IMPORTANT NOTICE TO SHAREHOLDERS
PLEASE RETURN YOUR VOTE PROMPTLY
SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC.
Dear Shareholders:
As a shareholder in Smith Barney Shearson Fundamental Value Fund Inc., a
Fund sponsored by Smith Barney Shearson Inc. ("Smith Barney Shearson"), you
are invited to vote on various proposals in connection with, among other
things, reincorporating the Fund in the State of Maryland and modification of
certain of the Fund's fundamental investment policies.
Annual Meeting of Shareholders: Your Vote is Important
Detailed information regarding these proposals is included in the
enclosed proxy statement and, on behalf of the Board of Directors, I urge you
to promptly exercise your right to vote on these issues. Timely votes save
money.
Thank you for your time and participation as a shareholder. If you have
any questions regarding the proposals detailed in the enclosed proxy
statement, please contact your Smith Barney Shearson Financial Consultant.
Very truly yours,
[SIGNATURE]
Heath B. McLendon
Chairman of the Board
PLEASE SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED SELF-ADDRESSED ENVELOPE
REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
SMITH BARNEY SHEARSON
FUNDAMENTAL VALUE FUND INC.
- - ----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 28, 1994
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders
(the "Meeting") of Smith Barney Shearson Fundamental Value Fund Inc.
(the "Fund"), a Washington corporation, will be held at 999 Third
Avenue, 40th Floor, Seattle Washington, on June 28, 1994 at 11:00 a.m.
The Meeting is being held for the purposes listed below:
1. To elect eight (8) Directors of the Fund (Proposal 1);
2. To ratify the selection of Deloitte & Touche as independent
certified public accountants for the Fund for the fiscal year ending
September 30, 1994 (Proposal 2);
3. To consider and act upon the reincorporation of the Fund in the
State of Maryland (Proposal 3);
4. To approve the modification of certain of the Fund's fundamental
investment policies (Proposal 4); and
5. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors of the Fund has fixed the close of business
on May 10, 1994 as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.
By Order of the Directors,
Francis J. McNamara, III
Secretary
May 16, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN
THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense to the Fund involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing
the proxy card should be indicated unless it is reflected in the form of
registration. For example:
Registration Valid Signature
Corporate Accounts
(1) ABC Corp.
ABC Corp.
(2) ABC Corp.
John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer
John Doe
(4) ABC Corp. Profit Sharing Plan
John Doe, Trustee
Trust Accounts
(1) ABC Trust
Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78
Jane B. Doe
Custodian or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA
John B. Smith, Jr.
(2) Estate of John B. Smith
John B. Smith, Jr.,
Executor
SMITH BARNEY SHEARSON
FUNDAMENTAL VALUE FUND INC.
_________________________
ANNUAL MEETING OF SHAREHOLDERS
JUNE 28, 1994
__________________________
PROXY STATEMENT
INTRODUCTION
This proxy statement is being furnished to the shareholders of
Smith Barney Shearson Fundamental Value Fund Inc. (the "Fund") for use
at the Annual Meeting of Shareholders of the Fund to be held on June 28,
1994 at 11:00 a.m. (pacific time), or at any adjournments thereof (the
"Meeting"). The Meeting will be held at 999 Third Avenue, 40th Floor,
Seattle, Washington. Proxy solicitations will be made primarily by
mail, but proxy solicitations also may be made by telephone, telegraph
or personal interviews conducted by officers and employees of the Fund;
Smith Barney Shearson Inc. ("Smith Barney Shearson"), distributor of
shares of the Fund; Smith Barney Shearson Asset Management ("SBSAM"), a
division of Smith, Barney Advisers, Inc. ("SBA"), the investment adviser
to the Fund; The Boston Company Advisors, Inc., administrator for the
Fund ("Boston Advisors"); and/or The Shareholder Services Group, Inc.
("TSSG"), a subsidiary of First Data Corporation, the transfer agent for
the Fund. In addition, the Fund has retained Management Information
Services to assist in the solicitation of proxies for a fee estimated at
$_____ plus reimbursement of expenses. The total cost of the proxy
solicitation is anticipated to be $________. The cost of the proxy
solicitation and the expenses incurred in connection with the
preparation of this proxy statement and its enclosures, including the
reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material to the beneficial owners of the Fund's
shares, will be borne by the Fund.
The Annual Report of the Fund, containing audited financial
statements for the Fund's fiscal year ended September 30, 1993, has
previously been furnished to all shareholders of the Fund.
The Fund currently issues three classes of shares, but for
purposes of the matters to be considered at the Meeting, all shares will
be voted as a single class. Each share is entitled to one vote and any
fractional share is entitled to a fractional vote. If the enclosed
proxy is properly executed and returned in time to be voted at the
Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. Unless instructions to the contrary
are marked thereon, a proxy will be voted FOR the matters listed on the
Notice of Annual Meeting of Shareholders and FOR any other matters
deemed appropriate. For purposes of determining the presence of a
quorum for transacting business at the meeting, abstentions and broker
"non-votes" (i.e., proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or
other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary
power) will be treated as shares that are present but which have not
been voted. For this reason, abstention and broker non-votes will have
the effect of a "no" vote for the purposes of obtaining the requisite
approval of Proposals 3 and 4. Approval of Proposals 1 and 2 require
the affirmative vote of a plurality or a majority, respectively, of
shares voted. Because abstention and broker non-votes are not treated
as shares voted, abstention and broker non-votes would have no impact on
such Proposals. Any shareholder who has given a proxy has the right to
revoke it at any time prior to its exercise either by attending the
Meeting and voting his or her shares in person or by submitting a letter
of revocation or a later-dated proxy to the Fund at the above address
prior to the date of the Meeting.
In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present but sufficient votes to approve any
of the proposals are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting,
the following factors may be considered: the nature of the proposals
that are the subject of the Meeting; the percentage of votes actually
cast; the percentage of negative votes actually cast; the nature of any
further solicitation and the information to be provided to shareholders
with respect to the reasons for solicitation. Any adjournment will
require the affirmative vote of a majority of those shares represented
at the Meeting in person or by proxy. A shareholder vote may be taken
on any one of the proposals in this proxy statement prior to any
adjournment if sufficient votes have been received for approval of such
proposal. Under the By-laws of the Fund, a quorum is constituted by the
presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund entitled to vote at the Meeting.
