<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1994.
SECURITIES ACT FILE NO. 33-
INVESTMENT COMPANY ACT FILE NO. 811-07201
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(check appropriate box or boxes)
------------------------
GREENWICH STREET CALIFORNIA
MUNICIPAL 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) 720-9218
MR. HEATH B. McLENDON
Smith Barney 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 833,750
$.001 per share........ shares $12.00 $10,005,000 $3,450.02
<FN>
(1) Includes 108,750 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.
</TABLE>
------------------------
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 CALIFORNIA 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 California 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
California Municipal Fund 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 California
Municipal Fund Inc. Statement of Assets
and Liabilities
</TABLE>
PART C
Items 24-32 have been answered in order in Part C.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 12, 1994
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- ---------------------------------------------------------------------------
PROSPECTUS September , 1994
Greenwich Street California 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 and California
personal income tax as is consistent with the preservation of principal. Under
normal conditions, the Portfolio will, in seeking its investment objective,
invest its assets primarily in long-term, investment grade obligations issued
by, or on behalf of, the State of California and its political subdivisions,
agencies and instrumentalities or multistate agencies or authorities. The
Portfolio's address is Two World Trade Center, New York, New York 10048 and the
Portfolio's telephone number is (212) 720-9218.
Shares of the Portfolio's Common Stock, par value $.001 per share ("Common
Stock"), will be offered through Smith Barney Inc. and certain of its affiliates
("Smith Barney"), 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).
Investors are advised to read this Prospectus and to retain it for future
reference.
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
American Stock Exchange, Inc. (the "AMEX"). Trading in the Common Stock will not
begin, however, until a date within 30 days of the date of this
(CONTINUED ON PAGE 2)
<TABLE>
<CAPTION>
PRICE TO PROCEEDS TO
PUBLIC SALES LOAD(1)(2) THE PORTFOLIO(3)
<S> <C> <C> <C>
Per
Share... $12.00 $0.00 $12.00
Total(4).. $8,700,000 $0.00 $8,700,000
</TABLE>
(FOOTNOTES ON PAGE 2)
The shares of Common Stock offered by this Prospectus during the Offering are
offered by Smith Barney subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by Smith
Barney, and to certain other conditions. It is expected that delivery of shares
of Common Stock will be made at the offices of Smith Barney, New York, New York,
on or about September , 1994.
SMITH BARNEY INC.
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.
1
<PAGE>
(CONTINUED FROM PAGE 1)
Prospectus. Smith Barney does not intend to make a market in the Common Stock
during the period in which the Common Stock is not traded on the AMEX. 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 intends to make a market in the Common Stock after trading in the
Common Stock has commenced on the AMEX. Smith Barney, 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. 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. This
Prospectus is to be used by Smith Barney 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.
- ----------------
(FOOTNOTES FROM PAGE 1)
(1) The Portfolio's shares of Common Stock will be sold during the offering
without any sales load. Smith Barney will compensate sales personnel out of
its own funds.
(2) The Portfolio has agreed to indemnify Smith Barney 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 $ .
(4) The Portfolio has granted Smith Barney an option to purchase up to an
additional 108,750 shares of Common Stock to cover over-allotments. If the
option is exercised in full, the Total Price to Public, Sales Load and
Proceeds to the Portfolio will be $10,005,000, $0.00 and $10,005,000,
respectively. See "Purchase of Shares."
UNTIL DECEMBER , 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.
IN CONNECTION WITH THE OFFERING, SMITH BARNEY MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMEX, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY 4
-----------------------------------------------------------------
THE PORTFOLIO 10
-----------------------------------------------------------------
USE OF PROCEEDS 11
-----------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES 11
-----------------------------------------------------------------
INVESTMENT RESTRICTIONS 37
-----------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIO 38
-----------------------------------------------------------------
SECURITIES TRANSACTIONS AND TURNOVER 41
-----------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN 43
-----------------------------------------------------------------
NET ASSET VALUE 45
-----------------------------------------------------------------
TAXATION 46
-----------------------------------------------------------------
DESCRIPTION OF CAPITAL STOCK 52
-----------------------------------------------------------------
PURCHASE OF SHARES 53
-----------------------------------------------------------------
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION 55
-----------------------------------------------------------------
CUSTODIAN, TRANSFER, AND DIVIDEND-PAYING AGENT,
REGISTRAR AND PLAN AGENT 57
-----------------------------------------------------------------
LEGAL MATTERS 57
-----------------------------------------------------------------
REPORTS TO SHAREHOLDERS 58
-----------------------------------------------------------------
EXPERTS 58
-----------------------------------------------------------------
FURTHER INFORMATION 58
-----------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS 60
-----------------------------------------------------------------
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
STATEMENT OF ASSETS AND LIABILITIES 61
-----------------------------------------------------------------
APPENDIX A A-1
-----------------------------------------------------------------
APPENDIX B B-1
-----------------------------------------------------------------
</TABLE>
3
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- ---------------------------------------------------------------------------
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.
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 and California personal 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 and California personal 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 not less than 80% of its net assets in
municipal obligations and not less than 65% of its net assets in California
obligations. 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. 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."
4
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
The Portfolio anticipates applying to list the Common Stock on the AMEX.
Trading in the Common Stock will not begin, however, until a date within 30 days
of the date of this Prospectus. Smith Barney does not intend to make a market in
the Common Stock during the period in which the Common Stock is not traded on
the AMEX. As a result, during that period, an investment in the Common Stock
should be considered illiquid. Smith Barney intends to make a market in the
Common Stock after trading in the Common Stock has commenced on the AMEX. Smith
Barney, 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. 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. 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 Financial Consultants
will receive compensation from Smith Barney 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. Smith Barney is a wholly
owned subsidiary of Smith Barney 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.
acts as administrator of the Portfolio and in that capacity provides certain
administrative services, 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
5
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
daily and paid monthly at the annual rate of 0.90% of the value of the
Portfolio's average daily net assets. The 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."
CUSTODIAN PNC Bank, National Association ("PNC Bank") 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
6
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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 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,
7
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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 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 concentration in California obligations involves certain
additional risks that should be considered carefully by investors. Certain
California constitutional amendments, legislative measures, executive orders,
administrative regulations, court decisions and voter initiatives could result
in certain adverse consequences affecting California obligations. In particular,
there are risks resulting from certain recent amendments to the California
Constitution and other statutes that limit the taxing and spending authority of
California governmental entities, and these may have the effect of impairing the
ability of certain issuers of California obligations to pay principal and
interest on their obligations. In addition, investors purchasing municipal
obligations of their state of residence, or a fund comprised of such
obligations, should recognize that the benefits of the exemption from state and
local taxes, in addition to the exemption from federal taxes, necessarily limits
the Portfolio's ability to diversify geographically. See "Investment Objective
and Management Policies -- Risk Factors and Special Considerations" and
"Taxation."
The Portfolio's Articles of Incorporation include provisions that could have
the effect of limiting the ability of other entities or persons to acquire
8
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
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 will be soliciting indications of
interest with respect to the Common Stock, the Portfolio and Smith Barney 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 AMEX, 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."
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>
------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price) 0%
Dividend Reinvestment Plan Fees and Cash Purchase
Plan Fees 0%
------------------------------------------------------------------
ANNUAL EXPENSES
(as a percentage of net assets attributable to
Common Stock)
Management Fees 0.90%
------------------------------------------------------------------
Other Expenses (estimated) 0.20%
------------------------------------------------------------------
TOTAL ANNUAL EXPENSES (ESTIMATED) 1.10%
------------------------------------------------------------------
</TABLE>
9
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PROSPECTUS SUMMARY (CONTINUED)
"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> <C>
--------------------------------------------------------------------------------
$ 11 $ 35 $ 61 $ 134
--------------------------------------------------------------------------------
</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."
- --------------------------------------------------------------------
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
10
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
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THE PORTFOLIO (CONTINUED)
of Maryland on July 8, 1994, 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.
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USE OF PROCEEDS
The net proceeds from the sale of shares of Common Stock in the Offering will
be approximately $ ($ if Smith Barney exercises the
over-allotment option in full) 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."
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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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 tax and California personal income taxes as is
consistent with the preservation of principal. In seeking its objective, the
Portfolio will invest primarily in investment grade debt obligations issued by,
or on behalf of, the State of California and its 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 the purposes of federal income tax as
well as California personal income tax. The Portfolio will operate subject to a
fundamental investment policy providing that, under normal conditions, the
Portfolio will invest not less than 80% of its net assets in municipal
obligations the interest on which is exempt from federal income tax (other than
the alternative minimum tax) ("Municipal Obligations") and not less than 65% of
its net assets in Municipal Obligations the interest on which is also exempt
from California personal income tax in the opinion of bond counsel to the
issuers ("California 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%
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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.
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.
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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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.
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
which the Portfolio is authorized to invest. A determination by the Investment
Manager that an unrated lease obligation is
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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,
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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.
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
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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 PNC Bank 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
fully invested in securities at the same
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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
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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, 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
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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,
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 PNC Bank 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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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.
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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 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.
The Investment Manager 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 the Investment Manager 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 the
Investment Manager to value the Portfolio's securities will become more
difficult. The Investment Manager's judgment may play a greater role in the
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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.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA OBLIGATIONS. The Portfolio's
concentration in California obligations involves certain additional risks that
should be considered carefully by investors. Certain California constitutional
amendments, legislative measures, executive orders, administrative regulations,
court decisions and voter initiatives could result in certain adverse
consequences affecting California obligations. In particular, there are risks
resulting from certain recent amendments to the California Constitution and
other statutes that limit the taxing and spending authority of California
governmental entities, and these may have the effect of impairing the ability of
certain issuers of California obligations to pay principal and interest on their
obligations.
The following information is a summary of special factors affecting California
obligations. It does not purport to be a complete description and is based on
information from statements relating to securities offerings of California
issuers.
California's economy is the largest among the 50 states. The State's January
1, 1992 population of 31 million represented approximately 12.0% of the total
United States population. Total employment was about 14 million, the majority of
which was in the service, trade and manufacturing sectors.
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Since the start of the 1990-91 fiscal year, the State has faced the worst
economic, fiscal and budget conditions since the 1930s. Construction,
manufacturing (especially aerospace), and financial services, among others, have
all been severely affected; agriculture has been hurt by weather conditions.
Overall, the State has lost over 808,000 jobs since May 1990 and the trough of
the recession may still not have been reached. The State's tax revenue
experience clearly reflects sharp declines in employment, income, and retail
sales on a scale not seen in over 50 years. The Department of Finance in its May
1992 Revision of General Fund Revenues and Expenditures (the "May Revision")
assumed that by the second half of 1992, the State would join a modest national
upturn. It is now likely that recovery will be delayed until the national
economy turns around and achieves a sustained pattern of growth.
Nonfarm payroll employment has continued to slide since the beginning of 1992.
The number of payroll jobs in June was at the lowest level since the recession
began. Although seasonally adjusted payroll jobs increased from June to July,
the rise was attributable primarily to the employment of teachers and
administrators as a result of year-round schooling. From the year earlier level,
July 1992 employment was down 275,000, or 2.2%, and private payroll employment
fell by 2.6% over the same 12 month period. Declines were concentrated in the
goods-producing industries, although every industry division shared in the
losses. Manufacturing and construction together accounted for about 60% of the
total job losses. The aerospace industries remain notably weak, showing declines
in the range of 10 to 13% from year ago levels, which reflect ongoing downsizing
and defense cutbacks. August's unemployment rate for the State was 9.8%, the
highest since June 1983. For the first eight months of 1992, the unemployment
rate averaged 8.8% compared to 7.5% for the same period last year.
Construction data show continued weakness in the State's housing market with
residential building permits averaging slightly below a 100,000 unit pace for
the first seven months of the year. This is below last year's sluggish
performance over the same period. The latest data also indicate that
nonresidential construction activity has yet to show any vitality. In looking at
year-to-date comparisons, permit value for office buildings and hotels was down
46% and 73%, respectively. Construction of stores and other mercantile buildings
has performed relatively well with only a 2.5% decline. Office vacancy rates are
still high in California, particularly in the southern
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part of the State, which will impede recovery in the nonresidential construction
sector. The latest job data for the State show a drop of 38,000 jobs in
September 1992, due not only to the end of federally-sponsored summer jobs, but
also to further declines in construction, manufacturing and retail trade.
The recession has seriously affected State revenues, which basically mirror
economic conditions. It has also caused increased expenditures for health and
welfare programs. The State is also facing a structural imbalance in its budget
with the largest programs supported by the General Fund--K-14 education
(kindergarten through community college), health, welfare and
corrections--growing at rates significantly higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State entered a
period of chronic budget imbalance, with expenditures exceeding revenues for
four of the last five fiscal years. Revenues declined in 1990-91 over 1989-90,
the first time since the 1930s. By June 30, 1992, the State's General Fund had
an accumulated deficit, on a budget basis, of approximately $2.2 billion.
A further consequence of the large budget imbalances over two consecutive
years was that the State exhausted its available cash resources. In late June
1992, the State was required to issue $475 million of short-term revenue
anticipation warrants to cover obligations coming due on June 30. With the
failure of the Governor and Legislature to adopt a budget for the 1992-93 fiscal
year on time, the shortfall of cash forced the State Controller to issue
interest-bearing "register warrants" (I.O.U.s) in lieu of regular warrants
redeemable for cash after July 1, 1992 to many State vendors, suppliers, and
employees and to local government agencies. Until the State Budget was adopted
on September 2, 1992, the Controller issued more than one million registered
warrants totalling approximately $3.8 billion to pay valid obligations from the
prior fiscal year, and to pay continuing obligations after July 1 based on
special appropriations or court orders. Certain constitutionally mandated
obligations, such as debt service on bonds and revenue anticipation warrants,
were paid with available cash. Registered warrants have not been issued by the
State since the 1930's.
The 1992-93 Governor's Budget proposed expenditures of $56.3 billion in
General and Special Funds for the 1992-93 fiscal year, a 1.6% increase over
corresponding figures for the 1991-92 fiscal year. General Fund expenditures
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were projected at $43.8 billion, an increase of 0.2% over the 1992-93 Revised
Governor's Budget. The Budget estimated $45.7 billion of revenues and transfers
for the General Fund (a 4.7% increase over 1991-92) and $12.4 billion for
Special Funds (a 9.6% increase over 1991-92). To balance the proposed budget,
program reductions totaling $4.365 billion and revenue and transfer increases of
$872 million were proposed for the 1991-92 and 1992-93 fiscal years.
In October 1992, the Commission on State Finance forecast that the General
Fund will end the 1992-93 fiscal year with a deficit of $2.4 billion, which
could lead to a two-year funding gap at the end of the 1993-94 fiscal year of
more than $4 billion. The forecast reflects the Commission's reevaluation of its
basic premise that the State was in a cyclical downturn and that economic growth
would return in the foreseeable future. The Commission's primary forecast falls
between two extreme forecasts. Under the Commission's "optimistic forecast," if
the economy rebounds sooner than expected, the projected $4 billion gap would
disappear and a $1.5 billion surplus might exist by the end of fiscal year
1993-94. Under the Commission's "pessimistic forecast," if the economy turns
down again, producing a deeper recession, the shortfall could reach $7.4 billion
by the end of the 1993-94 fiscal year.
The State is subject to an annual appropriations limit imposed by Article
XIIIB of the State Constitution (the "Appropriations Limit"), and is prohibited
from spending "appropriations subject to limitation" in excess of the
Appropriations Limit. Article XIIIB, originally adopted in 1979, was modified
substantially by Propositions 98 and 111 in 1988 and 1990, respectively.
"Appropriations subject to limitation" are authorizations to spend "proceeds of
taxes", which consist of tax revenues and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to the extent that
such proceeds exceed the reasonable cost of providing the regulation, product or
service. The Appropriations Limit is based on the limit for the prior year,
adjusted annually for certain changes, and is tested over consecutive two-year
periods. Any excess of the aggregate proceeds of taxes received over such
two-year period above the combined Appropriations Limits for those two years is
divided equally between transfers to K-14 districts and refunds to taxpayers.
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Exempted from the Appropriations Limit are debt service costs of certain
bonds, court or federally mandated costs, and, pursuant to Proposition 111,
qualified capital outlay projects and appropriations or revenues derived from
any increase in gasoline taxes and motor vehicle weight fees above January 1,
1990 levels. Some recent initiatives were structured to create new tax revenues
dedicated to specific uses and expressly exempted from the Article XIIIB limits.
The Appropriations Limit may also be exceeded in cases of emergency arising from
civil disturbance or natural disaster declared by the Governor and approved by
two-thirds of the Legislature. If not so declared and approved, the
Appropriations Limit for the next three years must be reduced by the amount of
the excess.
Article XIIIB, as amended by Proposition 98 on November 8, 1988, also
establishes a minimum level of state funding for school and community college
districts and requires that excess revenues up to a certain limit be transferred
to schools and community college districts instead of returned to the taxpayers.
Determination of the minimum level of funding is based on several tests set
forth in Proposition 98. During fiscal year 1991-92 revenues were smaller than
expected, thus reducing the payment owed to schools in 1991-92 under alternate
"test" provisions. In response to the changing revenue situation, and to fully
fund the Proposition 98 guarantee in the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted legislation to reduce 1991-92
appropriations. The amount budgeted to schools but which exceeded the reduced
appropriation was treated as a non-Proposition 98 short-term loan in 1991-92. As
part of the 1992-93 Budget, $1.1 billion of the amount budgeted to K-14 schools
was designated to "repay" the prior year loan, thereby reducing cash outlays in
1992-93 by that amount.
Because of the complexities of Article XIIIB, the ambiguities and possible
inconsistencies in its terms, the applicability of its exceptions and exemptions
and the impossibility of predicting future appropriations, the Sponsor cannot
predict the impact of this or related legislation on the Bonds in the California
Trust Portfolio. Other Constitutional amendments affecting state and local taxes
and appropriations have been proposed from tine to time. If any such initiatives
are adopted, the State could be pressured to provide additional financial
assistance to local governments or appropriate revenues as mandated by such
initiatives. Propositions such as Proposition 98 and others that may be adopted
in the future, may place increasing pressure on
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the State's budget over future years, potentially reducing resources available
for other State programs, especially to the extent the Article XIIIB spending
limit would restrain the State's ability to fund such other programs by raising
taxes.
As of September 30, 1992, the State had over $15.66 billion aggregate amount
of its general obligation bonds outstanding. General obligation bond
authorizations in the aggregate amount of approximately $8.96 billion remained
unissued as of September 30, 1992. The State expects to sell between $3.0 and
$3.6 billion in general obligation bonds in 1992. Since 1980, voters of the
State have approved $23.763 billion and rejected $6.159 billion of general
obligation bond proposals. Of the rejected bonds, $4.579 billion were turned
down by the voters in November 1990. The State Legislature and the Governor have
placed $1.9 million of new bond proposals on the November 1992 ballot. The State
also builds and acquires capital facilities through the use of lease purchase
borrowing. As of June 30, 1992, the State had approximately $2.88 billion of
outstanding Lease-Purchase Debt.
In addition to the general obligation bonds, State agencies and authorities
had approximately $21.87 billion aggregate principal amount of revenue bonds and
notes outstanding as of June 30, 1992. Revenue bonds represent both obligations
payable from State revenue-producing enterprises and projects, which are not
payable from the General Fund, and conduit obligations payable only from
revenues paid by private users of facilities financed by such revenue bonds.
Such enterprises and projects include transportation projects, various public
works and exposition projects, education facilities (including the California
State University and University of California systems), housing health
facilities and pollution control facilities.
The State is a party to numerous legal proceedings, many of which normally
occur in governmental operations. In addition, the State is involved in certain
other legal proceedings that, if decided against the State, might require the
State to make significant future expenditure or impair future revenue sources.
