As filed with the Securities and Exchange Commission on
October 17, 1997
Registration No. [ ]
U.S. 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.
SMITH BARNEY MONEY FUNDS, INC.
(Exact name of Registrant as specified in the Articles of
Incorporation)
Area Code and Telephone Number: (800) 224-7523
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Christina T. Sydor, Esq.
Smith Barney Inc.
388 Greenwich Street New York, New York 10013 (22nd floor)
(Name and address of agent for service)
copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Approximate date of proposed public offering: As soon as possible
after the effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, as amended;
accordingly, no fee is payable herewith. Registrant's Rule 24f-2
Notice for the fiscal period ended December 31, 1996 was filed with
the Securities and Exchange Commission on February 18, 1997.
It is proposed that this filing become effective:
XXX 30 days after filing pursuant to Rule 488(a) of the Securities
Act of 1933, as amended.
SMITH BARNEY MONEY FUNDS, INC.
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and
documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Instructions for Signing Proxy Cards
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY MONEY FUNDS, INC.
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
Item 1. Beginning of Registration Cover Page; Cross Reference
Statement and Outside Front Sheet
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Fee Table, Synopsis Information and Fee Table; Summary;
Risk Factors; Comparison of
Risk Factors Investment Objectives and
Policies
Item 4. Information About the Transaction Summary: Reasons for
the Reorganization;
Information about the
Reorganization;
Information on Shareholders'
Rights;
Exhibit A (Agreement and Plan of
Reorganization)
Item 5. Information About the Registrant Cover Page; Summary;
Information about
the Reorganization; Comparison of
Investment
Objectives and Policies;
Information on Shareholders'
Rights; Additional Information
about the Acquired Fund and
the Acquiring Fund
Item 6. Information About the Summary; Information
About the Company Being Acquired Reorganization; Comparison of
Investment
Objectives and Policies;
Information on Shareholder's
Rights; Additional Information
about the Acquired Fund and
the Acquiring Fund
Item 7. Voting Information Summary; Information
About the Reorganization;
Information on Shareholders'
Rights; Voting Information
Item 8. Interest of Certain Persons Financial Statements
and Experts; Validity of Shares
and Experts
Item 9. Additional Information Not Applicable
Required for Reoffering By
Persons Deemed to be Underwriters
Part B Item No. and Caption Statement of Additional
Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information Cover Page; Statement of Additional
About the Registrant Information of Smith
Barney Money Funds, Inc.
dated April 30, 1997
Item 13 Additional Information Cover Page; Statement of Additional
About the Company Being Information of Common Sense Trust
Acquired dated March 10, 1997
Item 14. Financial Statements Cover Page;
Annual Report and Semi-Annual
Report of Smith Barney Money
Funds, Inc.
dated December 31, 1996 and
June 30, 1997,
respectively, and Annual
Report and Semi-
Annual Report of Common
Sense Trust
dated October 31, 1996 and
April 30, 1997,
respectively
Part C Item No. and Caption Other Information
Caption
Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
Dear Common Sense Trust Money Market Fund Shareholder:
The enclosed materials include a combined Prospectus/Proxy Statement
containing information you need to make an informed decision. However,
we thought it would also be helpful for you to have, at the start,
answers to some of the important questions you might have about the
proposed merger. We hope you find these explanations useful as you
review your materials before voting. For more detailed information about
the merger, please refer to the combined Prospectus/Proxy Statement.
1. Q. Why am I receiving this Proxy Statement?
A. The Board of Trustees of the Common Sense Trust
approved the merger of the Common Sense Trust Money Market
Fund with Smith Barney Money Funds, Inc. - Cash Portfolio.
The proposed acquisition and merger into the Smith Barney
Cash Portfolio requires your approval. Please read the proxy
statement carefully.
2. Q. Why is the merger being recommended?
A. The merger is being recommended to combine the assets of
the Common Sense Trust Money Market Fund with the larger
assets of the Smith Barney Cash Portfolio. This merger will
allow you to benefit from a larger asset base and the
potential for lower expenses.
3. Q. How will the proposed merger affect how my account will be
managed?
A. Smith Barney Cash Portfolio is managed by Smith Barney Mutual
Funds Management, Inc. an investment advisor which manages
over $118 billion in assets and has been managing money since
[1968].
4. Q. Will my vote make a difference?
A. Your vote is needed to ensure that a quorum of shareholders
is represented at the shareholders' meeting so that the
proposed merger can take place. We encourage all
shareholders to participate in the affairs of their
investments.
5. Q. How do the Trustees of my Fund suggest I vote?
A. Yes. The Trustees have approved the merger and recommend the
shareholders vote "FOR" the proposal.
6. Q. Who is paying for the proxy solicitation and shareholder
meeting?
A. Smith Barney, Inc. is paying all costs for the proxy
solicitation and shareholder meeting. Your Fund will not
bear any expenses.
7. Q. Will the merger result in a taxable event for federal income
tax reporting?
A. No. This transaction, in the opinion of counsel, will be a
non-taxable event. However, you should consult your tax
advisor regarding the effect, if any, of the merger.
8. Q. Can I continue to use my Common Sense Trust Money Market
checks after the Money Market Fund is merged into the Smith
Barney Cash Portfolio?
A. Yes. You may continue to use your existing Money Market
checks. You will receive Smith Barney Cash Portfolio checks
on you next reorder.
9. Q. How will share classes be affected by the merger?
A. All classes of shares will be merged into Class A shares of
the Smith Barney Cash Portfolio.
10. Q. Will the Money Market Fund expense ratio change?
A. Yes. It is anticipated after the merger the expense ratio
will be reduced since the Fund's assets will now be part of
the larger fund.
11. Q. Will the 12b-1 fee expense change?
A. The 12b-1 fee of Class A shares of the Smith Barney Cash
Portfolio is .10%. Since Class 1 and Class B shareholders
will receive Class A shares of the Cash Portfolio, the 12b-1
fee will be .10%
12. Q. Will my account servicing features remain the same?
A. All shareholder services that are currently in effect will
remain the same.
13. Q. Will my Fund Account Number change after the merger?
A. All shareholders' account numbers will change. You will
receive a confirmation statement from PFS Shareholder
Services with your new Fund Account Number after the merger
has been completed.
14. Q. What if I redeem my Common Sense Trust Money Market Fund
shares before the merger takes place?
A. If you choose to redeem your shares of Common Sense Trust
Money Market Fund before the merger takes place, the
redemption will be treated as a normal redemption of shares
and will be a taxable transaction.
15. Q. How will I be notified when the Common Sense Trust Money
Market Fund is part of the Smith Barney Cash Portfolio?
A. You will receive special notification shortly after the Fund
has been merged.
16. Q. Where do I mail my proxy card?
A. You may use the enclosed postage-paid envelope or mail your
proxy card to:
Proxy Tabulator
Address (need address)
17. Q. What if I have other questions?
A. We will be happy to answer your questions about this proxy
solicitation. Please call PFS Shareholder Services at 1-800-
544-5445. Our Representatives are available Monday through
Friday from 9:00 a.m. to 6:00 p.m., Eastern Time, to assist
you.
Thank you for your investment in the Common Sense Trust Fund.
COMMON SENSE TRUST - COMMON SENSE MONEY MARKET FUND
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
__________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 18, 1997
__________________
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Common Sense Trust - Common Sense Money Market Fund
("Common Sense Money Market Fund") will be held at One Parkview Plaza,
Oakbrook Terrace, Illinois, 60181, on December 18, 1997, commencing at [
]a.m., for the following purposes:
1. To consider and act upon the Agreement and Plan of
Reorganization (the "Plan") dated as of October 14, 1997,
providing for (i) the acquisition of all or substantially all of
the assets of Common Sense Money Market Fund by Smith Barney
Money Funds, Inc. on behalf of its Cash Portfolio ("Cash
Portfolio") in exchange for Class A shares of Cash Portfolio and
the assumption by Cash Portfolio of all stated liabilities of
Common Sense Money Market Fund; (ii) the distribution of such
shares of the Cash Portfolio to shareholders of Common Sense
Money Market Fund in liquidation of Common Sense Money Market
Fund; and (iii) the subsequent termination of Common Sense Money
Market Fund.
2. To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The Trustees of Common Sense Money Market Fund have fixed the close of
business on November 12, 1997 as the record date for the determination of
shareholders of Common Sense Money Market Fund entitled to notice of and
to vote at the Meeting and any adjournment or adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE URGED TO SIGN AND RETURN
WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE, SO THAT THEIR SHARES MAY BE REPRESENTED AT THE
MEETING. INSTRUCTIONS FOR THE PROPER EXECUTION OF PROXY CARDS ARE SET
FORTH ON THE FOLLOWING PAGE.
By Order of the Board of Trustees
Ronald Nyberg
Secretary
[ ], 1997
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE
EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense involved in validating your vote if
you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
Registration Valid Signatures
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp.
Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe,
Trustee u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith,
Cust. f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr.,
Executor
PROSPECTUS/PROXY STATEMENT dated November [ ], 1997
CASH PORTFOLIO
a separate investment portfolio of
SMITH BARNEY MONEY FUNDS, INC.
388 Greenwich Street
New York, New York 10013
(800) 544-5445
COMMON SENSE MONEY MARKET FUND
a separate investment portfolio of
COMMON SENSE TRUST
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(800) 544-5445
This Prospectus/Proxy Statement is being furnished to shareholders
of Common Sense Money Market Fund (the "Acquired Fund"), a separate
series of Common Sense Trust (the "Trust") in connection with a proposed
Agreement and Plan of Reorganization dated October 14, 1997 (the "Plan")
to be submitted to shareholders of the Acquired Fund for consideration at
a Special Meeting of Shareholders to be held on December 18, 1997 at [
] a.m. at One Parkview Plaza, Oakbrook Terrace, Illinois, 60181 (the
"Meeting") or any adjournment or adjournments thereof.
The Plan provides for all or substantially all of the assets of
the Acquired Fund to be acquired by the Cash Portfolio (the "Acquiring
Fund"), a separate series of Smith Barney Money Funds, Inc. (the
"Company") in exchange for Class A shares of the Acquiring Fund and the
assumption by the Acquiring Fund of all stated liabilities of the
Acquired Fund (the Acquiring Fund and the Acquired Fund are sometimes
referred to hereinafter collectively as the "Funds" and individually as a
"Fund"). Upon completion of the reorganization, Class A shares of the
Acquiring Fund would be distributed to shareholders of the Acquired Fund
in liquidation of the Acquired Fund. As a result of the reorganization,
each shareholder of the Acquired Fund would receive that number of shares
of the Acquiring Fund having an aggregate value equal to the aggregate
value of such shareholder's shares of the Acquired Fund. All
shareholders of the Acquired Fund would receive Class A shares of the
Acquiring Fund. This transaction is structured to be tax-free for Federal
income tax purposes to shareholders and to both the Acquiring and
Acquired Funds.
The Acquiring Fund and the Acquired Fund are both money market
funds and the investment objectives of both Funds are substantially
similar. The Acquiring Fund's investment objectives are maximum current
income and preservation of capital. The investment objective of the
Acquired Fund is protection of capital and a high level of current
income. Certain differences in the investment policies of the Acquiring
Fund and the Acquired Fund are described under "Comparison of Investment
Objectives and Policies" in this Prospectus/Proxy Statement. Van Kampen
American Capital Asset Management, Inc. ("VKAC") manages the day-to-day
operations of the Acquired Fund. Smith Barney Mutual Funds Management
Inc. ("SBMFM") manages the day-to-day operations of the Acquiring Fund.
SBMFM is a subsidiary of Smith Barney Holdings Inc., which is a
subsidiary of Travelers Group Inc.("Travelers"), a financial services
holding company engaged, through its subsidiaries, principally in the
business of life and property and casualty insurance services, investment
services and consumer finance services.
The Acquired Fund is one of seven separate funds of the Trust (the
"Common Sense Funds"). At a meeting held on September 11, 1997, the
Board of Trustees of the Trust approved, subject to the approval of
shareholders of the Common Sense Funds, new investment advisory
agreements between the Trust and SBMFM, whereby SBMFM would become the
investment manager of each of the Common Sense Funds. A meeting of
shareholders of the Trust has been scheduled to be held on December 18,
1997, for the purpose of approving the new investment advisory agreements
and it is anticipated that the new advisory agreements will become
effective on or about December 31, 1997. A more detailed discussion of
the new investment advisory agreements and SBMFM can be found under
"Reasons For the Reorganization" in this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the
Acquiring Fund that a prospective investor should know before investing.
Certain relevant documents listed below, which have been filed with the
Securities and Exchange Commission ("SEC"), are incorporated in whole or
in part by reference. A Statement of Additional Information dated
November 16, 1997, relating to this Prospectus/Proxy Statement and the
reorganization described herein, has been filed with the SEC and is
incorporated by reference into this Prospectus/Proxy Statement. A copy
of such Statement of Additional Information is available upon request and
without charge by writing to the Acquired Fund at the address listed on
the cover page of this Prospectus/Proxy Statement, by contacting a
Registered Representative of PFS Investments, Inc. ("PFS Investments"),
or by calling (800) 544-5445. The Prospectus of the Acquiring Fund dated
April 30, 1997 is incorporated by reference in its entirety and a copy is
included herein.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a
copy of the Plan for the proposed transaction.
The shares of the Acquiring Fund are not insured or guaranteed by
the U.S. Government. There is no assurance that the Acquiring Fund will
be able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials 2
Fee Tables 3
Summary 6
Risk Factors 8
Reasons for the Reorganization 9
Information about the Reorganization 10
Information about the Acquiring Fund 14
Information about the Acquired Fund 17
Comparison of Investment Objectives and Policies 19
Information on Shareholders' Rights 23
Additional Information about the Trust, the Company and the Funds. 24
Other Business 24
Voting Information 25
Financial Statements and Experts 26
Validity of Shares 26
Exhibit A: Agreement and Plan of Reorganization A-1
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information dated November 16,
1997 relating to this Prospectus/Proxy Statement, will be sent to all
shareholders requesting a copy of such Statement of Additional
Information.
1. Statement of Additional Information of the Acquiring Fund dated
April 30, 1997.
2. Statement of Additional Information of the Acquired Fund dated
March 10, 1997.
3. Annual Report of the Acquiring Fund for the fiscal year ended
December 31, 1996.
4. Annual Report of the Acquired Fund for the fiscal year ended
October 31, 1996.
5. Semi-Annual Report of the Acquiring Fund for the six month
period ended June 30, 1997.
6. Semi-Annual Report of the Acquired Fund for the six month
period ended April 30, 1997.
FEE TABLES
The following table shows the costs and expenses of the Class 1, Class
A and Class B shares of the Acquired Fund and the Class A shares of the
Acquiring Fund, and the pro forma costs and expenses expected to be
incurred by the Acquiring Fund after giving effect to the reorganization,
each based on the maximum sales charge or maximum contingent deferred
sales charge ("CDSC") that may be incurred at the time of purchase or
redemption and, unless otherwise indicated, on each Fund's operating
expenses for its most recent fiscal year:
Class 1 Class A Class B Class A Pro
Shares Shares Shares Shares Forma*
Acquired Acquired Acquired Acquiring
Fund Fund Fund Fund
Shareholder Transaction
Expenses
Maximum sales charge
imposed on purchases None None None None None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of None None 5.00% None None
original cost or redemption
proceeds, whichever is lower)
Annual Fund Operating Expenses
(as a percentage of average
net assets)
Management fees** 0.50% 0.50% 0.50% 0.40% 0.40%
12b-1 fees 0.00 0.10 0.75*** 0.10 0.10
Other expenses**1.36 1.36 1.36 0.12 0.12
Total Fund Operating Expenses 1.86% 1.96% 2.61% 0.62% 0.62%
______________________
* The pro forma financial figures are intended to provide shareholders
information about the continuing impact of the reorganization as if
the reorganization had taken place as of December 31, 1997. Pro forma
financial figures are based on estimated expenses for the fiscal year
ending December 31, 1997.
** As of October 31, 1996, VKAC waived its management fees and reimbursed
the Acquired Fund for certain expenses. After taking effect of the
waiver and reimbursements, total fund operating expenses were 1.00%,
1.09% and 1.75% for Class 1, Class A and Class B Shares, respectively.
***Upon conversion of Class B shares of the Acquired Fund to Class A
shares, such shares will no longer be subject to a distribution fee,
but will be subject to a service fee of 0.10%.
Examples
The following examples are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The examples assume payment of operating expenses at the
levels set forth in the table above.
1 Year 3 Years 5 Years 10 Years
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5.00% annual return
and (2) redemption at the end of
each time period:
Acquired Fund Class 1 $19 $58 $101 $218
Acquired Fund Class A 20 62 106 229
Acquired Fund Class B 76 111 154 294
Acquiring Fund Class A 6 20 35 77
Pro Forma 6 20 35 77
The examples also provide a means for the investor to compare expense
levels of funds with different fee structures over varying investment
periods. To facilitate such comparison, all funds are required to
utilize a 5.00% annual return assumption. However, a fund's actual
return will vary and may be greater or less than 5.00%. These examples
should not be considered representations of past or future expenses and
actual expenses may be greater or less than those shown.
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Agreement and Plan of Reorganization, a copy of which is
attached to this Prospectus/Proxy Statement as Exhibit A, the
accompanying Prospectus of the Acquiring Fund dated April 30, 1997 and
the Prospectus of the Acquired Fund dated March 10, 1997, as amended.
Proposed Reorganization. The Plan provides for the transfer of all
or substantially all of the assets of the Acquired Fund to the Acquiring
Fund in exchange for Class A shares of the Acquiring Fund and the
assumption by the Acquiring Fund of all stated liabilities of the
Acquired Fund. The Plan also calls for the distribution of Class A
shares of the Acquiring Fund to the Acquired Fund's shareholders in
liquidation of the Acquired Fund. (The foregoing proposed transaction is
referred to in this Prospectus/Proxy Statement as the "Reorganization.")
As a result of the Reorganization, each shareholder of the Acquired Fund
will become the owner of that number of full and fractional Class A
shares of the Acquiring Fund having an aggregate value equal to the
aggregate value of the shareholder's shares of the Acquired Fund as of
the close of business on the date that the Acquired Fund's assets are
exchanged for shares of the Acquiring Fund. Shareholders of the Acquired
Fund will receive Class A shares of the Acquiring Fund, whether they
currently own Class 1, Class A or Class B shares of the Acquired Fund.
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Trustees of the Acquired Fund, including
the "Independent Trustees" (the Board members who are not "interested
persons" as that term is defined in the Investment Company Act of 1940,
as amended (the "1940 Act")), has determined that the Reorganization
would be in the best interests of the shareholders of the Acquired Fund
and that the interests of the Acquired Fund's shareholders will not be
diluted as a result of the transaction contemplated by the
Reorganization, and the Board therefore has submitted the Plan for
approval by the Acquired Fund's shareholders. The Board of Directors of
the Acquiring Fund has reached similar conclusions with respect to the
Acquiring Fund and its shareholders, and has also approved the
Reorganization with respect to the Acquiring Fund.
Approval of the Reorganization will require the vote of a majority
of the outstanding shares of the Acquired Fund at a meeting of
shareholders at which a quorum is present, by the holders of shares
present in person or by proxy and entitled to vote on such action. The
presence in person or by proxy of the holders of record of a majority of
the shares of the capital stock of the Acquired Fund issued and
outstanding and entitled to vote will constitute a quorum at the Meeting.
