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SMITH BARNEY INVESTMENT FUNDS INC.
Smith Barney Hansberger Global Small Cap Value Fund
7 World Trade Center
New York, New York 10048
October 18, 2000
Dear Shareholders:
You are being asked to vote on a Plan of Reorganization whereby all of the
assets of the Smith Barney Hansberger Global Small Cap Value Fund (the
"Fund"), a series of Smith Barney Investment Funds Inc. ("Investment Funds"),
would be transferred in a tax-free reorganization to Smith Barney Hansberger
Global Value Fund (the "Acquiring Fund"), also a series of Investment Funds,
in exchange for shares of the corresponding class of common stock of the
Acquiring Fund. If the 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 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 vote by telephone or
through the internet by using the information located on your proxy card. The
Fund may also solicit proxies from shareholders by letter and/or telephone.
Voting by telephone or through the internet 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
Smith Barney Investment Funds Inc.
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.
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SMITH BARNEY INVESTMENT FUNDS INC.
Smith Barney Hansberger Global Small Cap Value Fund
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders (the "Special
Meeting") of Smith Barney Investment Funds Inc. (the "Corporation"), on behalf
of its series, the Smith Barney Hansberger Global Small Cap Value Fund (the
"Fund"), will be held at the offices of SSB Citi Fund Management LLC, 7 World
Trade Center, Mezzanine Level, New York, New York 10048, on November 22, 2000,
at 9:20 a.m., Eastern time, for the following purposes:
PROPOSAL 1: To approve the Corporation's Plan of Reorganization
providing for (i) the acquisition of all of the assets and
liabilities of the Fund by Smith Barney Hansberger Global
Value Fund (the "Acquiring Fund"), also a series of the
Corporation, (ii) the amendment of the Corporation's
Charter reclassifying all shares of the Fund as shares of
the Acquiring Fund, and (iii) the accomplishment of the
reclassification by the issuance of shares of the
Acquiring Fund to shareholders of 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 October
13, 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 Directors
Christina T. Sydor
Secretary
October 18, 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.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
GENERAL..................................................................... 1
PROPOSAL: APPROVAL OF PLAN OF REORGANIZATION................................ 4
SYNOPSIS.................................................................... 4
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND AND THE FUND........ 6
INVESTMENT MANAGEMENT FEES AND EXPENSES..................................... 8
ANNUAL FUND OPERATING EXPENSES.............................................. 9
DISTRIBUTION OF SHARES AND OTHER SERVICES................................... 11
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION............................... 12
DIVIDENDS AND OTHER DISTRIBUTIONS........................................... 12
TAX CONSEQUENCES............................................................ 12
PRINCIPAL INVESTMENTS AND RISK FACTORS...................................... 12
THE PROPOSED REORGANIZATION................................................. 18
REASONS FOR THE PROPOSED REORGANIZATION..................................... 19
DESCRIPTION OF THE SECURITIES TO BE ISSUED.................................. 21
FEDERAL INCOME TAX CONSEQUENCES............................................. 22
LIQUIDATION AND TERMINATION OF SERIES....................................... 23
PORTFOLIO SECURITIES........................................................ 23
PORTFOLIO TURNOVER.......................................................... 23
CAPITALIZATION AND PERFORMANCE.............................................. 24
ADDITIONAL INFORMATION ABOUT THE FUNDS...................................... 25
INTERESTS OF CERTAIN PERSONS................................................ 25
ADDITIONAL INFORMATION...................................................... 26
</TABLE>
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ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information dated October 18, 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 and the
Fund, dated August 28, 2000.
2. Annual Reports of the Acquiring Fund and the Fund for the year ended
April 30, 2000.
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Merger Q&A
Smith Barney Hansberger Global Small Cap Value Fund into Smith Barney
Hansberger Global Value Fund
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 Hansberger Global Value Fund
on or about December 1, 2000 ("Closing Date") and will no longer be a
shareholder of the Smith Barney Hansberger Global Small Cap Value Fund, which
will be terminated pursuant to the proposed reorganization. You will receive
shares of the Smith Barney Hansberger Global Value Fund with a total net asset
value equal to the total net asset value of your investment in the Smith
Barney Hansberger Global Small Cap Value Fund at the time of the transaction.
What is the key reason for this fund reorganization?
Smith Barney Hansberger Global Small Cap Value Fund has been unable to
attract a substantial asset base since its inception. This fund's small size
has hindered the portfolio management flexibility of its adviser and resulted
in higher total annual operating expenses for its shareholders. The proposed
reorganization will create one single larger sized fund and is expected to
provide shareholders of the Smith Barney Hansberger Global Small Cap Value
Fund with a fund that has lower overall risk characteristics and lower total
annual operating expenses. The Funds' manager, SSB Citi Fund Management LLC
("SSB Citi"), 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. The proposed reorganization is
also part of a broader initiative by SSB Citi to restructure more efficiently
its mutual fund product offerings.
Do the funds have similar investment objectives?
Yes. Both funds have identical investment objectives and substantially
similar policies and pursue their objectives in a substantially similar
manner. Thomas L. Hansberger, Ronald W. Holt, Francisco J. Alzuru, and Charles
F. Gulden of Hansberger Global Investors, Inc., the sub-investment adviser to
each Fund, are responsible for the day-to-day management of the portfolio of
the Smith Barney Hansberger Global Value Fund.
The principal investment objective of both funds is to seek long-term
capital growth. However, the investment practices and limitations of each Fund
(and related risks) are not identical. For additional information regarding
the differences between the two funds, please refer to the enclosed proxy
statement.
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.
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Will I enjoy the same privileges as a shareholder of the Smith Barney
Hansberger Global Value Fund that I currently have as a shareholder of the
Smith Barney Hansberger Global Small Cap Value Fund?
Yes. You will continue to enjoy 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 Directors recommend I vote?
The Directors recommend that you vote FOR the reorganization. The Directors
believe the reorganization is in the best interest of the Smith Barney
Hansberger Global Small Cap Value 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. Thank you in advance
for your vote.
<PAGE>
PROXY STATEMENT/PROSPECTUS
7 World Trade Center
New York, New York 10048
(800) 451-2010
October 18, 2000
RELATING TO THE ACQUISITION BY THE
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND (THE "ACQUIRING FUND"),
A SERIES OF SMITH BARNEY INVESTMENT FUNDS INC. ("INVESTMENT FUNDS")
OF THE ASSETS OF SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND (THE
"FUND"), ALSO A SERIES OF INVESTMENT FUNDS.
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 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 the Acquiring Fund of all of the liabilities of the
Fund (collectively, the "Reorganization"). The Reorganization will be
accomplished pursuant to an amendment to the Investment Funds' Charter that
will reclassify shares of the Acquired Fund into shares of the Acquiring Fund.
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 a Plan of Reorganization
pursuant to which such transactions, as described more fully below, would be
consummated.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely the information about the Acquiring Fund that
a prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of
the Acquiring Fund, see the prospectus for the Acquiring Fund, dated August
28, 2000, as supplemented from time to time, which is included herewith and
incorporated herein by reference. This Proxy Statement/Prospectus is also
accompanied by the Acquiring Fund's annual report to shareholders for the year
ended April 30, 2000, which is included herewith and incorporated herein by
reference. For a more detailed discussion of the investment objectives,
policies,
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.
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restrictions and risks of the Fund, see the prospectus for the Fund, dated
August 28, 2000, and the annual report to shareholders for the year 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, 7 World Trade Center, New York, New York 10048, or by calling toll-free
(800) 451-2010. A Statement of Additional Information of the Fund and the
Acquiring Fund dated October 18, 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 both Funds has been provided by, and is included herein in
reliance upon, Investment Funds.
Each of the Acquiring Fund and the Fund is a diversified series of
Investment Funds, an open-end management investment company organized as a
Maryland corporation. The investment objective of each Fund is to seek long-
term capital growth. The Acquiring Fund seeks to achieve its objective by
investing primarily in common stocks and other equity securities of U.S. and
foreign companies, including those of emerging market issuers. The Fund seeks
to achieve its objective by investing primarily in common stocks and other
equity securities of U.S. and foreign companies, including those of emerging
market issuers, with relatively small market capitalizations. Each Fund
employs a "bottom-up" approach to security selection, focusing primarily on
identifying individual securities that meet the Funds' value criteria.
----------------
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 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 October 23, 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 Funds 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
shareholders entitled to cast a majority of the votes 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
2
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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 a majority of
the Fund's shares outstanding and entitled to vote thereon. Abstentions and
broker non-votes will have the effect of a "no" vote on the Proposal.
Holders of record of the shares of the Fund at the close of business on
October 13, 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 October 13, 2000, there were 1,159,048.692 shares
of the Fund outstanding.