Example of such cases include challenges to the State's method of taxation of
certain businesses, challenges to certain vehicle license fees, and challenges
to the State's use of Public Employee Retirement System funds to offset future
State and local pension contributions. Other cases
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which could significantly impact revenue or expenditures involve reimbursement
to school districts for voluntary school desegregation and state mandated costs,
challenges to Medi-Cal eligibility, recovery for flood damages, and liability
for toxic waste cleanup. Because of the prospective nature of these proceedings,
it is not presently possible to predict the outcome of such litigation or
estimate the potential impact on the ability of the State to pay debt service on
its obligations.
As a result of the deterioration in the State's budget and cash situation in
fiscal year 1991-92, and the delay in adopting the 1992-93 budget which resulted
in issuance of registered warrants (I.O.U.s), rating agencies reduced the
State's credit rating. Between November 1991 and September 30, 1992, the rating
on the State's general obligation bonds was reduced by Standard & Poor's
Corporation from "AAA" to "A+", by Moody's Investors Service, Inc. from "Aaa" to
"Aa", and by Fitch Investors Service, Inc. from "AAA" to "AA". There can be no
assurance that such ratings will continue for any given period of time or that
they will not in the future be further revised or withdrawn.
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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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
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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
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
36
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES (CONTINUED)
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. 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.
2. 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.
37
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
INVESTMENT RESTRICTIONS (CONTINUED)
3. Underwrite any issue of securities, except to the extent that the
purchase of Municipal Obligations may be deemed to be an underwriting.
4. 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.
5. 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.
6. 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.
7. Issue senior securities.
8. 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.
9. 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
38
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
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>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH THE PORTFOLIO DURING PAST FIVE YEARS
<S> <C> <C>
- -------------------------------------------------------------------------------
*+Heath B. McLendon Chairman of the Board Executive Vice President of
Two World Trade Center of Directors, Chief Smith Barney; Chairman of the
New York, NY 10048 Executive Officer and Board of Smith Barney
Director Investment Strategy Advisers
Inc.
*+Stephen J. Treadway President and Director Executive Vice President of
1345 Ave. of the Smith Barney; Chairman of the
Americas Board, President and Chief
New York, NY 10105 Executive Officer of Mutual
Management Corp., and Smith,
Barney Advisers, Inc.,
investment advisory affiliates
of Smith Barney.
*Richard P. Roelofs Executive Vice President of Smith Barney
Two World Trade Center President and Director Investment Strategy Advisers
New York, NY 10048 Inc. and a Managing Director of
Smith Barney.
Lewis E. Daidone Chief Financial and Managing Director of Smith
1345 Ave. of the Accounting Officer and Barney, Senior Vice President
Americas Treasurer and/or Treasurer of investment
New York, NY 10105 companies associated with Smith
Barney, Director and Senior
Vice President of Mutual
Management Corp. and Smith,
Barney Advisers, Inc., and
Senior Vice President of Smith
Barney Strategy Advisers
Inc. Prior to January 1990,
Senior Vice President and Chief
Financial Officer of Cortland
Financial Group, Inc. and Vice
President and Treasurer of its
associated investment com-
panies and subsidiary broker.
Vice President and
Investment Officer
Investment Officer
</TABLE>
39
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH THE PORTFOLIO DURING PAST FIVE YEARS
- -------------------------------------------------------------------------------
<S> <C> <C>
Christina T. Sydor Secretary Managing Director of Smith
1345 Ave. of the Barney and Secretary of
Americas investment companies as-
New York, NY 10105 sociated with Smith Barney and
of Mutual Management Corp.,
Smith, Barney Advisers, Inc.
and Smith Barney Strategy
Advisers Inc.
- -------------------------------------------------------------------------------
<FN>
*"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 is affiliated.
</TABLE>
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. Mutual Management Corp. was incorporated in 1978 and currently manages
investment companies that had total assets of approximately $50 billion at March
31, 1994, of which $7.5 billion consisted of municipal bond portfolios. Mutual
Management Corp. is controlled by Smith Barney Holdings Inc., the parent company
of Smith Barney. Smith Barney Holdings Inc. is a 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
40
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIO (CONTINUED)
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.
, who is Vice President and Investment Officer of the Portfolio,
is primarily responsible for management of the Portfolio's assets. [Biography to
be supplied]
The Investment Manager 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; 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
41
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
SECURITIES TRANSACTIONS AND TURNOVER (CONTINUED)
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.
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 seek an exemptive order from the SEC permitting it
to enter into principal transactions involving certain money market instruments
with Smith Barney and certain Smith Barney-affiliated dealers; no assurance can
be given that such an order will be sought or granted.
42
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
SECURITIES TRANSACTIONS AND TURNOVER (CONTINUED)
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
43
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN (CONTINUED)
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 date of valuation, 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 asset value is less than 95% of the then
current market price of the Common Stock, then at 95% of the market value.
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, as purchasing agent for Plan participants (the "Purchasing Agent"), will
buy Common Stock in the open market, on the AMEX or elsewhere, for the
participants' accounts. If, following the commencement of the purchases and
before 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
44
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS; DIVIDEND REINVESTMENT PLAN (CONTINUED)
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 New York Stock Exchange (the "NYSE"), currently
4:00 p.m., New York time, on each day on which the NYSE is open for 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.
45
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
NET ASSET VALUE (CONTINUED)
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 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.
46
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
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 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
47
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
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 treated as receiving a
48
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
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.
California shareholders will not be subject to California state personal
income tax on Portfolio dividends to the extent that such distributions qualify
as exempt-interest dividends under the Code and California law; provided, that
at the close of each quarter of the Portfolio's taxable year at least 50% of the
Portfolio's total assets are invested in municipal obligations of California
issuers. To the extent that distributions are derived from taxable income,
including long or short-term capital gains, such distributions will not be
exempt from California state personal income tax. Dividends on the Portfolio are
not excluded in determining California state franchise taxes on corporations and
financial institutions.
In general, investors purchasing municipal obligations of their state of
residence, or a fund comprised of such obligations, should recognize that the
49
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
benefits of the exemption from state and local taxes, in addition to the
exemption from federal taxes, necessarily limits the Portfolio's ability to
diversify geographically.
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.
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
50
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
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.
51
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
TAXATION (CONTINUED)
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.
- --------------------------------------------------------------------
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 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 are intended to enable the Portfolio to meet an initial
capitalization requirement imposed under the 1940 Act. Smith Barney 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.
52
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
PURCHASE OF SHARES
GENERAL
Common Stock will be made available during the Offering through Smith Barney
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
Financial Consultants will receive compensation from Smith Barney 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 AMEX under the symbol " ."
Trading in the Common Stock on the AMEX will not begin, however, until a date
within 30 days of the date of this Prospectus. Smith Barney does not intend to
make a market in the Common Stock during the period in which the Common Stock is
not traded on the AMEX. As a result, during that period, an investment in the
Common Stock should be considered illiquid. Purchases of shares on the AMEX will
be subject to payment of customary brokerage commissions.
During the period in which Smith Barney will be soliciting indications of
interest with respect to the Common Stock, the Portfolio and Smith Barney 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 intends to make a market in the Common Stock after trading in the
Common Stock has commenced on the AMEX. Smith Barney, 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. 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. This
Prospectus is to be used by Smith Barney 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.
53
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
PURCHASE OF SHARES (CONTINUED)
Smith Barney 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 AMEX. 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 September , 1994 (the
"Underwriting Agreement") between the Portfolio and Smith Barney, Smith Barney
will serve as the underwriter of the Common Stock. Compensation received by
Smith Barney Financial Consultants in connection with the sale of Common Stock
during the Offering will be from Smith Barney's own assets and not from the
Portfolio's assets.
Smith Barney 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 725,000 shares of Common Stock (the "Firm
Shares"). The Portfolio has also granted Smith Barney an option, exercisable for
60 days after the date of this Prospectus, to purchase up to 108,750 additional
shares of Common Stock to cover over-allotments, if any, at a price equal to the
public offering price for the Common Stock during the offering. The Underwriting
Agreement provides that, if any of the Firm Shares are purchased by Smith
Barney, all must be so purchased, and that the obligations of Smith Barney under
the Underwriting Agreement are subject to various conditions. Under the terms of
the Underwriting Agreement, the Portfolio has agreed to indemnify Smith Barney
against certain liabilities, including certain liabilities under the 1933 Act.
SMITH BARNEY
Smith Barney, located at 1345 Avenue of the Americas, New York, New York
10105, is a wholly owned subsidiary of Smith Barney Holdings Inc. ("Holdings").
All of the issued and outstanding common stock of Holdings is held by Travelers.
Smith Barney is one of the leading full-line investment firms serving the U.S.
and foreign securities and commodities markets.
54
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
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
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
55
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION (CONTINUED)
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 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
56
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- ---------------------------------------------------------------------------
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION (CONTINUED)
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
PNC Bank, located at 17th and Chestnut Streets, Philadelphia, Pennsylvania
19103, 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.
57
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
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 KPMG Peat Marwick, independent
accountants, as experts in auditing and accounting.
- --------------------------------------------------------------------
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.
-------------------
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 INVESTMENT MANAGER OR SMITH BARNEY. 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
58
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
FURTHER INFORMATION (CONTINUED)
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.
59
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
[To be supplied]
60
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- --------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES As of September , 1994
<TABLE>
<S> <C>
ASSETS
Cash $ 100,008
Deferred offering expenses (Note 2) --
- ------------------------------------------------------------------------------
TOTAL ASSETS --
- ------------------------------------------------------------------------------
LIABILITIES
Accrued offering expenses (Note 2) --
- ------------------------------------------------------------------------------
NET ASSETS, applicable to 8,334 shares of common stock issued and
outstanding 100,008
- ------------------------------------------------------------------------------
NET ASSET VALUE per share ($100,008 divided by 8,334 shares of
common stock outstanding) $12.00
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this statement.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
(1) Greenwich Street California Municipal Fund Inc. (the "Portfolio") was
organized on July 8, 1994 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 8,334 shares of Common Stock on September , 1994 to Smith Barney
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.
61
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
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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.
A-1
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
APPENDIX A (CONTINUED)
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.
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.
A-2
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
APPENDIX A (CONTINUED)
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, 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.
A-3
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
APPENDIX A (CONTINUED)
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.
A-4
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GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
APPENDIX A (CONTINUED)
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.
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-5
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- ---------------------------------------------------------------------------
APPENDIX B
TAX-EXEMPT INCOME COMPARED TO TAXABLE INCOME
In August 1993 the United States Congress passed the Revenue Reconciliation
Act of 1993 which increased the top federal income tax bracket to 36 percent.
For taxpayers with adjusted incomes in excess of $250,000 a surcharge of ten
percent was added, and thus these taxpayers have a top bracket of 39.6 percent.
For many Americans the new rates mean higher taxes at a time when the
tax-advantaged status of many investments has been eliminated. One simple and
liquid investment that has retained its tax-exempt status is municipal bonds.
Because the interest they pay is exempt from federal income taxes, and in some
cases state and local taxes, municipal bonds can allow investors to realize
higher effective yields than investments in taxable instruments having the same
stated interest rate.
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 TAXABLE MARGINAL TAX-EXEMPT YIELDS
INCOME RATE* 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50% 8.00% 8.50%
----------------- ---------- ------- ------- ------- ------- ------- -------- -------- -------- -------- --------
EQUIVALENT TAXABLE YIELD
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SINGLE RETURN
-----------------
$0-$22,750 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41% 10.00%
$22,751-$55,100 28.00% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11% 11.81%
$55,101-$115,000 31.00% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59% 12.32%
$115,001-$250,000 36.00% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72% 12.50% 13.28%
over $250,000 39.60% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25% 14.07%
<CAPTION>
JOINT RETURN
-----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$38,000 15.00% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82% 9.41% 10.00%
$38,001-$91,850 28.00% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42% 11.11% 11.81%
$91,851-$140,000 31.00% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87% 11.59% 12.32%
$140,001-$250,000 36.00% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72% 12.50% 13.28%
over $250,000 39.60% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12.42% 13.25% 14.07%
<FN>
- ------------------------------
* 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
</TABLE>
B-1
<PAGE>
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
- -------------------------------------------------------------
APPENDIX B (CONTINUED)
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. Income may be subject to
state and local taxes, and a portion of the Portfolio's income may be a
preference item for purposes of the federal alternative minimum tax. Capital
gains, if any, will be subject to capital gains taxes.
B-2
<PAGE>
GREENWICH STREET
CALIFORNIA MUNICIPAL
FUND INC.
COMMON STOCK
Two World Trade Center
New York, New York 10048
FD0568 F4
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
<TABLE>
<S> <C> <C> <C>
Parts A and B
(a) -- Greenwich Street California Municipal Fund Inc.
Statement of Assets and Liabilities.*
(b) -- Report of Independent Accountants.*
Part C -- None.
</TABLE>
(2) Exhibits
<TABLE>
<S> <C> <C> <C>
(a) -- Articles of Incorporation of Registrant.
(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) -- Form of Investment Management 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 and Registrar 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) -- Consent of KPMG Peat Marwick.*
(o) -- Not applicable.
(p) -- Not applicable.
(q) -- Not applicable.
</TABLE>
ITEM 25. MARKETING ARRANGEMENTS
See the Forms of Purchase Agreement and Underwriting Agreement filed as
Exhibits (h)(1) and (2).
- ------------------------
* 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............................. $ 4,450.00
National Association of Securities Dealers, Inc.
fees............................................. $ 1,500.00
American 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......................................... $ *
-----------
-----------
<FN>
- ------------------------
* To be supplied by Amendment.
</TABLE>
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 September , 1994 is as
follows:
(1) Title of Class:
Common Stock, $.001 par value
(2) Number of Record Holders: 1
ITEM 29. INDEMNIFICATION
Under Article 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
Greenwich Street Advisors, through its predecessors, has been in the
investment counseling business since 1934 and is a division of Mutual Management
Corp. ("MMC"). MMC was incorporated in 1978 and is a wholly owned subsidiary of
Smith Barney Holdings Inc. ("Holdings"), which is in turn a wholly owned
subsidiary of The Travelers Inc. ("Travelers") (formerly known as Primerica
Corporation).
The list required by this Item 30 of officers and directors of MMC and
Greenwich Street Advisors, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two fiscal years, is incorporated by
reference to Schedules A and D of FORM ADV filed by MMC on behalf of Greenwich
Street Advisors pursuant to the Advisers Act (SEC File No. 801-14437).
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) PNC Bank, National Association
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
(3) 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 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 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 12th day of
July, 1994.
GREENWICH STREET CALIFORNIA 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, Registrant has
caused this Amendment to its Registration Statement to be 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 July 12,
Heath B. McLendon Executive Officer 1994
/s/ STEPHEN J. TREADWAY July 12,
------------------------------ President and Director 1994
Stephen J. Treadway
/s/ RICHARD P. ROELOFS July 12,
------------------------------ Executive Vice President and Director 1994
Richard P. Roelofs
/s/ LEWIS E. DAIDONE
------------------------------ Treasurer (Chief Financial and July 12,
Lewis E. Daidone Accounting Officer) 1994
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- -------------------------------------------------- ------------
<S> <C> <C> <C> <C>
(a) -- Articles of Incorporation of Registrant.
(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) -- Form of Investment Management 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 and Registrar Agreement.
(k) -- Not applicable.
(l) (1) -- Opinion and consent of Willkie Farr & Gallagher.*
-- Opinion and consent of Venable, Baetjer and
(2) Howard.*
(m) -- Not applicable.
(n) -- Consent of KPMG Peat Marwick.*
(o) -- Not applicable.
(p) -- Not applicable.
(q) -- Not applicable.
<FN>
- ------------------------
* To be filed by Amendment.
</TABLE>
<PAGE>1
ARTICLES OF INCORPORATION
OF
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
FIRST: The undersigned, Carol R. Leslie, whose post office address is
c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022-4669, being at least eighteen years of age, forms a
corporation under the Maryland General Corporation Law (the "MGCL").
SECOND: The name of the corporation (the "Corporation") is Greenwich
Street California Municipal Fund Inc.
THIRD: The Corporation is formed for the following purposes:
(1) to hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash;
(2) to issue and sell shares of its capital stock ("Shares") in such
amounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration as may now or hereafter be permitted by law;
and
(3) to do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the purposes described in
this Article THIRD.
The Corporation is authorized to exercise and enjoy all of the powers,
rights and privileges granted to, or conferred upon, corporations by the MGCL
should now or hereafter in force, and the enumeration of the powers, rights
and privileges described in this Article THIRD should not be deemed to exclude
any powers, rights or privileges so granted or otherwise.
FOURTH: The post office address of the principal office of the
Corporation within the State of Maryland, and the name and post office address
of the resident agent of the Corporation within the State of Maryland, is The
Corporation Trust Company Incorporated, 32 South Street, Baltimore, Maryland
21202.
FIFTH: (1) The total number of Shares that the Corporation has authority
to issue is 500,000,000 Shares, having a par value of one-tenth of one cent
($.001) per Share and of the aggregate par value of $500,000, all of which
500,000,000 Shares are designated Common Stock.
<PAGE>2
(2) All persons who acquire Shares ("Shareholders") will acquire the
same subject to the provisions of these Articles of Incorporation and the
by-laws of the Corporation, as from time to time amended.
(3) The Board is authorized to classify or to reclassify unissued Shares
by setting or changing the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms
and conditions of redemption, prior to issuance.
(4) Notwithstanding any provisions of the MGCL requiring a greater
proportion than a majority of the votes of Shareholders entitled to be cast in
order to take or authorize any action, any such action shall be taken or
authorized upon the concurrence of a majority of the Shares entitled to vote
on the subject matter, except as otherwise provided in these Articles of
Incorporation.
(5) The presence in person or by proxy of the holders of a majority of
the Shares entitled to vote (without regard to class) will constitute a quorum
at any meeting of the Shareholders, except with respect to any matter that,
under applicable statutes or regulatory requirements, requires approval by a
separate vote of one or more classes of stock, in which case the presence in
person or by proxy of the holders of a majority of the Shares entitled to vote
on the matter will constitute a quorum.
(6) The Corporation may issue Shares in fractional denominations to the
same extent as its whole Shares, and Shares in fractional denominations will
be Shares having proportionately to the respective fractions represented
thereby all the rights of whole Shares, including, without limitation, the
right to vote, the right to receive dividends and distributions and the right
to participate upon liquidation of the Corporation, but excluding the right to
receive a certificate evidencing a fractional Share.
(7) No Shareholder will have, by virtue of being a Shareholder, any
right to purchase or subscribe for any Shares or any other security that the
Corporation may issue or sell other than a right that the Board in its
discretion may determine to grant.
SIXTH: (1) The initial number of directors of the Corporation
("Directors") will be two. The number of Directors may be changed by the
by-laws or by the Board pursuant to authority provided by the by-laws. The
number of Directors will not be less than the minimum number prescribed by the
MGCL nor more than twelve (12). The maximum number of Directors may be
increased only by action of Shareholders holding at least
<PAGE>3
seventy-five percent (75%) of the outstanding Shares entitled to be voted on
the matter.
(2) The names of the persons who will act as Directors until the
Corporation's first annual meeting or until their successors are duly chosen
and qualify are as follows:
Heath B. McLendon
Richard P. Roelofs
Stephen J. Treadway
(3) Beginning with the first annual meeting of Shareholders held after
the initial public offering of the shares of the Corporation (the "Initial
Annual Meeting"), the Board will be divided into three classes: Class I,
Class II and Class III. The term of office of one class of Directors elected
at the Initial Annual Meeting will expire each year. At the Initial Annual
Meeting, Directors of Class I will be elected to hold office for a term
expiring at the next succeeding annual meeting, Directors of Class II will be
elected to hold office for a term expiring at the second succeeding annual
meeting and Directors of Class III will be elected to hold office for a term
expiring at the third succeeding annual meeting. At each subsequent annual
meeting of Shareholders, the Directors chosen to succeed those whose terms are
expiring will be identified as being of the same class as the Directors whom
they succeed and will be elected for a term expiring at the time of the third
succeeding annual meeting of Shareholders, or thereafter in each case when
their respective successors are elected and qualified. If the number of
Directors is changed, any increase or decrease will be apportioned among the
classes by resolution of the Board so as to maintain the number of Directors
in each class as nearly equal as possible, but in no case will a decrease in
the number of Directors shorten the term of any incumbent director.
