balance is still below $500 after 30 days, the
Fund may close your account and send you the redemption
proceeds.
Exchanges
Shareholders of each Fund may exchange Fund shares for shares of the same
class of certain other Salomon funds, subject to the limitations noted below.
Each Fund may suspend or terminate your exchange privilege if you engage in an
excessive pattern of exchanges. Shares of each Fund are eligible for exchange
commencing 30 days after purchase. Shareholders of the Acquired Fund do not have
to wait 30 days before exchanging shares of the Acquiring Fund received in the
Reorganization.
If you exchange Class A shares of either Fund, you are not required to pay
an initial sales charge on the shares to be acquired in the exchange. The Class
A shares of the Acquiring Fund issued in connection with the Reorganization will
not be subject to an initial sales charge at the time of the exchange.
If you exchange Class B shares of either Fund, those shares will not be
subject to a deferred sales charge at the time of the exchange but those shares
will be subject to any applicable deferred sales charge upon ultimate
redemption. Your deferred sales charge (if any) will continue to be measured
from the date of your original purchase.
If you exchange Class 2 shares of either Fund, those shares will not be
subject to an initial or deferred sales charge at the time of exchange but those
shares will be subject to any applicable contingent deferred sales charge upon
ultimate redemption. Your deferred sales charge (if any) will continue to be
measured from the date of original purchase.
Shareholders of the Funds may place exchange orders through the applicable
Fund's transfer agent, and may place exchange orders by telephone if their
account application permits.
Dividends and Other Distributions
The Acquired Fund and the Acquiring Fund have similar policies relating to
dividend and capital gain distributions to shareholders. The Funds pay dividends
and distribute capital gains, if any, according to the following schedule:
- --------------------------------------------------------------------
DIVIDENDS INCOME DIVIDEND CAPITAL GAIN
FUND DECLARED DISTRIBUTIONS DISTRIBUTIONS
- --------------------------------------------------------------------
Acquired Fund daily monthly annually
- --------------------------------------------------------------------
Acquiring Fund daily monthly semi-annually
- --------------------------------------------------------------------
Each Fund may also make additional distributions to shareholders to the
extent necessary to avoid the application of a federal tax. For each Fund,
capital gain distributions and dividends are reinvested in additional Fund
shares of the same class that you hold. You do not pay a sales charge on
reinvested distributions or dividends. Alternately, you can, in the case of each
Fund, have your distributions and/or dividends paid in cash.
On or immediately prior to the Closing Date of the Reorganization, the
Acquired Fund will distribute (in the form of one or more dividends and/or other
distributions) to its shareholders substantially all of its investment company
taxable income and realized net capital gain, if any, for the current taxable
year through the date of such distribution or dividend. Such distributions or
dividends will automatically be reinvested in the manner described above.
Between the Closing Date and the end of its current taxable year, it is expected
that the Acquiring Fund will make one or more similar distributions to its
shareholders, including the former Acquired Fund shareholders who receive shares
of the Acquiring Fund in the Reorganization.
Tax Consequences
The Acquired Fund and the Acquiring Fund will each receive an opinion of
Simpson Thacher & Bartlett in connection with the Reorganization to the effect
that, based upon certain facts, assumptions and representations, the transfer of
substantially all of the assets and liabilities of the Acquired Fund solely to
the Acquiring Fund in exchange for voting stock of the Acquiring Fund, followed
by the distribution of such shares in complete liquidation of the Acquired Fund,
will constitute a reorganization within the meaning of section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). If the Reorganization
constitutes such a reorganization, no gain or loss will be recognized by the
Acquired Fund or its shareholders as a result of the Reorganization. See "The
Proposed Transaction - Federal Income Tax Consequences."
PRINCIPAL INVESTMENTS, RISK FACTORS, AND INVESTMENT RESTRICTIONS
Principal Investments and Risk Factors
The investment objectives and policies and risk factors of the Acquired
Fund are, in many respects, similar to those of the Acquiring Fund. There are,
however, some differences. The following discussion summarizes some of the more
significant similarities and differences in the investment policies and risk
factors of the Acquired Fund and the Acquiring Fund and is qualified in its
entirety by the Prospectuses and Statements of Additional Information of the
Acquired Fund and the Acquiring Fund incorporated herein by reference.
BOTH FUNDS FIXED INCOME SECURITIES (BONDS, DEBENTURES, NOTES,
COMMERCIAL PAPER AND OTHER DEBT OBLIGATIONS):
o The prices of securities may rise or fall due to
changing economic, political or market conditions, or
due to an issuer's individual situation.
o Interest rates may increase, causing the prices of
fixed income securities to decline, thereby reducing
the value of a Fund's portfolio. An increase in
interest rates also could cause a Fund's share price
to go down. Longer term obligations are usually more
sensitive to interest rate changes. This is known as
interest rate risk.
o If interest rates decline, the amount of income paid
to you by a Fund as dividends may also decline. This
is known as income risk.
o Some issuers may not make payments of principal and/or
interest on debt securities held by a Fund, causing a
loss. Or, an issuer's financial condition may
deteriorate, lowering the credit quality of a security
and leading to greater volatility in the price of the
security and in shares of a Fund. This is known as
credit risk. If the credit quality of a security
deteriorates below investment grade, a Fund may
continue to hold the security, commonly known as a
"junk" bond. A change in the quality rating of a bond
or other security can also affect the security's
liquidity and make it more difficult for the Fund to
sell. Lower quality debt securities are more
susceptible to these problems than higher quality
obligations.
o As interest rates decline, the issuers of fixed income
securities held by a Fund may pay principal earlier
than scheduled or exercise a right to call the
securities. A Fund may not be able to reinvest that
principal at attractive rates, reducing income to the
Fund, and the Fund may lose any premium paid. A Fund
would also lose the benefit of falling interest rates
on the price of the repaid bond. This is known as
prepayment risk. Securities subject to prepayment risk
generally offer less potential for gains when interest
rates decline, and may offer a greater potential for
loss when interest rates rise.
o Rising interest rates may cause prepayments to occur
at slower than expected rates. This effectively
lengthens the maturities of the affected securities,
making them more sensitive to interest rate changes
and a Fund's share price more volatile. This is known
as extension risk.
o The portfolio manager's judgment about interest rates
or the attractiveness, value or income potential of a
particular security may prove incorrect. In that case,
you may lose money, or your investment may not do as
well as an investment in another tax-free mutual fund.
BOTH FUNDS MUNICIPAL SECURITIES:
Each Fund invests primarily in municipal securities,
which are fixed and variable rate obligations issued by
or on behalf of states and municipal governments, Puerto
Rico and other U.S. territories, and their authorities,
agencies, instrumentalities and political and political
subdivisions, and by other qualifying issuers. The
interest on these securities is exempt from federal
personal income taxes.
There are special factors that may affect the value of
municipal securities and, as a result, each Fund's share
price. These factors include political or legislative
changes, uncertainties related to the tax status of the
securities or the rights of investors in the securities
and the supply and demand for municipal obligations.
The two principal classifications of municipal securities
are "general obligation" securities and "revenue"
securities. General obligation securities are secured by
the issuer's pledge of its full faith, credit and taxing
power for the payment of principal and interest. Revenue
securities are payable only from the revenues generated
from a particular project or, in some cases, from the
proceeds of a special excise tax or other specific
revenue source. Projects may suffer construction delays,
increased costs or reduced revenues as a result of
political, regulatory, economic and other factors. As a
result, projects may not generate sufficient revenues to
pay principal and interest on a Fund's revenue
obligations.
The secondary market for municipal securities may be less
liquid than for most taxable fixed income securities,
which may limit a Fund's ability to buy and sell these
obligations at times and prices the portfolio manager
believes would be advantageous. There may be less
information available about the financial condition of an
issuer of municipal obligations than about issuers of
other publicly traded securities. Also, state and federal
bankruptcy laws could hinder a Fund's ability to recover
interest or principal in the event of a default by the
issuer.
BOTH FUNDS MUNICIPAL LEASE OBLIGATIONS:
Each Fund may invest in municipal lease obligations. A
municipal lease obligation is an undivided interest
issued by a state or municipality in a lease or
installment purchase of equipment or facilities.
Municipal leases frequently have special risks not
normally associated with general obligation securities or
revenue securities. Many leases include
"non-appropriation" clauses that provide that the
governmental issuer has no obligation to make future
payments under the lease or contract unless money is
appropriated for such purpose by the appropriate
legislative body on a yearly or other periodic basis.
Although the obligations will be secured by the leased
equipment or facilities, the disposition of the property
in the event of non-appropriation or foreclosure might,
in some cases, prove difficult.
BOTH FUNDS PARTICIPATION INTERESTS:
Each Fund may purchase from banks participation interests
in all or part of an underlying municipal obligation. A
Fund has the right to sell the participation interest
back to the bank and draw on a letter of credit or
guarantee for all or any part of the full principal
amount of the participation interest in the security,
plus accrued interest. In some cases, these rights may
not be exercisable in the event of a default on the
underlying municipal obligation; in these cases, the
underlying municipal obligation must meet a Fund's credit
standards at the time of purchase of the participation
interest. Each participation interest is backed by an
irrevocable letter of credit or guarantee of the selling
bank. Participation interests will only be purchased if
in the opinion of counsel to the issuer interest income
on such interests will be tax-exempt when distributed as
dividends to the shareholders of a Fund. The Acquiring
Fund will not invest more than 5% of its total assets
(taken at the greater of cost or market value) in
participation interests.
ACQUIRING FUND NON-DIVERSIFICATION:
The Acquiring Fund is a non-diversified mutual fund. This
means that the Acquiring Fund may invest a relatively
high percentage of its assets in the obligations of a
limited number of issuers. As a result, many securities
held by the Acquiring Fund may be adversely affected by a
particular economic, business, regulatory or political
event. The Acquiring Fund seeks to limit its exposure in
the housing, electrical utilities and hospital sectors by
restricting its investment in any one of these sectors to
25% of its assets.
Because the Acquired Fund is a diversified fund, it is
not subject to this risk. The Acquired Fund, however, may
invest more than 25% of its assets in obligations whose
payments are from revenues of similar projects (such as
utilities or hospitals) or whose issuers share the same
geographic locations.
BOTH FUNDS FUTURES CONTRACTS:
ACQUIRED FUND MAY NOT Both Funds may, but need not, invest in futures
ENGAGE IN FUTURES contracts, a common form of derivative.
TRANSACTIONS FOR
LEVERAGING PURPOSES. Both Funds may use futures contracts in order to
protect (or "hedge") against changes in interest
ACQUIRING FUND MAY rates without actually buying or selling debt
ENGAGE IN FUTURES securities. The Acquiring Fund may also use
TRANSACTIONS FOR futures contracts to manage the maturity or
LEVERAGING PURPOSES. duration of the fixed income securities in the
Fund's portfolio in an effort to reduce potential losses
or enhance potential gain.
A futures contract is an agreement between two parties
for the purchase or sale for future delivery of
securities or for the payment or acceptance of a cash
settlement based upon changes in the value of the
securities or of an index of securities.
A Fund's ability to use futures contracts successfully
depends on a number of factors, including futures
contracts being available at prices that are not too
costly, tax considerations, the portfolio manager's
ability to accurately predict interest rate movements and
the availability of liquid markets. If the portfolio
manager's predictions are wrong, a Fund could suffer
greater losses than if it had not used futures contracts.
The other parties to certain futures contracts present
the same types of credit risk as issuers of fixed income
securities. Investing in futures contracts can also make
a Fund less liquid and harder to value, especially in
declining markets.
The Acquiring Fund's use of futures contracts may expose
the Fund to the effects of leveraging which occurs when
futures are used so that the Fund's exposure to the
market is greater than it would have been if the Fund had
invested directly in the underlying securities.
"Leveraging" increases the Acquiring Fund's potential for
both gain and loss. The Acquiring Fund adheres to certain
policies relating to the use of futures contracts, which
should have the effect of limiting the amount of leverage
by the Acquiring Fund.
Because the Acquiring Fund has fewer restrictions on its
use of futures contracts, it may be more susceptible to
the risks of investing in futures contracts than the
Acquired Fund.
ACQUIRING FUND ZERO COUPON OBLIGATIONS:
The Acquiring Fund may purchase zero coupon obligations.
Zero coupon obligations pay no current interest. As a
result, their prices tend to be more volatile than those
of securities that offer regular payments of interest.
This makes the Fund's share price more volatile. In order
to pay cash distributions representing income on zero
coupon obligations, the Fund may have to sell other
securities on unfavorable terms. These sales may generate
taxable gains for Fund investors.
The Acquired Fund is not subject to this risk.
BOTH FUNDS FLOATING AND VARIABLE RATE INSTRUMENTS:
The Funds may invest in floating and variable rate
obligations. Floating or variable rate obligations bear
interest at rates that are not fixed, but vary with
changes in specified market rates or indices, such as the
prime rate, and at specified intervals.
Certain of the floating or variable rate obligations that
may be purchased by a Fund may carry a demand feature
that would permit the holder to tender them back to the
issuer at par value prior to maturity. Some of the demand
instruments purchased by a Fund are not traded in a
secondary market and derive their liquidity solely from
the ability of the holder to demand repayment from the
issuer or third party providing credit support. A Fund's
right to obtain payment at par on a demand instrument
could be affected by events occurring between the date
such Fund elects to demand payment and the date payment
is due. These events may affect the ability of the issuer
of the instrument or third party providing credit support
to make payment when due.
ACQUIRING FUND SHORT SALES:
The Acquiring Fund may engage in short sales. A short
sale occurs when the Fund's portfolio manager,
anticipating that the price of a security will decline,
enters into an agreement to sell the security even though
the Fund may not own it.
The Acquiring Fund may only engage in short sales
"against the box." A short sale is "against the box" to
the extent that the Fund owns or has the right to obtain
at no added cost securities identical to those sold
short.
The Acquiring Fund may make a short sale against the box
as a hedge, when it believes that the price of a security
may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible or
exchangeable for such security). In such case, any future
losses in the Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short
position. The extent to which such gains or losses are
reduced depends upon the amount of the security sold
short relative to the amount the Fund owns. There are
certain additional transaction costs associated with
short sales against the box, but the Fund endeavors to
offset these costs with the income from the investment of
the cash proceeds of short sales.
The Acquired Fund is not subject to this risk.
ACQUIRING FUND STAND-BY COMMITMENTS:
When the Acquiring Fund purchases municipal obligations,
it may also acquire stand-by commitments from banks or
broker-dealers with respect to the municipal obligations.
