<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1999.
SECURITIES ACT FILE NO. 333-[INSERT]
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. [_]
SMITH BARNEY MUNI FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
388 Greenwich Street, New York, New York 10013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 816-6474
(REGISTRANT'S AREA CODE AND TELEPHONE NUMBER)
CHRISTINA T. SYDOR, ESQ.
Smith Barney Muni Funds
388 Greenwich Street,
New York, New York 10013
(NAME AND ADDRESS OF AGENT FOR SERVICE)
WITH COPIES TO:
BURTON M. LEIBERT, ESQ. DAVID M. CARTER, ESQ.
Willkie Farr & Gallagher Hunton & Williams
787 Seventh Avenue 600 Peachtree Street, N.E., Suite 4100
New York, NY 10019-6099 Atlanta, Georgia 30308-2216
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: Registrant proposes that the
Registration Statement become effective on November 12, 1999 pursuant to Rule
488 under the Securities Act of 1933, as amended.
TITLE OF SECURITIES BEING REGISTERED:
Shares of Beneficial Interest ($.001 par value) of the Georgia Portfolio, a
Series of the Registrant
___________________
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940, as amended; accordingly, no fee is payable herewith because of
reliance upon Section 24(f).
- --------------------------------------------------------------------------------
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
[INSERT], 1999
ALTERMAN INVESTMENT FUND, INC.
IMPORTANT NEWS
FOR ALTERMAN SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement/Prospectus, here's a brief overview of some matters affecting your
Fund that will be the subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: You are being asked to vote on an Agreement and Plan of Reorganization
whereby all or substantially all of the assets of Alterman Investment Fund,
Inc., a closed-end diversified management investment company ("Alterman" or
the "Fund"), would be transferred in a tax-free reorganization to the
Georgia Portfolio (the "Georgia Portfolio," the "Portfolio" and collectively
with Alterman, the "Funds"), an open-end non-diversified series of Smith
Barney Muni Funds ("Muni Funds"), in exchange for Class A shares of
beneficial interest of the Georgia Portfolio. If the Agreement and Plan of
Reorganization is approved and consummated, you would no longer be a
shareholder of Alterman, but would become a shareholder of the Georgia
Portfolio, which has similar investment objectives and policies to your
Fund, except as described in the Proxy Statement/Prospectus.
Q: WHAT ARE THE BENEFITS OF THE PROPOSED REORGANIZATION?
A: The Board members of Alterman believe that you may benefit from the proposed
reorganization, in part, because the Georgia Portfolio is an open-end fund
providing its shareholders with the opportunity to purchase, redeem and
exchange shares of the Georgia Portfolio at net asset value on any business
day subject only to the various limitations set forth in its prospectus and
in certain instances to the payment of a sales charge. Currently, the shares
of Alterman held by its shareholders are not liquid, and Alterman
shareholders may not purchase, redeem or exchange Alterman shares. The
Georgia Portfolio may also offer the opportunity for higher annual income
and total return and for lower fees and expenses than Alterman. The proposed
reorganization also provides Alterman shareholders with the opportunity of
benefiting from the investment management expertise of SSBC Fund Management,
Inc. ("SSBC"). The following pages give you additional information on the
proposed reorganization on which you are being asked to vote.
<PAGE>
Q: WHO IS SSBC?
A: Unlike your Fund, which is managed by SunTrust Bank, the Georgia Portfolio
is managed by SSBC, an affiliate of Salomon Smith Barney Inc. ("Salomon
Smith Barney"). SSBC, an affiliate of Salomon Smith Barney, is a subsidiary
of Citigroup Inc. As of June 30, 1999, SSB Citi Asset Management Group,
which is comprised of Citigroup Inc.'s primary asset management business
platforms, has assets under management of approximately $347 billion. SSB
Citi Asset Management Group has a strong product balance among equities,
fixed income and liquidity products. SSB Citi Asset Management Group has
investment centers in the United States, Europe, Japan, Latin America, Asia
Pacific and Australia and has global research centers in New York, London,
Tokyo, Singapore and Melbourne. Citigroup businesses produce a broad range
of financial services -- asset management, banking and consumer finance,
credit and charge cards, insurance, investments, investment banking and
trading -- and use diverse channels to make them available to consumer and
corporate customers around the world.
Q: HOW DO THE BOARD MEMBERS OF ALTERMAN RECOMMEND THAT I VOTE?
A: AFTER CAREFUL CONSIDERATION, THE BOARD MEMBERS OF ALTERMAN, INCLUDING THOSE
WHO ARE NOT AFFILIATED WITH ALTERMAN, RECOMMEND THAT YOU VOTE FOR THE
PROPOSED REORGANIZATION ON THE ENCLOSED PROXY CARD(S).
Q: WILL ALTERMAN PAY FOR THIS PROXY SOLICITATION?
A: Salomon Smith Barney will bear a majority of these costs, although
Alterman may also bear some portion of these expenses.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call Kusiel (Sonny) Kaplan at (800) 861-1844.
2
<PAGE>
ALTERMAN INVESTMENT FUND, INC.
182 Hilderbrand Drive, Suite 102
Atlanta, Georgia 30328
[INSERT], 1999
Dear Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of Alterman Investment Fund, Inc. ("Alterman" or "Fund") which will be held on
[INSERT], 1999, at [11:00 a.m.], at Alterman's offices at 182 Hilderbrand Drive,
Suite 102, Atlanta, Georgia 30328.
You are being asked to vote on an Agreement and Plan of Reorganization
whereby all or substantially all of the assets of Alterman would be transferred
in a tax-free reorganization to the Georgia Portfolio (the "Georgia Portfolio,"
the "Portfolio" and collectively with Alterman, the "Funds"), an open-end non-
diversified series of Smith Barney Muni Funds ("Muni Funds"), in exchange for
Class A shares of beneficial interest of the Georgia Portfolio. If the
Agreement and Plan of Reorganization is approved and consummated, you would no
longer be a shareholder of Alterman, but would become a shareholder of the
Georgia Portfolio, which is managed by SSBC Fund Management, Inc. ("SSBC") and
has similar investment objectives and policies to your Fund, except as described
in the Proxy Statement/Prospectus. Unlike your Fund, the Georgia Portfolio
provides its shareholders with the opportunity to purchase, redeem and exchange
shares of the Georgia Portfolio at net asset value on any business day subject
only to the various limitations set forth in its prospectus and in certain
instances to the payment of a sales charge. Of course, there would be no sales
charges assessed on the issuance of Georgia Portfolio shares as part of the
proposed Reorganization.
Other business of the meeting will be (i) to elect five directors to hold
office until the next annual meeting of stockholders, (ii) to ratify the
selection by the board of directors of Alterman of Birnbrey, Minsk & Minsk LLC
as auditors of Alterman for fiscal 2000 and (iii) to transact such other
business as may come before the meeting.
After careful review, the members of Alterman's board have approved the
proposed reorganization and the other proposals to be considered at the Annual
Meeting. The board members of Alterman believe that the proposals set forth in
the notice of meeting for Alterman are important and recommend that you read the
enclosed materials carefully and then vote for each of the proposals.
<PAGE>
Your vote is important. Please take a moment now to sign and return your
proxy card(s) in the enclosed postage-paid return envelope. For more
information, please call Kusiel (Sonny) Kaplan at (800) 861-1844.
Respectfully,
/s/ Paul Alterman
Paul Alterman
President
Alterman Investment Fund, Inc.
We urge you to sign and return your proxy card(s) in the enclosed postage-paid
envelope to ensure a quorum at the meeting. Your vote is important regardless of
the number of shares you own.
2
<PAGE>
ALTERMAN INVESTMENT FUND, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Please take notice that an Annual Meeting of Shareholders (the "Annual
Meeting") of Alterman Investment Fund, Inc. will be held at the offices of
Alterman Investment Fund, Inc., 182 Hilderbrand Drive, Suite 102, Atlanta,
Georgia 30328, on [INSERT], 1999, at [11:00 a.m.], Eastern time, for the
following purposes:
PROPOSAL 1: To approve an Agreement and Plan of Reorganization for
the Fund pursuant to which the Fund shall transfer all or
substantially all of its assets and all of its stated
liabilities, in exchange for issued and outstanding Class
A voting shares of the Georgia Portfolio of Smith Barney
Muni Funds and the Fund shall liquidate and distribute
pro rata to its shareholders the Georgia Portfolio Shares
received from the Georgia Portfolio, terminate as a
closed-end management investment company under the
Investment Company Act of 1940, as amended, and then
dissolve as a corporation under Delaware law.
PROPOSAL 2: To elect five (5) directors to hold office until the next
annual meeting of stockholders and until their successors
shall be elected and shall qualify, as shown in the
enclosed Proxy Statement.
PROPOSAL 3: To ratify or reject the selection by the Board of
Directors of Birnbrey, Minsk & Minsk LLC as auditors of
the Fund for fiscal 2000.
PROPOSAL 4: To transact such other business as may properly come
before the meeting or any adjournment(s) thereof.
The appointed proxies will vote in their discretion on any other business
as may properly come before the Annual Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on
[INSERT], 1999 are entitled to vote at the Annual Meeting and at any
adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Annual Meeting, the
persons named as proxies may propose one or more adjournments of the Annual
Meeting in accordance with applicable law to permit further solicitation of
proxies. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Fund's shares present in person or by proxy
at
<PAGE>
the Annual Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of the
Proposal and will vote against any such adjournment those proxies to be voted
against the Proposal. For more information, please call Kusiel (Sonny) Kaplan at
(800) 861-1844.
By Order of the Board of Directors
/s/ C.H. Shepherd
C.H. Shepherd
Secretary
[INSERT], 1999
Important -- we urge you to sign and date the enclosed proxy card(s) and return
it in the enclosed addressed envelope which requires no postage and is intended
for your convenience. Your prompt return of the enclosed proxy card(s) may save
the necessity and expense of further solicitations to ensure a quorum at the
annual meeting. If you can attend the annual meeting and wish to vote your
shares in person at that time, you will be able to do so.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROPOSAL 1: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION................ 5
SYNOPSIS.................................................................... 6
PRINCIPAL RISK FACTORS...................................................... 14
THE PROPOSED TRANSACTION.................................................... 19
ADDITIONAL INFORMATION ABOUT THE GEORGIA PORTFOLIO AND
ALTERMAN................................................................. 29
PROPOSAL 2: ELECTION OF DIRECTORS........................................... 30
PROPOSAL 3: SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS..................... 36
ADDITIONAL INFORMATION...................................................... 36
</TABLE>
i
<PAGE>
ADDITIONAL MATERIALS
The following additional materials, which have been incorporated by
reference into the Statement of Additional Information dated [INSERT], 1999
relating to this Combined Proxy Statement/Prospectus and the Reorganization,
will be sent to all shareholders of Alterman Investment Fund, Inc. requesting a
copy of such Statement of Additional Information.
The Statement of Additional Information for the Georgia Portfolio of Smith
Barney Muni Funds, dated July 29, 1999.
ii
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 13, 1999
PROXY STATEMENT/PROSPECTUS
[INSERT], 1999
RELATING TO THE ACQUISITION BY
THE GEORGIA PORTFOLIO ("GEORGIA PORTFOLIO"),
A SERIES OF SMITH BARNEY MUNI FUNDS ("MUNI FUNDS"),
388 Greenwich Street
New York, New York 10013
(212) 816-6474
OF THE ASSETS OF
ALTERMAN INVESTMENT FUND, INC. ("ALTERMAN"),
182 Hilderbrand Drive, Suite 102
Atlanta, Georgia 30328
(404) 237-9891
GENERAL
This Proxy Statement/Prospectus is furnished to shareholders of Alterman in
connection with Alterman's annual meeting on [INSERT], 1999. At the annual
meeting, one of the proposals to be considered is a proposed reorganization in
which all or substantially all of the assets of Alterman would be acquired by
the Georgia Portfolio, in exchange solely for Class A voting shares of
beneficial interest of the Georgia Portfolio and the assumption by the Georgia
Portfolio of all of the stated liabilities of Alterman (collectively, the
"Reorganization"). Shares of the Georgia Portfolio thereby received would then
be distributed to the shareholders of Alterman in complete liquidation of
Alterman. As a result of the Reorganization, each shareholder of Alterman would
receive that number of full and fractional shares of the Georgia Portfolio
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares of Alterman held as of the close of business on the
business day preceding the closing of the Reorganization. Shareholders of
Alterman are being asked to vote on an Agreement and Plan of Reorganization
pursuant to which such transactions, as described more fully below, would be
consummated.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely the information about the Georgia Portfolio that
a prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions
_______________________
The Securities and Exchange Commission has not approved or disapproved these
securities nor passed upon the accuracy or adequacy of this proxy
statement/prospectus. Any representation to the contrary is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this combined prospectus/proxy
statement and in the materials expressly incorporated herein by reference and,
if given or made, such other information or representations must not be relied
upon as having been authorized by the funds.
<PAGE>
and risks of the Georgia Portfolio, see the prospectus for the Georgia
Portfolio, dated July 29, 1999, as supplemented from time to time, which is
included herewith and incorporated herein by reference. This Proxy
Statement/Prospectus is also accompanied by the Georgia Portfolio's annual
report to shareholders for the year ended March 31, 1999. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of
Alterman, see the prospectus for Alterman, dated August 14, 1992, which is
incorporated herein by reference and a copy of which may be obtained without
charge by writing to Alterman, 182 Hilderbrand Drive, Suite 102, Atlanta,
Georgia 30328, or by calling at (800) 861-1844. A Statement of Additional
Information of Alterman and Muni Funds dated [INSERT], 1999 containing
additional information about the Reorganization and the parties thereto has been
filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") and is incorporated by reference into this Proxy
Statement/Prospectus. A copy of the Statement of Additional Information and
Alterman's annual report for the year ended April 30, 1999 are available upon
request and without charge by writing to or calling Alterman at the address or
phone number listed above. Shareholder inquiries regarding Alterman or the
Georgia Portfolio may also be made by calling the phone number listed above. The
information contained herein concerning Alterman has been provided by, and is
included herein in reliance upon, Alterman. The information contained herein
concerning the Georgia Portfolio has been provided by, and is included herein in
reliance upon, the Georgia Portfolio.
The Georgia Portfolio is a non-diversified series of Muni Funds, an open-
end management investment company organized as a Massachusetts business trust.
Alterman is a diversified closed-end management investment company organized as
a Delaware corporation. The principal investment objective of the Georgia
Portfolio is to pay its shareholders as high a level of income exempt from
Federal income taxes and Georgia personal income taxes as is consistent with
prudent investing. The principal investment objective of Alterman is to receive
current income, capital appreciation being a minor objective (not more than 25%
of Alterman's total assets will be invested for the primary purpose of capital
appreciation). Although not a part of its stated investment objective, Alterman
has also sought investments in securities with income exempt from Federal income
tax and Georgia personal income tax.
_______________________
In the descriptions of the Proposal regarding the Reorganization below, the
word "fund" is sometimes used to mean investment companies or series thereof in
general, and not Alterman whose proxy statement this is. In addition, in this
Proxy Statement/ Prospectus, for simplicity, actions are described as being
taken by the Georgia Portfolio, although the actions are actually taken by Muni
Funds on behalf of the Georgia Portfolio.
This Proxy Statement/Prospectus, the Notice of Annual Meeting and the proxy
card(s) are first being mailed to shareholders on or about [INSERT], 1999 or as
soon as practicable thereafter. Any Alterman shareholder giving a proxy has the
power to revoke it by mail (addressed to the Secretary at the principal
executive office of Alterman at the address for Alterman shown at the beginning
of this Proxy Statement/Prospectus) or in person at the Annual Meeting, by
executing a superseding proxy or by submitting a notice of revocation to
Alterman.
2
<PAGE>
All properly executed proxies received in time for the Annual Meeting will be
voted as specified in the proxy or, if no specification is made, in favor of the
Proposals referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of a majority of the shares of Alterman entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Annual Meeting, the persons named
as proxies may propose one or more adjournments of the Annual Meeting in
accordance with applicable law to permit further solicitation of proxies with
respect to the Proposal that did not receive the vote necessary for its passage
or to obtain a quorum. Any such adjournment as to a matter will require the
affirmative vote of the holders of a majority of Alterman's shares present in
person or by proxy at the Annual Meeting. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of that Proposal and will vote against any such adjournment those
proxies to be voted against that Proposal. For purposes of determining the
presence of a quorum for transacting business at the Annual Meeting, abstentions
and broker "non-votes" will be treated as shares that are present but which have
not been voted. Broker non-votes are proxies received by Alterman from brokers
or nominees when the broker or nominee has neither received instructions from
the beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter. Accordingly, shareholders are urged to
forward their voting instructions promptly.
Proposal 1 regarding the Reorganization requires the affirmative vote of
the holders of a majority in interest of Alterman's outstanding shares; Proposal
2 regarding the election of Directors requires the affirmative vote of the
holders of a plurality of Alterman's shares present in person or by proxy at the
Annual Meeting and entitled to vote thereat, a quorum being present; and
Proposal 3 regarding the Independent Public Accountants requires the affirmative
vote of the holders of a majority in interest of Alterman's shares present in
person or by proxy at the Annual Meeting and entitled to vote thereat, a quorum
being present. Abstentions and broker non-votes will have the effect of a "no"
vote on Proposals 1 and 3, but will have no effect on Proposal 2. Broker non-
votes will, however, be utilized in determining the voting securities "present"
at the Annual Meeting.
Holders of record of the shares of Alterman at the close of business on
[INSERT], 1999 (the "Record Date"), as to any matter on which they are entitled
to vote, will be entitled to one vote per share on all business of the Annual
Meeting. As of [INSERT], 1999, there were [787,769] shares of Alterman
outstanding.
To the best of Muni Funds' knowledge, as of July 17, 1999, except as set
forth on Appendix A, no person owned beneficially more than 5% of the Georgia
Portfolio's outstanding shares.
The following table sets forth certain information concerning each person
known to Alterman to be a beneficial owner of more than 5% of the outstanding
shares of Common Stock of Alterman as of [INSERT], 1999.
3
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount of Beneficial
of Beneficial Owner Ownership (a)(b) Percent of Class
- ----------------------------------------- ------------------------- ------------------
<S> <C> <C>
Rosalie Alterman 150,335 19.1%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30327
Estate of Sam P. Alterman 115,420 14.7%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30328
Estate of David Alterman 50,533 6.4%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30328
Estate of Malcolm Alterman 64,696 8.2%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30328
Paul Alterman 131,736 16.7%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30328
Daniel Alterman 49,200 6.3%
182 Hilderbrand Drive, Suite 102
Atlanta, GA 30328
Laura A. Cox 56,577 7.2%
5255 W. Bank Drive
Marietta, GA 30068
Paula A. Kaplan 83,878 10.6%
2746 Ridgewood Road, N.W.
Atlanta, GA 30327
Joanne A. Singer 76,098 9.6%
2793 Ridge Valley Road, N.W.
Atlanta, GA 30327
</TABLE>
________________________
/(a)/ Includes the beneficial ownership of shares of Common Stock held by the
named individuals and their spouse or widow individually or as custodian
or trustee as follows: Estate of Sam P. Alterman - 1,890 shares by estate
of deceased spouse disclaimed by the estate of Sam P. Alterman, 69,402
shares held by Alterman Real Estate, Ltd., a Georgia limited partnership
of which Alterman Real Estate Corp. and Paul Alterman are the sole general
partners and the estate of the deceased spouse of Sam P. Alterman is the
sole limited partner and 40,000 shares held by the Sam P. Alterman Family
Foundation, Inc., a non-profit corporation of which Paul Alterman, Laura
A. Cox and Daniel Alterman are three of five trustees; Estate of David
Alterman 1,105 shares by widow and 49,428 shares held under two marital
trusts under the will of David Alterman, in the amount of 11,894 shares
and 37,534 shares, respectively; Estate of Malcolm Alterman - includes
20,300 shares held by the Malcolm Alterman Limited Partnership; Paul
Alterman - 69,402 shares held by Alterman Real Estate, Ltd., 40,000 shares
held by the Sam P. Alterman Family Foundation, Inc., 11,955 shares held as
custodian for two minor children, and 100 shares held by his wife; Daniel
Alterman - 40,000 shares held by the Sam P. Alterman Family Foundation, of
which he is one of five trustees; Laura Alterman Cox - 40,000 shares held
by the Sam P. Alterman Family Foundation, of which she is one of five
trustees, and 6,977 shares held as custodian for two minor children; Paula
A. Kaplan - 12,300 held by her husband, and 12,853 shares held as co-
trustee of two trusts established under the will of Esther Alterman; and
Joanne A. Singer -1,120 shares held by husband and 12,853 shares held as
co-trustee of two trusts established under the will of Esther Alterman.
