<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1994.
SECURITIES ACT FILE NO. 33-58610
INVESTMENT COMPANY ACT FILE NO. 811-7524
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. 1 /X/
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /X/
(check appropriate box or boxes)
------------------------
GREENWICH STREET MUNICIPAL
FUND INC.
(formerly, Municipal Opportunity Fund Inc.)
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048
(Address of Principal Executive Offices) (zip code)
Registrant's Telephone Number, including Area Code: (212) 298-7315
MR. HEATH B. McLENDON
Smith Barney Shearson Inc.
Two World Trade Center, 100th Floor
New York, New York 10048
(Name and Address of Agent for Service of Process)
------------------------
COPY TO:
JON S. RAND, ESQ,
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form N-2 are to be offered
on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF OFFERING AMOUNT MAXIMUM MAXIMUM
SECURITIES BEING BEING OFFERING PRICE AMOUNT OF REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, par value 5,750,000
$.001 per share........ shares $12.00 $69,000,000 $22,562.50(3)
</TABLE>
(1) Includes 750,000 shares of Common Stock which the Underwriters may purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) The total amount of the registration fee has been previously paid with the
filing of the initial Registration Statement on February 19, 1993.
------------------------
------------------------
REGISTRANT AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED, ON SUCH DATE AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL REGISTRANT FILES A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL
THE REGISTRATION STATEMENT BECOMES EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GREENWICH STREET MUNICIPAL FUND INC.
CROSS-REFERENCE SHEET
PARTS A AND B OF PROSPECTUS*
<TABLE>
<CAPTION>
ITEMS IN PARTS A AND B OF FORM N-2 LOCATION
- -------------------------------------------------------------- ---------------------------------------------------
<C> <S> <C>
1. Outside Front Cover................................ Outside Front Cover
2. Inside Front and Outside Back Cover Page........... Inside Front and Outside Back Cover Page
3. Fee Table and Synopsis............................. Prospectus Summary; Fee Table
4. Financial Highlights............................... Not Applicable
5. Plan of Distribution............................... Outside Front Cover; Purchase of Shares --
Underwriting
6. Selling Shareholders............................... Not Applicable
7. Use of Proceeds.................................... Use of Proceeds; Investment Objective and
Management Policies
8. General Description of Registrant.................. The Portfolio; Investment Objective and Management
Policies; Investment Restrictions; Net Asset
Value; Securities Transactions and Turnover;
Description of Capital Stock
9. Management......................................... Management of the Portfolio; Custodian, Transfer
Agent, Dividend-Paying Agent, Registrar and Plan
Agent; Greenwich Street Municipal Fund Inc.
Statement of Assets and Liabilities
10. Capital Stock, Long-Term Debt, and Other
Securities........................................ Dividends and Distributions; Dividend Reinvestment
Plan; Description of Capital Stock; Taxation;
Stock Purchases and Tenders
11. Defaults and Arrears on Senior Securities.......... Not Applicable
12. Legal Proceedings.................................. Not Applicable
13. Table of Contents of Statement of Additional
Information....................................... Not Applicable
14. Cover Page......................................... Not Applicable
15. Table of Contents.................................. Not Applicable
16. General Information and History.................... The Portfolio; Investment Objective and Management
Policies
17. Investment Objective and Policies.................. Investment Objective and Management Policies;
Investment Restrictions; Securities Transactions
and Turnover
18. Management......................................... Management of the Portfolio; Custodian, Transfer
Agent, Dividend-Paying Agent, Registrar and Plan
Agent
19. Control Persons and Principal Holders of
Securities........................................ Description of Capital Stock; Greenwich Street
Municipal Find Inc. Statement of Assets and
Liabilities
</TABLE>
- ------------------------
* Pursuant to General Instruction H of Form N-2, all information required to be
set forth in Part B: Statement of Additional Information has been included in
Part A: The Prospectus.
<PAGE>
<TABLE>
<CAPTION>
ITEMS IN PARTS A AND B OF FORM N-2 LOCATION
- ---------------------------------------------------- -----------------------------------------
<C> <S> <C>
20. Investment Advisory and Other Services... Management of the Portfolio
21. Brokerage Allocation and Other
Practices............................... Securities Transactions and Turnover
22. Tax Status............................... Dividends and Distributions; Dividend
Reinvestment Plan; Taxation
23. Financial Statements..................... Experts; Report of Independent
Accountants; Greenwich Street Municipal
Fund Inc. Statement of Assets and
Liabilities
</TABLE>
PART C
Items 24-32 have been answered in order in Part C.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL , 1994
PROSPECTUS JUNE , 1994
COMMON STOCK
GREENWICH STREET MUNICIPAL FUND INC.
---------------
Greenwich Street Municipal Fund Inc. (the "Portfolio") is a newly organized,
non-diversified, closed-end management investment company that seeks as high a
level of current income exempt from federal income tax as is consistent with the
preservation of principal. Under normal conditions, the Portfolio will, in
seeking its investment objective, invest substantially all of its assets in
long-term, investment grade obligations issued by state and local governments,
political subdivisions, agencies and public authorities. The Portfolio's address
is Two World Trade Center, New York, New York 10048 and the Portfolio's
telephone number is (212) 298-7315.
Shares of the Portfolio's Common Stock, par value $.001 per share ("Common
Stock"), will be offered through Smith Barney Shearson Inc. and certain of its
affiliates ("Smith Barney Shearson"), including The Robinson-Humphrey Company,
Inc. The minimum purchase during the offering described in this Prospectus (the
"Offering") is 100 shares of Common Stock ($1,200).
No market has existed for the Common Stock prior to the Offering. The
Portfolio anticipates applying to list the Common Stock for trading on the New
York Stock Exchange, Inc. (the "NYSE"). Trading in the Common Stock will not
begin, however, until a date within 30 days of the date of this Prospectus.
Smith Barney Shearson does not intend to make a market in the Common Stock
during the period in which the Common Stock is not traded on the NYSE. As a
result, during that period, an investment in the Common Stock should be
considered illiquid. The shares of closed-end investment companies have in the
past frequently traded at discounts from their net asset values or initial
offering prices.
Smith Barney Shearson intends to make a market in the Common Stock after
trading in the Common Stock has commenced on the NYSE. Smith Barney Shearson,
however, is not obligated to conduct market-making activities and any such
activities may be discontinued at any time without notice, at the sole
discretion of Smith Barney Shearson. No assurance can be given as to the
liquidity of, or the trading market for, the Common Stock as a result of any
market-making activities undertaken by Smith Barney Shearson. This Prospectus is
to be used by Smith Barney Shearson in connection with the Offering and with
offers and sales of the Common Stock in market-making transactions in the
over-the-counter market at negotiated prices related to prevailing market prices
at the time of the sale.
Investors are advised to read this Prospectus and to retain it for future
reference.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1)(2) THE PORTFOLIO(3)
<S> <C> <C> <C>
Per Share.................................... $12.00 $0.00 $12.00
Total(4)..................................... $60,000,000 $0.00 $60,000,000
</TABLE>
(1) The Portfolio's shares of Common Stock will be sold during the offering
without any sales load. Smith Barney Shearson will compensate sales
personnel out of its own funds.
(2) The Portfolio has agreed to indemnify Smith Barney Shearson against certain
liabilities under the Securities Act of 1933, as amended.
(3) Before deducting organizational and offering expenses payable by the
Portfolio, estimated to be approximately $ , which includes up to
$ to be paid to Smith Barney Shearson as the Underwriter in partial
reimbursement of its expenses.
(4) The Portfolio has granted Smith Barney Shearson an option to purchase up to
an additional 750,000 shares of Common Stock to cover over-allotments. If
the option is exercised in full, the Total Price to Public, Underwriting
Discounts and Commissions and Proceeds to the Portfolio will be $69,000,000,
$0.00 and $69,000,000, respectively. See "Purchase of Shares."
--------------------------
The shares of Common Stock offered by this Prospectus during the Offering
are offered by Smith Barney Shearson subject to prior sale, withdrawal,
cancellation or modification of the offer without notice, to delivery to and
acceptance by Smith Barney Shearson, and to certain other conditions. It is
expected that delivery of shares of Common Stock will be made at the offices of
Smith Barney Shearson, New York, New York, on or about , 1994.
--------------------------
SMITH BARNEY SHEARSON INC.
---------------
<PAGE>
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary...................................................................... 3
The Portfolio........................................................................... 9
Use of Proceeds......................................................................... 9
Investment Objective and Management Policies............................................ 9
Investment Restrictions................................................................. 22
Management of the Portfolio............................................................. 23
Securities Transactions and Turnover.................................................... 26
Dividends and Distributions; Dividend Reinvestment Plan................................. 27
Net Asset Value......................................................................... 28
Taxation................................................................................ 29
Description of Capital Stock............................................................ 32
Purchase of Shares...................................................................... 33
Certain Provisions of the Articles of Incorporation..................................... 34
Custodian, Transfer Agent, Dividend-Paying Agent, Registrar and Plan Agent.............. 36
Legal Matters........................................................................... 36
Reports to Shareholders................................................................. 36
Experts................................................................................. 36
Further Information..................................................................... 37
Report of Independent Accountants....................................................... 38
Greenwich Street Municipal Fund Inc.
Statement of Assets and Liabilities................................................... 39
Appendix A.............................................................................. A-1
Appendix B.............................................................................. B-1
</TABLE>
-------------
UNTIL , 1994, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PORTFOLIO, THE PORTFOLIO'S INVESTMENT ADVISER OR SMITH BARNEY SHEARSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
THE OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PORTFOLIO SINCE
THE DATE OF THIS PROSPECTUS. IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS
IS REQUIRED BY LAW TO BE DELIVERED, HOWEVER, THIS PROSPECTUS WILL BE
SUPPLEMENTED OR AMENDED ACCORDINGLY.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING IN THE BODY OF THIS PROSPECTUS. CROSS REFERENCES IN THIS
SUMMARY ARE TO HEADINGS IN THE BODY OF THE PROSPECTUS.
<TABLE>
<S> <C>
The Portfolio......... The Portfolio is a newly organized, non-diversified, closed-end
management investment company. See "The Portfolio."
Investment Objective.. The Portfolio seeks as high a level of current income exempt from
federal income tax as is consistent with the preservation of
principal. See "Investment Objective and Management Policies."
Tax-Exempt Income..... The Portfolio is intended to operate in such a manner that dividends
paid by the Portfolio may be excluded by the Portfolio's
shareholders from their gross incomes for federal income tax
purposes. See "Investment Objective and Management Policies" and
"Taxation."
Quality Investments... The Portfolio will invest substantially all of its assets in
long-term, investment grade obligations issued by state and local
governments, political subdivisions, agencies and public
authorities. The Portfolio will operate subject to a fundamental
investment policy providing that, under normal conditions, the
Portfolio will invest at least 80% of its net assets in federal
tax-exempt obligations issued by state and local governments,
political subdivisions, agencies and public authorities. At least
80% of the Portfolio's total assets will be invested in securities
rated investment grade by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P"), Fitch
Investors Service, Inc. ("Fitch") or another nationally-recognized
rating agency (that is, rated no lower than Baa, MIG or Prime-1 by
Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch). Up to
20% of the Portfolio's total assets may be invested in unrated
securities that are deemed by the Portfolio's investment adviser
to be of a quality comparable to investment grade. See "Investment
Objective and Management Policies" and "Appendix A."
Purchase of Shares.... Common Stock may be purchased through Smith Barney Shearson. See
"Purchase of Shares."
The Offering.......... Shares of Common Stock will be offered at a price of $12.00 during
the Offering. See "Purchase of Shares."
The Portfolio anticipates applying to list to the Common Stock on
the NYSE. Trading in the Common Stock will not begin, however,
until a date within 30 days of the date of this Prospectus. Smith
Barney Shearson does not intend to make a market in the Common
Stock during the period in which the Common Stock is not traded on
the NYSE. As a result, during that period, an investment in the
Common Stock should be considered illiquid. Smith Barney Shearson
intends to make a market in
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
the Common Stock after trading in the Common Stock has commenced
on the NYSE. Smith Barney Shearson, however, is not obligated to
conduct market-making activities and any such activities may be
discontinued at any time without notice, at the sole discretion of
Smith Barney Shearson. No assurance can be given as to the
liquidity of, or the trading market for, the Common Stock as a
result of any market-making activities undertaken by Smith Barney
Shearson. See "Purchase of Shares."
No Sales Charges...... The Common Stock will be sold during the Offering subject to no
sales charges or underwriting discounts, but Smith Barney Shearson
Financial Consultants will receive compensation from Smith Barney
Shearson in connection with sales of Common Stock. See "Purchase
of Shares."
Minimum Purchase...... The minimum purchase during the Offering is 100 shares ($1,200). See
"Purchase of Shares."
Investment Manager.... Greenwich Street Advisors, a division of Mutual Management Corp.,
serves as the Portfolio's investment manager (the "Investment
Manager"). The Investment Manager provides investment advisory and
management services to investment companies affiliated with Smith
Barney Shearson. Smith Barney Shearson is a wholly owned
subsidiary of Smith Barney Shearson Holdings Inc., which is in
turn a wholly owned subsidiary of The Travelers Inc.
("Travelers"). Subject to the supervision and direction of the
Portfolio's Board of Directors, the Investment Manager manages the
securities held by the Portfolio in accordance with the
Portfolio's stated investment objectives and policies, makes
investment decisions for the Portfolio, places orders to purchase
and sell securities on behalf of the Portfolio and employs
professional portfolio managers. Mutual Management Corp. provides
certain administration services to the Portfolio, including
overseeing the Portfolio's non-investment operations and its
relations with other service providers and providing executive and
other officers to the Portfolio. The Portfolio pays the Investment
Manager a fee ("Management Fee") for services provided to the
Portfolio that is computed daily and paid monthly at the annual
rate of 0.90% of the value of the Portfolio's average daily net
assets. This Management Fee is higher than the rates for similar
services paid by other recently organized, publicly offered,
closed-end, management investment companies that have investment
objectives and policies similar to those of the Fund. The
Portfolio will bear other expenses and costs in connection with
its operation in addition to the costs of investment management
services. See "Management of the Portfolio -- Investment Manager."