To the best of knowledge of Investment Funds, as of October 13, 2000, except
as set forth in Annex A, no person owned beneficially more than 5% of any
class of each Fund's outstanding shares.
As of October 13, 2000, less than 1% of the outstanding shares of each of
the Fund and the Acquiring Fund were owned directly or beneficially by the
Directors of Investment Funds.
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.
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PROPOSAL: APPROVAL OF PLAN OF REORGANIZATION
The Board of Directors of Investment Funds, on behalf of the Acquiring Fund
and the Fund, including all of the 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 Board Members"), approved on September
15, 2000, a Plan of Reorganization (the "Plan"). Subject to its approval by
the shareholders of the Fund, the Plan provides for the acquisition of all of
the assets and the assumption of all of the liabilities of the Fund by the
Acquiring Fund and the issuance of the shares of the Acquiring Fund to the
shareholders of the Fund. (The foregoing proposed transaction is referred to
in this Prospectus/Proxy Statement as the "Reorganization.") The
Reorganization will be accomplished pursuant to an amendment to the Charter of
the Investment Funds that will reclassify shares of the Fund as shares of the
Acquiring Fund, substantially in the form set forth as Annex I to the Plan of
Reorganization (Exhibit A). 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 December 1, 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"). Each Fund's investment objective is to seek long-
term capital growth. Moreover, the distributor, custodian, transfer agent and
the sub-transfer agent of each of the Fund and the Acquiring Fund are
identical. Each Fund has retained KPMG LLP as its independent auditors. Both
Funds' subadviser is Hansberger Global Investors, Inc. ("Hansberger"), a
wholly-owned subsidiary of Hansberger Group, Inc. However, while Aurcole L. W.
Fuong, John C. Fenley, Stephen W. Ho, David M. Wu, and Vladimir Tyurenkov are
responsible for the day-to-day management of your Fund's portfolio, Thomas L.
Hansberger, Ronald W. Holt, Francisco J. Alzuru and Charles F. Gulden are
responsible for the day-to-day management of the Acquiring Fund's portfolio.
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 because the
Funds have identical investment objectives; substantially similar policies and
overall risk characteristics; and the Acquiring Fund is subject to both a
lower management fee and a lower total annual expense ratio. The Fund has not
been successful in attracting investors and its relatively small size hampers
the management of its portfolio securities and also results in a higher
expense ratio than would be the case for a large fund. After the
Reorganization, Shareholders of the Fund will continue to enjoy the same
shareholder privileges, such as systematic investment, exchanging shares,
automatic cash withdrawal and
4
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automatic dividend reinvestment, and access to professional service
representatives upon becoming shareholders of 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 Reorganization. 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 Reorganization--Reasons
for the Proposed Reorganization," the Board of Directors of Investment Funds
on behalf of the Fund, including the Non-Interested Directors, 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 Directors recommend approval of the Plan. If the Plan is
not approved, the Fund will continue in existence unless other action is taken
by the Directors; 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 each Fund is to seek long-term capital growth. The Acquiring Fund seeks to
achieve its objective by investing primarily in common stocks and other equity
securities of U.S. and foreign companies, including those of emerging market
issuers. The Fund seeks to achieve its objective by investing primarily in
common stocks and other equity securities of U.S. and foreign companies,
including those of emerging market issuers, with relatively small market
capitalizations. Each Fund employs a "bottom-up" approach to security
selection, focusing primarily on identifying individual securities that meet
the Funds' value criteria. The Acquiring Fund compares its performance against
the Morgan Stanley Capital International All Country World Free Market Index,
while the Fund compares its performance against the Salomon Smith Barney World
Extended Market Index. Although the Fund's investment policies and
restrictions are substantially similar to those of the Acquiring Fund, except
as described in this Proxy Statement/Prospectus, the Acquiring Fund is subject
to lower overall risk characteristics as it does not intend to invest
primarily in issuers with relatively small market capitalizations.
Under normal market conditions, the Fund invests at least 65% of the value
of its total assets in companies with individual market capitalizations of
U.S. $1.4 billion or less (at the time of purchase). Under normal market
conditions, each Fund will invest its assets in at least three countries,
which may include the United States. Each Fund has adopted substantially
similar fundamental investment restrictions with respect to its diversified
status; issuing senior securities; underwriting securities; industry
concentration; making loans; borrowing money; purchasing or selling real
estate, real estate mortgages, commodities or commodity contracts; and
purchasing any securities on margin or selling any securities short. 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 policies with respect to
investments in illiquid securities, investing in any company for the purpose
of exercising control of management and investing in securities of other
investment companies.
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Each Fund may also invest in preferred stocks, certain debt securities,
repurchase and reverse repurchase agreements, warrants or rights to subscribe
to or purchase such securities, and sponsored or unsponsored American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") and other depository receipts (collectively,
"Depositary Receipts"), each in accordance with any 1940 Act or other
applicable limitations. Each Fund may also lend its portfolio securities and
borrow money for investment purposes (i.e., "leverage" its portfolio). In
addition, each Fund may invest in closed-end investment companies holding
foreign securities, and enter into transactions in options on securities,
foreign currencies, forward foreign currency contracts, and futures contracts
and related options. Investors should refer to the respective prospectuses and
statements of additional information of the Fund and the Acquiring Fund for a
fuller description of each Fund's investment policies and restrictions.
INVESTMENT OBJECTIVE AND POLICIES OF THE ACQUIRING FUND AND THE FUND
Investment objective. Each Fund seeks long-term capital growth.
Key investments. The Acquiring Fund invests primarily in common stocks and
other equity securities of U.S. and foreign companies, including those of
emerging market issuers. The Fund invests primarily in common stocks and other
equity securities of U.S. and foreign companies, including those of emerging
market issuers, with relatively small market capitalizations. These are market
capitalizations of $1.4 billion or less at the time of investment. Equity
securities include exchange traded and over-the-counter common stocks and
preferred shares, debt securities convertible into equity securities and
warrants and rights relating to equity securities. Each Fund may purchase
foreign securities in the form of sponsored and unsponsored ADRs, EDRs, GDRs
or other securities representing underlying shares of foreign companies.
Selection process. The subadviser for each Fund uses a "bottom-up" approach
to security selection, focusing primarily on identifying individual securities
that meet each Fund's value criteria. Each Fund seeks to invest in companies
with low share prices relative to their earnings, cash flow and/or net asset
value.
First, the subadviser uses fundamental analysis to identify a universe of
securities of companies (small capitalization companies, in the case of the
Fund) the subadviser believes are undervalued. Specifically, the subadviser
uses proprietary valuation screens, internal and external research sources and
other fundamental analysis to identify these undervalued securities. The
subadviser considers companies in various industries and sectors, and searches
a wide variety of countries and regions.
Once the subadviser has identified a range of securities that appear
undervalued, the subadviser further analyzes each security to determine
whether it meets each Fund's strict value criteria. For each security, the
subadviser considers economic and other fundamental factors, including:
. Sales and earnings growth
. New product development
. Cash flow
. Track record and structure of management
The subadviser will consider a security for investment in each Fund only if it
meets such Fund's strict value criteria.
6
<PAGE>
Principal risks of investing in the Funds. Investors could lose money on
their investment in the Funds, or the Funds may not perform as well as other
investments, if:
. U.S. or foreign stock prices decline
. Adverse governmental action or political, economic or market instability
affects a foreign country or region, which risks may be greater in
emerging markets as described below
. Small capitalization or foreign companies fall out of favor with
investors
. The currency in which a security is priced declines in value relative to
the U.S. dollar
. The manager's judgment about the attractiveness, value or potential
appreciation of a particular stock proves to be incorrect
. In the case of the Fund, a particular product or service developed by a
company in which the Fund invests is unsuccessful, the company does not
meet earnings expectations or other events depress the value of the
company's stock
Many foreign countries in which each Fund invests have markets that are less
liquid and more volatile than markets in the U.S. In some foreign countries,
less information is available about foreign issuers and markets because of
less rigorous accounting and regulatory standards than in the U.S. Currency
fluctuations could erase investment gains or add to investment losses.
Emerging markets investments involve greater risks than investing in more
developed countries. Political or economic instability, lack of market
liquidity and government actions such as currency controls or seizure of
private business or property may be more likely in emerging markets.
Accordingly, the prices of securities of emerging market companies and the
relative prices of emerging market currencies can be more volatile than those
of developed countries.