(4) Any vacancy occurring in the Board may be filled by a majority of
the Directors in office.
(5) A Director may be removed from office with or without cause, but
only by vote of Shareholders holding at least seventy-five percent (75%) of
the outstanding Shares entitled to vote in an election of Directors.
(6) The initial by-laws of the Corporation will be adopted by the
Directors at their organizational meeting or by their informal written action.
Thereafter, the power to make, alter, and repeal the by-laws of the
Corporation will be vested in the Board.
<PAGE>4
(7) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board is expressly authorized:
(a) to make, alter or repeal the by-laws of the Corporation, except
as otherwise required by the Investment Company Act of 1940, as amended (the
"1940 Act");
(b) from time to time to determine whether and to what extent and
at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them, other than the stock ledger,
will be open to the inspection of the Shareholders. No Shareholder will have
any right to inspect any account or book or document of the Corporation,
except as conferred by law or authorized by resolution of the Board;
(c) without the assent or vote of the Shareholders, to authorize
the issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into shares of stock of the Corporation of any class or classes, whether now
or hereafter authorized, for such consideration as the Board may deem
advisable; and
(d) without the assent or vote of the Shareholders, to authorize
and issue obligations of the Corporation, secured and unsecured, as the Board
may determine, and to authorize and cause to be executed mortgages and liens
upon the real or personal property of the Corporation.
In addition to the powers and authorities granted in these Articles of
Incorporation and by statute expressly conferred upon it, the Board is
authorized to exercise all powers and do all acts that may be exercised or
done by the Corporation pursuant to the provisions of the laws of the State of
Maryland, these Articles of Incorporation and the by-laws of the Corporation.
(8) Any determination made in good faith by or pursuant to the direction
of the Board, with respect to the amount of assets, obligations or liabilities
of the Corporation, as to the amount of net income of the Corporation from
dividends and interest for any period or amounts at any time legally
available for the payment of dividends, as to the amount of any reserves or
charges set up and the propriety thereof, as to the time of or purpose for
creating reserves or as to the use, alteration or cancellation of any reserves
or charges (whether or not any obligation or liability for which the reserves
or charges have been created has been paid or discharged or is then or
thereafter
<PAGE>5
required to be paid or discharged), as to the value of any security owned by
the Corporation or as to the determination of the net asset value of Shares of
any class, will be final and conclusive, and will be binding upon the
Corporation and all holders of Shares, past, present and future, and Shares
are issued and sold on the condition and understanding, evidenced by the
purchase of Shares or acceptance of Share certificates, that any and all such
determinations will be binding as described in this paragraph (8). No
provision of these Articles of Incorporation of the Corporation will be
effective to (a) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended (the "1933 Act"), or the 1940 Act, or of
any valid rule, regulation or order of the Securities and Exchange Commission
under those Acts or (b) protect or purport to protect any Director or officer
of the Corporation against any liability to the Corporation or its
Shareholders to which the Director or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
SEVENTH: (1) To the fullest extent that limitations on the liability of
Directors and officers are permitted by the MGCL, no Director or officer of
the Corporation will have any liability to the Corporation or its Shareholders
for damages. This limitation on liability applies to events occurring at the
time a person serves as a Director or officer of the Corporation whether or
not the person is a Director or officer at the time of any proceeding in which
liability is asserted.
(2) Any person who was or is a party or is threatened to be made a party
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
the person is a current or former Director or officer of the Corporation, or
is or was serving while a Director or officer of the Corporation at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, will be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by the person in
connection with the action, suit or proceeding to the fullest extent
permissible under the MGCL, the 1933 Act and the 1940 Act, as those statutes
are now or hereafter in force. In addition, the Corporation will advance
expenses 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. The Board may by by-law, resolution or agreement
make further provision for
<PAGE>6
indemnification of Directors, officers, employees and agents to the fullest
extent permitted by the MGCL.
(3) No provision of this Article SEVENTH shall be effective to protect
or purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(4) References to the MGCL in this Article SEVENTH are to the law as
from time to time amended. No amendment to the Articles of Incorporation of
the Corporation will affect any right of any person under this Article SEVENTH
based on any event, omission or proceeding prior to the amendment.
EIGHTH: (a) Except as otherwise provided in this Article EIGHTH, at
least seventy-five percent (75%) of the votes entitled to be cast by
stockholders, in addition to the affirmative vote of at least seventy-five
percent (75%) of the entire Board of Directors, shall be necessary to effect
any of the following actions:
(i) any stockholder proposal as to specific investment decisions
made or to be made with respect to the Corporation's assets;
(ii) any proposal as to the voluntary liquidation or dissolution of
the Corporation or any amendment to these Articles of Incorporation to
terminate the existence of the Corporation, unless the Continuing Directors of
the Corporation, by a vote of at least seventy-five percent (75%) of such
Directors, approve such proposals in which case the affirmative vote of a
majority of the votes entitled to be cast by stockholders shall be required to
approve such transaction; or
(iii) any Business Combination (as hereinafter defined) unless
either the condition in clause (A) below is satisfied, or all of the
conditions in clauses (B), (C), (D), (E) and (F) below are satisfied, in which
case paragraph (c) below shall apply.
(A) The Business Combination shall have been approved by a vote of
at least 75% of the Continuing Directors.
(B) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of any class of
<PAGE>7
outstanding Voting Stock (as hereinafter defined) in such Business Combination
shall be at least equal to the higher of the following:
(x) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by an
Interested Party (as hereinafter defined) for any shares of such Voting Stock
acquired by it (aa) within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date"), or (bb)(i) in the Threshold Transaction (as hereinafter
defined), or (ii) in any period between the Threshold Transaction and the
consummation of the Business Combination, whichever is higher; and
(y) the net asset value per share of such Voting Stock on the
Announcement Date or on the date of the Threshold Transaction, whichever is
higher.
(C) The consideration to be received by holders of the particular
class of outstanding Voting Stock shall be in cash or in the same form as the
Interested Party has previously paid for shares of any class of Voting Stock.
If the Interested Party has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form used to acquire the largest
number of shares of such class of Voting Stock previously acquired by it.
(D) After the occurrence of the Threshold Transaction, and prior to
the consummation of such Business Combination, such Interested Party shall not
have become the beneficial owner of any additional shares of Voting Stock
except by virtue of the Threshold Transaction.
(E) After the occurrence of the Threshold Transaction, such
Interested Party shall not have received the benefit, directly or indirectly
(except proportionately as a shareholder of the Corporation), of any loans,
advances, guarantees, pledges or other financial assistance or any tax credits
or other tax advantages provided by the Corporation, whether in anticipation
of or in connection with such Business Combination or otherwise.
(F) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934 (the "1939 Act") and the 1940 Act, and the rules and
regulations thereunder (or any subsequent provisions replacing such Acts,
rules or regulations) shall be prepared and mailed by the Interested Party, at
such
<PAGE>8
Interested Party's expense, to the shareholders of the Corporation at least 30
days prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to such
Acts or subsequent provisions).
(b) For the purposes of this Article:
(i) "Business Combination" shall mean any of the transactions
described or referred to in any one or more of the following subparagraphs:
(A) any merger, consolidation or share exchange of the
Corporation with or into any other person;
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions in any 12
month period) to or with any other person of any assets of the Corporation
having an aggregate Fair Market Value of $1,000,000 or more except for
portfolio transactions of the Corporation effected in the ordinary course of
the Corporation's business;
(C) the issuance or transfer by the Corporation (in one
transaction or a series of transactions in any 12 month period) of any
securities of the Corporation to any other person in exchange for cash,
securities or other property (or a combination thereof) having an aggregate
Fair Market Value of $1,000,000 or more excluding (x) sales of any securities
of the Corporation in connection with a public offering thereof, (y) issuances
of any securities of the Corporation pursuant to a dividend reinvestment plan
adopted by the Corporation and (z) issuances of any securities of the
Corporation upon the exercise of any stock subscription rights distributed by
the Corporation;
(ii) "Continuing Director" means any member of the Board of Directors of
the Corporation who is not an Interested Party or an Affiliate of an
Interested Party and has been a member of the Board of Directors for a period
of at least 12 months (or since the Corporation's commencement of operations,
if that period is 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
on the Board of Directors.
(iii) "Interested Party" shall mean any person, other than an investment
company advised by the Corporation's initial investment manager or any of its
Affiliates, which enters, or
<PAGE>9
proposes to enter, into a Business Combination with the Corporation.
(iv) "Person" shall mean an individual, a corporation, a trust or a
partnership.
(v) "Voting Stock" shall mean capital stock of the Corporation entitled
to vote generally in the election of directors.
(vi) A person shall be a "beneficial owner" of any Voting Stock:
(A) which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(B) which such person or any of its Affiliates or Associates has
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or
(C) which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(vii) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934.
(viii) "Fair Market Value" means:
(A) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the relevant date of a share of such stock
on the American Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the 1934 Act on which such stock is listed, or, if such stock is not listed on
any such exchange, the highest closing sale price (if such stock is a National
Market System security) or the highest closing bid quotation (if such stock is
not a National Market System security) with respect to a share of such stock
during the 30-day period preceding the relevant date on the National
Association of Securities Dealers, Inc. Automated Quotation Systems (NASDAQ)
or any system then in use, or if no such quotations are available,
<PAGE>10
the fair market value on the relevant date of the share of such stock as
determined by at least 75% of the Continuing Directors in good faith, and
(B) in the case of property other than cash or stock, the fair
market value of such property on the relevant date as determined by at least
75% of the Continuing Directors in good faith.
(ix) "Threshold Transaction" means the transaction by or as a result of
which an Interested Party first becomes the beneficial owner of Voting Stock.
(x) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
subparagraph (a)(iii)(B) above shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting Stock retained by the
holders of such shares.
(xi) Continuing Directors of the Corporation, acting by a vote of at
least 75%, shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, all facts necessary to
determine (a) the number of shares of Voting Stock beneficially owned by any
person, (b) whether a person is an Affiliate or Associate of another, (c)
whether the requirements of subparagraph (a)(iii) above have been met with
respect to any Business Combination, and (d) whether the assets which are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation in any Business
Combination has, an aggregate Fair Market Value of $1,000,000 or more.
(c) If any Business Combination described in paragraph (b)(i)(A) or (B)
(if the transfer or other disposition constitutes a transfer of all or
substantially all of the assets of the Corporation with respect to which
stockholder approval is required under Maryland law) is approved by a vote of
75% of the Continuing Directors or all of the conditions in paragraph
(a)(iii)(B), (C), (D), (E) and (F) are satisfied, a majority of the votes
entitled to be cast by stockholders shall be required to approve such
transaction. If any other Business Combination is approved by a vote of 75%
of the Continuing Directors or all of the conditions in paragraph (a)(iii)(B),
(C), (D), (E) and (F) are satisfied, no stockholder vote shall be required to
approve such transaction unless otherwise provided in these Articles of
Incorporation or required by law.
<PAGE>11
NINTH: Notwithstanding any other provision of these Articles of
Incorporation, the affirmative vote of Shareholders holding at least
two-thirds of the outstanding Shares will be required to approve, adopt or
authorize an amendment to these Articles of Incorporation to make the Shares
redeemable securities (as defined in the 1940 Act), unless the action
previously has been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Continuing Directors, in which case the
affirmative vote of a majority vote of the outstanding Shares will be required
to approve, adopt or authorize such an amendment. For purposes of this
Article NINTH, the term "Continuing Directors" means those Directors who (1)
are members of the Board on the date of the closing of the initial offering
period for the Shares, (2) have been members of the Board for a period of at
least twelve (12) months or (3) have subsequently become Directors and whose
election is approved by a majority of Continuing Directors then on the Board.
TENTH: (1) The Corporation reserves the right from time to time to make
any amendment to its Articles of Incorporation, now or hereafter authorized by
law, including any amendment that alters the contract rights, as expressly set
forth in its Articles of Incorporation, of any outstanding stock.
(2) Notwithstanding Paragraph (1) of this Article or any other provision
of these Articles of Incorporation, no amendment to these Articles of
Incorporation shall amend, alter, change or repeal any of the provisions of
paragraphs (3) or (5) of Article SIXTH or the provision of Article SIXTH
setting forth the maximum of Directors at twelve (12), unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of at least seventy-five percent (75%) of the votes entitled
to be cast by stockholders and the affirmative vote of at least seventy-five
percent (75%) of the entire Board of Directors, unless the amendment shall
have been approved by at least 75% of the Continuing Directors, in which case
the affirmative vote of a majority of the votes entitled to be cast shall be
sufficient to approve the amendment, and no amendment to these Articles of
Incorporation shall amend, alter, change or repeal Articles EIGHTH or TENTH
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote of at least seventy-five percent (75%) of
the votes entitled to be cast by stockholders and a vote of at least
seventy-five percent (75%) of the entire Board of Directors.
<PAGE>12
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and acknowledge that the adoption and signing are my acts.
Dated: July 8, 1994
/s/ Carol R. Leslie
Carol R. Leslie, Incorporator
<PAGE>1
BYLAWS
OF
GREENWICH STREET CALIFORNIA MUNICIPAL FUND INC.
BYLAW-ONE: NAME OF COMPANY, LOCATION OF OFFICES AND SEAL.
Article 1.1. Name. The name of the Company is Greenwich Street
California Municipal Fund Inc.
Article 1.2. Principal Offices. The principal office of the Company
in the State of Maryland shall be located in Baltimore, Maryland. The Company
may, in addition, establish and maintain such other offices and places of
business within or outside the State of Maryland as the Board of Directors may
from time to time determine.
Article 1.3. Seal. The corporate seal of the Company shall be
circular in form and shall bear the name of the Company, the year of its
incorporation and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any Officer or Director of the Company shall have
authority to affix the corporate seal of the Company to any document requiring
the same.
BYLAW-TWO: STOCKHOLDERS.
Article 2.1. Place of Meetings. All meetings of the Stockholders
shall be held at such place within the United States, whether within or
outside the State of Maryland, as the
<PAGE>2
Board of Directors shall determine, which shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Article 2.2. Annual Meeting. The annual meeting of the Stockholders
of the Company shall be held at such place as the Board of Directors shall
select on such date, during the 31-day period ending four months after the end
of the Company's fiscal year, as may be fixed by the Board of Directors each
year, at which time the Stockholders shall elect Directors by plurality vote,
and transact such other business as may properly come before the meeting. Any
business of the Company may be transacted at the annual meeting without being
specially designated in the notice except as otherwise provided by statute, by
the Articles of Incorporation or by these Bylaws.
Article 2.3. Special Meetings. Special meetings of the Stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Articles of Incorporation, may be called by resolution of the Board of
Directors or by the President, and shall be called by the Secretary at the
request of a majority of the Board of Directors or at the request, in writing,
of Stockholders owning at least 25% of the votes entitled to be cast at the
meeting upon payment by such Stockholders to the Company of the reasonably
estimated cost of preparing and mailing a notice of the meeting (which
estimated cost shall be provided to such Stockholders by the Secretary of
<PAGE>3
the Company). Notwithstanding the foregoing, unless requested by Stockholders
entitled to cast a majority of the votes entitled to be cast at the meeting, a
special meeting of the Stockholders need not be called at the request of
Stockholders to consider any matter that is substantially the same as a matter
voted on at any special meeting of the Stockholders held during the preceding
12 months. A written request shall state the purpose or purposes of the
proposed meeting.
Article 2.4. Notice. Written notice of every meeting of Stockholders,
stating the purpose or purposes for which the meeting is called, the time when
and the place where it is to be held, shall be served, either personally or by
mail, not less than ten nor more than ninety days before the meeting, upon
each Stockholder as of the record date fixed for the meeting who is entitled
to notice of or to vote at such meeting. If mailed (i) such notice shall be
directed to a Stockholder at his address as it shall appear on the books of
the Company (unless he shall have filed with the Transfer Agent of the Company
a written request that notices intended for him be mailed to some other
address, in which case it shall be mailed to the address designated in such
request) and (ii) such notice shall be deemed to have been given as of the
date when it is deposited in the United States mail with first-class postage
thereon prepaid.
Article 2.5. Notice of Stockholder Business. At any annual or special
meeting of the Stockholders, only such business
<PAGE>4
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual or special meeting, the business must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by a Stockholder.
For business to be properly brought before an annual or special meeting
by a Stockholder, the Stockholder must have given timely notice thereof in
writing to the Secretary of the Company. To be timely, any such notice must
be delivered to or mailed and received at the principal executive offices of
the Company not later than 60 days prior to the date of the meeting; provided,
however, that if less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, any such notice by a
Stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which notice of the date of the
annual or special meeting was given or such public disclosure was made.
Any such notice by a Stockholder shall set forth as to each matter the
Stockholder proposes to bring before the annual or special meeting (i) a brief
description of the business desired to be brought before the annual or special
meeting and the reasons for conducting such business at the annual or special
<PAGE>5
meeting, (ii) the name and address, as they appear on the Company's books, of
the Stockholder proposing such business, (iii) the class and number of shares
of the capital stock of the Company which are beneficially owned by the
Stockholder, and (iv) any material interest of the Stockholder in such
business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at any annual or special meeting except in accordance with
the procedures set forth in this Article 2.5. The chairman of the annual or
special meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in
accordance with the provisions of this Article 2.5, and, if he should so
determine, he shall so declare to the meeting that any such business not
properly brought before the meeting shall not be considered or transacted.
Article 2.6. Quorum. The holders of a majority of the stock issued
and outstanding and entitled to vote, present in person or represented by
proxy, shall be requisite and shall constitute a quorum at all meetings of the
Stockholders for the transaction of business except as otherwise provided by
statute, by the Articles of Incorporation or by these Bylaws. If a quorum
shall not be present or represented, the Stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, to a date not more
<PAGE>6
than 120 days after the original record date, until a quorum shall be present
or represented. At such adjourned meeting, at which a quorum shall be present
or represented, any business which might have been transacted at the original
meeting may be transacted.
Article 2.7. Vote of the Meeting. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the votes
cast shall decide any question brought before such meeting, unless the
question is one upon which, by express provisions of applicable statutes, the
Articles of Incorporation or of these Bylaws, a different vote is required, in
which case such express provisions shall govern and control the decision of
such question.
Article 2.8. Voting Rights of Stockholders. Each Stockholder of
record having the right to vote shall be entitled at every meeting of the
Stockholders of the Company to one vote for each share of stock having voting
power standing in the name of such Stockholder on the books of the Company on
the record date fixed in accordance with Article 6.5 of these Bylaws, with pro
rata voting rights for any fractional shares, and such votes may be cast
either in person or by written proxy.
Article 2.9. Organization. At every meeting of the Stockholders, the
Chairman of the Board, or in his absence or inability to act, a chairman
chosen by the Stockholders, shall act as chairman of the meeting. The
Secretary, or in his absence
<PAGE>7
or inability to act, a person appointed by the chairman of the meeting, shall
act as secretary of the meeting and keep the minutes of the meeting.
Article 2.10. Proxies. Every proxy must be executed in writing by the
Stockholder or by his duly authorized attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless it shall have specified therein its duration. Every proxy shall be
revocable at the pleasure of the person executing it or of his personal
representatives or assigns. Proxies shall be delivered prior to the meeting
to the Secretary of the Company or to the person acting as Secretary of the
meeting before being voted. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by one of them unless, at or
prior to exercise of such proxy, the Company receives a specific written
notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Stockholder shall be deemed valid unless
challenged at or prior to its exercise.
Article 2.11. Stock Ledger and List of Stockholders. It shall be the
duty of the Secretary or Assistant Secretary of the Company to cause an
original or duplicate stock ledger to be maintained at the office of the
Company's Transfer Agent.