4
<PAGE>
/(b)/ Shares which are beneficially owned by the emancipated descendants of the
named individuals are not included in the table. Each of the named
individuals disclaims the beneficial ownership of shares held by their
emancipated descendants and the wives of their emancipated descendants.
As stated in the Notice of Annual Meeting of Stockholders, attached
hereto, only holders of Common Stock of the Record Date will be entitled to
notice of and to vote at the meeting or any adjournment thereof. The stock
transfer book will not be closed.
[Appendix B hereto sets forth the number of shares of the Georgia
Portfolio owned directly or beneficially by the Trustees of Muni Funds]. See
"PROPOSAL 2: ELECTION OF DIRECTORS" regarding the number of shares of Alterman
owned directly or beneficially by the Directors of Alterman.
Each of Alterman and the Georgia Portfolio provides periodic reports
to all of its shareholders which highlight relevant information, including
investment results and a review of portfolio changes. You may receive an
additional copy of the most recent annual report for each of Alterman and the
Georgia Portfolio and a copy of any more recent semi-annual report, without
charge, by calling Alterman at (800) 861-1844 and the Georgia Portfolio at (800)
451-2010 or writing to Alterman or the Georgia Portfolio, c/o Smith Barney Muni
Funds, at the addresses shown at the beginning of this Proxy
Statement/Prospectus.
PROPOSAL 1: APPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
The Board of Directors/Trustees of each of Alterman and Muni Funds,
including all of the Directors/Trustees who are not "interested persons" of
Alterman or Muni Funds (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) (the "Non-Interested Directors/Trustees" or "Non-
Interested Board Members"), approved on [INSERT], 1999 an Agreement and Plan of
Reorganization dated as of [INSERT], 1999 (the "Plan"). Subject to its approval
by the shareholders of Alterman, the Plan provides for (a) the transfer of all
or substantially all of the assets of Alterman to the Georgia Portfolio, an
open-end non-diversified series of Muni Funds, in exchange for Class A voting
shares of the Georgia Portfolio and the assumption by the Georgia Portfolio of
all of Alterman's stated liabilities; (b) the distribution of such Georgia
Portfolio shares to the shareholders of Alterman in complete liquidation of
Alterman; (c) the termination of Alterman as a diversified closed-end management
investment company; and (d) the dissolution of Alterman as a corporation under
Delaware law (collectively, the "Reorganization"). As a result of the
Reorganization, each shareholder of Alterman will become a shareholder of the
Georgia Portfolio and will hold, immediately after the closing of the
Reorganization (the "Closing"), that number of full and fractional shares of the
Georgia Portfolio having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares held in Alterman as of the close of
business on the business day preceding the Closing (the "Valuation Date"). The
Closing is expected to occur on [INSERT], 1999, or on such later date as the
parties may agree in writing (the "Closing Date").
5
<PAGE>
SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information contained elsewhere in this Proxy Statement/Prospectus, the
Prospectus of the Georgia Portfolio, the Prospectus of Alterman and the Plan,
the form of which is attached to this Proxy Statement/Prospectus as Exhibit A.
Alterman shareholders should read this entire Proxy Statement/Prospectus
carefully.
INTRODUCTION
SunTrust Bank, formerly known as Trust Company Bank, located at One Park
Place, Atlanta, Georgia 30303 ("SunTrust"), is the investment manager of
Alterman. SSBC, located at 388 Greenwich Street, New York, New York 10013, is
the investment manager of the Georgia Portfolio. If the Plan is consummated,
Alterman shareholders will become shareholders of the Georgia Portfolio and may
benefit from the open-end nature of the Georgia Portfolio and access to the
investment management expertise of SSBC and will be able to enjoy certain
shareholder privileges not currently available to them, such as the ability to
purchase, redeem and exchange shares at net asset value on any business day
(subject only to the various limitations set forth in the Georgia Portfolio's
prospectus and in certain instances to the payment of a sales charge), access to
professional service representatives, and automatic cash withdrawal. Alterman
shareholders, as shareholders of the Georgia Portfolio, may also be presented
with the opportunity for higher annual income and total return and for lower
fees and expenses as compared to Alterman. The Georgia Portfolio declares
dividends daily and pays dividends monthly. Alterman declares dividends
quarterly and pays dividends quarterly. See "Dividends and Other
Distributions." It is a condition of the Reorganization that each Fund receive
an opinion of independent legal counsel that the Reorganization will be tax-
free. This means that shareholders will not realize any capital gain or loss as
a direct result of the Reorganization.
PROPOSED TRANSACTION
The aggregate net asset value of the Georgia Portfolio Class A voting
shares (the "Shares") issued in exchange for the assets and stated liabilities
of Alterman will be equal to the net asset value of Alterman as of the Valuation
Date. Immediately following the transfer of Shares to Alterman, the Shares will
be distributed pro rata to the shareholders of record of Alterman on the Closing
Date and the shares of Alterman will be cancelled.
For the reasons described below under "The Proposed Transaction-Reasons for
the Proposed Transaction," the Board of Directors of Alterman, including the
Non-Interested Directors, has concluded the following:
- the Reorganization is in the best interests of Alterman and its
shareholders; and
- the interests of the existing shareholders of Alterman will not be
diluted as a result of the Reorganization.
6
<PAGE>
Accordingly, the Directors recommend approval of the Plan. If the Plan is
not approved, Alterman will continue in existence unless other action is taken
by the Directors.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The principal investment objective of the Georgia Portfolio is to pay its
shareholders as high a level of income exempt from Federal income taxes and
Georgia personal income taxes as is consistent with prudent investing. The
principal investment objective of Alterman is to receive current income, capital
appreciation being a minor objective (not more than 25% of Alterman's total
assets will be invested for the primary purpose of capital appreciation).
Whereas the Georgia Portfolio is a non-diversified open-end fund, Alterman is a
diversified closed-end fund. Whereas the Georgia Portfolio, under normal market
conditions, will seek to invest not less than 80% and up to 100% of its assets
in municipal obligations the interest on which is exempt from Federal income
taxes (other than the Federal alternative minimum tax ("AMT")), Alterman has no
stated policies with respect to such investment practice. However, Alterman's
investment practice has been to invest substantially all of its assets in
municipal obligations, the interest on which is exempt from Federal income taxes
(other than AMT) and Georgia income taxes. Whereas all municipal bonds
purchased by the Georgia Portfolio must, at the time of purchase, be investment-
grade municipal securities and at least two-thirds of the Georgia Portfolio's
municipal bonds must be rated within the three highest ratings categories by a
nationally recognized statistical rating organization ("NRSRO"), Alterman has no
stated policies with respect to such investment practices. However, Alterman's
investment practice has been to invest substantially all of its assets in
municipal bonds such that its average bond rating by a NRSRO is AA. Also,
Alterman historically has invested in municipal bonds with a shorter average
maturity than those of the Georgia Portfolio. Whereas the Georgia Portfolio
will not invest more than 15% of its net assets in illiquid securities, Alterman
will invest in securities which have been publicly distributed and for which a
market exists. Whereas the Georgia Portfolio may engage in short-term trading
consistent with its investment objective, Alterman may not acquire securities
for short-term resale or other disposition or for the purpose of realizing
short-term profits. Despite the absence of stated policies with respect to
these and other investment practices discussed in this proxy
statement/prospectus, the actual investment practices of Alterman substantially
coincide with those of the Georgia Portfolio.
The Georgia Portfolio and Alterman have substantially similar fundamental
policies with respect to issuing senior securities, engaging in industry
concentration, making loans, underwriting securities, and purchasing or selling
real estate, real estate mortgages, commodities or commodity contracts.
Investment restrictions of each Fund which are fundamental policies may not be
changed without the approval of the applicable Fund's shareholders. Investors
should refer to the respective prospectuses and statements of additional
information of Alterman and the Georgia Portfolio for a fuller description of
each Fund's investment policies and restrictions.
COMPARISON OF CLOSED-END AND OPEN-END INVESTMENT COMPANIES
Generally, closed-end funds, such as Alterman, neither redeem their
outstanding stock nor engage in the continuous sale of new securities.
Therefore, a closed-end fund operates with a relatively fixed capitalization.
Shareholders who wish to buy or sell shares generally must do so
7
<PAGE>
through a broker-dealer, and pay or receive whatever price the market may bear.
This price may be more or less than the net asset value per share of the closed-
end fund's shares. There is no established market for shares of Alterman and,
therefore, no assurance that a shareholder will be able to liquidate his or her
position in the Alterman shares at a time or at a price that is acceptable. In
contrast, open-end funds, such as the Georgia Portfolio, issue redeemable
securities entitling shareholders to surrender those securities to the fund and
receive in return their proportionate share of the value of the fund's net
assets (less any redemption fee charged by the fund and any "sales load" if
purchased through a broker-dealer). Also, open-end funds generally issue new
shares at the fund's net asset value, subject to any applicable sales load.
In addition to these structural distinctions between the two types of
funds, several other differences exist. These distinctions can give rise to
advantages and disadvantages to Alterman if, on the one hand, it remains a
closed-end fund or if, on the other hand, it converts to open-end status. An
advantage of being a closed-end fund is that assets may be fully invested in
accordance with both the fund's investment objectives and policies, whereas
open-end funds frequently maintain a portion of their assets in cash or cash
equivalents in order to facilitate meeting redemption requests. Based upon
information provided by SSBC, the Board has considered the advantages and
disadvantages to Alterman and its shareholders associated with the
Reorganization in general and with remaining closed-end or converting to open-
end form in particular and found the overall advantages of the Reorganization to
outweigh the disadvantages.
INVESTMENT OBJECTIVE AND POLICIES OF THE GEORGIA PORTFOLIO
The Georgia Portfolio seeks as high a level of income exempt from Federal
income taxes and Georgia personal income taxes as is consistent with prudent
investing.
The Georgia Portfolio invests at least 80% of its net assets in municipal
securities and at least 65% of its net assets in Georgia municipal securities.
Georgia municipal securities include securities issued by the State of Georgia
and certain other municipal issuers, political subdivisions, agencies and public
authorities that pay interest which is exempt from Georgia state personal income
taxes. The Georgia Portfolio focuses primarily on intermediate-term and long-
term municipal securities which have remaining maturities at the time of
purchase of from five to more than thirty years. The Georgia Portfolio invests
exclusively in municipal securities that are rated investment grade at the time
of purchase or are of comparable quality if unrated. At least two-thirds of the
municipal securities must be rated, at the time of purchase, within the three
highest investment grade rating categories by a nationally recognized rating
organization.
SSBC, the Georgia Portfolio's investment manager, selects securities
primarily by identifying undervalued sectors and individual securities, while
also selecting securities it believes will benefit from changes in market
conditions. In selecting individual securities, SSBC:
- uses fundamental credit analysis to estimate the relative value and
attractiveness of various securities and sectors and to exploit
opportunities in the municipal bond market;
8
<PAGE>
- may trade between general obligation and revenue bonds and among various
revenue bond sectors, such as housing, hospital and industrial
development, based on their apparent relative values and their impact on
the level of dividends generated by the overall portfolio;
- identifies individual securities with the most potential for added
value, such as those involving unusual situations, new issuers, the
potential for credit upgrades, unique structural characteristics or
innovative features; and
- considers the yield available for securities with different maturities
and a security's maturity in light of the outlook for the issuer and its
sector and interest rates.
INVESTMENT OBJECTIVE AND POLICIES OF THE ALTERMAN FUND
Alterman's primary objective is to receive current income, capital
appreciation being a minor objective (not more than 25% of Alterman's total
assets will be invested for the primary purpose of capital appreciation). The
Fund is a diversified company maintaining a diversified portfolio of municipal
bonds. The Fund's stockholders are given the opportunity to approve or
disapprove any recommended changes in Alterman's investment objectives.
Alterman will not issue any senior securities, engage in short sales,
purchase on margin (except such short-term credits as are necessary for the
clearance of transactions) or write put and call options. The Fund will not
borrow money except that, as a temporary measure for extraordinary or emergency
purposes, the Fund may borrow from banks up to 5% of its total assets. The Fund
will not underwrite securities of other issuers and will not invest 25% or more
of the value of its assets in any particular industry (government or political
subdivisions of governments that issue tax exempt securities are not considered
members of any industry). The Fund will not purchase or sell real estate or
real estate mortgage loans and will not purchase or sell commodities or
commodities contracts. The Fund will not make loans to other persons except
through the acquisition of publicly traded debt securities for investment.
Alterman deems the following policies to be fundamental and such policies
may not be changed without approval of its stockholders: the Fund does not
intend, but reserves the right, to invest 25% or more of its assets in
industrial development bonds; the Fund may invest in securities of other
investment companies only in aggregate amounts of up to 10% of its total assets
and not more than 3% of the total outstanding voting securities of any
investment company, except that the Fund may acquire securities of other
investment companies in connection with a merger or similar combination; the
Fund will not invest in issuers for the purpose of exercising control of such
issuer; and with respect to 75% of the value of its total assets, the Fund
limits its holdings in the securities of any one issuer, except as otherwise
permitted under the 1940 Act, to an amount not greater in value than 5% of the
value of its total assets and not more than 10% of the outstanding voting
securities of such issuer.
Alterman reserves freedom of action with respect to the following areas,
wherein no stockholder approval of policy changes is required, (i) the
determination of grade and maturity of municipal bonds for the Fund's investment
portfolio and (ii) pending investment in tax free
9
<PAGE>
municipal bonds or distribution as dividends, the Fund's assets and net proceeds
thereof (or interest earned thereon) may be invested in short-term securities
such as certificates of deposit, commercial paper, United States government
securities or may be retained in cash in conformity with the requirements of the
1940 Act.
Alterman does not acquire securities for short-term resale or other
disposition or for the purpose of realizing short-term profits. Therefore, the
Fund's investment objectives are pursued with little portfolio turnover, except
as required by prudent investment management and as may be required to maintain
regulated investment company status for Federal income tax purposes.
INVESTMENT MANAGEMENT FEES AND EXPENSES
Alterman and Muni Funds retain SunTrust and SSBC, respectively, pursuant to
separate contracts, to manage the daily investment and business affairs of
Alterman and the Georgia Portfolio, respectively, subject to the policies
established by each Fund's Board of Directors/Trustees. The expenses of each
Fund, which are discussed in greater detail below, are paid out of gross
investment income. Shareholders pay no direct charges or fees for investment
services.
THE GEORGIA PORTFOLIO
The Georgia Portfolio's investment adviser is SSBC, an affiliate of Salomon
Smith Barney. SSBC selects the Georgia Portfolio's investments and oversees its
operations. SSBC and Salomon Smith Barney are subsidiaries of Citigroup Inc.
Citigroup businesses produce a broad range of financial services -- asset
management, banking and consumer finance, credit and charge cards, insurance,
investments, investment banking and trading -- and use diverse channels to make
them available to consumer and corporate customers around the world.
Peter M. Coffey, investment officer of SSBC and managing director of
Salomon Smith Barney, has been responsible for the day- to-day management of the
Georgia Portfolio since it commenced operations in April 1994. Mr. Coffey has
30 years of experience with SSBC or its predecessors. During the fiscal year
ended March 31, 1999, SSBC received an advisory fee equal to .35% of the Georgia
Portfolio's average daily net assets (after taking into account certain expense
limitation arrangements).
ALTERMAN FUND
Alterman's investment adviser is SunTrust. SunTrust, incorporated in 1891,
is a commercial bank and a registered bank holding company under federal and
Georgia law. Through its investment banking department, SunTrust provides a
wide range of investment counseling services to individuals, corporations,
correspondent banks and others. SunTrust of Georgia holds one hundred (100%)
percent of the outstanding stock of SunTrust. The Trust Company of Georgia was
organized in 1974 for the purpose of becoming a multi-bank holding company.
Pursuant to the advisory agreement, which went into effect on August 20, 1980,
Alterman pays SunTrust based upon a monthly advisory fee of one-twelfth of
.1125% of the current market value of the Fund's portfolio securities. Under
the advisory agreement, SunTrust
10
<PAGE>
furnishes investment advice to the Fund with respect to the investment and
reinvestment of the assets comprising the Fund's investment portfolio. The
advisory agreement further provides that SunTrust, as agent and attorney-in-fact
with respect to the Fund's investment portfolio, may, when it deems appropriate,
without prior consultation with the Fund and at the Fund's risk, buy, sell,
exchange, convert or otherwise trade in, retain or reinvest in securities and
other investments, place orders for the execution of such investment
transactions with or through such brokers, dealers, issuers or other persons as
SunTrust may select, and take any action or non-action that SunTrust reasonably
deems appropriate. All services provided to the Fund pursuant to the advisory
agreement will be furnished by and at the expense of SunTrust in consideration
for the investment advisory fee. In order to avoid any potential conflict of
interest, no investment transactions for the Fund are made through the Bond
Department of SunTrust. All decisions and selections are subject to review by
the Fund's Board of Directors.
For the year ended April 30, 1999, Alterman's annualized total expense
ratio (total annual operating expenses as a percentage of average net assets)
was 0.67%, including waivers and reimbursements. As demonstrated below, after
taking into account certain expense limitation arrangements, shareholders of
Alterman may experience a decrease in expenses with respect to the Shares
received pursuant to the Reorganization.
The expenses of Alterman and the Georgia Portfolio for the fiscal year
ended April 30, 1999 and March 31, 1999, respectively, and pro forma expenses
following the proposed Reorganization are outlined below:
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
GEORGIA
ALTERMAN PORTFOLIO/1/ PRO FORMA
---------- ------------ ---------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a % of offering price).......... NONE 4.00%/2/ 4.00%
Management Fee................................. .11% .45% .45%
Distribution (12b-1) Fees...................... NONE .15%
Other Expenses................................. .56% .14% .14%
Total Annual Fund Operating Expenses........... .67% .74% .74%
</TABLE>
__________________
/1/ For the fiscal year ended March 31, 1999, the Class A shares of the Georgia
Portfolio had total annual fund operating expenses of 0.64% (.35%
management fee and .14% other expenses) after taking into account certain
expense limitation arrangements.
/2/ Class A shares purchased in amounts of $500,000 or more are not subject to
an initial sales charge, but are subject to a deferred sales charge of
1.00% for 12 months from the date of purchase.
Example. This Example is intended to help you compare the cost of investing
in each of the Funds. The Example assumes that you invest $10,000 in each Fund
for the time periods indicated and then redeem all of your shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that each Fund's annual operating
11
<PAGE>
expenses remain the same. Although your actual costs maybe higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Assumes Shares are not GEORGIA
sold at the end of ALTERMAN PORTFOLIO PRO FORMA
each period: ---------- ----------- -----------
<S> <C> <C> <C>
1 Year................. $ $ 473 $ 473
3 Years................ $ $ 627 $ 627
5 Years................ $ $ 795 $ 795
10 Years............... $ $1,282 $1,282
</TABLE>
<TABLE>
<CAPTION>
Assumes Shares are GEORGIA
sold at the end of ALTERMAN PORTFOLIO PRO FORMA
each period: ---------- ----------- -----------
<S> <C> <C> <C>
1 Year................. $ $ 473 $ 473
3 Years................ $ $ 627 $ 627
5 Years................ $ $ 795 $ 795
10 Years............... $ $1,282 $1,282
</TABLE>
This example assumes reinvestment of all dividends and distributions. This
example should not be considered a representation of past or future expenses.
Actual Fund expenses can vary from year to year and may be higher or lower than
those shown.