For purposes of voting with respect to the Reorganization, the Class 1,
Class A and Class B shares of the Acquired Fund will vote together as a
single class. See "Voting Information."
Additionally, the Reorganization is contingent upon the
approval by shareholders of the Common Sense Funds of proposed new
management agreements with SBMFM, which is discussed further under It is
anticipated that a meeting of shareholders of each of the Common Sense
Funds will be held prior to of simultaneous with the Meeting to consider
the approval of such agreements. In the event that the proposed new
management agreements are not approved by shareholders of the Common
Sense Funds, the Acquiring Fund may elect to postpone the consummation
of the Reorganization until such time as satisfactory new management
agreements are approved. See "Reasons For the Reorganization" below for
a discussion of the proposed new management agreements.
Tax Consequences. Prior to completion of the Reorganization, the
Acquired Fund will have received an opinion of counsel that, upon the
Reorganization and the transfer of the assets of the Acquired Fund, no
gain or loss will be recognized by the Acquired Fund or its shareholders
for federal income tax purposes. The holding period and aggregate tax
basis of the Acquiring Fund shares that are received by an Acquired Fund
shareholder will be the same as the holding period and aggregate tax
basis of the shares of the Acquired Fund previously held by such
shareholder. In addition, the holding period and tax basis of the assets
of the Acquired Fund in the hands of the Acquiring Fund as a result of
the Reorganization will be the same as in the hands of the Acquired Fund
immediately prior to the Reorganization. See "Information About the
Reorganization- Federal Income Tax Consequences."
Investment Objectives and Policies. The Acquired Fund and the
Acquiring Fund are both money market funds and have substantially similar
investment objectives, policies and restrictions. The Acquired Fund
seeks protection of capital and a high level of current income for its
shareholders. The Acquiring Fund seeks maximum current income and
preservation of capital. For a discussion of the differences between the
investment policies of the Acquiring Fund and the Acquired Fund, see
"Comparison of Investment Objectives and Policies."
Fees and Expenses. The Acquired Fund pays VKAC management fees
calculated daily and payable monthly at the following annual rates:
0.50% of the first $2 billion of the Fund's average daily net assets;
0.475% of the next $2 billion of the Fund's average daily net assets; and
0.45% of the Fund's average daily net assets over $4 billion. The
Acquiring Fund pays SBMFM a management fee payable daily at the following
annual rates: 0.45% of the first $6 billion of the Fund's net assets;
0.425% on the next $6 billion of the Fund's net assets; 0.40% of the next
$6 billion of the Fund's net assets; and 0.35% of net assets in excess of
$18 billion.
Class A shares of both Funds and Class B shares of the Acquired
Fund are sold subject to distribution plans adopted pursuant to Rule 12b-
1 under the 1940 Act. Under the plans applicable to each Fund's Class A
shares, PFS Distributors, Inc. ("PFS") is paid a service fee calculated
at the annual rate of 0.10% of the value of each Fund's average daily net
assets attributable to the Class A shares. Class B shares of the
Acquired Fund are sold subject to an annual distribution fee calculated
at the annual rate of 0.75% of the Acquired Fund's assets attributable to
Class B shares.
Exchange Privileges. Shareholders of the Acquired Fund currently
are entitled to exchange their shares for shares of the same class of any
of the Common Sense Funds. Shareholders of the Acquiring Fund are
entitled to exchange their shares for shares of the same class of certain
funds of the Smith Barney Mutual Funds to the extent shares are offered
for sale in the shareholder's state of residence. As part of the
Reorganization, each shareholder of the Acquired Fund will become the
owner of Class A shares of the Acquiring Fund and will be entitled to
exchange such shares for Class A shares of other Smith Barney sponsored
mutual funds distributed by PFS. Any exchange will be a taxable event
for which a shareholder may have to recognize a gain or loss under
federal income tax provisions.
Dividends. The policies of each Fund with regard to dividends and
distributions are substantially similar. Each Fund declares a dividend
of substantially all of its net investment income daily and pays income
dividends monthly. In determining net investment income, both Funds
include interest accrued and discount earned and all short-term realized
gains and losses on portfolio securities, less premium amortized and
expenses accrued. Long-term capital gains, if any, are distributed
annually.
Unless a shareholder of either Fund has elected to receive
dividends and capital gains distributions in cash, dividends and capital
gains distributions are reinvested automatically in additional shares of
the respective Fund. Acquired Fund shareholders who have elected to
receive dividends and distributions in cash will continue to receive
distributions in such manner from the Acquiring Fund. See "Dividends,
Automatic Reinvestment and Taxes" in the accompanying Prospectus of the
Acquiring Fund.
Purchase and Redemption Procedures. Purchases of shares of both
Funds may be made through a Registered Representative of PFS Investments.
Class 1 shares of the Acquired Fund are sold at net asset value without a
sales charge or service fee and are available only to accounts of
previously established shareholders of the Trust or members of a family
unit comprising husband, wife and minor children, and Class 1
shareholders of other Common Sense Funds exchanging their Class 1 shares
for Class 1 shares of the Acquired Fund. Class A shares of both Funds
are sold at net asset value without a sales charge and are subject to an
ongoing service fee at an annual rate of 0.10% of each Fund's average
daily net assets. Class B shares of the Acquired Fund are sold at net
asset value, subject to an ongoing distribution fee at an annual rate of
0.75% and are available only through exchanges by Class B shareholders of
another Common Sense Fund. Class B shares of the Acquired Fund remain
subject to the CDSC imposed by the Common Sense Fund from which a
shareholder exchanged, however, upon completion of the Reorganization,
shareholders of Class B shares of the Acquired Fund will receive Class A
shares of the Acquiring Fund which are not subject to a CDSC.
Shares of both Funds may be redeemed by submitting a written
request in proper form to PFS Shareholder Services, Inc. ("PFS
Shareholder Services"), the Acquired Fund's transfer agent and the
Acquiring Fund's sub-transfer agent. Shareholders of either Fund may
redeem their shares by faxing their redemption request to PFS Shareholder
Services, provided a signature guarantee or other documentary evidence is
not required.
Shares of either Fund may be redeemed, at their respective net
asset values per share next determined, without charge on any day such
Fund calculates its net asset value. Redemption requests received prior
to the close of regular trading on the New York Stock Exchange ("NYSE")
with respect to the Acquired Fund, or before 12 noon New York City time
with respect to the Acquiring Fund, are priced at the net asset value per
share determined on that day; otherwise, redemption requests are priced
at the net asset value as next determined. See "Redemption of Shares" in
the accompanying Prospectus of the Acquiring Fund.
Shareholders' Voting Rights. Both Funds are open-end investment
companies. The Acquired Fund is a separate series of the Trust, a
Massachusetts business trust. The Acquiring Fund is a separate series of
the Company, a Maryland corporation. As permitted by both Massachusetts
and Maryland law, neither the Trust nor the Company holds meetings of
shareholders annually, and there is normally no meeting of shareholders
for the purpose of electing Trustees/Directors unless and until such time
as less than a majority of the Trustees/Directors holding office have
been elected by shareholders. Shareholders of the Acquired Fund may
continue to redeem their shares at net asset value prior to the date of
the Reorganization. See "Information on Shareholder Rights."
RISK FACTORS
Due to the similarities of investment objectives and policies of
the Acquiring Fund and the Acquired Fund, an investment in the Acquiring
Fund does not involve investment risks that are materially different from
those involved in an investment in the Acquired Fund. For a full
description of the risks involved in investing in the Acquiring Fund,
refer to "Investment Objectives and Policies" in the accompanying
Prospectus of the Acquiring Fund.
REASONS FOR THE REORGANIZATION
The Board of Trustees of the Acquired Fund has determined that it
is advantageous to combine the Acquired Fund with the Acquiring Fund. In
reaching this conclusion, the Board considered a number of factors as
described below.
Among the factors considered by the Board of the Acquired Fund was
the proposed transaction pursuant to which VKAC and certain of its
affiliates entered into an agreement with SBMFM and certain of its
affiliates which provided for the sale and assignment of the current
Common Sense Funds' advisory agreements from VKAC to SBMFM. As a result
of such transaction, the Board of Trustees of the Trust has approved new
investment management agreements with SBMFM on behalf of each of the
Common Sense Funds (the "new advisory agreements") and has called a
meeting of shareholders to approve the new advisory agreements. Upon
completion of the transaction and shareholder approval of the new
advisory agreements, the Common Sense Funds will become integrated with
certain funds of the Smith Barney mutual fund family and shareholders
will be able to exchange their shares for shares of other Smith Barney
mutual funds distributed through PFS. The Board considered Smith Barney
Inc.'s ("Smith Barney") recommendation that it was important and
necessary to integrate the two fund groups and that the first step in
achieving that result would be to merge the two money market funds. It
was noted to the Board that, in addition to the Acquired Fund, PFS
currently offers the Acquiring Fund as a money market alternative to
investors purchasing Class A shares. Smith Barney indicated that, upon
completion of the integration of the Common Sense Funds with the other
Smith Barney funds offered through PFS and the resulting exchangeability
among those funds, PFS would like to offer only one money market option
to Class A shareholders. Smith Barney indicated that , since the
Acquiring Fund does not offer Class B shares, shareholders of Class B
shares of a Common Sense Fund wishing to exchange into a money market
fund after the Reorganization will be offered Class B shares of the Smith
Barney Exchange Reserve Fund. The Board was shown financial information
which indicated that the total expense ratios for each of Class 1, Class
A and Class B shares of the Acquired Fund was higher than the expense
ratios currently in effect for Class A shares of the Acquiring Fund and
higher than the pro forma expense ratio of Class A shares of the
Acquiring Fund expected upon completion of the Reorganization. The
financial information indicated that, as of April 30, 1997, absent the
fee waiver and expense reimbursement by VKAC, total expenses for Class 1,
Class A and Class B shares of the Acquired Fund were 1.82%, 1.92% and
2.60%, respectively, while total expenses of Class A shares of the
Acquiring Fund as of June 30, 1997 were 0.63%. The Board was shown that,
even taking effect of the fee waiver and expense reimbursement, total
expense ratios of 1.00%, 1.11% and 1.77% for Class 1, Class A and Class B
shares, respectively, of the Acquired Fund were higher than the expense
ratios of Class A shares of the Acquiring Fund. The Board was also shown
that the expected total expense ratios for Class A shares of the
Acquiring Fund upon completion of the Reorganization will be
approximately 0.63%.
The Board was also shown information indicating that the yield
provided by the Acquiring Fund has been higher than the yield provided by
the Acquired Fund. As of August 31, 1997, the 12-month yield on Class A
shares of the Acquiring Fund was 4.97%, while the 12-month yield on Class
1, Class A and Class B shares of the Acquired Fund was 4.46%, 4.39% and
3.70%, respectively. As of September 30, 1997, the 7-day yield on Class
A shares of the Acquiring Fund was 5.01%, while the 7-day yield on Class
1, Class A and Class B shares of the Acquired Fund was 4.57%, 4.44% and
3.82%, respectively.
The Board also considered (i) the fact that as a result of the
Reorganization, Class B shares of the Acquired Fund would no longer be
subject to a CDSC or distribution fee, (ii) the advantages of eliminating
duplication inherent in marketing two funds with similar investment
objectives, and (iii) the expanded exchange privileges that would be
available to shareholders as a result of the integration of the two fund
groups. In light of the foregoing, the Board of Trustees of the Acquired
Fund, including the Independent Trustees, determined that it is in the
best interests of the Acquired Fund and its shareholders to combine the
Acquired Fund with the Acquiring Fund. The Board also determined that a
combination of the Acquired Fund and the Acquiring Fund would not result
in a dilution of the interests of the Acquired Fund's shareholders.
In light of the foregoing, the Board of Trustees of the Acquired
Fund, including the Independent Trustees, determined that it is in the
best interests of the Acquired Fund and its shareholders to combine the
Acquired Fund with the Acquiring Fund. The Board also determined that a
combination of the Acquired Fund and the Acquiring Fund would not result
in a dilution of the interests of the Acquired Fund's shareholders.
The Board of Directors of the Acquiring Fund also determined that
it is advantageous to the Acquiring Fund to acquire the assets of the
Acquired Fund. Among other reasons, the Board considered that: (1) the
impact of the Reorganization on the current expenses of the Acquiring
Fund will be minimal, and (2) the portfolio securities will be acquired
without any cost to the Acquiring Fund. Accordingly, the Board of the
Acquiring Fund, including a majority of the Independent Directors,
determined that the Reorganization is in the best interests of the
Acquiring Fund's shareholders and that the interests of the Acquiring
Fund's shareholders will not be diluted as a result of the
Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary is qualified in its
entirety by reference to the Plan (Exhibit A hereto). The Plan provides
that the Acquiring Fund will acquire all or substantially all of the
assets of the Acquired Fund in exchange for shares of the Acquiring Fund
and the assumption by the Acquiring Fund of all stated liabilities of the
Acquired Fund on December 31, 1997 or such later date as may be agreed
upon by the parties (the "Closing Date").
Prior to the Closing Date, the Acquired Fund will endeavor to
discharge all of its known liabilities and obligations. The Acquiring
Fund will not assume any liabilities or obligations other than those
reflected on an unaudited statement of assets and liabilities of the
Acquired Fund prepared as of the close of regular trading on the NYSE,
currently 4:00 p.m. New York City time, on the Closing Date. The
Acquiring Fund will deliver to the Acquired Fund for distribution to the
Acquired Fund shareholders the number of Class A shares of the Acquiring
Fund, including fractional Class A shares, determined by dividing the
value of the Acquired Fund's net assets attributable to each class of its
shares by the net asset value of one Class A share of the Acquiring Fund.
The net asset value per share will be determined by dividing assets, less
liabilities, by the total number of outstanding shares and will be
computed as of 12:00 noon with respect to the Acquiring Fund and as of
the close of regular trading on the NYSE with respect to the Acquired
Fund, both on the Closing Date. As a condition to the Closing the value
of each class of shares of each Fund on the Closing Date will be $1.00
per share; accordingly, shareholders of the Acquired Fund would receive
one Acquiring Fund share for each Acquired Fund share held on the Closing
Date.
The Acquired Fund and the Acquiring Fund will utilize the
procedures set forth in the Prospectus of the Acquiring Fund to determine
the value of their respective portfolio securities and to determine the
aggregate value of each Fund's portfolio. The method of valuation
employed will be consistent with the requirements set forth in the
Prospectus of the Acquiring Fund, Rule 22c-1 under the 1940 Act and the
interpretation of such rule by the SEC's Division of Investment
Management.
At or prior to the Closing Date, the Acquired Fund will and the
Acquiring Fund may declare a dividend or dividends on their respective
shares which, together with all previous such dividends, will have the
effect of distributing to their respective shareholders all taxable
income for the period ending on or prior to the Closing Date. In
addition, the Acquired Fund's dividend will include any net capital gains
realized in the period ending on or prior to the Closing Date (after
reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable, the
Acquired Fund will liquidate and distribute pro rata to shareholders of
record as of the close of business on the Closing Date the full and
fractional shares of the Acquiring Fund received by the Acquired Fund.
Shareholders of the Acquired Fund will receive Class A shares of the
Acquiring Fund. Such liquidation and distribution will be accomplished
by the establishment of accounts in the names of the Acquired Fund's
shareholders on the share records of the Acquiring Fund's transfer agent.
Each account will represent the respective pro rata number of full and
fractional shares of the Acquiring Fund due to each of the Acquired
Fund's shareholders. After such distribution and the winding up of its
affairs, the Acquired Fund will be terminated as a series of the Trust.
The consummation of the Reorganization is subject to the conditions
set forth in the Plan. Notwithstanding approval of the Acquired Fund's
shareholders, the Plan may be terminated at any time at or prior to the
Closing Date by (1) mutual agreement of the Company and the Trust or (2)
by either party to the Plan upon a material breach by the other party of
any representation, warranty or agreement contained therein.
Approval of the Reorganization will require a vote of a majority of
the outstanding shares of the Acquired Fund.
Description of the Acquiring Fund 's Shares. Full and fractional
shares of common stock of the Acquiring Fund will be issued to the
Acquired Fund in accordance with the procedures detailed in the Plan and
as described in the Acquiring Fund's Prospectus. Generally, the
Acquiring Fund does not issue share certificates to shareholders unless a
specific request is submitted to the Acquiring Fund's transfer agent.
See "Information on Shareholders' Rights" and the Prospectus of the
Acquiring Fund for additional information with respect to the shares of
the Acquiring Fund.
Federal Income Tax Consequences
The exchange of assets for shares of the Acquiring Fund is intended
to qualify for Federal income tax purposes as a tax-free reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). As a condition to the closing of the Reorganization, the
Acquiring Fund and the Acquired Fund will receive an opinion from
Sullivan & Worcester LLP, counsel to the Acquired Fund, substantially to
the effect that, on the basis of the existing provisions of the Code,
U.S. Treasury regulations issued thereunder, current administrative
rules, pronouncements and court decisions, for Federal income tax
purposes, upon consummation of the Reorganization:
(1) the transfer of all or substantially all of the
Acquired Fund's assets in exchange for the Acquiring
Fund's shares and the assumption by the Acquiring
Fund of certain scheduled liabilities of the Acquired
Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Code, and the
Acquiring Fund and the Acquired Fund are each a
"party to a reorganization" within the meaning of
Section 368(b) of the Code;
(2) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the
Acquired Fund in exchange for the Acquiring Fund's
shares, and the assumption by the Acquiring Fund of
certain scheduled liabilities in the Acquired Fund;
(3) no gain or loss will be recognized by the
Acquired Fund upon the transfer of the Acquired
Fund's assets to the Acquiring Fund in exchange for
the Acquiring Fund shares and the assumption by the
Acquiring Fund of certain scheduled liabilities of
the Acquired Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund shares
to the Acquired Fund's shareholders;
(4) no gain or loss will be recognized by
shareholders of the Acquired Fund upon the exchange
of their Acquired Fund shares for the Acquiring Fund
shares and the assumption by the Acquiring Fund of
certain scheduled liabilities of the Acquired Fund;
(5) the aggregate tax basis of the Acquiring Fund
shares received by each Acquired Fund shareholder
pursuant to the Reorganization will be the same as
the aggregate tax basis of the Acquired Fund shares
surrendered in exchange therefor and, (provided the
Acquired Fund shares were held as capital assets on
the date of the Reorganization), the holding period
of the Acquiring Fund shares to be received by each
Acquired Fund shareholder will include the period
during which the shares of the Acquired Fund which
are surrendered in exchange therefor were held by
such shareholder;
(6) the tax basis of the Acquired Fund's assets
acquired by the Acquiring Fund will be the same as
the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization and 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.
Shareholders of the Acquired Fund should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of
their individual circumstances. Since the foregoing discussion only
relates to the Federal income tax consequences of the Reorganization,
shareholders of the Acquired Fund should also consult their tax advisors
as to state and local tax consequences, if any, of the Reorganization.
Capitalization. The following table shows the capitalization of
the Acquiring Fund and the Acquired Fund, on an unaudited basis, as of
October 10, 1997, and on a pro forma unaudited basis as of that date,
giving effect to the proposed acquisition of assets at net asset value.