Under a stand-by commitment, a bank or broker-dealer
agrees to purchase at the Fund's option a specified
municipal obligation at a specified price. A stand-by
commitment is the equivalent of a "put" option with
respect to a particular municipal obligation. The
Acquiring Fund intends to acquire stand-by commitments
solely to facilitate liquidity.
Stand-by commitments are subject to certain risks, which
include the ability of the issuer of the commitment to
pay for the municipal obligations at the time the
commitment is exercised, the fact that the commitment is
not marketable, and the fact that the maturity of the
underlying security will generally be different from that
of the commitment. In some cases it may not be possible
to exercise rights under a stand-by commitment when the
underlying municipal obligation is in default.
The Acquired Fund is not subject to this risk.
BOTH FUNDS WHEN-ISSUED SECURITIES:
Each Fund may purchase securities on a "when-issued" or
on a "forward delivery" basis, meaning that delivery of
the securities occurs beyond normal settlement times. In
general, a Fund does not pay for the securities until
they are received and does not start earning interest on
those securities until the contractual settlement date.
When a Fund commits to purchase a security on a
"when-issued" or on a "forward delivery" basis, it sets
up procedures consistent with Securities and Exchange
Commission policies. Since those policies currently
require that an amount of the Fund's assets equal to the
amount of the purchase be held aside or segregated to be
used to pay for the commitment, the Fund expects always
to have cash or liquid securities sufficient to cover any
commitments or to limit any potential risk. However, even
though the Fund does not intend to make such purchases
for speculative purposes and intends to adhere to its
policies, purchases of securities on such bases may
involve more risk than other types of purchases.
When-issued securities are subject to market fluctuation,
and no interest accrues on the security to the purchaser
during the period before delivery. The payment obligation
and the interest rate that will be received on the
securities are each fixed at the time the purchaser
enters into the commitment. Purchasing obligations on a
when-issued basis is a form of leveraging and can involve
a risk that the yields available in the market when the
delivery takes place may actually be higher than those
obtained in the transaction itself. In that case, there
could be an unrealized loss at the time of delivery. An
increase in the percentage of a Fund's assets committed
to the purchase of securities on a "when-issued" basis
may increase the volatility of its net asset value.
BOTH FUNDS PORTFOLIO TURNOVER:
Each Fund may engage in active and frequent trading to
achieve its principal investment strategies. The sale of
securities may produce capital gains, which, when
distributed, are taxable to shareholders. Frequent
trading may also increase the amount of commissions or
mark-ups a Fund pays to brokers or dealers when it buys
and sells securities.
Although the portfolio managers of the Funds attempt to
minimize portfolio turnover, from time to time a Fund's
annual portfolio turnover rate may exceed 100%. For a
comparison of the historical portfolio turnover rates of
the Funds, see "The Proposed Transaction - Portfolio
Turnover" below.
BOTH FUNDS DEFENSIVE STRATEGIES:
Each Fund may, from time to time, take temporary
defensive positions that are inconsistent with the Fund's
principal investment strategies in attempting to respond
to adverse market, political or other conditions. When
doing so, the Funds may invest without limit in cash and
in taxable U.S. dollar-denominated high-quality money
market and short-term instruments, and may not be
pursuing their investment goals. These investments may
result in a lower yield than would be available from
investments in lower quality or longer term obligations.
The foregoing describes the principal investments and related risks of
each Fund. Each Fund may invest in additional types of investments and may be
subject to additional risk factors that are described in the Statement of
Additional Information of that Fund. Certain of these non-principal investments
and related risk factors may differ for each Fund. For a further description of
such investments and related risks, please consult the Statement of Additional
Information of the applicable Fund.
Fundamental Investment Restrictions
Each Fund has adopted certain fundamental investment limitations that may
not be changed without the affirmative vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund. The
fundamental investment restrictions of the Funds are, in general, similar. These
fundamental restrictions limit the amounts that the Funds may borrow and
prohibit the Funds from making loans (with certain exceptions), from
underwriting securities issued by other persons, from purchasing or selling real
estate, or interests in oil, gas or mineral leases (with respect to the
Acquiring Fund only), or commodities or commodity contracts (with certain
exceptions), or from issuing "senior securities" (as defined in the 1940 Act) to
the extent prohibited by the 1940 Act.
In addition, neither Fund may invest more than 25% of the total assets of
the Fund in the securities of issuers having their principal activities in any
particular industry (with certain exceptions). The risk of concentration is that
securities held by the Fund may be adversely affected by a particular single
economic, business, regulatory or political event.
The Acquired Fund, as a diversified fund, also may not purchase the
securities of any issuer if the purchase would cause more than 5% of the value
of the Acquired Fund's total assets to be invested in the securities of any one
issuer (excluding securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities and bank obligations) or cause more than 10% of
the voting securities of the issuer to be held by the Acquired Fund (with
certain exceptions). The Acquiring Fund is not a diversified fund. See
"Principal Investments and Risk Factors" above for more information on the risks
of non-diversification.
Although these restrictions are similar, the specific limitations may be
different between the two Funds.
Non-Fundamental Investment Restrictions
In addition to the fundamental restrictions described above, each Fund is
subject to certain non-fundamental restrictions that may be changed at any time
by that Fund's Board without shareholder approval.
These non-fundamental investment restrictions provide that the Acquired
Fund may not:
(1) purchase securities on margin (with certain exceptions);
(2) sell securities short (with certain exceptions);
(3) purchase or retain any securities of an issuer if one or more persons
affiliated with the Acquired Fund owns beneficially more than 1/2 of 1% of the
outstanding securities of such issuer and such affiliated persons so owning 1/2
of 1% together own beneficially more than 5% of such securities;
(4) invest in oil, gas and other mineral leases (with certain
exceptions);
(5) purchase the securities of any issuer if by reason thereof the value
of its investment in all securities of that issuer will exceed 5% of the value
of the issuer's total assets;
(6) purchase securities of issuers that it is restricted from selling to
the public without registration under the 1933 Act if by reason thereof the
value of its aggregate investment in such classes of securities will exceed 10%
of its total assets (with certain exceptions);
(7) invest more than 5% of its total assets in securities of unseasoned
issuers which, including their predecessors, have been in operation for less
than three years (with certain exceptions);
(8) purchase puts, calls, straddles, spreads and any combination thereof
if by reason thereof the value of its aggregate investment in such classes of
securities will exceed 5% of its total assets;
(9) invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a result,
the investments (valued at the lower of cost or market) would exceed 5% of the
value of the Fund's net assets or if, as a result, more than 2% of the Fund's
net assets would be invested in warrants that are not listed on AMEX or NYSE; or
(10) invest for the purpose of exercising control over the management
of any company.
The one non-fundamental investment restriction of Acquiring Fund provides
that the Fund may not invest more than 15% of its net assets (taken at market
value) in securities for which there is no readily available market.
As a result of these differences in non-fundamental restrictions, the
Acquired Fund may be more limited in its ability to engage in certain types of
transactions than the Acquiring Fund. However, these additional non-fundamental
restrictions may also prevent the Acquired Fund from engaging in transactions
that would subject the Acquired Fund to additional risks.
For additional information, you should consult the Prospectus and
Statement of Additional Information of the applicable Fund.
THE PROPOSED TRANSACTION
Description of the Plan
As described above, the Plan provides that substantially all of the assets
and liabilities of the Acquired Fund will be transferred to the Acquiring Fund.
In exchange for the transfer of those assets and liabilities, each class of
shares of the Acquired Fund will receive shares of the corresponding class of
the Acquiring Fund ("Reorganization Shares"). Reorganization Shares of the
Acquiring Fund so received will then be distributed to the shareholders of the
Acquired Fund in complete liquidation of the Acquired Fund, and the Acquired
Fund will be terminated.
As a result of the Reorganization, each shareholder of each class of the
Acquired Fund will receive that number of full and fractional shares of the
corresponding class of the Acquiring Fund having an aggregate net asset value
equal to the aggregate net asset value of the shareholder's shares of the
Acquired Fund held on the Closing Date. The Acquiring Fund will establish an
account for each Acquired Fund shareholder that will reflect the number and
class of shares of the Acquiring Fund distributed to that shareholder. The
Acquiring Fund's shares issued in the Reorganization will be in uncertificated
form. You may receive share certificates if you submit a written request signed
by all registered owners to the Acquiring Fund's sub-transfer agent after the
Reorganization.
Until the closing of the Reorganization, shareholders of the Acquired Fund
will, of course, continue to be able to redeem their shares by sending a
redemption request in proper form to the Acquired Fund's transfer agent.
Redemption requests received by the Acquired Fund's transfer agent after the
closing of the Reorganization will be treated as requests received for the
redemption of shares of the Acquiring Fund.
The obligations of the Acquired Fund and the Acquiring Fund under the Plan
are subject to various conditions, as stated therein. Among other things, the
Plan requires that all filings be made with, and all authority be received from,
the Securities and Exchange Commission and state securities commissions as may
be necessary in the opinion of counsel to permit the parties to carry out the
transactions contemplated by the Plan. The Acquired Fund and the Acquiring Fund
are in the process of making the necessary filings.
To provide against unforeseen events, the Plan may be terminated prior to
the Closing Date by action of the Trustees of the Acquiring Fund or the
Directors of the Acquired Fund, or amended prior to the Closing Date by action
of both the Trustees of the Acquiring Fund and the Directors of the Acquired
Fund, in each case notwithstanding the approval of the Plan by the shareholders
of the Acquired Fund. However, no amendment may be made that materially
adversely affects the interests of the Acquired Fund shareholders without
obtaining the approval of the shareholders of the Acquired Fund. The Acquired
Fund and the Acquiring Fund may at any time waive compliance with certain of the
covenants and conditions contained in the Plan.
CFM and SBAM will assume and pay all of the expenses that are solely and
directly related to the Reorganization. Shareholders have no rights of
appraisal.
Reasons for the Proposed Transaction
At a meeting of the Board of Directors of SBSF held on May 21, 2001, the
Directors of SBSF, including a majority of the Non-Interested Directors,
considered materials discussing the potential benefits to the shareholders of
the Acquired Fund if the Acquired Fund were to reorganize with and into the
Acquiring Fund. For the reasons discussed below, the Board of Directors of SBSF,
including a majority of the Non-Interested Directors, has determined that the
proposed Reorganization is in the best interests of the Acquired Fund and its
shareholders and that the interests of the Acquired Fund shareholders will not
be diluted as a result of the proposed Reorganization.
The proposed combination of the Acquired Fund into the Acquiring Fund will
allow the shareholders of the Acquired Fund to continue to participate in a
professionally managed portfolio governed by similar investment objectives and
policies. The Directors of the Acquired Fund believe that the Acquired Fund and
its shareholders will benefit from the proposed Reorganization for the following
reasons:
Economies of Scale; Fees and Expenses
Having determined that the offering of multiple funds with substantially
similar objectives and investment strategies is both repetitious and confusing,
CFM and SBAM believe that the combination of the Funds, which have similar
investment objectives, policies and strategies into a single larger fund, may
increase economic and other efficiencies for investors and may ultimately result
in a lower total annual expenses ratio. Of course, there is no assurance that
this will be the case. Some of the fixed expenses currently paid by the Funds,
such as accounting, legal and printing costs, would be spread over a larger
asset base upon the combination of the Acquired Fund and Acquiring Fund. Other
things being equal, shareholders may be expected to benefit from economies of
scale through lower expense ratios and higher net income distributions over
time. CFM also believes that a larger asset base will provide portfolio
management benefits such as greater diversification.
After giving effect to the waivers and reimbursements, the total annual
operating expenses of each class of shares of the Acquiring Fund (on a pro forma
basis) are the same as the total annual operating expenses of the corresponding
class of shares of the Acquired Fund. These waivers and reimbursements can be
terminated at any time and Acquired Fund shareholders will benefit from the
lower total annual operating expenses of the Acquiring Fund before giving
effect to these waivers and reimbursements.
Compatible Investment Objectives and Investment Strategies
Both Funds invest in municipal obligations. After the Reorganization, the
Acquired Fund shareholders will own shares of a professionally managed portfolio
with investment objectives and strategies that are substantially similar to
those of the Acquired Fund.
Due to a combination of factors, including the benefits described above,
the Board of Directors of SBSF, on behalf of the Acquired Fund, believes that
the Acquired Fund and its shareholders would benefit from a tax-free
reorganization with the Acquiring Fund. ACCORDINGLY, IT IS RECOMMENDED THAT THE
SHAREHOLDERS OF THE ACQUIRED FUND APPROVE THE REORGANIZATION WITH THE ACQUIRING
FUND.
The Board of Directors of SBSF, on behalf of the Acquired Fund, in
recommending the proposed transaction, considered a number of factors, including
the following:
(a) the compatibility of the Acquired Fund's investment objectives,
policies and restrictions with those of the Acquiring Fund;
(b) the advisory, distribution, and other servicing arrangements of
the Acquiring Fund;
(c) the tax-free nature of the Reorganization;
(d) the terms and conditions of the Reorganization and that it should
not result in a dilution of Acquired Fund shareholder interests;
(e) the level of costs and expenses to the Acquired Fund of the
Reorganization;
(f) the lower total annual expense ratios of the Acquiring Fund as
compared to the Acquired Fund and the same total annual expense
ratios of the Acquiring Fund (on a pro forma basis) after giving
effect to waivers and reimbursements that can be terminated at any
time;
(g) a variety of alternatives potentially available to the Acquired
Fund, including maintaining the status quo or liquidating the
Acquired Fund; and
(h) the historic performance of the Acquiring Fund.
Description of the Securities to Be Issued
The Acquiring Fund is a non-diversified series of Salomon Funds Trust
("SFT"), which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 27, 1986, and is registered with the
Securities and Exchange Commission as an open-end management investment company.
Pursuant to SFT's Declaration of Trust, as amended, Trustees have authorized the
issuance of four series of shares (or funds), including the Acquiring Fund.
The Acquiring Fund currently offers four different classes of shares:
Class A, Class B, Class 2 and Class O. Shares of each class of the Acquiring
Fund represent interests in the Acquiring Fund in proportion to each share's net
asset value. The per share net asset value of each class of shares in the
Acquiring Fund is calculated separately and may differ among classes as a result
of the differences in distribution and service fees payable by the classes and
the allocation of certain incremental class-specific expenses to the appropriate
class to which such expenses apply.