DISTRIBUTION OF SHARES AND OTHER SERVICES
CFBDS, Inc. ("CFBDS"), a registered broker-dealer and an indirect wholly-
owned subsidiary of Signature Financial Group, Inc., is the principal
underwriter and distributor of the Georgia Portfolio. A selling group consisting
of Salomon Smith Barney and other broker-dealers sells shares of the Georgia
Portfolio to the public. The Georgia Portfolio has adopted Rule 12b-1
distribution plans for its Class A, B and L shares. Under each plan, the Georgia
Portfolio pays distribution and service fees. These fees are an ongoing expense
and, over time, may cost shareholders more than other types of sales charges.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and privileges with
respect to Alterman are materially different than those of the Georgia
Portfolio. Whereas Alterman is a closed-end fund imposing no sales charges or
Rule 12b-1 fees, the Georgia Portfolio is an open-end fund imposing sales
charges and Rule 12b-1 fees. The sales charges and the Rule 12b-1 fees are used
to pay for the distribution and shareholder services provided to shareholders of
the Georgia Portfolio. No sales charges will be assessed on the issuance of
Georgia Portfolio shares as part of the Reorganization. Additionally, whereas
there is no exchange privilege in Alterman, shareholders of the Georgia
Portfolio may exchange their shares for a corresponding class of shares of a
fund in the Smith Barney fund complex. Although sales charges and Rule 12b-1
fees are not imposed by Alterman, Alterman's Board of Directors believes that
the greater liquidity of the Georgia Portfolio's Shares, access to the
investment management expertise of SSBC and the potential for higher annual
income and total return and for lower fees and expenses provide benefits of at
least equal significance. Investors should refer to the respective prospectuses
and statements of additional information of Alterman and the Georgia Portfolio
for a fuller description
12
<PAGE>
of each Fund's policies and restrictions with respect to the purchase,
redemption and exchange of shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Georgia Portfolio pays dividends each month from its net investment
income. The Georgia Portfolio generally makes capital gain distributions, if
any, once a year, typically in December. The Georgia Portfolio may pay
additional distributions and dividends at other times if necessary for the
Georgia Portfolio to avoid a Federal tax. Capital gain distributions and
dividends are reinvested in additional Georgia Portfolio shares of the same
class held. The Georgia Portfolio expects distributions to be primarily from
income. Shareholders do not pay a sales charge on reinvested distributions or
dividends. Alternatively, shareholders can instruct their Salomon Smith Barney
Financial Consultant, dealer representative or the transfer agent to have their
distributions and/or dividends paid in cash.
Alterman distributes to its shareholders at least 90% of its tax-exempt
interest income, less certain deductions. The Fund is not taxed on either the
distributed or undistributed portion of its net tax-exempt interest income.
Dividends designated by the Fund as paid out of net tax-exempt interest income,
to the extent of such income, are not taxable to its shareholders. The Fund
expects to distribute dividends as often as deemed appropriate, and possibly at
irregular intervals, but in any event at least annually, substantially all of
its income and its capital gains for each of its taxable years. In the event the
Fund should sustain capital losses upon sales of its assets, subsequent capital
gains may be retained by the Fund rather than distributed to shareholders, at
least to the extent of such capital losses.
If the Plan is approved by Alterman's shareholders, then as soon as
practicable before the Closing Date, Alterman will pay its shareholders a cash
distribution of all undistributed 1999 net investment income, the excess of its
interest income excludable from gross income under section 103(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), over its deductions
disallowed under sections 265 and 171(a)(2) of the Code and undistributed
realized net capital gains.
TAX CONSEQUENCES
Muni Funds will have received the opinion of Willkie Farr & Gallagher,
counsel to the Georgia Portfolio, and Alterman shall have received the opinion
of Hunton & Williams, counsel to Alterman, each dated the Closing Date and in
connection with the Reorganization, to the effect that, based upon certain
facts, assumptions and representations, the Reorganization will constitute a
tax-free reorganization within the meaning of section 368(a)(1) of the Code. If
the Reorganization constitutes a tax-free reorganization, no gain or loss will
be recognized by Alterman or its shareholders as a direct result of the
Reorganization. See "The Proposed Transaction -- Federal Income Tax
Consequences."
13
<PAGE>
PRINCIPAL RISK FACTORS
Despite the absence of stated policies with respect to various investment
practices, Alterman 's actual investment practices coincide to a substantial
extent with those of the Georgia Portfolio. Accordingly, each Fund shares
similar risks in connection with their investments in municipal securities.
Shareholders of the Georgia Portfolio could lose money on their investment
in the Georgia Portfolio, or the Georgia Portfolio may not perform as well as
other investments, if:
- interest rates rise, causing the value of its portfolio to decline;
- the issuer of a security owned by the Georgia Portfolio defaults on its
obligation to pay principal and/or interest or the security's credit
rating is downgraded;
- the Georgia municipal securities fall out of favor with investors (in
such event, the Georgia Portfolio will suffer more than a national
municipal fund from adverse events affecting Georgia municipal issuers);
- unfavorable legislation affects the tax-exempt status of municipal
bonds; and
- SSBC's judgment about the attractiveness, value or income potential of a
particular security proves to be incorrect.
It is possible that some of the Georgia Portfolio's income distributions
may be, and distributions of the Georgia Portfolio's gains generally will be,
subject to Federal and Georgia state taxation. The Georgia Portfolio may
realize taxable gains on the sale of its securities or on transactions in
futures contracts. Some of the Georgia Portfolio's income may be subject to the
Federal AMT. In addition, distributions of the Georgia Portfolio's income and
gains will be taxable to investors in states other than Georgia.
The Georgia Portfolio is classified as "non-diversified," which means it
may invest a larger percentage of its assets in one issuer than a diversified
fund such as Alterman. To the extent the Georgia Portfolio concentrates its
assets in fewer issuers, the Georgia Portfolio will be more susceptible to
negative events affecting those issuers. The Georgia Portfolio intends to
conduct its operations, however, so as to qualify as a "regulated investment
company" for purposes of the Code, which will relieve the Georgia Portfolio of
any liability for Federal income tax to the extent its earnings are distributed
to shareholders. To so qualify, among other requirements, the Georgia Portfolio
will limit its investments so that, at the close of each quarter of the taxable
year, (a) not more than 25% of the market value of the Georgia Portfolio's total
assets will be invested in the securities of a single issuer and (b) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a single
issuer and the Georgia Portfolio will not own more than 10% of the outstanding
voting securities of a single issuer. The Georgia Portfolio's assumption of
large positions in the obligations of a small number of issuers may cause the
Georgia Portfolio's share price to fluctuate to a greater extent than that of a
diversified company such as Alterman as a result of changes in the financial
condition or in the market's assessment of the issuers.
14
<PAGE>
The Georgia Portfolio may not be an appropriate investment if you:
- are not a Georgia taxpayer in a high federal tax bracket seeking income
exempt from Georgia and Federal taxation;
- currently do not have exposure to other asset classes and are not
seeking to broaden your investment portfolio; or
- are not willing to accept the risks of municipal securities, including
the risks of concentrating in a single state.
Please refer to each Fund's prospectus and the Georgia Portfolio's
statement of additional information for a more detailed discussion of the risks
of investing in the applicable Fund.
PRINCIPAL INVESTMENTS OF THE GEORGIA PORTFOLIO
The Georgia Portfolio seeks to provide as high a level of income exempt
from Federal income taxes and from Georgia personal income taxes as is
consistent with prudent investing. The Georgia Portfolio has a fundamental
policy that, under normal market conditions, it will seek to invest 100% of its
total assets - and the Georgia Portfolio will invest not less than 80% of its
total assets - in municipal obligations the interest on which is exempt from
Federal income taxes (other than the AMT). It is also a fundamental policy
that, under normal market conditions, the Georgia 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 Georgia in the opinion of
bond counsel to issuers. The Georgia Portfolio may invest up to 20% of its
assets in taxable fixed income securities, but only in obligations issued or
guaranteed by the full faith and credit of the United States.
The Georgia Portfolio principally invests in the following securities.
Georgia Municipal Securities. Georgia municipal securities include debt
obligations issued by certain non-Georgia governmental issuers such as Puerto
Rico, the Virgin Islands and Guam. The interest on these bonds is exempt from
Federal income tax and Georgia personal income tax. As a result, the interest
rate on these bonds normally is lower than it would be if the bonds were subject
to taxation. The Georgia municipal securities in which the Georgia Portfolio
invests include general obligation bonds, revenue bonds and municipal leases.
These securities may pay interest at fixed, variable or floating rates. The
Georgia Portfolio may also hold zero coupon securities which pay no interest
during the life of the obligation but trade at prices below their stated
maturity value.
Other Debt Securities. The Georgia Portfolio may invest up to 35% of its
assets in municipal securities of non-Georgia issuers. These will generally be
exempt from Federal, but not Georgia income taxes. The Georgia Portfolio may
also invest up to 20% of its assets in debt securities which are issued or
guaranteed by the full faith and credit of the U.S. government. These
securities will generally be subject to federal and state taxation.
15
<PAGE>
Derivative Contracts. The Georgia Portfolio may, but need not, use
derivative contracts, such as financial futures, for any of the following
purposes, (i) to hedge against the economic impact of adverse changes in the
market value of portfolio securities due to changes in interest rates or (ii) as
a substitute for buying or selling securities.
A futures contract will obligate or entitle the Georgia Portfolio to
deliver or receive an asset or cash payment based on the change in value of one
or more securities. The other parties to certain futures present the same types
of default risk as issuers of fixed income securities.
The Georgia Portfolio may invest in inverse floating rate securities.
These securities pay interest at a rate which moves in the opposite direction
from movements in market interest rates. Even a small investment in futures or
in certain inverse floaters with leverage features can have a big impact on the
Georgia Portfolio's interest rate exposure. Therefore, using futures or inverse
floaters can disproportionately increase losses and reduce opportunities for
gains when interest rates are changing. The Georgia Portfolio may not fully
benefit from or may lose money on futures or inverse floaters used for hedging
purposes if changes in their value do not correspond accurately to changes in
the value of the Georgia Portfolio's holdings. Futures and inverse floaters can
also make a fund less liquid and harder to value, especially in declining
markets.
Municipal Bond Index Futures Contracts. The Georgia Portfolio may invest
in municipal bond futures contracts (currently traded on the Chicago Board of
Trade) which are enlisted contracts based on U.S. government securities as a
hedging policy in pursuant of its investment objective; provided that
immediately thereafter not more than 33 1/3% of the Georgia Portfolio's net
assets would be hedged or the amount of margin deposits on the Georgia
Portfolio's existing futures contracts would not exceed 5% on the value of its
total assets. A municipal bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of an amount of cash equal
to a fund specific dollar amount multiplied by the difference between the value
of the index at the close of the last trading day of the contract and the price
at which the index contract was originally written. No physical delivery of the
underlying municipal bonds in the index is made. Municipal bond index futures
contracts are based on an index of 40 tax-exempt, long-term municipal bonds with
an original issue size of at least $50 million and a rating of A- or higher by
S&P or A or higher by Moody's which began trading in mid-1985. The purpose of
the acquisition or sale of a municipal bond index futures contract by the
Georgia Portfolio, as the holder of long-term municipal securities, is to
protect the Georgia Portfolio from fluctuations in interest rates on tax-exempt
securities without actually buying or selling long-term municipal securities.
Defensive Investing. The Georgia Portfolio may depart from its principal
investment strategies in response to adverse market, economic or political
conditions by taking temporary defensive positions in all types of money market
and short- term debt securities. If the Georgia Portfolio takes a temporary
defensive position, it may be unable to achieve its investment goal.
PRINCIPAL INVESTMENTS OF ALTERMAN
Consistent with Alterman's fundamental and non-fundamental investment
policies, Alterman invests in tax free municipal securities and pending such
investment or distribution of
16
<PAGE>
dividends, the Fund's assets and net proceeds thereof (or interest earned
thereon) may be invested in short-term securities such as certificates of
deposit, commercial paper, U.S. government securities or may be retained in cash
in conformity with the 1940 Act.
INVESTMENT PRACTICES OF ALTERMAN AND THE GEORGIA PORTFOLIO
Alterman and the Georgia Portfolio may engage in certain investments and
investment techniques that are substantially the same. The following is a brief
description of these investment practices. The Georgia Portfolio may explicitly
engage in certain additional investment practices, as described above, and a
more complete description is contained in the prospectus of the Georgia
Portfolio, dated July 29, 1999, as supplemented from time to time, a copy of
which is included herewith, and in the Statement of Additional Information of
the Muni Funds and Alterman dated [INSERT], 1999 (relating to the proposed
Reorganization) which is incorporated herein by reference.
Municipal Obligations. In general, municipal obligations are debt
obligations (bonds or notes) issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions, agencies and
instrumentalities the interest on which is exempt from Federal income tax in the
opinion of bond counsel to the issuer. Municipal obligations are issued to
obtain funds for various public purposes, many of which may enhance the quality
of life, including the construction of a wide range of public facilities, such
as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets, water and sewer works, gas, and electric utilities. They may
also be issued to refund outstanding obligations, to obtain funds for general
operating expenses, or to obtain funds to loan to other public institutions and
facilities and in anticipation of the receipt of revenue or the issuance of
other obligations. In addition, the term "municipal obligations" includes
certain types of industrial development bonds ("IDBs") issued by public
authorities to obtain funds to provide various privately-operated facilities for
business and manufacturing, housing, sports, convention or trade show
facilities, airport, mass transit, port and parking facilities, air or water
pollution control facilities, and certain facilities for water supply, gas,
electricity or sewerage or solid waste disposal.
The two principal classifications of municipal obligations are "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.
Although IDBs are issued by municipal authorities, they are generally secured by
the revenues derived from payments of the industrial user. The payment of the
principal and interest on IDBs is dependent solely on the ability of the user of
the facilities financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
Short-Term Instruments. Among the types of short-term instruments in which
each Fund may invest are floating- or variable- rate 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
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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). Each Fund may purchase
participation interests 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 fund.
Investments in participation interests in variable-rate tax-exempt
securities (such as IDBs) purchased from banks give the purchaser an undivided
interest in the tax-exempt security in the proportion that the Fund
participation interest bears to the total principal amount of the tax-exempt
security with a demand repurchase feature. Participation interests are
frequently backed by an irrevocable letter of credit or guarantee of a bank that
the investment adviser, under the supervision of each Fund's Board, has
determined meets the prescribed quality standards for the fund. The Funds
generally have the right to sell the instrument back to the bank and draw on the
letter of credit on demand on seven days' notice or less, for all or any part of
the applicable Fund's participation interest in the tax-exempt security, plus
accrued interest. Banks will retain a service and letter of credit fee and a
fee for issuing repurchase commitments in an amount equal to the excess of the
interest paid on the tax-exempt securities over the negotiated yield at which
the instruments were purchased by a Fund.
Illiquid securities. Each Fund may invest a portion of its assets in
securities for which there is not an active trading market, or which have resale
restrictions. These types of securities generally offer a higher return than
more readily marketable securities, but carry the risk that a Fund may be not be
able to dispose of them at an advantageous time or price.
Municipal Leases. Each Fund may invest in "municipal leases," which
generally are participations in intermediate- and short-term debt obligations
issued by municipalities consisting of leases or installment purchase contracts
for property or equipment. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation is ordinarily backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. In addition to the "non-appropriation" risk, these
securities represent a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional bonds.
Although "non-appropriation" lease obligations are often secured by the
underlying property, disposition of the property in the event of foreclosure
might prove difficult.
Private Activity Bonds. Each Fund may invest in private activity bonds.
Interest income on certain types of private activity bonds issued after August
7, 1986 to finance non-governmental activities is a specific tax preference item
for purposes of the federal individual and corporate alternative minimum taxes.
Individual and corporate shareholders may be subject to a Federal AMT to the
extent that the applicable Fund's dividends are derived from interest on those
bonds.
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Repurchase agreements. As a means of earning taxable income for periods as
short as overnight, each Fund may enter into repurchase agreements with selected
banks and broker/dealers. Under a repurchase agreement, a Fund acquires
securities, subject to the seller's agreement to repurchase at a specified time
and price. Income from repurchase agreements will be taxable when distributed to
shareholders.
When-Issued Securities. Each Fund may purchase municipal bonds on a "when-
issued" basis (i.e., for delivery beyond the normal settlement date at a stated
price and yield). The payment obligation and the interest rate that will be
received on the municipal bonds purchased on a when-issued basis are each fixed
at the time the buyer enters into the commitment. Although a Fund will purchase
municipal bonds on a when-issued basis only with the intention of actually
acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment strategy.
Zero Coupon Securities. Each Fund may invest in zero coupon bonds. Zero
coupon securities are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity of a specified cash payment date
when the securities begin paying current interest (the "cash payment date") and
therefore are issued and traded at a discount from their face amounts or par
values. The discount varies depending on the time remaining until maturity or
cash payment date, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. The discount, in the absence of
financial difficulties of the issuer, decreases as the final maturity or cash
payment date of the security approaches. The market prices of zero coupon
securities generally are more volatile than the market prices of other debt
securities that pay interest periodically and are likely to respond to changes
in interest rates to a greater degree than do debt securities having similar
maturities and credit quality. The credit risk factors pertaining to low-rated
securities also apply to low-rated zero coupon bonds. Such zero coupon bonds
carry an additional risk in that, unlike bonds which pay interest throughout the
period to maturity, a Fund will realize no cash until the cash payment date
unless a portion of such securities is sold and, if the issuer defaults, the
applicable Fund may obtain no return at all on its investment.
THE PROPOSED TRANSACTION
Description of the Plan. As stated above, the Plan provides for the
transfer of all or substantially all of the assets of Alterman to the Georgia
Portfolio in exchange for that number of full and fractional Class A shares of
the Georgia Portfolio having an aggregate net asset value equal to the aggregate
net asset value of each Alterman shareholder's shares held in Alterman as of the
close of business on the business day preceding the date of the Closing. The
Georgia Portfolio will assume all of the stated liabilities of Alterman. In
connection with the Closing, Alterman will distribute Class A shares of
beneficial interest of the Georgia Portfolio received in the exchange to the
shareholders of Alterman in complete liquidation of Alterman. Alterman will
then be terminated as a diversified closed-end management investment company and
dissolved as a corporation under Delaware law.
Upon completion of the Reorganization, each shareholder of Alterman will
own that number of full and fractional Class A shares of the Georgia Portfolio
having an aggregate net
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asset value equal to the aggregate net asset value of such shareholder's shares
held in Alterman immediately as of the close of business on the business day
preceding the Closing. Each Alterman shareholder's account with the Muni Funds
as a Georgia Portfolio shareholder will be significantly different in material
respects to the accounts currently maintained by Wachovia Bank of Georgia, N.A.
for such shareholder, as noted in this Proxy Statement/Prospectus. Shares of
Alterman are represented by physical certificates. However, in the interest of
economy and convenience, shares of the Georgia Portfolio issued to Alterman
shareholders will be in uncertificated form.
The obligations of Alterman and Muni Funds, on behalf of the Georgia
Portfolio, under the Plan are subject to various conditions, as stated therein.
Among other things, the Plan requires that all filings be made with, and all
authority be received from, the SEC and state securities commissions as may be
necessary in the opinion of counsel to permit the parties to carry out the
transactions contemplated by the Plan. Alterman and the Georgia Portfolio are
in the process of making the necessary filings. To provide against unforeseen
events, the Plan may be terminated or amended at any time prior to the Closing
by action of the Board of Directors/Trustees of either Fund, notwithstanding the
approval of the Plan by the shareholders of Alterman. However, no amendment may
be made that materially adversely affects the interests of the shareholders of
Alterman without obtaining the approval of Alterman shareholders. Alterman and
the Georgia Portfolio may at any time waive compliance with certain of the
covenants and conditions contained in the Plan.
The Plan provides that the obligations of Muni Funds are not personally
binding upon any of the Trustees, shareholders, nominees, officers, agents, or
employees of Muni Funds or the Georgia Portfolio, but bind only the property of
the Georgia Portfolio as provided in Muni Funds' Declaration of Trust.
Moreover, no series of Muni Funds other than the Georgia Portfolio is
responsible for the obligations of Muni Funds under the Plan, and all persons
must look only to the assets of the Georgia Portfolio to satisfy the obligations
of Muni Funds under the Plan. The execution and the delivery of the Plan have
been authorized by Muni Funds' Board of Trustees, on behalf of the Georgia
Portfolio, and the Plan has been signed by authorized officers of the Georgia
Portfolio acting as such, and neither such authorization by such Trustees, nor
such execution and delivery by such officers, shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally. For a complete description of the terms and conditions of the
Reorganization, see the Plan at Exhibit A.
The Georgia Portfolio will bear all the expenses it incurs in connection
with the Reorganization. Salomon Smith Barney will assume and pay a majority
of the legal and accounting expenses that are solely and directly related to the
Reorganization, within the meaning of Revenue Ruling 73-54, which expenses are
estimated to be approximately $[INSERT]. Accordingly, Alterman will bear
relatively limited expenses relating to the Reorganization. Shareholders have
no rights of appraisal.
REASONS FOR THE PROPOSED TRANSACTION
At meetings on November 10, 1998, January 1999, May 7, 1999, and June 8,
1999, the Board of Directors of Alterman considered its strategic alternatives,
including a business combination with an open-end management investment company.
