As filed with the Securities and Exchange Commission
on September 25, 1996
Registration No. [ ]
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective
Amendment No.
SMITH BARNEY MUNI FUNDS
(Exact name of Registrant as specified in
Charter)
Area Code and Telephone Number: (800) 224-7523
388 Greenwich Street, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Christina T. Sydor, Esq.
Smith Barney Inc.
388 Greenwich Street New York, New York 10013 (22nd floor)
(Name and address of agent for service)
copy to:
John E. Baumgardner, Jr., Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Approximate date of proposed public offering: As soon as possible after the
effective date of this Registration Statement.
Registrant has registered an indefinite amount of securities pursuant to Rule
24f-2 under the Investment Company Act of 1940, as amended; accordingly, no
fee is payable herewith. Registrant's Rule 24f-2 Notice for the fiscal period
ended March 31, 1996 was filed with the Securities and Exchange Commission on
May 30, 1996.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, by action pursuant to said Section
8(a), may determine.
Total Number of Pages: [ ]
SMITH BARNEY MUNI FUNDS
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
SMITH BARNEY MUNI FUNDS
FORM N-14 CROSS REFERENCE SHEET
Pursuant to Rule 481(a) Under the Securities Act of 1933
Prospectus/Proxy
Part A Item No. and Caption Statement Caption
Item 1. Beginning of Registration Cover Page; Cross
Reference
Statement and Outside Front Sheet
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Synopsis Information and Summary; Risk Factors; Comparison
of Risk Factors Investment Objectives and
Policies
Item 4. Information About the Transaction Summary: Reasons for the
Reorganization; Information About the
Reorganization; Information on
Shareholders' Rights;
Exhibit A
(Plan of Reorganization)
Item 5. Information About the Registrant Cover Page; Summary;
Information About the
Reorganization; Comparison of
Investment Objectives and Policies;
Comparative Information on Shareholders'
Rights; Additional Information About the
National Portfolio and the Ohio Portfolio
,
Item 6. Information About the Summary; Information
About the
Company Being Acquired Reorganization; Comparison of
Investment Objectives and
Policies; Information on
Shareholders' Rights; Additional Information About the Ohio Portfolio
Item 7. Voting Information Summary; Information About
the Reorganization;
Comparative Information on
Shareholders' Rights; Voting Information
Item 8. Interest of Certain Persons Financial Statements
and Experts; Legal
Matters
Item 9. Additional Information Not Applicable
Required for Reoffering By
Persons Deemed to be Underwriters
Statement of Additional
Part B Item No. and Caption Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. Additional Information Cover Page; Statement of Additional
About the Registrant Information of Smith Barney Muni Funds dated
July 1, 1996 as amended July 29, 1996
Item 13. Additional Information Cover Page; Statement of Additional
About the Company Being Information of Smith Barney Muni
Acquired Funds dated July 1, 1996
as amended July 29,1996
Item 14. Financial Statements Annual Report of Smith Barney
Muni Funds dated March 31, 1996
Part C Item No. and Caption Other Information
Caption
Item 15. Indemnification Incorporated by reference to Part A
caption "Comparative Information on
Shareholders' Rights - Liability of
Trustees"
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
SMITH BARNEY MUTUAL FUNDS
Investing for your future. Every day.
A Special Notice To Shareholders Of Smith Barney Muni Funds -
Ohio Portfolio
Your Vote is Important
Dear Shareholder:
The Board of Trustees of Smith Barney Muni Funds (the "Fund") has
recently reviewed and unanimously endorsed a proposal for a
reorganization of the Smith Barney Muni Funds-Ohio Portfolio ("Ohio
Portfolio"), a separate investment portfolio of the Fund, which it
judges to be in the best interests Ohio Portfolio shareholders.
Under the terms of the proposed reorganization, Smith Barney Muni
Funds-on behalf of its National Portfolio ("National Portfolio") would
acquire all or substantially all of the Ohio Portfolio's assets and
liabilities. After the transaction, the Ohio Portfolio would be
liquidated and you will become a shareholder of the National Portfolio
having received shares with an aggregate net asset value equivalent to
the aggregate net asset value of your Ohio Portfolio investment at the
time of the transaction. No sales charge would be imposed in the
transaction. The transaction would, in the opinion of counsel, be free
from Federal income taxes to you, the Ohio Portfolio and the National
Portfolio.
The Board of Trustees believes that the proposed reorganization is
in the best interests of Ohio Portfolio shareholders and should provide
benefits due, in part, to the substantially higher expense ratio and
substantially lower performance that would be the result of the
discontinuance of management's voluntary practice of waiving the Ohio
Portfolio's fees and expenses, including the management fee, on behalf
of the shareholders.
Please complete, sign and mail the enclosed proxy card...today!
To consider this transaction, we have called a Special Meeting of
Shareholders to be held on January 10, 1997. We strongly urge your
participation by asking you to review, complete and return your proxy
promptly in the postage-paid envelope provided.
For more details about the proposed transaction, please refer to
the enclosed proxy statement. On behalf of the Board, I thank you for
your participation as a shareholder. If you sign and date your proxy
card, but do not provide voting instructions, your shares will be voted
FOR the proposal.
We thank you for your timely response and look forward to
continuing to serve your investment needs with Smith Barney Mutual
Funds. If you have any questions, please call your Financial Consultant
who will be pleased to assist you.
Sincerely,
Heath B. McLendon
Chairman of the Board
[_________] ,1996
SMITH BARNEY MUNI FUNDS- OHIO PORTFOLIO
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On January 10, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Smith Barney Muni Funds-Ohio Portfolio (the "Ohio
Portfolio"), will be held at 388 Greenwich Street, New York, New York on
January 10, 1997, commencing at 2:00 p.m. for the following purposes:
1. To consider and act upon the Plan of Reorganization (the
"Plan") dated as of
[ ], 1996, providing for: (i) the acquisition of all or
substantially all of the assets of the Ohio Portfolio by the
National Portfolio, a separate series of Smith Barney Muni Funds
(the "National Portfolio"), in exchange for shares of the National
Portfolio and the assumption by the National Portfolio of certain
liabilities of the Ohio Portfolio; (ii) the distribution of such
shares of the National Portfolio to shareholders of the Ohio
Portfolio in liquidation of the Ohio Portfolio; and (iii) the
subsequent termination of the Ohio Portfolio.
2. To transact any other business which may properly come
before the Meeting or any adjournment thereof.
The Trustees of the Smith Barney Muni Funds have fixed the close of
business on November 8, 1996, as the record date for the determination of
shareholders of the Ohio Portfolio entitled to notice of and to vote at this
Meeting or any adjournment thereof (the "Record Date").
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO
NOT EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN AND RETURN WITHOUT DELAY THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE PROPER
EXECUTION OF PROXIES ARE SET FORTH ON THE FOLLOWING PAGE. PROXIES MAY BE
REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT EXECUTION AND
SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
OHIO PORTFOLIO AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN
PERSON AT THE MEETING.
By Order of the Board of Trustees
Christina T. Sydor
Secretary
[_________] , 1996
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID THE
EXPENSE OF FURTHER SOLICITATION.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and avoid the time and expense involved in validating your vote if you
fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the
name shown on the registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing
the proxy card should be indicated unless it is
reflected in the form of registration. For example:
Registration Valid Signatures
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Fund Accounts
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr.,
Executor
PROSPECTUS/PROXY STATEMENT DATED [_____]_, 1996
Acquisition of the Assets of
SMITH BARNEY MUNI FUNDS-- OHIO PORTFOLIO
388 Greenwich Street
New York, New York 10013
(800) 224-7523
By And In Exchange For Shares of
SMITH BARNEY MUNI FUNDS-- NATIONAL PORTFOLIO
388 Greenwich Street
New York, New York 10013
(800) 224-7523
This Prospectus/Proxy Statement is being furnished to shareholders of
Ohio Portfolio, a separate series of Smith Barney Muni Funds (the "Ohio
Portfolio"), in connection with a proposed Plan of Reorganization (the
"Plan"), to be submitted to shareholders for consideration at a Special
Meeting of Shareholders to be held on January 10, 1997 at_2:00 p.m. New York
City time, at the offices of Smith Barney Inc., located at 388 Greenwich
Street, 22nd Floor, New York, New York, and any adjournments thereof (the
"Meeting").
The Plan provides for all or substantially all of the assets of the Ohio
Portfolio to be acquired by the National Portfolio, a separate series of Smith
Barney Muni Funds (the "National Portfolio"), in exchange for shares of the
National Portfolio and the assumption by the National Portfolio of certain
liabilities of the Ohio Portfolio (hereinafter referred to as the
"Reorganization"); the Ohio Portfolio and the National Portfolio are sometimes
referred to hereinafter as the "Portfolios" and individually as a "Portfolio".
Following the Reorganization, shares of the National Portfolio will be
distributed to shareholders of the Ohio Portfolio in liquidation of the Ohio
Portfolio and the Ohio Portfolio will be terminated. As a result of the
proposed Reorganization, each shareholder of the Ohio Portfolio will receive
that number of shares of the National Portfolio having an aggregate net asset
value equal to the aggregate net asset value of such shareholder's shares of
the Ohio Portfolio. Holders of Class A shares in the Ohio Portfolio will
receive Class A shares of the National Portfolio, and no sales charge will be
imposed on the Class A shares of the National Portfolio received by the Ohio
Portfolio Class A shareholders. Holders of Class B and Class C shares in the
Ohio Portfolio will receive Class B and Class
C shares, respectively of the National Portfolio. No contingent deferred sales
charge ("CDSC") will be imposed upon consummation of the Reorganization.
However, any CDSC which is applicable to a shareholders investment will
continue to apply, and in calculating the applicable CDSC payable upon the
subsequent redemption of Class A, Class B or Class C shares of the National
Portfolio, the period during which an Ohio Portfolio shareholder held Class A,
Class B or Class C shares of the Ohio Portfolio will be counted. Holders of
Class Y shares in the Ohio Portfolio will receive Class Y shares of the
National Portfolio. This transaction is being structured as a tax-free
reorganization.
The National Portfolio is an open-end diversified management investment
company and the Ohio Portfolio is an open-end non-diversified management
investment company. The National Portfolio and the Ohio Portfolio have
substantially similar investment objectives. Each Portfolio seeks as high a
level of income exempt from Federal income taxes as is consistent with prudent
investing. The Ohio Portfolio also seeks to pay its shareholders income exempt
from the personal income taxes of the State of Ohio. taxes. Smith Barney
Mutual Funds Management Inc., a subsidiary of Smith Barney Holdings Inc. (the
"Manager")., serves as investment manager to both the National Portfolio and
the Ohio Portfolio.
The investment policies of the National Portfolio are generally similar
to those of the Ohio Portfolio. Certain differences in the investment policies
of the Ohio and National Portfolios are described under "Summary of Investment
Objectives and Policies" in this Prospectus/Proxy Statement.
This Prospectus/Proxy Statement, which should be retained for future
reference, sets forth concisely the information about the National Portfolio
that a prospective investor should know before investing. Certain relevant
documents listed below, which have been filed with the Securities and Exchange
Commission ("SEC"), are incorporated by reference. A Statement of Additional
Information dated[__]_, 1996 relating to this Prospectus/Proxy Statement and
the Reorganization, has been filed with the SEC and is incorporated by
reference into this Prospectus/Proxy Statement. A copy of such Statement of
Additional Information is available upon request and without charge by writing
to the Ohio Portfolio at the address listed on the cover page of this
Prospectus/Proxy Statement or by contacting a Smith Barney Financial
Consultant.
