As filed with the Securities and Exchange Commission
on October 24, 2000
Securities Act File No. 333-45840
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
Post-Effective Amendment No. |_|
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
7 WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(800) 331-1710
(Registrant's Area Code and Telephone Number)
----------
Christina T. Sydor, Esq., Secretary
Smith Barney Intermediate Municipal Fund, Inc.
7 World Trade Center
New York, New York 10048
(Name and Address of Agent for Service)
with copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
<PAGE>
Approximate Date of Proposed Public Offering:
As soon as practicable after
this Registration Statement becomes effective
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
=======================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE(2)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
($0.001 par value) 6,500,000 $9.00 $58,500,000 $15,444
=======================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as
amended, based on the average of the high and low sales prices
reported on the American Stock Exchange on September 12, 2000.
(2) Previously paid.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Form N-14 Cross Reference Sheet
o Letter to Shareholders of Smith Barney Intermediate Municipal Fund, Inc.
o Letter to Shareholders of Smith Barney Municipal Fund, Inc.
o Notice of Special Meeting of Shareholders of Smith Barney Intermediate
Municipal Fund, Inc.
o Notice of Special Meeting of Shareholders of Smith Barney Municipal Fund,
Inc.
o Part A - Proxy Statement/Prospectus
o Part B - Statement of Additional Information
o Part C - Other Information
o Signature Page
o Exhibits
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A Item No. and Caption Proxy Statement/Prospectus Caption
--------------------------- ----------------------------------
<S> <C>
1. Beginning of Registration Statement and Cover Page
Outside Front Cover Page of Prospectus
2. Beginning and Outside Back Cover Page of Cover Page; Table of Contents
Prospectus Contents
3. Fee Table, Synopsis Information, and Risk Synopsis; Risk Factors and Special
Factors Considerations; Comparison of Investment
Objectives and Management Policies
4. Information about the Transactions Synopsis - The Proposed Merger; Information
about the Merger; Additional Information
about the Funds
5. Information about the Registrant Synopsis; Risk Factors and Special
Considerations; Comparison of Investment
Objectives and Management Policies;
Additional Information about the Funds
6. Information about the Company Being Acquired Synopsis; Risk Factors and Special
Considerations; Comparison of Investment
Objectives and Management Policies;
Additional Information about the Funds
7. Voting Information Notice of Meeting of Shareholders; General;
Required Vote
8. Interest of Certain Persons and Experts Additional Information about the Funds
9. Additional Information Required for Reoffering by (Not Applicable)
Persons Deemed to be Underwriters
<CAPTION>
PART B Item No. and Caption Statement of Additional Information Caption
--------------------------- -------------------------------------------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Incorporated by reference
12. Additional Information about the Registrant Incorporated by reference
13. Additional Information about the Company Incorporated by reference
Being Acquired
14. Financial Statements Financial Statements
<CAPTION>
PART C
------
<S> <C>
15 - 17 Information required to be included in Part
C is set forth under the appropriate Item,
so numbered, in Part C of this Registration
Statement.
</TABLE>
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
7 World Trade Center
New York, New York 10048
October __, 2000
Dear Shareholder:
We are pleased to invite you to a special meeting of shareholders of Smith
Barney Intermediate Municipal Fund, Inc., a Maryland corporation. Smith Barney
Intermediate Municipal Fund, Inc. is sometimes referred to as "SBI" or the
"Fund."
The special meeting is scheduled to be held at 10:00 a.m., Eastern time,
on Monday, December 4, 2000, at the offices of SSB Citi Fund Management LLC,
7 World Trade Center, 42nd Floor, New York, New York 10048. Shareholders who are
unable to attend this meeting are strongly encouraged to vote by proxy, which is
customary in corporate meetings of this kind. A Proxy Statement/Prospectus
regarding the meeting, a proxy card(s) for your vote at the meeting and an
envelope - postage prepaid - in which to return your proxy card are enclosed.
At the special meeting you will be asked to vote on a Merger Agreement and
Plan of Reorganization, or the Merger Agreement, whereby Smith Barney Municipal
Fund, Inc., sometimes referred to as "SBT," will merge with and into SBI in
accordance with the Maryland General Corporation Law. As a result of the merger:
o each share of common stock of SBT will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of common stock of SBI, based on the net asset value per
share of each fund; and
o SBI will change its name to the "Intermediate Muni Fund, Inc."
SBI will not issue any fractional shares to SBT shareholders. SBI will
purchase all fractional shares at the current net asset value of the shares and
remit the cash proceeds to former shareholders of SBT. The currently issued and
outstanding shares of SBI will remain issued and outstanding.
All expenses incurred in connection with the merger of SBI and SBT will be
borne by SSB Citi Fund Management LLC, the investment manager to both funds.
Both SBI and SBT are closed-end, diversified management investment
companies listed on the American Stock Exchange. The funds have substantially
similar investment objectives and invest primarily in the same markets. Both
funds seek a high level of current income exempt from regular federal income
taxes consistent with prudent investing. The current investment objective and
policies of SBI will continue unchanged if the merger occurs.
The board of directors of SBI believes that combining the two funds could
benefit Fund shareholders by providing the potential for:
o economies of scale,
o a lower operating expense ratio, and
o enhanced market liquidity of SBI's shares.
<PAGE>
The proposed merger and investment policies of the funds are described in
more detail in the combined Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER IS
IN THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" THE MERGER PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your signed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from us reminding you to vote your shares.
Respectfully,
Heath B. McLendon
Chairman of the Board of Directors
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
SMITH BARNEY MUNICIPAL FUND, INC.
7 World Trade Center
New York, New York 10048
October __, 2000
Dear Shareholder:
We are pleased to invite you to a special meeting of shareholders of Smith
Barney Municipal Fund, Inc., a Maryland corporation. Smith Barney Municipal
Fund, Inc. is sometimes referred to as "SBT" or the "Fund."
The special meeting is scheduled to be held at 9:30 a.m., Eastern time, on
Monday, December 4, 2000, at the offices of SSB Citi Fund Management LLC, 7
World Trade Center, 42nd Floor, New York, New York 10048. Shareholders who are
unable to attend this meeting are strongly encouraged to vote by proxy, which is
customary in corporate meetings of this kind. A Proxy Statement/Prospectus
regarding the meeting, a proxy card(s) for your vote at the meeting and an
envelope - postage prepaid - in which to return your proxy card are enclosed.
At the special meeting you will be asked to vote on a Merger Agreement and
Plan of Reorganization, or the Merger Agreement, whereby SBT will merge with and
into Smith Barney Intermediate Municipal Fund, Inc., sometimes referred to as
"SBI," in accordance with the Maryland General Corporation Law. As a result of
the merger:
o each share of common stock of SBT will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of common stock of SBI, based on the net asset value per
share of each fund; and
o SBI will change its name to the "Intermediate Muni Fund, Inc."
SBI will not issue any fractional shares to SBT shareholders. SBI will
purchase all fractional shares at the current net asset value of the shares and
remit the cash proceeds to former shareholders of SBT. The currently issued and
outstanding shares of SBI will remain issued and outstanding. Although the SBI
shares received in the merger will have the same total net asset value as the
SBT shares you held immediately before the merger (disregarding fractional
shares), their stock price (market value) will be less than that of your SBT
shares, assuming current market discount levels persist.
All expenses incurred in connection with the merger of SBI and SBT will be
borne by SSB Citi Fund Management LLC, the investment manager to both funds.
Like SBT, SBI is a closed-end, diversified management investment company
listed on the American Stock Exchange. The investment objective of both funds is
to seek a high level of current income exempt from regular federal income taxes
consistent with prudent investing. The current investment objective and policies
of SBI will continue unchanged if the merger occurs.
The board of directors of SBT believes that combining the two funds could
benefit Fund shareholders by providing the potential for:
<PAGE>
o economies of scale,
o a lower operating expense ratio, and
o enhanced market liquidity of SBI's shares.
The proposed merger and the investment policies of the funds are described
in more detail in the combined Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF YOUR FUND BELIEVES THAT THE PROPOSED MERGER IS
IN THE BEST INTERESTS OF THE SHAREHOLDERS AND RECOMMENDS THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE "FOR" THE MERGER PROPOSAL.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your signed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from us reminding you to vote your shares.
Respectfully,
Heath B. McLendon
Chairman of the Board of Directors
YOU ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN THE CARD(S) IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE>
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Smith Barney Intermediate Municipal Fund, Inc.:
Please take notice that a special meeting of shareholders of Smith Barney
Intermediate Municipal Fund, Inc. (sometimes referred to as "SBI"), a Maryland
corporation, will be held at the offices of SSB Citi Fund Management LLC, 7
World Trade Center, 42nd Floor, New York, New York 10048, on Monday, December
4, 2000, at 10:00 a.m., Eastern time, for the following purposes:
1. To consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated October 23, 2000 whereby Smith Barney Municipal Fund,
Inc. (sometimes referred to as "SBT"), a Maryland corporation, will merge
with and into SBI in accordance with the Maryland General Corporation Law;
and
2. To transact such other business as may properly come before the special
meeting or any adjournments thereof.
Holders of record of shares of common stock of SBI at the close of
business on September 21, 2000 are entitled to vote at the special meeting and
at any postponements or adjournments thereof. SBT shareholders must approve the
merger as well.
The persons named as proxies may propose one or more adjournments of the
special meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of SBI's shares present in person or by proxy at the special meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
SBI.
The enclosed proxy is being solicited on behalf of the board of directors
of SBI.
By Order of the Board of Directors,
Christina T. Sydor, Secretary
October __, 2000
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
SMITH BARNEY MUNICIPAL FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Smith Barney Municipal Fund, Inc.:
Please take notice that a special meeting of shareholders of Smith Barney
Municipal Fund, Inc. (sometimes referred to as "SBT"), a Maryland corporation,
will be held at the offices of SSB Citi Fund Management LLC, 7 World Trade
Center, 42nd Floor, New York, New York 10048, on Monday, December 4, 2000, at
9:30 a.m., Eastern time, for the following purposes:
1. To consider and vote upon the approval of a Merger Agreement and Plan of
Reorganization dated October 23, 2000 whereby SBT will merge with and into
Smith Barney Intermediate Municipal Fund, Inc. (sometimes referred to as
"SBI"), a Maryland corporation, in accordance with the Maryland General
Corporation Law; and
2. To transact such other business as may properly come before the special
meeting or any adjournments thereof.
Holders of record of shares of common stock of SBT at the close of
business on September 21, 2000 are entitled to vote at the special meeting and
at any postponements or adjournments thereof. SBI shareholders must approve the
merger as well.
The persons named as proxies may propose one or more adjournments of the
special meeting if the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the meeting. Any
such adjournment will require the affirmative vote of the holders of a majority
of SBT's shares present in person or by proxy at the special meeting. The
persons named as proxies will vote those proxies which they are entitled to vote
on any such proposal in accordance with their best judgment in the interest of
SBT.
The enclosed proxy is being solicited on behalf of the board of directors
of SBT.
By Order of the Board of Directors,
Christina T. Sydor, Secretary
October __, 2000
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
THE CARD(S) IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS
INTENDED FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S)
MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM
AT THE MEETING. IF YOU CAN ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE>
SUBJECT TO COMPLETION - DATED October 24, 2000
SMITH BARNEY MUNICIPAL FUND, INC.
7 World Trade Center
NEW YORK, NEW YORK 10048
(800) 331-1710
TO BE MERGED WITH AND INTO
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
7 World Trade Center
NEW YORK, NEW YORK 10048
(800) 331-1710
PROXY STATEMENT
MEETINGS OF SHAREHOLDERS
TO BE HELD DECEMBER 4, 2000
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC. PROSPECTUS
This Proxy Statement/Prospectus is being furnished to shareholders of the
Smith Barney Municipal Fund and the Smith Barney Intermediate Municipal Fund for
use at a special meeting of shareholders of each Fund to be held on Monday,
December 4, 2000 at 10:00 a.m., Eastern time, with respect to the Smith Barney
Intermediate Municipal Fund, and at 9:30 a.m., Eastern time, with respect to the
Smith Barney Municipal Fund, and at any and all postponements or adjournments
thereof. Smith Barney Intermediate Municipal Fund is sometimes referred to in
this Proxy Statement/Prospectus as "SBI," Smith Barney Municipal Fund is
sometimes referred to in this Proxy Statement/Prospectus as "SBT" and SBI and
SBT are sometimes collectively referred to as the "Funds" and individually, as
the context may require, as the "Fund." The approximate mailing date of this
Proxy Statement/Prospectus is ___________, 2000.
PURPOSE OF THE SPECIAL MEETINGS. At the special meetings, shareholders of
the Funds will be asked to approve a Merger Agreement and Plan of Reorganization
dated as of October 23, 2000 whereby SBT will merge with and into SBI, in
accordance with the Maryland General Corporation Law. The Merger Agreement and
Plan of Reorganization is sometimes referred to in this Proxy
Statement/Prospectus as the "Plan."
SPECIFICS OF THE PROPOSED MERGER. As a result of the merger:
o each share of common stock of SBT will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of common stock of SBI, based on the net asset value per
share of each Fund; and
o SBI will change its name to the "Intermediate Muni Fund, Inc."
Each SBT shareholder, in connection with the merger, will receive full
shares of SBI having an aggregate net asset value (disregarding fractional
shares) equal to the aggregate net asset value of the shareholder's SBT shares
before the merger.
<PAGE>
SBI will not issue any fractional shares to SBT shareholders. In lieu
thereof, SBI will purchase all fractional shares at the current net asset value
of the shares and remit the cash proceeds to former SBT shareholders in
proportion to their fractional shares. The currently issued and outstanding
shares of SBI will remain issued and outstanding. SBT shareholders will
recognize no gain or loss for federal income tax purposes as a result of the
merger, except with respect to any cash proceeds received from the purchase of
fractional shares by SBI. These shareholders will be treated for federal income
tax purposes as if they received fractional share interests and then sold such
interests for cash.
INFORMATION ABOUT THE FUNDS. The Funds are closed-end, diversified
management investment companies with the same investment objectives. Both Funds
seek a high level of current income exempt from regular federal income taxes
consistent with prudent investing. The current investment objective and policies
of SBI will continue unchanged if the merger occurs.
The terms and conditions of the merger and related transactions are more
fully described in this Proxy Statement/Prospectus and in the Plan, a copy of
which is attached as Exhibit A.
This Proxy Statement/Prospectus serves as a prospectus for shares of SBI
under the Securities Act of 1933, which is referred to in this Proxy
Statement/Prospectus as the "Securities Act," in connection with the issuance of
SBI common shares in the merger.
Assuming the shareholders of the Funds approve the merger and all other
conditions to the consummation of the merger are satisfied or waived, the Funds
will jointly file articles of merger, or the Articles of Merger, with the State
Department of Assessments and Taxation of Maryland, or the Department. The
merger will become effective when the Department accepts for record the Articles
of Merger or at such later time, which may not exceed 30 days after the Articles
of Merger are accepted for record, as specified in the Articles of Merger. The
date when the Articles of Merger are accepted for record, or the later date, is
referred to in this Proxy Statement/Prospectus as the "Effective Date." SBT, as
soon as practicable after the Effective Date, will terminate its registration
under the Investment Company Act of 1940, which is referred to in this Proxy
Statement/Prospectus as the "Investment Company Act."
You should retain this Proxy Statement/Prospectus for future reference as
it sets forth concisely information about SBI and SBT that you should know
before voting on the merger proposal described below.
A Statement of Additional Information, which is referred to in this Proxy
Statement/Prospectus as the "SAI," dated October __, 2000, which contains
additional information about the merger and the Funds has been filed with the
Securities and Exchange Commission, or SEC. The SAI, the current prospectuses,
the annual reports of each Fund for the fiscal year ended December 31, 1999 and
the semi-annual reports of each Fund for the six months ended June 30, 2000, are
incorporated by reference into this Proxy Statement/Prospectus. A copy of these
documents is available upon request and without charge by writing to either Fund
at 7 World Trade Center, New York, New York 10048, or by calling 1-(800)
331-1710. You may ask questions about the Funds by calling 1-(800) 331-1710. SBI
has provided the information included in this Proxy Statement/Prospectus
regarding that Fund. SBT has provided the information included in this Proxy
Statement/Prospectus regarding that Fund.
SBI's shares of common stock are listed on the American Stock Exchange, or
AMEX, under the symbol "SBI". SBT's shares of common stock are listed on the
AMEX under the symbol "SBT".
2
<PAGE>
After the Effective Date, shares of common stock of SBI will continue to be
listed on the AMEX under the symbol "SBI". Reports, proxy materials and other
information concerning each Fund may be inspected at the offices of the AMEX, 86
Trinity Place, New York, New York 10006.
The SEC has not approved or disapproved these securities or determined if
this Proxy Statement/Prospectus is truthful or complete. To state otherwise is a
crime.
The date of this Proxy Statement/Prospectus is October __, 2000
3
<PAGE>
TABLE OF CONTENTS
Page
----
GENERAL ............................................................... 5
PROPOSAL (BOTH FUNDS): APPROVAL OF THE MERGER AGREEMENT AND
PLAN OF REORGANIZATION PURSUANT TO WHICH SMITH BARNEY
MUNICIPAL FUND WILL MERGE WITH AND INTO SMITH BARNEY
INTERMEDIATE MUNICIPAL FUND ........................................... 7
SYNOPSIS .............................................................. 8
EXPENSE TABLE ......................................................... 12
FINANCIAL HIGHLIGHTS .................................................. 14
RISK FACTORS AND SPECIAL CONSIDERATIONS ............................... 19
COMPARISON OF INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES ........... 25
TAXATION .............................................................. 32
INFORMATION ABOUT THE MERGER .......................................... 36
ADDITIONAL INFORMATION ABOUT THE FUNDS ................................ 42
MANAGEMENT OF THE FUNDS ............................................... 52
INDEPENDENT AUDITORS................................................... 59
REQUIRED VOTE ......................................................... 59
LEGAL PROCEEDINGS ..................................................... 59
LEGAL OPINIONS ........................................................ 59
ADDITIONAL INFORMATION ................................................ 60
EXHIBIT A - FORM OF MERGER AGREEMENT AND PLAN OF REORGANIZATION ....... A-1
4
<PAGE>
GENERAL
This Proxy Statement/Prospectus is furnished to the shareholders of the
Funds in connection with the solicitation of proxies on behalf of the boards of
directors of SBI and SBT. The board of directors of each Fund is soliciting
proxies for use at the special meetings. The mailing address for both Funds is
7 World Trade Center, New York, New York 10048.
This Proxy Statement/Prospectus, the Notice of Meeting to Shareholders and
the proxy card(s) are first being mailed to shareholders on or about ________,
2000 or as soon as practicable thereafter. Any shareholder who gives a proxy has
the power to revoke the proxy either:
o by mail, addressed to the Secretary of the respective Fund, at
the Fund's mailing address, or
o in person at the special meeting
by executing a superseding proxy or by submitting a notice of revocation to the
respective Fund. All properly executed proxies received in time for the special
meeting will be voted as specified in the proxy or, if no specification is made,
in favor of the merger proposal for that Fund referred to in the Proxy
Statement/Prospectus.
Shareholders of SBI and SBT will be asked to vote on the merger proposal
-- the approval of the Plan.
The presence, either in person or by proxy, of the holders of one-third of
the outstanding shares of common stock entitled to vote at a meeting of a Fund,
will constitute a quorum for the transaction of business by such Fund. For
purposes of determining the presence of a quorum for transacting business at a
meeting, abstentions and broker "non-votes" will be treated as shares that are
present. Broker non-votes are proxies received by the Funds from brokers or
nominees, indicating that the broker or nominee has neither received
instructions from the beneficial owner or other persons entitled to vote nor has
the discretionary power to vote on a particular matter. Shareholders are urged
to forward their voting instructions promptly.
The merger proposal requires the affirmative vote of a majority of the
outstanding shares of common stock of each Fund.
Abstentions and broker non-votes will have the effect of a "no" vote for
the merger proposal to be submitted at either special meeting.
Proxy solicitations will be made primarily by mail, but solicitations may
also be made by telephone, telegraph or personal interviews conducted by
officers or employees of the Funds, SSB Citi Fund Management LLC, or SSB Citi,
or the manager, the investment manager to the Funds. SSB Citi will bear costs
of solicitation, including:
o printing and mailing of this Proxy Statement/Prospectus and
accompanying material,
o the reimbursement of brokerage firms and others for their expenses
in forwarding solicitation material to the beneficial owners of each
Fund's shares, and
o supplementary solicitations to submit proxies.
5
<PAGE>
Only shareholders of record of each Fund at the close of business on
September 21, 2000, the Record Date, are entitled to vote. An outstanding share
of each Fund is entitled to one vote on all matters voted upon at a special
meeting for that Fund. As of September 21, 2000, there were 8,208,165.291 shares
of SBI outstanding and 3,985,661.791 shares of SBT outstanding.
SBI and SBT provide periodic reports to all of their shareholders. These
reports highlight relevant information including investment results and a review
of portfolio changes for each Fund. You may receive a copy of the most recent
annual report for SBI or SBT and a copy of any more recent interim report,
without charge, by calling 1-(800) 331-1710 or writing to either Fund at 7 World
Trade Center, New York, New York 10048.
The boards of directors of the Funds know of no business other than the
proposal described above which will be presented for consideration at the
special meetings. If any other matter is properly presented, it is the intention
of the persons named in the enclosed proxy to vote on that matter in their
discretion.
6
<PAGE>
PROPOSAL (BOTH FUNDS): APPROVAL OF THE MERGER
AGREEMENT AND PLAN OF REORGANIZATION PURSUANT
TO WHICH SMITH BARNEY MUNICIPAL FUND WILL MERGE WITH
AND INTO SMITH BARNEY INTERMEDIATE MUNICIPAL FUND
On June 21, 2000, the boards of directors of SBI and SBT, including a
majority of the directors of each Fund who are not "interested persons" of the
respective Fund, or the non-interested directors, unanimously:
o declared the merger, or the Merger, of SBT with and into SBI
advisable,
o approved entering into the Plan, and
o recommended that the Plan be approved by the shareholders of each
Fund.
For more information about the Merger, see "Information About The Merger."
The Plan is subject to the approval of the shareholders of both Funds and
certain other conditions.
A copy of the Plan is attached to this Proxy Statement/Prospectus as
Exhibit A, and the description of the Plan included in this Prospectus/Proxy
Statement is qualified in its entirety by reference to Exhibit A.
The following provides a more detailed discussion about the Merger, each
Fund and additional information that you may find helpful in deciding how to
vote on the Merger Agreement.
7
<PAGE>
SYNOPSIS
This summary highlights important information included in this Proxy
Statement/Prospectus. This summary is qualified by reference to the more
complete information included elsewhere in this Proxy Statement/Prospectus and
the Plan. Shareholders of the Funds should read this entire Proxy
Statement/Prospectus carefully.
THE PROPOSED MERGER. The boards of directors of SBI and SBT, including the
non-interested directors of each Fund, have unanimously approved the Plan. The
Plan provides for the merger of SBT with and into SBI. As a result of the
Merger:
o each share of common stock of SBT will convert into an equivalent
dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of common stock of SBI, based on the net asset value per
share of each Fund calculated at 4:00 pm on the Business Day
preceding the Effective Date;
o each shareholder of SBT will become a shareholder of SBI and will
receive, on the Effective Date, that number of full shares of common
stock of SBI having an aggregate net asset value (disregarding
fractional shares) equal to the aggregate net asset value of such
shareholder's shares held in SBT as of the close of business on the
Business Day preceding the Effective Date;
o SBI will not issue any fractional shares to SBT shareholders. In
lieu thereof, SBI will purchase all fractional shares at the current
net asset value of the shares and remit the cash proceeds to former
SBT shareholders in proportion to their fractional shares; and
o SBI will change its name to the "Intermediate Muni Fund, Inc."
A "Business Day" is any day on which the New York Stock Exchange is open
for trading. For the reasons set forth below under "Information About The Merger
- Reasons for the Merger," the boards of directors of SBI and SBT, including the
non-interested directors of each Fund, have unanimously concluded that:
o the Merger is in the best interests of each respective Fund, and
o the interests of existing shareholders of each respective Fund will
not be diluted as a result of the transactions contemplated by the
Plan.
Accordingly, the board of directors of each Fund recommends approval of
the Merger. If the Merger is not approved, each Fund will continue as a separate
investment company, and the board of directors of each Fund will consider such
other alternatives as it determines to be in the best interests of its
shareholders.
FORM OF ORGANIZATION. Both Funds are closed-end, diversified management
investment companies registered under the Investment Company Act. SBI was
organized as a Maryland corporation in 1991 and SBT was organized as a Maryland
corporation in 1992. Each Fund's board of directors is responsible for the
management of the business and affairs of each Fund, including the supervision
of the duties performed by each Fund's investment manager.
8
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES. Each Fund's investment
object is to seek a high level of current income exempt from regular federal
income taxes consistent with prudent investing. SBI seeks its objective by
investing primarily in intermediate, investment grade municipal debt securities
issued by state and local governments including U.S. territories and
possessions, political subdivisions, agencies and public authorities (municipal
obligations) with remaining maturities of less than fifteen years. SBT seeks its
objective by investing primarily in investment grade municipal debt securities
issued by state and local governments, political subdivisions, agencies and
public authorities (municipal obligations) with remaining maturities of less
than fifteen years. Under normal conditions, SBI invests at least 80% of its
total assets in municipal securities with remaining maturities of less than
fifteen years and to maintain a dollar-weighted average maturity of the entire
portfolio between three and ten years, while SBT invests at least 80% of its
total assets in municipal securities with remaining maturities of less than
fifteen years. Each Fund's investment objective and the investment policies in
the previous sentence are fundamental, and can only be changed with the approval
of the holders of a "majority of each Fund's outstanding voting securities."
Such term is defined under the Investment Company Act as the lesser of
(i) more than 50% of the Fund's outstanding common stock and of any
outstanding shares of preferred stock, voting by class, or
(ii) 67% of the Fund's outstanding common stock and of any outstanding
shares of preferred stock, voting by class, present at a meeting at
which the holders of more than 50% of the outstanding shares of each
such class are present in person or by proxy.
Under normal market conditions, each Fund will invest at least two thirds
of its total assets in municipal securities rated, at the time of investment, A
or better by Standard & Poor's Ratings Group, or S&P, or by Moody's Investors
Service, Inc., or Moody's, or rated within the three highest ratings categories
by a nationally recognized statistical rating organization, or NRSRO (or, if
unrated, deemed by the SSB Citi to be of comparable quality). Under normal
market conditions, both Funds will also invest only in municipal securities
rated investment grade at the time of investment. Investment grade securities
are securities rated BBB or higher by S&P, Baa or higher by Moody's or within
the four highest ratings categories of an NRSRO (or, if unrated, deemed by the
SSB Citi to be of comparable quality). Neither Fund will invest more than 25% of
its total assets in any industry, nor will either Fund invest more than 5% of
its total assets in the securities of any single issue. Each Fund may invest
more than 25% of its assets in industrial development bonds or in issuers
located in the same state.
The preceding summary of the Funds' investment objectives and certain
policies should be considered in conjunction with the discussion below under
"Risk Factors and Special Considerations" and "Comparison of Investment
Objectives and Management Policies."
FEES AND EXPENSES - SMITH BARNEY INTERMEDIATE MUNICIPAL FUND. SSB Citi
serves as SBI's investment manager with respect to all investments. As
compensation for its management services, SSB Citi is contractually entitled to
receive from the Fund a monthly fee in arrears equal to 0.60% per annum of the
Fund's average daily net assets at the end of each month. For the years ended
December 31, 1997, 1998 and 1999, SBI paid $522,436, $532,649 and $516,522,
respectively, in management fees to SSB Citi.
9
<PAGE>
For the fiscal year ended December 31, 1999, SBI's total expense ratio was
0.77%, and is currently 0.78% based on an estimate of operating expenses for the
first six months of 2000. The Fund's total expense ratio is the ratio of total
annual operating expenses to average net assets, net of fee waivers and
including taxes.
FEES AND EXPENSES - SMITH BARNEY MUNICIPAL FUND. SSB Citi also serves as
SBT's investment manager with respect to all investments. As compensation for
its management services, SSB Citi is contractually entitled to receive from the
Fund a monthly fee in arrears equal to 0.70% per annum of the Fund's average
daily net assets at the end of each month. For the years ended December 31,
1997, 1998 and 1999, SBT paid $436,257, $445,553 and $430,866, respectively, in
management fees to SSB Citi.
For the fiscal year ended December 31, 1999, SBT's total expense ratio was
0.91%, and is currently 0.92% based on an estimate of operating expenses for the
first six months of 2000. The Fund's total expense ratio is the ratio of total
annual operating expenses to the average net assets, net of fee waivers and
including taxes.
The expense ratio of SBI is projected to be approximately 0.74% after
giving effect to the Merger. The actual expense ratios for SBI for the current
and future fiscal years, if the Merger occurs, may be higher or lower than this
projection and depend upon SBI's performance, general stock market and economic
conditions, net asset levels, stock price and other factors.
See "Expense Table" below for the current expenses of each Fund and pro
forma expenses following the Merger.
UNREALIZED CAPITAL GAINS. As of June 30, 2000, SBI had approximately
$1,383,474 of unrealized capital gains, representing approximately 0.017% of its
net asset value. As of that same date, SBT had approximately $20,694 of
unrealized capital losses. As of June 30, 2000, SBI had approximately $1,041,500
of capital loss carryforwards. SBT had approximately $822,700 of capital loss
carryforwards as of that same date.
Both Funds will pay their shareholders a cash distribution of
substantially all undistributed 2000 net investment income prior to the
Effective Date. It is expected that any undistributed realized net capital
gains will be offset through the utilization of capital loss carryforwards prior
to the Effective Date.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER. As a condition to the
closing of the Merger, both Funds will receive an opinion of Willkie Farr &
Gallagher, counsel to the Funds and SSB Citi, stating that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986, or the Code. Accordingly, neither SBT, SBI
nor the shareholders of either Fund will recognize any gain or loss for federal
income taxes purposes as a result of the Merger, except with respect to the
shareholders of SBT who receive cash proceeds from the purchase of fractional
share interests by SBI. These shareholders will be treated for federal income
tax purposes as if they received such fractional share interests and then sold
such interests for cash. The holding period and the aggregate tax basis of SBI
shares (including fractional share interests purchased by SBI) received by a SBT
shareholder will be the same as the holding period and aggregate tax basis of
the shares of SBT previously held by the shareholder. The holding period and the
aggregate tax basis of the assets received by SBI in the Merger will be the same
as the holding period and the tax basis of such assets in the hands of SBT
immediately before the Merger. For more
10
<PAGE>
information about the tax consequences of the Merger, see "Information About The
Merger - Tax Considerations."