On May 7, 1999, the Board
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authorized the commencement of negotiations with the Georgia Portfolio with
respect to the Reorganization. Prior to that, representatives of Alterman
received presentations by representatives of SSBC and other mutual fund
complexes. The proposed Reorganization was presented to the Board of Directors
for consideration and approval at a meeting on July 15, 1999. At that meeting,
the Board reviewed information and representations presented to it by Hunton &
Williams, counsel to Alterman, including information concerning the differences
between closed-end and open-end management investment companies, Alterman's
operations and performance to date, and the possible effects of conversion on
Alterman. Alterman's Board was also informed that the proposal to open-end the
Fund would not involve a significant change of investment style for the Fund,
except that the average maturity of the Georgia Portfolio is longer than that of
Alterman and that the Georgia Portfolio may be invested from time to time in
bonds that, while investment grade, have lower ratings from a NRSRO than the
bonds invested in by Alterman. For the reasons discussed below, the Board of
Directors of Alterman, including all of the Non-Interested Directors, has
unanimously determined that the interests of the shareholders of Alterman will
not be diluted as a result of the proposed Reorganization, and that the proposed
Reorganization is in the best interests of Alterman and its shareholders.
The proposed combination of Alterman and the Georgia Portfolio will allow
the shareholders of Alterman to participate in a professionally-managed open-end
investment company holding primarily high quality bonds and to earn a high level
of return consistent with a high degree of principal stability. The Directors
of Alterman believe that Alterman shareholders will benefit from the proposed
Reorganization because the Georgia Portfolio is guided by similar investment
objectives and policies as the Fund, and offers the following benefits:
GREATER LIQUIDITY OF SHARES. As shareholders of the Georgia Portfolio,
Alterman shareholders will be able to purchase, redeem and exchange the Shares
at net asset value on any business day subject only to the various limitations
set forth in the Georgia Portfolio's prospectus and in certain instances to the
payment of a sales load, which is intended to discourage short-term trading in
the Georgia Portfolio which is intended for long-term investment. Currently,
Alterman shareholders cannot transfer, redeem or exchange their shares in
Alterman.
ACCESS TO SSBC'S INVESTMENT ADVISORY EXPERTISE. SSBC, an affiliate of
Salomon Smith Barney, is a subsidiary of Citigroup Inc. As of June 30, 1999,
SSB Citi Asset Management Group, which is comprised of Citigroup Inc.'s primary
asset management business platforms, has assets under management of
approximately $347 billion. SSB Citi Asset Management Group has a strong
product balance among equities, fixed income and liquidity products. SSB Citi
Asset Management Group has investment centers in the United States, Europe,
Japan, Latin America, Asia Pacific and Australia and has global research centers
in New York, London, Tokyo, Singapore and Melbourne. Citigroup businesses
produce a broad range of financial services -- asset management, banking and
consumer finance, credit and charge cards, insurance, investments, investment
banking and trading -- and use diverse channels to make them available to
consumer and corporate customers around the world.
OPPORTUNITY FOR HIGHER ANNUAL INCOME AND RETURN. The Board of Alterman
anticipates that Georgia Portfolio would normally achieve a higher level of
income and return over a year's time than Alterman. This would occur for various
reasons. First, the Georgia
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Portfolio will invest in a portfolio of municipal securities as selected by SSBC
the income from which will be exempt from federal and Georgia personal taxes in
pursuit of its investment objective, which may potentially generate higher
income. Second, as discussed in detail below, the total operating expenses of
the Georgia Portfolio (assuming the continuation of waivers and reimbursements
by SSBC on behalf of the Georgia Portfolio) are projected to be lower than the
total operating expenses to be incurred by Alterman.
The Georgia Portfolio has generally produced better total returns than
Alterman over comparable one-, three-, five-, and ten-year or since inception
periods. In addition, the average term of the securities held by the Georgia
Portfolio has historically been longer than the average term of the securities
held by Alterman. During each of these periods, the Georgia Portfolio has ranked
in the [INSERT] of its fund category as tracked by Lipper Analytical Services.
[For Georgia investors in the 36% tax bracket, there is also an advantage in
owning the Georgia Portfolio, as its tax-equivalent yield is [INSERT]% versus
Alterman's tax-equivalent yield of 8.14%.] Past performance is not necessarily
indicative of future results.
LOWER FEES AND EXPENSES. If the proposed transaction is approved, Alterman
shareholders may benefit from lower fees and lower total fund expenses (after
taking into account certain expense limitation arrangements). Please refer to
"Investment Management Fees and Expenses" and "Annual Fund Operating Expenses"
set forth above.
Alterman has higher gross operating expenses due to its relatively small
level of assets. As of April 30, 1999, Alterman had gross annual operating
expenses of 0.67%. As of March 31, 1999, the Georgia Portfolio had gross annual
operating expenses of 0.64% (after taking into account certain expense
limitation arrangements). As a result of the Reorganization, Alterman
shareholders will be investing in a Fund with expenses that are currently .03%
lower than Alterman's expense ratio. If the Reorganization is approved by
Alterman shareholders, the Georgia Portfolio' net expense ratio is expected to
remain unchanged for the year ending March 31, 2000.
Some of the fixed expenses currently paid by the Georgia Portfolio, such as
accounting, legal and printing costs, would be spread over a larger asset base.
Other things being equal, shareholders should benefit from economies of scale
through lower expense ratios and higher net income distributions.
Due to a combination of factors, including the greater liquidity of the
Georgia Portfolio Shares, the investment advisory expertise of SSBC, the small
size of Alterman and current market conditions, the Board of Directors of
Alterman believes the Fund and its shareholders would benefit from a tax-free
reorganization with a larger non-diversified open-end fund with similar
investment objectives and policies. Accordingly, it is recommended that the
Alterman shareholders approve the Reorganization with the Georgia Portfolio.
The Board of Directors of Alterman, in recommending the proposed
transaction, considered a number of factors, including the following:
(1) the greater liquidity of the Georgia Portfolio's Class A shares;
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(2) the current and continuing capabilities and resources of SSBC and its
affiliates in the areas of marketing, investment management,
administration and shareholder service which are and will continue to
be available to the Georgia Portfolio;
(3) the completely tax-free nature of the Reorganization;
(4) the current and potentially higher income levels, higher annual return
and lower expense ratio of the Georgia Portfolio;
(5) the positive compatibility of the Georgia Portfolio's investment
objectives, policies and restrictions with those of Alterman;
(6) the terms and conditions of the Reorganization and that it should not
result in a dilution of Alterman shareholder interests; and
(7) the relatively limited costs and expenses to Alterman of the proposed
Reorganization.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
The Georgia Portfolio is a non-diversified series of Muni Funds, an open-
end Massachusetts business trust established under a Declaration of Trust, dated
August 14, 1985, as amended. Muni Funds' authorized capital consists of an
unlimited number of shares of beneficial interest, par value $0.001 per share.
The Trustees are authorized to divide the shares into separate series.
INFORMATION ON SHAREHOLDERS' RIGHTS
Georgia Portfolio
General. The Georgia Portfolio, a series of Muni Funds, is a diversified
open-end management investment company under the 1940 Act. Muni Funds was
organized on August 14, 1985 under the laws of The Commonwealth of Massachusetts
and is an entity commonly known as a Massachusetts business trust. Muni Funds
is governed by its Declaration of Trust and By-Laws, and its operations are
subject to oversight by its Board of Trustees. Therefore, the Portfolio is
governed by Massachusetts state law and federal law.
Shares of beneficial interest in the Georgia Portfolio have a par value of
$.001 per share. The number of authorized shares of the Georgia Portfolio that
may be issued is unlimited. The Board of Trustees of Muni Funds has authorized
the issuance of multiple series of shares, each representing shares in a
corresponding portfolio, and may authorize the issuance of additional series of
shares in the future. In each portfolio of Muni Funds, Class A shares, 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 a particular class of shares are borne solely by such class of
shares. Each class has exclusive voting rights with respect to provisions of
the portfolio's Rule 12b-1 distribution plan, if any, which pertains to that
class.
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Trustees. The Declaration of Trust of 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 may be removed with cause by written instrument, signed by
at least two-thirds of the remaining Trustees. Vacancies on the Board of
Trustees 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. The Georgia Portfolio does not hold 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 the Portfolio, for any purpose, must be called upon the written
request of shareholders holding at least 25% of the Portfolio's outstanding
shares. On each matter submitted to a vote of the shareholders of the
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 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 affected by the matter shall decide such matter.
Liquidation or Termination. In the event of the liquidation or termination
of the Georgia Portfolio, the shareholders of the Portfolio are entitled to
receive, when, and as declared by the Trustees, as the case may be, the excess
of its assets over its liabilities. The assets so distributed to shareholders
of the Portfolio 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 Portfolio.
Liability of Trustees. Under the Declaration of Trust and By-Laws of 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
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 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 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.
Muni Funds' Declaration of Trust, however, disclaims
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shareholder liability for acts or obligations of Muni Funds and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by Muni Funds. The Declaration of Trust also provides
for indemnification out of the property of Muni Funds for all losses and
expenses of any shareholder held personally liable for the obligations of Muni
Funds. Shares of the Georgia Portfolio issued to Alterman shareholders will be
fully paid and nonassessable when issued, transferable without restrictions and
will have no preemptive rights.
Alterman
General. Alterman is a diversified closed-end management investment
company under the 1940 Act. Alterman was organized as a corporation on April
29, 1955 under the laws of the State of Delaware and elected to become a closed-
end management investment company in 1980. Alterman is governed by its
Certificate of Incorporation and By-Laws, and its operations are subject to
oversight by its Board of Directors. Therefore, Alterman is governed by
Delaware state law and federal law.
Stock. Alterman's Certificate of Incorporation provides that it is
authorized to issue 800,000 shares of Common Stock, $2.50 par value. Holders of
Alterman's Common Stock have no preemptive rights.
Directors. The Certificate of Incorporation and By-laws of Alterman
provide that there shall be from three to fifteen Directors, and each Director
is elected for a term of one year, and until his or her successor shall be
elected and shall qualify. A Director may be removed with or without cause by a
majority vote of Alterman's stockholders at a special meeting of stockholders
duly called in compliance with Alterman's By-laws. Vacancies on the Board of
Directors may be filled by the Directors remaining in office, except for
vacancies occurring by stockholder vote at a special meeting, if otherwise
provided in such proceeding.
Voting Rights. Alterman holds annual stockholders meetings for the purpose
of electing Directors and for the transaction of other business as may be
properly brought before the meeting. A special meeting of Alterman stockholders
may be called by the Board of Directors, the Chairman of the Board of Directors,
the President, any Vice-President or upon the written request of stockholders
holding at least 40% of Alterman's outstanding shares. On each matter submitted
to a vote of the Alterman stockholders, each stockholder is entitled to one vote
for each whole share owned and a proportionate, fractional vote for each
fractional share outstanding in the stockholder's name on Alterman's books.
Except as otherwise required by Delaware law, Alterman's Certificate of
Incorporation and By-laws provide that for matters requiring a majority
stockholder vote, a majority of shares represented in person or by proxy and
entitled to vote at a meeting of stockholders at which a quorum is present shall
decide such matter, and Directors are elected by a plurality of the votes cast
at such meeting.
Dissolution. In the event of the dissolution of Alterman, the stockholders
of Alterman are entitled to receive, after Alterman has made arrangements to pay
all claims and obligations in accordance with Delaware law, any remaining
assets. The assets so distributed to stockholders of
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Alterman will be distributed among the stockholders in proportion to the number
of shares held by them and recorded on the books of Alterman.
Liability of Directors. The By-laws of Alterman provide that each director
or officer, whether or not then in office, shall be indemnified against all
costs and expenses reasonably incurred by or imposed upon him or her in
connection with or arising out of any action, suit, or proceeding in which he or
she may be involved by reason of his or her being or having been a director or
officer of the corporation, such expenses to include the cost of reasonable
settlements (other than amounts paid to the corporation itself) made with a view
to curtailment of costs of litigation. Alterman shall not, however, indemnify
any director or officer with respect to matters as to which he or she may be
finally adjudged in any such action, suit, or proceeding to have been derelict
in the performance of his or her duty as such director or officer, nor in
respect of any matter on which any settlement or compromise is effected, if the
total expense, including the cost of such settlement, shall substantially exceed
the expense which might reasonably be incurred by such director or officer in
conducting such litigation to a final conclusion. The foregoing right of
indemnification shall not be exclusive of other rights to which any director or
officer may be entitled as a matter of law.
Rights of Inspection. Under Delaware corporate law, each Alterman
stockholder has the right, upon written demand under oath, to inspect, for any
proper purpose, Alterman's stock ledger, a list of its stockholders, and its
other books and records, and to make copies and extract therefrom.
Stockholder Liability. Under Delaware law, stockholders of a Delaware
corporation may be held personally liable for unpaid shares subscribed for
and/or held by such stockholder. Stockholders may also be liable for certain
claims against a dissolved corporation if certain Delaware law dissolution
procedures were not followed, but only to the extent of amounts distributed to
such stockholder in dissolution.
The foregoing is only a summary of certain characteristics of the
operations of the Georgia Portfolio and Alterman. The foregoing is not a
complete description of the documents cited. Shareholders should refer to the
provisions of the trust and corporate documents and Massachusetts and Delaware
law governing the Georgia Portfolio and Alterman, respectively, for a more
thorough description.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by Alterman of an
opinion from Hunton & Williams and the receipt by Muni Funds, on behalf of the
Georgia Portfolio, of an opinion from Willkie Farr & Gallagher, each dated the
Closing Date, substantially to the effect that, based upon certain facts,
assumptions and representations of the parties (including the principal
shareholders of Alterman), for Federal income tax purposes: (i) the transfer to
the Georgia Portfolio of all or substantially all of the assets of Alterman in
exchange solely for Shares and the assumption by the Georgia Portfolio of all of
the stated liabilities of Alterman, followed by the distribution of such Shares
to Alterman shareholders in exchange for their shares of Alterman in complete
liquidation of Alterman, will constitute a "reorganization" within the meaning
of
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Section 368(a)(1) of the Code, and the Georgia Portfolio and Alterman will each
be "a party to a reorganization" within the meaning of Section 368(b) of the
Code; (ii) no gain or loss will be recognized by Alterman upon the transfer of
all or substantially all of its assets to the Georgia Portfolio in exchange
solely for Shares and the assumption by the Georgia Portfolio of all of the
stated liabilities of Alterman, or upon the distribution of Shares to the
shareholders of Alterman; (iii) the basis of the assets of Alterman in the hands
of the Georgia Portfolio will be the same as the basis of such assets of
Alterman immediately prior to the transfer; (iv) the holding period of the
assets of Alterman in the hands of the Georgia Portfolio will include the period
during which such assets were held by Alterman; (v) no gain or loss will be
recognized by the Georgia Portfolio upon the receipt of the assets of Alterman
in exchange for Shares and the assumption by the Georgia Portfolio of all of the
stated liabilities of Alterman; (vi) no gain or loss will be recognized by the
shareholders of Alterman upon the receipt of Shares solely in exchange for their
shares of Alterman as part of the transaction; (vii) the aggregate basis of
Shares received by a shareholder of Alterman will be the same as the aggregate
basis of the shares of Alterman exchanged therefor; and (viii) the holding
period of Shares received by a shareholder of Alterman will include the holding
period during which the shares of Alterman exchanged therefor were held,
provided that at the time of the exchange the shares of Alterman were held as
capital assets by the shareholder.
While neither Alterman nor Muni Funds is aware of any adverse state or
local tax consequences of the proposed Reorganization, they have not requested
any ruling or opinion with respect to such consequences and shareholders may
wish to consult their own tax adviser with respect to such matters. The
dividend(s) required by the Plan to be declared and distributed by Alterman to
its shareholders prior to the Closing of the Reorganization will be taxable or
tax exempt, as the case may be, to Alterman shareholders in the same manner as
if the Reorganization had not been contemplated or entered into by Alterman and
Muni Funds.
LIQUIDATION AND TERMINATION OF ALTERMAN
If the Reorganization is effected, Alterman will be liquidated and
terminated as a diversified closed-end management investment company and
dissolved as a corporation under Delaware law.
PORTFOLIO SECURITIES
If the Reorganization is effected, SSBC will analyze and evaluate the
portfolio securities of Alterman being transferred to the Georgia Portfolio.
Consistent with the Georgia Portfolio's investment objective and policies, any
restrictions imposed by the Code and the best interests of the Georgia
Portfolio's shareholders (including former Alterman shareholders), SSBC will
determine the extent and duration to which the Alterman portfolio securities
will be maintained by the Georgia Portfolio. It is not currently anticipated
that there would be a significant rebalancing of the Alterman portfolio
securities following the consummation of the Reorganization. Subject to market
conditions at the time of any such rebalancing, the disposition of Alterman
portfolio securities may result in a capital gain or loss. The actual tax
consequences of any disposition of portfolio securities will vary depending upon
the specific security(ies) being sold.
27
<PAGE>
PORTFOLIO TURNOVER
The portfolio turnover rate for the Georgia Portfolio (i.e., the ratio of
the lesser of annual sales or purchases to the monthly average value of the
portfolio) (excluding from both the numerator and the denominator securities
with maturities at the time of acquisition of one year or less), for the year
ended March 31, 1999 was 48%. The portfolio turnover rate for Alterman for the
year ended April 30, 1999 was 11%.
CAPITALIZATION AND PERFORMANCE
PRO FORMA CAPITALIZATION (UNAUDITED)
The following table sets forth the unaudited capitalization of the Georgia
Portfolio and Alterman as of [INSERT], 1999 as adjusted giving effect to the
Reorganization discussed herein:/1/
<TABLE>
<CAPTION>
GEORGIA
GEORGIA PRO FORMA PORTFOLIO
PORTFOLIO ALTERMAN ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
(Actual) (Actual)
<S> <C> <C> <C> <C>
Net Assets $56,178,795 $22,325,772 115,724 $78,620,291
Net Asset
Value Per Share $ 13.39 $ 28.34 -- $ 13.39
Shares Outstanding 4,196,035 787,769 887,764 5,871,568
</TABLE>
________________
1 Assumes the Reorganization had been consummated on [INSERT], 1999, and is for
information purposes only. No assurance can be given as to how many shares of
the Georgia Portfolio will be received by shareholders of Alterman on the
date the Reorganization takes place, and the foregoing should not be relied
upon to reflect the number of shares of the Georgia Portfolio that actually
will be received on or after such date.
Total return is a measure of the change in value of an investment in a fund
over the period covered, which assumes that any dividends or capital gains
distributions are automatically reinvested in shares of the fund rather than
paid to the investor in cash. The formula for total return used by a fund is
prescribed by the SEC and includes three steps: (1) adding to the total number
of shares of the fund that would be purchased by a hypothetical $1,000
investment in the fund all additional shares that would have been purchased if
all dividends and distributions paid or distributed during the period had been
automatically reinvested; (2) calculating the redeemable value of the
hypothetical initial investment as of the end of the period by multiplying the
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period; and (3) dividing this account value
for the hypothetical investor by the amount of the initial investment, and
annualizing the result for periods of less than one year. Total return may be
stated with or without giving effect to any expense limitations in effect for a
fund.
28
<PAGE>
The following table reflects the average annual total return for the 1, 5
and 10 year periods ending April 30, 1999 for Alterman and March 31, 1999 for
the Georgia Portfolio, and the 30-day SEC yield for the Georgia Portfolio as of
[INSERT], 1999:
<TABLE>
<CAPTION>
ALTERMAN GEORGIA PORTFOLIO/1/
-------- --------------------
<S> <C> <C>
Average Annual Total Return:
1-year....................................... 3.31% 5.62%
3-year....................................... 3.40% 8.41%
5-year....................................... 3.61% N/A
10-year/Since inception...................... 5.92% 8.34%/2/
30-day SEC Yield............................. N/A %
</TABLE>
__________________
/1/ If SSBC had not temporarily waived fees and reimbursed expenses, the
cumulative total return of the Georgia Portfolio for the one year and since
inception periods would have been lower.
/2/ Since inception on April 4, 1994.
INVESTMENT MANAGER
SSBC is the investment manager for the Georgia Portfolio pursuant to an
investment management agreement with Muni Funds, on behalf of the Georgia
Portfolio. SunTrust is the investment manager for Alterman pursuant to an
investment management agreement with Alterman.
ADDITIONAL INFORMATION ABOUT THE GEORGIA PORTFOLIO AND ALTERMAN
As noted above, additional information about Alterman, the Georgia
Portfolio of Muni Funds and the Reorganization has been filed with the SEC and
may be obtained without charge by writing to Alterman Investment Fund, Inc., 182
Hilderbrand Drive, Suite 102, Atlanta, Georgia 30328, or by calling (800) 861-
1844.
Alterman and Muni Funds are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in
accordance therewith, files reports, proxy material and/or other information
about the applicable Fund with the Securities and Exchange Commission.
Such reports, proxy material and/or other information can be inspected and
copied at the Public Reference Room maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
material can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates and without
charge from Alterman or Muni Funds at the addresses set forth above.
The Board Members of Alterman Recommend that the Shareholders
of the Fund Vote in Favor of this Proposal.
