AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON July 17,
2000.
SECURITIES ACT FILE NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
SMITH BARNEY MANAGED MUNICIPALS FUND INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
388 GREENWICH STREET, NEW YORK, NY 10013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(800) 451-2010
(REGISTRANT'S AREA CODE AND TELEPHONE NUMBER)
HEATH B. MCLENDON
SSB CITI FUND MANAGEMENT LLC
388 GREENWICH STREET
NEW YORK, NY 10013
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
BURTON M. LEIBERT, ESQ.
CHRISTINA T. SYDOR, ESQ.
WILLKIE FARR & GALLAGHER
SSB CITI FUND MANAGEMENT LLC
787 SEVENTH AVENUE
388 GREENWICH STREET
NEW YORK, NY 10019-6099
NEW YORK, NY 10013
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Registrant
proposes that the Registration Statement become effective on
August 16, 2000 pursuant to Rule 488 under the Securities Act of
1933, as amended.
TITLE OF SECURITIES BEING REGISTERED:
Shares of Common Stock ($.001 par value) of the Registrant
___________________
The Registrant has registered an indefinite amount of
securities under the Securities Act of 1933 pursuant to Section
24(f) under the Investment Company Act of 1940; accordingly, no
fee is payable herewith because of reliance upon Section 24(f).
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
CONCERT INVESTMENT SERIES(r)
Municipal Bond Fund
388 Greenwich Street
New York, New York 10013
_________, 2000
Dear Shareholders:
You are being asked to vote on an Agreement and Plan of
Reorganization whereby all of the assets of
Municipal Bond Fund (the "Fund"), a series of Concert Investment
Series(r) ("Investment Series"), would be transferred in a tax-free
reorganization to Smith Barney Managed Municipals Fund Inc. (the
"Acquiring Fund"), in exchange for shares of the corresponding
class of common stock of the Acquiring Fund. If the Agreement and
Plan of Reorganization is approved and consummated, you would no
longer be a holder of shares of beneficial interests in the Fund,
but would become a shareholder of the corresponding class of
common stock of the Acquiring Fund, which has similar investment
objectives and policies to your Fund, except as described in the
Proxy Statement/Prospectus.
AFTER CAREFUL REVIEW, THE MEMBERS OF YOUR FUND'S BOARD HAVE
APPROVED THE PROPOSED REORGANIZATION. THE BOARD MEMBERS OF YOUR
FUND BELIEVE THAT THE PROPOSAL SET FORTH IN THE NOTICE OF MEETING
FOR YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR THE PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN
AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN
ENVELOPE. For more information, please call 1-800-451-2010. [If
you prefer, you can fax the proxy card to _____________, Attn.:
________, at (800) ________ or vote by telephone by calling (800)
_______ using the xx-digit control number located on your proxy
card.] The Fund may also solicit proxies from shareholders by
letter, telephone and/or telegraph. [Voting by fax or telephone
will reduce the time and costs associated with the proxy
solicitation.] When the Fund records proxies by telephone, it
will use procedures designed to (i) authenticate shareholders'
identities, (ii) allow shareholders to authorize the voting of
their shares in accordance with their instructions and
(iii) confirm that their instructions have been properly recorded.
Whichever voting method you choose, please read the full
text of the accompanying proxy statement/prospectus before you
vote.
Respectfully,
/s/ Heath B. McLendon
Heath B. McLendon
Chairman of the Board, President and Chief Executive Officer
Concert Investment Series(r)
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR
VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
CONCERT INVESTMENT SERIES(r)
Municipal Bond Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders
(the "Special Meeting") of Concert Investment Series(r) ("Investment
Series"), on behalf of its series, Municipal Bond Fund (the
"Fund"), will be held at the offices of SSB Citi Fund Management
LLC, 7 World Trade Center, New York, New York 10048, on September
25, 2000, at 9:00 a.m., Eastern time, for the following purposes:
PROPOSAL 1: To approve an Agreement and Plan of
Reorganization for the Fund;
PROPOSAL 2: To transact such other business as may
properly come before the meeting or any
adjournment(s) thereof.
The appointed proxies will vote in their discretion on any
other business as may properly come before the Special Meeting or
any adjournments thereof.
Holders of record of shares of beneficial interests in the
Fund at the close of business on August 11, 2000 are entitled to
vote at the Special Meeting and at any adjournments thereof.
If the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Special
Meeting, the persons named as proxies may propose one or more
adjournments of the Special Meeting in accordance with applicable
law to permit further solicitation of proxies. Any such
adjournment as to a matter will require the affirmative vote of
the holders of a majority of the Fund's shares present in person
or by proxy at the Special Meeting. The persons named as proxies
will vote in favor of such adjournment those proxies which they
are entitled to vote in favor of the Proposal and will vote
against any such adjournment those proxies to be voted against the
Proposal. For more information, please call 1-800-451-2010.
By Order of the Board of
Trustees,
/s/ Christina T. Sydor
Christina T. Sydor
Secretary
___________, 2000
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY
CARD(S) AND RETURN THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE
WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR YOUR CONVENIENCE.
YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE SPECIAL MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND
WISH TO VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU WILL BE ABLE
TO DO SO.
TABLE OF CONTENTS
GENERAL 1
PROPOSAL: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION 4
SYNOPSIS 4
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND 6
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND 8
INVESTMENT MANAGEMENT FEES AND EXPENSES 9
ANNUAL FUND OPERATING EXPENSES 10
DISTRIBUTION OF SHARES AND OTHER SERVICES 12
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION 13
DIVIDENDS AND OTHER DISTRIBUTIONS 13
TAX CONSEQUENCES 13
PRINCIPAL INVESTMENTS AND RISK FACTORS 13
THE PROPOSED TRANSACTION 18
REASONS FOR THE PROPOSED TRANSACTION 19
DESCRIPTION OF THE SECURITIES TO BE ISSUED 21
FEDERAL INCOME TAX CONSEQUENCES 23
LIQUIDATION AND TERMINATION OF SERIES 24
PORTFOLIO SECURITIES 24
PORTFOLIO TURNOVER 24
CAPITALIZATION AND PERFORMANCE 25
ADDITIONAL INFORMATION ABOUT THE FUNDS 26
ADDITIONAL INFORMATION 27
ADDITIONAL MATERIALS
The following additional materials, which have been
incorporated by reference into the Statement of Additional
Information dated ________, 2000 relating to this Prospectus/Proxy
Statement and the Reorganization, will be sent to all shareholders
of the Fund requesting a copy of such Statement of Additional
Information.
1. The Statement of Additional Information for the
Acquiring Fund, dated June 28, 2000.
2. The Statement of Additional Information for the Fund,
dated February 28, 2000.
3. Annual Report of the Fund for the year ended October
31, 1999 and the Semi-Annual Report of the Fund for
the six months ended April 30, 2000.
Q&A-
Concert Municipal Fund into Smith Barney Managed Municipals Fund
July 13, 2000
The enclosed materials include a combined Prospectus/Proxy
Statement containing information you need to make a more informed
decision. However, we thought it would also be helpful for you to
have, at the start, answers to some of the important questions you
might have about the proposed reorganization.
We hope you find these explanations useful as you review your
materials before voting. For more detailed information about the
proposed reorganization, please refer to the enclosed combined
Prospectus/Proxy Statement.
What will happen to my shares if the proposed reorganization is
approved?
You will become a shareholder of the Smith Barney Managed
Municipals Fund on or about October 6, 2000 ("Closing Date") and
will no longer be a shareholder of the Concert Municipal Bond
Fund, which will be terminated pursuant to the proposed
reorganization. You will receive shares of the Smith Barney
Managed Municipals Fund with a total net asset value equal to the
total net asset value of your investment in the Concert Municipal
Bond Fund at the time of the transaction.
What is the key reason for this fund reorganization?
The proposed reorganization will create one single larger sized
fund and provide shareholders of Concert Municipal Fund with a
fund that has lower annual expenses. The proposed reorganization
is part of a broader initiative by the Funds' manager, SSB Citi
Fund Management LLC, to restructure more efficiently its mutual
fund product offerings.
As a shareholder of the Smith Barney Managed Municipals Fund, you
will be able to exchange into the same class of certain Smith
Barney mutual funds offered by the funds' distributor, provided
that the Smith Barney Fund offers the relevant class of shares.
Do the funds have similar investment objectives?
Yes. Both funds have similar investment objectives and policies
and pursue their objectives in a substantially similar manner. The
Concert Municipal Bond Fund seeks a high level of current interest
income exempt from federal income tax as is consistent with the
preservation of capital. The Smith Barney Managed Municipals Fund
seeks to maximize current interest income which is excluded from
gross income for regular federal income tax purposes to the extent
consistent with prudent investment management and the preservation
of capital. Joe Deane, the portfolio manager of your fund, has
also been the manager of the Smith Barney Managed Municipals Fund
since November 1988. However, the investment practices and
limitations of each Fund (and related risk) are not identical. For
additional information regarding the differences between the two
funds, please refer to the enclosed proxy statement.
Do both funds have the same dividend and other distribution
payment schedules?
Yes. Both Funds declare dividends from net investment income
monthly and pay distributions of net realized capital gains, if
any, annually.
What are the tax consequences of this proposed reorganization?
Subject to shareholder approval, the proposed fund reorganization
will not be a taxable event. Shareholders will not realize any
capital gain or loss as a direct result of the proposed
reorganization.
However, if the proposed reorganization is approved by the
Concert Municipal Bond Fund's shareholders, then as soon as
practicable before the Closing Date, the Concert Municipal Bond
Fund will pay or have paid its shareholders a cash distribution of
substantially all undistributed 2000 net investment income and
undistributed realized net capital gains. We ask that you consult
your tax advisor or other tax professional for assistance.
Will I enjoy the same privileges as a shareholder of the Smith
Barney Managed Municipals Fund that I currently have as a
shareholder of the Concert Municipal Bond Fund?
Yes. You will continue to enjoy substantially the same shareholder
privileges such as systematic investment, automatic cash
withdrawal and dividend reinvestment as well as access to
professional service representatives.
How does the Board of Trustees recommend I vote?
The Trustees recommend that you vote FOR the reorganization. The
Trustees believe the reorganization is in the best interest of the
Concert Municipal Bond Fund and its shareholders.
Why is my vote important?
Shareholders have a responsibility to vote on important matters
affecting their fund investments. No matter how many shares you
own, your vote --- and its timeliness-are also important. Please
complete and sign the enclosed proxy card today!
Please note if you sign and date your proxy card, but do not
provide voting instructions, your shares will be voted FOR the
proposal. By voting promptly, you will help us to avoid the
expense of having to re-solicit your proxy and help to keep fund
expenses down. Thank you in advance for your vote.
2
1
SUBJECT TO COMPLETION, DATED JULY 17, 2000
PROXY STATEMENT/PROSPECTUS
________, 2000
RELATING TO THE ACQUISITION BY
SMITH BARNEY MANAGED MUNICIPALS FUND INC.
(THE "ACQUIRING FUND")
388 Greenwich Street
New York, New York 10013
(800) 451-2010
OF THE ASSETS OF
MUNICIPAL BOND FUND (THE "FUND"),
A SERIES OF CONCERT INVESTMENT SERIES(r) ("INVESTMENT SERIES").
GENERAL
This Proxy Statement/Prospectus is furnished to holders of
shares of beneficial interests in the Fund in connection with a
proposed reorganization in which all of the
assets of the Fund would be acquired by the Acquiring Fund, in
exchange solely for voting shares of the corresponding class of
common stock of the Acquiring Fund and the assumption by the
Acquiring Fund of all of the stated liabilities of the Fund
(collectively, the "Reorganization"). Shares of the Acquiring
Fund thereby received would then be distributed to the
shareholders of the Fund in complete liquidation of the Fund, and
the Fund would be terminated as a series of Investment Series. As
a result of the Reorganization, each shareholder of the Fund would
receive that number of full and fractional shares of the
corresponding class of common stock of the Acquiring Fund having
an aggregate net asset value equal to the aggregate net asset
value of such shareholder's shares of beneficial interests in the
Fund held as of the close of business on the Closing Date (as
defined herein) of the Reorganization. Shareholders of the Fund
are being asked to vote on an Agreement and Plan of Reorganization
pursuant to which such transactions, as described more fully
below, would be consummated.
This Proxy Statement/Prospectus, which should be retained
for future reference, sets forth concisely the information about
the Acquiring Fund that a prospective investor should know before
investing. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of the Acquiring
Fund, see the prospectus for the Acquiring Fund, dated June 28,
2000, as supplemented from time to time, which is included
herewith and incorporated herein by reference. This Proxy
Statement/Prospectus is also accompanied by the Acquiring Fund's
annual report to shareholders for the year ended February 29,
2000, which is included herewith and incorporated herein by
reference. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of the Fund, see the
prospectus for the Fund, dated February 28, 2000, the annual
report to shareholders for the year ended October 31, 1999 and the
semi-annual report to shareholders for the six months ended April
30, 2000, each of which is incorporated herein by reference and a
copy of which may be obtained without charge by writing to Smith
Barney Mutual Funds, 388 Greenwich Street, New York, New York
10013, or by calling toll-free (800) 451-2010. A Statement of
Additional Information of the Fund and the Acquiring Fund dated
________, 2000 containing additional information about the
Reorganization and the parties thereto has been filed with the
Securities and Exchange Commission (the "SEC" or the "Commission")
and is incorporated by reference into this Proxy
Statement/Prospectus. A copy of the Statement of Additional
Information is available upon request and without charge by
writing to or calling Smith Barney Mutual Funds at the address or
phone number listed above. Shareholder inquiries regarding the
Fund or the Acquiring Fund may also be made by calling the phone
number listed above. The information contained herein concerning
the Fund has been provided by, and is included herein in reliance
upon, Investment Series on behalf of the Fund. The information
contained herein concerning the Acquiring Fund has been provided
by, and is included herein in reliance upon, the Acquiring Fund.
The Acquiring Fund is a diversified open-end management
investment company organized as a Maryland corporation. The Fund
is a diversified series of Investment Series, an open-end
management investment company organized as a Massachusetts
business trust. The principal investment objective of the
Acquiring Fund is to maximize current interest income which is
excluded from gross income for regular federal income tax purposes
to the extent consistent with prudent investment management and
the preservation of capital. The Acquiring Fund seeks to achieve
its objective by investing primarily in intermediate-term and
long-term municipal securities that SSB Citi Fund Management LLC,
the Acquiring Fund's investment adviser ("SSB Citi"), believes are
undervalued in the marketplace as determined by fundamental credit
analysis. The investment objective of the Fund is to seek as high
a level of current interest income exempt from federal income tax
as is consistent with the preservation of capital. The Fund
invests in a diversified portfolio consisting principally of tax-
exempt municipal securities that SSB Citi believes are undervalued
in the marketplace as determined by fundamental credit analysis.
_______________________
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES NOR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY
INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE FUNDS.