ACQUIRING FUND
Class A
Shares
(Unaudited)
ACQUIRED FUND
Class 1
Shares
(Unaudited)
Class A
Shares
(Unaudited)
Class B
Shares
(Unaudited)
PRO FORMA FOR
REORGANIZATION
Class A
Shares
(Unaudited)
Net assets
(millions)
$30,415.2
$53.23
$7.11
$0.30
$30,475.84
Net asset
value
per share
1.00
1.00
1.00
1.00
1.00
Shares
outstanding
30,416,143,
034
53,196,296
7,057,536
297,558
30,476,694,424
As of October 10, 1997, there were 53,196,295.779 outstanding Class
1 shares, 7,057,536.180 outstanding Class A shares and 297,557.940
outstanding Class B shares of the Acquired Fund and 30,416,143,034.049
outstanding Class A shares of the Acquiring Fund. As of the Record Date,
the officers and Trustees of the Trust beneficially owned as a group less
than 1% of the outstanding shares of the Acquired Fund. Except as set
forth below, to the best knowledge of the Board of Trustees of the
Acquired Fund, as of October 10, 1997, no shareholder or "group" (as that
term is used in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) owned beneficially or of record 5% or more
of a Class of shares of the Acquired Fund. As of October 10, 1997, the
officers and Directors of the Company beneficially owned as a group less
than 1% of the outstanding Class A shares of the Acquiring Fund. To the
best knowledge of the Board of Directors of the Acquiring Fund, as of
October 10, 1997, no shareholder or group (as that term is used in
Section 13(d) of the Exchange Act) owned beneficially or of record more
than 5% of the Acquiring Fund.
Name and Address
Percentage of Class
Owned of Record or
Beneficially as
of the Record Date
Upon
Consummation of
the
Reorganization
Acquired Fund Class 1
PFS Investments Inc.
Retirement Plan Custodian
17.2%
0.00%
Acquired Fund Class B
Steven K. Broido
Pamela E. Broido
60 Old Dennett Road
Kittery, ME 03904-1017
6.4%
0.00%
Katherine Phomphakdy
Peth Phomphakdy
919 Magenta Street
San Diego, CA 92113-3540
5.4%
0.00%
Kathleen M. Preece
7818 N. 16th Lane
Phoenix, AZ 85021-7006
5.1%
0.00%
Larry R. Grieb
Pamela S. Grieb
206 Deer Run Drive
Sellersburg, IN 47172-9747
5.0%
0.00%
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion comparing investment objectives, policies and
restrictions of the Acquiring Fund and the Acquired Fund is based upon
and qualified in its entirety by the respective discussions in the
Prospectuses of the Acquiring Fund and the Acquired Fund. For a full
discussion of the investment objectives, policies and restrictions of the
Acquiring Fund, refer to the Prospectus of the Acquiring Fund, which
accompanies this Prospectus/Proxy Statement, under the caption
"Investment Objectives and Policies," and for a discussion of these
issues as they apply to the Acquired Fund, refer to the Prospectus of the
Acquired Fund under the captions "Goals and Investment Policies" and
"Investment Practices and Risks."
Investment Objectives. The Acquired Fund and the Acquiring Fund
are both money market funds and have substantially similar investment
objectives. The Acquired Fund seeks protection of capital and a high
level of current income. The Acquiring Fund seeks maximum current income
and preservation of capital. There can be no assurance that either Fund
will be able to achieve its investment objectives. Both the Acquiring
Fund and the Acquired Fund's investment objectives are considered
fundamental policies which cannot be changed without the affirmative vote
of a majority of the outstanding voting securities, as defined in the
1940 Act, of the respective Fund, which is the lesser of: (i) 67% of the
voting securities of the Fund present at a meeting of shareholders, if
the holders of more than 50% of the outstanding voting securities of such
Fund are present or represented by proxy; or (ii) more than 50% of the
outstanding voting securities of such Fund.
Primary Investments. The Acquiring Fund seeks to achieve its
objectives by investing in U.S. Government obligations and related
repurchase agreements, bank obligations and high quality commercial
paper, corporate obligations and municipal obligations (as such
instruments are described below). The Acquiring Fund's investments are
limited to United States dollar-denominated instruments that have
received the highest rating from (a) any two nationally recognized
statistical rating organizations ("NRSRO") that have issued a rating with
respect to a security or class of debt obligations of an issuer or (b)
one NRSRO, if only one NRSRO has issued a rating at the time that the
Fund acquires a security.
The Acquired Fund attempts to achieve its investment objective by
investing in money market securities, including securities of the U.S.
Government, its agencies and instrumentalities, bank obligations,
commercial paper and repurchase agreements secured by obligations of the
U.S. Government, its agencies and instrumentalities. The Acquired Fund
will only invest in United States dollar-denominated securities which are
rated in one of the two highest rating categories for debt obligations by
at least two NRSROs (or one NRSRO if the intrument was rated by only one
such organization) or, if unrated, are of comparable quality as
determined in accordance with procedures established by the trustees.
Both Funds have adopted certain investment policies to assure that,
to the extent reasonably possible, the Fund's price per share will not
change from $1.00, although no assurance can be given that this goal will
be achieved on a continuous basis. In order to minimize fluctuations in
market price, neither Fund will purchase a security with a remaining
maturity of greater than 13 months or maintain a dollar weighted average
portfolio maturity in excess of 90 days.
The following is a description of the types of money market
instruments in which the Funds may invest:
U.S. Government Obligations Both Funds may invest in U. S.
Government Obligations. The Acquiring Fund may invest in obligations
issued or guaranteed as to payment of principal and interest by the U.S.
Government (including Treasury bills, notes and bonds) or by its agencies
and instrumentalities (such as the Government National Mortgage
Association Bank for Cooperatives ("GNMA"), Federal Land Banks, Federal
Intermediate Credit Banks and the Federal National Mortgage Association
("FNMA")). Some of these securities (such as Treasury bills) are
supported by the full faith and credit of the U.S. Treasury; others (such
as obligations of the Federal Home Loan Bank) are supported by the right
of the issuer to borrow from the Treasury; while still others (such as
obligations of the Student Loan Marketing Association) are supported only
by the credit of the instrumentality. Similarly, the Acquired Fund
invests in obligations issued or guaranteed as to principal and interest
by the U.S. Government, its agencies and instrumentalities which are
supported by any of the following: (a) the full faith and credit of the
U.S. Government, (b) the right of the issuer to borrow an amount limited
to a specific line of credit from the U.S. Government, (c) discretionary
authority of the U.S. Government agency or instrumentality, or (d) the
credit of the instrumentality. Such agencies or instrumentalities
include, but are not limited to, FNMA, GNMA, Federal Land Banks and the
Farmer's Home Administration.
Repurchase Agreements. Both Funds may enter into repurchase
agreement transactions (which are typically the acquisition of an
underlying security for a relatively short period of time (usually not
more than one week) subject to an obligation of the seller to repurchase,
and the Fund to resell, the security at an agreed upon price and future
date (normally the next business day)) with a broker/dealer or domestic
bank or, in the case of the Acquiring Fund, other financial institutions,
including the Fund's custodian. The Acquiring Fund, as a matter of
fundamental policy, may not enter into a repurchase agreement if, as a
result thereof, more than 10% of its total assets at that time would be
invested in repurchase agreements maturing in more than seven days. The
Acquired Fund has a similar fundamental restriction limiting investment
in repurchase agreements maturing in more than seven days (unless subject
to a demand feature) if any such investment, together with any illiquid
securities (including securities which are subject to legal or
contractual restrictions on resale) held by the Fund, exceeds 10% of the
market or other fair value of the Fund's total net assets.
Commercial Paper. Both Funds may invest in commercial paper.
Because the Funds are money market funds, the Board of each Fund must
determine that there is limited credit risk in order for the Fund to
invest in commercial paper. The Acquiring Fund may invest in promissory
notes that have received the highest rating from the requisite NRSRO for
short-term debt securities or comparable unrated securities and in the
commercial paper of foreign issuers. The Acquired Fund may invest in
short-term obligations of companies which at the time of investment are
(a) rated in the two highest categories by Standard & Poor's Corporation
("S&P") (A-1 and A-2) or by Moody's Investors Service, Inc. ("Moody's)
(Prime-1 and Prime-2), or (b) if not rated, are in the opinion of VKAC,
of comparable quality. The Acquired Fund's current policy is to limit
investments in commercial paper to obligations rated A-1 or Prime-1.
Corporate Obligations. The Acquiring Fund may invest in obligations
of corporations (1) rated AA or better by the requisite NRSRO or (2)
issued by an issuer that has a class of short-term debt obligations that
are comparable in priority and security with the obligation and that have
been rated in one of the two highest rating categories for short-term
debt obligations. The Acquiring Fund may invest only in corporate
obligations with remaining maturities of 13 months or less. The Acquired
Fund does not invest in corporate obligations.
Bank Obligations. Both Funds may invest in bank obligations. The
Acquiring Fund may invest in obligations (including certificates of
deposit ("CDs"), bankers' acceptances and fixed time deposits ("TDs"))
and securities backed by letters of credit of U.S. banks or other U.S.
financial institutions that are members of the Federal Reserve System or
the Federal Deposit Insurance Corporation ("FDIC") (including obligations
of foreign branches of such members) if either: (a) the principal amount
of the obligation is insured in full by the FDIC or (b) the issuer of
such obligation has capital, surplus and undivided profits in excess of
$100 million or total assets of $l billion (as reported in its most
recently published financial statements prior to the date of investment).
The Acquiring Fund intends to maintain at least 25% of its total assets
in obligations of domestic and foreign banks, subject to the foregoing
criteria. The Acquiring Fund will not purchase a fixed TD with an
ultimate maturity of more than six months and intends to limit its
investment in fixed TDs maturing from two business days to seven calendar
days to 10% of its total assets. The Acquired Fund may invest in TDs,
CDs and bankers' acceptances of domestic banks having total assets in
excess of $1 billion as of the date of their most recently published
financial statements. The Acquired Fund is also authorized to invest up
to 5% of its total assets in CDs issued by domestic banks having total
assets of less than $1 billion, provided that the principal amount of the
CD acquired by the Fund is insured in full by the FDIC.
Loans of Portfolio Securities. The Acquired Fund may lend
portfolio securities to unaffiliated brokers, dealers and financial
institutions provided that (a) immediately after any such loan, the value
of the securities loaned does not exceed 10% of the total value of the
Fund's assets and (b) any securities loan is collateralized in accordance
with applicable regulatory requirements. The Acquiring Fund may not loan
its portfolio securities.
Restricted and Illiquid Securities. The Acquired Fund may invest
up to 5% of its net assets in restricted securities and other illiquid
assets. Restricted securities are those that have been sold in the U.S
without registration under the Securities Act of 1933, as amended (the
"1933 Act"). Excluded from this restriction, however, are any restricted
securities which are eligible for resale pursuant to Rule 144A of the
1933 Act and which have been determined to be liquid by the Trustees or
by VKAC pursuant to guidelines established by the Board of Trustees. The
Acquiring Fund may invest up to 10% of its total assets in illiquid
securities or other securities that are not readily marketable.
High Quality Municipal Obligations. The Acquiring Fund may invest
in debt obligations of states, cities, counties, municipalities,
municipal agencies and regional districts rated SP-1+ or A-1 or AA or
better by S&P or MIG 2, VMIG 2 or Prime-l or Aa or better by Moody's or,
if not rated, determined by SBMFM to be of comparable quality. At
certain times, supply/demand imbalances in the tax-exempt market cause
municipal obligations to yield more than taxable obligations of
equivalent credit quality and maturity length. The purchase of these
securities could enhance the Acquiring Fund's yield. The Acquiring Fund
will not invest more than 10% of its total assets in municipal
obligations. The Acquired Fund does not invest in municipal obligations.
Notwithstanding the permitted investments described above, the
Acquired Fund and the Acquiring Fund are money market funds and, as such,
are subject to the requirements of Rule 2a-7 under the 1940 Act ("Rule
2a-7"). Under Rule 2a-7, money market funds (other than tax-exempt money
market funds which have separate guidelines) are also required to meet
certain diversification tests. Investments in the securities of any one
issuer (other than U.S. Government securities) generally may not exceed
5% of such fund's total assets.
Investment Restrictions. The Funds have adopted the following
investment restrictions for the protection of shareholders. These
restrictions may not be changed without the approval of the holders of "a
majority of the outstanding voting securities," as defined in the 1940
Act, of the respective Fund.
The Acquired Fund may not:
1. Lend money except by the purchase of bonds or other debt
obligations of types commonly offered publicly or privately and
purchased by financial institutions, including investments in
repurchase agreements. The Acquired Fund will not invest in
repurchase agreements maturing in more than seven days (unless
subject to a demand feature) if any such investment, together with
any illiquid securities (including securities which are subject to
legal or contractual restrictions on resale) held by the Fund,
exceeds 10% of the market or other fair value of its total net
assets.
2. Underwrite securities of other companies, except insofar
as the Acquired Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933 in the resale of any
securities owned by the Fund.
3. Lend its portfolio securities in excess of 10% of its
total assets, taken at market value, provided that any loans shall
be in accordance with the guidelines established for such loans by
the trustees, including the maintenance of collateral from the
borrower equal at all times to the current market value of the
securities loaned.
4. With respect to 75% of its assets, invest more than 5% of
its assets in the securities of any one issuer (except obligation
of the U.S. Government, its agencies or instrumentalities and
repurchase agreements secured thereby) or purchase more than 10% of
the outstanding voting securities of any one issuer. In compliance
with Rule 2a-7, the Acquired Fund will not purchase securities,
other than obligations of the U.S. Government or its agencies and
instrumentalities, if, immediately after such purchase, more than
5% of the value of the Fund's total assets would be invested in
securities of any one issuer.
5. Invest more than 25% of the value of its total assets in
securities of issuers in any particular industry. (This does not
restrict the Fund from investing in obligations of the U.S.
Government and repurchase agreements secured thereby).
6. Borrow in excess of 10% of the market or other fair value
of its total assets, or pledge its assets to an extent greater than
5% of the market or other fair value of its total assets, provided
that so long as any borrowing exceeds 5% of the value of the Fund's
total assets, the Fund shall not purchase portfolio securities Any
such borrowings shall be from banks and shall be undertaken only as
a temporary measure for extraordinary or emergency purposes.
7. Make investment in real estate, commodities or commodities
contracts, or warrants.
8. Purchase securities on margin, except that the Fund may
obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
9. Invest in securities of any company if any officer or
trustee of the Trust or of VKAC owns more than 1/2 of 1% of the
outstanding securities of such company, and such officers and
trustees own more than 5% of the outstanding securities of such
issuer.
10. Invest in oil or other mineral leases, rights or
royalty contracts or exploration or development programs.
11. Invest in companies for the purpose of acquiring
control or management thereof.
12. Invest in the securities of other open-end investment
companies, or invest in the securities of closed-end investment
companies except through purchase in the open market in a
transaction involving no commission or profit to a sponsor of
dealer (other than the customary brokers commission) or as part of
a merger, consolidation or other acquisition.
13. Purchase a restricted security or a security for which
market quotations are not readily available if as a result of such
purchase more than 5% of the Fund's assets would be invested in
such securities. Illiquid securities include securities subject to
legal or contractual restrictions on resale, which include
repurchase agreements which have a maturity of longer than seven
days. This policy does not apply to restricted securities eligible
for resale pursuant to Rule 144A under the 1933 Act which the
trustees or VKAC under Board approved guidelines, may determine are
liquid nor does it apply to other securities for which,
notwithstanding legal or contractual restrictions on resale, a
liquid market exists.
14. Invest more than 5% of its assets in companies having a
record together with predecessors, of less than three years'
continuous operation.
15. Engage in option writing for speculative purposes or
purchase call or put options on securities if, as a result, more
than 5% of the net assets of the Fund would be invested in premiums
on such options.
16. Purchase any security issued by any company deriving
more than 25% of its gross revenues from the manufacture of alcohol
or tobacco.
The Acquiring Fund may not:
1. Borrow money except from banks for temporary purposes in
an amount up to 10% of the value of its total assets and may pledge
its assets in an amount up to 10% of the value of its total assets
only to secure such borrowings. The Acquiring Fund will borrow
money only to accommodate requests for the redemption of shares
while effecting an orderly liquidation of portfolio securities or
to clear securities transactions and not for leveraging purposes.
Whenever borrowings exceed 5% of the value of the Fund's total
assets, the Fund will not make any additional investments. This
restriction shall not be deemed to prohibit the Fund from obtaining
letters of credit solely for purposes of participating in a captive
insurance company sponsored by the Investment Company Institute to
provide fidelity and directors and officers liability insurance.
2. With respect to 75% of the Acquiring Fund's assets, invest
more than 5% of its assets in the securities of any one issuer,
except securities issued or guaranteed as to principal and interest
by the U.S. Government, its agencies or instrumentalities or U.S.
bank obligations. In compliance with Rule 2a-7, the Acquiring Fund
will not purchase securities, other than obligations of the U.S.
Government or its agencies and instrumentalities, if, immediately
after such purchase, more than 5% of the value of the Fund's total
assets would be invested in securities of any one issuer. The
Acquiring Fund's fundamental policy would give the Fund the ability
to invest, with respect to 25% of the Fund's assets, more than 5%
of its assets in any one issuer only in the event that Rule 2a-7 is
amended in the future.
3. Invest less than 25% if its assets in bank obligations
(including both domestic and foreign bank obligations) and the
Acquiring Fund reserves the freedom of action to concentrate in
securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies of instrumentalities.
4. Sell securities short.
5. Write or purchase put or call options.
6. Purchase illiquid securities (such as repurchase
agreements with maturities in excess of seven days) or other
securities that are not readily marketable if more than 10% of the
total assets of the Fund would be invested in such securities.
7. Purchase or sell real estate, real estate investment trust
securities, commodities, or oil and gas interests.
8. Make loans to others, (except through the purchase of debt
obligations referred to under "Investment Objectives and Policies"
in the Acquiring Fund's Prospectus, except that the Fund may
purchase and simultaneously resell for later delivery, obligations
issued or guaranteed as to principal and interest by the U.S.
Government or its agencies or instrumentalities; provided, however,
that the Fund will not enter into such a repurchase agreement if,
as a result thereof, more than 10% of the Fund's total assets
(taken at current value) at that time would be subject to
repurchase agreements maturing in more than seven days.
9. Invest in companies for the purpose of exercising control.
10. The Acquiring Fund may not invest in securities of
other investment companies, except as they may be acquired as part
of a merger, consolidation or acquisition of assets.
INFORMATION ON SHAREHOLDERS' RIGHTS
General. The Acquired Fund is a series of the Trust, which is
organized under the laws of Massachusetts and is a business entity
commonly referred to as a business trust. The Trust is governed by its
Agreement and Declaration of Trust and its By-laws. The Acquiring Fund
is a series of the Company, a Maryland corporation governed by its
Articles of Incorporation and By-laws.
Voting Rights. Neither the Trust nor the Company holds meetings of
shareholders annually, and there normally is no meeting of shareholders
for the purpose of electing trustees/directors unless and until such time
as less than a majority of the trustees/directors holding office have
been elected by shareholders. A meeting of shareholders of the Company,
for any purpose, must be called upon the written request of shareholders
holding at least 25% of the Company's outstanding shares. A meeting of
shareholders of the Acquired Fund must be called for the purpose of
voting upon the removal of any trustee, upon the written request of
shareholders holding at least 10% of the Trust's outstanding shares. On
each matter submitted to a vote of the shareholders of either the Trust
or the Company, each shareholder is entitled to one vote for each whole
share owned and a proportionate, fractional vote for each fractional
share outstanding in the shareholder's name on the respective Fund's
books. On any matter which affects only the interests of a Fund, only
the holders of shares of such Fund are entitled to vote. Similarly,
holders of shares of a Fund will not be entitled to vote on matters not
affecting their interests (for example, those affecting only the interest
of other series of the Trust or the Company).
