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 INVESTMENT FUNDS 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 August
16, 2000 pursuant to Rule 488 under the Securities Act of 1933, as
amended.
TITLE OF SECURITIES BEING REGISTERED:
Shares of Beneficial Interest ($.001 par value) of the Registrant
___________________
The Registrant has registered an indefinite amount of
securities under the Securities Act of 1933 pursuant to Section
24(f) under the Investment Company Act of 1940; 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)
Small Cap Fund
388 Greenwich Street
New York, New York 10013
August 21, 2000
Dear Shareholders:
You are being asked to vote on an Agreement and Plan of
Reorganization whereby all of the assets of
the Small Cap Fund (the "Fund"), a series of Concert Investment
Series(r) ("Investment Series"), would be transferred in a tax-free
reorganization to Smith Barney Small Cap Growth Fund (the
"Acquiring Fund"), a series of Smith Barney Investment Funds Inc.
("Investment Funds"), 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 shareholder of the Fund, but would become a
shareholder of the corresponding class 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)
Small Cap 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, the Small Cap 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 10:00 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 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 outstanding 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
August 21, 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
PROPOSAL: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION 4
SYNOPSIS 4
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND AND THE
FUND 6
INVESTMENT MANAGEMENT FEES AND EXPENSES 9
DISTRIBUTION OF SHARES AND OTHER SERVICES 13
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION 14
DIVIDENDS AND OTHER DISTRIBUTIONS 14
TAX CONSEQUENCES 14
PRINCIPAL INVESTMENTS AND RISK FACTORS 14
THE PROPOSED TRANSACTION 18
REASONS FOR THE PROPOSED TRANSACTION 20
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 25
ADDITIONAL INFORMATION ABOUT THE FUNDS 26
INTERESTS OF CERTAIN PERSONS 26
ADDITIONAL INFORMATION 26
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 October 11, 1999.
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.
Merger Q&A
Concert Small Cap into Smith Barney Small Cap Growth
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 combined enclosed
Prospectus/Proxy Statement.
What will happen to my shares if the proposed reorganization is
approved?
You will become a shareholder of the Smith Barney Small Cap Growth
Fund on or about
October 6, 2000 ("Closing Date") and will no longer be a
shareholder of the Concert Small Cap Fund, which will be
terminated pursuant to the proposed reorganization. You will
receive shares of the Smith Barney Small Cap Growth Fund with a
total net asset value equal to the total net asset value of your
investment in the Concert Small Cap 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 Small Cap 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 Small Cap Growth 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. The principal investment objective of the Concert Small Cap
Fund is capital appreciation, while the investment objective of
the Smith Barney Small Cap Growth Fund is long-term growth of
capital. Timothy Woods, the portfolio manager of the Smith Barney
Small Cap Growth Fund, has over 15 years of securities business
experience and has been the manager of the Smith Barney Small Cap
Growth Fund since its inception in 1999.
In both funds, the managers seek to achieve growth of capital by
investing in small sized companies in the early stages of their
life cycles with favorable growth prospects. However, the
investment practices and limitation 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.
How does portfolio manager Tim Woods identify small cap growth
opportunities?*
Tim selects individual stocks for investment by identifying those
companies which exhibit the most favorable growth prospects. In
selecting individual companies for investment, the manager
considers:
? Growth characteristics, including high historic growth rates
and high forecasted growth of sales, profits and return on
equity
? Innovative companies at the cutting edge of positive and
dynamic demographic and economic trends
? Products and services that give the company a competitive
advantage
? Skilled management committed to long term growth
? Potential for a long-term investment by the fund
* Small cap stocks involve more risk and greater price
fluctuations than large cap stocks
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.
Will I enjoy the same privileges as a shareholder of the Smith
Barney Small Cap Growth Fund that I currently have as a
shareholder of the Concert Small Cap 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 Small Cap 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.
SUBJECT TO COMPLETION, DATED JULY 17, 2000
PROXY STATEMENT/PROSPECTUS
________, 2000
RELATING TO THE ACQUISITION BY
SMITH BARNEY SMALL CAP GROWTH FUND (THE "ACQUIRING FUND"),
A SERIES OF SMITH BARNEY INVESTMENT FUNDS INC. ("INVESTMENT
FUNDS")
388 Greenwich Street
New York, New York 10013
(800) 451-2010
OF THE ASSETS OF SMALL CAP FUND (THE "FUND"),
A SERIES OF CONCERT INVESTMENT SERIES(r) ("INVESTMENT SERIES").
General. This Proxy Statement/Prospectus is furnished to
shareholders of the Fund in connection with a proposed
reorganization in which all of the assets of
the Fund would be acquired by Investment Funds, on behalf of the
Acquiring Fund, in exchange solely for voting shares of the
corresponding class of shares of common stock of the Acquiring
Fund and the assumption by Investment Funds, on behalf of 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 the Acquiring Fund having an aggregate net
asset value equal to the aggregate net asset value of such
shareholder's shares of 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.
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.
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 October 11,
1999, 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
semi-annual report to shareholders for the six months ended March
31, 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, Investment Funds.
The Acquiring Fund is a diversified series of Investment
Funds, an 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 investment
objective of the Acquiring Fund is long-term growth of capital,
and the investment objective of the Fund is capital appreciation.
The Acquiring Fund seeks to achieve its objective by investing
primarily in equity securities of companies that have a market
capitalization within the market capitalization range of companies
in the Russell 2000 Growth Index at the time of investment. The
Fund seeks to achieve its objective by investing in U.S. companies
with market capitalizations in the lowest 20% of all publicly-
traded U.S. companies. Each Fund employs a style of stock
selection which emphasizes individual stock selection based on
high growth prospects.
_______________________
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 Funds, on behalf of the
Acquiring Fund, and 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 shareholder of 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 shares 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 the Fund holding 20% of
the outstanding shares of the Fund entitled to vote 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 outstanding 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 outstanding shares of
beneficial interest entitled to vote thereon. Abstentions and
broker non-votes will have the effect of a "no" vote on the
Proposal.
Holders of record of the shares of 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 ___________ shares of the Fund outstanding.
To the best of knowledge of Investment Funds as of August 11,
2000, [no person owned beneficially more than 5% of any class of
the Acquiring Fund's outstanding shares]. To the best of
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 each of the Fund and the Acquiring Fund were owned
directly or beneficially by the Trustees of Investment Series or
the Directors of Investment Funds, respectively.]
Each of the Fund 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 the Fund and a copy of any more recent
semi-annual report for each of the Fund and the Acquiring Fund,
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 Board of Trustees of Investment Series, on behalf of the
Fund, and the Board of Directors of Investment Funds, on behalf of
the Acquiring Fund, including all of the Trustees/Directors 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 Trustees" or "Non-Interested Board Members"),
approved on July 17, 2000, an Agreement and Plan of Reorganization
(the "Plan"). Subject to its approval by the shareholders of the
Fund, the Plan provides for (a) the transfer of all of the assets and
all of the stated liabilities of the
Fund to Investment Funds, on behalf of the Acquiring Fund, in
exchange for shares of the corresponding class of the Acquiring
Fund and assumption by Investment Funds, on behalf of the
Acquiring Fund, of the Fund's liabilities; (b) the distribution of
such Acquiring Fund shares to the shareholders of the Fund in
complete liquidation of the Fund and the cancellation of the
Fund's outstanding shares; and (c) the termination of the Fund as
a series of Investment Series (collectively, the
"Reorganization"). As a result of the Reorganization, each
shareholder of the Fund will become a shareholder of the
corresponding class 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 the Acquiring Fund having an aggregate net
asset value equal to the aggregate net asset value of such
shareholder's shares 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.
Shareholders of the Fund should read this entire Proxy
Statement/Prospectus carefully.
Introduction. Like your Fund, the Acquiring Fund is managed
by SSB Citi Fund Management LLC ("SSB Citi"), an affiliate of
Salomon Smith Barney Inc. ("Salomon Smith Barney"). However,
while Sandip Bhagat is the portfolio manager of your Fund, Timothy
Woods is the portfolio manager of the Acquiring Fund. Whereas
your Fund has capital appreciation as its investment objective,
the Acquiring Fund has long-term growth of capital as its
investment objective. Moreover, the distributor, custodian and
transfer agent of each of the Fund and the Acquiring Fund are
identical. Whereas the Acquiring Fund has retained PFPC Global
Financial Services, Inc. as a sub-transfer agent, the Fund has
additionally retained PFS Shareholder Services as a sub-transfer
agent. Further, where 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, shareholders of the Fund will
become shareholders of the corresponding class 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 total annual
expense ratio. Shareholders of the Fund will continue to enjoy
the same shareholder privileges, such as systematic investment,
automatic cash withdrawal and automatic dividend reinvestment, and
access to professional service representatives upon becoming
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 shareholders of the Fund may
only exchange into shares of certain Smith Barney Funds,
Concert brand funds or, in certain instances,
Citi FundsSM Cash Reserves. Moreover, although many of the
services provided by PFS Shareholder Services, Inc. to the Fund
are available to shareholders of the Acquiring Fund, PFS
Shareholder Services, Inc. will not provide services to the
Acquiring Fund. Each of the Fund and the Acquiring Fund declares
dividends from net investment income 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 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 shareholders of record of
the Fund on the Closing Date and the shares of the Fund will be
cancelled.
For the reasons described below under "The Proposed
Transaction-Reasons for the Proposed Transaction," the Board of
Trustees of Investment Series on behalf of the Fund, including the
Non-Interested Trustees, has concluded the following:
- the Reorganization is in the best interests of the Fund
and its shareholders; and
- the interests of the existing shareholders of the Fund
will not be diluted as a result of the Reorganization.
Accordingly, the Trustees recommend approval of the Plan.
If the Plan is not approved, the Fund will continue in existence
unless other action is taken by the Trustees; 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
investment objective of the Acquiring Fund is long-term growth of
capital. The investment objective of the Fund is capital
appreciation. The Acquiring Fund seeks to achieve its objective
by investing primarily in equity securities of high growth
companies that have a market capitalization within the market
capitalization range of companies in the Russell 2000 Growth Index
at the time of investment. The Fund seeks to achieve its
objective by investing in U.S. companies with market
capitalizations in the lowest 20% of all publicly-traded U.S.
companies. Each Fund employs a style of stock selection which
emphasizes individual stock selection based on high growth
prospects. The Acquiring Fund compares its performance against
the Russell 2000 Growth Index, while the Fund compares its
performance against the Russell 2000 Stock Index. The Fund's
investment restrictions are substantially similar to that of the
Acquiring Fund, except as described in this Proxy
Statement/Prospectus.
The Acquiring Fund may invest up to 10% and the Fund may
invest up to 20% of its assets in foreign securities directly or
in the form of depositary receipts representing an interest in
those securities. Each Fund has adopted substantially similar
fundamental investment restrictions with respect to its
diversified status; issuing senior securities; underwriting
securities; industry concentration; borrowing money; and
purchasing or selling real estate, real estate mortgages,
commodities or commodity contracts. Each Fund's fundamental
investment restrictions may not be changed without the approval of
the applicable Fund's shareholders. Each Fund has also adopted
substantially similar non-fundamental investment policy with
respect to investments in illiquid and restricted securities or in
oil or other mineral leases, purchasing securities on margin, and
investing in any company for the purpose of exercising control of
management. The Fund has adopted certain additional non-
fundamental restrictions with respect to, among other things,
short sales, warrants and alcohol and tobacco manufacturers. The
Acquiring Fund has adopted an additional non-fundamental
restriction with respect to unseasoned issuers. While both Funds
may use derivative contracts, such as futures and options on
securities, securities indices and currencies; options on these
futures; forward currency contracts; and interest rate and
currency swaps, (i) to hedge against the economic impact of
adverse changes in the market value of portfolio securities and
(ii) as a substitute for buying or selling securities, the Fund
may engage in such activities to enhance return and the Acquiring
Fund may engage in such activities as a cash management technique.
Whereas the Fund may only lend up to 15% of the total value of its
portfolio securities, the Acquiring Fund may lend its portfolio
securities to the fullest extent permitted under the 1940 Act (in
each case, these are fundamental investment restrictions).