In the case of the Fund, as compared to mutual funds that focus on large
capitalization companies, the Fund's share price may be more volatile because
of its focus on smaller capitalized companies. These companies are more likely
to have:
. More limited product lines
. Fewer capital resources
. Less depth of management
Further, securities of small capitalization companies are more likely to:
. Experience sharper swings in market values
. Be harder to sell at times and prices the manager believes appropriate
. Offer greater potential for gains and losses
Who may want to invest. The Funds may be an appropriate investment if you:
. Are seeking to invest for long-term capital appreciation in the global
market
. Currently have exposure to domestic equity investments or fixed income
investments and wish to broaden your investment portfolio
. Are willing to accept the risks of the stock market and the special
risks of investing in foreign markets, including emerging markets, and,
in the case of the Fund, small capitalization companies
7
<PAGE>
INVESTMENT MANAGEMENT FEES AND EXPENSES
Investment Funds, on behalf of the Fund and the Acquiring Fund, retains SSB
Citi, pursuant to separate contracts as each Fund's investment manager, to
oversee each Fund's investment operations and those of the subadviser, subject
to the policies established by the Board of Directors. The subadviser of each
Fund is Hansberger, which is responsible for the day-to-day management of each
Fund's portfolio. SSB Citi pays a sub-advisory fee to Hansberger out of the
advisory fees it receives from each Fund. All expenses of the Funds, including
the investment advisory fees, are paid by each Fund. Shareholders pay no
direct charges or fees for investment services.
The Acquiring Fund. The Acquiring Fund's investment manager is SSB Citi. The
manager's address is 7 World Trade Center, New York, New York 10048. The
manager oversees the Fund's investment operations and those of the subadviser.
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 June 30, 2000 in excess of $388 billion. 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 management agreement, the Acquiring Fund pays SSB Citi a fee
computed daily and paid monthly at the annual rate of 0.95% of the value of
its average daily net assets. The total investment management fee incurred and
paid by the Acquiring Fund for the year ended April 30, 2000 was $631,191.
The Acquiring Fund's subadviser, Hansberger, is located at 515 East Las Olas
Blvd., Suite 1300, Fort Lauderdale, Florida 33301. Hansberger is a wholly-
owned subsidiary of Hansberger Group, Inc. As of August 15, 2000, the
subadviser had approximately $3.4 billion under management.
Under a sub-advisory agreement, SSB Citi pays Hansberger a fee, computed
daily and paid monthly, at the annual rate of 0.50% of the value of its
average daily net assets. The total sub-advisory fee incurred and paid by SSB
Citi for the year ended April 30, 2000 was $1,176,648.
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 April 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 either
remain unchanged (in the case of Class A and Class Y shares) or go down (in
the case of Class B and Class L shares) for the year ending April 30, 2001.
The actual expense ratio for the Acquiring Fund for the year ending April 30,
2001 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.
Thomas L. Hansberger, Ronald W. Holt, Francisco J. Alzuru and Charles F.
Gulden are responsible for the day-to-day management of the Acquiring Fund's
portfolio. Mr. Hansberger has been the chairman and chief executive officer of
the subadviser since its inception. Prior thereto, he served as chairman,
president and chief executive officer of Templeton Worldwide, Inc., where he
also was director of research and an officer, director or primary portfolio
manager for several Templeton mutual funds. Mr. Holt has been a research
analyst for the subadviser since 1997. Prior to that time, Mr. Holt was a vice
president in the corporate and institutional client group of Merrill Lynch.
Mr. Alzuru has been a portfolio manager and research analyst for the
subadviser since
8
<PAGE>
1994. Prior thereto, he worked at Vestcorp Partners as their Latin American
analyst. Mr. Gulden has been a managing director of the subadviser since 1996.
Prior to that time, he was vice president and director of Templeton Worldwide,
Inc.
The Fund. The Fund's investment manager is also SSB Citi. SSB Citi oversees
the Fund's investment operations and those of the subadviser. Under an
investment management agreement, the Fund pays SSB Citi a fee computed daily
and paid monthly at the annual rate of 1.05% of the Fund's average daily net
assets. The total investment management fees paid by the Fund for the fiscal
year ended April 30, 2000 were $16,947. For the year ended April 30, 2000, SSB
Citi waived a portion of its management fee for the Fund in the amount of
$32,619.
The Fund's subadviser is also Hansberger. Under a sub-advisory agreement,
SSB Citi pays Hansberger a fee, computed daily and paid monthly, at the annual
rate of 0.60% of the value of its average daily net assets. The total sub-
advisory fee incurred and paid by SSB Citi for the year ended April 30, 2000
was $87,840.
Aurcole L. W. Foong, John C. Fenley, Stephen W. Ho, David M. Wu, and
Vladimir Tyurenkov are responsible for the day-to-day management of the Fund's
portfolio. Mr. Foong has been a research analyst and portfolio manager for the
subadviser since 1997. Prior to that time, he was a director of Peregrine
Asset Management. Mr. Fenley, CFA, has been an analyst and portfolio manager
with the subadviser since 1997. Prior thereto, he managed the Institutional
Investment Department for Sun Trust Bank, South Florida. Mr. Ho joined the
subadviser in 1999 as a research analyst. Prior to that time, he worked for
American International Group in New York and Asia where he managed
institutional and investment company portfolios. Mr. Wu joined the subadviser
as a research analyst in 1995. Prior to joining the subadviser, he was an
editor at Business Asia, an Economist Group publication. Mr. Tyurenkov has
been managing director of the subadviser since 1995. Prior thereto, he spent
several years working for the Russian government and working extensively on
the Pepperdine University Russian Conversion and Privatization Program.
The actual expenses for the Funds for the fiscal years ended April 30, 2000,
and pro forma expenses following the proposed restructuring are outlined
below. 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 projected to be between 1.04% and 1.50% lower than those of the relevant
class of the Fund.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Value Fund Class A Class B Class L Class Y
----------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Fees
Maximum sales charge (load) imposed on
purchases.................................. 5.00% None 1.00% None
(as a percentage of offering price)
Maximum deferred sales charge (load)........ None* 5.00% 1.00% None
(as a percentage of the lower of net asset
value at purchase or redemption)
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees............................. 0.95% 0.95% 0.95% 0.95%
12b-1 fees.................................. 0.25% 1.00% 1.00% None
Other expenses.............................. 0.22% 0.24% 0.26% 0.11%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES.......... 1.42% 2.19% 2.21% 1.06%
==== ==== ==== ====
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Small Cap Value
Fund Class A Class B Class L Class Y
---------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Fees
Maximum sales charge (load) imposed on
purchases.................................... 5.00% None 1.00% None
(as a percentage of offering price)
Maximum deferred sales charge (load).......... None* 5.00% 1.00% None
(as a percentage of the lower of net asset
value at purchase or redemption)
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees**............................. 1.05% 1.05% 1.05% 1.05%
12b-1 fees.................................... 0.25% 1.00% 1.00% None
Other expenses................................ 1.34% 1.38% 1.62% 1.05%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES............ 2.64% 3.43% 3.67% 2.10%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Value Pro Forma Pro Forma Pro Forma Pro Forma
Fund (Pro Forma) (Unaudited) Class A Class B Class L Class Y
------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shareholder Fees
Maximum sales charge (load) imposed
on purchases........................ 5.00% None 1.00% None
(as a percentage of offering price)
Maximum deferred sales charge (load). None* 5.00% 1.00% None
(as a percentage of the lower of
net asset value at purchase or
redemption)
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management fees...................... 0.95% 0.95% 0.95% 0.95%
12b-1 fees........................... 0.25% 1.00% 1.00% None
Other expenses....................... 0.22% 0.22% 0.22% 0.11%
---- ---- ---- ----
TOTAL ANNUAL FUND OPERATING EXPENSES... 1.42% 2.17% 2.17% 1.06%
==== ==== ==== ====
</TABLE>
--------
* 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%.
** Management has agreed to waive a portion of its management fee for all
classes. Currently such waiver is equal to .225%. Management may
discontinue or modify this management fee waiver at any time.
Example. These examples are intended to help you compare the cost of
investing in each of the Funds. The examples assume 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 examples also assume 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:
10
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Value Fund 1 year 3 years 5 years 10 years*
----------------------------------------- ------ ------- ------- ---------
<S> <C> <C> <C> <C>
Class A (with or without redemption).......... $637 $927 $1,238 $2,117
Class B (redemption at end of period)......... $722 $985 $1,275 $2,329
Class B (no redemption)....................... $222 $685 $1,175 $2,329
Class L (redemption at end of period)......... $422 $784 $1,273 $2,619
Class L (no redemption)....................... $322 $784 $1,273 $2,619
Class Y (with or without redemption).......... $108 $337 $ 585 $1,294
</TABLE>
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Small Cap
Value Fund 1 year 3 years 5 years 10 years*
---------------------------------------- ------ ------- ------- ---------
<S> <C> <C> <C> <C>
Class A (with or without redemption)......... $732 $1,214 $1,721 $3,109
Class B (redemption at end of period)........ $824 $1,289 $1,778 $3,329
Class B (no redemption)...................... $324 $ 989 $1,678 $3,329
Class L (redemption at end of period)........ $544 $1,149 $1,875 $3,792
Class L (no redemption)...................... $444 $1,149 $1,875 $3,792
Class Y (with or without redemption)......... $191 $ 591 $1,016 $2,201
</TABLE>
<TABLE>
<CAPTION>
Smith Barney Hansberger Global Value Pro Forma Pro Forma Pro Forma Pro Forma
Fund (ProForma) (Unaudited) 1 year 3 years 5 years 10 years*
------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Class A (with or without redemption).. $637 $927 $1,238 $2,117
Class B (redemption at end of period). $720 $979 $1,264 $2,313
Class B (no redemption)............... $220 $679 $1,164 $2,313
Class L (redemption at end of period). $418 $772 $1,253 $2,578
Class L (no redemption)............... $318 $772 $1,253 $2,578
Class Y (with or without redemption).. $108 $337 $ 585 $1,294
</TABLE>
--------
* Ten-year figures for Class B shares 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. Each Fund has adopted a plan of
distribution under Rule 12b-1 under the 1940 Act (a "Plan").