The Board of Directors of the Fund (the "Board") has fixed the
close of business on May 10, 1994 as the record date (the "Record Date")
for the determination of shareholders of the Fund entitled to notice of
and to vote at the Meeting. At the close of business on the Record
Date, there were issued and outstanding ___________ shares of Class A
common stock, ___________ shares of Class B common stock, and
___________ shares of Class D common stock.
[As of the Record Date, to the knowledge of the Fund and its
Board, no single shareholder or "group" (as that term is used in Section
13(d) of the Securities Exchange Act of 1934 (the "Exchange Act"))
beneficially owned more than 5% of the outstanding shares of the Fund.
As of the Record Date, the officers and Board members of the Fund as a
group beneficially owned less than 1% of the shares of the Fund.]
Shareholders of the Fund will vote as a single class on each of
the four proposals presented at the Meeting. Proxy cards will be sent
to each shareholder who is a record owner of Fund shares. It is
essential that shareholders complete, date and sign the enclosed proxy
card. In order that a shareholder's shares may be represented at the
Meeting, shareholders are required to allow sufficient time for their
proxy to be received on or before 11:00 a.m. (pacific time) on June 28,
1994.
All shareholders of the Fund will vote on Proposals 1, 2, 3 and 4.
Proposal 1 requires for approval the affirmative vote of a
plurality of the votes cast at the Meeting in person or by proxy
("Plurality Vote"). Proposal 2 requires for approval the affirmative
vote of a majority of the votes cast at the Meeting in person or by
proxy. Proposal 3 requires the affirmative vote of two-thirds (67%) of
all the votes entitled to be cast at the Meeting. Proposal 4 requires
the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, which, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), means the lesser of (a) 67% of the
Fund's shares present at a meeting of its shareholders if the owners of
more than 50% of the shares of the Fund then outstanding are present in
person or by proxy or (b) more than 50% of the Fund's outstanding shares
("Majority Vote").
This proxy statement and accompanying proxy card is first being
mailed on or about May 16, 1994.
PROPOSAL 1: TO ELECT EIGHT (8) DIRECTORS OF THE FUND
The first proposal to be considered is the election of eight (8)
Directors of the Fund, each to hold office until the next Annual Meeting
of Shareholders or until his or her successor shall have been elected
and qualified. The Board currently consists of eight (8) members, all
of whom have been previously elected by the Fund's shareholders.
Each nominee has consented to serve as a Director if elected at
the Meeting. If a designated nominee declines or otherwise becomes
unavailable for election, however, the proxy confers discretionary power
on the persons named therein to vote in favor of a substitute nominee or
nominees. Mr. McLendon also serves as a trustee, director or general
partner of other investment companies for which Smith Barney Shearson
serves as the principal underwriter.
Set forth below are the names of the nominees for election to the
Board, together with certain other information:
Name, Age, Principal Occupation and
Other Directorships*** during last Five
Years
Served on
Board
Since
Amount (and
Percentage) of
Outstanding
Fund Shares
Beneficially
Owned** as of
May 10, 1994
Lloyd J. Andrews, age 73
Private Investor; Director of Flow
Systems, Inc.; and North Coast Life
Insurance Company. Post Vice Chairman
and Director of Chem-Nuclear Systems,
Inc.
1981
Robert M. Frayn, Jr., age 60
President and Director of Book
Publishing Company.
1981
Leon P. Gardner, age 66
Chairman of Fargo's Pizza Company;
private investor.
1984
Howard J. Johnson, age 57
President and Chairman of Howard
Johnson & Co.; Secretary and Director
of Wurts Johnson and Company; Director
of Spring Street Securities, Inc.;
Director ex officio of American Society
of Pension Actuaries; Director of
Ranier Trust Company
1981
David E. Maryatt, age 57
Director of ALS Co.
1981
Heath B. McLendon *, age 60
Executive Vice President of Smith
Barney Shearson and Chairman of Smith
Barney Shearson Strategy Advisors Inc.
("SBSSA"). Prior to July 1993, Senior
Executive Vice President of Shearson
Lehman Brothers Inc. and Vice Chairman
of Shearson Asset Management; a
Director of PanAgora Asset Management.
1987
Jerry A. Viscione, age 49
Dean of Albers School of Business and
Economics, Seattle University.
1993
- - --
Julie A. Weston, age 50
Private attorney.
1987
Directors and Officers as a Group
- - --
_______________________
* "Interested person" of the Fund, as defined in the 1940 Act, by
virtue of his position as an officer or director of the Fund's adviser
or one of its affiliates.
** For this purpose "beneficial ownership" is defined under Section
13(d) of the Exchange Act. The information as to beneficial ownership
is based upon information furnished to the Fund by the nominees.
*** Directorships, general partnerships or trusteeships of companies
that are required to report to the Securities and Exchange Commission
("SEC"), other than open-end registered investment companies.
If elected, each Director will hold office until the next Annual
Meeting of Shareholders or until his or her successor shall have been
elected and qualified, except that any Director may resign or be removed
at any meeting of shareholders called for that purpose by a majority of
the votes entitled to be cast for election of Directors. In case a
vacancy shall exist for any reason, the remaining Directors may fill the
vacancy by appointing another Director. If at any time less than a
majority of the Directors holding office have been elected by
shareholders, the Directors then in office will call a shareholders
meeting for the purpose of electing Directors.
Each Director who is not otherwise affiliated with the Fund,
Boston Advisors, or Smith Barney Shearson receives $500 as compensation
for each meeting attended and an annual fee of $3,000, plus
reimbursement of travel and out-of-pocket expenses. The Board has an
Audit Committee consisting of all Board Members who are not "interested
persons" of the Fund, as defined in the 1940 Act (the "Independent Board
Members"), which met twice during the Fund's 1993 fiscal year. The
Audit Committee reviews the scope and results of the Fund's annual audit
with the Fund's independent certified public accountants and recommends
the engagement of such accountants. The aggregate remuneration paid to
the Independent Board Members, as a group, by the Fund for the fiscal
year ended September 30, 1993 amounted to $53,719 (including
reimbursement for travel and out-of-pocket expenses). The Board held
five meetings during the Fund's fiscal year ended September 30, 1993.
All of the Board Members, with the exception of Mr. Johnson, attended at
least 75% of the Board and Committee meetings convened while they were
in office. [Audit Committee meetings and attendance?]
The following table shows certain information about the executive
officers of the Fund, other than Mr. McLendon who is also a Director of
the Fund and as to whom comparable information is supplied above. [None
of the executive officers listed below beneficially own, as that term is
defined under Section 13(d) of the Exchange Act, any shares of the
Fund.]
Name, Age and Principal Occupation
During the Past Five Years
Office (Year First Elected)
Stephen J. Treadway, age 46
Director and Executive Vice
President of Smith Barney Shearson:
Director and President, of SBA and
Mutual Management Corp.; a Trustee
of Corporate Realty Income Trust I.