_______________________
In the description of the Proposal below, the word "fund"
is sometimes used to mean investment companies or series thereof
in general, and not the Fund whose proxy statement this is. The
Fund and the Acquiring Fund may each be referred to as a "Fund"
and may also be referred to collectively as the "Funds." In
addition, in this Proxy Statement/ Prospectus, for simplicity,
actions are described as being taken by the Fund, although all
actions are actually taken by Investment Series on behalf of the
Fund.
This Proxy Statement/Prospectus, the Notice of Special
Meeting and the proxy card(s) are first being mailed to
shareholders on or about August 21, 2000 or as soon as practicable
thereafter. Any holder of shares of beneficial interests in the
Fund giving a proxy has the power to revoke it by mail (addressed
to the Secretary at the principal executive office of Investment
Series at the address shown at the beginning of this Proxy
Statement/Prospectus) or in person at the Special Meeting by
executing a superseding proxy or by submitting a notice of
revocation to the Fund. All properly executed proxies received in
time for the Special Meeting will be voted as specified in the
proxy or, if no specification is made, in favor of the Proposals
referred to in the Proxy Statement. In cases where certain
shareholders have purchased their shares through service agents,
these service agents are the shareholders of record of the Fund.
At the special meeting, a service agent may, as permitted by
applicable laws and regulations, vote any shares of
which it is the holder of record and for which it does not receive
voting instructions proportionately in accordance with the
instructions it receives for all other share of which that service
agent is the holder of record. The presence at any shareholders'
meeting, in person or by
proxy, of the holders of shares of beneficial interests in the
Fund holding 20% of the votes of the Fund entitled to be
cast shall be necessary and sufficient to constitute a quorum for
the transaction of business. If the necessary quorum to transact
business or the vote required to approve any Proposal is not
obtained at the Special Meeting, the persons named as proxies may
propose one or more adjournments of the Special Meeting in
accordance with applicable law to permit further solicitation of
proxies with respect to the Proposal that did not receive the vote
necessary for its passage or to obtain a quorum. Any such
adjournment as to a matter will require the affirmative vote of
the holders of a majority of the Fund's shares present in person
or by proxy at the Special Meeting. The persons named as proxies
will vote in favor of such adjournment those proxies which they
are entitled to vote in favor of that Proposal and will vote
against any such adjournment those proxies to be voted against
that Proposal. For purposes of determining the presence of a
quorum for transacting business at the Special Meeting,
abstentions and broker "non-votes" will be treated as shares that
are present but which have not been voted. Broker non-votes are
proxies received by the Fund from brokers or nominees when the
broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter. Accordingly,
shareholders are urged to forward their voting instructions
promptly.
The Proposal requires the affirmative vote of the holders of
not less than a majority of the Fund's shares of beneficial
interests outstanding and entitled to vote thereon. Abstentions
and broker non-votes will have the effect of a "no" vote on the
Proposal.
Holders of record of shares of beneficial interests in the
Fund at the close of business on August 11, 2000 (the "Record
Date"), as to any matter on which they are entitled to vote, will
be entitled to one vote per share on all business of the Special
Meeting. As of August 11, 2000, there were [INSERT] shares of the
Fund outstanding.
To the best of the Acquiring Fund's knowledge, as of August
11, 2000, except as set forth on ANNEX A, no person owned
beneficially more than 5% of any class of the Acquiring Fund's
outstanding shares. To the best knowledge of Investment Series,
as of August 11, 2000, no person owned beneficially more than 5% of
any class of the Fund's outstanding shares.
As of August 11, 2000, less than 1% of the outstanding shares
of the Fund and the Acquiring Fund were owned directly or
beneficially by the trustees or directors of Investment Series and
the Acquiring Fund, respectively.
Each of Investment Series and the Acquiring Fund provides
periodic reports to all of its shareholders which highlight
relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most
recent annual report for each of the Fund and the Acquiring Fund
and a copy of any more recent semi-annual report, without charge,
by calling 800-451-2010 or writing to the Fund or the Acquiring
Fund at the address shown at the beginning of this Proxy
Statement/Prospectus.
PROPOSAL: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION
The governing board of each of Investment Series and the
Acquiring Fund, including all of the Trustees or Directors, as
applicable, who are not "interested persons" of such Funds (as
defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) (the "Non-Interested Board Members"), approved on
July 17, 2000 and July 12, 2000, respectively, an Agreement and
Plan of Reorganization (the "Plan"). Subject to its approval by
the holders of shares of beneficial interests in the Fund, the
Plan provides for (a) the transfer of all of
the assets and all of the stated liabilities of the Fund to the
Acquiring
Fund in exchange for shares of the corresponding class of common
stock of the Acquiring Fund and assumption of the Fund's
liabilities; (b) the distribution of such Acquiring Fund shares to
the holders of shares of beneficial interests in the Fund in
complete liquidation of the Fund and the cancellation of the
Fund's outstanding shares of beneficial interests; and (c) the
termination of the Fund as a series of Investment Series
(collectively, the "Reorganization"). As a result of the
Reorganization, each holder of shares of beneficial interests in
the Fund will become a shareholder of the corresponding class of
common stock of the Acquiring Fund and will hold, immediately
after the closing of the Reorganization (the "Closing"), that
number of full and fractional shares of the corresponding class of
common stock of the Acquiring Fund having an aggregate net asset
value equal to the aggregate net asset value of such shareholder's
shares of beneficial interests held in the Fund as of the close of
business on the Closing Date (as defined below). The Closing is
expected to occur on October 6, 2000, or on such later date as the
parties may agree in writing (the "Closing Date").
SYNOPSIS
The following is a summary of certain information contained
in this Proxy Statement/Prospectus. This summary is qualified by
reference to the more complete information contained elsewhere in
this Proxy Statement/Prospectus, the Prospectus of the Acquiring
Fund, the Prospectus of the Fund and the Plan, the form of which
is attached to this Proxy Statement/Prospectus as Exhibit A.
Holders of shares of beneficial interests in the Fund should read
this entire Proxy Statement/Prospectus carefully.
Introduction. Like your Fund, the Acquiring Fund is managed
by SSB Citi, an affiliate of Salomon Smith Barney Inc. ("Salomon
Smith Barney"), and has a substantially similar investment
objective. Joseph P. Deane, the portfolio manager of your Fund,
is also the portfolio manager of the Acquiring Fund. Moreover,
the distributor and custodian of each of the Fund and the
Acquiring Fund are also identical. Whereas each Fund has retained
Citi Fiduciary Trust Company as transfer agent and PFPC Global
Financial Services as a sub-transfer agent, the Fund has
additionally retained PFS Shareholder Services as a sub-transfer
agent. Whereas the Fund has retained Ernst & Young LLP as its
independent auditors, the Acquiring Fund has retained KPMG LLP as
its independent auditors. If the Plan is consummated, holders of
shares of beneficial interests in the Fund will become
shareholders of the corresponding class of common stock of the
Acquiring Fund. The Reorganization has been proposed as part of a
broader initiative by SSB Citi to eliminate duplication and
possible confusion in its mutual fund product offerings.
Specifically, this Reorganization has been proposed as the Funds
have substantially similar investment objectives and policies and
the Acquiring Fund is subject to lower management fees
and a total annual expense ratio.
Holders of shares of beneficial interests in the Fund will
continue to enjoy many of the same shareholder privileges, such as
systematic investment, automatic redemption and automatic dividend
reinvestment, and access to professional service representatives
as shareholders of the Acquiring Fund. Further, shareholders of
the Acquiring Fund may exchange into the same class of any Smith
Barney Fund (provided that the Smith Barney Fund offers the
relevant class of shares), whereas holders of shares of beneficial
interests in the Fund may only exchange into shares of certain
Smith Barney Funds, Concert brand funds or, in certain cases, of
Citi FundsSM Cash
Reserves. Moreover,
although many of the services provided by PFS Shareholder Services
to the Fund are available to shareholders of the Acquiring Fund,
PFS Shareholder Services does not provide services to the
Acquiring Fund. Each of the Fund and the Acquiring Fund declares
dividends from net investment income monthly and pays
distributions of net realized capital gains, if any, annually.
See "Dividends and Other Distributions." It is a condition of the
Reorganization that each Fund receive an opinion of independent
legal counsel that the Reorganization will be tax-free. This
means that shareholders will not realize any capital gain or loss
as a direct result of the Reorganization.
Proposed transaction. The aggregate net asset value of each
class of voting shares of the Acquiring Fund (the "Shares") issued
in exchange for the assets and liabilities of the corresponding
class of shares of beneficial interests in the Fund will be equal
to the net asset value of that class of the Fund as of the Closing
Date. Immediately following the transfer of Shares to the Fund,
the Shares received by the Fund will be distributed pro rata to
the record holders of shares of beneficial interests of the Fund
on the Closing Date and the shares of beneficial interests of the
Fund will be cancelled.
For the reasons described below under "Reasons for the
Proposed Transaction," the Board of Investment Series, including
the Non-Interested Board Members, has concluded the following:
- the Reorganization is in the best interests of the Fund
and its holders of shares of beneficial interests; and
- the interests of the existing holders of shares of
beneficial interests of the Fund will not be diluted as a
result of the Reorganization.
Accordingly, the Board recommends approval of the Plan. If
the Plan is not approved, the Fund will continue in existence
unless other action is taken by the Board; such other action may
include resubmitting the Plan for shareholder approval and
termination and liquidation of the Fund.
Comparison of investment objectives and policies. The
principal investment objective of the Acquiring Fund is to
maximize current interest income which is excluded from gross
income for regular federal income tax purposes to the extent
consistent with prudent investment management and the preservation
of capital. The Acquiring Fund seeks to achieve its objective by
investing primarily in intermediate-term and long-term municipal
securities that SSB Citi believes are undervalued in the market
place as determined by fundamental credit analysis. The Acquiring
Fund may also invest up to 20% of its assets in below investment
grade bonds or unrated securities of equivalent quality.
The investment objective of the Fund is to seek a high level
of current interest income exempt from federal income tax as is
consistent with the preservation of capital. The Fund invests in
a diversified portfolio consisting principally of tax-exempt
municipal securities that SSB Citi believes are undervalued in the
marketplace as determined by fundamental credit analysis. The
Fund may also invest up to 25% of its assets in below investment
grade bonds or unrated securities of equivalent quality.
Each Fund may purchase short-term investments, money market
instruments and repurchase agreements; lend portfolio securities;
and enter into derivative transactions. Whereas the Fund may not
lend portfolio securities in excess of 10% of its assets, the
Acquiring Fund may lend its portfolio securities to the fullest
extent permitted by applicable law. Whereas the Fund may
generally enter into futures contracts and options on futures
contracts for both hedging and speculative purposes, the Acquiring
Fund may only do so with respect to interest rate futures
contracts. Additionally, whereas the Fund may invest up to 10% of
its net assets in illiquid securities, the Acquiring Fund may
invest up to 15% of its net assets in such securities.
Each Fund has either identical or substantially similar
fundamental investment restrictions with respect to its
diversified status; industry concentration; purchasing or selling
real estate, real estate mortgages, commodities or commodity
contracts; making loans; underwriting securities; purchasing
securities on margin; and unseasoned issuers. Whereas the Fund as
a fundamental policy may only borrow up to 10% of its total
assets, the Acquiring Fund as a fundamental policy may borrow up
to 33-1/3% of its total assets. Investment restrictions of each
Fund which are fundamental policies may not be changed without the
approval of the applicable Fund's shareholders. The Fund's
investment restrictions are substantially similar to those of the
Acquiring Fund, except as described in this Proxy
Statement/Prospectus. Investors should refer to the respective
prospectuses and statements of additional information of the Fund
and the Acquiring Fund for a fuller description of each Fund's
investment policies and restrictions.
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND
The Acquiring Fund seeks to maximize current interest income
which is excluded from gross income for regular federal income tax
purposes to the extent consistent with prudent investment
management and the preservation of capital.
Principal investment strategies
Key investments. The Acquiring Fund invests at least 80% of
its assets in municipal securities. Municipal securities include
securities issued by any of the 50 states and certain other
municipal issuers, political subdivisions, agencies and public
authorities that pay interest which is exempt from federal income
tax. The fund focuses primarily on intermediate-term and long-
term municipal securities which have remaining maturities at the
time of purchase of from three to more than thirty years. The
fund can invest up to 20% of its assets in below investment grade
bonds or in unrated securities of equivalent quality (commonly
known as "junk bonds"). Investment grade bonds are those rated in
any of the four highest long-term rating categories, or if
unrated, of comparable quality.
Selection process. SSB Citi selects securities primarily by
identifying undervalued sectors and individual securities, while
also selecting securities it believes will benefit from changes in
market conditions. In selecting individual securities, SSB Citi:
? Uses fundamental credit analysis to estimate the
relative value and attractiveness of various securities
and sectors and to exploit opportunities in the
municipal bond market
? Measures the potential impact of supply/demand
imbalances for obligations of different states, the
yields available for securities with different
maturities and a security's maturity in light of the
outlook for interest rates to identify individual
securities that balance potential return and risk
? May trade between general obligation and revenue bonds
and among various revenue bond sectors, such as housing,
hospital and industrial development, based on their
apparent relative values
? Identifies individual securities with the most potential
for added value, such as those involving unusual
situations, new issues, the potential for credit
upgrades, unique structural characteristics or
innovative features
Principal risks of investing in the Acquiring Fund
Investors could lose money on their investment in the
Acquiring Fund, or the fund may not perform as well as other
investments, if:
? Interest rates rise, causing the value of the fund's
portfolio to decline
? The issuer of a security owned by the fund defaults on
its obligation to pay principal and/or interest or the
security's credit rating is downgraded
? Municipal securities fall out of favor with investors
? Unfavorable legislation affects the tax-exempt status of
municipal bonds
? The manager's judgment about the attractiveness, value
or income potential of a particular security proves to
be incorrect
It is possible that some of the Acquiring Fund's income
distributions may be, and distributions of the fund's gains
generally will be, subject to federal taxation. The fund may
realize taxable gains on the sale of its securities or on
transactions in derivatives. Some of the fund's income may be
subject to the federal alternative minimum tax. In addition,
distributions of the fund's income and gains generally will be
subject to state income taxation.
Who may want to invest in the Acquiring Fund
The Acquiring Fund may be an appropriate investment if you:
? Are a taxpayer in a high federal tax bracket seeking
income exempt from federal taxation
? Currently have exposure to other asset classes and are
seeking to broaden your investment portfolio
? Are willing to accept the risks of municipal securities
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund's investment objective is to seek as high a level
of current interest income exempt from federal income tax as is
consistent with the preservation of capital. As further set forth
herein, the Fund and the Acquiring Fund have substantially similar
investment objectives and policies and pursue their respective
investment objectives using investment practices (and subject to
investment limitations and risks) which are also substantially
similar.
Key investments
The Fund invests in a diversified portfolio consisting
principally of tax-exempt municipal bonds, which are obligations
issued by or on behalf of states, territories or possessions of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities. Tax-exempt means
that the bonds pay interest that is excluded from gross income for
federal income tax purposes.
The Fund invests principally in municipal bonds rated at the
time of purchase within the three highest grades by nationally
recognized bond rating services, or, if unrated, of equivalent
quality. The fund may also invest up to 25% in lower rated
municipal bonds that have speculative characteristics.