DISCOUNT FROM NET ASSET VALUE. Shares of closed-end funds frequently trade
at a market price that is less than the value of the fund's net assets. The
possibility that shares of SBI will trade at a discount from its net asset value
is a risk separate and distinct from the risk that the Fund's net asset value
will decrease. Except for limited periods of time, SBI's shares have traded in
the market at a discount, and, as of June 22, 2000, the last trading day
immediately before the announcement of the Merger, and September 1, 2000, traded
at a market price discount of 12.05% and 10.63%, respectively. Similarly, SBT
shares have traded in the market at a discount and, as of those same dates,
traded at a market price discount of 12.55% and 11.68%, respectively.
Recently, SBT's market discount has narrowed substantially. Management
believes that this narrowing is largely attributable to market activity
following the announcement of the Merger and other initiatives described in this
Proxy Statement/Prospectus. In contrast, as of the date of this Proxy
Statement/Prospectus, SBI's market discount remains at or near higher historical
levels. If this pattern continues, the total market value of SBI shares issued
to SBT shareholders on the Effective Date will be less than the total market
value of SBT shares outstanding immediately prior to the Effective Date,
although their total net asset values will be the same (disregarding fractional
shares). While the current disparity of market discounts would cause SBT
shareholders to receive shares in the Merger with a lower aggregate market
value, shareholders should consider that, over time, there has not been a
significant disparity between the two Fund's market discount levels.
Accordingly, the Boards' recommendations are based on long-term average market
discount levels. In other words, the initiatives described in this Proxy
Statement/Prospectus have led to a situation that the Boards believe is a
temporary aberration, but which could cause a SBT shareholder to receive assets
(SBI shares) that are less valuable, from a market value perspective only, than
the assets (SBT shares) owned immediately prior to the transaction. Over time,
the deviations in market discounts between the Funds have not been significant,
and, although there can be no assurance, the board of directors of SBI believes
that the initiatives described in this Proxy Statement/Prospectus should have
the effect of reducing the discount at which SBI shares trade. The discount
level of the Funds may be different at the time the Merger occurs. For more
information, see "Additional Information about the Funds - Discount to Net Asset
Value."
EXPENSES OF THE MERGER. In evaluating the proposed Merger, SSB Citi has
estimated the amount of expenses the Funds would incur, including AMEX listing
fees, SEC registration fees, legal and accounting fees and proxy solicitation
and distribution costs. The estimated total expenses pertaining to the Merger
are $95,000. The aggregate amount of estimated expenses of the Merger will be
borne by SSB Citi, including the SEC registration fees and the fees for listing
additional shares of SBI on the AMEX.
11
<PAGE>
EXPENSE TABLE
<TABLE>
<CAPTION>
SMITH BARNEY
INTERMEDIATE SMITH BARNEY
MUNICIPAL MUNICIPAL PRO FORMA
FUND FUND POST-MERGER
------------ ------------ -----------
SHAREHOLDER
TRANSACTION EXPENSES
---------------------------------------------
<S> <C> <C> <C>
Sales Load (as a percentage of offering price) NONE NONE NONE
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS) (1)
---------------------------------------------
<S> <C> <C> <C>
Management Fees 0.60% 0.70% 0.60%
Other Expenses 0.17% 0.21% 0.14%
Total Annual Operating Expenses 0.77% 0.91% 0.74%
</TABLE>
-----------------
(1) The percentages in the above table expressing annual fund operating
expenses are based on the Funds' operating expenses for the year ended
December 31, 1999. "Other Expenses" include fees for shareholder services,
custody, legal and accounting services, printing costs, the costs involved
in communications with shareholders and the costs of regulatory
compliance, maintaining corporate existence and the listing of shares of
common stock on the AMEX.
EXAMPLE. The purpose of the following example is to help you understand
the costs and expenses you may bear as an investor. This example is based on the
level of total annual operating expenses for each Fund listed in the table
above, the total expenses relating to a $1,000 investment, assuming a 5% annual
return and reinvestment of all dividends and distributions. Shareholders do not
pay these expenses directly; they are paid by the Funds before they distribute
net investment income to shareholders. This example should not be considered a
representation of future expenses, and actual expenses may be greater or less
than those shown. Federal regulations require the example to assume a 5% annual
return, but actual annual returns will vary.
12
<PAGE>
<TABLE>
<CAPTION>
Smith Barney Intermediate Smith Barney Pro Forma
Municipal Fund Municipal Fund Post-Merger
------------------------- -------------- -----------
<S> <C> <C> <C>
1 Year $ 8 $ 9 $ 8
3 Years $ 25 $ 29 $ 24
5 Years $ 43 $ 50 $ 41
10 Years $ 95 $112 $ 92
</TABLE>
PERFORMANCE. The table below provides performance data for periods ended
December 31, 1999 based on each Fund's net asset value and market value. Past
performance is not a guarantee of future results, and it is not possible to
predict whether or how investment performance will be affected by the Merger.
The seven-year comparison has been included to illustrate the comparative
performance of both Funds during a period which closely approximates the period
during which both Funds were in existence and were fully invested.
<TABLE>
<CAPTION>
SMITH BARNEY INTERMEDIATE SMITH BARNEY
MUNICIPAL FUND MUNICIPAL FUND
------------------------- --------------------------
AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Net Asset Value One Year -1.39% -1.39% -2.14% -2.14%
Three Year 12.87% 4.12% 13.13% 4.20%
Five Year 33.67% 5.98% 37.75% 6.62%
Seven Year 44.77% 5.43% 49.35% 5.90%
Since inception (1) 56.23% 5.86% 49.83% 5.60%
Market Value One Year -17.10% -17.10% -12.25% -12.25%
Three Year 0.68% 0.23% 3.17% 1.05%
Five Year 18.55% 3.46% 32.65% 5.81%
Seven Year 25.44% 3.29% 31.96% 4.04%
Since inception (1) 27.52% 3.15% 27.38% 3.31%
</TABLE>
-----------------
(1) SBI commenced operations on March 2, 1992. SBT commenced operations on
July 31, 1992.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial
performance of SBI and SBT. This information is derived from the financial and
accounting records of each Fund.
This information has been audited by KPMG LLP, the Funds' independent
auditors, whose reports, along with the Funds' financial statements, are
incorporated herein by reference and included in the Funds' Annual Reports to
Shareholders. The Annual Reports may be obtained without charge, by writing to
either Fund at 7 World Trade Center, New York, New York 10048, or by calling
1-(800) 331-1710.
14
<PAGE>
Smith Barney Intermediate Municipal Fund, Inc.
Financial Highlights
================================================================================
--------------------------------------------------------------------------------
The following table includes per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each year indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
--------------------------------------------------------------------------------
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:
<TABLE>
<CAPTION>
Smith Barney Intermediate
Municipal Fund, Inc. 1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ..... $10.61 $10.64 $10.47 $10.66 $ 9.95
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ............... 0.53 0.55 0.57 0.58 0.58
Net realized and unrealized gain
(loss) ............................. (0.71) 0.01 0.28 (0.17) 0.73
------ ------ ------ ------ ------
Total Income (Loss) from Operations .... (0.18) 0.56 0.85 0.41 1.31
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ............... (0.53) (0.55) (0.57) (0.60) (0.60)
In excess of net investment income .. -- -- (0.01) -- --
Net realized gains .................. (0.01) (0.04) (0.10) -- --
------ ------ ------ ------ ------
Total Distributions .................... (0.54) (0.59) (0.68) (0.60) (0.60)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ........... $ 9.89 $10.61 $10.64 $10.47 $10.66
====== ====== ====== ====== ======
TOTAL RETURN, BASED ON MARKET VALUE** .. (17.10)% 7.05% 13.42% 1.56% 15.93%
====== ====== ====== ====== ======
TOTAL RETURN, BASED ON NET ASSET VALUE** (1.39)% 5.50% 8.49% 4.13% 13.72%
====== ====== ====== ====== ======
NET ASSETS, END OF YEAR (MILLIONS) ..... $ 83 $ 89 $ 89 $ 87 $ 88
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 0.77% 0.76% 0.74% 0.77% 0.72%
Net investment income ............... 5.17 5.10 5.42 5.56 5.63
PORTFOLIO TURNOVER RATE ................ 54% 42% 58% 21% 13%
MARKET VALUE, END OF YEAR .............. $ 8.38 $10.69 $10.56 $ 9.94 $10.38
====== ====== ====== ====== ======
</TABLE>
-------------------
** The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
15
<PAGE>
--------------------------------------------------------------------------------
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:
<TABLE>
<CAPTION>
SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND, INC. 1994(a) 1993(a) 1992(a)(b)
-------- ------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ....... $10.81 $10.36 $10.00
-------- ------- ---------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................. 0.58 0.59 0.48*
Net realized and unrealized gain (loss) (0.84) 0.46 0.34
-------- ------- ---------
Total Income (Loss) from Operations ...... (0.26) 1.05 0.82
-------- ------- ---------
LESS DISTRIBUTIONS FROM:
Net investment income ................. (0.60) (0.57) (0.46)
In excess of net investment income .... -- -- --
-------- ------- ---------
Net realized gains .................... -- (0.03) --
-------- ------- ---------
Total Distributions ...................... (0.60) (0.60) (0.46)
-------- ------- ---------
NET ASSET VALUE, END OF YEAR ............. $ 9.95 $10.81 $10.36
======== ======= =========
TOTAL RETURN, BASED ON MARKET VALUE** .... (9.34)% 16.71% 1.66%++
======== ======= =========
TOTAL RETURN, BASED ON NET ASSET VALUE** . (2.33)% 10.30% 8.44%++
======== ======= =========
NET ASSETS, END OF YEAR (MILLIONS) ....... $82 $89 $83
======== ======= =========
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................. 0.72% 0.73% 0.59+*
Net investment income ................. 5.64 5.56 5.74+
PORTFOLIO TURNOVER RATE .................. 26% 10% 23%
MARKET VALUE, END OF YEAR ................ $ 9.50 $11.13 $10.13
======== ======= =========
</TABLE>
-----------------
(a) Based on the monthly average shares outstanding for period.
(b) For the period from March 2, 1992 (commencement of operations) to December
31, 1992.
* The manager waived a portion of its fees for the period from March 2, 1992
to December 31, 1992. If such fees were not waived, the per share decrease
in net investment income would have been $0.01, and the ratio of expenses
to average net assets would have been 0.70% (annualized).
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
** The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
16
<PAGE>
Smith Barney Municipal Fund, Inc.
Financial Highlights
================================================================================
--------------------------------------------------------------------------------
The following table includes per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net assets
and other supplemental data for each year indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
--------------------------------------------------------------------------------
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:
<TABLE>
<CAPTION>
SMITH BARNEY MUNICIPAL FUND, INC. 1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ..... $15.82 $15.84 $15.42 $15.75 $14.30
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ............... 0.78 0.78 0.83 0.84 0.83
Net realized and unrealized gain
(loss) ............................. (1.21) 0.04 0.50 (0.32) 1.47
------ ------ ------ ------ ------
Total Income (Loss) from Operations .... (0.43) 0.82 1.33 0.52 2.30
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ............... (0.76) (0.81) (0.84) (0.85) (0.85)
In excess of net investment income .. -- -- (0.01) -- --
Net realized gains .................. -- (0.03) (0.06) -- --
------ ------ ------ ------ ------
Total Distributions .................... (0.76) (0.84) (0.91) (0.85) (0.85)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ........... $14.63 $15.82 $15.84 $15.42 $15.75
====== ====== ====== ====== ======
TOTAL RETURN, BASED ON MARKET VALUE** .. (12.25)% 6.71% 10.18% 11.02% 15.83%
====== ====== ====== ====== ======
TOTAL RETURN, BASED ON NET ASSET VALUE** (2.14)% 5.69% 9.38% 3.96% 17.11%
====== ====== ====== ====== ======
NET ASSETS, END OF YEAR (MILLIONS) ..... $ 59 $ 64 $ 64 $ 62 $ 63
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 0.91% 0.87% 0.85% 0.90% 0.86%
Net investment income ............... 5.07 4.93 5.31 5.45 5.48
FUND TURNOVER RATE ..................... 45% 62% 58% 30% 21%
MARKET VALUE, END OF YEAR .............. $12.44 $15.00 $14.88 $14.38 $13.75
====== ====== ====== ====== ======
</TABLE>
----------------
** The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
17
<PAGE>
FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE YEAR:
<TABLE>
<CAPTION>
SMITH BARNEY MUNICIPAL FUND, INC. 1994 1993 1992(a)(b)
-------- -------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ....... $15.85 $14.81 $15.00
------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income ................. 0.84 0.84 0.32*
Net realized and unrealized gain (loss) (1.54) 1.00 (0.21)
------ ------ ------
Total Income (Loss) from Operations ...... (0.70) 1.84 0.11
------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income ................. (0.85) (0.80) (0.30)
In excess of net investment income .... -- -- --
Net realized gains .................... -- -- --
------ ------ ------
Total Distributions ...................... (0.85) (0.80) (0.30)
------ ------ ------
NET ASSET VALUE, END OF YEAR ............. $14.30 $15.85 $14.81
====== ====== ======
TOTAL RETURN, BASED ON MARKET VALUE** .... (12.96)% 14.30% (3.47)%++
====== ====== ======
TOTAL RETURN, BASED ON NET ASSET VALUE** . (4.09)% 12.82% 0.81%++
====== ====== ======
NET ASSETS, END OF YEAR (MILLIONS) ....... $ 58 $ 64 $ 60
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................. 0.86% 0.85% 0.56+*
Net investment income ................. 5.59 5.42 5.22+
PORTFOLIO TURNOVER RATE .................. 35% 23% 36%
MARKET VALUE, END OF YEAR ................ $12.63 $15.38 $14.25
====== ====== ======
</TABLE>
----------
(a) Based on the monthly average shares outstanding for period.
(b) For the period from July 31, 1992 (commencement of operations) to December
31, 1992.
++ Total return is not annualized as it may not be representative of the
total return for the year.
+ Annualized.
* The manager waived a portion of its fees for the period from July 31, 1992
to December 31, 1992. If such fees were not waived, the per share decrease
in net investment income would have been $0.014, and the ratio of expenses
to average net assets would have been 0.79% (annualized).
** The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
18
<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Both SBI and SBT invest in substantially similar municipal obligations
and, accordingly, are subject to substantially the same investment risks. The
investment risks of each of the Funds are described below.
MUNICIPAL OBLIGATIONS
Each Fund invests primarily in municipal obligations and may be affected
by any of the following:
o Interest rates rise, causing the value of the Funds' portfolios
generally to decline;
o When interest rates are declining, the issuer of a security
exercises its right to prepay principal earlier than scheduled,
forcing the Funds to reinvest in lower yielding securities. This is
known as call or prepayment risk;
o The underlying revenue source for a municipal obligation other than
a general obligation bond is insufficient to pay principal or
interest in a timely manner;
o The issuer of a security owned by the Funds has its credit rating
downgraded or defaults on its obligation to pay principal and/or
interest;
o The manager's judgment about the attractiveness, value or income
potential of a particular bond proves to be incorrect;
o Municipal obligations fall out of favor with investors; and
o Unfavorable legislation affects the tax-exempt status of municipal
obligations.
Either Fund may invest more than 25% of its assets in municipal securities
that finance the same or similar types of facilities in issuers located in the
same state. If either Fund invests more than 25% of its assets in such segments,
it will be more susceptible to economic, business, political, regulatory and
other developments generally affecting issuers of those sectors of the municipal
market.
LEASE OBLIGATIONS
The Funds may invest in unrated "non-appropriation" lease obligations or
installment purchase obligations of municipal authorities or entities believed
by the investment manager to be of comparable quality to securities that are
rated investment grade. There is no limitation on the percentage of the Funds'
assets that may be invested in these lease or installment purchase obligations.
A lease or installment purchase obligation is backed by the municipality's
promise to make the payments due under the obligation. Lease or installment
purchase obligations containing "non-appropriation" clauses 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. It
is possible that a municipality will fail to appropriate money in the
19
<PAGE>
future because of political changes, changes in the economic viability of a
project or general economic changes. While these obligations generally are
secured by a lien on the financed property, disposing of foreclosed property
could be costly, time consuming and the Funds may not recoup its original
investment.
INVESTMENT GRADE AND UNRATED SECURITIES
The Funds invest in investment grade debt securities, and unrated
securities that SSB Citi believes are of comparable quality. Investment grade
securities that are not in the highest rating category may be subject to greater
risk of downgrading and issuer default than higher rated securities and may have
speculative characteristics. The Funds may experience more difficulty selling
unrated securities because markets for these securities may be less liquid.
POSSIBILITY OF TAXABLE INCOME OR GAINS
It is possible that some of the Funds' income and gains may be subject to
federal taxation. The Funds may realize taxable gains on the sale of their
securities, and some of the Funds' income may be subject to the federal
alternative minimum tax.
DERIVATIVES
The Funds hold securities or use investment techniques that provide for
payments based on or "derived" from the performance of an underlying asset,
index or other economic benchmark.
The Funds may use derivatives:
o to shorten or lengthen the Funds' effective maturity or duration;
o as a substitute for purchasing or selling securities; or
o to hedge against adverse changes caused by changing interest rates
in the market value of securities held or to be bought by either
Fund.
A derivative contract will obligate or entitle the Funds to deliver or
receive an asset or cash payment that is based on the change in value of one or
more securities or indices. Even a small investment in derivative contracts can
have a big impact on the Funds' interest rate exposure. Therefore, using
derivatives can disproportionately increase losses and reduce opportunities for
gains when interest rates are changing. The Funds may not fully benefit from or
may lose money on derivatives if changes in their value do not correspond
accurately to changes in the value of the Funds' holdings. The other parties to
certain derivative contracts present the same types of default risk as issuers
of fixed-income securities. Derivatives can also make the Funds less liquid and
harder to value, especially in declining markets.
INTEREST RATE SENSITIVITY
Municipal obligations are fixed-income securities which are sensitive to
changes in interest rates. Generally, when interest rates are rising, the value
of the Funds' fixed-income
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securities can be expected to decrease. When interest rates are declining, the
value of the Funds' fixed-income securities can be expected to increase. The
Funds' net asset values may fluctuate in response to the increasing or
decreasing value of the Funds' fixed-income securities.
LESS LIQUID MARKETS FOR SOME MUNICIPAL OBLIGATIONS
o The market for municipal obligations may be less liquid than the
market for corporate bonds. The market for special obligation bonds,
lease obligations, participation certificates and variable rate
instruments, which the Funds may purchase, may be less liquid than
the market for general obligation bonds.
o Liquid secondary trading in unrated municipal obligations may not
exist. The Funds may not be able to sell these securities when SSB
Citi determines it appropriate.
o Less liquid markets tend to be more volatile and react more
negatively to adverse publicity and investor perception than more
liquid markets. If markets are less liquid, the Funds may not be
able to dispose of municipal obligations in a timely manner and at a
fair price.
o There may be no established trading markets for certain municipal
obligations, and trading in these securities may be relatively
inactive. Some of the Funds' investments may be restricted as to
resale. Although restricted securities may be sold in private
transactions, a security's value may be less than the price
originally paid by the Funds. The ability of SSB Citi to value
illiquid or restricted securities will be more difficult and SSB
Citi's judgment may play a greater role in their valuation.
ISSUER OF A MUNICIPAL OBLIGATION MAY DEFAULT ON ITS OBLIGATION TO PAY
o The issuer of a municipal obligation may not be able to make timely
payments of interest and principal because of general economic
downturns or adverse allocation of government cost burdens. If an
issuer did not make timely payments, the Funds would not receive the
anticipated income from the investment and the value of the
investment might be reduced. This could result in a decrease in each
Fund's net asset value. This risk of default may be greater for
private activity bonds or other municipal obligations whose payments
are dependent upon a specific source of revenue.
o Even if the issuer does not actually default, adverse changes in the
issuer's financial condition may negatively affect its credit rating
or presumed creditworthiness. These developments would adversely
affect the market value of the issuer's obligations.
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ISSUER OF A MUNICIPAL OBLIGATION DECLARES BANKRUPTCY
o The issuer of a municipal obligation might declare bankruptcy and
the Funds could experience delays collecting interest and principal.
To enforce their rights, the Funds might be required to take
possession of and manage the assets securing the issuer's
obligation. This may increase the Funds' expenses, reduce their net
asset values and increase the amount of the Funds' distributions
that are in taxable form.
o If the Funds took possession of a bankrupt issuer's assets, income
derived from the Funds' ownership and management of the assets may
not be tax exempt. Shareholders may receive more of the total
distributions from the Funds in taxable form.
o The Funds might not be able to take possession of the assets of a
bankrupt issuer because of laws protecting state and local
institutions, limits on the investments the Funds are permitted to
make, and the nature of the income the Funds are entitled to receive
from their investments imposed on them by the Code. If the Funds
cannot take possession of the assets and enforce their rights, the
value of the security may be greatly diminished. This could reduce
each Fund's net asset value.
ADVERSE GOVERNMENTAL ACTION
The U.S. government has enacted laws that have restricted or diminished
the income tax exemption on some municipal obligations and it may do so again in
the future. If this were to happen, shareholders could receive more of the
distributions from the Funds in taxable form.
OTHER RISKS OF INVESTING IN MUNICIPAL OBLIGATIONS
o The issuer of a municipal obligation may be obligated to redeem the
security at face value, but if the Funds paid more than face value
for the security, the Funds may lose money on the security when it
is sold.
o Market rates of interest may be lower for municipal obligations than
for taxable securities, but this may be offset by the federal income
tax on income derived from taxable securities.
o There may be less extensive information available about the
financial condition of issuers of municipal obligations than for
corporate issuers with publicly traded securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may use when-issued and delayed delivery transactions to
purchase securities. The value of securities purchased in these transactions may
decrease before they are delivered to the Funds. Also, the yield on securities
purchased in these transactions may be higher in the market when the delivery
takes place.
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REPURCHASE AGREEMENTS
Each Fund may use repurchase agreements to manage its cash position. If
the other party to the agreement defaults, the Funds may not be able to sell the
underlying securities. If the Funds must assert their rights against the other
party to recover the securities, the Funds will incur unexpected expenses, risk
losing the income on the security and bear the risk of loss in the value of the
security.
LENDING SECURITIES
If the party borrowing the Funds' securities fails financially, the Funds
may be unable to recover the loaned securities.
FINANCIAL FUTURES AND OPTIONS
The Funds may use financial futures contracts and options on these
contracts to protect the Funds from a decline in the price of municipal
obligations they own or an increase in the price of a municipal obligation they
plan to buy. Risks associated with futures and options transactions include the
following:
o Because it is not possible to perfectly correlate the price of the
securities being hedged with the price movement in a futures
contract, it is not possible to provide a perfect offset on losses
on the futures contract or the option on the contract.
o Because there is imperfect correlation between the Funds' securities
that are hedged and the futures contract, the hedge may not be fully
effective. Losses on the Funds' security may be greater than gains
on the futures contract, or losses on the futures contract may be
greater than gains on the securities subject to the hedge.
o To compensate for imperfect correlation, the Funds may over-hedge or
under-hedge by entering into a futures contract or options on
futures contracts in dollar amounts greater or lesser than the
dollar amounts of the securities being hedged. If market movements
are not as anticipated, the Funds could lose money from these
positions.
o If the Funds hedge against an increase in interest rates, and rates
decline instead, the Funds will lose all or part of the benefit of
the increase in value of the securities they hedged because they
will have offsetting losses in their futures or options positions.
Also, in order to meet margin requirements, the Funds may have to
sell securities at a time they would not normally choose.
CLOSED-END INVESTMENT COMPANY
Shares of closed-end investment companies frequently trade at a discount
from net asset value. Trading at a discount is a risk separate and distinct from
the risk that the net asset value of each Fund will decrease. The risk of
purchasing shares of a closed-end fund that might trade at a discount is more
pronounced for shareholders who wish to sell their shares in a relatively short
period of time because for those shareholders, realization of a gain or loss on
their investments is likely to be more dependent upon the existence of a premium
or discount than upon portfolio
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performance. Although each Fund's shares have at times been traded in the market
above net asset value, since the commencement of each Fund's operations, each
Fund's shares have generally traded in the market at a discount to net asset
value. Neither Fund's shares are subject to redemption. Investors desiring
liquidity may, subject to applicable securities laws, trade their shares in the
Funds on any exchange where such shares are then listed at the then current
market value, which may differ from the then current net asset value.
CHARTER PROVISIONS
Certain provisions of each Fund's Articles of Incorporation and Bylaws may
inhibit that Fund's possible conversion to open-end status and limit the ability
of other persons to acquire control of the Fund's board of directors. In certain
circumstances, these provisions might also inhibit the ability of shareholders
to sell their shares at a premium over prevailing market prices.
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COMPARISON OF INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
ORGANIZATION. SBI and SBT are both diversified, closed-end management
investment companies registered under the Investment Company Act. Both Funds are
organized as corporations under the laws of the State of Maryland. Each Fund is
managed by SSB Citi (successor to SSBC Fund Management Inc.). The shares of
common stock of each Fund are listed and trade on the AMEX under the symbols
"SBI" and "SBT", respectively. After the Merger, SBI's shares will continue to
be traded on the AMEX under the symbol "SBI", while SBT's shares will be
delisted and SBT will cease to exist.
The shares of common stock of each Fund have equal non-cumulative voting
rights and equal rights with respect to dividends, assets and dissolution. Each
Fund's shares of common stock are fully paid and non-assessable and have no
preemptive, conversion or other subscription rights. Fluctuations in the market
price of the Fund's shares is the principal investment risk of an investment in
either Fund. Portfolio management, market conditions, investment policies and
other factors affect such fluctuations. Although the investment objectives,
policies and restrictions of the Funds are similar, there are differences
between them, as discussed below. There can be no assurance that either Fund
will achieve its stated objective.
INVESTMENT OBJECTIVES. Each Fund's investment objective is to provide
shareholders a high level of current income exempt from regular federal income
tax consistent with prudent investing. SBI seeks to achieve this objective by
investing primarily in intermediate term, investment grade municipal obligations
with remaining maturities at the time of investment of less than fifteen years,
while SBT seeks to achieve this objective by investing primarily in investment
grade municipal obligations with remaining maturities of less than fifteen
years. The investment objective is a fundamental policy of each Fund and cannot
be changed without the approval of the holders of a "majority of each Fund's
outstanding voting securities," as defined in the Investment Company Act and
under "Proposal (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization Pursuant to which Smith Barney Municipal Fund will Merge with and
into Smith Barney Intermediate Municipal Fund -- Synopsis -- Investment
Objectives and Management Policies."
No assurance can be given that either Fund's investment objective will be
achieved.
COMPARISON OF INVESTMENT POLICIES. SBI's policy under normal market
conditions is to invest at least 80% of its total assets in municipal securities
with remaining maturities of less than fifteen years and to maintain a
dollar-weighted average maturity of the entire portfolio between three and ten
years. For this purpose, any scheduled principal prepayments will be reflected
in the calculation of dollar-weighted average maturity. SBT's policy under
normal market conditions is to invest at least 80% of its total assets in
municipal securities with remaining maturities of less than fifteen years. These
policies and the investment limitations described below under the caption
"Investment Restrictions" are fundamental and may not be changed without the
approval of a majority of each Fund's outstanding voting securities as defined
under "Proposal (Both Funds): Approval of the Merger Agreement and Plan of
Reorganization Pursuant to which Smith Barney Municipal Fund will Merge with and
into Smith Barney Intermediate Municipal Fund -- Synopsis -- Investment
Objectives and Management Policies." All other policies and percentage
limitations of each Fund as described below may be
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modified by that Fund's board of directors if, in the reasonable exercise of its
business judgment, it determines that modification is necessary or appropriate
to carry out that Fund's investment objective.
Both Funds define municipal obligations to include bonds and notes such
as:
o general obligation bonds issued for various public purposes and
supported by the municipal issuer's credit and taxing power;
o revenue bonds whose principal and interest is payable only from the
revenues of a particular project or facility. Industrial revenue
bonds depend on the credit standing of a private issuer and may be
subject to the federal alternative minimum tax, or AMT; and
o notes that are short-term obligations of municipalities or agencies
sold in anticipation of a bond sale, collection of taxes or receipt
of other revenues.
Municipal obligations may have all types of interest rate payment and
reset terms, including fixed rate, floating and variable rate, zero coupon,
payment in kind and auction rate features.
Under normal market conditions, each Fund will invest at least two thirds
of its total assets in municipal securities rated, at the time of investment, A
or better by S&P or by Moody's, or rated within the three highest ratings
categories by an NRSRO (or, if unrated, deemed by the manager to be of
comparable quality). Under normal market conditions, the Funds will also invest
only in municipal securities rated investment grade at the time of investment.
Investment grade securities are securities rated BBB or higher by S&P, Baa or
higher by Moody's or within the four highest ratings categories of an NRSRO (or,
if unrated, deemed by the manager to be of comparable quality). The Funds will
not invest in any municipal securities that are rated lower than BBB by S&P or
Baa by Moody's if they are not otherwise rated investment grade by another
NRSRO.
Each Fund's policies on the credit quality of its investments apply only
at the time of the purchase of a security, and the Funds are not required to
dispose of securities in the event that S&P or Moody's or any other NRSRO
downgrades its assessment of the credit characteristics of a particular issuer
or in the event the manager reassesses its view with respect to the credit
quality of the issuer thereof.
MUNICIPAL SECURITIES. Municipal securities are obligations issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, the interest on which, in the opinion of bond counsel or
other counsel to the issuer of such securities is, at the time of issuance, not
includable in gross income for federal income tax purposes. Under normal market
conditions, at least 80% of each Fund's total assets will be invested in
municipal securities with remaining maturities of less than fifteen years. This
policy is fundamental and cannot be changed without shareholder approval.