President (1993)
Richard P. Roelofs, age 40
Managing Director of Smith Barney
Shearson; President of SBSSA.
Executive Vice President (1993)
John G. Goode, age 49
President and Chief Executive
Officer of Davis Skaggs Investment
Management, a division of SBSAM.
Vice President and Investment
Officer (1990)
Peter Hable, age 34
Senior Vice President of Davis
Skaggs Investment Management, a
division of SBSAM.
Investment Officer (1991)
Vincent Nave, age 49
Senior Vice President of Boston
Advisors and Boston Safe Deposit and
Trust Company.
Treasurer (1985)
Francis J. McNamara, III, age 38
Senior Vice President and General
Counsel of Boston Advisors.
Secretary (1989)
The principal business address of Mr. Treadway is 1345 Avenue of
the Americas, New York, New York, 10105. The principal business address
of Mr. Roelofs is Two World Trade Center, New York, New York 10048. The
principal business address of Mr. Goode and Mr. Hable is One Sansome
Street, San Francisco, California 94104 and the principal business
address of Mr. McNamara and Mr. Nave is One Exchange Place, Boston,
Massachusetts 02109.
Required vote
Election of the listed nominees for Director must be approved by a
Plurality Vote.
THE BOARD, INCLUDING ALL THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES TO THE
BOARD.
PROPOSAL 2: TO RATIFY THE SELECTION OF DELOITTE & TOUCHE AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE CURRENT FISCAL YEAR.
The second proposal to be considered at the Meeting is the
ratification of the selection of Deloitte & Touche as the independent
certified public accountants for the Fund for its fiscal year ending
September 30, 1994. Deloitte & Touche has served as independent
certified public accountants for the Fund since its commencement of
operations and have been selected to serve in this capacity for the
Fund's current fiscal year by at least a majority of the Fund's
Independent Board Members. Deloitte & Touche has informed the Fund that
it has no direct or indirect financial interest in the Fund, Smith
Barney Shearson, or any of their affiliates. Representatives of
Deloitte & Touche are not expected to be present at the Meeting, but
they will be given the opportunity to make a statement if they so desire
and will be available by telephone should any matter arise requiring
their presence.
Required Vote
Ratification of the selection of Deloitte & Touche as independent
certified public accountants for the Fund's fiscal year ending September
30, 1994 requires the affirmative vote of a majority of the votes cast
at the Meeting in person or by proxy.
THE BOARD, INCLUDING ALL OF THE INDEPENDENT BOARD MEMBERS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.
PROPOSAL 3: TO CONSIDER AND ACT UPON THE REINCORPORATION OF THE FUND IN
THE STATE OF MARYLAND
The Board, at a meeting held on March 15, 1994 and pursuant to
written consent dated as of , 1994, approved an Agreement and
Plan of Reorganization (the "Plan") pursuant to which all of the assets,
liabilities and obligations of the Fund will be assumed and carried on
by a newly formed Maryland corporation ("Maryland Corp."). The proposed
transaction (the "Reorganization") is expected to achieve cost savings
and administrative conveniences for the Fund. The investment
objectives, policies and restrictions of the Maryland Corp. will be
identical to those of the Fund. The Reorganization will become
effective on or about July 1, 1994 if approved by shareholders of the
Fund. A copy of the Plan is attached as Exhibit A to this proxy
statement.
Reasons for the Reorganization
Management of the Fund has identified several reasons for the
Reorganization, and the Board has concurred with Management's
recommendations concerning the Reorganization. The Fund is currently
organized as a Washington corporation and is subject to regulation under
the corporate laws of the State of Washington. The Plan contemplates a
transfer of the business and operations of the Fund to the newly formed
Maryland Corp. A significant number of investment companies are
organized as Maryland corporations. The laws governing Maryland
corporations offer greater flexibility than do Washington corporate laws
and Management of the Fund believes that this fact may produce
administrative conveniences in operations and resultant cost savings.
In determining to approve the Reorganization, the Board concluded
that the Reorganization would be in the best interest of the Fund and
its shareholders and the interests of existing shareholders of the Fund
would not be diluted as a result of the transactions contemplated by the
Reorganization.
Summary of the Agreement and Plan of Reorganization
The Plan provides for the Reorganization to take place pursuant to
(1) a transfer of its business and assets by the Fund to the Maryland
Corp. (subject to the assumption of the Fund's liabilities and
obligations by the Maryland Corp.), in exchange for shares of the
Maryland Corp., and (2) the distribution of the shares of the Maryland
Corp. to shareholders of the Fund, ultimately leaving each shareholder
of the Fund holding the same number of shares of the Maryland Corp. as
he or she presently owns of the Fund. After the effective date of the
Reorganization, the Fund would be dissolved.
The obligations of the Fund and the Maryland Corp. under the Plan
are subject to various conditions as stated therein. To provide against
unforeseeable events, the Plan may be terminated or amended at any time
prior to the closing of the Reorganization by action of the Board of
either the Fund or the Maryland Corp., notwithstanding the approval of
the Plan by the shareholders of the Fund. However, no amendment may be
made that materially adversely affects the interests of shareholders of
the Fund.
Comparative Information on Shareholder Rights
General. As a corporation organized under the laws of the State
of Maryland, the Maryland Corp. is governed by its Articles of
Incorporation, its By-Laws, and applicable Maryland law. The Fund,
which is organized as a Washington corporation, is governed by its
Articles of Incorporation, By-Laws, and applicable Washington law.
Shares of the Maryland Corp. and the Fund. Interests in the
Maryland Corp. are represented by transferable shares of capital stock,
par value $0.001 per share. The Maryland Corp. currently has authorized
one billion shares, of which 150,000,000 have been initially classified
as follows: 25,000,000 Class A Common Shares; 75,000,000 Class B Common
Shares; 25,000,000 Class C Common Shares; and 25,000,000 Class D Common
Shares. The Maryland Corp.'s Board of Directors has the power to
classify or reclassify any of the remaining authorized but unissued
stock, and may, without shareholder approval, from time to time
authorize the creation of additional series of shares of the Maryland
Corp. utilizing the remaining authorized but unissued shares. Each
share represents an equal proportionate interest in the assets and
liabilities of a Class, and each share is entitled to dividends and
distributions out of the income (after expenses) attributable to the
Class as declared by the Maryland Corp.'s Board of Directors.
Interests in the Fund are represented by shares of common stock.