Article 2.12. Action without Meeting. Any action to be taken by
Stockholders may be taken without a meeting if (1) all Stockholders entitled
to vote on the matter consent to the action
<PAGE>8
in writing, (2) all Stockholders entitled to notice of the meeting but not
entitled to vote at it sign a written waiver of any right to dissent and (3)
said consents and waivers are filed with the records of the meetings of
Stockholders. Such consent shall be treated for all purposes as a vote at a
meeting.
BYLAW-THREE: BOARD OF DIRECTORS.
Article 3.1. General Powers. Except as otherwise provided in the
Articles of Incorporation, the business and affairs of the Company shall be
managed under the direction of the Board of Directors. All powers of the
Company may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the Stockholders by law, by the Articles
of Incorporation or by these Bylaws.
Article 3.2. Board of Three to Twelve Directors. The Board of
Directors shall consist of not less than three (3) nor more than twelve (12)
Directors; provided that if there are less than three stockholders, the number
of Directors may be the same number as the number of stockholders but not less
than one. Directors need not be Stockholders. The majority of the entire
Board of Directors shall have power from time to time, and at any time when
the Stockholders as such are not assembled in a meeting, regular or special,
to increase or decrease the number of Directors. If the number of Directors
is increased, the additional Directors may be elected by a majority of the
Directors in office at the time of the increase. If such
<PAGE>9
additional Directors are not so elected by the Directors in office at the time
they increase the number of places on the Board, then the additional Directors
shall be elected or reelected by the Stockholders at their next annual meeting
or at an earlier special meeting called for that purpose.
Beginning with the first annual meeting of Stockholders held after the
initial public offering of the shares of the Company (the "initial annual
meeting"), the Board of Directors shall be divided into three classes: Class
I, Class II and Class III. The terms of office of the classes of Directors
elected at the initial annual meeting shall expire at the times of the annual
meetings of the Stockholders as follows: Class I on the next annual meeting,
Class II on the second next annual meeting and Class III on the third next
annual meeting, or thereafter in each case when their respective successors
are elected and qualified. At each subsequent annual election, the Directors
chosen to succeed those whose terms are expiring shall be identified as being
of the same class as the Directors whom they succeed, and shall be elected for
a term expiring at the time of the third succeeding annual meeting of
Stockholders, or thereafter in each case when their respective successors are
elected and qualified. The number of directorships shall be apportioned among
the classes so as to maintain the classes as nearly equal in number as
possible.
<PAGE>10
Article 3.3. Director Nominations.
(a) Only persons who are nominated in accordance with the procedures
set forth in this Article 3.3 shall be eligible for election or re-election as
Directors. Nominations of persons for election or re-election to the Board of
Directors of the Company may be made at a meeting of Stockholders by or at the
direction of the Board of Directors or by any Stockholder of the Company who
is entitled to vote for the election of such nominee at the meeting and who
complies with the notice procedures set forth in this Article 3.3.
(b) Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice delivered in
writing to the Secretary of the Company. To be timely, any such notice by a
Stockholder must be delivered to or mailed and received at the principal
executive offices of the Company not later than 60 days prior to the meeting;
provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Stockholders, any
such notice by a Stockholder to be timely must be so received not later than
the close of business on the 10th day following the day on which notice of the
date of the meeting was given or such public disclosure was made.
(c) Any such notice by a Stockholder shall set forth (i) as to each
person whom the Stockholder proposes to nominate for election or re-election
as a Director, (A) the name, age,
<PAGE>11
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the capital stock of the Company which are beneficially owned by such person
and (D) any other information relating to such person that is required to be
disclosed in solicitations of proxies for the election of Directors pursuant
to Regulation 14A under the Securities Exchange Act of 1934 or any successor
regulation thereto (including without limitation such person's written consent
to being named in the proxy statement as a nominee and to serving as a
Director if elected and whether any person intends to seek reimbursement from
the Company of the expenses of any solicitation of proxies should such person
be elected a Director of the Company); and (ii) as to the Stockholder giving
the notice (A) the name and address, as they appear on the Company's books, of
such Stockholder and (B) the class and number of shares of the capital stock
of the Company which are beneficially owned by such Stockholder. At the
request of the Board of Directors any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
Company that information required to be set forth in a Stockholder's notice of
nomination which pertains to the nominee.
(d) If a notice by a Stockholder is required to be given pursuant to
this Article 3.3, no person shall be entitled to receive reimbursement from
the Company of the expenses of a
<PAGE>12
solicitation of proxies for the election as a Director of a person named in
such notice unless such notice states that such reimbursement will be sought
from the Company. The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and, if he should so
determine, he shall so declare to the meeting and the defective nomination
shall be disregarded for all purposes.
Article 3.4. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, if the office of any Director or Directors
becomes vacant for any reason (other than an increase in the number of
Directors), the Directors in office, although less than a quorum, shall
continue to act and may choose a successor or successors by majority vote, who
shall hold office until the next election of Directors. A majority of the
entire Board of Directors in office at the time of the increase may fill a
vacancy which results from an increase in the number of Directors.
Article 3.5. Removal. At any meeting of Stockholders duly called and
at which a quorum is present, the Stockholders may, by the affirmative vote of
the holders of at least three-fourths of the votes entitled to be cast
thereon, remove any Director or Directors from office, with or without cause,
and may elect a successor or successors to fill any resulting vacancies for
the unexpired term of the removed Director.
<PAGE>13
Article 3.6. Resignation. A Director may resign at any time by giving
written notice of his resignation to the Board of Directors or the Chairman of
the Board or the Secretary of the Company. Any resignation shall take effect
at the time specified in it or, should the time when it is to become effective
not be specified in it, immediately upon its receipt. Acceptance of a
resignation shall not be necessary to make it effective unless the resignation
states otherwise.
Article 3.7. Place of Meetings. The Directors may hold their meetings
at the principal office of the Company or at such other places, either within
or outside the State of Maryland, as they may from time to time determine.
Article 3.8. Regular Meetings. Regular meetings of the Board may be
held at such date and time as shall from time to time be determined by
resolution of the Board.
Article 3.9. Special Meetings. Special meetings of the Board may be
called by order of the Chairman of the Board on one day's notice given to each
Director either in person or by mail, telephone, telegram, cable or wireless
to each Director at his residence or regular place of business. Special
meetings will be called by the Chairman or Vice Chairman, if any, of the Board
or Secretary in a like manner on the written request of a majority of the
Directors.
Article 3.10. Quorum. At all meetings of the Board, the presence of
one-third of the number of Directors then in office
<PAGE>14
(but not less than two Directors) shall be necessary to constitute a quorum
and sufficient for the transaction of business, and any act of a majority
present at a meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, by
the Articles of Incorporation or by these Bylaws. If a quorum shall not be
present at any meeting of Directors, the Directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Article 3.11. Organization. The Board of Directors shall designate
one of its members to serve as Chairman of the Board. The Chairman of the
Board shall be Chief Executive Officer of the Corporation, shall preside at
all meetings of the stockholders and the Board of Directors and shall have the
same powers and duties as those of the President. In the absence or inability
of the Chairman of the Board to act, another Director chosen by a majority of
the Directors present shall act as chairman of the meeting and preside at the
meeting. The Secretary (or, in his absence or inability to act, any person
appointed by the chairman) shall act as secretary of the meeting and keep the
minutes of the meeting.
Article 3.12. Informal Action by Directors and Committees. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof
<PAGE>15
may, except as otherwise required by statute, be taken without a meeting if a
written consent to such action is signed by all members of the Board, or of
such committee, as the case may be, and filed with the minutes of the
proceedings of the Board or committee. Subject to the Investment Company Act
of 1940, as amended, members of the Board of Directors or a committee thereof
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time.
Article 3.13. Executive Committee. There may be an Executive
Committee of two or more Directors appointed by the Board who may meet at
stated times or on notice to all by any of their own number. The Executive
Committee shall consult with and advise the Officers of the Company in the
management of its business and exercise such powers of the Board of Directors
as may be lawfully delegated by the Board of Directors. Vacancies shall be
filled by the Board of Directors at any regular or special meeting. The
Executive Committee shall keep regular minutes of its proceedings and report
the same to the Board when required.
Article 3.14. Audit Committee. There shall be an Audit Committee of
two or more Directors who are not "interested persons" of the Company (as
defined in the Investment Company Act of 1940, as amended) appointed by the
Board who may meet at stated times or on notice to all by any of their own
number. The
<PAGE>16
Committee's duties shall include reviewing both the audit and other work of
the Company's independent accountants, recommending to the Board of Directors
the independent accountants to be retained, and reviewing generally the
maintenance and safekeeping of the Company's records and documents.
Article 3.15. Other Committees. The Board of Directors may appoint
other committees which shall in each case consist of such number of members
(but not less than two) and shall have and may exercise, to the extent
permitted by law, such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee may
determine its action, and fix the time and place of its meetings, unless the
Board of Directors shall otherwise provide. The Board of Directors shall
have power at any time to change the members and, to the extent permitted by
law, to change the powers of any such committee, to fill vacancies and to
discharge any such committee.
Article 3.16. Compensation of Directors. The Board may, by
resolution, determine what compensation and reimbursement of expenses of
attendance at meetings, if any, shall be paid to Directors in connection with
their service on the Board. Nothing herein contained shall be construed to
preclude any Director from serving the Company in any other capacity or from
receiving compensation therefor.
<PAGE>17
BYLAW-FOUR: OFFICERS.
Article 4.1. Officers. The Officers of the Company shall be fixed by
the Board of Directors and shall include a President, Secretary and Treasurer.
Any two offices may be held by the same person except the offices of President
and Vice President. A person who holds more than one office in the Company
may not act in more than one capacity to execute, acknowledge or verify an
instrument required by law to be executed, acknowledged or verified by more
than one officer.
Article 4.2. Appointment of Officers. The Directors shall appoint the
Officers, who need not be members of the Board.
Article 4.3. Additional Officers. The Board may appoint such other
Officers and agents as it shall deem necessary who shall exercise such powers
and perform such duties as shall be determined from time to time by the Board.
Article 4.4. Salaries of Officers. The salaries of all Officers of
the Company shall be fixed by the Board of Directors.
Article 4.5. Term, Removal, Vacancies. The Officers of the Company
shall serve at the pleasure of the Board of Directors and hold office for one
year and until their successors are chosen and qualify in their stead. Any
Officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Directors. If the office of
any Officer becomes vacant for any reason, the vacancy shall be filled by the
Board of Directors.
<PAGE>18
Article 4.6. President. The President shall have, subject to the
control of the Board of Directors, general charge of the business and affairs
of the Corporation, and may employ and discharge employees and agents of the
Corporation, except those appointed by the Board, and he may delegate these
powers.
Article 4.7. Vice President. Any Vice President shall, in the absence
or disability of the President, perform the duties and exercise the powers of
the President and shall perform such other duties as the Board of Directors
shall prescribe.
Article 4.8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the Company as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the
Chairman of the Board and Directors at the regular meetings of the Board, or
whenever they may require it, an account of the financial condition of the
Company.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, may perform all the duties of the Treasurer.
<PAGE>19
Article 4.9. Secretary. The Secretary shall attend meetings of the
Board and meetings of the Stockholders and record all votes and the minutes of
all proceedings in a book to be kept for that purpose, and shall perform like
duties for the Executive Committee of the Board when required. He shall give
or cause to be given notice of all meetings of Stockholders and special
meetings of the Board of Directors and shall perform such other duties as may
be prescribed by the Board of Directors. He shall keep in safe custody the
seal of the Company and affix it to any instrument when authorized by the
Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, may perform all the duties of the Secretary.
Article 4.10. Subordinate Officers. The Board of Directors from time
to time may appoint such other officers or agents as it may deem advisable,
each of whom shall serve at the pleasure of the Board of Directors and have
such title, hold office for such period, have such authority and perform such
duties as the Board of Directors may determine. The Board of Directors from
time to time may delegate to one or more officers or agents the power to
appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
<PAGE>20
Article 4.11. Surety Bonds. The Board of Directors may require any
officer or agent of the Company to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940, as
amended, and the rules and regulations of the Securities and Exchange
Commission) to the Company in such sum and with such surety or sureties as the
Board of Directors may determine, conditioned upon the faithful performance of
his duties to the Company, including responsibility for negligence and for the
accounting of any of the Company's property, funds or securities that may come
into his hands.
BYLAW-FIVE: GENERAL PROVISIONS.
Article 5.1. Waiver of Notice. Whenever the Stockholders or the Board
of Directors are authorized by statute, the provisions of the Articles of
Incorporation or these Bylaws to take any action at any meeting after notice,
such notice may be waived, in writing, before or after the holding of the
meeting, by the person or persons entitled to such notice, or, in the case of
a Stockholder, by his duly authorized attorney-in-fact.
Article 5.2. Indemnity.
(a) The Company shall indemnify its directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Company shall indemnify its officers to the same extent
as its directors and to such further extent as is consistent with law. The
Company shall
<PAGE>21
indemnify its directors and officers who, while serving as directors or
officers, also serve at the request of the Company as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan
to the fullest extent consistent with law. The indemnification and other
rights provided by this Article shall continue as to a person who has ceased
to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. This Article shall not protect
any such person against any liability to the Company or any Stockholder
thereof to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct").
(b) Any current or former director or officer of the Company seeking
indemnification within the scope of this Article shall be entitled to advances
from the Company for payment of the reasonable expenses incurred by him in
connection with the matter as to which he is seeking indemnification in the
manner and to the fullest extent permissible under the Maryland General
Corporation Law. The person seeking indemnification shall provide to the
Company a written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the Company has been met and a
written undertaking to repay
<PAGE>22
any such advance if it should ultimately be determined that the standard of
conduct has not been met. In addition, at least one of the following
additional conditions shall be met: (i) the person seeking indemnification
shall provide security in form and amount acceptable to the Company for his
undertaking; (ii) the Company is insured against losses arising by reason of
the advance; or (iii) a majority of a quorum of directors of the Company who
are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall have determined, based on a review of facts readily
available to the Company at the time the advance is proposed to be made, that
there is reason to believe that the person seeking indemnification will
ultimately be found to be entitled to indemnification.
(c) At the request of any person claiming indemnification under this
Article, the Board of Directors shall determine, or cause to be determined, in
a manner consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met. Indemnification shall be
made only following: (i) a final decision on the merits by a court or other
body before whom the proceeding was brought that the person to be indemnified
was not liable by reason of disabling conduct or (ii) in the absence of such a
decision, a reasonable determination,
<PAGE>23
based upon a review of the facts, that the person to be indemnified was not
liable by reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an independent legal
counsel in a written opinion.
(d) Employees and agents who are not officers or directors of the
Company may be indemnified, and reasonable expenses may be advanced to such
employees or agents, as may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the Investment Company Act
of 1940.
(e) The Board of Directors may make further provision consistent with
law for indemnification and advance of expenses to directors, officers,
employees and agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed exclusive of any
other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance or other agreement
or resolution of stockholders or disinterested directors or otherwise.
(f) References in this Article are to the Maryland General Corporation
Law and to the Investment Company Act of 1940, as from time to time amended.
No amendment of these Bylaws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
<PAGE>24
Article 5.3. Insurance. The Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Company or who, while a director, officer, employee or agent
of the Company, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan, against any liability asserted against and incurred by such
person in any such capacity or arising out of such person's position; provided
that no insurance may be purchased by the Company on behalf of any person
against any liability to the Company or to its Stockholders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Article 5.4. Checks. All checks or demands for money and notes of the
Company shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Article 5.5. Fiscal Year. The fiscal year of the Company shall be
determined by resolution of the Board of Directors.
BYLAW-SIX: CERTIFICATES OF STOCK.
Article 6.1. Certificates of Stock. The interest of each Stockholder
of the Company shall be evidenced by certificates for
<PAGE>25
shares of stock in such form as the Board of Directors may from time to time
prescribe. The certificates shall be numbered and entered in the books of the
Company as they are issued. They shall exhibit the holder's name and the
number of whole shares and no certificate shall be valid unless it has been
signed by the President, Vice President or Chairman and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary and bears the
corporate seal. Such seal may be a facsimile, engraved or printed. Where any
such certificate is signed by a Transfer Agent or by a Registrar, the
signatures of any such officer may be facsimile, engraved or printed. In case
any of the officers of the Company whose manual or facsimile signature appears
on any stock certificate delivered to a Transfer Agent of the Company shall
cease to be such Officer prior to the issuance of such certificate, the
Transfer Agent may nevertheless countersign and deliver such certificate as
though the person signing the same or whose facsimile signature appears
thereon had not ceased to be such officer, unless written instructions of the
Company to the contrary are delivered to the Transfer Agent.
Article 6.2. Lost, Stolen or Destroyed Certificates. The Board of
Directors, or the President together with the Treasurer or Secretary, may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Company, alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of
<PAGE>26
stock to be lost, stolen or destroyed, or by his legal representative. When
authorizing such issue of a new certificate, the Board of Directors, or the
President and Treasurer or Secretary, may, in its or their discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as it or they shall require and/or give the Company a bond
in such sum and with such surety or sureties as it or they may direct as
indemnity against any claim that may be made against the Company with respect
to the certificate alleged to have been lost, stolen or destroyed for such
newly issued certificate.
Article 6.3. Transfer of Stock. Shares of the Company shall be
transferable on the books of the Company by the holder thereof in person or by
his duly authorized attorney or legal representative upon surrender and
cancellation of a certificate or certificates for the same number of shares of
the same class, duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, with such proof of the authenticity of
the signature as the Company or its agents may reasonably require. The shares
of stock of the Company may be freely transferred, and the Board of Directors
may, from time to time, adopt rules and regulations with reference to the
method of transfer of the shares of stock of the Company.
<PAGE>27
Article 6.4. Registered Holder. The Company shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person whether or not it shall have express or other notice thereof, except as
expressly provided by statute.
Article 6.5. Record Date. The Board of Directors may fix a time not
less than 10 nor more than 90 days prior to the date of any meeting of
Stockholders or prior to the last day on which the consent or dissent of
Stockholders may be effectively expressed for any purpose without a meeting,
as the time as of which Stockholders entitled to notice of, and to vote at,
such a meeting or whose consent or dissent is required or may be expressed for
any purpose, as the case may be, shall be determined; and all such persons who
were holders of record of voting stock at such time, and no other, shall be
entitled to notice of, and to vote at, such meeting or to express their
consent or dissent, as the case may be. If no record date has been fixed, the
record date for the determination of Stockholders entitled to notice of, or to
vote at, a meeting of Stockholders shall be the later of the close of business
on the day on which notice of the meeting is mailed or the thirtieth day
before the meeting, or, if notice is waived by all Stockholders, at the close
of business on the tenth day next preceding the day on
<PAGE>28
which the meeting is held. The Board of Directors may also fix a time not
exceeding 90 days preceding the date fixed for the payment of any dividend or
the making of any distribution, or for the delivery of evidences of rights, or
evidences of interests arising out of any change, conversion or exchange of
capital stock, as a record time for the determination of the Stockholder
entitled to receive any such dividend, distribution, rights or interests.
Article 6.6. Stock Ledgers. The stock ledgers of the Company,
containing the names and addresses of the Stockholders and the number of
shares held by them respectively, shall be kept at the principal offices of
the Company or at the offices of the Transfer Agent of the Company or at such
other location as may be authorized by the Board of Directors from time to
time.
Article 6.7. Transfer Agents and Registrars. The Board of Directors
may from time to time appoint or remove Transfer Agents and/or Registrars of
transfers (if any) of shares of stock of the Company, and it may appoint the
same person as both Transfer Agent and Registrar. Upon any such appointment
being made, all certificates representing shares of capital stock thereafter
issued shall be countersigned by one of such Transfer Agents or by one of such
Registrars of transfers (if any) or by both and shall not be valid unless so
countersigned. If the same person shall be both Transfer Agent and Registrar,
only one countersignature by such person shall be required.
<PAGE>29
BYLAW-SEVEN:AMENDMENTS.