Each Fund may also invest in preferred stock and convertible
securities, short-term instruments, and repurchase and reverse
repurchase agreements, each in accordance with any 1940 Act or
other applicable limitations. 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. Whereas the
Fund may only lend up to 15% of the total value of its portfolio
securities, the Acquiring Fund may lend its portfolio securities
to the fullest extent permitted under the 1940 Act (in each case,
these are fundamental investment restrictions).
INVESTMENT OBJECTIVE AND POLICIES
OF THE ACQUIRING FUND AND THE FUND
The Acquiring Fund
Investment objective. The Acquiring Fund seeks long-term
growth of capital.
Key investments. The Acquiring Fund invests primarily in
equity securities of high growth companies. These companies
possess a market capitalization within the market capitalization
range of companies in the Russell 2000 Growth Index (the "Index")
at the time of the Acquiring Fund's investment. The size of the
companies in the Index changes with market conditions and the
composition of the Index. As of September 30, 1999, the largest
market capitalization of a company in the Index was $3.5 billion.
Equity securities include exchange traded and over-the-counter
common stocks, preferred stocks, debt securities convertible into
equity securities and warrants and rights relating to equity
securities. The Acquiring Fund may invest up to 35% of its assets
in equity securities of companies with market capitalizations
outside the range of companies in the Index.
Selection process. The manager focuses on small
capitalization companies that exhibit attractive growth
characteristics. The manger selects individual stocks for
investment by identifying those companies which exhibit the most
favorable growth prospects. In selecting individual companies for
investment, the manager considers:
? Growth characteristics, including high historic growth
rates and high forecasted growth of sales, profits and
return on equity
? Innovative companies at the cutting edge of positive and
dynamic demographic and economic trends
? Products and services that give the company a competitive
advantage
? Skilled management committed to long-term growth
? Potential for a long-term investment by the fund
The manager uses a disciplined investment process to identify
small financially sound growth companies that exhibit the
potential to become much larger and more successful. Elements of
this process include fundamental research, evaluation of key
management and screening techniques.
Principal risks of investing in the Acquiring Fund.
Investors could lose money on their investment in the Acquiring
Fund, or the Acquiring Fund may not perform as well as other
investments, if:
? Key economic trends become materially unfavorable, such
as rising interest rates and levels of inflation or a
slowdown of economic growth
? U.S. stock markets perform poorly relative to other types
of investments
? An adverse company specific event, such as an unfavorable
earnings report, negatively affects the stock price of a
company in which the fund invests
? Small capitalization stocks underperform mid
capitalization and large capitalization stocks
? The manager's judgment about the attractiveness, growth
prospects, value or potential appreciation of a
particular stock proves to be incorrect
Because the Acquiring Fund invests primarily in small
capitalization growth companies, an investment in the Acquiring
Fund may be more volatile and more susceptible to loss than an
investment in a fund which invests primarily in large
capitalization companies. Small capitalization companies may have
more limited product lines, markets and financial resources than
large capitalization companies. They may have shorter operating
histories and more erratic businesses. In addition, small
capitalization company stocks may be less liquid than large
capitalization company stocks.
Who may want to invest. The Acquiring Fund may be an
appropriate investment if you:
? Are seeking to participate in the long term potential of
small capitalization growth companies
? Are looking for an investment with potentially greater
return but higher risk than a fund that invests primarily
in large cap companies
? Are willing to accept the risks of the stock market and
the special risks and potential long-term rewards of
investing in smaller companies with limited track records
? Are seeking diversification
The Fund
Investment objective. The Fund seeks capital appreciation.
Key investments. The Fund invests in common stocks of
small sized companies considered by the manager to be "emerging
growth" companies. These are primarily domestic companies, in the
early stages of their life cycles, characterized by relatively
high earnings growth. The manager selects investments from among
companies that have market capitalizations in the lowest 20% of
all publicly traded U.S. companies.
How the manager selects the Fund's investments. The
manager emphasizes individual security selection while spreading
investments among many industries and sectors. The manager uses
quantitative analysis to identify individual companies that it
believes offer exceptionally high prospects for growth. The
manager purchases these companies' stocks when it believes they
are reasonably priced. This style of stock selection is commonly
known as "growth at a reasonable price." Quantitative methods are
also used to control portfolio risk related to broad macroeconomic
factors, such as interest rate changes. The manager selects
investments for their potential capital appreciation; any ordinary
income is incidental. In selecting individual companies for
investment, the manager looks for:
? Above average earnings growth
? A pattern of reported earnings that exceed market
expectations
? Rising earnings estimates over the next several quarters
? High relative return on invested capital
? Reasonable price/earnings multiple
Principal risks of investing in the Fund. Investors could
lose money on their investment in the Fund, or the Fund may not
perform as well as other investments, if any of the following
occurs:
? Stock prices decline generally
? Small cap companies fall out of favor with investors
? The manager's judgment about the attractiveness, value or
potential appreciation of a particular stock proves to be
incorrect
? A particular product or service developed by a small cap
company is unsuccessful, the company does not meet
earnings expectations or other events depress the value
of the company's stock
Compared to large, established companies, small cap
companies are more likely to have limited product lines, limited
capital resources and less experienced management. In addition,
securities of small cap companies are more likely to:
? Experience sharper swings in market value
? Be harder to sell at times and prices the manager
believes appropriate
? Offer greater potential for gains and losses
Who may want to invest in the Fund. The Fund may be an
appropriate investment if you:
? Are seeking to participate in the long term growth
potential of small cap companies
? Currently have exposure to fixed income investments and
less volatile equity investments and wish to broaden your
investment portfolio
? Are willing to accept the risks of investing in the stock
market and the special risks of investing in emerging
growth companies with limited track records
INVESTMENT MANAGEMENT FEES AND EXPENSES
Investment Series, on behalf of the Fund, and Investment
Funds, on behalf of 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. The Acquiring Fund's investment manager
is SSB Citi. The manger's address is 388 Greenwich Street, New
York, New York 10013. The manager selects the fund's investments
and oversees its operations. The manager 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. Under an investment advisory agreement, the Acquiring Fund
pays SSB Citi a fee computed daily and paid monthly at an
aggregate annual rate of 0.75% of the value of its average daily
net assets. The total investment management fee incurred and paid
by the Acquiring Fund for the six months ended March 31, 2000 was
$________.
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 fiscal year ending September 30, 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 September 30, 2000. The actual
expense ratio for the Acquiring Fund for the year ending September
30, 2000 may be higher or lower than as set forth below, depending
upon the Acquiring Fund's performance, general stock market and
economic conditions, sales and redemptions of the Acquiring Fund's
shares (including redemptions by former shareholders of the Fund),
and other factors.
Timothy Woods, CFA, investment officer of the manager and
managing director of Salomon Smith Barney, is responsible for the
day-to-day management of the Acquiring Fund's portfolio. Mr.
Woods has more than 15 years of securities business experience.
Prior to July 1999, he was a Principal at Bankers Trust Company
and manager of the Small-Mid Cap Growth Team.
The Fund. The Fund's investment manager is also SSB Citi.
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 [December 31, 1999] in
excess of [$119] billion. SSB Citi selects the Fund's investments
and oversees its operations. Under an investment advisory
agreement, the Fund pays SSB Citi a fee computed daily and paid
monthly at the annual rate of 0.65% of the Fund's average daily
net assets. The total investment management fees paid by the Fund
for the fiscal year ended October 31, 1999 were $________.
Sandip Bhagat, President of Travelers Investment Management
Company, an affiliate of Solomon Smith Barney, has been
responsible for the day-to-day management of the Fund since 1997.
Mr. Bhagat's management discussion and analysis of the Fund's
performance during the fiscal year ended December 31, 1999 is
included in the Fund's Annual Report to Shareholders dated
December 31, 1999.
The estimated expenses of the Acquiring Fund and the actual
expenses for the Fund for the fiscal years ended September 30, 2000
and October 31, 1999, respectively, and pro forma expenses
following the proposed restructuring are outlined below:
ANNUAL FUND OPERATING EXPENSES
Small Cap Growth Fund*
Class A
Class B
Class
1*
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering price)
5.00%
None
[8.50%]
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
5.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.75%
0.75%
0.75%
12b-1 fees
0.25%
1.00%
0.00%
Other expenses
0.34%
0.37%
0.37%
TOTAL ANNUAL FUND OPERATING EXPENSES
1.34%
2.12%
1.12%
Small Cap Fund
Class A
Class B
Class 1
Shareholder Transaction Expenses
Maximum sales charge imposed on
purchases
(as a percentage of offering price)
5.00%
None
8.50%
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
5.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.65%
0.65%
0.65%
12b-1 fees
0.25%
1.00%
0.00%
Other expenses
0.65%
0.66%
0.60%
TOTAL ANNUAL FUND OPERATING EXPENSES
1.55%
2.31%
1.25%
Small Cap Growth Fund (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)
5.00%
None
[8.50%]
Maximum CDSC
(as a percentage of original cost
or redemption proceeds, whichever
is lower)
None**
5.00%
None
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees
0.75%
0.75%
0.75%
12b-1 fees
0.25%
1.00%
0.00%
Other expenses
0.21%
0.21%
0.37%
TOTAL FUND OPERATING EXPENSES
1.21%
1.96%
1.12%
* Shares of the Acquiring Fund had not commenced operations as
of September 30, 1999. The amounts shown are amounts
estimated to be charged for the fiscal year ending September
30, 2000.
** You may buy Class A Shares in amounts of $1,000,000 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:
Small Cap Growth 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
$630
$ 903
$1,197
$2,032
Class B
$715
$964
$1,239
$2,253
Class 1
$954
$1,176
$1,414
$2,097
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$ 630
$903
$ 1,197
$2,032
Class B
$ 215
$604
$ 1,139
$2,253
Class 1
$95
$1,176
$1,414
$2,097
Small Cap 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
$ 650
$ 965
$ 1,302
$ 2,253
Class B
$ 734
$ 1,021
$ 1,335
$ 2,456
Class 1
$ 967
$ 1,213
$ 1,478
$ 2,233
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$ 650
$ 965
$ 1,302
$ 2,253
Class B
$ 234
$ 721
$1,235
$2,456
Class 1
$ 967
$ 1,213
$ 1,478
$ 2,233
Small Cap Growth Fund (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
$617
$ 865
$1,132
$ 1,893
Class B
$699
$915
$ 1,157
$ 2,091
Class 1
$954
$1,176
$1,414
$2,097
An investor would pay the following
expenses on the same investment,
assuming the same annual return and no
redemption:
Class A
$ 617
$ 865
$ 1,132
$ 1,893
Class B
$ 199
$615
$ 1,057
$2,091
Class 1
$954
$1,176
$1,414
$2,097
* 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.
The above examples assume reinvestment of all dividends and
distributions. The examples should not be considered
representations 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
As of June 5, 2000, Salomon Smith Barney distributes shares
of each Fund as principal underwriter and, as such, conducts a
continuous offering pursuant to a "best efforts" arrangement
requiring Salomon Smith Barney 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. With
respect to the Fund, Salomon Smith Barney has entered into a
selling agreement with PFS Distributors, Inc. (on behalf of PFS
Investments, Inc.) and with one or more other service agents
giving the service agents the rights to sell shares of the Fund.
Each Fund has adopted a plan of distribution under Rule 12b-1
under the 1940 Act (a "Plan").
With respect to the Acquiring Fund, Salomon Smith Barney is
paid a service fee for Class A and Class B shares at the annual
rate of 0.25% of the average daily net assets of the respective
Class under the Plan. Salomon Smith Barney is also paid a
distribution fee with respect to Class B shares of the Acquiring
Fund at the annual rate of 0.75% of the average daily net assets
attributable to that Class. The fees are used by Salomon Smith
Barney to pay its 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.