All shares of the Acquiring Fund have equal voting rights. Shares of the
Acquiring Fund and the shares of the other series offered by SFT are entitled to
vote separately to approve advisory agreements or changes in investment policy,
and shares of a class are entitled to vote separately to approve any
distribution or service arrangements relating to that class, but shares of the
Acquiring Fund and the shares of the other series offered by SFT may vote
together in the election or selection of Trustees and accountants for SFT. In
matters affecting only a particular series or class only shares of that
particular series or class are entitled to vote. Shareholders have, under
certain circumstances (e.g., upon the application and submission of certain
specified documents to the Trustees by a specified number of shareholders), the
right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have under certain circumstances the right to remove one or
more Trustees without a meeting by a declaration in writing by a specified
number of shareholders. No material amendment may be made to SFT's Declaration
of Trust without the affirmative vote of the holders of a majority of the
outstanding shares of each series affected by the amendment. The Trustees of SFT
have approved an Amended and Restated Declaration of Trust, which can be amended
without shareholder approval in most cases. The Amended and Restated Declaration
of Trust would take effect only if approved by shareholders of each fund of SFT,
including the Acquiring Fund.
Each shareholder of the Acquiring Fund is entitled to cast, at all
meetings of shareholders on items on which that shareholder is entitled to vote,
such number of votes as is equal to the number of full and fractional shares
held by such shareholder. The Amended and Restated Declaration of Trust provides
for dollar-weighted voting. This means that each share of each fund of SFT,
including the Acquiring Fund, would have one vote for each dollar of net asset
value of the fund attributable to that share. Dollar-weighted voting is
important on matters where the funds in SFT vote together. This kind of voting
would match a shareholder's economic interest in SFT with the shareholder's
voting powers, and would prevent a shareholder who holds many shares with a
relatively low price per share from having disproportionately large voting
powers. As noted above, the Amended and Restated Declaration of Trust would take
effect only if approved by shareholders of each fund of SFT, including the
Acquiring Fund.
All shares of the Acquiring Fund will, when issued, be fully paid and
nonassessable. SFT is not required to hold, and has no present intention of
holding, annual meetings of shareholders but SFT will hold special meetings of
shareholders when in the judgment of the Trustees it is necessary or desirable
to submit matters for a shareholder vote.
The shares of the Acquiring Fund and the shares of the other series
offered by SFT have non-cumulative voting rights. This means that the holders of
more than 50% of the shares voting for the election of Trustees can elect 100%
of the Trustees, if they choose to do so. In such event, the holders of the
remaining less than 50% of the shares voting for such election will not be able
to elect any person or persons to the Board of Trustees.
Federal Income Tax Consequences
The Reorganization is conditioned upon the receipt by each of the
Acquiring Fund and the Acquired Fund of an opinion from Simpson Thacher &
Bartlett, substantially to the effect that, based upon certain facts,
assumptions and representations of the parties, for federal income tax purposes:
(i) the transfer to the Acquiring Fund of all or substantially all of the assets
of the Acquired Fund in exchange solely for Reorganization Shares and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund,
followed by the distribution of such Reorganization Shares to the shareholders
of the Acquired Fund in exchange for their shares of the Acquired Fund in
complete liquidation of the Acquired Fund, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Acquiring Fund and the
Acquired Fund will each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized by the
Acquired Fund upon the transfer of the Acquired Fund's assets to the Acquiring
Fund solely in exchange for the Reorganization Shares and the assumption by the
Acquiring Fund of liabilities of the Acquired Fund or upon the distribution
(whether actual or constructive) of the Reorganization Shares to the Acquired
Fund's shareholders in exchange for their shares of the Acquired Fund; (iii) the
basis of the assets of the Acquired Fund in the hands of the Acquiring Fund will
be the same as the basis of such assets in the hands of the Acquired Fund
immediately prior to the transfer; (iv) the holding period of the assets of the
Acquired Fund in the hands of the Acquiring Fund will include the period during
which such assets were held by the Acquired Fund; (v) no gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the Acquired
Fund solely in exchange for Reorganization Shares and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain or
loss will be recognized by the shareholders of the Acquired Fund upon the
receipt of Reorganization Shares solely in exchange for their shares of the
Acquired Fund as part of the transaction; (vii) the basis of Reorganization
Shares received by the shareholders of the Acquired Fund will be, in the
aggregate, the same as the basis, in the aggregate, of the shares of the
Acquired Fund exchanged therefor; and (viii) the holding period of
Reorganization Shares received by the shareholders of the Acquired Fund will
include the holding period during which the shares of the Acquired Fund
exchanged therefor were held, provided that at the time of the exchange the
shares of the Acquired Fund were held as capital assets in the hands of the
shareholders of the Acquired Fund.
As described above, although the Acquired Fund will, immediately prior to
or on the Closing Date, distribute substantially all of its investment company
taxable income and net realized capital gain to its shareholders as one or more
taxable dividends, the Acquiring Fund will not make such a distribution
immediately prior to or on the Closing Date. As a result, when the Acquiring
Fund subsequently makes a similar distribution or distributions to its
shareholders, including the former Acquired Fund shareholders who receive
Reorganization Shares of the Acquiring Fund, those former Acquired Fund
shareholders will effectively be receiving a return of a portion of their
capital investment in the Acquiring Fund (on which they may have already paid
taxes) in the form of a taxable dividend.
While the Acquiring Fund is not aware of any adverse state or local tax
consequences of the proposed Reorganization, the Fund has not requested any
ruling or opinion with respect to such consequences and shareholders may wish to
consult their own tax adviser with respect to such matters.
Liquidation and Termination of the Acquired Fund
If the Reorganization is effected, the Acquired Fund will be liquidated
and terminated, and the Fund's outstanding shares will be cancelled.
Portfolio Securities
If the Reorganization is effected, the Acquired Fund will transfer its
portfolio securities to the Acquiring Fund. If the Reorganization is effected,
CFM will analyze and evaluate the portfolio securities of the Acquired Fund
being transferred to the Acquiring Fund. Consistent with the Acquiring Fund's
investment objectives and policies, any restrictions imposed by the Code and the
best interests of the Acquiring Fund's shareholders (including former
shareholders of the Acquired Fund), CFM will determine whether to maintain an
investment in these portfolio securities. Subject to market conditions, the
disposition of 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 securities being sold.
Portfolio Turnover
The portfolio turnover rate for the Acquired Fund for its fiscal year
ended December 31, 2000 was 27%. The portfolio turnover rate for the Acquiring
Fund for its fiscal year ended December 31, 2000 was 46%. For a discussion of
the risks relating to portfolio turnover, see "Principal Investments and Risk
Factors."
Pro Forma Capitalization
Because the Acquired Fund will be combined in the Reorganization with the
Acquiring Fund, the total capitalization of the Acquiring Fund after such
Reorganization is expected to be greater than the current capitalization of the
Acquired Fund. The following table sets forth as of December 31, 2000: (a) the
capitalization of the Acquired Fund and the Acquiring Fund, and (b) the pro
forma capitalization of the Acquiring Fund as adjusted to give effect to the
Reorganization. If the Reorganization is consummated, the capitalization of the
Acquired Fund and the Acquiring Fund is likely to be different as a result of
daily share purchase and redemption activity. The Class B, Class 2 and Class O
shares of the Acquiring Fund are newly offered commencing on July 12, 2001.
SHARES NET ASSET VALUE
TOTAL NET ASSETS OUTSTANDING PER SHARE
- ---------------------------------------------------------------------------
ACQUIRED FUND
Class A $3,140,321.00 301,239 $10.42
Class B $4,764,649.00 459,423 $10.37
Class 2 $1,228,776.00 117,959 $10.42
Class O $390,455.00 37,435 $10.43
ACQUIRING FUND
Class A $72,975,152.00 6,472,984.000 $11.26
Class B $0.00 0.000 $0.00
Class 2 $0.00 0.000 $0.00
Class O $0.00 0.000 $0.00
PRO FORMA ACQUIRING
FUND
Class A $76,015,473.00 6,751,750 $11.26
Class B $4,764,649.00 423,110 $11.26
Class 2 $1,228,776.00 109,159 $11.26
Class O $390,455.00 34,676 $11.26
Performance
Performance shown below is as of December 31, 2000 and is based on
historical earnings. Each Fund's performance reflects certain fee waivers and
reimbursements. If these are reduced or eliminated, each Fund's performance may
go down. Past performance does not necessarily indicate how the Funds will
perform in the future.
Class B, Class 2 and Class O shares of the Acquiring Fund are newly
offered commencing July 12, 2001. In both the bar chart and the performance
table below, the returns shown are for periods before the creation of these
classes. All outstanding Acquiring Fund shares were designated Class A shares on
July 12, 2001. Prior to that date, Acquiring Fund shares were sold without a
sales charge. The returns in the performance table, but not the bar chart, have
been adjusted to reflect the maximum front-end sales charge currently applicable
to the Class A and Class 2 shares and the maximum deferred sales charge
currently applicable to Class B and Class 2 shares.
The bar chart below shows the performance of each Fund's Class A shares
for each of the full calendar years indicated. Class B, 2 and O shares would
have different performance because of their different expenses. The performance
in the bar chart does not reflect sales charges, which would reduce your return.
The bar chart provides an indication of the risks of investing in each
Fund by showing changes in the Fund's performance from year to year.
% TOTAL RETURN
ACQUIRED FUND 4.18% 7.52% 4.52% 0.18% 7.60%
ACQUIRING FUND 3.31% 11.45% 10.05% (3.86)% 12.10%
1996 1997 1998 1999 2000
Calendar years ended December 31
ACQUIRED FUND ACQUIRING FUND
QUARTERLY RETURNS:
Highest: .................... 2.95% in 2nd 5.12% in 4th
Quarter 1997 Quarter 2000
Lowest: ..................... (1.24%) in 2nd (2.59%) in 2nd
Quarter 1999 Quarter 1999
The table below shows the average annual total returns for each Fund as of
December 31, 2000. The table indicates the risk of investing in each Fund by
comparing the average annual total returns for each class of each Fund for the
periods shown to that of a broad-based index.
The table below assumes the imposition of the maximum sales charge
applicable to the class, redemption of shares at the end of the period, and the
reinvestment of distributions and dividends.
AVERAGE ANNUAL RETURNS
CALENDAR YEARS ENDING DECEMBER 31, 2000
SINCE INCEPTION
ONE YEAR FIVE YEARS INCEPTION DATE
CLASS A
Acquired Fund 2.44% 3.75% 4.73% 2/22/95
Acquiring Fund 6.77% 5.40% 6.42% 8/17/95
CLASS B
Acquired Fund 1.77% 3.63% 4.61% 2/22/95
Acquiring Fund N/A N/A N/A 7/12/01
CLASS 2
Acquired Fund(1) 5.02% 3.85% 4.65% 2/22/95
Acquiring Fund N/A N/A N/A 7/12/01
CLASS 0
Acquired Fund 7.94% 5.03% 5.82% 2/22/95
Acquiring Fund N/A% N/A% N/A% 7/12/01
Lehman Brothers(3)
1-10 Year Municipal 8.17% 5.22% 6.04% N/A(5)
Bond Index
Lehman Municipal 12.40% 5.95% N/A(6) N/A
Years Plus Bond
Index(4)
- ---------------------
(1) Formerly Class C
(2) Class B, Class 2 and Class O shares of the Acquiring Fund are newly offered
commencing July 12, 2001.
(3) This Index is the benchmark of the Acquired Fund.
(4) This Index is the benchmark of the Acquiring Fund.
(5) Index comparison begins on 2/28/95.
(6) Information not available.
VOTING INFORMATION
General Information
The Board of Directors of the SBSF, on behalf of the Acquired Fund, is
furnishing this Proxy Statement/Prospectus in connection with the solicitation
of proxies for a Special Meeting of Shareholders of the Acquired Fund at which
shareholders will be asked to consider and approve the proposed Plan with
respect to the Acquired Fund.
It is expected that the solicitation of proxies will be primarily by mail.
Officers and service contractors of the Acquired Fund and Acquiring Fund may
also solicit proxies and voting instructions by telephone or otherwise. Alamo
Direct has been retained to assist in the solicitation of proxies, at a cost of
approximately $4,500. Shareholders may vote (1) by mail, by marking, signing,
dating and returning the enclosed proxy card(s) in the enclosed postage-paid
envelope, (2) by fax, (3) by touch-tone voting over the telephone, or (4) via
the internet.
Any shareholder of the Acquired Fund giving a proxy has the power to
revoke it by submitting a written notice of revocation to the Acquired Fund or
by attending the Special Meeting and voting in person. All properly executed
proxies received in time for the Special Meeting will be voted as specified in
the proxy card or, if no specification is made, in favor of the proposals
referred to in this Proxy Statement/Prospectus.
Quorum; Vote Required to Approve Proposal
The holders of one-third of the outstanding shares of the Acquired Fund
present in person or by proxy shall constitute a quorum at any meeting of
shareholders for the transaction of business by the Acquired Fund. If the
necessary quorum to transact business or the vote required to approve the Plan
is not obtained at the Special Meeting, the persons named as proxies may propose
one or more adjournments of the Special Meeting in accordance with applicable
law to permit further solicitation of proxies. Any such adjournment as to a
matter will require the affirmative vote of the holders of a majority of the
Acquired Fund's shares present in person or by proxy at the Special Meeting. The
persons named as proxies will vote in favor of such adjournment those proxies
that they are entitled to vote in favor of that proposal and will vote against
any such adjournment those proxies to be voted against that proposal.
For purposes of determining the presence of a quorum for transacting
business at the Special Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but that have not been voted. Broker
non-votes are proxies received by the Acquired Fund from brokers or nominees
when the broker or nominee has neither received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter.
The Plan must be approved by the vote of more than 50% of the outstanding
voting securities of the Acquired Fund. Abstentions and broker non-votes will
have the effect of a "no" vote on the proposal to approve the Plan.
Outstanding Shareholders
Holders of record of the shares of the Acquired Fund at the close of business
on July 13, 2001 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. As of June 1, 2001, there were 296,775.850 outstanding Class A
shares, 451,712.648 outstanding Class B shares, 127,113.642 outstanding Class 2
shares and 38,033.418 outstanding Class O shares of the Acquired Fund.
The table below shows the name, address and share ownership of each person
known to the Acquired Fund to own 5% or more of the shares of the Acquired Fund
as of June 1, 2001. The table also indicates the percentage of the Acquired
Fund's shares that would be owned by such persons upon consummation of the
Reorganization on the basis of present holdings and commitments. The type of
ownership of each person listed in the table below is noted.