1. The Prospectus dated July 1, 1996 of Smith Barney Muni Funds --
National Portfolio and the Prospectus dated July 1, 1996 of
Smith Barney Muni Funds--Ohio Portfolio are incorporated in
their entirety by reference and a copy of each Prospectus is
included herewith.
Also accompanying this Prospectus/Proxy Statement as Exhibit A is a
copy of the Plan of Reorganization for the proposed transaction.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Additional Materials
Summary
Risk Factors
Reasons for the Reorganization
Information about the Reorganization
Information about the National Portfolio
Information about the Ohio Portfolio
Summary of Investment Objectives and Policies
Comparative Information on Shareholders' Rights
Additional Information About the National Portfolio and
the Ohio Portfolio
Other Business
Voting Information
Financial Statements and Experts
Legal Matters
Exhibit A: Plan of Reorganization Appendix
ADDITIONAL MATERIALS
The following additional materials, which have been
incorporated by reference into the Statement of Additional
Information dated [_______]_, 1996 relating to this
Prospectus/Proxy Statement and the Reorganization, will be sent
to all shareholders requesting a copy of such Statement of
Additional Information.
1. Statement of Additional Information of Smith
Barney Muni Funds
dated July 1, 1996 as amended July 29, 1996.
2. Annual Report of Smith Barney Muni Funds--National Portfolio
dated March 31, 1996.
3. Annual Report of Smith Barney Muni Funds--Ohio Portfolio
dated March 31, 1996.
FEE TABLES
Following are tables showing the current costs and expenses of the
National Portfolio and the Ohio Portfolio and the Pro Forma costs and expenses
expected to be incurred by the National Portfolio after giving effect to the
Reorganization, each based on the maximum sales charge or maximum CDSC that
may be incurred at the time of purchase or redemption:
<TABLE>
<S> <C> <C> <C>
CLASS A SHARES National Pro Forma
Portfolio Ohio Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases 4.00 % 4.00% 4.00%
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of None* None* None*
original cost or redemption
proceeds, whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.45% 0.40%** %
12b-1 fees 0.15 0.15
Other expenses 0.10 0.15**
Total Portfolio Operating 0.70% 0.70%** %
Expenses
*Purchases of Class A shares, which when combined with current holdings of
Class A shares offered with a sales charge equal or exceed $500,000 in the
aggregate, will be made at net asset value with no sales charge, but will be
subject to a CDSC of 1.00% on redemptions made within 12 months.
**Management fees have been restated to reflect the management fee waiver
currently in effect. Absent the fee waiver, the management fee would be
incurred at the rate of 0.45% of the Class' average daily net assets for the
current fiscal period. Absent the fee waiver and expense reimbursement, total
expenses would be incurred at the rate of 1.58%.
</TABLE>
<TABLE>
CLASS B SHARES
<S> <C> <C> <C>
National Pro Forma
Portfolio Ohio Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases None None None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of 4.50% 4.50% 4.50%*
original cost or redemption
proceeds, whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.45% 0.40%** %
12b-1 fees 0.65* 0.65*
Other expenses 0.09 0.18**
Total Portfolio Operating 1.19% 01.23%** %
Expenses
</TABLE>
* Upon conversion of Class B shares to Class A shares, such shares will no
longer be subject to a distribution fee.
** Management fees have been restated to reflect the management fee waiver
currently in effect. Absent the fee waiver , the management fee would be
incurred at the rate of 0.45% of the Class' average daily net assets for the
current fiscal period. Absent the fee waiver and expense reimbursement, total
expenses would be incurred at the rate of 2.14%.
<TABLE>
<S> <C> <C> <C>
CLASS C SHARES National Pro Forma
Portfolio Ohio
Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases None None None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of original 1.00% 1.00% 1.00%
cost or redemption proceeds,
whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.45% 0.40%** %
12b-1 fees 0.70* 0.70*
Other expenses 0.12 0.19**
Total Portfolio Operating 1.27% 1.29%** %
Expenses
______________________
*Class C shares do not have a conversion feature and, therefore, are subject
to an ongoing distribution fee. As a result, long-term shareholders of Class
C shares may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities Dealers, Inc.
**Management fees have been restated to reflect the management fee waiver
currently in effect. Absent the fee waiver , the management fee would be
incurred at the rate of 0.45% of the Class' average daily net assets for the
current fiscal period. Absent the fee waiver and expense reimbursement, total
expenses would be incurred at the rate of 2.20%.
</TABLE>
<TABLE>
<S> <C> <C> <C>
CLASS Y SHARES National Ohio Pro Forma
Portfolio Portfolio
Shareholder Transaction Expenses
Maximum sales charge
imposed on purchases None None None
(as a percentage of
offering price)
Maximum CDSC
(as a percentage of None None None
original cost or redemption
proceeds, whichever is lower)
Annual Portfolio Operating Expenses
(as a percentage of average
net assets)
Management fees 0.45% 0.40%* .
12b-1 fees -- -- --
Other expenses 0.10+* 0.15+*
Total Portfolio Operating 0.55% 0.55%*
Expenses
+ "Other Expenses" for National Portfolio Class Y shares have been estimated
because no National Portfolio Class Y shares were outstanding for the period
ended March 31, 1996.
* Absent the management fee waiver and expense reimbursement, total expenses
would be incurred at the rate of 1.43%.
</TABLE>
Examples
The following examples are intended to assist an investor in
understanding the various costs that an investor will bear directly or
indirectly. The examples assume payment of operating expenses at the levels
set forth in the tables above.
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10Years*
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5.00% annual return
and (2) redemption at the end of
each time period:
Class A
National Portfolio $47 $61 $77 $124
Ohio Portfolio 47 61 77 124
Pro Forma
Class B
National Portfolio $57 $68 $75 $131
Ohio Portfolio 58 69 78 134
Pro Forma
Class C
National Portfolio $23 $40 $70 $153
Ohio Portfolio 23 41 71 156
Pro Forma
Class Y
National Portfolio $ 6 $18 $31 $69
Ohio Portfolio 6 18 31 69 Pro Forma
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10Years
An investor would pay the following
expenses on the same annual return
and no redemption:
Class A
National Portfolio $47 $61 $77 $124
Ohio Portfolio 47 61 77 124
Pro Forma
Class B
National Portfolio $12 $38 $65 $131
Ohio Portfolio 13 39 68 134
Pro Forma
Class C
National Portfolio $13 $40 $70 $153
Ohio Portfolio 13 41 71 156
Pro Forma
Class Y
National Portfolio $6 $18 $31 $69
Ohio Portfolio 6 18 31 69
Pro Forma
________________________
The examples also provide a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, each Portfolio's actual return will vary and may
be greater or less than 5.00%. These examples should not be considered
representations of past or future expenses and actual expenses may be greater
or less than those shown.
</TABLE>
SUMMARY
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this Prospectus/Proxy Statement, the
Prospectus of the National Portfolio dated July 1, 1996 and the Ohio Portfolio
dated July 1, 1996, the Statement of Additional Information of Smith Barney
Muni Funds dated July 1, 1996 as amended July 29, 1996, and the Plan, a copy
of which is attached to this Prospectus/Proxy Statement as Exhibit A.
Proposed Reorganization. The Plan provides for the transfer of all or
substantially all of the assets of the Ohio Portfolio in exchange for shares
of the National Portfolio and the assumption by the National Portfolio of
certain liabilities of the Ohio Portfolio. The Plan also calls for the
distribution of shares of the National Portfolio to the Ohio Portfolio
shareholders in liquidation of the Ohio Portfolio. As a result of the
Reorganization, each shareholder of the Ohio Portfolio will become the owner
of that number of full and fractional shares of the National Portfolio having
an aggregate net asset value equal to the aggregate net asset value of their
shares of the Ohio Portfolio, as of the close of business on the date that the
Ohio Portfolio's assets are exchanged for shares of the National Portfolio.
(Shareholders of Class A, Class B, Class C and Class Y shares of the Ohio
Portfolio will receive Class A, Class B, Class C and Class Y shares,
respectively, of the National Portfolio.) See "Information About the
Reorganization."
For the reasons set forth below under "Reasons for the Reorganization,"
the Trustees of Smith Barney Muni Funds (the "Fund"), including all of the
Trustees who are "non-interested" Trustees, as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), has unanimously
concluded that the Reorganization would be in the best interests of the
shareholders of the Ohio Portfoliod and that the interests of Ohio
Portfolio's existing shareholders will not be diluted as a result of the
transaction contemplated by the Reorganization, and therefore has submitted
the Plan for approval by the Ohio Portfolio's shareholders. The Trustees of
the Fund have reached similar conclusions with respect to the National
Portfolio and have also approved the Reorganization with respect to the
National Portfolio.
Pursuant to the Fund's restated Declaration of Trust, approval of the
Reorganization will require the affirmative vote of a majority of the shares
of the Ohio Portfolio represented in person or by proxy and entitled to vote
at a meeting of shareholders at which a quorum is present, as determined in
accordance with the By-Laws. According to the By-Laws, the presence in person
or by proxy of the holders of record of one-third of the shares of the of the
Ohio Portfolio, issued and outstanding and entitled to vote shall constitute a
quorum at share holder meetings, For purposes of voting , with respect to the
Reorganization , the Class A, Class B, Class C and Class Y, shares ,if any, of
the Ohio Portfolio shall vote together as a single class.
Tax Consequences. Prior to completion of the Reorganization, the Fund
will have received an opinion from counsel that, upon the Reorganization and
the transfer of the assets of the Ohio Portfolio, no gain or loss will be
recognized by the Ohio Portfolio or its shareholders for Federal income tax
purposes. The holding period and tax basis of shares of the National
Portfolio that are received by each Ohio Portfolio shareholder will be the
same as the holding period and tax basis of the shares of the Ohio Portfolio
previously held by such shareholder. In addition, the holding period and tax
basis of the assets of the Ohio Portfolio in the hands of the National
Portfolio as a result of the Reorganization will be the same as in the hands
of the Ohio Portfolio immediately prior to the Reorganization.
Investment Objectives, Policies and Restrictions. The Ohio Portfolio
and the National Portfolio have substantially similar investment objectives,
and generally similar investment policies and restrictions. The National
Portfolio and the Ohio Portfolio each seek a high level of income exempt from
Federal income taxes by investing primarily in obligations issued by the State
of Ohio, and its political subdivisions, agencies and instrumentalities .For a
discussion of the differences between the investment policies of the National
Portfolio and the Ohio Portfolio , see "Comparison of Investment Objectives
and Policies."
t
Purchase and Redemption Procedures. Purchases of shares of the National
Portfolio and the Ohio Portfolio may be made through a brokerage account
maintained with Smith Barney Inc. ("Smith Barney"), the Fund's distributor, a
broker that clears securities transactions through Smith Barney on a fully
disclosed basis (an "Introducing Broker") or an investment dealer in the
selling group, at their respective public offering prices (net asset value
next determined plus any applicable sales charge). Class A shares of the
National and Ohio Portfolios are subject to a maximum initial sales charge of
4.00% of the public offering price. Purchases of Class A shares of both
Portfolios , which when combined with current holdings of Class A shares
offered with a sales charge equal or exceed $500,000 in the aggregate, will be
made at net asset value with no sales charge, but will be subject to a CDSC of
1.00% on redemptions within 12 months. Class B shares of both Portfolios are
offered at net asset value subject to a maximum CDSC of 4.50% of redemption
proceeds, declining by .50% the first year after purchase and by 1.00% each
year thereafter to zero. The Class B shares' distribution fee may cause that
Class to have higher expenses and pay lower dividends than Class A shares.