With respect to Class A shares of the Fund, the Fund pays
PFS Distributors, Inc. and Salomon Smith Barney, as administrative
agents for "PFS Accounts" (i.e., accounts held by PFS Shareholder
Services, Inc.) and other accounts, respectively (the
"Administrative Agents") 0.25% per annum of its average daily net
assets attributable to such class of shares as a service fee. The
service fee is intended to cover shareholder and account
maintenance services provided to Class A shareholders of the Fund
by financial professionals. Class B shares of the Fund are
subject to a combined annual distribution fee and service fee at
the rate of 1.00% of the Fund's aggregate average daily net assets
attributable to such class of shares, which fees are paid to the
Administrative Agents. Payments are made by the Fund under the
Class B Plan of 0.25% per annum, and distribution fee payments of
0.75% per annum, of the aggregate average daily net assets
attributable to Class B shares. The distribution fee payments are
used as compensation for sales and promotional activities and
marketing of the Class B shares of the Fund. These expenditures
may consist of sales commissions to financial professionals for
selling Class B shares, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of
expenses incurred in its sales and promotional activities,
including advertising expenditures related to the Class B shares
of the Fund and the costs of preparing and distributing
promotional materials with respect to the Class B shares.
Class 1 shares of the Funds are not subject to any
distribution fees. 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.
Payments under the above Plans are not tied exclusively to
the distribution and shareholder service expenses actually
incurred by Salomon Smith Barney or PFS Distributors, Inc. and the
payments may exceed distribution expenses actually incurred by the
Funds.
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 shareholders of 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). Furthermore, while the Fund permitted telephone
redemptions, and did not require signature guarantees for mail
redemptions, of $50,000 or less, the Acquiring Fund limits such
amounts to $10,000 or less. Moreover, although many of the
services provided by PFS Shareholder Services, Inc. to the Fund
are available to shareholders of the Acquiring Fund, PFS
Shareholder Services, Inc. will 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 Fund declares dividends from net investment income 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.
Whereas the Acquiring Fund expects distributions to be primarily
from income, the Fund expects distributions to be primarily from
gain. 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
"The Proposed Transaction -- Federal Income Tax Consequences."
PRINCIPAL INVESTMENTS AND RISK FACTORS
General. As described above, 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 investment practices and
techniques that are substantially similar. 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 October 11,
1999, as supplemented from time to time, a copy of which is
included herewith, and in the Statement of Additional Information
of the Fund 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.
Because of their substantially similar investment policies,
the Funds are exposed to similar risks. The following summarizes
those principal investment policies and related risk factors:
Equity Securities. Common stocks represent an equity
(ownership) interest in a corporation. Although equity securities
have a history of long-term growth in value, their prices
fluctuate based on changes in a company's financial condition and
on overall market and economic conditions.
Small Capitalization Companies. Small companies (those
companies that have market capitalizations in the lowest 20% of
all publicly traded U.S. companies) may (i) be subject to more
volatile market movements than securities of larger, more
established companies; (ii) have limited product lines, markets or
financial resources; and (iii) depend upon a limited or less
experienced management group. The securities of small companies
may be traded only on the over-the-counter market or on a regional
securities exchange and may not be traded daily or in the volume
typical of trading on a national securities exchange. Disposition
by a Fund of small company securities in order to meet redemptions
may require the Fund to sell these securities at a discount from
market prices, over a longer period of time or during periods when
disposition is not desirable.
Preferred Stocks and Convertible Securities. The Funds may
invest in convertible debt and preferred stocks. Convertible debt
securities and preferred stock entitle the holder to acquire the
issuer's stock by exchange or purchase for a predetermined rate.
Convertible securities are subject both to the credit and interest
rate risks associated with fixed income securities and to the
stock market risk associated with equity securities.
Warrants. Warrants acquired by the Funds entitle it to buy
common stock from the issuer at a specified price and time.
Warrants are subject to the same market risks as stocks, but may
be more volatile in price. A Fund's investment in warrants will
not entitle it to receive dividends or exercise voting rights and
will become worthless if the warrants cannot be profitably
exercised before the expiration dates.
Illiquid and Restricted Securities. The Funds may invest up
to 15% of its assets in securities (excluding those subject to
Rule 144A under the Securities Act of 1933, as amended (the "1933
Act"), with contractual or other restrictions on resale and other
instruments that are not readily marketable, including (a)
repurchase agreements with maturities greater than seven days, (b)
time deposits maturing from two business days through seven
calendar days, (c) to the extent that a liquid secondary market
does not exist for the instruments, futures contracts and options
on those contracts and (d) other securities that are subject to
restrictions on resale that the investment adviser has determined
are not liquid under guidelines established by a Fund's governing
board.
Foreign Securities. The Acquiring Fund may invest up to 10%
and the Fund may invest up to 20% of its assets in securities of
foreign issuers, including securities denominated in foreign
currencies. These investments involve certain risks not
ordinarily associated with investments in securities of domestic
issuers. These risks include differences in accounting, auditing
and financial reporting standards, generally higher commission
rates on foreign portfolio transactions, the possibility of
expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability
which could affect U.S. investments in foreign countries and
potential restrictions on the flow of international capital.
Additionally, dividends or interest payable on foreign securities,
and in some cases capital gains, may be subject to foreign
withholding or other foreign taxes. Foreign securities often
trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Changes in
foreign exchange rates will affect the value of those securities
which are denominated or quoted in currencies other than U.S.
dollars. Certain of the foreign securities held by the fund may
not be registered with, nor will the issuers thereof be subject to
the reporting requirements of, the SEC. Accordingly, there may be
less publicly available information about the securities and the
foreign company or government issuing them than is available about
a domestic company or government entity. Moreover, individual
foreign economies may differ favorably or unfavorably from the
U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency
and balance of payment positions.
ADRs. The Funds may purchase ADRs or other securities
representing underlying shares of foreign companies. ADRs are
publicly traded on exchanges or over-the-counter in the United
States and are issued through "sponsored" or "unsponsored"
arrangements. In a sponsored ADR arrangement, the foreign issuer
assumes the obligation to pay some or all of the depository's
transaction fees, whereas under an unsponsored arrangement, the
foreign issuer assumes no obligation and the depository's
transaction fees are paid by the ADR holders. In addition, less
information is available in the United States about an unsponsored
ADR than about a sponsored ADR, and the financial information
about a company may not be as reliable for an unsponsored ADR as
it is for a sponsored ADR. A Fund may invest in ADRs through both
sponsored and unsponsored arrangements.
Repurchase Agreements. The Funds may enter into repurchase
agreements. A repurchase agreement is a contract under which a
Fund acquires a security for a relatively short period (usually
not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time
and price (representing the Fund's cost plus interest). It is the
Fund's present intention to enter into repurchase agreements only
upon receipt of fully adequate collateral and only with commercial
banks (whether U.S. or foreign) and registered broker-dealers.
Repurchase agreements may also be viewed as loans made by the fund
which are collateralized primarily by the securities subject to
repurchase. The Fund bears a risk of loss in the event that the
other party to a repurchase agreement defaults on its obligations
and the Fund is delayed in or prevent from exercising its rights
to dispose of the collateral securities. Pursuant to policies
established by the Fund's governing board, the investment adviser
monitors the creditworthiness of all issuers with which the Fund
enters into repurchase agreements.
Reverse Repurchase Agreements. The Funds may enter into
reverse repurchase agreements. A reverse repurchase agreement
involves the sale of a money market instrument by a Fund and its
agreement to repurchase the instrument at a specified time and
price. The Fund will maintain a segregated account consisting of
U.S. government securities or cash or cash equivalents to cover
its obligations under reverse repurchase agreements with broker-
dealers and other financial institutions. The Fund will invest
the proceeds in other money market instruments or repurchase
agreements maturing not later than the expiration of the reverse
repurchase agreement. Under the 1940 Act, reverse repurchase
agreements may be considered borrowing by the seller.
Short Term Instruments. The Funds may invest in short term
and money market instruments. Money market instruments in which a
Fund may invest include: U.S. government securities; certificates
of deposit, time deposits and bankers' acceptances issued by
domestic banks (including their branches located outside the
United States and subsidiaries located in Canada), domestic
branches of foreign banks, savings and loan associations and
similar institutions; high grade commercial paper; and repurchase
agreements with respect to the foregoing types of instruments.
Derivative contracts. The Funds may, but need not, use
derivative contracts, such as futures and options on securities,
securities indices and currencies; options on these futures;
forward currency contracts; and interest rate and currency swaps
for any of the following purposes:
? To hedge against the economic impact of adverse changes
in the market value of portfolio securities, because of
changes in stock market prices
? As a substitute for buying or selling securities
? In the case of the Fund, to enhance total return and in
the case of the Acquiring Fund, as a cash management
technique
A derivative contract will obligate or entitle a Fund to deliver
or receive an asset or cash payment based on the change in value
of one or more securities or indices. Even a small investment in
derivative contracts can have a big impact on a fund's stock
exposure. Therefore, using derivatives can disproportionately
increase losses and reduce opportunities for gains. The Fund may
not fully benefit from or may lose money on derivatives if changes
in their value do not correspond accurately to changes in the
value of the fund's holdings. The other parties to certain
derivative contracts present the same types of default risk as
issuers of fixed income securities. Derivatives can also make a
fund less liquid and harder to value, especially in declining
markets.
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. A purchase or sale of a futures contract may result in
losses in excess of the amount invested in the futures contract.
Where a 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.
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.
Defensive investing. The Funds 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 goal. A Fund may engage
in active and frequent trading, resulting in high portfolio
turnover. This may lead to the realization and distribution to
shareholders of higher capital gains, increasing their tax
liability. Frequent trading also increases transaction costs,
which could detract from the fund's performance.
Investment goal. The Fund's investment goal is not
fundamental and may be changed without shareholder approval by the
fund's board of trustees.
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 the Acquiring Fund having an aggregate
net asset value equal to the aggregate net asset value of the
shareholder's shares held 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 shares 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 shareholder of
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
shareholder's shares held in the Fund immediately as of the close
of business on the Closing Date. Each Fund shareholder's account
with the Acquiring Fund will be substantially 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 interest 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, shareholders of 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 Investment Funds, on behalf of 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. The Fund 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/Directors of either
Investment Series or Investment Funds, 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 the shareholders of the Fund without obtaining the
approval of the Fund's shareholders. The Fund 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 $_______.] Shareholders have no
rights of appraisal.
REASONS FOR THE PROPOSED TRANSACTION
At a [telephonic] meeting of Investment Series' Board of
Trustees held on July 17, 2000, the Trustees, including all of the
Non-Interested Trustees, were presented with materials discussing
the benefits which would accrue to the shareholders of 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 Trustees, 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 similar investment objectives and
policies that is professionally managed by SSB Citi. The Board of
Trustees of Investment Series believes that shareholders of the
Fund will benefit from the proposed Reorganization because the
Acquiring Fund 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. 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 return over a year's time than the Fund.
As discussed in detail herein, the 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 expenses incurred by the Fund.
Lower Fees and Expenses. If the proposed transaction is
approved, shareholders of the Fund may benefit from 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 has higher total annual operating
expenses than the corresponding class of the Acquiring Fund. As a
result of the Reorganization, shareholders of the Fund will be
investing in the corresponding class of the Acquiring Fund with
expenses that are currently between [0.30%] and [0.31%] lower than
those of the relevant class of the Fund. [If the Reorganization
is consummated, the Acquiring Fund's net expense ratio for each
class of its shares is estimated to remain unchanged for the year
ending September 30, 2000.] Going forward, shareholders should
benefit from economies of scale through lower expense ratios and
higher net income distributions over time since 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.
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 shareholders 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 (e.g., 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 and
higher annual return;
(6) the lower 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 is a diversified series of Investment
Funds, a corporation incorporated under the laws of the State of
Maryland on September 29, 1981, and is registered with the SEC as
a diversified, open-end management investment company. The Fund
currently offers shares of beneficial interest 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 each 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 Investment Funds 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 Investment Funds 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 Investment Funds
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 Investment Funds 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.
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 Funds and Investment Series. The
foregoing is not a complete description of the documents cited.
Shareholders should refer to the provisions of 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 by Investment Funds,
on behalf of 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
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 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 shareholders
of the Fund upon the receipt of Shares solely in exchange for
their shares of the Fund as part of the transaction; (vii) the
basis of Shares received by the shareholders of the Fund will be
the same as the basis of the shares of the Fund exchanged
therefor; and (viii) the holding period of Shares received by the
shareholders of the Fund will include the holding period during
which the shares of the Fund exchanged therefor were held,
provided that at the time of the exchange the shares of the Fund
were held as capital assets in the hands of the shareholders of
the Fund.