PRO FORMA
TYPE OF PERCENTAGE PERCENTAGE OWNERSHIP
NAME AND ADDRESS CLASS OWNERSHIP OWNERSHIP POST-REORGANIZATION
- --------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc. Class A Record 30.012% 1.46%
334 West 34th St, 3rd Floor
New York, NY 10001
Morgan Stanley Dean
Witter & Co. Class A Record 39.228% 1.90%
P.O. Box 250
Church Street Station
New York, NY 10008-0250
Wells Fargo Class A Record 7.482% 3.64%
608 Second Avenue
Minneapolis MN 55402
Salomon Smith Barney, Inc. Class B Record 35.947% 35.947%
334 West 34th St, 3rd Floor
New York, NY 10001
Merrill Lynch & Co., Inc. Class B Record 31.21% 31.21%
Attn: Fund Administration
4800 Deer Lake Dr. East,
3rd Fl.
Jacksonville, FL 32246
Sally Golaske Class B Record/ 7.01% 7.01%
Jeffrey W. Gillespie Beneficial
Conservators
FBO Katherine G. Savidge
PO Box 217
Royal Oak, MI 48068
Salomon Smith Barney, Inc. Class 2 Record 42.00% 42.00%
334 West 34th St, 3rd Floor
New York, NY 10001
Dain Rauscher Inc. Class 2 Record 23.24% 23.24%
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis MN 55402
Dain Rauscher Inc. FBO Class 2 Beneficial 10.18% 10.18%
Florence L. Moore TTEE
Janis M. Drake TTEE
Alfred F. Moore Credit Trust
17143 133rd. Ave NE Apt. 272
Woodinville, WA 98072
Dain Rauscher Inc. FBO Class 2 Beneficial 6.19% 6.19%
Carolyn Wilson Schofield
Estate of Jane J. Wilson
6902 Gleneagles Dr.
Tyler, TX 75703
H.R. Lewis TTEE Class 2 Record/ 9.23% 9.23%
H.R. Lewis M.D. Pa. Beneficial
Corporation
Professional Plaza One
One Medical Parkway, Ste 139
Dallas, TX 75234
The table below shows the name, address and share ownership of each person
known to the Acquiring Fund to own 5% or more of the shares of the Acquiring
Fund as of June 1, 2001. The table also indicates the percentage of the
Acquiring Fund's shares that would be owned by such persons upon consummation of
the Reorganization on the basis of present holdings and commitments. The type of
ownership of each person listed below is record ownership.
TYPE PRO FORMA
NAME AND ADDRESS OF PERCENTAGE PERCENTAGE OWNERSHIP
CLASS OWNERSHIP OWNERSHIP POST-REORGANIZATION
- --------------------------------------------------------------------------------
Salomon Smith Barney Class A Record 90% 91%
333 W 34th Street
New York, NY 10001-2483
As of June 1, 2001 the Directors and officers of the Acquired Fund owned
less than 1% of any class of the Acquired Fund's outstanding shares. As of June
1, 2001 the Trustees and officers of the Acquiring Fund owned less than 1% of
any class of the Acquiring Fund's outstanding shares.
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about the Acquired Fund, the
Acquiring Fund and the Reorganization has been filed with the Securities and
Exchange Commission and may be obtained without charge by writing or calling the
Acquired Fund, Seven World Trade Center, New York, New York 10048, telephone
number (800) 725-6666, or the Acquiring Fund, Seven World Trade Center, New
York, New York 10048, telephone number (800) 995-0134. Information included in
this Proxy Statement/Prospectus concerning the Acquired Fund was provided by
SBSF, on behalf of the Acquired Fund, and information concerning the Acquiring
Fund was provided by the Salomon Funds Trust, on behalf of the Acquiring Fund.
Each Fund files reports, proxy materials and other information about the
applicable Fund with the Securities and Exchange Commission. Such reports, proxy
material and other information can be inspected and copied at the Public
Reference Room maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549 at prescribed rates or without charge from the Commission at
publicinfo@sec.gov.
OTHER MATTERS
No Director is aware of any matters that will be presented for action at
the Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
the Acquired Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. YOU MAY ALSO CAST YOUR VOTE BY FAX,
THE INTERNET OR TELEPHONE.
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [**___**] day of [**________**], 2001 between Salomon Brothers Series Funds
Inc, a Maryland corporation with its principal place of business at Seven World
Trade Center, New York, New York 10048 (the "Acquired Company"), on behalf of
its series, Salomon Brothers National Intermediate Municipal Fund (the "Acquired
Fund") and CitiFunds Tax Free Income Trust (to be renamed the "Salomon Funds
Trust"), a Massachusetts business trust with its principal place of business at
Seven World Trade Center, New York, New York 10048 (the "Acquiring Trust"), on
behalf of its series, Citi National Tax Free Income Fund (to be renamed the
"Salomon Brothers National Tax Free Income Fund") (the "Acquiring Fund," and
together with the Acquired Fund, the "Funds"), and, solely for purposes of
Section 10.2 below, Salomon Brothers Asset Management Inc. and Citi Fund
Management Inc.
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), with respect to the
Acquired Fund and the Acquiring Fund, with which the Acquired Fund will
reorganize, as provided herein. The reorganization will consist of the transfer
of substantially all of the assets of the Acquired Fund to the Acquiring Trust,
on behalf of the Acquiring Fund, in exchange solely for shares of beneficial
interest (no par value per share) of the Acquiring Fund (the "Acquiring Fund
Shares"), the assumption by the Acquiring Trust, on behalf of the Acquiring
Fund, of all of the liabilities of the Acquired Fund and the distribution of the
Acquiring Fund Shares to the shareholders of the Acquired Fund in complete
liquidation of the Acquired Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement (the "Reorganization").
Shares of beneficial interest of the Acquired Fund ("Acquired Fund
Shares") and Acquiring Fund Shares are divided into four classes of shares,
designated Class A, Class B, Class O and Class 2 shares.
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. THE REORGANIZATION
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Company, on
behalf of the Acquired Fund, agrees to transfer to the Acquiring Fund
substantially all of the Acquired Fund assets as set forth in Section 1.2, and
the Acquiring Trust, on behalf of the Acquiring Fund, agrees in exchange
therefor:
(i) to issue and deliver to the Acquired Fund the number of full and
fractional (A) Class A Acquiring Fund Shares determined by dividing the
portion of the net value of the Assets (as defined below) (such net value
computed as set forth in Section 2.1 hereof and referred to as the
"Acquired Fund Value") attributable to the Class A Acquired Fund Shares by
the net asset value ("NAV") of a Class A Acquiring Fund Share (computed as
set forth in Section 2.2), (B) Class B Acquiring Fund Shares determined by
dividing the portion of the Acquired Fund Value attributable to the Class
B Acquired Fund Shares by the NAV of a Class B Acquiring Fund Share
(computed as set forth in Section 2.2), (C) Class O Acquiring Fund Shares
determined by dividing the portion of the Acquired Fund Value attributable
to the Class O Acquired Fund Shares by the NAV of a Class O Acquiring Fund
Share (computed as set forth in Section 2.2), and (D) Class 2 Acquiring
Fund Shares determined by dividing the portion of the Acquired Fund Value
attributable to the Class 2 Acquired Fund Shares by the NAV of a Class 2
Acquiring Fund Share (computed as set forth in Section 2.2), and
(ii) to assume all of the liabilities of the Acquired Fund, as
set forth in Section 1.3.
Such transactions shall take place at the closing provided for in Section 3.1
(the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(collectively, "Assets") shall consist of all property and assets of every kind
and nature of the Acquired Fund, including, without limitation, all cash, cash
equivalents, securities, commodities, futures, claims (whether absolute or
contingent, known or unknown), receivables (including dividend, interest and
other receivables), good will and other intangible property, any deferred or
prepaid expenses, and all interests, rights, privileges and powers, other than
cash in an amount necessary to pay dividends and distributions as provided in
Section 1.4 hereof and the Acquired Fund's rights under this Agreement.
1.3. The Acquiring Fund shall assume all liabilities of the Acquired Fund,
whether accrued or contingent, existing at the Valuation Time as defined in
Section 2.1. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in Section 3.1,
other than those liabilities and obligations which would otherwise be discharged
at a later date in the ordinary course of business.
1.4. On or as soon as practicable prior to the Closing Date, the Acquired
Fund will declare and pay to its shareholders of record one or more dividends
and/or other distributions so that it will have distributed substantially all of
its investment company taxable income (computed without regard to any deduction
for dividends paid) and realized net capital gain, if any, for the current
taxable year through the Closing Date.
1.5. Immediately after the transfer of its Assets provided for in Section
1.1, the Acquired Fund will distribute to its shareholders of record (the
"Acquired Fund Shareholders"), determined as of the Valuation Time as defined in
Section 2.1, on a pro rata basis, the Acquiring Fund Shares received by the
Acquired Fund pursuant to Section 1.1 and will completely liquidate. Acquired
Fund Shareholders owning (i) Class A Acquired Fund Shares shall receive Class A
Acquiring Fund Shares therefor, (ii) Class B Acquired Fund Shares shall receive
Class B Acquiring Fund Shares therefor, (iii) Class O Acquired Fund Shares shall
receive Class O Acquiring Fund Shares therefor, and (iv) Class 2 Acquired Fund
Shares shall receive Class 2 Acquiring Fund Shares therefor. Such distribution
and liquidation will be accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the names of the Acquired Fund Shareholders. The aggregate net asset value of
the Acquiring Fund Shares to be so credited to Acquired Fund Shareholders shall
be equal to the aggregate net asset value of the Acquired Fund Shares owned by
such shareholders as of the Valuation Time. All issued and outstanding shares of
the Acquired Fund will simultaneously be cancelled on the books of the Acquired
Fund. The Acquiring Fund will not issue certificates representing Acquiring Fund
Shares in connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the Acquiring
Fund's books. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Acquired Fund, including, without
limitation, the responsibility for filing of regulatory reports, tax returns or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2. VALUATION
2.1. The value of the Assets and liabilities of the Acquired Fund shall be
computed as of the close of regular trading on the New York Stock Exchange, Inc.
("NYSE") on the Closing Date (such time and date also being hereinafter called
the "Valuation Time"), after the declaration and payment of any dividends and/or
other distributions on that date, using the valuation procedures described in
the Acquiring Fund's then-current prospectus and statement of additional
information. The Acquired Fund Value shall be determined by dividing the value
of the Assets of the Acquired Fund less the value of the liabilities of the
Acquired Fund as determined as provided herein.
2.2. The net asset value of each class of Acquiring Fund Shares shall be
computed as of the Valuation Time using the valuation procedures set forth in
the Acquiring Fund's then-current prospectus and statement of additional
information.
2.3. All computations of value hereunder shall be made by or under the
direction of each Fund's investment adviser in accordance with its regular
practice and the requirements of the 1940 Act, and shall be subject to
confirmation by each Fund's Board of Trustees or Board of Directors, as
applicable, and independent accountants.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the Reorganization contemplated by this Agreement
shall be September 14, 2001, or such earlier or later date as the parties may
agree in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously as of 4:00 p.m. Eastern time, on
the Closing Date, unless otherwise agreed to by the parties. The Closing shall
be held at the offices of Bingham Dana LLP, 399 Park Avenue, New York, New York,
or at such other place and time as the parties may agree.
3.2. The Acquired Company shall furnish to the Acquiring Trust a statement
of the Acquired Fund's net assets, together with a list of portfolio holdings
with values as determined in Section 2.1, all as of the Valuation Time,
certified by an authorized officer of the Acquired Company.
3.3. The Acquired Company shall deliver at the Closing a certificate of an
authorized officer of the Acquired Company certifying that the Acquired Company
has instructed the custodian for the Acquired Fund to deliver the Assets of the
Acquired Fund to State Street Bank and Trust Company ("State Street"), custodian
for the Acquiring Fund, prior to or on the Closing Date. The portfolio
securities of the Acquired Fund represented by a certificate or other written
instrument shall be presented by the Acquired Fund's custodian to State Street
for examination no later than five business days preceding the Closing Date and
transferred and delivered by the Acquired Fund as of the Closing Date for the
account of the Acquiring Fund duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof. The Acquired Fund's securities
and instruments deposited with a securities depository, as defined in Rule 17f-4
under the 1940 Act, shall be delivered as of the Closing Date by book entry in
accordance with the customary practices of such depositories and the Acquired
Fund's custodian. The cash to be transferred by the Acquired Fund shall be
delivered by wire transfer of federal funds on the Closing Date.
3.4. The Acquired Company shall instruct the transfer agent of the
Acquired Fund to deliver at the Closing its records containing the names and
addresses of the Acquired Fund Shareholders and the number and percentage
ownership (to three decimal places) of outstanding Acquired Fund Shares owned by
each such shareholder immediately prior to the Closing. The Acquiring Fund shall
issue and deliver a confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Acquired Fund or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's accounts on the books of the Acquiring Fund.
3.5. In the event that immediately prior to the Valuation Time (a) the
NYSE or another primary trading market for portfolio securities of the Acquiring
Fund or the Acquired Fund shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on the NYSE or
elsewhere shall be disrupted so that, in the judgment of the Board of Directors
of the Acquired Company or the Board of Trustees of the Acquiring Trust,
accurate appraisal of the value of the net assets with respect to the Acquiring
Fund Shares or the Acquired Fund Shares 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.
3.6. At the Closing, each party shall deliver to the other such bills of
sale, checks, assumption agreements, assignments, share certificates, if any,
receipts or other documents as such other party or its counsel may reasonably
request to effect the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Company, on behalf of itself and the Acquired Fund,
represents and warrants to the Acquiring Trust and the Acquiring Fund as
follows:
(a) The Acquired Company is a corporation duly organized and validly
existing under the laws of the State of Maryland with power under its
Articles of Incorporation to own all of its properties and assets and to
carry on its business as it is now being conducted. The Acquired Fund has
been duly established as a series of the Acquired Company.
(b) The Acquired Company is duly registered with the Commission as
an open-end management investment company under the 1940 Act, and such
registration is in full force and effect.
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired
Company, on behalf of the Acquired Fund, of the transactions contemplated
herein, except such as may be required under the Securities Act of 1933,
as amended (the "1933 Act"), the Securities Exchange Act of 1934 (the
"1934 Act"), the 1940 Act, and state securities laws.