Trustees/Directors. The Trust's Agreement and Declaration of Trust
provides that the term of office of any trustee shall continue until the
termination of the Trust or the earlier of his or her death, resignation,
retirement, bankruptcy, adjudicated incompetency or other incapacity or
removal, or if not so terminated, until the election of such trustee's
successor in office has become effective. The By-laws of the Company
provide that each director of the Company shall hold office until a
successor is elected and qualified. Vacancies in the Board of either the
Trust or the Company may be filled by the respective Board. Trustees of
the Trust may be removed with or without cause at any time (1) by written
instrument signed by at least two-thirds of the number of trustees prior
to such removal, or (2) by vote of shareholders holding not less than
two-thirds of the shares of each series of the Trust then outstanding,
cast in person or by proxy at any meeting called for the purpose or (3)
by a written declaration signed by shareholders of the Trust holding not
less than two-thirds of the shares of each series of the Trust then
outstanding and filed with the Trust's custodian.
Liquidation. In the event of a liquidation of the Acquired Fund
or Acquiring Fund, shareholders of such liquidating Fund are entitled to
receive, when and as declared by the Board, the excess of the assets
belonging to such liquidating Fund over the liabilities belonging to such
liquidating Fund. In such a case, the assets so distributed to
shareholders will be distributed among the shareholders in proportion to
the number of shares held by them and recorded in the books of the Fund.
Shareholder Liability. Under Maryland law, the Company's
shareholders do not have personal liability for the Company's corporate
acts and obligations. Shares of the Acquiring Fund issued to the
shareholders of the Acquired Fund in the Reorganization will be fully
paid and nonassessable when issued with no personal liability attaching
to the ownership thereof and transferable without restrictions and will
have no preemptive or conversion rights. Under Massachusetts law,
shareholders of the Acquired Fund may, under certain circumstances, be
held personally liable for the obligations of the Acquired Fund. The
Trust's Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Acquired Fund. The Agreement
and Declaration of Trust further provides indemnification out of the
property of the Trust against all loss and expense of any shareholder
held personally liable for the obligations of the Trust, solely by reason
of such person being a shareholder of the Trust and not because of such
shareholder's acts or omissions or for some other reason.
Liability of Trustees/Directors. The Agreement and Declaration of
Trust of the Trust and the Articles of Incorporation of the Company each
provide that the Trust or the Company, as the case may be, will indemnify
its trustees/directors and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved
because of their positions with the Trust or Company. The Agreement and
Declaration of Trust provides that such indemnification is not available
where it has been determined that the trustee or officer (i) did not act
in good faith in the reasonable belief that such person's action was in
or not opposed to the best interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Nothing in the
Articles of Incorporation or the By-laws of the Company protects or
indemnifies a Director or officer of the Company against any liability to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
Rights of Inspection. Maryland law permits any shareholder of the
Acquiring Fund or any agent of such shareholder to inspect and copy
during the Fund's usual business hours the Company's By-laws, minutes of
shareholder proceedings, annual statements of the Company's affairs and
voting trust agreements on file at its principal office. Shareholders of
the Acquired Fund have the same inspection rights as are permitted
shareholders of a Massachusetts corporation under Massachusetts corporate
law. Currently, each shareholder of a Massachusetts corporation is
permitted to inspect the records, accounts and books of a corporation for
any legitimate business purpose.
The foregoing is only a summary of certain characteristics of the
operations of the Trust and the Company. The foregoing is not a complete
description of the documents cited. Shareholders should refer to the
provisions of the corporate documents and state laws governing each Fund
for a more thorough description.
ADDITIONAL INFORMATION ABOUT
THE ACQUIRED FUND AND THE ACQUIRING FUND
The Acquired Fund. Information about the Acquired Fund is included
in its current Prospectus and Statement of Additional Information, each
dated March 10, 1997, as may be amended, that have been filed with the
Securities and Exchange Commission (the "SEC"), both of which are
incorporated herein by reference. A copy of the Prospectus and the
Statement of Additional Information is available upon request and without
charge by writing the Acquired Fund at the address listed on the cover
page of this Prospectus/Proxy Statement or by calling toll-free 1-800
544-5445.
The Acquiring Fund. Information about the Acquiring Fund is
incorporated herein by reference from its current Prospectus and
Statement of Additional Information, each dated April 30, 1997, as may be
amended. A copy of such Statement of Additional Information has been
filed with the SEC and is available upon request and without charge by
writing the Acquiring Fund at the address listed on the cover page of
this Prospectus/Proxy Statement or by calling toll-free 1-800 544-5445.
Both the Acquiring Fund and the Acquired Fund are subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and in accordance therewith file reports and
other information including proxy material, reports and charter documents
with the SEC. These materials can be inspected and copies obtained at
the Public Reference Facilities maintained by the SEC 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, SEC, Washington, D.C. 20549 at prescribed rates
or on the world wide web at www.sec.gov.
OTHER BUSINESS
The Board of Trustees of the Acquired Fund does not intend to
present any other business at the Meeting. If, however, any other
matters are properly brought before the Meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their
judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of the Acquired Fund to
be used at the Special Meeting of Shareholders to be held at [ ] a.m.
on December 18, 1997, at One Parkview Plaza, Oakbrook Terrace, Illinois,
60181, and at any adjournment thereof. This Prospectus/Proxy Statement,
along with a Notice of the Meeting and a proxy card, is first being
mailed to shareholders of the Acquired Fund on or about November [ ],
1997. Only shareholders of record as of the close of business on
November 12, 1997 will be entitled to notice of, and to vote at, the
Meeting or any adjournment thereof. For purposes of determining a quorum
for transacting business at the Meeting, abstentions and broker "non-
votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to
which the brokers or nominees do not have discretionary power) will be
treated as shares that are present but which have not been voted. For
this reason, abstentions and broker non-votes will have the effect of
"no" votes for purposes of obtaining the requisite approval of the Plan.
If the enclosed form of proxy is properly executed and returned in time
to be voted at the Meeting, the proxies named therein will vote the
shares represented by the proxy in accordance with the instructions
marked thereon. Unmarked proxies will be voted FOR the proposed
Reorganization and FOR any other matters deemed appropriate. A
shareholder who has executed a proxy may revoke it at any time before
they are voted by filing with the Trust a written notice of revocation,
by delivering a duly executed proxy bearing a later date or by attending
the Meeting and voting in person. Unless revoked, all valid proxies will
be voted in accordance with the specifications thereon or, in the absence
of such specifications, for approval of the Plan and the Reorganization
contemplated thereby.
Approval of the Plan will require the vote of a majority of the
outstanding shares of the Acquired Fund. Shareholders of the Acquired
Fund are entitled to one vote for each share. Fractional shares are
entitled to proportional voting rights.
Smith Barney will use the services of First Data Investor Services,
Inc. ("First Data") to solicit proxies. Proxy solicitations will be made
primarily by mail, but proxy solicitations also may be made by telephone,
telegraph or personal interviews conducted by officers and employees of
First Data, Smith Barney and/or PFS Shareholder Services, Inc. The
aggregate cost of solicitation of the shareholders of the Acquired Fund
is expected to be approximately $47,000. Expenses of the Reorganization,
including the costs of the proxy solicitation and the preparation of
enclosures to the Prospectus/Proxy Statement, reimbursement of expenses
of forwarding solicitation material to beneficial owners of shares of the
Acquired Fund and expenses incurred in connection with the preparation of
this Prospectus/Proxy Statement will be borne by Smith Barney.
In the event that sufficient votes to approve the Reorganization
are not received by the date of the Meeting, the persons named as proxies
may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting,
the following factors may be considered: the percentage of votes actually
cast, the percentage of negative votes actually cast, the nature of any
further solicitation and the information to be provided to shareholders
with respect to the reasons for the solicitation. Any such adjournment
will require an affirmative vote by the holders of a majority of the
shares present in person or by proxy and entitled to vote at the Meeting.
The persons named as proxies will vote upon a decision to adjourn the
Meeting.
The votes of the shareholders of the Acquiring Fund are not being
solicited by this, or any Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
Ernst & Young LLP has rendered an opinion on the statements of
assets and liabilities, including the schedules of investments, of the
Acquired Fund as of October 31, 1996, and the related statements of
operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the
financial highlights for each of the years in the [nine]-year period then
ended. These financial statements have been incorporated by reference
herein and into the Statement of Additional Information relating to this
Prospectus/Proxy Statement in reliance upon the report of Ernst & Young
LLP, independent auditors, incorporated by reference herein, and upon the
authority of such firm as experts in accounting and auditing. KPMG Peat
Marwick LLP has rendered an opinion on the statement of assets and
liabilities, including the schedule of investments, of the Acquiring Fund
as of December 31, 1996, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for
each of the years in the ten-year period then ended. These financial
statements have been incorporated by reference herein and into the
Statement of Additional Information dated November 16, 1997 relating to
this Prospectus/Proxy Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in
accounting and auditing.
VALIDITY OF SHARES
The validity of shares of the Acquiring Fund will be passed upon by
Sullivan & Cromwell, 125 Broad Street, New York, New York, 10004. In
rendering such opinion, Sullivan & Cromwell may rely on an opinion of
Maryland counsel.
THE BOARD OF TRUSTEES OF THE ACQUIRED FUND, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN, AND
ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED
IN FAVOR OF APPROVAL OF THE PLAN.
Exhibit A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this th day of October, 1997, by and between SMITH BARNEY MONEY FUNDS,
INC. ("Smith Barney Money Funds"), a Maryland corporation with its
principal place of business at 388 Greenwich Street, New York, New York
10013, on behalf of the CASH PORTFOLIO (the "Acquiring Fund"), and COMMON
SENSE TRUST ("Common Sense Trust"), a Massachusetts business trust with
its principal place of business at One Parkview Plaza, Oakbrook Terrace,
Illinois, 60181, on behalf of the COMMON SENSE MONEY MARKET FUND (the
"Acquired Fund"). The reorganization (the "Reorganization") will consist
of the transfer of all or substantially all of the assets of the Acquired
Fund in exchange for Class A shares of common stock of the Acquiring Fund
(collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund
Share") and the assumption by the Acquiring Fund of certain liabilities
of the Acquired Fund and the distribution, after the Closing Date herein
referred to, of Acquiring Fund Shares to the shareholders of the Acquired
Fund in liquidation of the Acquired Fund and the liquidation of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in
this Agreement.
WHEREAS, Smith Barney Money Funds and Common Sense Trust are
registered investment companies of the management type, and the Acquired
Fund owns securities that generally are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, both Smith Barney Money Funds is authorized to issue
shares of common stock and Common Sense Trust is authorized to issue
shares of beneficial interest;
WHEREAS, the Board of Trustees of Common Sense Trust has determined
that the exchange of all or substantially all of the assets and certain
of the liabilities of the Acquired Fund for Acquiring Fund Shares and the
assumption of such liabilities by Smith Barney Money Funds on behalf of
the Acquiring Fund is in the best interests of the Acquired Fund's
shareholders and that the interests of the existing shareholders of the
Acquired Fund would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of Smith Barney Money Funds has
determined that the exchange of all or substantially all of the assets of
the Acquired Fund for Acquiring Fund Shares is in the best interests of
the Acquiring Fund's shareholders and that the interests of the existing
shareholders of the Acquiring Fund would not be diluted as a result of
this transaction.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
1. Transfer of Assets of the Acquired Fund in Exchange for the
Acquiring Fund Shares and Assumption of the Acquired Fund's
Scheduled Liabilities and Liquidation of the Acquired Fund
1.1. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein,
the Acquired Fund agrees to transfer the Acquired Fund's assets as
set forth in paragraph 1.2 to Smith Barney Money Funds on behalf of
the Acquiring Fund, and Smith Barney Money Funds on behalf of the
Acquiring Fund agrees in exchange therefor: (i) to deliver to the
Acquired Fund the number of Class A Acquiring Fund Shares,
including fractional Class A Acquiring Fund Shares, determined by
dividing the value of the Acquired Fund's net assets attributable
to its Class 1, computed in the manner and as of the time and date
set forth in paragraph 2.1, by the net asset value of one Class A
Acquiring Fund Share, computed in the manner and as of the time and
date set forth in paragraph 2.2; (ii) to deliver to the Acquired
Fund the number of Class A Acquiring Fund Shares, including
fractional Class A Acquiring Fund Shares, determined by dividing
the value of the Acquired Fund's net assets attributable to Class A
shares, computed in the manner and as of the time and date set
forth in paragraph 2.1, by the net asset value of one Class A
Acquiring Fund Share, computed in the manner and as of the time and
date set forth in paragraph 2.2; (iii) to deliver to the Acquired
Fund the number of Class A Acquiring Fund Shares, including
fractional Class A Acquiring Fund Shares, determined by dividing
the value of the Acquired Fund's net assets attributable to Class B
shares, computed in the manner and as of the time and date set
forth in paragraph 2.1, by the net asset value of one Class A
Acquiring Fund Share, computed in the manner and as of the time and
date set forth in paragraph 2.2; and (iii) to assume certain
liabilities of the Acquired Fund, as set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in
paragraph 3.1 (the "Closing").
1.2. (a) The assets of the Acquired Fund to be acquired by Smith
Barney Money Funds on behalf of the Acquiring Fund shall consist of
all or substantially all of its property, including, without
limitation, all cash, securities and dividends or interest
receivables which are owned by the Acquired Fund and any deferred
or prepaid expenses shown as an asset on the books of the Acquired
Fund on the closing date provided in paragraph 3.1 (the "Closing
Date").
(b) The Acquired Fund has provided the Acquiring Fund with
a list of all of the Acquired Fund's assets as of the date of
execution of this Agreement. The Acquired Fund reserves the right
to sell any of these securities but will not, without the prior
approval of the Acquiring Fund, acquire any additional securities
other than securities of the type in which the Acquiring Fund is
permitted to invest. The Acquiring Fund will, within a reasonable
time prior to the Closing Date, furnish the Acquired Fund with a
statement of the Acquiring Fund's investment objectives, policies
and restrictions and a list of the securities, if any, on the
Acquired Fund's list referred to in the first sentence of this
paragraph which do not conform to the Acquiring Fund's investment
objectives, policies and restrictions. In the event that the
Acquired Fund holds any investments which the Acquiring Fund may
not hold, the Acquired Fund will dispose of such securities prior
to the Closing Date. In addition, if it is determined that the
portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage
limitations imposed upon the Acquiring Fund with respect to such
investments, the Acquired Fund, if requested by the Acquiring Fund,
will dispose of and/or reinvest a sufficient amount of such
investments as may be necessary to avoid violating such limitations
as of the Closing Date.
1.3. The Acquired Fund will endeavor to discharge all the
Acquired Fund's known liabilities and obligations prior to the
Closing Date. Smith Barney Money Funds on behalf of the Acquiring
Fund shall assume all liabilities, expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and
Liabilities of the Acquired Fund prepared by Van Kampen American
Capital Asset Management, Inc. ("VKACAM"), as of the Valuation Date
(as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the prior
audited period. Smith Barney Money Funds on behalf of the
Acquiring Fund shall assume only those liabilities of the Acquired
Fund reflected in that unaudited Statement of Assets and
Liabilities and shall not assume any other liabilities, whether
absolute or contingent, not reflected thereon.
1.4. As provided in paragraph 3.4, as soon after the Closing
Date as is conveniently practicable (the "Liquidation Date"), the
Acquired Fund will liquidate and distribute pro rata to the
Acquired Fund's shareholders of record determined as of the close
of business on the Closing Date (the "Acquired Fund Shareholders"),
the Acquiring Fund Shares it receives pursuant to paragraph 1.1.
Shareholders of Class 1 and Class A shares of the Acquired Fund
shall receive Class A Acquiring Fund Shares. Such liquidation and
distribution 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 name of the Acquired Fund's
shareholders and representing the respective pro rata number of the
Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of Common Sense Trust, although share
certificates representing interests in the Acquired Fund will
represent a number of Acquiring Fund Shares after the Closing Date
as determined in accordance with paragraph 1.1. Common Sense
Trust shall not issue certificates representing the Acquiring Fund
Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the
books of the Acquiring Fund's transfer agent. Acquiring Fund
Shares will be issued in the manner described in the Acquiring
Fund's current prospectus and statement of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring
Fund Shares in a name other than the registered holder of the
Acquired Fund shares on the books of Smith Barney Funds as of that
time shall, as a condition of such issuance and transfer, be paid
by the person to whom such Acquiring Fund Shares are to be issued
and transferred.
1.7. Any reporting responsibility of the Acquired Fund is and
shall remain the responsibility of Common Sense Trust up to and
including the Closing Date.
2. Valuation
2.1. The value of the Acquired Fund's assets to be acquired by
the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") noon on the Closing Date (such time and
date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Acquiring Fund's then current
prospectus or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the
net asset value per share computed as of 12:00 noon on the
Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then current prospectus or statement of additional
information.
2.3. All computations of value shall be made by VKACAM and SBMFM
in accordance with their regular practices as pricing agent,
respectively, for the Acquired Fund and the Acquiring Fund.
3. Closing and Closing Date
3.1. The Closing Date shall be December 31, 1997, or such later
date as the parties may agree to in writing. All acts taking
place at the Closing shall be deemed to take place simultaneously
as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 5:00 p.m. at the offices
of Smith Barney Inc., 388 Greenwich Street, New York, New York
10013, or at such other time and/or place as the parties may agree.
3.2. The custodian for the Acquiring Fund (the "Custodian")
shall deliver at the Closing a certificate of an authorized officer
stating that: (a) the Acquired Fund's portfolio securities, cash
and any other assets shall have been delivered in proper form to
the Acquiring Fund within two business days prior to or on the
Closing Date and (b) all necessary transfer taxes including all
applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in
conjunction with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or
another primary trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to trading or
trading thereon shall be restricted, (b) trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring
Fund or the Acquired Fund is impracticable or (c) the net asset
value of Class A shares of the Acquiring Fund or any class of the
Acquired Fund is other than $1.00, 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 or such net asset value is $1.00, as the case may be.
3.4. The Acquired Fund shall deliver at the Closing a list of
the names and addresses of the Acquired Fund's shareholders and the
number and percentage ownership of outstanding shares owned by each
such shareholder immediately prior to the Closing, certified on
behalf of the Acquired Fund by its President. The Acquiring Fund
shall issue and deliver a confirmation evidencing the Acquiring
Fund Shares to be credited to the Acquired Fund's account on the
Closing Date to the Secretary of Common Sense Trust, or provide
evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to the Acquired Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other
party or its counsel may reasonably request.