Under the Plan, each Fund pays Salomon Smith Barney a service fee, accrued
daily and paid monthly, calculated at the annual rate of 0.25% of the value of
each Fund's average daily net assets attributable to the Class A, Class B and
Class L shares. In addition, each Fund pays Salomon Smith Barney a
distribution fee, with respect to the Class B and Class L shares primarily
intended to compensate Salomon Smith Barney for its initial expense of paying
its financial consultants a commission upon sales of those shares. Such
shares' distribution fees, which are accrued daily and paid monthly, are
calculated at the annual rate of 0.75% of the value of average daily net
assets attributable to the Class B and Class L shares.
11
<PAGE>
Class Y 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,
and the payments may exceed those 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 the same as those of 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. Each Fund expects distributions to be primarily from capital 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 same class 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. 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 August 28, 2000, as supplemented from time to time, a copy
12
<PAGE>
of which is included herewith, and in the Statement of Additional Information
of the Fund and the Acquiring Fund dated October 18, 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, but not identical, risks. The following summarizes those
principal investment policies and related risk factors:
Repurchase Agreements. Each Fund 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
each 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 a Fund which are collateralized primarily by the
securities subject to repurchase. A 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 or prevented from exercising its rights to dispose of the
collateral securities. Pursuant to policies established by the Board of
Directors, SSB Citi and Hansberger monitor the creditworthiness of all issuers
with which each Fund enters into repurchase agreements.
Reverse Repurchase Agreements. Each Fund currently does not intend to commit
more than 5% of its Fund's net assets to reverse repurchase agreements. Each
Fund may enter into reverse repurchase agreements with broker/dealers and
other financial institutions. Such agreements involve the sale of Fund
securities with an agreement to repurchase the securities at an agreed-upon
price, date and interest payment and are considered to be borrowings by a Fund
and are subject to the borrowing limitations. Since the proceeds of reverse
repurchase agreements are invested, this would introduce the speculative
factor known as "leverage." The securities purchased with the funds obtained
from the agreement and securities collateralizing the agreement will have
maturity dates no later than the repayment date. Such transactions are only
advantageous if the Fund has an opportunity to earn a greater rate of interest
on the cash derived from the transaction than the interest cost of obtaining
that cash. Opportunities to realize earnings from the use of the proceeds
equal to or greater than the interest required to be paid may not always be
available, and each Fund intends to use the reverse repurchase technique only
when SSB Citi and Hansberger believe it will be advantageous to the Fund. The
use of reverse repurchase agreements may exaggerate any interim increase or
decrease in the value of the participating Fund's assets. Each Fund's
custodian bank will maintain a separate account for the Fund with securities
having a value equal to or greater than such commitments.
Securities Lending. Each Fund is authorized to lend up to 33 1/3% of the
total market value of its portfolio securities to brokers, dealers, domestic
and foreign banks or other financial institutions for the purpose of
increasing its net investment income. Any loan of securities must be callable
at any time and are continuously secured by cash or U.S. Government
Obligations equal to no less than the market value, determined daily, of the
securities loaned. There may, however, be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrowers of
the securities fail financially. Apart from lending its securities and
acquiring debt securities of a type customarily purchased by financial
institutions, no Fund will make loans to other persons.
Commercial Bank Obligations. For the purposes of each Fund's investment
policies with respect to bank obligations, obligations of foreign branches of
U.S. banks and of foreign banks may be general obligations of
13
<PAGE>
the parent bank in addition to the issuing bank, or may be limited by the
terms of a specific obligation and by government regulation. As with
investment in non-U.S. securities in general, investments in the obligations
of foreign branches of U.S. banks and of foreign banks may subject the Funds
to investment risks that are different in some respects from those of
investments in obligations of domestic issuers. Although a Fund will typically
acquire obligations issued and supported by the credit of U.S. or foreign
banks having total assets at the time of purchase in excess of U.S. $1 billion
(or the equivalent thereof), this is not a fundamental investment policy or
restriction of the Fund. For calculation purposes with respect to the U.S. $1
billion figure, the assets of a bank will be deemed to include the assets of
its U.S. and non-U.S. branches.
When-Issued and Delayed Delivery Securities. Each Fund may purchase
securities on a when-issued or delayed delivery basis. The price of debt
obligations purchased on a when-issued basis is fixed at the time a Fund
commits to purchase, but delivery and payment for the securities
("settlement") takes place at a later date. The price of these securities may
be expressed in yield terms. A Fund will enter into these transactions in
order to lock in the yield (price) available at the time of commitment.
Between purchase and settlement, a Fund assumes the ownership risk of the
when-issued securities, including the risk of fluctuations in the securities
market value due to, among other factors, a change in the general level of
interest rates. However, no interest accrues to the Fund during this period.
Commercial Paper. Commercial paper consists of short-term (usually from 1 to
270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender, such as one of
the Funds, pursuant to which the lender may determine to invest varying
amounts. Transfer of such notes is usually restricted by the issuer, and there
is no secondary trading market for such notes. Each Fund, therefore, may not
invest in a master demand note, if as a result more than 15% of the value of
the Fund's total assets would be invested in such notes and other illiquid
securities.
Temporary Investments. Each Fund may make money market investments pending
other investments or settlement for liquidity, or in adverse market
conditions. These money market investments include obligations of the U.S.
Government and its agencies and instrumentalities, obligations or foreign
sovereignties, other debt securities, commercial paper including bank
obligations, certificates of deposit (including Eurodollar certificates of
deposit) and repurchase agreements.
Non-Publicly Traded Securities. Each Fund may invest in securities that are
neither listed on a stock exchange nor traded over the counter, including
privately placed securities. These securities may present a higher degree of
business and financial risk, which can result in substantial losses. In the
absence of a public trading market for these securities, they may be less
liquid than publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by the Fund or less than what
the Fund may consider the fair value of such securities. Further, companies
whose securities are not publicly traded may not be subject to disclosure and
other investor protection requirements that might apply if their securities
were publicly traded. If such securities are required to be registered under
the securities laws of one or more jurisdictions before being resold, the Fund
may be required to bear the costs of registration. A Fund may not invest more
than 15% of its net assets in illiquid securities, including securities for
which there is no readily available secondary market. A Fund may invest in
securities that can be offered and sold to qualified institutional buyers
under Rule 144A under the Securities Act of 1933, as amended ("Rule 144A
Securities"). The Board of Directors has delegated to SSB Citi and Hansberger,
14
<PAGE>
subject to the Board's supervision, the daily function of determining and
monitoring the liquidity of Rule 144A Securities. Rule 144A Securities held by
a Fund which have been determined to be liquid will not be subject to the 15%
limitation described above. However, Rule 144A Securities may become illiquid
if qualified institutional buyers are not interested in acquiring them.
Short Sales. Each Fund may sell securities short "against the box", that is,
sell a security that the Fund owns or has the right to acquire, for delivery
at a specified date in the future.
Depositary Receipts (including ADRs, EDRs and GDRs). Each Fund may purchase
ADRs, EDRs, GDRs and other depositary receipts or other securities
representing underlying shares of foreign companies. Depositary Receipts are
typically issued by a financial institution ("depository") and evidence
ownership interests in a security or a pool of securities ("underlying
securities") that have been deposited with the depository. 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 such 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. The Funds may invest in ADRs
through both sponsored and unsponsored arrangements.
Real Estate Investment Trusts ("REITs"). Each Fund may invest up to 10% of
its assets in Real Estate Investment Trusts. REITs are pooled investment
vehicles that invest primarily in either real estate or real estate related
loans. The value of a REIT is affected by changes in the value of the
properties owned by the REIT or securing mortgage loans held by the REIT. A
REIT is dependent upon cash flow from its investments to repay financing costs
and the ability of the REIT's manager. REITs are also subject to risks
generally associated with investments in real estate.