(d) The Acquired Fund is not, and the execution, delivery and
performance of this Agreement by the Acquired Company on behalf of the
Acquired Fund will not result, in violation of Maryland law or of the
Acquired Company's Articles of Incorporation or By-Laws, or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquired Fund is a party or by which it is bound, nor will the
execution, delivery and performance of this Agreement by the Acquired
Company on behalf of the Acquired Fund result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Acquired Fund is a party or by which it is bound.
(e) To the Acquired Company's knowledge, there is no material
litigation or administrative proceeding or investigation of or before any
court or governmental body presently pending or threatened against the
Acquired Fund or any properties or assets held by it. The Acquired Company
knows of no facts which might form the basis for the institution of such
proceedings or which would materially and adversely affect its business or
the business of the Acquired Fund, and 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 its or the Acquired Fund's
business or its or the Acquired Fund's ability to consummate the
transactions herein contemplated.
(f) The financial statements of the Acquired Fund at and for the
year ended December 31, 2000 have been audited by PricewaterhouseCoopers
LLP, independent certified public accountants, and are in accordance with
generally accepted accounting principles ("GAAP") consistently applied.
All of such statements (copies of which have been furnished to the
Acquiring Fund) present fairly, in all material respects, the financial
position, results of operations, changes in net assets and financial
highlights of the Acquired Fund as of the dates thereof in accordance with
GAAP, and there are no known actual or contingent liabilities of the
Acquired Fund required to be reflected on a statement of assets and
liabilities (including the notes thereto) in accordance with GAAP as of
such dates not disclosed therein.
(g) Since December 31, 2000, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquiring Fund. For purposes
of this subsection (g), a decline in net asset value per share of the
Acquired Fund due to declines in market values of securities in the
Acquired Fund's portfolio, the discharge of Acquired Fund liabilities, or
the redemption of Acquired Fund Shares by Acquired Fund Shareholders shall
not constitute a material adverse change.
(h) At the date hereof and at the Closing Date, all federal and
other tax returns and reports of the Acquired Fund required by law to have
been filed by such dates (including any extensions) have or shall have
been filed and are or will be correct in all material respects, and all
federal and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision shall have been
made for the payment thereof, and, to the best of the Acquired Company's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to such returns or reports.
(i) For each taxable year of its operation (including the tax year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment
company and has elected to be treated as such, and has been eligible to
and has computed its federal income tax under Section 852 of the Code. At
Closing, the Acquired Fund will have distributed all of its investment
company taxable income and net capital gain (as defined in the Code) that
has accrued up to the Closing Date.
(j) The authorized capital stock of the Acquired Company consists of
10,000,000,000 shares, $0.001 par value per share, divided into twelve
(12) series and, with respect to the Acquired Fund, four classes. All
issued and outstanding shares of the Acquired Fund (i) have been offered
and sold in every state and the District of Columbia in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws, (ii) are, and on the Closing Date will be,
duly and validly issued and outstanding, fully paid and non-assessable,
and (iii) will be held at the time of the Closing by the persons and in
the amounts set forth in the records of the Acquired Fund's transfer
agent, as provided in Section 3.4. There are no outstanding options,
warrants or other rights to subscribe for or purchase any Acquired Fund
Shares, nor is there outstanding any security convertible into any
Acquired Fund Share.
(k) At the Closing Date, the Acquired Company, on behalf of the
Acquired Fund, will have good and marketable title to the Acquired Fund's
Assets and full right, power and authority to sell, assign, transfer and
deliver such Assets hereunder free of any liens or other encumbrances,
except those liens or encumbrances as to which the Acquiring Trust, on
behalf of the Acquiring Fund, has received notice at or prior to the
Closing, 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, except those restrictions as to which the
Acquiring Fund has received notice and necessary documentation at or prior
to the Closing.
(l) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Directors
of the Acquired Company, and, subject to the approval of the shareholders
of the Acquired Fund, this Agreement constitutes a valid and binding
obligation of the Acquired Company, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general principles of equity.
(m) The information to be furnished by the Acquired Company for use
in applications for orders, registration statements or proxy materials or
for use in any other document filed or to be filed with any federal, state
or local regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary or appropriate in
connection with the transactions contemplated hereby, shall be accurate
and complete and shall comply with federal securities and other laws and
regulations applicable thereto.
(n) The current combined prospectus and statement of additional
information of the Acquired 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.
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in Section 5.6 (the "Proxy Statement"),
insofar as it relates to the Acquired 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 are made, not materially
misleading; provided, however, that the representations and warranties in
this Section shall not apply to statements in or omissions from the Proxy
Statement and the Registration Statement made in reliance upon and in
conformity with information that was furnished or should have been
furnished by the Acquiring Trust for use therein.
4.2. The Acquiring Trust, on behalf of itself and the Acquiring Fund,
represents and warrants to the Acquired Company and the Acquired Fund as
follows:
(a) The Acquiring Trust is a business trust duly established and
validly existing under the laws of the Commonwealth of Massachusetts with
power under its Declaration of Trust to own all of its properties and
assets and to carry on its business as it is now being conducted. The
Acquiring Fund has been duly established as a series of the Acquiring
Trust.
(b) The Acquiring Trust is duly registered with the Commission as an
open-end management investment company under the 1940 Act, and such
registration is in full force and effect.
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring
Trust, on behalf of the Acquiring Fund, of the transactions contemplated
herein, except such as may be required under the 1933 Act, the 1934 Act,
the 1940 Act, and state securities laws.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement by the Acquiring Trust on behalf of the
Acquiring Fund will not result, in violation of Massachusetts law or of
the Acquiring Trust's Declaration of Trust or By-Laws, or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is bound, nor will the
execution, delivery and performance of this Agreement by the Acquiring
Trust on behalf of the Acquiring Fund result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Acquiring Fund is a party or by which it is bound.
(e) To the Acquiring Trust's knowledge, there is no material
litigation or administrative proceeding or investigation of or before any
court or governmental body presently pending or threatened against the
Acquiring Fund or any properties or assets held by it. The Acquiring Trust
knows of no facts which might form the basis for the institution of such
proceedings or which would materially and adversely affect its business or
the business of the Acquiring Fund, and 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 its or the
Acquiring Fund's business or its or the Acquiring Fund's ability to
consummate the transactions herein contemplated.
(f) The financial statements of the Acquiring Fund at and for the
year ended December 31, 2000 have been audited by Deloitte & Touche LLP,
independent certified public accountants, and are in accordance with GAAP
consistently applied. All such statements (copies of which have been
furnished to the Acquired Fund) present fairly, in all material respects,
the financial position, results of operations, changes in net assets and
financial highlights of the Acquiring Fund as of such date in accordance
with GAAP, and there are no known actual or contingent liabilities of the
Acquiring Fund required to be reflected on a statement of assets and
liabilities (including the notes thereto) in accordance with GAAP as of
such date not disclosed therein.
(g) Since December 31, 2000, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquired Fund. For purposes of
this subsection (g), a decline in net asset value per share of the
Acquiring Fund due to declines in market values of securities in the
Acquiring Fund's portfolio, the discharge of Acquiring Fund liabilities,
or the redemption of Acquiring Fund Shares by Acquiring Fund shareholders
shall not constitute a material adverse change.
(h) At the date hereof and at the Closing Date, all federal and
other tax returns and reports of the Acquiring Fund required by law to
have been filed by such dates (including any extensions) have or shall
have been filed and are or will be correct in all material respects, and
all federal and other taxes shown as due or required to be shown as due on
said returns and reports shall have been paid or provision shall have been
made for the payment thereof, and, to the best of the Acquiring Trust's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to such returns or reports.
(i) For each taxable year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such, has
been eligible to and has computed its federal income tax under Section 852
of the Code, and intends to do so for the taxable year including the
Closing Date.
(j) The authorized capital of the Acquiring Trust consists of an
unlimited number of shares of beneficial interest, no par value per share,
divided into three (3) series, and, with respect to the Acquiring Fund,
four classes. All issued and outstanding shares of the Acquiring Fund (i)
have been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and state securities laws, and (ii) are, and
on the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. There are no outstanding options, warrants
or other rights to subscribe for or purchase any Acquiring Fund Shares,
nor is there outstanding any security convertible into any Acquiring Fund
Share. The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund for the account of the Acquired Fund Shareholders pursuant
to the terms of this Agreement, at the Closing Date, will have been duly
authorized and, when so issued and delivered, will be duly and validly
issued and outstanding Acquiring Fund Shares, and will be fully paid and
non-assessable.
(k) At the Closing Date, the Acquiring Trust, on behalf of the
Acquiring Fund, will have good and marketable title to the Acquiring
Fund's assets, free of any liens or other encumbrances, except those liens
or encumbrances as to which the Acquired Company, on behalf of the
Acquired Fund, has received notice at or prior to the Closing.
(l) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Trustees
of the Acquiring Trust, and this Agreement constitutes a valid and binding
obligation of the Acquiring Trust, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general principles of equity.
(m) The information to be furnished by the Acquiring Trust for use
in applications for orders, registration statements or proxy materials or
for use in any other document filed or to be filed with any federal, state
or local regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary or appropriate in
connection with the transactions contemplated hereby, shall be accurate
and complete and shall comply with federal securities and other laws and
regulations applicable thereto.
(n) 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.
(o) The Proxy Statement, insofar as it relates to the Acquiring
Fund, and the Registration Statement will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not materially
misleading; provided, however, that the representations and warranties in
this Section shall not apply to statements in or omissions from the Proxy
Statement and the Registration Statement made in reliance upon and in
conformity with information that was furnished or should have been
furnished by the Acquired Company for use therein.
5. COVENANTS
5.1. Each Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that (a) such
ordinary course of business will include (i) the declaration and payment of
customary dividends and other distributions and (ii) such changes as are
contemplated by the Fund's normal operations; and (b) each Fund shall retain
exclusive control of the composition of its portfolio until the Closing Date.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to the Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Company and the Acquired Fund covenant to call a meeting
of the shareholders of the Acquired Fund to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than September 14, 2001 (or such other date as the parties may agree to in
writing).
5.4. The Acquired Company and the Acquired Fund covenant that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.5. Subject to the provisions of this Agreement, the parties hereto will
each take, or cause to be taken, all actions, and do or cause to be done, all
things reasonably necessary, proper, and/or advisable to consummate and make
effective the transactions contemplated by this Agreement.
5.6. The Acquiring Trust will file a Registration Statement on Form N-14
(the "Registration Statement") under the 1933 Act, and the Acquired Company will
file the Proxy Statement contained therein, in connection with the meeting of
shareholders of the Acquired Fund to consider approval of this Agreement and the
transactions contemplated herein, with the Commission as promptly as
practicable. The Acquired Company and the Acquired Fund will provide the
Acquiring Trust with information relating to it that is required by the 1933
Act, the 1934 Act and the 1940 Act to be included in the Registration Statement,
including the Proxy Statement.
5.7. Each of the Acquired Company and the Acquired Fund covenants that it
will, from time to time, as and when reasonably requested by the Acquiring
Trust, execute and deliver or cause to be executed and delivered all such
assignments and other instruments, and will take or cause to be taken such
further action, as the Acquiring Trust may reasonably deem necessary or
desirable in order to vest in and confirm the Acquiring Trust's title to and
possession of the Assets and otherwise to carry out the intent and purpose of
this Agreement.
5.8. Each of the Acquiring Trust and the Acquiring Fund covenants that it
will, from time to time, as and when reasonably requested by the Acquired
Company, execute and deliver or cause to be executed and delivered all such
assignments, assumption agreements, releases and other instruments, and will
take or cause to be taken such further action, as the Acquired Company may
reasonably deem necessary or desirable in order to (i) vest and confirm the
Acquired Company's title to and possession of all Acquiring Fund Shares to be
transferred to the Acquired Fund pursuant to this Agreement and (ii) assume the
assumed liabilities of the Acquired Fund.
5.9. The Acquired Company, the Acquiring Trust and each Fund covenant to
use all reasonable efforts to obtain the approvals and authorizations required
by the 1933 Act, the 1940 Act and such of the state securities laws as it deems
appropriate in order to consummate the transactions contemplated herein and, in
the case of the Acquiring Fund, to continue its operations after the Closing
Date.
5.10. As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.11. Each of the Acquiring Fund and the Acquired Fund shall use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED COMPANY
The obligations of the Acquired Company and the Acquired Fund to
consummate the transactions provided for herein shall be subject, at the
Acquired Company's election, to the performance by the Acquiring Trust and the
Acquiring Fund of all the obligations to be performed by them hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Acquiring Trust, on behalf
of itself and the Acquiring Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date;
and there shall be (i) no pending or threatened litigation brought by any person
against the Acquiring Trust or the Acquiring Fund, the Acquired Company or the
Acquired Fund, or the advisers, directors, trustees or officers of any of the
foregoing, arising out of this Agreement and (ii) no facts known to the Acquired
Company or the Acquired Fund, or the Acquiring Trust or the Acquiring Fund,
which any of such persons reasonably believes might result in such litigation.
6.2. The Acquiring Trust shall have delivered to the Acquired Company on
the Closing Date a certificate executed in its name by an authorized officer of
the Acquiring Trust, in a form reasonably satisfactory to the Acquired Company
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquiring Trust and the Acquiring Fund made in this Agreement
are true and correct on and as of the Closing Date and as to such other matters
as the Acquired Company shall reasonably request.
6.3. the Acquired Company shall have received on the Closing Date an
opinion of Bingham Dana LLP, in a form reasonably satisfactory to the Acquired
Company, and dated as of the Closing Date, to the effect that:
(a) the Acquiring Trust is existing under the laws of the
Commonwealth of Massachusetts as a voluntary association with transferable
shares of beneficial interest commonly referred to as a Massachusetts
business trust, and the Acquiring Fund has been duly designated as a
series of the Acquiring Trust;
(b) the Acquiring Trust, with respect to the Acquiring Fund, has the
power as a Massachusetts business trust to carry on its business as
presently conducted in accordance with the description thereof in the
Acquiring Trust's registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed and delivered
by the Acquiring Trust, and constitutes a valid and legally binding
obligation of the Acquiring Trust, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, marshaling, or other laws and rules of law
affecting the enforcement generally of creditors' rights and remedies
(including such as may deny giving effect to waivers of debtors' or
guarantors' rights), and, with respect to any provision of
indemnification, considerations of public policy;
(d) the execution and delivery of the Agreement did not, and the
exchange of the Acquired Fund's assets for Acquiring Fund Shares pursuant
to the Agreement will not, violate the Acquiring Trust's Declaration of
Trust or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by
the Acquiring Trust under the Federal laws of the United States or the
laws of the Commonwealth of Massachusetts for the exchange of the Acquired
Fund's assets for Acquiring Fund Shares pursuant to the Agreement have
been obtained or made.