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Sub-Administrator..... The Boston Company Advisors, Inc. ("Boston Advisors") serves as the
Portfolio's sub-administrator pursuant to an agreement with Mutual
Management Corp. Boston Advisors is a wholly owned subsidiary of
The Boston Company, Inc. ("TBC"), a financial services holding
company, which is a wholly owned subsidiary of Mellon Bank
Corporation ("Mellon"). See "Management of the Portfolio --
Sub-Administrator."
Custodian............. Boston Safe Deposit and Trust Company ("Boston Safe") serves as the
Portfolio's custodian. See "Custodian, Transfer Agent,
Dividend-Paying Agent, Registrar and Plan Agent."
Transfer Agent,
Dividend-Paying
Agent, Registrar and
Plan Agent.......... The Shareholder Services Group, Inc. ("TSSG") serves as the
Portfolio's transfer agent, dividend-paying agent and registrar. See
"Custodian, Transfer Agent, Dividend-Paying Agent, Registrar and
Plan Agent."
Dividends and
Distributions....... The Portfolio expects to pay monthly dividends of net investment
income (that is, income other than net realized capital gains) and
to distribute net realized capital gains, if any, annually. All
dividends or distributions with respect to shares of Common Stock
will be reinvested automatically in additional shares through
participation in the Portfolio's Dividend Reinvestment Plan,
unless a shareholder elects to receive cash. When the market price
of the Common Stock is equal to or exceeds net asset value,
participants in the Portfolio's Dividend Reinvestment Plan will
receive distributions through issuance of additional shares of
Common Stock valued at net asset value or, if the net asset value
is less than 95% of the then current market price of the Common
Stock, then at 95% of the market price. Whenever market price is
less than net asset value, participants will receive distributions
through purchases of shares on the open market. See "Dividends and
Distributions; Dividend Reinvestment Plan."
Initial dividends to Common Stock shareholders are expected to be
declared approximately 60 days, and paid approximately 90 days,
from the completion of the Offering. See "Dividends and
Distributions; Dividend Reinvestment Plan" and "Taxation."
Risk Factors and
Special
Considerations...... The Portfolio is a closed-end investment company with no history of
operations that is designed primarily for long-term investors and
not as a trading vehicle. The net asset value of the Common Stock
will change with changes in the value of the securities held by
the Portfolio. Because the Portfolio will invest primarily in
fixed-income securities, the net asset value of the Common Stock
can be expected to change as levels of
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
interest rates fluctuate; generally, when prevailing interest
rates increase, the value of fixed-income securities held by the
Portfolio can be expected to decrease and when prevailing interest
rates decrease, the value of the fixed-income securities held by
the Portfolio can be expected to increase. The value of the
fixed-income securities held by the Portfolio, and thus the
Portfolio's net asset value, may also be affected by other
economic, market and credit factors. The net asset value of the
Portfolio may be subject to greater fluctuation to the extent that
the Portfolio invests in zero coupon securities. See "Investment
Objective and Management Policies -- Risk Factors and Special
Considerations."
The Portfolio will not purchase securities that are rated lower than
Baa by Moody's, BBB by S&P or BBB by Fitch at the time of
purchase. Although obligations rated Baa by Moody's, BBB by S&P or
BBB by Fitch are considered to be investment grade, they may be
subject to greater risks than other higher rated investment grade
securities. Obligations rated Baa by Moody's, for example, are
considered medium grade obligations that lack outstanding
investment characteristics and have speculative characteristics as
well; obligations rated BBB by S&P are regarded as having an
adequate capacity to pay principal and interest, and obligations
rated BBB by Fitch are deemed to be subject to an increased
likelihood that their rating will fall below investment grade than
higher rated bonds. See "Investment Objective and Management
Policies -- Quality Standards" and "-- Risk Factors and Special
Considerations."
The Portfolio may invest up to 20% of its total assets in unrated
securities that the Investment Manager determines to be of
comparable quality to the securities rated investment grade in
which the Portfolio may invest. Dealers may not maintain daily
markets in unrated securities and retail secondary markets for
many of them may not exist; this lack of markets may affect the
Portfolio's ability to sell these securities when the Investment
Manager deems it appropriate. The Portfolio has the right to
invest without limitation in state and local obligations that are
"private activity bonds," the income from which may be taxable as
a specific preference item for purposes of the federal alternative
minimum tax. Thus, the Portfolio may not be a suitable investment
for investors who are subject to the alternative minimum tax. See
"Investment Objective and Management Policies" and "Taxation."
Certain of the instruments held by the Portfolio, and certain of the
investment techniques that the Portfolio may employ, might expose
the Portfolio to special risks. The instruments presenting the
Portfolio with risks are municipal leases, zero coupon securities,
custodial receipts, municipal obligation components, floating and
variable rate demand notes and bonds, and participation interests.
Entering into securities transactions on a when-issued or delayed
delivery basis, entering into
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
repurchase agreements, lending portfolio securities, and engaging
in financial futures and options transactions, are investment
techniques involving risks to the Portfolio. As a non-diversified
fund within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), the Portfolio may invest a greater
proportion of its assets in the obligations of a smaller number of
issuers and, as a result, may be subject to greater risk than a
diversified fund with respect to its holdings of securities. See
"Investment Objective and Management Policies -- Risk Factors and
Special Considerations."
The Portfolio's Articles of Incorporation include provisions that
could have the effect of limiting the ability of other entities or
persons to acquire control of the Portfolio and of depriving
shareholders of an opportunity to sell their shares of Common
Stock at a premium over prevailing market prices. See "Certain
Provisions of the Articles of Incorporation."
During the period in which Smith Barney Shearson will be soliciting
indications of interest with respect to the Common Stock, the
Portfolio and Smith Barney Shearson will evaluate the market for
the Common Stock as well as the market for the Portfolio's
contemplated investments. If changes in existing market and other
conditions make it impractical or inadvisable to proceed with the
Offering, the Offering will not be made. See "Purchase of Shares."
Discount from Net
Asset Value......... The shares of closed-end investment companies, when listed for
trading on a securities exchange, often, although not always, trade
at a discount from their net asset value. The Common Stock, when
traded on the NYSE, may likewise trade at a discount from net
asset value. In addition, the trading price of the Common Stock
when listed may be less than the public offering price per share
of Common Stock applicable to the Offering. The Portfolio's market
price risk may be greater for investors who intend to sell their
shares of Common Stock within a relatively short period after
completion of the Offering. See "Investment Objective and
Management Policies -- Risk Factors and Special Considerations"
and "Purchase of Shares."
</TABLE>
7
<PAGE>
FEE TABLE
THE FOLLOWING TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES DIRECTLY OR INDIRECTLY ASSOCIATED WITH INVESTING IN
THE PORTFOLIO.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------------
<S> <C>
Sales Load (as a percentage of offering price).................................... 0%
Dividend Reinvestment Plan Fees and Cash Purchase Plan Fees....................... 0 %
<CAPTION>
ANNUAL EXPENSES (as a percentage of net assets attributable to Common Stock)
<S> <C>
Management Fees................................................................... 0.90%
---
Other Expenses (estimated)........................................................ %
---
TOTAL ANNUAL EXPENSES (ESTIMATED)................................................... %
---
</TABLE>
"Management Fees" as shown above, is for the initial fiscal year of the
Portfolio. See "Use of Proceeds" and "Management of the Portfolio" for
additional information. "Other Expenses", as shown above, is based upon
estimated amounts of expenses for the initial fiscal year.
EXAMPLE
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
a hypothetical investment in the Portfolio. These amounts are based upon payment
by the Portfolio of operating expenses at the levels set forth in the table
above.
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) reinvestment of all dividends and distributions
at net asset value:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------- ---------- ---------- ----------
<S> <C> <C> <C>
$ $ $ $
</TABLE>
This example should not be considered a representation of future expenses of
the Portfolio and actual expenses may be greater or less than those shown.
Moreover, while the example assumes a 5% annual return, the Portfolio's
performance will vary and may result in a return greater or less than 5%. In
addition, while the example assumes reinvestment of all dividends and
distributions at net asset value, participants in the Portfolio's Dividend
Reinvestment Plan may receive shares purchased or issued at a price or value
different from net asset value. See "Dividends and Distributions, Dividend
Reinvestment Plan."
8
<PAGE>
THE PORTFOLIO
The Portfolio is a newly organized, non-diversified, closed-end management
investment company that seeks as high a level of current income exempt from
federal income tax as is consistent with the preservation of principal. The
Portfolio, which was incorporated under the laws of the State of Maryland on
February 19, 1993, is registered under the 1940 Act, and has its principal
office at Two World Trade Center, New York, New York 10048. The Portfolio's
telephone number is (212) 298-7315.
USE OF PROCEEDS
The net proceeds from the sale of shares of Common Stock in the Offering
will be approximately $ after deducting offering expenses of the
Portfolio, estimated to be approximately $ .
The net proceeds of the Offering will be invested in accordance with the
Portfolio's investment objective and management policies (as stated below) as
soon as practicable after completion of the Offering; the Portfolio currently
anticipates being able to be fully invested within 90 days of the completion of
the Offering. Pending investment of the net proceeds in accordance with the
Portfolio's investment objective and management policies, the Portfolio will
invest in high quality, short-term, tax-exempt money market securities or in
high quality obligations issued by state or local governments, political
subdivisions, agencies and public authorities with relatively low volatility
(such as pre-funded and intermediate-term securities), to the extent those types
of securities are available. Investors should expect that, before the Portfolio
has fully invested the proceeds of the Offering in accordance with the
Portfolio's investment objective and management policies, the Portfolio's yield
would be somewhat less, but that its net asset value would be subject to less
fluctuation, than would be the case at such time as the Portfolio is fully
invested. If necessary to invest fully the net proceeds of the Offering
immediately, the Portfolio may purchase short-term taxable investments of the
type described under "Investment Objective and Management Policies -- Taxable
Investments."
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
Set out below is a description of the investment objective and principal
investment policies of the Portfolio. No assurance can be given that the
Portfolio will be able to achieve its investment objective, which may be changed
only with the approval of a majority of the Portfolio's outstanding voting
securities as defined in the 1940 Act. Such a majority is defined in the 1940
Act as the lesser of (1) 67% or more of the shares present at a meeting of the
Portfolio, if the holders of more than 50% of the outstanding shares of the
Portfolio are present or represented by proxy or (2) more than 50% of the
outstanding shares of the Portfolio.
GENERAL
The Portfolio's investment objective is to seek as high a level of current
income exempt from federal income taxes as is consistent with the preservation
of principal. In seeking its objective, the Portfolio will invest in investment
grade debt 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 or multistate agencies or
authorities, the interest from which debt obligations is, in the opinion of bond
counsel to their issuer, excluded from gross income for federal income tax
purposes ("Municipal Obligations"). The Portfolio will operate subject to a
fundamental investment policy providing that, under normal conditions, the
Portfolio will invest at least 80% of its
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net assets in Municipal Obligations. The Portfolio will generally invest in
long-term Municipal Obligations; under normal market conditions, the weighted
average maturity of the Portfolio's securities is expected to be in excess of 20
years.
The Portfolio is classified as a non-diversified fund under the 1940 Act,
which means that the Portfolio is not limited by the 1940 Act in the proportion
of its assets that it may invest in the obligations of a single issuer. The
Portfolio intends to conduct its operations, however, so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which will relieve the Portfolio of any liability
for federal income tax to the extent that its earnings are distributed to
shareholders. To qualify as a regulated investment company, the Portfolio will,
among other things, limit its investments so that, at the close of each quarter
of its taxable year (1) not more than 25% of the market value of the Portfolio's
total assets will be invested in the securities of a single issuer and (2) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a single
issuer. See "Taxation."
The Portfolio generally will not invest more than 25% of its total assets in
any industry. Governmental issuers of Municipal Obligations are not considered
part of any "industry." Municipal Obligations backed only by the assets and
revenues of non-governmental users may be deemed to be issued by the
non-governmental users, and would be subject to the Portfolio's 25% industry
limitation.
The Portfolio may invest more than 25% of its total assets in a broad segment
of the Municipal Obligations market, such as revenue obligations of hospitals
and other health care facilities, housing agency revenue obligations, or airport
revenue obligations, if the Investment Manager determines that the yields
available from obligations in a particular segment of the market justify the
additional risks associated with a large investment in the segment. Although
these Municipal Obligations could be supported by the credit of governmental
users, or by the credit of non-governmental users engaged in a number of
industries, economic, business, political and other developments generally
affecting the revenues of the users (for example, proposed legislation or
pending court decisions affecting the financing of projects and market factors
affecting the demand for their services or products) may have a general adverse
effect on all municipal securities in such a market segment. The Portfolio
reserves the right to invest more than 25% of its assets in industrial
development bonds or in issuers located in the same state, although it has no
current intention of investing more than 25% of its assets in issuers located in
the same state. If the Portfolio were to invest more than 25% of its total
assets in issuers located in the same state, it would be more susceptible to
adverse economic, business or regulatory conditions in that state.
From time to time, the Portfolio's investments may include securities as to
which the Portfolio, by itself or together with other funds or accounts managed
by the Investment Manager, holds a major portion or all of an issue of Municipal
Obligations. Because relatively few potential purchasers may be available for
these investments and, in some cases, contractual restrictions may apply on
resales, the Portfolio may find it more difficult to sell these securities at a
time when the Investment Manager believes it is advisable to do so.