How the manager selects the Fund's investments
SSB Citi selects securities primarily by identifying
undervalued sectors and individual securities, while also
selecting securities that it believes will benefit from changes in
relative interest rates. In selecting individual securities, SSB
Citi employs a selection process substantially similar to that
employed by the Acquiring Fund (described above).
Principal risks of investing in the Fund
The principal risks of investing in the Fund are virtually
identical to the principal risks set forth above with respect to
investing in the Acquiring Fund.
Who may want to invest in the Fund
The factors which may make the Fund an appropriate
investment for you are the same as the factors set forth above
with respect to the Acquiring Fund.
INVESTMENT MANAGEMENT FEES AND EXPENSES
Investment Series, on behalf of the Fund, and the Acquiring
Fund each retain SSB Citi pursuant to separate contracts, to
manage the daily investment and business affairs of the Fund and
the Acquiring Fund, respectively, subject to the policies
established by their respective governing boards. The expenses of
each Fund are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment services.
The Acquiring Fund. SSB Citi, located at 388 Greenwich
Street, New York, New York 10013, serves as the Acquiring Fund's
investment adviser and administrator. SSB Citi selects the
Acquiring Fund's investments and oversees its operations. SSB
Citi and Salomon Smith Barney are subsidiaries of Citigroup Inc.
Citigroup businesses produce a broad range of financial services-
asset management, banking and consumer finance, credit and charge
cards, insurance, investments, investment banking and trading-and
use diverse channels to make them available to consumer and
corporate customers around the world. SSB Citi
has been in the investment counseling
business since 1968 and renders investment management and
administration services to a wide variety of individual,
institutional and investment company clients having aggregate
assets under management as of May 31, 2000 in excess of $218
billion.
Under an investment advisory agreement, the Acquiring Fund
currently pays SSB Citi a monthly fee at the annual rate of 0.30%
of the value of its average daily net assets. As administrator,
SSB Citi oversees all aspects of the Acquiring Fund's
administration and operation. For administration services
rendered to the Acquiring Fund, the Acquiring Fund currently pays
SSB Citi a fee at the annual rate of 0.17% of the value of the
Acquiring Fund's average daily net assets. For its management and
administration services, SSB Citi received an aggregate fee during
the fund's last fiscal year equal to 0.47% of the fund's average
daily net assets. The total investment management and
administration fees incurred and paid by the Acquiring Fund for
the year ended February 29, 2000 were $16,481,900.
The Acquiring Fund's total expense ratio (total annual
operating expenses as a percentage of average net assets) for each
class of its shares for the year ended February 29, 2000 is set
forth below under "Annual Fund Operating Expenses." [SSB Citi
projects that if the proposed Reorganization is effected, the
expense ratio for each class of the Acquiring Fund will be
unchanged for the year ending February 28, 2001.] The actual
expense ratio for the Acquiring Fund for the year ending February
28, 2001 may be higher or lower than as set forth below, depending
upon the Acquiring Fund's performance, general bond market and
economic conditions, sales and redemptions of the Acquiring Fund
shares (including redemptions by former shareholders of the Fund),
and other factors.
Joseph P. Deane, investment officer of SSB Citi and senior
vice president and managing director of Salomon Smith Barney, has
been responsible for the day-to-day management of the Acquiring
Fund's portfolio since November 1988. Mr. Deane has 29 years of
securities business experience. Mr. Deane's management discussion
and analysis of the Acquiring Fund's performance during the fiscal
year ended February 29, 2000 is included in the Acquiring Fund's
Annual Report to Shareholders dated February 29, 2000.
The Fund. The Fund's investment manager is SSB Citi. SSB
Citi selects the Fund's investments and oversees its operations.
For its management and administration services, SSB Citi received
a fee during the fund's last fiscal year equal to 0.60% of the
fund's average daily net assets. The total investment management
fees incurred and paid by the Fund for the year ended October 31,
1999 were $[INSERT].
Joseph P. Deane (described above) has been the portfolio
manager of the Fund since 1997.
The expenses of the Fund and the Acquiring Fund for the
fiscal year ended October 31, 1999 and February 29, 2000,
respectively, and pro forma expenses following the proposed
restructuring are outlined below:
ANNUAL FUND OPERATING EXPENSES
Smith Barney Managed Municipals Fund
Inc.
Class A
Class B
Class 1*
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering
price)
4.00%
None
4.75%
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
4.50%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.48%
0.48%
0.48%
12b-1 fees
0.15
0.65
0.00
Other expenses
0.05
0.08
0.24
TOTAL FUND OPERATING EXPENSES
0.68%
1.21%
0.72%
Municipal Bond Fund
Class A
Class B
Class 1
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering
price)
4.50%
None
4.75%
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
4.50%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.60%
0.60%
0.60%
12b-1 fees
0.25
1.00
0.00
Other expenses
0.33
0.33
0.35
TOTAL FUND OPERATING EXPENSES
1.18%
1.93%
0.95%
Smith Barney Managed Municipals Fund
Inc. (Pro Forma)
Pro Forma
Class A
Pro Forma
Class B
Pro Forma
Class 1*
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering
price)
4.00%
None
4.75%
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
4.50%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.48%
0.48%
0.48%
12b-1 fees
0.15
0.65
0.00
Other expenses
0.05
0.08
0.24
TOTAL FUND OPERATING EXPENSES
0.68%
1.21%
0.72%
* Class 1 Shares of the Acquiring Fund had not commenced
operations as of February 29, 2000. The amounts shown are
amounts estimated to be charged for the fiscal year ending
February 28, 2001.
** You may buy Class A Shares in amounts of $500,000 or more at
net asset value (without an initial sales charge) but if you
redeem those shares within 12 months of their purchase, you
will pay a deferred sales charge of 1.00%
Example. This Example is intended to help you compare the
cost of investing in each of the Funds. The Example assumes you
invest $10,000 in each Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The
Example also assumes your investment has a 5% return each year and
that each Fund's annual operating expenses remain the same.
Although your actual costs maybe higher or lower, based on these
assumptions your costs would be:
Smith Barney Managed Municipals Fund
Inc.
1 year
3 years
5 years
10
years*
An Investor would pay the following
expenses on a $10,000 investment,
assuming (1) 5.00% annual return and
(2) redemption at the end of each time
period:
Class A
$467
$609
$764
$1,213
Class B
573
684
765
1,319
Class 1
545
694
857
1,327
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$467
$609
$764
$1,213
Class B
123
384
665
1,319
Class 1
545
694
857
1,327
Municipal Bond Fund
1 year
3 years
5 years
10
years*
An Investor would pay the following
expenses on a $10,000 investment,
assuming (1) 5.00% annual return and
(2) redemption at the end of each time
period:
Class A
$565
$808
$1,070
$1,817
Class B
646
906
1,142
2,059
Class 1
567
763
976
1,586
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$565
$808
$1,070
$1,817
Class B
196
606
1,042
2,059
Class 1
567
763
976
1,586
Smith Barney Managed Municipals Fund
Inc. (Pro Forma)
Pro
Forma
1 year
Pro
Forma
3 years
Pro
Forma
5 years
Pro
Forma
10
years*
An Investor would pay the following
expenses on a $10,000 investment,
assuming (1) 5.00% annual return and
(2) redemption at the end of each time
period:
Class A
$467
$609
$764
$1,213
Class B
573
684
765
1,319
Class 1
545
694
857
1,327
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$467
$609
$764
$1,213
Class B
123
384
665
1,319
Class 1
545
694
857
1,327
* Ten-year figures assume conversion of Class B shares to
Class A shares at the end of the eighth year following the
date of purchase.
This example assumes reinvestment of all dividends and
distributions. This example should not be considered a
representation of past or future expenses. Actual Fund expenses
can vary from year to year and may be higher or lower than those
shown. Please refer to each Fund's prospectus and statement of
additional information for a more detailed discussion of the fees
and expenses applicable to each class of shares of a Fund.
DISTRIBUTION OF SHARES AND OTHER SERVICES
Salomon Smith Barney as of June 5, 2000 distributes shares
of each Fund as principal underwriter (PFS also serves as a
principal underwriter in the case of the Fund) and as such
conducts a continuous offering pursuant to a "best efforts"
arrangement requiring Salomon Smith Barney and PFS, as applicable,
to take and pay for only such securities as may be sold to the
public. Prior to that time, CFBDS, Inc., located at 21 Milk
Street, Boston, Massachusetts 02109-5408, acted as distributor of
each Fund's shares. Each Fund has adopted a plan of distribution
under Rule 12b-1 under the 1940 Act (the "Plan"), pursuant to
which Salomon Smith Barney and PFS, as applicable, are paid a
service fee with respect to Class A and Class B shares of each
Fund. Salomon Smith Barney and PFS, as applicable, are also paid
a distribution fee with respect to Class B shares of each Fund at
the annual rate of 0.75% in the case of the Fund and 0.50% in the
case of the Acquiring Fund of the average daily net assets
attributable to those Classes. Class B shares of each Fund that
automatically convert to Class A shares eight years after the date
of original purchase will no longer be subject to a distribution
fee. Class 1 shares of each Fund do not pay a Rule 12b-1 fee or a
distribution fee. The fees are used by Salomon Smith Barney and
PFS to pay their respective Financial Consultants for servicing
shareholder accounts and, in the case of Class B shares, to cover
expenses primarily intended to result in the sale of those shares.
Payments under the Plan are not tied exclusively to the
distribution and shareholder service expenses actually incurred by
Salomon Smith Barney or PFS and the payments may exceed
distribution expenses actually incurred. Please refer to each
Fund's prospectus and statement of additional information for a
more detailed discussion of the distribution and shareholder
servicing arrangements applicable to each class of shares of a
Fund.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and
privileges with respect to the Fund are substantially similar to
those of the Acquiring Fund. However, whereas holders of shares
of beneficial interests in the Fund may only exchange into shares
of certain Concert brand funds or of Citi FundsSM Cash Reserves,
shareholders of the Acquiring Fund may exchange into the same
class of any Smith Barney Fund (provided that the Smith Barney
Fund offers the relevant class of shares). Moreover, although
many of the services provided by PFS Shareholder Services to the
Fund are available to shareholders of the Acquiring Fund, PFS
Shareholder Services does not provide services to the Acquiring
Fund. Please refer to each Fund's prospectus and statement of
additional information for a more detailed discussion of the
purchase, redemption and exchange procedures and privileges
applicable to each class of a Fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each of the Fund and the Acquiring Fund declares dividends
from net investment income monthly and pays distributions of net
realized capital gains, if any, annually. Each Fund intends to
distribute any net realized capital gains after utilization of
capital loss carryforwards, if any, in November or December to
prevent application of a federal excise tax. An additional
distribution may be made if necessary. Any dividends or capital
gains distributions declared in October, November or December with
a record date in such month and paid during the following January
will be treated by shareholders for federal income tax purposes as
if received on December 31 of the calendar year in which it is
declared. Dividends and distributions of each Fund will be
invested in additional shares of the applicable Fund at net asset
value and credited to the shareholder's account on the payment
date or, at the shareholder's election, paid in cash.
If the Plan is approved by the Fund's shareholders, then as
soon as practicable before the Closing Date, the Fund will pay or
have paid its shareholders a cash distribution of substantially
all undistributed 2000 net investment income and undistributed
realized net capital gains.
TAX CONSEQUENCES
The Fund and the Acquiring Fund will have received an
opinion of Willkie Farr & Gallagher in connection with the
Reorganization, to the effect that, based upon certain facts,
assumptions and representations, the Reorganization will
constitute a tax-free reorganization within the meaning of section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the
"Code"). If the Reorganization constitutes a tax-free
reorganization, no gain or loss will be recognized by the Fund or
its shareholders as a direct result of the Reorganization. See
"Federal Income Tax Consequences."
PRINCIPAL INVESTMENTS AND RISK FACTORS
As set forth herein, the Fund and the Acquiring Fund have
substantially similar investment objectives and policies and
pursue their respective objectives in a similar manner.
Accordingly, the Funds engage in investments practices and
techniques that are substantially similar. However, the
investment practices and limitations of each Fund (and the risks
related thereto) are not identical. For instance, the Fund may
invest a slightly larger portion of its assets in "junk bonds", is
generally subject to less restrictive limitations in connections
with its use of options and futures contracts and is generally
subject to more restrictive limitations with respect to securities
lending and borrowing. The skill of each Fund's portfolio
management team in choosing appropriate investments for the
relevant Fund will determine in large part its ability to achieve
its investment objective.
A more complete description of the investment practices and
limitations of the Acquiring Fund is contained in the prospectus
and statement of additional information of the Acquiring Fund,
dated June 28, 2000, as supplemented from time to time, a copy of
which is included herewith, and in the Statement of Additional
Information of Investment Series and the Acquiring Fund dated
_______, 2000 (relating to the proposed Reorganization) which is
incorporated herein by reference. Please refer to each Fund's
prospectus and statement of additional information for a more
detailed discussion of the specific investment practices and risks
of the applicable Fund.
An investment in either the Fund or the Acquiring Fund
includes certain risks and special considerations, such as those
described below:
Municipal Market Volatility. Municipal securities can be
significantly affected by political changes as well as
uncertainties in the municipal market related to taxation,
legislative changes, or the rights of municipal security holders.
Because many municipal securities are issued to finance similar
projects, especially those relating to education, health care,
transportation and utilities, conditions in those sectors can
affect the overall municipal market. In addition, changes in the
financial condition of an individual municipal insurer can affect
the overall municipal market.
Fixed Income Securities. Investments in fixed income
securities may subject a Fund to risks, including the following:
Interest Rate Risk. Debt securities have varying
levels of sensitivity to changes in interest rates. In general,
the price of a debt security can fall when interest rates rise and
can rise when interest rates fall. Securities with longer
maturities can be more sensitive to interest rate changes. In
other words, the longer the maturity of a security, the greater
the impact a change in interest rates could have on the security's
price. In addition, short-term and long-term interest rates do
not necessarily move in the same amount or the same direction.
Short-term securities tend to react to changes in short-term
interest rates, and long-term securities tend to react to changes
in long-term interest rates. The volatility of a security's
market value will differ depending upon the security's duration,
the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income
securities are subject to the risk that the issuer of the security
could default on its obligations, causing a Fund to sustain losses
on such investments. A default could impact both interest and
principal payments. Changes in the financial condition of an
issuer, changes in specific economic or political conditions that
affect a particular type of security or issuer, and changes in
general economic or political conditions can affect the credit
quality or value of an issuer's securities. Lower-quality debt
securities (those of less than investment-grade equality) tend to
be more sensitive to these changes than higher-quality debt
securities. Entities providing credit support or a maturity-
shortening structure also can be affected by these types of
changes. Municipal securities backed by current or anticipated
revenues from a specific project or specific assets can be
negatively affected by the discontinuance of the taxation
supporting the project or assets or the inability to collect
revenues for the project or from the assets. If the Internal
Revenue Service determines an issuer of a municipal security has
not complied with applicable tax requirements, interest from the
security could become taxable and the security could decline
significantly in value. In addition, if the structure of a
security fails to function as intended, interest from the security
could become taxable or the security could decline in value.