Such opinion may state that it is solely for the benefit of the Acquired
Company, its Directors and its officers. Such opinion also shall include such
other matters incident to the transaction contemplated hereby as the Acquired
Company may reasonably request.
6.4. The Acquiring Trust and the Acquiring Fund shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by them on or before the Closing
Date.
6.5. The Acquiring Trust, on behalf of the Acquiring Fund, shall have
executed and delivered an assumption agreement in form reasonably satisfactory
to the Acquired Company pursuant to which the Acquiring Trust, on behalf of the
Acquiring Fund, will assume all of the liabilities of the Acquired Fund existing
at the Valuation Time.
[**6.6 An endorsement to the Acquired Company's existing errors and
omissions and directors and officers liability insurance policy, or other
evidence of insurance, satisfactory in all respects to the Acquired Company's
Board of Directors shall have been obtained at no cost to the Acquired Company
or the Acquired Fund and shall be in full force and effect.**]
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING TRUST
The obligations of the Acquiring Trust and the Acquiring Fund to
consummate the transactions provided for herein shall be subject, at the
Acquiring Trust's election, to the performance by the Acquired Company and the
Acquired Fund of all of the obligations to be performed by them hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Acquired Company, on behalf
of itself and the Acquired Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and as of the Closing
Date, with the same force and effect as if made on and as of the Closing Date;
and there shall be (i) no pending or threatened litigation brought by any person
against the Acquired Company or the Acquired Fund, the Acquiring Trust or the
Acquiring Fund or the advisers, directors, trustees or officers of any of the
foregoing, arising out of this Agreement and (ii) no facts known to the
Acquiring Trust or the Acquiring Fund, or the Acquired Company or the Acquired
Fund, which any of such persons reasonably believes might result in such
litigation.
7.2. The Acquired Company shall have delivered to the Acquiring Trust the
statement of net assets described in Section 3.2.
7.3. The Acquired Company shall have delivered to the Acquiring Trust on
the Closing Date a certificate executed in its name by an authorized officer of
the Acquired Company, in a form reasonably satisfactory to the Acquiring Trust
and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquired Company and the Acquired Fund made in this Agreement
are true and correct on and as of the Closing Date and as to such other matters
as the Acquiring Trust shall reasonably request.
7.4. The Acquiring Trust shall have received on the Closing Date an
opinion of Simpson Thacher & Bartlett, in a form reasonably satisfactory to the
Acquiring Trust, and dated as of the Closing Date, to the effect that:
(a) the Acquired Company is existing under the laws of the State of
Maryland as a corporation, and the Acquired Fund has been duly designated
as a series of the Acquired Company;
(b) the Acquired Company, with respect to the Acquired Fund, has the
corporate power as a Maryland corporation to carry on its business as
presently conducted in accordance with the description thereof in the
Acquired Company's registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed and delivered
by the Acquired Company, and constitutes a valid and legally binding
obligation of the Acquired Company, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, marshaling, or other laws and rules of law
affecting the enforcement generally of creditors' rights and remedies
(including such as may deny giving effect to waivers of debtors' or
guarantors' rights), and, with respect to any provision of
indemnification, considerations of public policy;
(d) the execution and delivery of the Agreement did not, and the
exchange of the Acquired Fund's assets for Acquiring Fund Shares pursuant
to the Agreement will not, violate the Acquired Company's Articles of
Incorporation or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by
the Acquired Company under the Federal laws of the United States or the
laws of the State of Maryland for the exchange of the Acquired Fund's
assets for Acquiring Fund Shares pursuant to the Agreement have been
obtained or made.
Such opinion may state that it is solely for the benefit of the Acquiring Trust,
its Trustees and its officers, and counsel may rely as to matters governed by
the laws of the State of Maryland on an opinion of Maryland counsel. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby as the Acquiring Trust may reasonably request.
7.5. The Acquired Company and the Acquired Fund shall have performed all
of the covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by them on or before the Closing
Date.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below have not been met on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the Reorganization.
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Company's
Articles of Incorporation and By-Laws, applicable Maryland law and the 1940 Act,
and certified copies of the resolutions evidencing such approval shall have been
delivered to the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither party may waive the condition set forth in this Section 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to either party's knowledge threatened before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
material damages or other relief in connection with, this Agreement or the
transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Trust and the Acquiring Fund or the Acquired Company and the
Acquired Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
material adverse effect on the assets or properties of the Acquiring Fund or the
Acquired Fund.
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 parties shall have received an opinion of Simpson Thacher &
Bartlett addressed to the Acquired Company, the Acquired Fund, the Acquiring
Trust and the Acquiring Fund substantially to the effect that, based upon
certain facts, assumptions and representations, for Federal income tax purposes:
(i) the transfer to the Acquiring Fund of all or substantially all of the assets
of the Acquired Fund in exchange solely for Acquiring Fund Shares and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund,
followed by the distribution of the Acquiring Fund Shares to the Acquired Fund
Shareholders in exchange for their shares of the Acquired Fund in complete
liquidation of the Acquired Fund, will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Acquiring Fund and the Acquired
Fund will each be "a party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized by the Acquired Fund
upon the transfer of the Acquired Fund's assets to the Acquiring Fund solely in
exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of liabilities of the Acquired Fund or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares to the Acquired Fund Shareholders in
exchange for their shares of the Acquired Fund; (iii) the basis of the assets of
the Acquired Fund in the hands of the Acquiring Fund will be the same as the
basis of such assets in the hands of the Acquired Fund immediately prior to the
transfer; (iv) the holding period of the assets of the Acquired Fund in the
hands of the Acquiring Fund will include the period during which such assets
were held by the Acquired Fund; (v) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in
exchange for Acquiring Fund Shares and the assumption by the Acquiring Fund of
all of the liabilities of the Acquired Fund; (vi) no gain or loss will be
recognized by the Acquired Fund Shareholders upon the receipt of Acquiring Fund
Shares solely in exchange for their shares of the Acquired Fund as part of the
transaction; (vii) the basis of Acquiring Fund Shares received by each
shareholder of the Acquired Fund pursuant to the reorganization will be, in the
aggregate, the same as the basis, in the aggregate, of the shares of the
Acquired Fund exchanged therefor; and (viii) the holding period of Acquiring
Fund Shares received by each shareholder of the Acquired Fund pursuant to the
reorganization will include the holding period during which the shares of the
Acquired Fund exchanged therefor were held, provided that at the time of the
exchange the shares of the Acquired Fund were held as capital assets in the
hands of such shareholder. The delivery of such opinion is conditioned upon
receipt by Simpson Thacher & Bartlett of representations it shall request of
each Fund. Notwithstanding anything herein to the contrary, neither party may
waive the condition set forth in this Section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Trust agrees to indemnify and hold harmless the
Acquired Company, its Directors and its officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without limitation,
the payment of reasonable legal fees and reasonable costs of investigation) to
which any such indemnified party may become subject, insofar as any such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquiring Trust or the Acquiring Fund of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
9.2. The Acquired Company agrees to indemnify and hold harmless the
Acquiring Trust, its Trustees and its officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without limitation,
the payment of reasonable legal fees and reasonable costs of investigation) to
which any such indemnified party may become subject, insofar as any such loss,
claim, damage, liability or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquired Company or the Acquired Fund of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
10. FEES AND EXPENSES
10.1. The Acquiring Trust and the Acquired Company each represents and
warrants to the other that it has no obligations to pay any brokers or finders
fees in connection with the transactions provided for herein.
10.2. Expenses of the Reorganization will be borne equally by Salomon
Brothers Asset Management Inc. and Citi Fund Management Inc.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The parties agree that neither party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
11.2 Except as specified in the next sentence set forth in this Section
11.2, 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.
The covenants to be performed after the Closing and the obligations of
each of the Acquired Company, on behalf of the Acquired Fund, and the Acquiring
Trust, on behalf of the Acquiring Fund, in Sections 9.1 and 9.2 shall survive
the Closing.
12. TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by either party by (i) mutual agreement of the parties, (ii) by
either party if the Closing shall not have occurred on or before October 31,
2001, unless such date is extended by mutual agreement of the parties, or (iii)
by either party if the other party shall have materially breached its
obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective trustees or officers,
except for any such material breach or intentional misrepresentation, as to each
of which all remedies at law or in equity of the party adversely affected shall
survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Company and the Acquiring Trust; provided, however, that following the
meeting of shareholders of the Acquired Fund called by the Acquired Fund
pursuant to Section 5.3 of this Agreement, no such amendment may have the effect
of reducing the number of the Acquiring Fund Shares to be issued to the
shareholders of the Acquired Fund under this Agreement to the detriment of such
shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Company or the Acquired Fund, c/o Salomon Brothers Series Funds Inc,
Seven World Trade Center, New York, New York 10048, with a copy to Sarah E.
Cogan, Esq. Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017, or to the Acquiring Trust or the Acquiring Fund, c/o CitiFunds Tax Free
Income Trust, Seven World Trade Center, New York, New York 10048, with a copy to
Roger P. Joseph, Esq., Bingham Dana LLP, 150 Federal Street, Boston,
Massachusetts 02110, or to any other address that the Acquired Company or the
Acquiring Trust shall have last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. 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 or corporation (including the shareholders of any Fund) any rights or
remedies under or by reason of this Agreement, other than the parties hereto and
their successor and permitted assigns. Nothing in this Section is intended to
limit the rights of shareholders of the Acquired Company to maintain derivative
actions with respect to this Agreement, subject to and in accordance with
applicable law.
15.4. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
15.5. The Acquiring Trust is a business trust organized under
Massachusetts law and under a Declaration of Trust, to which reference is hereby
made and a copy of which, with amendments, is on file with the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law. It is expressly
acknowledged and agreed that the obligations of the Acquiring Trust entered into
in the name or on behalf of the Acquiring Trust by any of its Trustees,
officers, employees or agents are not made individually, but in such capacities,
that the Acquiring Trust's obligations under this Agreement bind only that
portion of the trust estate consisting of assets of the Acquiring Fund and not
any Trustee, officer, employee, agent or shareholder individually, and that any
liability of the Acquiring Trust under this Agreement or in connection with the
transactions contemplated herein shall be discharged only out of the assets of
the Acquiring Fund.
[Signatures follow]
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as
of the day and year first above written.
SALOMON BROTHERS SERIES FUNDS INC, on
behalf of Salomon Brothers National
Intermediate Municipal Fund
By:
----------------------------------------
Name:
Title:
CITIFUNDS TAX FREE INCOME TRUST (to be
renamed Salomon Funds Trust), on behalf of
Citi National Tax Free Income Fund (to be
renamed Salomon Brothers National Tax Free
Income Fund)
By:
----------------------------------------
Name:
Title:
Solely for purposes of Section 10.2:
Salomon Brothers Asset
Management Inc.
By:
-------------------------------
Name:
Title:
Citi Fund Management Inc.
By:
-------------------------------
Name:
Title:
PART B
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE ACQUISITION BY
SALOMON BROTHERS NATIONAL TAX FREE INCOME FUND
(THE "ACQUIRING FUND"),
A SERIES OF SALOMON FUNDS TRUST
Seven World Trade Center
New York, New York 10048
(800) 995-0134
OF THE ASSETS OF
SALOMON BROTHERS NATIONAL INTERMEDIATE MUNICIPAL FUND
(THE "ACQUIRED FUND"),
A SERIES OF SALOMON BROTHERS SERIES FUNDS INC ("SBSF")
Seven World Trade Center
New York, New York 10048
(800) 725-6666
Dated: July 16, 2001
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus, dated July 16, 2001 relating to the above-referenced
matter may be obtained without charge by calling or writing the Acquiring Fund
at the telephone number or address set forth above. This Statement of Additional
Information should be read in conjunction with the Proxy Statement/Prospectus.
Each of the following documents accompanies this Statement of Additional
Information and is incorporated herein by reference:
1. Prospectus and Statement of Additional Information for the
Acquired Fund, dated April 30, 2001.
2. Prospectus and Statement of Additional Information for the
Acquiring Fund, dated July 12, 2001.
3. Annual Report of the Acquired Fund for the year ended December
31, 2000.
4. Annual Report of the Acquiring Fund for the year ended December
31, 2000.
TABLE OF CONTENTS
Page
General Information ............................................... __
Pro Forma Financial Statements (Unaudited) ........................ __
GENERAL INFORMATION
This Statement of Additional Information relates to the proposed transfer
of substantially all of the assets and liabilities of the Acquired Fund to the
Salomon Funds Trust, on behalf of the Acquiring Fund, in exchange for shares of
the Acquiring Fund (the "Reorganization"). The shares issued by the Acquiring
Fund will have an aggregate net asset value equal to the aggregate net asset
value of the shares of the Acquired Fund that were outstanding immediately
before the effective time of the Reorganization.
After the transfer of substantially all of its assets and liabilities in
exchange for the Acquiring Fund shares, the Acquired Fund will distribute such
shares to its shareholders in liquidation of the Acquired Fund. Each shareholder
owning shares of the Acquired Fund at the effective time of the Reorganization
will receive shares of the corresponding class from the Acquiring Fund of equal
value, and will receive any unpaid dividends or distributions that were declared
before the effective time of the Reorganization on shares of the Acquired Fund.
The Acquiring Fund will establish an account for each former shareholder of the
Acquired Fund reflecting the appropriate number of shares distributed to such
shareholder. These accounts will be substantially identical to the accounts
maintained by the Acquired Fund for each shareholder. Upon completion of the
Reorganization with respect to the Acquired Fund, all outstanding shares of the
Acquired Fund will have been redeemed and cancelled in exchange for shares
distributed by the Acquiring Fund, and the Acquired Fund will wind up its
affairs and be terminated as a series of SBSF under Maryland law.
For further information about the transaction, see the Proxy
Statement/Prospectus.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The unaudited pro forma information attached to this Statement of
Additional Information as Exhibit A gives effect to the proposed transfer of
substantially all of the assets and liabilities of the Acquired Fund to the
Acquiring Fund as if such transfer had occurred as of December 31, 2000. In
addition, the pro forma combined statements have been prepared based upon the
fee and expense structure of the Acquiring Fund. The pro forma financial
information should be read in conjunction with the historical financial
statements and notes thereto of the Acquired Fund and the Acquiring Fund
incorporated herein by reference in this Statement of Additional Information.