Class C shares of both Portfolios are sold without an initial sales charge but
are subject to higher ongoing expenses than Class A shares, and a CDSC payable
upon certain redemptions. Purchases of Class Y shares of both Portfolios are
sold without an initial sales charge or CDSC, and are available only to
investors investing a minimum of $5,000,000.
Class A shares, except as set forth in the preceding paragraph, and
Class Y shares of both Portfolios may be redeemed, at their respective net
asset values per share next determined without charge. Class B shares of both
Portfolios may be redeemed at their net asset value per share subject to a
CDSC of 4.50% of the lower of the original cost or redemption proceeds ,
declining by 0.50% the first year after purchase and by 1.00% each year
thereafter. Class C shares of both Portfolios may be redeemed at their net
asset value per share, subject to a CDSC of 1.00% if such shares are redeemed
during the first 12 months following their purchase. Shares of both Portfolios
held by Smith Barney as custodian must be redeemed by submitting a written
request to a Smith Barney Financial Consultant. All other shares may be
redeemed through a Smith Barney Financial Consultant, Introducing Broker or
dealer in the selling group or by forwarding a written request for redemption
to the transfer agent, First Data Investor Services Group, Inc. ("First
Data"). See "Redemption of Shares" in the accompanying Prospectus of the
National Portfolio.
Exchange Privileges. The exchange privileges available to shareholders
of the National Portfolio are identical to those available to shareholders of
the Ohio Portfolio. Shareholders of both the Ohio Portfolio and the National
Portfolio may exchange at net asset value all or a portion of their shares for
shares of the same Class in certain funds of the Smith Barney Mutual Funds.
Any exchange will be a taxable event for which a shareholder may have to
recognize a gain or a loss under Federal income tax provisions. No initial
sales charge is imposed on the shares being acquired, and no CDSC is imposed
on the shares being disposed of, through an exchange. However, a sales charge
differential may apply to exchanges of Class A shares with other Smith Barney
Mutual Funds. With respect to Class B and Class C shares of the Portfolios,
the Class B and Class C shares acquired in the exchange will be deemed to have
been purchased on the same date as the Class B and Class C shares that were
exchanged. See "Exchange Privilege" in the accompanying Prospectus of the
National Portfolio.
Dividends. The dividend and distribution policies of both Portfolios
are identical. Each Portfolio's policy is to declare and pay dividends monthly
from substantially all of the Portfolio's net investment income, and both
Portfolio's declare and distribute any realized capital gains annually. Unless
a shareholder otherwise instructs, dividends and capital gains distributions
are reinvested automatically in additional shares of the same Class at net
asset value, subject to no sales charge or CDSC. The distribution option
currently in effect for a shareholder of the Ohio Portfolio will remain in
effect after the Reorganization. After the Reorganization, however, the former
Ohio Portfolio shareholders may change their distribution option at any time
by contacting a Smith Barney Financial Consultant. See "Dividends,
Distributions and Taxes" in the accompanying prospectus of the National
Portfolio.
Shareholder Voting Rights. The National Portfolio and the Ohio
Portfolio are both open-end management investment companies. Both the National
and Ohio Portfolios are separate series of Smith Barney Muni Funds., a
Massachusetts business trust having a Board of Trustees. Shareholders of both
Portfolios have identical voting rights. Neither Portfolio holds meetings of
shareholders annually, and as permitted by Massachusetts law, normally no
meeting of shareholders is held for the purpose of electing Trustees unless
and until such time as less than a majority of the Trustees holding office
have been elected by shareholders. At that time, the Trustees of the Fund
then in office will call a shareholders' meeting for the election of Trustees.
For purposes of voting with respect to the Reorganization, the Class A, Class
B, Class C and Class Y shares, if any, of the Ohio Portfolio shall vote
together as a single class.
In addition, under the laws of the Commonwealth of Massachusetts,
shareholders of the Ohio Portfolio do not have appraisal rights in connection
with a combination or acquisition of the assets of the Portfolio by another
entity. Shareholders of the Ohio Portfolio may, however, redeem their shares
at net asset value (subject to any applicable CDSC) prior to the date of the
Reorganization.
RISK FACTORS
Due to the similarities of the investment objectives and policies of the
National Portfolio and the Ohio Portfolio, the investment risks are also
similar. Such risks are generally those typically associated with investing
primarily in municipal obligations. In addition, the Ohio Portfolio's
investment risks include those risks typically associated with investing
primarily in obligations issued by a single state and its political
subdivisions, agencies and instrumentalities. Such risks are discussed under
the caption "Summary of Investment Objectives and Policies."
REASONS FOR THE REORGANIZATION
The Trustees of the Fund have determined that it is advantageous to
combine the Ohio Portfolio with the National Portfolio. The Portfolios have
similar investment objectives and investment policies and the same Manager and
shareholder servicing agent. In reaching this conclusion, the Trustees
considered a number of factors as described below.
Among the factors considered by the Trustees of the Fund was the
Manager's representation that the Ohio Portfolio does not have sufficient
assets to justify maintaining the Portfolio as a stand-alone fund. At their
September 4, 1996 meeting, the Trustees were advised that the Ohio Portfolio,
which has been in existence for more than two years, had only $8.9 million in
assets as of June 28, 1996. In contrast, the assets of the National Portfolio
reached $397 million as of June 28, 1996. The Trustees were also informed
that the Portfolio's assets have been growing at a very slow rate and there is
no foreseeable potential for significant future growth. In addition, the
Manager reminded the Trustees that Smith Barney has been subsidizing the Ohio
Portfolio by waiving its management fee, and absorbing expenses since the
Portfolio's inception and noted that Smith Barney may be unwilling to continue
such subsidies indefinitely. The Trustees recognized that without these
subsidies the Ohio Portfolio would have had substantially higher expense
ratios and, as a result, significantly lower performance. Specifically, the
Trustees were shown financial information which indicated that, without Smith
Barney's subsidies, the total expenses of each of the Portfolio's Classes
would be more than five times greater--going from 0.30% to 1.58% for Class A
shares, and more than doubled--going from 0.83% to 2.14% for Class B shares
and from 0.89% to 2.20% for Class C shares. The Trustees were also shown pro
forma information which indicated that the total expense ratio of the Class A
shares of the combined fund (assuming the same level of assets of each
Portfolio as of June 28, 1996) would be 0.70%--a decrease of 0.88% from the
unsubsidized total expense ratio of Class A shares of the Ohio Portfolio , and
the total expense ratio of the Class B shares of the combined fund would be
1.19%--a decrease of 0.95% from the unsubsidized total expense ratio of the
Class B shares of the Ohio Portfolio. With respect to Class C shares, the pro
forma information showed that the total expense ratio of Class C shares of the
combined fund would be 1..27%--a decrease of 0.93% from the unsubsidized total
expense ratio of the Class C shares of the Ohio Portfolio. In addition , in
reaching their conclusion, the Trustees took into consideration the fact that
for theone year period ended June 28, 1996 the yield and average annual total
return of the National Portfolio's Class A, Class B and Class C shares was
higher than that of the Ohio Portfolio's Class A, Class B and Class C shares.
The Trustees also considered that the Reorganization would permit the
shareholders of the Ohio Portfolio to pursue similar investment goals in a
larger fund. A larger fund should enhance the ability of the Manager to
effect portfolio transactions on more favorable terms and give the Manager
greater investment flexibility and the ability to select a larger number of
portfolio securities for the Portfolio, with the attendant benefits of
increased diversification. In addition, the larger aggregate asset base could
potentially result in lower overall expense ratios through the spreading of
both fixed and variable costs of Portfolio operations over a larger asset
base. As a general rule, economies can be expected to be realized with
respect to fixed expenses, such as costs of printing and fees for professional
services, although expenses that are based on the value of assets or the
number of shareholder accounts, such as custody assets, would be largely
unaffected by the Reorganization. In addition, the Trustees were advised that
the Reorganization would be effected as a tax-free reorganization.
In light of the foregoing, the Trustees of the Fund, including the non-
interested Trustees, have determined that it is in the best interests of the
Ohio Portfolio and its shareholders to combine with the National Portfolio.
The Trustees have also determined that a combination of the Ohio Portfolio and
the National Portfolio would not result in a dilution of the interests of the
Ohio Portfolio shareholders.
The Trustees of the Fund have also determined that it is advantageous to
the National Portfolio to acquire the assets of the Ohio Portfolio. Among
other reasons, the Trustees believe that: (1) the impact of the
Reorganization on the current expenses of the National Portfolio will be
minimal; and (2) the Reorganization will be effected as a tax-free
reorganization. Accordingly, the Trustees of the Fund, including a majority
of the non-interested Trustees, determined that the Reorganization is in the
best interests of the National Portfolio's shareholders and that the interests
of National Portfolio shareholders will not be diluted as a result of the
Reorganization.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The following summary of the Plan is qualified
in its entirety by reference to the Plan (Exhibit A hereto). The Plan
provides that the National Portfolio will acquire all or substantially all of
the assets of the Ohio Portfolio in exchange for shares of the National
Portfolio and the assumption by the National Portfolio of certain liabilities
of the Ohio Portfolio on January 17, 1997, or such later date as may be agreed
upon by the parties (the "Closing Date").
Prior to the Closing Date, the Ohio Portfolio will endeavor to discharge
all of its known liabilities and obligations. The National Portfolio will not
assume any liabilities or obligations of the Ohio Portfolio other than those
reflected in an unaudited statement of assets and liabilities of the Ohio
Portfolio prepared as of the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE"), currently 4:00 p.m. New York City time, on the
Closing Date. The National Portfolio will assume the liability for payment of
any unpaid amounts under the Ohio Portfolio's Rule 12b-1 plan which were
carried over as of the Closing Date. The number of full and fractional Class
A, Class B, Class C and Class Y shares of the National Portfolio to be issued
to the Ohio Portfolio shareholders will be determined on the basis of the
National Portfolio's and the Ohio Portfolio's relative net asset values per
Class A, Class B, Class C and Class Y shares, respectively, computed as of the
close of regular trading on the NYSE on the Closing Date. The net asset value
per share of each Class will be determined by dividing assets, minus
liabilities, by the total number of outstanding shares.
Both the Ohio Portfolio and the National Portfolio utilize the same
procedures to determine the value of their respective portfolio securities.
This method of valuation will be employed for the Reorganization and will be
consistent with the requirements set forth in each Portfolio's Prospectus,
Rule 22c-1 under the 1940 Act, and with the interpretation of such rule by the
SEC's Division of Investment Management.
At or prior to the Closing Date, the Ohio Portfolio will, and the
National Portfolio may, declare a dividend or dividends which, together with
all previous such dividends, shall have the effect of distributing to their
respective shareholders all taxable income for the taxable year ending on or
prior to the Closing Date (computed without regard to any deduction for
dividends paid). In addition, the Ohio Portfolio's dividend will include all
of its net capital gains realized in the taxable year ending on or prior to
the Closing Date (after reductions for any capital loss carry forward).