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Each Fund has not established any limit on the percentage of its portfolio
that may be invested in municipal securities subject to the alternative minimum
tax provisions of federal tax law, and a substantial portion of the income
produced by the Funds may be subject to the alternative minimum tax. The Funds
may not be a suitable investment for investors who are already subject to the
federal alternative minimum tax or who would become subject to the federal
alternative minimum tax as a result of an investment in the Funds.
Included within the general category of municipal securities are
participations in lease obligations or installment purchase contract obligations
(hereinafter collectively called "lease obligations") of municipal authorities
or entities. 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. Each Fund may invest up to 100% of its assets in "non-appropriation"
lease obligations and in unrated "non-appropriation" lease obligations believed,
at the time of investment, by the manager to have credit characteristics
equivalent to, and to be of comparable quality as, securities that are rated
investment grade.
In evaluating such unrated lease obligations, the manager will consider
such factors as it deems appropriate, including:
o whether the lease can be cancelled
o the ability of the lease obligee to direct the sale of the
underlying assets
o the general creditworthiness of the lease obligor
o the likelihood that the municipality will discontinue appropriating
funding for the leased property in the event such property is no
longer considered essential by the municipality
o the legal recourse of the lease obligee in the event of such a
failure to appropriate funding
o any limitations which are imposed on the lease obligor's ability to
utilize substitute property or services than those covered by the
lease obligations.
Participation certificates are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities. They may represent participations in a lease, an installment
purchase contract, or a conditional sales contract. Some municipal leases and
participation certificates may not be readily marketable. See "Risk Factors and
Special Considerations."
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The "issuer" of municipal securities is generally deemed to be the
governmental agency, authority, instrumentality or other political subdivision,
or the non-governmental user of a revenue bond-financed facility, the assets and
revenues of which will be used to meet the payment obligations, or the guarantee
of such payment obligations, of the municipal securities.
Municipal securities may have fixed or variable interest rates. Each Fund
may purchase floating and variable rate demand notes, which are municipal
securities normally having a stated maturity in excess of one year, but which
permit the holder to tender the notes for purchase at the principal amount
thereof. The interest rate on a floating rate demand note is based on a known
lending rate, such as a bank's prime rate, and is adjusted each time such rate
is adjusted. The interest rate on a variable rate demand note is adjusted at
specified intervals. There generally is no secondary market for these notes,
although they may be tendered for redemption or remarketing at face value. See
"Risk Factors and Special Considerations." Each such note purchased by the Funds
will meet the criteria established for the purchase of municipal securities.
The Funds may invest in zero coupon bonds. A zero coupon bond pays no
interest in cash to its holder during its life, although interest is accrued
during that period. Its value to an investor consists of the difference between
its face value at the time of maturity and the price for which it was acquired,
which is generally an amount significantly less than its face value (sometimes
referred to as a "deep discount" price). Because these securities usually trade
at a deep discount, they will be subject to greater fluctuations of market value
in response to changing interest rates than debt obligations of comparable
maturities which make periodic distributions of interest. On the other hand,
because there are no periodic interest payments to be reinvested prior to
maturity, zero coupon securities eliminate the reinvestment risk and lock in a
rate of return to maturity.
SELECTION OF INVESTMENTS. The manager selects securities for each Fund's
portfolio which the manager believes entail reasonable credit risk considered in
relation to the particular investment policies of the Funds. As a result, the
Funds do not necessarily invest in the highest yielding municipal securities
permitted by their investment policies if the manager determines that market
risks or credit risks associated with such investments would subject the Funds'
portfolios to excessive risk. The potential for realization of capital gains
resulting from possible changes in interest rates is not a major consideration.
Each Fund's policy is to invest at least 80% of its total assets in municipal
securities with remaining maturities of less than fifteen years. For this
purpose, any scheduled principal prepayments on municipal securities are
reflected in the calculation of dollar-weighted average maturity. The manager
may adjust the average maturity of each Fund's portfolio from time to time,
depending on its assessment of the relative yields available on securities of
different maturities and its expectations of future changes in interest rates.
Each Fund generally does not invest more than 25% of its total assets in
any industry, nor does each Fund invest more than 5% of its total assets in the
securities of any single issue. Governmental issuers of municipal securities are
not considered part of any "industry". However, municipal securities backed only
by the assets and revenues of nongovernmental users may for this purpose be
deemed to be issued by such nongovernmental users, and the 25% limitation would
apply to the industries of such nongovernmental users. It is nonetheless
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possible that each Fund may invest more than 25% of its total assets in a
broader segment of the municipal securities market, such as: hospital and other
health care facilities obligations, housing agency revenue obligations, or
airport revenue obligations. Each Fund may invest more than 25% of its assets in
such types of municipal securities if the manager determines that the yields
available from such obligations in a particular segment justify the additional
risks associated with a large investment in that segment. Although these
obligations could be supported by the credit of governmental users, or by the
credit of nongovernmental users engaged in a number of industries, economic,
business, political and other developments generally affecting the revenues of
such users (for example, proposed legislation or pending court decisions
affecting the financing of such projects and market factors affecting the demand
for their services or products) may have a general adverse effect on all such
municipal securities in such a market segment. Each Fund may invest more than
25% of its assets in industrial development bonds or in issuers located in the
same state. If the Funds were to invest more than 25% of their total assets in
issuers located in the same state, they would be more susceptible to adverse
economic, business, or regulatory conditions in that state.
From time to time, the Funds may invest in securities of a municipal
issue, most or all of which is held by the Funds, by themselves or together with
other funds or accounts managed by the manager. Because there may be relatively
few potential purchasers for such investments and, in some cases, there may be
contractual restrictions on resales, the Funds may find it more difficult to
sell such securities at a time when the manager believes it advisable to do so.
TEMPORARY DEFENSIVE STRATEGIES. When the SSB Citi believes a temporary defensive
posture in the market is warranted (e.g., times when, in the SSB Citi's opinion,
temporary imbalances of supply and demand or other temporary dislocations in the
municipal securities market adversely affect the price at which municipal
securities are available), and in order to keep cash on hand fully invested, the
Funds may temporarily invest to a substantial degree in high quality, short-term
municipal securities. If these high-quality, short-term municipal securities are
not available or, in the SSB Citi's judgment, do not afford sufficient
protection against adverse market conditions, the Funds may invest in the
following taxable securities: obligations of the U.S. Government, its agencies
or instrumentalities; other debt securities rated within the four highest
categories by an NRSRO; commercial paper rated in the highest category by an
NRSRO; certificates of deposit, time deposits and bankers' acceptances; or
repurchase agreements with respect to any of the foregoing investments or any
other fixed-income securities that the manager considers consistent with such
strategy. To the extent the Funds invest in taxable securities, each Fund will
not at such times be able to achieve its investment objective of income exempt
from regular federal income taxes.
INVESTMENT TECHNIQUES. Each Fund may employ, among others, the investment
techniques described below, which may give rise to taxable income:
In connection with the investment objective and policies described above,
each Fund may:
o engage in interest rate and other hedging and risk management
transactions;
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o purchase and sell options (including swaps, caps, floors and
collars) on municipal securities and on indices based on municipal
securities. In general, each Fund may purchase and sell (or write)
options on up to 20% of its assets;
o purchase and sell municipal securities on a "when-issued" or
"delayed delivery" basis;
o borrow amounts up to 33 1/3% of its total assets (including the
amount borrowed). Each Fund may also borrow up to an additional 5%
of its total assets for temporary purposes; and
o enter into the following hedging transactions: financial futures
contracts and related options contracts. The Funds will not engage
in these transactions for speculative purposes, but only in limited
circumstances as a means to hedge risks associated with management
of each Fund's portfolio.
INVESTMENT RESTRICTIONS. The following investment restrictions of each Fund are
fundamental and cannot be changed without the approval of the holders of a
majority of each Fund's outstanding voting securities as defined in the
Investment Company Act. If a percentage restriction on investment or use of
assets set forth below is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing market values will not be
considered a deviation from policy. Each Fund may not:
1. Purchase securities (other than obligations issued or guaranteed by the
United States Government or by its agencies or instrumentalities) of any issuer
if as a result of the purchase more than 5% of the value of either Fund's total
assets would be invested in the securities of the issuer, except that up to 25%
of the value of either Fund's total assets may be invested without regard to
this 5% limitation.
2. Invest more than 25% of its total assets in a single industry; however,
as described above under "Investment Objective and Management Policies," each
Fund may from time to time invest more than 25% of its total assets in a
particular segment of the municipal securities market or in obligations of
issuers located in the same state.
3. Issue senior securities if such issuance is specifically prohibited by
the Investment Company Act or the rules and regulations thereunder.
4. Borrow money in excess of 33 1/3% of its total assets (including the
amount of money borrowed but excluding any liabilities and indebtedness not
constituting senior securities) except that the Funds may borrow up to an
additional 5% of its total assets for temporary purposes; pledge its assets
other than to secure such borrowings or in connection with when-issued and
forward commitment transactions and similar investment strategies.
5. Make loans of money or property to any person, except to the extent
that the securities in which the Funds may invest are considered to be loans and
except that the Funds may lend money or property in connection with the
maintenance of the value of or the Funds' interests with respect to the
municipal securities owned by the Funds.
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6. Buy any securities "on margin." Neither the deposit of initial or
variation margin in connection with hedging and risk management transactions nor
short-term credits as may be necessary for the clearance of transactions is
considered the purchase of a security on margin.
7. Sell any securities "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell financial futures or options, except
as described in the above "Investment Techniques" section.
8. Act as an underwriter of securities, except to the extent that each
Fund may be deemed to be an underwriter in connection with the sale of
securities held in its portfolio.
9. Make investments for the purpose of exercising control or participation
in management, except to the extent that exercise by each Fund of its rights
under agreements related to municipal securities would be deemed to constitute
such control or participation.
10. Invest in securities of other investment companies in an amount
exceeding the limitation set forth in the Investment Company Act and the rules
thereunder, except as part of a merger, consolidation or other acquisition.
11. Invest in equity interests in oil, gas or other mineral exploration or
development programs except pursuant to the exercise by the fund of its rights
under agreements relating to municipal securities.
12. Purchase or sell real estate, commodities or commodity contracts,
except to the extent that the municipal securities the Funds may invest in are
considered to be interests in real estate, commodities or commodity contracts,
or to the extent that each Fund exercises its rights under agreements relating
to such municipal securities (in which case the Funds may liquidate real estate
acquired as a result of default on a mortgage).
In addition, SBT may not purchase or sell commodities or commodity
contracts, except that it may purchase or sell financial futures contracts and
related options thereon.
Each Fund generally will not engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish each Fund's investment objective. For example, the Funds may sell
portfolio securities in anticipation of a movement in interest rates. Other than
for tax purposes, frequency of portfolio turnover will not be a limiting factor
if the Funds consider it advantageous to purchase or sell securities, which must
be borne by the Funds and their respective shareholders. High portfolio turnover
may also result in the realization of substantial net short-term capital gains,
and any distributions resulting from such gains will be taxable at ordinary
income rates for federal income tax purposes.
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TAXATION
The discussion set out below of tax considerations generally affecting
each Fund and its shareholders is intended to be only a summary and is not
intended as a substitute for careful tax planning by prospective shareholders.
TAXATION OF EACH FUND AND ITS INVESTMENTS
Each Fund has qualified and intends to continue to qualify each year as a
"regulated investment company" under Subchapter M of the Code. In addition, each
Fund intends to satisfy each year conditions contained in the Code that will
enable interest from municipal securities, excluded from gross income for
federal income tax purposes with respect to such Fund, to retain that tax-exempt
status when distributed to the shareholders of such Fund (that is, to be
classified as "exempt-interest" dividends of such Fund).
As a regulated investment company, each Fund pays no federal income taxes
on its taxable net investment income (that is, taxable income other than net
realized capital gains) and its net realized capital gains that are distributed
to shareholders. To qualify under Subchapter M of the Code, each Fund must,
among other things: (1) distribute to its shareholders at least 90% of its
taxable net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gain in excess of net
realized long-term capital loss) and 90% of its tax-exempt net investment income
(reduced by certain expenses); (2) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of securities, gains from
the sale or other disposition of securities, and other income (including, but
not limited to, gains from options, futures and forward contracts) derived with
respect to such Fund's business of investing in securities; and (3) diversify
its holdings so that, at the end of each fiscal quarter of such Fund (a) at
least 50% of the market value of such Fund's assets is represented by cash, U.S.
Government securities, securities of other regulated investment companies, and
other securities, with those other securities limited, with respect to any one
issuer, to an amount no greater than 5% of such Fund's assets and 10% of the
outstanding voting securities of such issuer, (b) not more than 25% of the
market value of such Fund's assets is invested in the securities of any one
issuer (other than U.S. Government securities or securities of other regulated
investment companies) or of two or more issuers that such Fund controls and
which are determined to be in the same or similar trades or businesses or
related trades or businesses. As a regulated investment company, each Fund is
subject to a 4% non-deductible excise tax measured with respect to certain
undistributed amounts of ordinary income and capital gain. Each Fund pays
dividends and distributions necessary to avoid the application of this excise
tax.
As described above, each Fund may invest in financial futures contracts
and options on financial futures contracts that are traded on a U.S. exchange or
board of trade. As a general rule, these investment activities will increase or
decrease the amount of long-term and short-term capital gains or losses realized
by each Fund and, thus, will affect the amount of capital gains distributed to
each Fund's shareholders.
For federal income tax purposes, gain or loss on the futures and options
described above (collectively referred to as "Section 1256 Contracts") would, as
a general rule, be taxed pursuant
32
<PAGE>
to a special "mark-to-market system." Under the mark-to-market system, each Fund
may be treated as realizing a greater or lesser amount of gains or losses than
actually realized. As a general rule, gain or loss on Section 1256 Contracts is
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss, and as a result, the mark-to-market system will generally affect the
amount of capital gains or losses taxable to each Fund and the amount of
distributions taxable to a shareholder. Moreover, if the Funds invest in both
Section 1256 Contracts and offsetting positions in those contracts, then either
of the Funds might not be able to receive the benefit of certain realized losses
for an indeterminate amount of time. Each Fund expects that its activities with
respect to Section 1256 Contracts and offsetting positions in those Contracts
(1) will not cause it or its shareholders to be treated as receiving a
materially greater amount of capital gains or distributions than actually
realized or received and (2) will permit it to use substantially all of its
losses for the fiscal years in which the losses actually occur (to the extent it
realizes corresponding gains in such years).
TAXATION OF EACH FUND'S STOCKHOLDERS
Dividends paid by each Fund, other than dividends derived from taxable
investments and market discount on municipal securities and from income or gain
derived from securities transactions and from the use of certain of the
investment techniques described under "Investment Techniques," are derived from
interest on municipal securities and are exempt-interest dividends that may be
excluded by shareholders from their gross income for federal income tax purposes
if the Fund satisfies certain asset percentage and income distribution
requirements. Distributions of each Fund's net realized short-term capital gains
are taxable to shareholders of such Fund as ordinary income, and distributions
of net realized long-term capital gains are taxable to shareholders as long-term
capital gains, regardless of the length of time shareholders have held shares of
common stock and whether the distributions are received in cash or reinvested in
additional shares. As a general rule, a shareholder's gain or loss on a sale of
his shares of common stock will be a long-term gain or loss if he has held his
shares for more than one year and will be a short-term capital gain or loss if
he has held his shares for one year or less. Long-term capital gains of
individual shareholders are generally subject to a maximum 20% capital gains tax
rate. Dividends and distributions paid by each Fund do not qualify for the
federal dividends-received deduction for corporations.
EXEMPT-INTEREST DIVIDENDS
Interest on indebtedness incurred by a shareholder to purchase or carry
shares of a Fund's common stock is not deductible for federal income tax
purposes to the extent it is deemed related to exempt-interest dividends. If a
shareholder receives exempt-interest dividends with respect to any share of a
Fund's common stock and if the share is held by the shareholder for six months
or less, then any loss on the sale of the share may, to the extent of the
exempt-interest dividends, be disallowed. The Code may also require a
shareholder, if he receives exempt-interest dividends, to treat as taxable
income a portion of certain otherwise non-taxable social security and railroad
retirement benefit payments. In addition, the portion of any exempt-interest
dividend paid by a Fund that represents income derived from private activity
bonds held by such Fund may not retain its tax-exempt status in the hands of a
shareholder who is a "substantial user" of a facility financed by such bonds or
who is a "related person" to such substantial user. Although each Fund's
exempt-interest dividends may be excluded by shareholders from their gross
income for
33
<PAGE>
federal income tax purposes, some or all of each Fund's exempt-interest
dividends may be a specific preference item, or a component of an adjustment
item, for purposes of the federal individual and corporate alternative minimum
taxes. The receipt of dividends and distributions from each Fund may affect a
foreign corporate shareholder's federal "branch profits" tax liability and the
federal "excess net passive income" tax liability of a shareholder of an S
corporation. Shareholders should consult their own tax advisors to determine
whether they are (1) "substantial users" with respect to a facility or "related"
to those users within the meaning of the Code or (2) subject to a federal
alternative minimum tax, the federal "branch profits" tax, or the federal
"excess net passive income" tax.
DIVIDEND REINVESTMENT PLAN
A shareholder of each Fund receiving dividends or distributions in
additional shares purchased in the open market pursuant to the plan should be
treated for federal income tax purposes as receiving a distribution in an amount
equal to the amount of money that a shareholder receiving cash dividends or
distributions receives, and should have a cost basis in the shares received
equal to that amount. A shareholder of each Fund receiving dividends or
distributions in additional shares issued directly by each Fund pursuant to the
plan should be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the issued shares on
the payment date, and should have a cost basis in the shares received equal to
that amount.
STATEMENTS AND NOTICES
Statements as to the tax status of the dividends and distributions
received by shareholders of each Fund are mailed annually. These statements show
the dollar amount of income excluded from gross income for federal income tax
purposes and the dollar amount, if any, subject to federal income taxes
including the amount, if any, of long-term capital gains distributions. The
statements will also designate the amount of exempt-interest dividends that are
a specific preference item for purposes of the federal individual and corporate
alternative minimum taxes. Each Fund will notify shareholders annually as to the
interest excluded from gross income for federal income tax purposes earned by
each Fund with respect to those states and possessions in which such Fund has or
had investments. The dollar amount of dividends paid by each Fund that is
excluded from gross income for federal income tax purposes and the dollar amount
of dividends paid by each Fund that is subject to federal income taxation, if
any, will vary for each shareholder depending upon the size and duration of the
shareholder's investment in such Fund. To the extent that each Fund earns
taxable net investment income, it intends to designate as taxable dividends the
same percentage of each day's dividend as its taxable net investment income
bears to its total net investment income earned on that date. Therefore, the
percentage of each day's dividend designated as taxable, if any, may vary from
day to day.
BACKUP WITHHOLDING
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is not
subject to "backup withholding," the shareholder may be subject to a 31% "backup
withholding" tax with respect to (1) taxable dividends and distributions
34
<PAGE>
and (2) the proceeds of any sales or repurchases of shares of common stock. An
individual's taxpayer identification number is his social security number. The
31% backup withholding tax is not an additional tax and may be credited against
a taxpayer's federal income tax liability.
35
<PAGE>
INFORMATION ABOUT THE MERGER
GENERAL. Under the Plan, SBT will merge with and into SBI on the Effective
Date. As a result of the Merger and on the Effective Date:
o SBT will no longer exist,
o SBI will be the surviving corporation, and
o SBI will change its name to the "Intermediate Muni Fund, Inc."
SBT will then:
o deregister as an investment company under the Investment Company
Act,
o cease its separate existence under Maryland Law,
o remove its shares of common stock from listing on the AMEX, and
o withdraw from registration under the Securities Exchange Act of
1934, or the Securities Exchange Act.
Each share of outstanding stock of SBT will convert into an equivalent
dollar amount of full shares of stock of SBI, based on the net asset value per
share of each Fund calculated at 4:00 p.m. on the Business Day preceding the
Effective Date. SBI will not issue any fractional shares to SBT shareholders. In
lieu thereof, SBI will purchase all fractional shares at the current net asset
value of the shares and remit the cash proceeds to former SBT shareholders in
proportion to their fractional shares. No sales charge or fee of any kind will
be charged to SBT shareholders in connection with their receipt of SBI common
stock in the Merger.
Under Maryland law, shareholders of a corporation whose shares are traded
publicly on a national securities exchange, such as the Funds' shares, are not
entitled to demand the fair value of their shares upon a merger; therefore, the
shareholders of the Funds will be bound by the terms of the Merger. However, any
shareholder of either Fund may sell his or her shares of common stock at any
time prior to the Merger on the AMEX.
The Plan may be terminated and the Merger abandoned, whether before or
after approval by the Funds' shareholders, at any time prior to the Effective
Date:
o by the mutual written consent of the board of directors of each
Fund, or
o by either Fund if the conditions to that Fund's obligations under
the Plan have not been satisfied or waived.
o If the Merger has not been consummated by January 31, 2001, the Plan
automatically terminates on that date, unless a later date is
mutually agreed upon by the board of directors of each Fund.
36
<PAGE>
REASONS FOR THE MERGER. The board of directors of each Fund considered and
unanimously approved the proposed Merger at separate meetings of each board held
on June 21, 2000. All of the Directors of each Fund, including all Directors who
are not interested persons of the Funds and SSB Citi, were present at the
meeting in person. For the reasons discussed below, the board of directors of
each Fund, including non-interested directors of each Fund, after consideration
of the potential benefits of the Merger to the shareholders of that Fund and the
expenses expected to be incurred by that Fund in connection with the Merger,
unanimously determined that:
o the interests of the existing shareholders of that Fund will not be
diluted as a result of the proposed Merger, and
o the proposed Merger is in the best interests of that Fund.
Each board of directors has, over the years, discussed the significance of
the existence of the discount to net asset value at which each Fund's shares
have traded on the AMEX and the impact on shareholders of the discount. Each
board has discussed and considered various alternative strategies to address the
discount, including instituting share repurchases, combining with other funds,
converting to an open-end format, or liquidating. The directors of each Fund
however, have consistently concluded that it was in the best interests of each
Fund and its shareholders to maintain the current closed-end format, because, in
the view of the Boards and of SSB Citi, the closed-end format is an attractive
investment vehicle for participating in the municipal bond market.
The alternatives available to the Funds, including a full range of
alternatives that has been reviewed in the past discussions of the discount
issue, were considered at meetings of each board of directors held on June 21,
2000. After consideration of these alternatives, the board of directors of each
Fund approved the course of action described below. Willkie Farr & Gallagher,
counsel for the Funds and SSB Citi, and Sullivan & Cromwell, counsel to the
non-interested Directors of each Fund, also assisted in the consideration of
these matters.
IN THE JUDGMENT OF THE BOARD OF DIRECTORS OF EACH FUND, THE MERGER SERVES
THE BEST INTERESTS OF EACH FUND AND ITS SHAREHOLDERS.
In deciding to approve the course of action described below, the
non-interested directors considered many factors, including, but not limited to,
market information and analyses. In addition, in considering the merits of the
proposed Merger, the Boards also considered the larger asset size of the
combined Fund relative to each constituent Fund standing alone, and the
potential for economies of scale that may result from the larger asset size of
the combined Fund. Based on data presented by SSB Citi, the board of directors
of each Fund believes that a combination of the Funds may result in a total
operating expense ratio that will be lower than the total operating expense
ratio of either Fund currently.
The Boards also considered whether a larger asset base would provide
benefits in portfolio management. After the Merger, a larger asset size could
result in a more liquid trading market for shares of SBI than either Fund
currently enjoys separately, which might have a positive impact on the discount
at which each Fund's shares have tended to trade. Further, the
37
<PAGE>
Merger itself should focus the attention of a wider circle of securities
analysts on SBI, and after the Merger, may facilitate securities analysts'
following of this Fund because the Merger may eliminate confusion in the
marketplace that results from two funds with the same objective, similar
policies and similar names managed by the same manager.
There can be no guarantee that any of these potential beneficial results
will be realized.
The board of directors of each Fund, in declaring advisable and
recommending the proposed Merger, also considered the following:
(1) the capabilities and resources of SSB Citi and its affiliates in the
areas of investment management and shareholder servicing;
(2) expense ratios and information regarding fees and expenses of the
Funds, both currently and on a pro forma basis;
(3) the terms and conditions of the Merger and whether it would result
in dilution of the interests of each Fund and its existing
shareholders;
(4) the compatibility of each Fund's portfolio securities, investment
objective, policies and restrictions;
(5) the tax consequences to each Fund and its shareholders in connection
with the Merger; and
(6) the anticipated expenses of the Merger.
In reviewing issues relating to the structure of the Merger and the
selection of the surviving corporation in the Merger, each board also considered
information provided to them by SSB Citi concerning:
o the comparative performance records of the two Funds,
o public and market perception of the two Funds,
o the relative size of the two Funds,
o the investment policies, strategies and personnel SSB Citi intends
to utilize in managing the merged fund, and
o SBI as the surviving corporation.
Based on the factors discussed above, the board of directors of each Fund
concluded that the expenses of the Merger are outweighed by the benefits that
are anticipated to be derived from the Merger. In addition, the Boards of each
Fund, including the non-interested directors of each Fund, have unanimously
concluded that:
o the Merger is in the best interests of each respective Fund, and
38
<PAGE>
o the interests of existing shareholders of each respective Fund will
not be diluted as a result of the transactions contemplated by the
Plan.
TERMS OF THE MERGER AGREEMENT. The following is a summary of the
significant terms of the Plan. This summary is qualified in its entirety by
reference to the Plan, attached hereto as Exhibit A.
At the Effective Date, each share of common stock of SBT will convert into
an equivalent dollar amount (to the nearest one ten-thousandth of one cent) of
full shares of SBI common stock, based on the net asset value per share of each
Fund calculated at 4:00 p.m. on the Business Day preceding the Effective Date.
SBI will not issue any fractional shares to SBT shareholders. In lieu thereof,
SBI will purchase all fractional shares at the current net asset value of the
shares and remit the cash proceeds to former SBT shareholders in proportion to
their fractional shares.
For purposes of valuing assets in connection with the Merger, the assets
of SBT will be valued pursuant to the principles and procedures consistently
utilized by SBI, which principles and procedures are also utilized by SBT in
valuing its own assets and determining its own liabilities. As a result, it is
not expected that SBI's valuation procedures as applied to SBT's portfolio
securities will result in any difference from the valuation that would have
resulted from the application of SBT's valuation procedures to such securities.
The net asset value per share of SBI common stock will be determined in
accordance with these principles and procedures, and SBI will certify the
computations involved. The net asset value per share of each Fund will not be
adjusted to take into account differences in unrealized gains and losses.
SBI will issue separate certificates or share deposit receipts for SBI
common stock to shareholders of SBT. SBI will deliver these certificates or
share deposit receipts representing shares of SBI common stock to PFPC, as the
transfer agent and registrar for SBI common stock. SBI will not permit any SBT
shareholder to receive new certificates representing shares of SBI common stock
until this shareholder has surrendered his or her outstanding certificates
representing shares of the common stock of SBT or, in the event of lost
certificates, posted adequate bond. SBT will request its shareholders to
surrender their outstanding certificates representing shares of the common stock
of SBT or post adequate bond therefor. Dividends payable to holders of record of
shares of SBI as of any date after the Effective Date and prior to the exchange
of certificates by any shareholder of SBT will be paid to such shareholder,
without interest; however, such dividends will not be paid unless and until such
shareholder surrenders his or her stock certificates of SBT for exchange.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. UPON
CONSUMMATION OF THE MERGER, SHAREHOLDERS OF SMITH BARNEY MUNICIPAL FUND WILL BE
FURNISHED WITH INSTRUCTIONS FOR EXCHANGING THEIR STOCK CERTIFICATES FOR SMITH
BARNEY INTERMEDIATE MUNICIPAL FUND STOCK CERTIFICATES.
The net asset value of the SBI shares received by SBT shareholders plus
the cash amounts received upon the purchase of fractional share interests by SBI
will equal the net asset value of the SBT shares exchanged.
39
<PAGE>
The Plan provides, among other things, that the Merger will not take place
without:
o the requisite approval of the shareholders of SBI and SBT, and
o effectiveness of a Registration Statement on Form N-14.
The Plan may be terminated at any time prior to the Effective Date by
mutual agreement of each Fund's board of directors or by either Fund if the
other has violated a condition of the Plan. The Plan will automatically
terminate after January 31, 2001 if the Merger has not been consummated, unless
such time is extended by mutual agreement of the board of directors of each
Fund.
The Plan may be amended, modified or supplemented by mutual agreement of
SBT and SBI. However, no amendments which would have the effect of changing the
provisions for determining the number of shares issued to SBT shareholders will
be permitted following the special meeting unless those shareholders consent to
the amendment.
EXPENSES OF THE MERGER. In evaluating the proposed Merger, SSB Citi has
estimated the amount of expenses, including AMEX listing fees, SEC registration
fees, legal and accounting fees and proxy and distribution costs. The estimated
total expenses pertaining to the Merger are $95,000. For more information about
the expenses of the Merger, see "Synopsis--Expenses of the Merger."
TAX CONSIDERATIONS. The Plan and Merger are conditioned upon the receipt
by the Funds of an opinion from Willkie Farr & Gallagher, substantially to the
effect that, based upon the facts, assumptions and representations of the
parties, for federal income tax purposes:
o the Merger will constitute a tax-free "reorganization" within the
meaning of Section 368(a)(1) of the Code, and each Fund will be "a
party to a reorganization" within the meaning of Section 368(b) of
the Code,
o no gain or loss will be recognized by either Fund as a result of the
Merger,
o the basis of the assets of SBT in the hands of SBI will be the same
as the basis of such assets to SBT immediately prior to the Merger,
o the holding period of the assets of SBT in the hands of SBI will
include the period during which such assets were held by SBT,
o no gain or loss will be recognized by the shareholders of SBT upon
the conversion of their SBT shares into SBI common stock except with
respect to cash received upon the purchase of fractional share
interests by SBI,
o the basis of SBI shares received by the shareholders of SBT
(including the basis of fractional share interests purchased by SBI)
will be the same as the basis of the shares of SBT exchanged
therefor,
40
<PAGE>
o the holding period of SBI shares received by the shareholders of SBT
and the holding period of fractional share interests purchased by
SBI will include the holding period during which the shares of SBT
exchanged therefor were held, provided that at the time of the
exchange the shares of SBT were held as capital assets in the hands
of the shareholders of SBT, and
o cash received for fractional share interests purchased by SBI will
generally generate capital gain or loss to shareholders receiving
such cash.