Article 7.1. General. Except as provided in the next succeeding
sentence and in the Articles of Incorporation, all Bylaws of the Company,
whether adopted by the Board of Directors or the Stockholders, shall be
subject to amendment, alteration or repeal, and new Bylaws may be made, by the
affirmative vote of a majority of either: (a) the holders of record of the
outstanding shares of stock of the Company entitled to vote, at any annual or
special meeting, the notice or waiver of notice of which shall have specified
or summarized the proposed amendment, alteration, repeal or new Bylaw; or (b)
the Directors, at any regular or special meeting, the notice or waiver of
notice of which shall have specified or summarized the proposed amendment,
alteration, repeal or new Bylaw. The provisions of Articles 2.5, 3.2, 3.3,
7.1 and 8.1 of these Bylaws shall be subject to amendment, alteration or
repeal by: (i) the affirmative vote of the holders of record of 75% of the
outstanding shares of stock of the Company entitled to vote, at any annual or
special meeting, the notice or waiver of notice of which shall have specified
or summarized the proposed amendment, alteration or repeal or (ii) the Board
of Directors including the affirmative vote of 75% of the Continuing Directors
(as such term is defined in Article IX of the Company's Articles of
Incorporation), at any regular or special meeting, the notice or waiver of
notice of which shall
<PAGE>30
have specified or summarized the proposed amendment, alteration or repeal.
BYLAW-EIGHT:SPECIAL PROVISIONS.
Article 8.1. Actions Relating to Discount in Price of the Company's
Shares. In the event that at any time after the second anniversary of the
initial public offering of shares of the Company's Common Stock such shares
publicly trade for a substantial period of time at a substantial discount from
the Company's then current net asset value per share, the Board of Directors
shall consider, at its next regularly scheduled meeting, taking various
actions designed to eliminate the discount. The actions considered by the
Board of Directors may include periodic repurchases by the Company of its
shares of Common Stock or an amendment to the Company's Articles of
Incorporation to make the Company's Common Stock a "redeemable security" (as
such term is defined in the Investment Company Act of 1940), subject in all
events to compliance with all applicable provisions of the Company's Articles
of Incorporation, these Bylaws, the Maryland General Corporation Law and the
Investment Company Act of 1940.
Dated: July 8, 1994
<PAGE>1
Temporary Certificate Exchangeable for Definitive Engraved Certificate When
Ready for Delivery
Common Stock
Common Stock
Transferable in Boston Massachusetts and New York, New York
Greenwich Street ___________ Municipal Fund Inc.
Incorporated Under the Laws of the State of Maryland
Shares
CUSIP ___________
See reverse for certain definitions
This Certifies That
Is the Owner and Registered Holder of
Fully paid and Non-Assessable Shares of Common Stock, $.001 Per Share, of
Greenwich Street ___________ Municipal Fund Inc. transferable on the books of
the Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this Certificate properly endorsed. This Certificate and
the shares represented hereby are issued and shall be subject to all of the
provisions of the Articles of Incorporation of the Corporation, and the Bylaws
of the Corporation, and all amendments thereof, copies of which are on file at
the principal office of the Corporation and with the Transfer Agent.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar or its designated Agent.
Witness, the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
Countersigned and registered
The Shareholder Services Group, Inc.
a Subsidiary of First Data Corporation
(Boston, Massachusetts)
Transfer Agent and Registrar
<PAGE>2
By
Authorized Signature
/s/ Heath B. McLendon
Chairman of the Board
[Signature]
Secretary
<PAGE>1
GREENWICH STREET_________________MUNICIPAL FUND INC.
TERMS AND CONDITIONS OF
DIVIDEND REINVESTMENT PLAN
1. Each holder of shares (a "Shareholder") of common stock in Greenwich
Street__________________Municipal Fund Inc. (the "Fund") whose Fund shares are
registered in his or her own name will automatically be a participant
("Participant") in the Dividend Reinvestment Plan (the "Plan"), unless any
such Shareholder specifically elects to receive all dividends and capital
gains in cash paid by check mailed directly to the Shareholder. A Shareholder
whose shares are registered in the name of a broker-dealer or other nominee
(the "Nominee") will be a Participant if (a) such a service is provided by the
Nominee and (b) the Nominee makes an election on behalf of the Shareholder to
participate in the Plan. Smith Barney Shearson Inc. intends to make such an
election on behalf of Shareholders whose shares are registered in its name, as
Nominee, unless a Shareholder specifically instructs his or her broker to pay
dividends and capital gains in cash. The Shareholder Services Group, Inc.
(the "Agent") will act as agent for Participants and will open an account
under the Plan for each Participant in the same name as such Participant's
common stock is registered on the books and records of the transfer agent for
the common stock.
2. Whenever the Fund declares a capital gains distribution or an income
dividend payable in shares of common stock or cash, Participants will receive
such distribution or dividend in the manner described in paragraph 3 below as
determined on the date such distribution or dividend becomes payable.
3. Whenever the market price of the Fund's common stock is equal to or
exceeds the net asset value per share at the time shares of common stock are
valued for the purpose of determining the number of shares equivalent to the
cash dividend or capital gains distribution, Participants will be issued
shares of common stock valued at the greater of (i) the net asset value per
share most recently determined or (ii) 95% of the then current market price.
Participants will receive any such distribution or dividend entirely in shares
of common stock, and the Agent shall automatically receive such shares of
common stock, including fractions, for all Participants' accounts. If the net
asset value per share of the common stock at the time of valuation exceeds the
market price of the common stock, or if the Fund should declare a dividend or
capital gains distribution payable only in cash, a broker-dealer not
affiliated with Smith Barney Shearson will, as purchasing agent (the
"Purchasing Agent") for
<PAGE>2
the Participants, buy shares of common stock in the open market, on the New
York Stock Exchange (the "Exchange") or elsewhere, for each Participant's
account. If, following the commencement of such purchases and before the
Agent has completed its purchases, the market price exceeds the net asset
value per share, the average per share purchase price paid by the Agent may
exceed the net asset value of the common stock, resulting in the acquisition
of fewer shares of common stock than if the dividend or capital gains
distribution had been paid in common stock issued by the Fund at net asset
value per share.
Additionally, if the market price exceeds the net asset value of shares
before the Agent has completed its purchases, the Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares at a price equal
to the greater of (a) net asset value or (b) 95% of the then current market
price. In a case where the Agent has terminated open market purchases and the
Fund has issued the remaining shares, the number of shares received by the
participant in respect of the cash dividend or distribution will be based on
the weighted average of prices paid for shares purchased in the open market
and the price at which the Fund issues remaining shares.
The Agent will apply all cash received as a dividend or capital gains
distribution to purchase shares of common stock on the open market as soon as
practicable after the payment date of such dividend or capital gains
distribution, but in no event later than 30 days after such date, except where
necessary to comply with applicable provisions of the Federal securities laws.
4. For all purposes of the Plan: (a) the market price of the Fund's
common stock on a particular date shall be the last sale price on the Exchange
at the close of the previous trading day or, if there is no sale on the
Exchange on that date, then the mean between the closing bid and asked
quotations for such common stock on the Exchange on such date and (b) net
asset value per share of common stock on a particular date shall be as
determined by or on behalf of the Fund.
5. The open market purchases provided for above may be made on any
securities exchange where the shares of common stock of the Fund are traded,
in the over-the-counter market or in negotiated transactions, and may be on
such terms as to price, delivery and otherwise as the Purchasing Agent shall
determine. Funds held by the Purchasing Agent uninvested will not bear
interest, and it is understood that, in any event, the Purchasing Agent shall
have no liability in connection with any inability to purchase shares of
common stock within 30 days after the initial date of such purchase as herein
provided, or with the timing of any purchases effected. The Purchasing Agent
shall have no responsibility as to the value of the shares of common stock of
the Fund acquired for any Participant's account.
<PAGE>3
6. The Agent will hold shares of common stock acquired pursuant to the
Plan in noncertificated form in the Participant's name. The Agent will
forward to each Participant any proxy solicitation material and will vote any
shares of common stock so held for each Participant only in accordance with
the proxy returned by any such Participant to the Fund. Upon any
Participant's written request, the Agent will deliver to her or him, without
charge, a certificate or certificates for the full shares of common stock.
7. The Agent will confirm to each Participant acquisitions made for her
or his account as soon as practicable but not later than 60 days after the
date thereof. Although a Participant may from time to time have an undivided
fractional interest (computed to three decimal places) in a share of common
stock of the Fund, no certificates for fractional shares will be issued.
However, dividends and distributions on fractional shares of common stock will
be credited to Participants' accounts. In the event of termination of a
Participant account under the Plan, the Agent will adjust for any such
undivided fractional interest in cash at the market value of the shares of
common stock at the time of termination.
8. Any stock dividends or split shares distributed by the Fund on shares
of common stock held by the Agent for any Participant will be credited to such
Participant's account. In the event that the Fund makes available to
Participants rights to purchase additional shares of common stock or other
securities, the Agent will sell such rights and apply the proceeds of the sale
to the purchase of additional shares of common stock of the Fund for the
account of Participants.
9. The Agent's service fee for handling capital gains distributions or
income dividends will be paid by the Fund. Participants will be charged a pro
rata share of brokerage commissions on all open market purchases.
10. Any Participant may withdraw shares from such Participant's account
or terminate such Participant's account under the Plan by notifying the Agent
in writing. Such withdrawal or termination will be effective immediately if
notice is received by the Agent not less than 10 days prior to any dividend or
distribution record date; otherwise such withdrawal or termination will be
effective, with respect to any subsequent dividend or distribution, on the
first trading day after the dividends paid for such record date have been
credited to the Participant's account. The Plan may be terminated by the
Agent or the Fund upon notice in writing mailed to each Participant at least
30 days prior to any record date for the payment of any dividend or
distribution by the Fund. Upon any withdrawal or termination, the Agent will
cause to be delivered to each Participant a certificate or certificates for
the appropriate
<PAGE>4
number of full shares and a cash adjustment for any fractional share (valued
at the market value of the shares at the time of withdrawal or termination);
provided, however, that any Participant may elect by notice to the Agent in
writing in advance of such termination to have the Agent sell part or all of
the shares in question and remit the proceeds to such Participant, net of any
brokerage commissions. A $5.00 fee will be charged by the Agent upon any cash
withdrawal or termination, and the Agent is authorized to sell a sufficient
number of the Participant's shares to cover such fee and any brokerage
commission on such sale.
11. These terms and conditions may be amended or supplemented by the
Agent or the Fund at any time or times but, except when necessary or
appropriate to comply with applicable law or the rules or policies of the
Securities and Exchange Commission or any other regulatory authority, only by
mailing to each Participant appropriate written notice at least 90 days prior
to the effective date thereof. The amendment or supplement shall be deemed to
be accepted by each Participant unless, with respect to any such Participant,
prior to the effective date thereof, the Agent receives written notice of the
termination of that Participant's account under the Plan. Any such amendment
may include an appointment by the Agent in its place and stead of a successor
Agent under these terms and conditions, with full power and authority to
perform all or any of the acts to be performed by the Agent under these terms
and conditions. Upon any such appointment of an Agent for the purpose of
receiving dividends and distributions, the Fund will be authorized to pay to
such successor Agent, for Participants' accounts, all dividends and
distributions payable on the shares of common stock held in each Participant's
name or under the Plan for retention or application by such successor Agent as
provided in these terms and conditions.
12. The Agent shall at all times act in good faith and agree to use its
best efforts within reasonable limits to ensure the accuracy of all services
performed under this agreement and to comply with applicable law, but assumes
no responsibility and shall not be liable for loss or damage due to errors
unless such error is caused by its or its employees' negligence, bad faith or
willful misconduct.
13. The Participant shall have no right to draw checks or drafts against
such Participant's Account or to give instructions to the Plan Agent in
respect of any shares or cash held therein except as expressly provided
herein.
14. The Participant agrees to notify the Plan Agent promptly in writing
of any change of address. Notices to the Participant may be given by the Plan
Agent by letter addressed to the Participant as shown on the records of the
Plan Agent.
<PAGE>5
15. This Agreement and the account established hereunder for the
Participant shall be governed by and construed in accordance with the laws of
the State of Maryland and the Rules and Regulations of the Securities and
Exchange Commission, as they may be changed or amended from time to time.
<PAGE>1
INVESTMENT MANAGEMENT AGREEMENT
GREENWICH STREET __________ MUNICIPAL FUND INC.
_______, 1994
Greenwich Street Advisors,
a Division of Mutual Management Corp.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Greenwich Street _________ Municipal Fund Inc. (the "Fund"), a
corporation organized under the laws of the State of Maryland, confirms its
agreement with Greenwich Street Advisors, a division of Mutual Management
Corp. (the "Adviser"), as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the investment objective,
policies and limitations specified in its Articles of Incorporation, as
amended from time to time (the "Charter"), in the prospectus and the statement
of additional information filed with the Securities and Exchange Commission
(the "SEC") as part of the Fund's Registration Statement on Form N-2, as
amended from time to time (the "Registration Statement"), and in the manner
and to the extent as may from time to time be approved by the Board of
Directors of the Fund (the "Board"). Copies of the Prospectus, the Statement
and the Charter have been or will be submitted to the Adviser. The Fund
agrees to provide copies of all amendments to the Registration Statement and
the Charter to the Adviser on an on-going basis. The Fund desires to employ
and hereby appoints the Adviser to act as the investment manager to the Fund.
The Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision, direction and approval of the Board, the
Adviser will (a) manage the Fund's holdings in accordance with the Fund's
investment objective and policies as stated in the Charter and the
Registration Statement; (b) make investment decisions for the Fund; (c) place
purchase and sale orders for portfolio transactions for the Fund; and (d)
employ professional portfolio managers and securities analysts who provide
research services to the Fund. In providing those services, the Adviser will
conduct a continual program of
<PAGE>2
investment, evaluation and, if appropriate, sale and reinvestment of the
Fund's assets.
3. Services as Administrator
Subject to the supervision and direction of the Board, the Adviser
will: (a) supervise all aspects of the Fund's operations under the direction
of the Board and the Fund's officers; (b) supply the Fund with office
facilities (which may be in the Adviser's own offices), statistical and
research data, data processing services, clerical, accounting and bookkeeping
services (including, but not limited to, the calculation of the net asset
value of shares of the Fund), internal auditing and legal services, internal
executive and administrative services, and stationery and office supplies; and
(c) prepare reports to shareholders of the Fund, tax returns and reports to
and filings with the SEC and state blue sky authorities. The Adviser is
hereby authorized to retain third parties and to delegate some or all of its
duties and obligations under this paragraph 3 to such persons provided that
such persons shall remain under the general supervision of the Adviser.
4. Brokerage
In selecting brokers or dealers to execute transactions on behalf of
the Fund, the Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Adviser
will consider factors it deems relevant, including, but not limited to, the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Adviser
is authorized to consider the brokerage and research services (as those terms
are defined in Section 28(c) of the Securities Exchange Act of 1934), provided
to the Fund and/or other accounts over which the Adviser or its affiliates
exercise investment discretion.
5. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Fund's holdings, and will, on its own initiative, furnish the
Fund from time to time with whatever information the Adviser believes is
appropriate for this purpose.
6. Standard of Care
<PAGE>3
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2, 3, 4 and 5 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport
to protect the Adviser against any liability to the Fund or to its
shareholders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Adviser's reckless disregard of
its obligations and duties under this Agreement.
7. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser on the first business day of each
month a fee for the previous month at the annual rate of .90 of 1.00% of the
Fund's average daily net assets. The fee for the period from the Effective
Date (defined below) of this Agreement to the end of the month during which
the Effective Date occurs shall be prorated according to the proportion that
such period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the
manner specified in the Registration Statement.
8. Expenses
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear all
other expenses to be incurred in its operation, including, but not limited to,
the fees payable under this Agreement; taxes, interest, brokerage fees and
commissions, if any; fees of the Board members of the Fund who are not
officers, directors or employees of Smith Barney Inc., Boston Advisors or
their affiliates; SEC fees and state blue sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; the Fund's and its
Board members' proportionate share of insurance premiums, professional
association dues and/or assessments; outside auditing and legal expenses;
costs of maintaining the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses;
costs of preparing and printing prospectuses and
<PAGE>4
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders, reports and
meetings of the officers or Board and any extraordinary expenses.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may in the future act as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Fund has no objections to the Adviser's so acting, provided that whenever the
Fund and one or more other clients advised by the Adviser have available funds
for investment, investments suitable and appropriate for each will be
allocated in accordance with a formula believed to be equitable to each
client. The Fund recognizes that in some cases this procedure may adversely
affect the size of the position obtainable for the Fund. In addition, the
Fund understands that the persons employed by the Adviser to assist in the
performance of the Adviser's duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Adviser or any affiliate of the
Adviser to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of _______, 1994, (the
"Effective Date") and shall continue for an initial two-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board or (ii) a vote of a majority of the Fund's
outstanding "voting securities" (as that term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act")), provided that in either
event the continuance is also approved by a majority of the Board who are not
"interest persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable, without penalty, on 60
days' written notice, by the Board or by vote of holders of a majority of the
Fund's shares, or upon 90 days' written notice, by the Adviser. This
Agreement will also terminate automatically in the event of its "assignment"
(as defined in the 1940 Act and the rules thereunder).
<PAGE>5
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
GREENWICH STREET _________ MUNICIPAL
FUND INC.
By:_________________________________
Name:
Title:
Accepted:
GREENWICH STREET ADVISORS, a
Division of Mutual Management Corp.
By:_________________________
Name:
Title:
<PAGE>1
GREENWICH STREET ___________ MUNICIPAL FUND INC.
PURCHASE AGREEMENT
Greenwich Street ___________ Municipal Fund Inc. (the "Fund"), a
corporation formed under the laws of the State of Maryland, and Smith Barney
Inc. ("Smith Barney"), a corporation organized under the laws of the State of
Delaware, agree as follows:
1. Offer and Purchase. The Fund offers Smith Barney, and Smith
Barney purchases, 8,334 shares of the Fund's Common Stock, par value $.001 per
share (the "Shares"). Smith Barney acknowledges receipt of a certificate
representing the Shares and the Fund acknowledges receipt from Smith Barney of
$100,008.00 in full payment for the Shares.
2. Representation by Smith Barney. Smith Barney represents and
warrants to the Fund that the Shares are being acquired for investment
purposes and not with a view to resale or further distribution.
3. No Right of Assignment. Smith Barney's right under this
Purchase Agreement to purchase the Shares is not assignable.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the _____ day of _____, 1994.
GREENWICH STREET __________ MUNICIPAL FUND INC.
By:_________________________
Name: Richard P. Roelofs
Title: Executive
Vice President
SMITH BARNEY INC.
By:_________________________
Name: Richard P. Roelofs
Title: Managing Director
<PAGE>1
GREENWICH STREET ________ MUNICIPAL FUND INC.
UNDERWRITING AGREEMENT
_______, 1994
Smith Barney Inc.
Two World Trade Center, 100th Floor
New York, New York 10048
Gentlemen:
Greenwich Street _________ Municipal Fund Inc., a corporation formed
under the laws of the State of Maryland (the "Portfolio"), and Smith Barney
Inc., a corporation formed under the laws of the State of Delaware ("Smith
Barney"), confirm their agreement, subject to the terms and conditions set out
below, pursuant to which Smith Barney (1) will be the underwriter of shares of
the Portfolio's Common Stock, par value $.001 per share, and (2) may engage in
market-making transactions with respect to those shares.
1. Definitions.
The following terms have the following meanings when used in this
Agreement:
(a) "Acts" means the Securities Act and the Investment Company
Act collectively.
(b) "Advisers Act" means the Investment Advisers Act of 1940,
as amended.
(c) "Advisers Act Rules" means those rules and regulations
adopted by the Commission under the Advisers Act.
(d) "Advisory Agreement" means the Investment Management
Agreement between the Portfolio and Greenwich Street Advisors, a division of
Mutual Management Corp., dated as of ______, 1994.
(e) "Agreement" means this Underwriting Agreement as originally
executed and as amended, modified, supplemented or restated from time to time.
(f) "Business Day" means any day on which the NYSE is open for
trading.