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MUNICIPAL OBLIGATIONS
Municipal Obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general taxing
power. Notes are short-term obligations of issuing municipalities or agencies
and are sold in anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations bear fixed, floating and variable rates of
interest, and variations exist in the security of Municipal Obligations, both
within a particular classification and between classifications.
The yields on, and values of, Municipal Obligations are dependent on a
variety of factors, including general economic and monetary conditions, money
market factors, conditions in the Municipal Obligation markets, size of a
particular offering, maturity of the obligation and rating of the issue.
Consequently, Municipal Obligations with the same maturity, coupon and rating
may have different yields or values, whereas obligations of the same maturity
and coupon with different ratings may have the same yield or value. See "Risk
Factors and Special Considerations -- Municipal Obligations."
Issuers of Municipal Obligations may be subject to the provisions of
bankruptcy, insolvency and other laws, such as the Federal Bankruptcy Reform Act
of 1978, affecting the rights and remedies of creditors. In addition, the
obligations of those issuers may become subject to laws enacted in the future by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of the
obligations or upon the ability of municipalities to levy taxes. The possibility
also exists that, as a result of litigation or other conditions, the power or
ability of any issuer to pay, when due, the principal of, and interest on, its
obligations may be materially affected.
QUALITY STANDARDS
The Portfolio will typically purchase a Municipal Obligation if the
Investment Manager believes that the yield of the obligation is sufficiently
attractive in light of the risks of ownership of the obligation. In determining
whether the Portfolio should invest in particular Municipal Obligations,
Greenwich Street Advisors will consider factors such as: the price, coupon and
yield to maturity of the obligations; the Investment Manager's assessment of the
credit quality of the issuer of the obligations; the issuer's available cash
flow and the related coverage ratios; the property, if any, securing the
obligations; and the terms of the obligations, including subordination, default,
sinking fund and early redemption provisions. The Investment Manager will also
review the ratings, if any, assigned to the securities by Moody's, S&P, Fitch or
another nationally-recognized rating agency.
The Portfolio will invest at least 80% of its total assets in Municipal
Obligations rated investment grade, that is, rated no lower than Baa, MIG 3 or
Prime-1 by Moody's, BBB, SP-2 or A-1 by S&P or BBB or F-1 by Fitch. Up to 20% of
the Portfolio's total assets may be invested in unrated securities that are
deemed by the Investment Manager to be of a quality comparable to investment
grade. The Portfolio will not invest in Municipal Obligations that are rated
lower than Baa by Moody's, BBB by S&P or BBB by Fitch, at the time of purchase.
Although Municipal Obligations rated Baa by Moody's, BBB by S&P or BBB by Fitch
are considered to be investment grade, they may be subject to greater
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risks than other higher rated investment grade securities. Municipal Obligations
rated Baa by Moody's, for example, are considered medium grade obligations that
lack outstanding investment characteristics and have speculative characteristics
as well. Municipal Obligations rated BBB by S&P are regarded as having an
adequate capacity to pay principal and interest. Municipal Obligations rated BBB
by Fitch are deemed to be subject to a higher likelihood that their rating will
fall below investment grade than higher rated bonds.
The ratings of agencies such as Moody's, S&P and Fitch represent their
opinions as to the quality of the Municipal Obligations that they undertake to
rate; the ratings are relative and subjective and are not absolute standards of
quality. The Investment Manager's judgment as to the credit quality of a
Municipal Obligation, thus, may differ from that suggested by the ratings
published by a rating service. A description of Moody's, S&P and Fitch ratings
relevant to the Portfolio's investments is included as Appendix A to this
Prospectus. The policies of the Portfolio described above as to ratings of
investments will apply only at the time of the purchase of a security, and the
Portfolio will not be required to dispose of a security in the event Moody's,
S&P or Fitch downgrades its assessment of the credit characteristics of the
security's issuer.
PRIVATE ACTIVITY BONDS
The Portfolio may invest without limit in Municipal Obligations that are
tax-exempt "private activity bonds," as defined in the Code, which are in most
cases revenue bonds. Private activity bonds generally do not carry the pledge of
the credit of the issuing municipality, but are guaranteed by the corporate
entity on whose behalf they are issued. Interest income on certain types of
private activity bonds issued after August 7, 1986 to finance nongovernmental
activities is a specific tax preference item for purposes of the federal
individual and corporate alternative minimum taxes. Individual and corporate
shareholders may be subject to a federal alternative minimum tax to the extent
that the Portfolio's dividends are derived from interest on these bonds.
Dividends derived from interest income on Municipal Obligations are a "current
earnings" adjustment item for purposes of the federal corporate alternative
minimum tax. See "Taxation." Private activity bonds held by the Portfolio will
be included in the term Municipal Obligations for purposes of determining
compliance with the Portfolio's policy of investing at least 80% of its total
assets in Municipal Obligations.
TYPES OF MUNICIPAL OBLIGATIONS HELD BY THE PORTFOLIO
MUNICIPAL LEASES. Among the Municipal Obligations in which the Portfolio
may invest are municipal leases, which may take the form of a lease or an
installment purchase or conditional sales contract to acquire a wide variety of
equipment and facilities. Interest payments on qualifying municipal leases are
exempt from federal income taxes and state income taxes within the state of
issuance. The Portfolio may invest in municipal leases containing
"non-appropriation" clauses that provide that the governmental issuer has no
obligation to make future payments under the lease or contract unless money is
appropriated for the purpose by the applicable legislative body on a yearly or
other periodic basis.
Municipal leases that the Portfolio may acquire will be both rated and
unrated. Rated leases that may be held by the Portfolio include those rated
investment grade at the time of investment (that is, rated no lower than Baa by
Moody's, BBB by S&P or BBB by Fitch). The Portfolio may acquire unrated issues
that the Investment Manager deems to be comparable in quality to rated issues in
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which the Portfolio is authorized to invest. A determination by the Investment
Manager that an unrated lease obligation is comparable in quality to a rated
lease obligation will be made on the basis of, among other things, a
consideration of whether the nature of the leased equipment or other property is
such that its ownership or use is reasonably essential to a governmental
function of the issuing municipality. In addition, all such determinations made
by the Investment Manager will be subject to oversight and approval by the
Portfolio's Board of Directors.
Municipal leases held by the Portfolio will be considered illiquid securities
unless the Portfolio's Board of Directors determines on an ongoing basis that
the leases are readily marketable. An unrated municipal lease with a
non-appropriation risk that is backed by an irrevocable bank letter of credit or
an insurance policy issued by a bank or insurer deemed by the Investment Manager
to be of high quality and minimal credit risk will not be deemed to be illiquid
solely because the underlying municipal lease is unrated, if the Investment
Manager determines that the lease is readily marketable because it is backed by
the letter of credit or insurance policy.
Municipal leases are subject to special risks described below under "Risk
Factors and Special Considerations." To limit those risks, the Portfolio will
invest no more than 5% of its total assets in lease obligations that contain
non-appropriation clauses and will only purchase a non-appropriation lease
obligation with respect to which (1) the nature of the leased equipment or other
property is such that its ownership or use is reasonably essential to a
governmental function of the issuing municipality, (2) the lease payments will
begin to amortize the principal balance due at an early date, resulting in an
average life of five years or less for the lease obligation, (3) appropriate
covenants will be obtained from the municipal obligor prohibiting the
substitution or purchase of similar equipment or other property if lease
payments are not appropriated, (4) the lease obligor has maintained good market
acceptability in the past, (5) the investment is of a size that will be
attractive to institutional investors and (6) the underlying leased equipment or
other property has elements of portability and/or use that enhance its
marketability in the event that foreclosure on the underlying equipment or other
property were ever required.
ZERO COUPON SECURITIES. The Portfolio may invest up to 10% of its assets in
zero coupon Municipal Obligations. Zero coupon Municipal Obligations are
generally divided into two categories: Pure Zero Obligations, which are those
that pay no interest for their entire life and Zero/Fixed Obligations, which pay
no interest for some initial period and thereafter pay interest currently. In
the case of a Pure Zero Obligation, the failure to pay interest currently may
result from the obligation's having no stated interest rate, in which case the
obligation pays only principal at maturity and is issued at a discount from its
stated principal amount. A Pure Zero Obligation may, in the alternative, specify
a stated interest rate, but provide that no interest is payable until maturity,
in which case accrued unpaid interest on the obligation may be capitalized as
incremental principal. The value to the investor of a zero coupon Municipal
Obligation consists of the economic accretion either of the difference between
the purchase price and the nominal principal amount (if no interest is stated to
accrue) or of accrued, unpaid interest during the Municipal Obligation's life or
payment deferral period.
CUSTODIAL RECEIPTS. The Portfolio may acquire custodial receipts or
certificates underwritten by securities dealers or banks that evidence ownership
of future interest payments, principal payments or both on certain Municipal
Obligations. The underwriter of these certificates or receipts typically
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purchases Municipal Obligations and deposits the obligations in an irrevocable
trust or custodial account with a custodian bank, which then issues receipts or
certificates that evidence ownership of the periodic unmatured coupon payments
and the final principal payment on the obligations. Custodial receipts
evidencing specific coupon or principal payments have the same general
attributes as zero coupon Municipal Obligations described above. Although under
the terms of a custodial receipt, the Portfolio would be typically authorized to
assert its rights directly against the issuer of the underlying obligation, the
Portfolio could be required to assert through the custodian bank those rights as
may exist against the underlying issuer. Thus, in the event the underlying
issuer fails to pay principal and/or interest when due, the Portfolio may be
subject to delays, expenses and risks that are greater than those that would
have been involved if the Portfolio had purchased a direct obligation of the
issuer. In addition, in the event that the trust or custodial account in which
the underlying security has been deposited is determined to be an association
taxable as a corporation, instead of a non-taxable entity, the yield on the
underlying security would be reduced in recognition of any taxes paid.
MUNICIPAL OBLIGATION COMPONENTS. The Portfolio may invest in Municipal
Obligations, the interest rate on which has been divided by the issuer into two
different and variable components, which together result in a fixed interest
rate. Typically, the first of the components (the "Auction Component") pays an
interest rate that is reset periodically through an auction process, whereas the
second of the components (the "Residual Component") pays a residual interest
rate based on the difference between the total interest paid by the issuer on
the Municipal Obligation and the auction rate paid on the Auction Component. The
Portfolio may purchase both Auction and Residual Components.
Because the interest rate paid to holders of Residual Components is generally
determined by subtracting the interest rate paid to the holders of Auction
Components from a fixed amount, the interest rate paid to Residual Component
holders will decrease as the Auction Component's rate increases and increase as
the Auction Component's rate decreases. Moreover, the extent of the increases
and decreases in market value of Residual Components may be larger than
comparable changes in the market value of an equal principal amount of a fixed
rate Municipal Obligation having similar credit quality, redemption provisions
and maturity.
FLOATING AND VARIABLE RATE INSTRUMENTS. The Portfolio may purchase floating
and variable rate demand notes and bonds, which are Municipal Obligations
normally having a stated maturity in excess of one year, but which permit their
holder to demand payment of principal at any time, or at specified intervals.
The issuer of floating and variable rate demand obligations normally has a
corresponding right, after a given period, to prepay at its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of the obligations. The interest
rate on a floating rate demand obligation is based on a known lending rate, such
as a bank's prime rate, and is adjusted automatically each time that rate is
adjusted. The interest rate on a variable rate demand obligation is adjusted
automatically at specified intervals. Frequently, floating and variable rate
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Use of letters of credit or other credit support
arrangements will not adversely affect the tax-exempt status of these
obligations. Because they are direct lending arrangements between the lender and
borrower, floating and variable rate obligations will generally not be
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traded. In addition, no secondary market generally exists for these obligations,
although their holders may demand their payment at face value. For these
reasons, when floating and variable rate obligations held by the Portfolio are
not secured by letters of credit or other credit support arrangements, the
Portfolio's right to demand payment is dependent on the ability of the borrower
to pay principal and interest on demand. The Investment Manager, on behalf of
the Portfolio, will consider, on an ongoing basis, the creditworthiness of the
issuers of floating and variable rate demand obligations held by the Portfolio.
To the extent the Portfolio holds certain floating and variable rate demand
obligations or Auction Components, the Portfolio may not, under certain market
conditions, be fully achieving its investment objective.
PARTICIPATION INTERESTS. The Portfolio may purchase from financial
institutions tax-exempt participation interests in Municipal Obligations. A
participation interest gives the Portfolio an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation
interest bears to the total amount of the Municipal Obligation. These
instruments may have floating or variable rates of interest. If the
participation interest is unrated, it will be backed by an irrevocable letter of
credit or guarantee of a bank that the Portfolio's Board of Directors has
determined meets certain quality standards or the payment obligation otherwise
will be collateralized by obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government securities").
The Portfolio will have the right, with respect to certain participation
interests, to demand payment, on a specified number of days' notice, for all or
any part of the Portfolio's interest in the Municipal Obligation, plus accrued
interest. The Portfolio intends to exercise its right with respect to these
instruments to demand payment only upon a default under the terms of the
Municipal Obligation or to maintain or improve the quality of the instruments it
holds. In addition, the Portfolio will invest no more than 5% of its total
assets in participation interests.
TAXABLE INVESTMENTS
Under normal conditions, the Portfolio may hold up to 20% of its total
assets in cash or money market instruments, including taxable money market
instruments (collectively, "Taxable Investments"). In addition, the Portfolio
may take a temporary defensive posture and invest without limitation in
short-term Municipal Obligations and Taxable Investments, upon a determination
by the Investment Manager that market conditions warrant such a posture. To the
extent the Portfolio holds Taxable Investments, the Portfolio will not be
pursuing its investment objective.