While SBT is not aware of any adverse state or local tax consequences of
the proposed Merger, it has not requested any ruling or opinion with respect to
such consequences and shareholders may wish to consult their own tax advisers
with respect to such matters.
PORTFOLIO SECURITIES. If the Merger is effected, SSB Citi will analyze and
evaluate the portfolio securities of SBT being transferred to SBI. Consistent
with the SBI's investment objective and policies, any restrictions imposed by
the Code and the best interests of SBI's shareholders (including former
shareholders of SBT), SSB Citi will determine the extent and duration to which
SBT's portfolio securities will be maintained by SBI. A significant rebalancing
of SBT's portfolio securities in connection with the Merger is not anticipated.
Subject to market conditions at the time of any such rebalancing, the
disposition of SBT's portfolio securities may result in a capital gain or loss.
The actual tax consequences of any disposition of portfolio securities will vary
depending upon the specific security(ies) being sold.
HISTORY OF SMITH BARNEY MUNICIPAL FUND'S DISCOUNT. SBT's shares have
generally traded at a discount to their net asset value per share since shortly
after its commencement of operations. See "Additional Information about the
Funds-Market Discount." The board of directors of SBT has considered a number of
actions in response to this discount.
Subsequent to the close of the Fund's reporting period, the board of
directors of SBT approved a plan for which the Fund began to repurchase its
common stock shares on January 4, 2000. These shares are purchased on the AMEX
at market prices and then retired. Over time, a share repurchase program will
reduce the number of shares outstanding and may increase both the stock price
and the net asset value per share of the Fund by increasing the demand for the
Fund's shares. As of June 30, 2000, the Fund has repurchased 33,300 shares
totaling $416,329 at an average price of $12.48 per share.
41
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
DESCRIPTION OF SECURITIES TO BE ISSUED. The authorized stock of SBI
consists of 100,000,000 shares of common stock, U.S. $0.001 par value. Shares of
SBI entitle its holders to one vote per share. Holders of SBI's common stock are
entitled to share equally in dividends authorized by the Fund's board of
directors payable to the holders of such common stock and in the net assets of
SBI available for distribution to holders of such common stock. Shares have
noncumulative voting rights and no conversion, preemptive or other subscription
rights, and are not redeemable. The outstanding shares of common stock of SBI
are fully paid and non-assessable. In the event of liquidation, each share of
common stock is entitled to its proportion of the Fund's assets after payment of
debts and expenses. SBI holds shareholder meetings annually.
The following table shows information about the common stock of each Fund
as of June 30, 2000.
<TABLE>
<CAPTION>
(4)
Amount Outstanding
Exclusive of Shares
(3) held by Fund for its
(1) (2) Amount held by Fund Own Account as of
Title of Class Amount Authorized for its Own Account June 30, 2000
-------------- ----------------- ------------------- --------------------
<S> <C> <C> <C> <C>
SMITH BARNEY Common Stock, 100,000,000 None 8,210,165
INTERMEDIATE $0.001
MUNICIPAL FUND par value
SMITH BARNEY Common Stock, 100,000,000 None 3,987,862
MUNICIPAL FUND $0.001 par value
</TABLE>
The shares of common stock of SBI and SBT are listed and trade on the AMEX
under the symbols "SBI" and "SBT", respectively. As of September 1, 2000, the
net asset value of SBI common stock was $10.14, and the market price per share
was $9.063. As of that same date, the net asset value of SBT common stock was
$14.79, and the market price per share was $13.063.
MARKET DISCOUNT. Shares of closed-end investment companies, such as the
Funds, have frequently traded at a discount from net asset value, or in some
cases trade at a premium. Shares of closed-end investment companies investing
primarily in fixed income securities tend to trade on the basis of income yield
on the market price of the shares and the market price may also be affected by
trading volume, general market conditions and economic conditions and other
factors beyond the control of the fund. As a result, the market price of each
Fund's shares may be greater or less than the net asset value. From March 12,
1993 through June 30, 2000, SBI's shares have traded from a premium of 4.66% to
a market discount of 16.67%, and SBT's shares have traded from a premium of
1.22% to a market discount of 19.08%.
42
<PAGE>
Some closed-end companies have taken certain actions, including the
repurchase of common stock in the market at market prices and the making of one
or more tender offers for common stock at net asset value, in an effort to
reduce or mitigate the discount, and others have converted to an open-end
investment company, the shares of which are redeemable at net asset value.
Each Fund's board of directors has seen no reason to adopt any of the
steps, which some other closed-end funds have used to address the discount. In
addition, the experience of many closed-end funds suggests that the effect of
many of these steps (other than open-ending) on the discount may be temporary or
insignificant. Accordingly, there can be no assurance that any of these actions
will be taken or, if undertaken, will cause each Fund's shares to trade at a
price equal to their net asset value.
43
<PAGE>
SHARE PRICE DATA FOR
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
COMMON STOCK TRADED ON THE AMEX
The Fund's common stock is listed on the AMEX under the symbol "SBI."
Salomon Smith Barney intends to buy and sell the Fund's shares in order to make
a market in the common stock.
The following table sets forth for the Fund's common stock the following
information for each quarterly period during the last two fiscal years and for
the first three quarters of 2000 ended September 1, 2000: high and low sales
prices and net asset values; sales price and price and net asset value at
quarter-end; and the premium (discount) of the sales price to net asset value at
quarter-end.
<TABLE>
<CAPTION>
Three Months AMEX NAV AMEX Price NAV at Premium
Ended Price Range Price Range at Quarter-End Quarter-End (Discount)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/31/98........ $10.06 - 11.00 $10.55 - 10.78 $10.06 $10.58 (4.92)%
6/30/98........ 9.75 - 10.25 10.46 - 10.67 10.00 10.60 (5.66)
9/30/98........ 10.00 - 10.38 10.57 - 10.75 10.38 10.75 (3.44)
12/31/98....... 10.38 - 10.75 10.58 - 10.85 10.69 10.61 (0.75)
3/31/99........ 9.81 - 10.81 10.52 - 10.69 10.13 10.53 (3.80)
6/30/99........ 9.38 - 10.19 10.20 - 10.58 9.50 10.23 (7.14)
9/30/99........ 9.19 - 9.63 10.05 - 10.28 9.31 10.06 (7.43)
12/31/99....... 8.38 - 9.31 9.88 - 10.06 8.36 9.89 (15.32)
3/31/00........ 8.25 - 8.81 9.82 - 10.03 8.56 10.00 (14.38)
6/30/00........ 8.38 - 8.81 9.74 - 10.04 8.88 10.00 (11.25)
9/1/00......... 8.81 - 9.44 10.00 - 10.14 9.06 10.14 (10.63)
</TABLE>
44
<PAGE>
PER SHARE DATA FOR SMITH BARNEY MUNICIPAL FUND, INC.
COMMON STOCK TRADED ON THE AMEX
The Fund's common stock is listed on the AMEX under the symbol "SBT."
Salomon Smith Barney also intends to make a market in the common stock.
The following table sets forth for the Fund's common stock the following
information for each quarterly period during the last two fiscal years and for
the first three quarters of 2000 ended September 1, 2000: high and low sales
prices and net asset values; sales price and net asset value at quarter-end; and
the premium (discount) of the sales price to net asset value at quarter-end.
<TABLE>
<CAPTION>
Three Months AMEX NAV AMEX Price NAV at Premium
Ended Price Range Price Range at Quarter-End Quarter-End (Discount)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3/31/98............... $14.25 - 15.44 $15.72 - 16.05 $14.38 $15.76 (8.76)%
6/30/98............... 14.00 - 15.13 15.58 - 15.89 15.06 15.79 (3.93)
9/30/98............... 14.50 - 15.13 15.74 - 16.03 15.00 16.03 (6.43)
12/31/98.............. 14.75 - 15.25 15.77 - 16.17 15.00 15.82 (5.18)
3/31/99............... 14.00 - 15.00 15.67 - 15.95 14.00 15.71 (10.88)
6/30/99............... 13.13 - 14.25 15.18 - 15.78 13.50 15.22 (11.30)
9/30/99............... 12.63 - 13.75 14.91 - 15.35 12.63 14.92 (15.38)
12/31/99.............. 12.00 - 12.75 14.62 - 14.92 12.44 12.44 (14.99)
3/31/00............... 12.13 - 12.88 14.49 - 14.80 12.88 14.77 (12.83)
6/30/00............... 12.06 - 12.75 14.22 - 14.84 12.75 14.54 (12.31)
9/1/00................ 12.81 - 13.56 14.54 - 14.79 13.06 14.79 (11.68)
</TABLE>
45
<PAGE>
CAPITALIZATION. The following table shows on an unaudited basis the
capitalization of SBI and SBT as of June 30, 2000 and on a pro forma basis as
of that same date giving effect to the Merger(1):
<TABLE>
<CAPTION>
SMITH BARNEY
INTERMEDIATE SMITH BARNEY PRO FORMA PRO FORMA FOR
MUNICIPAL FUND MUNICIPAL FUND ADJUSTMENTS MERGER
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets $82,061,746 $57,970,244 $ (125,635) $ 140,157.624
Net asset value per share(2) $10.00 $14.54 -- $10.00(3)
Shares outstanding(4) 8,210,165 3,987,862 -- 14,008,516
</TABLE>
(1) Assumes that the Merger had been consummated on June 30, 2000, and is
for information purposes only. No assurance can be given as to how many
shares of SBI common stock shareholders of SBT will receive on the date
the Merger takes place, and the foregoing should not be relied upon to
reflect the number of shares of SBI common stock that actually will be
received on or after such date. Assumes distributions of ordinary income
of $0.552 per share annually.
(2) Net asset value per share after distribution of ordinary income.
(3) Subsequent to the proposed merger, SBT, the accounting survivor, will
restate its historical financial highlights to reflect the adjustment to
its net asset value per share which will result from the exchange of its
net assets for shares of SBI.
(4) Assumes the issuance of 5,798,351 shares in exchange for the net assets of
SBT. The number of shares issued was based on the net asset value of each
Fund, net of estimated distributions, on June 30, 2000.
46
<PAGE>
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN. Each Fund
generally expects to pay monthly dividends of net investment income (income
other than net realized capital gains) and to distribute net realized capital
gains, if any, annually. From time to time, when each Fund makes a substantial
capital gains distribution, it may do so in lieu of paying its regular monthly
dividend. All dividends or distributions with respect to shares of common stock
are reinvested automatically in additional shares through participation in each
Fund's dividend reinvestment plan, unless a shareholder elects to receive cash.
Under each Fund's dividend reinvestment plan, a shareholder whose shares
of common stock are registered in his or her own name will have all
distributions from the Funds reinvested automatically by PFPC as purchasing
agent under the plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in "street name") will be reinvested by the broker or
nominee in additional shares under the plan, unless the service is not provided
by the broker or nominee or the shareholder elects to receive distributions in
cash. Investors who own common stock registered in street name should consult
their broker-dealers for details regarding reinvestment. All distributions to
Fund shareholders who do not participate in the plan will be paid by check
mailed directly to the record holder by or under the direction of PFPC as
dividend-paying agent.
The number of shares of common stock distributed to participants in the
plan in lieu of a cash dividend is determined in the following manner. Whenever
the market price of the common stock is equal to or exceeds the net asset value
per share on the date of valuation, plan participants will be issued shares of
common stock at a price equal to the greater of (1) the net asset value per
share most recently determined as described under "Net Asset Value" or (2) 95%
of the market price.
If the market price of the common stock is less than the net asset value
of the common stock at the time of valuation (which is the close of business on
the determination date), or if the Funds declare a dividend or capital gains
distribution payable only in cash, PFPC will buy common stock in the open
market, on the AMEX or elsewhere, for the participants' accounts. If, following
the commencement of the purchases and before PFPC has completed its purchases,
the market price exceeds the net asset value of the common stock, PFPC will
attempt to terminate purchases in the open market and cause the Funds to issue
the remaining portion of the dividend or distribution by issuing shares at a
price equal to the greater of (a) net asset value or (b) 95% of the then current
market price. In this case, the number of shares of common stock received by a
plan participant will be based on the weighted average of prices paid for shares
purchased in the open market and the price at which each Fund issues the
remaining shares. To the extent PFPC is unable to stop open market purchases and
cause the Funds to issue the remaining shares, the average per share purchase
price paid by PFPC may exceed the net asset value of the common stock, resulting
in the acquisition of fewer shares than if the dividend or capital gains
distribution had been paid in common stock issued by the Funds at net asset
value. PFPC will begin to purchase common stock on the open market as soon as
practicable after the payment date of the dividend or capital gains
distribution, but in no event shall such purchases continue later than 30 days
after that date, except when necessary to comply with applicable provisions of
the federal securities laws.
47
<PAGE>
PFPC maintains all shareholder accounts in the plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each plan participant will be held
by PFPC in uncertificated form in the name of each plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the plan. PFPC's fees for handling the
reinvestment of dividends and distributions; dividend reinvestment plan
dividends and capital gains distributions will be paid by each Fund. No
brokerage charges apply with respect to shares of common stock issued directly
by each Fund under the plan. Each plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to open
market purchases made under the plan.
Experience under the plan may indicate that changes to it are desirable.
Each Fund reserves the right to amend or terminate the plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The plan also may be amended or
terminated by PFPC, with each Fund's prior written consent, on at least 30 days'
written notice to plan participants. All correspondence concerning the plan
should be directed by mail to PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 02266 or by telephone at 1-800-331-1710.
NET ASSET VALUE. The net asset value per share of each Fund's common stock
is determined by calculating the total value of each Fund's assets, deducting
its total liabilities and dividing the result by the number of shares of common
stock outstanding. The net asset value will be computed as of the close of
regular trading on the New York Stock Exchange (NYSE) on each day that the NYSE
is open. Each fund reserves the right to calculate the net asset value more
frequently if deemed desirable.
Each Fund's securities will be valued on the basis of bid prices provided
by a pricing service when the Fund believes such prices reflect fair market
value. Pricing services generally determine value by reference to transactions
in municipal securities, quotations from municipal bond dealers, market
transactions in comparable securities and various relationships between
securities. If a pricing service is not used, municipal securities will be
valued at the quoted bid prices provided by municipal bond dealers. Short-term
instruments maturing within 60 days will be valued at cost plus amortized
discount, if any, when the board of directors has determined that amortized cost
equals fair value. Securities and other assets that are not priced by a pricing
service and for which market quotations are not available will be valued in good
faith at fair value by or under the direction of the board of directors.
If any securities held by the Funds are restricted as to resale, SSB Citi
will determine their fair value following procedures approved by the directors.
The directors will periodically review such valuations and procedures. The fair
value of such securities generally will be determined as the amount which the
Funds could reasonably expect to realize from an orderly disposition of such
securities over a reasonable period of time. The valuation procedures applied in
any specific instance are likely to vary from case to case. However,
consideration will be
48
<PAGE>
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of securities (including any registration expenses that might be
borne by the fund in connection with such disposition). In addition, specific
factors also generally will be considered, such as the cost of the investment,
the market value of any unrestricted securities of the same class (both at the
time of purchase and at the time of valuation), the size of the holding, the
prices of any recent transactions or offers with respect to such securities, and
any available analysts' reports regarding the issuer. Shares of closed-end
investment companies frequently trade at a discount from net asset value, but in
some cases trade at a premium. Since the market price of each Fund's shares will
be determined by such factors as trading volume of the shares, general market
and economic conditions and other factors beyond the control of the Funds,
either of the Funds cannot predict whether its shares will trade at, below or
above its computed net asset value.
SECURITIES TRANSACTIONS. Subject to the general supervision of the board
of directors, SSB Citi is responsible for decisions to buy and sell securities
and the selection of broker-dealers to effect the transactions. Each Fund
invests primarily in the over-the-counter market. Securities are generally
traded in the over-the-counter market on a "net" basis with dealers acting as
principal for their own accounts without charging a stated commission, although
the price of the security usually includes a profit to the dealer. Each Fund
also purchases securities at times in underwritten offerings, where the price
includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. On occasion, each Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. The Funds will not engage in any principal
transactions with Salomon Smith Barney.
SSB Citi currently serves as investment adviser to other investment
companies, some of which invest principally in municipal securities. In the
future it may act as investment adviser to other investment companies or
accounts that invest in municipal securities. Although each investment company
is individually managed, from time to time SSB Citi may, to the extent permitted
by law, allocate purchase or sale transactions among various investment
companies. In making such allocations SSB Citi will consider, among other
things, the respective investment objectives, the relative size of portfolio
holdings of the same or comparable securities and the liquidity of the
portfolio.
Each Fund's policy regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices consistent with efficient execution of transactions in seeking
to implement each Fund's policies. SSB Citi will effect transactions with those
dealers who SSB Citi believes provide the most favorable prices and who are
capable of providing efficient executions. Those factors that SSB Citi believes
contribute to efficient execution include size of the order, difficulty of
execution, operational capabilities and facilities of the dealer involved,
whether that dealer has risked its own capital in positioning a block of
securities and the dealer's prior experience in effecting transactions of this
type. If SSB Citi believes such price and execution are obtainable from more
than one dealer, it may give consideration to placing portfolio transactions
with those dealers who also furnish research and other services to SSB Citi.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale;
49
<PAGE>
statistical or factual information or opinions pertaining to investment;
economic analysis; and appraisals or evaluations of portfolio securities.
The information and services so received by SSB Citi may be of benefit to
SSB Citi in the management of other accounts and may not in all cases benefit
the Funds directly. While the receipt of such information and services is useful
in varying degrees and would generally reduce the amount of research or services
otherwise performed by SSB Citi and thus may reduce its expenses, it is of
indeterminable value and the advisory fee paid to SSB Citi is not reduced by any
amount that may be attributable to the value of such services.
TURNOVER. Either of the Funds cannot accurately predict its turnover rate,
but anticipates that its annual turnover rate will not exceed 100%. Each Fund's
turnover rate is calculated by dividing the lesser of each Fund's sales or
purchases of securities during a year (excluding any security the maturity of
which at the time of acquisition is one year or less) by the average monthly
value of each Fund's securities for the year. Higher turnover rates can result
in corresponding increases in each Fund's transaction costs, which must be borne
by each Fund and its shareholders. High portfolio turnover may also result in
the realization of substantial net short-term capital gains, and any
distributions resulting from such gains will be taxable at ordinary income rates
for federal income tax purposes. Each Fund will not consider turnover rate a
limiting factor in making investment decisions consistent with its investment
objective and policies.
CORPORATE GOVERNANCE PROVISIONS. Both Funds are Maryland corporations and
in many respects have similar charter and bylaw provisions.
ANTI-TAKEOVER PROVISIONS. Each Fund presently has provisions in its
articles of incorporation and Bylaws (commonly referred to as "anti-takeover"
provisions) which may have the effect of limiting the ability of other entities
or persons to acquire control of each Fund, to cause it to engage in certain
transactions or to modify its structure.
The board of directors of each Fund is classified into three
classes, each with a term of three years with only one class of directors
standing for election in any year. Such classification may prevent replacement
of a majority of the directors for up to a two year period. Directors may be
removed from office only for cause by vote of at least 75% of the shares
entitled to be voted on the matter.
Unless 70% of the board of directors approves the transaction, the
affirmative vote of the holders of at least 75% of the shares will be required
to authorize each Fund's conversion from a closed-end to an open-end investment
company, or generally to authorize any of the following transactions: (i)
merger, consolidation or share exchange of either of the Funds with or into any
other corporation; (ii) dissolution or liquidation of either of the Funds; (iii)
sale, lease, exchange or other disposition of all or substantially all of the
assets of either of the Funds other than in the ordinary course of the Fund's
business; (iv) change in the nature of the business of either of the Funds so
that it would cease to be an investment company registered under the Investment
Company Act; or (v) issuance or transfer by either of the Funds of any
securities of either of the Funds to any other person in exchange for cash,
securities or other property having an aggregate fair market value of $1,000,000
or more excluding (a) sales of any securities of
50
<PAGE>
either of the Funds in connection with a public offering thereof, (b) issuance
of any securities of either of the Funds pursuant to a dividend reinvestment
plan adopted by either of the Funds or pursuant to a stock dividend and (c)
issuances of any securities of either of the Funds upon the exercise of any
stock subscription rights distributed by either of the Funds. The affirmative
vote of at least 75% of the shares will be required to amend the Articles of
Incorporation to change any of the foregoing provisions.
The percentage votes required under these provisions, which are
greater than the minimum requirements under Maryland law or the Investment
Company Act, will make more difficult a change in either of the Fund's business
or management and may have the effect of depriving shareholders of an
opportunity to sell shares at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of either of the Funds
in a tender offer or similar transaction. Each Fund's board of directors,
however, has considered these anti-takeover provisions and believes they are in
the best interests of shareholders.
The full text of SBI's Articles of Incorporation and Bylaws are on file
with the SEC and these documents, as may be amended from time to time, will
govern SBI after the Merger.
51
<PAGE>
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS. The business and affairs of each Fund, including
the general supervision of the duties performed by the manager under the
investment management agreement, are the responsibility of each Fund's board of
directors. The directors and officers of SBI, their addresses and their
principal occupations for at least the past five years are set forth below:
<TABLE>
<CAPTION>
Principal Occupations
Name and Address Positions Held with the Fund During Past Five Years and Age
---------------- ---------------------------- ------------------------------
<S> <C> <C>
*+Heath B. McLendon Chairman of the Board of Directors, Managing Director of Salomon
7 World Trade Center Chief Executive Office and President Smith Barney; Chairman,
New York, NY 10048 Co-Chairman or Trustee of the
board of 78 investment
companies associated with
Citigroup; President and
Director of SSB Citi and
Travelers Investment Adviser,
Inc. ("TIA"); 66.
+Lee Abraham Director Retired; Director of R.G.
106 Barnes Road Barry Corp., a footwear
Stamford, CT 06902 manufacturer, Signet Group
plc, a specialty retailer and
eNote.com, Inc., a computer
hardware company. Formerly
Chairman and Chief Executive
Officer of Associated
Merchandising Corporation, a
major retail merchandising and
sourcing organization;
Director/Trustee of 12
investment companies associated
with Citigroup; 72.
+Allan J. Bloostein Director President of Allan J. Bloostein
27 West 67th Street Associates, a consulting firm;
New York, NY 10023 Director of CVS Corporation, a
drugstore chain, and Taubman
Centers Inc., a real estate
development company; Retired
Vice Chairman and Director of
The May's Department Stores
Company; Director/Trustee of 19
investment companies associated
with Citigroup; 70.
+Jane F. Dasher Director Investment Officer; Korsant
283 Greenwich Avenue Partners, a family investment
Greenwich, CT 06830 company; Prior to 1997,
Independent Financial
Consultant; Director/Trustee of
12 investment companies
associated with Citigroup; 50.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Name and Address Positions Held with the Fund During Past Five Years and Age
---------------- ---------------------------- ------------------------------
<S> <C> <C>
+Donald R. Foley Director Retired; Formerly Vice President
3668 Freshwater Drive of Edwin Bird Wilson,
Jupiter, FL 33477 Incorporated (advertising);
Director/Trustee of 12
investment companies associated
with Citigroup; 77.
+Richard E. Hanson, Jr. Director Retired; Formerly Head of School,
2751 Vermont Route 140 The New Atlanta Jewish Community
Poultney, VT 05764 High School, Atlanta, Georgia;
Formerly Headmaster, The Peck
School, Morristown, New Jersey;
Director/Trustee of 12
investment companies associated
with Citigroup; 58.
+Paul Hardin Director Professor of Law at the
12083 Morehead University of North Carolina at
Chapel Hill, NC 27514 Chapel Hill; Director of The
Summit Bancorporation. Formerly
Chancellor of the University of
North Carolina at Chapel Hill;
Director/Trustee of 14
investment companies associated
with Citigroup; 68.
+Roderick C. Rasmussen Director Investment Counselor; Formerly
9 Cadence Court Vice President of Dresdner and
Morristown, NJ 07960 Company Inc. (investment
counselors); Director/Trustee of
12 investment companies
associated with Citigroup; 73.
+John P. Toolan Director Retired; Trustee of John Hancock
13 Chadwell Place Funds; Formerly Director and
Morristown, NJ 07960 Chairman of Smith Barney Trust
Company, Director of Smith
Barney Holdings Inc. and various
subsidiaries, Senior Executive
Vice President, Director and
Member of the Executive
Committee of Smith Barney;
Director/Trustee of 12
investment companies associated
with Citigroup; 69.
Lewis E. Daidone Senior Vice President, Chief Managing Director of Salomon
125 Broad Street Financial and Accounting Officer and Smith Barney, Senior Vice
New York, NY 10004 Treasurer President or Executive Vice
President and Treasurer of 61
investment companies associated
with Citigroup; Director and
Senior Vice President of SSB
Citi and TIA; 41.
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations
Name and Address Positions Held with the Fund During Past Five Years and Age
---------------- ---------------------------- ------------------------------
<S> <C> <C>
Peter Coffey Vice President and Investment Officer Managing Director of Salomon
388 Greenwich Street Smith Barney; Vice President of
New York, NY 10013 SSB Citi and 7 investment
companies associated with
Citigroup; 55.
Paul Brook Controller Director of Salomon Smith Barney
125 Broad Street and Controller or Assistant
New York, NY 10004 Treasurer of 43 investment
companies associated with
Citigroup since 1998; Prior to
1998, Managing Director of AMT
Capital Services Inc.; Prior to
1997, Partner with Ernst & Young
LLP; 46.
Christina T. Sydor Secretary Managing Director of Salomon
7 World Trade Center Smith Barney and Secretary of 61
New York, NY 10048 investment companies associated
with Citigroup; and General
Counsel of SSB Secretary Citi
and TIA; 49.
</TABLE>
----------------
* Denotes a director who is an "interested person" of the Fund as defined in
the Investment Company Act.
+ Director, trustee and/or general partner of other investment companies
registered under the Investment Company Act with which Salomon Smith
Barney is affiliated.
All the directors and officers of SBI are also directors and officers of
SBT.
Fees for directors who are not "interested persons" of each Fund are set
at $60,000 per annum and are allocated based on relative net assets of each fund
in the group plus a per meeting fee of $2,500 with respect to in-person
meetings. In addition, these directors receive $100 per fund for each telephone
meeting plus travel and out-of-pocket expenses incurred in connection with board
meetings. The board meeting fees and out-of-pocket expenses are borne
proportionately by each individual fund or portfolio in the group.
54
<PAGE>
The following table shows the compensation paid by SBI to each person who
was a director during the Fund's most recent fiscal year (from January 1, 1999
to December 31, 1999).
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Total
Aggregate Pension or Compensation Number of
Compensation Retirement from Funds for
from Fund Benefits Accrued Fund Complex Which Person
for Fiscal Year as part of for Calendar Year Serves Within
Name of Person Ended 12/31/99 Fund Expenses Ended 12/31/99 Fund Complex
-------------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Lee Abraham $ 39 $0 $ 71,133 12
Allan J. Bloostein 39 0 112,483 19
Jane F. Dasher 144 0 65,733 12
Donald R. Foley+ 259 0 71,300 12
Richard E. Hanson, Jr. 38 0 68,233 12
Paul Hardin 259 0 90,450 14
Heath B. McLendon* 0 0 0 78
Roderick C Rasmussen 259 0 71,200 12
John P. Toolan+ 159 0 69,100 12
</TABLE>
----------------
* Designates a director who is an "interested person" of the Fund.
+ Pursuant to a deferred compensation plan, the indicated persons elected to
defer the following amounts of their compensation from the Fund: Donald R.
Foley: $21, and John P. Toolan: $159, and the following amounts of their
total compensation from the Fund Complex: Donald R. Foley: $21,600, and
John P. Toolan: $69,100.
++ Upon attainment of age 72 the Fund's current directors may elect to change
to emeritus status. Any directors elected or appointed to the board of
directors in the future will be required to change to emeritus status upon
attainment of age 80. Directors emeritus are entitled to serve in emeritus
status for a maximum of 10 years during which time they are paid 50% of
the annual retainer fee and meeting fees otherwise applicable to the Fund
directors, together with reasonable out-of-pocket expenses for each
meeting attended. During the Fund's last fiscal year aggregate
compensation from the fund to emeritus directors totaled $130.
The Articles of Incorporation and Bylaws of each Fund provide that the
Fund will indemnify directors and officers and may indemnify employees or agents
of the Fund against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their positions with the
Fund to the fullest extent permitted by law. In addition, each Fund's Articles
of Incorporation provide that the Fund's directors and officers will not be
liable to shareholders for money damages, except in limited instances.
Each of the non-interested directors of the Funds is also party to
Indemnification Agreements with the Funds providing for contractual rights of
indemnity and advancement of expenses. However, nothing in the Articles of
Incorporation, the Bylaws or the Indemnification
55
<PAGE>
Agreements of either Fund protects or indemnifies a director, officer, employee
or agent against any liability to which such person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
Insurance obtained by either Fund shall not protect or purport to protect
officers or directors or the investment adviser of that Fund against any
liability to the Fund or its shareholders to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of their obligations and duties.
At the close of business on June 30, 2000, 7,965,526 shares of common
stock or 97.02% of SBI's total shares outstanding on that date, and 3,925,355
shares of common stock or 98.43% of SBT's total shares outstanding on that date,
were held in accounts of, but were not beneficially owned by, CEDE & Co., P.O.
Box 20, Bowling Green Station, NY, NY 10004. As of that date, the officers and
board members of SBI and SBT beneficially owned less than 1% of the outstanding
shares of each Fund.
INVESTMENT MANAGER. SSB Citi serves as each Fund's investment manager. SSB
Citi (through its predecessors) has been in the investment counseling business
since 1934 and is a registered investment adviser. SSB Citi was formed in 1999
and currently manages investment companies that had total assets in excess of
$388 billion as of June 30, 2000, of which approximately $15.7 billion consisted
of municipal bond portfolios.
Pursuant to the investment management agreement, each Fund has retained
the manager to manage the investment of the Fund's assets and to provide such
investment research, advice and supervision, in conformity with the Fund's
investment objective and policies, as may be necessary for the investment
activities of each Fund. The manager also administers each Fund's corporate
affairs subject to the supervision of each Fund's board of directors and in
connection therewith furnishes the Fund with office facilities together with
such ordinary clerical and bookkeeping services (e.g., preparation of annual and
other reports to shareholders and the Commission and filing of federal, state
and local income tax returns) as are not being furnished by the Fund's
custodian.