Call Risk and Extension Risk. Fixed income securities
may be subject to both call risk and extension risk. Call risk
exists when the issuer may exercise its right to pay principal on
an obligation earlier than scheduled, which would cause cash flows
to be returned earlier than expected. This typically results when
interest rates have declined and a Fund will suffer from having to
reinvest in lower yielding securities. Extension risk exists when
the issuer may exercise its right to pay principal on an
obligation later than scheduled, which would cause cash flows to
be returned later than expected. This typically results when
interest rates have increased, and a Fund will suffer from the
inability to invest in higher yield securities.
Below Investment Grade Fixed-Income Securities. Securities
rated in the fourth highest ratings category by an NRSRO, such as
those rated BBB by S&P or Baa by Moody's, are generally regarded
as having adequate capacity to pay interest and repay principal,
but may have some speculative characteristics. Securities rated
below the fourth highest ratings category by an NRSRO, including
those rated below Baa by Moody's or BBB by S&P, are not
"investment grade," and may have more speculative characteristics,
including the possibility of default or bankruptcy of the issuers
of such securities, market price volatility based upon interest
rate sensitivity, questionable creditworthiness and relative
liquidity of the secondary trading market. Because high yield
bonds have been found to be more sensitive to adverse economic
changes or individual corporate developments and less sensitive to
interest rate changes than higher-rated investments, an economic
downturn could disrupt the market for high yield bonds and
adversely affect the value of outstanding bonds and the ability of
issuers to repay principal and interest. In addition, in a
declining interest rate market, issuers of high yield bonds may
exercise redemption or call provisions, which may force a Fund, to
the extent it owns such securities, to replace those securities
with lower yielding securities. This could result in a decreased
return.
Derivative Instruments. In accordance with its investment
policies, a Fund may invest in certain derivative instruments
which are securities or contracts that provide for payments based
on or "derived" from the performance of an underlying asset, index
or other economic benchmark. Essentially, a derivative instrument
is a financial arrangement or a contract between two parties (and
not a true security like a stock or a bond). Transactions in
derivative instruments can be, but are not necessarily, riskier
than investments in conventional stocks, bonds and money market
instruments. A derivative instrument is more accurately viewed as
a way of reallocating risk among different parties or substituting
one type of risk for another. Every investment by the Fund,
including an investment in conventional securities, reflects an
implicit prediction about future changes in the value of that
investment. Every Fund investment also involves a risk that SSB
Citi's expectations will be wrong. Transactions in derivative
instruments often enable the Fund to take investment positions
that more precisely reflect the portfolio manager's expectations
concerning the future performance of the various investments
available to the Fund. Derivative instruments can be a legitimate
and often cost-effective method of accomplishing the same
investment goals as could be achieved through other investment in
conventional securities.
Derivative contracts include options, futures contracts,
forward contracts, forward commitment and when-issued securities
transactions, forward foreign currency exchange contracts and
interest rate, mortgage and currency swaps. The following are the
principal risks associated with derivative instruments:
Market risk: The instrument will decline in value or
that an alternative investment would have appreciated more, but
this is no different from the risk of investing in conventional
securities.
Leverage and associated price volatility: Leverage
causes increased volatility in the price and magnifies the impact
of adverse market changes, but this risk may be consistent with
the investment objective of even a conservative fund in order to
achieve an average portfolio volatility that is within the
expected range for that type of fund.
Credit risk: The issuer of the instrument may
default on its obligation to pay interest and principal.
Liquidity and valuation risk: Many derivative
instruments are traded in institutional markets rather than on an
exchange. Nevertheless, many derivative instruments are actively
traded and can be priced with as much accuracy as conventional
securities. Derivative instruments that are custom designed to
meet the specialized investment needs of a relatively narrow group
of institutional investors such as the Fund are not readily
marketable and are subject to the Fund's restrictions on illiquid
investments.
Correlation risk: There may be imperfect correlation
between the price of the derivative and the underlying asset. For
example, there may be price disparities between the trading
markets for the derivative contract and the underlying asset.
Each derivative instrument purchased for a Fund's portfolio
is reviewed and analyzed by SSB Citi to assess the risk and reward
of each such instrument in relation the Fund's portfolio
investment strategy. The decision to invest in derivative
instruments or conventional securities is made by measuring the
respective instrument's ability to provide value to the Fund and
its shareholders.
Special Risks of Using Futures Contracts. The prices of
futures contracts are volatile and are influenced by, among other
things, actual and anticipated changes in interest rates, which in
turn are affected by fiscal and monetary policies and national and
international political and economic events.
At best, the correlation between changes in prices of
futures contracts and of the securities or currencies being hedged
can be only approximate. The degree of imperfection of
correlation depends upon circumstances such as: variations in
speculative market demand for futures and for debt securities or
currencies, including technical influences in futures trading; and
differences between the financial instruments being hedged and the
instruments underlying the standard futures contracts available
for trading, with respect to interest rate levels, maturities, and
creditworthiness of issuers. A decision of whether, when, and how
to hedge involves skill and judgment, and even a well-conceived
hedge may be unsuccessful to some degree because of unexpected
market behavior or interest rate trends.
Because of the low margin deposits required, futures
trading involves an extremely high degree of leverage. As a
result, a relatively small price movement in a futures contract
may result in immediate and substantial loss, as well as gain, to
the investor. For example, if at the time of purchase, 10% of the
value of the futures contract is deposited as margin, a subsequent
10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original
margin deposit, if the futures contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. A Fund,
however, would presumably have sustained comparable losses if,
instead of the futures contract, it had invested in the underlying
financial instrument and sold it after the decline. Where the
Fund enters into futures transactions for non-hedging purposes, it
will be subject to greater risks and could sustain losses which
are not offset by gains on other Fund assets.
Furthermore, in the case of a futures contract purchase, in
order to be certain that a Fund has sufficient assets to satisfy
its obligations under a futures contract, the Fund segregates and
commits to back the futures contract an amount of cash and liquid
securities equal in value to the current value of the underlying
instrument less the margin deposit.
Most U.S. futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular type of futures
contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a
particular trading day and therefore does not limit potential
losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to
substantial losses.
Alternative Minimum Tax. Under current federal income tax
law, (1) interest on tax-exempt municipal securities issued after
August 7, 1986 which are "specified private activity bonds," and
the proportionate share of any exempt-interest dividend paid by a
regulated investment company which receives interest from such
specified private activity bonds, will be treated as an item of
tax preference for purposes of the alternative minimum tax ("AMT")
imposed on individuals and corporations, though for regular
Federal income tax purposes such interest will remain fully tax-
exempt, and (2) interest on all tax-exempt obligations will be
included in "adjusted current earnings" of corporations for AMT
purposes. Such private activity bonds ("AMT-Subject bonds"),
which include industrial development bonds and bonds issued to
finance such projects as airports, housing projects, solid waste
disposal facilities, student loan programs and water and sewage
projects, have provided, and may continue to provide, somewhat
higher yields than other comparable municipal securities.
Investors should consider that, in most instances, no state,
municipality or other governmental unit with taxing power will be
obligated with respect to AMT-Subject bonds. AMT-Subject bonds
are in most cases revenue bonds and do not generally have the
pledge of the credit or the taxing power, if any, of the issuer of
such bonds. AMT-Subject bonds are generally limited obligations
of the issuer supported by payments from private business entities
and not by the full faith and credit of a state or any
governmental subdivision. Typically the obligation of the issuer
of AMT-Subject bonds is to make payments to bond holders only out
of and to the extent of payments made by the private business
entity for whose benefit the AMT-Subject bonds were issued.
Payment of the principal and interest of such revenue bonds
depends solely on the ability of the user of the facilities
financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment. It is not possible to provide specific
detail on each of these obligations in which Fund assets may be
invested.
Defensive Investing. A Fund may depart from its principal
investment strategies in response to adverse market, economic or
political conditions by taking temporary defensive positions in
all types of money market and short-term debt securities. If the
Fund takes a temporary defensive position, it may be unable to
achieve its investment objective.
THE PROPOSED TRANSACTION
Description of the Plan. As stated above, the Plan provides
for the transfer of all of the assets of the Fund to the Acquiring
Fund in exchange for that number of full and fractional shares of
the corresponding class of common stock of the Acquiring Fund
having an aggregate net asset value equal to the aggregate net
asset value of the holder's shares of beneficial interests in the
Fund as of the close of business on the business day preceding the
date of the Closing. The Acquiring Fund will assume all of the
liabilities of the Fund. In connection with the Closing, the Fund
will distribute the shares of the corresponding class of common
stock of the Acquiring Fund received in the exchange to the
shareholders of the Fund in complete liquidation of the Fund. The
Fund will be terminated as a series of Investment Series.
Upon completion of the Reorganization, each holder of shares
of beneficial interests in the Fund will own that number of full
and fractional shares of the corresponding class of the Acquiring
Fund having an aggregate net asset value equal to the aggregate
net asset value of such holder's shares of beneficial interests in
the Fund immediately as of the close of business on the Closing
Date. Each Fund shareholder's account with Investment Series as a
shareholder of the Acquiring Fund will be similar in all material
respects to the accounts currently maintained by the Fund's sub-
transfer agent for such shareholder. Some of the outstanding
shares of beneficial interests of the Fund are represented by
physical certificates; however, in the interest of economy and
convenience, shares of the Fund generally are not represented by
physical certificates, and shares of the Acquiring Fund issued to
Fund shareholders similarly will be in uncertificated form.
Certificates representing shares of the Fund will be cancelled
after the Closing.
Until the Closing, holders of shares of beneficial interests
in the Fund will, of course, continue to be able to redeem their
shares at the net asset value next determined after receipt by the
Fund's sub-transfer agent of a redemption request in proper form.
Redemption requests received by the sub-transfer agent thereafter
will be treated as requests received for the redemption of shares
of the Acquiring Fund received by the shareholder in connection
with the Reorganization.
The obligations of Investment Series, on behalf of the Fund,
and the Acquiring Fund, under the Plan are subject to various
conditions, as stated therein. Among other things, the Plan
requires that all filings be made with, and all authority be
received from, the SEC and state securities commissions as may be
necessary in the opinion of counsel to permit the parties to carry
out the transactions contemplated by the Plan. Investment Series
and the Acquiring Fund are in the process of making the necessary
filings. To provide against unforeseen events, the Plan may be
terminated or amended at any time prior to the Closing by action
of the Trustees or Directors of either Fund, notwithstanding the
approval of the Plan by the holders of shares of beneficial
interests in the Fund. However, no amendment may be made that
materially adversely affects the interests of the holders of
shares of beneficial interests in the Fund without obtaining the
approval of the Fund's shareholders. Investment Series and the
Acquiring Fund may at any time waive compliance with certain of
the covenants and conditions contained in the Plan.
The Plan provides that the obligations of Investment Series
are not personally binding upon any of its Trustees, shareholders,
nominees, officers, agents, or employees, but binds only the
property of the Fund as provided in the Declaration of Trust of
Investment Series. Moreover, no series of Investment Series is
responsible for the obligations of Investment Series under the
Plan, and all persons must look only to the assets of the Fund to
satisfy the obligations of Investment Series under the Plan. The
execution and the delivery of the Plan have been authorized by the
Board of Trustees of Investment Series, on behalf of the Fund, and
the Plan has been signed by authorized officers of Investment
Series 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. For a complete
description of the terms and conditions of the Reorganization, see
the Plan at Exhibit A.
SSB Citi will assume and pay all of the expenses that are
solely and directly related to the Reorganization, which expenses
are estimated to be approximately $[INSERT].] Shareholders have
no rights of appraisal.
REASONS FOR THE PROPOSED TRANSACTION
At a telephonic meeting of the Board of Trustees of
Investment Series held on July 17, 2000, the Trustees of the Fund,
including all of the Non-Interested Board Members, were presented
with materials discussing the benefits which would accrue to the
holders of shares of beneficial interests in the Fund if the Fund
were to reorganize with and into the Acquiring Fund. For the
reasons discussed below, the Board of Trustees of Investment
Series, including all of the Non-Interested Board Members, has
determined that the proposed Reorganization is in the best
interests of the Fund and its shareholders and that the interests
of the shareholders of the Fund will not be diluted as a result of
the proposed Reorganization.
The proposed combination of the Fund and the Acquiring Fund
will allow the shareholders of the Fund to continue to participate
in a portfolio governed by substantially similar investment
objectives and policies that is professionally managed by the same
portfolio manager. The Board of Trustees of Investment Series
believes that the proposed Reorganization offers the following
benefits:
Enhanced Flexibility with Respect to Portfolio Investments.
As stated previously, the Reorganization is being proposed as part
of a broader initiative by SSB Citi to eliminate duplication and
possible confusion in its mutual fund product offerings. Having
determined that the offering of multiple funds with substantially
similar objectives and identical portfolio managers is both
repetitious and confusing, SSB Citi believes that the combination
of the Funds which have substantially similar investment
objectives and policies into a single larger fund may increase
economic and other efficiencies for investors and SSB Citi and may
ultimately result in a lower total annual expense ratio for
investors. SSB Citi also believes that a larger asset base could
provide portfolio management benefits such as greater
diversification and the ability to command more attention from
brokers and underwriters. In light of the foregoing, it is
anticipated that the Acquiring Fund may achieve a higher level of
income over a year's time than the Fund. As discussed in detail
herein, the management fees and total operating expenses of the
Acquiring Fund are also currently (and are projected to be
following the Closing of the Reorganization) lower than the
corresponding fees and expenses incurred by the Fund.
While past performance is not necessarily indicative of
future results, the Acquiring Fund has generally produced better
total returns than the Fund over the periods ended December 31,
1999. See "Capitalization and Performance". During each of these
periods, the Acquiring Fund has ranked in the [INSERT] of its
Lipper Category, while the Fund has ranked in the [INSERT] of its
Lipper Category. Moreover, while the Acquiring Fund has a
[INSERT] Morningstar rating, the Fund has a [INSERT] Morningstar
rating in their respective rating categories.
Lower Fees and Expenses. If the proposed transaction is
approved, holders of shares of beneficial interests in the Fund
may benefit from both lower advisory fees and lower total fund
expenses. See "Investment Management Fees and Expenses" and
"Annual Fund Operating Expenses".
As set forth above, as of their most recent fiscal year end,
each class of shares of the Fund had a higher management fee and
higher gross operating expenses than the corresponding class of
the Acquiring Fund. As a result of the Reorganization, holders of
shares of beneficial interests in the Fund will be investing in
the corresponding class of the Acquiring Fund with expenses that
are currently between [0.23%] and [0.72%] lower than those of the
relevant class of the Fund. If the Reorganization is approved by
shareholders of the Fund, the Acquiring Fund's net expense ratio
for each class of its shares is estimated to remain unchanged for
the year ending February 28, 2001.
Some of the fixed expenses currently paid by the Acquiring
Fund, such as accounting, legal and printing costs, would also be
spread over a larger asset base. Other things being equal,
shareholders should benefit from economies of scale through lower
expense ratios and higher net income distributions over time.