Money market instruments in which the Portfolio may invest include: U.S.
Government securities; tax-exempt notes of municipal issuers rated, at the time
of purchase, no lower than MIG 1 by Moody's, SP-1 by S&P or F-1 by Fitch or, if
not rated, by issuers having outstanding, unsecured debt then rated within the
three highest rating categories; bank obligations (including certificates of
deposit, time deposits and bankers' acceptances of domestic banks, domestic
savings and loan associations and similar institutions); commercial paper rated
no lower than P-1 by Moody's, A-1 by S&P or F-1 by Fitch or the equivalent from
another nationally-recognized rating agency or, if unrated, of an issuer having
an outstanding, unsecured debt issue then rated within the three highest rating
categories; and repurchase agreements. At no time will the Portfolio's
investments in bank obligations, including time deposits, exceed 25% of the
value of its assets.
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U.S. Government securities in which the Portfolio may invest include direct
obligations of the United States and obligations issued by U.S. Government
agencies and instrumentalities. Included among direct obligations of the United
States are Treasury Bills, Treasury Notes and Treasury Bonds, which differ
principally in terms of their maturities. Included among the securities issued
by U.S. Government agencies and instrumentalities are: securities that are
supported by the full faith and credit of the United States (such as Government
National Mortgage Association certificates); securities that are supported by
the right of the issuer to borrow from the U.S. Treasury (such as securities of
Federal Home Loan Banks); and securities that are supported by the credit of the
instrumentality (such as Federal National Mortgage Association and Federal Home
Loan Mortgage Corporation bonds).
The Portfolio may enter into repurchase agreement transactions with member
banks of the Federal Reserve System or with certain dealers listed on the
Federal Reserve Bank of New York's list of reporting dealers. A repurchase
agreement is a contract under which the buyer of a security simultaneously
commits to resell the security to the seller at an agreed-upon price on an
agreed-upon date. Under the terms of a typical repurchase agreement, the
Portfolio would acquire an underlying debt obligation for a relatively short
period subject to an obligation of the seller to repurchase, and the Portfolio
to resell, the obligation at an agreed-upon price and time, thereby determining
the yield during the Portfolio's holding period. This arrangement results in a
fixed rate of return that is not subject to market fluctuations during the
Portfolio's holding period. Under each repurchase agreement, the selling
institution will be required to maintain the value of the securities subject to
the repurchase agreement at not less than their repurchase price.
The value of the securities underlying a repurchase agreement of the
Portfolio will be monitored on an ongoing basis by the Investment Manager or
Boston Advisors to ensure that the value is at least equal at all times to the
total amount of the repurchase obligation, including interest. The Investment
Manager will also monitor, on an ongoing basis to evaluate potential risks, the
creditworthiness of the banks and dealers with which the Portfolio enters into
repurchase agreements.
INVESTMENT TECHNIQUES
The Portfolio may employ, among others, the investment techniques described
below, which may give rise to taxable income:
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued basis, or may purchase or sell securities for
delayed delivery. In when-issued or delayed delivery transactions, delivery of
the securities occurs beyond normal settlement periods, but no payment or
delivery will be made by the Portfolio prior to the actual delivery or payment
by the other party to the transaction. The Portfolio will not accrue income with
respect to a when-issued or delayed delivery security prior to its stated
delivery date. The Portfolio will establish with Boston Safe a segregated
account consisting of cash, U.S. Government securities, or other liquid high
grade debt obligations, in an amount equal to the amount of the Portfolio's
when-issued and delayed delivery purchase commitments. Placing securities rather
than cash in the segregated account may have a leveraging effect on the
Portfolio's net asset value per share; that is, to the extent that the Portfolio
remains substantially
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fully invested in securities at the same time that it has committed to purchase
securities on a when-issued or delayed delivery basis, greater fluctuations in
its net asset value per share may occur than if it had set aside cash to satisfy
its purchase commitments.
STAND-BY COMMITMENTS. The Portfolio may acquire "stand-by commitments" with
respect to Municipal Obligations it holds. Under a stand-by commitment, which
resembles a put option, a broker, dealer or bank is obligated to repurchase at
the Portfolio's option specified securities at a specified price. Each exercise
of a stand-by commitment, therefore, is subject to the ability of the seller to
make payment on demand. The Portfolio will acquire stand-by commitments solely
to facilitate liquidity and does not intend to exercise the rights afforded by
the commitments for trading purposes. The Portfolio anticipates that stand-by
commitments will be available from brokers, dealers and banks without the
payment of any direct or indirect consideration. The Portfolio may pay for
stand-by commitments if payment is deemed necessary, thus increasing to a degree
the cost of the underlying Municipal Obligation and similarly decreasing the
obligation's yield to investors.
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS. To hedge against a decline in
the value of Municipal Obligations it owns or an increase in the price of
Municipal Obligations it proposes to purchase, the Portfolio may enter into
financial futures contracts and invest in options on financial futures contracts
that are traded on a U.S. exchange or board of trade. The futures contracts or
options on futures contracts that may be entered into by the Portfolio will be
restricted to those that are either based on an index of Municipal Obligations
or relate to debt securities the prices of which are anticipated by the
Investment Manager to correlate with the prices of the Municipal Obligations
owned or to be purchased by the Portfolio.
In entering into a financial futures contract, the Portfolio will be required
to deposit with the broker through which it undertakes the transaction an amount
of cash or cash equivalents equal to approximately 5% of the contract amount.
This amount, which is known as "initial margin," is subject to change by the
exchange or board of trade on which the contract is traded, and members of the
exchange or board of trade may charge a higher amount. Initial margin is in the
nature of a performance bond or good faith deposit on the contract that is
returned to the Portfolio upon termination of the futures contract, assuming all
contractual obligations have been satisfied. In accordance with a process known
as "marking-to-market," subsequent payments, known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable. At any time prior to the
expiration of a futures contract, the Portfolio may elect to close the position
by taking an opposite position, which will operate to terminate the Portfolio's
existing position in the contract.
A financial futures contract provides for the future sale by one party and
the purchase by the other party of a certain amount of a specified property at a
specified price, date, time and place. Unlike the direct investment in a futures
contract, an option on a financial futures contract gives the purchaser the
right, in return for the premium paid, to assume a position in the financial
futures contract at a specified exercise price at any time prior to the
expiration date of the option. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account, which represents the amount by which the market price of the
futures contract exceeds, in the case of a call,
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or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
financial futures contracts is limited to the premium paid for the option (plus
transaction costs). The value of the option may change daily and that change
would be reflected in the net asset value of the Portfolio.
Regulations of the Commodity Futures Trading Commission applicable to the
Portfolio require that its transactions in financial futures contracts and
options on financial futures contracts be engaged in for bona fide hedging
purposes or other permitted purposes, and that no such transactions may be
entered into by the Portfolio if the aggregate initial margin deposits and
premiums paid by the Portfolio exceed 5% of the market value of its assets. In
addition, the Portfolio will, with respect to its purchases of financial futures
contracts, establish a segregated account consisting of cash or cash equivalents
in an amount equal to the total market value of the futures contracts, less the
amount of initial margin on deposit for the contracts. The Portfolio's ability
to trade in financial futures contracts and options on financial futures
contracts may be limited to some extent by the requirements of the Code
applicable to a regulated investment company that are described below under
"Taxation."
LENDING SECURITIES. The Portfolio is authorized to lend securities it holds
to brokers, dealers and other financial organizations, but it will not lend
securities to any affiliate of the Investment Manager, including Smith Barney
Shearson, unless the Portfolio applies for and receives specific authority to do
so from the Securities and Exchange Commission (the "SEC"). Loans of the
Portfolio's securities, if and when made, may not exceed 33 1/3% of the
Portfolio's assets taken at value. The Portfolio's loans of securities will be
collateralized by cash, letters of credit or U.S. Government securities that
will be maintained at all times in a segregated account with Boston Safe in an
amount equal to the current market value of the loaned securities. From time to
time, the Portfolio may pay a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the Portfolio and that is acting as a "finder."
By lending its securities, the Portfolio can increase its income by
continuing to receive interest on the loaned securities, by investing the cash
collateral in short-term instruments or by obtaining yield in the form of
interest paid by the borrower when U.S. Government securities are used as
collateral. The Portfolio will adhere to the following conditions whenever it
lends its securities: (1) the Portfolio must receive at least 100% cash
collateral or equivalent securities from the borrower, which amount of
collateral will be maintained by daily marking to market; (2) the borrower must
increase the collateral whenever the market value of the securities loaned rises
above the level of the collateral; (3) the Portfolio must be able to terminate
the loan at any time; (4) the Portfolio must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (5) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (6) voting rights on
the loaned securities may pass to the borrower, except that, if a material event
adversely affecting the investment in the loaned securities occurs, the
Portfolio's Board of Directors must terminate the loan and retain the
Portfolio's right to vote the securities.
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<PAGE>
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Portfolio involves risk factors and special
considerations, such as those described below:
MUNICIPAL OBLIGATIONS. Substantially all of the Portfolio's total assets
will be invested, under normal market conditions, in Municipal Obligations rated
investment grade at the time of investment. Market rates of interest available
with respect to Municipal Obligations generally may be lower than those
available with respect to taxable securities, although the differences may be
wholly or partially offset by the effects of federal income tax on income
derived from taxable securities. The amount of available information about the
financial condition of issuers of Municipal Obligations may be less extensive
than that for corporate issuers with publicly traded securities, and the market
for Municipal Obligations may be less liquid than the market for corporate debt
obligations. Municipal Obligations in which the Portfolio may invest include
special obligation bonds, lease obligations, participation certificates and
variable rate instruments. The market for these Municipal Obligations may be
less liquid than the market for general obligation Municipal Obligations.
Although the Portfolio's policy will generally be to hold Municipal Obligations
until their maturity, the relative illiquidity of some of the Portfolio's
securities may adversely affect the ability of the Portfolio to dispose of the
securities in a timely manner and at a fair price. The market for less liquid
securities tends to be more volatile than the market for more liquid securities
and market values of relatively illiquid securities may be more susceptible to
change as a result of adverse publicity and investor perceptions than are the
market values of more liquid securities. Although the issuer of certain
Municipal Obligations may be obligated to redeem the obligations at face value,
redemption could result in capital losses to the Portfolio to the extent that
the Municipal Obligations were purchased by the Portfolio at a premium to face
value.
Although the Municipal Obligations in which the Portfolio may invest will be,
at the time of investment, rated investment grade, municipal securities, like
other debt obligations, are subject to the risk of non-payment by their issuers.
The ability of issuers of Municipal Obligations to make timely payments of
interest and principal may be adversely affected in general economic downturns
and as relative governmental cost burdens are allocated and reallocated among
federal, state and local governmental units. Non-payment by an issuer would
result in a reduction of income to the Portfolio, and could result in a
reduction in the value of the Municipal Obligations experiencing non-payment and
a potential decrease in the net asset value of the Portfolio.
Issuers of Municipal Obligations may from time to time seek protection under
federal bankruptcy laws. In the event of bankruptcy of an issuer of a Municipal
Obligation it holds, the Portfolio could experience delays and limitations with
respect to the collection of principal and interest on the obligation, and the
Portfolio may not, in all circumstances, be able to collect all principal and
interest to which it is entitled. To enforce its rights in the event of a
default in the payment of interest or repayment of principal, or both, the
Portfolio may take possession of and manage the assets securing the issuer's
obligations on the securities, which may increase the Portfolio's operating
expenses and adversely affect the net asset value of the Portfolio. Any income
derived from the Portfolio's ownership or operation of these assets may not be
tax-exempt. In addition, the Portfolio's intention to qualify as a regulated
investment company under the Code may limit the extent to which the Portfolio
may
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<PAGE>
exercise its rights by taking possession of the assets, because as a regulated
investment company the Portfolio is subject to certain limitations on its
investments and on the nature of its income. See "Taxation."
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest on them from federal income taxes are rendered by bond
counsel to the respective issuers at the time of issuance. Neither the Portfolio
nor the Investment Manager will review the procedures relating to the issuance
of Municipal Obligations or the basis for opinions of counsel.
Boston Advisors values the Portfolio's investments pursuant to guidelines
adopted and periodically reviewed by the Portfolio's Board of Directors. To the
extent that no established retail market exists for some of the securities in
which the Portfolio may invest, trading in the securities may be relatively
inactive and the ability of Boston Advisors to value the securities accurately
may be adversely affected. During periods of reduced market liquidity and in the
absence of readily available market quotations for Municipal Obligations held by
the Portfolio, the responsibility of Boston Advisors to value the Portfolio's
securities will become more difficult. Boston Advisors' judgment may play a
greater role in the valuation of the Portfolio's securities as a result of the
reduced availability of reliable objective data. To the extent that the
Portfolio invests in illiquid securities and securities that are restricted as
to resale, the Portfolio may incur additional risks and costs. The sale of
illiquid and restricted securities is particularly difficult.
The net asset value of the Common Stock will change with changes in the value
of the Portfolio's securities. Because the Portfolio will invest primarily in
fixed-income securities, the net asset value of the Common Stock can be expected
to change as levels of interest rates fluctuate; generally, when prevailing
interest rates increase, the value of fixed-income securities held by the
Portfolio can be expected to decrease and when prevailing interest rates
decrease, the value of the fixed-income securities held by the Portfolio can be
expected to increase. The value of the fixed-income securities held by the
Portfolio, and thus the Portfolio's net asset value, may also be affected by
other economic, market and credit factors.