The proposed transfer of the assets and liabilities of the Acquired Fund to the
Acquiring Fund will be accounted for as a tax-free reorganization.
Exhibit A
(SAI)
PORTFOLIO OF INVESTMENTS
December 31, 2000
SALOMON BROTHERS
SALOMON BROTHERS NATIONAL
NATIONAL TAX FREE INTERMEDIATE SALOMON BROTHERS
INCOME FUND MUNICIPAL FUND PRO FORMA FUND
---------------------- ------------------ ------------------------
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT
(000'S (000'S (000'S
Issuer OMITTED) VALUE OMITTED) VALUE OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.7%
- ------------------------------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS - 15.9%
- ------------------------------------------------------------------------------------------------------------------------------
Cook County, Illinois,
Refunding, 5.625% due 11/15/16 $ 250 $ 261,805 $ 250 $ 261,805
Georgia State, 5.80 % due 11/01/16 $1,605 $ 1,779,688 1,605 1,779,688
Hamilton County, Ohio,
Sales Tax, 5.75 % due 12/01/17 1,300 1,397,474 1,300 1,397,474
Illinois State, 6.10 % due 1/01/20 1,500 1,627,365 1,500 1,627,365
Massachusetts State, 6.00 % due 2/01/14 3,900 4,327,011 3,900 4,327,011
Massachusetts State, 6.00 % due 6/01/15 2,000 2,198,960 2,000 2,198,960
New York, New York, 6.125% due 11/15/14 1,500 1,685,805 1,500 1,685,805
----------- ---------- -----------
13,016,303 261,805 13,278,108
----------- ---------- -----------
EDUCATION - 14.5%
- ------------------------------------------------------------------------------------------------------------------------------
ABC, California, Union
School District, Zero Coupon 8/01/17 750 321,315 750 321,315
Chicago, Illinois,
Board of Education, Zero Coupon 9/01/14 2,000 994,080 2,000 994,080
El Paso County,
Colorado,
School District, 6.375% due 12/01/17 1,025 1,149,343 1,025 1,149,343
El Segundo,
California, Union
School District, Zero Coupon 8/01/14 485 253,058 485 253,058
Fort Worth, Texas,
School District, 5.75 % due 2/15/12 3,080 3,353,073 3,080 3,353,073
Illinois Student
Assistance
Commission
Student Loan
Revenue, 6.40 % due 3/01/04 400 415,364 400 415,364
Indiana Secondary
Market for
Educational Loans
Revenue, 5.55 % due 12/01/05 300 312,816 300 312,816
Louisiana Public
Facilities
Authority Student
Loan Revenue, 6.75 % due 9/01/06 350 367,913 350 367,913
Massachusetts State,
Health & Educational
Facilities Authority
Revenue, 6.50 % due 12/01/05 400 426,412 400 426,412
Mississippi Higher
Education, 6.05 % due 9/01/07 245 251,448 245 251,448
Mountain View, Los
Altos, California,
Union High
School District, Zero Coupon 8/01/17 900 385,578 900 385,578
Northside, Texas,
School District, 6.00 % due 8/15/16 1,150 1,262,642 1,150 1,262,642
Pennsylvania State
Higher Education
Authority, 6.125% due 12/15/17 1,300 1,441,453 1,300 1,441,453
University of Texas
Revenue, 5.75 % due 8/15/15 1,045 1,124,232 1,045 1,124,232
----------- ---------- -----------
10,284,774 1,773,953 12,058,727
----------- ---------- -----------
HEALTHCARE - 0.8%
- ------------------------------------------------------------------------------------------------------------------------------
Indiana Health
Facilities Financing
Authority Hospital
Revenue, 5.80 % due 8/15/06 500 496,040 500 496,040
Miami County, Ohio,
Hospital Facilities
Refunding &
Improvement Revenue, 5.60 % due 5/15/02 130 130,143 130 130,143
---------- -----------
626,183 626,183
---------- -----------
HOUSING - 9.7%
- ------------------------------------------------------------------------------------------------------------------------------
Colorado Housing
Finance Authority, 6.55 % due 5/01/25 955 1,028,611 955 1,028,611
Colorado Housing
Finance Authority, 6.60 % due 5/01/28 1,000 1,083,500 1,000 1,083,500
Connecticut State
Housing and
Finance Corp., 5.95 % due 5/15/17 2,000 2,084,440 2,000 2,084,440
Florida Housing
Finance Agency
Refunding,
Single-Family
Mortgage, 6.15 % due 7/01/06 170 182,165 170 182,165
Georgia State
Housing and
Finance Corp., AMT, 4.65 % due 12/01/20 1,435 1,411,682 1,435 1,411,682
Iowa Finance
Authority
Single-Family
Revenue, 6.00 % due 7/01/13 250 262,380 250 262,380
Maine State
Housing
Authority Mortgage
Purchase Revenue, 5.95 % due 11/15/11 250 266,733 250 266,733
New Jersey State
Housing Finance
Authority, 4.75 % due 10/01/17 1,010 995,001 1,010 995,001
New York State
Mortgage Agency
Revenue Homeowner
Mortgage, 5.90 % due 10/01/06 500 528,050 500 528,050
North Dakota
State Housing
Finance Agency
Revenue, 6.10 % due 7/01/13 250 265,205 250 265,205
----------- ---------- -----------
6,603,234 1,504,533 8,107,767
----------- ---------- -----------
POWER REVENUE - 2.8%
- ------------------------------------------------------------------------------------------------------------------------------
Sikeston, Missouri,
Electrical Revenue, 6.00 % due 6/01/14 2,000 2,264,900 2,000 2,264,900
Washington State,
Public Power Supply
System Refunding
Revenue, 5.125% due 7/01/17 100 100,261 100 100,261
----------- ---------- -----------
2,264,900 100,261 2,365,161
----------- ---------- -----------
STATE AGENCIES - 4.9%
- ------------------------------------------------------------------------------------------------------------------------------
New York State,
Dormitory Authority, 5.625% due 5/15/13 3,020 3,100,121 3,020 3,100,121
New York State,
Dormitory Authority
Lease Revenue, 6.00 % due 7/01/14 250 273,473 250 273,473
New York State,
Dormitory Authority
Revenue, College
& University Loan, 5.60 % due 7/01/06 700 737,177 700 737,177
----------- ---------- -----------
3,100,121 1,010,650 4,110,771
----------- ---------- -----------
TRANSPORTATION REVENUE - 34.0%
- ------------------------------------------------------------------------------------------------------------------------------
Alliance, Texas,
Airport Authority
Inc., AMT, 6.375% due 4/01/21 1,750 1,744,855 1,750 1,744,855
Austin, Texas
Airport System, 6.50 % due 11/15/05 500 542,812 500 542,812
Dallas/Fort Worth
Texas, International
Airport Revenue, AMT, 7.25 % due 11/01/30 1,000 1,038,610 1,000 1,038,610
Indiana
Transportation
Finance Authority
Airport
Facilities Lease
Revenue, 6.25 % due 11/01/03 650 680,303 650 680,303
Kenton County,
Kentucky, Airport
Authority, AMT, 7.125% due 2/01/21 1,250 1,279,037 1,250 1,279,037
Massachusetts Bay
Transportation
Authority, 5.50 % due 3/01/13 1,685 1,820,019 1,685 1,820,019
Massachusetts Bay
Transportation
Authority, 5.50 % due 3/01/14 5,000 5,388,900 5,000 5,388,900
Massachusetts Bay
Transportation
Authority, 5.50 % due 3/01/15 2,500 2,678,150 2,500 2,678,150
Metropolitan
Transit Authority,
New York, 6.125% due 4/01/17 1,000 1,106,530 1,000 1,106,530
Miami, Dade County,
Florida, Aviation
Revenue, 6.15 % due 7/01/06 250 264,300 250 264,300
Miami, Dade County,
Florida, Expressway
Authority, 6.00 % due 7/01/13 1,500 1,671,000 1,500 1,671,000
New Jersey Economic
Development
Authority, 5.75 % due 5/01/13 3,000 3,238,320 3,000 3,238,320
Niagara, New York
Frontier Authority
Airport Revenue, 5.50 % due 4/01/09 250 264,762 250 264,762
Regional
Transportation
Authority of
Illinois, 5.75 % due 6/01/14 4,010 4,404,143 4,010 4,404,143
Regional
Transportation
Authority of
Illinois, 5.75 % due 6/01/15 2,000 2,180,620 2,000 2,180,620
----------- ---------- -----------
26,550,184 1,752,177 28,302,361
----------- ---------- -----------
WATER AND SEWER REVENUE - 10.9%
- ------------------------------------------------------------------------------------------------------------------------------
Chicago, Illinois,
Wastewater Revenue, 6.00 % due 1/01/15 1,000 1,111,130 1,000 1,111,130
Chicago, Illinois,
Water Reclaimation
District
Refunding GO, 5.90 % due 12/01/06 300 325,305 300 325,305
Kansas State,
Development
Finance Authority, 5.75 % due 4/01/14 2,280 2,480,093 2,280 2,480,093
Lower Colorado River
Authority, Texas,
Revenue, 6.00 % due 4/15/13 3,000 3,326,850 3,000 3,326,850
Passaic Valley,
New Jersey,
Sewer Systems, 5.75 % due 12/01/07 280 304,598 280 304,598
Pueblo, Colorado,
Waterworks Revenue, 6.00 % due 11/01/15 1,165 1,294,630 1,165 1,294,630
Texas Water
Development
Board Revenue, 5.00 % due 7/15/15 200 200,868 200 200,868
----------- ---------- -----------
8,212,703 830,771 9,043,474
----------- ---------- -----------
MISCELLANEOUS - 5.2%
Brazos River,
Texas, Authority
Revenue, 4.90 % due 10/01/15 1,575 1,576,528 1,575 1,576,528
Greater Richmond,
Virginia,
Convention Center
Authority Tax Revenue, 6.00 % due 6/15/13 250 275,190 250 275,190
Los Angeles,
California, Harbor
Department Revenue, 6.00 % due 8/01/03 285 297,520 285 297,520
New Jersey Sports
& Exposition
Authority
Contractors, 6.00 % due 3/01/15 1,500 1,651,875 1,500 1,651,875
Port Oakland
California,
Port Revenue, 6.00 % due 11/01/05 250 268,710 250 268,710
Sacramento County,
California,
Sanitation
District Financing
Authority Revenue, 5.25 % due 12/01/12 250 269,840 250 269,840
----------- ---------- -----------
3,228,403 1,111,260 4,339,663
----------- ---------- -----------
TOTAL MUNICIPAL BONDS 73,260,622 8,971,593 82,232,215
----------- ---------- -----------
Identified Cost 69,471,965 8,582,628 78,054,593
----------- ---------- -----------
VARIABLE RATE DEMAND NOTES*
AT AMORTIZED COST - 1.3%
Gulf Coast Waste
Disposal Authority,
Texas,
Environmental
Facilities Revenue, 4.95% due 6/01/30 200 200,000 200 200,000
Long Island Power
Authority, New York, 4.90 % due 5/01/33 700 700,000 700 700,000
Ohio State,
Air Quality
Development
Authority Revenue, 4.90 % due 12/01/15 100 100,000 100 100,000
Ohio State, Water
Development
Authority Refunding
Pollution Control
Revenue, 4.90 % due 4/01/24 100 100,000 100 100,000
----------- ---------- -----------
TOTAL VARIABLE
RATE DEMAND NOTES 700,000 400,000 1,100,000
----------- ---------- -----------
Identified Cost 700,000 400,000 1,100,000
----------- ---------- -----------
TOTAL INVESTMENTS $73,960,622 $9,371,593 $83,332,215
=========== ========== ===========
Identified Cost $70,171,965 $8,982,628 $79,154,593
=========== ========== ===========
* Variable rate demand notes have a demand feature under which the Fund could tender them back to the issuer on no more than
7 days notice.
AMT - Subject to Alternative Minimum Tax
See notes to financial statements
Reorganization of Salomon Brothers National Tax Free Income Fund and Salomon Brothers National Intermediate Municipal Fund
Salomon Salomon
Brothers Brothers Salomon
National Tax National Brothers
Free Intermediate Pro Forma
Income Fund Municipal Fund Fund
----------- -------------- -----------
As of As of As of
12/31/00 12/31/00 Adjustments 12/31/00
----------- -------------- ----------- -----------
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES (unaudited)
ASSETS:
Investments, at value $73,960,622 $9,371,593 $ 83,332,215
Cash 153,742 67,938 221,680
Interest receivable 1,057,421 140,989 1,198,410
Receivable for investments sold 300,007 5,000 305,007
Receivable for fund shares sold 0 2,214 2,214
Receivable from Manager 0 2,961 2,961
----------- ---------- ------------
Total Assets 75,471,792 9,590,695 85,062,487
----------- ---------- ------------
LIABILITIES:
Payable for fund shares repurchased 2,370,281 0 2,370,281
Dividends Payable 82,430 13,967 96,397
Payable to affiliate 15,166 5,391 20,557
Accrued expenses and other liabilities 128,763 47,136 175,899
----------- ---------- ------------
Total Liabilities 2,596,640 66,494 2,663,134
----------- ---------- ------------
Net Assets $72,875,152 $9,524,201 $ 82,399,353
=========== ========== ============
NET ASSETS CONSIST OF:
Par value of capital shares $ 916 $(916)
Capital paid in excess of par value $79,813,083 9,170,406 916 $ 88,984,405
Unrealized appreciation of investments 3,788,657 388,965 4,177,622
Undistributed net investment income 77,555 0 77,555
Accumulated net realized gain (loss) on
security transactions (10,804,143) (36,086) (10,840,229)
----------- ---------- ------------
Net Assets $72,875,152 $9,524,201 $ 82,399,353
=========== ========== ============
Net Assets: Class A $72,875,152 $3,140,321 $ 76,015,473
=========== ========== ============
Class B $4,764,649 $ 4,764,649
========== ============
Class 2 $1,228,776 $ 1,228,776
========== ============
Class O $390,455 $ 390,455
========== ============
Outstanding Shares: Class A 6,472,984 301,239 (22,473) 6,751,750
=========== ========== ============
Class B 459,423 (36,313) 423,110
========== ============
Class 2 117,959 (8,800) 109,159
========== ============
Class O 37,435 (2,759) 34,676
========== ============
Net Asset Value: Class A $11.26 $10.42 $11.26
=========== ========== ============
Class B $10.37 $11.26
========== ============
Class 2 $10.42 $11.26
========== ============
Class O $10.43 $11.26
========== ============
Offering Price: Class A $11.26 $10.94 * $11.82 *
=========== ========== ============
Class B $10.37 $11.26
========== ============
Class 2 $10.54 ** $11.37 **
========== ============
Class O $10.43 $11.26
========== ============
* Based on a maximum sales charge of 4.75%.