Borrowing. Each Fund may borrow money from U.S.-regulated banks in an amount
not to exceed 33 1/3% of the value of the Fund's total assets (including the
amount borrowed) valued at market less liabilities other than the borrowing.
If a Fund borrows and uses the proceeds to make additional investments, income
and appreciation from such investments will improve its performance if they
exceed the associated borrowing costs but impair its performance if they are
less than such borrowing costs. This speculative factor is known as
"leverage."
Other Investment Companies. Some emerging countries have laws and
regulations that preclude direct foreign investment in the securities of
companies located there. However, indirect foreign investment in the
securities of companies listed and traded on the stock exchanges in these
countries is permitted by certain emerging countries through specifically
authorized investment funds. Each Fund may invest in these investment funds,
as well as other closed-end investment companies up to 10% of its assets, as
permitted by the 1940 Act.
Forward Roll Transactions. In order to enhance current income, each Fund may
enter into forward roll transactions. In a forward roll transaction, a Fund
sells a security to a financial institution, such as a bank or broker-dealer,
and simultaneously agrees to repurchase a similar security from the
institution at a later date at an agreed-upon price. During the period between
the sale and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be
invested in short-term instruments, particularly repurchase agreements, and
the income from these investments, together with any additional fee income
received on the sale will generate income for the Fund exceeding the yield on
the securities
15
<PAGE>
sold. Forward roll transactions involve the risk that the market value of the
securities sold by the Fund may decline below the repurchase price of those
securities. At the time the Fund enters into forward roll transactions, it
will place in a segregated account on the books of the Fund, or with The Chase
Manhattan Bank ("Chase"), cash or liquid assets having a value equal to the
repurchase price (including accrued interest) and will subsequently monitor
the account to insure that such equivalent value is maintained.
Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. Each Fund may enter into forward foreign currency exchange
contracts ("forward contracts"), providing for the purchase of or sale of an
amount of a specified currency at a future date. A Fund may use forward
contracts to protect against a foreign currency's decline against the U.S.
dollar between the trade date and settlement date for a securities
transaction, or to lock in the U.S. dollar value of dividends declared on
securities it holds, or generally to protect the U.S. dollar value of the
securities it holds against exchange rate fluctuations. A Fund may also use
forward contracts to protect against fluctuating exchange rates and exchange
control regulations. Forward contracts may limit the Fund's losses due to
exchange rate fluctuation, but they will also limit any gains that the Fund
might otherwise have realized. A Fund may also enter into foreign currency
futures contracts ("currency futures").
Except where segregated accounts are not required by the 1940 Act, when a
Fund enters into a forward contract or currency future, it will place in a
segregated account maintained on the books of the Fund, or with Chase, cash or
liquid securities in an amount equal to the value of the Fund's total assets
committed to consummation of forward contracts and currency futures. If the
value of these segregated securities declines, additional cash or securities
will be placed in the account on a daily basis so that the account value is at
least equal to the Fund's commitments to such contracts.
A Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines
in the U.S. dollar value of foreign currency denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the writing of an
option on a foreign currency constitutes only a partial hedge, up to the
amount of the premium received, and the Fund could be required to purchase or
sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event
of rate movements adverse to a Fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by each Fund are traded on U.S. and
foreign exchanges or over-the- counter.
Option Transactions. In addition to options on currencies described above,
each Fund may seek to hedge all or a portion of its investments through
options on other securities in which it may invest. Options which each Fund
may purchase or sell will be traded on a recognized securities or futures
exchange or over the counter ("OTC"). Options markets in emerging countries
are currently limited and the nature of the strategies adopted by Hansberger
and the extent to which those strategies are used will depend on the
development of such markets.
The primary risks associated with the use of options on securities are (i)
imperfect correlation between the change in market value of the securities a
Fund holds and the prices of options relating to the securities purchased or
sold by the Fund; and (ii) possible lack of a liquid secondary market for an
option. Options not traded on an exchange (OTC options) are generally
considered illiquid and may be difficult to value. Hansberger believes that
the Fund will minimize its risk of being unable to close out an option
contract by transacting in options only if there appears to be a liquid
secondary market for those options.
16
<PAGE>
Future Contracts and Related Options. Each Fund may buy and sell financial
futures contracts, stock and bond index futures contracts, interest rate
futures contracts, foreign currency futures contracts (collectively, "Futures
Contracts") and options on Futures Contracts for hedging purposes only. A
Futures Contract is an agreement between two parties to buy or sell a
specified debt security at a set price on a future date. An index futures
contract is an agreement to take or make delivery of an amount of cash based
on the difference between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign currency is an
agreement to buy or sell a specified amount of a currency for a set price on a
future date. Each Fund may enter into Futures Contracts as a hedge against
changes in prevailing levels of interest rates, currency exchange rates,
securities indices or individual securities, in order to establish more
definitely the effective return on securities or currencies held or committed
to be acquired by the Fund. A Fund may enter into Futures Contracts based on
financial indices including any index of U.S. Government securities, foreign
government securities or corporate debt securities.
Forward Currency Contracts and Options on Currency. A forward currency
contract is an obligation to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund may
either accept or make delivery of the currency at the maturity of the forward
contract or, prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract. Each Fund may engage in forward
currency transactions in anticipation of, or to protect itself against,
fluctuations in exchange rates. A Fund might sell a particular foreign
currency forward, for example, when it holds bonds denominated in that
currency but anticipates, and seeks to be protected against, decline in the
currency against the U.S. dollar. Similarly, a Fund might sell the U.S. dollar
forward when it holds bonds denominated in U.S. dollars but anticipates, and
seeks to be protected against, a decline in the U.S. dollar relative to other
currencies. Further, a Fund might purchase a currency forward to "lock in" the
price of securities denominated in that currency which it anticipates
purchasing.
Forward contracts are traded in an interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement and is consummated
without payment of any commission. Each Fund, however, may enter into forward
contracts with deposit requirements or commissions.
Each Fund's ability to establish and close out positions in foreign currency
options is subject to the existence of a liquid market. There can be no
assurance that a liquid market will exist for a particular option at any
specific time. In addition, options on foreign currencies are affected by all
of those factors that influence foreign exchange rates and investments
generally.
Interest Rate Swaps, Caps and Floors. Among the hedging transactions into
which the Funds may enter are interest rate swaps and the purchase or sale of
interest rate caps and floors. Each Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular
investment or portion of its Fund or to protect against any increase in the
price of securities the Fund anticipates purchasing at a later date. Each Fund
intends to use these transactions as a hedge and not as a speculative
investment. Each Fund will not sell interest rate caps or floors that it does
not own. Interest rate swaps involve the exchange by a Fund with another party
of their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified index exceeds
a predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase
of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling such
interest rate floor.
17
<PAGE>
Sovereign Debt. Each Fund may invest in sovereign debt, which may trade at
a substantial discount from face value. Each Fund may hold and trade sovereign
debt of emerging market countries in appropriate circumstances and to
participate in debt conversion programs. Emerging country Sovereign Debt
involves a high degree of risk, is generally lower-quality debt, and is
considered speculative in nature. The issuer or governmental authorities that
control sovereign debt repayment ("sovereign debtors") may be unable or
unwilling to repay principal or interest when due in accordance with the terms
of the debt. A sovereign debtor's willingness or ability to repay principal
and interest due in a timely manner may be affected by, among other factors,
its cash flow situation, the extent of its foreign reserves, the availability
of sufficient foreign exchange on the date a payment is due, the relative size
of the debt service burden to the economy as a whole, the sovereign debtor's
policy towards the International Monetary Fund (the "IMF") and the political
constraints to which the sovereign debtor may be subject. Sovereign debtors
may also be dependent on expected disbursements from foreign governments,
multilateral agencies and others abroad to reduce principal and interest
arrearage on their debt. The commitment of these third parties to make such
disbursements may be conditioned on the sovereign debtor's implementation of
economic reforms or economic performance and the timely service of the
debtor's obligations. The sovereign debtor's failure to meet these conditions
may cause these third parties to cancel their commitments to provide funds to
the sovereign debtor, which may further impair the debtor's ability or
willingness to timely service its debts.
Brady Bonds. Each Fund may invest in Brady Bonds as part of its investment
in Sovereign Debt of countries that have restructured or are in the process of
restructuring their Sovereign Debt pursuant to the Brady Plan (discussed
below).
Brady Bonds are issued under the framework of the Brady Plan, an initiative
announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a
mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the debtor
nation's adoption of certain economic reforms and the exchange of commercial
bank debt for newly issued bonds. In restructuring its external debt under the
Brady Plan framework, a debtor nation negotiates with its existing bank
lenders as well as the World Bank or IMF. The World Bank or IMF supports the
restructuring by providing funds pursuant to loan agreements or other
arrangements that enable the debtor nation to collateralize the new Brady
Bonds or to replenish reserves used to reduce outstanding bank debt. Under
these loan agreements or other arrangements with the World Bank or IMF, debtor
nations have been required to agree to implement certain domestic monetary and
fiscal reforms. The Brady Plan sets forth only general guiding principles for
economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their creditors.