The management agreement provides, among other things, that the manager
will bear all expenses of its employees and overhead incurred in connection with
its duties under the management agreement, other than those assumed by each
Fund, as described below, and will pay all director's fees and salaries of each
Fund's directors and officers who are affiliated persons (as such term is
defined in the Investment Company Act) of the manager.
The management agreement provides that SBI and SBT shall pay to the
manager a monthly fee in arrears equal to 0.60% and 0.70%, respectively, per
annum of each Fund's average daily net assets at the end of each month.
Although the manager intends to devote such time and effort to the
business of the Funds as reasonably necessary to perform its duties to the
Funds, the services of the manager are not exclusive and the manager provides
similar services to other investment companies and may engage in other
activities.
56
<PAGE>
The management agreement also provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the manager is not liable to the Funds or any of the
Funds' shareholders for any act or omission by the manager in the supervision or
management of its investment activities or for any loss sustained by the Funds
or the Funds' shareholders.
The management agreement will continue in effect for successive periods of
12 months, provided that each continuance is specifically approved at least
annually by both (1) the vote of a majority of each Fund's board of directors or
the vote of a majority of the outstanding voting securities of each Fund (as
such term is defined in the Investment Company Act) and (2) by the vote of a
majority of the directors who are not parties to such agreement or interested
persons (as such term is defined in the Investment Company Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The management agreement may be terminated at any time by the Funds,
without the payment of any penalty, upon the vote of a majority of each Fund's
board of directors or a majority of the outstanding voting securities of each
Fund or by the manager, on 60 days' written notice by either party to the other.
The management agreement will terminate automatically in the event of its
assignment (as such term is defined in the Investment Company Act and the rules
thereunder).
For information about each Fund's management fees, including amounts paid
for the year ended December 31, 1999, see "Synopsis -- Fees and Expenses --
Smith Barney Intermediate Municipal Fund" and "Synopsis -- Fees and Expenses --
Smith Barney Municipal Fund."
Peter Coffey, Vice President and Investment Officer of each Fund, is
primarily responsible for management of each Fund's assets. Mr. Coffey is a Vice
President of the manager and is the senior asset manager for ten other funds
investing in tax-exempt securities with aggregate assets of approximately $2
billion as of June 30, 2000.
CODE OF ETHICS. Pursuant to Rule 17j-1 of the Investment Company Act, each
Fund and its investment adviser have adopted codes of ethics that permit
personnel to invest in securities for their own accounts, including securities
that may be purchased or held by the Funds. All personnel must place the
interests of clients first and avoid activities, interests and relationships
that might interfere with the duty to make decisions in the best interests of
the clients. All personal securities transactions by employees must adhere to
the requirements of the codes and must be conducted in such a manner as to avoid
any actual or potential conflict of interest, the appearance of such a conflict,
or the abuse of an employee's position of trust and responsibility.
Each Fund's Code of Ethics can be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. In addition, information on the
operation of the Public Reference Room may be obtained by calling the Commission
at 1-202-942-8090. The Code of Ethics is available on the EDGAR Database on the
Commission's Internet site at http://www.sec.gov. A copy of the Code of Ethics
may be obtained for a duplicating fee by electronic request at the following
E-mail address: [email protected], or by writing the Commission's Public
Reference Section, Washington, D.C. 20549-0102.
ESTIMATED EXPENSES. Except as indicated above, each Fund pays all other
expenses incurred in the operation of that Fund including, among other things:
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o fees of the directors not affiliated with the manager and board meeting
expenses;
o fees of the manager;
o taxes;
o interest charges;
o charges and expenses of the Fund's legal counsel and independent
accountants, and of the transfer agent, registrar and dividend disbursing
agent of the Fund;
o expenses of repurchasing shares;
o expenses of printing and mailing share certificates, shareholder reports,
notices, proxy statements and reports to governmental offices;
o brokerage and other expenses connected with the execution, recording and
settlement of portfolio security transactions;
o expenses connected with negotiating of, effecting purchase or sale of, or
registering privately issued portfolio securities;
o fees and expenses of the Fund's custodian for all services to each Fund,
including safekeeping of Funds and securities and maintaining required
books and accounts;
o expenses of calculating and publishing the net asset value of each Fund's
common stock;
o expenses of membership in investment company associations;
o expenses of fidelity bonding and other insurance premiums;
o expenses of shareholders' meetings;
o Commission registration fees and state notice filing fees;
o American Stock Exchange listing fees; and
o its other business and operating expenses.
PORTFOLIO MANAGER. If the Merger is consummated, it is anticipated that
Peter Coffey will continue as the Investment Officer of SBI.
CUSTODIAN, TRANSFER AGENT, DIVIDEND-PAYING AGENT, REGISTRAR AND
DIVIDEND-REINVESTMENT-PLAN AGENT. PFPC Global Fund Services, or PFPC, located at
P.O. Box 8030, Boston, Massachusetts 02266, acts as each Fund's custodian and
has custody of all securities and cash of each Fund. The custodian, among other
things, attends to the collection of principal and income, and payment for
securities bought and sold by the Funds. PFPC also serves as each
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Fund's transfer agent, dividend-paying agent and registrar, as well as agent in
connection with the dividend reinvestment plan.
INDEPENDENT ACCOUNTANTS
Each Fund has selected KPMG LLP, 757 Third Avenue, New York, NY 10017, as
its independent public accountants who will audit its financial statements.
REQUIRED VOTE
The Merger has been approved unanimously by the board of directors of each
Fund. Accordingly, under the Articles of Incorporation of each Fund, approval of
the Merger requires the affirmative vote of the holders of a majority of the
outstanding shares of common stock of each Fund. The board of directors of each
Fund recommends that the shareholders of each Fund vote in favor of the merger
proposal.
LEGAL PROCEEDINGS
There are currently no material legal proceedings to which the Funds are a
party.
LEGAL OPINIONS
Certain legal matters in connection with the Merger will be passed upon
for the Funds by Willkie Farr & Gallagher. Willkie Farr & Gallagher will rely as
to certain matters of Maryland law on the opinion of Venable, Baetjer and
Howard, LLP.
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ADDITIONAL INFORMATION
The Proxy Statement/Prospectus does not contain all of the information set
forth in the registration statements and the exhibits relating thereto which the
Funds have filed with the Commission, under the SEC and the Investment Company
Act, to which reference is hereby made.
The Funds are subject to the informational requirements of the Securities
Exchange Act and in accordance therewith, file reports and other information
with the SEC. Reports, proxy statements, registration statements and other
information filed by the Funds can be inspected and copied at the public
reference facilities of the SEC in Washington, D.C. and at the New York Regional
Office of the SEC at Seven World Trade Center, New York, New York 10048. Copies
of such materials also can be obtained by mail from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20594, at prescribed rates.
PROPOSALS OF SHAREHOLDERS. A shareholder desiring to submit a proposal for
inclusion in either Fund's proxy material for a shareholder meeting subsequent
to the special meeting, if any, must be a record or beneficial owner of at least
1% of the outstanding shares of common stock of that Fund or shares of that Fund
with a market value of $2,000 entitled to be voted at the meeting and must have
held such shares for at least one year. Further, the shareholder must continue
to hold such shares through the date on which the meeting is held. Documentary
support regarding the foregoing must be provided along with the proposal. There
are additional requirements regarding proposals of the shareholders, and a
shareholder contemplating submission of a proposal is referred to Rule 14a-8
promulgated under the Securities Exchange Act. Shareholders who meet the above
conditions and desire to submit a written proposal, should send their written
proposals to the relevant Fund c/o SSB Citi Fund Management LLC, 7 World Trade
Center, New York, New York 10048, within a reasonable time before the
solicitation of proxies for the meeting of shareholders. The timely submission
of a proposal does not guarantee its inclusion in either Fund's proxy materials.
OTHER MATTERS TO COME BEFORE THE MEETING. The board of directors of each
Fund is not aware of any matters that will be presented for action at the
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 their discretion in the interest of the respective Fund. PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the boards of directors of Smith Barney Intermediate Municipal Fund,
Inc. and Smith Barney Municipal Fund, Inc.
Christina T. Sydor
Secretary, Smith Barney Intermediate Municipal Fund, Inc.
Christina T. Sydor
Secretary, Smith Barney Municipal Fund, Inc.
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EXHIBIT A
FORM OF
MERGER AGREEMENT AND PLAN OF REORGANIZATION
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MERGER AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
AND
SMITH BARNEY MUNICIPAL FUND, INC.
DATED AS OF OCTOBER 23, 2000
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TABLE OF CONTENTS
1. DEFINITIONS............................................................... 1
2. BASIC TRANSACTION......................................................... 1
2.1. The Merger....................................................... 1
2.2. Actions at Closing............................................... 2
2.3. Effect of Merger................................................. 2
3. REPRESENTATIONS AND WARRANTIES OF SMITH BARNEY MUNICIPAL FUND............. 2
3.1. Organization..................................................... 2
3.2. Registrations and Qualifications................................. 2
3.3. Regulatory Consents and Approvals................................ 3
3.4. Noncontravention................................................. 3
3.5. Financial Statements............................................. 3
3.6. Annual and Semi-Annual Reports................................... 3
3.7. Qualification, Corporate Power, Authorization of Transaction..... 3
3.8. Legal Compliance................................................. 4
3.9. Material Contracts............................................... 4
3.10. Undisclosed Liabilities.......................................... 4
3.11. Tax Filings...................................................... 4
3.12. Qualification under Subchapter M................................. 4
3.13. Form N-14........................................................ 5
3.14. Capitalization................................................... 5
3.15. Books and Records................................................ 5
4. REPRESENTATIONS AND WARRANTIES OF SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND............................................................ 6
4.1. Organization..................................................... 6
4.2. Registrations and Qualifications................................. 6
4.3. Regulatory Consents and Approvals................................ 6
4.4. Noncontravention................................................. 6
4.5. Financial Statements............................................. 6
4.6. Annual and Semi-Annual Reports................................... 7
4.7. Qualification, Corporate Power, Authorization of Transaction..... 7
4.8. Legal Compliance................................................. 7
4.9. Material Contracts............................................... 7
4.10. Undisclosed Liabilities.......................................... 7
4.11. Tax Filings...................................................... 8
4.12. Qualification under Subchapter M................................. 8
4.13. Form N-14........................................................ 8
4.14. Capitalization................................................... 9
4.15. Issuance of Stock................................................ 9
4.16. Books and Records................................................ 9
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5. CONVERSION TO SMITH BARNEY INTERMEDIATE MUNICIPAL FUND COMMON STOCK...... 9
5.1. Conversion...................................................... 9
5.2. Computation of Net Asset Value.................................. 10
5.3. Issuance of Smith Barney Intermediate Municipal Fund
Common Stock................................................... 10
5.4. Surrender of Smith Barney Municipal Fund Stock Certificates..... 10
6. COVENANTS OF THE PARTIES................................................. 11
6.1. Shareholders' Meetings.......................................... 11
6.2. Operations in the Normal Course................................. 11
6.3. Articles of Merger.............................................. 11
6.4. Regulatory Filings.............................................. 11
6.5. Preservation of Assets.......................................... 12
6.6. Tax Matters..................................................... 12
6.7. Shareholder List................................................ 12
6.8. Delisting, Termination of Registration as an Investment
Company........................................................ 12
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND........................................................... 13
7.1. Approval of Merger.............................................. 13
7.2 Certificates and Statements by Smith Barney Municipal Fund...... 13
7.3. Absence of Litigation........................................... 14
7.4. Legal Opinions.................................................. 14
7.5. Auditor's Consent and Certification............................. 16
7.6. Liabilities..................................................... 16
7.7. Effectiveness of N-14 Registration Statement.................... 16
7.8. Regulatory Filings.............................................. 16
7.9. Administrative Rulings, Proceedings............................. 16
7.10. Satisfaction of Smith Barney Intermediate Municipal Fund........ 16
7.11. Dividends....................................................... 17
7.12. Custodian's Certificate......................................... 17
7.13. Books and Records............................................... 17
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SMITH BARNEY MUNICIPAL FUND... 17
8.1. Approval of Merger.............................................. 17
8.2. Certificates and Statements by Smith Barney Intermediate
Municipal Fund................................................. 17
8.3. Absence of Litigation........................................... 18
8.4. Legal Opinions.................................................. 18
8.5. Auditor's Consent and Certification............................. 20
8.6. Effectiveness of N-14 Registration Statement.................... 20
8.7. Regulatory Filings.............................................. 21
8.8. Satisfaction of Smith Barney Municipal Fund..................... 21
8.9. Dividends....................................................... 21
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9. PAYMENT OF EXPENSES.................................................. 21
9.1. Allocation.................................................. 21
10. COOPERATION FOLLOWING EFFECTIVE DATE................................. 22
11. INDEMNIFICATION...................................................... 22
11.1. Smith Barney Municipal Fund................................. 22
11.2. Smith Barney Intermediate Municipal Fund.................... 22
12. TERMINATION, POSTPONEMENT AND WAIVERS................................ 22
12.1. Termination................................................. 22
12.2. Waiver...................................................... 23
12.3. Expiration of Representations and Warranties................ 23
13. MISCELLANEOUS........................................................ 24
13.1. Transfer Restriction........................................ 24
13.2. Material Provisions......................................... 24
13.3. Notices..................................................... 24
13.4. Amendments.................................................. 25
13.5. Headings.................................................... 26
13.6. Counterparts................................................ 26
13.7. Enforceability.............................................. 26
13.8. Successors and Assigns...................................... 26
13.9. Governing Law............................................... 26
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THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made as of this day of October 23, 2000, between Smith Barney
Municipal Fund, Inc. (the "Target Fund" or the "Smith Barney Municipal Fund"), a
Maryland corporation and a registered investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and Smith Barney Intermediate
Municipal Fund, Inc. (the "Acquiring Fund" or the "Smith Barney Intermediate
Municipal Fund"), a Maryland corporation and a registered investment company
under the 1940 Act, and solely for purposes of Section 9 hereof, SSB Citi Fund
Management LLC ("SSB Citi").
This agreement contemplates a tax-free merger transaction which
qualifies for federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS
Certain capitalized terms used in this Agreement are specifically
defined herein.
2. BASIC TRANSACTION
2.1. THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target Fund will merge with and into the Acquiring Fund (the
"Merger") at the Effective Date (as defined in Section 2.3 below) in accordance
with the Maryland General Corporation Law ("MGCL"). Smith Barney Intermediate
Municipal Fund shall be the surviving investment company. Smith Barney Municipal
Fund shall cease to exist as a separate investment company.
Each share of Smith Barney Municipal Fund will be converted into an
equivalent dollar amount (to the nearest one ten-thousandth of one cent) of full
shares of Common Stock of the Smith Barney Intermediate Municipal Fund, with a
par value of $0.001 per share, based on the net asset value per share of each of
the parties at 4:00 p.m. Eastern Time on the Business Day prior to the Effective
Date (the "Valuation Time"). No fractional shares of Smith Barney Intermediate
Municipal Fund will be issued to Smith Barney Municipal Fund shareholders. In
lieu thereof, the Smith Barney Intermediate Municipal Fund will purchase all
fractional shares of the Smith Barney Intermediate Municipal Fund at the current
net asset value of the Smith Barney Intermediate Municipal Fund for the account
of all holders of fractional interests, and each such holder will receive such
holder's pro rata share of the proceeds of such purchase. The Effective Date and
the Business Day prior to it must each be a day on which the New York Stock
Exchange is open for trading (a "Business Day").
From and after the Effective Date, the Acquiring Company shall
possess all of the properties, assets, rights, privileges, powers and shall be
subject to all of the restrictions, liabilities, obligations, disabilities and
duties of Smith Barney Municipal Fund, all as provided under Maryland law.
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2.2. ACTIONS AT CLOSING. At the closing of the transactions
contemplated by this Agreement (the "Closing") on the date thereof (the "Closing
Date"), (i) Smith Barney Municipal Fund will deliver to Smith Barney
Intermediate Municipal Fund the various certificates and documents referred to
in Article 7 below, (ii) Smith Barney Intermediate Municipal Fund will deliver
to Smith Barney Municipal Fund the various certificates and documents referred
to in Article 8 below, and (iii) Smith Barney Municipal Fund and Smith Barney
Intermediate Municipal Fund will file jointly with the State Department of
Assessments and Taxation of Maryland (the "Department") articles of merger (the
"Articles of Merger") and make all other filings or recordings required by
Maryland law in connection with the Merger.
2.3. EFFECT OF MERGER. Subject to the requisite approvals of the
shareholders of the parties, and to the other terms and conditions described
herein, the Merger shall become effective at such time as the Articles of Merger
are accepted for record by the Department or at such later time as is specified
in the Articles of Merger (the "Effective Date") and the separate corporate
existence of Smith Barney Municipal Fund shall cease. As promptly as practicable
after the Merger, Smith Barney Municipal Fund shall delist its shares from the
American Stock Exchange ("AMEX") and its registration under the 1940 Act shall
be terminated. Any reporting responsibility of Smith Barney Municipal Fund is,
and shall remain, the responsibility of Smith Barney Municipal Fund up to and
including the Effective Date.
2.4. NAME CHANGE. Upon the Effective Date, the name of the Acquiring
Fund shall be changed to the "Intermediate Muni Fund, Inc."
3. REPRESENTATIONS AND WARRANTIES OF SMITH BARNEY MUNICIPAL FUND
Smith Barney Municipal Fund represents and warrants to the Smith
Barney Intermediate Municipal Fund that the statements contained in this Article
3 are correct and complete in all material respects as of the execution of this
Agreement on the date hereof. Smith Barney Municipal Fund represents and
warrants to, and agrees with, Smith Barney Intermediate Municipal Fund that:
3.1. ORGANIZATION. Smith Barney Municipal Fund is a corporation duly
organized, validly existing under the laws of the State of Maryland and is in
good standing with the Department, and has the power to own all of its assets
and to carry on its business as it is now being conducted and to carry out this
Agreement.
3.2. REGISTRATIONS AND QUALIFICATIONS. Smith Barney Municipal Fund
is duly registered under the 1940 Act as a closed-end, diversified management
investment company (File No. 811-06688), and such registration has not been
revoked or rescinded and is in full force and effect. Smith Barney Municipal
Fund has elected and qualified for the special tax treatment afforded regulated
investment companies ("RICs") under Sections 851-855 of the Code at all times
since its inception. Smith Barney Municipal Fund is qualified as a foreign
corporation in every jurisdiction where required, except to the extent that
failure to so qualify would not have a material adverse effect on Smith Barney
Municipal Fund.
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3.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by Smith Barney Municipal Fund of the transactions contemplated
herein, except (i) such as have been obtained or applied for under the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934 (the "1934 Act"), and the 1940 Act, (ii) such as may be required by
state securities laws and (iii) such as may be required under Maryland law for
the acceptance for record of the Articles of Merger by the Department.
3.4. NONCONTRAVENTION. Smith Barney Municipal Fund is not, and the
execution, delivery and performance of this Agreement by Smith Barney Municipal
Fund will not result, in violation of the laws of the State of Maryland or of
the Articles of Incorporation or the Bylaws of Smith Barney Municipal Fund, or
of any material agreement, indenture, instrument, contract, lease or other
undertaking to which Smith Barney Municipal Fund is a party or by which it is
bound, and the execution, delivery and performance of this Agreement by Smith
Barney Municipal 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 Smith Barney Municipal Fund is a
party or by which it is bound.
3.5. FINANCIAL STATEMENTS. Smith Barney Intermediate Municipal Fund
has been furnished with a statement of assets, liabilities and capital and a
schedule of investments of Smith Barney Municipal Fund, each as of December 31,
1999, said financial statements having been examined by KPMG LLP, independent
public auditors. These financial statements are in accordance with generally
accepted accounting principles applied on a consistent basis ("GAAP") and
present fairly, in all material respects, the financial position of Smith Barney
Municipal Fund as of such date in accordance with GAAP, and there are no known
contingent liabilities of Smith Barney Municipal Fund required to be reflected
on a balance sheet (including the notes thereto) in accordance with GAAP as of
such date not disclosed therein.
Smith Barney Intermediate Municipal Fund has been furnished with an
unaudited statement of assets, liabilities and capital and a schedule of
investments of Smith Barney Municipal Fund, each as of June 30, 2000. This
financial statement and the schedule of investments are in accordance with GAAP
and present fairly, in all material respects, the financial position of Smith
Barney Municipal Fund as of such date in accordance with GAAP, and there are no
known contingent liabilities of Smith Barney Municipal Fund required to be
reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein.
3.6. ANNUAL AND SEMI-ANNUAL REPORTS. Smith Barney Intermediate
Municipal Fund has been furnished with Smith Barney Municipal Fund's Annual
Report to Shareholders for the year ended December 31, 1999, and Semi-Annual
Report to Shareholders for the six months ended June 30, 2000.
3.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION.
Smith Barney Municipal Fund has full power and authority to enter into and
perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary action
of its board of directors, and,
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subject to shareholder approval, this Agreement constitutes a valid and binding
contract enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto.
3.8. LEGAL COMPLIANCE. No material litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending (in which service of process has been received) or to its
knowledge threatened against Smith Barney Municipal Fund or any properties or
assets held by it. Smith Barney Municipal 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.
3.9. MATERIAL CONTRACTS. There are no material contracts outstanding
to which Smith Barney Municipal Fund is a party that have not been disclosed in
the N-14 Registration Statement (as defined in Section 3.13 below) or will not
be otherwise disclosed to Smith Barney Intermediate Municipal Fund prior to the
Effective Date.
3.10. UNDISCLOSED LIABILITIES. Since December 31, 1999, there has
not been any material adverse change in Smith Barney Municipal Fund's financial
condition, assets, liabilities or business and Smith Barney Municipal Fund has
no known liabilities of a material amount, contingent or otherwise, required to
be disclosed in a balance sheet in accordance with GAAP other than those shown
on Smith Barney Municipal Fund's statements of assets, liabilities and capital
referred to above, those incurred in the ordinary course of its business as an
investment company since January 1, 2000, and those incurred in connection with
the Merger. Prior to the Effective Date, Smith Barney Municipal Fund will advise
Smith Barney Intermediate Municipal Fund in writing of all known liabilities,
contingent or otherwise, whether or not incurred in the ordinary course of
business, existing or accrued. For purposes of this Section 3.10, a decline in
net asset value per share of Smith Barney Municipal Fund due to declines in
market values of securities in Smith Barney Municipal Fund's portfolio or the
discharge of Smith Barney Municipal Fund liabilities will not constitute a
material adverse change.
3.11. TAX FILINGS. All federal and other tax returns and information
reports of Smith Barney Municipal Fund required by law to have been filed 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 Smith Barney Municipal Fund's
knowledge, no such return is currently under audit and no assessment has been
asserted with respect to such returns. All tax liabilities of Smith Barney
Municipal Fund have been adequately provided for on its books, and no tax
deficiency or liability of Smith Barney Municipal Fund has been asserted and no
question with respect thereto has been raised by the Internal Revenue Service or
by any state or local tax authority for taxes in excess of those already paid,
up to and including the taxable year in which the Effective Date occurs.
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3.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation (including the taxable year ending on the Effective Date), Smith
Barney Municipal Fund has met the requirements of Subchapter M of the Code for
qualification as a RIC 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 substantially all of its investment company taxable income
and net realized capital gain (as defined in the Code) that has accrued through
the Effective Date.
3.13. FORM N-14. The registration statement to be filed with the
Securities and Exchange Commission (the "SEC") by Smith Barney Intermediate
Municipal Fund on Form N-14 relating to the Smith Barney Intermediate Municipal
Fund Common Stock to be issued pursuant to this Agreement, and any supplement or
amendment thereto or to the documents therein (as amended, the "N-14
Registration Statement"), on the effective date of the N-14 Registration
Statement, at the time of the shareholders' meetings referred to in Article 6 of
this Agreement and at the Effective Date, insofar as it relates to Smith Barney
Municipal Fund (i) shall have complied or will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act and the 1940 Act and the rules
and regulations thereunder and (ii) did not or will not contain 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 not misleading; and
the prospectus included therein did not or will not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the representations and warranties in
this Section 3.13 shall only apply to statements in, or omissions from, the N-14
Registration Statement made in reliance upon and in conformity with information
furnished by the Smith Barney Intermediate Municipal Fund for use in the N-14
Registration Statement.
3.14. CAPITALIZATION.
(a) All issued and outstanding shares of Smith Barney
Municipal Fund (i) have been offered and sold in compliance in all material
respects with applicable registration requirements of the 1933 Act and state
securities laws, (ii) are, and on the Effective 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 6.7. Smith Barney Municipal
Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of Smith Barney Municipal Fund shares, nor is
there outstanding any security convertible into, or exchangeable for, any of
Smith Barney Municipal Fund shares.
(b) Smith Barney Municipal Fund is authorized to issue
100,000,000 shares of stock, par value $0.001 per share, all of which shares are
classified as Common Stock and each outstanding share of which is fully paid,
non-assessable and has full voting rights.
3.15. BOOKS AND RECORDS. The books and records of Smith Barney
Municipal Fund made available to Smith Barney Intermediate Municipal Fund are
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substantially true and correct and contain no material misstatements or
omissions with respect to the operations of Smith Barney Municipal Fund.
4. REPRESENTATIONS AND WARRANTIES OF SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND
Smith Barney Intermediate Municipal Fund represents and warrants to
Smith Barney Municipal Fund that the statements contained in this Article 4 are
correct and complete in all material respects as of the execution of this
Agreement on the date hereof. Smith Barney Intermediate Municipal Fund
represents and warrants to, and agrees with, Smith Barney Municipal Fund that:
4.1. ORGANIZATION. Smith Barney Intermediate Municipal Fund is a
corporation duly organized, validly existing under the laws of the State of
Maryland and is in good standing with the Department, and has the power to own
all of its assets and to carry on its business as it is now being conducted and
to carry out this Agreement.
4.2. REGISTRATIONS AND QUALIFICATIONS. Smith Barney Intermediate
Municipal Fund is duly registered under the 1940 Act as a closed-end,
diversified management investment company (File No. 811-06506) and such
registration has not been revoked or rescinded and is in full force and effect.
Smith Barney Intermediate Municipal Fund has elected and qualified for the
special tax treatment afforded RICs under Sections 851-855 of the Code at all
times since its inception. Smith Barney Intermediate Municipal Fund is qualified
as a foreign corporation in every jurisdiction where required, except to the
extent that failure to so qualify would not have a material adverse effect on
Smith Barney Intermediate Municipal Fund.
4.3. REGULATORY CONSENTS AND APPROVALS. No consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation by the Smith Barney Intermediate Municipal Fund of the
transactions contemplated herein, except (i) such as have been obtained or
applied for under the 1933 Act, the 1934 Act and the 1940 Act, (ii) such as may
be required by state securities laws and (iii) such as may be required under
Maryland law for the acceptance for record of the Articles of Merger by the
Department.
4.4. NONCONTRAVENTION. Smith Barney Intermediate Municipal Fund is
not, and the execution, delivery and performance of this Agreement by the Smith
Barney Intermediate Municipal Fund will not result, in violation of the laws of
the State of Maryland or of the Articles of Incorporation or the Bylaws of Smith
Barney Intermediate Municipal Fund, or of any material agreement, indenture,
instrument, contract, lease or other undertaking to which Smith Barney
Intermediate Municipal Fund is a party or by which it is bound, and the
execution, delivery and performance of this Agreement by Smith Barney
Intermediate Municipal 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 Smith Barney
Intermediate Municipal Fund is a party or by which it is bound.
4.5. FINANCIAL STATEMENTS. Smith Barney Municipal Fund has been
furnished with a statement of assets, liabilities and capital and a schedule of
investments of
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Smith Barney Intermediate Municipal Fund, each as of December 31, 1999, said
financial statements having been examined by KPMG LLP, independent public
auditors. These financial statements are in accordance with GAAP and present
fairly, in all material respects, the financial position of Smith Barney
Intermediate Municipal Fund as of such date in accordance with GAAP, and there
are no known contingent liabilities of Smith Barney Intermediate Municipal Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein.
Smith Barney Municipal Fund has been furnished with an unaudited
statement of assets, liabilities and capital and a schedule of investments of
Smith Barney Intermediate Municipal Fund, each as of June 30, 2000. This
financial statement and schedule of investments are in accordance with GAAP and
present fairly, in all material respects the financial position of Smith Barney
Intermediate Municipal Fund as of such date in accordance with GAAP, and there
are no known contingent liabilities of Smith Barney Intermediate Municipal Fund
required to be reflected on a balance sheet (including the notes thereto) in
accordance with GAAP as of such date not disclosed therein.
4.6. ANNUAL AND SEMI-ANNUAL REPORTS. Smith Barney Municipal Fund has
been furnished with Smith Barney Intermediate Municipal Fund's Annual Report to
Shareholders for the year ended December 31, 1999, and Semi-Annual Report to
Shareholders for the six months ended June 30, 2000.
4.7. QUALIFICATION, CORPORATE POWER, AUTHORIZATION OF TRANSACTION.
Smith Barney Intermediate Municipal Fund has full power and authority to enter
into and perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by all necessary
action of its board of directors, and, subject to shareholder approval, this
Agreement constitutes a valid and binding contract enforceable in accordance
with its terms, subject to the effects of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto.
4.8. LEGAL COMPLIANCE. 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 Smith Barney
Intermediate Municipal Fund or any properties or assets held by it. Smith Barney
Intermediate Municipal 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.
4.9. MATERIAL CONTRACTS. There are no material contracts outstanding
to which Smith Barney Intermediate Municipal Fund is a party that have not been
disclosed in the N-14 Registration Statement or will not be otherwise disclosed
to Smith Barney Municipal Fund prior to the Effective Date.
4.10. UNDISCLOSED LIABILITIES. Since December 31, 1999, there has
not been any material adverse change in Smith Barney Intermediate Municipal
Fund's financial condition, assets, liabilities, or business and the Smith
Barney Intermediate
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Municipal Fund has no known liabilities of a material amount, contingent or
otherwise, required to be disclosed in a balance sheet with GAAP other than
those shown on the Smith Barney Intermediate Municipal Fund's statements of
assets, liabilities and capital referred to above, those incurred in the
ordinary course of its business as an investment company since January 1, 2000,
and those incurred in connection with the Merger. Prior to the Effective Date,
Smith Barney Intermediate Municipal Equity Fund will advise Smith Barney
Municipal Fund in writing of all known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued.