4. Representations and Warranties
4.1. Common Sense Trust represents and warrants to Smith Barney
Money Funds as follows:
(a) The Acquired Fund is a portfolio of Common Sense Trust,
which is business trust, duly organized, validly existing and in
good standing under the laws of The Commonwealth of Massachusetts;
(b) Common Sense Trust is a registered investment company
classified as a management company of the open-end type, and its
registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company
Act of 1940, as amended (the "1940 Act") is in full force and
effect;
(c) Common Sense Trust is not, and the execution, delivery
and performance of this Agreement on behalf of the Acquired Fund
will not result, in a material violation of its Agreement and
Declaration of Trust or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which Common
Sense Trust is a party or by which it is bound;
(d) Common Sense Trust has no material contracts or other
commitments (other than this Agreement) which will be terminated
with liability to Common Sense Trust prior to the Closing Date;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Common
Sense Trust with respect to the Acquired Fund or any of the
Acquired Fund's properties or assets, except as previously
disclosed to the Acquiring Fund. Common Sense Trust knows of no
facts which might form the basis for the institution of such
proceedings and neither Common Sense Trust nor the Acquired Fund is
a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects the Acquired Fund's business or Common Sense
Trust' ability on behalf of the Acquired Fund to consummate the
transactions herein contemplated;
(f) The Statement of Assets and Liabilities of the Acquired
Fund for the fiscal year ended October 31, 1996 has been audited by
Ernst & Young LLP, independent auditors, and is in accordance with
generally accepted accounting principles consistently applied, and
such statement (copies of which have been furnished to the
Acquiring Fund) fairly reflects the financial condition of the
Acquired Fund as of such dates, and there are no known contingent
liabilities of the Acquired Fund as of such dates not disclosed
therein;
(g) At the Closing Date, all federal and other tax returns
and reports of the Acquired Fund required by law then to have been
filed by such dates shall have been filed, and all federal and
other taxes shown as due on such returns shall have been paid so
far as due, or provision shall have been made for the payment
thereof and, to the best of the Acquired Fund's knowledge, no such
return is currently under audit and no assessment has been asserted
with respect to such returns;
(h) For the most recent fiscal year of its operation, the
Acquired Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company;
(i) All issued and outstanding shares of the Acquired Fund
are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. All of the issued and
outstanding shares of the Acquired Fund will, at the time of
Closing, be held by the persons and in the amounts set forth in the
records of the transfer agent as provided in paragraph 3.4. The
Acquired Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the
Acquired Fund, nor is there outstanding any security convertible
into any shares of the Acquired Fund;
(j) At the Closing Date, the Acquired Fund will have good
and marketable title to its assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2 and full right, power and
authority to sell, assign, transfer and deliver such assets
hereunder and, upon delivery and payment for such assets, the
Acquiring Fund will acquire good and marketable title thereto,
subject to no restrictions on the full transfer thereof, including
such restrictions as might arise under the Securities Act of 1933,
as amended (the "1933 Act"), other than as disclosed to the
Acquiring Fund;
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the
part of Common Sense Trust's Board of Trustees and, subject to the
approval of the Acquired Fund's shareholders, assuming due
authorization, execution and delivery by the Acquiring Fund, this
Agreement will constitute a valid and binding obligation of Common
Sense Trust on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles;
(l) The information to be furnished by the Acquired Fund
for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and
other laws and regulations thereunder applicable thereof;
(m) The proxy statement of Common Sense Trust on behalf of
the Acquired Fund (the "Proxy Statement") to be included in the
Registration Statement referred to in paragraph 5.7 (other than
information therein that relates to the Acquiring Fund) will, on
the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which such statements were made, not materially misleading.
4.2. Smith Barney Money Funds represents and warrants to Common
Sense Trust as follows:
(a) The Acquiring Fund is a portfolio of Smith Barney Money
Funds, which is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Maryland;
(b) Smith Barney Money Funds is a registered investment
company classified as a management company of the open-end type and
its registration with the Commission as an investment company under
the 1940 Act is in full force and effect;
(c) The current prospectus of and statement of additional
information of Smith Barney Money Funds conform in all material
respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not materially
misleading;
(d) At the Closing Date, Smith Barney Money Funds will have
good and marketable title to the Acquiring Fund's assets;
(e) Smith Barney Money Funds is not, and the execution,
delivery and performance of this Agreement on behalf of the
Acquiring Fund will not result, in a material violation of its
Articles of Incorporation or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking with
respect to the Acquiring Fund to which Smith Barney Money Funds is
a party or by which it is bound;
(f) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against Smith
Barney Money Funds with respect to the Acquiring Fund or any of the
Acquiring Fund's properties or assets, except as previously
disclosed in writing to Common Sense Trust. Smith Barney Money
Funds and the Acquiring Fund know of no facts which might form the
basis for the institution of such proceedings and neither Smith
Barney Money Funds nor the Acquiring Fund is a party to or subject
to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects the
Acquiring Fund's business or Smith Barney Money Funds' ability on
behalf of the Acquiring Fund to consummate the transactions
contemplated herein;
(g) The Statement of Assets and Liabilities of the
Acquiring Fund for the fiscal year ended December 31, 1996 has been
audited by KPMG Peat Marwick LLP, independent certified public
accountants, and is in accordance with generally accepted
accounting principles consistently applied, and such statement
(copies of which have been furnished to the Acquired Fund) fairly
reflects the financial condition of the Acquiring Fund as of such
dates, and there are no known contingent liabilities of the
Acquiring Fund as of such dates not disclosed therein;
(h) At the Closing Date, all federal and other tax returns
and reports of the Acquiring Fund required by law then to have been
filed by such dates shall have been filed, and all federal and
other taxes shown as due on said returns and reports shall have
been paid so far as due, or provision shall have been made for the
payment thereof and, to the best of the Acquiring Fund's knowledge,
no such return is currently under audit and no assessment has been
asserted with respect to such returns;
(i) For the most recent fiscal year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment company
and the Acquiring Fund intends to do so in the future;
(j) At the date hereof, all issued and outstanding shares
of the Acquiring Fund are, and at the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable,
with no personal liability attaching to the ownership thereof. The
Acquiring Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the
Acquiring Fund, nor is there outstanding any security convertible
into shares of the Acquiring Fund;
(k) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action, if any,
on the part of Smith Barney Money Funds' Board of Directors and,
assuming due authorization, execution and delivery by the Acquired
Fund, this Agreement constitutes a valid and binding obligation of
Smith Barney Money Funds on behalf of the Acquiring Fund,
enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium
and other laws relating to or affecting creditors' rights and to
general equity principles;
(l) The Acquiring Fund Shares to be issued and delivered to
Common Sense Trust for the account of the Acquired Fund
Shareholders, pursuant to the terms of this Agreement, will at the
Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Acquiring Fund Shares,
and will be fully paid and non-assessable with no personal
liability attaching to the ownership thereof;
(m) The information to be furnished by the Acquiring Fund
for use in no-action letters, applications for exemptive orders,
registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated
hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and
other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement (only insofar as it relates to the Acquiring Fund and
Smith Barney Money Funds) 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; and
(o) Smith Barney Money Funds, on behalf of the Acquiring
Fund, agrees to use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act and the 1940 Act, and
to file notices with state securities commissions as it may deem
appropriate in order to continue the Acquiring Fund's operations
after the Closing Date.
5. Covenants of the Acquired Fund, Common Sense Trust, the
Acquiring Fund and Smith Barney Money Funds
5.1. Smith Barney Money Funds on behalf of the Acquiring Fund
and Common Sense Trust on behalf of the Acquired Fund each will
operate its business in the ordinary course between the date hereof
and the Closing Date. It is understood that such ordinary course
of business will include the declaration and payment of customary
dividends and distributions and any other dividends and
distributions deemed advisable, in each case payable either in cash
or in additional shares.
5.2. Common Sense Trust will call a meeting of Acquired Fund
shareholders to consider and act upon this Agreement and to take
all other action necessary to obtain approval of the transactions
contemplated herein.
5.3. Common Sense Trust covenants that the Acquiring Fund Shares
to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the
terms of this Agreement.
5.4. Common Sense Trust will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Acquired Fund's
shares.
5.5. Subject to the provisions of this Agreement, Common Sense
Trust on behalf the Acquired Fund and Smith Barney Money Funds on
behalf of the Acquiring Fund each will take, or cause to be taken,
all action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty
days after the Closing Date, Common Sense Trust shall furnish the
Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the
Acquired Fund for federal income tax purposes which will be carried
over to the Acquiring Fund as a result of Section 381 of the Code,
and which will be certified by the Chairman and Treasurer or
Assistant Treasurer of the Acquired Fund.
5.7. Common Sense Trust will provide the Acquiring Fund with
information reasonably necessary for the preparation of a
prospectus (the "Prospectus") which will include the Proxy
Statement, referred to in paragraph 4.1(m), all to be included in a
Registration Statement on Form N-14 of the Acquiring Fund (the
"Registration Statement"), in compliance with the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act
in connection with the meeting of the Acquired Fund's shareholders
to consider approval of this Agreement and the transactions
contemplated herein.
6. Conditions Precedent to Obligations of Common Sense Trust in
respect of the Acquired Fund
The obligations of Common Sense Trust to consummate the
transactions provided for herein shall be subject, at its election,
to the performance by Smith Barney Money Funds and the Acquiring
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:
6.1. All representations and warranties of Smith Barney Money
Funds and the Acquiring Fund contained in this Agreement shall be
true and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the
same force and effect as if made on and as of the Closing Date;
6.2. Smith Barney Money Funds on behalf of the Acquiring Fund
shall have delivered to the Acquired Fund a certificate executed in
its name by its Chairman and its Treasurer or Assistant Treasurer,
in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and
warranties of Smith Barney Money Funds and the Acquiring Fund made
in this Agreement are true and correct at and as of the Closing
Date, except as they may be affected by the transactions
contemplated by this Agreement; and
6.3. Common Sense Trust shall have received on the Closing Date
a favorable opinion from Sullivan & Cromwell, counsel to Smith
Barney Money Funds, dated as of the Closing Date, in a form
reasonably satisfactory to Ronald A. Nyberg, Esq., Secretary of the
Acquired Fund, covering the following points:
That (a) Smith Barney Money Funds is duly organized and validly
existing under the laws of the State of Maryland; (b) Smith
Barney Money Funds is an open-end management investment company
registered under the 1940 Act; (c) this Agreement, the
Reorganization provided for hereunder and the execution of this
Agreement have been duly authorized and approved by all
requisite action of Smith Barney Money Funds, and this Agreement
has been duly executed and delivered by Smith Barney Money Funds
and is a valid and binding obligation of Smith Barney Money
Funds with respect to the Acquiring Fund enforceable in
accordance with its terms against the assets of the Acquiring
Fund, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles; and (d) the Class A Acquiring Fund
Shares to be issued to the Acquired Fund for distribution to its
shareholders pursuant to this Agreement have been duly
authorized and, subject to the receipt by Smith Barney Money
Funds on behalf of the Acquiring Fund of consideration equal to
the net asset value thereof (but in no event less than the par
value thereof), such Class A Acquiring Fund Shares, when issued
in accordance with this Agreement, will be validly issued, fully
paid and nonassessable.
Such opinion may state that it is solely for the benefit of
Common Sense Trust, its trustees and its officers. Such counsel
may rely, as to matters governed by the laws of the State of
Maryland, on an opinion of Maryland counsel.
7. Conditions Precedent to Obligations of Smith Barney Money Funds
in Respect of the
Acquiring Fund
The obligations of Smith Barney Money Funds on behalf of the
Acquiring Fund to complete the transactions provided for herein
shall be subject, at its election, to the performance by Common
Sense Trust of all the obligations to be performed by it hereunder
on or before the Closing Date and, in addition thereto, the
following conditions:
7.1. All representations and warranties of Common Sense Trust
contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of
the Closing Date with the same force and effect as if made on and
as of the Closing Date;
7.2. Common Sense Trust on behalf of the Acquired Fund shall
have delivered to the Acquiring Fund a statement of the Acquired
Fund's assets and liabilities, together with a list of the Acquired
Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of
the Closing Date, certified by the Treasurer or Assistant Treasurer
of the Acquired Fund;
7.3. Common Sense Trust shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by its
Chairman and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Fund and dated as of the
Closing Date, to the effect that the representations and warranties
of the Common Sense Trust and the Acquired Fund made in this
Agreement are true and correct at and as of the Closing Date,
except as they may be affected by the transactions contemplated by
this Agreement; and
7.4. The Acquiring Fund shall have received on the Closing Date
a favorable opinion of Sullivan & Worcester,LLP, counsel to the
Common Sense Trust, in a form satisfactory to Christina T. Sydor,
Esq., Secretary of Smith Barney Money Funds, covering the following
points:
That (a) the Common Sense Trust is duly organized and validly
existing under the laws of The Commonwealth of Massachusetts;
(b) Common Sense Trust is an open-end management investment
company registered under the 1940 Act; and (c) this Agreement,
the Reorganization provided for hereunder and the execution of
this Agreement have been duly authorized and approved by all
requisite action of Common Sense Trust , and this Agreement has
been duly executed and delivered by Common Sense Trust and is a
valid and binding obligation of Common Sense Trust enforceable
in accordance with its terms against the assets of the Acquired
Fund, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
Such opinion may state that it is solely for the benefit of
Smith Barney Money Funds, its directors and its officers. Such
counsel may rely, as to matters governed by the laws of the State
of Massachusetts, on an opinion of Massachusetts counsel.
7.5 The Acquiring Fund shall have received on the Closing Date
a favorable opinion of Sullivan & Worcester, LLP, counsel to the
Common Sense Trust, in a form satisfactory to Christina T. Sydor,
Esq., Secretary of Smith Barney Money Funds, substantially to the
effect that, on the basis of the existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), U.S.
Treasury regulations issued thereunder, current administrative
rules, pronouncements and court decisions, for Federal income tax
purposes, upon consummation of the Reorganization:
(1) the transfer of all or substantially all of the
Acquired Fund's assets in exchange for the Acquiring
Fund's shares and the assumption by the Acquiring
Fund of certain scheduled liabilities of the Acquired
Fund will constitute a "reorganization" within the
meaning of Section 368 (a)(1)(C) of the Code, and the
Acquiring Fund and the Acquired Fund are each a
"party to a reorganization" within the meaning of
Section 368(b) of the Code;
(2) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the
Acquired Fund in exchange for the Acquiring Fund's
shares, and the assumption by the Acquiring Fund of
certain scheduled liabilities in the Acquired Fund;
(3) no gain or loss will be recognized by the
Acquired Fund upon the transfer of the Acquired
Fund's assets to the Acquiring Fund in exchange for
the Acquiring Fund shares and the assumption by the
Acquiring Fund of certain scheduled liabilities of
the Acquired Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund shares
to the Acquired Fund's shareholders;
(4) no gain or loss will be recognized by
shareholders of the Acquired Fund upon the exchange
of their Acquired Fund shares for the Acquiring Fund
shares and the assumption by the Acquiring Fund of
certain scheduled liabilities of the Acquired Fund;
(5) the aggregate tax basis of the Acquiring Fund
shares received by each Acquired Fund shareholder
pursuant to the Reorganization will be the same as
the aggregate tax basis of the Acquired Fund shares
surrendered in exchange therefor and, (provided the
Acquired Fund shares were held as capital assets on
the date of the Reorganization), the holding period
of the Acquiring Fund shares to be received by each
Acquired Fund shareholder will include the period
during which the shares of the Acquired Fund which
are surrendered in exchange therefor were held by
such shareholder;
(6) the tax basis of the Acquired Fund's assets
acquired by the Acquiring Fund will be the same as
the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization and 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.
8. Further Conditions Precedent to Obligations of the Acquired
Fund, Common Sense Trust, the Acquiring Fund and Smith Barney
Money Funds
If any of the conditions set forth below do not exist on or
before the Closing Date with respect to Smith Barney Money Funds on
behalf of the Acquiring Fund, or the Acquired Fund, the other party
to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein
shall have been approved by the requisite vote of the holders of
the outstanding shares of the Acquired Fund in accordance with the
provisions of Common Sense Trust's Agreement and Declaration of
Trust and by-laws and certified copies of the votes evidencing such
approval shall have been delivered to the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither Smith
Barney Money Funds on behalf of the Acquiring Fund nor Common Sense
Trust on behalf of the Acquired Fund may waive the conditions set
forth in this paragraph 8.1;
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in which
it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions
contemplated herein;
8.3. All consents of other parties and all other consents,
orders and permits of federal and if applicable state and local,
regulatory authorities (including those of the Commission and of
state Blue Sky and securities authorities, including "no-action"
positions of and exemptive orders from such federal and state
authorities) deemed necessary by the Acquiring Fund or 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, provided
that either party hereto may for itself waive any of such
conditions;
8.4. The Registration Statement shall have become effective
under the 1933 Act and no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or
contemplated under the 1933 Act;
8.5. The Acquired Fund shall have declared and paid a dividend
or dividends on the outstanding shares of the Acquired Fund, which,
together with all previous such dividends, shall have the effect of
distributing to the shareholders of the Acquired Fund all of the
investment company taxable income of the Acquired Fund for all
taxable years ending on or prior to the Closing Date. The dividend
declared and paid by the Acquired Fund shall also include all of
such fund's net capital gain realized in all taxable years ending
on or prior to the Closing Date (after reduction for any capital
loss carry forward);
9. Brokerage Fees and Expenses
9.1. Smith Barney Money Funds on behalf of the Acquiring Fund
represents and warrants to the Acquired Fund, and Common Sense
Trust on behalf of the Acquired Fund hereby represents and warrants
to Smith Barney Money Funds on behalf of the Acquiring Fund, that
there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. (a) Except as may be otherwise provided herein, Smith
Barney Inc. shall be liable for the expenses incurred in connection
with entering into and carrying out the provisions of this
Agreement, including the expenses of: (i) counsel and independent
accountants associated with the Reorganization; (ii) printing and
mailing the Prospectus/Proxy Statement and soliciting proxies in
connection with the meeting of shareholders of the Acquired Fund
referred to in paragraph 5.2 hereof; (iii) any special pricing fees
associated with the valuation of the Acquired Funds or the
Acquiring Funds portfolio on the Closing Date; (iv) expenses
associated with preparing this Agreement and preparing and filing
the Registration Statement under the 1933 Act covering the
Acquiring Fund Shares to be issued in the Reorganization; (v)
registration or qualification fees and expenses of preparing and
filing such forms, if any, necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued
in connection with the Reorganization. The Acquired Fund shall be
liable for: (i) all fees and expenses related to the liquidation of
the Acquired Fund; and (ii) fees and expenses of the Acquired
Fund's custodian and transfer agent incurred in connection with the
Reorganization. The Acquiring Fund shall be liable for any fees
and expenses of the Acquiring Fund's transfer agent incurred in
connection with the Reorganization.
(b) Consistent with the provisions of paragraph 1.3, the
Acquired Fund, prior to the Closing, shall pay for or include in
the unaudited Statement of Assets and Liabilities prepared pursuant
to paragraph 1.3 all of its known and reasonably estimated expenses
associated with the transactions contemplated by this Agreement.
10. Entire Agreement; Survival of Warranties
10.1. The parties hereto agree that no party has made any
representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the
parties.
10.2. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the
transactions contemplated hereunder.
11. Termination
11.1. This Agreement may be terminated at any time prior to the
Closing Date by: (1) the mutual agreement of Common Sense Trust on
behalf of the Acquired Fund and Smith Barney Money Funds on behalf
of the Acquiring Fund; (2) Common Sense Trust in respect of the
Acquired Fund in the event that Smith Barney Money Funds in respect
of the Acquiring Fund shall, or Smith Barney Money Funds in respect
of the Acquiring Fund in the event that Common Sense Trust in
respect of the Acquired Fund shall, materially breach any
representation, warranty or agreement contained herein to be
performed at or prior to the Closing Date; or (3) a condition
herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that
it will not or cannot be met.