As soon after the Closing Date as conveniently practicable, the Ohio
Portfolio will liquidate and distribute pro rata to shareholders of record as
of the close of business on the Closing Date the full and fractional shares of
the National Portfolio received by the Ohio Portfolio. Such liquidation and
distribution will be accomplished by the establishment of accounts in the
names of the Ohio Portfolio's shareholders on the share records of the
National Portfolio's shareholder servicing agent. Each account will represent
the respective pro rata number of full and fractional shares of the National
Portfolio due to each of the Ohio Portfolio's shareholders. After such
distribution has been made and the affairs have been wound up, the Ohio
Portfolio will be terminated.
The consummation of the Reorganization is subject to the conditions set
forth in the Plan. Notwithstanding approval of the Ohio Portfolio's
shareholders, the Plan may be terminated at any time at or prior to the
Closing Date by consent of the Board of Trustees of the Fund.
Pursuant to the Fund's restated Declaration of Trust, approval of the
Reorganization will require the affirmative vote of a majority of the shares
of the Ohio Portfolio represented in person or by proxy and entitled to vote
at a meeting of shareholders at which a quorum is present, as determined in
accordance with the By-Laws. According to the By-Laws, the presence in person
or by proxy of the holders of record of one-third of the shares of the of the
Ohio Portfolio, issued and outstanding and entitled to vote shall constitute a
quorum at share holder meetings, For purposes of voting , with respect to the
Reorganization , the Class A, Class B, Class C and Class Y, shares ,if any, of
the Ohio Portfolio shall vote together as a single class.
Description of the National Portfolio's Shares. Full and fractional
shares of the respective class of shares of beneficial interest of the
National Portfolio will be issued to the Ohio Portfolio in accordance with the
procedures detailed in the Plan and as described in the National Portfolio's
Prospectus. Generally, the National Portfolio does not issue share
certificates to shareholders unless a specific request is submitted to the
National Portfolio's shareholder servicing agent. The shares of the National
Portfolio to be issued to the Ohio Portfolio shareholders and registered on
the shareholder records of the shareholder servicing agent will have no
preemptive rights. See "Information on Shareholders Rights' and the
Prospectus of the National Portfolio for additional information with respect
to the shares of the National Portfolio.
Federal Income Tax Consequences. For Federal income tax purposes, the
exchange of assets of the Ohio Portfolio for shares of the National Portfolio
is intended to qualify as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"). As a condition to
the closing of the Reorganization, the Ohio Portfolio and the National
Portfolio will receive an opinion from Sullivan & Cromwell, to the effect
that, on the basis of certain assumptions by counsel and certain
representations by the Ohio Portfolio and the National Portfolio, as well as
the existing provisions of the Code, U.S. Treasury regulations issued
thereunder, current administrative rules, pronouncements and court decisions,
for Federal income tax purposes, upon consummation of the Reorganization, the
following will apply:
(1) the transfer of all or substantially all of the Ohio
Portfolio's assets in exchange for the National Portfolio's
shares and the assumption by the National Portfolio of
certain liabilities of the Ohio Portfolio will constitute a
"reorganization" within the meaning of Section 368 a)(1)(C)
of the Code, and the National Portfolio and the Ohio
Portfolio are each a "party to a reorganization" within the
meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the National Portfolio
upon the receipt of the assets of the Ohio Portfolio in
exchange for the National Portfolio's shares and the
assumption by the National Portfolio of certain scheduled
liabilities of the Ohio Portfolio;
(3) no gain or loss will be recognized by the Ohio Portfolio
upon the transfer of the Ohio Portfolio's assets to the
National Portfolio in exchange for the National Portfolio's
shares and the assumption by the National Portfolio of
certain scheduled liabilities of the Ohio Portfolio or upon
the distribution (whether actual or constructive) of the
National Portfolio's shares to the Ohio Portfolio's
shareholders;
(4) no gain or loss will be recognized by shareholders of the
Ohio Portfolio upon the exchange of their Ohio Portfolio
shares for the National Portfolio shares;
(5) the aggregate tax basis of the National Portfolio shares to
be received by each Ohio Portfolio shareholder pursuant to
the Reorganization will be the same as the aggregate tax
basis of the Ohio Portfolio shares surrendered in exchange
therefor and the holding period of the National Portfolio
shares to be received by each Ohio Portfolio shareholder
will include the period during which the shares of the Ohio
Portfolio which are surrendered in exchange therefor were
held by such shareholder (provided the Ohio Portfolio shares
were held as capital assets on the date of the
Reorganization); and
(6) the tax basis of the Ohio Portfolio's assets to be acquired
by the National Portfolio will be the same as the tax basis
of such assets to the Ohio Portfolio immediately prior to
the Reorganization. The holding period of the assets of the
Ohio Portfolio in the hands of the National Portfolio will
include the period during which such assets were held by the
Ohio Portfolio.
Shareholders of the Ohio Portfolio should consult their tax advisors
regarding the effect, if any, of the proposed Reorganization in light of their
individual circumstances. Since the foregoing discussion only relates to the
Federal income tax consequences of the Reorganization, shareholders of the
Ohio Portfolio should also consult their tax advisors as to state and local
tax consequences, if any, of the Reorganization.
Capitalization. The following table, which is unaudited, shows the
capitalization of the National Portfolio and the Ohio Portfolio as of November
8, 1996 and on a pro forma basis as of that date, giving effect to the
proposed acquisition of assets at net asset value:
<TABLE>
<S> <C> <C> <C>
(In thousands, except
per share values)
(Unaudited)
National Ohio Pro forma for
Class A Shares Portfolio Portfolio
Reorganization
Net Assets............... .
Net asset value per share.
Shares outstanding........
Class B Shares
Net Assets................
Net asset value per share.
Shares outstanding........
Class C Shares
Net Assets................
Net asset value per share.
Shares outstanding........
Class Y Shares
Net Assets................
Net asset value per share.
Shares outstanding........
As of the Record Date, there were __________outstanding Class A
shares,_____________ outstanding Class B shares,__________outstanding
Class C shares and______outstanding Class Y shares of the Ohio Portfolio
and __________outstanding Class A shares,___________ outstanding Class B
shares, __________outstanding Class C shares and __________outstanding
Class Y shares of the National Portfolio. As of the Record Date, the
officers and Trustees of Smith Barney Muni Funds as a group beneficially
owned less than 1% of the outstanding shares of the Ohio Portfolio.
Except as set forth below, to the best knowledge of the Trustees of the
Fund, as of the Record Date, no shareholder or "group" (as that term is
used in Section 13(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), owned beneficially or of record 5% or more of a Class
of shares of the Ohio Portfolio.
</TABLE>
<TABLE>
Percentage of Class Owned of
Record or Beneficially
Name and Fund and As of the Upon Consummation
Address Class Record Date of the Reorganization
<S> <C> <C> <C>
</TABLE>
INFORMATION ABOUT THE NATIONAL PORTFOLIO
Management's Discussion and Analysis of Market Conditions and
Portfolio Review.
Dear Shareholder:
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds National Portfolio. For your convenience, we have summarized the
period's prevailing economic and market conditions and outlined the
Portfolio's investment strategy employed during this time.
Portfolio's Performance and Investment Strategy
For the year ended March 31, 1996, the National Portfolio had a total return
of 8.83% for Class A shares which compares favorably with its Lipper
Analytical Services, Inc. peer group average of 7.17%. (Lipper Analytical
Services, Inc. is a major fund tracking organization.) The National
Portfolio's five-year total return of 51.38% (Class A shares) significantly
outperformed the average total return of 44.70% for all general municipal bond
funds as tracked by Lipper for the period ended March 31, 1996.
We emphasized high credit quality and a balanced coupon and maturity structure
in the National Portfolio. Approximately 60% of the Portfolio is invested in
municipal bonds rated in the double-A and triple-A categories by Standard &
Poor's Corporation and Moody's Investors Services, two major credit reporting
and bond rating agencies. The average maturity of the National Portfolio is
just over 19 years with excellent call protection of slightly more than 10
years.
The three largest sectors of the National Portfolio were housing (roughly
15%), hospitals (approximately 15%) and bonds escrowed with U.S. government
securities (roughly 13%). Some of the National Portfolio's escrowed-to-
maturity bonds were sinking fund bonds and some were non-callable, zero coupon
issues with a high degree of interest-rate sensitivity that have attractive
yield potential and good performance potential in a rising market. (Sinking
fund bonds are issued under a sinking fund, which requires the debtor
organization (obligor) to periodically set aside out of earnings a sum which,
with interest, will be sufficient to redeem the issue in whole or part at
maturity.)
In light of the recent uncertainty and increased volatility in the municipal
bond market, the National Portfolio remains committed to its high-quality
orientation, broad sector diversification and good call protection. In
addition, the National Portfolio will continue to emphasize higher coupon
issues trading at a premium for the high income they are producing and the
measure of protection they afford should interest rates rise.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over stalemated federal budget negotiations
continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over
a year. However, despite continued uncertainty over the direction of short-
term interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view,
municipal bonds represent good value and now may be the time for individuals
to consider participating in the tax-exempt market.
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has
made long-term municipal bonds more attractive on a relative basis. In our
view, competitive pressures in the global economy and changing demographics
should help to keep inflation in check. (Labor costs constitute roughly two-
thirds of the total cost of all finished goods.) We believe long-term
municipal bonds currently represent good value and offer investors a healthy
risk premium over inflation. In addition, with long-term municipal bonds
providing roughly 90% of the yield available on comparable maturity Treasury
securities, investors are being well compensated for the potential risks of
all but the most radical tax reform proposals currently in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially
the biggest issue of the upcoming Presidential election in November. The exit
of Republican candidate Steven Forbes from the Presidential race has caused
the flat tax to recede from the political debate. However, between now and
November, tax reform again could well move into the political spotlight as the
campaign intensifies. However, although we believe the tax-exempt market is
currently attractive regardless of the final outcome of the tax reform debate,
this issue will continue to be an important one for the municipal bond market
over the next two to three years.
Sincerely,
/s/ Heath B. McLendon /s/ Peter M. Coffey
Heath B. McLendon Peter M. Coffey
Chairman and Vice President and
Chief Executive Officer Investment Officer
INFORMATION ABOUT THE OHIO PORTFOLIO
Management's Discussion and Analysis of Market Conditions and
Portfolio Review.
(for the year ended March 31, 1996)
We are pleased to provide you with the annual report for the Smith Barney Muni
Funds -- Ohio and Portfolio. We have summarized the period's prevailing
economic and market conditions below and outlined the various investment
strategies employed by the Portfolios during this time.
Market and Economic Overview
Interest rates declined steadily over the first nine months of the fiscal year
in response to low inflation and very sluggish economic growth. Over the last
three months of the fiscal year, however, interest rates rose sharply as
economic reports pointed to much stronger growth than was expected by most
market participants and concerns over the stalemated federal budget
negotiations continued.
In the past few months, the volatility of the municipal bond market has
increased and municipal bond yields have reached their highest levels in over
a year. However, despite continued uncertainty over the direction of short-
term interest rates, there were some signs of a possible municipal bond market
turnaround as the higher yields offered by municipal bonds began to attract a
growing number of individual and institutional investors. In our view,
municipal bonds represent good value and now is the time for individuals to
consider participating in the tax-exempt market.