POTENTIAL LEGISLATION. In past years, the U.S. Government has enacted
various laws that have restricted or diminished the income tax exemption on
various types of Municipal Obligations and may enact other similar laws in the
future. If any such laws are enacted that would reduce the availability of
Municipal Obligations for investment by the Portfolio so as to affect the
Portfolio's shareholders adversely, the Portfolio's Board of Directors will
reevaluate the Portfolio's investment objective and management policies and
might submit possible changes in the Portfolio's structure to the shareholders
for their consideration. If legislation was enacted that would treat a type of
Municipal Obligation as taxable for federal income tax purposes, the Portfolio
would treat the security as a permissible Taxable Investment within the
applicable limits described in this Prospectus.
UNRATED SECURITIES. The Portfolio may invest in unrated securities that the
Investment Manager determines to be of comparable quality to the rated
securities in which the Portfolio may invest. Dealers may not maintain daily
markets in unrated securities and retail secondary markets for many of them may
not exist. As a result, the Portfolio's ability to sell these securities when
the Investment Manager deems it appropriate may be diminished.
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<PAGE>
MUNICIPAL LEASES. Municipal leases in which the Portfolio may invest have
special risks not normally associated with Municipal Obligations. These
obligations frequently contain non-appropriation clauses that provide that the
governmental issuer of the obligation need not make future payments under the
lease or contract unless money is appropriated for that purpose by a legislative
body annually or on another periodic basis. Municipal leases have additional
risks because they represent a type of financing that has not yet developed the
depth of marketability generally associated with other Municipal Obligations.
Moreover, although a municipal lease typically will be secured by financed
equipment or facilities, the disposition of the equipment or facilities in the
event of foreclosure might prove difficult. In addition, in certain instances
the tax-exempt status of the municipal lease will not be subject to the legal
opinion of a nationally-recognized bond counsel, although in all cases the
Investment Manager will require that a municipal lease purchased by the
Portfolio be covered by a legal opinion to the effect that, as of the effective
date of the municipal lease, the lease is the valid and binding obligation of
the governmental issuer.
NON-PUBLICLY TRADED SECURITIES. As suggested above, the Portfolio may, from
time to time, invest a portion of its assets in non-publicly traded Municipal
Obligations. Non-publicly traded securities may be less liquid than publicly
traded securities. Although non-publicly traded securities may be resold in
privately negotiated transactions, the prices realized from these sales could be
less than those originally paid by the Portfolio.
REPURCHASE AGREEMENTS. In entering into a repurchase agreement, the
Portfolio will bear a risk of loss in the event that the other party to the
transaction defaults on its obligations and the Portfolio is delayed or
prevented from exercising its rights to dispose of the underlying securities,
including the risk of a possible decline in the value of the underlying
securities during the period in which the Portfolio seeks to assert its rights
to them, the risk of incurring expenses associated with asserting those rights
and the risk of losing all or a part of the income from the agreement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Securities purchased on a
when-issued or delayed delivery basis may expose the Portfolio to risk because
the securities may experience fluctuations in value prior to their delivery.
Purchasing securities on a when-issued or delayed delivery basis can involve the
additional risk that the yield available in the market when the delivery takes
place may be higher than that obtained in the transaction itself.
FINANCIAL FUTURES AND OPTIONS. Although the Portfolio intends to enter into
financial futures contracts and options on financial futures contracts that are
traded on a U.S. exchange or board of trade only if an active market exists for
those instruments, no assurance can be given that an active market will exist
for them at any particular time. If closing a futures position in anticipation
of adverse price movements is not possible, the Portfolio would be required to
make daily cash payments of variation margin. In those circumstances, an
increase in the value of the portion of the Portfolio's investments being
hedged, if any, may offset partially or completely losses on the futures
contract. No assurance can be given, however, that the price of the securities
being hedged will correlate with the price movements in a futures contract and,
thus, provide an offset to losses on the futures contract or option on the
futures contract. In addition, in light of the risk of an imperfect correlation
between securities held by the Portfolio that are the subject of a hedging
transaction and the futures or options used as a hedging device, the hedge may
not be fully effective because, for example, losses on the securities held by
the Portfolio may be in excess of gains on the futures contract or losses on the
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<PAGE>
futures contract may be in excess of gains on the securities held by the
Portfolio that were the subject of the hedge. In an effort to compensate for the
imperfect correlation of movement in the price of the securities being hedged
and movements in the price of futures contracts, the Portfolio may enter into
financial futures contracts or options on financial futures contracts in a
greater or lesser dollar amount than the dollar amount of the securities being
hedged if the historical volatility of the futures contract has been less or
greater than that of the securities. This "over hedging" or "under hedging" may
adversely affect the Portfolio's net investment results if market movements are
not as anticipated when the hedge is established.
If the Portfolio has hedged against the possibility of an increase in
interest rates adversely affecting the value of securities it holds and rates
decrease instead, the Portfolio will lose part or all of the benefit of the
increased value of securities that it has hedged because it will have offsetting
losses in its futures or options positions. In addition, in those situations, if
the Portfolio has insufficient cash, it may have to sell securities to meet
daily variation margin requirements on the futures contracts at a time when it
may be disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest rates.
NON-DIVERSIFIED CLASSIFICATION. Investment in the Portfolio, which is
classified as a non-diversified fund under the 1940 Act, may present greater
risks to investors than an investment in a diversified fund. The investment
return on a non-diversified fund typically is dependent upon the performance of
a smaller number of securities relative to the number of securities held in a
diversified fund. The Portfolio's assumption of large positions in the
obligations of a small number of issuers will affect the value of the securities
it holds to a greater extent than that of a diversified fund in the event of
changes in the financial condition, or in the market's assessment, of the
issuers.
INVESTMENT RESTRICTIONS
The Portfolio has adopted certain fundamental investment restrictions that
may not be changed without the prior approval of the holders of a majority of
the Portfolio's outstanding shares of Common Stock as defined in the 1940 Act.
All percentage limitations included in the investment restrictions below apply
immediately after a purchase or initial investment, and any subsequent change in
any applicable percentage resulting from market fluctuations will not require
the Portfolio to dispose of any security that it holds. Under its fundamental
restrictions, the Portfolio may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are described in this Prospectus.
2. Borrow money, except for temporary or emergency purposes, or for
clearance of transactions, and then only in amounts not exceeding 15% of
its total assets (not including the amount borrowed) and as otherwise
described in this Prospectus. When the Portfolio's borrowings exceed 5% of
the value of its total assets, the Portfolio will not make any additional
investments.
3. Sell securities short or purchase securities on margin, except for
short-term credits as are necessary for the clearance of transactions,
but the Portfolio may make margin deposits in connection with transactions in
options, futures and options on futures.
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<PAGE>
4. Underwrite any issue of securities, except to the extent that the
purchase of Municipal Obligations may be deemed to be an underwriting.
5. Purchase, hold or deal in real estate or oil and gas interests, except
that the Portfolio may invest in Municipal Obligations secured by real
estate or interests in real estate.
6. Invest in commodities, except that the Portfolio may enter into futures
contracts, including those relating to indexes, and options on futures
contracts or indexes, as described in this Prospectus.
7. Lend any funds or other assets, except through purchasing Municipal
Obligations or Taxable Investments, lending securities and entering into
repurchase agreements consistent with the Portfolio's investment objective.
8. Issue senior securities.
9. Invest more than 25% of its total assets in the securities of issuers in
any single industry, except that this limitation will not be applicable
to the purchase of U.S. Government securities.
10. Make any investments for the purpose of exercising control or management
of any company.
MANAGEMENT OF THE PORTFOLIO
DIRECTORS AND OFFICERS
The business and affairs of the Portfolio, including the general supervision
of the duties performed by the Investment Manager under the Investment
Management Agreement, are the responsibility of the Portfolio's Board of
Directors. The Directors and officers of the Portfolio, their addresses and
their principal occupations for at least the past five years are set forth
below:
<TABLE>
<S> <C> <C>
Positions Held Principal Occupations
Name and Address with the Portfolio During Past Five Years
- ------------------------------- -------------------------------- -----------------------------------------
*+Heath B. McLendon Chairman of the Board of Executive Vice President of Smith Barney
Two World Trade Center Directors, Chief Executive Shearson; Chairman of the Board of Smith
New York, NY 10048 Officer and Director Barney Shearson Investment Strategy
Advisers Inc.
*+Stephen J. Treadway President Executive Vice President of Smith Barney
1345 Ave. of the Americas Shearson; Chairman of the Board,
New York, NY 10105 President and Chief Executive Officer of
Mutual Management Corp., and Smith,
Barney Advisers, Inc., investment
advisory affiliates of Smith Barney
Shearson.
*+Richard P. Roelofs Director President of Smith Barney Shearson
Two World Trade Center Investment Strategy Advisers Inc. and a
New York, NY 10048 Managing Director of Smith Barney
Shearson.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Positions Held Principal Occupations
Name and Address with the Portfolio During Past Five Years
- ------------------------------- -------------------------------- -----------------------------------------
+Charles F. Barber Director Consultant; formerly Chairman of the
66 Glenwood Drive Board, ASARCO Incorporated.
Greenwich, CT 06830
+Allan J. Bloostein Director Consultant; formerly Vice Chairman of the
27 West 67th Street Board of The May Department Stores
New York, NY 10023 Company; Director of Crystal Brands,
Inc., Melville Corp., R.G. Barry Corp.
and Hechinger Co.
+Robert E. Borgesen Director Retired; formerly Vice President of
160 South East Morgan Guaranty Trust Company of New
Crestwood Circle York.
Stuart, FL 34997
+Martin Brody Director Vice Chairman of the Board of Directors
Three ADP Boulevard of Restaurant Associates Industries,
Roseland, NJ 07068 Inc.; a Director of Jaclyn, Inc.
+Dwight B. Crane Director Professor, Graduate School of Business
Harvard Business Administration, Harvard University.
School
Soldiers Field Road
Boston, MA 02163
Joseph P. Deane Vice President and Investment Senior Vice President and Managing
Two World Trade Center Officer Director of Greenwich Street Advisors.
New York, NY 10048
David Fare Investment Officer Assistant Vice President of Greenwich
Two World Trade Center Street Advisors. Prior to March 1989, a
New York, NY 10048 senior portfolio accountant with the firm
of Merrill Lynch, Pierce, Fenner & Smith
Inc., New York, New York.
Vincent Nave Chief Financial and Senior Vice President of Boston Advisors
Exchange Place Accounting Officer and and Boston Safe
Boston, MA 02109 Treasurer
</TABLE>
- ----------
* "Interested person" of the Portfolio as defined in the 1940 Act.
+ Director, trustee and/or general partner of other investment companies
registered under the 1940 Act with which Smith Barney Shearson is affiliated.
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<PAGE>
The Portfolio intends to pay each of its Directors who is not a director,
officer or employee of the Investment Manager or Boston Advisors, or any of
their affiliates, an annual fee of $5,000 plus $500 for each Board of Directors
meeting attended. In addition, the Portfolio will reimburse those Directors for
travel and out-of-pocket expenses incurred in connection with Board of Directors
meetings.
INVESTMENT MANAGER
Greenwich Street Advisors, a division of Mutual Management Corp., serves as
the Portfolio's investment manager. The Investment Manager provides investment
advisory and management services to investment companies affiliated with Smith
Barney Shearson. Mutual Management Corp. was incorporated in 1978 and currently
manages investment companies with total assets of approximately $ billion
at March 31, 1994. Mutual Management Corp. is controlled by Smith Barney
Shearson Holdings Inc., the parent company of Smith Barney Shearson. Smith
Barney Shearson Holdings Inc. is a direct wholly-owned subsidiary of Travelers.
Greenwich Street Advisors is located at 388 Greenwich Street, New York, New York
10013. Mutual Management Corp. is located at 1345 Avenue of the Americas, New
York, New York 10105.
Subject to the supervision and direction of the Portfolio's Board of
Directors, the Investment Manager manages the securities held by the Portfolio
in accordance with the Portfolio's stated investment objectives and policies,
makes investment decisions for the Portfolio, places orders to purchase and sell
securities on behalf of the Portfolio and employs managers and securities
analysts who provide research services to the Portfolio. Mutual Management Corp.
provides certain administration services to the Portfolio, including overseeing
the Portfolio's non-investment operations and its relations with other service
providers and providing executive and other officers to the Portfolio. The
Portfolio pays the Investment Manager a Management Fee for the services provided
to the Fund that is computed daily and paid monthly at the annual rate of 0.90%
of the value of the Fund's average daily net assets, which is higher than the
rates for similar services paid by other recently organized publicly offered,
closed-end, management investment companies that have investment objectives and
policies similar to those of the Portfolio.
Joseph P. Deane, who is Vice President and Investment Officer of the
Portfolio, is primarily responsible for management of the Portfolio's assets.
Mr. Deane is a Senior Vice President and Managing Director of the Investment
Manager and is the senior asset manager for investment companies and other
accounts investing in tax-exempt securities with aggregate assets of $
billion as of ,1993.
SUB-ADMINISTRATOR
Boston Advisors, located at One Boston Place, Boston, Massachusetts 02108,
serves as the Portfolio's sub-administrator pursuant to an agreement with Mutual
Management Corp. Boston Advisors is a wholly owned subsidiary of TBC, which is
in turn a wholly owned subsidiary of Mellon. Boston Advisors provides investment
management, investment advisory and/or administrative services to investment
companies that had aggregate assets under management as of , 1994,
in excess of $ billion.
Boston Advisors generally assists Mutual Management Corp. and it has primary
responsibility for statistical, accounting, bookkeeping and internal auditing
aspects of the Portfolio's administration
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<PAGE>
and operation. For its services to the Portfolio, the Investment Manager pays
Boston Advisors a fee from its Management Fee. Boston Advisors bears all
expenses in connection with the performance of its services.