The Fund has authorized common stock of 150,000,000 shares with no
stated par value. Such shares are classified into four classes,
consisting of 25,000,000 shares of Class A Common Stock, 75,000,000
shares of Class B Common Stock, 25,000,000 shares of Class C Common
Stock, and 25,000,000 shares of Class D Common Stock. Each share
represents an equal proportionate interest in the assets and liabilities
of a class, and each share is entitled to dividends and distributions
attributable to such Class on a pro-rata basis.
Voting Requirements. The Maryland Corp. and the Fund provide
comparable voting requirements and rights for shareholders. The
shareholders of the Maryland Corp. have the power to vote, as a single
class, inter alia, (1) for the election or removal of Directors, (2)
with respect to approval of an investment advisory or management
contract, (3) with respect to dissolution of the Fund or termination of
the Maryland Corp., (4) with respect to certain amendments of the
Articles of Incorporation of the Fund or the Maryland Corp., (5) with
respect to any merger, consolidation, or sale of assets, and (6) with
respect to other matters for which shareholder approval may be required
under the 1940 Act.
On a matter submitted to a vote of shareholders of the Fund or the
Maryland Corp., each holder of a share of the Fund or the Maryland Corp.
is entitled to one vote for each whole share and to a proportionate
fractional vote for each fractional share, irrespective of the Class
thereof, outstanding in the shareholder's name on the books of the Fund
or the Maryland Corp. Similarly, as to any matter with respect to which
a separate vote of any class is required by the 1940 Act, Maryland law
or Washington law, such requirement shall apply in lieu of voting as a
single class. As to any matter which does not affect the interest of a
particular class, only the holders of shares of the one or more affected
classes shall be entitled to vote as a single class.
Except as may otherwise be provided in the respective By-Laws, the
Boards of Directors of the Maryland Corp. and the Fund are expressly
authorized to make, alter, amend and repeal By-Laws or to adopt new By-
Laws of the Maryland Corp. or the Fund, respectively, without any action
on the part of the shareholders. In either case; the By-Laws made by
the Boards of Directors and the power so conferred may be altered or
repealed by the shareholders.
Liquidation or Termination. In the event of the liquidation of
the Maryland Corp., the net assets of the Maryland Corp. shall be
distributed among the classes based on their relative net asset values
or in such other manner as may be determined by the Board of Directors.
The assets so distributable to the shareholders of any particular class
shall be distributed among such shareholders in proportion to the number
of shares of that class held by them and recorded on the books of the
Maryland Corp.. [The liquidation of any particular class in which there
are shares then outstanding may be authorized by vote of the majority of
the Board of Directors then in office, subject to the approval of a
majority of the outstanding securities of that class, as defined in the
1940 Act and the Maryland General Corporation Law.]
In the event of liquidation of the Fund, the shareholders of each
class of stock of the Fund are entitled to receive, as a class, out of
the assets of the Fund available for distribution but other than general
assets not belonging to any particular class of stock, the assets
belonging to such class. The assets so distributable to the
shareholders of any class shall be distributed among the shareholders in
proportion to the number of shares of the class of stock held by them.
General assets of the Fund not attributable to any particular class, or
any proceeds thereof, shall be allocated among the respective classes in
proportion to the asset value of each class in relation to the asset
value of all classes.
Directors. Directors of the Maryland Corp. shall be initially
elected by a vote of the shareholders. Thereafter there will be no need
to convene an annual meeting of shareholders to consider the election of
directors unless and until a majority of directors then in office have
not been elected by the shareholders. It is anticipated that the Board
of Directors of the Maryland Corp. shall consist of the current Board of
Directors of the Fund subsequent to the Reorganization.
Directors of the Fund are currently elected annually by
shareholders and serve until the next annual meeting or until their
successors are elected and qualified.
Shareholder liability. Under both Maryland and Washington law, a
shareholder is not liable to the Maryland Corp. or the Fund or its
creditors except for payment of the consideration for which the shares
of the Maryland Corp. or the Fund were authorized to be issued by the
Directors of the Maryland Corp. or the Fund.
Liability of Directors. The Articles of Incorporation of the
Maryland Corp. provide for the indemnification of the directors and
officers of the Maryland Corp. to the fullest extent permitted by
Maryland law. Maryland law generally permits indemnification of
directors and officers against certain costs, liabilities and expenses
that any such person may incur by reason of serving in such positions
unless it is proved that: (i) the act or omission of the director or
officer was material to the cause of action adjudicated in the
proceeding and was committed in bad faith or was the result of active
and deliberate dishonesty; (ii) the director or officer actually
received an improper personal benefit in money, property or services; or
(iii) in the case of criminal proceedings, the director or officer had
reasonable cause to believe that the act or omission was unlawful.
[Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ( the "Securities Act") may be permitted to directors,
officers or persons controlling the Maryland Corp. pursuant to the
foregoing provisions, the Maryland Corp. has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act and is
therefore unenforceable.]
Under the Fund's Articles of Incorporation, By-Laws and Washington
law: (1) any officer or director of the Fund will be personally liable
only for his or her own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of their
respective office; (2) officers and directors will be indemnified for
the expenses of litigation against them unless their conduct is
determined to constitute willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties; (3) the Fund may also
advance money for these expenses provided that the officer or director
undertakes to repay the Fund if his or her conduct is later determined
to preclude indemnification.
Rights of Inspection. Maryland law provides that a shareholder of
the Maryland Corp. has the right to examine the Maryland Corp.'s By-
Laws, minutes of the proceedings of shareholders and annual statements
of affairs.
Shareholders of the Fund have the right to inspect and copy the
Fund's Articles of Incorporation, Bylaws, minutes of shareholder
meetings and other actions, certain financial statements and certain
other records, accounts and books of the Fund for any reason upon
written demand, and may inspect and copy basically all other records of
the Fund upon written demand if the records demanded in good faith and
for a proper purpose, the records and purpose are described in the
demand with reasonable particularity, and the records are directly
connected with the shareholder's purpose.
The foregoing is only a summary of certain characteristics of the
operations of the Maryland Corp. and the Fund, their Articles of
Incorporation and their By-Laws and certain provisions Maryland and
Washington law. The foregoing is not a complete description of the
documents cited. Shareholders should refer to the provisions of
Maryland law and Washington law directly for a more thorough
description.
Federal Income Tax Consequences
It is anticipated that the transactions contemplated by the Plan
will be tax-free. Consummation of the Reorganization is subject to
receipt of an opinion of Willkie Farr & Gallagher, counsel to the Fund,
that under the Internal Revenue Code of 1986 (the "Code"), the
reorganization of the Fund into a Maryland corporation pursuant to the
Plan will not give rise to the recognition of income, gain or loss for
federal income tax purposes to the Fund or the shareholders of the Fund.