** Based on a maximum sales charge of 1.00%.
See accompanying notes to unaudited pro forma financial statements.
Reorganization of Salomon Brothers National Tax Free Income Fund and Salomon Brothers National Intermediate
Municipal Fund
Salomon Salomon
Brothers Brothers Salomon
National Tax National Brothers
Free Intermediate Pro Forma
Income Fund Municipal Fund Fund
-------------- --------------- ------------
For the 12 For the 12 For the 12
Months Months Months
Ended Ended Ended
12/31/00 12/31/00 Adjustments 12/31/00
-------------- --------------- ---------- ------------
PRO FORMA STATEMENT OF OPERATIONS (unaudited)
INVESTMENT INCOME:
Interest $ 4,738,354 $ 616,235 $ 5,354,589
----------- ---------- -----------
EXPENSES:
Management & Administrative fees 649,280 62,131 (278,558) * 432,853
Service and Distribution fees 232,119 66,039 0 298,158
Audit & Legal fees 92,280 49,601 (36,800) ** 105,081
Custody and Fund Accounting fees 67,546 1,315 0 68,861
Transfer Agent fees 61,171 58,656 (44,600) ** 75,227
Shareholder reports & communications 28,521 15,000 (7,500) ** 36,021
Trustees & Directors fees 9,764 1,071 (870) ** 9,965
Registration fees 24,840 36,343 0 61,183
Miscellaneous 8,561 12,182 (9,700) ** 11,043
----------- ---------- -------- -----------
Total Expenses 1,174,082 302,338 (378,028) 1,098,392
Less: Management Fee Waivers and
Expense Reimbursements (466,083) (179,815) 314,547 (331,351)
----------- ---------- -------- -----------
Net Expenses 707,999 122,523 (63,481) 767,041
----------- ---------- -------- -----------
Net Investment Income 4,030,355 493,712 63,481 4,587,548
----------- ---------- -------- -----------
NET REALIZED and UNREALIZED GAIN (LOSS) on INVESTMENTS:
Net realized gain (loss) on investment transactions (2,596,064) 9,018 (2,587,046)
Net change in unrealized appreciation (depreciation)
of investments 7,980,322 269,962 8,250,284
----------- ---------- -------- -----------
Net Realized and Unrealized Gain on Investments 5,384,258 278,980 0 5,663,238
----------- ---------- -------- -----------
Net Increase in Net Assets Resulting from
Operations $ 9,414,613 $ 772,692 $ 63,481 $10,250,786
=========== ========== ======== ===========
* Reflects reduction in management fee from 0.75% to 0.50% on the Salomon Brothers National Tax Free Income
Fund.
** Reflects adjustment for duplicate services.
See accompanying notes to unaudited pro forma financial statements.
CAPITALIZATION TABLE
Acquiring Fund: Salomon Brothers National Tax Free Income Fund
Acquired Fund: Salomon Brothers National Intermediate Municipal Fund
As of: December 31, 2000
Acquiring Acquired Pro Forma Pro Forma
Fund Fund Adjustments Combined Check
--------- -------- ----------- --------- -----
Net Assets:
- -------------
Class A $72,875,152 $3,140,321 $76,015,473
Class B 4,764,649 4,764,649
Class 2 1,228,776 1,228,776
Class O 390,455 390,455
----------------------- -----------
Total $72,875,152 $9,524,201 $82,399,353
======================= ===========
Net Asset
Value
Per Share:
- -------------
Class A $11.26 $10.42 $11.26 $11.26
Class B $10.37 $11.26 $11.26
Class 2 $10.42 $11.26 $11.26
Class O $10.43 $11.26 $11.26
Shares
Outstanding:
- -------------
Class A 6,472,984 301,239 (22,473) 6,751,750
Class B 0 459,423 (36,313) 423,110
Class 2 0 117,959 (8,800) 109,159
Class O 0 37,435 (2,759) 34,676
--------------------------------------------------
Total 6,472,984 916,056 (70,345) 7,318,695
==================================================
Pro Forma Footnotes for the Reorganization Between Salomon Brothers National Tax
Free Income Fund (Citi National Tax Free Income Fund will be renamed in July
2001) and Salomon Brothers National Intermediate Municipal Fund December 31,
2000 (unaudited)
1. General
The accompanying unaudited pro forma financial statements are presented to show
the effect of the proposed acquisition of substantially all of the assets of the
Salomon Brothers National Intermediate Municipal Fund ("the Acquired Fund") by
the Salomon Brothers National Tax Free Income Fund ("The Fund" or "National Tax
Free Income") in exchange for shares of National Tax Free Income and the
assumption by National Tax Free Income of substantially all of the liabilities
of the Acquired Fund as described elsewhere in this proxy statement/prospectus.
Under the terms of the Agreement and Plan of Reorganization, the exchange of
assets of the Acquired Fund for shares of the National Tax Free Income will be
treated as a tax-free reorganization and accordingly will be accounted for as a
tax-free reorganization. The acquisition would be accomplished by an acquisition
of the net assets of the Acquired Fund in exchange for shares of National Tax
Free Income at net asset value. The unaudited pro forma portfolio of investments
and the unaudited pro forma statement of assets and liabilities have been
prepared as though the acquisition had been effective on December 31, 2000. The
unaudited pro forma statement of operations has been prepared as though the
acquisition had been effective January 1, 2000.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements and portfolio of investments of the Acquired Fund
and National Tax Free Income which are included in their respective annual
reports dated December 31, 2000.
2. Significant Accounting Policies
National Tax Free Income, a separate series of Salomon Funds Trust (CitiFunds
Tax Free Income Trust will be renamed in July 2001), ("the Trust"), a
Massachusetts business trust, is registered under the Investment Company Act of
1940, as amended, as a non-diversified, open-end management investment company.
The significant accounting policies consistently followed by National Tax Free
Income are:
(a) debt security transactions are accounted for on trade date; (b)
securities are valued on the basis of valuations furnished by a pricing
service which takes into account appropriate factors such as
institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, and other market data,
without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect
more accurately the fair value of the securities; (c) securities
maturing within 60 days are valued at cost plus accreted discount, or
minus amortized premium, which approximates value; (d) securities, if
any, for which there are no such valuations or quotations are valued at
fair value as determined in good faith by or under guidelines
established by the Trustees; (e) interest income is determined on the
basis of interest accrued and discount earned, adjusted for amortization
of premium or discount on long-term debt securities; (f) gains or losses
on the sale of securities are recorded on the identified cost basis; (g)
the Fund bears all costs of its operations other than expenses
specifically assumed by Citi Fund Management Inc. ("CFM"), expenses
incurred by the Trust with respect to any two or more funds or series
are allocated in proportion to the average net assets of each fund,
except when allocations of direct expenses to each fund can otherwise be
made fairly: expenses directly attributable to a fund are charged to
that fund; (h) dividends and distributions to shareholders are recorded
on the ex-dividend date; (i) the character of income and gains to be
distributed is determined in accordance with income tax regulations
which may differ from generally accepted accounting principles; (j) the
Fund intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment
companies and to make distributions of taxable income sufficient to
relieve it from substantially all federal income and excise taxes; and
(k) estimates and assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from operations when
financial statements are prepared. Changes in the economic environment,
financial markets and any other parameters used in determining these
estimates could cause actual results to differ.
3. Pro Forma Adjustments
The accompanying unaudited pro forma portfolio of investments and pro forma
financial statements reflect changes in shares and fund expenses as if the
reorganization had taken place on December 31, 2000. Adjustments were made to
certain expenses to reflect the entities' operations as if they had been in
place as of December 31, 2000.
4. Management Agreement and Other Transactions
CFM, a subsidiary of Citigroup Inc. ("Citigroup"), acts as the investment
manager of National Tax Free Income. CFM was established in January 2001 to take
over the mutual fund investment advisory operations of Citibank, N.A. National
Tax Free Income pays CFM a management fee calculated at an annual rate of 0.50%
of the Fund's average daily net assets. This fee is calculated daily and paid
monthly. CFM also provides certain administrative services to the Fund.
Citi Fiduciary Trust Company ("CFTC"), a subsidiary of Citigroup, is National
Tax Free Income's transfer agent. Salomon Smith Barney Inc., another subsidiary
of Citigroup, acts as the Fund's distributor.
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Reference is hereby made to (a) Section 9 of the Agreement and Plan of
Reorganization, (b) Article V of the Registrant's Declaration of Trust, filed as
an Exhibit to Amendment No. 19 to its Registration Statement on Form N-1A; (c)
Section 6 of the Distribution Agreement between the Registrant and Salomon Smith
Barney, Inc. filed as an Exhibit to Amendment No. 27 to its Registration
Statement on Form N-1A; and (d) the undertaking of the Registrant regarding
indemnification set forth in its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
ITEM 16. EXHIBITS
1(a) Declaration of Trust of the Registrant is incorporated
herein by reference to Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-5819) as filed with the Securities and Exchange
Commission on February 20, 1998.
1(b) Amendments to the Declaration of Trust of the Registrant
are incorporated herein by reference to Amendment No. 19
to the Registrant's Registration Statement on Form N-1A
(File No. 33-5819) as filed with the Securities and
Exchange Commission on February 20, 1998.
1(c) Forms of Amendments to the Declaration of Trust of the
Registrant are incorporated herein by reference to
Amendment No. 29 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with
the Securities and Exchange Commission on April 5, 2001.
2(a) Amended and Restated By-laws of Registrant are
incorporated herein by reference to Amendment No. 19 to
the Registrant's Registration Statement on Form N-1A (File
No. 33-5819) as filed with the Securities and Exchange
Commission on February 20, 1998.
2(b) Amendments to Amended and Restated By-laws of the
Registrant are incorporated herein by reference to
Amendment No. 19 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with
the Securities and Exchange Commission on February 20,
1998.
3 Not Applicable.
4 Form of Agreement and Plan of Reorganization is filed
herewith as Exhibit A.
5 Not Applicable.
6 Form of Management Agreement between the Registrant and
Citi Fund Management Inc., as manager, is hereby
incorporated by reference to Amendment No. 31 to the
Registrant's Registration Statement on Form N-1A (File No.
33-5819) as filed with the Securities and Exchange
Commission on April 12, 2001.
7 Distribution Agreement between the Registrant and Salomon
Smith Barney Inc., as distributor, is incorporated herein
by reference to Amendment No. 27 to the Registrant's
Registration Statement on Form N-1A (File No. 33-5819) as
filed with the Securities and Exchange Commission on
September 28, 2000.
8 Not Applicable.
9 Custodian Agreement between the Registrant and State
Street Bank and Trust Company, as custodian, is
incorporated herein by reference to Amendment No. 19 to
the Registrant's Registration Statement on Form N-1A (File
No. 33-5819) as filed with the Securities and Exchange
Commission on February 20, 1998.
10 Form of Service Plans of the Registrant are incorporated
herein by reference to Amendment No. 31 to the
Registrant's Registration Statement on Form N-1A (File No.
33-5819) as filed with the Securities and Exchange
Commission on April 12, 2001.
11 Opinion and Consent of Bingham Dana LLP is filed herewith.
12 Opinion of Simpson Thacher & Bartlett supporting the tax
matters and consequences to shareholders discussed in the
prospectus is filed herewith.
13 Not Applicable.
14 Consents of Independent Public Accountants is filed
herewith.
15 Not Applicable.
16 Power of Attorney for the Registrant are incorporated
herein by reference to Amendment No. 28 to the
Registrant's Registration Statement on Form N-1A (File No.
33-5819) as filed with the Securities and Exchange
Commission on February 15, 2001.
17(a) Form of proxy card is filed herewith.
17(b) Annual Report of the Salomon Brothers National Intermediate
Municipal Fund, dated December 31, 2000, is incorporated herein
by reference.
17(c) Prospectus and Statement of Additional Information of the
Salomon Brothers National Intermediate Municipal Fund, dated
April 30, 2001, are incorporated herein by reference to
Amendment No. 32 to the Registration Statement of Salomon
Brothers Series Funds Inc on Form N-1A (File No. 33-34423) as
filed with the Securities and Exchange Commission on April 30,
2001.
17(d) Annual Report of the Salomon Brothers National Tax Free Income
Fund, dated December 31, 2000, is incorporated by reference.
17(e) Prospectus and Statement of Additional Information of the
Salomon Brothers National Tax Free Income Fund, are
incorporated herein by reference to Amendment No. 31 to
the Registrant's Registration Statement on Form N-1A (File
No. 33-5819) as filed with the Securities and Exchange
Commission April 12, 2001.
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, 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
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant in the City of New York and the State of
New York on the 15th day of June, 2001.
CITIFUNDS TAX FREE INCOME TRUST
By: /s/ Heath B. McLendon
-------------------------
Heath B. McLendon
President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
President, Principal
Executive Officer and
/s/ Heath B. McLendon Trustee
- --------------------------
Heath B. McLendon
Principal Financial
Officer and Principal
/s/ Lewis E. Daidone* Accounting Officer
- --------------------------
Lewis E. Daidone
/s/ Elliott J. Berv* Trustee
- --------------------------
Elliott J. Berv
/s/ Mark T. Finn* Trustee
- --------------------------
Mark T. Finn
/s/ Riley C. Gilley* Trustee
- --------------------------
Riley C. Gilley
/s/ Diana R. Harrington* Trustee
- --------------------------
Diana R. Harrington
/s/ Susan B. Kerley* Trustee
- --------------------------
Susan B. Kerley
/s/ C. Oscar Morong, Jr.* Trustee
- --------------------------
C. Oscar Morong, Jr.
/s/ Walter E. Robb, III* Trustee
- --------------------------
Walter E. Robb, III
/s/ E. Kirby Warren* Trustee
- --------------------------
E. Kirby Warren
*By: /s/ Thomas C. Mandia
---------------------
Thomas C. Mandia
Executed by Thomas C. Mandia, Attorney-in-Fact on behalf of those
indicated, pursuant to Powers of Attorney.
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
11 Opinion and Consent of Bingham Dana LLP
12 Opinion and Consent of Simpson Thacher & Bartlett as
to tax matters
14 Consents of Independent Public Accountants
17(a) Form of proxy card