The Investment Manager and Boston Advisors each bears all expenses in
connection with the performance of the services it provides to the Portfolio.
The Portfolio will bear all other expenses to be incurred in its operation,
including, but not limited to: the costs incurred in connection with the
Portfolio's organization; management fees; fees for necessary professional and
brokerage services; fees for any pricing service; the costs of regulatory
compliance; and the costs associated with maintaining the Portfolio's corporate
existence; and costs of corresponding with the Portfolio's shareholders.
SECURITIES TRANSACTIONS AND TURNOVER
GENERAL
The Portfolio's securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which the Investment Manager
determines that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by the Portfolio for purchases and
sales undertaken through principal transactions, although the price paid usually
includes an undisclosed compensation to the dealer acting as agent. The prices
paid to underwriters of newly issued securities typically include a concession
paid by the issuer to the underwriter, and purchases of after-market securities
from dealers ordinarily are executed at a price between the bid and asked price.
Transactions on behalf of the Portfolio are allocated to various dealers by
the Investment Manager in its best judgment. The primary consideration is prompt
and effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Investment Manager to supplement its own research
and analysis with the views and information of other securities firms.
Research services furnished by broker-dealers through which the Portfolio
effects securities transactions may be used by the Investment Manager in
managing other investment funds and accounts and, conversely, research services
furnished to the Investment Manager by broker-dealers in connection with other
funds and accounts the Investment Manager advises may be used by the Investment
Manager in advising the Portfolio. Although it is not possible to place a dollar
value on these services, the Investment Manager is of the view that the receipt
of the services should not reduce the overall costs of its research services.
Investment decisions for the Portfolio are made independently from those of
other investment companies or accounts managed by the Investment Manager. If
those investment companies or accounts are prepared to invest in, or desire to
dispose of, Municipal Obligations or Taxable Investments at the same time as the
Portfolio, however, available investments or opportunities for sales will be
allocated equitably to each client of the Investment Manager. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by the Portfolio or the price paid or received by the Portfolio.
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<PAGE>
The Portfolio's Board of Directors will review periodically the commissions
paid by the Portfolio to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits inuring to the
Portfolio. The Portfolio may, from time to time, in accordance with an exemptive
order granted by the SEC, enter into principal transactions involving certain
money market instruments with Smith Barney Shearson and certain Smith Barney
Shearson-affiliated dealers.
TURNOVER
The Portfolio cannot accurately predict its turnover rate, but anticipates
that its annual turnover rate will not exceed 100%. The Portfolio's turnover
rate is calculated by dividing the lesser of the Portfolio'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 the
Portfolio's securities for the year. Higher turnover rates can result in
corresponding increases in the Portfolio's transaction costs. The Portfolio will
not consider turnover rate a limiting factor in making investment decisions
consistent with its investment objective and policies.
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN
The Portfolio expects to pay monthly dividends of net investment income
(that is, income (including its tax-exempt income and its accrued original issue
discount income) other than net realized capital gains) to the holders of the
Common Stock. Under the Portfolio's current policy, which may be changed at any
time by its Board of Directors, the Portfolio's monthly dividends will be made
at a level that reflects the past and projected performance of the Portfolio,
which policy over time will result in the distribution of all net investment
income of the Portfolio. Initial dividends to Common Stock shareholders are
expected to be declared approximately 60 days, and paid approximately 90 days,
from the completion of the Offering. Net income of the Portfolio consists of all
interest income accrued on the Portfolio's assets less all expenses of the
Portfolio. Expenses of the Portfolio are accrued each day. Net realized capital
gains, if any, will be distributed to the shareholders at least once a year.
Under the Portfolio's Dividend Reinvestment Plan (the "Plan"), a shareholder
whose shares of Common Stock are registered in his own name will have all
distributions from the Portfolio reinvested automatically by TSSG as 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
Portfolio 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 TSSG as
dividend-paying agent.
If the Portfolio declares a dividend or capital gains distribution payable
either in shares of Common Stock or in cash, shareholders who are not Plan
participants will receive cash, and Plan participants will receive the
equivalent amount in shares of Common Stock. When the market price of the Common
Stock is equal to or exceeds the net asset value per share of the Common Stock
on the Valuation Date (as defined below), Plan participants will be issued
shares of Common Stock valued at the net asset value most recently determined as
described below under "Net Asset Value" or, if net
27
<PAGE>
asset value is less than 95% of the then current market price of the Common
Stock, then at 95% of the market value. The Valuation Date is the dividend or
capital gains distribution payment date or, if that date is not a NYSE trading
day, the immediately preceding trading day.
If the market price of the Common Stock is less than the net asset value of
the Common Stock, or if the Portfolio declares a dividend or capital gains
distribution payable only in cash, a broker-dealer not affiliated with Smith
Barney Shearson, as purchasing agent for Plan participants (the "Purchasing
Agent"), will buy Common Stock in the open market, on the NYSE or elsewhere, for
the participants' accounts. If, following the commencement of the purchases and
before the Purchasing Agent has completed its purchases, the market price
exceeds the net asset value of the Common Stock, the average per share purchase
price paid by the Purchasing Agent 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 Portfolio
at net asset value. TSSG will apply all cash received as a dividend or capital
gains distribution 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 later than 30 days after that date, except when
necessary to comply with applicable provisions of the federal securities laws.
TSSG will maintain all shareholder accounts in the Plan and will furnish
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 TSSG in uncertificated form in the name of the Plan participant, and each
shareholder's proxy will include those shares purchased pursuant to the Plan.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions. TSSG's fees for handling the reinvestment of
dividends and capital gains distributions will be paid by the Portfolio. No
brokerage charges apply with respect to shares of Common Stock issued directly
by the Portfolio as a result of dividends or capital gains distributions payable
either in Common Stock or in cash. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to open
market purchases made in connection with the reinvestment of dividends or
capital gains distributions.
Experience under the Plan may indicate that changes to it are desirable. The
Portfolio 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 TSSG, with the Portfolio'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 The Shareholders Services Group, Inc., One
Exchange Place, Boston, Massachusetts 02109 or by telephone at (617) 573-9300.
NET ASSET VALUE
The net asset value of shares of the Common Stock will be calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m., New York time, on
each day on which the NYSE is open for
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<PAGE>
trading. The Portfolio reserves the right to cause its net asset value to be
calculated on a less frequent basis as determined by the Portfolio's Board of
Directors. For purposes of determining net asset value, futures contracts and
options on futures contracts will be valued 15 minutes after the close of
regular trading on the NYSE.
Net asset value per share of Common Stock is calculated by dividing the value
of the Portfolio's total assets less liabilities. In general, the Portfolio's
investments will be valued at market value, or in the absence of market value,
at fair value as determined by or under the direction of the Portfolio's Board
of Directors. Short-term investments that mature in 60 days or less are valued
on the basis of amortized cost (which involves valuing an investment at its cost
and, thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest rates on the market
value of the investment) when the Board of Directors has determined that
amortized cost represents fair value.
The valuation of the Portfolio's assets is made by Boston Advisors after
consultation with an independent pricing service (the "Service") approved by the
Portfolio's Board of Directors. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are representative of the bid
side of the market, these investments are valued at the mean between the quoted
bid prices and asked prices. Investments for which, in the judgment of the
Service, no readily obtainable market quotation is available, are carried at
fair value as determined by the Service, based on methods that include
consideration of: yields or prices of Municipal Obligations of comparable
quality, coupon, maturity and type; indications as to values from dealers; and
general market conditions. The Service may use electronic data processing
techniques and/or a matrix system to determine valuations. The procedures of the
Service are reviewed periodically by the officers of the Portfolio under the
general supervision and responsibility of the Board of Directors, which may
replace the Service at any time if it determines it to be in the best interests
of the Portfolio to do so.
TAXATION
The discussion set out below of tax considerations generally affecting the
Portfolio 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 THE PORTFOLIO AND ITS INVESTMENTS
The Portfolio intends to qualify as a "regulated investment company" under
Subchapter M of the Code. In addition, the Portfolio intends to satisfy
conditions contained in the Code that will enable interest from Municipal
Obligations, excluded from gross income for federal income tax purposes with
respect to the Portfolio, to retain that tax-exempt status when distributed to
the shareholders of the Portfolio (that is, to be classified as
"exempt-interest" dividends of the Portfolio).
If it qualifies as a regulated investment company, the Portfolio will pay 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,
the Portfolio 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 gains) and 90%
of its tax-exempt net investment income (reduced by
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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, or other income (including, but not limited to,
gains from options, futures, and forward contracts) derived with respect to the
Portfolio's business of investing in securities; (3) derive less than 30% of its
annual gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (4) diversify
its holdings so that, at the end of each fiscal quarter of the Portfolio (a) at
least 50% of the market value of the Portfolio's assets is represented by cash,
U.S. Government securities and 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 the Portfolio's
assets and (b) not more than 25% of the market value of the Portfolio'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 the Portfolio controls and that are determined to be in the
same or similar trades or businesses or related trades or businesses. In meeting
these requirements, the Portfolio may be restricted in the selling of securities
held by the Portfolio for less than three months and in the utilization of
certain of the investment techniques described above under "Investment Objective
and Management Policies -- Investment Techniques." As a regulated investment
company, the Portfolio will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. The Portfolio expects to pay dividends and distributions necessary
to avoid the application of this excise tax.
Legislation currently pending before the U.S. Congress would repeal the
requirement contained in Subchapter M of the Code that a regulated investment
company must derive less than 30% of its gross income from the sale or other
disposition of assets described above that are held for less than three months.
It is unclear at this time whether this legislation will become law and, if it
is so enacted, the form it will take.
As described above, the Portfolio may invest in financial futures contracts
and options on financial futures contracts that are traded on a U.S. exchange or
board of trade. The Portfolio anticipates that these investment activities will
not prevent the Portfolio from qualifying as a regulated investment company. 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 the Portfolio
and, thus, will affect the amount of capital gains distributed to the
Portfolio'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 to a special "mark-to-market system." Under
the mark-to-market system, the Portfolio 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 the Portfolio and the amount of distributions taxable to a
shareholder. Moreover, if the Portfolio invests in both Section 1256 Contracts
and offsetting positions in those contracts, then the Portfolio might not be
able to receive the benefit of certain realized losses for an indeterminate
period of time. The Portfolio 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
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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.
TAXATION OF THE PORTFOLIO'S SHAREHOLDERS
The Portfolio anticipates that all dividends it pays, other than dividends
from Taxable Investments and from income or gain derived from securities
transactions and from the use of certain of the investment techniques described
under "Investment Objective and Management Policies -- Investment Techniques,"
will be derived from interest on Municipal Obligations and thus will be exempt-
interest dividends that may be excluded by shareholders from their gross income
for federal income tax purposes if the Portfolio satisfies certain asset
percentage requirements. Dividends paid from the Portfolio's net investment
income and distributions of the Portfolio's net realized short-term capital
gains are taxable to shareholders of the Portfolio as ordinary income,
regardless of the length of time shareholders have held shares of Common Stock
and whether the dividends or 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. Dividends and distributions paid by
the Portfolio will 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 Common Stock is not deductible for federal income tax purposes. If a
shareholder receives exempt-interest dividends with respect to any share of
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 the
Portfolio that represents income derived from private activity bonds held by the
Portfolio may not retain its tax-exempt status in the hands of a shareholder who
is a "substantial user" of a facility financed by the bonds, or a "related
person" of the substantial user. Although the Portfolio's exempt-interest
dividends may be excluded by shareholders from their gross income for federal
income tax purposes (1) some or all of the Portfolio'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 and
(2) the receipt of dividends and distributions from the Portfolio may affect a
corporate shareholder's federal "environmental" tax liability. The receipt of
dividends and distributions from the Portfolio 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 "environmental" tax, the federal "branch profits" tax, or the
federal "excess net passive income" tax.
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TAX-EXEMPT INCOME VS. TAXABLE INCOME
The tables set out in Appendix B to this Prospectus show individual
taxpayers how to translate the tax savings from investments such as the
Portfolio into an equivalent return from a taxable investment. The yields used
in the tables are for illustration only and are not intended to represent
current or future yields for the Portfolio, which may be higher or lower than
those shown.
DIVIDEND REINVESTMENT PLAN
A shareholder of the Portfolio receiving dividends or distributions in
additional shares 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.
STATEMENTS AND NOTICES
Statements as to the tax status of the dividends and distributions received
by shareholders of the Portfolio are mailed annually. These statements show the
dollar amount of income excluded from federal income taxes and the dollar
amount, if any, subject to federal income taxes. 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 and will indicate the shareholder's share of the investment expense of the
Portfolio. The Portfolio will notify shareholders annually as to the interest
excluded from federal income taxes earned by the Portfolio with respect to those
states and possessions in which the Portfolio has or had investments. The dollar
amount of dividends paid by the Portfolio that is excluded from federal income
taxation and the dollar amount of dividends paid by the Portfolio 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 the
Portfolio. To the extent that the Portfolio 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 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.
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DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Portfolio is authorized to issue up to 500,000,000 shares of Common
Stock, par value $.001 per share. All shares of Common Stock have equal
non-cumulative voting rights and equal rights with respect to dividends, assets
and liquidation. Shares of Common Stock will be fully paid and non-assessable
when issued and have no preemptive, conversion or exchange rights.
PRINCIPAL SHAREHOLDER
As of the date of this Prospectus, Smith Barney Shearson was the record and
beneficial owner of all of the outstanding shares of Common Stock and thus was
deemed to "control" the Portfolio as that term is defined in the 1940 Act. The
shares held by Smith Barney Shearson are intended to enable the Portfolio to
meet an initial capitalization requirement imposed under the 1940 Act. Smith
Barney Shearson has undertaken that the shares were purchased for investment
purposes only and that they will be sold only pursuant to a registration
statement under the Securities Act of 1933, as amended (the "1933 Act") or an
applicable exemption from the registration requirements of the 1933 Act.