<PAGE>2
(g) "Commission" means the Securities and Exchange Commission.
(h) "Common Stock" means the Portfolio's Common Stock, par
value $.001 per share.
(i) "Custody Agreement" means the Custody Agreement between the
Portfolio and Boston Safe Deposit and Trust Company dated as of _______, 1994.
(j) "Effective Date" means the date on which the Registration
Statement becomes effective.
(k) "Exchange Act" means the Securities Exchange Act of 1934.
(l) "Final Amendment" means an amendment to the Registration
Statement necessary to permit the Registration Statement to become effective.
(m) "Firm Shares" means an aggregate of __________ Shares
covered by the Registration Statement.
(n) "First Closing Date" means the fifth Business Day following
the Effective Date or other date as determined by agreement between Smith
Barney and the Portfolio.
(o) "Investment Company Act" means the Investment Company Act
of 1940, as amended.
(p) "Investment Company Act Rules" means those rules and
regulations adopted by the Commission under the Investment Company Act.
(q) "Notification" means a notification of registration on Form
N-8A under the Investment Company Act filed on behalf of the Portfolio.
(r) "NYSE" means the New York Stock Exchange, Inc.
(s) "Offering" means the offering described in the Prospectus.
(t) "Option" means the option to purchase up to an additional
__________ Shares granted to Smith Barney under Section 4(b) of this Agreement.
<PAGE>3
(u) "Option Shares" means those Shares covered by the
Registration Statement and purchased by Smith Barney in exercising the Option.
(v) "Preliminary Prospectus" means any preliminary prospectus
included at any time as part of the Registration Statement that has been
authorized by the Portfolio for use in connection with the public offering of
Shares.
(w) "Prospectus" means the prospectus contained in the
Registration Statement.
(x) "Registration Statement" means the Registration Statement
on Form N-2 under the Acts, as supplemented by any amendments to that
Registration Statement, filed by the Portfolio with the Commission.
(y) "Rules and Regulations" means the Investment Company Act
Rules and the Securities Act Rules.
(z) "Second Closing Date" means a date determined by Smith
Barney on which the Option Shares are to be delivered, except that the Second
Closing Date may not be earlier than the First Closing Date nor earlier than
the second Business Day after the day on which the Option is exercised nor
later than the fifth Business Day after the date on which the Option is
exercised.
(aa) "Securities Act" means the Securities Act of 1933, as
amended.
(bb) "Securities Act Rules" means the rules and regulations
adopted by the Commission under the Securities Act.
(cc) "Shares" means the Firm Shares and the Option Shares, if
purchased.
(dd) "Smith Barney" means, as the context so requires, Smith
Barney and certain of its affiliates, including The Robinson-Humphrey Company,
Inc.
(ee) "Sub-Administration Agreement" means the Sub-
Administration Agreement between the Portfolio and The Boston Company
Advisors, Inc. dated as of _______, 1994.
(ff) "Transfer Agency Agreement" means the Transfer Agent and
Dividend-Paying Agent and Registrar Agreement between the Portfolio and TSSG
dated as of _______, 1994.
(gg) "TSSG" means The Shareholder Services Group,
<PAGE>4
Inc., a subsidiary of First Data Corporation.
2. Appointment of Smith Barney.
Subject to the terms and conditions contained in this Agreement, the
Portfolio appoints Smith Barney to serve as the underwriter of the Shares
during the Offering. Smith Barney accepts the appointment as the underwriter
of the Shares, the appointment's becoming effective as of the commencement
date of the Offering.
3. Services of Smith Barney.
Smith Barney will offer and sell through its organization those
Shares that Smith Barney has purchased pursuant to Section 4 of this
Agreement.
4. Sale of Shares to Smith Barney.
(a) On the basis of the representations and warranties
contained in, and subject to the terms and conditions of, this Agreement, the
Portfolio agrees to sell to Smith Barney, and Smith Barney agrees to purchase,
the Firm Shares.
(b) The Portfolio grants Smith Barney, solely for the purpose
of covering over-allotments in the sale of Firm Shares, the Option. The
Option may be exercised by Smith Barney at any time on or before the sixtieth
day following the Effective Date by written notice provided to the Portfolio
specifying (i) the aggregate number of Option Shares as to which the Option is
being exercised, (ii) the Second Closing Date and (iii) the time on the Second
Closing Date at which the Option Shares are to be delivered.
(c) The Portfolio will not be obligated to deliver any of the
Firm Shares except upon payment for all of the Firm Shares to be purchased as
provided in paragraph (a) of this Section 4.
(d) Delivery of and payment for the Firm Shares purchased by
Smith Barney under the terms of this Agreement will be made at the office of
Smith Barney at 10:00 A.M. New York City time, on the First Closing Date. On
the First Closing Date, the Portfolio will deliver the Firm Shares to Smith
Barney against payment to or upon the order of the Portfolio of the purchase
price by certified or official bank check or checks payable in New York
Clearing House (next-day) funds. Time will be of the essence with respect to
the Portfolio's payment obligation, and delivery at the time and place
specified in this paragraph (d) is
<PAGE>5
a further condition of the obligation of Smith Barney to purchase the Firm
Shares. Upon delivery, the Firm Shares will be registered in such names and
in such denominations as Smith Barney requests in writing not less than two
Business Days prior to the First Closing Date.
(e) Delivery of and payment for the Option Shares purchased by
Smith Barney under the terms of this Agreement will be made at the office of
Smith Barney at 10:00 A.M. New York City time, on the Second Closing Date. On
the Second Closing Date, the Portfolio will deliver the Option Shares to Smith
Barney against payment to or upon the order of the Portfolio of the purchase
price by certified or official bank check or checks payable in New York
Clearing House (next-day) funds. Time will be of the essence with respect to
the Portfolio's payment obligation, and delivery at the time and place
specified in this paragraph (e) is a further condition of the obligation of
Smith Barney to purchase the Option Shares. Upon delivery, the Option Shares
will be registered in such names and in such denominations as Smith Barney
requests in writing not less than two Business Days prior to the Second
Closing Date.
5. Price of Shares.
The price to Smith Barney of the Firm Shares and the Option Shares
will be $12.00 per Share.
6. Payments to Smith Barney Financial Consultants.
The Portfolio acknowledges that Smith Barney Financial Consultants
will receive compensation from Smith Barney in connection with sales of
Shares. In no event, however, will the Portfolio be obligated (a) to
reimburse Smith Barney for any costs incurred in connection with so
compensating its Financial Consultants or (b) to compensate those Financial
Consultants in any other way out of its own assets.
7. Compliance with Applicable Rules.
In engaging in the activities contemplated under this Agreement,
Smith Barney will conform in all material respects with all state and federal
laws relating to the sale of Shares and with all applicable rules and
regulations of all regulatory bodies, including, without limitation, the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. and
the Rules and Regulations. Neither Smith Barney nor any other person is
authorized by the Portfolio to give any information or to make any
representations in connection with the sale of Shares, other than those
contained in the Registration Statement or the
<PAGE>6
Prospectus with respect to the Shares, and in any information supplemental to
the Prospectus specifically approved by the Portfolio for use in connection
with the offer or sale of Shares, and neither Smith Barney nor any other
person is authorized, except as contemplated by this Agreement, to act as
agent for the Portfolio in connection with the offering or sale of Shares to
the public or otherwise.
8. Registration Statement and Prospectus; Public Offering.
(a) The Portfolio has filed with the Commission, pursuant to
the Acts and the Rules and Regulations, the Registration Statement, including
a Preliminary Prospectus, and those amendments to the Registration Statement
as may have been required to have been made prior to the date of this
Agreement. The Portfolio has furnished Smith Barney with copies of the
Registration Statement, each amendment to the Registration Statement filed by
the Portfolio with the Commission and the Preliminary Prospectus. If the
Registration Statement has not become effective prior to the date of this
Agreement, the Portfolio will promptly file with the Commission the Final
Amendment, including the form of final Prospectus. If the Registration
Statement has become effective and the Prospectus omits certain information at
the time of effectiveness pursuant to Rule 430A under the Securities Act, a
final prospectus containing that information will promptly be filed by the
Portfolio with the Commission in accordance with Rule 497(b) of the Securities
Act.
(b) The Portfolio understands that Smith Barney proposes to
make a public offering of the Shares, as described in the Prospectus, as soon
after the Effective Date (or, if later, after the date this Agreement is
signed) as Smith Barney deems advisable. The Portfolio confirms that Smith
Barney has been authorized to distribute the Preliminary Prospectus relating
to the Shares included in Pre-Effective Amendment No. 1 and Pre-Effective
Amendment No. 2 to the Registration Statement and is authorized to distribute
the Prospectus and any amendments or supplements to the Prospectus.
9. Representations and Warranties of the Portfolio.
The Portfolio represents and warrants to Smith Barney that:
(a) on the Effective Date and the date the Prospectus is first
filed with the Commission pursuant to Rule 497(b) or (h) under the Securities
Act and the date when any
<PAGE>7
post-effective amendment to the Registration Statement becomes effective or
any amendment or supplement to the Prospectus is filed with the Commission,
the Registration Statement, the Prospectus and any such amendment or
supplement did or will comply in all material respects with the applicable
requirements of the Acts and the Rules and Regulations, except that the
Portfolio makes no representations, warranties or agreements as to information
contained in or omitted from the Registration Statement, the Prospectus or any
such amendment or supplement in reliance upon or in conformity with written
information furnished to the Portfolio by Smith Barney specifically for
inclusion in such document;
(b) on the Effective Date and when any post-effective
amendment to the Registration Statement becomes effective, neither the
Registration Statement nor any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in it or necessary to make the statements in it not misleading, except
that the Portfolio makes no representations, warranties or agreements as to
information contained in or omitted from the Registration Statement or such
amendment in reliance upon or in conformity with written information furnished
to the Portfolio by Smith Barney specifically for inclusion in such document;
(c) on the Effective Date, and the date the Prospectus or any
amendment or supplement to the Prospectus is filed with the Commission, the
Prospectus or amendment or supplement did not or will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements in it, in light of the circumstances under which they were
made, not misleading, except that the Portfolio makes no representations,
warranties or agreements as to information contained in or omitted from the
Prospectus or amendment or supplement to the Prospectus in reliance upon or in
conformity with written information furnished to the Portfolio by Smith Barney
specifically for inclusion in such document;
(d) the Notification complied, and any amendment to the
Notification will comply, in all material respects with the requirements of
the Investment Company Act;
(e) the Portfolio is not in violation of its corporate charter
or by-laws or in default under any agreement, indenture, or instrument, to
which the Portfolio is a party, by which the Portfolio may be bound, or to
which any of the properties or assets of the Portfolio is subject or, to the
best knowledge of the Portfolio, in breach or violation of any judgment,
decree, order, rule or regulation of any court or
<PAGE>8
governmental or self-regulatory agency or body, the effect of which violation
or default or breach would be material to the Portfolio;
(f) each of the Advisory Agreement, the Sub- Administration
Agreement, the Custody Agreement and the Transfer Agency Agreement has been
duly authorized, executed and delivered by the Portfolio, complies in all
material respects with all applicable provisions of the Investment Company
Act, the Advisers Act and the Advisers Act Rules, and, assuming due
authorization, execution and delivery by the other party to each such
agreement, constitutes a legal, valid and binding obligation of the Portfolio
enforceable in accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights and by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law);
(g) this Agreement has been duly authorized, executed and
delivered by the Portfolio, complies in all material respects with all
applicable provisions of the Investment Company Act and the Investment Company
Act Rules, and, assuming due authorization, execution and delivery by Smith
Barney, constitutes the legal, valid and binding obligation of the Portfolio,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
and by general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(h) no consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Advisory Agreement, the Sub-Advisory
Agreement, the Custody Agreement and the Transfer Agency Agreement by the
Portfolio, or the consummation by the Portfolio of the transactions
contemplated by each of those agreements, except those that have been obtained
and those that may be required under the Acts;
(i) the execution, delivery and performance of this Agreement,
the Sub-Administration Agreement, the Custody Agreement and the Transfer
Agency Agreement, and the consummation by the Portfolio of the transactions
contemplated by each of those agreements, will not conflict with, result in
the creation or imposition of, any lien, charge or encumbrance upon the assets
of the Portfolio pursuant to the terms of, result in a breach or violation by
the Portfolio of any of the material terms or
<PAGE>9
provisions of, or constitute a default by the Portfolio under, any material
contract, including indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which the Portfolio is a party or to which
its properties is subject, the corporate charter or by-laws of the Portfolio,
or, to the best knowledge of the Portfolio, any statute (including the Acts),
judgment, decree, order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Portfolio or any of its property;
(j) to the best of the Portfolio's knowledge, subsequent to
the dates as of which information is given in the Registration Statement or
the Prospectus, there has not been any material adverse change in, or any
adverse development that materially affects, the business, properties,
financial condition, results of operations, or prospects of the Portfolio;
(k) Coopers & Lybrand, whose report appears in the Prospectus,
are independent public accountants as required by the Acts and the Rules and
Regulations;
(l) the shares of Common Stock being sold by the Portfolio,
when issued, delivered and paid for on the First Closing Date and the Second
Closing Date in the manner described in the Prospectus, will be validly
authorized, issued and outstanding, fully paid and nonassessable;
(m) the shares of Common Stock being sold by the Portfolio
will conform in all material respects to the descriptions of them contained in
the Registration Statement and the Prospectus;
(n) the balance sheet of the Portfolio filed as part of the
Registration Statement or included in any Preliminary Prospectus or the
Prospectus, presents fairly the financial condition of the Portfolio at the
dates indicated in the balance sheet and has been prepared in accordance with
generally accepted accounting principles applied on a consistent basis;
(o) there is no litigation or proceeding pending or, to the
knowledge of the Portfolio, threatened against the Portfolio that might result
in any material adverse change in the financial condition, results of
operations, business or prospects of the Portfolio or that is required to be
disclosed in the Registration Statement;
(p) there are no material contracts or other documents that
are required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Acts or by
<PAGE>10
the Rules and Regulations that have not been described in the Prospectus or
filed as exhibits to the Registration Statement or incorporated in the
Registration Statement by reference as permitted by the Rules and Regulations;
(q) the Portfolio is registered with the Commission under the
Investment Company Act as a closed-end, non-diversified management investment
company and is, and at all times through the completion of the transactions
contemplated by this Agreement will be, in compliance in all material respects
with the terms and provisions of the Acts;
(r) no person is serving or acting or is proposed to serve or
act as an officer, director or investment adviser of the Portfolio except in
accordance with the provisions of the Investment Company Act and the Advisers
Act, the Investment Company Act Rules and the Advisers Act Rules; and
(s) the Portfolio has been duly incorporated, is validly
existing and in good standing under the laws of the State of Maryland, is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership of property or the conduct of its
business requires qualification, and has all power and authority necessary to
own or hold its property and to conduct its business as described in the
Prospectus.
10. Covenants of the Portfolio.
The Portfolio covenants and agrees:
(a) if the Registration Statement has not become effective by
the date of this Agreement, promptly to file the Final Amendment with the
Commission, to use its best efforts to cause the Registration Statement to
become effective and, as soon as the Portfolio is advised, to notify Smith
Barney when the Registration Statement or any amendment to it has become
effective and, if required, to file a Prospectus pursuant to Rule 497(b) under
the Securities Act as promptly as practicable, but no later than the fifth
Business Day following the date of the later of the Effective Date or the
commencement of the Offering;
(b) if the Registration Statement has become effective on or
before the date of this Agreement and the Prospectus contained in the
Registration Statement omits certain information at the time of effectiveness
pursuant to Rule 430A under the Securities Act, to file a prospectus pursuant
to Rule 497(h) under the Securities Act as promptly as practicable, but no
later than the second Business Day following the date of the
<PAGE>11
determination of the offering price of the Shares or the date the Prospectus
is first used after the Effective Date;
(c) not to file any Prospectus or any other amendment or
supplement to the Registration Statement or the Prospectus unless a copy has
first been submitted to Smith Barney a reasonable time before its filing and
Smith Barney has not reasonably objected to it within a reasonable time after
receiving the copy;
(d) to furnish promptly to Smith Barney a conformed copy of
the Registration Statement and the Notification as originally filed with the
Commission, and each amendment to the Registration Statement and Notification
filed with the Commission, including all consents and exhibits filed with the
Registration Statement;
(e) to deliver to Smith Barney, as soon as the Registration
Statement becomes effective and thereafter when the Prospectus is required to
be delivered under the Acts, as many copies of the Prospectus and as many
conformed copies of the Registration Statement and of each amendment to the
Registration Statement (including exhibits filed with the Registration
Statement or incorporated by reference in the Registration Statement) as Smith
Barney may reasonably request;
(f) during the period of time in which the Prospectus is
required to be delivered by Smith Barney under the Securities Act and the
Securities Act Rules (the "Delivery Period"), to deliver promptly to Smith
Barney the number of copies of the Prospectus (as amended or supplemented and
including all documents incorporated by reference in the Prospectus) as Smith
Barney may reasonably request;
(g) during the Delivery Period, to advise Smith Barney
promptly (i) when the Registration Statement and any post-effective amendment
to the Registration Statement is declared effective, (ii) of any request or
proposed request by the Commission for an amendment to the Registration
Statement, a supplement to the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threat of any
proceeding for that purpose and (iv) of the happening of any event that makes
untrue any statement of a material fact made in the Registration Statement or
the Prospectus, or that requires the making of a change in the Registration
Statement or the Prospectus to make any material statement contained in either
document not misleading;
<PAGE>12
(h) if the Commission issues a stop order suspending the
effectiveness of the Registration Statement or an order pursuant to Section
8(e) of the Investment Company Act, to make every reasonable effort to obtain
the lifting of the order at the earliest possible time;
(i) as soon as practicable after the Effective Date, but in no
event later than the last day of the eighteenth full calendar month following
the calendar quarter in which the Effective Date falls, to make generally
available to its shareholders and to deliver to Smith Barney an earnings
statement, conforming to the requirements of Section 11(a) of the Securities
Act, covering a period of at least 12 months beginning after the Effective
Date;
(j) to furnish to Smith Barney copies of all public reports
and all reports and financial statements furnished by the Portfolio to the
NYSE or any other securities exchange upon which the Common Stock is listed or
admitted for trading, pursuant to requirements of or agreements with those
exchanges or to the Commission pursuant to the Exchange Act, the Investment
Company Act or any rule or regulation of the Commission under the Exchange Act
or the Investment Company Act;
(k) to take whatever actions Smith Barney reasonably requests
to qualify the Shares for offer and sale under the securities or "blue sky"
laws of those jurisdictions reasonably designated by Smith Barney, except
that, under no circumstances, will the Portfolio be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction; and
(l) to use its best efforts to list the Shares on the NYSE,
the American Stock Exchange, Inc. or other national securities exchange, or to
have the Shares traded on the NASDAQ National Market System or other national
market system, as and when contemplated by the Prospectus and to comply with
the rules and regulations of the exchange on which the Shares are listed or
the market system through which the Shares are traded.