1
<PAGE>
Ohio Economic Highlights
Ohio has maintained its high credit ratings of double-A from Moody's Investors
Services, Inc. and double-A from Standard & Poor's Corporation, respectively.
Ohio has begun to attract new businesses with offers of tax credits and tax
waivers designed to help stem the erosion of its manufacturing base. In
addition, the State remains committed to its long-range strategy of
diversifying away from the cyclical heavy equipment industry and creating new
employment in the fast-growing services and high technology industries.
We expect that Ohio's economy will continue its modest recovery as many of its
manufacturers retool their facilities to improve efficiency and expand their
reach into promising foreign markets. Moreover, officials in Ohio have begun
to see some tangible benefits from their past efforts to control spending and
reduce the size of State government.
Ohio Portfolio's Performance and Investment Strategy
For the year ended March 31, 1996, the Ohio Portfolio had a total return of
7.65% for Class A shares, which exceeded its Lipper Analytical Services, Inc.
peer group average of 6.74%. With respect to the Ohio Portfolio's investment
strategy, we have maintained a high-quality portfolio with more than 89% in
investment-grade securities. (An investment-grade security is a security with
a rating of BBB/Baa or better from Standard & Poor's Corporation or Moody's
Investors Services, Inc.) As of March 31, 1996, the Ohio Portfolio's average
weighted maturity was approximately 23 years. The Portfolio focused on school,
hospital and pollution-control issues because we believe they offered good
value. In turbulent markets, the Portfolio's emphasis on high-quality issues
should generally provide investors with a competitive stream of income while
helping to keep its principal relatively stable.
Outlook
While the day-to-day volatility in the fixed income markets is likely to
continue, the sharp increase in interest rates over the last two months has
made long-term municipal bonds more attractive on a relative basis. In our
view, competitive pressures in the global economy and changing demographics
should help to keep inflation in check. (Labor costs constitute roughly two-
thirds of the total cost of all finished goods.) We believe long-term
municipal bonds currently represent good value and offer investors a healthy
risk premium over inflation. In addition, with long-term municipal bonds
providing roughly 90% of the yield available on comparable maturity Treasury
securities, investors are well compensated for the potential risks of all but
the most radical tax reform proposals currently in circulation.
It was not too long ago that the "flat tax" issue was touted as potentially
the biggest issue of the upcoming Presidential election in November. The exit
of Republican candidate Steven Forbes from the Presidential race has caused
the flat tax to recede from the political debate. However, between now and
November, tax reform again could move into the political spotlight as the
campaign intensifies.
In closing, we believe there is little chance that radical tax reforms will be
enacted. In our view, the municipal bond market remains quite attractive and
the Portfolios are well positioned in the current environment.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion, which summarizes the investment objectives,
policies and restrictions of the National Portfolio and the Ohio Portfolio, is
based upon and qualified in its entirety by the investment objectives,
policies and restriction sections of the Prospectuses of the National
Portfolio and the Ohio Portfolio. For a full discussion of the investment
objectives, policies and restrictions of each Portfolio refer to the
Prospectus which accompanies this Prospectus/Proxy Statement, under the
captions, "Investment Objective and Management Policies."
Investment Objective. The principal investment objective of the
National Portfolio is substantially similar to that of the Ohio Portfolio, in
that each seeks as high a level of income exempt from Federal income taxes as
is consistent with prudent investing. In addition, the Ohio Portfolio seeks as
high a level of income of income exempt from the personal income taxes of
Ohio. Both the National Portfolio's and the Ohio Portfolio's investment
objective is fundamental and, as such, may be changed only by the "vote of a
majority of the outstanding voting securities," as defined in the 1940 Act.
The investment policies of the National Portfolio and the Ohio Portfolio are
non-fundamental and, as such, may be changed by the Board of Trustees, without
shareholder approval, provided such change is not prohibited by the investment
restrictions (which are set forth in the Statement of Additional Information)
or applicable law, and any such change will first be disclosed in the then
current prospectus.
Primary Investments. The National Portfolio and the Ohio Portfolio
invest primarily in municipal obligations, Each Portfolio invests in municipal
obligations of varying maturities but typically invests in securities with
remaining maturities of 5 to 30 years.. The Portfolios operate subject to a
fundamental policy that, under normal market conditions, the Portfolios will
seek to invest at least 100% of their assets and the Portfolios will not
invest less than 80% of their assets in municipal obligations the interest on
which is exempt from Federal income taxes.(other than the alternative minimum
tax). The Ohio Portfolio also operates subject to a fundamental policy
providing that, under normal market conditions, the Portfolio will invest at
least 65% of its total assets in municipal obligations the interest on which
is also exempt from the personal income taxes of the State of Ohio. Such
obligations are issued to raise money for a variety of public projects that
enhance the quality of life including health facilities, housing, airports,
schools, highways and bridges. In addition, both Portfolios may invest up to
20% of their assets in taxable fixed-income securities but only in obligations
issued or guaranteed by the full faith and credit of the United States.
Municipal bonds purchased for the Portfolios must, at the time of
purchase, be investment-grade municipal bonds and at least two-thirds of the
Portfolios' municipal bonds must be rated in the category of A or better.
Investment grade bonds are those rated Aaa,, Aa,, A and Baa by Moody's
Investors Service, Inc. ("Moody's) and AAA, AA, A and BBB by Standard &
Poor's Corporation ("S&P) or have an equivalent rating by any nationally
recognized statistical rating organization; prerefunded bonds escrowed by U.S.
Treasury obligations will be considered AAA-rated even though the issuer does
not obtain a new rating. Up to one-third of the assets of the Portfolios may
be invested in municipal bonds rated Baa or BBB or in unrated municipal bonds,
if, based upon credit analysis by the Manager, it is believed that such
securities are at least of comparable quality to those securities in which the
Portfolio may invest. After the Portfolios purchase a municipal bond, the
issuer may cease to be rated or its rating may be reduced below the minimum
required for purchase. Such an event would not require the elimination of the
issue from the Portfolio but the Manager will consider such an event in
determining whether the Portfolio should continue to hold the security. The
Portfolios' short-term municipal obligations will be limited to high grade
obligations (obligations that are secured by the full faith and credit of the
United States or are rated MIG1 or MIG2, VMIG1 or VMIG2 or Prime-1 or Aa or
better by Moody's or SP-1+, SP-1, SP-2, or A-1 or AA or better by S&P or have
an equivalent rating by any nationally recognized statistical rating
organization or obligations determined by the Manager to be equivalent). Among
the types of short-term instruments in which the Portfolios may invest are
floating or variable rate term demand instruments, tax-exempt commercial paper
(generally having a maturity of less than nine months), and other types of
notes generally having maturities of less than three years, such as Tax
Anticipation Notes, Revenue Anticipation Notes, Tax and Revenue Anticipation
Notes and Bond Anticipation Notes. Demand instruments usually have an
indicated maturity of more than one year, but contain a demand feature that
enables the holder to redeem the investment on no more than 30 days' notice;
variable rate demand instruments provide for automatic establishment of a new
interest rate on set dates; floating rate demand instruments provide for
automatic adjustment of their interest rates whenever some other specified
interest rate changes (e.g., the prime rate). The Portfolios may purchase
participation interests ("Participations") in variable rate tax-exempt
securities (such as Industrial Development Bonds) owned by banks.
Participations are frequently backed by an irrevocable letter of credit or
guarantee of a bank that the Manager has determined meets the prescribed
quality standards for the Portfolios. Participations will be purchased only if
management believes interest income on such Participations will be tax-exempt
when distributed as dividends to shareholders.
Municipal Obligations. Municipal Obligations are classified as
general obligation and revenue. General obligations are secured by a municipal
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue obligations are payable only from the revenues
derived from a particular facility or class of facilities or, in some cases
from the proceeds of a special excise tax or other specific revenue source,
but not from general taxing power. Notes are short-term obligations of
issuing municipalities or agencies and are sold in anticipation of a bond
sale, collection of taxes or receipt of other revenues.
In attempting to achieve their investment objective, the Portfolios may
employ, among others, the following portfolio strategies:
Illiquid Securities. The National Portfolio and the Ohio Portfolio may
invest up to 10% and 15%, respectively, of the value of its net assets in
illiquid securities, including those that are not readily marketable or for
which there is no established market.
Municipal Bond Index Futures. Each Portfolio may invest in municipal
bond index futures (currently traded on the Chicago Board of Trade) or in
listed contracts based on U.S. Government securities as a hedging policy in
pursuit of its investment objective; provided that immediately thereafter not
more than 331/3% of its net assets would be hedged or the amount of margin
deposit on the Portfolio's existing futures contracts would not exceed 5% of
the value of its total assets. Since any income would be taxable, it is
anticipated that such investments would be made only in those circumstances
when the Manager anticipates the possibility of an extreme change in interest
rates or in market conditions but does not wish to liquidate the Portfolio's
securities.
Temporary Investments. The portfolios may invest up to 20% of their
assets in taxable fixed income securities, but only in obligations issued or
guaranteed by the full faith and credit of the United States, and may invest
more than 20% of its assets in U.S. Government securities during periods when
in the Manager's opinion a temporary defensive posture is warranted, including
any period when the Portfolio's monies available for investment exceed the
municipal obligations available for purchase that meet the Portfolio's rating,
maturity and other investment criteria.
When Issued Securities. Each Portfolio may purchase new issues of
Municipal Obligations on a when-issued basis, which means that delivery and
payment for such securities normally take place within 45 days after the date
of the commitment to purchase. Each Portfolio will not accrue income with
respect to a
when-issued security prior to its stated delivery date. When-issued securities
may decline in value before this actual delivery to a Portfolio. Each
Portfolio will establish a segregated account with the Portfolio's custodian
consisting of cash or other liquid high grade debt securities in an amount
equal to the purchase price of the Portfolio's when-issued commitments. The
Portfolio generally will purchase Municipal Obligations on a when-issued basis
only with the intention of actually acquiring the securities, but the
Portfolio may sell such securities before the delivery date if it is deemed
advisable.
The Portfolios may also engage in short-term trading consistent with
their investment objective .
Restrictions. Each Portfolio has adopted the following fundamental
investment restrictions, as indicated, for the protection of its shareholders,
which restrictions may not be changed without the approval of the holders of a
majority, as defined in the 1940 Act, of the voting securities of the
respective Portfolio:
1. . The Portfolios may not invest more than 25% of their total assets taken
at market value in any one industry, except that securities of the U.S.
Government, its agencies and instrumentalities, and Municipal Obligations of
Ohio are not considered an industry for purposes of this limitation.
2. Neither Portfolio may borrow money, except that the Portfolios may borrow
from banks for temporary purposes (such as facilitating redemptions or for
extraordinary or emergency purposes) in an amount not exceeding 10% of the
value of such Portfolio's total assets at the time the borrowing is made (not
including the amount borrowed) and no investments will be made while
borrowings exceed 5% of total assets. Each Portfolio is further prohibited
from pledging, or mortgaging its assets, except to secure permitted borrowing.
3. Neither Fund may make loans, except to the extent the purchase of bonds
or other evidences of indebtedness or the entry into repurchase agreements or
deposits with banks, including the Portfolio's custodian, may be considered
loans (the National Portfolio has no intention of entering into repurchase
agreements).