29
<PAGE>
PROPOSAL 2: ELECTION OF DIRECTORS
Five directors are to be elected. The proxyholders intend to vote for the
five persons named below as directors for a one-year term of office.
Management recommends that the five nominees named below be elected to the
Board of Directors for one-year terms of office. The five nominees have
consented to being named in the proxy statement and to serve if elected. Unless
otherwise directed in the proxy form, the proxyholders intend to vote in favor
of electing the five nominees as directors for one-year terms of office and
until their respective successors are elected and shall qualify.
Although management does not contemplate the possibility, in the event any
nominee is not a candidate or is unable to serve as a director at the time of
the election, the proxies will be voted for any nominee who shall be designated
by the present Board of Directors to fill such vacancy.
The current members of the Board of Directors, who own of record and
beneficially approximately 18% of the voting securities of Alterman, have
informed Alterman that they intend to vote for the election of the five nominees
named below.
The name and age of each nominee, the term of office for which he is
proposed to be elected, his principal occupation, the period during which he has
served as a director, the number of shares of Alterman Common Stock beneficially
owned directly or indirectly by each nominee as of the close of business on
[INSERT], 1999, and the percentage of outstanding shares of Alterman's Common
Stock such ownership represented at [INSERT], 1999 (according to information
received by Alterman) are as set out below.
<TABLE>
<CAPTION>
SHARES OF
COMMON
STOCK
BENEFICIALLY PERCENT OF
PRINCIPAL DIRECTOR TERM OWNED AS OF OUTSTANDING
NAME OCCUPATION AGE SINCE EXPIRES [INSERT], 1999/1/ SHARES
- ---- ---------- --- ----- ------- ----------------- ------
<S> <C> <C> <C> <C> <C> <C>
Perry Alterman * General Manager, Cumberland 62 1991 1999 10,269/2/ 1.3/2/
Real Estate (family real
estate holdings)
Daniel Alterman*/3/ Partner, Alterman Real Estate, 45 1998 1999 49,200 6.3
Ltd.
Kusiel Kaplan*/3/ General Manager, Alterman 80 1998 1999 71,025 9.0
Enterprises, Ltd.
Stanley Friedman(3) Management of personal 68 1998 1999 7,000/2/ 0.8
investments
Joel F. Fryer Senior State Judge, State of 70 1980 1999 None 0
Georgia
All offices and 165,688/2/ 19.7/2/
Directors as a Group
(7 persons)
</TABLE>
30
<PAGE>
__________________
/*/ The named individual is an "interested person" as defined in the 1940 Act
due to the extent of such person's holdings of Alterman Common Stock and/or
position as an officer of Alterman.
/1/ Includes the beneficial ownership of shares of Common Stock held by the
named individuals and their wives individually or as custodian for their
minor children as follows: 1,300 shares held by Perry Alterman as custodian
for minor children. As to Daniel Alterman, includes 40,000 shares held by
the Sam P. Alterman Family Foundation of which he is one of five trustees.
As to Kusiel Kaplan, includes 58,725 shares held by wife.
/2/ Shares which are beneficially owned by the emancipated descendants of Perry
Alterman and Daniel Alterman and by or for the benefit of such emancipated
descendants are not included in the table. Messrs. Perry and Daniel
Alterman disclaim the beneficial ownership of the shares held by their
brothers and their brothers' wives, emancipated descendants and by or for
the benefit of their and their brothers' emancipated descendants. As to Mr.
Friedman, includes 6,000 shares held in two corporations controlled by Mr.
Friedman.
/3/ Upon the resignation of Paul Alterman from the board of directors on
November 20, 1997, the board of directors elected Daniel Alterman to fill
the remaining term of the position left vacant by such resignation.
Effective March 17, 1998 the Board of Directors elected Kusiel Kaplan to
serve as a director of Alterman to fill the remaining term of the vacancy
created by the death of Malcolm Alterman (who had served as a director
since 1986) and elected Stanley Friedman to serve as a director to fill the
remaining term of the vacancy created by the death of Al Garber (who had
served as a director since 1980).
C.H. Shepherd, 81, has been Controller of Alterman since May 27, 1982
and Secretary of Alterman since August 19, 1980 and will continue to serve as
Controller and Secretary until his successor is elected and qualifies.
Alterman has no standing audit, nominating or compensation committees.
During fiscal 1999, a total of four meetings of Alterman's Board of
Directors were held. No director participated in fewer than 75% of the total
number of Board meetings.
During the past five years, the current directors of Alterman have
been engaged in the principal occupation shown in the table above. Perry
Alterman and Daniel Alterman are cousins. Mr. Kaplan is the husband of Paula
Alterman Kaplan, an owner of approximately 10.6% of the outstanding Common Stock
of Alterman.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3, 4 or 5, or written statements
representing that no Form 5 was required, furnished to Alterman by Alterman's
directors, officers subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and persons holding ten
percent (10%) or more of the outstanding Common Stock of Alterman, Alterman
believes that all filing requirements of such persons under Section 16 of the
Exchange Act during the fiscal year ended April 30, 1999 have been satisfied.
INVESTMENT ADVISER'S AGREEMENT WITH SUNTRUST BANK
On August 19, 1980, the stockholders approved the Investment Adviser's
Agreement (the "Adviser's Agreement") between Alterman and SunTrust.
SunTrust does not serve as investment adviser for any other
"investment companies" as defined in the 1940 Act, as amended, but is
responsible for the management of investments of many private investment
portfolios. None of the nominees to the Board of Directors or present officers
of Alterman are officers, employees, or directors of SunTrust.
31
<PAGE>
Under the Adviser's Agreement, SunTrust furnishes Alterman investment
advice with respect to the investment and reinvestment of the assets comprising
Alterman's investment portfolio. The Adviser's Agreement further provides that
SunTrust, as agent and attorney-in-fact with respect to Alterman's investment
portfolio, may, when it deems appropriate, without prior consultation with
Alterman and at the risk of Alterman, buy, sell, exchange, convert or otherwise
trade in, retain or reinvest in securities and other investments, place orders
for the execution of such investment transactions with or through such brokers,
dealers, issuers or other persons as SunTrust may select, and take any action or
non-action that SunTrust reasonably deems appropriate. All services provided
Alterman pursuant to the Adviser's Agreement are furnished by SunTrust.
Under the Adviser's Agreement, Alterman is required to pay SunTrust for its
services furnished under the Adviser's Agreement, within fifteen days after the
close of each calendar month, an amount equal to one-twelfth (1/12) of .1125% of
the market value of Alterman's portfolio securities at the close of each
preceding calendar month. In addition, Alterman has agreed to indemnify SunTrust
in the absence of willful misfeasance, bad faith or gross negligence. During
fiscal 1999, Alterman paid advisory fees aggregating $24,858 to SunTrust
pursuant to the Adviser's Agreement.
In order to avoid any potential conflict of interest in connection with the
rendering of investment advice and the execution of investment transactions, no
investment transactions are made through the Bond Department of SunTrust.
The Adviser's Agreement was entered into and became effective on August 20,
1980 and provides that it shall remain in effect for two years from such date,
and from year to year thereafter so long as continuance is specifically approved
at least annually by the Board of Directors of Alterman or by vote of the
holders of a majority of the voting securities of Alterman. In addition, under
the provisions of the Adviser's Agreement and of the 1940 Act the Adviser's
Agreement may not be extended unless such extension is approved annually by a
majority of the directors of Alterman who are not parties to the contract or
"interested persons" of any such party at a meeting called for the purpose of
considering approval of the Adviser's Agreement. On May 27, 1982 the Board of
Directors of Alterman unanimously approved an extension of the Adviser's
Agreement through August 20, 1983, and a one-year extension was unanimously
approved in each subsequent year. On May 7, 1999, the Board of Directors of
Alterman unanimously approved an extension of the Adviser's Agreement through
August 20, 2000.
The Adviser's Agreement further provides that each party has the right to
terminate the Adviser's Agreement without penalty upon sixty (60) days written
notice to the other party, and that the Adviser's Agreement will automatically
terminate in the event of its "assignment" as that term is defined under the
1940 Act, unless an order is issued by the Securities and Exchange Commission
conditionally or unconditionally exempting such assignment from the provisions
of Section 15(a) of the 1940 Act in which event the Adviser's Agreement shall
remain in full force and effect.
The address of SunTrust, a bank organized under the laws of the State of
Georgia and a member of the Federal Reserve System, is One Park Place, N.E.,
Atlanta, Georgia 30303.
32
<PAGE>
SunTrust of Georgia, a bank holding company, owns 100% of the outstanding
stock of SunTrust. The address of SunTrust of Georgia is One Park Place,
Atlanta, Georgia 30303.
The following table sets forth certain information concerning the directors
of SunTrust:
<TABLE>
<CAPTION>
Position
With Position
SunTrust With Principal
Name Bank Registrant Occupation Address
- ---- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Mary B. Bullock Director None President, Agnes Scott Agnes Scott College
College 141 East College Ave.
Decatur, GA 30030
William M. Chace Director None President, Emory Emory University
University Atlanta, GA 30322
Gaylord O. Coan Director None Chief Executive Gold Kist, Inc.
Officer, Gold Kist, Inc. P. O. Box 2210
Atlanta, GA 30301
A.D. Correll Director None Chairman, Chief Georgia-Pacific Corporation
Executive Officer, P.O. Box 105605
Georgia-Pacific Atlanta, GA 30348
Corporation
R.W. Courts, II Director None President, Atlantic Atlantic Realty Company
Realty Company 50 Hurt Plaza
Atlanta, GA 30303
A.W. Dahlberg Director None Chairman, President, The Southern Company
and Chief Executive 270 Peachtree Street, NE
Officer, The Southern Suite 2200
Company Atlanta, GA 30303
Larry L. Gellerstedt, III Director None President, and Chief American Business Products,
Executive Officer, Inc.
American Business P. O. Box 105684
Products, Inc. Atlanta, GA 30348
John T. Glover Director None President, Post Post Properties, Inc.
Properties, Inc. 3350 Cumberland Circle
Suite 2200
Atlanta, GA 30339
L. Phillip Humann Director None President, SunTrust SunTrust Banks, Inc.
Banks, Inc. P.O. Box 4418
Atlanta, GA 30302
William B. Johnson Director None Chairman of the Board, W.B. Johnson Properties, L.L.C.
and President, W.B. 3424 Peachtree Road, N.E.
Johnson Properties, Suite 2075
L.L.C. Atlanta, GA 30326
M. Douglas Ivester Director None Chairman of the Board The Coca-cola Company
Officer, and Chief P. O. Drawer 1734
Executive Officer, Atlanta, GA 30301
The Coca-Cola Company
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Position
With Position
SunTrust With Principal
Name Bank Registrant Occupation Address
- ---- --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
J. Hicks Lanier Director None Chairman of the Board Oxford Industries, Inc.
and President, Oxford 222 Piedmont Avenue, N.E.
Industries, Inc. Atlanta, Georgia
J.L. Lanier, Jr. Director None Chairman of the Board, Dan River, Inc.
Dan River, Inc. P. O. Box 261
Danville, VA 24543
Robert R. Long Chairman None President, SunTrust SunTrust Bank, Atlanta
and Bank, Atlanta P. O. Box 4418
President Atlanta, GA 30302
Dennis M. Love Director None President and Chief Printpack, Inc.
Executive Officer, P. O. Box 43687
Printpack, Inc. Atlanta, GA 30378
Charles H. McTier Director None President, Robert Robert Woodruff Foundation
Woodruff Foundation 50 Hurt Plaza
Suite 1200
Atlanta, GA 30301
Larry L. Prince Director None Chairman of the Board, Genuine Parts Company
Genuine Parts Company 2999 Circle 75 Parkway
Atlanta, GA 30339
R. Randall Rollins Director None Chairman of the Board, Rollins, Inc.
Rollins, Inc. P. O. Box 647
Atlanta, GA 30301
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser's Agreement provides that SunTrust will recommend and implement
investment decisions for Alterman. Subject to the written direction of the
Directors and President of Alterman, SunTrust will select the brokerage firms
which effect securities transactions for Alterman. Alterman paid no commissions
during its last fiscal year.
The Adviser's Agreement provides that in placing orders for the execution
of portfolio transactions for Alterman, SunTrust may allocate such transactions
to such brokers and dealers for execution on such markets, at such prices and at
such commission rates as in the good faith judgment of SunTrust will be in the
best interests of Alterman. SunTrust may take into consideration in the
selection of brokers and dealers not only available prices and rates of
brokerage commissions but also other relevant factors (including execution
capabilities, research and other services such as account evaluation, analysis
and reporting and market information services), which are expected to enhance
the general portfolio management capabilities of SunTrust. Accordingly,
transactions in securities may be effected on behalf of Alterman with brokers
and dealers at prices and rates of commissions that may be in excess of those
which another broker might have charged for effecting the same transaction, in
recognition of the value of brokerage, research or other services provided by
the executing broker. Moreover, research services furnished by brokers through
whom securities transactions are effected on behalf of
34
<PAGE>
Alterman may be used by SunTrust in servicing all of its accounts generally, and
not all of such services may be used by SunTrust in connection with Alterman.
While there will be no agreement or formula for the allocation of brokerage
business on the basis of such factors, all else being equal, the Board of
Directors has designated certain brokers which have in the past provided
brokerage and other services to Alterman as brokers to be selected in future
investment transactions.
SunTrust performs various trust and investment advisory services for
various other clients. Under the Adviser's Agreement, SunTrust may give advice
and take action with respect to any of its other clients, which may differ from
advice given or the timing or nature of action taken with respect to Alterman,
so long as it is the policy of SunTrust, to the extent practical, to allocate
investment opportunities to Alterman over a period of time on a fair and
equitable basis relative to other clients.
In addition, SunTrust has no obligation to purchase or sell, or to
recommend for purchase or sale, for Alterman, any security or other investment
which SunTrust, its principals, affiliates or employees may purchase or sell for
its or their own accounts or for the account of any other clients, if in the
opinion of SunTrust such transaction or investment appears unsuitable,
impractical or undesirable for Alterman.
EXECUTIVE COMPENSATION
During the fiscal year ended April 30, 1999 no executive officer received
from Alterman aggregate remuneration in excess of $60,000. Messrs. Max
Alterman, Malcolm Alterman, Paul Alterman, Perry Alterman, Daniel Alterman and
Kusiel Kaplan received no remuneration from Alterman during their respective
tenure as directors or officers. Mr. Fryer received $7,000 for fiscal year
April 30, 1999 and Mr. Friedman received $7,000 for fiscal year April 30, 1999,
Mr. Friedman received $7,000 since becoming a director in March, 1998 and Mr. C.
H. Shepherd, who is an officer but not a director of Alterman, received no
remuneration as an officer. Mr. Shepherd receives $1,524 per month in exchange
for certain bookkeeping and related regulatory compliance services rendered to
Alterman. Directors who are not "interested persons" of Alterman, as defined in
the 1940 Act, receive $500 per month plus $200 per directors meeting attended in
person.
The Board Members of Alterman Recommend that the Shareholders
of the Fund Vote in Favor of this Proposal.
PROPOSAL 3: SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The independent certified public accountants selected by the Directors and
ratified by the stockholders of Alterman to audit the financial and accounting
matters of Alterman for fiscal 1999 was Birnbrey, Minsk & Minsk LLC. Pursuant
to the 1940 Act, a majority of the entire Board of Directors of Alterman,
including a majority of those members of the Board of Directors of Alterman who
are not officers or employees or investment advisors or interested persons of
the investment advisor of Alterman, selected Birnbrey, Minsk & Minsk LLC as
Alterman's independent public accountant for fiscal year 2000 subject to
termination without penalty upon the vote of a majority of the outstanding
voting securities of Alterman at a meeting called for such
35
<PAGE>
purpose. The selection of Birnbrey, Minsk & Minsk LLC as Alterman's independent
public accountant for fiscal year 2000 will be submitted for ratification or
rejection by the holders of a majority of the shares voted at the meeting. The
proxyholders named in the accompanying form of proxy intend to vote "FOR"
ratification of Birnbrey, Minsk & Minsk LLC as the independent auditors of
Alterman for fiscal 2000 unless contrary action is specified by the stockholders
in the space provided in the form of proxy.
Alterman expects that representatives of Birnbrey, Minsk & Minsk LLC will
be present at the Annual Meeting of Stockholders with the opportunity to make a
statement if they desire to do so and that they will be available to respond to
appropriate questions.
The members of the current Board of Directors, who own of record
approximately [19%] of the voting securities of Alterman, have informed Alterman
that they intend to vote for ratification of the selection of Birnbrey, Minsk &
Minsk LLC as auditors of Alterman for fiscal 2000.
The Board Members of Alterman Recommend that the Shareholders
of the Fund Vote in Favor of this Proposal.
ADDITIONAL INFORMATION
GENERAL
The majority of the cost of preparing, printing and mailing the enclosed
proxy card(s) and Proxy Statement/Prospectus and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter, telephone or telegraph, will be paid by Alterman.
In addition to solicitation by mail, certain officers, employees and
representatives of Alterman and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies [by telegram or] personally.
To participate in the Annual Meeting, the shareholder may submit the proxy
card originally sent with the Proxy Statement/Prospectus or attend in person.
Any proxy given by a shareholder is revocable until voted at the Annual Meeting.
PROPOSALS OF SHAREHOLDERS
If the Reorganization is not completed and Alterman holds an annual meeting
of stockholders in 2000, appropriate proposals of stockholders intended to be at
such meeting must be received by Alterman by [March 16, 2000] for inclusion in
its proxy statement and form of proxy relating to that meeting. If the date of
the next annual meeting is advanced by more than 30 calendar days or delayed by
more than 90 calendar days from the date of the annual meeting to which the
proxy statement relates, Alterman shall, in a timely manner, inform its
stockholders of the change, and the date by which proposals of stockholders must
be received.
36
<PAGE>
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
No Board member is aware of any matters that will be presented for action
at the Annual Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
Alterman.
Please complete, sign and return the enclosed proxy card(s) promptly. No
postage is required if mailed in the united states.
By order of the Boards of Directors,
/s/ C.H. Shepherd
C.H. Shepherd
Secretary
37
<PAGE>
INDEX OF EXHIBITS AND APPENDICES
Exhibit A: Form of Agreement and Plan of Reorganization
Appendix A: 5% Shareholders of the Georgia Portfolio
Appendix B: Fund Shares Owned by Trustees of Muni Funds
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this __th day of _________, 1999, between and among Smith Barney Muni Funds, a
Massachusetts business trust with its principal place of business at 388
Greenwich Street, New York, New York 10013 ("Muni Funds"), on behalf of the
Georgia Portfolio (the "Acquiring Fund"), and Alterman Investment Fund, Inc., a
Delaware corporation with its principal place of business at 182 Hilderbrand
Drive, Suite 102, Atlanta, Georgia 30328 (the "Acquired Fund"), and solely for
purposes of section 10 hereof, Salomon Smith Barney, Inc.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the "Reorganization")
will consist of the transfer of all or substantially all of the assets of the
Acquired Fund to the Acquiring Fund in exchange solely for Class A voting shares
of beneficial interest ($.001 par value per share) of the Acquiring Fund (the
"Acquiring Fund Shares"), the assumption by the Acquiring Fund of all of the
stated liabilities of the Acquired Fund and the distribution of the Acquiring
Fund Shares to the shareholders of the Acquired Fund in complete liquidation of
the Acquired Fund as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR THE ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND STATED
LIABILITIES AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer to the Acquiring Fund all or substantially all of the Acquired
Fund's assets as set forth in section 1.2, and the Acquiring Fund agrees in
exchange therefor (i) to deliver to the Acquired Fund that number of full and
fractional Acquiring Fund Shares determined by dividing the value of the
Acquired Fund's net assets transferred to the Acquiring Fund, computed in the
manner and as of the time and date set forth in section 2.1, by the net asset
value of one Acquiring Fund Share, computed in the manner and as of the time and
date set forth in section 2.2; and (ii) to assume all of the stated liabilities
of the Acquired Fund, as set forth in section 1.3. Such transactions shall take
place at the closing provided for in section 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(collectively "Assets") shall consist of all assets, including, without
limitation, all cash, cash equivalents, securities, commodities and futures
interests and dividends or interest or other receivables that are owned by or
owed to the Acquired Fund and any deferred or prepaid expenses shown on the
unaudited statement of assets and liabilities of the Acquired Fund prepared
A-1
<PAGE>
as of the effective time of the closing (the "Effective Time Statement"),
prepared in accordance with generally accepted accounting principles ("GAAP")
applied consistently with those of the Acquired Fund's most recent audited
balance sheet. The assets shall constitute at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Acquired Fund immediately before the Closing (excluding for
these purposes assets used to pay the dividends and other distributions paid
pursuant to section 1.4).