11.2. In the event of any such termination, there shall be no
liability for damages on the part of either Common Sense Trust on
behalf of the Acquired Fund or Smith Barney Money Funds on behalf
of the Acquiring Fund or their respective directors or officers to
the other party, but each shall bear the expenses incurred by it
incidental to the preparation and carrying out of this Agreement as
provided in paragraph 9.2.
12. 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 Common Sense Trust and Smith Barney Money Funds;
provided, however, that following the meeting of the Acquired Fund
shareholders called by Common Sense Trust pursuant to paragraph 5.2
of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund's shareholders under
this Agreement to the detriment of such shareholders without their
further approval.
13. Notices
Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be
given by prepaid telegraph, telecopy or certified mail addressed to
Common Sense Trust, 2800 Post Oak Blvd. Houston, Texas 77056,
Attention: Secretary; or to Smith Barney Money Funds, 388 Greenwich
Street, New York, New York 10013, Attention: Secretary.
14. Headings; Counterparts; Governing Law; Assignment;
Limitation of Liability
14.1 The article and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
14.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other party. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give any person, firm,
corporation or other entity, other than the parties hereto and
their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.
14.5 It is expressly agreed that the obligations of Common Sense
Trust in respect of the Acquired Fund shall not be binding upon any
of its Trustees, shareholders, nominees, officers, agents or
employees personally, but bind only the trust property of the
Acquired Fund as provided in the trust instruments of Common Sense
Trust. The execution and delivery of this Agreement has been
authorized by the trustees of Common Sense Trust and this Agreement
has been executed by authorized officers of Common Sense Trust,
acting as such, and neither such authorization by such trustees nor
such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust
property of the Acquired Fund as provided in Common Sense Trust's
Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its Chairman of the Board, President or Vice President
and attested by its Secretary or Assistant Secretary.
Attest:
SMITH BARNEY
MONEY FUNDS, INC.
on behalf of the
CASH PORTFOLIO
/s/ Christina T. Sydor
Name: Christina T. Sydor
Title: Secretary
By: /s/ Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the Board and
Chief Executive Officer
Attest:
COMMON SENSE TRUST
on behalf of the
COMMON SENSE MONEY MARKET FUND
Name: /s/
Title: Secretary
By: /s/
Name:
Title: Chairman of the Board
STATEMENT OF ADDITIONAL INFORMATION DATED, NOVEMBER 16, 1997
Acquisition Of The Assets Of
COMMON SENSE MONEY MARKET FUND
a separate investment portfolio of Common Sense Trust, One Parkview
Plaza, Oakbrook, Illinois 60181, (800) 544-5445
By And In Exchange For Class A Shares Of
CASH PORTFOLIO
a separate investment portfolio of SMITH BARNEY MONEY FUNDS, INC., 388
Greenwich Street, New York, 10013, (800) 224-7523
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets of the
Common Sense Money Market Fund of Common Sense Trust, (the "Acquired
Fund")to the Cash Portfolio of Smith Barney Money Funds, Inc., (the
"Acquiring Fund") in exchange for Class A shares of the Acquiring Fund
and the assumption by the Acquiring Fund of certain liabilities of the
Acquired Fund, consists of this cover page and the following described
documents, each of which accompanies this Statement of Additional
Information and is incorporated herein by reference.
1. Statement of Additional Information of Acquired Fund dated March
10, 1997.
2. Statement of Additional Information of Acquiring Fund dated April
30, 1997.
3. Annual Report of Acquired Fund for the year ended October 31,
1996.
4. Annual Report of Acquiring Fund for the year ended December 31,
1996.
5. Semi-Annual Report of Acquired Fund for the six-month period ended
April 30, 1997.
6. Semi-Annual Report of Acquiring Fund for the six-month period
ended June 30, 1997.
This Statement of Additional Information is not a Prospectus. A
Prospectus/Proxy Statement dated November 16, 1997, relating to the
above-referenced matter may be obtained without charge by calling or
writing either the Acquiring Fund or the Acquired Fund at the
telephone numbers or addresses set forth above, by contacting a PFS
Investments Registered Representative, or by calling toll-free 1-800-
544-5445. This Statement of Additional Information should be read in
conjunction with the Prospectus/Proxy Statement dated November 16,
1997.
The date of this Statement of Additional Information is November 16,
1997.
PROSPECTUS OF SMITH BARNEY MONEY FUNDS, INC. - CASH PORTFOLIO DATED
APRIL 30, 1997 IS INCORPORATED BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 49 TO THE SMITH BARNEY FUNDS, INC. REGISTRATION
STATEMENT ON FORM N-1A FILED ON APRIL 23, 1997.
REFERENCE NOS. 2-51301, 811-2490
ACCESSION NUMBER: 91155-97-000209
STATEMENT OF ADDITIONAL INFORMATION OF COMMON SENSE TRUST DATED MARCH
10, 1997 IS INCORPORATED BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO.
18 TO THE COMMON SENSE TRUST REGISTRATION STATEMENT ON FORM N-1A FILED
ON FEBRUARY 28, 1997.
REFERENCE NOS. 33-11716, 811-5018
ACCESSION NUMBER: 950124-97-1280
STATEMENT OF ADDITIONAL INFORMATION OF SMITH BARNEY MONEY FUNDS, INC.
DATED APRIL 30, 1997 IS INCORPORATED BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 49 TO THE SMITH BARNEY FUNDS, INC. REGISTRATION
STATEMENT ON FORM N-1A FILED ON APRIL 23, 1997.
REFERENCE NOS. 2-51301, 811-2490
ACCESSION NUMBER. 91155-97-000209
ANNUAL REPORT OF COMMON SENSE TRUST - COMMON SENSE MONEY MARKET FUND
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 FILED ON DECEMBER 30, 1996.
ACCESSION NUMBER: 950131-96-6496
ANNUAL REPORT OF SMITH BARNEY MONEY FUNDS, INC. - CASH PORTFOLIO FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1996.
ACCESSION NUMBER: 91155-97-000081
SEMI-ANNUAL REPORTS OF COMMON SENSE TRUST - COMMON SENSE MONEY MARKET
FUND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 FILED ON JULY 2,
1997 AND JULY 8, 1997.
ACCESSION NUMBERS: 950131-97-4273 AND 950131-97-4329
SEMI-ANNUAL REPORT OF SMITH BARNEY MONEY FUNDS, INC. -CASH PORTFOLIO
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997
ACCESSION NUMBER: 91155-97-000384
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article SEVENTH of Registrant's Articles of
Incorporation for a complete statement of its terms.
Subparagraph (9) of Article SEVENTH provides: "Anything herein
contained to the contrary notwithstanding, no officer or director of
the corporation shall be indemnified for any liability to the
registrant or its security holders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his
office."
Registrant is a named assured on a joint insured bond pursuant to Rule
17g-1 of the Investment Company Act of 1940. Other assured include
Smith Barney Mutual Funds Management Inc. (Registrant's Manager) and
affiliated investment companies.
Item 16. Exhibits
(1) (a) Articles Supplementary to the Articles of
Incorporation dated November 7, 1985, January 30,
1984, August 12, 1980 and May 8, 1980 are
incorporated by reference to Exhibits (a) through
(d) to Post-Effective Amendment No. 32.
(b) Articles Supplementary to the Articles of
Incorporation dated December 5, 1990 and Articles of
Amendment dated April 19, 1991 are incorporated by
reference to Exhibit 1(b) and (c) to Post-Effective
Amendment No. 35.
(c) Articles of Amendment to the Articles of
Incorporation dated October 28,1992 and Articles
Supplementary to the Articles of Incorporation dated
December 8, 1992 are incorporated by reference to
Exhibit 1(c) and (d) to Post-Effective Amendment No.
41.
(d) Certificate of Correction dated July 15, 1994
(filed herewith).
(e) Articles Supplementary to the Articles of
Incorporation dated July 19, 1994 (filed herewith).
(f) Articles of Amendment to Articles of
Incorporation dated November 3,1994 (filed
herewith).
(g) Articles Supplementary to Articles of
Incorporation dated November 3, 1994 (filed
herewith).
(h) Articles Supplementary to Articles of
Incorporation dated November 3, 1994(filed
herewith).
(i) Articles Supplementary to Articles of
Incorporation dated January 16, 1996 (filed
herewith).
(2) Restated Bylaws (filed herewith).
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization (filed
herewith as Exhibit A to Registrant's
Prospectus/Proxy Statement).
(5) Specimen Stock Certificate for shares of common
stock of the Cash Portfolio, a portfolio of the
Registrant, is incorporated by reference to Exhibit
4(a) to Post-Effective Amendment No. 32.
(6) Management Agreement for the Cash Portfolio is
incorporated by reference to Exhibit 5(b) to Post-
Effective Amendment No. 44.
(7) Underwriting Agreement is incorporated by reference
to Exhibit 6 to Post-Effective Amendment No. 32.
(8) Not applicable.
(9) (a) Custodian Agreement is incorporated by reference
to Exhibit 8 to Post-Effective Amendment No. 32.
(b) Form of Transfer Agency Agreement is
incorporated by reference to Exhibit 8 to Post-
Effective Amendment No. 49.
(10) Plan of Distribution Pursuant to Rule 12b-1 of Smith
Barney Money Funds, Inc. is incorporated by
reference to Exhibit 15(a) to Post-Effective
Amendment No. 44.
(11) Opinion and Consent of Sullivan & Cromwell with
respect to validity of shares of the Registrant
(filed herewith)
(12) Opinion and Consent of Sullivan & Worcester with
respect to certain tax matters (filed herewith)
(13) Not Applicable
(14)(a) Consent of KPMG Peat Marwick L.L.P. (filed
herewith)
(b) Consent of Ernst & Young LLP (filed herewith)
(15) Not Applicable.
(16) Power of Attorney (filed herewith).
(17) (a) Form of Proxy Card (filed herewith)
(b) Registrant's Declaration pursuant to Rule 24f-
2 is incorporated by reference to its initial
Registration Statement.
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 of 1933, 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 Securities Act of 1933, 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 the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, SMITH BARNEY MONEY FUNDS, INC. has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, State of New
York on the 17th day of October, 1997.
SMITH BARNEY MONEY FUNDS, INC.
By: \s\ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Heath B. McLendon, Christina T.
Sydor and Robert A. Vegliante , and each and any one of them, his true
and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done about the premises, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents,
or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
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.
Signature Title Date
\s\ Heath B. McLendon Chairman of the Board, October 17, 1997
Heath B. McLendon Chief Executive Officer
\s\ Lewis E. Daidone Senior Vice President and October 17, 1997
Lewis E. Daidone Treasurer (Chief Financial
and Accounting Officer)
/s/Joseph H. Fleiss Director October 17, 1997
Joseph H. Fleiss
/s/Donald R. Foley Director October 17, 1997
Donald R. Foley
/s/Paul Hardin Director October 17, 1997
Paul Hardin
/s/Roderick C. Rasmussen Director October 17, 1997
Roderick C. Rasmussen
/s/John P. Toolan Director October 17, 1997
John P. Toolan
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
(1) (d)* Certificate of Correction dated July 15, 1994
(1)(e)* Articles Supplementary to the Articles of
Incorporation dated July 19, 1994
(1)(f)* Articles of Amendment to Articles of Incorporation
dated November 3,1994
(1)(g)* Articles Supplementary to Articles of Incorporation
dated November 3, 1994
(1)(h)* Articles Supplementary to Articles of Incorporation
dated November 3, 1994
(1)(i)* Articles Supplementary to Articles of Incorporation
dated January 16, 1996
(2)* Restated By-Laws
(4)* Plan of Reorganization (included as Exhibit A to
Registrant's Prospectus/Proxy Statement contained in
Part A of this Registration Statement).
(11)* Opinion and Consent of Sullivan & Cromwell with
respect to validity of shares of the Registrant.
(12)* Opinion and Consent of Sullivan & Worcester with
respect to certain tax matters.
(14)(a)* Consent of KPMG Peat Marwick LLP
(b)* Consent of Ernst & Young LLP
(16)* Power of Attorney (included as part of Signature
Page to this Registration Statement)
(17) (a)* Form of Proxy Card.
* Filed herewith.
SMITH BARNEY MONEY FUNDS, INC.
CERTIFICATE OF CORRECTION
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The title of the document being corrected is Articles
Supplementary.
SECOND: The name of the party to the document being corrected is
Smith Barney Money Funds, Inc.
THIRD: The date that the document being corrected was filed is
December 10, 1992.
FOURTH: The following provision of the Articles Supplementary is
hereby corrected as follows:
ARTICLE SECOND (a) of the Articles Supplementary which now reads
as follows:
"(a) The Government Portfolio series of the Common Stock shall
have three classes of shares, which shall be designated Class A, Class B
and Class C, each consisting, until further changed, of the lesser of
(x) 500,000,000 shares or (y) the number of shares that could be issued
by issuing all of the shares of Common Stock of that series less the
total number of shares of all classes of Common Stock of that series
then issued and outstanding."
is corrected to read as follows:
"(a) The Government Portfolio series of the Common Stock shall
have three classes of shares, which shall be designated Class A, Class B
and Class C, each consisting, until further changed, of the lesser of
(x) 2,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series less
the total number of shares of all classes of Common Stock of that series
then issued and outstanding."
FIFTH: The execution of the Articles Supplementary was not
defective.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused
these presents to be signed in its name and on its behalf by its
Chairman of the Board and Chief Executive Officer and witnessed by its
Secretary on this July 15, 1994.
Witness: SMITH BARNEY MONEY FUNDS, INC.
/s/ Christina T. Sydor By: /s/ Stephen J.Treadway
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
and Chief Executive Officer
THE UNDERSIGNED, the Chairman of the Board and Chief Executive
Officer of Smith Barney Money Funds, Inc. who executed on behalf of the
Corporation the foregoing Certificate of Correction, hereby acknowledges
in the name and on behalf of the Corporation the foregoing Certificate
of Correction to be the corporate act of said Corporation and hereby
certifies that the matters and facts set forth herein are true in all
material respects under the penalties of perjury.
/s/ Stephen J. Treadway
Stephen J. Treadway
Chairman of the Board
and Chief Executive Officer
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Taxation of Maryland that:
FIRST: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of Common Stock, the Board of
Directors has divided the Cash Portfolio series of the Common Stock of
the Corporation into Classes A, C, Y and Z and has provided for the
issuance of shares of such classes.
SECOND: The terms of the Common Stock as set by the Board of
Directors are as follows:
(a) The Cash Portfolio series of the Common Stock shall have
four classes of shares, which shall be designated Class A,
Class C, Class Y and Class Z, each consisting, until further
changed, of the lesser of (x) 4,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the
shares of Common Stock of that series less the total number
of shares of all other classes of Common Stock of that series
then issued and outstanding.
(b) All Classes of such series of Common Stock of the
Corporation shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation,
and other rights with any other shares of Common Stock of
that series; provided, however, that notwithstanding anything
in the charter of the Corporation to the contrary:
(1) The Class A Shares shall be subject to such front-end
sales loads as may be established by the Board of
Directors from time to time in accordance with the
Investment Company Act of 1940 (the "Investment Company
Act") and applicable rules and regulations of the National
Association of Securities Dealers, Inc. ("NASD").
(2) The Class A and Class C Shares shall be subject to
such contingent deferred sales charges (which may differ
between Classes) as may be established from time to time
by the Board of Directors in accordance with the
Investment Company Act and applicable rules and
regulations of the NASD.
(3) The Class Y and Class Z Shares shall be subject to
such front-end sales loads or such contingent deferred
sales charges or both as may be established by the Board
of Directors from time to time in accordance with the
Investment Company Act and applicable rules and
regulations of the NASD and as disclosed in the then
current Prospectus.
(4) Expenses related solely to a particular Class of such
series (including, without limitation, distribution
expenses under a Rule 12b-1 plan and administrative
expenses under an administration or service agreement,
plan or other arrangement, however designated, which may
differ among the various Classes) shall be borne by that
Class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset
value, dividends, distribution and liquidation rights of
the shares of that Class.
(5) At such time as may be determined by the Board of
Directors in accordance with the Investment Company Act
and applicable rules and regulations of the NASD and
reflected in the current registration statement relating
to such series, shares of a particular Class of such
series may be automatically converted into shares of
another Class; provided, however, that such conversion
shall be subject to the continuing availability of an
opinion of counsel to the effect that such conversion does
not constitute a taxable event under federal income tax
law and shall otherwise be in accordance with the
Investment Company Act. The Board of Directors, in its
sole discretion, may suspend any conversion rights if such
opinion is no longer available.
(6) As to any matter with respect to which a separate
vote of any Class is required by the Investment Company
Act or by the Maryland General Corporation Law (including,
without limitation, approval of any plan, agreement or
other arrangement referred to in subsection (3) above),
such requirement as to a separate vote by that Class shall
apply in lieu of single class voting, and, if permitted by
the Investment Company Act or any rules, regulations, or
order thereunder and the Maryland General Corporation Law,
the Classes of more than one series shall vote together as
a single Class on any such matter which shall have the
same effect on each such Class. As to any matter that
does not affect the interest of a particular Class, only
the holders of shares of the affected Classes shall be
entitled to vote.
THIRD: The Shares aforesaid have been duly classified by the Board
of Directors
pursuant to authority and power contained in the Charter of the
Corporation.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused these
presents to be signed in its name and on its behalf by its Chairman of
the Board and Chief Executive Officer and witnessed by its Secretary on
July 19, 1994.
WITNESS: SMITH BARNEY MONEY FUNDS, INC.
By:
Christina T. Sydor, Secretary Stephen J. Treadway,
Chairman of the Board and
Chief Executive Officer
THE UNDERSIGNED, Chairman of the Board and Chief Executive Officer
of Smith Barney Money Funds, Inc., who executed on behalf of the
Corporation Articles Supplementary of which this Certificate is made a
part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles Supplementary to be the corporate act of said
Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in
all material respects under the penalties of perjury.
Stephen J. Treadway,
Chairman of the Board and
Chief Executive Officer.
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES OF AMENDMENT
CHANGING NAME OF CLASSES
PURSUANT TO MGCL SECTION 2-605
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended to
provide as follows:
(A) The name and designation of the Class C Shares of the
Government Portfolio series of capital stock are hereby changed to Class
Y Shares of such series or portfolio.
(B) The name and designation of the Class B Shares of the
Government Portfolio series of capital stock are hereby changed to Class
C Shares of such series or portfolio.
SECOND: The amendment does not change the outstanding capital
stock of the Corporation or the aggregate par value thereof.
THIRD: The foregoing amendment to the Charter of the Corporation
has been approved by the Board of Directors and is limited to changes
expressly permitted by Section 2-605 of the Maryland General Corporation
Law.
FOURTH: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these presents to
be signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles of Amendment of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles
of Amendment to be the corporate act of the Corporation and hereby
certifies to the best of his knowledge, information and belief the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties
of perjury.
_____________________________
Stephen J. Treadway
Chairman of the Board
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
INCREASING AUTHORIZED STOCK
AS AUTHORIZED BY SECTION 2-105(c) OF
THE MARYLAND GENERAL CORPORATION LAW
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has increased the
authorized capital stock of (1) the Cash Portfolio series of the
Corporation to 25,000,000,000 shares of Common Stock (par value $.01 per
share); (2) the Government Portfolio series of the Corporation to
10,000,000,000 shares of Common Stock (par value $.01 per share); and
(3) the Retirement Portfolio series of the Corporation to 5,000,000,000
shares of Common Stock (par value $.01 per share).