While neither Investment Series nor Investment Funds 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's
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 four months
ended March 31, 2000 was 27%. The portfolio turnover rate for
the Fund for the year ended October 31, 1999 was 115%.
CAPITALIZATION
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
THE
FUND
PRO FORMA
ADJUSTMENTS
PRO FORMA
COMBINED
(Actual)
(Actual)
Class A
Net Assets
47,824,273
179,546,700
227,371,063
Net Asset
Value Per
Share
16.79
23.06
16.79
Shares
Outstanding
2,848,533
7,786,206
10,693,674
13,542,207
Class B
Net Assets
74,823,594
177,574,558
252,398,152
Net Asset
Value Per
Share
16.73
21.85
16.73
Shares
Outstanding
4,472,943
8,126,209
10,614,140
15,087,082
Class 1*
Net Assets
-
13,230,406
13,230,406
Net Asset
Value Per
Share
16.79
23.43
16.79
Shares
Outstanding
-
564,587
787,993
787,993
Class L
Net Assets
56,476,668
-
56,476,668
Net Asset
Value Per
Share
16.73
-
16.73
Shares
Outstanding
3,375,915
-
-
3,375,915
Class Y
Net Assets
111,628,505
-
111,628,505
Net Asset
Value Per
Share
16.81
-
16.81
Shares
Outstanding
6,640,334
-
-
6,640,334
__________________
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.
* Assumes subscriptions of Class 1 shares in acquiring fund at
Class A NAV.
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.
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about Investment
Series, with respect to the Fund, and Investment Funds, with
respect to 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; the amount of those assets
will increase 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, the shareholder may
submit the proxy card originally sent with the Proxy
Statement/Prospectus or attend in person. Any proxy given by a
shareholder is revocable until voted at the 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
Exhibit A: Form of Agreement and Plan of Reorganization
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, the
Small Cap Fund (the "Acquired Fund"), and Smith Barney Investment
Funds Inc. ("Investment Funds"), a Maryland corporation with its
principal place of business at 388 Greenwich Street, New York, New
York 10013, on behalf of its series, the Small Cap Growth Fund
(the "Acquired Fund") 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 Investment Funds, on behalf of 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 Investment
Funds, on behalf of 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, Investment Series, on behalf of the Acquired Fund, agrees
to transfer to Investment Funds, on behalf of the Acquiring Fund,
all of the Acquired Fund's assets as set forth in section 1.2, and
Investment Funds, on behalf of 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 Investment Funds with respect to 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. Investment Series, on behalf of Acquired Fund, shall
deliver to Investment Funds, on behalf of the Acquiring Fund, on
the Closing Date a schedule of assets.
3.3. PNC Bank, National Association, as custodian for the
Investment Series, 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. Investment Funds, on behalf of
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 Investment Funds, on behalf of 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. Investment Funds, on behalf of the Acquiring Fund,
represents and warrants to Investment Series, on behalf of the
Acquired Fund, as follows:
(a) Investment Funds 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) Investment Funds 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) Investment Funds is not, and the execution,
delivery and performance of this Agreement by Investment
Funds will not result, in violation of Maryland law or of
the Investment Funds' 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 unaudited 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 six months ended March 31, 2000, which have
not 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 March 31, 2000, there has not been any
material adverse change in the Acquiring Fund's financial
condition, assets, liabilities or business other than
changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing
more than one year from the date such indebtedness was
incurred except as otherwise disclosed to and accepted in
writing by Investment Series(r) 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 Investment Funds and this Agreement will
constitute a valid and binding obligation of Investment
Funds on behalf 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) Investment Funds, on behalf of 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. Investment Funds, on behalf of 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, Investment Funds' 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 September 25, 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 Investment Funds in obtaining such
information as Investment Funds reasonably requests concerning the
beneficial ownership of the Acquired Fund Shares and will provide
Investment Funds with a list of affiliates of the Acquired Fund.
5.6. Subject to the provisions of this Agreement,
Investment Funds, on behalf of 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. Investment Funds, on behalf of 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 Investment Funds, 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
Investment Funds 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. Investment Funds, on behalf of 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
Investment Funds may take such actions it reasonably deems
advisable after the Closing Date as circumstances change.
5.10. Investment Funds, on behalf of the Acquiring Fund,
covenants that it will, from time to time, as and when reasonably
requested by Investment Series, 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 Investment Series 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. Investment Funds, on behalf of 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 Investment Funds,
on behalf of 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 Investment
Funds, with respect to 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. Investment Funds, on behalf of 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 Investment Funds, with respect
to 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) Investment Funds has been duly organized and is
a validly existing corporation;
(b) Investment Funds, with respect to the Acquiring
Fund, has the corporate power to carry on its business as
presently conducted in accordance with the description
thereof in Investment Funds' registration statement under
the 1940 Act;
(c) the Agreement has been duly authorized, executed
and delivered by Investment Funds, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding
obligation of Investment Funds, on behalf 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 Articles of Incorporation, as amended, or By-
laws of Investment Funds; 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. Investment Funds, on behalf of 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. Investment Funds, on behalf of 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 Investment Funds or Investment
Series 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 and Investment
Funds 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 and Investment Funds. Notwithstanding
anything herein to the contrary, neither Investment Series nor
Investment Funds may waive the condition set forth in this section
8.5.
9. INDEMNIFICATION
9.1. Investment Funds, on the behalf of 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, on behalf of the Acquired Fund,
agrees to indemnify and hold harmless Investment Funds 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 Investment
Funds 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. Investment Funds, on behalf of 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. Investment Funds, on behalf of 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 Investment Funds, on behalf of the
Acquiring Fund, and Investment Series, on behalf of the 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 Investment Funds; 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, c/o Smith Barney
Investment Funds 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 any other address that Investment Series or Investment
Funds 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 the Small Cap
Fund
By:
_________________________
_________
Name:
____________________________
Title:
_____________________________
Attest: SMITH BARNEY INVESTMENT FUNDS
INC.
on behalf of the Small Cap
Growth Fund
By:
_________________________
_________
Name:
____________________________
Title:
_____________________________
Attest: SSB CITI FUND MANAGEMENT LLC
By:
_________________________
_________
Name:
____________________________
Title:
_____________________________
THE PROSPECTUS AND SEMI-ANNUAL REPORT OF THE ACQUIRING FUND
DATED OCTOBER 11, 1999 AND MARCH 31, 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 SMALL CAP GROWTH FUND, INC. (THE "ACQUIRING FUND")
A SERIES OF SMITH BARNEY INVESTMENT FUNDS INC. ("INVESTMENT
FUNDS")
388 Greenwich Street
New York, New York 10013
(800) 451-2010
OF THE ASSETS OF SMALL CAP FUND (THE "FUND"),
A SERIES OF CONCERT INVESTMENT SERIES(r) ("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 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 October 11, 1999.
2. Statement of Additional Information for the Fund,
dated February 28, 2000.
3. Semi-Annual Report of the Acquiring Fund for the six-
months ended March 31, 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 Semi-Annual Report (unaudited) of the Acquiring Fund for
the six months ended March 31, 2000 and the Annual Report of the
Fund for the year ended October 31, 1999, 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)
The following tables set forth the unaudited pro forma
condensed Statement of Assets and Liabilities as of April 30,
2000, and the unaudited pro forma condensed Statement of
Operations for the twelve month period ended April 30, 2000 for
the Acquiring Fund and the Fund as adjusted giving effect to the
Reorganization.
PRO FORMA CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 2000 (UNAUDITED)
<PAGE>
CIS SMALL CAP FUND (Formerly Emerging Growth Fund)
STATEMENT OF OPERATIONS
12-Months Ended 4/30/00
<TABLE>
<CAPTION>
Balance As Of 12-Months
-------------------------------------------------- Ended
4/30/99 10/31/99 4/30/00 4/30/00
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends 410,986 891,807 528,612 1,009,433
Interest 251,737 806,399 894,580 1,449,242
Less: Foreign withholding tax (358) (1,853) (2,070) (3,565)
----------------------------------------------------------------------------------------------------------------------------
Total Investment Income 662,365 1,696,353 1,421,122 2,455,110
----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 763,020 1,632,814 1,140,280 2,010,074
Distribution fees 678,301 1,465,913 1,043,059 1,830,671
Registration fees 35,717 71,119 52,138 87,540
Shareholder and system servicing fees 570,730 1,253,153 766,195 1,448,618
Audit and legal 11,660 53,377 20,343 62,060
Shareholder communications 18,524 198,973 76,513 256,962
Custody 17,648 35,599 7,804 25,755
Directors' fees 8,485 16,963 11,820 20,298
Organization costs 2,084 4,168 2,084 4,168
Other 10,389 20,379 5,353 15,343
----------------------------------------------------------------------------------------------------------------------------
Total Expenses 2,116,558 4,752,458 3,125,589 5,761,489
----------------------------------------------------------------------------------------------------------------------------
Net Investment Income (1,454,193) (3,056,105) (1,704,467) (3,306,379)
----------------------------------------------------------------------------------------------------------------------------
Realized Gain From:
Security Transactions 18,954,636 76,911,975 43,389,890 101,347,229
Futures Contracts (114,533) 1,197,481 (1,039,396) 272,618
----------------------------------------------------------------------------------------------------------------------------
Net Realized Gain 18,840,103 78,109,456 42,350,494 101,619,847
----------------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period (4/30/99) 42,339,659
End of Period (4/30/00) 6,244,863
----------------------------------------------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (36,094,796)
----------------------------------------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 65,525,051
----------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 62,218,672
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SMITH BARNEY SMALL CAP GROWTH
CIS SMALL CAP FUND
Average Net Assets Calculation
<TABLE>
<CAPTION>
CIS
----------------------------------------------------------------------------------------
Class A Class B Class 1 Fund
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cum. Net Assets 10/31/99 $46,906,223,381.60 $42,032,546,417.04 $3,164,794,998.54 $92,103,564,797.18
Less: Cum. Net Assets 4/30/99 (22,040,692,965.13) (19,161,364,076.73) (1,489,207,179.64) (42,691,264,221.50)
Add: Cum. Net Assets 4/30/00 31,880,028,700.82 30,261,144,747.02 2,147,741,615.48 64,288,915,063.32
----------------------------------------------------------------------------------------
Total $56,745,559,117.29 $53,132,327,087.33 $3,823,329,434.38 $113,701,215,639.00
----------------------------------------------------------------------------------------
Avg. (5/1/99-4/30/00)(366 days) $155,042,511.25 $145,170,292.59 $10,446,255.29 $310,659,059.12
========================================================================================
<CAPTION>
SB Small Cap Growth
---------------------------------------------------------------------------------------------
Class A Class B Class L Class Y Fund
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cum. Net Assets 12/31/99 $0.00 $0.00 $0.00 $0.00 $0.00
Less: Cum. Net Assets 4/30/99 0.00 0.00 0.00 0.00 0.00
Add: Cum. Net Assets 4/30/00 0.00 0.00 0.00 0.00 0.00
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Total $0.00 $0.00 $0.00 $0.00 $0.00
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Avg. (5/1/99-4/30/00)(366 days) $0.00 $0.00 $0.00 $0.00 $0.00