For purposes of this Section 4.10, a decline in net asset value per share of
Smith Barney Intermediate Municipal Fund due to declines in market values of
securities in the Smith Barney Intermediate Municipal Fund's portfolio or the
discharge of the Smith Barney Intermediate Municipal Fund liabilities will not
constitute a material adverse change.
4.11. TAX FILINGS. All federal and other tax returns and information
reports of Smith Barney Intermediate Municipal Fund required by law to have been
filed 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 Smith Barney Intermediate
Municipal Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns. All tax liabilities
of Smith Barney Intermediate Municipal Fund have been adequately provided for on
its books, and no tax deficiency or liability of Smith Barney Intermediate
Municipal Fund has been asserted and no question with respect thereto has been
raised by the Internal Revenue Service or by any state or local tax authority
for taxes in excess of those already paid, up to and including the taxable year
in which the Effective Date occurs.
4.12. QUALIFICATION UNDER SUBCHAPTER M. For each taxable year of its
operation, Smith Barney Intermediate Municipal Fund has met the requirements of
Subchapter M of the Code for qualification as a RIC 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 substantially all of
its investment company taxable income and net realized capital gain (as defined
in the Code) that has accrued through the Effective Date.
4.13. FORM N-14. The N-14 Registration Statement, on the effective
date of the N-14 Registration Statement, at the time of the shareholders'
meetings referred to in Section 6 of this Agreement and at the Effective Date,
insofar as it relates to Smith Barney Intermediate Municipal Fund (i) shall have
complied or will comply in all material respects with the provisions of the 1933
Act, the 1934 Act and the 1940 Act and the rules and regulations thereunder and
(ii) did not or will not contain 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 not misleading; and the prospectus included therein did
not or will not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this Section 4.13 shall not apply to
statements in, or omissions from, the N-14 Registration Statement made in
reliance upon and in conformity with information furnished by Smith Barney
Municipal Fund for use in the N-14 Registration Statement.
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4.14. CAPITALIZATION.
(a) All issued and outstanding shares of Smith Barney
Intermediate Municipal Fund (i) have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933 Act and
state securities laws, (ii) are, and on the Effective 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. Smith Barney Intermediate Municipal Fund does
not have outstanding any options, warrants or other rights to subscribe for or
purchase any of the Smith Barney Intermediate Municipal Fund shares, nor is
there outstanding any security convertible into, or exchangeable for, any of the
Smith Barney Intermediate Municipal Fund shares.
(b) Smith Barney Intermediate Municipal Fund is authorized to
issue 100,000,000 shares of stock, par value $0.001 per share, all of which
shares are classified as Common Stock and each outstanding share of which is
fully paid, non-assessable and has full voting rights.
4.15. ISSUANCE OF STOCK.
(a) The offer and sale of the shares to be issued pursuant to
this Agreement will be in compliance with all applicable federal and state
securities laws.
(b) At or prior to the Effective Date, Smith Barney
Intermediate Municipal Fund will have obtained any and all regulatory, director
and shareholder approvals necessary to issue the Smith Barney Intermediate
Municipal Fund Common Stock.
4.16. Books and Records. The books and records of Smith Barney
Intermediate Municipal Fund made available to Smith Barney Municipal Fund are
substantially true and correct and contain no material misstatements or
omissions with respect to the operations of Smith Barney Intermediate Municipal
Fund.
5. CONVERSION TO SMITH BARNEY INTERMEDIATE MUNICIPAL FUND COMMON STOCK
5.1. CONVERSION.
(a) Subject to the requisite approval of the shareholders of
the parties, and the other terms and conditions contained herein, at the
Effective Date, each share of Common Stock of Smith Barney Municipal Fund will
be converted into an equivalent dollar amount (to the nearest one ten-thousandth
of one cent) of full shares of Smith Barney Intermediate Municipal Fund Common
Stock, computed based on the net asset value per share of each of the parties at
the Valuation Time.
(b) No fractional shares of Smith Barney Intermediate
Municipal Fund will be issued to Smith Barney Municipal Fund shareholders. In
lieu thereof, the Smith Barney Intermediate Municipal Fund will purchase all
fractional shares of the Smith Barney Intermediate Municipal Fund at the current
net asset value of the Smith Barney
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Intermediate Municipal Fund for the account of all holders of fractional
interests, and each such holder will receive such holder's pro rata share of the
proceeds of such purchase.
5.2. COMPUTATION OF NET ASSET VALUE. The net asset value per share
of the parties shall be determined as of the Valuation Time, and no formula will
be used to adjust the net asset value so determined of either of the parties to
take into account differences in realized and unrealized gains and losses. The
value of the assets of Smith Barney Municipal Fund to be transferred to Smith
Barney Intermediate Municipal Fund shall be determined by Smith Barney
Intermediate Municipal Fund pursuant to the principles and procedures
consistently utilized by Smith Barney Intermediate Municipal Fund in valuing its
own assets and determining its own liabilities for purposes of the Merger, which
principles and procedures are substantially similar to those employed by Smith
Barney Municipal Fund when valuing its own assets and determining its own
liabilities. Such valuation and determination shall be made by Smith Barney
Intermediate Municipal Fund in cooperation with Smith Barney Municipal Fund and
shall be confirmed in writing by Smith Barney Intermediate Municipal Fund to
Smith Barney Municipal Fund. The net asset value per share of Smith Barney
Intermediate Municipal Fund Common Stock shall be determined in accordance with
such procedures, and Smith Barney Intermediate Municipal Fund shall certify the
computations involved.
5.3. ISSUANCE OF SMITH BARNEY INTERMEDIATE MUNICIPAL FUND COMMON
STOCK. Smith Barney Intermediate Municipal Fund shall issue to the shareholders
of Smith Barney Municipal Fund separate certificates or share deposit receipts
for Smith Barney Intermediate Municipal Fund Common Stock by delivering the
certificates or share deposit receipts evidencing ownership of the Smith Barney
Intermediate Municipal Fund Common Stock to PFPC, as the transfer agent and
registrar for the Smith Barney Intermediate Municipal Fund Common Stock.
5.4. SURRENDER OF SMITH BARNEY MUNICIPAL FUND STOCK CERTIFICATES.
With respect to any Smith Barney Municipal Fund shareholder holding certificates
representing shares of the Common Stock of Smith Barney Municipal Fund as of the
Effective Date, and subject to Smith Barney Intermediate Municipal Fund being
informed thereof in writing by Smith Barney Municipal Fund, Smith Barney
Intermediate Municipal Fund will not permit such shareholder to receive new
certificates evidencing ownership of the Smith Barney Intermediate Municipal
Fund Common Stock until such shareholder has surrendered his or her outstanding
certificates evidencing ownership of the Common Stock of Smith Barney Municipal
Fund or, in the event of lost certificates, posted adequate bond. Smith Barney
Municipal Fund will request its shareholders to surrender their outstanding
certificates representing certificates of the Common Stock of Smith Barney
Municipal Fund or post adequate bond therefor. Dividends payable to holders of
record of shares of Smith Barney Intermediate Municipal Fund as of any date
after the Effective Date and prior to the exchange of certificates by any
shareholder of Smith Barney Municipal Fund shall be paid to such shareholder,
without interest; however, such dividends shall not be paid unless and until
such shareholder surrenders his or her stock certificates of Smith Barney
Municipal Fund for exchange.
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6. COVENANTS OF THE PARTIES
6.1. SHAREHOLDERS' MEETINGS.
(a) Each of the parties shall hold a meeting of its respective
shareholders for the purpose of considering the Merger as described herein,
which meeting has been called by each party for December 4, 2000, and any
adjournments thereof.
(b) Each of the parties agrees to mail to each of its
respective shareholders of record entitled to vote at the meeting of
shareholders at which action is to be considered regarding the Merger, in
sufficient time to comply with requirements as to notice thereof, a combined
Proxy Statement and Prospectus which complies in all material respects with the
applicable provisions of Section 14(a) of the 1934 Act and Section 20(a) of the
1940 Act, and the rules and regulations, respectively, thereunder.
6.2. OPERATIONS IN THE NORMAL COURSE. Each party covenants to
operate its business in the ordinary course between the date hereof and the
Effective Date, it being understood that such ordinary course of business will
include (i) the declaration and payment of customary dividends and other
distributions and (ii) in the case of Smith Barney Municipal Fund, preparing for
its deregistration, except that the distribution of dividends pursuant to
Sections 7.11 and 8.9 of this Agreement shall not be deemed to constitute a
breach of the provisions of this Section 6.2.
6.3. ARTICLES OF MERGER. The parties agree that, as soon as
practicable after satisfaction of all conditions to the Merger, they will
jointly file executed Articles of Merger with the Department and make all other
filings or recordings required by Maryland law in connection with the Merger.
6.4. REGULATORY FILINGS.
(a) Smith Barney Municipal Fund undertakes that, if the Merger
is consummated, it will file, or cause its agents to file, an application
pursuant to Section 8(f) of the 1940 Act for an order declaring that Smith
Barney Municipal Fund has ceased to be a registered investment company.
(b) Smith Barney Intermediate Municipal Fund will file the
N-14 Registration Statement with the SEC and will use its best efforts to ensure
that the N-14 Registration Statement becomes effective as promptly as
practicable. Smith Barney Municipal Fund agrees to cooperate fully with Smith
Barney Intermediate Municipal Fund, and will furnish to Smith Barney
Intermediate Municipal Fund the information relating to itself to be set forth
in the N-14 Registration Statement as required by the 1933 Act, the 1934 Act,
the 1940 Act, and the rules and regulations thereunder and the state securities
or blue sky laws.
6.5. PRESERVATION OF ASSETS. Smith Barney Intermediate Municipal
Fund agrees that it has no plan or intention to sell or otherwise dispose of the
assets of Smith Barney Municipal Fund to be acquired in the Merger, except for
dispositions made in the ordinary course of business.
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6.6. TAX MATTERS. Each of the parties agrees that by the Effective
Date all of its federal and other tax returns and reports required to be filed
on or before such date shall have been filed and all taxes shown as due on said
returns either have been paid or adequate liability reserves have been provided
for the payment of such taxes. In connection with this covenant, the parties
agree to cooperate with each other in filing any tax return, amended return or
claim for refund, determining a liability for taxes or a right to a refund of
taxes or participating in or conducting any audit or other proceeding in respect
of taxes. Smith Barney Intermediate Municipal Fund agrees to retain for a period
of ten (10) years following the Effective Date all returns, schedules and work
papers and all material records or other documents relating to tax matters of
Smith Barney Municipal Fund for its final taxable year and for all prior taxable
periods. Any information obtained under this Section 6.6 shall be kept
confidential except as otherwise may be necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
After the Effective Date, Smith Barney Intermediate Municipal Fund shall
prepare, or cause its agents to prepare, any federal, state or local tax
returns, including any Forms 1099, required to be filed and provided to required
persons by Smith Barney Municipal Fund with respect to its final taxable years
ending with the Effective Date and for any prior periods or taxable years for
which the due date for such return has not passed as of the Effective Date and
further shall cause such tax returns and Forms 1099 to be duly filed with the
appropriate taxing authorities and provided to required persons. Notwithstanding
the aforementioned provisions of this Section 6.6, any expenses incurred by
Smith Barney Intermediate Municipal Fund (other than for payment of taxes) in
excess of any accrual for such expenses by Smith Barney Municipal Fund in
connection with the preparation and filing of said tax returns and Forms 1099
after the Effective Date shall be borne by Smith Barney Intermediate Municipal
Fund.
6.7. SHAREHOLDER LIST. Prior to the Effective Date, Smith Barney
Municipal Fund shall have made arrangements with its transfer agent to deliver
to Smith Barney Intermediate Municipal Fund, a list of the names and addresses
of all of the shareholders of record of Smith Barney Municipal Fund on the
Effective Date and the number of shares of Common Stock of Smith Barney
Municipal Fund owned by each such shareholder, certified by Smith Barney
Municipal Fund's transfer agent or President to the best of their knowledge and
belief.
6.8. DELISTING, TERMINATION OF REGISTRATION AS AN INVESTMENT
COMPANY. Smith Barney Municipal Fund agrees that the (i) delisting of the shares
of Smith Barney Municipal Fund with the AMEX and (ii) termination of its
registration as a RIC will be effected in accordance with applicable law as soon
as practicable following the Effective Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND
The obligations of Smith Barney Intermediate Municipal Fund
hereunder shall be subject to the following conditions:
7.1. APPROVAL OF MERGER. This Agreement shall have been adopted by
the affirmative vote of the holders of a majority of the shares of Common Stock
of Smith Barney Intermediate Municipal Fund issued and outstanding and entitled
to vote thereon
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and the affirmative vote of the holders of a majority of the shares of Common
Stock of Smith Barney Municipal Fund issued and outstanding and entitled to vote
thereon; and Smith Barney Municipal Fund shall have delivered to Smith Barney
Intermediate Municipal Fund a copy of the resolutions approving this Agreement
adopted by its board of directors and shareholders, certified by its secretary.
7.2. CERTIFICATES AND STATEMENTS BY SMITH BARNEY MUNICIPAL FUND.
(a) Smith Barney Municipal Fund shall have furnished a
statement of assets, liabilities and capital, together with a schedule of
investments with their respective dates of acquisition and tax costs, certified
on its behalf by its President (or any Vice President) and its Treasurer, and a
certificate executed by both such officers, dated the Effective Date, certifying
that there has been no material adverse change in its financial position since
June 30, 2000, other than changes in its portfolio securities since that date or
changes in the market value of its portfolio securities.
(b) Smith Barney Municipal Fund shall have furnished to Smith
Barney Intermediate Municipal Fund a certificate signed by its President (or any
Vice President), dated the Effective Date, certifying that as of the Effective
Dates, all representations and warranties made in this Agreement are true and
correct in all material respects as if made at and as of such date and each has
complied with all of the agreements and satisfied all of the conditions on its
part to be performed or satisfied at or prior to such dates.
(c) Smith Barney Municipal Fund shall have delivered to Smith
Barney Intermediate Municipal Fund a letter from KPMG LLP, dated the Effective
Date, stating that such firm has performed a limited review of the federal,
state and local income tax returns for the period ended December 31, 1999, and
that based on such limited review, nothing came to their attention which caused
them to believe that such returns did not properly reflect, in all material
respects, the federal, state and local income taxes of Smith Barney Municipal
Fund for the period covered thereby; and that for the period from December 31,
1999 to and including the Effective Date and for any taxable year ending upon
the Effective Date, such firm has performed a limited review to ascertain the
amount of such applicable federal, state and local taxes, and has determined
that either such amount has been paid or reserves have been established for
payment of such taxes, this review to be based on unaudited financial data; and
that based on such limited review, nothing has come to their attention which
caused them to believe that the taxes paid or reserves set aside for payment of
such taxes were not adequate in all material respects for the satisfaction of
federal, state and local taxes for the period from December 31, 1999, to and
including the Effective Date and for any taxable year ending upon the Effective
Date or that Smith Barney Municipal Fund would not continue to qualify as a RIC
for federal income tax purposes.
7.3. ABSENCE OF LITIGATION. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.
7.4. LEGAL OPINIONS.
(a) Smith Barney Intermediate Municipal Fund shall have
received an opinion of Willkie Farr & Gallagher, as counsel to Smith Barney
Municipal Fund, in form
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and substance reasonably satisfactory to Smith Barney Intermediate Municipal
Fund and dated the Effective Date, to the effect that (i) Smith Barney Municipal
Fund is a corporation duly organized, validly existing under the laws of the
State of Maryland and in good standing with the Department; (ii) the Agreement
has been duly authorized, executed and delivered by Smith Barney Municipal Fund,
and, assuming that the N-14 Registration Statement complies with the 1933 Act,
1934 Act and the 1940 Act, constitutes a valid and legally binding obligation of
Smith Barney Municipal Fund, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws pertaining to the enforcement of creditors' rights generally and by
equitable principles; (iii) to the best of such counsel's knowledge, no consent,
approval, authorization or order of any United States federal or Maryland state
court or governmental authority is required for the consummation by Smith Barney
Municipal Fund of the Merger, except such as may be required under the 1933 Act,
the 1934 Act, the 1940 Act, the published rules and regulations of the SEC
thereunder and under Maryland law and such as may be required by state
securities or blue sky laws; (iv) such counsel does not know of any contracts or
other documents with respect to Smith Barney Municipal Fund related to the
Merger of a character required to be described in the N-14 Registration
Statement which are not described therein or, if required to be filed, filed as
required; (v) the execution and delivery of this Agreement does not, and the
consummation of the Merger will not, violate any material provision of the
Articles of Incorporation, as amended, the bylaws, as amended, or any agreement
(known to such counsel) to which Smith Barney Municipal Fund is a party or by
which Smith Barney Municipal Fund is bound, except insofar as the parties have
agreed to amend such provision as a condition precedent to the Merger; (vi) to
the best of such counsel's knowledge, no material suit, action or legal or
administrative proceeding is pending or threatened against Smith Barney
Municipal Fund; and (vii) all corporate actions required to be taken by Smith
Barney Municipal Fund to authorize this Agreement and to effect the Merger have
been duly authorized by all necessary corporate actions on behalf of Smith
Barney Municipal Fund. Such opinion shall also state that (A) while such counsel
cannot make any representation as to the accuracy or completeness of statements
of fact in the N-14 Registration Statement or any amendment or supplement
thereto with respect to Smith Barney Municipal Fund, nothing has come to their
attention that would lead them to believe that, on the respective effective
dates of the N-14 Registration Statement and any amendment or supplement thereto
with respect to Smith Barney Municipal Fund, (1) the N-14 Registration Statement
or any amendment or supplement thereto contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading with respect
to Smith Barney Municipal Fund, and (2) the prospectus included in the N-14
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading with
respect to Smith Barney Municipal Fund; provided that such counsel need not
express any opinion or belief as to the financial statements, other financial
data, statistical data or information relating to Smith Barney Municipal Fund
contained or incorporated by reference in the N-14 Registration Statement. In
giving the opinion set forth above, Willkie Farr & Gallagher may state that it
is relying on certificates of officers of Smith Barney Municipal Fund with
regard to matters of fact and certain certificates and written statements of
governmental officials
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with respect to the good standing of Smith Barney Municipal Fund and on the
opinion of Venable, Baetjer and Howard, LLP, as to matters of Maryland law.
(b) Smith Barney Intermediate Municipal Fund shall have
received an opinion from Willkie Farr & Gallagher, as counsel to Smith Barney
Intermediate Municipal Fund, dated the Effective Date, to the effect that for
federal income tax purposes (i) the Merger as provided in this Agreement will
constitute a reorganization within the meaning of Section 368(a)(1)(A) of the
Code and that Smith Barney Intermediate Municipal Fund and Smith Barney
Municipal Fund will each be deemed a "party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
to Smith Barney Municipal Fund as a result of the Merger or the conversion of
Smith Barney Municipal Fund shares to Smith Barney Intermediate Municipal Fund
Common Stock; (iii) no gain or loss will be recognized to Smith Barney
Intermediate Municipal Fund as a result of the Merger; (iv) no gain or loss will
be recognized to the shareholders of Smith Barney Municipal Fund on the
conversion of their shares into Smith Barney Intermediate Municipal Fund Common
Stock except to the extent such shareholders are paid cash in lieu of fractional
shares of Smith Barney Intermediate Municipal Fund in the Merger; (v) the tax
basis of Smith Barney Municipal Fund assets in the hands of Smith Barney
Intermediate Municipal Fund will be the same as the tax basis of such assets in
the hands of Smith Barney Municipal Fund immediately prior to the consummation
of the Merger; (vi) immediately after the Merger, the tax basis of Smith Barney
Intermediate Municipal Fund Common Stock received by the shareholders of Smith
Barney Municipal Fund in the Merger (including that of fractional share
interests purchased by the Smith Barney Intermediate Municipal Fund) will be
equal, in the aggregate, to the tax basis of the shares of Smith Barney
Municipal Fund converted pursuant to the Merger; (vii) a shareholder's holding
period for Smith Barney Intermediate Municipal Fund Common Stock (including that
of fractional share interests purchased by the Smith Barney Intermediate
Municipal Fund) will be determined by including the period for which he or she
held the Common Stock of Smith Barney Municipal Fund converted pursuant to the
Merger, provided that such Smith Barney Municipal Fund shares were held as a
capital asset; (viii) the Smith Barney Intermediate Municipal Fund's holding
period with respect to Smith Barney Municipal Fund assets transferred will
include the period for which such assets were held by Smith Barney Municipal
Fund; and (ix) the payment of cash to Smith Barney Municipal Fund shareholders
in lieu of fractional shares of Smith Barney Intermediate Municipal Fund will be
treated as though the fractional shares were distributed as part of the Merger
and then redeemed by Smith Barney Intermediate Municipal Fund with the result
that Smith Barney Municipal Fund shareholder will generally have capital gains
or losses to the extent the cash distribution differs from such shareholder's
basis allocable to the fractional shares.
7.5. AUDITOR'S CONSENT AND CERTIFICATION. Smith Barney Intermediate
Municipal Fund shall have received from KPMG LLP a letter dated as of the
effective date of the N-14 Registration Statement and a similar letter dated
within five days prior to the Effective Date, in form and substance satisfactory
to Smith Barney Intermediate Municipal Fund, to the effect that (i) they are
independent public auditors with respect to Smith Barney Municipal Fund within
the meaning of the 1933 Act and the applicable published rules and regulations
thereunder; and (ii) in their opinion, the financial statements and
supplementary information of Smith Barney Municipal Fund included or
incorporated by
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reference in the N-14 Registration Statement and reported on by them comply as
to form in all material respects with the applicable accounting requirements of
the 1933 Act and the published rules and regulations thereunder.
7.6. LIABILITIES. The assets or liabilities of Smith Barney
Municipal Fund to be transferred to Smith Barney Intermediate Municipal Fund
shall not include any assets or liabilities which Smith Barney Intermediate
Municipal Fund, by reason of limitations in its Registration Statement or
Articles of Incorporation, may not properly acquire or assume. Smith Barney
Intermediate Municipal Fund does not anticipate that there will be any such
assets or liabilities but Smith Barney Intermediate Municipal Fund will notify
Smith Barney Municipal Fund if any do exist and will reimburse Smith Barney
Municipal Fund for any reasonable transaction costs incurred by Smith Barney
Municipal Fund for the liquidation of such assets and liabilities.
7.7. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14
Registration Statement shall have become effective under the 1933 Act and no
stop order suspending such effectiveness shall have been instituted or, to the
knowledge of Smith Barney Intermediate Municipal Fund, contemplated by the SEC.
7.8. REGULATORY FILINGS. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall have expired or been
terminated.
7.9. ADMINISTRATIVE RULINGS, PROCEEDINGS. The SEC shall not have
issued an unfavorable advisory report under Section 25(b) of the 1940 Act, nor
instituted or threatened to institute any proceeding seeking to enjoin
consummation of the Merger under Section 25(c) of the 1940 Act; no other legal,
administrative or other proceeding shall be instituted or threatened which would
materially affect the financial condition of Smith Barney Municipal Fund or
would prohibit the Merger.
7.10. SATISFACTION OF SMITH BARNEY INTERMEDIATE MUNICIPAL FUND. All
proceedings taken by Smith Barney Municipal Fund and its counsel in connection
with the Merger and all documents incidental thereto shall be satisfactory in
form and substance to Smith Barney Intermediate Municipal Fund.
7.11. DIVIDENDS. Prior to the Effective Date, Smith Barney Municipal
Fund shall have declared and paid a dividend or dividends which, together with
all such previous dividends, shall have the effect of distributing to its
shareholders substantially all of its net investment company taxable income that
has accrued through the Effective Date, if any (computed without regard to any
deduction of dividends paid), and substantially all of its net capital gain, if
any, realized through the Effective Date.
7.12. CUSTODIAN'S CERTIFICATE. Smith Barney Municipal Fund's
custodian shall have delivered to Smith Barney Intermediate Municipal Fund a
certificate identifying all of the assets of Smith Barney Municipal Fund held or
maintained by such custodian as of the Valuation Time.
7.13. BOOKS AND RECORDS. Smith Barney Municipal Fund's transfer
agent shall have provided to Smith Barney Intermediate Municipal Fund (i) the
originals or true copies of all of the records of Smith Barney Municipal Fund in
the possession of such
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transfer agent as of the Exchange Date, (ii) a certificate setting forth the
number of shares of Smith Barney Municipal Fund outstanding as of the Valuation
Time, and (iii) the name and address of each holder of record of any shares and
the number of shares held of record by each such shareholder.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SMITH BARNEY MUNICIPAL
FUND
The obligations of Smith Barney Municipal Fund hereunder shall be
subject to the following conditions:
8.1. APPROVAL OF MERGER. This Agreement shall have been adopted, by
the affirmative vote of the holders of a majority of the shares of Common Stock
of Smith Barney Municipal Fund issued and outstanding and entitled to vote
thereon and the affirmative vote of the holders of a majority of the shares of
Common Stock of Smith Barney Intermediate Municipal Fund issued and outstanding
and entitled to vote thereon; and that Smith Barney Intermediate Municipal Fund
shall have delivered to Smith Barney Municipal Fund a copy of the resolutions
approving this Agreement adopted by its board of directors and shareholders,
certified by its secretary.
8.2. CERTIFICATES AND STATEMENTS BY SMITH BARNEY INTERMEDIATE
MUNICIPAL FUND.
(a) Smith Barney Intermediate Municipal Fund shall have
furnished a statement of assets, liabilities and capital, together with a
schedule of investments with their respective dates of acquisition and tax
costs, certified on its behalf by its President (or any Vice President) and its
Treasurer, and a certificate executed by both such officers, dated the Effective
Date, certifying that there has been no material adverse change in its financial
position since June 30, 2000, other than changes in its portfolio securities
since that date or changes in the market value of its portfolio securities.
(b) Smith Barney Intermediate Municipal Fund shall have
furnished to Smith Barney Municipal Fund a certificate signed by its President
(or any Vice President), dated the Effective Date, certifying that as of the
Effective Date, all representations and warranties made in this Agreement are
true and correct in all material respects as if made at and as of such date and
each has complied with all of the agreements and satisfied all of the conditions
on its part to be performed or satisfied at or prior to such dates.
(c) Smith Barney Intermediate Municipal Fund shall have
delivered to Smith Barney Municipal Fund a letter from KPMG LLP, dated the
Effective Date, stating that such firm has performed a limited review of the
federal, state and local income tax returns for the period ended December 31,
1999, and that based on such limited review, nothing came to their attention
which caused them to believe that such returns did not properly reflect, in all
material respects, the federal, state and local income taxes of Smith Barney
Intermediate Municipal Fund for the period covered thereby; and that for the
period from December 31, 1999 to and including the Effective Date, such firm has
performed a limited review to ascertain the amount of such applicable federal,
state and local taxes, and has determined that either such amount has been paid
or reserves established for payment of such taxes, this review to be based on
unaudited financial data;
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and that based on such limited review, nothing has come to their attention which
caused them to believe that the taxes paid or reserves set aside for payment of
such taxes were not adequate in all material respects for the satisfaction of
federal, state and local taxes for the period from December 31, 1999, to and
including the Effective Date or that Smith Barney Intermediate Municipal Fund
would not continue to qualify as a RIC for federal income tax purposes.
8.3. ABSENCE OF LITIGATION. There shall be no material litigation
pending with respect to the matters contemplated by this Agreement.
8.4. LEGAL OPINIONS.
(a) Smith Barney Municipal Fund shall have received an opinion
of Willkie Farr & Gallagher, as counsel to Smith Barney Intermediate Municipal
Fund, in form and substance reasonably satisfactory to Smith Barney Municipal
Fund and dated the Effective Date, to the effect that (i) Smith Barney
Intermediate Municipal Fund is a corporation duly organized, validly existing
under the laws of the State of Maryland and in good standing with the
Department; (ii) the Agreement has been duly authorized, executed and delivered
by Smith Barney Intermediate Municipal Fund, and, assuming that the N-14
Registration Statement complies with the 1933 Act, 1934 Act and the 1940 Act,
constitutes a valid and legally binding obligation of Smith Barney Intermediate
Municipal Fund, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws pertaining to the enforcement of creditors' rights generally and by
equitable principles; (iii) to the best of such counsel's knowledge, no consent,
approval, authorization or order of any United States federal or Maryland state
court or governmental authority is required for the consummation by Smith Barney
Intermediate Municipal Fund of the Merger, except such as may be required under
the 1933 Act, the 1934 Act, the 1940 Act and the published rules and regulations
of the SEC thereunder and under Maryland law and such as may be required under
state securities or blue sky laws; (iv) the N-14 Registration Statement has
become effective under the 1933 Act, no stop order suspending the effectiveness
of the N-14 Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the 1933 Act,
and, with respect to Smith Barney Intermediate Municipal Fund, the N-14
Registration Statement, and each amendment or supplement thereto, as of their
respective effective dates, appear on their face to be appropriately responsive
in all material respects to the requirements of the 1933 Act, the 1934 Act and
the 1940 Act and the published rules and regulations of the SEC thereunder; (v)
such counsel does not know of any statutes, legal or governmental proceedings or
contracts with respect to Smith Barney Intermediate Municipal Fund or other
documents related to the Merger of a character required to be described in the
N-14 Registration Statement which are not described therein or, if required to
be filed, filed as required; (vi) the execution and delivery of this Agreement
does not, and the consummation of the Merger will not, violate any material
provision of the Articles of Incorporation, as amended, the bylaws, as amended,
or any agreement (known to such counsel) to which Smith Barney Intermediate
Municipal Fund is a party or by which Smith Barney Intermediate Municipal Fund
is bound, except insofar as the parties have agreed to amend such provision as a
condition precedent to the Merger; (vii) to the best of such counsel's
knowledge, no material suit, action or legal or administrative proceeding is
pending or
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threatened against Smith Barney Intermediate Municipal Fund; and (viii) all
corporate actions required to be taken by Smith Barney Intermediate Municipal
Fund to authorize this Agreement and to effect the Merger have been duly
authorized by all necessary corporate actions on behalf of Smith Barney
Intermediate Municipal Fund. Such opinion shall also state that (A) while such
counsel cannot make any representation as to the accuracy or completeness of
statements of fact in the N-14 Registration Statement or any amendment or
supplement thereto with respect to Smith Barney Intermediate Municipal Fund,
nothing has come to their attention that would lead them to believe that, on the
respective effective dates of the N-14 Registration Statement and any amendment
or supplement thereto, (1) the N-14 Registration Statement or any amendment or
supplement thereto contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading with respect to Smith Barney Intermediate
Municipal Fund; and (2) the prospectus included in the N-14 Registration
Statement contained any untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading with respect to Smith
Barney Intermediate Municipal Fund; provided that such counsel need not express
any opinion or belief as to the financial statements, other financial data,
statistical data or information relating to Smith Barney Intermediate Municipal
Fund contained or incorporated by reference in the N-14 Registration Statement.