THE PROPOSED REORGANIZATION
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
regular trading on The New York Stock Exchange, Inc. on the Closing Date. The
Acquiring Fund will assume all of the liabilities of the Fund. The
Reorganization will be accomplished pursuant to an amendment to the Charter of
the Investment Funds that will reclassify shares of the Fund as shares of the
Acquiring Fund, substantially in the form set forth as Annex I to the Plan of
Reorganization (Exhibit A).
18
<PAGE>
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 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 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 the Fund and the Acquiring Fund under the Plan are
subject to various conditions, as stated therein. Among other things, the Plan
requires that all filings be made with, and all authority be received from,
the SEC and state securities commissions as may be necessary in the opinion of
counsel to permit the parties to carry out the transactions contemplated by
the Plan. 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
Directors of the 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. 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 $58,000. Shareholders have no rights of appraisal.
REASONS FOR THE PROPOSED REORGANIZATION
Prior to a telephonic meeting of Investment Funds' Board of Directors held
on September 7, 2000, the Directors, including all of the Non-Interested
Directors, 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. These materials were discussed at the meeting to the
satisfaction of the Directors, who were advised by independent counsel. For
the reasons discussed below, the Board of Directors of Investment Funds,
including all of the Non-Interested Directors, 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
identical investment objectives and substantially similar policies that is
professionally managed by SSB Citi. The Board of Directors of Investment Funds
believes that shareholders of the Fund will benefit from the proposed
Reorganization because the Acquiring Fund offers the following benefits:
19
<PAGE>
Enhanced Flexibility with Respect to Portfolio Investments. As stated
previously, the Fund has been unable to attract a substantial asset base since
its inception. The Fund's small size has hindered the portfolio management
flexibility of SSB Citi and Hansberger and resulted in higher total annual
operating expenses for its shareholders. The Reorganization is also 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 identical investment objectives
and substantially similar policies and overall risk characteristics into a
single larger fund may increase economic and other efficiencies for investors,
SSB Citi and Hansberger, and may ultimately result in a lower total annual
expense ratio for investors. SSB Citi and Hansberger also believe 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. While past performance is not necessarily indicative of future
results, the Acquiring Fund has generally outperformed the Fund. See
"Capitalization and Performance". 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 annual fund operating
expenses and lower management fees. 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 projected to be between 1.04% and 1.50%
lower than those of the relevant class of the Fund. If the Reorganization is
consummated, the Acquiring Fund's expense ratio for each class of its shares
is estimated to either remain unchanged (in the case of Class A and Class Y
shares) or go down (in the case of Class B and Class L shares) for the year
ending April 30, 2001. 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 Directors and management of Investment Funds believe the Fund and its
shareholders would benefit from a tax-free reorganization with a larger fund
with identical investment objectives and substantially similar 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 Directors of Investment Funds, 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;
20
<PAGE>
(4) the tax-free nature of the Reorganization;
(5) the lower total annual expense ratio of the Acquiring Fund;
(6) the terms and conditions of the Reorganization and that it should not
result in a dilution of Fund shareholder interests; and
(7) the level of costs and expenses to the Fund of the proposed
Reorganization.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
General. Each of the Fund and 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. Investment Funds is registered with the SEC as
a diversified, open-end management investment company. Each Fund currently
offers shares of common stock classified into four Classes: A, B, L and Y.
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 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 Director, 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 provide that the term of office of
each Director shall be from the time of his or her election and qualification
until his or her successor shall have been elected and shall have qualified.
Any Director of Investment Funds 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. Vacancies on the Board of Investment Funds may be filled by the
Directors remaining in office. A meeting of shareholders will be required for
the purpose of electing additional Directors whenever fewer than a majority of
the Directors then in office were elected by shareholders and to fill
vacancies if less than two-thirds of the Directors 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, 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.
21
<PAGE>
Liability of Directors. The Articles of Incorporation of Investment Funds
provide that the Directors and officers shall not be liable for monetary
damages for breach of fiduciary duty as a Director or officer, except to the
extent such exemption is not permitted by law.
Rights of Inspection. Maryland law permits any shareholder of each 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 relevant Fund on file
at its principal office.
Shareholder Liability. Under Maryland law, shareholders of each Fund do not
have personal liability for corporate acts and obligations.
Shares of the Acquiring Fund issued to the holders of shares of 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. The foregoing is not a complete description of the
documents cited. Shareholders should refer to the provisions of corporate
documents and state laws governing each Fund for a more thorough description.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by the Fund and the
Acquiring Fund of an opinion from Willkie Farr & Gallagher, substantially to
the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the
Acquiring Fund of all 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 the 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 Investment Funds is not aware of any adverse state or local tax
consequences of the proposed Reorganization, it has not requested any ruling
or opinion with respect to such consequences and shareholders may wish to
consult their own tax adviser with respect to such matters.
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<PAGE>
LIQUIDATION AND TERMINATION OF SERIES
If the Reorganization is effected, the Fund will be liquidated and
terminated as a series of Investment Fund's, and the Fund's outstanding shares
will be cancelled.
PORTFOLIO SECURITIES
If the Reorganization is effected, SSB Citi and Hansberger 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 and Hansberger 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 year
ended April 30, 2000 was 50%. The portfolio turnover rate for the Fund for the
year ended April 30, 2000 was 60%.
23
<PAGE>
CAPITALIZATION AND PERFORMANCE
Pro Forma Capitalization (Unaudited). The following table sets forth the
unaudited capitalization of each class of each of the Acquiring Fund and the
Fund as of August 31, 2000 as adjusted giving effect to the Reorganization
discussed herein:(1)
<TABLE>
<CAPTION>
Hansberger
Hansberger Global
Global Small Cap Pro Forma Pro Forma
Value Fund Value Fund Adjustments Combined
----------- ---------- ----------- -----------
(Actual) (Actual)
<S> <C> <C> <C> <C>
Class A
Net Assets....................... 13,460,067 2,144,651 -- 15,604,718
Net Asset Value Per Share........ 12.92 8.37 -- 12.92
Shares Outstanding............... 1,041,601 256,114 165,995 1,207,596
Class B
Net Assets....................... 27,456,720 3,198,271 -- 30,654,991
Net Asset Value Per Share........ 12.78 8.31 -- 12.78
Shares Outstanding............... 2,148,794 384,930 250,256 2,399,050
Class L
Net Assets....................... 7,929,184 762,224 -- 8,691,408
Net Asset Value Per Share........ 12.77 8.23 -- 12.77
Shares Outstanding............... 620,690 92,584 59,689 680,379
Class Y
Net Assets....................... 190,829,529 3,886,192 -- 194,715,721
Net Asset Value Per Share........ 12.96 8.36 -- 12.96
Shares Outstanding............... 14,725,870 464,608 299,860 15,025,730
</TABLE>
--------
(1) Assumes the Reorganization had been consummated on August 31, 2000, and
is for information purposes only. No assurance can be given as to how
many shares of the Acquiring Fund will be received by shareholders of the
Fund on the date the Reorganization takes place, and the foregoing should
not be relied upon to reflect the number of shares of the Acquiring Fund
that actually will be received on or after such date.
Total return is a measure of the change in value of an investment in a fund
over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the fund rather than
paid to the investor in cash. The formula for total return used by a fund is
prescribed by the SEC and includes three steps: (1) adding to the total number
of shares of the fund that would be purchased by a hypothetical $1,000
investment in the fund all additional shares that would have been purchased if
all dividends and distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the redemption value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value
per share on the last trading day of the period; and (3) dividing this account
value for the hypothetical investor by the amount of the initial investment,
and annualizing the result for periods of less than one year. Total return may
be stated with or without giving effect to any expense limitations in effect
for a fund.
24
<PAGE>
The following table reflects the average annual total returns of Class A
Shares of the Fund and the Acquiring Fund (including sales charges) for the
one year and since inception periods ending April 30, 2000:
<TABLE>
<CAPTION>
The Fund The Acquiring Fund
-------- ------------------
<S> <C> <C>
Average Annual Total Return:(1)
1-year............................................ (20.28)% 4.28%
Since Inception................................... (12.55)% 4.59%
Inception Date.................................... 12/18/97 12/19/97
</TABLE>
--------
(1) The average annual total returns for other classes of each Fund's shares
would be similar to the returns of the Class A Shares of the relevant
Fund, but would differ to the extent that the other class of shares had a
higher or lower total annual expense ratio during the relevant periods.
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about Investment Funds, with respect
to the Fund and 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, 7 World Trade Center New York, New York 10048, 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, 7 World Trade Center, New
York, New York 10048, 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 FUNDS RECOMMEND THAT THE SHAREHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL.