=============================================================================================
</TABLE>
<PAGE>
SMITH BARNEY SMALL CAP GROWTH FUND
STATEMENT OF OPERATIONS
5-Months Ended 5/31/00
<TABLE>
<CAPTION>
Balance As Of 5-Months
-------------------------------------- Ended
3/31/00 4/30/00 4/30/00
--------------------------------------------------------
<S> <C> <C> <C>
Dividends 6,276 5,292 11,568
Interest 218,852 91,969 310,821
Less: Foreign withholding tax 0 0 0
------------------------------------------------------------------------------------------------------------------
Total Investment Income 225,128 97,261 322,389
------------------------------------------------------------------------------------------------------------------
Investment advisory fees 318,946 135,413 454,359
Distribution fees 285,756 96,059 381,815
Administration fees 0 0 0
Registration fees 29,682 5,665 35,347
Shareholder and system servicing fees 41,976 13,126 55,102
Audit and legal 13,432 2,142 15,574
Shareholder communications 39,990 3,009 42,999
Custody 11,415 2,295 13,710
Directors' fees 2,707 817 3,524
Other 3,162 536 3,698
------------------------------------------------------------------------------------------------------------------
Total Expenses 747,066 259,062 1,006,128
------------------------------------------------------------------------------------------------------------------
Net Investment Income (521,938) (161,801) (683,739)
------------------------------------------------------------------------------------------------------------------
Realized Gain From:
Security Transactions (5,631,538) (18,839,592) (24,471,130)
Futures Contracts 24,475 0 24,475
------------------------------------------------------------------------------------------------------------------
Net Realized Gain (5,607,063) (18,839,592) (24,446,655)
------------------------------------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments and Futures Contracts:
Beginning of period 0
End of Period 15,705,123
------------------------------------------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 15,705,123
------------------------------------------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts (8,741,532)
------------------------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations (9,425,271)
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Merger of CIS Small Cap Fund into Smith Barney Small Cap Growth
<TABLE>
<CAPTION>
SB Small Adjustments
Cap Growth CIS Small Cap ------------------- Pro Forma
4/30/00 4/30/00 CIS Small Cap Combined
-------------- ---------------- ------------------- ---------------
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES
ASSETS:
<S> <C> <C> <C> <C>
Investments, at value (cost $242,449,158 and
$355,363,485) $258,154,281 $361,993,459 $620,147,740
Cash 833 902 1,735
Collateral for securites on loan 0 43,848,459 43,848,459
Dividends & interest receivable 8,439 37,756 46,195
Due from broker 0 358,875 358,875
Receivable for securities sold 1,055,782 0 1,055,782
Receivable for Fund shares sold 1,535,751 117,631 1,653,382
Other Assets 0 0 $946,687 b, c 946,687
Deferred organization costs - 5,552 5,552
-------------- ---------------- --------------- ---------------
Total Assets 260,755,086 406,362,634 946,687 668,064,407
-------------- ---------------- --------------- ---------------
LIABILITIES:
Payable for securities on loan - 43,848,459 43,848,459
Payable for securities purchased 1,584,168 - 1,584,168
Trustees' retirement plan - 16,611 16,611
Management fees payable 135,495 180,855 319,869 a 636,219
Distribution costs payable 157,883 230,591 388,474
Accrued expenses and other liabilities 66,035 276,511 (342,546)b,c 0
-------------- ---------------- --------------- ---------------
Total Liabilities 1,943,581 44,553,027 (22,677) 46,473,931
-------------- ---------------- --------------- ---------------
Net Assets $258,811,505 $361,809,607 $969,364 $621,590,476
============== ================ =============== ===============
NET ASSETS:
Par value of capital shares $15,970 $160,272 ($137,940)d $38,302
Capital paid in excess of par value 268,270,702 314,954,350 137,940 d 583,362,992
Undistributed net investment income (loss) (733,635) (1,710,418) 969,364 a,b,c (1,474,689)
Accumulated net realized gain (loss) (24,446,655) 42,160,540 17,713,885
Net unrealized appreciation of investments 15,705,123 6,244,863 21,949,986
-------------- ---------------- --------------- ---------------
Net Assets $258,811,505 $361,809,607 $969,364 $621,590,476
============== ================ =============== ===============
Outstanding Shares:
CLASS A 2,879,371 7,632,848 10,889,279 13,768,650
============== ================ ===============
CLASS B 4,292,565 7,848,100 10,651,686 14,944,251
============== ================ ===============
CLASS L 3,307,835 - 3,307,835
============== ================ ===============
CLASS Y 5,490,324 - 5,490,324
============== ================ ===============
CLASS 1 - 546,232 791,060 * 791,060
============== ================ ===============
Net Asset Value
CLASS A (and redemption price) $16.22 $23.14 $16.24
============== ================
CLASS B $16.18 $21.96 $16.20
============== ================
CLASS L $16.18 - $16.20
============== ================
CLASS Y $16.23 - $16.25
============== ================
CLASS 1 - $23.49 $16.25
============== ================
CLASS A MAXIMUM OFFERING PRICE $17.07 $24.36 $17.09
============== ================
CLASS L MAXIMUM OFFERING PRICE $16.34 - $16.36
============== ================
CLASS 1 MAXIMUM OFFERING PRICE - $25.67 $17.75
============== ================
</TABLE>
* Assumes subscriptions of Class 1 shares in acquiring Fund at Class A NAV
See accompanying notes to pro forma financial statements.
<PAGE>
Merger of CIS Small Cap Fund into Smith Barney Small Cap Growth
<TABLE>
<CAPTION>
SB Small Adjustments
Cap Growth CIS Small Cap ----------------- Pro Forma
4/30/00 4/30/00 CIS Small Cap Combined
-------------- -------------- ----------------- ---------------
PRO FORMA STATEMENT OF OPERATIONS
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends $11,568 $1,009,433 - $1,021,001
Interest 310,821 1,449,242 - 1,760,063
Less: Foreign withholding tax - (3,565) - (3,565)
-------------- -------------- ------------- ---------------
Total Investment Income 322,389 2,455,110 - 2,777,499
EXPENSES:
Investment advisory fees 454,359 2,010,074 $319,869 a 2,784,302
Distribution fees 381,815 1,830,671 - 2,212,486
Shareholder and system servicing fees 55,102 1,448,618 (1,131,233)b 372,487
Shareholder communications 42,999 256,962 (75,000)c 224,961
Registration fees 35,347 87,540 (40,000)c 82,887
Custody 13,710 25,755 39,465
Audit and legal 15,574 62,060 (30,000)c 47,634
Directors' fees 3,524 20,298 (10,000)c 13,822
Amortization of deferred organization costs - 4,168 - 4,168
Other 3,698 15,343 (3,000)c 16,041
-------------- -------------- ----------------- ---------------
Total Expenses 1,006,128 5,761,489 (969,364) 5,798,253
Less: Management Fee Waivers - - - -
-------------- -------------- ----------------- ---------------
Net Expenses 1,006,128 5,761,489 (969,364) 5,798,253
-------------- -------------- ----------------- ---------------
NET INVESTMENT LOSS (683,739) (3,306,379) 969,364 (3,020,754)
-------------- -------------- ------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) From:
Security Transactions (excluding short term securities) (24,471,130) 101,347,229 - 76,876,099
Futures contracts 24,475 272,618 297,093
Net Change in Unrealized Appreciation of Investments 15,705,123 (36,094,796) - (20,389,673)
-------------- -------------- ------------- ---------------
Net Gain (Loss) On Investments (8,741,532) 65,525,051 - 56,783,519
Increase (Decrease) in Net Assets Resulting from Operations ($9,425,271) $62,218,672 $969,364 $53,762,765
============== ============== ============= ===============
</TABLE>
(a) Reflects recalculation of Managent fees at 0.75%
(b) Reflects adjustment for lower T/A fees.
(c) Decrease due to duplicate services.
(d) Reflects adjustment for difference in par value per share.
See accompanying notes to pro forma financial statements.
<PAGE>
--------------------------------------------------------------------------------
Adjustment to Management Fee Calculation:
Average net assets CIS Small Cap Fund: 310,659,059
new rate 310,659,059 0.75% $2,329,943
==============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Transfer Agent Fees:
SB Small Cap Growth Rates
CIS Small Cap Fund Transfer
TSSG Class Fee Average Net Assets Agent Fee Class
0.1000% 155,042,511 155,043 A
0.1000% 145,170,293 145,170 B
--------------
300,213
Actual Transfer Agent fees of Class 1 17,172
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Outstanding Net Assets Allocation of Income Adj. Net Assets Adj. NAV
<S> <C> <C> <C> <C> <C>
A 13,768,650 223,327,500 340,680.45 223,668,181 16.24
B 14,944,251 241,797,978 368,856.69 242,166,834 16.20
L 3,307,835 53,520,770 81,644.58 53,602,415 16.20
Y 5,490,324 89,107,959 135,931.93 89,243,890 16.25
Z 791,060 12,830,990 19,573.35 12,850,563 16.24
-----------------------------------------------------------------------------------------------
38,302,119 620,585,197 946,687 621,531,884
NAVs before income adj. $16.22 946,687
$16.18
$16.18
$16.23
$16.22
</TABLE>
<PAGE>
Merger of CIS Small Cap Fund into Smith Barney Small Cap Growth
<TABLE>
<CAPTION>
SB Small Adjustments
Cap Growth CIS Small Cap ----------------- Pro Forma
4/30/00 4/30/00 CIS Small Cap Combined
-------------- -------------- ----------------- ---------------
<S> <C>
---------------------------------------------------------------------------------
Adjustment to Management Fee Calculation:
Average net assets CIS Small Cap Fund: 310,659,059
new rate 310,659,059 0.75% $2,329,943
==============-
---------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Transfer Agent Fees:
SB Small Cap Growth Rates
CIS Small Cap Fund Transfer
TSSG Class Fee Average Net Assets Agent Fee Class
0.1000% 155,042,511 155,043 A
0.1000% 145,170,293 145,170 B
--------------
300,213
Actual Transfer Agent fees of Class 1 17,172
--------------------------------------------------------------------------------
Pro Forma Footnotes of Merger Between Smith Barney Small Cap Fund
and CIS Small Cap Fund.
April 30, 2000 (unaudited)
1. General
The accompanying unaudited pro forma financial statements are
presented to show the effect of the proposed acquisition of
substantially all of the assets of CIS Small Cap Fund ("the
Acquired Fund") by the Smith Barney Small Cap Growth Fund ("Fund")
in exchange for shares of Smith Barney Small Cap Growth Fund and
the assumption by Smith Barney Small Cap Growth Fund of
substantially all of the liabilities of the Acquired Fund as
described elsewhere in this proxy statement/prospectus.
Under the terms of the Agreement and Plan of Reorganization, the
exchange of assets of the Acquired Fund for shares of Smith Barney
Small Cap Growth Fund will be treated as a tax-free reorganization
and accordingly will be accounted for as a tax-free merger. The
acquisition would be accomplished by an acquisition of the net
assets of the Acquired Fund in exchange for shares of Smith Barney
Small Cap Growth Fund at net asset value. The unaudited pro forma
schedule of investments and the unaudited pro forma statement of
assets and liabilities have been prepared as though the
acquisition had been effective April 30, 2000. The unaudited pro
forma statement of operations has been prepared as though the
acquisition had been effective May 1, 1999. The unaudited pro
forma financial statements are as of the semi-annual period end of
the Acquired Fund as that date is more recent than the most
recently filed financial statements for Smith Barney Small Cap
Growth Fund.
The accompanying pro forma financial statements should be read in
conjunction with the financial statements and schedule of
investments of the Acquired Fund and Smith Barney Small Cap Growth
Fund which are included in their respective shareholder reports
dated October 31, 1999 and March 31, 2000, respectively. The
expense of the reorganization, including the cost of the proxy
solicitation, will be borne by SSB Citi Fund Management LLC
("SSBC"), Smith Barney Small Cap Growth Fund's Investment Manager.
SSBC is a subsidiary of Salomon Smith Barney Holdings Inc., which
in turn is a subsidiary of Citigroup Inc.
2. Significant Accounting Policies
The Smith Barney Small Cap Growth Fund,a series of Smith Barney
Investment Funds Inc., a Maryland corporation is
registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company.
The significant accounting policies consistently followed by Smith
Barney Small Cap Growth Fund are:
(a) securities transactions are accounted for on trade date;
(b) securities traded on national securities markets are
valued at the closing price on such markets; securities
traded in the over-the-counter market and listed securities
for which no sales price was reported and U.S. government
and government agency obligations are valued at the bid
price, or in the absence of a recent bid price, at the bid
equivalent obtained from one or more of the major market
makers; (c) securities maturing within 60 days are valued at
cost plus accreted discount, or minus amortized premium,
which approximates value; (d) interest income adjusted for
accretion of original issue discount, is recorded on the
accrual basis; (e) realized gains or losses on the sale of
securities are calculated by using the specific
identification method; (f) dividends and distributions to
shareholders are recorded on the ex-dividend date; (g)
direct expenses are charged to each portfolio and each
class; management fees and general expenses are allocated on
the basis of relative net assets; (h) the Fund intends to
comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated
investment companies and to make distributions of taxable
income sufficient to relieve it from substantially all
Federal income and excise taxes; (i) the character of income
and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally
accepted accounting principles; and (j) estimates and
assumptions are required to be made regarding assets,
liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes
in the economic environment, financial markets and any other
parameters used in determining these estimates could cause
actual results to differ.