In giving the opinion set forth above, Willkie Farr & Gallagher may state that
it is relying on certificates of officers of Smith Barney Intermediate Municipal
Fund with regard to matters of fact and certain certificates and written
statements of governmental officials with respect to the good standing of Smith
Barney Intermediate Municipal Fund and on the opinion of Venable, Baetjer and
Howard, LLP as to matters of Maryland law.
(b) Smith Barney Municipal Fund shall have received an opinion
from Willkie Farr & Gallagher and dated the Effective Date, to the effect that
for federal income tax purposes (i) the Merger as provided in this Agreement
will constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Code and that Smith Barney Intermediate Municipal Fund and Smith Barney
Municipal Fund will each be deemed a "party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized
to Smith Barney Municipal Fund as a result of the Merger or on the conversion of
Smith Barney Municipal Fund shares to Smith Barney Intermediate Municipal Fund
Common Stock; (iii) no gain or loss will be recognized to Smith Barney
Intermediate Municipal Fund as a result of the Merger; (iv) no gain or loss will
be recognized to the shareholders of Smith Barney Municipal Fund on the
conversion of their shares into Smith Barney Intermediate Municipal Fund Common
Stock except to the extent such shareholders are paid cash in lieu of fractional
shares of Smith Barney Intermediate Municipal Fund in the Merger; (v) the tax
basis of Smith Barney Municipal Fund assets in the hands of Smith Barney
Intermediate Municipal Fund will be the same as the tax basis of such assets in
the hands of Smith Barney Municipal Fund immediately prior to the consummation
of the Merger; (vi) immediately after the Merger, the tax basis of Smith Barney
Intermediate Municipal Fund Common Stock received by the shareholders of Smith
Barney Municipal Fund in the Merger (including that of fractional share
interests purchased by the Smith Barney Intermediate Municipal Fund) will be
equal, in the aggregate, to the tax basis of the shares of Smith Barney
Municipal Fund converted pursuant to the Merger; (vii) a shareholder's holding
period for Smith Barney
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Intermediate Municipal Fund Common Stock (including that of fractional share
interests purchased by the Smith Barney Intermediate Municipal Fund) will be
determined by including the period for which he or she held the Common Stock of
Smith Barney Municipal Fund converted pursuant to the Merger, provided, that
such Smith Barney Municipal Fund shares were held as a capital asset; (viii) the
Smith Barney Intermediate Municipal Fund's holding period with respect to Smith
Barney Municipal Fund assets transferred will include the period for which such
assets were held by Smith Barney Municipal Fund; and (ix) the payment of cash to
Smith Barney Municipal Fund shareholders in lieu of fractional shares of Smith
Barney Intermediate Municipal Fund will be treated as though the fractional
shares were distributed as part of the Merger and then redeemed by Smith Barney
Intermediate Municipal Fund with the result that Smith Barney Municipal Fund
shareholder will generally have capital gains or losses to the extent the cash
distribution differs from such shareholder's basis allocable to the fractional
shares.
8.5. AUDITOR'S CONSENT AND CERTIFICATION. Smith Barney Municipal
Fund shall have received from KPMG LLP a letter dated as of the effective date
of the N-14 Registration Statement and a similar letter dated within five days
prior to the Effective Date, in form and substance satisfactory to Smith Barney
Municipal Fund, to the effect that (i) they are independent public auditors with
respect to Smith Barney Intermediate Municipal Fund within the meaning of the
1933 Act and the applicable published rules and regulations thereunder; and (ii)
in their opinion, the financial statements and supplementary information of
Smith Barney Intermediate Municipal Fund incorporated by reference in the N-14
Registration Statement and reported on by them comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
published rules and regulations thereunder.
8.6. EFFECTIVENESS OF N-14 REGISTRATION STATEMENT. The N-14
Registration Statement shall have become effective under the 1933 Act and no
stop order suspending such effectiveness shall have been instituted or, to the
knowledge of Smith Barney Municipal Fund, contemplated by the SEC.
8.7. REGULATORY FILINGS.
(a) Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby shall have expired or been terminated.
(b) The SEC shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted or threatened to
institute any proceeding seeking to enjoin consummation of the Merger under
Section 25(c) of the 1940 Act; no other legal, administrative or other
proceeding shall be instituted or threatened which would materially affect the
financial condition of Smith Barney Municipal Fund or would prohibit the Merger.
(c) Smith Barney Intermediate Municipal Fund shall have
received from any relevant state securities administrator such order or orders
as are reasonably necessary or desirable under the 1933 Act, the 1934 Act, the
1940 Act, and any applicable state securities or blue sky laws in connection
with the transactions contemplated hereby, and that all such orders shall be in
full force and effect.
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8.8. SATISFACTION OF SMITH BARNEY MUNICIPAL FUND. All proceedings
taken by Smith Barney Intermediate Municipal Fund and its counsel in connection
with the Merger and all documents incidental thereto shall be satisfactory in
form and substance to Smith Barney Municipal Fund.
8.9. DIVIDENDS. Prior to the Effective Date, Smith Barney
Intermediate Municipal Fund shall have declared and paid a dividend or dividends
which, together with all such previous dividends, shall have the effect of
distributing to its shareholders substantially all of its net investment company
taxable income that has accrued through the Effective Date, if any (computed
without regard to any deduction of dividends paid), and substantially all of its
net capital gain, if any, realized through the Effective Date.
9. PAYMENT OF EXPENSES
All expenses incurred in connection with the Merger of Smith Barney
Intermediate Municipal Fund and Smith Barney Municipal Fund will be borne by SSB
Citi. Such expenses shall include, but not be limited to, all costs related to
the preparation and distribution of the N-14 Registration Statement, proxy
solicitation expenses, SEC registration fees, and AMEX listing fees. Neither of
the Acquiring Fund and the Target Fund owes any broker's or finder's fees in
connection with the transactions provided for herein.
10. COOPERATION FOLLOWING EFFECTIVE DATE
In case at any time after the Effective Date any further action is
necessary to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party may reasonably request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification as described below). Smith Barney Municipal Fund
acknowledges and agrees that from and after the Effective Date, Smith Barney
Intermediate Municipal Fund shall be entitled to possession of all documents,
books, records, agreements and financial data of any sort pertaining to Smith
Barney Municipal Fund.
11. INDEMNIFICATION
11.1. SMITH BARNEY MUNICIPAL FUND. Smith Barney Intermediate
Municipal Fund agrees to indemnify and hold harmless Smith Barney Municipal Fund
and each of Smith Barney Municipal 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, Smith Barney Municipal 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 Smith Barney Intermediate Municipal Fund of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
11.2. SMITH BARNEY INTERMEDIATE MUNICIPAL FUND. Smith Barney
Municipal Fund agrees to indemnify and hold harmless Smith Barney Intermediate
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Municipal Fund and each of Smith Barney Intermediate Municipal Fund's directors
and officers from and against any and all losses, claims, liabilities or
expenses (including, without limitation, the payment of reasonable legal fees
and reasonable costs of investigation) to which jointly and severally, Smith
Barney Intermediate Municipal 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
Smith Barney Municipal Fund of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
12. TERMINATION, POSTPONEMENT AND WAIVERS
12.1. TERMINATION.
(a) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the Merger abandoned at any time
(whether before or after adoption by the shareholders of each of the parties)
prior to the Effective Date, or the Effective Date may be postponed, (i) by
mutual agreement of the parties' board of directors; (ii) by the board of
directors of Smith Barney Intermediate Municipal Fund if any of the obligations
of Smith Barney Municipal Fund set forth in this Agreement has not been
fulfilled or waived by such board or if Smith Barney Municipal Fund has made a
material and intentional misrepresentation herein or in connection herewith; or
(iii) by the board of directors of Smith Barney Municipal Fund if any of the
obligations of Smith Barney Intermediate Municipal Fund set forth in this
Agreement has not been fulfilled or waived by such board or if Smith Barney
Intermediate Municipal Fund has made a material and intentional
misrepresentation herein or in connection herewith.
(b) If the transaction contemplated by this Agreement shall
not have been consummated by January 31, 2001, this Agreement automatically
shall terminate on that date, unless a later date is mutually agreed to by the
boards of directors of the parties.
(c) In the event of termination of this Agreement pursuant to
the provisions hereof, the Agreement shall become void and have no further
effect, and there shall not be any liability hereunder on the part of either of
the parties or their respective directors or officers, except for any such
material breach or intentional misrepresentation, as to each of which all
remedies at law or in equity of the party adversely affected shall survive.
12.2. WAIVER. At any time prior to the Effective Date, any of the
terms or conditions of this Agreement may be waived by the board of directors of
either Smith Barney Municipal Fund or Smith Barney Intermediate Municipal Fund
(whichever is entitled to the benefit thereof), if, in the judgment of such
board after consultation with its counsel, such action or waiver will not have a
material adverse effect on the benefits intended in this Agreement to the
shareholders of their respective fund, on behalf of which such action is taken.
12.3. EXPIRATION OF REPRESENTATIONS AND WARRANTIES.
(a) The respective representations and warranties contained in
Articles 3 and 4 of this Agreement shall expire with, and be terminated by, the
consummation of
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the Merger, and neither of the parties nor any of their officers, directors,
agents or shareholders shall have any liability with respect to such
representations or warranties after the Effective Date. This provision shall not
protect any officer, director, agent or shareholder of the parties against any
liability to the entity for which that officer, director, agent or shareholder
so acts or to its shareholders to which that officer, director, agent or
shareholder would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties in the conduct of
such office.
(b) If any order or orders of the SEC with respect to this
Agreement shall be issued prior to the Effective Date and shall impose any terms
or conditions which are determined by action of the boards of directors of the
parties to be acceptable, such terms and conditions shall be binding as if a
part of this Agreement without further vote or approval of the shareholders of
the parties, unless such terms and conditions shall result in a change in the
method of computing the number of shares of Smith Barney Intermediate Municipal
Fund Common Stock to be issued pursuant to this Agreement, in which event,
unless such terms and conditions shall have been included in the proxy
solicitation materials furnished to the shareholders of the parties prior to the
meetings at which the Merger shall have been approved, this Agreement shall not
be consummated and shall terminate unless the parties call special meetings of
shareholders at which such conditions so imposed shall be submitted for
approval.
13. MISCELLANEOUS
13.1. TRANSFER RESTRICTION. Pursuant to Rule 145 under the 1933 Act,
and in connection with the issuance of any shares to any person who at the time
of the Merger is, to its knowledge, an affiliate of a party to the Merger
pursuant to Rule 145(c), Smith Barney Intermediate Municipal Fund will cause to
be affixed upon the certificate(s) issued to such person (if any) a legend as
follows:
THESE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFER UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
EXCEPT TO SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC. (OR ITS
STATUTORY SUCCESSOR) UNLESS (I) A REGISTRATION STATEMENT WITH
RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933 OR
(II) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE FUND,
SUCH REGISTRATION IS NOT REQUIRED.
and, further, that stop transfer instructions will be issued to Smith Barney
Intermediate Municipal Fund's transfer agent with respect to such shares. Smith
Barney Municipal Fund will provide Smith Barney Intermediate Municipal Fund on
the Effective Date with the name of any Smith Barney Municipal Fund Shareholder
who is to the knowledge of Smith Barney Municipal Fund an affiliate of it on
such date.
13.2. MATERIAL PROVISIONS. All covenants, agreements,
representations and warranties made under this Agreement and any certificates
delivered pursuant to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any investigation made by
them or on their behalf.
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<PAGE>
13.3. NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Smith Barney Municipal Fund:
Christina T. Sydor, Esq.
Secretary
Smith Barney Municipal Fund, Inc.
7 World Trade Center
New York, New York 10048
With copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
If to Smith Barney Intermediate Municipal Fund:
Christina T. Sydor, Esq.
Secretary
Smith Barney Intermediate Municipal Fund
7 World Trade Center
New York, New York 10048
With copies to:
Burton M. Leibert, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Any party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
13.4. 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 Smith Barney Municipal Fund and Smith Barney Intermediate
Municipal Fund; provided, however, that following the meeting of Smith Barney
Municipal Fund and Smith
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Barney Intermediate Municipal Fund shareholders to approve the Merger, no such
amendment may have the effect of changing the provisions for determining the
number of Smith Barney Intermediate Municipal Fund shares to be issued to Smith
Barney Municipal Fund shareholders under this Agreement to the detriment of such
shareholders without their further approval.
13.5. HEADINGS. The Article headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
13.7. ENFORCEABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
13.8. SUCCESSORS AND ASSIGNS. 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 parties and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
13.9. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Maryland,
without regard to its principles of conflicts of law.
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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.
SMITH BARNEY INTERMEDIATE MUNICIPAL
FUND, INC.
By:_______________________________[SEAL]
Name:___________________________________
Attest:_________________________________
Title:__________________________________
SMITH BARNEY MUNICIPAL FUND, INC.
By:_______________________________[SEAL]
Name:___________________________________
Attest:_________________________________
Title:__________________________________
SSB CITI FUND MANAGEMENT LLC
By:_______________________________[SEAL]
Name:___________________________________
Attest:_________________________________
Title:__________________________________
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<PAGE>
PROXY CARD FOR
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
B-1
<PAGE>
PROXY
P SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
R This Proxy is Solicited on Behalf of the Board of Directors
O The undersigned hereby appoints Heath B. McLendon, Christina T.
Sydor and Gordon E. Swartz, and each of them, as Proxies, each with the
X power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side and in accordance
Y with their judgment on such other matters as may properly come before the
meeting or any adjournments thereof, all shares of Smith Barney
Intermediate Municipal Fund, Inc. (the "Fund") that the undersigned is
entitled to vote at the special meeting of shareholders to be held on
December 4, 2000, and at any adjournments thereof.
----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------
B-2
<PAGE>
PLEASE MARK
|X| VOTES AS IN
THIS EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
To approve a Merger Agreement and Plan
of Reorganization whereby Smith Barney FOR AGAINST ABSTAIN
Municipal Fund, Inc. will merge with and |_| |_| |_|
into the Fund.
Signature:___________________________________ Date:___________________________
|_|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If in a
partnership, please sign in partnership name by authorized person.
Signature:___________________________________ Date:___________________________
B-3
<PAGE>
PROXY CARD FOR
SMITH BARNEY MUNICIPAL FUND, INC.
C-1
<PAGE>
PROXY
P SMITH BARNEY MUNICIPAL FUND, INC.
R THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O The undersigned hereby appoints Heath B. McLendon, Christina T.
Sydor and Gordon E. Swartz, and each of them, as Proxies, each with the
X power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side and in accordance
Y with their judgment on such other matters as may properly come before the
meeting or any adjournments thereof, all shares of Smith Barney
Municipal Fund, Inc. (the "Fund") that the undersigned is entitled to
vote at the special meeting of shareholders to be held on December 4,
2000, and at any adjournments thereof.
----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
----------- -----------
C-2
<PAGE>
PLEASE MARK
|X| VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE PROPOSAL.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL.
To approve a Merger Agreement and Plan
of Reorganization whereby the Fund will FOR AGAINST ABSTAIN
merge with and into Smith Barney |_| |_| |_|
Intermediate Municipal Fund, Inc.
Signature:___________________________________ Date:___________________________
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears at left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If in a
partnership, please sign in partnership name by authorized person.
Signature:___________________________________ Date:___________________________
C-3
<PAGE>
PART B
SUBJECT TO COMPLETION DATED OCTOBER 24, 2000
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
MERGER OF
SMITH BARNEY MUNICIPAL FUND, INC.
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
1 (800) 331-1710
WITH AND INTO
SMITH BARNEY INTERMEDIATE MUNICIPAL FUND, INC.
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
1 (800) 331-1710
This Statement of Additional Information, or SAI, relates specifically to
the proposed merger (the "Merger") of Smith Barney Municipal Fund, Inc. (the
"Smith Barney Municipal Fund") with and into Smith Barney Intermediate Municipal
Fund, Inc. (the "Smith Barney Intermediate Municipal Fund") in accordance with
the General Corporation Law of the State of Maryland. Each of the following
documents accompanies this Statement of Additional Information and is
incorporated by reference herein:
(1) Prospectus for Smith Barney Intermediate Municipal Fund, dated April 28,
2000;
(2) Prospectus for Smith Barney Municipal Fund, dated April 28, 2000;
(3) Annual Report for Smith Barney Intermediate Municipal Fund for the year
ended December 31, 1999;
(4) Annual Report for Smith Barney Municipal Fund for the year ended December
31, 1999;
(5) Semi-Annual Report for Smith Barney Intermediate Municipal Fund for the
six months ended June 30, 2000; and
(6) Semi-Annual Report for Smith Barney Municipal Fund for the six months
ended June 30, 2000.
<PAGE>
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Proxy Statement/Prospectus dated October ____,
2000, relating to the Merger. A copy of the Proxy Statement/Prospectus may be
obtained without charge by writing to either Fund at 7 World Trade Center, New
York, New York 10048 or by calling 1-(800) 331-1710.
This Statement of Additional Information is dated ____________, 2000
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements, notes to the financial statements and
report of the independent auditors of each Fund for the fiscal year ended
December 31, 1999 are incorporated by reference herein and are included in the
Funds' Annual Reports to Shareholders. The Annual and Semi-Annual Reports may be
obtained without charge, by writing to either Fund at 7 World Trade Center, New
York, New York 10048, or by calling 1-(800) 331-1710.
PRO FORMA FINANCIAL STATEMENTS
The following tables set forth the unaudited pro forma condensed statement
of assets and liabilities and unaudited pro forma condensed statement of
operations for each Fund as of and for the period ending June 30, 2000 and as
adjusted to give effect to the Merger.
<PAGE>
PRO FORMA CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AT JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SMITH BARNEY
INTERMEDIATE SMITH BARNEY
MUNICIPAL, INC. MUNICIPAL, INC. ADJUSTMENTS COMBINED
----------- --------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value $80,806,264.05 $57,886,974.95 -- $138,693,239.00
Cash 37,815.98 (51,893.70) -- (14,077.72)
Receivable for securities sold 984,273.00 1,715,639.90 -- 2,699,912.90
Interest receivable 1,315,340.04 1,153,067.80 -- 2,468,407.84
-------------- -------------- -------------- ---------------
Total Assets 83,143,693.07 60,703,788.95 -- $143,847,482.02
LIABILITIES:
Payable for securities purchased 890,087.78 2,584,083.24 -- 3,474,171.02
Management fees payable 40,760.00 31,514.90 (31,514.90) 38,432.85
Dividend payable 102,266.37 94,120.04 (94,120.04) 102,266.37
Accrued expenses and other liabilities 48,833.24 23,826.92 -- 74,987.31
-------------- -------------- -------------- ---------------
Total Liabilities 1,081,947.39 2,733,545.10 (125,634.94) 3,689,857.55
-------------- -------------- -------------- ---------------
TOTAL NET ASSETS $82,061,745.68 $57,970,243.85 $140,157,624.47
============== ============== ============== ===============
NET ASSETS:
Par value of shares of beneficial
interest 8,210.00 3,988.00 -- $12,198.00
Capital paid in excess of par 82,329,551.73 59,644,981.30 -- 141,974,533.03
Undistributed Net Investment Income 86,293.47 103,317.79 125,634.940 315,246.20
Accumulated net realized loss (1,745,783.90) (1,761,349.17) -- (3,507,133.07)
Net unrealized appreciation of investments 1,383,474.38 (20,694.07) -- 1,362,780.31
-------------- -------------- -------------- ---------------
TOTAL NET ASSETS $82,061,745.68 $57,970,243.85 $125,634.94 $140,157,624.47
============== ============== ============== ===============
OUTSTANDING SHARES OF COMMON STOCK: 8,210,165.291 3,987,861.791 5,798,351.044 14,008,516.34
NAV PER SHARE OF COMMON STOCK: $10.00 $14.54 1.454
</TABLE>
<PAGE>
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
SBI SBI
PORTFOLIO SBT PRO FORMA PORTFOLIO
(ACTUAL) (ACTUAL) ADJUSTMENTS COMBINED
============== ============= ============== =============
<S> <C> <C> <C> <C> <C>
Investment Income
Interest Income $2,578,484 $1,831,287 $4,409,771
Expenses
Management Fee $244,979 $203,517 $0 $448,496 (1)
Management Fee (After Merger) $422,847 (1)
Custody, Accounting, Legal &
Auditing 16,012 13,923 (9,023) 20,912 (5)
Shareholder Servicing 20,288 20,290 (18,690) 21,888
Shareholder Communications 17,405 15,913 (13,318) 20,000 (4)
Pricing Service 6,465 5,469 (4,102) 7,832 (2)
Registration 2,983 2,586 (2,586) 2,983 (3)
Trustees/Directors 3,102 1,989 (1,489) 3,602
Other 4,388 4,972 (3,472) 5,888
---------- ---------- ------- ----------
Total Expenses 315,622 268,659 (52,680) 954,448
Net investment income (loss) $2,262,862 $1,562,628 $52,680 $3,455,323
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized gain (loss)
from Investments (375,687) (669,076) (1,044,763)
Net unrealized appreciation
(depreciation) 989,609 180,618 1,170,227
---------- ---------- ----------
Net increase in assets from
operations $2,876,784 $1,074,170 $3,580,787
========== ========== ==========
</TABLE>
Assumptions for projected expenses:
(1) Based on combined net assets at an annual rate of .62%. Rate will be
calculated at 0.60% upon completion of the merger. Estimated
combined advisory for merger is 0.62%.
(2) Pricing services of SBI increase minimally for increase due to
additional holdings. Assumption being that both funds hold the same
securities.
(3) One remaining registration fee for the exchange.
(4) SBI Shareholder Communications increase on surviving fund modestly
for some additional pages.
(5) Assumes one audit fee, reduced custody fees and reduced accounting
fees.
<PAGE>
SCHEDULE OF INVESTMENTS
Pro forma Schedule of Investments at June 30, 2000
<PAGE>
Pro-Forma
Schedule of Investments (unaudited) June 30, 2000
<TABLE>
<CAPTION>
Smith Barney Smith Smith Barney Smith Smith Barney
Intermediate Barney Intermediate Barney Intermediate
Municipal Municipal Municipal Municipal Municipal
FACE FACE PRO-FORMA
AMOUNT AMOUNT RATING(a) SECURITY VALUE VALUE VALUE
<C> <C> <C> <S> <C> <C> <C>
Education - 13.1%, 4.4%
$1,200,000 AAA Alta Loma, CA School District, Capital Appreciation,
Series A, zero coupon due 8/1/19 $ 397,500 $ 397,500
1,000,000 Aa2* Arizona Education Loan Corp., 6.625% due 9/1/05 (b) $ 1,031,250 1,031,250
1,700,000 Aa2* Arizona Educational Lien Revenue, Series B,
7.000% due 3/1/02 (b) 1,742,500 1,742,500
1,805,000 AAA Bastrop, TX ISD, PSFG, zero coupon due 2/15/18 643,031 643,031
2,500,000 AAA Chicago, IL Board of Education, Capital Appreciation,
Chicago School of Reform, Series A, AMBAC-Insured,
zero coupon due 12/1/16 968,750 968,750
120,000 Aaa* Du Page County, IL School District No. 041, Glen Ellyn,
Capital Appreciation, FGIC-Insured, zero coupon due 2/1/17 45,150 45,150
1,000,000 AAA Franklin, TX Special School District, Capital Appreciation,
FSA-Insured, zero coupon due 6/1/19 328,750 328,750
400,000 Aaa* Joshua, TX Independent School Board, Capital Appreciation,
Series C, PSFG, zero coupon due 2/15/12 212,000 212,000
1,075,000 Aaa* Lago Vista, TX Independent School District, Capital
Appreciation, PSFG, zero coupon due 8/15/21 306,375 306,375
215,000 Aaa* Lake & McHenry Counties, IL Community School District
No. 118, Capital Appreciation, FGIC-Insured,
zero coupon due 2/1/11 121,206 121,206
255,000 AAA Massachusetts Education Loan Authority Issue E,
Series A, AMBAC-Insured, 6.850% due 1/1/04 (b) 263,925 263,925
500,000 A* Montana Higher Education Student Assistance Corp.,
Student Loan Revenue, 7.050% due 6/1/04,
Sinking Fund Average Life 3/1/03 (b) 510,624 510,624
1,000,000 1,000,000 Aaa* Nebhelp Inc., Nebraska Revenue, MBIA-Insured,
Series A, 6.200% due 6/1/13 1,042,500 1,042,500 2,085,000
1,000,000 Aaa* Nebraska Income Revenue, Junior Subordinate,
Series A-6, MBIA-Insured, 6.450% due 6/1/18,
Sinking Fund Average Life 8/8/17 (b) 1,041,250 1,041,250
500,000 A3* New England Education Loan Marketing Corp.,
Massachusetts Refunding Student Loan Revenue,
6.900% due 11/1/09 (b) 545,625 545,625
500,000 AAA New Haven, CT GO, Series 1992A, 9.250% due 3/1/02,
Sinking Fund Average Life 8/30/00 523,750 523,750
1,870,000 A* New Mexico Educational Assistance Foundation,
Student Loan Revenue, Series A-2, 5.950% due 11/1/07 (b) 1,870,000 1,870,000
1,000,000 Aaa* Northwest, TX ISD, Capital Appreciation, PSFG,
zero coupon due 8/15/13 467,500 467,500
--------------------------------------
10,557,705 2,546,481 13,104,186
--------------------------------------
Escrowed to Maturity (c) - 10.7%, 13.7%
255,000 AAA Anderson County, SC Hospital Facilities Revenue,
7.125% due 8/1/07 273,169 273,169
1,110,000 AAA Boston, MA Water & Sewer Community Revenue, Series A,
10.875% due 1/1/09, Sinking Fund Average Life 9/5/05 1,390,275 1,390,275
655,000 AAA Illinois Health Facility Authority Revenue, (Methodist
Medical Center Project), 9.000% due 10/1/10,
Sinking Fund Average Life 10/1/05 765,531 765,531
620,000 AAA Illinois Health Facilities Authority Revenue, (Ravenwood
Hospital Medical Center Project), 7.250% due 8/1/06 660,300 660,300
875,000 AAA Jackson, TN Water & Sewer Revenue, 7.200% due 7/1/12,
Sinking Fund Average Life 2/7/07 965,781 965,781
415,000 AAA Lake County, OH Hospital Improvement Revenue,
Lake County Memorial Hospital, 8.625% due 11/1/09 479,325 479,325
310,000 1,270,000 NR Los Angeles, CA Hollywood Presbyterian Medical Center,
9.625% due 7/1/13, Sinking Fund Average Life 6/13/08 395,250 1,619,250 2,014,500
200,000 AAA Louisiana Public Facilities, Southern Baptist Hospital,
8.000% due 5/15/12, Sinking Fund Average Life 6/6/07 230,750 230,750
775,000 AAA Metropolitan Nashville,TN Airport Authority Revenue,
7.500% due 7/1/05, Sinking Fund Average Life 10/14/02 821,500 821,500
180,000 Aaa* Nacogdoches County, TX Hospital District Revenue,
9.000% due 5/15/04 196,200 196,200
194,000 230,000 AAA New Jersey State Turnpike Authority Revenue Refunding Bonds,
10.375% due 1/1/03, Sinking Fund Average Life 1/25/02 209,520 248,400 457,920
1,355,000 A- New York, NY GO, Series D, 7.300% due 2/1/01 1,377,330 1,377,330
1,855,000 A New York State Urban Development Corp. Revenue,
7.300% due 4/1/01 1,894,994 1,894,994
1,330,000 1,115,000 AAA Ohio State Water Development Authority Revenue,
Safe Water, Series 2, 9.375% due 12/1/10,
Sinking Fund Average Life 10/1/05 1,582,700 1,326,850 2,909,550
345,000 AAA Ringwood Borough, NJ Sewer Authority Special Obligation
Refunding, 9.875% due 7/1/13 434,700 434,700
</TABLE>
<PAGE>
Pro-Forma
Schedule of Investments (unaudited) June 30, 2000
<TABLE>
<CAPTION>
Smith Barney Smith Smith Barney Smith Smith Barney
Intermediate Barney Intermediate Barney Intermediate
Municipal Municipal Municipal Municipal Municipal
FACE FACE PRO-FORMA
AMOUNT AMOUNT RATING(a) SECURITY VALUE VALUE VALUE
<C> <C> <C> <S> <C> <C> <C>
Escrowed to Maturity (c) - 10.7%, 13.7% (continued)
60,000 AAA Salt Lake City, UT Water Conservancy Distribution Revenue,
Series A, MBIA-Insured, 10.875% due 10/1/02,
Sinking Fund Average Life 5/17/01 64,425 64,425
825,000 NR Southwestern Illinios, Development Authority Hospital
Revenue, (Wood River Hospital Project), 6.875% due 8/1/03,
Sinking Fund Average Life 9/19/01 849,750 849,750
125,000 AA Taos County, NM Gross Receipts Tax Revenue,
Asset Guaranty-Insured, 6.125% due 12/1/01,
Sinking Fund Average Life 12/25/00 126,250 126,250
650,000 NR Tom Green County, TX Hospital Authority, 7.875% due 2/1/06 701,188 701,188
--------------------------------------
8,683,207 7,930,231 16,613,438
--------------------------------------
General Obligation - 6.2%, 3.5%
500,000 AAA Anchorage, AK FGIC-Insured, 6.000% due 10/1/14 534,375 534,375
1,000,000 AA Central Falls, RI GO, Asset Guaranty-Insured,
5.875% due 5/15/15 1,020,000 1,020,000
1,000,000 AAA Chicago, IL GO, AMBAC-Insured, 6.100% due 1/1/03 1,031,250 1,031,250
660,000 695,000 Aaa* East Rochester, NY Union Free School District, FSA-Insured,
5.700% due 6/15/00 687,225 717,588 1,404,813
500,000 Aaa* Erie County, NY Public Improvement, AMBAC-Insured, Series C,
5.500% due 7/1/29 476,875 476,875
1,000,000 AA Harvey, IL GO Refunding, Asset Guaranty-Insured,
6.700% due 2/1/09, Sinking Fund Average Life 2/26/08 1,072,500 1,072,500
290,000 A3* New Haven, CT Unrefunded Balance, Series B,
9.000% due 12/1/01 306,675 306,675
145,000 A- New York, NY GO, Series D, 7.300% due 2/1/01 147,290 147,290
1,735,000 AAA Palo Duro River Authority, TX Refunding, CGIC-Insured,
zero coupon due 8/1/09 1,075,700 1,075,700
--------------------------------------
5,033,965 2,035,513 7,069,478
--------------------------------------
Hospital - 16.5%, 23.2%
$ 435,000 BBB Allentown, PA Area Hospital Authority Revenue Refunding,
Sacred Heart Hospital, Series A, 6.200% due 11/15/03 437,175 437,175
1,000,000 500,000 BBB- Arkansas Development Finance Authority Revenue,
(Washington Regional Medical Center), 7.000% due 2/1/15 981,250 490,625 1,471,875
650,000 AAA Calcasieu Parish, LA Memorial Hospital Service District
Revenue Refunding, Lake Charles Memorial Hospital,
Series A, CONNIE LEE-Insured, 7.500% due 12/1/05 719,875 719,875
1,500,000 A+ California Statewide Community Development Authority
Revenue, COP Refunding Hospital, Triad Healthcare,
6.250% due 8/1/06 1,591,875 1,591,875
1,000,000 A Clackamas County, OR Hospital Facility Authority Revenue,
(Kaiser Permanente), Series A, 5.375% due 4/1/14 946,250 946,250
1,090,000 BB Colorado Health Facilities Authority Revenue,
Rocky Mountain Adventist, 6.250% due 2/1/04 1,068,200 1,068,200
1,500,000 AA Cumberland County, NC Hospital Facilities Revenue,
Cumberland County Hospital Systems Inc.,
5.250% due 10/1/13 1,436,250 1,436,250
625,000 2,000,000 AA Harris County, TX Health Facilities Development Corp.