11. Conditions of Smith Barney's Obligations.
(a) The obligations of Smith Barney under this Agreement to
purchase Shares on the terms and conditions set out in this Agreement will at
all times be subject, in its discretion, to the accuracy, on the date of this
Agreement, on the First Closing Date, and on the Second Closing Date, of the
representations and warranties of the Portfolio contained in this Agreement,
to the performance by the Portfolio of its obligations
<PAGE>13
under this Agreement, to the prior receipt by Smith Barney of good funds in
payment for Shares to be purchased in accordance with the terms and conditions
of this Agreement, and to each of the following additional terms and
conditions:
(i) the Registration Statement has become effective by 5:30
p.m., New York City time, on the date of this
Agreement, or later date and time to which Smith Barney has consented in
writing;
(ii) the Prospectus has been timely filed with the Commission
in accordance with the provisions of this Agreement;
(iii) on or before the First Closing Date or the Second
Closing Date, no stop order suspending the effectiveness of the Registration
Statement or order pursuant to Section 8(e) of the Investment Company Act has
been issued, and no stop order proceeding or proceeding for an order pursuant
to Section 8(e) of the Investment Company Act has been initiated or threatened
by the Commission;
(iv) any request of the Commission for inclusion of additional
information in the Registration Statement or the Prospectus or otherwise has
been met;
(v) the Portfolio has not filed with the Commission the
Prospectus or any amendment or supplement to the Registration Statement or the
Prospectus without the consent of Smith Barney, which consent has not been
unreasonably withheld or delayed;
(vi) Smith Barney has not discovered and disclosed to the
Portfolio, on or prior to the First Closing Date or the Second Closing Date,
that the Registration Statement or the Prospectus or any amendment or
supplement to the Registration Statement or the Prospectus contains an untrue
statement of a fact that, in the reasonable opinion of counsel to Smith
Barney, is, as a matter of law, material or omits to state a fact that, in the
reasonable opinion of that counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading; and
(vii) all corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement and the
Shares and the form of the Registration Statement and the Prospectus, other
than financial statements and other financial data, and all other legal
matters relating to this Agreement and the transactions contemplated by this
<PAGE>14
Agreement are satisfactory in all respects to counsel to Smith Barney, and the
Portfolio has furnished to that counsel all documents and information that
counsel may reasonably request to enable counsel to pass upon those matters.
(b) All opinions, letters, evidence and certificates described
in this Section 11 or elsewhere in this Agreement will be deemed to be in
compliance with the provisions of this Agreement only if they are in form and
substance reasonably satisfactory to counsel to Smith Barney.
12. Expenses.
(a) The Portfolio will pay or cause to be paid, or reimburse
if paid by Smith Barney or others:
(i) all costs and expenses in connection with the registration
of Shares under the Acts and the Rules and Regulations;
(ii) all costs and expenses of qualifying and maintaining
qualification of the Shares for sale under the securities or "blue sky" laws
of the various states designated by Smith Barney;
(iii) all federal or state original issue taxes or transfer
taxes, payable upon the issuance, transfer or delivery of Shares from the
Portfolio to Smith Barney;
(iv) the costs of preparing and issuing any certificates that
may be issued to represent Shares;
(v) all expenses in connection with the printing of any
notices of meetings of the Portfolio's shareholders, proxy and proxy
statements and enclosures with those documents, as well as any other notice or
communication sent to shareholders in connection with any meeting of the
shareholders or otherwise, any annual, semi-annual or other report or
communications sent to the shareholders, and the expense of sending
prospectuses relating to the Shares to existing shareholders;
(vi) all expenses in connection with the printing, copying
and/or distribution of any preliminary Registration Statement (including a
Preliminary Prospectus and any exhibits attached to the Preliminary
Prospectus, and any pre-effective amendments to the Preliminary Prospectus),
the Registration Statement, the Prospectus or any post-effective amendments to
the Registration Statement or Prospectus;
<PAGE>15
(vii) all expenses in connection with obtaining listing of the
Shares on a national securities exchange or national market system; and
(viii) all expenses in connection with obtaining approval from
the National Association of Securities Dealers, Inc. for the distribution of
the Shares.
(b) Smith Barney will permit its officers and employees to
serve without compensation as directors and/or officers of the Portfolio if
those employees are duly elected to those positions.
13. Secondary Market Activity.
(a) The Portfolio and Smith Barney acknowledge and agree that
(i) during the Offering, Shares will not be repurchased by either the
Portfolio or Smith Barney, (ii) no secondary market for the Shares currently
exists or is expected to develop during the Offering, (iii) no secondary
market for the Shares is expected to develop after the First Closing Date and
prior to the date on which trading in Shares commences on the NYSE or other
national securities exchange and (iv) after the Second Closing Date, the
Portfolio will be free to repurchase Shares, subject to compliance with
applicable law.
(b) The Portfolio agrees that Smith Barney is authorized,
after trading in Shares has commenced on the NYSE or other national securities
exchange, to engage in market-making transactions with respect to Shares in
the over-the-counter market at negotiated prices related to prevailing market
prices at the time of sale of the Shares. The Portfolio acknowledges and
agrees that (i) Smith Barney may act as principal or agent in such
market-making transactions and (ii) Smith Barney is under no obligation to
engage in such market-making transactions and may at any time discontinue
those transactions at its sole discretion and without notice to the Portfolio.
14. Indemnification and Contribution.
(a) The Portfolio agrees to indemnify Smith Barney and hold
harmless Smith Barney and each person that controls Smith Barney within the
meaning of the Securities Act ("Controlling Person") from and against any
loss, claim, damage or liability, joint or several, and any action with
respect to any such loss, claim, damage or liability, to which Smith Barney or
any Controlling Person may become subject, under the Securities Act or
otherwise, insofar as the loss, claim, damage, liability or action arises out
of, is based upon, or is alleged
<PAGE>16
to arise out of or be based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus, or the Registration Statement or the Prospectus as amended or
supplemented, or the omission or alleged omission to state in any such
document a material fact required to be stated in the document or necessary to
make the statements in the document not misleading, except that the Portfolio
will not be liable to the extent that any such loss, claim, damage, liability
or action arises out of, or is based upon, or is alleged to arise out of or be
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement or the Prospectus or any
amendments or supplements to the Registration Statement or Prospectus, in
reliance upon and in conformity with written information furnished to the
Portfolio by Smith Barney specifically for inclusion in the document, (ii) any
failure of the Portfolio to issue and sell the Shares, (iii) any action taken
or omitted to be taken by Smith Barney with the consent of the Portfolio, (iv)
any action taken or omitted to be taken by the Portfolio, (v) any breach by
the Portfolio of any representation or warranty, or any failure by the
Portfolio to comply with any agreement or covenant contained in this Agreement
or (vi) any of the other transactions contemplated by Smith Barney'
performance of its obligations under this Agreement, and will reimburse Smith
Barney and each Controlling Person for any legal and other expenses reasonably
incurred by Smith Barney or the Controlling Person in investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action, except that the Portfolio will not be liable for
indemnity under paragraph (a)(vi) of this Section 14 to the extent that the
action or omission to which that indemnity relates has been determined by a
court of competent jurisdiction to have resulted directly from the willful
misfeasance, bad faith or gross negligence of Smith Barney or reckless
disregard of its obligations or duties hereunder. The indemnity agreement
contained in this Section 14(a) is in addition to any liability that the
Portfolio may otherwise have to Smith Barney or any Controlling Person.
(b) Smith Barney will indemnify and hold harmless the
Portfolio, each of its directors, each of its officers who signed the
Registration Statement and any person who controls the Portfolio within the
meaning of the Securities Act from and against any loss, claim, damage or
liability, joint or several, or any action with respect to any such loss,
claim, damage or liability, to which the Portfolio or any such director,
officer or controlling person may become subject, under the Securities Act or
otherwise, insofar as the loss, claim, damage, liability or action arises out
of, or is based upon, or is alleged to arise
<PAGE>17
out of or be based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, the Prospectus, or the
Registration Statement or the Prospectus as amended or supplemented, or arises
out of, or is based upon, or is alleged to arise out of or be based upon, the
omission or alleged omission to state in any such document a material fact
required to be stated in the document or necessary to make the statements in
the document not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Portfolio by Smith Barney specifically for inclusion in the document,
and will reimburse the Portfolio for any legal and other expenses reasonably
incurred by the Portfolio or any such director, officer or controlling person
in investigating or defending or preparing to defend against the loss, claim,
damage, liability or action. The indemnity agreement contained in this
Section 14(b) is in addition to any liability that Smith Barney may otherwise
have to the Portfolio or any of its directors, officers or controlling
persons.
(c) Promptly after receipt by an indemnified party under this
Section 14 of notice of any claim or the commencement of any action, the
indemnified party will notify the indemnifying party in writing of the claim
or the commencement of that action, except that the failure to notify the
indemnifying party will not relieve the indemnifying party from any liability
that it may have to an indemnified party under this Section 14 except to the
extent that the indemnifying party has been prejudiced in any material respect
by the failure or from any liability that it may have to an indemnified party
otherwise than under this Section 14. If any such claim or action is brought
against an indemnified party, and the indemnified party notifies the
indemnifying party of the claim or action, the indemnifying party will be
entitled to participate in the claim or action and, to the extent that the
indemnifying party wishes, jointly with any other similarly notified
indemnifying party, to assume the defense of the claim or action with counsel
satisfactory to the indemnified party. After notice from the indemnifying
party to the indemnified party of the indemnifying party's election to assume
the defense of the claim or action, the indemnifying party will not be liable
to the indemnified party under this Section 14 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
of the claim or action other than reasonable costs of investigation and
providing evidence, except that the indemnified party will have the right to
employ counsel to represent the indemnified party, its officers, directors,
employees and controlling persons who may be subject to liability arising out
of any claim or action with
<PAGE>18
respect to which indemnity may be sought by the indemnified party and any such
officers, directors, employees or controlling persons if, in the reasonable
judgment of the indemnified party, it is advisable for the indemnified party
to be represented by separate counsel, and in that event, the fees and
reasonable expenses of that counsel will be paid by the indemnifying party.
(d) If indemnification provided for in this Section 14 is
unavailable to an indemnified party with respect to any loss, claim, damage or
liability, or any action with respect to any such loss, claim, damage or
liability referred to in this Section 14, then each indemnifying party will,
in lieu of indemnifying the indemnified party, contribute to the amount paid
or payable by the indemnified party as a result of the loss, claim, damage, or
liability, or action with respect to the loss, claim, damage or liability in
the proportion that is appropriate to reflect the relative fault of the
Portfolio and Smith Barney with respect to the transaction to which the loss,
claim, damage or liability, or action with respect to the loss, claim, damage
or liability relates, as well as any other relevant equitable considerations.
The relative fault of the Portfolio and Smith Barney will be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to
information supplied by the Portfolio or by Smith Barney, the intent of the
parties and their relative knowledge, access to information and opportunity
to correct or prevent the statement or omission, and other relevant equitable
considerations. The Portfolio and Smith Barney agree that it would not be
just and equitable if contributions pursuant to this Section 14 were to be
determined by a proportionate allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in
this paragraph (d). The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action with respect to the
loss, claim, damage or liability referred to in this Section 14 will be deemed
to include, for purposes of this Section 14, any legal or other expenses
reasonably incurred by the indemnified party in connection with investigating
or defending any such action or claim. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
by a court of competent jurisdiction will be entitled to contribution pursuant
to this paragraph (d) from any person who was not found guilty of the
fraudulent misrepresentation.
(e) The indemnity agreements contained in this Section 14 and
the representations, warranties, agreements and covenants of the Portfolio in
Sections 9, 10 and 14 of this Agreement will survive the delivery of the
Shares and will remain
<PAGE>19
in full force and effect, regardless of any termination or amendment of this
Agreement undertaken pursuant to Section 15 of this Agreement or any
investigation made by or on behalf of any indemnified party.
15. Continuation, Amendment or Termination of Agreement.
(a) This Agreement will become effective on the Effective Date
and will continue for an initial two-year term and will continue thereafter,
so long as such continuance is specifically approved at least annually (i) by
the Board of Directors of the Portfolio or (ii) by a vote of a majority of the
outstanding voting securities of the Portfolio entitled to vote, so long as in
either case, the continuance is also approved by a majority of the directors
of the Portfolio who are not interested persons of the Portfolio or Smith
Barney by vote cast in person at a meeting called for the purpose of voting on
the approval.
(b) This Agreement (i) may be terminated by the Portfolio at
any time on written notice to Smith Barney and (ii) will terminate
automatically in the event of its assignment.
(c) The Agreement may be terminated by Smith Barney in its
absolute discretion, by notice given to and received by the Portfolio prior to
the First Closing Date or the Second Closing Date, if prior to that time
trading in securities generally on the NYSE is suspended, or limited or
minimum prices are established on the NYSE, or a banking moratorium is
declared by either Federal or New York State authorities, or there shall have
occurred any outbreak or material escalation of hostilities in which the
United States is involved, any declaration of war by Congress, or any material
adverse change in the existing financial, political or economic conditions in
the United States or elsewhere or any other substantial national or
international calamity or emergency if the effect of any such outbreak,
escalation, declaration, adverse change, calamity or emergency makes it
impracticable or inadvisable to proceed with completion of the sale of, and
payment for, the Shares.
(d) Upon termination of this Agreement, the obligations of the
Portfolio and Smith Barney under this Agreement will cease and terminate as of
the date of the termination, except for any obligation to respond with respect
to a breach of this Agreement committed prior to the termination and except as
provided in Section 14(e) of this Agreement.
(e) This Agreement may be amended at any time by mutual
consent of the Portfolio and Smith Barney except that such
<PAGE>20
consent on the part of the Portfolio must have been approved (i) by the Board
of Directors of the Portfolio, or by a vote of the majority of the outstanding
voting securities of the Portfolio entitled to vote and (ii) by vote of a
majority of the directors of the Portfolio who are not interested persons of
the Portfolio cast in person at a meeting called for the purpose of voting
upon the amendment.
(f) For purposes of this Section 15, the terms "vote of a
majority of the outstanding voting securities" of the Portfolio, "interested
persons" and "assignment" have the meanings given to them in the Investment
Company Act.
16. Notices.
Any notice by the Portfolio to Smith Barney will be sufficient if
given in writing, by telegraph or by facsimile addressed to Smith Barney at
Two World Trade Center, 100th Floor, New York, New York 10048, and any notice
by Smith Barney to the Portfolio will be sufficient if given in writing, by
telegraph or by facsimile addressed to the Portfolio at Two World Trade Center
- -- 100th Floor, New York, New York 10048, Attention: Mr. Richard P. Roelofs.
17. Parties.
This Agreement will inure to the benefit of, and be binding upon,
Smith Barney and the Portfolio and their respective successors. This
Agreement and its terms and provisions are for the sole benefit of only those
persons, except that (a) the representations, warranties, indemnities and
agreements of the Portfolio contained in this Agreement will also be deemed to
be for the benefit of the person or persons controlling Smith Barney within
the meaning of Section 15 of the Securities Act and (b) the indemnity
agreement of Smith Barney contained in Section 14(b) of this Agreement will be
deemed to be for the benefit of the directors of the Portfolio and officers of
the Portfolio who have signed the Registration Statement and any person
controlling the Portfolio. Nothing in this Agreement is intended or should be
construed in any way to give any person other than the persons referred to in
this Section 17 any legal or equitable right, remedy or claim under, or with
respect to, this Agreement or any provision contained in this Agreement.
18. Governing Law.
This Agreement will be governed by and construed in accordance with
the laws of the State of New York.
<PAGE>21
19. Counterparts.
This Agreement may be executed in one or more counterparts and, if
executed in more than one counterpart, the executed counterparts will each be
deemed to be an original but all such counterparts will together constitute
one and the same instrument.
20. Headings.
The headings used in this Agreement have been inserted for
convenience of reference only and are not intended to be a part of, or to
affect the meaning or interpretations of, this Agreement.
* * * * *
<PAGE>22
If the foregoing correctly sets forth the agreement between the
Portfolio and Smith Barney, please indicate Smith Barney' acceptance in the
space provided for that purpose below.
Very truly yours,
Greenwich Street ___________ Municipal
Fund Inc.
By:______________________________
Richard P. Roelofs
Title: Executive Vice President
Accepted:
SMITH BARNEY INC.
By:_______________________________
Heath B. McLendon
Title: Executive Vice President
<PAGE>1
TRANSFER AGENCY AND REGISTRAR AGREEMENT
AGREEMENT, dated as of _____________, 1994, between GREENWICH STREET
___________MUNICIPAL FUND INC. (the "Fund"), a corporation organized under the
laws of Maryland and having its principal place of business at Two World Trade
Center, New York, New York 10048, and THE SHAREHOLDER SERVICES GROUP, INC.
(MA) (the "Transfer Agent"), a corporation organized under the laws of
Massachusetts and having its principal offices at One Exchange Place, 53 State
Street, Boston, Massachusetts 02109.
W I T N E S S E T H
That for and in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and the Transfer Agent agree as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, Partnership Agreement or similar
organizational document, as the case may be, of the Fund as the same may be
amended from time to time.
(b) "Authorized Person" shall be deemed to include any person,
whether or not such person is an officer or employee of the Fund, duly
authorized to give Oral Instructions or Written Instructions on behalf of the
Fund as indicated in a certificate furnished to the Transfer Agent pursuant to
Section 4(c) hereof as may be received by the Transfer Agent from time to
time.
(c) "Board of Directors" shall mean the Board of Directors, Board
of Trustees or, if the Fund is a limited partnership, the General Partner(s)
of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time deposit, or
cause to be deposited or held under the name or account of such a custodian
pursuant to a Custody Agreement.
(f) "Fund" shall mean the entity executing this Agreement and if it
is a series fund, as such term is used in the
<PAGE>2
1940 Act, such term shall mean each series of the Fund hereafter created,
except that appropriate documentation with respect to each series must be
presented to the Transfer Agent before this Agreement shall become effective
with respect to each such series.
(g) "1940 Act" shall mean the Investment Company Act of 1940.
(h) "Oral Instructions" shall mean instructions, other than Written
Instructions, actually received by the Transfer Agent from a person reasonably
believed by the Transfer Agent to be an Authorized Person.
(i) "Prospectus" shall mean the most recently dated Fund Prospectus
including any supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(j) "Shareholder" shall mean a holder of shares of capital stock,
beneficial interest or any other class or series, and also refers to partners
of limited partnerships.
(k) "Shares" refers collectively to such shares of capital stock,
beneficial interest or limited partnership interests, as the case may be, of
the Fund as may be issued from time to time and, if the Fund is a closed-end
or a series fund, as such terms are used in the 1940 Act any other classes or
series of capital stock, shares of beneficial interest or limited partnership
interests that may be issued from time to time.
(l) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by the Transfer Agent to be an
Authorized Person and actually received by the Transfer Agent. Written
Instructions shall include manually executed originals and authorized
electronic transmissions, including telefacsimile of a manually executed
original or other process.
2. Appointment of the Transfer Agent. The Fund hereby appoints and
constitutes the Transfer Agent as transfer agent, registrar and dividend
disbursing agent for Shares of the Fund and as shareholder servicing agent for
the Fund and as plan agent under the Fund's Dividend Reinvestment Plan. The
Transfer Agent accepts such appointments and agrees to perform the duties
hereinafter set forth.
3. Compensation.
(a) The Fund will compensate or cause the Transfer Agent to be
compensated for the performance of its obligations hereunder in accordance
with the fees set forth in the written
<PAGE>3
schedule of fees annexed hereto as Schedule A and incorporated herein. The
Transfer Agent will transmit an invoice to the Fund as soon as practicable
after the end if each calendar month which will be detailed in accordance with
Schedule A, and the Fund will pay to the Transfer Agent the amount of such
invoice within thirty (30) days after the Fund's receipt of the invoice.
In addition, the Fund agrees to pay, and will be billed
separately for, reasonable out-of-pocket expenses incurred by the Transfer
Agent in the performance of its duties hereunder. Out-of-pocket expenses
shall include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule B and
incorporated herein. Unspecified out-of-pocket expenses shall be limited to
those out-of-pocket expenses reasonably incurred by the Transfer Agent in the
performance of its obligations hereunder. Reimbursement by the Fund for
expenses incurred by the Transfer Agent in any month shall be made as soon as
practicable but no later than fifteen (15) days after the receipt of an
itemized bill from the Transfer Agent.
(b) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule A, a revised fee schedule executed and dated
by the parties hereto.