3. Pro-Forma Adjustments
The accompanying unaudited pro forma schedule of investments and
pro forma financial statements reflect changes in shares and fund
expenses as if the merger had taken place on May 1, 1999.
Adjustments were made to reduce certain expenses for duplicated
services and to reflect new investment advisory agreement as if
they had been in place as of May 1, 1999.
4. Investment Advisory Agreement and Other Transactions
SSBC acts as investment advisor of Smith Barney Small Cap Growth
Fund. Smith Barney Small Cap Growth Fund pays SSBC an advisory fee
calculated at an annual rate of 0.75% of the average daily net
assets. This fee is calculated daily and paid monthly. SSBC also
acts as investment adviser for the Acquired Fund. The Acquired
Fund pays SSBC an advisory fee calculated at an annual rate of
0.65% of the average daily net assets. This fee is calculated
daily and paid monthly. It is expected that the overall expense
ratio for the Acquired Fund's shareholders will be reduced because
of economies of scale recognized in connection with the merger.
Citi Fiduciary Trust Company ("CFTC"), a subsidiary of Citigroup,
is Smith Barney Small Cap Growth Fund's transfer agent. Salomon
Smith Barney Inc., another subsidiary of Citigroup, acts as
Government Fund's distributor.
SCHEDULE OF INVESTMENTS
Portfolio of Investments at April 30, 2000 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Small Cap Growth Fund
Concert Investment Series Small Cap Fund
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK --- 92.3%
Auto & Transportation --- 1.0%
96,600 American Axle & Manufacturing
Holdings, Inc.* $ 1,449,000 $ 1,449,000
107,100 Aviation Sales Co.+* 408,319 408,319
24,300 CNF Transportation Inc. 678,881 678,881
99,900 Dura Automotive Systems, Inc.,
Class B Shares* 1,623,375 1,623,375
33,800 Hayes Lemmerz International, Inc.* 532,350 532,350
39,300 Mesaba Holdings, Inc. * 491,250 491,250
20,500 SkyWest, Inc. 863,563 863,563
---------------------------------------------------------------------------------------------------------------------------
6,046,738 6,046,738
---------------------------------------------------------------------------------------------------------------------------
Business Services --- 0.4%
24,100 Catalina Marketing Corp.* $ 2,440,125 2,440,125
---------------------------------------------------------------------------------------------------------------------------
2,440,125 2,440,125
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary --- 12.5%
65,066 99 Cents Only Stores* 2,448,108 2,448,108
61,400 The Ackerley Group, Inc. 798,200 798,200
32,100 Action Performance Co., Inc.+* 296,925 296,925
44,900 Apollo Group, Inc., Class A
Shares* 1,302,100 1,302,100
35,700 bebe stores, inc.+* 325,763 325,763
79,100 BJ's Wholesale Club, Inc.* 2,803,106
29,700 Blyth Industries, Inc. 881,719 881,719
113,900 The Bombay Company, Inc.* 412,887 412,887
41,400 Borders Group, Inc.* 657,225 657,225
57,600 CEC Entertainment Inc. * 1,728,000 1,728,000
21,100 Central Newspapers, Inc.,
Class A shares 647,506 647,506
53,700 Church & Dwight Co., Inc. 959,887 959,887
32,900 Citadel Communications Corp.* 1,285,156 1,285,156
20,600 Claire's Stores, Inc. 379,813 379,813
40,500 Complete Business Solutions, Inc. * 926,437 926,437
100,500 Copart, Inc.* 1,733,625 1,733,625
15,600 Cox Radio, Inc., Class A Shares* 1,131,000 1,131,000
57,000 The Dial Corp. 794,437 794,437
20,600 23,100 Dollar Tree Stores, Inc.* 1,192,225 1,336,913 2,529,138
43,700 Emmis Communications Corp.,
Class A shares+* 1,857,250 1,857,250
57,010 Encompass Services Corp.* 395,507 395,507
47,300 Ethan Allen Interiors Inc. 1,262,319 1,262,319
58,100 Furniture Brands
International, Inc.* 1,085,744 1,085,744
43,600 Hot Topic, Inc.* 1,340,700
24,400 Houghton Mifflin Co. 1,014,125 1,014,125
70,000 Interim Services Inc.* 1,198,750 1,198,750
31,912 International Game
Technology +* 777,855 777,855
62,800 Jack in the Box Inc.* 1,538,600 1,538,600
48,600 Jones Apparel Group, Inc.* 1,442,813 1,442,813
44,700 Jostens, Inc. 1,103,531 1,103,531
44,600 Launch Media, Inc.* 465,513 465,513
38,200 71,800 Linens 'n Things, Inc.* 1,179,425 2,216,825 3,396,250
64,300 The Men's Warehouse, Inc.* 1,378,431 1,378,431
40,000 Metamor Worldwide, Inc.* 775,000 775,000
27,900 Michaels Stores, Inc.* 1,100,306
45,100 Navigant Consulting, Inc.* $ 448,181 $ 448,181
21,900 Outback Steakhouse, Inc.* 717,225 717,225
54,987 103,800 Pacific Sunwear of
California, Inc.+* 1,872,995 $ 3,535,688 5,408,683
30,800 Performance Food Group Co.* 812,350 812,350
18,200 PowerTel, Inc.* 1,223,950
42,600 Pre-paid Legal Services, Inc.* 1,363,200 1,363,200
16,500 Radio One, Inc.* 957,000 957,000
30,650 Regis Corp. 358,222 358,222
52,200 Rent-Way, Inc.* 1,353,938 1,353,938
51,200 Ross Stores, Inc. 1,062,400 1,062,400
100,900 Samsonite Corp.+* 529,725 529,725
54,800 Shaw Industries, Inc. 866,525 866,525
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
51,400 Sirius Satellite.+* 2,039,937 2,039,937
21,600 Sotheby's Holdings, Inc.,
Class A shares 357,750 357,750
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
---------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
119,500 The Source Information Management Co.+* 1,762,625 1,762,625
90,700 Station Casinos, Inc.* 2,584,950
61,800 Talbot's, Inc. 3,124,763
56,000 TeleTech Holdings, Inc.* 1,827,000 1,827,000
29,200 Tupperware Corp. 551,150 551,150
30,300 United Stationers Inc. 1,011,263 1,011,263
11,400 Universal Access, Inc.* 233,700
45,000 Westwood One, Inc.* 1,591,875 1,591,875
109,700 Williams-Sonoma, Inc.* 3,798,363
106,800 WMS Industries Inc. 934,500 934,500
---------------------------------------------------------------------------------------------------------------------------
53,793,737 23,299,264 77,093,001
---------------------------------------------------------------------------------------------------------------------------
Consumer Staples --- 0.2%
108,600 The Earthgrains Co. 1,527,188 1,527,188
---------------------------------------------------------------------------------------------------------------------------
1,527,188 - 1,527,188
---------------------------------------------------------------------------------------------------------------------------
Finance --- 5.5%
54,300 Affiliated Mangers Group, Inc.* 2,178,788 2,178,788
119,000 AmeriCredit Corp.* 2,223,813 2,223,813
12,400 Astoria Financial Corp. 341,775 341,775
22,045 Commerce Bancorp, Inc. 874,911 874,911
38,000 Community First Bankshares, Inc. 641,250 641,250
21,000 37,200 Dain Rauscher Corp. 1,300,687 2,304,075 3,604,762
67,000 Doral Financial Corp. 799,812 799,812
32,700 55,700 Eaton Vance Corp. 1,383,619 2,356,806 3,740,425
31,210 Fidelity National Financial, Inc. 460,347 460,347
20,000 The FINOVA Group, Inc. 256,250 256,250
30,600 FPIC Insurance Group, Inc.+* 439,875 439,875
15,800 Greater Bay Bancorp 671,747 671,747
31,600 GreenPoint Financial Corp. 588,550 588,550
48,800 HCC Insurance Holdings, Inc. 573,400 573,400
40,800 HSB Group, Inc. 1,183,200 1,183,200
25,435 Hudson United Bancorp 573,877 573,877
32,700 37,800 Metris Cos., Inc. 1,226,250 1,417,500 2,643,750
73,200 National Discount Broker Group, Inc.* 2,136,525
54,000 North Fork Bancorp., Inc. 874,125 874,125
40,800 Oriental Financial Group Inc. 693,600 693,600
84,000 Pacific Century Financial Corp. 1,727,250 1,727,250
33,200 Queens County Bancorp Inc. 674,375 674,375
26,200 Radian Group Inc. 1,334,562 1,334,562
20,900 S1 Corp.* $ 1,135,131 $ 1,135,131
19,300 Silicon Valley Bancshares 1,191,775 1,191,775
18,300 Southwest Securities Group, Inc. 752,587 752,587
49,700 Sovereign Bancorp, Inc. 341,687 341,687
52,600 United Bankshares, Inc. 1,147,337 1,147,337
---------------------------------------------------------------------------------------------------------------------------
25,590,580 $ 8,214,906 33,805,486
---------------------------------------------------------------------------------------------------------------------------
Health Care --- 12.7%
10,300 17,800 Abgenix, Inc. * 922,494 1,594,212 2,516,706
10,550 16,800 Affymetrix, Inc.+* 1,424,909 2,269,050 3,693,959
25,400 Akamai Technologies, Inc.* 2,511,425
51,000 Allaire Corp.* 2,808,188
10,000 Allscripts Inc.* 310,000
14,300 13,400 Alkermes, Inc.+* 761,475 713,550 1,475,025
54,300 Bergen Brunswig Corp., Class A shares 271,500 271,500
35,600 Cephalon Inc.* 2,002,500
68,100 CONMED Corp.* 1,779,113 1,779,113
42,500 The Cooper Companies, Inc. 1,429,062 1,429,062
119,000 Covance Inc.* 1,093,313 1,093,313
25,000 Curagen Corp.* 665,625
42,800 71,500 Cytyc Corp.+* 1,915,300 3,199,625 5,114,925
46,000 DSP Group, Inc.* 3,271,750
6,300 Enzo Biochem, Inc.* 255,150 255,150
46,000 Enzon, Inc.+* 1,713,500 1,713,500
25,000 Gene Logic Inc.* 671,875
33,100 Gilead Sciences, Inc.* 1,793,606 1,793,606
70,700 Hanger Orthopedic Group, Inc.* 353,500 353,500
</TABLE>
See Notes to Finacial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
31,760 Human Genome Sciences, Inc.* 2,431,625 2,431,625
42,800 IDEC Pharmaceuticals Corp.+* 2,739,200 2,739,200
</TABLE>
See Notes to Finacial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
----------------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Healthcare (cont'd.) --- 12.8%
17,500 ImClone Systems Inc.* 1,592,500 1,592,500
73,800 InfoCure Corp.* 673,425 673,425
62,425 Jones Pharma Inc.+ 1,798,620 1,798,620
38,260 King Pharmaceuticals, Inc.+* 1,889,087 1,889,087
94,600 Ligand Pharmaceuticals Inc.,
Class B Shares* 1,265,275 1,265,275
52,250 Medicis Pharmaceuticals Corp.,
Class A Shares* 2,285,938 2,285,938
42,600 MedQuist Inc.* 1,509,637 1,509,637
65,800 Mentor Corp. 1,163,838 1,163,838
45,400 Millennium Pharmaceuticals, Inc.* 3,603,625 3,603,625
21,500 MiniMed, Inc.* 2,643,156
31,100 Ocular Sciences, Inc. * 515,094 515,094
66,300 Omnicare, Inc. 1,006,931 1,006,931
67,800 Orthodontic Centers of America, Inc.* 1,436,513 1,436,513
120,200 Oxford Health Plans, Inc.* 2,283,800
86,100 Pharmaceutical Product Development,
Inc.* 1,447,556 1,447,556
28,500 Priority Healthcare Corp.* 1,578,187
10,000 Protein Design Labs, Inc.* 1,015,000
67,225 PSS World Medical, Inc.* 577,715 577,715
21,100 QLT, Inc.* 1,172,369
38,150 Res-Care, Inc.+* 417,266 417,266
219,400 SICOR Inc.+* 2,481,963 2,481,963
36,800 STERIS Corp.* 331,200 331,200
43,600 Sunrise Assisted Living, Inc.* 686,700 686,700
52,100 Sybron International Corp.* $ 1,621,613 $ 1,621,613
35,900 Transkaryotic Therapies, Inc.+* 1,074,756 1,074,756
64,700 Trigon Healthcare Inc.* $ 2,325,156
15,200 Universal Health Services, Inc.,
Class B Shares* 832,200 832,200