A shareholder's adjusted basis for tax purposes in shares of the
Maryland Corp. after the Reorganization will be the same as his or her
adjusted basis for tax purposes in the shares of the Fund immediately
before the Reorganization. Each shareholder should consult his or her
own tax adviser with respect to the state and local tax consequences of
the proposed transaction.
Appraisal Rights. Chapter 23B.13 of the Washington Business
Corporation Act provides that a shareholder of the Fund who objects to
the Reorganization has the right to demand and receive payment of the
fair value of his shares as of the day shareholders vote on the
Reorganization and further specifies the required procedures to be
followed in connection therewith. [ Insert discussion of Washington Law
provisions]
The discussion above is intended only to summarize the necessary
procedures under Washington law for a shareholder to perfect this right
to an appraisal of his shares. Shareholders wishing to seek the
appraisal remedy should consult the Washington Business Corporation Act
directly.
[The staff of the Securities and Exchange Commission has taken the
position in Investment Company Act Release 8752 (April 10, 1975) that
adherence to appraisal rights statutes such as that of Washington by
registered investment companies issuing redeemable securities would
constitute a violation of Rule 22c-1 under the 1940 Act, which precludes
such a company form redeeming securities otherwise than at a price based
upon the net asset value next computed after receipt of a tender of such
securities for redemption. In this connection, the staff has also taken
the position in Release No. 8752 that pursuant to Section 50 of the 1940
Act, Rule 22c-1 supersedes appraisal right statutes. While the Fund is
not aware of any judicial decision which has dealt with this issue, it
intends to adhere to the position of the staff of the Securities and
Exchange Commission and will not honor any shareholder's request for
appraisal rights.]
Required Vote
Approval of the above-described Reorganization of the Fund in
Maryland requires an affirmative vote of two-thirds (67%) of all the
votes entitled to be cast at the Meeting.
THE BOARD, INCLUDING ALL THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE REORGANIZATION OF THE FUND.
PROPOSAL 4 TO APPROVE THE MODIFICATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES
The 1940 Act requires a registered investment company, such as the
Fund, to have certain specific investment policies that can be changed
only by a Majority Vote. Certain of the Fund's fundamental policies
were adopted to reflect business conditions which, in the opinion of
SBSAM, are no longer in effect. Accordingly, the Board has approved a
modification to the Fund's investment restrictions as set forth below,
which it believes may enhance SBSAM's, or any subsequent adviser's,
ability to continue to meet the Fund's principal investment objective of
long-term capital growth.
This proposal seeks shareholder approval of changes intended to
accomplish the foregoing goal. The policies are discussed in detail
below. The Board believes that SBSAM's ability to manage the Fund's
portfolios in a changing investment environment will be enhanced by the
adoption of these policies. Accordingly, investment management
opportunities generally will be increased.
The Fund may make commitments that are more restrictive than the
restrictions listed herein so as to permit the sale of the Fund's shares
in certain states. Should the Board determine that a commitment is no
longer in the best interest of the Fund and its shareholders, the Board
will revoke the commitment by terminating the sale of the Fund's shares
in the state involved.
If this proposal is approved by the shareholders at the Meeting,
the Fund's Prospectus and Statement of Additional Information will be
amended or supplemented in order to reflect the modification of the
investment restrictions. Shareholders will be notified by the Fund of
any future investment policy changes, either in the Fund's Prospectus or
Statement of Additional Information, which are updated at least
annually, or in other Fund correspondence.
The Fund's fundamental policies currently provide that the Fund
may write covered put and call options on its portfolio securities, may
trade in futures contracts and options on futures contracts and may, for
hedging purposes, purchase put options and write call options on broad-
based domestic stock indexes. The Board has approved modifications to
these fundamental restrictions such that the Fund may, for hedging
purposes, purchase put options on portfolio securities.
In the opinion of SBSAM, purchasing put options on securities in
the Fund's portfolio will enhance the Fund's ability to hedge against
losses on the securities it holds in its portfolio. The ability to
purchase put options will allow the Fund to protect unrealized gains in
an appreciated security in its portfolio without actually selling the
security. The Fund will also have the ability to enter into closing
sale transactions with respect to such put options. Profit or loss on a
closing sale transaction will depend on whether the amount received in
such transaction is more or less than the premium paid for the option,
plus related transaction costs.
Set forth below is the Fund's policy regarding the purchase and
sale of options, as it is proposed to be modified:
[The Fund will not] write, purchase or sell puts, calls, straddles,
spreads or combinations thereof or engage in transactions involving
futures contracts and related options, except as permitted under the
Fund's investment goals and policies, as set forth in its current
prospectus and statement of additional information .
Required Vote
Approval of the modification of certain of the Fund's fundamental
investment policies requires a Majority Vote.
THE BOARD, INCLUDING ALL THE INDEPENDENT BOARD MEMBERS, RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE MODIFICATION OF CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT POLICIES.
ADDITIONAL INFORMATION
Investment Adviser
SBSAM, located at Two World Trade Center, New York, New York
10048, has served as the investment adviser to the Fund since July 30,
1993 pursuant to an investment advisory agreement dated July 30, 1993
(the "Advisory Agreement"). SBSAM (through its predecessors) has been
in the investment counseling business since 1940 and is a division of
SBA which was incorporated in 1968. SBSAM renders investment advice to
investment companies that had assets under management as of March 31,
1994 in excess of $_____ billion. SBA is a wholly owned subsidiary of
Smith Barney Shearson, which in turn is a wholly owned subsidiary of The
Travelers Inc. ("Travelers"). The principal executive offices of Smith
Barney Shearson and Travelers are 1345 Avenue of the Americas, New York,
New York 10105, and 65 East 55th Street, New York, New York 10022,
respectively.
The name, position with SBSAM and principal occupation of each
executive officer and director of SBSAM are set forth below.
The address of each individual named below is Two World Trade
Center, New York, New York 10048, for those marked (*), One Sansome
Street, San Francisoco, California 94104.
Name
Title
Pulling, Thomas L
Chairman & CEO
Cohen, Harry D.
President
Williamson, Jr. Harold L.
Managing Director
Rolfe, Gerald T.
Managing Director
Marin, Dragan
Managing Director
Blake, Alan J.
Managing Director
Ceisler, Robert F.
Managing Director
Freeman, Richard
Managing Director
Raimondo, Joseph R.
Managing Director
Vandeventer, Thomas
Managing Director
Zweifler, Irving
Managing Director
Goode, John G. *
Managing Director
Davis, Richard M. *
Sr. VP
Davis, Donald W. *
Sr. VP
Hable, Peter *
Sr. VP
Williamson, James G.
Sr. VP
Acosta, Thomas I.