Due to a combination of factors, including the relatively
small size of the Fund, past and prospective sales of the Fund and
current market conditions, the Trustees and management of
Investment Series believe the Fund and its holders of shares of
beneficial interests would benefit from a tax-free reorganization
with a larger fund with substantially similar investment
objectives and policies and with a lower total annual expense
ratio. Accordingly, it is recommended that the shareholders of
the Fund approve the Reorganization with the Acquiring Fund.
The Board of Trustees of Investment Series, in recommending
the proposed transaction, considered a number of factors,
including the following:
(1) the Reorganization will result in a single larger
fund, which, may increase economic and other
efficiencies (for example, eliminating one of the two
sets of prospectuses, annual reports and other
documents required for two Funds), and may result in a
lower expense ratio;
(2) a larger asset base could provide portfolio management
benefits, such as greater diversification and the
ability to command more attention from brokers and
underwriters;
(3) the positive compatibility of the Acquiring Fund's
investment objectives, policies and restrictions with
those of the Fund;
(4) the tax-free nature of the Reorganization;
(5) the potential opportunity for higher income levels;
(6) the lower management fees and total annual expense
ratio of the Acquiring Fund;
(7) the terms and conditions of the Reorganization and
that it should not result in a dilution of Fund
shareholder interests; and
(8) the level of costs and expenses to the Fund of the
proposed Reorganization.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
General. The Fund is a diversified series of Investment
Series, a business trust organized under the laws of The
Commonwealth of Massachusetts on January 29, 1987, and is
registered with the SEC as an open-end management investment
company. The Acquiring Fund was incorporated under the laws of
the State of Maryland on September 16, 1980, and is registered
with the SEC as a diversified, open-end management investment
company. The Fund currently offers shares of beneficial interests
classified into three Classes, A, B, and 1. The Acquiring Fund
currently offers shares of common stock classified into four
classes, A, B, L and Y and will offer Class 1 Shares upon the
closing of the Reorganization. Each Class of shares represents an
identical pro rata interest in the relevant Fund's investment
portfolio. As a result, the Classes of a Fund have the same
rights, privileges and preferences, except with respect to:
(a) the designation of each Class; (b) the amount of the
respective sales charges, if any, for each Class; (c) the
distribution and/or service fees borne by each Class; (d) the
expenses allocable exclusively to each Class; (e) voting rights on
matters exclusively affecting a single Class; (f) the exchange
privilege of each Class; and (g) the conversion feature of the
Class B Shares.
Each share of each class of a Fund represents an interest in
that class of the Fund that is equal to and proportionate with
each other share of that class of the Fund. Shareholders are
entitled to one vote per share (and a proportionate fractional
vote per each fractional share) held on matters on which they are
entitled to vote.
Voting Rights. Neither Fund is required to hold shareholder
meetings annually, although shareholder meetings may be called for
purposes such as electing or removing Trustees or Directors, as
applicable, changing fundamental policies or approving an
investment management contract. In the event that shareholders of
a Fund wish to communicate with other shareholders concerning the
removal of any Trustee or Director, as applicable, such
shareholders shall be assisted in communicating with other
shareholders for the purpose of obtaining signatures to request a
meeting of shareholders, all in the manner provided in Section
16(c) of the 1940 Act as if Section 16(c) were applicable.
Board. The By-Laws of the Acquiring Fund and of Investment
Series provide that the term of office of each Director/Trustee
shall be from the time of his or her election and qualification
until the next annual meeting of shareholders and until his or her
successor shall have been elected and shall have qualified. Any
Director/Trustee of the Acquiring Fund or Investment Series may be
removed by the vote of at least a majority of the outstanding
shares then entitled to be cast for the election of
Directors/Trustees. Vacancies on the Boards of the Acquiring Fund
or Investment Series may be filled by the Directors/Trustees
remaining in office. A meeting of shareholders will be required
for the purpose of electing additional Directors/Trustees whenever
fewer than a majority of the Directors/Trustees then in office
were elected by shareholders and to fill vacancies if less than
two-thirds of the Directors/Trustees then holding office have been
elected by the shareholders.
Liquidation or Termination. In the event of the liquidation
or termination of the Acquiring Fund or the Fund, the shareholders
of each Fund are entitled to receive, when and as declared by the
Directors/Trustees, the excess of the assets over the liabilities
belonging to the relevant Fund. In either case, the assets so
distributed to shareholders will be distributed among the
shareholders in proportion to the number of shares of the class
held by them and recorded on the books of the relevant Fund. The
net asset value of the classes of shares would differ due to
differences in expense ratios.
Liability of Directors/Trustees. The Articles of
Incorporation of the Acquiring Fund and the Declaration of Trust
of Investment Series provide that the Directors/Trustees and
officers shall not be liable for monetary damages for breach of
fiduciary duty as a Director/Trustee or officer, except to the
extent such exemption is not permitted by law. The Articles of
Incorporation of the Acquiring Fund and the Declaration of Trust
of Investment Series provide that the relevant Fund shall
indemnify each Director, Trustee and officer to the fullest extent
permitted by Maryland or Massachusetts law and other applicable
law.
Rights of Inspection. Maryland law permits any shareholder
of the Acquiring Fund or any agent of such shareholders to inspect
and copy, during usual business hours, the By-Laws, minutes of
shareholder proceedings, annual statements of the affairs and
voting trust agreements (if any) of the Acquiring Fund on file at
its principal office. The Declaration of Trust of Investment
Series permits any shareholder of the Fund or his agent to inspect
and copy during normal business hours the By-Laws, minutes of the
proceedings of shareholders and annual financial statements of the
Fund (including a balance sheet and financial statements of
operations) on file, at its principal offices.
Shareholder Liability. Under Maryland law, shareholders of
the Acquiring Fund do not have personal liability for corporate
acts and obligations. Under Massachusetts law, shareholders of a
Massachusetts business trust could, under certain circumstances,
be held personally liable for obligations of a fund. The
Declaration of Trust for Investment Series, however, disclaims
shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
that Fund or its Trustees. Moreover, the Declaration of Trust
provides for indemnification out of the Fund's property for all
losses and expenses of any shareholder held personally liable for
the obligations of the Fund and the Fund will be covered by
insurance which the Trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder of the
Fund incurring financial loss on account of shareholder liability
is considered by SSB Citi remote and not material, since it is
limited to circumstances in which a disclaimer is inoperative and
the Fund itself is unable to meet its obligations.
Shares of the Acquiring Fund issued to the holders of shares
of beneficial interests in the Fund pursuant to the Reorganization
will be fully paid and nonassessable when issued, transferable
without restrictions and will have no preemptive rights.
The foregoing is only a summary of certain characteristics
of the operations of Investment Series and the Acquiring Fund.
The foregoing is not a complete description of the documents
cited. Shareholders should refer to the provisions of the
corporate and trust documents and state laws governing each Fund
for a more thorough description.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by
Investment Series, on behalf of the Fund, and the Acquiring Fund
of an opinion from Willkie Farr & Gallagher, substantially to the
effect that, based upon certain facts, assumptions and
representations of the parties, for federal income tax purposes:
(i) the transfer to the Acquiring Fund of all or substantially all
of the assets of the Fund in exchange solely for Shares and the
assumption by the Acquiring Fund of all of the liabilities of the
Fund, followed by the distribution of such Shares to Fund
shareholders in exchange for their shares of beneficial interests
in the Fund in complete liquidation of the Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the
Code, and the Acquiring Fund and the Fund will each be "a party to
a reorganization" within the meaning of Section 368(b) of the
Code; (ii) no gain or loss will be recognized by the Fund upon the
transfer of the Fund's assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring
Fund of liabilities of the Fund or upon the distribution (whether
actual or constructive) of the Acquiring Fund Shares to the Fund's
shareholders in exchange for their shares of beneficial interests
in the Fund; (iii) the basis of the assets of the Fund in the
hands of the Acquiring Fund will be the same as the basis of such
assets of the Fund immediately prior to the transfer; (iv) the
holding period of the assets of the Fund in the hands of the
Acquiring Fund will include the period during which such assets
were held by the Fund; (v) no gain or loss will be recognized by
the Acquiring Fund upon the receipt of the assets of the Fund in
exchange for Shares and the assumption by the Acquiring Fund of
all of the liabilities of the Fund; (vi) no gain or loss will be
recognized by the holders of beneficial interests in the Fund upon
the receipt of Shares solely in exchange for their shares of
beneficial interests in the Fund as part of the transaction;
(vii) the basis of Shares received by the holders of shares of
beneficial interests in the Fund will be the same as the basis of
shares of beneficial interests in the Fund exchanged therefor; and
(viii) the holding period of Shares received by the holders of
shares of beneficial interests in the Fund will include the
holding period during which the shares of beneficial interests in
the Fund exchanged therefor were held, provided that at the time
of the exchange the shares of beneficial interests in the Fund
were held as capital assets in the hands of the holders of shares
of beneficial interests in the Fund.
While neither Investment Series nor the Acquiring Fund is
aware of any adverse state or local tax consequences of the
proposed Reorganization, they have not requested any ruling or
opinion with respect to such consequences and shareholders may
wish to consult their own tax adviser with respect to such
matters.
LIQUIDATION AND TERMINATION OF SERIES
If the Reorganization is effected, the Fund will be
liquidated and terminated as a series of Investment Series, and
the Fund's outstanding shares will be cancelled.
PORTFOLIO SECURITIES
If the Reorganization is effected, SSB Citi will analyze and
evaluate the portfolio securities of the Fund being transferred to
the Acquiring Fund. Consistent with the Acquiring Fund's
investment objective and policies, any restrictions imposed by the
Code and the best interests of the Acquiring Fund's shareholders
(including former shareholders of the Fund), SSB Citi will
determine the extent and duration to which the Fund's portfolio
securities will be maintained by the Acquiring Fund. [It is
possible that there may be a significant rebalancing of the Fund
portfolio securities in connection with the Reorganization.]
Subject to market conditions at the time of any such rebalancing,
the disposition of the Fund's portfolio securities may result in a
capital gain or loss. The actual tax consequences of any
disposition of portfolio securities will vary depending upon the
specific security(ies) being sold.
PORTFOLIO TURNOVER
The portfolio turnover rate for the Acquiring Fund (i.e.,
the ratio of the lesser of annual sales or purchases to the
monthly average value of the portfolio (excluding from both the
numerator and the denominator securities with maturities at the
time of acquisition of one year or less)), for the year ended
February 29, 2000 was 55%. The portfolio turnover rate for the
Fund for the year ended October 31, 1999 was 38%.
CAPITALIZATION AND PERFORMANCE
Pro forma capitalization (unaudited). The following table
sets forth the unaudited capitalization of each class of each of
the Acquiring Fund and the Fund as of June 30, 2000, as adjusted
giving effect to the Reorganization discussed herein:1
ACQUIRING
FUND
(Actual)
THE
FUND
(Actual)
PRO FORMA
ADJUSTMENTS
PRO FORMA
COMBINED
Class A
Net Assets
1,880,392,759
30,243,679
1,910,636,438
Net Asset
Value Per
Share
14.61
13.04
14.61
Shares
Outstanding
128,733,834
2,319,782
2,070,067
130,803,901
Class B
Net Assets
817,452,991
6,458,411
823,911,402
Net Asset
Value Per
Share
14.61
13.03
14.61
Shares
Outstanding
55,952,005
495,729
442,054
56,394,060
Class 1
Net Assets
-
66,050,386
66,050,386
Net Asset
Value Per
Share
14.61
13.04
14.61
Shares
Outstanding\
-
5,065,117
4,520,903
4,520,903
Class L
Net Assets
138,759,368
-
138,759,368
Net Asset
Value Per
Share
14.60
14.60
Shares
Outstanding
9,502,345
-
-
9,502,345
Class Y
Net Assets
26,018,531
-
26,018,531
Net Asset
Value Per
Share
14.63
14.63
Shares
Outstanding
1,778,987
-
-
1,778,987
__________________
1 Assumes the Reorganization had been consummated on June 30,
2000, and is for information purposes only. No assurance
can be given as to how many shares of the Acquiring Fund
will be received by shareholders of the Fund on the date the
Reorganization takes place, and the foregoing should not be
relied upon to reflect the number of shares of the Acquiring
Fund that actually will be received on or after such date.
Total return is a measure of the change in value of an
investment in a fund over the period covered, which assumes that
any dividends or capital gains distributions are automatically
reinvested in shares of the fund rather than paid to the investor
in cash. The formula for total return used by a fund is
prescribed by the SEC and includes three steps: (1) adding to the
total number of shares of the fund that would be purchased by a
hypothetical $1,000 investment in the fund all additional shares
that would have been purchased if all dividends and distributions
paid or distributed during the period had been automatically
reinvested; (2) calculating the redemption value of the
hypothetical initial investment as of the end of the period by
multiplying the total number of shares owned at the end of the
period by the net asset value per share on the last trading day of
the period; and (3) dividing this account value for the
hypothetical investor by the amount of the initial investment, and
annualizing the result for periods of less than one year. Total
return may be stated with or without giving effect to any expense
limitations in effect for a fund.
The following table reflects the average annual total
returns of Class A Shares of the Acquiring Fund for the 1, 5 and
10 year and since inception periods, as applicable, ending
December 31, 1999 for each of the Fund and the Acquiring Fund:
THE FUND
THE ACQUIRING FUND
Average Annual Total Return: 1
1-year
(9.20%)
(10.90%)
5-year
N/A
5.59%
10-year
N/A
6.69%
Since Inception
1.82%
9.53%
(8/18/96)
(3/4/81)
__________________
1 The average annual total returns for other classes of each
Fund's shares would be similar to the returns of the Class A
Shares of the relevant Fund, but would differ to the extent
that the other class of shares had a higher or lower total
annual expense ratio during the relevant periods. For
example, the average annual total returns of Class 1 Shares
of the Fund, which are subject to a lower total annual
expense ratio, were as follows: 1-year: (9.15%); 5-year:
4.80%; 10-year: 5.57%; and since inception: 6.04% (7/13/88).
Class 1 Shares of the Acquiring Fund had not been issued as
of the date of this Proxy Statement/Prospectus.
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about Investment
Series with respect to the Fund, the Acquiring Fund, and the
Reorganization has been filed with the SEC and may be obtained
without charge by writing to Smith Barney Mutual Funds, 388
Greenwich Street, New York, New York 10013, or by calling (800)
451-2010.
Each Fund is subject to the informational requirements of
the Securities Exchange Act of 1934 and the 1940 Act, and in
accordance therewith, files reports, proxy material and other
information about the applicable Fund with the Commission.
Such reports, proxy material and other information can be
inspected and copied at the Public Reference Room ((202) 942-8090)
maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange
Commission 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates or without charge from the Commission at
[email protected]. Copies of such material can also be obtained
from Smith Barney Mutual Funds, 388 Greenwich Street, New York,
New York 10013, or by calling (800) 451-2010.
Interests of certain persons. SSB Citi and certain of the
Acquiring Fund's service providers have a financial interest in
the Reorganization arising from the fact that their respective
fees under their respective agreements with the Acquiring Fund
will increase as the amount of the Acquiring Fund's assets
increases by virtue of the Reorganization.
THE BOARD MEMBERS OF INVESTMENT SERIES RECOMMEND THAT THE
SHAREHOLDERS OF THE FUND VOTE IN FAVOR OF THIS PROPOSAL.