----------------------------------------------------------------------------------------------------------------------------------
47,095,199 31,035,468 78,130,667 12.7%
----------------------------------------------------------------------------------------------------------------------------------
Materials & Processing --- 2.1%
117,200 Airgas, Inc. * 688,550 688,550
32,900 Centex Construction Products, Inc. 1,015,788 1,015,788
29,100 CoStar Group Inc.* 697,945 697,945
22,200 Cousins Properties, Inc. 871,350 871,350
23,700 Federal Realty Investment Trust 503,625 503,625
34,600 NL Industries, Inc. 562,250 562,250
23,400 NVR, Inc.* 1,456,650 1,456,650
26,500 Reckson Associates Realty Corp. 531,656 531,656
19,700 The Rouse Co. 461,719 461,719
52,700 Spartech Corp. 1,831,325 1,831,325
63,950 Stillwater Mining Co.* 1,790,600 1,790,600
17,900 USG Corp. 747,325 747,325
32,300 Vornado Realty Trust 1,114,350 1,114,350
62,700 Wausau-Mosinee Paper Corp. 760,238 760,238
----------------------------------------------------------------------------------------------------------------------------------
13,033,371 - 13,033,371 2.1%
----------------------------------------------------------------------------------------------------------------------------------
Other Energy --- 4.6%
47,600 Barrett Resources Corp. * 1,511,300 1,511,300
40,400 Basin Exploration, Inc.* 565,600 565,600
45,500 BJ Services Co.* 3,196,375
33,400 Cooper Cameron Corp.* 2,505,000
16,600 12,800 Devon Energy Corp.+ 799,913 616,800 1,416,713
73,700 Ensco International Inc. 2,445,919
47,600 Grant Prideco, Inc.* 916,300
82,900 Marine Drilling Cos., Inc.* 2,155,400
29,264 Ocean Energy Inc.* 378,603 378,603
91,200 Plains Resources Inc.* 1,293,900 1,293,900
49,900 R&B Falcon Corp.* 1,035,425 1,035,425
39,300 Smith International, Inc.* 2,986,800
50,900 Stone Energy Corp.* 2,405,025
39,000 Tidewater Inc. 1,160,250
68,600 UTI EnergyCorp.* 2,383,850
47,600 Weatherford International, Inc.* 1,933,750
----------------------------------------------------------------------------------------------------------------------------------
5,584,741 22,705,469 28,290,210 4.6%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
------------------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Producer Durables 2.7%
76,200 Astec Industries, Inc.* 1,914,525 1,914,525
24,800 C&D Technologies, Inc. 1,598,050 1,598,050
49,400 CommScope, Inc.* 2,346,500 2,346,500
21,200 Fastenal Corp.* 1,238,875
19,600 Jacobs Engineering Group Inc. * 613,725 613,725
45,300 Kellstrom Industries, Inc.+* 183,323 183,323
43,500 The Kroll-O' Gara Co.* 334,406 334,406
35,200 Lennar Corp.+ 655,600 655,600
41,800 The Manitowoc Co., Inc. 1,387,238 1,387,238
55,100 Mettler-Toledo International Inc. * 1,900,950 1,900,950
19,000 Nordson Corp. 849,063 849,063
40,400 PerkinElmer, Inc. 2,211,900 2,211,900
106,700 Waste Connections, Inc.* $ 1,333,750 $ 1,333,750
------------------------------------------------------------------------------------------------------------------------------------
15,329,030 $ 1,238,875 16,567,905 2.7%
------------------------------------------------------------------------------------------------------------------------------------
Technology 48.1%
52,400 Actuate Corp.* 1,568,725
33,500 ADTRAN, Inc.* 2,263,344 2,263,344
44700 Advanced Energy Industries, Inc.* 3,084,300
70,300 65,700 Advanced Fibre Communication, Inc.+* 3,211,831 3,001,669 6,213,500
47,400 Advent Software Inc.* 2,488,500 2,488,500
43,400 70,000 Alpha Industries, Inc. 2,256,800 3,640,000 5,896,800
64,800 American Management Systems, Inc.* 2,397,600 2,397,600
103,400 41,400 Amkor Technology, Inc.+* 6,326,787 2,533,162 8,859,949
16,300 41,800 ANADIGICS, Inc.* 1,226,575 3,145,450 4,372,025
29,200 Ancor Communications, Inc.* 881,475 881,475
89,500 AnswerThink Consulting Group, Inc.+* 1,722,875 1,722,875
Antec Corp.
54,900 Apex Inc.* 1,622,981 1,622,981
32,300 Applied Micro Circuits Corp.* 4,162,663
49,400 AppliedTheory Corp.* 543,400 543,400
3,750 ArrowPoint Communications, Inc.* 367,500
39,500 Art Technology Group, Inc.* 2,399,625
51,800 ASM International N.V.* 1,787,100
28,000 57,300 Aspect Development, Inc.* 1,935,500 3,960,862 5,896,362
45,300 Aspen Technology, Inc.* 1,602,487 1,602,487
28,600 Avanex Corp.* 3,485,625
80,300 AVT Corp.* 888,319 888,319
72,600 Bea Systems, Inc.* 3,502,950
51,200 BindView Development Corp.* 412,800 412,800
22,400 Black Box Corp.* 1,723,400 1,723,400
23000 BreezeCom Ltd.* 632,500
120,100 BroadVision, Inc. +* 5,276,894 5,276,894
53,000 52,850 Burr-Brown Corp.+* 3,610,625 3,600,406 7,211,031
30,100 Business Objects S.A., Sponsored ADR 2,946,038
46,400 CACI International Inc., Class A Shares* 1,087,500 1,087,500
29,800 Carrier Access Corp.+* 1,300,025 1,300,025
52,900 C-Cube Microsystems Inc.* 3,398,825 3,398,825
16,822 CIBER, Inc. +* 303,847 303,847
24,200 Clarent Corp.* 1,645,600
22,100 Cognex Corp.* 1,256,938 1,256,938
41,200 Cognizant Technology Solutions Corp.* 1,890,050 1,890,050
69,000 Com21 Inc.* 1,932,000
73,000 Computer Network Technology Corp.* 1,177,125 1,177,125
28,100 Concentric Network Corp. * 1,222,350 1,222,350
36,500 Copper Mountain Networks, Inc.* 3,043,188
20,700 Credence Systems Corp.* 2,954,925 2,954,925
11,600 22,700 Cree, Inc.+* 1,687,800 3,302,850 4,990,650
89,100 Cypress Semiconductor Corp.* 4,627,631 4,627,631
37,300 Dallas Semiconductor Corp. 1,601,569 1,601,569
46,300 Diamond Technology Partners, Inc.,
Class A shares * 3,663,488 3,663,488
49,600 82,600 Digital Microwave Corp.* 1,832,100 3,051,037 4,883,137
48,300 Dycom Industries, Inc.* 2,511,600 2,511,600
26,700 Efficient Networks, Inc.* 1,755,525
</TABLE>
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
Proforma Schedule of Investments (unaudited) April 30, 2000
SHARES/FACE AMOUNT SECURITY VALUE
------------------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
54,600 Electro Scientific Industries, Inc.* 3,443,212 3,443,212
</TABLE>
See Notes to Financial Statements
<PAGE>
Proforma Schedule of Investments (unaudited) April 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
SHARES/FACE AMOUNT SECURITY VALUE
----------------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Technology (cont'd) --48.1%
35,700 22,700 Emulex Corp.* $ 1,619,888 $ 1,030,012 $ 2,649,900
5,000 Exar Corp.* 400,859
59,700 Exchange Applications, Inc.* 727,594 727,594
18,193 Flextronics International Ltd.* 1,278,058 1,278,058
44,100 Getty Images, Inc.+* 1,339,537 1,339,537
39,100 GlobeSpan, Inc.* 3,714,500
15,200 30,800 Harmonic Inc.+* 1,121,950 2,273,425 3,395,375
32,600 Helix Technology Corp. 1,664,638 1,664,638
3,600 31,400 hi/fn, inc.* 122,175 1,065,638 1,187,813
21,945 Hyperion Solutions Corp.* 665,551 665,551
47,000 iGATE Capital Corp.* 1,410,000 1,410,000
45,300 In Focus Systems, Inc.* 1,356,169 1,356,169
176,100 Informix Corp.* 1,937,100 1,937,100
50,800 Inter-Tel, Inc., Class A Shares 1,028,700 1,028,700
31,400 InterDigital Communications Corp.* 649,588 649,588
77,400 InterVoice-Brite, Inc.* 1,233,562 1,233,562
264,500 Iomega Corp.* 942,281 942,281
32,100 ISS Group, Inc.* 2,903,044 2,903,044
32,500 Juno Online Services, Inc.+* 322,969 322,969
95,500 72,600 Lam Research Corp.+* 4,381,062 3,330,525 7,711,587
27,700 44,900 Lattice Semiconductor Corp.+* 1,866,287 3,025,137 4,891,424
32,100 MasTec, Inc.* 2,772,637 2,772,637
8,050 MatrixOne, Inc.* 265,650
47,300 Mattson Technology, Inc.* 2,323,613
58,900 MCK Communications, Inc.* 1,840,625
125,600 Mentor Graphics Corp.* 1,648,500 1,648,500
64,400 43,500 Mercury Interactive Corp.* 5,796,000 3,915,000 9,711,000
17,600 38,300 Micrel, Inc.* 1,522,400 3,312,950 4,835,350
12,900 27,800 Micromuse Inc.* 1,265,812 2,727,875 3,993,687
51,000 MircoStrategy Inc.+* 1,319,625 1,319,625
44,300 MRV Communications, Inc.* 3,053,931
60,100 National Computer Systems, Inc. 3,091,394 3,091,394
39,700 Natural Microsystems Corp.* 2,585,463
60,700 Novellus Systems, Inc.* 4,047,931
84,900 Oak Technology, Inc.* 1,193,906
25,400 Open Market, Inc.* 261,937 261,937
26,550 Orbotech Ltd.* 2,263,388
38,000 Orckit Communications Ltd.* 1,681,500
31,600 Peregrine Systems, Inc.* 760,375 760,375
77,600 Photronics, Inc.* 2,585,050
41,400 Policy Management Systems Corp.* 548,550 548,550
28,400 Polycom, Inc.* 2,247,150 2,247,150
8,900 16,200 Powerwave Technologies, Inc. * 1,851,756 3,370,613 5,222,369
48,000 PRI Automation, Inc.* 3,834,000
12,900 Quantum Effect Devices, Inc.* 751,425
53,500 RadiSys Corp.* 2,213,562 2,213,562
40,000 Rare Medium Group, Inc.* 822,500 822,500
30,700 Redback Networks, Inc.* 2,436,812
19,100 Register.com,Inc.* 974,100
27,200 RSA Security, Inc.* 1,596,300
55,700 RWD Technologies, Inc. * 445,600 445,600
34,800 Sanchez Computer Associates, Inc. +* 674,250 674,250
30,100 24,300 SanDisk Corp.* $ 2,757,913 $ 2,226,488 $ 4,984,401
18,100 Sapient Corp.* 1,433,294
40,400 Sawtek Inc. * 1,931,625 1,931,625
21,000 SCM Microsystems, Inc. +* 1,661,625 1,661,625
68,000 Sensormatic Electronics Corp.* 1,134,750 1,134,750
10,800 Silicon Laboratories, Inc.* 939,600
52,900 SpeedFam-IPEC, Inc.* 836,481 836,481
9,000 Terayon Communication Systems, Inc.* 837,000 837,000
11,000 Tollgrade Communications Corp.* 726,000
37,000 55,150 TranSwitch Corp.* 3,258,313 4,856,646 8,114,959
36,800 41,500 TriQuint Semiconductor, Inc.* 3,783,500 4,266,718 8,050,218
</TABLE>
See Notes to Financial Statements
<PAGE>
Proforma Schedule of Investments (unaudited) April 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
SHARES/FACE AMOUNT SECURITY VALUE
----------------------------------------------------------------------------------------------------------------------------------
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
18,800 Turnstone Systems, Inc.* 2,068,000
32,300 Varian Semiconductor Equipment Associates, Inc.* 2,172,175 2,172,175
</TABLE>
See Notes to Financial Statements
<PAGE>
Proforma Schedule of Investments (unaudited) April 30, 2000
<TABLE>
<CAPTION>
SHARES/FACE AMOUNT SECURITY VALUE
==============================================================================================================================
CIS SB CIS SB COMBINED
Small Cap Small Cap Small Cap Small Cap VALUE
Growth Growth Growth Growth
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Technology (cont'd.) --- 0.0%
41,400 Vignette Corp.* 1,994,962
19,200 Virata Corp.* 2,404,800
25,600 Visual Networks, Inc.* 998,400 998,400
3,200 webMethods, Inc.* 288,000
122,500 Westell Technologies, Inc.* 3,483,594
68,000 Wind River Systems, Inc.+* 2,902,750 2,902,750
12,200 WorldGate Communications, Inc.+* 287,462 287,462
30,900 Xircom, Inc. * 1,218,619 1,218,619
33,800 Zebra Technologies Corp. * 1,926,600 1,926,600