SECOND: (a) As of immediately before the increase the total
number of shares of stock of: (1) all classes which the Cash Portfolio
series of the Corporation has authority to issue is 4,000,000,000 shares
of Common Stock (par value $.01 per share); (2) all classes which the
Government Portfolio series of the Corporation has authority to issue is
2,000,000,000 shares of Common Stock (par value $.01 per share); and (3)
all classes which the Retirement Portfolio series of the Corporation has
authority to issue is 2,000,000,000 shares of Common Stock (par value
$.01 per share).
(b) As increased the total number of shares of stock of: (1) all
classes which the Cash Portfolio series of the Corporation has authority
to issue is 25,000,000,000 shares of Common Stock (par value $.01 per
share); (2) all classes which the Government Portfolio series of the
Corporation has authority to issue is 10,000,000,000 shares of Common
Stock (par value $.01 per share); and (3) all classes which the
Retirement Portfolio series of the Corporation has authority to issue is
5,000,000,000 shares of Common Stock (par value $.01 per share).
(c) The aggregate par value of: (1) all shares of the Cash
Portfolio having a par value is $40,000,000 before the increase and
$250,000,000 as increased; (2) all shares of the Government
Portfolio having a par value is $20,000,000 before the increase and
$100,000,000 as increased; and (3) all shares of the Retirement
Portfolio having a par value is $20,000,000 before the increase and
$50,000,000 as increased.
THIRD: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
IN WITNESS WHEREOF, the Corporation has caused these presents to
be signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief
the matters and facts set forth herein with respect to the authorization
and approval thereof are true in all material respects under the
penalties of perjury.
_____________________________
Stephen J. Treadway
Chairman of the Board
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of capital stock of the
Corporation, the Board of Directors has reclassified (1) a portion
of the authorized but unissued shares of capital stock of each of
the "Cash Portfolio" and the "Government Portfolio" into Class Y
shares of capital stock of such series or portfolios, (2) a portion
of the authorized but unissued shares of capital stock of each of
the "Cash Portfolio" and the "Government Portfolio" into Class Z
shares of capital stock of such series or portfolios and (3) a
portion of the authorized but unissued shares of capital stock of
the "Retirement Portfolio" into Class Y shares of capital stock of
such series or portfolio, in each case having the preferences,
conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions
of redemption of such shares as contained in the charter and as
supplemented by the provisions hereinafter set forth.
SECOND: All Classes of any series or portfolio of Common Stock of
the Corporation shall represent the same interest in the
Corporation and have identical preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption as any other
shares of Common Stock of that series or portfolio; provided,
however, that notwithstanding anything in the charter of the
Corporation to the contrary:
(1) The Class A shares, Class C shares, Class Y shares and
Class Z shares of each series or portfolio shall be subject
to such front-end sales loads or such contingent deferred
sales charges as may be established by the Board of Directors
from time to time in accordance with the Investment Company
Act of 1940 (the "Investment Company Act") and applicable
rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD") and set forth in the
then current prospectus for such shares;
(2) Expenses related solely to a particular Class of a series
or portfolio (including, without limitation, distribution
expenses under a Rule 12b-1 plan and administrative expenses
under an administration or service agreement, plan or other
arrangement, however designated, which may differ among the
various Classes) shall be borne by that Class and shall be
appropriately reflected (in the manner determined by the
Board of Directors) in the net asset value, dividends,
distribution and liquidation of that Class;
(3) At such time as may be determined by the Board of
Directors in accordance with the Investment Company Act and
applicable rules and regulations of the NASD and reflected in
the current registration statement relating to a series or
portfolio, shares of a particular Class of a series or
portfolio may be automatically converted into shares of
another Class; provided, however, that such conversion shall
be subject to the continuing availability of an opinion of
counsel to the effect that such conversion does not
constitute a taxable event under federal income tax law and
shall otherwise be in accordance with the Investment Company
Act. The Board of Directors, in its sole discretion, may
suspend any conversion rights if such opinion is no longer
available; and
(4) As to any matter with respect to which a separate vote of
any Class is required by the Investment Company Act or by the
Maryland General Corporation Law (including without
limitation, approval of any plan, agreement or other
arrangement referred to in subsection (2) of this Article
SECOND), such requirement as to a separate vote by the Class
shall apply in lieu of single class voting, and, if permitted
by the Investment Company Act or any rules, regulations, or
order thereunder and the Maryland General Corporation Law,
the Classes of more than one series or portfolio shall vote
together as a single Class on any such matter which shall
have the same effect on each such Class. As to any matter
that does not affect the interest of a particular Class, only
the holders of shares of the affected Classes shall be
entitled to vote.
THIRD: After giving effect to the reclassification of shares
herein provided for, the Cash Portfolio has been divided into four
classes of shares, designated Class A, Class C, Class Y and Class
Z, and each consisting, until further changed, of the lesser of (x)
25,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series
or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and
outstanding.
FOURTH: After giving effect to the reclassification of shares
herein provided for, the Government Portfolio has been divided into
four classes of shares, designated Class A, Class C, Class Y and
Class Z, and each consisting, until further changed, of the lesser
of (x) 10,000,000,000 shares or (y) the number of shares that could
be issued by issuing all of the shares of Common Stock of that
series or portfolio less the total number of shares of all other
classes of Common Stock of that series or portfolio then issued and
outstanding.
FIFTH: After giving effect to the reclassification of shares
herein provided for, the Retirement Portfolio has been divided into
two classes of shares, designated Class A and Class Y, and each
consisting, until further changed, of the lesser of (x)
5,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series
or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and
outstanding.
SIXTH: These Articles Supplementary do not change the outstanding
capital stock of the Corporation or the aggregate par value
thereof.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chairman of the Board and
witnessed by its Secretary on this 3rd day of November, 1994.
WITNESS: SMITH BARNEY MONEY FUNDS, INC.
By:
Christina T. Sydor Stephen J. Treadway
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc., who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief the
matters and facts set forth herein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
Stephen J. Treadway
Chairman of the Board
U:\sorrenti\sbm\artsupp.N94
SMITH BARNEY MONEY FUNDS, INC.
ARTICLES SUPPLEMENTARY
INCREASING AUTHORIZED STOCK
AS AUTHORIZED BY SECTION 2-105(c) OF
THE MARYLAND GENERAL CORPORATION LAW
Smith Barney Money Funds, Inc., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: In accordance with Section 2-105(c) of the Maryland
General Corporation Law, the Board of Directors has increased the
authorized capital stock of the Corporation to 55,000,000,000 shares of
Common Stock (par value $.01 per share).
THIRD: (a) As of immediately before the increase the total number
of shares of stock of all classes which the Corporation had authority to
issue was 40,000,000,000 shares, of which no shares were Preferred Stock
and 40,000,000,000 shares were Common Stock (par value $.01 per share),
divided into three series designated as the Cash Portfolio series, the
Government Portfolio series and the Retirement Portfolio series. The
Cash Portfolio series consisted of four classes of shares, designated
Class A, Class C, Class Y and Class Z, each such class consisting, until
further changed, of the lesser of (x) 25,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the shares of
Common Stock of that series or portfolio less the total number of shares
of all other classes of Common Stock of that series or portfolio then
issued and outstanding. The Government Portfolio series consisted of
four classes of shares, designated Class A, Class C, Class Y and Class Z
shares, each such class consisting, until further changed, of the lesser
of (x) 10,000,000,000 shares or (y) the number of shares that could be
issued by issuing all of the shares of Common Stock of that series or
portfolio less the total number of shares of all other classes of Common
Stock of that series or portfolio then issued and outstanding. The
Retirement Portfolio series consisted of two classes of shares,
designated Class A and Class Y shares, each such class consisting, until
further changed, of the lesser of (x) 5,000,000,000 shares or (y) the
number of shares that could be issued by issuing all of the shares of
Common Stock of that series or portfolio less the total number of shares
of all other classes of Common Stock of that series or portfolio then
issued and outstanding.
(b) As increased the total number of shares of stock of all
classes which the Corporation has authority to issue is 55,000,000,000
shares, of which no shares are Preferred Stock and 55,000,000,000 shares
are Common Stock (par value $.01 per share), which shall consist, until
further changed of the Cash Portfolio series, the Government Portfolio
series and the Retirement Portfolio series. The Cash Portfolio series
consists of four classes of shares, designated Class A, Class C, Class Y
and Class Z, each such class consisting, until further changed, of the
lesser of (x) 40,000,000,000 shares or (y) the number of shares that
could be issued by issuing all of the shares of Common Stock of that
series or portfolio less the total number of shares of all other classes
of Common Stock of that series or portfolio then issued and outstanding.
The Government Portfolio series consists of four classes of shares,
designated Class A, Class C, Class Y and Class Z shares, each such class
consisting, until further changed, of the lesser of (x) 10,000,000,000
shares or (y) the number of shares that could be issued by issuing all of
the shares of Common Stock of that series or portfolio less the total
number of shares of all other classes of Common Stock of that series or
portfolio then issued and outstanding. The Retirement Portfolio series
consists of two classes of shares, designated Class A and Class Y shares,
each such class consisting, until further changed, of the lesser of (x)
5,000,000,000 shares or (y) the number of shares that could be issued by
issuing all of the shares of Common Stock of that series or portfolio
less the total number of shares of all other classes of Common Stock of
that series or portfolio then issued and outstanding.
(c) The aggregate par value of all shares of the Corporation
having a par value is $400,000,000 before the increase and $550,000,000
as increased.
FOURTH: The terms of the Class A, Class C, Class Y and Class Z
shares of the Cash Portfolio series are set forth in the Charter of the
Corporation. The terms of the Class A, Class C, Class Y and Class Z
shares of the Government Portfolio series are set forth in the Charter of
the Corporation. The terms of the Class A and Class Y shares of the
Retirement Portfolio series are set forth in the Charter of the
Corporation.
IN WITNESS WHEREOF, Smith Barney Money Funds, Inc. has caused
these presents to be signed in its name and on its behalf by its Chairman
of the Board and witnessed by its Secretary on this 17th day of January,
1996.
Attest: SMITH BARNEY MONEY FUNDS, INC.
_________________________ By:
____________________________
Christina T. Sydor Heath B. McLendon
Secretary Chairman of the Board
THE UNDERSIGNED, the Chairman of the Board of Smith Barney Money
Funds, Inc. who executed on behalf of the Corporation the foregoing
Articles Supplementary of which this certificate is made a part, hereby
acknowledges in the name and on behalf of the Corporation the foregoing
Articles Supplementary to be the corporate act of the Corporation and
hereby certifies to the best of his knowledge, information and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
_____________________________
Heath B. McLendon
Chairman of the Board
g:\funds\smfi\misc\artsupp.J96
As amended through 3/3/95
and restated as of 9/10/97
SMITH BARNEY MONEY FUNDS, INC.
(formerly NATIONAL LIQUID RESERVES, INC.)
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of
Baltimore, State of Maryland.
Section 2. The corporation may also have offices at such other
places both within and without the state of Maryland as the board of
directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders shall be held at the
office of the corporation in New York City, State of New York. Meetings
may be held at the principal office in this State or at such other place
within the United States as designated in the by-laws or fixed by the
Board of Directors pursuant to the by-laws.
Section 2. Annual Meeting. The annual meeting of stockholders
of the Corporation for the election of directors and for the transaction
of such other business as may properly be brought before the meeting
shall be held on such day in each year as shall be designated annually
by the Board of Directors; provided however, that an annual meeting of
stockholders shall not be required to be held in any year in which none
of the following is required to be acted on by stockholders pursuant to
the Investment Company Act of 1940: election of directors; approval of
the management agreement; ratification of the selection of independent
public accountants; and approval of a distribution agreement.
Section 3. At any time in the interval between annual meetings
special meetings of the stockholders may be called by the board of
directors, or by the president, a vice-president, the secretary, or an
assistant secretary.
Section 4. Special meetings of stockholders shall be called by
the secretary upon the written request of the holders of shares entitled
to not less than twenty-five percent of all the votes entitled to be
cast at such meeting. Such request shall state the purpose or purposes
of such meeting and the matters proposed to be acted on thereat. The
secretary shall inform such stockholders of the reasonably estimated
cost of preparing and mailing such notice of the meeting, and upon
payment to the corporation of such costs the secretary shall give notice
stating the purpose or purposes of the meeting to all stockholders
entitled to vote at such meeting. No special meeting need be called
upon the request of the holders of shares entitled to cast less than a
majority of all votes entitled to be cast at such meeting, to consider
any matter which is substantially the same as a matter voted upon at any
special meeting of the stockholders held during the preceding twelve
months.
Section 5. Not less than ten nor more than ninety days before
the date of every stockholders' meeting, the secretary shall give to
each stockholder entitled to vote at such meeting, and to each
stockholder not entitled to vote who is entitled by statute to notice,
written or printed notice stating the time and place of the meeting and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called, either by mail or by presenting it to him personally
or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the stockholder at his post-office
address as it appears on the records of the corporation, with postage
thereon prepaid.
Section 6. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. At any meeting of stockholders the presence in person
or by proxy of stockholders entitled to cast a majority of the votes
thereat shall constitute a quorum; but this section shall not affect any
requirement under the statute or under the charter for the vote
necessary for the adoption of any measure.
Section 8. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may
properly come before the meeting, unless more than a majority of the
votes cast is required by the statute or by the charter.
Section 9. Each outstanding share of stock having voting power
shall be entitled to one vote on each matter submitted to vote at a
meeting of stockholders; but no share shall be entitled to vote if any
installment payable thereon is overdue and unpaid. A stockholder may
vote the shares owned of record by him either in person or by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from its
date, unless otherwise provided in the proxy. At all meetings of
stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting.
Section 10. A meeting of stockholders convened on the date for
which it was called may be adjourned as permitted by Maryland Law. If a
quorum shall not be present or represented at such meeting of
stockholders, a majority of the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn
the meeting. At any adjourned session of a meeting which a quorum shall
be present or represented any business may be transacted that might have
been transacted at the meeting as originally noticed.
Section 11. Any action required or permitted to be taken at any
meeting of stockholders may be taken without a meeting, if a consent in
writing, setting forth such action, is signed by all the stockholders
entitled to vote on the subject matter thereof and any other
stockholders entitled to notice of a meeting of stockholders (but not to
vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the
records of the corporation.
ARTICLE III
DIRECTORS
Section 1. The number of directors of the corporation shall be
ten. By vote of a majority of the entire board of directors, the number
of directors fixed by the charter or by these by-laws may be increased
or decreased from time to time not exceeding 15 nor less than 3, but the
tenure of office of a director shall not be affected by any decrease in
the number of directors so made by the board. Until the first annual
meeting of stockholders or until successors are duly elected and
qualify, the board shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders and at each annual
meeting thereafter, the stockholders shall elect directors to hold
office until the next annual meeting or until their successors are
elected and qualify. Directors need not be stockholders in the
corporation.
Section 2. Any vacancy occurring in the board of directors for
any cause other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the board of
directors, although such majority is less than a quorum. Any vacancy
occurring by reason of an increase in the number of directors may be
filled by action of a majority of the entire board of directors. A
director elected by the board of directors to fill a vacancy shall be
elected to hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies.
Section 3. The business and affairs of the corporation shall be
managed by its board of directors, which may exercise all of the powers
of the corporation, except such as are by law or by the charter or by
these by-laws conferred upon or reserved to the stockholders.
Section 4. At any meeting of stockholders, duly called and at
which a quorum is present, the stockholders may, by the affirmative vote
of the holders of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. Meetings of the board of directors, regular or
special, may be held at any place in or out of the State of Maryland as
the board may from time to time determine.
Section 6. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting, and no notice of such
meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or place
of such first meeting of the newly elected board of directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings
of the board of directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 7. Regular meetings of the board of directors may be
held without notice at such time and place as shall from time to time be
determined by the board of directors.
Section 8. Special meetings of the board of directors may be
called at any time by the board of directors or the executive committee,
if one be constituted, by vote at a meeting, or by the president or by a
majority of the directors or a majority of the members of the executive
committee in writing with or without a meeting. Special meetings may be
held at such place or places within or without Maryland as may be
designated from time to time by the board of directors; in the absence
of such designation such meeting shall be held at such places as may be
designated in the call.
Section 9. Notice of the place and time of every special meeting
of the board of directors shall be served on each director or sent to
him by telegraph or by mail, or by leaving the same at his residence or
usual place of business at least two days before the date of the
meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the director at his
post-office address as it appears on the records of the corporation,
with postage thereon prepaid.
Section 10. At all meetings of the board a majority of the
entire board of directors shall constitute a quorum for the transaction
of business and the action of a majority of the directors present at any
meeting at which a quorum is present shall be the action of the board of
directors unless the concurrence of a greater proportion is required for
such action by statute, the articles of incorporation or these by-laws.
If a quorum shall not be present at any meeting of directors, the
directors present thereat may by a majority vote adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Any action required or permitted to be taken at any
meeting of the board of directors or of any committee thereof may be
taken without a meeting, if a written consent to such action is signed
by all members of the board or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the
board or committee.
COMMITTEES OF DIRECTORS
Section 12. The board of directors may appoint from among its
members an executive committee and other committees composed of two or
more directors, and may delegate to such committees, in the intervals
between meetings of the board of directors, any or all of the powers of
the board of directors in the management of the business and affairs of
the corporation, except the power to declare dividends, to issue stock
or to recommend to stockholders any action requiring stockholders'
approval. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the board of directors to act in the
place of such absent members.
Section 13. The committees shall keep minutes of their
proceedings and shall report the same to the board of directors at the
meeting next succeeding, and any action by the committees shall be
subject to revision and alteration by the board of directors, provided
that no rights of third persons shall be affected by any such revision
or alteration.
COMPENSATION OF DIRECTORS
Section 14. Directors may receive compensation for services to
the corporation in their capacities as directors or otherwise in such
manner and in such amounts as may be fixed from
time to time by the board of directors.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the time
when the same shall be mailed. In the case of stockholders' meetings
the notice may be left at the stockholders residence or usual place of
business. Notice to directors may also be given by telegram.
Section 2. Whenever any notice of the time, place or purpose of
any meeting of stockholders, directors or committee is required to be
given under the provisions of the statute or under the provisions of the
charter or these bylaws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of
the meeting, whether before or after the holding thereof, or actual
attendance at the meeting stockholders in person or by proxy or at the
meeting of directors or committee in person, shall be deemed equivalent
to the giving of such notice to such persons.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a
secretary and a treasurer. The president shall be selected from among
the directors. The board of directors may also choose additional vice-
presidents, and one or more assistant secretaries and assistant
treasurers. Two or more offices, except those of president and vice-
president, may be held by the same person but no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the charter or these by-laws to be
executed, acknowledged or verified by two or more officers.
Section 2. The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president from among
the directors, and shall choose one or more vice-presidents, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint such other
officials and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall serve for one
year and until their successors are chosen and qualify. Any officer or
agent may be removed by the board of directors whenever, in its
judgment, the best interests of the corporation will be served thereby,
but such removal shall be without prejudice to the contractual rights,
if any, of the person so removed. If the office of any officer becomes
vacant for any reason, the vacancy shall be filled by the board of
directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of
the corporation; he shall preside at all meetings of the stockholders
and directors, shall have general and active management of the business
of the corporation, and shall see that all orders and resolutions of the
board are carried into effect.