1.3. The Acquired Fund will endeavor to discharge all the Acquired Fund's
known liabilities and obligations prior to the Closing Date as defined in
section 3.1, other than those liabilities and obligations which would otherwise
be discharged at a later date in the ordinary course of business. Upon Closing,
the Acquiring Fund shall assume only those stated liabilities of the Acquired
Fund reflected in the Effective Time Statement, which the Acquiring Fund shall
have the right to review prior to finalization, and shall not assume any other
liabilities, whether absolute or contingent, known or unknown, accrued or
unaccrued, not reflected thereon.
1.4. On or as soon as practicable prior to the Closing Date as defined in
section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid), the excess of its interest
income excludable from gross income under section 103(a) of the Code over its
deductions disallowed under sections 265 and 171(a)(2) of the Code, and realized
net capital gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of assets provided for in section 1.1
(the "Liquidation Time"), the Acquired Fund will distribute to the Acquired
Fund's shareholders of record, determined as of the Valuation Time (the
"Acquired Fund Shareholders"), on a pro rata basis, the Acquiring Fund Shares
received by the Acquired Fund pursuant to section 1.1 and will completely
liquidate. Such distribution and liquidation will be accomplished by the
transfer of the Acquiring Fund Shares then credited to the account of the
Acquired Fund on the books of the Acquiring Fund to open accounts on the share
records of the Acquiring Fund in the names of the Acquired Fund Shareholders.
The aggregate net asset value of Acquiring Fund Shares to be so credited to
Acquired Fund Shareholders shall be equal to the aggregate net asset value of
the Acquired Fund shares owned by such shareholders as of the Valuation Time.
All issued and outstanding shares of the Acquired Fund will simultaneously be
cancelled on the books of the Acquired Fund, although share certificates
representing interests in shares of the Acquired Fund will represent a number of
Acquiring Fund Shares after the Closing Date as determined in accordance with
section 2.3. The Acquiring Fund will not issue certificates representing
Acquiring Fund Shares in connection with such exchange. The Acquired Fund will
then, as soon as practicable, terminate as a closed-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and dissolve and terminate its corporate existence under Delaware law.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
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1.7. Any reporting responsibility of the Acquired Fund until its
dissolution in accordance with Delaware law including, without limitation, the
responsibility for filing of regulatory reports, tax returns, or other documents
with the Securities and Exchange Commission (the "Commission"), any state
securities commission, and any federal, state or local tax authorities or any
other relevant regulatory authority, is and shall remain the responsibility of
the Acquired Fund; provided, however, that notwithstanding any dissolution in
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accordance with Delaware law, the Acquired Fund shall remain responsible for the
filing of any regulatory reports, tax returns or other documents in connection
with its termination and deregistration as a management investment company under
the 1940 Act and any applicable state laws.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and after
the Closing Date and shall be turned over to the Acquiring Fund as soon as
practicable following the Closing Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of regular
trading on The New York Stock Exchange, Inc. on the business day immediately
preceding the Closing Date, as defined in Section 3.1 (such time and date being
hereinafter called the "Valuation Time") after the declaration and payment of
any dividends and/or other distributions on that date, using the valuation
procedures set forth in the Acquiring Fund's Declaration of Trust, as amended,
and then-current prospectus or statement of additional information.
2.2. The net asset value of an Acquiring Fund share shall be the net asset
value per share computed as of the Valuation Time using the valuation procedures
referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the Acquired Fund
determined in accordance with section 2.1 by the net asset value of an Acquiring
Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall
be [INSERT], 1999, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 4:00 P.M., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
the Acquired Fund or at such other place and time as the parties may agree.
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3.2. Acquired Fund shall deliver to Acquiring Fund on the Closing Date a
schedule of assets.
3.3. Wachovia Bank of Georgia, N.A., as custodian for the Acquired Fund,
shall deliver at the Closing a certificate of an authorized officer stating that
(a) the Assets shall have been delivered in proper form to PNC Bank, National
Association, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by Custodian for Acquired Fund to Custodian for Acquiring Fund for
examination no later than five business days preceding the Closing Date and
transferred and delivered by the Acquired Fund as of the Closing Date by the
Acquired Fund for the account of Acquiring Fund duly endorsed in proper form for
transfer in such condition as to constitute good delivery thereof. Acquired
Fund's portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, shall be delivered as
of the Closing Date by book entry in accordance with the customary practices of
such depositories and Custodian for Acquiring Fund. The cash to be transferred
by the Acquired Fund shall be delivered by wire transfer of federal funds on the
Closing Date.
3.4. American Stock Transfer & Trust Company (the "Transfer Agent"), on
behalf of the Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage ownership (to three
decimal places) of outstanding Acquired Fund Shares owned by each such
shareholder immediately prior to the Closing. The Acquiring Fund shall issue
and deliver a confirmation evidencing the Acquiring Fund Shares to be credited
on the Closing Date to the Acquired Fund or provide evidence satisfactory to the
Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired
Fund's account on the books of the Acquiring Fund. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request to effect the transactions contemplated by this
Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the New
York Stock Exchange or another primary trading market for portfolio securities
of the Acquiring Fund or the Acquired Fund shall be closed to trading or trading
thereupon shall be restricted, or (b) trading or the reporting of trading on
such Exchange or elsewhere shall be disrupted so that, in the judgment of the
Board of Trustees of Muni Funds and Board of Directors of Acquired Fund,
accurate appraisal of the value of the net assets with respect to the Acquiring
Fund Shares or the Acquired Fund Shares is impracticable, the Closing Date shall
be postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
(a) The Acquired Fund is a corporation duly organized and validly
existing under the laws of the State of Delaware with power under the
Acquired Fund's Certificate
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of Incorporation, as amended, to own all of its properties and assets and
to carry on its business as it is now being conducted;
(b) The Acquired Fund is registered with the Commission as a closed-
end management investment company under the 1940 Act, and such registration
is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired
Fund of the transactions contemplated herein, except such as have been
obtained under the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1940
Act and such as may be required by state corporate and securities laws;
(d) Other than with respect to contracts entered into in connection
with the portfolio management of the Acquired Fund which shall terminate on
or prior to the Closing Date, the Acquired Fund is not, and the execution,
delivery and performance of this Agreement by the Acquired Fund will not
result, in violation of Delaware law or of the Acquired Fund's Certificate
of Incorporation, as amended, or By-Laws, or of any material agreement,
indenture, instrument, contract, lease or other undertaking to which the
Acquired Fund is a party or by which it is bound, and the execution,
delivery and performance of this Agreement by the Acquired Fund will not
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the Acquired Fund is a party or by which it is
bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquired Fund or any
properties or assets held by it. The Acquired Fund knows of no facts which
might form the basis for the institution of such proceedings which would
materially and adversely affect its business and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities, including the
Investment Portfolio, Operations, and Changes in Net Assets, and the
Financial Highlights of the Acquired Fund at and for the year ended April
30, 1999, has been audited by Birnbrey, Minsk & Minsk LLC, independent
certified public accountants, and are in accordance with GAAP consistently
applied, and such statements (copies of which have been furnished to the
Acquiring Fund) present fairly, in all material respects, the financial
position, results of operations, changes in net assets and financial
highlights of the Acquired Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Acquired Fund required
to be reflected on a statement of assets and liabilities (including the
notes thereto) in accordance with GAAP as of such date not disclosed
therein;
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(g) Since April 30, 1999, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquired Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquiring Fund. For purposes
of this subsection (g), a decline in net asset value per share of the
Acquired Fund due to declines in market values of securities in the
Acquired Fund's portfolio, the discharge of Acquired Fund liabilities, or
the redemption of Acquired Fund shares by Acquired Fund Shareholders shall
not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other
tax returns and reports of the Acquired Fund required by law to have been
filed by such dates (including any extensions) shall have been filed and
are or will be correct in all material respects, and all federal and other
taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Acquired Fund's knowledge, no such
return is currently under audit and no unpaid assessment has been asserted
with respect to such returns;
(i) For each taxable year of its operation beginning on or after May
1, 1982 (including the taxable year ending on the Closing Date), the
Acquired Fund has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected to be
treated as such, has been eligible to and has computed its federal income
tax under Section 852 of the Code, and will have distributed all of its
investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have
been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and applicable state securities laws, (ii)
are, and on the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, and (iii) will be held at the
time of the Closing by the persons and in the amounts set forth in the
records of the Transfer Agent, as provided in section 3.3. The Acquired
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security convertible into any of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to section 1.2 and full right, power, and authority
to sell, assign, transfer and deliver such assets hereunder free of any
liens or other encumbrances, except those liens or encumbrances as to which
the Acquiring Fund has received notice at or prior to the Closing, and upon
delivery and payment for such assets, the Acquiring Fund will acquire good
and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933
Act and the 1940 Act, except
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those restrictions as to which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action
on the part of the Directors of the Acquired Fund, and, subject to the
approval of the Acquired Fund Shareholders, this Agreement constitutes a
valid and binding obligation of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for
use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary in connection with the
transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
only insofar as it relates to the Acquired Fund, will, on the effective
date of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
materially misleading; provided, however, that the representations and
warranties in this section shall not apply to statements in or omissions
from the Proxy Statement and the Registration Statement made in reliance
upon and in conformity with information that was furnished or should have
been furnished by the Acquiring Fund for use therein.
4.2. Muni Funds, on behalf of the Acquiring Fund, represents and warrants
to the Acquired Fund as follows:
(a) Muni Funds is a business trust duly organized and validly
existing under the laws of The Commonwealth of Massachusetts with power
under the Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being
conducted;
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(b) Muni Funds is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is
in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated herein, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may
be required by state securities laws;
(d) Muni Funds is not, and the execution, delivery and performance
of this Agreement by the Trust will not result, in violation of
Massachusetts law or of the Trust's Declaration of Trust, as amended, or
By-Laws, or of any material agreement, indenture, instrument, contract,
lease or other undertaking to which the Acquiring Fund is a party or by
which it is bound, and the execution, delivery and performance of this
Agreement by the Acquiring Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Acquiring Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any
properties or assets held by it. The Acquiring Fund knows of no facts which
might form the basis for the institution of such proceedings which would
materially and adversely affect its business and is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business or
its ability to consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities, including the
Investment Portfolio, Operations, and Changes in Net Assets, and the
Financial Highlights of the Acquiring Fund at and for the year ended March
31, 1999 has been audited by KPMG LLP, independent certified public
accountants, and are in accordance with GAAP consistently applied, and such
statements (copies of which have been furnished to the Acquired Fund)
present fairly, in all material respects, the financial position, results
of operations, changes in net assets and financial highlights of the
Acquiring Fund as of such date in accordance with GAAP, and there are no
known contingent liabilities of the Acquiring Fund required to be reflected
on a statement of assets and liabilities (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein;
(g) Since March 31, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred except as otherwise
disclosed to and accepted in writing by the Acquired Fund. For purposes of
this subsection (g), a decline in net asset value per share of the
Acquiring Fund due to declines in market values of securities in the
Acquiring Fund's portfolio, the discharge of Acquiring Fund liabilities, or
the redemption of Acquiring Fund shares by Acquiring Fund shareholders
shall not constitute a material adverse change;
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(h) At the date hereof and at the Closing Date, all federal and
other tax returns and reports of the Acquiring Fund required by law to have
been filed by such dates (including any extensions) shall have been filed
and are or will be correct in all material respects, and all federal and
other taxes shown as due or required to be shown as due on said returns and
reports shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Acquiring Fund's knowledge, no
such return is currently under audit and no unpaid assessment has been
asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification as a
regulated investment company and has elected to be treated as such, has
been eligible to and has computed its federal income tax under Section 852
of the Code, and will do so for the taxable year including the Closing
Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in
compliance in all material respects with applicable registration
requirements of the 1933 Act and applicable state securities laws and (ii)
are, and on the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable (recognizing that, under
Massachusetts law, Acquiring Fund Shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Acquired Fund). The Acquiring Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any of the Acquiring
Fund shares, nor is there outstanding any security convertible into any of
the Acquiring Fund shares;
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant
to the terms of this Agreement, will at the Closing Date have been duly
authorized and, when so issued and delivered, will be duly and validly
issued and outstanding Acquiring Fund Shares, and will be fully paid and
non-assessable (recognizing that, under Massachusetts law, Acquiring Fund
Shareholders, under certain circumstances, could be held personally liable
for the obligations of the Acquired Fund);
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired
Fund has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action
on the part of the Trustees of the Muni Funds and this Agreement will
constitute a valid and binding obligation of the Muni Funds, on behalf of
the Acquiring Fund, enforceable in accordance with its terms, subject, as
to enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
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(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for
use in any other document filed or to be filed with any federal, state or
local regulatory authority (including the National Association of
Securities Dealers, Inc.), which may be necessary in connection with the
transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information
of the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(p) The Proxy Statement to be included in the Registration
Statement, only insofar as it relates to the Acquiring Fund, will, on the
effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were
made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to
statements in or omissions from the Proxy Statement and the Registration
Statement made in reliance upon and in conformity with information that was
furnished or should have been furnished by the Acquired Fund for use
therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
Act and such of the state securities laws as may be necessary in order to
continue its operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each covenants to operate
its business in the ordinary course between the date hereof and the Closing
Date, it being understood that (a) such ordinary course of business will include
(i) the declaration and payment of customary dividends and other distributions
and (ii) such changes as are contemplated by the Funds' normal operations; and
(b) each Fund shall retain exclusive control of the composition of its portfolio
until the Closing Date.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to the Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable
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action necessary to obtain approval of the transactions contemplated herein.
Such meeting shall be scheduled for no later than [INSERT], 1999, subject to the
Commission having declared the Registration Statement effective by such time to
allow for a timely mailing of the Proxy Statement for such meeting.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund Shares and will provide the
Acquiring Fund with a list of affiliates of the Acquired Fund.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. The Acquiring Fund covenants to prepare the Registration Statement on
Form N-14 (the "Registration Statement"), in compliance with the 1933 Act, the
1934 Act and the 1940 Act in connection with the meeting of the Acquired Fund
Shareholders to consider, among other things, approval of this Agreement and the
transactions contemplated herein. The Acquired Fund covenants to prepare the
Proxy Statement to be included in the Registration Statement in compliance with
the 1934 Act and the 1940 Act in connection with the meeting of the Acquired
Fund Shareholders to consider, among other things, approval of this Agreement
and the transactions contemplated herein. The Acquiring Fund will file the
Registration Statement, including the Proxy Statement, with the Commission. The
Acquired Fund will provide the Acquiring Fund with information reasonably
necessary for the preparation of a prospectus, which will include the Proxy
Statement referred to in section 4.1(o), all to be included in the Registration
Statement, in compliance in all material respects with the 1933 Act, the 1934
Act and the 1940 Act.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
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5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund shares to be transferred to Acquired Fund pursuant to this Agreement and
(ii) assume the stated liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing, terminate and deregister as a
closed-end management investment company under the 1940 Act and dissolve and
terminate its corporate existence under Delaware law.
5.12. The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of Muni Funds, with respect to
the Acquiring Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than Acquired Fund, its adviser or any of their affiliates) against the Acquired
Fund, the Acquiring Fund or their advisers, directors, trustees or officers
arising out of this Agreement and (ii) no facts known to the Acquired Fund which
the Acquired Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Muni Funds, with respect to the Acquiring Fund, made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request;
6.3. The Acquired Fund shall have received on the Closing Date an opinion
of Willkie Farr & Gallagher, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, to the effect that:
(a) Muni Funds has been duly formed and is an existing business
trust;
A-12
<PAGE>
(b) the Acquiring Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Muni
Funds' registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed and delivered
by Muni Funds, on behalf of the Acquiring Fund, and constitutes a valid and
legally binding obligation of Muni Funds, on behalf of the Acquiring Fund,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(d) the execution and delivery of the Agreement did not, and the
exchange of the Acquired Fund's assets for Acquiring Fund Shares pursuant
to the Agreement will not, violate the Acquiring Fund's Declaration of
Trust, as amended, or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquiring Fund under the Federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's
assets for Acquiring Fund Shares, pursuant to the Agreement have been
obtained or made; and
Such opinion may state that it is solely for the benefit of the Acquired Fund,
its Directors and its officers. Such counsel may rely as to matters governed by
the laws of The Commonwealth of Massachusetts on an opinion of Massachusetts
counsel and/or certificates of officers or Trustees of the Acquiring Fund. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby, as the Acquired Fund may reasonably request.
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Acquired Fund, contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date, with the same force and effect as if
made on and as of the Closing Date; and there shall be (i) no pending or
threatened litigation brought by any person (other than Acquiring Fund, its
adviser or any of their affiliates) against the Acquiring Fund, the Acquired
Fund or their advisers, directors/trustees or officers arising out of this
Agreement and (ii) no facts known to the Acquiring Fund which the Acquiring Fund
reasonably believes might result in such litigation.
A-13
<PAGE>
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquired Fund made in this Agreement are true and correct on and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request;
7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Hunton & Williams, in a form reasonably satisfactory to the Acquiring Fund,
and dated as of the Closing Date, to the effect that:
(a) the Acquired Fund is a duly incorporated, validly existing
Delaware corporation;
(b) the Acquired Fund has the corporate power to carry on its
business as presently conducted in accordance with the description thereof
in the Acquired Fund's registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed and delivered by
the Acquired Fund and constitutes a valid and legally binding obligation of
the Acquired Fund enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
laws of general applicability relating to or affecting creditors' rights
and to general equity principles;
(d) the execution and delivery of the Agreement did not, and the
exchange of the Acquired Fund's assets for Acquiring Fund Shares pursuant
to the Agreement will not, violate the Acquired Fund's Certificate of
Incorporation, as amended, or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquired Fund under the Federal laws of the United States or the laws of
the State of Delaware for the exchange of the Acquired Fund's assets for
Acquiring Fund Shares, pursuant to the Agreement have been obtained or
made; and
Such opinion may state that it is solely for the benefit of the Acquiring Fund,
its Trustees and its officers. Such counsel may rely on certificates of officers
or Directors of the Acquired Fund and, as to matters governed by the laws of the
State of Delaware, on an opinion of Delaware counsel. Such opinion also shall
include such other matters incident to the transaction contemplated hereby, as
the Acquiring Fund may reasonably request.
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
A-14
<PAGE>
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Fund's
Certificate of Incorporation, as amended, and By-Laws, applicable Delaware law
and the 1940 Act, and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Acquired
Fund may waive the conditions set forth in this section 8.1;
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein;
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
8.5. The Acquired Fund shall have received an opinion of Hunton & Williams
and the Acquiring Fund shall have received an opinion of Willkie Farr &
Gallagher, each dated the Closing Date, substantially to the effect that, based
upon certain facts, assumptions and representations, for Federal income tax
purposes: (i) the transfer to the Acquiring Fund of all or substantially all of
the assets of the Acquired Fund in exchange solely for Shares and the assumption
by the Acquiring Fund of all of the stated liabilities of the Acquired Fund,
followed by the distribution of such Shares to the Acquired Fund shareholders in
exchange for their shares of the Acquired Fund in complete liquidation of the
Acquired Fund, will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code, and the Acquiring Fund and the Acquired Fund will each be
"a party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Acquired Fund upon the transfer
of all or substantially all of its assets to the Acquiring Fund in exchange
solely for Shares and the assumption by the Acquiring Fund of all of the stated
liabilities of the Acquired Fund, or upon the distribution of Shares to the
shareholders of the Acquired Fund; (iii) the basis of the assets of the
A-15
<PAGE>
Acquired Fund in the hands of the Acquiring Fund will be the same as the basis
of such assets of the Acquired Fund immediately prior to the transfer; (iv) the
holding period of the assets of the Acquired Fund in the hands of the Acquiring
Fund will include the period during which such assets were held by the Acquired
Fund; (v) no gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund in exchange for Shares and the
assumption by the Acquiring Fund of all of the stated liabilities of the
Acquired Fund; (vi) no gain or loss will be recognized by the shareholders of
the Acquired Fund upon the receipt of Shares solely in exchange for their shares
of the Acquired Fund as part of the transaction; (vii) the aggregate basis of
Shares received by a shareholder of the Acquired Fund will be the same as the
aggregate basis of the shares of the Acquired Fund exchanged therefor; and
(viii) the holding period of Shares received by a shareholder of the Acquired
Fund will include the holding period during which the shares of the Acquired
Fund exchanged therefor were held, provided that at the time of the exchange the
shares of the Acquired Fund were held as capital assets by the shareholder. The
delivery of such opinion is conditioned upon receipt by each of Hunton &
Williams and Willkie Farr & Gallagher of representations it shall request of the
Acquired Fund (including its principal shareholders) and the Acquiring Fund,
respectively. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the condition set forth in this
section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's directors and officers from and against any
and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally the Acquired Fund or any of its
directors or officers may become subject, insofar as any such loss, claim damage
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Acquiring Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
9.2. The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's trustees and officers from and against any
and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally the Acquiring Fund or any of its
trustees or officers may become subject, insofar as any such loss, claim damage
liability or expense (or actions with respect thereto) arises out of or is based
on any breach by the Acquired Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement. The Acquired Fund further
agrees to accept full responsibility for and to indemnify and hold harmless the
Acquiring Fund and each of the Acquiring Fund's trustees and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally the Acquiring Fund or any of its
trustees or officers may become subject, insofar as any such loss, claim damage
liability or expense (or actions with respect thereto) arises out of or is based
on any and all statements, misstatements and/or omissions relating to the
Acquired Fund, including (but not limited to) any and all financial information
relating to the Acquired Fund (whether pro forma, audited or unaudited), either
included in or incorporated by
A-16
<PAGE>
reference into the Proxy Statement and Registration Statement referred to in
Sections 4.1(o) and 5.7, respectively.