4. Neither Portfolio may purchase securities on margin.
5. Neither Portfolio may make short sales of securities.
6. Neither Portfolio may purchase or hold any real estate, except that it
may invest in securities secured by real estate or interests therein or issued
by persons (other than real estate investment trusts) which deal in real
estate or interests therein.
7. Neither Portfolio may purchase or sell commodities and commodity
contracts. except that they may invest in or sell municipal bond index futures
contracts as described above, provided that immediately thereafter not more
than 33 1/3% of its net assets would be hedged or the amount of margin
deposits on the Portfolio's existing futures contracts would not exceed 5% of
the value of its total assets.
8 Neither Portfolio may act as an underwriter of securities of other
issuers.
9. Neither Portfolio may write or purchase puts, calls, straddles, or
spread options.
10. The National Portfolio may not with respect to 75% of the value of its
total assets, purchase securities of any issuer if immediately thereafter more
than 5% of total assets at market value would be invested in the securities of
any issuer (except that this limitation does not apply to obligations issued
or guaranteed either by the U. S. Government or its agencies or
instrumentalities).
11. The National Portfolio may not invest in securities issued by other
investment companies, except as permitted by Section 12(d)(1) of the
Investment Company Act if 1940 or in connection with a merger, consolidation,
acquisition or reorganization.
12. The National Portfolio may not purchase or hold the securities of any
issuer, if to its knowledge, Trustees or officers of the Fund individually
owning more than .5% of the securities of that issuer own in the aggregate
more than 5% of such securities.
Other Restrictions
As a matter of operating policy, the Portfolios may not (1) purchase
oil, gas or other mineral leases rights or royalty contracts or exploration or
development programs, except that each Portfolio may invest in securities of
issuers which operate, invest in, or sponsor such programs; or (2) invest more
than 5% of their assets in unseasoned issuers, including their predecessors,
which have been in operation for less than three years.
INFORMATION ON SHAREHOLDERS' RIGHTS
General. The National Portfolio is an open-end, diversified management
investment companies registered under the 1940 Act and the Ohio Portfolio is
an open-end non-diversified management investment company registered under the
1940 Act, which continuously offer to sell shares at their current net asset
value.. The National and Ohio Portfolio's are series of Smith Barney Muni
Funds. Smith Barney Muni Funds was organized on August 14, 1985 under the laws
of Massachusetts and is a business entity commonly known as a Massachusetts
business trust. Smith Barney Muni Funds is governed by its Declaration of
Trust, By-Laws and Trustees. Each Portfolio is also governed by Massachusetts
state and federal law.
The beneficial interest in the Portfolios is divided into shares, all
with a par value of $.001 per share. The number of authorized shares of Smith
Barney Muni Funds that may be issued is unlimited. The Trustees of Smith
Barney Muni Funds have authorized the issuance of twenty six series of shares,
each representing shares in one of twenty six portfolios, and may authorize
the issuance of additional series of shares in the future. In each Portfolio,
Class A, Class B shares, Class C shares and Class Y shares represent interests
in the assets of the Portfolio and have identical voting, dividend,
liquidation and other rights on the same terms and conditions except that
expenses related to the distribution of each class of shares are borne solely
by each class of shares. Each class has exclusive voting rights with respect
to provisions of the Portfolio's Rule 12b-1 distribution plan which pertains
to a particular class.
Trustees. The Declaration of Trust of Smith Barney Muni Funds provides
that the term of office of each Trustee shall be from the time of his or her
election until the termination of the trust or until such Trustee sooner dies,
resigns or is removed. A Trustee of Smith Barney Muni Funds may be removed
with cause by written instrument, signed by at least two-thirds of the
remaining Trustees. Vacancies on the Board of Smith Barney Muni Funds may be
filled by the Trustees remaining in office. A meeting of shareholders will be
required for the purpose of electing additional Trustees whenever fewer than a
majority of the Trustees then in office were elected by shareholders.
Voting Rights. Neither Portfolio holds a meeting of shareholders
annually, and there normally is no meeting of shareholders for the purpose of
electing Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders. A meeting of
shareholders of a Portfolio, for any purpose, must be called upon the written
request of shareholders holding at least 25% of such Portfolio's outstanding
shares. On each matter submitted to a vote of the shareholders of a Portfolio,
each shareholder is entitled to one vote for each whole share owned and a
proportionate, fractional vote for each fractional share outstanding in the
shareholder's name on the Portfolio's books. With respect to matters relating
to Smith Barney Muni Funds requiring a majority shareholder vote as described
in the Declaration of Trust, a majority of shares represented in person or by
proxy and entitled to vote at a meeting of shareholders at which a quorum is
present shall decide such matter. In cases where the vote is submitted to the
holders of one or more but not all series or classes, a majority of the
outstanding
shares of the particular series or class effected by the matter shall decide
such matter.
Liquidation or Termination In the event of the liquidation or
termination of any of the portfolios of Smith Barney Muni Funds, the
shareholders of the respective Portfolio are entitled to receive, when, and as
declared by the Trustees, as the case may be, the excess of the assets over
the liabilities belonging to the liquidated or terminated portfolio of Smith
Barney Muni Funds. The assets so distributed to shareholders of the
liquidated or terminated portfolio of Smith Barney Muni Funds will be
distributed among the shareholders in proportion to the number of shares of
the particular class held by them and recorded on the books of the liquidated
or terminated portfolio of Smith Barney Muni Funds.
Liability of Trustees. Under the Declaration of Trust and By-Laws of
Smith Barney Muni Funds, a Trustee will be personally liable only for his or
her own willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of the office of Trustee. The
Declaration of Trust of Smith Barney Muni Funds further provides that Trustees
and officers will be indemnified for the expenses of litigation against them
unless it is determined that the person did not act in good faith in the
reasonable belief that the person's actions were in or not opposed to the best
interest of Smith Barney Muni Funds or the person's conduct is determined to
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of the person's duties.
Rights of Inspection. Shareholders of Smith Barney Muni Funds have the
same inspection rights as are permitted shareholders of a Massachusetts
corporation under Massachusetts corporate law. Currently, each shareholder of
a Massachusetts corporation is permitted to inspect the records, accounts and
books of a corporation for any legitimate business purpose.
Shareholder Liability. Under Massachusetts law, shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable for the obligations of such Massachusetts business trust.
Smith Barney Muni Funds' Declaration of Trust, however, disclaims shareholder
liability for acts or obligations of Smith Barney Muni Funds and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Fund. Smith Barney Muni Fund's Declaration of
Trust also provides for indemnification out of the property of Smith Barney
Muni Funds for all losses and expenses of any shareholder held personally
liable for the obligations of the Fund. Shares of the National Portfolio
issued to the shareholders of the Ohio Portfolio in 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 the National and Ohio Portfolios. The foregoing is not a
complete description of the documents cited. Shareholders should refer to the
provisions of the trust documents and Massachusetts law governing the
Portfolios for a more thorough description.
.
ADDITIONAL INFORMATION ABOUT
THE NATIONAL PORTFOLIO
AND THE OHIO PORTFOLIO
The Ohio Portfolio. Information about the Ohio Portfolio is
incorporated herein by reference from its current Prospectus dated July 1,
1996, a copy of which is enclosed herewith, and in the Statement of Additional
Information dated July 1, 1996 as amended July 29, 1996, which has been filed
with the SEC. A copy of such Statement of Additional Information is available
upon request and without charge by writing to Smith Barney Muni Funds on
behalf of the Ohio Portfolio at 388 Greenwich Street, New York, New York 10013
or by calling (800) 224-7523.
The National Portfolio. Information concerning the operation and
management of the National Portfolio is incorporated herein by reference from
its current Prospectus dated July 1, 1996, a copy of which is enclosed
herewith, and the Statement of Additional Information dated July 1, 1996 as
amended July 29, 1996, which has been filed with the SEC. A copy of such
Statement of Additional Information is available upon request and without
charge by writing to Smith Barney Muni Funds on behalf of the National
Portfolio at 388 Greenwich Street, New York, New York 10013 or by calling
(800) 224-7523.
Both the National Portfolio and the Ohio Portfolio are subject to the
informational requirements of the Exchange Act and in accordance therewith
file reports and other information including proxy material, reports and
charter documents with the SEC. These reports can be inspected and copies
obtained at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the New York Regional Office of
the SEC, 75 Park Place, New York, New York 10007. Copies of such material can
also be obtained from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, Washington, D.C. 20549 at prescribed rates.
OTHER BUSINESS
The Trustees of Smith Barney Muni Funds do not intend to present any
other business at the Meeting. If, however, any other matters are properly
brought before the Meeting, the persons named in the accompanying form of
proxy will vote thereon in accordance with their judgment.
VOTING INFORMATION
This Prospectus/Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of Trustees of the Fund to be used at the
Special Meeting of Shareholders to be held at 2:00 p.m. New York City time on
January 10, 1997, at 388 Greenwich Street, New York, New York 10013 and at any
adjournments thereof. This Prospectus/Proxy Statement, along with a Notice of
the Meeting and a proxy card, is first being mailed to shareholders of the
Ohio Portfolio on or about November 30, 1996. Only shareholders of record as
of the close of business on the Record Date will be entitled to notice of, and
to vote at, the Meeting or any adjournment thereof. The holders of one-third
of the shares of the Ohio Portfolio issued and outstanding and entitled to
vote at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting. For purposes of
determining a quorum for transacting business at the Meeting, abstentions and
broker "non-votes" (that is, proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which
the brokers or nominees do not have discretionary power) will be treated as
shares that are present but which have not been voted. For this reason,
abstentions and broker "non-votes" will have the effect of a "no" vote for
purposes of obtaining the requisite approval of the Plan. If the enclosed
form of proxy is properly executed and returned in time to be voted at the
Meeting, the proxies named therein will vote the shares represented by the
proxy in accordance with the instructions marked thereon. Unmarked proxies
will be voted FOR the proposed Reorganization and FOR any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of Smith Barney Muni Funds, 388 Greenwich
Street, New York, New York 10013. Unless revoked, all valid proxies will be
voted in accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Reorganization contemplated
thereby.
Pursuant to the Fund's restated Declaration of Trust, approval of the
Reorganization will require the affirmative vote of a majority of the shares
of the Ohio Portfolio represented in person or by proxy and entitled to vote
at a meeting of shareholders at which a quorum is present, as determined in
accordance with the By-Laws. According to the By-Laws, the presence in person
or by proxy of the holders of record of one-third of the shares of the of the
Ohio Portfolio, issued and outstanding and entitled to vote shall constitute a
quorum at share holder meetings, For purposes of voting , with respect to the
Reorganization , the Class A, Class B, Class C and Class Y, shares ,if any, of
the Ohio Portfolio shall vote together as a single class. Shareholders of the
Ohio Portfolio are entitled to one vote for one share. Fractional shares are
entitled to proportional voting rights.
Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal interviews
conducted by officers or employees of Smith Barney and its affiliates and/or
by First Data, the transfer agent of the Fund. In addition, Applied Mailing
Systems, Inc., an affiliate of the transfer agent ("Applied Mailing") or an
agent of Applied Mailing, may call shareholders of the Ohio Portfolio to ask
if they would be willing to have their votes recorded by telephone. The
telephone voting procedure is designed to authenticate the shareholder's
identity by asking the shareholder to provide his social security number, in
the case of an individual, or a taxpayer identification number, in the case of
an entity. The shareholder's telephone vote will be recorded and a
confirmation will be sent to the shareholder to ensure that the vote has been
taken in accordance with the shareholder's instructions. Shareholders voting
by telephone may vote for or against each proposal separately. Although a
shareholder's vote may be taken by telephone, each shareholder will receive a
copy of this Prospectus/Proxy Statement and may vote by mail using the
enclosed proxy card. The Fund has been advised that this telephonic voting
system will comply with Massachusetts state law. The aggregate cost of
solicitation of the shareholders of the Ohio Portfolio is expected to be
approximately [ ].Expenses of the Reorganization, including the costs of
proxy solicitation, the preparation of this Prospectus/Proxy Statement and
enclosures attached hereto and reimbursement of expenses for forwarding
solicitation material to beneficial owners of shares of the Ohio Prospectus
will be borne by the[ National and Ohio Portfolio in proportion to their
assets.]
In the event that sufficient votes to approve the Reorganization are not
received by, January 10, 1997, the persons named as proxies may propose one or
more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares present in person or by proxy and entitled
to vote at the Meeting. The persons named as proxies will vote upon such
adjournment after consideration of the best interests of all shareholders.
The votes of the shareholders of the National Portfolio are not being
solicited by this Prospectus/Proxy Statement.
FINANCIAL STATEMENTS AND EXPERTS
The statements of assets and liabilities, including the schedules of
investments, of the Ohio Portfolio and the National Portfolio as of March 31,
1996, and the related statements of operations, for the year then ended,
changes in net assets for each of the years in the two-year period then ended
and financial highlights for each of the years in the five-year period then
ended, have been incorporated by reference into the Statement of Additional
Information relating to this Prospectus/Proxy Statement in reliance on the
report of KPMG Peat Marwick LLP, independent auditors for the Ohio Portfolio
and the National Portfolio, given on the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
National Portfolio will be passed upon by Sullivan & Cromwell, 125 Broad
Street, New York, NY 10004. In rendering such opinion, Sullivan & Cromwell
may rely on an opinion of Goodwin, Procter & Hoar as to certain matters under
Massachusetts law.
THE BOARD OF TRUSTEES OF THE FUND, INCLUDING THE "NON-INTERESTED"
TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN, AND ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE
VOTED IN FAVOR OF APPROVAL OF THE PLAN.
EXHIBIT A
PLAN OF REORGANIZATION
THIS PLAN OF REORGANIZATION (the "Plan") is adopted as of this [ ]the
day of [ ], 1996, by Smith Barney Muni Funds ("Smith Barney Muni
Funds"), a Massachusetts business trust with its principal place of business
at 388 Greenwich Street, New York, New York 10013, on behalf of the National
Portfolio (the "Acquiring Fund") and the Ohio Portfolio (the "Acquired Fund").
This Plan is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United
States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of the transfer of all or
substantially all of the assets of the Acquired Fund in exchange for Class A,
Class B, Class C and Class Y shares of beneficial interest of the Acquiring
Fund (collectively, the "Acquiring Fund Shares" and each, an "Acquiring Fund
Share") and the assumption by the Acquiring Fund of certain scheduled
liabilities of the Acquired Fund and the distribution, after the Closing Date
herein referred to, of Acquiring Fund Shares to the shareholders of the
Acquired Fund in liquidation of the Acquired Fund and the termination of the
Acquired Fund, all upon the terms and conditions hereinafter set forth in this
Plan.
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR THE ACQUIRING FUND
SHARES AND ASSUMPTION OF THE ACQUIRED FUND'S SCHEDULED LIABILITIES AND
LIQUIDATION AND TERMINATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth, the Acquired
Fund agrees to transfer its assets as set forth in paragraph 1.2 to the
Acquiring Fund, and the Acquiring Fund agrees in exchange therefor: (i) to
deliver to the Acquired Fund the number of Class A Acquiring Fund Shares,
including fractional Class A Acquiring Fund Shares, determined by dividing the
value of the Acquired Fund's net assets attributable to its Class A shares,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one Class A, Acquiring Fund Share, computed in the
manner and as of the time and date set forth in paragraph 2.2 (ii) to deliver
to the Acquired Fund the number of Class B Acquiring Fund Shares, including
fractional Class B Acquiring Fund Shares, determined by dividing the value of
the Acquired Fund's net assets attributable to its Class B shares, computed in
the manner and as of the time and date set forth in paragraph 2.1, by the net
asset value of one Class B Acquiring Fund Share, computed in the manner and as
of the time and date set forth in paragraph 2.2; (iii) to deliver to the
Acquired Fund the number of Class C Acquiring Fund Shares, including
fractional Class C Acquiring Fund Shares, determined by dividing the value of
the Acquired Fund's net assets attributable to its Class C shares, computed in
the manner and as of the time and date set forth in paragraph 2.1, by the net
asset value of one Class C Acquiring Fund Share, computed in the manner and as
of the time and date set forth in paragraph 2.2; and (iv) to deliver to the
Acquired Fund the number of Class Y Acquiring Fund Shares, including
fractional Class Y Acquiring Fund Shares, determined by dividing the value of
the Acquired Fund's net assets attributable to its Class Y shares computed in
the manner and as of the time and date set forth in paragraph 2.1, by the net
asset value of one Class Y Acquiring Fund Share, computed in the manner and as
of the time and date set forth in paragraph 2.2.; and (iv) to assume certain
scheduled liabilities of the Acquired Fund, as set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in paragraph
3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring
Fund shall consist of all or substantially all of its property, including,
without limitation, all cash, securities and dividends or interest receivables
which are owned by the Acquired Fund and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Fund on the closing date
provided in paragraph 3.1 (the "Closing Date").
1.3. The Acquired Fund will endeavor to discharge all its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund
shall assume all liabilities, expenses, costs, charges and reserves reflected
on an unaudited Statement of Assets and Liabilities of the Acquired Fund as of
the Valuation Date (as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the prior audited
period. The Acquiring Fund shall assume only those liabilities of the
Acquired Fund reflected in that unaudited Statement of Assets and Liabilities
and shall not assume any other liabilities, whether absolute or contingent,
not reflected thereon.
1.4. As provided in paragraph 3.3, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Acquired Fund will
liquidate and distribute pro rata to the Acquired Fund's shareholders of
record determined as of the close of business on the Closing Date (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares it receives pursuant
to paragraph 1.1. Shareholders of Class A, Class B, Class C and Class Y
shares of the Acquired Fund shall receive Class A, Class B, Class C and Class
Y shares, respectively, of the Acquiring Fund. Such liquidation and
distribution will be accomplished by the transfer of the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund's shareholders and representing the respective
pro rata number of the Acquiring Fund Shares due such shareholders. All
issued and outstanding shares of the Acquired Fund will simultaneously be
canceled on the books of the Acquired Fund, although share certificates
representing interests in the Acquired Fund will represent a number of
Acquiring Fund Shares after the Closing Date as determined in accordance with
paragraph 1.1. The Acquiring Fund shall not issue certificates representing
the Acquiring Fund Shares in connection with such exchange.
1.5. Ownership of Acquiring Fund Shares will be shown on the books of
the Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in
the manner described in the Acquiring Fund's current prospectus and statement
of additional information.
1.6. Any transfer taxes payable upon issuance of the Acquiring Fund
Shares in a name other than the registered holder of the Acquired Fund Shares
on the books of the Acquired Fund as of that time shall, as a condition of
such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.7. The Acquired Fund shall, following the Closing Date and the making
of all distributions pursuant to paragraph 1.4, be terminated under the laws
of the Commonwealth of Massachusetts and in accordance with its governing
documents.
2. VALUATION
2.1. The value of the Acquired Fund's assets to be acquired by the
Acquiring Fund hereunder shall be the value of such assets computed as of the
close of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
the Closing Date (such time and date being hereinafter called the "Valuation
Date"), using the valuation procedures set forth in the Acquiring Fund's then
current prospectus or statement of additional information.
2.2. The net asset value of Acquiring Fund Shares shall be the net
asset value per share computed as of the close of regular trading on the NYSE
on the Valuation Date, using the valuation procedures set forth in the
Acquiring Fund's then current prospectus or statement of additional
information.
2.3. All computations of value shall be made by Smith Barney Mutual
Funds Management Inc. in accordance with its regular practice as pricing agent
for the Acquired Fund and the Acquiring Fund, respectively.
3. CLOSING AND CLOSING DATE
3.1. The Closing Date shall be January 17, 1997, or such later date as
the Acquired Fund and the Acquiring Fund may adopt by resolution of Smith
Barney Muni Funds' Board of Trustees. All acts taking place at the Closing
shall be deemed to take place simultaneously as of the close of business on
the Closing Date unless otherwise provided. The Closing shall be held as of
5:00 p.m. at the offices of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013, or at such other time and/or place as Smith Barney Muni Funds
may adopt by resolution of its Board of Trustees.
3.2. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the Acquiring Fund or the
Acquired Fund shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
shall be disrupted so that accurate appraisal of the value of the net assets
of the Acquiring Fund or the Acquired Fund is impracticable, the Closing Date
shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.3. The Acquired Fund shall deliver at the Closing a list of the names
and addresses of the Acquired Fund's shareholders and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited to the
Acquired Fund's account on the Closing Date.
3.4. The Closing is contingent upon receipt by Smith Barney Muni Funds
of a favorable opinion of Sullivan & Cromwell, addressed to Smith Barney Muni
Funds and satisfactory to Christina T. Sydor, Esq., as Secretary of Smith
Barney Muni Funds, based upon certain assumptions by counsel and certain
representations by the Acquiring Fund and the Acquired Fund substantially to
the effect that for federal income tax purposes:
(a) the transfer of all or substantially all of the Acquired Fund's
assets in exchange for the Acquiring Fund Shares and the assumption by
the Acquiring Fund of certain scheduled liabilities of the Acquired Fund
will constitute a "reorganization" within the meaning of Section
368(a)(1)(C) of the Code, and the Acquiring Fund and the Acquired Fund
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
Acquiring Fund upon the receipt of the assets of the Acquired Fund in
exchange for the Acquiring Fund Shares and the assumption by the
Acquiring Fund of certain scheduled liabilities of the Acquired Fund;
(c) no gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption by the Acquiring Fund
of certain scheduled liabilities of the Acquired Fund or upon the
distribution (whether actual or constructive) of the Acquiring Fund
Shares to the Acquired Fund's shareholders; (d) no gain or loss will be
recognized by shareholders of the Acquired Fund upon the exchange of
their Acquired Fund shares for the Acquiring Fund Shares and the
assumption by the Acquiring Fund of certain scheduled liabilities of the
Acquired Fund; (e) the aggregate tax basis for the Acquiring Fund Shares
to be received by each of the Acquired Fund's shareholders pursuant to
the Reorganization will be the same as the aggregate tax basis of the
Acquired Fund shares held by such shareholder immediately prior to the
Reorganization, and the holding period of the Acquiring Fund Shares to
be received by each Acquired Fund shareholder will include the period
during which the Acquired Fund shares exchanged therefor were held by
such shareholder (provided that the Acquired Fund shares were held as
capital assets on the date of the Reorganization); and (f) the tax basis
of the Acquired Fund's assets to be acquired by the Acquiring Fund will
be the same as the tax basis of such assets to the Acquired Fund
immediately prior to the Reorganization, and the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired
Fund.