ADDITIONAL INFORMATION
General. [The cost of preparing, printing and mailing the
enclosed proxy card(s) and Proxy Statement/Prospectus and all
other costs incurred in connection with the solicitation of
proxies, including any additional solicitation made by letter,
telephone or telegraph, will be paid by SSB Citi.] In addition to
solicitation by mail, certain officers and representatives of
Investment Series, officers and employees of SSB Citi and certain
financial services firms and their representatives, who will
receive no extra compensation for their services, may solicit
proxies by telephone, telegram or personally.
When the Fund records proxies by telephone, it will use
procedures designed to (i) authenticate shareholders' identities,
(ii) allow shareholders to authorize the voting of their shares in
accordance with their instructions and (iii) confirm that their
instructions have been properly recorded.
To participate in the Special Meeting, holders of shares of
beneficial interests in the Fund may submit the proxy card
originally sent with the Proxy Statement/Prospectus or attend in
person. Any proxy given by a shareholder is revocable until voted
at the Special Meeting.
Proposals of shareholders. Shareholders wishing to submit
proposals for inclusion in a proxy statement for a shareholder
meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of Investment Series, c/o
Smith Barney Mutual Funds, 388 Greenwich Street, New York, New
York 10013, within a reasonable time before the solicitation of
proxies for such meeting. The timely submission of a proposal
does not guarantee its inclusion.
Other matters to come before the special meeting. No Board
member is aware of any matters that will be presented for action
at the Special Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise,
the proxy in the accompanying form will confer upon the person or
persons entitled to vote the shares represented by such proxy the
discretionary authority to vote the shares as to any such other
matters in accordance with their best judgment in the interest of
Investment Series and/or the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
/s/ Christina T. Sydor
Christina T. Sydor
Secretary
INDEX OF EXHIBITS
ANNEX: 5% Shareholders of the Acquired Fund
Exhibit A: Form of Agreement and Plan of Reorganization
ANNEX A
5% SHAREHOLDERS OF THE ACQUIRED FUND
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
is made as of this ____ day of _________, 2000, between Concert
Investment Series(r) ("Investment Series"), a Massachusetts business
trust with its principal place of business at 388 Greenwich
Street, New York, New York 10013, on behalf of its series,
Municipal Bond Fund (the "Acquired Fund"), and Smith Barney
Managed Municipals Fund Inc. (the "Acquiring Fund"), a Maryland
corporation with its principal place of business at 388 Greenwich
Street, New York, New York 10013 and solely for purposes of
Section 10.2 hereof, SSB Citi Fund Management, LLC ("SSB Citi").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). The reorganization (the "Reorganization") will consist
of the transfer of all of the assets of the Acquired Fund to the
Acquiring Fund in exchange solely for voting shares of the
corresponding class of common stock ($.001 par value per share) of
the Acquiring Fund (the "Acquiring Fund Shares"), the assumption
by the Acquiring Fund of all of the stated liabilities of the
Acquired
Fund and the distribution of the Acquiring Fund Shares to the
holders of shares of beneficial interests in the Acquired Fund in
complete liquidation of the Acquired Fund as provided herein, all
upon the terms and conditions hereinafter set forth in this
Agreement.
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 TO THE ACQUIRING
FUND IN EXCHANGE FOR THE ACQUIRING FUND SHARES, THE
ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES AND THE
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 to the Acquiring Fund
all of the Acquired Fund's assets as set forth in Section 1.2, and
the Acquiring Fund agrees in exchange therefor (i) to deliver to
the Acquired Fund that number of full and fractional Acquiring
Fund Shares determined by dividing the value of the Acquired
Fund's assets, computed in the manner and as of the time and date
set forth in Section 2.1, by the net asset value of one Acquiring
Fund Share, computed in the manner and as of the time and date set
forth in Section 2.2; and (ii) to assume all of the stated
liabilities of
the Acquired Fund, as set forth in Section 1.3. Such transactions
shall take place at the closing provided for in Section 3.1 (the
"Closing").
1.2. The assets of the Acquired Fund to be acquired by the
Acquiring Fund (collectively "Assets") shall consist of all
assets, including, without limitation, all cash, cash equivalents,
securities, commodities and futures interests and dividends or
interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited
statement of assets and liabilities of the Acquired Fund prepared
as of the effective time of the closing (the "Effective Time
Statement"), prepared in accordance with generally accepted
accounting principles ("GAAP") applied consistently with those of
the Acquired Fund's most recent audited balance sheet.
1.3. The Acquired Fund will endeavor to discharge all the
Acquired Fund's known liabilities and obligations prior to the
Closing Date as defined in Section 3.1, other than those
liabilities and obligations which would otherwise be discharged at
a later date in the ordinary course of business.
1.4. On or as soon as practicable prior to the Closing Date
as defined in Section 3.1, the Acquired Fund will declare and pay
to its shareholders of record one or more dividends and/or other
distributions so that it will have distributed substantially all
of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing
Date.
1.5. Immediately after the transfer of assets provided for
in Section 1.1 (the "Liquidation Time"), Investment Series will
distribute to the Acquired Fund's shareholders of record (the
"Acquired Fund Shareholders"), determined as of the Valuation Time
(as defined herein), on a pro rata basis, the Acquiring Fund
Shares received by the Acquired Fund pursuant to Section 1.1 and
will completely liquidate. Such distribution and liquidation will
be accomplished by the transfer of the Acquiring Fund Shares then
credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders.
The aggregate net asset value of Acquiring Fund Shares to be so
credited to Acquired Fund Shareholders shall be equal to the
aggregate net asset value of each class of the Acquired Fund
shares owned by such shareholders as of the Valuation Time (as
defined herein). All issued and outstanding shares of the
Acquired Fund will simultaneously be cancelled on the books of
Investment Series with respect to the Acquired Fund, although
share certificates representing interests in shares of the
Acquired Fund will represent a number of Acquiring Fund Shares
after the Closing Date as determined in accordance with Section
2.3. The Acquiring Fund will not issue certificates representing
Acquiring Fund Shares in connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on
the books of the Acquiring Fund. Shares of the Acquiring Fund
will be issued in the manner described in the Acquiring Fund's
then-current prospectus and statement of additional information.
1.7. Any reporting responsibility of the Acquired Fund
including, without limitation, the responsibility for filing of
regulatory reports, tax returns, or other documents with the
Securities and Exchange Commission (the "Commission"), any state
securities commission, and any federal, state or local tax
authorities or any other relevant regulatory authority, is and
shall remain the responsibility of the Acquired Fund.
1.8. All books and records of the Acquired Fund, including
all books and records required to be maintained under the 1940 Act
and the rules and regulations thereunder, shall be available to
the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following
the closing date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the
close of regular trading on The New York Stock Exchange, Inc.
("NYSE") on the Closing Date, as defined in Section 3.1 (such time
and date also being hereinafter called the "Valuation Time") after
the declaration and payment of any dividends and/or other
distributions on that date, using the valuation procedures set
forth in the Acquiring Fund's Articles of Incorporation, as
amended, and then-current prospectus or statement of additional
information.
2.2. The net asset value of an Acquiring Fund share shall
be the net asset value per share of each class computed as of the
Valuation Time using the valuation procedures referred to in
Section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued
(including fractional shares, if any) in exchange for the Assets
shall be determined by dividing the value of the Assets with
respect to shares of each class of the Acquired Fund determined in
accordance with Section 2.1 by the net asset value by class of an
Acquiring Fund Share determined in accordance with Section 2.2.
2.4. All computations of value hereunder shall be made by
or under the direction of each Fund's respective accounting agent,
if applicable, in accordance with its regular practice and the
requirements of the 1940 Act and shall be subject to confirmation
by each Fund's respective independent accountants.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this
Agreement shall be October 6, 2000, or such later date as the
parties may agree in writing (the "Closing Date"). All acts
taking place at the Closing shall be deemed to take place
simultaneously as of 4:00 P.M., Eastern time, on the Closing
Date, unless otherwise agreed to by the parties. The Closing
shall be held at the offices of [Willkie Farr & Gallagher] or at
such other place and time as the parties may agree.
3.2. Acquired Fund shall deliver to Acquiring Fund on the
Closing Date a schedule of assets.
3.3. PNC Bank, National Association, as custodian for the
Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets shall have been
delivered in proper form to PNC Bank, National Association,
custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the
Assets, including all applicable federal and state stock transfer
stamps, if any, have been paid or provision for payment has been
made. The Acquired Fund's portfolio securities represented by a
certificate or other written instrument shall be presented by
Custodian for Acquired Fund to Custodian for Acquiring Fund for
examination no later than five business days preceding the Closing
Date and transferred and delivered by the Acquired Fund as of the
Closing Date by the Acquired Fund for the account of Acquiring
Fund duly endorsed in proper form for transfer in such condition
as to constitute good delivery thereof. The Acquired Fund's
portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, shall be
delivered as of the Closing Date by book entry in accordance with
the customary practices of such depositories and Custodian for
Acquiring Fund. The cash to be transferred by the Acquired Fund
shall be delivered by wire transfer of federal funds on the
Closing Date.
3.4. Citi Fiduciary Trust Company (the "Transfer Agent"),
on behalf of the Acquired Fund, shall deliver at the Closing a
certificate of an authorized officer stating that its records
contain the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership (to three decimal places)
of outstanding Acquired Fund Shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares to
be credited on the Closing Date to the Acquired Fund or provide
evidence satisfactory to the Acquired Fund that such Acquiring
Fund Shares have been credited to the Acquired Fund's 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 to effect the
transactions contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation
Time (a) the NYSE or another primary trading market for portfolio
securities of the Acquiring Fund or the Acquired Fund shall be
closed to trading or trading thereupon shall be restricted, or
(b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board
of Directors/Trustees of either Fund, accurate appraisal of the
value of the net assets with respect to the Acquiring Fund Shares
or the Acquired Fund Shares is impracticable, the Closing Date
shall be postponed until the first business day after the day when
trading shall have been fully resumed and reporting shall have
been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. Investment Series, on behalf of the Acquired Fund,
represents and warrants to the Acquiring Fund as follows:
(a) Investment Series is a business trust duly
organized and validly existing under the laws of The
Commonwealth of Massachusetts with power under its
Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is
now being conducted;
(b) Investment Series is registered with the
Commission as an open-end management investment company
under the Investment Company Act of 1940, as amended (the
"1940 Act"), and such registration is in full force and
effect;
(c) No consent, approval, authorization, or order of
any court or governmental authority is required for the
consummation by the Acquired Fund of the transactions
contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934 (the "1934 Act") and the
1940 Act and such as may be required by state securities
laws;
(d) Other than with respect to contracts entered
into in connection with the portfolio management of the
Acquired Fund which shall terminate on or prior to the
Closing Date, Investment Series is not, and the execution,
delivery and performance of this Agreement by Investment
Series will not result, in violation of Massachusetts law or
of its Declaration of Trust, as amended, or By-Laws, or of
any material agreement, indenture, instrument, contract,
lease or other undertaking known to counsel to which the
Acquired Fund is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by the
Acquired Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any
agreement, indenture, instrument, contract, lease, judgment
or decree to which the Acquired Fund is a party or by which
it is bound;
(e) 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 the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts
which might form the basis for the institution of such
proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or
governmental body which materially and adversely affects its
business or its ability to consummate the transactions
herein contemplated;
(f) The Statements of Assets and Liabilities,
including the Investment Portfolio, Operations, and Changes
in Net Assets, and the Financial Highlights of the Acquired
Fund at and for the year ended October 31, 1999, has been
audited by Ernst & Young LLP, independent certified public
accountants, and are in accordance with GAAP consistently
applied, and such statements (copies of which have been
furnished to the Acquiring Fund) present fairly, in all
material respects, the financial position, results of
operations, changes in net assets and financial highlights
of the Acquired Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the
Acquired Fund required to be reflected on a statement of
assets and liabilities (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(g) Since October 31, 1999, there has not been any
material adverse change in the Acquired Fund's financial
condition, assets, liabilities or business other than
changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing
more than one year from the date such indebtedness was
incurred except as otherwise disclosed to and accepted in
writing by the Acquiring Fund. For purposes of this
subsection (g), a decline in net asset value per share of
the Acquired Fund due to declines in market values of
securities in the Acquired Fund's portfolio, the discharge
of Acquired Fund liabilities, or the redemption of Acquired
Fund shares by Acquired Fund Shareholders shall not
constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all
federal and other tax returns and reports of the Acquired
Fund required by law to have been filed by such dates
(including any extensions) shall have been filed and are or
will be correct in all material respects, and all federal
and other taxes shown as due or required to be shown as due
on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and,
to the best of the Acquired Fund's knowledge, no such return
is currently under audit and no assessment has been asserted
with respect to such returns;
(i) For each taxable year of its operation, the
Acquired Fund has met the requirements of Subchapter M of
the Code for qualification as a regulated investment company
and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of
the Code, and will have distributed all of its investment
company taxable income and net capital gain (as defined in
the Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the
Acquired Fund (i) have been offered and sold in every state
and the District of Columbia in compliance in all material
respects with applicable registration requirements of the
1933 Act and state securities laws, (ii) are, and on the
Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, and (iii) will
be held at the time of the Closing by the persons and in the
amounts set forth in the records of the Transfer Agent, as
provided in Section 3.3. The Acquired Fund does not have
outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund shares,
nor is there outstanding any security convertible into any
of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have
good and marketable title to the Acquired Fund's assets to
be transferred to the Acquiring Fund pursuant to Section 1.2
and full right, power, and authority to sell, assign,
transfer and deliver such assets hereunder free of any liens
or other encumbrances, except those liens or encumbrances as
to which the Acquiring Fund has received notice at or prior
to the Closing, and upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise
under the 1933 Act and the 1940 Act, except those
restrictions as to which the Acquiring Fund has received
notice and necessary documentation at or prior to the
Closing;
(l) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the
Trustees of Investment Series, and, subject to the approval
of the Acquired Fund Shareholders, this Agreement
constitutes a valid and binding obligation of Investment
Series, on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired
Fund for use in applications for orders, registration
statements or proxy materials or for use in any other
document filed or to be filed with any federal, state or
local regulatory authority (including the National
Association of Securities Dealers, Inc.), which may be
necessary 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; and
(n) The current prospectus and statement of
additional information of the Acquired Fund conform in all
material respects to the applicable requirements of the 1933
Act and the 1940 Act and the rules and regulations of the
Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be
included in the Registration Statement referred to in
Section 5.7 (the "Proxy Statement"), insofar as it relates
to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which such statements are made, not materially
misleading; provided, however, that the representations and
warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with
information that was furnished or should have been furnished
by the Acquiring Fund for use therein.