Hospital Revenue, (Texas Children's Hospital Project),
Series A, 5.375% due 10/1/11 612,500 1,895,000 2,507,500
2,000,000 A Hawaii State Department of Budget and Finance,
Special Purpose Mangement Revenue,
Kapiolani Health Care System, 6.400% due 7/1/13 2,025,000 2,025,000
1,000,000 755,000 BBB+ Henderson, NV Health Care Facility Revenue, (Catholic
Healthcare West Project), Series A, 6.200% due 7/1/09 968,750 731,406 1,700,156
1,300,000 A- Illinois Health Facilities Authority Revenue Friendship,
VLG Hospital, 6.650% due 12/1/06 1,313,000 1,313,000
1,000,000 A2* Indiana Health Facilities Authority Hospital Revenue
Refunding Bonds, St. Anthony Medical Center,
7.000% due 10/1/06, Sinking Fund Average Life 10/17/05 1,056,250 1,056,250
1,200,000 BBB+ Klamath Falls, OR Intercommunity, Merle Hospital,
8.000% due 9/1/08 1,323,000 1,323,000
1,000,000 B3* Langhorne Manor Borough, PA Higher Education &
Health Authority, Bucks County, Lower Bucks Hospital,
6.750% due 7/1/02 943,750 943,750
535,000 AAA Lima, OH Hospital Revenue, 7.500% due 11/1/06 575,794 575,794
700,000 BBB- Louisiana Public Facilities Authority Revenue,
General Health Systems Project, 6.000% due 11/1/16 690,375 690,375
Hospital - 16.5%, 23.2% (continued)
510,000 1,000,000 BBB+ Maricopa County, AZ IDA, Health Facilities Revenue, (Catholic
Healthcare West Project), Series A, 5.250% due 7/1/06 485,775 952,500 1,438,275
1,000,000 AAA Maryland Health & Higher Education Facility Authority
Revenue, (Mercy Medical Center Project), FSA-Insured,
6.500% due 7/1/13, Sinking Fund Average Life 3/7/11 1,101,250 1,101,250
500,000 2,000,000 AAA Orange County, FL Health Facilities Authority Revenue,
Adventist Health System/Sunbelt, FSA-Insured, FLAIRS,
6.050% due 11/15/07 (d) 518,125 2,072,500 2,590,625
1,045,000 BBB+ Rhode Island State Health & Education Building Corp.
Revenue, Roger Williams Hospital Financing, 5.400% due
7/1/13, Sinking Fund Average Life 1/23/12 902,619 902,619
1,000,000 Baa2* Tomball, TX Hospital Authority Revenue, Tomball
Regional Hospital, 5.750% due 7/1/14 881,250 881,250
--------------------------------------
13,303,388 13,416,956 26,720,344
--------------------------------------
</TABLE>
<PAGE>
Pro-Forma
Schedule of Investments (unaudited) June 30, 2000
<TABLE>
<CAPTION>
Smith Barney Smith Smith Barney Smith Smith Barney
Intermediate Barney Intermediate Barney Intermediate
Municipal Municipal Municipal Municipal Municipal
FACE FACE PRO-FORMA
AMOUNT AMOUNT RATING(a) SECURITY VALUE VALUE VALUE
<C> <C> <C> <S> <C> <C> <C>
Housing: Multi-Family - 12.0%, 5.3%
885,000 AA Beaumont, TX Multi-Family Housing Finance, Regency
Place Apartments, Asset Guaranty-Insured,
7.000% mandatory tender 10/1/03,
Sinking Fund Average Life 7/21/03 887,062 887,062
535,000 AAA Charlotte, NC Mortgage Revenue Refunding, Double Oaks
Apartment, Series A, FHA-Insured, 7.300% due 11/15/07,
Sinking Fund Average Life 2/24/04 561,080 561,080
1,100,000 Baa2* Dallas, TX Housing Corp. Capital Program Revenue
Refunding, Section 8 Assisted, 7.700% due 8/1/05,
Sinking Fund Average Life 9/2/03 1,119,250 1,119,250
785,000 AA Hudson County, NJ Improvement Authority, Multi-Family
Housing Revenue Bonds, 6.600% due 6/1/04,
Sinking Fund Average Life 9/24/02 (b) 810,513 810,513
1,470,000 NR Lynchburg, VA Redevelopment & Housing Authority,
Multi-Family Housing Revenue Refunding, Princeton
Circle Association, 6.250% due 12/1/10,
Sinking Fund Average Life 9/24/07 1,447,950 1,447,950
820,000 A2* McMinnville, TN Housing Authority Revenue Refunding,
First Mortgage, Beersheba Heights, 6.000% due 10/1/09 833,325 833,325
380,000 AAA Missouri State Housing Development Community Mortgage
Revenue, Series C, GNMA/FNMA-Collateralized,
7.450% due 9/1/27, Sinking Fund Average Life 12/9/22 409,925 409,925
500,000 500,000 NR Montgomery County, PA Redevelopment Authority,
Multi-Family Housing Revenue, Series A, 6.375% due 7/1/12,
Sinking Fund Average Life 1/29/09 504,375 504,375 1,008,750
Mount Vernon, IL Elderly Housing Corp., First Lien Revenue
Bonds, Section 8 Assisted, Series 1979:
160,000 Ba3* 7.875% due 4/1/01 160,386 160,386
170,000 Ba3* 7.875% due 4/1/02 170,065 170,065
185,000 Ba3* 7.875% due 4/1/03 184,945 184,945
200,000 Ba3* 7.875% due 4/1/04 200,000 200,000
215,000 Ba3* 7.875% due 4/1/05 214,942 214,942
235,000 Ba3* 7.875% due 4/1/06 234,937 234,937
250,000 Ba3* 7.875% due 4/1/07 249,920 249,920
270,000 Ba3* 7.875% due 4/1/08 270,000 270,000
710,000 AAA San Jose, CA Multi-Family Housing, (County Brook Project),
FNMA-Collateralized, 6.500% mandatory tender 4/1/02 721,538 721,538
Housing: Multi-Family - 12.0%, 5.3% (continued)
755,000 Aa2* Streamwood, IL Multi-Family Housing Revenue,
(Southgate Project), FHA-Insured, 6.200% due 11/1/07 779,643 779,643
1,000,000 NR Texas State Department of Housing & Community Affairs,
Home Management Revenue, Series C-2,
Variable Rate due 7/2/24 1,107,500 1,107,500
705,000 NR Tulsa, OK Housing Assistance Corp. Multi-Family Revenue,
7.250% due 10/1/17, Sinking Fund Average Life 7/16/04 727,913 727,913
675,000 AAA Washington County, OR Housing Authority, Multi-Family
Housing Revenue, (Terrace View Project),
FNMA-Collateralized, 5.500% due 12/1/17 (b) 638,719 638,719
--------------------------------------
9,666,788 3,071,575 12,738,363
--------------------------------------
Housing: Single Family - 4.1%, 7.5%
135,000 A1* Ford County, KS Single-Family Mortgage Revenue Refunding,
Series A, FHA-Insured, 7.900% due 8/1/10 140,400 140,400
190,000 AA Juneau City & Borough, AK Home Mortgage Revenue
Refunding, Mortgage-Backed Securities Program,
FNMA-Collateralized, FHA-Insured, 8.000% due 2/1/09 197,125 197,125
$ 500,000 NR Lees Summit, MO IDA Health Facilities, Refunding &
Improvement Revenue, (John Knox Village Project),
7.125% due 8/15/12, Sinking Fund Average Life 2/17/08 516,250 516,250
920,000 920,000 A+ Massachusetts State HFA, Single-Family, Series 38,
7.200% due 12/1/26 (b) 960,250 960,250 1,920,500
60,000 Aa2* Montgomery County, MD Housing Opportunities
Commission Mortgage Revenue, Series A,
7.200% due 7/1/04 61,589 61,589
810,000 AAA Pima County, AZ IDA, Single-Family Mortgage Revenue,
Series A, GNMA/FNMA-Collateralized,
step bond to yield 6.250% due 11/1/29 (b) 824,175 824,175
1,500,000 BBB Puerto Rico Housing Bank & Finance Agency,
7.500% due 12/1/06 1,655,625 1,655,625
245,000 AAA St. Louis County, MO Single-Family Mortgage Revenue,
MBIA-Insured, 6.750% due 4/1/10 245,225 245,225
1,000,000 AA+ Virginia State Housing Development Authority
Commonwealth Mortgage, Series H, 6.100% due 7/1/03 1,026,250 1,026,250
1,060,000 AA Wisconsin Housing & Education Development Authority,
Home Ownership Revenue, 6.350% due 3/1/01 1,071,035 1,071,035
--------------------------------------
3,302,760 4,355,414 7,658,174
--------------------------------------
</TABLE>
<PAGE>
Pro-Forma
Schedule of Investments (unaudited) June 30, 2000
<TABLE>
<CAPTION>
Smith Barney Smith Smith Barney Smith Smith Barney
Intermediate Barney Intermediate Barney Intermediate
Municipal Municipal Municipal Municipal Municipal
FACE FACE PRO-FORMA
AMOUNT AMOUNT RATING(a) SECURITY VALUE VALUE VALUE
<C> <C> <C> <S> <C> <C> <C>
Industrial Development - 4.9%, 11.1%
535,000 BB+ Bourbonnais, IL IDR Refunding, (Kmart Corp. Project),
6.600% due 10/1/06 544,363 544,363
400,000 Aa3* Cambria County, PA Industrial Development Authority,
Series A-1, Variable Rate due 12/1/28 400,000 400,000
1,500,000 AAA Des Moines, IA IDR Refunding Revenue, (The Printer Project
1992), LOC Norwest Bank, 6.375% due 9/1/09 1,505,625 1,505,625
1,500,000 BBB+ Dickinson County, MI Economic Development Corp., Solid
Waste Disposal Refunding Revenue, Champion International,
6.550% due 3/1/07 1,536,885 1,536,885
1,000,000 A+ Kanawha, WV Commerial Development Revenue,
(May Department Store Project), 6.500% due 6/1/03 1,037,500 1,037,500
1,000,000 AA- LaCrosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21 (b) 1,001,250 1,001,250
310,000 AAA Massachusetts State Developmental Finance Agency Revenue,
GMNA-Collateralized, Series A, 6.700% due 10/20/21 331,312 331,312
1,300,000 AA Massachusetts State Development Finance Agency Revenue,
Worcester Redevelopment Authority Issue, Guaranty-Insured,
6.000% due 6/1/24 1,314,625 1,314,625
1,000,000 1,000,000 BB+ Oklahoma Developmental Finance Authority Revenue,
Hillcrest Healthcare System, Series A, 5.625% due 8/15/19 800,000 800,000 1,600,000
500,000 500,000 BBB Schuylkill County, PA Industrial Development Authority
Revenue, Pine Groove Landfill Inc., 5.100% due 10/1/19 435,000 435,000 870,000
1,000,000 CC Tooele County, UT Hazardous Waste Disposal Revenue,
Laidlaw Incineration, Series A, 6.750% due 8/1/10 (b) 280,000 280,000
--------------------------------------
3,987,125 6,434,435 10,421,560
--------------------------------------
Life Care - 2.3%, -
945,000 NR Coweta County, GA Development Authority Revenue,
(Care-Pointe Project), Series A, 6.750% due 7/1/10 865,856 865,856
980,000 AAA Massachusetts State Industrial Finance Agency Assisted
Living Facility Revenue, (Arbors at Amherst Project),
GNMA-Collateralized, 5.750% due 6/20/17 991,025 991,025
--------------------------------------
1,856,881 - 1,856,881
--------------------------------------
Miscellaneous - 4.9%, 9.1%
1,000,000 500,000 NR Barona Band of Mission Indians, CA, 8.250% due 1/1/20 1,015,000 507,500 1,522,500
1,050,000 AA Bernalillo County, NM Gross Receipts Tax Revenue Refunding,
5.125% due 4/1/17 994,875 994,875
1,000,000 1,000,000 BBB- Clarksville, TN Natural Gas Acquisition Corp. Gas Revenue,
Series A, 7.500% due 11/1/04 1,024,530 1,024,530 2,049,060
640,000 NR Clayton County, GA Development Authority Revenue, First
Mortgage, Senior Care Group Inc., (Bayberry Project),
6.750% due 7/1/10 597,600 597,600
Miscellaneous - 4.9%, 9.1% (continued)
1,000,000 1,000,000 A Illinois Development Finance Authority Revenue,
City of East St. Louis, 6.875% due 11/15/05,
Sinking Fund Average Life 7/26/03 1,058,750 1,058,750 2,117,500
645,000 Baa2* Indianapolis, IN Economic Development Refunding &
Improvement Revenue, National Benevolent Association,
(Robin Run Village Project), 6.900% due 10/1/04 660,319 660,319
$ 430,000 AAA Massachusetts State Industrial Finance Agency Assisted
Living Facility Revenue, (Arbors at Amherst Project),
GNMA-Collateralized, 5.750% due 6/20/17 434,838 434,838
795,000 A South Dakota Economic Development Finance Authority,
APA Optics, Series A, 6.750% due 4/1/16,
Sinking Fund Average Life 7/7/13 (b) 842,700 842,700
--------------------------------------
3,940,980 5,278,412 9,219,392
--------------------------------------
Pollution Control - 5.2%, 3.0%
890,000 B1* Altantic City, NJ Utility Authority Solid Waste Revenue,
7.000% due 3/1/02, Sinking Fund Average Life 10/1/00 885,550 885,550
1,000,000 1,000,000 Aa3* Brazos River, TX Navigation Harbor District, Brazonia County,
PCR, (BASF Corp. Project), 6.750% due 2/1/10 1,093,750 1,093,750 2,187,500
595,000 A+ Broward County, FL Resource Recovery PCR, (North Project),
7.950% due 12/1/08 612,368 612,368
1,200,000 BBB+ Erie County, PA PCR (International Paper Company Project),
Series A, 5.300% due 4/1/12 1,147,500 1,147,500
1,000,000 AAA Monroe County, MI PCR, (Detroit Edison Co. Project),
AMBAC-Insured, 6.350% due 12/1/04 (b) 1,058,750 1,058,750
--------------------------------------
4,185,550 1,706,118 5,891,668
--------------------------------------
Pre-Refunded (e) - 1.3%, 1.7%
70,000 AAA Indiana University Revenue, Series 1983N, (Call 7/1/01 @
100), 10.000% due 7/1/03, Sinking Fund Average Life 12/22/00 71,591 71,591
115,000 AAA Ohio State Water Development Authority Revenue,
Armco Steel Corp., 7.785% due 11/1/00, Sinking Fund
Average Life 5/2/00 116,173 116,173
55,000 AAA Oklahoma State IDA,Oklahoma Health Care Corp.,
Series A, FGIC-Insured, (Various Call Dates),
9.125% due 11/1/08, Sinking Fund Average Life 5/7/06 64,488 64,488
210,000 AAA Oshkosh, WI Hospital Facility Revenue, Mercy Medical Center,
7.375% due 7/1/09, Sinking Fund Average Life 1/22/04 227,325 227,325
510,000 460,000 Aaa* Philadelphia, PA Hospital Authority Revenue,
United Hospital Inc. Project, 10.875% due 7/1/08 609,450 549,700 1,159,150
370,000 NR San Leandro, CA Redevelopment Agency Residential Mortgage
Revenue, 11.250% due 4/1/13, (Call 10/1/04 @ 100),
Sinking Fund Average Life 4/13/04 447,700 447,700
--------------------------------------
1,089,027 997,400 2,086,427
--------------------------------------
</TABLE>
<PAGE>
Pro-Forma
Schedule of Investments (unaudited) June 30, 2000
<TABLE>
<CAPTION>
Smith Barney Smith Smith Barney Smith Smith Barney
Intermediate Barney Intermediate Barney Intermediate
Municipal Municipal Municipal Municipal Municipal
FACE FACE PRO-FORMA
AMOUNT AMOUNT RATING(a) SECURITY VALUE VALUE VALUE
<C> <C> <C> <S> <C> <C> <C>
Public Facilities - 3.0%, 1.8%
1,350,000 1,000,000 A- Dekalb County, IN Redelopment Authority Revenue,
Mini-Mill Public Improvement, 6.250% due 1/15/09 1,412,436 1,051,250 2,463,686
1,000,000 AA- LaCrosse, WI Resource Recovery Revenue, (Northern States
Power Co. Project), 6.000% due 11/1/21 (b) 1,001,250 1,001,250
Short-Term Securities - -, 1.9%
--------------------------------------
2,413,686 1,051,250 3,464,936
--------------------------------------
200,000 VMIG 1* Philadelphia, PA Institution Cancer Research, Series A,
4.160% due 7/1/13 200,000 200,000
900,000 VMIG 1* Sublette County, WY Pollution Control Revenue,
(Exxon Project), Series B, 3.950% due 7/1/17 900,000 900,000
--------------------------------------
- 1,100,000 1,100,000
--------------------------------------
Transportation - 11.0%, 6.3%
1,000,000 855,000 A Connecticut State Special Obligation, (Bradley International
Airport), ACA-Insured, Series A, 6.375% due 7/1/12 1,035,000 884,925 1,919,925
3,000,000 2,000,000 BBB- Connector 2000 Association, SC Toll Road Revenue, Capital
Appreciation, Series B, zero coupon due 1/1/15 1,012,500 675,000 1,687,500
2,035,000 AAA Dallas Fort Worth, TX Regional Airport Revenue Refunding,
Series 1992A, FGIC-Insured, 7.750% due 11/1/03 2,223,238 2,223,238
Transportation - 11.0%, 6.3% (continued)
1,920,000 A Denver, CO City & County Airport Revenue, Series 1990A,
8.250% due 11/15/02 (b) 1,979,789 1,979,789
3,110,000 AAA E-470 Public Highway Authority, Colorado Revenue, Capital
Appreciation, Series B, MBIA-Insured, zero coupon due 9/1/14 1,407,275 1,407,275
500,000 A- PittsField Township, MI Economic Development Corp.
Revenue Refunding, (Airport Association Project),
Unconditional Guaranty-Lincoln National, 6.400% due 12/1/02 505,000 505,000
3,000,000 2,000,000 BBB- Pocahontas Parkway Association, Virgina Toll Road Revenue,
Capital Appreciation, Series B, zero coupon due 8/15/19 780,000 520,000 1,300,000
500,000 BBB- Raleigh-Durham, NC Airport Authority Special Facilities
Revenue, (American Airlines Inc. Project), 9.400% due 11/1/00 506,215 506,215
595,000 NR Sanford, FL Airport Authority IDR (Central Florida Terminals
Project), Series B, 7.500% due 5/1/06 (b) 618,800 618,800
500,000 AA+ Tri-County Metropolitan Transportation District, OR Revenue,
Series A, 5.000% due 8/1/19 455,625 455,625
--------------------------------------
8,942,802 3,660,565 12,603,367
--------------------------------------
Utilities - 3.5%, 4.6%
2,215,000 2,000,000 AAA Chelan County, WA Public Utililties Distribution No. 1,
Columbia River Rock Island, MBIA-Insured,
zero coupon due 6/1/13 1,074,275 970,000 2,044,275
1,500,000 1,500,000 AAA Long Island Power Authority, New York Electric Systems
Revenue, Capital Appreciation, FSA-Insured, Series B,
zero coupon due 6/1/15 643,125 643,125 1,286,250
1,000,000 BBB North Carolina Eastern Municipal Power Agency, Power
System Revenue, Series D, 6.450% due 1/1/14 1,017,500 1,017,500
1,000,000 AA Washington State Public Power Supply, Nuclear
Project No.1, 7.750% due 7/1/03 1,075,000 1,075,000
--------------------------------------
2,792,400 2,630,625 5,423,025
--------------------------------------
Water & Sewer - 1.3%, 2.9%
1,000,000 AAA Jefferson County, AL Sewer Revenue, Capital Improvement
Warrants, Series A, FGIC-Insured, 5.000% due 2/1/33 868,750 868,750
1,000,000 765,000 AAA Pueblo, CO Bridge Waterworks, Water Revenue, Series A,
FSA-Insured, 6.000% due 11/1/14 1,050,000 803,250 1,853,250
TOTAL INVESTMENTS < 100% 1,050,000 1,672,000 2,722,000
(Cost < $79,422,790**) $80,806,264 $57,886,975 138,693,239
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) which are rated by Moody's Investors
Service, Inc.
(b) Income from these issues is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer has not
applied for new ratings.
(d) Inverse floating rate security - coupon varies inversely with level of
short-term tax-exempt interest rates.
(e) Bonds are escrowed with U.S. government securities and are considered by
the Manager to be triple-A rated even if the issuer has not applied for
new ratings.
** Aggregate cost for Federal income tax purposes is substantially the same.
<PAGE>
Notes to Pro Forma Financial Statements
June 30, 2000 (unaudited)
1. General
The accompanying unaudited pro forma financial statements are presented to show
the effect of the proposed merger of Smith Barney Municipal Fund, Inc.("SBT")
into Smith Barney Intermediate Municipal Fund, Inc. ("SBI") as described
elsewhere in the proxy statement/prospectus. The proposed merger will be
accounted for by the method of accounting for tax-free mergers of investment
companies (sometimes referred to as the pooling-of-interest basis). The Merger
provides for the conversion of each share of common stock of SBT into an
equivalent dollar amount of full shares of common stock of SBI based on the net
asset value per share of each Fund. The accounting survivor in the proposed
merger will be SBI. The unaudited pro forma statement of assets and liabilities
and statement of operations have been prepared as though the merger had been
effective June 30, 2000.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements and schedule of investments of SBI and SBT which
are included in their respective semi-annual reports dated June 30, 2000. The
expense of the reorganization, including the cost of the proxy solicitation,
will be borne by SSB Citi Fund Management LLC ("SSBC"), SBI's and SBT's
Investment Manager. SSBC is a subisidiary of Salomon Smith Barney Holdings,
Inc., which in turn is a subsidiary of Citigroup, Inc.
2. Pro Forma Adjustments
The accompanying unaudited pro forma schedule of investments and pro forma
financial statements reflect changes in shares and fund expenses as if the
merger had taken place on June 30, 2000. Adjustments were made to reduce certain
expenses for duplicated services and to reflect the investment advisory
agreement of SBI as if it has been in place on a pro forma basis as of June 30,
2000. Adjustments to dividends of SBT reflect payments of dividends to merger
date. Adjustment to advisory fees reflect payment of a liaiblity for investment
advisory services.
<PAGE>
PART C
OTHER INFORMATION
Item 15. Indemnification
A policy of insurance covering SSB Citi Fund Management LLC, its affiliates, and
all of the registered investment companies advised by SSB Citi Fund Management
LLC insures the Registrant's directors and officers and others against liability
arising by reason of an alleged breach of duty caused by any negligent act,
error or accidental omission in the scope of their duties.
Article IX of the Registrant's Articles of Incorporation states as follows:
ARTICLE IX
LIABILITY AND INDEMNIFICATION
A director or officer of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director or officer, except to the extent such exemption from
liability or limitation thereof is not permitted by law (including the 1940 Act)
as currently in effect or as the same may hereafter be amended.
Each director and each officer of the Corporation shall be indemnified by
the Corporation to the fullest extent permitted by the Maryland General
Corporation Law, including the advancing of expenses, subject to any limitations
imposed by the 1940 Act and the rules and regulations promulgated thereunder.
No amendment, modification or appeal of this Article IX shall adversely
affect any right or protection of a director or officer that exists at the time
of such amendment, modification or repeal.
<PAGE>
Item 16. Exhibits
1. Articles of Incorporation of Registrant incorporated by
reference to the initial Registration Statement (No.
33-44639) filed by Registrant on December 19, 1991.
2. By-Laws incorporated by reference to the initial
Registration Statement (No. 33-44639) filed by
Registrant on December 19, 1991.
3. Not Applicable.
4. Form of Merger Agreement and Plan of Reorganization is
attached as Exhibit A to the Proxy Statement/Prospectus
filed herewith.
5. Not Applicable.
6. Form of Investment Management Agreement Incorporated by
reference to Pre-Effective Amendment No. 3 to the
Registration Statement (No. 33-44639) filed on February
27, 1992.
7. Not Applicable.
8. Not Applicable.
9. Form of Custodian Services Agreement Incorporated by
reference to Pre-Effective Amendment No. 3 to the
Registration Statement (No. 33-44639) filed on February
27, 1992.
10. Not Applicable
11.(a) Opinion and Consent of Willkie Farr & Gallagher.*
(b) Opinion and consent of Venable, Baetjer and Howard,
LLP.*
12. Form of Opinion and Consent of Willkie Farr & Gallagher
with respect to tax matters.*
----------
* Filed herewith.
<PAGE>
13.(a) Form of Transfer Agency and Registrar Agreement
Incorporated by reference to Post-Effective Amendment
No. 1 to the Registration Statement (No. 33-44639)
filed on March 22, 1996.
14. Consent of KPMG LLP.**
15. Not Applicable
16. Powers of Attorney.**
17.(a) Code of Ethics Incorporated by reference to Exhibit
(r)(2) of Post-Effective Amendment No. 5 to the
Registration Statement (No. 33-44639) filed on April
19, 2000.
17.(b) Annual Report of Smith Barney Municipal Fund Inc.,
dated December 31, 1999 is incorporated by reference to
the definitive N-30D filed on February 22, 2000 as
accession number 91155-00-000117.
17.(c) Annual Report of the Registrant, dated December 31,
1999, is incorporated by reference to the definitive
N-30D filed on February 23, 2000 as accession number
91155-00-000119.
17.(d) Prospectus of Smith Barney Municipal Fund Inc., dated
April 28, 2000, is incorporated by reference to the
filing made pursuant to Rule 497 on May 3, 2000
(File #: 033-48166).
17.(e) Prospectus of the Registrant, dated April 28, 2000, is
incorporated by reference to the filing made pursuant
to Rule 497 on May 3, 2000 (File #: 033-44639).
17.(f) Semi-Annual Report of Smith Barney Municipal Fund Inc.,
dated June 30, 2000, is incorporated by reference to
the definitive N-30D filed on September 6, 2000 as
accession number 1005477-00-006362.
17.(g) Semi-Annual Report of the Registrant, dated June 30,
2000, is incorporated by reference to the definitive
N-30D filed on September 6, 2000 as accession number
1005477-00-006361.
----------
** Incorporated by reference to the Registrant's Registration Statement of
Form N-14 filed on September 15, 2000 (No. 333-45840).
<PAGE>
Item 17. Undertakings
(1) The 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, 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 Registrant agrees that every prospectus that is filed under paragraph
(1) above will be filed as a part of an amendment to the registration statement
and will not be used until the amendment is effective, and that, in determining
any liability under the 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.
<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 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 the State of New York on the 24th
day of October, 2000.
Smith Barney Intermediate Municipal Fund, Inc.
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 on Form N-14 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
---------------------------
Heath B. McLendon Chairman of the Board, President and
Chief Executive Officer (Principal
Executive Officer) October 24, 2000
/s/ *
---------------------------
Lee Abraham Director October 24, 2000
/s/ *
---------------------------
Alan J. Bloostein Director October 24, 2000
/s/ *
---------------------------
Jane F. Dasher Director October 24, 2000
/s/ *
---------------------------
Donald R. Foley Director October 24, 2000
/s/ *
---------------------------
Richard E. Hanson, Jr. Director October 24, 2000
/s/ *
---------------------------
Paul Hardin Director October 24, 2000
/s/ *
---------------------------
Roderick C. Rasmussen Director October 24, 2000
/s/ *
---------------------------
John P. Toolan Director October 24, 2000
/s/ Lewis E. Daidone
---------------------------
Lewis E. Daidone Senior Vice President and Treasurer
(Principal Financial Officer) October 24, 2000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
*By: /s/ Heath B. McLendon
---------------------------
Heath B. McLendon Attorney-in-Fact October 24, 2000
</TABLE>
<PAGE>
Exhibit No. Exhibit
----------- -------
11(a) Opinion and Consent of Willkie Farr & Gallagher.
11(b) Opinion and Consent of Venable, Baetjer and Howard, LLP.
12 Form of Opinion and Consent of Willkie Farr & Gallagher with
respect to tax matters.