Sr. VP
Berkowitz, Bruce
Sr. VP
Godwin, Lamond
Sr. VP
Joseph, William
Sr. VP
Parker, Stuart
Sr. VP
[As of the Record Date, the Directors and/or executive officers of
the Fund beneficially owned (or were deemed to beneficially own pursuant
to the rules of the SEC) less than 1% of the shares of common stock of
Travelers. An audited balance sheet for SBA as of December 31, 1993 is
set forth as Exhibit B hereto.
The Advisory Agreement
The Advisory Agreement was most recently approved by the Board,
including a majority of the Independent Board Members, on April 7, 1993,
and by the Fund's, shareholders on June 22, 1993. Under the terms of
the Advisory Agreement, SBSAM is required, subject to the supervision
and approval of the Board to manage the Fund's investments in accordance
with the investment objectives and policies as stated in the Fund's
Prospectus. SBSAM is responsible for making investment decisions,
supplying investment research and portfolio management services and
placing orders to purchase and sell securities on behalf of the Fund.
In consideration of services rendered by SBSAM pursuant to the
Advisory Agreement, the Fund pays a monthly fee at the annual rate of
0.55% of the Fund's average monthly net assets. Pursuant to the
Advisory Agreement, the Fund paid a total of $759,836 in advisory fees
for the fiscal year ended September 30, 1993. SBSAM bears all expenses
in connection with the performance of its services under the Advisory
Agreement.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, SBSAM shall not be liable for any act or
omission in the course of, or in connection with, the rendering of its
services hereunder.
Pursuant to its terms, the Advisory Agreement will remain in
effect for an initial two-year term and will continue in effect for
successive one-year periods if and so long as such continuance is
specifically approved annually by (a) the Fund's Board or (b) a Majority
Vote of the Fund's shareholders, provided that in either event, the
continuance also is approved by a majority of the Independent Board
Members by vote cast in person at a meeting called for the purpose of
voting on approval. The Advisory Agreement is terminable, without
penalty, on 60 days' written notice by the Board of the Fund or by a
Majority Vote of the Fund's shareholders, or on 90 days' written notice
by SBSAM. The Advisory Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Fund are made by
SBSAM, subject to the overall review of the Fund's Board. Portfolio
securities transactions for the Fund are placed on behalf of the Fund by
SBSAM.
Transactions on U.S. stock exchanges and many foreign stock
exchanges involve the payment of negotiated brokerage commissions. On
exchanges on which commissions are negotiated, the cost of transactions
may vary among different brokers. No stated commission is generally
applicable to securities traded in U.S. over-the-counter markets, but
the prices of those securities include undisclosed commissions or mark-
ups. The cost of securities purchased from underwriters includes an
underwriting commission or concession and the prices at which securities
are repurchased from and sold to dealers include a dealer's mark-up or
mark-down. U.S. government securities may be purchased directly from
the United States Treasury or from the issuing agency or
instrumentality.
In selecting brokers or dealers to execute portfolio transactions
on behalf of the Fund, SBSAM seeks the best overall terms available. In
assessing the best overall terms available for any transaction, SBSAM
will consider the factors it deems relevant, including the breadth of
the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction
and on a continuing basis. In addition, SBSAM is authorized, in
selecting brokers or dealers to execute a particular transaction and in
evaluating the best overall terms available, to consider the brokerage
and research services (as those terms are defined in Section 28(e) of
the Exchange Act) provided to the Fund and/or other accounts over which
SBSAM or its affiliates exercises investment discretion. The fees under
an the Advisory Agreement are not reduced by reason of the Fund's or
SBSAM's receiving brokerage and research services.
The Board of the Fund periodically will review the commissions
paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the
benefits inuring to the Fund. During the fiscal year ended September
30, 1993, the Fund paid $531,478 in brokerage commissions, of which
$21,074 (representing 4.0% of the total of all brokerage commissions
paid) was paid to Smith Barney Shearson (or its predecessor, Shearson
Lehman Brothers Inc.). Such commissions were paid with respect to 2.3%
of the total dollar value of all transactions involving the payment of
brokerage commissions effected during the year.
The Fund will not purchase any security, including U.S. government
securities, during the existence of any underwriting or selling group
relating to the security of which Smith Barney Shearson is a member,
except to the extent permitted by the SEC.
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund does not intend to present any other business at the
Meeting nor is it aware that any shareholder intends to do so. If,
however, any other matters are properly brought before the Meeting, the
persons named in the accompanying proxy card will vote thereon in
accordance with their judgment.
SHAREHOLDERS' REQUEST FOR SPECIAL MEETING
Shareholders holding at least 10% of the Fund's outstanding voting
securities (as defined in the 1940 Act) may require the calling of a
meeting of shareholders for the purpose of voting on the removal of any
Board Member of the Fund. Meetings of the Fund's shareholders for any
other purpose will also be called by the Board Members when requested in
writing by shareholders holding at least 10% of the shares then
outstanding or, if the Board Members shall fail to call or give notice
of any meeting of shareholders for a period of 30 days after such
application, shareholders holding at least 10% of the shares then
outstanding may call and give notice of such meeting.
May 16, 1994
EXHIBIT LIST
EXHIBIT A Agreement and Plan of Reorganization and Liquidation
EXHIBIT B Audited balance sheet of SBA
shaed/shearsn2/fundamen/proxy/794b
EXHIBIT A
DRAFT 5-4-94
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of
May __, 1994 (the "Agreement") between Smith Barney Shearson
Fundamental Value Fund Inc., a Washington corporation (the
"Existing Fund"), and Smith Barney Shearson Fundamental Value
Fund Inc., a Maryland corporation (the "New Fund").
WHEREAS the Existing Fund is a diversified, open-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS the Existing Fund has authorized capital stock
consisting of 150,000,000 shares of common stock, no par value;
and
WHEREAS the New Fund was organized pursuant to Articles of
Incorporation dated May , 1994, and has authorized capital
stock of one billion (1,000,000,000) shares, $0.001 par value
per share:
NOW, THEREFORE, in consideration of the mutual promises
herein contained, the parties hereto agree as follows:
1. Plan of Reorganization. The Existing Fund shall, at
the Effective Time of the Reorganization (as hereinafter
defined), transfer all of its business and assets and assign all
its liabilities and obligations to the New Fund, and the New
Fund shall acquire all such business and assets and shall assume
all such liabilities and obligations of the Existing Fund in
exchange for delivery to the Existing Fund by the New Fund of a
number of shares of the New Fund (both full and fractional)
equivalent to the number of shares of the Existing Fund
outstanding immediately prior to the Effective Time of the
Reorganization. All debts, liabilities, obligations and duties
of the Existing Fund, to the extent that they exist at the
Effective Time of the Reorganization, shall after the Effective
Time of the Reorganization attach to the New Fund and may be
enforced against the New Fund to the same extent as if the same
had been incurred by the New Fund.