------------------------------------------------------------------------------------------------------------------------------------
151,382,092 145,325,605 296,707,697
------------------------------------------------------------------------------------------------------------------------------------
Utilities --- 2.5%
32,400 Calpine Corp.* 2,964,600
19,500 Commonwealth Telephone Enterprises
Inc.* 946,969 946,969
204,800 e.spire Communications, Inc.* 1,036,800 1,036,800
58,300 Intermedia Communications Inc.* 2,375,725 2,375,725
53,900 ITC/ \Deltacom, Inc.* 1,771,962 1,771,962
26,700 Leap Wireless International, Inc.* 1,371,712 1,371,712
47,000 MGC Communications, Inc.* 2,303,000 2,303,000
35,700 Pinnacle Holdings Inc.* 2,005,894 2,005,894
20,500 US LEC Corp., Class A shares * 535,563 535,563
------------------------------------------------------------------------------------------------------------------------------------
11,400,656 3,911,569 15,312,225
------------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost --- $550,296,856) 330,783,332 238,171,281 568,954,613
U.S. TREASURY BILLS --- 0.3%
$ 1,920,000 U.S. Treasury Bills, due 06/15/00
(Cost- $1,905,787) 1,905,787 1,905,787
====================================================================================================================================
SUB-TOTAL INVESTMENTS -
(Cost --- $552,202,643) 332,689,119 238,171,281 570,860,400
====================================================================================================================================
REPURCHASE AGREEMENT --- 7.4%
$25,627,000 Chase Securities Inc., 5.550%
dated 04/28/00, due 5/1/00; Proceeds
at maturity - $25,638,850; (Fully
collateralized by U.S. Treasury Notes,
4.750% due 11/15/08; Market value
- $26,141,550) $ 25,627,000 $ 25,627,000
19,983,000 Goldman Sachs, 5.670% due 5/1/00;
Proceeds at maturity - $19,992,442;
(Fully collateralized by U.S. Treasury
Notes and Bonds, 6.500% to 11.125%
due 10/31/01 to 2/15/21 Market value
- $20,382,660) $ 19,983,000 19,983,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost --- $45,610,000) 25,627,000 19,983,000 45,610,000 7.4%
====================================================================================================================================
TOTAL INVESTMENTS ---100%
(Cost - $597,812,643)** $358,316,119 $258,154,281 $ 616,470,400 92.3%
====================================================================================================================================
</TABLE>
+ All or a portion of this security is on loan (See Note 12).
* Non income producing securities.
** Aggregate cost for Federal income tax purposes is substantially the same.
See Notes to Financial Statements.
<PAGE>
THE SEMI-ANNUAL REPORT AND STATEMENT OF ADDITIONAL INFORMATION
OF THE ACQUIRING FUND DATED MARCH 31, 2000 AND OCTOBER 11, 1999,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY
SMITH BARNEY INVESTMENT FUNDS
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. Reference is also made to the Registrant's
Articles of Restatement, dated September 17, 1993. Registrant is
a named assured on a joint insured bond pursuant to Rule 17g-1 of
the Investment Company Act of 1940. Other assureds include SSB
Citi Fund Management LLC(Registrant's Adviser) and affiliated
investment companies. The response to this item is further
incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-14 filed on October 8, 1993
(File No. 33-50153).
ITEM 16. EXHIBITS
1(a) Articles of Restatement dated September 17, 1993 to
Registrant's Articles of Incorporation dated
September 28, 1981, Articles of Amendment dated
October 14, 1994, Articles Supplementary, Articles of
Amendment dated October 14, 1994, Articles
Supplementary, Articles of Amendments and Certificates
of Correction dated November 7, 1994, are incorporated
by reference to Post-Effective Amendment No. 37 to the
Registration Statement filed on November 7, 1994.
1(b) Articles of Amendment dated October 23, 1997 are
incorporated by reference to Post-Effective Amendment
No. 46 filed on October 23, 1997 ("Post-Effective
Amendment No. 46").
1(c) Articles of Amendment dated February 27, 1998 are
incorporated by reference to Post-Effective Amendment
No. 48 dated April 29, 1998.
1(d) Articles of Amendment dated June 1, 1998 are
incorporated by reference to Post-Effective Amendment
No. 49 filed on July 16, 1998 ("Post-Effective
Amendment No. 49").
2 Registrant's By-Laws, as amended on September 30, 1992
are incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement filed
on April 30, 1993.
3 Not applicable.
4 Form of Agreement and Plan of Reorganization is
included in Part A to the Registration Statement on
Form N-14.
5 Registrant's form of stock certificate for Smith
Barney Hansberger Global Value Fund ("Global Value
Fund") and Smith Barney Hansberger Global Value Small
Cap Fund ("Small Cap Fund") is incorporated by
reference to Post-Effective Amendment No. 46.
6(a) Investment Advisory Agreement dated July 30, 1993,
between the Registrant on behalf of Smith Barney
Investment Grade Bond Fund, Smith Barney Government
Securities Fund and Smith Barney Special Equities Fund
and Greenwich Street Advisors is incorporated by
reference to the Registration Statement filed on Form
N-14 on September 2, 1993, File No. 33-50153.
6(b) Investment Advisory Agreements on behalf of Smith
Barney Growth Opportunity Fund and Smith Barney
Managed Growth Fund is incorporated by reference to
Post-Effective Amendment No. 40 filed on June 27, 1995
("Post-Effective Amendment No. 40").
6(c) Investment Management Agreements on behalf of Global
Value Fund and Global Small Cap Fund between
Registrant and Smith Barney Mutual Funds Management
Inc. is incorporated by reference to Post-Effective
Amendment No. 46.
6(d) Sub-Advisory Agreement on behalf of Global Value Fund
and Global Small Cap Fund between MMC and Hansberger
Global Investors Inc. is incorporated by reference to
Post-Effective Amendment No. 46.
6(e) Investment Management Agreements on behalf of Smith
Barney Small Cap Growth Fund and Smith Barney Small
Cap Value Fund between Registrant and Mutual
Management Corp. is incorporated by reference to Post-
Effective Amendment No. 49.
7(a) Distribution Agreement dated July 30, 1993, between
the Registrant and Smith Barney Shearson Inc. is
incorporated by reference to the Registration
Statement filed on Form N-14 on September 2, 1993,
File 33-50153.
7(b) Form of Distribution Agreement between the Registrant
and PFS Distributors on behalf of Smith Barney
Investment Funds Inc. is incorporated by reference to
Post-Effective Amendment No. 40.
7(c) Form of Distribution Agreement between the Registrant
and CFBDS, Inc. is incorporated by reference to Post-
Effective Amendment No. 49.
7(d) Selling Group Agreement is incorporated by reference
to Post-Effective Amendment No. 56 filed on
February 26, 1999.
8 Not applicable.
9(a) Custodian Agreement with PNC Bank, National
Association is incorporated by reference to Post-
Effective Amendment No. 44 filed on April 29, 1997.
9(b) Custodian Agreement with Chase Manhattan Bank is
incorporated by reference to Post-Effective Amendment
No. 46.
10(a) Amended Services and Distribution Plans pursuant to
Rule 12b-1 between the Registrant on behalf of Smith
Barney Investment Grade Bond Fund, Smith Barney
Government Securities Fund, Smith Barney Special
Equities Fund and Smith Barney European Fund and Smith
Barney, Inc. ("Smith Barney") are incorporated by
reference to Post-Effective Amendment No. 37 filed on
November 3, 1994 ("Post-Effective Amendment No. 37").
10(b) Form of Services and Distribution Plans pursuant to
Rule 12b-1 between the Registrant on behalf of Smith
Barney Growth Opportunity Fund and Smith Barney
Managed Growth Fund is incorporated by reference to
Post-Effective Amendment No. 40.
10(c) Form of Services and Distribution Plans pursuant to
Rule 12b-1 between the Registrant on behalf of the
Global Value Fund and Small Cap Fund is incorporated
by reference to Post-Effective Amendment No. 46.
10(d) Form of Amended and Restated Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 between the
Registrant on behalf of each of its series is
incorporated by reference to Post-Effective Amendment
No. 49.
10(e) Form of Plan pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No. 50 to
Registration Statement.
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) Transfer Agency and Registrar Agreement dated
August 5, 1993 with First Data Investor Services
Group, Inc. (formerly The Shareholder Services Group,
Inc.) is incorporated by reference to Post-Effective
Amendment No. 31 as filed on December 22, 1993.
13(b) Sub-Transfer Agency Agreement between the Registrant
and PFS Shareholders Services on behalf of Smith
Barney Investment Funds Inc. is incorporated by
reference to Post-Effective Amendment No. 40.
14 Auditors' Consent is filed herewith.
15 Not applicable.
16 Powers of Attorney are incorporated by reference to
Registrant's Registration Statement filed on Form N-1A.
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) Semi-Annual Report of Registrant, dated March 31,
2000, is incorporated herein by reference.
17(e) Prospectus and statement of additional information of
Registrant, dated October 11, 1999, 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
As required by the Securities Act of 1933, this registration
statement has been signed on behalf of the Registrant, in the City
of New York and State of New York on the 17th day of July, 2000.
SMITH BARNEY INVESTMENT FUNDS
INC.
BY /s/ Heath B. McLendon
Heath B. McLendon, Chief
Executive Officer
As required by the Securities Act of 1933, this registration
statement has been signed by the following persons in the
capacities and on the date indicated.
Signatures
Title
Date
/s/ Heath B. McLendon
Heath B. McLendon
Director, Chairman,
President and Chief
Executive Officer
July 17,
2000
*
/s/ Lewis E. Daidone
Lewis E. Daidone
Senior Vice President and Treasurer
(Chief Financial and Accounting Officer)
/s/ Paul R. Ades*
Paul R. Ades
Director
July 17,
2000
/s/Herbert Barg*
Herbert Barg
Director
July 17,
2000
/s/Dwight B. Crane*
Dwight B. Crane
Director
July 17,
2000
/s/ Frank Hubbard*
Frank Hubbard
Director
July 17,
2000
/s/Jerome Miller**
Jerome Miller
Director
July 17,
2000
/s/ Ken Miller*
Ken Miller
Director
July 17,
2000
*Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to power of attorney dated November 3, 1994.
** Signed by Heath B. McLendon, their duly authorized attorney-in-fact,
pursuant to power of attorney dated April 15, 1998.
/s/ Heath B. McLendon
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) Auditors' Consents
(17) Proxy Card