Section 7. He shall execute in the corporate name all authorized
deeds, mortgages, bonds, contracts or other instruments requiring a
seal, under the seal of the corporation, except in cases in which the
signing or execution thereof shall be expressly delegated by the board
of directors to some other officer or agent of the corporation.
VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall perform
such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board
of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of
directors in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors, and shall perform such other
duties as may be prescribed by the board of directors or president,
under whose supervision he shall be. He shall keep in safe custody the
seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it
shall be attested by this signature or by the signature of an assistant
secretary.
Section 10. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to
the credit of the corporation in such depositories as may be designated
by the board of directors.
Section 12. He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for
such disbursements, and shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so
requires an account of all his transactions as treasurer and of the
financial condition of the corporation.
Section 13. If required by the board of directors, he shall give
the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the board for the faithful performance of the
duties of his office and for the restoration to the corporation, in case
of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board
of directors, shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each stockholder shall be entitled to a certificate
or certificates which shall represent and certify the number and kind of
class of shares owned by him in the corporation. Each certificate shall
be signed by the president or a vice-president and countersigned by the
secretary or an assistant secretary or the treasurer or an assistant
treasurer or an assistant treasurer and may be sealed with the corporate
seal.
Section 2. The signatures may be either manual or facsimile
signatures and the seal may be either facsimile or any other form of
seal. In case any officer who as signed any certificate ceases to be an
officer of the corporation before the certificates is issued, the
certificate may nevertheless be issued by corporation with the same
effect as if the officer had not ceased to be such officer as of the
date of its issue. Every certificate representing stock issued by a
corporation which is authorized to issue stock of more than one class
shall set forth upon the face or back of the certificate, a full
statement or summary of the designations, preferences, limitations, and
relative rights of the shares of each class authorized to be issued and,
if the corporation is authorized to issue any preferred or special class
in series, the variations in the relative rights and preferences between
the shares of each such series so far as the same have been fixed and
determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series. A
summary of such information included in a registration statement
permitted to become effective under the Federal Securities Act of 1933,
as now or hereafter amended, shall be acceptable summary for the
purposes of this section. In lieu of such full statement or summary,
there may be set forth upon the face or back of the certificate a
statement that the corporation will furnish to any stockholder upon
request and without charge, a full statement of such information. Every
certificate representing shares which are restricted or limited as to
transferability by the corporation issuing such shares shall either (i)
set forth upon the face or back of the certificate a full statement of
such restriction or limitation or (ii) state that the corporation will
furnish such a statement upon request and without charge to any holder
of such shares. No certificate shall be issued for any share of stock
until such share is full [sic] paid.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been stolen, lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be stolen, lost or destroyed. When
authorizing such issue of a new certificate or certificates, the board
of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such stolen, lost or destroyed
certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and to give the corporation
a bond, with sufficient surety, to the corporation to indemnify it
against any loss or claim which may arise by reason of the issuance of a
new certificate.
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon its books.
RECORD DATE
Section 5. The board of directors may fix, in advance, a date as
the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any
rights, or in order to make a determination of stockholders for any
other proper purpose. Such date, in any case, shall be not more than
sixty days, and in case of a meeting of stockholders not less than ten
days, prior to the date on which the particular action requiring such
determination of stockholders is to be taken.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other
person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Maryland.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the articles of incorporation, if any, may
be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in its
own shares, subject to the provisions of the statute and of the articles
of incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such
sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property the
corporation, or for such other purpose as the directors shall think
conducive to the interests of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
Section 3. The president or a vice-president or the treasurer
shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting and shall be filed within
twenty days filed within twenty days thereafter at the principal office
of the corporation in the State of Maryland.
CHECKS
Section 4. All checks, drafts, and orders for the payment of
money, notes and other evidences of indebtedness, issued in the name of
the corporation shall be signed by such officer or officers as the board
of directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words
"Corporate Seal, Maryland." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
STOCK LEDGER
Section 7. The corporation shall maintain at Provident Financial
Processing Corporation, Wilmington, Delaware an original stock ledger
containing the names and addresses of all stockholders and the number of
shares of each class held by each stockholder. Such stock ledger may be
in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
ARTICLE VIII
AMENDMENTS
Section 1. The board of directors shall have the power, at any
regular meeting or at any special meeting if notice thereof be included
in the notice of such special meeting, to alter or repeal any by-laws of
the corporation and to make new by-laws, except that the board of
directors shall not alter or repeal any by-laws made by the
stockholders.
Section 2. The stockholders shall have the power, at any annual
meeting or at any special meeting if notice thereof be included in the
notice of such special meeting, to alter or repeal any by-laws of the
corporation and to make new by-laws.
14
u:\legal\funds\smfi\orgdocs\By-laws
October 14, 1997
Smith Barney Money Funds, Inc.
388 Greenwich Street,
New York, New York 10013.
Dear Sirs:
In connection with the registration under the Securities Act of
1933 (the "Act") of shares (the "Shares") of Common Stock,
par value $.01 per share, of Smith Barney Money Funds, Inc., a
Maryland Corporation (the "Company"), we, as your counsel, have examined
such corporate records, certificates and other documents, and such questions of
law, as we have considered necessary or appropriate for the purposes of this
opinion.
Upon the basis of such examination, we advise you that, in our
opinion, when not more Shares than are authorized by the
Articles of Incorporation but are unissued are issued and sold in
accordance with the Company's
Registration Statement on Form N-14 under the Act in
connection with the acquisition by the Company on behalf of the Cash
Portfolio of all or substantially all of the assets, and the assumption of
certain liabilities, of the Common Sense Money Market Fund, a series of
Common Sense Trust and in accordance with the Articles of Incorporation
and By-Laws of the Company, the Shares will be validly issued, fully paid
and nonassessable.
The foregoing opinion is limited to the laws of the General
Corporation Law of the State of Maryland,
and we are expressing no opinion as to the effect of the
laws of any other jurisdiction. With respect to all matters of Maryland
law we have, with your approval, relied upon the opinion dated October 14,
1997 of Piper & Marbury, and our opinion is subject to the same
assumptions, qualifications and limitations with respect to such matters as
are contained in such opinion of Piper & Marbury. We believe you and
we are justified in relying on such opinion for such matters.
We have relied as to certain matters on information obtained
from public officials, officers of the Company and other sources believed by us
to be responsible.
We hereby consent to the filing of this opinion as an exhibit to
the Company's Registration Statement. In giving such consent,
we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Sullivan & Cromwell
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201-3018
410-539-2530
FAX: 410-539-0489
WASHINGTON
NEW YORK
PHILADELPHIA
EASTON
October 14, 1997
Smith Barney Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
Re: Smith Barney Money Funds, Inc.
Dear Sirs:
We have acted as Maryland counsel to Smith Barney Money Funds,
Inc., a Maryland corporation (the "Company"), in connection with the
reorganization of the Common Sense Money Market Fund of the Common Sense
Trust (the "Acquired Fund") and the Cash Portfolio series of common
stock of the Company, and in that capacity have examined the charter and
by-laws of the Company, the Agreement and Plan of Reorganization dated
October __, 1997 between the Company and the Acquired Fund (the
"Agreement"), the Company's Registration Statement on Form N-14,
including all amendments or supplements thereto, filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), the proceedings of the Board of Directors of the
Company relating to the issuance of the Class A Shares contemplated by
the Agreement, and such other statutes, certificates, instruments and
documents relating to the Company and matters of law as we have deemed
necessary to the issuance of this opinion. In such examination, we have
assumed the genuineness of all signatures, the conformity of final
documents in all material respects to the versions thereof submitted to
us in draft form, the authenticity of all documents submitted to us as
originals, and the conformity with originals of all documents submitted
to us as copies.
Based upon the foregoing, and limited in all respects to
applicable Maryland law, we are of the opinion and advise you that:
1. The Company has been duly organized and is validly existing
as a corporation under the laws of the State of Maryland.
2. The Agreement, the Reorganization (as defined in the
Agreement), and the execution of the Agreement have been duly authorized
and approved by all requisite action of the Company, and the delivery of
the Agreement has been duly authorized by the Company.
3. The Class A Shares of the Cash Portfolio of common stock of
the Company to be issued by the Company pursuant to the Agreement have
been, duly authorized and, when issued as contemplated in the Agreement
and in an amount not exceeding that authorized by the charter of the
Company and unissued, will be validly issued, fully paid and non
assessable.
Sullivan & Cromwell are authorized to rely on this opinion in
rendering their opinion to be rendered pursuant to the Agreement. We
hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the
Registration Statement and the related Prospectus. In giving this
consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the 1933 Act or the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Piper & Marbury L.L.P.
Piper & Marbury
L.L.P.
HDK
October 14, 1997
Common Sense Trust
2880 Post Oak Boulevard
Houston, Texas 77056
Smith Barney Money Funds, Inc.
388 Greenwich Street
New York, New York 10013
Acquisition of Assets of Common Sense Money Market Fund
by Cash Portfolio of Smith Barney Money Funds, Inc.
Ladies and Gentlemen:
You have asked for our opinion as to certain tax consequences of the
proposed acquisition of assets of Common Sense Money Market Fund, a
series of Common Sense Trust, (the "Acquired Fund"), a Massachusetts
business trust (the "Trust"), by The Cash Portfolio (the "Acquiring
Fund"), a series of Smith Barney Money Fund, Inc., a Maryland corporation
(the "Company"), in exchange for voting shares of the Acquiring Fund
(the "Reorganization").
In rendering our opinion, we have reviewed and relied upon the draft
Prospectus/Proxy Statement dated October 3, 1997 and the Agreement and
Plan of Reorganization (the "Agreement") dated as of October 14, 1997.
We have relied, without independent verification, upon the factual
statements made therein, and assume that there will be no change in
material facts disclosed therein between the date of this letter and the
date of closing of the Reorganization. We further assume that the
Reorganization will be carried out in accordance with the Agreement. We
have also relied upon the following representations, each of which has
been made to us by officers of the Trust on behalf of Acquiring Fund or
of Acquired Fund:
The Reorganization will be consummated substantially as described in the
Agreement.
Acquiring Fund will acquire from Acquired Fund at least 90% of the fair
market value of the net assets and at least 70% of the fair market value
of the gross assets held by Acquired Fund immediately prior to the
Reorganization. For purposes of this representation, assets of Acquired
Fund used to pay reorganization expenses, cash retained to pay
liabilities, and redemptions and distributions (except for regular and
normal distributions) made by Acquired Fund immediately preceding the
transfer which are part of the plan of reorganization, will be
considered as assets held by Acquired Fund immediately prior to the
transfer.
To the best of the knowledge of management of Acquired Fund, there is no
plan or intention on the part of the shareholders of Acquired Fund to
sell, exchange, or otherwise dispose of a number of Acquiring Fund shares
received in the Reorganization that would reduce the former Acquired Fund
shareholders' ownership of Acquiring Fund shares to a number of shares
having a value, as of the date of the Reorganization (the "Closing
Date"), of less than 50 percent of the value of all the formerly
outstanding shares of Acquired Fund as of the same date. For purposes of
this representation, Acquired Fund shares which were redeemed in
connection with the Reorganization will be treated as outstanding
Acquired Fund shares on the Closing Date. There are no dissenters'
rights in the Reorganization, and no cash will be exchanged for Acquired
Fund shares in lieu of fractional shares of Acquiring Fund. Moreover,
shares of Acquired Fund and shares of Acquiring Fund held by Acquired
Fund shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Reorganization will be considered in making this
representation, except for shares of Acquired Fund or Acquiring Fund
redeemed in the ordinary course of business of Acquired Fund or Acquiring
Fund in accordance with the requirements of section 22(e) of the
Investment Company Act of 1940.
Acquired Fund has not redeemed and will not redeem the shares of any of
its shareholders in connection with the Reorganization except to the
extent necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan or intention to redeem or
reacquire any of the Acquiring Fund shares to be received by Acquired
Fund shareholders in connection with the Reorganization, except to the
extent necessary to comply with its legal obligation to redeem its
shares.
The management of Acquiring Fund has no plan or intention to sell or
dispose of any of the assets of Acquired Fund which will be acquired by
Acquiring Fund in the Reorganization, except for dispositions made in the
ordinary course of business, and to the extent necessary to enable
Acquiring Fund to comply with its legal obligation to redeem its shares.
Following the Reorganization, Acquiring Fund will continue the historic
business of Acquired Fund in a substantially unchanged manner as part of
the regulated investment company business of Acquiring Fund, or will use
a significant portion of Acquired Fund's historic business assets in a
business.
There is no intercorporate indebtedness between Acquiring Fund and
Acquired Fund.
Acquiring Fund does not own, directly or indirectly, and has not owned in
the last five years, directly or indirectly, any shares of Acquired Fund.
Acquiring Fund will not acquire any shares of Acquired Fund prior to the
Closing Date.
Acquiring Fund will not make any payment of cash or of property other
than shares to Acquired Fund or to any shareholder of Acquired Fund in
connection with the Reorganization.
Pursuant to the Agreement, the shareholders of Acquired Fund will receive
solely Acquiring Fund voting shares in exchange for their voting shares
of Acquired Fund.
The fair market value of the Acquiring Fund shares to be received by the
Acquired Fund shareholders will be approximately equal to the fair market
value of the Acquired Fund shares surrendered in exchange therefor.
Subsequent to the transfer of Acquired Fund's assets to Acquiring Fund
pursuant to the Agreement, Acquired Fund will distribute the shares of
Acquiring Fund, together with other assets it may have, in final
liquidation as expeditiously as possible.
Acquired Fund is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
Acquired Fund is treated as a corporation for federal income tax purposes
and at all times in its existence has qualified as a regulated investment
company, as defined in Section 851 of the Code.
Acquiring Fund is treated as a corporation for federal income tax
purposes and at all times in its existence has qualified as a regulated
investment company, as defined in Section 851 of the Code.
The sum of the liabilities of Acquired Fund to be assumed by Acquiring
Fund and the expenses of the Reorganization does not exceed either (i)
twenty percent of the fair market value of the assets of Acquired Fund or
(ii) the tax basis of the assets of Acquired Fund.
The foregoing representations are true on the date of this letter and
will be true on the date of closing of the Reorganization.
Based on and subject to the foregoing, and our examination of the legal
authority we have deemed to be relevant, it is our opinion that for
federal income tax purposes:
(1) the transfer of all or substantially all of the
Acquired Fund's assets in exchange for the Acquiring Fund's
shares and the assumption by the Acquiring Fund of certain
scheduled liabilities of the Acquired Fund will constitute a
"reorganization" within the meaning of Section 368 (a)(1)(C)
of the Code, and the Acquiring Fund and the Acquired Fund are
each a "party to a reorganization" within the meaning of
Section 368(b) of the Code;
(2) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the assets of the Acquired Fund in
exchange for the Acquiring Fund's shares, and the assumption
by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund;
(3) no gain or loss will be recognized by the Acquired
Fund upon the transfer of the Acquired Fund's assets to the
Acquiring Fund in exchange for the Acquiring Fund shares and
the assumption by the Acquiring Fund of certain scheduled
liabilities of the Acquired Fund or upon the distribution
(whether actual or constructive) of the Acquiring Fund shares
to the Acquired Fund's shareholders;
(4) no gain or loss will be recognized by shareholders
of the Acquired Fund upon the exchange of their Acquired Fund
shares for the Acquiring Fund shares and the assumption by
the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund;
(5) the aggregate tax basis of the Acquiring Fund
shares received by each Acquired Fund shareholder pursuant to
the Reorganization will be the same as the aggregate tax
basis of the Acquired Fund shares surrendered in exchange
therefor and the holding period of the Acquiring Fund shares
to be received by each Acquired Fund shareholder will include
the period during which the shares of the Acquired Fund which
are surrendered in exchange therefor were held by such
shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization);
(6) the tax basis of the Acquired Fund's assets
acquired by the Acquiring Fund will be the same as the tax
basis of such assets to the Acquired Fund immediately prior
to the Reorganization and 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.
This opinion letter is delivered to you in satisfaction of certain
requirements of the Reorganization. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement on Form N-14 and
to the use of our name and any reference to our firm in the Registration
Statement or in the Prospectus/Proxy Statement constituting a part
thereof. In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations
of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Sullivan & Worcester
Independent Auditors' Consent
To the Shareholders and Board of Directors of
Smith Barney Money Funds, Inc.:
We consent to the use of our report dated February 5, 1997, for the
Smith Barney Money Funds, Inc., incorporated herein by reference and
to the references to our Firm under the heading "Financial Statements
and Experts" in the Prospectus/Proxy Statement.
KPMG Peat Marwick LLP
New York, New York
October 17, 1997
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial
Statements and Experts" and to the incorporation by reference
herein of our report dated December 6, 1996, with respect to
the financial statements and financial highlights of each of the
funds constituting the Common Sense Trust included in Post-Effective
Amendment No. 18 to the Registration Statement (Form N-1A) and
related Prospectus of Common Sense Trust.
/s/ Ernst & Young LLP
Houston, Texas
October 16, 1997
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing
COMMON SENSE TRUST - COMMON SENSE MONEY MARKET FUND
PROXY SOLICITED BY THE BOARD OF
DIRECTORS
The undersigned holder of shares of Common Sense Trust -
Common Sense Money Market Fund (the "Money Market Fund") , hereby appoints
attorneys and proxies for the undersigned with full powers of
substitution and revocation, to represent the undersigned and to vote on
behalf of the undersigned all shares of Money Market Fund that the
undersigned is entitled to vote at the Special Meeting of Shareholders of
the Money Market Fund to be held at the offices of the Money Market Fund,
One Parkview Plaza, Oakbrook Terrace, Illinois 60181 on December 18, 1997
at a.m. Chicago time and any adjournment or adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of Special
Meeting and Prospectus/Proxy Statement dated , 1997 and hereby instructs
said attorneys and proxies to vote said
shares as indicated herein. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before
the Special Meeting. A majority of the proxies present and acting at the
Special Meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the
power and authority of said proxies hereunder. The undersigned hereby
revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Date: _______________________
NOTE: Please sign exactly as your
name appears on this Proxy. If joint
owners, EITHER may sign this Proxy.
When signing as attorney, executor,
administrator, trustee, guardian or
corporate officer, please give your
full title.
Signature(s) (Title(s), if
applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please fold and detach card at perforation before mailing
Please indicate your vote by an "X" in the appropriate box below. This proxy,
if properly executed,
will be voted in the manner directed by the undersigned shareholder.
IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE PROPOSAL.
FOR AGAINST ABSTAIN
1. To approve the Agreement and Plan of Reorganization dated as of
October 14, 1997
providing for:
(i) the acquisition of all or substantially all of the assets of Common
Sense Trust - Common Sense Money Market Fund (the " Money Market Fund")
by Smith Barney Money Funds, Inc. - Cash Portfolio (the "Cash Portfolio") in
exchange for Class A shares of the Cash Portfolio and the assumption
by the Cash Portfolio of all stated
liabilities of the Money Market Fund; (ii) the distribution of such
shares of the Cash Portfolio to shareholders of the Money Market Fund in
liquidation of the Money Market Fund; and (iii) the subsequent termination
of the Money Market Fund.