25
<PAGE>
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 and/or telephone, will be paid by SSB Citi. In
addition to solicitation by mail, certain officers and representatives of
Investment Funds, 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 or through the internet, 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 Funds, c/o Smith Barney Mutual Funds, 7 World Trade Center, New
York, New York 10048, 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 Funds 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 Directors,
Christina T. Sydor
Secretary
26
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Annex A: 5% Shareholders
Exhibit A: Form of Plan of Reorganization
</TABLE>
<PAGE>
ANNEX A
Hansberger Global Small Cap Value Fund Class A
<TABLE>
<CAPTION>
Shareholders: % of Shares
------------- -----------
<S> <C>
Philip S. Zettler................................................... 26.7751
1147 Willow Way North
Alexander City, AL 35010
British Motor Car Dist. Ltd......................................... 8.9430
Attn. Jeff Quale
901 Van Ness Avenue
San Francisco, CA 94109-6911
Kent S. Daft Inc.................................................... 5.3487
Profit Sharing Plan & Trust
10425 Fair Oaks Blvd., #203
Fair Oaks, CA 95628-7559
Hansberger Global Small Cap Value Fund Class B
Evelyn A. Freed TTEE................................................ 5.0511
fbo Evelyn A. Freed
U/A/D 03/26/90
1511 Clearview Lane
Santa Ana, CA 92705-1501
Hansberger Global Small Cap Value Fund Class L
Stephanie Hutchins.................................................. 5.2282
106 Cherrybark Lane
Natchez, MS 39120-9390
Hansberger Global Small Cap Value Fund Class Y
Smith Barney Concert Series, Inc. .................................. 100.0000
Global Portfolio
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19153-3111
Hansberger Global Value Fund Class A
Pentagon Performance Partners....................................... 8.5161
c/o Olympia Capital Assoc.
1211 Avenue of the Americas, 29th Fl.
New York, NY 10033-8701
</TABLE>
<PAGE>
Hansberger Global Value Fund Class Y
<TABLE>
<CAPTION>
Shareholders: % of Shares
------------- -----------
<S> <C>
Smith Barney Concert Series, Inc. .................................. 45.4785
Balanced Portfolio PNC Bank, NA
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19151-3111
Smith Barney Concert Series, Inc. .................................. 27.5709
Balanced Portfolio PNC Bank, NA
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19151-3111
Smith Barney Concert Series, Inc. .................................. 10.0820
Balanced Portfolio PNC Bank, NA
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19151-3111
Smith Barney Concert Series, Inc. .................................. 7.1565
Balanced Portfolio PNC Bank, NA
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19151-3111
Smith Barney Concert Series, Inc. .................................. 5.0091
Global Portfolio
Attn. Sheila Heacock
8800 Tinicum Blvd., 3rd Fl., Ste. 200
Philadelphia, PA 19151-3111
</TABLE>
<PAGE>
EXHIBIT A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Plan") is dated as of this 15th day of
September, 2000, and has been adopted by the Board of Directors of Smith
Barney Investment Funds Inc. (the "Corporation") to provide for the
reorganization of its Smith Barney Hansberger Global Small Cap Value Fund (the
"Acquired Fund") into its Smith Barney Hansberger Global Value Fund (the
"Acquiring Fund").
A. Background
The Acquired Fund and the Acquiring Fund (individually, a Fund and
collectively, the "Funds") are separate series of the Corporation. The
Corporation is organized as a Maryland corporation and is an open-end
management investment Company registered with the Securities and Exchange
Commission (the "SEC") under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Board of Directors of the Corporation has determined
that it is in the best interests of the Acquired Fund and its shareholders to
be reorganized through the transfer of all of the Acquired Fund's assets and
liabilities to the Acquiring Fund upon the terms set forth in this Plan (the
"Reorganization").
B. The Reorganization
1. Prior to the Closing Date (as defined below in Section 6 of this Article
B), the Corporation will execute and file Articles of Amendment to the
Corporation's Charter with the Maryland State Department of Assessments and
Taxation in substantially the form attached hereto as Annex I, which Articles
of Amendment will, effective as of the Closing Date: (a) reclassify all of the
Corporation's issued and outstanding shares of Common Stock of the Acquired
Fund as outstanding shares of Common Stock of the comparable class of equal
aggregate value of the Acquiring Fund; and (b) reclassify all of the
authorized and unissued Common Stock of the Acquired Fund as authorized Common
Stock of the Acquiring Fund.
2. At the Closing Date, all property of every description, and all
interests, rights, privileges and powers of the Acquired Fund, subject to all
liabilities of the Acquired Fund, whether accrued, absolute, contingent or
otherwise (such assets subject to such liabilities are herein referred to as
the "Assets") will be transferred and conveyed by the Acquired Fund to the
Acquiring Fund and will be assumed by the Acquiring Fund, such that at and
after the Closing Date, the Assets of the Acquired Fund will become and be the
Assets of the Acquiring Fund. In exchange for the transfer of the Assets of
the Acquired Fund and in order to accomplish the reclassification of shares as
described above in Section 1 of this Article B, the Acquiring Fund will
contemporaneously issue to shareholders of the Acquired Fund full and
fractional shares of the Acquiring Fund (as contemplated by Section 4 of this
Article B) having an aggregate net asset value equal to the value of the
Assets of the Acquired Fund. For purposes of effecting such exchange, the
value of the Assets of the Acquired Fund and the net asset value of the shares
of the Acquiring Fund shall be determined as of the close of regular trading
on the New York Stock Exchange on December 1, 2000 or at such other time as
may be determined by the Board of Directors or an authorized officer of the
Corporation. Such values shall be computed in the manner set forth in the
applicable Fund's then current prospectus under the Securities Act of 1933, as
amended. At and after the Closing Date, all debts, liabilities, obligations
and duties of the Acquired Fund will attach to the Acquiring Fund as aforesaid
and may thenceforth be enforced against the Acquiring Fund to the same extent
as if the same had been incurred by the Acquiring Fund.
A-1
<PAGE>
3. On or as soon as practicable prior to the Closing Date as defined in
section 6, 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.
4. At the Closing Date, the Corporation will liquidate the Acquired Fund and
issue full and fractional shares of the Acquiring Fund to the Acquired Fund's
shareholders, such that the shares of the Acquiring Fund that are distributed
to a shareholder of the Acquired Fund will have an aggregate net asset value
equal to the aggregate net asset value of the shares of the Acquired Fund held
by such shareholder immediately prior to the Closing Date. In addition, each
shareholder of the Acquired Fund will have the right to receive any unpaid
dividends or other distributions that were declared before the Closing Date
with respect to the shares of the Acquired Fund held by such shareholder
immediately prior to the Closing Date.
5. The stock transfer books of the Corporation with respect to the Acquired
Fund will be permanently closed as of the close of business on the day
immediately preceding the Closing Date. Redemption requests received
thereafter by the Corporation with respect to the Acquired Fund will be deemed
to be redemption requests for shares of the Acquiring Fund issued pursuant to
this Plan. If any shares of the Acquired Fund are represented by a share
certificate, the certificate must be surrendered to the Corporation's transfer
agent for cancellation before the Acquiring Fund shares issuable to the
shareholder pursuant to this Plan will be redeemed.
6. The Closing Date for purposes of this Plan shall be the close of business
on December 1, 2000, or at such other time as may be determined by the Board
of Directors or an authorized officer of the Corporation.
C. Actions by Shareholders of the Acquired Fund
Prior to the Closing Date and as a condition thereto, the Board of Directors
of the Corporation will call, and the Corporation will hold, a meeting of the
shareholders of the Acquired Fund to consider and vote upon:
1. Approval of this Plan and the implementing charter amendment
reclassifying shares of the Acquired Fund into shares of the Acquiring Fund
and the transactions contemplated hereby.
2. Such other matters as may be determined by the Board of Directors of the
Corporation.