2. Liquidation and Dissolution of the Existing Fund. At
the Effective Time of the Reorganization, the Existing Fund will
liquidate and the shares of the New Fund (both full and
fractional) received by the Existing Fund will be distributed to
the shareholders of the Existing Fund in exchange for their
shares of such class of the Existing Fund, each shareholder to
receive a number of shares of the New Fund of a class comparable
to the class of shares held by the shareholders in the Existing
Fund equal to the number of shares of the Existing Fund held by
such shareholder. Such liquidation and distribution will be
accompanied by the establishment of an open account on the share
records of the New Fund in the name of each shareholder of the
Existing Fund and representing the respective pro rata number of
shares of the New Fund of the appropriate class due such
shareholder. Certificates for shares of the Existing Fund
issued prior to the Effective Time of the Reorganization shall
represent outstanding shares of the New Fund after the Effective
Time of the Reorganization. As soon as practicable after the
Effective Time of the Reorganization, the Existing Fund shall
file Articles of Dissolution for record with the Secretary of
State of the State of Washington, and shall take, in accordance
with Washington law, all other steps as shall be necessary and
proper to effect a complete dissolution of the Existing Fund.
3. Issued Share. Prior to the Effective Time of the
Reorganization and after the Existing Fund has taken the actions
authorized by shareholders of the Existing Fund pursuant to
Section 4(f) hereof, the single share of the New Fund heretofore
held by the Existing Fund shall be redeemed and canceled by the
New Fund.
4. Conditions Precedent to the Obligation of the
Existing Fund. The obligations of the Existing Fund to
effectuate the Plan of Reorganization and Liquidation hereunder
shall be subject to the performance by the New Fund of all the
obligations to be performed by it hereunder on or before the
Effective Time of the Reorganization and to the satisfaction of
each of the following conditions:
(a) Such authority, including "no-action" letters and
orders from the Securities and Exchange Commission (the
"Commission") and state securities commissions as may be
necessary to permit the Existing Fund to carry out the
transactions contemplated by this Agreement, if any, shall have
been received.
(b) The Existing Fund shall have received an opinion of
Willkie Farr & Gallagher, counsel to the New Fund, that the New
Fund is duly formed and existing under the laws of the State of
Maryland and that the shares of the New Fund to be issued
pursuant to the terms of this Agreement have been duly
authorized, and, when issued and delivered as provided in this
Agreement, will have been validly issued, fully paid and
nonassessable. With respect to issues of Maryland Law, Willkie
Farr & Gallagher may rely on the opinion of local counsel in
rendering its opinion.
(c) The Existing Fund shall have received an opinion of
Willkie Farr & Gallagher, counsel to the Existing Fund, to the
effect that the transaction contemplated by the Agreement
qualifies as a "reorganization" under Section 368(a)(1)(F) of
the Internal Revenue Code of 1986 (the "Code").
(d) The shares of the New Fund shall have been duly
qualified for offering to the public in all states of the United
States, the Commonwealth of Puerto Rico and the District of
Columbia (except where such qualifications are not required) so
as to permit the transfers contemplated by this Agreement to be
consummated.
(e) All representations and warranties of the New 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 Effective Time of the Reorganization with the same
force and effect as if made as of the Effective Time of the
Reorganization.
(f) The Board of Directors of the New Fund shall have
taken the following actions at a meeting duly called for such
purposes:
(1) approval of an Investment Advisory Agreement (the
"Advisory Agreement") between the New Fund and Smith Barney
Asset Management Division of Smith Barney Advisers, Inc.;
(2) approval of the Distribution Agreement (the
"Distribution Agreement") and Services and Distribution Plan
(the "Plan") between the New Fund and Smith Barney Inc.;
(3) selection of Deloitte & Touche as the New Fund's
independent auditors for the fiscal year ending September 30,
1994;
(4) authorization of the issuance by the New Fund, prior
to the Effective Time of the Reorganization, of one share of the
New Fund to the Existing Fund at the price of $_______ for the
purpose of enabling the Existing Fund to vote on the matters
referred to in paragraph (e) of Section 5;
(5) submission of the matters referred to in paragraph
(e) of Section 5 to the Existing Fund as the sole shareholder of
the New Fund; and
(6) authorization of the issuance of shares of the New
Fund at the Effective Time of the Reorganization in exchange for
the assets of the Existing Fund pursuant to the terms and
provisions of this Agreement.
(g) The New Fund shall have filed with the Commission one
or more post-effective amendments to the Existing Fund's
Registration Statement on Form N-1A under the Securities Act of
1933 and the 1940 Act, containing such amendments as are
determined by the Board of the New Fund to be necessary and
appropriate as a result of this Agreement and such amendment or
amendments shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall
have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the Commission (and not
withdrawn or terminated).
(h) The Existing Fund shall have received the affirmative
vote of at least two-thirds of all votes entitled to be cast on
the transaction at a meeting of the shareholders of the Existing
Fund duly called for the purpose of considering the proposed
Reorganization.
At any time prior to the Effective Time of the
Reorganization, any of the foregoing conditions may be waived by
the Board of Directors of the Existing Fund if, in the judgment
of such Board, such waiver will not have a material adverse
effect on the benefits intended under this Agreement to the
shareholders of the Existing Fund.
5. Conditions Precedent to the Obligations of the New
Fund. The obligations of the New Fund to effectuate the Plan of
Reorganization and Liquidation hereunder shall be subject to the
performance by the Existing Fund of all the obligations to be
performed by its hereunder on or before the Effective Time of
the Reorganization and to the satisfaction of each of the
following conditions:
(a) Such authority, including "no-action" letters and
orders from the Commission and state securities commissions as
may be necessary to permit the New Fund to carry out the
transactions contemplated by this Agreement, if any, shall have
been received by the New Fund.
(b) One or more post-effective amendments to the
Registration Statement of the Existing Fund on Form N-1A under
the Securities Act of 1933 and the 1940 Act, containing (i) such
amendments to such Registration Statement as are determined by
the Board of Directors of the New Fund to be necessary and
appropriate as a result of this Agreement and (ii) the adoption
by the New Fund of such Registration Statement as its own, shall
have been filed with the Commission and such post-effective
amendment or amendments to the Registration Statement shall have
become effective, and no stop-order suspending the effectiveness
of the Registration Statement shall have been issued, and no
proceeding for that purpose shall have been initiated or
threatened by the Commission (and not withdrawn or terminated).