10. FEES AND EXPENSES
10.1. Muni Funds, on behalf of the Acquiring Fund, and Alterman represents
and warrants to the other that it has no obligations to pay any brokers or
finders fees in connection with the transactions provided for herein.
10.2. The Acquiring Fund shall bear all of the expenses it incurs in
connection with the Reorganization. The first $40,000 in legal and accounting
expenses of the Reorganization incurred by the Acquired Fund will be borne
solely by Salomon Smith Barney and legal and accounting expenses in excess of
$40,000 incurred by the Acquired Fund will be borne equally by Salomon Smith
Barney and by the Acquired Fund. Any such expenses which are so borne by
Salomon Smith Barney and the Acquired Fund will be solely and directly related
to the Reorganization within the meaning of Revenue Ruling 73-54, 1973-1 C.B.
187.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
11.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
12. TERMINATION
This Agreement may be terminated and the transactions contemplated hereby
may be abandoned by either party by (i) mutual agreement of the parties, or (ii)
by either party if the Closing shall not have occurred on or before [INSERT],
unless such date is extended by mutual agreement of the parties, or (iii) by
either party if the other party shall have materially breached its obligations
under this Agreement or made a material and intentional misrepresentation herein
or in connection herewith. In the event of any such termination, this Agreement
shall become void and there shall be no liability hereunder on the part of any
party or their respective directors/trustees or officers, except for any such
material breach or intentional misrepresentation, as to each of which all
remedies at law or in equity of the party adversely affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided, however, that following the
meeting of the Acquired Fund Shareholders called by the Acquired Fund pursuant
to section 5.3 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of the
A-17
<PAGE>
Acquiring Fund Shares to be issued to the Acquired Fund shareholders under this
Agreement to the detriment of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, 182 Hilderbrand Drive, Suite 102, Atlanta, Georgia 30328, with a
copy to Hunton & Williams, NationsBank Plaza, Suite 4100, 600 Peachtree Street,
N.E., Atlanta, Georgia 30308-2216, Attn.: David M. Carter, Esq., or to the
Acquiring Fund, 388 Greenwich Street, New York, New York 10013, with a copy to
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
Attn.: Burton M. Leibert, Esq., or to any other address that the Acquired Fund
or the Acquiring Fund shall have last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
15.4. Muni Funds is organized as a Massachusetts business trust, and
references in this Agreement to Muni Funds mean and refer to the its Trustees
from time to time serving under the Declaration of Trust on file with the
Secretary of State of The Commonwealth of Massachusetts, as the same may be
amended from time to time, pursuant to which Muni Funds conducts its business.
It is expressly agreed that the obligations of Muni Funds hereunder shall not be
binding upon any of its Trustees, shareholders, nominees, officers, agents, or
employees of Muni Funds or the Acquiring Fund personally, but bind only the
property of the Acquiring Fund as provided in the Muni Funds' Declaration of
Trust. Moreover, no series of Muni Funds other than the Acquiring Fund shall be
responsible for the obligations of Muni Funds hereunder, and all persons shall
look only to the assets of the Acquiring Fund to satisfy the obligations of Muni
Funds hereunder. The execution and the delivery of this Agreement have been
authorized by Muni Funds' Board of Trustees, on behalf of the Acquiring Fund,
and this Agreement has been signed by authorized officers of the Acquiring Fund
acting as such, and neither such authorization by such Trustees, nor such
execution and delivery by such officers, shall be deemed to have been
A-18
<PAGE>
made by any of them individually or to impose any liability on any of them
personally, but shall bind only the property of the Acquiring Fund as provided
in Muni Funds' Declaration of Trust.
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
[Remainder of page intentionally left blank.]
A-19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President or Vice President and its seal to be affixed
thereto and attested by its Secretary or Assistant Secretary.
Attest: ALTERMAN INVESTMENT FUND, INC.
______________________________ By:_________________________________
Name:
Title: Its:________________________________
Attest: SMITH BARNEY MUNI FUNDS
on behalf of the Georgia Portfolio
______________________________ By:_________________________________
Name:
Title: Its:________________________________
Solely with respect to section 10 hereof:
Attest: SALOMON SMITH BARNEY, INC.
______________________________ By:_________________________________
Name:
Title: Its:________________________________
A-20
<PAGE>
Appendix A
5% SHAREHOLDERS OF THE GEORGIA PORTFOLIO
As of July 17, 1999 the following shareholders beneficially owned 5% or
more of a class of shares of the Georgia Portfolio:
Georgia Portfolio Class L
Richard D. Bryant, Bruce Bryant, 5.3%
Christy B. Weaver, Executors
Estate of Jean P. Bryant
PO Box 226
Macon, GA 31202
A-1
<PAGE>
Appendix B
FUND SHARES OWNED BY TRUSTEES OF MUNI FUNDS
B-1
<PAGE>
PROSPECTUS OF THE GEORGIA PORTFOLIO DATED
JULY 29, 1999 IS INCORPORATED BY REFERENCE
TO MUNI FUNDS' N-1A REGISTRATION
STATEMENT
<PAGE>
PART B
INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER 13, 1999
Acquisition of the Assets of
ALTERMAN INVESTMENT FUND, INC. ("Alterman")
182 Hilderbrand Drive, Suite 102
Atlanta, Georgia 30328
(404) 237-9891
By and in Exchange for Shares of
THE GEORGIA PORTFOLIO
("Georgia Portfolio")
a series of
SMITH BARNEY MUNI FUNDS
388 Greenwich Street
New York, New York 10013
(212) 816-6474
This Statement of Additional Information, relating specifically to the
proposed transfer of all or substantially all of the assets of Alterman to the
Georgia Portfolio, a series of Muni Funds, in exchange for Class A shares of the
Georgia Portfolio and the assumption by the Georgia Portfolio of stated
liabilities of Alterman, consists of this cover page and the following described
documents, each of which accompanies this Statement of Additional Information
and is incorporated herein by reference.
1. Statement of Additional Information for the Georgia Portfolio, dated
July 29, 1999.
2. Annual Report of the Georgia Portfolio for the year ended March 31,
1999.
3. Annual Report of Alterman for the year ended April 30, 1999.
This Statement of Additional Information is not a prospectus. A combined
Prospectus/Proxy Statement, dated [INSERT], 1999, relating to the above-
referenced matter may be obtained without charge by calling or writing Alterman
or the Georgia Portfolio at the applicable telephone number or address set forth
above. This Statement of Additional Information should be read in conjunction
with the combined Prospectus/Proxy Statement.
B-1
<PAGE>
FINANCIAL STATEMENTS
The Annual Report of the Georgia Portfolio for the year ended March 31,
1999 and the Annual Report of Alterman for the year ended April 30, 1999, each
including audited financial statements, notes to the financial statements and
report of the independent auditors, are incorporated by reference herein. To
obtain a copy of the Annual Reports without charge, please call Alterman at
(800) 861-1844 or the Georgia Portfolio at (800) 451-2010, as applicable.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The following tables set forth the unaudited pro forma condensed Statement
of Assets and Liabilities as of April 30, 1999, and the unaudited pro forma
condensed Statement of Operations for the twelve month period ended April 30,
1999 for the Georgia Portfolio and Alterman as adjusted giving effect to the
Reorganization.
PRO FORMA CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Georgia Portfolio Alterman Pro forma Georgia Portfolio
(Actual) (Actual) Adjustments (As adjusted)
------------------ -------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Investments, at value $ 55,926,942 $ 22,174,734 $ -- $ 78,101,676
Cash 16,283 16,283
Other assets less liabilities 251,853 134,755 $ 208,748 595,356
----------------- -------------- ------------------- -------------------
Net assets $ 56,178,795 $ 22,325,772 $ 208,748 $ 78,713,315
================= ============== =================== ===================
Shares outstanding 4,196,035 787,769 879,544 5,863,348
Net asset value per share $ 13.39 $ 28.34 $ 13.42
</TABLE>
_________________________
B-2
<PAGE>
COMBINED ASSETS AND LIABILITIES
AT APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Georgia Portfolio Alterman Pro forma Georgia Portfolio
(Actual) (Actual) Adjustments (As adjusted)
------------------ --------------- --------------- -------------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value $ 55,926,941.90 $ 22,174,734.00 $ -- $ 78,101,675.90
Cash (283,128.32) 16,283.00 -- (266,845.32)
Receivable for Fund shares sold 23,459.94 -- -- 23,459.94
Receivable for securities sold -- -- -- --
Interest receivable 909,114.59 343,231.00 -- 1,252,345.59
Prepaid Expenses -- 272.00 -- 272.00
----------------- --------------- -------------- -------------------
Total Assets $ 56,576,388.11 $ 22,534,520.00 $ 79,110,908.11
Liabilities:
Payable for fund shares purchased 23,192.11 -- -- 23,192.11
Payable for securities purchased 186,056.72 -- -- 186,056.72
Management fees payable 129,506.69 3,928.00 (3,928.00) 129,506.69
Distribution fees payable 6,483.10 -- -- 6,483.10
Servicing fees payable 991.39 -- -- 991.39
Dividend payable 208,262.03 204,820.00 (204,820.00) 208,262.03
Accrued expenses and other liabilities (156,899.24) -- -- (156,899.24)
----------------- --------------- -------------- -------------------
Total Liabilities 397,592.80 208,748.00 (208,748.00) 397,592.80
Total Net Assets $ 56,178,795.31 $ 22,325,772.00 $ 78,713,315.31
Net assets:
Par value of shares of beneficial interest $ 4,196.29 $ 1,969,423.00 -- $ 1,973,619.29
Capital paid in excess of par 54,009,203.26 389,555.00 -- 54,398,758.26
Net Assets transferred at 1980 Reorg. -- 17,957,417.00 -- 17,957,417.00
Undistributed/Overdistributed NII (11,825.24) 596,364.00 208,748 793,238.76
Accumulated net realized gain/(loss) (104,287.00) 705,937.00 -- 601,650.00
Net unrealized appreciation of investments 2,281,508.00 707,076.00 -- 2,988,584.00
----------------- --------------- -------------- -------------------
Total Net Assets $ 56,178,795.31 $ 22,325,722.00 $ 78,713,315.31
Outstanding Shares: 4,196,034.74 787,769.00
A 2,612,166.01 787,769.000 879,544.089 4,279,479.09
B 1,037,740.44 -- -- 1,037,740.44
L 546,128.29 -- -- 546,128.29
Y -- -- -- --
NAV:
A $ 13.39 $ 28.34 2.11650
B $ 13.39 -- --
L $ 13.38 -- --
Y -- -- --
</TABLE>
B-3
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Georgia Georgia
Portfolio Alterman Pro Forma Portfolio
(Actual) (Actual) Adjustments (As adjusted)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income $2,431,531 $1,095,629 -- $3,527,160
-------------------------------------------------------------
Total Investment Income 2,431,531 1,095,629 -- 3,527,160
Expenses
Management fee 221,437 24,858 80,144 326,439
All other expenses 250,290 124,771 (12,483) 362,578
-------------------------------------------------------------
Total expenses before reductions 471,727 149,629 67,661 689,017
-------------------------------------------------------------
Expense reductions (48,063) 0 48,063 689,017
Expenses, net 423,664 149,629 115,724 0
-------------------------------------------------------------
Net investment income (loss) 2,007,887 946,000 115,724 2,838,143
-------------------------------------------------------------
Net realized and Unrealized Gain (loss) on
Investments:
Net realized gain (loss) from Investments 26,950 26,978 -- 53,928
Net unrealized appreciation (depreciation) 2,281,508 -- 2,443,134
of investments 161,626
-------------------------------------------------------------
Net increase in net assets from operations $4,366,325 $1,134,604 -- $5,335,205
=============================================================
</TABLE>
___________________________
B-4
<PAGE>
SCHEDULE OF INVESTMENTS
Portfolio of Investments at April 30, 1999 (Unaudited)
B-5
<PAGE>
THE ANNUAL REPORT AND STATEMENT OF ADDITIONAL INFORMATION OF
THE GEORGIA PORTFOLIO DATED MARCH 31, 1999 AND JULY 29, 1999,
RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY
SMITH BARNEY MUNI FUNDS
B-6
<PAGE>
THE ANNUAL REPORT AND PROSPECTUS OF ALTERMAN DATED APRIL 30, 1999
AND AUGUST 14, 1992, RESPECTIVELY, ARE INCORPORATED BY REFERENCE
TO THE MOST RECENT FILINGS THEREOF BY ALTERMAN
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/ Prospectus to the extent that a statement contained herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
B-7
<PAGE>
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Reference is made to ARTICLE V of Registrant's Declaration of Trust for a
complete statement of its terms. Section 5.2 of ARTICLE V provides: "No Trustee,
officer, employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee or agent thereof
for any action or failure to act (including without limitation the failure to
compel in any way any former or acting Trustee to redress any breach of trust)
except for his own bad faith, willful misfeasance, gross negligence or reckless
disregard of his or its duties."
ITEM 16. EXHIBITS
1. (a) Restated Declaration of Trust dated as of April 23, 1986 is
incorporated herein by reference to Exhibit 1 to Pre-Effective Amendment No. 1
to the Registration Statement on Form N-1A (File 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 on Form N-1A.
(c) Instrument of the Trustees, dated June 12, 1998, establishing and
designating classes of certain series of the Trust is incorporated by reference
to Exhibit 1(a) to Post-Effective Amendment No. 40 on Form N-1A.
2. Bylaws of the Trust are incorporated by reference to Exhibit 2 to Pre-
Effective Amendment No. 2 on Form N-1A.
3. Not applicable.
4. Form of Agreement and Plan of Reorganization is filed herewith as
Exhibit A.
5. Not applicable.
6. (a) Management Agreement between the National Portfolio & Mutual
Management Corp. is incorporated by reference to Exhibit 5(b) to Post-Effective
Amendment No. 18 on Form N-1A.
(b) Management Agreement between the Limited Term Portfolio and
Mutual Management Corp. is incorporated by reference to Exhibit 5(c) to Post-
Effective Amendment No. 18 on Form N-1A.
C-1
<PAGE>
(c) Management Agreement between the New York Portfolio and Mutual
Management Corp. is incorporated by reference to Exhibit 5(e) to Post-Effective
Amendment No. 18 on Form N-1A.
(d) Management Agreement between the Florida Portfolio and Mutual
Management Corp. is incorporated by reference to Exhibit (5)(h) to Post-
Effective Amendment No. 16 on Form N-1A.
(e) Management Agreement between the Georgia Portfolio and Mutual
Management Corp. is incorporated by reference to Exhibit 5(m) to Post-Effective
Amendment No. 27 on Form N-1A.
(f) Management Agreement between the Pennsylvania Portfolio and
Mutual Management Corp. is incorporated by reference to Exhibit 5(q) to Post-
Effective Amendment No. 27 on Form N-1A.
(g) Form of Management Agreement between California Money Market
Portfolio (and New York Money Market Portfolio) and Mutual Management Corp. is
incorporated by reference to Exhibit 5(s) to Post-Effective Amendment No. 34 on
Form N-1A.
7. (a) Distribution Agreement between Registrant and Smith Barney,
Harris Upham & Co. Incorporated is incorporated by reference to Exhibit 6 to
Post-Effective Amendment No. 7 on Form N-1A.
(b) Distribution Agreement between Registrant and CFBDS, Inc. is
incorporated by reference to Exhibit e.2 to Post-Effective Amendment No. 41 on
Form N-1A.
(c) Broker Dealer Contract between the Mutual Management Corp. and
CFBDS, Inc. is incorporated by reference to Exhibit e.2. to Post-Effective
Amendment No. 41 on Form N-1A.
8. Not applicable.
9. Custodian Agreement between Registrant and Provident National Bank is
incorporated by reference to Exhibit 8 to Pre-Effective Amendment No. 1 on Form
N-1A.
10. (a) Plan of Distribution pursuant to Rule 12b-1 on behalf of the
California Money Market Portfolio is incorporated by reference to Exhibit 15 to
Post-Effective Amendment No. 21 on Form N-1A.
(b) Plan of Distribution pursuant to Rule 12b-1 on behalf of the
Georgia Portfolio is incorporated by reference to Exhibit 15(f) to Post-
Effective Amendment No. 27 on Form N-1A.
(c) Plan of Distribution pursuant to Rule 12b-1 on behalf of the
Pennsylvania Portfolio is incorporated by reference to Exhibit 15(j) to Post-
Effective Amendment No. 27 on Form N-1A.
C-2
<PAGE>
(d) Form of Plan of Distribution pursuant to Rule 12b-1 on behalf of
Class A shares of each Portfolio, except the California Money Market and the New
York Money Market Portfolios is incorporated by reference to Exhibit 15(n) to
Post-Effective Amendment No. 34 on Form N-1A.
(e) Form of Amended and Restated Shareholder Services and
Distribution Plan pursuant to Rule 12b-1 is incorporated by reference to Exhibit
m.5 to Post-Effective Amendment No. 41 on Form N-1A.
(f) Amended and Restated Plan pursuant to Rule 18f-3 is incorporated
by reference to Exhibit 18 to Post-Effective Amendment No. 40 on Form N-1A.
11. Form of Opinion and Consent of Willkie Farr & Gallagher. Filed
herewith.
12. (a) Form of Opinion and Consent of Willkie Farr & Gallagher
supporting the tax matters and consequences to shareholders discussed in the
prospectus. Filed herewith.
(b) Form of Opinion and Consent of Hunton & Williams supporting the
tax matters and consequences to shareholders discussed in the prospectus. Filed
herewith.
13. Transfer Agency Agreement between Registrant and Provident Financial
Processing Corp. is incorporated by reference to Exhibit 9 to Post-Effective
Amendment No. 12 on Form N-1A.
14. (a) Consent of KPMG LLP. To be filed by amendment.
(b) Consent of Birnbrey, Minsk and Minsk LLC. Filed herewith.
15. Schedule of Computation of Performance Quotations is incorporated by
reference to Exhibit 16 to Post-Effective Amendment No. 5 on Form N-1A.
16. Powers of Attorney. (Incorporated by reference to Post-Effective
Amendment No. 41 of Registrant's filing on Form N-1A.)
17. Form of proxy card. Filed herewith.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
a part of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other 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
C-3
<PAGE>
not be used until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment shall be deemed to
be a new registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering of them.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
the Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and State of New
York on the 13th day of October, 1999.
SMITH BARNEY MUNI FUNDS
By: /s/ Heath B. McLendon
--------------------------------------
Heath B. McLendon
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Heath B. McLendon President, Chief Executive October 13, 1999
- ------------------------------------- Officer and Trustee
Heath B. McLendon
/s/ Lee Abraham* Trustee October 13, 1999
- -------------------------------------
Lee Abraham
/s/ Allan J. Bloostein* Trustee October 13, 1999
- -------------------------------------
Allan J. Bloostein
/s/ Jane F. Dasher* Trustee October 13, 1999
- -------------------------------------
Jane F. Dasher
/s/ Donald R. Foley* Trustee October 13, 1999
- -------------------------------------
Donald R. Foley
/s/ Paul Hardin III* Trustee October 13, 1999
- -------------------------------------
Paul Hardin III
/s/ Richard E. Hanson* Trustee October 13, 1999
- -------------------------------------
Richard E. Hanson
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Roderick C. Rasmussen* Trustee October 13, 1999
- -------------------------------------
Roderick C. Rasmussen
/s/ John P. Toolan* Trustee October 13, 1999
- -------------------------------------
John P. Toolan
/s/ Lewis E. Daidone Senior Vice President October 13, 1999
- ------------------------------------- and Treasurer
Lewis E. Daidone
*By: /s/ Christina T. Sydor Secretary October 13, 1999
--------------------------------
Christina T. Sydor
Pursuant to Power of Attorney
</TABLE>
C-6
<PAGE>
Exhibit Index
Exhibit Description
- ------- -----------
10 Consent of Independent Auditors of
Alterman
11 Form of opinion and consent of Wilkie
Farr, counsel to Georgia Portfolio
12(a) Form of opinion and consent of Wilkie
Farr, tax counsel to Georgia Portfolio
12(b) Form of opinion and consent of Hunton &
Williams, tax counsel to Alterman
17 Form of proxy card
<PAGE>
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
Alterman Investment Fund, Inc.:
We consent to the incorporation by reference of our report dated June 14, 1999
appearing in the Annual Report to Shareholders for the year ended April 30, 1999
in this Registration Statement on Form N-14 of Smith Barney Muni Funds, and to
the references to us in such Registration Statement.