D. Conditions of the Reorganization
Consummation of this Plan will be subject to:
1. The approval of the matters referred to in Article C of this Plan by the
shareholders of the Acquired Fund in the manner required by law and otherwise
deemed necessary or advisable by the Board of Directors of the Corporation;
and
2. The following additional conditions:
(a) The Corporation will have received opinions of Willkie Farr &
Gallagher based upon customary representations and assumptions and to the
effect that:
(i) the shares of the Acquiring Fund issued pursuant to this Plan
will, when issued in accordance with the provisions hereof, be validly
issued, fully paid and non-assessable; and
A-2
<PAGE>
(ii) for federal income tax purposes: (A) the acquisition of the
assets and assumption of the liabilities of the Acquired Fund by the
Acquiring Fund in return for shares of the Acquiring Fund followed by
the distribution of such shares to the shareholders of the Acquired
Fund will constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code (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; (B) no gain or loss will be
recognized by the Acquired Fund upon the transfer of its assets and
liabilities to the Acquiring Fund; (C) 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 of the Acquiring Fund and the
assumption by the Acquiring Fund of the liabilities of the Acquired
Fund; (D) no gain or loss will be recognized by the shareholders of the
Acquired Fund upon the receipt of the shares of the Acquiring Fund in
exchange for their shares of the Acquired Fund; (E) the tax basis of
the shares of the Acquiring Fund received by the shareholders of the
Acquired Fund will be the same as the tax basis of the shares of the
Acquired Fund exchanged therefor; (F) the tax basis of the assets of
the Acquired Fund in the hands of the Acquiring Fund will be the same
as the tax basis of such assets in the hands of the Acquired Fund
immediately prior to the transfer; (G) the holding period of the shares
of the Acquiring Fund received by the shareholders of the Acquired Fund
will include the holding period of the shares of the Acquired Fund
exchanged therefor, provided that at the time of the exchange the
shares of the Acquired Fund were held as capital assets; and (H) the
holding period of the Acquiring Fund for the assets of the Acquired
Fund transferred to it will include the period during which such assets
were held by the Acquired Fund.
(b) All necessary approvals, registrations and exemptions required under
federal and state laws will have been obtained.
E. Miscellaneous
1. This Plan and the transactions contemplated hereby will be governed and
construed in accordance with the laws of the State of Maryland.
2. This Plan and the transactions contemplated hereby may be abandoned at
any time for any reason prior to the Closing Date upon the vote of a majority
of the Board of Directors of the Corporation.
3. At any time prior to or (to the fullest extent permitted by law) after
approval of this Plan by the shareholders of the Acquired Fund, the
Corporation may, upon authorization by the Board of Directors and with or
without the approval of shareholders of the Acquired Fund, amend any of the
provisions of this Plan.
4. The expenses incurred in connection with the Reorganization will be borne
by SSB Citi Fund Management, LLC, the Funds' investment manager.
5. The Corporation, by consent of its Board of Directors, or an officer
authorized by such Board of Directors, may waive any condition to the
obligations of the Acquired Fund or the Acquiring Fund hereunder if, in its or
such officer's judgment, such waiver will not have a material adverse effect
on the interests of the shareholders of the Acquired Fund or the shareholders
of the Acquiring Fund.
A-3
<PAGE>
ANNEX I
SMITH BARNEY INVESTMENT FUNDS, INC.
ARTICLES OF AMENDMENT
SMITH BARNEY INVESTMENT FUNDS INC., a Maryland corporation, having its
principal office in the City of Baltimore, Maryland (the "Corporation"),
certifies to the State Department of Assessments and Taxation that:
FIRST: The Charter of the Corporation is amended by (i) reclassifying all of
the shares of the Corporation's Smith Barney Hansberger Global Small Cap Value
Fund ("Global Small Cap Value Fund") as shares of the Corporation's Smith
Barney Hansberger Global Value Fund ("Global Value Fund"), and (ii) increasing
the aggregate number of authorized shares of the Global Value Fund by
250,000,000 shares.
SECOND: Upon effectiveness of these Articles of Amendment:
(a) All of the assets and liabilities belonging to the Corporation's
Global Small Cap Value Fund and attributable to its Class A, B, L and Y
shares, respectively, shall be conveyed, transferred and delivered to the
Corporation's Global Value Fund, and shall thereupon become and be assets
and liabilities belonging to the Global Value Fund and attributable to its
Class A, B, L and Y shares, respectively.
(b) Each of the issued and outstanding shares (and fractions thereof) of
the Corporation's Global Small Cap Value Fund and its Class A, B, L and Y
shares, respectively, will automatically, and without the need of any
further act or deed, be reclassified and changed to full and fractional
issued and outstanding shares of the Corporation's Global Value Fund and of
its Class A, B, L and Y shares, respectively, of equal aggregate net asset
value, in such number of such Global Value Fund Class A, B, L and Y shares
as shall be determined by multiplying one (1) times the number obtained by
dividing the net asset value of a Class A, B, L or Y share, respectively,
of the Global Small Cap Value Fund by the net asset value of a Class A, B,
L or Y share, respectively, of the Global Value Fund, all determined as of
the close of regular trading on the New York Stock Exchange on the
effective date of these Articles of Amendment.
(c) Each unissued Class A, B, L, Y or Z share (or fraction thereof),
respectively, of the Corporation's Global Small Cap Value Fund will
automatically, and without the need for any further act or deed, be
reclassified and changed to such number of unissued Class A, B, L, Y or Z
shares (or fractions thereof), respectively, of the Corporation's Global
Value Fund as shall result, as of the effective time of these Articles of
Amendment and as a result hereof, in the total number of unissued shares of
the Corporation's Global Value Fund being increased by 250,000,000 shares
less the number of issued and outstanding shares of the Corporation's
Global Value Fund resulting from paragraph (b) of this Article SECOND.
(d) Open accounts on the share records of the Corporation's Global Value
Fund owned by each former holder of its Global Small Cap Value Fund shares
shall be established representing the appropriate number of the Global
Value Fund shares, of the appropriate class, deemed to be owned by each
such stockholder as a result of the reclassification.
THIRD: This amendment does not increase the authorized capital stock of the
Corporation or the aggregate par value thereof. This amendment reclassifies
and changes the 250,000,000 authorized shares of the Global Small Cap Value
Fund to 250,000,000 additional authorized shares of the Global Value Fund but
does not amend the description of any class of stock as set forth in the
Charter. As a result of this amendment, the
A-4
<PAGE>
Corporation is authorized to issue up to 550,000,000 shares of each of the
Class A Common Stock, Class B Common Stock, Class L Common Stock, Class Y
Common Stock and Class Z Common Stock of the Global Value Fund less, at any
time, the total number of shares of all such other classes of capital stock of
the Global Value Fund then issued and outstanding. The shares of the Global
Value Fund and of each class within such fund shall have all of the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such fund and such class as set forth in the Charter of the
Corporation.
FOURTH: Outstanding stock certificates representing issued and outstanding
Class A, B, L or Y shares, respectively, of the Global Small Cap Value Fund of
the Corporation immediately prior to these Articles of Amendment becoming
effective shall, upon these Articles becoming effective, be deemed to
represent the appropriate number of issued and outstanding shares of the same
respective class of the Corporation's Global Value Fund, calculated as set
forth in Article SECOND of these Articles.
FIFTH: This amendment has been duly authorized and advised by the Board of
Directors of the Corporation and approved by the stockholders of the
Corporation entitled to vote thereon.
SIXTH: These Articles of Amendment shall be effective as of , 2000.
IN WITNESS WHEREOF, SMITH BARNEY INVESTMENT FUNDS INC. has caused these
Articles of Amendment to be signed in its name and on its behalf by its ,
and witnessed by its [Assistant] Secretary, as of the day of , 2000.
WITNESS: Smith Barney Investment Funds Inc.
By: _________________________________ By: _________________________________
Name: Name:
[Assistant] Secretary Office:
A-5
<PAGE>
THE UNDERSIGNED, , of Smith Barney Investment Funds Inc., who
executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said Corporation and hereby certifies that to the best of his
knowledge, information and belief, the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
_____________________________________
Name:
Office:
A-6
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
7 World Trade Center
New York, New York 10048
(800) 451-2010
RELATING TO THE ACQUISITION BY THE
SMITH BARNEY HANSBERGER GLOBAL VALUE FUND, INC. (THE "ACQUIRING FUND")
A SERIES OF SMITH BARNEY INVESTMENT FUNDS INC. ("INVESTMENT FUNDS")
OF THE ASSETS OF SMITH BARNEY HANSBERGER GLOBAL SMALL CAP VALUE FUND (THE
"FUND"),
ALSO A SERIES OF SMITH BARNEY INVESTMENT FUNDS.
Dated: October 18, 2000
This Statement of Additional Information, relating specifically to the
proposed transfer of all of the assets of the Fund, a series of Investment
Funds, to the Acquiring Fund in exchange for shares of the corresponding class
of the Acquiring Fund and the assumption by the Acquiring Fund of the
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 and the
Fund, dated August 28, 2000.
2. Annual Reports of the Acquiring Fund and the Fund for the year ended
April 30, 2000.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated October 18, 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.
B-1
<PAGE>
FINANCIAL STATEMENTS
The Annual Reports of the Acquiring Fund and the Fund for the year ended
April 30, 2000, 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 without charge, please call 1-
800-451-2010.
PRO FORMA FINANCIAL STATEMENTS
Because the net asset value of the Fund is less than 10% of the Acquiring
Fund's net asset value, pro forma financial statements are not required to be
and have not been prepared for inclusion in the Statement of Additional
Information filed in connection with the Reorganization.