4.2. The Acquiring Fund represents and warrants to
Investment Series, on behalf of the Acquired Fund, as follows:
(a) The Acquiring Fund is a corporation duly
organized and validly existing under the laws of the State
of Maryland with power under its Articles of Incorporation,
as amended, to own all of its properties and assets and to
carry on its business as it is now being conducted;
(b) The Acquiring Fund is registered with the
Commission as an open-end management investment company
under the 1940 Act, and such registration is in full force
and effect;
(c) No consent, approval, authorization, or order of
any court or governmental authority is required for the
consummation by the Acquiring Fund of the transactions
contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may
be required by state securities laws;
(d) The Acquiring Fund is not, and the execution,
delivery and performance of this Agreement by the Acquiring
Fund will not result, in violation of Maryland law or of the
Acquiring Fund's Articles of Incorporation, as amended, or
By-Laws, or of any material agreement, indenture,
instrument, contract, lease or other undertaking known to
counsel to which the Acquiring Fund is a party or by which
it is bound, and the execution, delivery and performance of
this Agreement by the Acquiring Fund will not result in the
acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquiring
Fund is a party or by which it is bound;
(e) 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 the Acquiring Fund or any properties or
assets held by it. The Acquiring Fund knows of no facts
which might form the basis for the institution of such
proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or
governmental body which materially and adversely affects its
business or its ability to consummate the transactions
herein contemplated;
(f) The Statements of Assets and Liabilities,
including the Investment Portfolio, Operations, and Changes
in Net Assets, and the Financial Highlights of the Acquiring
Fund at and for the year ended February 29, 2000 has been
audited by KPMG LLP, independent certified public
accountants, and are in accordance with GAAP consistently
applied, and such statements (copies of which have been
furnished to the Acquired Fund) present fairly, in all
material respects, the financial position, results of
operations, changes in net assets and financial highlights
of the Acquiring Fund as of such date in accordance with
GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a statement of
assets and liabilities (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(g) Since February 29, 2000, there has not been any
material adverse change in the Acquiring Fund's financial
condition, assets, liabilities or business other than
changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was
incurred except as otherwise disclosed to and accepted in
writing by Investment Series on behalf of the Acquired Fund.
For purposes of this subsection (g), a decline in net asset
value per share of the Acquiring Fund due to declines in
market values of securities in the Acquiring Fund's
portfolio, the discharge of Acquiring Fund liabilities, or
the redemption of Acquiring Fund shares by Acquiring Fund
shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all
federal and other tax returns and reports of the Acquiring
Fund required by law to have been filed by such dates
(including any extensions) shall have been filed and are or
will be correct in all material respects, and all federal
and other taxes shown as due or required to be shown as due
on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and,
to the best of the Acquiring Fund's knowledge, no such
return is currently under audit and no assessment has been
asserted with respect to such returns;
(i) For each taxable year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of
the Code for qualification as a regulated investment company
and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of
the Code, and will do so for the taxable year including the
Closing Date;
(j) All issued and outstanding shares of the
Acquiring Fund (i) have been offered and sold in every state
and the District of Columbia in compliance in all material
respects with applicable registration requirements of the
1933 Act and state securities laws and (ii) are, and on the
Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable. The Acquiring
Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of the
Acquiring Fund shares, nor is there outstanding any security
convertible into any of the Acquiring Fund shares;
(k) The Acquiring Fund Shares to be issued and
delivered to the Acquired Fund, for the account of the
Acquired Fund Shareholders, pursuant to the terms of this
Agreement, will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly
and validly issued and outstanding Acquiring Fund Shares,
and will be fully paid and non-assessable;
(l) At the Closing Date, the Acquiring Fund will
have good and marketable title to the Acquiring Fund's
assets, free of any liens or other encumbrances, except
those liens or encumbrances as to which the Acquired Fund
has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the
Closing Date by all necessary action on the part of the
Directors of the Acquiring Fund and this Agreement will
constitute a valid and binding obligation of the Acquiring
Fund, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity
principles;
(n) The information to be furnished by the Acquiring
Fund for use in applications for orders, registration
statements or proxy materials or for use in any other
document filed or to be filed with any federal, state or
local regulatory authority (including the National
Association of Securities Dealers, Inc.), which may be
necessary 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;
(o) The current prospectus and statement of
additional information of the Acquiring Fund conform in all
material respects to the applicable requirements of the 1933
Act and the 1940 Act and the rules and regulations of the
Commission thereunder and do not include any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under
which they were made, not materially misleading;
(p) The Proxy Statement to be included in the
Registration Statement, only insofar as it relates to the
Acquiring Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which such statements were made, not materially
misleading; provided, however, that the representations and
warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with
information that was furnished or should have been furnished
by the Acquired Fund for use therein; and
(q) The Acquiring Fund agrees to use all reasonable
efforts to obtain the approvals and authorizations required
by the 1933 Act, the 1940 Act and such of the state
securities laws as may be necessary in order to continue its
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and Investment Series, on behalf of
the Acquired Fund, each covenants to operate its business in the
ordinary course between the date hereof and the Closing Date, it
being understood that (a) such ordinary course of business will
include (i) the declaration and payment of customary dividends and
other distributions and (ii) such changes as are contemplated by
the Funds' normal operations; and (b) each Fund shall retain
exclusive control of the composition of its portfolio until the
Closing Date.
5.2. Upon reasonable notice, the Acquiring Fund's officers
and agents shall have reasonable access to the Acquired Fund's
books and records necessary to maintain current knowledge of the
Acquired Fund and to ensure that the representations and
warranties made by the Acquired Fund are accurate.
5.3. Investment Series, on behalf of the Acquired Fund,
covenants to call a meeting of the Acquired Fund Shareholders
entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain
approval of the transactions contemplated herein. Such meeting
shall be scheduled for no later than _________, 2000 (or such
other date as the Acquired Fund and the Acquiring Fund may agree
to in writing).
5.4. Investment Series, on behalf of the Acquired Fund,
covenants that the Acquiring Fund Shares to be issued hereunder
are not being acquired for the purpose of making any distribution
thereof other than in accordance with the terms of this Agreement.
5.5. Investment Series, on behalf of the Acquired Fund,
covenants that it will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund Shares and will
provide the Acquiring Fund with a list of affiliates of the
Acquired Fund.
5.6. Subject to the provisions of this Agreement, the
Acquiring Fund and Investment Series, on behalf of the Acquired
Fund, will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or
advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.7. Each Fund covenants to prepare the Registration
Statement on Form N-14 (the "Registration Statement"), in
compliance with the 1933 Act, the 1934 Act and the 1940 Act in
connection with the meeting of the Acquired Fund Shareholders to
consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the
Registration Statement, including the Proxy Statement, with the
Commission. Investment Series, on behalf of the Acquired Fund,
will provide the Acquiring Fund with information reasonably
necessary for the preparation of a prospectus, which will include
the Proxy Statement referred to in Section 4.1(o), all to be
included in the Registration Statement, in compliance in all
material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. Investment Series, on behalf of the Acquired Fund,
covenants that it will, from time to time, as and when reasonably
requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other
instruments, and will take or cause to be taken such further
action as the Acquiring Fund may reasonably deem necessary or
desirable in order to vest in and confirm the Acquiring Fund's
title to and possession of all the assets and otherwise to carry
out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable
efforts to obtain the approvals and authorizations required by the
1933 Act and 1940 Act, and such of the state securities laws as it
deems appropriate in order to continue its operations after the
Closing Date and to consummate the transactions contemplated
herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as
circumstances change.
5.10. The Acquiring Fund covenants that it will, from time
to time, as and when reasonably requested by the Acquired Fund,
execute and deliver or cause to be executed and delivered all such
assignments, assumption agreements, releases, and other
instruments, and will take or cause to be taken such further
action, as the Acquired Fund may reasonably deem necessary or
desirable in order to (i) vest and confirm to the Acquired Fund
title to and possession of all Acquiring Fund shares to be
transferred to Acquired Fund pursuant to this Agreement and
(ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing,
the Acquired Fund shall make a liquidating distribution to its
shareholders consisting of the Acquiring Fund Shares received at
the Closing.
5.12. The Acquiring Fund and Investment Series, on behalf of
the Acquired Fund, shall each use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to
effect the transactions contemplated by this Agreement as promptly
as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of Investment Series, on behalf of the
Acquired Fund, to consummate the transactions provided for herein
shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it
hereunder on or before the Closing Date, and, in addition thereto,
the following further conditions:
6.1. All representations and warranties of the Acquiring
Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be
affected by the transactions contemplated by this Agreement, as of
the Closing Date, with the same force and effect as if made on and
as of the Closing Date; and there shall be (i) no pending or
threatened litigation brought by any person (other than Acquired
Fund, its adviser or any of their affiliates) against the
Acquiring Fund, the Acquired Fund or their advisers, trustees or
officers arising out of this Agreement and (ii) no facts known to
the Acquired Fund which the Acquired Fund reasonably believes
might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the
Acquired Fund on the Closing Date a certificate executed in its
name by its President or a Vice President, 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 the
Acquiring Fund made in this Agreement are true and correct on and
as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other
matters as the Acquired Fund shall reasonably request;
6.3. Investment Series, on behalf of the Acquired Fund,
shall have received on the Closing Date an opinion of Willkie Farr
& Gallagher, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, to the effect that:
(a) the Acquiring Fund has been duly organized and
is a validly existing corporation;
(b) the Acquiring Fund has the corporate power to
carry on its business as presently conducted in accordance
with the description thereof in the Acquiring Fund's
registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed
and delivered by the Acquiring Fund, and constitutes a valid
and legally binding obligation of the Acquiring Fund,
enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
(d) the execution and delivery of the Agreement did
not, and the exchange of the Acquired Fund's assets for
Acquiring Fund Shares pursuant to the Agreement will not,
violate the Acquiring Fund's Articles of Incorporation, as
amended, or By-laws; and
(e) to the knowledge of such counsel, all regulatory
consents, authorizations, approvals or filings required to
be obtained or made by the Acquiring Fund under the Federal
laws of the United States or the laws of the State of
Maryland for the exchange of the Acquired Fund's assets for
Acquiring Fund Shares pursuant to the Agreement have been
obtained or made.
Such opinion may state that it is solely for the benefit of
Investment Series, 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 and/or certificates of
officers or Directors of the Acquiring Fund. Such opinion also
shall include such other matters incident to the transaction
contemplated hereby as the Acquired Fund may reasonably request.
6.4. The Acquiring Fund shall have performed all of the
covenants and complied with all of the provisions required by this
Agreement to be performed or complied with by the Acquiring Fund
on or before the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the
transactions provided for herein shall be subject, at its
election, to the performance by the Acquired Fund of all of the
obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of Investment
Series, with respect to the Acquired 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; and there shall be (i) no pending or threatened
litigation brought by any person (other than Acquiring Fund, its
adviser or any of their affiliates) against the Acquired Fund, the
Acquiring Fund or their advisers, trustees or officers arising out
of this Agreement and (ii) no facts known to the Acquiring Fund
which the Acquiring Fund reasonably believes might result in such
litigation.
7.2. Investment Series shall have delivered to the
Acquiring Fund a statement of the Acquired Fund's assets and
liabilities as of the Closing Date, certified by the Treasurer of
Investment Series;
7.3. Investment Series shall have delivered to the
Acquiring Fund on the Closing Date a certificate executed in its
name by its President or a Vice President, in a form reasonably
satisfactory to the Acquiring Fund and dated as of the Closing
Date, to the effect that the representations and warranties of
Investment Series with respect to the Acquired Fund made in this
Agreement are true and correct on and as of the Closing Date,
except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Acquiring Fund
shall reasonably request;
7.4. The Acquiring Fund shall have received on the Closing
Date an opinion of [Sullivan & Worcester LLP], in a form
reasonably satisfactory to the Acquiring Fund, and dated as of the
Closing Date, to the effect that:
(a) Investment Series has been duly formed and is an
existing business trust;
(b) Investment Series, with respect to the Acquired
Fund, has the corporate power to carry on its business as
presently conducted in accordance with the description
thereof in Investment Series' registration statement under
the 1940 Act;
(c) the Agreement has been duly authorized, executed
and delivered by Investment Series, on behalf of the
Acquired Fund, and constitutes a valid and legally binding
obligation of Investment Series, on behalf of the Acquired
Fund, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
(d) the execution and delivery of the Agreement did
not, and the exchange of the Acquired Fund's assets for
Acquiring Fund Shares pursuant to the Agreement will not,
violate the Declaration of Trust, as amended, or By-laws of
Investment Series; and
(e) to the knowledge of such counsel, all regulatory
consents, authorizations, approvals or filings required to
be obtained or made by the Acquired Fund under the Federal
laws of the United States or the laws of The Commonwealth of
Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares pursuant to the Agreement have
been obtained or made.
Such opinion may state that it is solely for the benefit of the
Acquiring Fund, its Directors and its officers. Such counsel may
rely as to matters governed by the laws of The Commonwealth of
Massachusetts on an opinion of Massachusetts counsel and/or
certificates of officers or Trustees of Investment Series. Such
opinion also shall include such other matters incident to the
transaction contemplated hereby, as the Acquiring Fund may
reasonably request.
7.5. Investment Series, on behalf of the Acquired Fund,
shall have performed all of the covenants and complied with all of
the provisions required by this Agreement to be performed or
complied with by the Acquired Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE ACQUIRED FUND
If any of the conditions set forth below have not been met
on or before the Closing Date with respect to the Acquired Fund or
the Acquiring Fund, the other party to this Agreement shall, at
its option, not be required to consummate the 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 beneficial interests in the
Acquired Fund in accordance with the provisions of the Declaration
of Trust, as amended, and By-Laws of Investment Series, applicable
Massachusetts law and the 1940 Act, and certified copies of the
resolutions evidencing such approval shall have been delivered to
the Acquiring Fund. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this Section 8.1;
8.2. On the Closing Date, no action, suit or other
proceeding shall be pending or to its knowledge threatened before
any court or governmental agency in which it is sought to restrain
or prohibit, or obtain material damages or other relief in
connection with, this Agreement or the transactions contemplated
herein;
8.3. All consents of other parties and all other consents,
orders and permits of Federal, state and local regulatory
authorities deemed necessary by the Acquiring 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; and
8.5. The parties shall have received an opinion of Willkie
Farr & Gallagher addressed to Investment Series, on behalf of the
Acquired Fund, and the Acquiring Fund substantially to the effect
that, based upon certain facts, assumptions and representations,
for Federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired
Fund in exchange solely for Shares and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund,
followed by the distribution of such Shares to Acquired Fund
shareholders in exchange for their shares of the Acquired Fund in
complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the
Code, and the Acquiring Fund and the Acquired Fund will each be "a
party to a reorganization" within the meaning of Section 368(b) of
the Code; (ii) no gain or loss will be recognized by the Acquired
Fund upon the transfer of the Acquired Fund's assets to the
Acquiring Fund in exchange for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of liabilities of the Acquired
Fund or upon the distribution (whether actual or constructive) of
the Acquiring Fund Shares to the Acquired Fund's shareholders in
exchange for their shares of the Acquired Fund; (iii) the basis of
the assets of the Acquired Fund in the hands of the Acquiring Fund
will be the same as the basis of such assets of the Acquired Fund
immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund
will include the period during which such assets were held by the
Acquired Fund; (v) no gain or loss will be recognized by the
Acquiring Fund upon the receipt of the assets of the Acquired Fund
in exchange for Shares and the assumption by the Acquiring Fund of
all of the liabilities of the Acquired Fund; (vi) no gain or loss
will be recognized by the holders of shares of beneficial
interests in the Acquired Fund upon the receipt of Shares solely
in exchange for their shares of the Acquired Fund as part of the
transaction; (vii) the basis of Shares received by the holders of
shares of beneficial interests in the Acquired Fund will be the
same as the basis of the shares of beneficial interests in the
Acquired Fund exchanged therefor; and (viii) the holding period of
Shares received by the holders of shares of beneficial interests
in the Acquired Fund will include the holding period during which
the shares of beneficial interests in the Acquired Fund exchanged
therefor were held, provided that at the time of the exchange the
shares of beneficial interests in the Acquired Fund were held as
capital assets in the hands of the holders of shares of beneficial
interests in the Acquired Fund. The delivery of such opinion is
conditioned upon receipt by Willkie Farr & Gallagher of
representations it shall request of each of Investment Series, on
behalf of the Acquired Fund, and the Acquiring Fund.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Investment Series, on behalf of the
Acquired Fund, may waive the condition set forth in this Section
8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold
harmless Investment Series and each of its trustees and officers
from and against any and all losses, claims, damages, liabilities
or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to
which jointly and severally Investment Series or any of its
trustees or officers may become subject, insofar as any such loss,
claim damage liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the Acquiring
Fund of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
9.2. Investment Series agrees to indemnify and hold
harmless the Acquiring Fund and each of its directors and officers
from and against any and all losses, claims, damages, liabilities
or expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of investigation) to
which jointly and severally the Acquiring Fund or any of its
trustees or officers may become subject, insofar as any such loss,
claim damage liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the Acquired
Fund of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. The Acquiring Fund and Investment Series, on behalf of
the Acquired Fund, represents and warrants to the other that it
has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2. [Expenses of the Reorganization that relate to the
Acquiring Fund and the Acquired Fund will be borne by SSB Citi.]