(c) The New Fund shall have received an opinion of
Willkie Farr & Gallagher to the effect that the transaction
contemplated by the Agreement qualifies as a "Reorganization"
under Section 368(a)(1)(F) of the Code.
(d) All representations and warranties of the Existing
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 Effective Time of the Reorganization with
the same force and effect as if made as of the Effective Time of
the Reorganization.
(e) A vote approving this Agreement and the
reorganization contemplated hereby shall have been adopted by at
least two-thirds of all the votes entitled to be cast on the
transaction at a meeting of the shareholders of the Existing
Fund. The vote approving this Agreement and the reorganization
contemplated hereby shall direct the Existing Fund to vote, and
the Existing Fund shall have voted, as the sole shareholder of
the New Fund to:
(1) elect the Directors of the Existing Fund as Directors
of the New Fund;
(2) approve the Advisory Agreement;
(3) approve the Distribution Agreement and the Plan; and
(4) ratify the selection of Deloitte & Touche as the New
Fund's independent auditors for the fiscal year ending September
30, 1994.
At any time prior to the Effective Time of the
Reorganization, any of the foregoing conditions may be waived by
the Board of Directors of the New Fund if, in the judgment of
such Board, such waiver will not have a material adverse effect
on the benefits intended under this Agreement to the
shareholders of the New Fund.
6. Representation and Warranties.
6.1 The Existing Fund represents and warrants to the New
Fund as follows:
(a) The Existing Fund is a Washington corporation, duly
organized, validly existing and in good standing under the laws
of the State of Washington;
(b) The Existing Fund is a registered investment company
classified as a management company of the open-end type and its
registration with the Commission as an investment company under
the Investment Company Act of 1940 is in full force and effect;
(c) The Existing Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a material
violation of its Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the Existing Fund is a party or by which it
is bound;
(d) Except as otherwise disclosed in writing to and
accepted by the New Fund, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or, to its knowledge,
threatened against the Existing Fund or any of its properties or
assets (other than that previously disclosed to the New Fund)
which, if adversely determined, would materially and adversely
affect its financial condition or the conduct of its business.
The Existing Fund knows of no facts which might form the basis
for an institution of such proceedings 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
effects its business or its ability to consummate the
transactions herein contemplated;
(e) All issued and outstanding shares of the Existing
Fund are, and at the Effective Time of the Reorganization will
be, duly and validly issued and outstanding, fully paid and non-
assessable. All of the issued and outstanding shares of the
Existing Fund will, at the Effective Time of the Reorganization,
be held by the person and in the amounts set forth in the
records of the Existing Fund's transfer agent. The Existing
Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Existing Fund's
shares, nor is there outstanding and security convertible into
any of the Existing Fund's shares;
(f) At the Effective Time of the Reorganization, the
Existing Fund will have good and marketable title to its assets
to be transferred to the New Fund pursuant to this Agreement,
and full right, power and authority to sell, assign, transfer
and deliver such assets hereunder and, upon delivery and payment
for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise
under the Securities Act of 1933, as amended, other than as
disclosed in this Agreement;
(g) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Effective
Time of the Reorganization by all necessary actions on the part
of the Existing Fund's Board of Directors, and subject to the
approval of the Existing Fund's shareholders, this Agreement
will constitute a valid and binding obligation of the Existing
Fund, enforceable in accordance with its terms, subject to
enforcement of bankruptcy, insolvency, reorganization,
moratorium and other laws related to or affecting creditiors
rights and to general equity principles.
6.2 The New Fund represents and warrants to the Existing
Fund as follows:
(a) The New Fund is a Maryland corporation, duly
organized, validly existing and in good standing under the laws
of the State of Maryland;
(b) As of the Effective Time of the Reorganization, the
New Fund will have good and marketable title to its assets;
(c) The New Fund is not, and the execution, delivery and
performance of this Agreement will not result, in any material
violation of it Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other
undertaking to which the New Fund is a party or by which it is
bound;
(d) No material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or threatened against the New Fund or any of
its properties or assets, except as previously disclosed in
writing and agreed to by the Existing Fund. The New Fund knows
of no facts which might form the basis for the institution of
such proceedings 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 or adversely affects its
business or its ability to consummate the transactions
contemplated herein;
(e) At the date hereof, all of the issued and outstanding
New Fund shares are, and at the Effective Time of the
Reorganization will be, duly and validly issued and outstanding,
fully paid and non-assessable, with no personal liability
attaching to the ownership thereof. The New Fund does not have
outstanding any options, warrants or other rights to subscribe
for or purchase any New Fund shares, nor is there outstanding
any security convertible into any New Fund shares;
(f) The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Effective
Time of the Reorganization by all necessary actions, if any, on
the part of the New Fund's Board of Directors and the New Fund's
shareholders and this Agreement will constitute a valid and
binding obligation of the New Fund enforceable in accordance
with its terms, subject to enforcement of bankruptcy,
insolvency, reorganization, moratorium and other laws relating
to or effecting creditors' rights and to general equity
principles;
(g) The New Fund shares to be issued and delivered to the
Existing Fund, for the account of the Existing Fund's
shareholders, pursuant to the terms of this Agreement, will at
the Effecting Time of the Reorganization have been duly
authorized, and when so issued and delivered, will be duly and
validly issued New Fund shares and will be fully paid and non-
assessable with no personal liability attaching to the ownership
thereof;
(h) The New Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1940
Act, the Securities Act of 1933, and such of the state Blue Sky
or securities laws as it may deem appropriate in order to
continue its operations after the closing date.
7. Effective Time of the Reorganization. The
distribution of the shares of the New Fund held by the Existing
Fund shall be effective as of [5:00 p.m., Boston time, on June
30, 1994], or at such other time and date as fixed by the mutual
consent of the parties (the "Effective Time of the
Reorganization").
8. Termination. The Directors of the Existing Fund and
the New Fund may terminate this Agreement and abandon the
reorganization contemplated hereby, notwithstanding approval
thereof by the shareholders of the Existing Fund, at any time
prior to the Effective Time of the Reorganization, if
circumstances should develop that, in their judgment, make
proceeding with this Agreement inadvisable.
IN WITNESS WHEREOF, the parties have hereunto caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date and year first written above.
SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., a Washington
Corporation
By: __________________________
Heath B. McLendon
Chairman of the Board
SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC., a Maryland
Corporation
By: __________________________
Heath B. McLendon
Chairman of the Board
SHARED/SHEARSN2/FUNDAMEN/REINCORP/AGREEMENT/PLAN2
EXHIBIT B
[Audited Financial Statements of SBA for December 31, 1993 to be
provided]
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