PURCHASE OF SHARES
GENERAL
Common Stock will be made available during the Offering through Smith Barney
Shearson as underwriter. The public offering price for the Common Stock during
the Offering is $12.00 per share, and the minimum purchase during the Offering
is 100 shares of Common Stock ($1,200). The Common Stock will be sold during the
Offering subject to no sales charges or underwriting discounts, but Smith Barney
Shearson Financial Consultants will receive compensation from Smith Barney
Shearson in connection with sales of Common Stock during the Offering.
No market has existed for the Common Stock prior to the Offering. The Common
Stock has been approved for listing on the NYSE under the symbol " ." Trading
in the Common Stock on the will not begin, however, until a date within 30
days of the date of this Prospectus. Smith Barney Shearson does not intend to
make a market in the Common Stock during the period in which the Common Stock is
not traded on the NYSE. As a result, during that period, an investment in the
Common Stock should be considered illiquid.
In order to meet the requirements for listing of shares of the Common Stock
on the NYSE, Smith Barney Shearson will undertake to sell lots of 100 or more
shares to a minimum of 2,000 beneficial owners in the United States. During the
period in which Smith Barney Shearson will be soliciting indications of interest
with respect to the Common Stock, the Portfolio and Smith Barney Shearson will
evaluate the market for the Common Stock as well as the market for the
Portfolio's contemplated investments. If changes in existing market and other
conditions make it impractical or inadvisable to proceed with the Offering, the
Offering will not be made.
Smith Barney Shearson intends to make a market in the Common Stock after
trading in the Common Stock has commenced on the NYSE. Smith Barney Shearson,
however, is not obligated to conduct market-making activities and any such
activities may be discontinued at any time without
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<PAGE>
notice, at the sole discretion of Smith Barney Shearson. No assurance can be
given as to the liquidity of, or the trading market for, the Common Stock as a
result of any market-making activities undertaken by Smith Barney Shearson. This
Prospectus is to be used by Smith Barney Shearson in connection with the
Offering and with offers and sales of the Common Stock in market-making
transactions in the over-the-counter market at negotiated prices related to
prevailing market prices at the time of the sale.
Smith Barney Shearson may take certain actions to discourage short-term
trading of Common Stock during a period of time following the effectiveness of
the listing of the Common Stock for trading on the NYSE. During any such period,
for example, physical delivery of certificates representing Common Stock may be
required to transfer ownership of Common Stock.
UNDERWRITING
Under an underwriting agreement dated as of , 1994 (the
"Underwriting Agreement") between the Portfolio and Smith Barney Shearson,
Shearson will serve as the underwriter of the Common Stock. Compensation
received by Smith Barney Shearson Financial Consultants in connection with the
sale of Common Stock during the Offering will be from Smith Barney Shearson's
own assets and not from the Portfolio's assets.
Smith Barney Shearson has agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Portfolio, and the Portfolio has
agreed to sell to Smith Barney Shearson 5,750,000 shares of Common Stock (the
"Firm Shares"). The Underwriting Agreement provides that, if any of the Firm
Shares are purchased by Smith Barney Shearson, all must be so purchased, and
that the obligations of Smith Barney Shearson under the Underwriting Agreement
are subject to various conditions. Under the terms of the Underwriting
Agreement, the Portfolio has agreed to indemnify Smith Barney Shearson against
certain liabilities, including certain liabilities under the 1993 Act.
Smith Barney Shearson may take certain actions to discourage short-term
trading of the Common Stock during a period of time following the initial
offering date. Included in these actions may be the withholding of payments and
concessions to Smith Barney Shearson Financial Consultants in connection with
shares of Common Stock which were sold by such Smith Barney Shearson Financial
Consultants and which are repurchased for the account of the Smith Barney
Shearson Financial Consultant during such period.
SMITH BARNEY SHEARSON
Smith Barney Shearson, located at 1345 Avenue of the Americas, New York, New
York 10105, is a wholly owned subsidiary of Smith Barney Shearson Holdings Inc.
("Holdings"). All of the issued and outstanding common stock of Holdings is held
by Travelers. Smith Barney Shearson is one of the leading full-line investment
firms serving the U.S. and foreign securities and commodities markets.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION
The Portfolio's Articles of Incorporation include provisions that could have
the effect of limiting the ability of other entities or persons to acquire
control of the Portfolio or to change the composition of its Board of Directors
and could have the effect of depriving shareholders of an opportunity to sell
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<PAGE>
their shares of Common Stock at a premium over prevailing market prices by
discouraging a third party from seeking to obtain control of the Portfolio.
Commencing with the first annual meeting of shareholders, the Board of Directors
will be divided into three classes. At the annual meeting of shareholders in
each year thereafter, the term of one class will expire and each Director
elected to the class will hold office for a term of three years. The
classification of the Board of Directors in this manner could delay for up to
two years the replacement of a majority of the Board. The Articles of
Incorporation provide that the maximum number of Directors that may constitute
the Portfolio's entire board is 12. A Director may be removed from office, or
the maximum number of Directors increased, only by vote of the holders of at
least 75% of the shares of Common Stock entitled to be voted on the matter.
The Portfolio's Articles of Incorporation require the favorable vote of the
holders of at least two-thirds of the shares of Common Stock then entitled to be
voted to authorize the conversion of the Portfolio from a closed-end to an
open-end investment company as defined in the 1940 Act, unless two-thirds of the
Continuing Directors (as defined below) approve such a conversion. In the latter
case, the affirmative vote of a majority of the shares outstanding will be
required to approve the amendment to the Portfolio's Articles of Incorporation
providing for the conversion of the Portfolio.
The affirmative votes of at least 75% of the Directors and the holders of at
least 75% of the shares of the Portfolio are required to authorize any of the
following transactions (referred to individually as a "Business Combination"):
(1) a merger, consolidation or share exchange of the Portfolio with or into any
other person (referred to individually as a "Reorganization Transaction"); (2)
the issuance or transfer by the Portfolio (in one or a series of transactions in
any 12-month period) of any securities of the Portfolio to any other person or
entity for cash, securities or other property (or combination thereof) having an
aggregate fair market value of $1,000,000 or more, excluding sales of securities
of the Portfolio in connection with a public offering, issuances of securities
of the Portfolio pursuant to a dividend reinvestment plan adopted by the
Portfolio and issuances of securities of the Portfolio upon the exercise of any
stock subscription rights distributed by the Portfolio; (3) a sale, lease,
exchange, mortgage, pledge, transfer or other disposition by the Portfolio (in
one or a series of transactions in any 12-month period) to or with any person of
any assets of the Portfolio having an aggregate fair market value of $1,000,000
or more, except for transactions in securities effected by the Portfolio in the
ordinary course of its business (each such sale, lease, exchange, mortgage,
pledge, transfer or other disposition being referred to individually as a
"Transfer Transaction"). The same affirmative votes are required with respect
to: any proposal as to the voluntary liquidation or dissolution of the Portfolio
or any amendment to the Portfolio's Articles of Incorporation to terminate its
existence (referred to individually as a "Termination Transaction"); and any
shareholder proposal as to specific investment decisions made or to be made with
respect to the Portfolio's assets.
A 75% shareholder vote will not be required with respect to a Business
Combination if the transaction is approved by a vote of at least 75% of the
Continuing Directors (as defined below) or if certain conditions regarding the
consideration paid by the person entering into, or proposing to enter into, a
Business Combination with the Portfolio and various other requirements are
satisfied. In such case, a majority of the votes entitled to be cast by
shareholders of the Portfolio will be required to approve the transaction if it
is a Reorganization Transaction or a Transfer Transaction that involves
substantially all of the Portfolio's assets and no shareholder vote will be
required to approve the
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transaction if it is any other Business Combination. In addition, a 75%
shareholder vote will not be required with respect to a Termination Transaction
if it is approved by a vote of at least 75% of the Continuing Directors, in
which case a majority of the votes entitled to be cast by shareholders of the
Portfolio will be required to approve the transaction.
The voting provisions described above could have the effect of depriving
shareholders of the Portfolio of an opportunity to sell their Common Stock at a
premium over prevailing market prices by discouraging a third party from seeking
to obtain control of the Portfolio in a tender offer or similar transaction. In
the view of the Portfolio's Board of Directors, however, these provisions offer
several possible advantages, including: (1) requiring persons seeking control of
the Portfolio to negotiate with its management regarding the price to be paid
for the amount of Common Stock required to obtain control; (2) promoting
continuity and stability; and (3) enhancing the Portfolio's ability to pursue
long-term strategies that are consistent with its investment objective and
management policies. The Board of Directors has determined that the voting
requirements described above, which are generally greater than the minimum
requirements under Maryland law and the 1940 Act, are in the best interests of
shareholders generally.
A "Continuing Director," as used in the discussion above, is any member of
the Portfolio's Board of Directors (1) who is not a person or affiliate of a
person who enters or proposes to enter into a Business Combination with the
Portfolio (such a person or affiliate being referred to individually as an
"Interested Party") and (2) who has been a member of the Board of Directors for
a period of at least 12 months (or since the commencement of the Portfolio's
operations, if less than 12 months), or is a successor of a Continuing Director
who is unaffiliated with an Interested Party and is recommended to succeed a
Continuing Director by a majority of the Continuing Directors then members of
the Board of Directors.
CUSTODIAN, TRANSFER, AND DIVIDEND-PAYING AGENT, REGISTRAR AND PLAN AGENT
Boston Safe, located at One Boston Place, Boston, Massachusetts 02108, acts
as custodian of the Portfolio's investments. TSSG, located at One Exchange
Place, Boston, Massachusetts 02109, serves as the Portfolio's transfer agent,
dividend-paying agent and registrar. TSSG also serves as agent in connection
with the Plan.
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus will
be passed on for the Portfolio by Willkie Farr & Gallagher, New York, New York.
Willkie Farr & Gallagher serves as counsel to Smith Barney Shearson.
REPORTS TO SHAREHOLDERS
The Portfolio will send unaudited semi-annual and audited annual reports to
the holders of its securities, including a list of investments held.
EXPERTS
The financial statement of the Portfolio contained in this Prospectus has
been included in reliance on the report of Coopers & Lybrand, independent
accountants, as experts in auditing and accounting.
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FURTHER INFORMATION
This Prospectus does not contain all of the information included in the
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
with respect to the Common Stock offered by this Prospectus, certain portions of
which Registration Statement have been omitted pursuant to the rules and
regulations of the SEC. The Registration Statement, including exhibits filed
with the Registration Statement, may be examined at the office of the SEC in
Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and, in each instance,
reference is made to the copy of the contract or other document filed as an
exhibit to the Registration Statement, of which this Prospectus forms a part,
each such statement's being qualified in all respects by the reference.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Directors of
Greenwich Street Municipal Fund Inc.:
We have audited the accompanying statement of assets and liabilities of
Greenwich Street Municipal Fund Inc. (the "Portfolio") as of June , 1994. This
financial statement is the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement of assets and liabilities. Our
procedures included confirmation of cash held by the custodian as of June ,
1994. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit of the statement of
assets and liabilities provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Greenwich
Street Municipal Fund Inc. as of June , 1994 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
June , 1994
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GREENWICH STREET MUNICIPAL FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
As of June , 1994
<TABLE>
<S> <C>
ASSETS
Cash........................................................................ $
Deferred offering expenses (Note 2).........................................
-----------
Total Assets......................................................
LIABILITIES
Accrued offering expenses (Note 2)..........................................
-----------
Net assets, applicable to shares of common stock issued and
outstanding................................................................
-----------
-----------
Net Asset Value per share ($ divided by shares of common stock
outstanding)................................................................ $
-----------
-----------
</TABLE>
The accompanying notes are an integral part of this statement.
- ----------
NOTES TO STATEMENTS OF ASSETS AND LIABILITIES
(1) Greenwich Street Municipal Fund Inc. (the "Portfolio") was organized on
February 19, 1993 under the laws of the State of Maryland and is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
closed-end management investment company. The Portfolio has had no
operations other than organizational matters and the issuance and sale of
shares of Common Stock on June , 1994 to Smith Barney Shearson Inc.
(2) Costs relating to the public offering of the Portfolio's shares of Common
Stock will be payable from the proceeds of the offering and charged to
capital at the time of the issuance of the shares.
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APPENDIX A
DESCRIPTION OF MOODY'S, S&P AND FITCH RATINGS
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS:
AAA -- Bonds that are rated Aaa are judged to be of the best quality, carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments with respect to these bonds are protected by a large or
by an exceptionally stable margin, and principal is secure. Although the various
protective elements applicable to these bonds are likely to change, those
changes are most unlikely to impair the fundamentally strong position of these
bonds.
AA -- Bonds that are rated Aa are judged to be of high quality by all
standards and together with the Aaa group comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or other elements may be
present that make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest with respect to these bonds are considered
adequate, but elements may be present that suggest a susceptibility to
impairment sometime in the future.
BAA -- Bonds rated Baa are considered to be medium grade obligations, that
is they are neither highly protected nor poorly secured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. These bonds lack outstanding investment characteristics and may
have speculative characteristics as well.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS:
Moody's ratings for state and municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG) and for variable demand obligations
are designated Variable Moody's Investment Grade (VMIG). This distinction
recognizes the differences between short-term credit risk and long-term risk.
Loans bearing the designation MIG 1/VMIG 1 are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
Loans bearing the designation MIG 2/VMIG 2 are of high quality, with margins of
protection ample, although not as large as the preceding group. Loans bearing
the designation MIG 3/VMIG 3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the preceding
grades. Market access for refinancing, in particular, is likely to be less well
established.