4. BROKERAGE FEES AND EXPENSES
4.1. No brokers or finders will be entitled to receive any payments in
connection with the transactions provided for herein.
4.2. Except as may be otherwise provided herein,[ the Acquiring Fund
and the Acquired Fund] shall each be liable, in proportion to their assets,
for the expenses incurred in connection with entering into and carrying out
the provisions of this Plan, including the expenses of: (i) counsel and
independent accountants associated with the Reorganization; (ii) printing and
mailing the Prospectus/Proxy Statement and soliciting proxies in connection
with the meeting of shareholders of the Acquired Fund; (iii) any special
pricing fees associated with the valuation of the Acquired Fund's or the
Acquiring Fund's portfolio on the Closing Date; (iv) expenses associated with
preparing this Plan and preparing and filing the Registration Statement under
the 1933 Act covering the Acquiring Fund Shares to be issued in the
Reorganization; (v) registration or qualification fees and expenses of
preparing and filing such forms, if any, necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in
connection with the Reorganization. The Acquired Fund shall be liable for:
(i) all fees and expenses related to the liquidation and termination of the
Acquired Fund; and (ii) fees and expenses of the Acquired Fund's custodian and
transfer agent incurred in connection with the Reorganization. The Acquiring
Fund shall be liable for any fees and expenses of the Acquiring Fund's
custodian and transfer agent incurred in connection with the Reorganization.
Consistent with the provisions of paragraph 1.3, the Acquired
Fund, prior to the Closing, shall pay for or include in the unaudited
Statement of Assets and Liabilities prepared pursuant to paragraph 1.3 all of
its known and reasonably estimated expenses associated with the transactions
contemplated by this Plan.
5. TERMINATION
5.1. This Plan and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of Smith
Barney Muni Funds, at any time prior to the Closing Date if circumstances
should develop that, in the opinion of the Board, make proceeding with the
Plan inadvisable
5.2. In the event of any such termination, the Acquired Fund and the
Acquiring Fund shall each bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 4.
6. GOVERNING LAW
This Plan shall be governed by and construed in accordance with the laws
of the State of New York.
STATEMENT OF ADDITIONAL INFORMATION DATED,[ ], 1996
Acquisition Of The Assets Of
OHIO PORTFOLIO
a separate investment portfolio of
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York 10013
(800) 224-7523
By And In Exchange For Class A, Class B, Class C and Class Y
Shares Of
NATIONAL PORTFOLIO
a separate investment portfolio of
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York
10013
(800) 224-7523
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets of the Ohio
Portfolio (the "Acquired Fund") to the National Portfolio (the "Acquiring
Fund") in exchange for Class A, Class B, Class C and Class Y shares of the
Acquiring Fund and the assumption by the Acquiring Fund of certain scheduled
liabilities of the Acquired Fund, consists of this cover page and the
following described documents, each of which accompanies this Statement of
Additional Information and is incorporated herein by reference.
1. Statement of Additional Information of Smith Barney Muni Funds dated
July 1, 1996 as amended July 29, 1996.
2. Annual Report of Smith Barney Muni Funds, National Portfolio for the
fiscal year ended March 31, 1996.
3. Annual Report of Smith Barney Muni Funds, Ohio Portfolio for the
fiscal year ended March 31, 1996.
This Statement of Additional Information is not a prospectus. A
Prospectus/Proxy Statement, dated [ _______] , 1996, relating to the above-
referenced matter may be obtained without charge by calling or writing either
the Acquiring Fund or the Acquired Fund at the telephone numbers or addresses
set forth above or by contacting any Smith Barney Financial Consultant or by
calling toll-free 1-800-224-7523. This Statement of Additional Information
should be read in conjunction with the Prospectus/Proxy Statement dated
[______], 1996.
The date of this Statement of Additional Information is[_____] , 1996
PROSPECTUS OF SMITH BARNEY MUNI FUNDS--NATIONAL PORTFOLIO DATED JULY 1,1996 -
.-IS INCORPORATED BY REFERENCE TO POST EFFECTIVE AMENDMENT NO.37
TO THE SMITH BARNEY MUNI FUNDS REGISTRATION STATEMENT ON FORM N1-A FILED ON
JULY 1, 1996. REFERENCE NOS. 2-99861 AND 811-4395.
ACCESSION NUMBER: 91155-96-253
STATEMENT OF ADDITIONAL INFORMATION OF SMITH BARNEY MUNI FUNDS DATED JULY 1,
1996 AS AMENDED JULY 29,1996 --IS INCORPORATED BY REFERENCE TO POST EFFECTIVE
AMENDMENT NO.38 TO THE SMITH BARNEY MUNI FUNDS REGISTRATION STATEMENT ON
FORM N-1A FILED ON July 26, 1996.
ACCESSION NUMBER: 91155-96-291
Annual Report of Smith Barney Muni Funds --National Portfolios for the fiscal
year ended March 31, 1996.
ACCESSION NUMBER: 91155-96-223
Annual Report of Smith Barney Muni Funds Ohio Portfolio for the fiscal year
ended March 31, 1996.
ACCESSION NUMBER: 91155-96-223
PART C
OTHER INFORMATION
Item 15. Indemnification
The response to this item is incorporated by reference to
"Liability of Trustees" under the caption "Comparative Information
on Shareholder's Rights" in Part A of this Registration Statement.
Item 16. Exhibits
(1) (a) Restated Declaration of Trust dated as of January 29,
1986 is incorporated herein by reference to
Exhibit 1 to Pre-Effective Amendment No. 1 to
the Registration Statement No. 2-99861.
(b) Instrument of the Trustees Establishing and Designating
Classes of shares of Certain Series of the Trust is
incorporated herein by reference to Exhibit 1(b) to
Post-Effective Amendment No. 24.
(2) Bylaws of the Trust are incorporated by reference to Exhibit
2 to Pre-Effective Amendment No. 2.
(3) Not applicable.
(4) Plan of Reorganization (included as Exhibit A to
Registrant's Prospectus/Proxy Statement contained in Part A of
this Registration Statement).*
(5) Not applicable.
(6) Management Agreement between The National Portfolio and
Mutual Management Corp. is incorporated by reference to Exhibit
5(c) to Post-Effective Amendment No. 18 to the registration
statement.
(7) Distribution Agreement between Smith Barney Muni Funds and
Smith Barney, Harris Upham & Co. Incorporated is incorporated by
reference to Exhibit 6 to Post-Effective Amendment No. 7 to the
registration statement.
(8) Not Applicable
(9) Custodian Agreement between Smith Barney Muni Funds and
Provident National Bank is incorporated by reference to Exhibit 8
to Pre-Effective Amendment No. 1 to the Registration Statement.*
(10) Rule 12b-1 Plan.*
(11) (a) Opinion and consent of Sullivan & Cromwell with respect
to validity of shares.**
(11) (b) Opinion and consent of Goodwin, Procter & Hoar.,
special Massachusetts counsel with respect to Certain matters
under Massachusetts law.**
(12) Opinion and consent of Sullivan & Cromwell with respect to
tax matters.**
(13) Not Applicable
(14) Consent of KPMG Peat Marwick L.L.P.**
(15) Not Applicable.
(16) Not Applicable.
(17) (a) Form of Proxy Card (filed herewith).
(17) (b) Registrant's Declaration pursuant to Rule 24f-2 is
incorporated by reference to its
initial Registration Statement.*
*Incorporated by reference to Registrant's Registration Statement on Form N-
1A (the "Registration Statement") as filed with the Securities and Exchange
Commission on (File Nos. 2-99861 and 811-4395
**To be filed by amendment
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information called for by the
applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2)The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new registration statement
for the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registration
Statement has been signed on behalf of the Registrant, in the City of New York
and State of New York on the 24 th day of September 1996.
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, SMITH BARNEY MUNI FUNDS,
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, State of
New York on the 24th day of September, 1996
SMITH BARNEY MUNI FUNDS
By: \s\ Heath B. McLendon
Heath B. McLendon
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Heath B. McLendon, Christina T. Sydor and Robert M.
Nelson , and each and any one of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SMITH BARNEY MUNI FUNDS
By: \s\ Heath B. McLendon
Chairman of the Board,
and Chief Executive Officer
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
\s\ Heath B. McLendon Chairman of the Board, September 24, 1996
Heath B. McLendon (Chief Executive Officer)
\s\ Jessica Bibliowicz President and Trustee September 24, 1996
Jessica Bibliowicz
\s\ Lewis E. Daidone Senior Vice President and September 24, 1996
Lewis E. Daidone Treasurer (Chief Financial and
Accounting Officer)
Donald R. Foley Trustee September 24, 1996
Donald R. Foley
Paul Hardin Trustee September 24, 1996
Paul Hardin
Francis P. Martin Trustee September 24, 1996
Francis P. Martin
Roderick C. Rasmussen Trustee September 24, 1996
Roderick C. Rasmussen
John P. Toolan Trustee September 24, 1996
John P. Toolan
C. Richard Youngdahl Trustee September 24, 1996
C. Richard Youngdahl
FORM OF PROXY CARD
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
.....................................................................
...................................................................
..........................................................................
SMITH BARNEY MUNI FUNDS - OHIO PORTFOLIO
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of Smith Barney Muni Funds - Ohio Portfolio
(the "Ohio Portfolio") , hereby appoints Heath B. McLendon, Lewis E. Daidone
and Christina T. Sydor, attorneys and proxies for the undersigned with full
powers of substitution and revocation, to represent the undersigned and to
vote on behalf of the undersigned all shares of the Ohio Portfolio that the
undersigned is entitled to vote at the Special Meeting of
Shareholders of the Ohio Portfolio to be held at the offices of the Ohio
Portfolio, 388 Greenwich Street, New York, New York on January 10, 1997 at
2:00 p.m. and any adjournment or adjournments thereof. The undersigned
hereby acknowledges receipt of the Notice of Special Meeting and Prospectus /
Proxy Statement dated [ ] , 1996 and hereby instructs
said attorneys and proxies to vote said shares as indicated herein. In their
discretion, the proxies are authorized to vote upon such other business as
may properly come before the Special Meeting. A majority of the proxies
present and acting at the Special Meeting
in person or by substitute (or, if only one shall be so present, then
that one) shall have and may exercise all of the power and authority of
said proxies hereunder. The undersigned hereby revokes any proxy previously
given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If
joint owners, EITHER may sign this Proxy. When signing as
attorney, executor, administrator, trustee, guardian or corporate
officer, please give your full title.
Date:
Signature(s) (Title(s), if
applicable)
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
......................................................................
.....................................................................
..........................................................................
Please indicate your vote by an "X" in the appropriate box below. This proxy,
if properly
executed, will be voted in the manner directed by the undersigned shareholder.
IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
1. To approve the Plan of Reorganization FOR AGAINST ABSTAIN
dated as of [______]_, 1996 providing for:(i) the acquisition of all or
substantially all of the assets of Smith Barney Muni Funds-Ohio Portfolio (the
"Ohio Portfolio") by Smith Barney Muni Funds - National Portfolio
(the "National Portfolio") in exchange for Class A, Class B, Class C and
Class Y shares of the National Portfolio and the assumption by the National
Portfolio of certain scheduled liabilities of the Ohio Portfolio;
(ii) the distribution of such shares
of the National Portfolio to shareholders of the Ohio Portfolio in liquidation
of the Ohio Portfolio; and (iii) the subsequent termination of the Ohio
Portfolio.