/s/ Birnbrey, Minsk & Minsk LLC
BIRNBREY, MINSK & MINSK LLC
Atlanta, Georgia
October 11, 1999
<PAGE>
EXHIBIT 11
_________, 1999
Smith Barney Muni Funds
Georgia Portfolio
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
We have acted as counsel to the Georgia Portfolio (the "Georgia Portfolio"), a
series of Smith Barney Muni Funds, a Massachusetts business trust ("Muni
Funds"), in connection with the proposed acquisition by the Georgia Portfolio of
all or substantially all of the assets and stated liabilities of Alterman
Investment Fund, Inc. ("Alterman"), a Delaware corporation, in exchange for
shares of beneficial interest of the Georgia Portfolio (the "Shares"), pursuant
to an Agreement and Plan of Reorganization, dated as of ________, 1999, executed
by Muni Funds, on behalf of the Georgia Portfolio, and by Alterman (the "Plan").
We have examined Muni Funds' Registration Statement on Form N-14 substantially
in the form in which it is to become effective (the "Registration Statement"),
Muni Funds' Declaration of Trust and Bylaws, and the Plan.
We have also examined and relied upon other documents and certificates with
respect to factual matters as we have deemed necessary to render the opinions
expressed herein. We have assumed, without independent verification, the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with originals of all documents submitted to us
as copies. We have further assumed that the Plan constitutes the legal, valid
and binding obligation of Alterman, enforceable against Alterman in accordance
with its terms.
We are members of the bar of the State of New York and do not purport to be
experts on, or to express any opinion herein, concerning any law, other than the
laws of the State of New York and the federal laws of the United States of
America. Anything in this opinion to the contrary notwithstanding, we render or
imply no opinion with respect to compliance with any applicable securities or
anti-fraud statutes, rules, regulations or other similar laws of any state
(including The
<PAGE>
Commonwealth of Massachusetts) or the United States of America. In rendering the
opinions herein, we assume that there will be no material changes in the facts
and conditions on which we base such opinions between the date hereof and the
time of issuance of Shares pursuant to the Plan.
Based upon the foregoing, we are of the opinion that:
(a) Muni Funds is duly organized and validly existing under the laws of
The Commonwealth of Massachusetts;
(b) The Shares of the Georgia Portfolio to be issued as contemplated in
the Plan have been duly authorized, and, subject to the receipt by the
Georgia Portfolio of consideration equal to the net asset value
thereof (but in no event less than the par value thereof), when issued
in accordance with the Plan, will be validly issued, fully paid and
nonassessable Shares of the Georgia Portfolio under the laws of The
Commonwealth of Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the references to us in the Prospectus/Proxy
Statement included as part of the Registration Statement and to the filing of
this opinion as an exhibit to any application made by or on behalf of Muni Funds
on behalf of the Georgia Portfolio or any distributor or dealer in connection
with the registration or qualification of the Georgia Portfolio or the Shares
under the securities laws of any state or other jurisdiction.
This opinion is furnished by us as counsel to the Georgia Portfolio, is solely
for the benefit of Muni Funds and its Trustees and its officers in connection
with the above described acquisition of assets and may not be relied upon for
any other purpose or by any other person.
Very truly yours,
<PAGE>
EXHIBIT 12(A)
____________, 1999
Smith Barney Muni Funds
Georgia Portfolio
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
You have asked us for our opinion concerning certain federal income tax
consequences to (a) Alterman Investment Fund, Inc., a diversified closed-end
management investment company organized as a Delaware corporation ("Alterman"),
(b) the Georgia Portfolio (the "Georgia Portfolio"), a non-diversified series of
Smith Barney Muni Funds, an open-end management investment company organized as
a Massachusetts business trust ("Muni Funds"), and (c) holders of shares of
common stock in Alterman ("Alterman Shareholders") when Alterman Shareholders
receive shares of beneficial interest of the Georgia Portfolio (the "Georgia
Portfolio Shares") in exchange for their common stock in Alterman pursuant to an
acquisition by the Georgia Portfolio of all or substantially all of the assets
of Alterman in exchange for Georgia Portfolio Shares and the assumption by the
Georgia Portfolio of stated liabilities of Alterman (collectively, the
"Reorganization"), all pursuant to an agreement and plan of reorganization.
We have reviewed such documents and materials as we have considered necessary
for the purpose of rendering this opinion. In rendering this opinion, we have
assumed that such documents as yet unexecuted will, when executed, conform in
all material respects to the proposed forms of such documents that we have
examined. In addition, we have assumed the genuineness of all signatures, the
capacity of each party executing a document so to execute that document, the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies.
We have made inquiry as to the underlying facts which we considered to be
relevant to the conclusions set forth in this letter. The opinions expressed in
this letter are based upon certain factual statements relating to Alterman and
the Georgia Portfolio set forth in the Registration Statement on
<PAGE>
Form N-14 (the "Registration Statement") filed by Muni Funds, on behalf of the
Georgia Portfolio, with the Securities and Exchange Commission and
representations made in letters from Alterman (including the principal
shareholders of Alterman), and Muni Funds, on behalf of the Georgia Portfolio,
addressed to us for our use in rendering this final opinion. We have no reason
to believe that these representations and facts are not valid, but we have not
attempted to verify independently any of these representations and facts, and
this opinion is based upon the assumption that each of them is accurate.
Capitalized terms used herein and not otherwise defined shall have the meaning
given them in the Registration Statement.
The conclusions expressed herein are based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations issued thereunder, published
rulings and procedures of the Internal Revenue Service and judicial decisions,
all as in effect on the date of this letter.
Based upon the foregoing, we are of the opinion that for federal income tax
purposes:
(i) the transfer to the Georgia Portfolio of all or substantially all of
the assets of Alterman in exchange solely for the Georgia Portfolio
Shares and the assumption by the Georgia Portfolio of all of the
stated liabilities of Alterman, followed by the distribution of such
Georgia Portfolio Shares to the Alterman Shareholders in exchange
for their common stock of Alterman in complete liquidation of
Alterman, will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Code, and the Georgia Portfolio and
Alterman will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by Alterman upon the transfer of
all or substantially all of its assets to the Georgia Portfolio in
exchange solely for Georgia Portfolio Shares and the assumption by
the Georgia Portfolio of all of the stated liabilities of Alterman,
or upon the distribution of Georgia Portfolio Shares to the Alterman
Shareholders;
(iii) the basis of the assets of Alterman in the hands of the Georgia
Portfolio will be the same as the basis of such assets of Alterman
immediately prior to the transfer;
(iv) the holding period of the assets of Alterman in the hands of the
Georgia Portfolio will include the
2
<PAGE>
period during which such assets were held by Alterman;
(v) no gain or loss will be recognized by the Georgia Portfolio upon the
receipt of the assets of Alterman in exchange for Georgia Portfolio
Shares and the assumption by the Georgia Portfolio of all of the
stated liabilities of Alterman;
(vi) no gain or loss will be recognized by the Alterman Shareholders upon
the receipt of Georgia Portfolio Shares solely in exchange for their
shares of Alterman as part of the transaction;
(vii) the aggregate basis of Georgia Portfolio Shares received by a
shareholder of Alterman will be the same as the aggregate basis of
the shares of Alterman exchanged therefor; and
(viii) the holding period of Georgia Portfolio Shares received by a
shareholder of Alterman will include the holding period during which
the shares of Alterman exchanged therefor were held, provided that
at the time of the exchange the shares of Alterman were held as
capital assets by the shareholder.
Very truly yours,
3
<PAGE>
[HUNTON & WILLIAMS LETTERHEAD]
EXHIBIT 12(b)
_________ __, 1999
Alterman Investment Fund, Inc.
182 Hilderbrand Drive, N.W.
Suite 102
Atlanta, Georgia 30328
Reorganization of Alterman Investment Fund, Inc.
And Smith Barney Muni Funds, Georgia Portfolio
Certain Federal Income Tax Matters
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Alterman Investment Fund, Inc., a Delaware
corporation (the "Acquired Fund"), in connection with the proposed acquisition
of the assets of the Acquired Fund by Smith Barney Muni Funds, Georgia
Portfolio, a separate portfolio of a Massachusetts business trust (the
"Acquiring Fund"). This letter refers to the proposed acquisition of assets as a
"Reorganization." You have requested our opinion concerning certain federal
income tax consequences of the Reorganization.
With respect to the Reorganization: (1) the Acquired Fund will transfer all of
its assets to the Acquiring Fund in exchange for shares of beneficial interest
of the Acquiring Fund (the "Acquiring Fund Shares"); (2) the Acquiring Fund will
assume the stated liabilities, if any, of the Acquired Fund; (3) the Acquired
Fund will distribute the Acquiring Fund Shares (including fractional shares, if
any) to its shareholders; and (4) the Acquired Fund will terminate its
existence. No shareholders of the Acquired Fund are entitled to dissenters'
rights with respect to the Reorganization.
The Reorganization will be accomplished pursuant to an Agreement and Plan of
Reorganization (the "Agreement"). In giving this opinion, we have examined the
Agreement and such other documents as we have considered necessary. In
addition, appropriate officers of the Acquired Fund and the Acquiring Fund have
represented to us the following facts:
<PAGE>
Alterman Investment Fund, Inc.
_____ __, 1999
Page 2
1. The Acquired Fund qualifies, and will continue to qualify up to the
effective time of the Reorganization, as a regulated investment company (a
"RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). This means, among other things, that the Acquired Fund will satisfy
the distribution requirements of section 852(a)(1) of the Code for its taxable
year ending on the effective date of the Reorganization.
2. The Acquiring Fund qualifies, and will continue to qualify after the
Reorganization, as a RIC under Subchapter M of the Code and as a separate
corporation under section 851(g) of the Code.
3. The fair market value of the Acquiring Fund Shares received by an
Acquired Fund shareholder will be approximately equal to the fair market value
of the Acquired Fund shares surrendered in exchange.
4. The Acquiring Fund will acquire at least 90% of the fair market value of
the net assets and at least 70% of the fair market value of the gross assets
held by the Acquired Fund immediately before the Reorganization. For this
purpose, assets of the Acquired Fund held immediately before the Reorganization
are deemed to include (a) amounts paid or payable for expenses incurred by the
Acquired Fund in connection with the Reorganization and (b) all redemptions and
distributions made by the Acquired Fund in connection with the Reorganization
(except for regular, normal dividends).
5. The Acquiring Fund will continue the historic investment business of the
Acquired Fund (with substantially the same investment objectives as those used
by the Acquired Fund) or use a majority of the Acquired Fund's historic business
assets in an investment business. For this purpose, the Acquired Fund's
historic business assets include any assets disposed of by the Acquired Fund
pursuant to the Agreement.
6. There is no plan or intention by the Acquiring Fund to sell or otherwise
dispose of, or to cause the sale or disposition of, any of the assets of the
Acquired Fund acquired in the Reorganization, except for (a) dispositions made
in the ordinary course of business and/or (b) the sale of a minority of the
Acquired Fund's assets (including any assets disposed of by the Acquired Fund
pursuant to the Agreement) if necessary to comply with the Acquiring Fund's
investment objectives or to comply with its investment limitations.
7. There is no intercorporate indebtedness between the Acquiring Fund and
the Acquired Fund.
<PAGE>
Alterman Investment Fund, Inc.
_____ __, 1999
Page 3
8. None of the Acquired Fund's shares has been or will be redeemed directly
or indirectly (including, without limitation, through a partnership) by the
Acquired Fund in anticipation of the Reorganization, and the Acquired Fund has
not made and will not make any extraordinary distribution with respect to its
shares in anticipation of the Reorganization (except for any distribution
necessary for the Acquired Fund to comply with the distribution requirements of
section 852(a)(1) of the Code).
9. The Acquiring Fund has no plan or intention to reacquire directly or
indirectly (including, without limitation, through a partnership) or to make any
extraordinary distribution with respect to any Acquiring Fund Shares issued in
the Reorganization, except for redemptions pursuant to a demand of a shareholder
in the ordinary course of the Acquiring Fund's business as an open-end
investment company pursuant to section 22(e) of the Investment Company Act of
1940. There is no formal or informal agreement between the Acquiring Fund and
any shareholder of the Acquired Fund for the shareholder to make any such
demand.
10. The Acquiring Fund (a) has not transferred and will not transfer cash or
other property to the Acquired Fund in anticipation of the Reorganization and
(b) has not made and will not make any loan to the Acquired Fund in anticipation
of the Reorganization.
11. The Acquiring Fund, the Acquired Fund, and the Acquired Fund's
shareholders have paid or will pay their respective expenses, if any, incurred
in connection with the Reorganization, except that the Acquiring Fund and/or
Salomon Smith Barney, Inc. might pay expenses of the Acquired Fund solely and
directly related to the Reorganization.
12. The liabilities, if any, of the Acquired Fund to be assumed by the
Acquiring Fund and the liabilities to which the assets of the Acquired Fund are
subject, if any, were incurred by the Acquired Fund in the ordinary course of
business, except for liabilities for expenses of the Acquired Fund solely and
directly related to the Reorganization.
13. On the effective date of the Reorganization, each of the fair market
value and the adjusted federal income tax basis of the Acquired Fund's assets
transferred to the Acquiring Fund will exceed the sum of the Acquired Fund's
liabilities, if any, assumed by the Acquiring Fund, plus (without duplication)
the amount of liabilities, if any, to which the transferred assets are subject.
14. The Acquired Fund does not hold any asset the disposition of which could
be subject to tax under section 1374 of the Code or subject to a consent under
section 341(f) of the Code.
<PAGE>
Alterman Investment Fund, Inc.
_____ __, 1999
Page 4
15. No Acquired Fund shares acquired in connection with the performance of
services are subject to a substantial risk of forfeiture within the meaning of
section 83(a) of the Code.
16. The Acquiring Fund does not own, has not owned during the last five
years, and will not own before the Reorganization, directly or indirectly, any
of the Acquired Fund shares.
17. None of the compensation received by any shareholder-employee of the
Acquired Fund will be separate compensation for, or allocable to, any Acquired
Fund shares; none of the Acquiring Fund Shares received by any shareholder-
employee of the Acquired Fund will be separate consideration for, or allocable
to, any employment agreement; and the compensation paid to any shareholder-
employee of the Acquired Fund will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
18. Although the Acquiring Fund is an open-end investment company, there is
no plan or intention for any shareholder of the Acquired Fund to cause any
shares of the Acquiring Fund to be redeemed directly or indirectly by the
Acquiring Fund. Any redemption of Acquiring Fund shares held by any former
shareholder of the Acquired Fund after the Reorganization will be the result of
an independent investment decision of the shareholder based, at least in part,
on circumstances arising after the Reorganization.
Based on the foregoing, and assuming that (1) the preceding factual
representations are accurate and will be accurate at the effective time of the
Reorganization and all relevant times thereafter, and (2) the Reorganization,
including the termination of the Acquired Fund's existence, will be consummated
in accordance with the Agreement, we are of the opinion that (under existing
law) for federal income tax purposes:
1. The Reorganization will qualify as a reorganization within the meaning of
section 368(a) of the Code.
2. The Acquired Fund and the Acquiring Fund each will be a "party to a
reorganization" within the meaning of section 368(b) of the Code.
3. The Acquired Fund will recognize no gain or loss on the transfer of its
assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares and
the assumption of its liabilities or on the distribution of such Acquiring Fund
Shares to its shareholders.
<PAGE>
Alterman Investment Fund, Inc.
_____ __, 1999
Page 5
4. The Acquiring Fund will recognize no gain or loss on its receipt of the
assets of the Acquired Fund in exchange solely for Acquiring Fund Shares and the
assumption of the Acquired Fund's liabilities.
5. The Acquiring Fund's basis in the assets received from the Acquired Fund
will be the same as the Acquired Fund's basis in such assets immediately before
the Reorganization.
6. The Acquiring Fund's holding period for the assets received will include
the period during which the Acquired Fund held such assets.
7. An Acquired Fund shareholder will recognize no gain or loss on the
exchange of Acquired Fund shares for Acquiring Fund Shares in the
Reorganization.
8. The aggregate basis of the Acquiring Fund Shares received by an Acquired
Fund's shareholder in the Reorganization will be the same as the aggregate basis
of the Acquired Fund shares exchanged therefor.
9. The holding period for the Acquiring Fund Shares received by an Acquired
Fund shareholder in the Reorganization will include the holding period for the
Acquired Fund shares exchanged therefor, if such Acquired Fund shares are held
as a capital asset on the effective date of the Reorganization.
Except as set forth above, we express no opinion regarding any tax
consequences of the Reorganization. This opinion is solely for your benefit and
may not be relied on by any other person. This opinion may not be distributed,
quoted in whole or in part or otherwise reproduced in any document, or filed
with any governmental agency without our prior written consent.
We consent to the use of this opinion as an exhibit to the Registration
Statement under the Securities Act of 1933 filed with the Securities and
Exchange Commission by Smith Barney Muni Funds in connection with the
Reorganization. In giving this consent, we do not admit that we are within the
category of persons whose consent is required by section 7 of the Securities Act
of 1933 or the rules and regulations promulgated thereunder.
Very truly yours,
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
ALTERMAN INVESTMENT FUND, INC.
The undersigned stockholder(s) of Alterman Investment Fund, Inc. a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated _____________, 1999, and hereby
appoints Perry Alterman and Daniel Alterman, and either of them, proxies and
attorneys-in-fact, with full power of substitution, on behalf and in the name of
the undersigned, to represent the undersigned at the 1999 Annual Meeting of
Stockholders of Alterman Investment Fund, Inc. to be held on ______________,
1999 at 11:00 a.m., local time, at 182 Hilderbrand Drive, Suite 102, Atlanta,
Georgia 30328 and at any adjournment or adjournments thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present on the matters set forth on the reverse side.
This Proxy, when properly executed, will be voted in accordance with the
directions given by the undersigned stockholder. If no direction is made, it
will be voted FOR Proposal 1, FOR Proposal 2 and FOR Proposal 3, and as the
proxies deem advisable on such other matters as may come before the meeting.
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
ALTERMAN INVESTMENT FUND, INC.
__________________________
Please detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
FOR AGAINST ABSTAIN
1. To approve an Agreement and
Plan of Reorganization with the [ ] [ ] [ ]
Georgia Portfolio of Smith Barney
Muni Funds, as described in the
accompanying Proxy Statement/
Prospectuses.
<TABLE>
<CAPTION>
FOR all nominees listed WITHHOLD authority
to right (except as marked to vote for all
to the contrary below) nominees listed at right
<S> <C> <C> <C>
2. To elect the nominees listed Nominees: Perry Alterman
at right to serve as [ ] [ ] Daniel Alterman
directors of Alterman Kusiel Kaplan
Investment Fund, Inc. for the Stanley Friedman
ensuing year. Joel J. Fryer
</TABLE>
Instruction: To withhold authority to vote for any individual nominee, mark
"FOR" hereon, and write that nominee's name in the space below.
_____________________________
FOR AGAINST ABSTAIN
3. To approve ratification of the selection of
Bimbrey, Minsk & Minsk LLC as auditors [ ] [ ] [ ]
of Alterman Investment Fund, Inc. for
fiscal 2000, subject to termination without
penalty upon the vote of a majority of the
outstanding voting securities of Alterman
Investment Fund, Inc.
4. In their discretion, upon such other matters which may properly come before
the meeting or any adjournment or adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
SIGNATURE_______________ ____________________________ DATED:________, 1999
Signature, if held jointly (Please Date This Proxy)
NOTE: (This Proxy should be marked, dated and signed by the stockholder(s)
exactly as his or her name appears hereon, and returned promptly in the
enclosed envelope. persons signing in a fiduciary capacity should so
indicate. if shares are held by joint tenants or as community property,
both should sign.)