A-1
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DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS:
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations, normally evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
DESCRIPTION OF S&P MUNICIPAL BOND RATINGS:
AAA -- These bonds are the obligations of the highest quality and have the
strongest capacity for timely payment of debt service.
GENERAL OBLIGATION BONDS RATED AAA -- In a period of economic stress, the
issuers of these bonds will suffer the smallest declines in income and will be
least susceptible to autonomous decline. Debt burden is moderate. A strong
revenue structure appears more than adequate to meet future expenditure
requirements. Quality of management appears superior.
REVENUE BONDS RATED AAA -- Debt service coverage with respect to these
bonds has been, and is expected to remain, substantial. Stability of the pledged
revenues is also exceptionally strong due to the competitive position of the
municipal enterprise or to the nature of the revenues. Basic security provisions
(including rate covenant, earnings test for issuance of additional bonds, debt
service reserve requirements) are rigorous. There is evidence of superior
management.
AA -- The investment characteristics of bonds in this group are only
slightly less marked than those of the prime quality issues. Bonds rated AA have
the second strongest capacity for payment of debt service.
A -- Principal and interest payments on bonds in this category are regarded
as safe although the bonds are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories. This rating describes the third strongest capacity for payment of
debt service.
GENERAL OBLIGATION BONDS RATED A -- There is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date.
REVENUE BONDS RATED A -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appearance appears adequate.
BBB -- The bonds in this group are regarded as having an adequate capacity
to pay interest and repay principal. Whereas bonds in this group normally
exhibit adequate protection parameters,
A-2
<PAGE>
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories. Bonds rated BBB have the fourth
strongest capacity for payment of debt service.
S&P's letter ratings may be modified by the addition of a plus or a minus
sign, which is used to show relative standing within the major rating
categories, except in the AAA category.
DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS:
Municipal notes with maturities of three years or less are usually given
note ratings (designated SP-1, -2 or -3) to distinguish more clearly the credit
quality of notes as compared to bonds. Notes rated SP-1 have a very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given the designation of SP-1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is strong, but the
relative degree of safety is not as high as for issues designated A-1.
DESCRIPTION OF FITCH MUNICIPAL BOND RATINGS
AAA -- Bonds rated AAA by Fitch are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA -- Bonds rated AA by Fitch are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated F-1+ by Fitch.
A -- Bonds rated A by Fitch are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB -- Bonds rated BBB by Fitch are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse consequences on
these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of a
credit within a rating category. Plus and minus signs, however, are not used in
the AAA category.
A-3
<PAGE>
DESCRIPTION OF FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+ -- Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 -- Issues assigned this rating reflect an assurance of timely payment
only slightly less in degree than issues rated F-1+.
F-2 -- Issues assigned this rating have a satisfactory degree of assurance
for timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3 -- Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term adverse
changes could cause these securities to be rated below investment grade.
LOC -- The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.
A-4
<PAGE>
APPENDIX B
TAX-EXEMPT INCOME COMPARED TO TAXABLE INCOME
The tables below show individual taxpayers how to translate the tax savings
from investments such as the Portfolio into an equivalent return from a taxable
investment. The yields used below are for illustration only and are not intended
to represent current or future yields for the Portfolio, which may be higher or
lower than those shown.
<TABLE>
<CAPTION>
Federal
Sample Marginal Tax-Exempt Yields
Taxable Income Rate* 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
- ----------------- ------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Equivalent Taxable Yield
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Single Return
$ 17,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
45,000 28.00% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
65,000 31.00% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
Joint Return
$ 27,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
75,000 28.00% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
105,000 31.00% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
<CAPTION>
Sample
Taxable Income 7.50% 8.00% 8.50%
- ----------------- ---------- ---------- ----------
<S> <C> <C> <C>
Single Return
$ 17,000 8.82% 9.41% 10.00%
45,000 10.42% 11.11% 11.81%
65,000 10.87% 11.59% 12.32%
Joint Return
$ 27,000 8.82% 9.41% 10.00%
75,000 10.42% 11.11% 11.81%
105,000 10.87% 11.59% 12.32%
</TABLE>
- ----------
* The federal tax rates shown are those currently in effect for 1994 and are
subject to change. The calculations reflected in the table assume that no
income will be subject to any federal, state or local individual
alternative minimum taxes. The rate brackets are subject to adjustment for
the Internal Revenue Service inflation indexation.
B-1
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Greenwich Street
Municipal Fund Inc.
COMMON STOCK
PROSPECTUS
JUNE , 1994
GREENWICH STREET MUNICIPAL FUND INC.
Two World Trade Center
New York, New York 10048
FD0172 E2
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
<TABLE>
<S> <C> <C>
Parts A and B
(a) -- Greenwich Street Municipal Fund Inc. Statement of Assets and
Liabilities.**
(b) -- Report of Independent Accountants.**
Part C -- None.
</TABLE>
(2) Exhibits
<TABLE>
<S> <C> <C>
(a)(1) -- Articles of Incorporation of Registrant.*
(2) -- Articles of Amendment.
(b) -- By-Laws of Registrant.*
(c) -- Not applicable.
(d) -- Form of Specimen certificate representing shares of Common Stock, par
value $.001 per share.**
(e) -- Registrant's Dividend Reinvestment Plan.**
(f) -- Not applicable.
(g)(1) -- Form of Investment Advisory Agreement.**
(2) -- Form of Administration Agreement.**
(h)(1) -- Form of Purchase Agreement.**
(2) -- Form of Underwriting Agreement.**
(i) -- Not applicable.
(j)(1) -- Form of Custody Agreement.**
(2) -- Form of Transfer Agency Agreement.**
(k) -- Not applicable.
(l)(1) -- Opinion and consent of Willkie Farr & Gallagher.**
(2) -- Opinion and consent of Venable, Baetjer and Howard.**
(m) -- Not applicable.
(n) -- Opinion and consent of Coopers & Lybrand.**
(o) -- Not applicable.
(p) -- Not applicable.
(q) -- Not applicable.
</TABLE>
ITEM 25. MARKETING ARRANGEMENTS
See the Forms of Purchase Agreement, Master Agreement Among Underwriters,
Underwriting Agreement and Selected Dealer Agreement to be filed by amendment as
Exhibits (h)(1), (2), (3) and (4).
- ------------------------
*Incorporated by reference to Registrant's initial Registration Statement
filed with the Commission on February 19, 1993.
**To be filed by amendment.
II-1
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses expected to be
incurred in connection with the offering described in this Registration
Statement:
<TABLE>
<S> <C>
SEC Registration fees................................................... $22,562.50
National Association of Securities Dealers, Inc. fees................... $ 7,400.00
New York Stock Exchange listing fee..................................... $ ***
Printing (other than stock certificates) and related delivery
expenses............................................................... $ ***
Engraving and printing stock certificates............................... $ ***
Fees and expenses of qualification under state securities laws
(including fees of counsel)............................................ $ ***
Legal fees and expenses................................................. $ ***
Travel and related out-of-pocket expenses and miscellaneous............. $ ***
Total............................................................... $ ***
---------
---------
</TABLE>
- ------------------------
***To be supplied by amendment.
ITEM 27. PERSON CONTROLLED BY OR UNDER COMMON CONTROL
None.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
The number of record holders of Registrant as of June , 1993 is as
follows:
(1) Title of Class:
Common Stock, $.001 par value
(2) Number of Record Holders:
ITEM 29. INDEMNIFICATION
Under Articles Seventh of Registrant's Articles of Incorporation, any past
or present Director or officer of Registrant is indemnified to the fullest
extent permitted by the Maryland General Corporation Law ("MGCL") against
liability and all expenses reasonably incurred by him in connection with any
action, suit or proceeding to which he may be a party or otherwise involved by
reason of his being or having been a Director or officer of Registrant. This
provision does not authorize indemnification when it is determined that the
Director or officer would otherwise be liable to Registrant or its shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his duties. Expenses may be paid by Registrant to its currently
acting and its former Directors and officers, to the fullest extent that
indemnification of directors is permitted by the MGCL, the 1933 Act and the 1940
Act, in advance of the final disposition of any action, suit or proceeding. The
Board may by bylaw, resolution or agreement make further provision for
indemnification of Directors, officers, employees and agents to the fullest
extent permitted by the MGCL.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of Registrant pursuant
to the foregoing provisions, or otherwise, Registrant has been advised that, in
the opinion of the SEC, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
[TO COME]
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
Each Person maintaining physical possession of accounts, books and other
documents required to be maintained pursuant to Section 31(a) of the 1940 Act is
listed below:
(1) Greenwich Street Advisors
388 Greenwich Street
New York, New York 10013
(2) The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
(3) Boston Safe Deposit and Trust Company
One Cabot Road
Medford, Massachusetts 02155
(4) The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
ITEM 32: MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(1) Registrant undertakes to suspend offering of the shares of Common Stock
covered by this Registration Statement until it amends the Prospectus contained
in this Registration Statement if (i) subsequent to the effective date of this
Registration Statement, its net asset value per share declines more than 10
percent from its net asset value per share as of the effective date of this
Registration Statement or (ii) its net asset value increases to an amount
greater than its net proceeds as stated in the Prospectus contained in this
Registration Statement.
(2) Registrant undertakes to file a post-effective amendment with certified
financial statements showing the initial capital received before it accepts
subscriptions from more than 25 persons if the Registrant proposes to raise its
initial capital under Section 14(a)(3) of the 1940 Act.
(3) Not applicable.
(4) Not applicable.
(5) Registrant undertakes that:
(a) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A under the 1933 Act
and contained in the form of Prospectus filed by Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the 1933 Act shall be deemed
to be part of this Registration Statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains the form of Prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of the securities at
that time will be deemed to be the initial bona fide offering
thereof.
(6) Not applicable.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant has duly caused this Pre-Effective
Amendment No. 1 to its Registration Statement on Form N-2 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 18th day of April, 1994.
GREENWICH STREET MUNICIPAL FUND INC.
By: _______/s/_HEATH B. MCLENDON______
Heath B. McLendon
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to its Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated:
<TABLE>
<C> <S> <C>
/s/HEATH B. MCLENDON Chairman of the Board and Chief April 18,
Heath B. McLendon Executive Officer 1994
/s/STEPHEN J. TREADWAY April 18,
Stephen J. Treadway President 1994
/s/RICHARD P. ROELOFS April 18,
Richard P. Roelofs Director 1994
/s/CHARLES F. BARBER April 18,
Charles F. Barber Director 1994
/s/ALLAN J. BLOOSTEIN April 18,
Allan J. Bloostein Director 1994
/s/MARTIN BRODY April 18,
Martin Brody Director 1994
/s/DWIGHT B. CRANE April 18,
Dwight B. Crane Director 1994
/s/VINCENT NAVE Treasurer (Chief Financial and April 18,
Vincent Nave Accounting Officer) 1994
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------------- ------------------------------------------------------------------------------- -------------
<C> <C> <S> <C>
(a)(1) -- Articles of Incorporation of Registrant.*
(a)(2) -- Articles of Amendment.
(b) -- By-Laws of Registrant.*
(c) -- Not applicable.
(d) -- Form of Specimen certificate representing shares of Common Stock, par value
$.001 per share.**
(e) -- Registrant's Dividend Reinvestment Plan.**
(f) -- Not applicable.
(g)(1) -- Form of Investment Advisory Agreement.**
(2) -- Form of Administration Agreement.**
(h)(1) -- Form of Purchase Agreement.**
(2) -- Form of Underwriting Agreement.**
(i) -- Not applicable.
(j)(1) -- Form of Custody Agreement.**
(2) -- Form of Transfer Agency Agreement.**
(k) -- Not applicable.
(l)(1) -- Opinion and consent of Willkie Farr & Gallagher.**
(2) -- Opinion and consent of Venable, Baetjer and Howard.**
(m) -- Not applicable.
(n) -- Opinion and consent of Coopers & Lybrand.**
(o) -- Not applicable.
(p) -- Not applicable.
(q) -- Not applicable.
</TABLE>
- ------------------------
* Incorporated by reference to the Registrant's initial Registration Statement
filed with the Commission on February 19, 1993.
** To be filed by amendment.
<PAGE>
MUNICIPAL OPPORTUNITY FUND INC.
ARTICLE OF AMENDMENT
Municipal Opportunity Fund Inc., a Maryland corporation having its
principal office in the City of Baltimore, State of Maryland (the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by striking out
Article SECOND and inserting in lieu thereof the following:
"SECOND: The name of the corporation is Greenwich Street
Municipal Fund Inc. (the "Corporation")."
SECOND: The foregoing amendment to the Charter of the Corporation has
been approved by the entire Board of Directors of the Corporation and no stock
entitled to be voted on this matter is outstanding or subscribed for.
The undersigned as Chairman of the Board of Directors and Chief Executive
Officer acknowledges this Article of Amendment to be the corporate act of the
Corporation, and states that to the best of his knowledge, information and
belief the matters and facts set forth in this Article of Amendment with respect
to the authorization and approval are true in all material respects and that
this statement is made under penalties of perjury.
IN WITNESS WHEREOF, Municipal Opportunity Fund Inc. has caused this Article
of Amendment to be signed in its name by its Chairman of the Board of Directors
and Chief Executive Officer, this 15th day of April, 1994.
MUNICIPAL OPPORTUNITY FUND INC.
/s/ Heath B. McLendon
-----------------------------------
Heath B. McLendon
Chairman of the Board of Directors,
Chief Executive Officer
WITNESS:
/s/ Lee D. Augsburger
- ----------------------
Lee D. Augsburger
Assistant Secretary