Any such expenses which are so borne by SSB Citi will be solely
and directly related to the Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and Investment Series, on behalf of
the Acquired Fund, agree that neither party has made any
representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the
parties.
11.2. Except as specified in the next sentence set forth in
this Section 11.2, the representations, warranties and covenants
contained in this Agreement or in any document delivered pursuant
hereto or in connection herewith shall not survive the
consummation of the transactions contemplated hereunder.
The covenants to be performed after the Closing and the
obligations of each of the Acquired Fund and Investment Series, on
behalf of Acquired Fund, in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by either party by (i) mutual
agreement of the parties, or (ii) by either party if the Closing
shall not have occurred on or before January 1, 2001, unless such
date is extended by mutual agreement of the parties, or (iii) by
either party if the other party shall have materially breached its
obligations under this Agreement or made a material and
intentional misrepresentation herein or in connection herewith.
In the event of any such termination, this Agreement shall become
void and there shall be no liability hereunder on the part of any
party or their respective directors or officers, except for any
such material breach or intentional misrepresentation, as to each
of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the
authorized officers of Investment Series and the Acquiring Fund;
provided, however, that following the meeting of the Acquired Fund
Shareholders called by the Acquired Fund pursuant to Section 5.3
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
shareholders under this Agreement to the detriment of such
shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or
permitted by any provisions of this Agreement shall be in writing
and shall be deemed duly given if delivered by hand (including by
Federal Express or similar express courier) or transmitted by
facsimile or three days after being mailed by prepaid registered
or certified mail, return receipt requested, addressed to the
Acquired Fund, c/o Concert Investment Series(r), Inc., 388 Greenwich
Street, New York, New York 10013, with a copy to Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
Attn.: Burton M. Leibert, Esq., or to the Acquiring Fund, 388
Greenwich Street, New York, New York 10013, with a copy to
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019-6099, Attn.: Burton M. Leibert, Esq., or to any other
address that Investment Series or the Acquiring Fund shall have
last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
15.2. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give
any person, firm or corporation, other than the parties hereto and
the shareholders of the Acquiring Fund and the Acquired Fund and
their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.
15.4. Investment Series is organized as a Massachusetts
business trust, and references in this Agreement to Investment
Series mean and refer to the Trustees from time to time serving
under the Declarations of Trust on file with the Secretary of
State of The Commonwealth of Massachusetts, as the same may be
amended from time to time, pursuant to which Investment Series
conducts its business. It is expressly agreed that the
obligations of Investment Series hereunder shall not be binding
upon any of its Trustees, shareholders, nominees, officers,
agents, or employees of Investment Series personally, but bind
only the property of the Acquired Fund as provided in the
Declaration of Trust of Investment Series. Moreover, no series of
Investment Series other than the Acquired Fund shall be
responsible for the obligations of Investment Series hereunder,
and all persons shall look only to the assets of the Acquired Fund
to satisfy the obligations of Investment Series hereunder. The
execution and the delivery of this Agreement have been authorized
by the Board of Trustees of Investment Series, on behalf of the
Acquired Fund, and this Agreement has been signed by authorized
officers of Investment Series 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 property of the Acquired Fund as provided
in the Declaration of Trust of Investment Series.
15.5. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York,
without regard to its principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its President, Vice President or
in the case of SSB Citi, an authorized person and attested by its
Secretary, Assistant Secretary or in the case of SSB Citi, an
authorized person.
Attest: CONCERT INVESTMENT SERIES(r)
on behalf of Municipal Bond
Fund
By:
Name:
Title:
Attest: SMITH BARNEY MANAGED
MUNICIPALS
FUND INC.
By:
Name:
Title:
Attest: SSB CITI FUND MANAGEMENT LLC
By:
Name:
Title:
THE PROSPECTUS AND ANNUAL REPORT OF THE ACQUIRING FUND
DATED JUNE 28, 2000 AND FEBRUARY 29, 2000, RESPECTIVELY,
ARE INCORPORATED BY REFERENCE TO THE MOST RECENT
FILINGS THEREOF BY THE ACQUIRING FUND
PART B
INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
SUBJECT TO COMPLETION, DATED JULY 17, 2000
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE ACQUISITION BY
SMITH BARNEY MANAGED MUNICIPALS FUND, INC.
(THE "ACQUIRING FUND")
388 Greenwich Street
New York, New York 10013
(800) 451-2010
OF THE ASSETS OF
MUNICIPAL BOND FUND (THE "FUND"),
A SERIES OF SMITH BARNEY INVESTMENT SERIES(r), INC.
("INVESTMENT SERIES").
Dated: ________, 2000
This Statement of Additional Information, relating
specifically to the proposed transfer of all or substantially all
of the assets of the Fund, a series of Investment Series, to the
Acquiring Fund in exchange for shares of the corresponding class
of common stock of the Acquiring Fund and the assumption by the
Acquiring Fund of liabilities of the Fund, consists of this cover
page and the following described documents, each of which
accompanies this Statement of Additional Information and is
incorporated herein by reference.
1. Statement of Additional Information for the Acquiring
Fund, dated June 28, 2000.
2. Statement of Additional Information for the Fund, dated
February 28, 2000.
3. Annual Report of the Acquiring Fund for the year ended
February 29, 2000.
4. Annual Report of the Fund for the year ended October 31,
1999 and the Semi-Annual Report of the Fund for the six
months ended April 30, 2000.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated ________, 2000, relating to the
above-referenced matter may be obtained without charge by calling
or writing the Acquiring Fund at the telephone number or address
set forth above. This Statement of Additional Information should
be read in conjunction with the Prospectus/Proxy Statement.
FINANCIAL STATEMENTS
The Annual Report of the Acquiring Fund for the year ended
February 29, 2000 and the Annual Report of Investment Series for
the year ended October 31, 1999, each including audited financial
statements, notes to the financial statements and report of the
independent auditors, are incorporated by reference herein. To
obtain a copy of the Annual Reports (and, as applicable, any more
recent semi-annual report) without charge, please call 1-800-
451-2010.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Due to the net asset value of the Fund being less than 10%
of the Acquiring Fund's net asset value, pro forma financial
statements are not required to be and have not been prepared for
inclusion in the Statement of Additional Information filed in
connection with the Reorganization.
THE ANNUAL REPORT AND STATEMENT OF ADDITIONAL INFORMATION OF THE
ACQUIRING FUND DATED FEBRUARY 29, 2000 AND JUNE 28, 2000,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY
THE ACQUIRING FUND
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION, ANNUAL
REPORT AND SEMI-ANNUAL REPORT OF THE FUND DATED FEBRUARY
28, 2000, OCTOBER 31, 1999 AND APRIL 30, 2000, RESPECTIVELY,
ARE INCORPORATED BY REFERENCE TO THE MOST RECENT
FILINGS THEREOF BY CONCERT INVESTMENT SERIES(r)
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION -- The response to this item is
incorporated by reference to Section 9 of the Agreement and Plan
of Reorganization. Response to this item is also incorporated by
reference to Post-Effective Amendment No. 22 filed on October 23,
1992 ("Post-Effective Amendment No. 22").
ITEM 16. EXHIBITS
Unless otherwise noted, all references are to the
Registrant's Registration Statement on Form N-1A (the
"Registration Statement") as filed with the SEC on
September 26, 1980 (File Nos. 2-69308 and 811-3097).
1(a) Articles of Amendment to the Articles of Incorporation
dated July 30, 1993, are incorporated by reference to
Post-Effective Amendment No. 25 filed on February 25,
1994 ("Post-Effective Amendment No. 25").
1(b) Form of Amendment to Articles of Incorporation, Form
of Articles Supplementary, Form of Amendment and
Articles of Correction dated October 14, 1994, are
incorporated by reference to Post-Effective Amendment
No. 27 filed on November 7, 1994 ("Post-Effective
Amendment No. 27").
1(c) Articles of Amendment dated June 1, 1998 to the
Articles of Incorporation is incorporated by reference
to Post-Effective Amendment No. 33 filed on April 28,
1999 ("Post-Effective Amendment No. 33")
2(a) Registrant's By-Laws are incorporated by reference to
Post-Effective Amendment No. 3 as filed on June 17,
1982
2(b) Amendments to Registrant's By-Laws are incorporated by
reference to Post-Effective Amendment No. 12, as filed
on April 29, 1988.
3 None.
4 Agreement and Plan of Reorganization are filed herein.
5 Registrant's form of stock certificate is incorporated
by reference to Post-Effective Amendment No. 22.
6(a) Investment Advisory Agreement dated July 30, 1993
between the Registrant and Greenwich Street Advisors
is incorporated by reference to Post-Effective
Amendment No. 25.
6(b) Form of Transfer of Investment Advisory Agreement
dated as of November 7, 1994 among Registrant, Mutual
Management Corp. and Smith Barney Mutual Funds
Management Inc. is incorporated by reference to Post-
Effective Amendment No. 28.
7(a) Distribution Agreement between the Registrant and
Smith Barney Shearson Inc. dated July 30, 1993, is
incorporated by reference to Post-Effective Amendment
No. 25.
7(b) Form of Distribution Agreement between Registrant and
CFBDS, Inc. is incorporated by reference to Post-
Effective Amendment No. 33.
8 Not applicable.
9 Form of Custody Agreement between the Registrant and
PNC Bank, National Association is incorporated by
reference to Post-Effective Amendment No. 29 filed on
February 27, 1996 ("Post-Effective Amendment No. 29")
10(a) Amended Services and Distribution Plan pursuant to
Rule 12b-1 between the Registrant and Smith Barney
Inc. is incorporated by reference to Post-Effective
Amendment No. 27.
10(b) Form of Amended Service and Distribution Plan pursuant
to Rule 12b-1 between the Registrant and Salomon Smith
Barney Inc. is incorporated by reference to Post-
Effective Amendment No. 33.
10(c) Form of Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-
Effective Amendment No. 16.
10(d) Form of Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-
Effective Amendment No. 32 dated June 26, 1998.
11 Opinion and consent of Counsel as to the legality of
the securities being registered is filed herewith.
12 Opinion and consent of Counsel supporting tax matters
and consequences to shareholders discussed in the
prospectus is filed herewith.
13(a) Administration Agreement dated April 20, 1994, between
the Registrant and Smith, Barney Advisers, Inc., is
incorporated by reference to Post-Effective Amendment
No. 27.
13(b) Transfer Agency Agreement dated August 2, 1993 between
the Registrant and The Shareholder Services Group,
Inc., is incorporated by reference to Post-Effective
Amendment No. 25.
14 Auditor's Consent is filed herein.
15 Not applicable.
16 Powers of Attorney filed herewith.
17(a) Form of proxy card is filed herewith.
17(b) Annual Report of Concert Investment Series(r), dated
October 31, 1999, and Semi-Annual Report dated April
30, 2000, are incorporated herein by reference.
17(c) Prospectus and statement of additional information of
Concert Investment Series(r), dated February 28, 2000,
are incorporated herein by reference.
17(d) Annual Report of Registrant, dated February 29, 2000,
is incorporated herein by reference.
17(e) Prospectus and statement of additional information of
Registrant, dated June 28, 2000, are incorporated
herein by reference.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any
public reoffering of the securities registered through the use of
a prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the securities Act [17 CFR 230.145c],
the reoffering prospectus will contain the information called for
by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called
for by the other terms of the applicable form.
(2) The undersigned registrant agrees that every
prospectus that is filed under paragraph (1) above will be filed
as a part of a n amendment to the registration statements and will
not be used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering
of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement on Form N-14 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of New York and the State of New York on the 17th day of
July, 2000.
SMITH BARNEY MANAGED
MUNICIPALS FUND INC.
By: /s/Heath B. McLendon
Name: Heath B. McLendon
Title: Chairman of the
Board
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/Heath B. McLendon
Heath B. McLendon
Chairman of the Board
(Chief Executive
Officer)
July 17, 2000
/s/Lewis E. Daidone
Lewis E. Daidone
Treasurer (Chief
Financial and
Accounting Officer)
July 17, 2000
/s/Herbert Barg *
Herbert Barg
Director
July 17, 2000
/s/Alfred Bianchetti *
Alfred Bianchetti
Director
July 17, 2000
/s/Martin Brody *
Martin Brody
Director
July 17, 2000
/s/Dwight B. Crane *
Dwight B. Crane
Director
July 17, 2000
/s/Burt N. Dorsett *
Burt N. Dorsett
Director
July 17, 2000
/s/Elliot S. Jaffe *
Elliot S. Jaffe
Director
July 17, 2000
/s/Stephen E. Kaufman *
Stephen E. Kaufman
Director
July 17, 2000
/s/Joseph J. McCann *
Joseph J. McCann
Director
July 17, 2000
/s/ Cornelius C. Rose, Jr
Cornelius C. Rose, Jr.
Director
July 17, 2000
*By: /s/Heath B. McLendon
Heath B. McLendon
Attorney-in-fact pursuant to a
power of attorney filed
herewith.
*Signed pursuant to power of attorney filed herewith.
EXHIBITS
(11) Opinion and consent of Counsel as to the legality of the
securities being registered
(12) Opinion and consent of Counsel supporting tax matters and
consequences to shareholders discussed in the prospectus
(14) Auditor's Consent
(16) Powers of Attorney
(17) Proxy Card