4. Documents. In connection with the appointment of the Transfer
Agent, the Fund shall deliver or cause to be delivered to the Transfer Agent
the following documents on or before the date this Agreement goes into effect,
but in any case within a reasonable period of time for the Transfer Agent to
prepare to perform its duties hereunder:
(a) If applicable, specimens of certificates for Shares of the
Fund;
(b) All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the Fund;
(c) A signature card bearing the signatures of any Authorized
Person who will sign Written Instructions or is authorized to give Oral
Instructions to the Transfer Agent on behalf of the Fund;
(d) A certified copy of the Fund's Articles of Incorporation, as
amended;
(e) A certified copy of the By-laws of the Fund, as amended;
(f) A copy of the resolution of the Board of Directors authorizing
the execution and delivery of this Agreement;
<PAGE>4
(g) A certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of each Shareholder, and the number
of Shares of the Fund held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts against which stop
transfer orders have been placed, together with the reasons therefore, and the
number of Shares redeemed by the Fund; and
(h) An opinion of counsel for the Fund with respect to the validity
of the Shares and the status of such Shares under the Securities Act of 1933,
as amended.
5. Further Documentation. The Fund will also furnish the Transfer
Agent with copies of the following documents promptly after the same become
available:
(a) each resolution of the Board of Directors authorizing the
issuance of Shares;
(b) any registration statements filed on behalf of the Fund and all
pre-effective and post-effective amendments thereto filed with the Commission;
(c) a certified copy of each resolution of the Board of Directors
or other authorization designating Authorized Persons; and
(d) such other certificates, documents or opinions as the Transfer
Agent may reasonably request in connection with the performance of its duties
hereunder.
6. Representations. The Fund represents to the Transfer Agent that all
outstanding Shares are validly issued, fully paid and non-assessable. When
Shares are hereafter issued in accordance with the terms of the Fund's
Articles of Incorporation and its Prospectus, such Shares shall be validly
issued, fully paid and non-assessable. The Transfer Agent represents that it
is and will continue to be registered as a transfer agent under the Securities
Exchange Act of 1934.
7. Distributions Payable in Shares. In the event that the Board of
Directors of the Fund shall declare a distribution payable in Shares, the Fund
shall deliver or cause to be delivered to the Transfer Agent written notice of
such declaration signed on behalf of the Fund by an officer thereof, upon
which the Transfer Agent shall be entitled to rely for all purposes,
certifying (i) the identity of the Shares involved, (ii) the number of Shares
involved, and (iii) that all appropriate action has been taken.
<PAGE>5
8. Duties of the Transfer Agent. The Transfer Agent shall be
responsible for administering and/or performing those functions typically
performed by a transfer agent; for acting as service agent in connection with
dividend and distribution functions and as plan agent under the Fund's
Dividend Reinvestment Plan; and for performing shareholder account and
administrative agent functions in connection with the issuance, transfer and
redemption or repurchase (including coordination with the Custodian) of Shares
in accordance with the terms of the Prospectus and applicable law. The
operating standards and procedures to be followed shall be determined from
time to time by agreement between the Fund and the Transfer Agent and shall
initially be as described in Schedule C attached hereto. In addition, the
Fund shall deliver to the Transfer Agent all notices issued by the Fund with
respect to the Shares in accordance with and pursuant to the Articles of
Incorporation and By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
9. Record Keeping and Other Information.
(a) The Transfer Agent shall create and maintain all records
required of it pursuant to its duties hereunder and as set forth in Schedule C
in accordance with all applicable laws, rules and regulations, including
records required by Section 31(a) of the 1940 Act. All records shall be
available during regular business hours for inspection and use by the Fund.
Where applicable, such records shall be maintained by the Transfer Agent for
the periods and in the places required by Rule 31a-2 under the 1940 Act.
(b) Upon reasonable notice by the Fund, the Transfer Agent shall
make available during regular hours such of its facilities and premises
employed in connection with the performance of its duties under this Agreement
for reasonable visitation by the Fund, or any person retained by the Fund as
may be necessary for the Fund to evaluate the quality of the services
performed by the Transfer Agent pursuant hereto.
(c) The Transfer Agent and the Fund agree that the records kept by
the Transfer Agent in compliance with the federal securities and applicable
tax laws remain the property of the Fund and, upon the termination of this
Agreement, the Transfer Agent shall, at the Fund's expense, provide such
records to the Fund or such successor transfer agent as the Fund designates in
writing to the Transfer Agent.
10. Other Duties. In addition to the duties set forth in Schedule C,
the Transfer Agent shall perform such other duties
<PAGE>6
and functions, and shall be paid such amounts therefor, as may from time to
time be agreed upon in writing between the Fund and the Transfer Agent. The
compensation for such other duties and functions shall be reflected in a
written amendment to Schedule A or B and the duties and functions shall be
reflected in an amendment to Schedule C, both dated and signed by authorized
persons of the parties hereto.
11. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent will have no liability when acting upon
Written or Oral Instructions reasonably believed to have been executed or
orally communicated by an Authorized Person and will not be held to have any
notice of any change of authority of any person until receipt of a Written
Instruction thereof from the Fund pursuant to Section 4(c). The Transfer
Agent will also have no liability when processing Share certificates which it
reasonably believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of the Transfer Agent.
(b) At any time, the Transfer Agent may apply to any Authorized
Person of the Fund for Written Instructions and may seek advice from legal
counsel for the Fund, or its own legal counsel, with respect to any matter
arising in connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance with
such Written Instructions or in accordance with the opinion of counsel for the
Fund or, with the consent of the Fund, counsel for the Transfer Agent.
Written Instructions requested by the Transfer Agent will be provided by the
Fund within a reasonable period of time. In addition, the Transfer Agent, its
officers, agents or employees, shall accept Oral Instructions or Written
Instructions given to them by any person representing or acting on behalf of
the Fund only if said representative is an Authorized Person. The Fund agrees
that all Oral Instructions shall be followed within one business day by
confirming Written Instructions, and that the Fund's failure to so confirm
shall not impair in any respect the Transfer Agent's right to rely on Oral
Instructions. The Transfer Agent shall have no duty or obligation to inquire
into, nor shall the Transfer Agent be responsible for, the legality of any act
done by it upon the request or direction of a person reasonably believed by
the Transfer Agent to be an Authorized Person.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received therefor; (ii)
the legality of the redemption of any Shares, or the propriety of the amount
to be paid therefor, (iii) the legality of the declaration of any
<PAGE>7
dividend by the Board of Directors, or the legality of the issuance of any
Shares in payment of any dividend; or (iv) the legality of any
recapitalization or readjustment of the Shares.
12. Acts of God, etc. The Transfer Agent will not be liable or
responsible for delays or errors by Acts of God or by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties, mechanical breakdown, insurrection, war,
riots, or failure or unavailability of transportation, communication or power
supply, fire, flood or other catastrophe.
13. Duty of Care and Indemnification. Each party hereto (the
"Indemnifying Party") will indemnify the other party (the "Indemnified Party")
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses of any sort or kind (including reasonable counsel fees
and expenses) resulting from any claim, demand, action or suit or other
proceeding (a "Claim") under this Agreement, unless such Claim has resulted
from a negligent failure to act or omission to act or bad faith of the
Indemnified Party in the performance of its duties hereunder. In addition,
the Fund will indemnify the Transfer Agent against and hold it harmless from
any Claim, damages, liabilities or expenses (including reasonable counsel
fees) that is a result of: (i) any action taken in accordance with Written or
Oral Instructions, or any other instructions, or share certificates reasonably
believed by the Transfer Agent to be genuine and to be signed, countersigned
or executed, or orally communicated by an Authorized Person; (ii) any action
taken in accordance with written or oral advice reasonably believed by the
Transfer Agent to have been given by counsel for the Fund or its own counsel;
or (iii) any action taken as a result of any error or omission in any record
(including but not limited to magnetic tapes, computer printouts, hard copies
and microfilm copies) delivered, or caused to be delivered by the Fund to the
Transfer Agent in connection with this Agreement.
In any case in which the Indemnifying Party may be asked to indemnify or
hold the Indemnified Party harmless, the Indemnifying Party shall be advised
of all pertinent facts concerning the situation in question. The Indemnified
Party will notify the Indemnifying Party promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Indemnifying Party although the failure to do so
shall not prevent recovery by the Indemnified Party. The Indemnifying Party
shall have the option to defend the Indemnified Party against any Claim which
may be the subject of this indemnification, and, in the event that the
Indemnifying Party so elects, such defense shall be conducted by counsel
chosen by the Indemnifying Party and satisfactory to the Indemnified Party,
and thereupon the Indemnifying Party shall take over complete defense of the
Claim and the Indemnified Party
<PAGE>8
shall sustain no further legal or other expenses in respect of such Claim.
The Indemnified Party will not confess any claim or make any compromise in any
case in which the Indemnifying Party will be asked to provide indemnification,
except with the Indemnifying Party's prior written consent. The obligations
of the parties hereto under this Section shall survive the termination of this
Agreement.
14. Consequential Damages. In no event and under no circumstances shall
either party under this Agreement be liable to the other party for indirect
loss of profits, reputation or business or any other special damages under any
provision of this Agreement or for any act or failure to act hereunder.
15. Term and Termination.
(a) This Agreement shall be effective on the date first written
above and thereafter shall automatically continue for successive annual
periods ending on the anniversary of the date first written above, provided
that it may be terminated by either party upon written notice given at least
60 days prior to termination.
(b) In the event a termination notice is given by the Fund, it
shall be accompanied by a resolution of the Board of Directors, certified by
the Secretary of the Fund, designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Fund, the Transfer
Agent will deliver to such successor a certified list of Shareholders of the
Fund (with names and addresses), and all other relevant books, records,
correspondence and other Fund records or data in the possession of the
Transfer Agent, and the Transfer Agent will cooperate with the Fund and any
successor transfer agent or agents in the substitution process.
16. Confidentiality. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed to any other person without the consent of the other
party, except as may be required by applicable law or at the request of the
Commission or other governmental agency. The parties further agree that a
breach of this provision would irreparably damage the other party and
accordingly agree that each of them is entitled, without bond or other
security, to an injunction or injunctions to prevent breaches of this
provision.
17. Amendment. This Agreement may only be amended or modified by a
written instrument executed by both parties.
18. Subcontracting. The Fund agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services described under this
Agreement or the Schedules hereto;
<PAGE>9
provided that the appointment of any such Transfer Agent shall not relieve the
Transfer Agent of its responsibilities hereunder.
19. Miscellaneous.
(a) Notices. Any notice or other instrument authorized by this
Agreement to be given in writing to the Fund or the Transfer Agent, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate
in writing.
To the Fund:
Greenwich Street_________________Municipal Fund Inc.
Two World Trade Center
New York, New York 10048
Attention: Heath McLendon, Chief Executive Officer
with a copy to Fund Counsel
To the Transfer Agent:
The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Robert F. Radin, President
with a copy to Transfer Agent Counsel.
(b) Successors. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective successors and assigns,
provided, however, that this Agreement shall not be assigned to any person
other than a person controlling, controlled by or under common control with
the assignor without the written consent of the other party, which consent
shall not be unreasonably withheld.
(c) Governing Law. This Agreement shall be governed exclusively by
the laws of the State of New York without reference to the choice of law
provisions thereof. Each party hereto hereby (i) agrees that the Supreme
Court of New York sitting in New York County shall have exclusive jurisdiction
over any and all disputes arising hereunder; (ii) consents to the personal
jurisdiction of such court over the parties hereto, hereby waiving any defense
of lack of personal jurisdiction; and (iii) appoints the person to whom
notices hereunder are to be sent as agent for service of process.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be
<PAGE>10
an original; but such counterparts shall, together, constitute only one
instrument.
(e) Captions. The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(f) Use of Transfer Agent's Name. The Fund shall not use the name
of the Transfer Agent in any Prospectus, shareholders' report, sales
literature or other material relating to the Fund in a manner not approved
prior thereto in writing; provided, that the Transfer Agent need only receive
notice of all reasonable uses of its name which merely refer in accurate terms
to its appointment hereunder or which are required by any government agency or
applicable law or rule. Notwithstanding the foregoing, any reference to the
Transfer Agent shall include a statement to the effect that the Transfer Agent
is a wholly owned subsidiary of First Data Corporation.
(g) Use of Fund's Name. The Transfer Agent shall not use the name
of the Fund or material relating to the Fund on any documents or forms for
other than internal use in a manner not approved prior thereto in writing;
provided, that the Fund need only receive notice of all reasonable uses of its
name which merely refer in accurate terms to the appointment of the Transfer
Agent or which are required by any government agency or applicable law or
rule.
(h) Independent Contractors. The parties agree that they are
independent contractors and not partners or co-venturers.
(i) Entire Agreement; Severability. This Agreement and the
Schedules attached hereto constitute the entire agreement of the parties
hereto relating to the matters covered hereby and supersede any previous
agreements. If any provision is held to be illegal, unenforceable or invalid
for any reason, the remaining provisions shall not be affected or impaired
thereby.
<PAGE>11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written.
GREENWICH STREET ___________ MUNICIPAL FUND INC.
By:____________________________
Title:_________________________
THE SHAREHOLDER SERVICES GROUP, INC.
By:____________________________
Title:_________________________
<PAGE>12
Schedule A
Annual Transfer Agent Fee: $8.50 per account
(but not less than $12,000.00
total)
New Account Establishment $2.50 per account
Certificate Issuance $1.50 per issuance
A-1
<PAGE>13
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable out-
of-pocket expenses, including, but not limited to, the following items:
- Microfiche/microfilm production
- Magnetic media tapes
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, bar-coding, first class) direct pass
through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease, maintenance
and line costs
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communications lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Wire charges
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including, but not
limited to, exit fees charged by third party record keeping vendors
- Third party audit reviews
- Insurance
- Such other miscellaneous expenses reasonably incurred by the Transfer
Agent in performing its duties and responsibilities under this
Agreement.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing as agreed with the Transfer Agent. In addition, the
Fund will promptly reimburse the Transfer Agent for any other unscheduled
expenses incurred by the Transfer Agent whenever the Fund and the Transfer
Agent mutually agree that such expenses are not otherwise properly borne by
the Transfer Agent as part of its duties and obligations under the Agreement.
B-1
<PAGE>14
Schedule C
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent or its agent shall
maintain a record of the number of Shares held by each holder of record which
shall include name, address, taxpayer identification and which shall indicate
whether such Shares are held in certificates or uncertificated form.
2. Shareholder Services. The Transfer Agent or its agent will
investigate all inquiries from shareholders of the Fund relating to
Shareholder accounts and will respond to all communications from Shareholders
and others relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between the Transfer Agent and
the Fund. The Transfer Agent shall provide the Fund with reports concerning
shareholder inquiries and the responses thereto by the Transfer Agent, in such
form and at such times as are agreed to by the Fund and the Transfer Agent.
3. Share Certificates.
(a) At the expense of the Fund, it shall supply the Transfer Agent
or its agent with an adequate supply of blank share certificates to meet the
Transfer Agent's or its agent's requirements therefor. Such Share
certificates shall be properly signed by facsimile. The Fund agrees that,
notwithstanding the death, resignation, or removal of any officer of the Fund
whose signature appears on such certificates, the Transfer Agent or its agent
may continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) The Transfer Agent or its agent shall issue replacement Share
certificates in lieu of certificates which have been lost, stolen or
destroyed, upon receipt by the Transfer Agent or its agent of properly
executed affidavits and lost certificate bonds, in form satisfactory to the
Transfer Agent or its agent, with the Fund and the Transfer Agent or its agent
as obligee under the bond.
(c) The Transfer Agent or its agent shall also maintain a record of
each certificate issued, the number of Shares represented thereby and the
holder of record. With respect to Shares held in open accounts or
uncertificated form, i.e., no certificate being issued with respect thereof,
including their names, addresses and taxpayer identification. The Transfer
Agent or its agent shall further maintain a stop transfer record on lost
and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. The
Transfer Agent or its agent will address and mail
<PAGE>15
to Shareholders of the Fund, all reports to Shareholders, dividend and
distribution notices and proxy material for the Fund's meetings of
Shareholders. In connection with meetings of Shareholders, the Transfer Agent
or its agent will prepare Shareholder lists, mail and certify as to the
mailing of proxy materials, process and tabulate returned proxy cards, report
on proxies voted prior to meetings, act as inspector of election at meetings
and certify Shares voted at meetings.
5. Transfer and Repurchase.
(a) Requirements for Transfer or Repurchase of Shares. The
Transfer Agent or its agent shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
The Transfer Agent or its agent will transfer or repurchase Shares
upon receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for transfer or
redemption, accompanied by such documents as the Transfer Agent or its agent
reasonably may deem necessary.
The Transfer Agent or its agent reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the endorsement on
the instructions is valid and genuine. The Transfer Agent or its agent also
reserves the right to refuse to transfer or repurchase Shares until it is
satisfied that the requested transfer or repurchase is legally authorized, and
it shall incur no liability for the refusal, in good faith, to make transfers
or repurchases which the Transfer Agent or its agent, in its good judgment,
deems improper or unauthorized, or until it is reasonably satisfied that there
is no basis to any claims adverse to such transfer or repurchase.
(b) Notice to Custodian and Fund. When Shares are redeemed, the
Transfer Agent or its agent shall, upon receipt of the instructions and
documents in proper form, deliver to the Custodian and the Fund or its
designee a notification setting forth the number of Shares to be repurchased.
Such repurchased Shares shall be reflected on appropriate accounts maintained
by the Transfer Agent or its agent reflecting outstanding Shares of the Fund
and Shares attributed to individual accounts.
(c) Payment of Repurchase Proceeds. The Transfer Agent or its
agent shall, upon receipt of the moneys paid to it by the Custodian for the
repurchase of Shares, pay such moneys as are received from the Custodian, all
in accordance with the procedures described in the Written Instruction
received by the Transfer Agent or its agent from the Fund.
The Transfer Agent or its agent shall not process or affect any
repurchase with respect to Shares of the Fund after
<PAGE>16
receipt by the Transfer Agent or its agent of notification of the suspension
of the determination of the net asset value of the Fund.
6. Dividends.
(a) Notice to Agent and Custodian. Upon the declaration of each
dividend and each capital gains distribution by the Board of Directors of the
Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be
furnished to the Transfer Agent or its agent a copy of a resolution of the
Fund's Board of Directors certified by the Secretary of the Fund setting forth
the date of the declaration of such dividend or distribution, the ex-dividend
date, the date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per Share to the
shareholders of record as of that date, the total amount payable to the
Transfer Agent or its agent on the payment date and whether such dividend or
distribution is to be paid in Shares of such class at net asset value.
On or before the payment date specified in such resolution of the
Board of Directors, the Custodian of the Fund will pay to the Transfer Agent
sufficient cash to make payment to the shareholders of record as of such
payment date.
(b) Insufficient Funds for Payments. If the Transfer Agent or its
agent does not receive sufficient cash from the Custodian to make total
dividend and/or distribution payments to all shareholders of the Fund as of
the record date, the Transfer Agent or its agent will, upon notifying the
Fund, withhold payment to all Shareholders of record as of the record date
until sufficient cash is provided to the Transfer Agent or its agent.
<PAGE>17
Exhibit 1
to
Schedule C
Summary of Services
The services to be performed by the Transfer Agent or its agent shall be as
follows:
A. DAILY RECORDS
Maintain daily the following information with respect to each Shareholder
account as received:
Name and Address (Zip Code)
Class of Shares
Taxpayer Identification Number
Balance of Shares held by Transfer Agent
Beneficial Owner code; i.e., male, female, joint tenant, etc.
Dividend code (reinvestment)
Number of Shares held in certificate form
B. OTHER DAILY ACTIVITY
Answer written inquiries relating to Shareholder accounts (matters
relating to portfolio management, distribution of Shares and other
management policy questions will be referred to the Fund).
Process dividends and disbursements into established Shareholder
accounts in accordance with Written Instructions from the Transfer
Agent.
Upon receipt of proper instructions and all required documentation,
process requests for repurchase of Shares.
Identify redemption requests made with respect to accounts in which
Shares have been purchased within an agreed-upon period of time for
determining whether good funds have been collected with respect to
such purchase and process as agreed by the Transfer Agent in
accordance with written instructions set forth by the Fund.
Examine and process all transfers of Shares, ensuring that all
transfer requirements and legal documents have been supplied.
Issue and mail replacement checks.
Open new accounts and maintain records of exchanges between
accounts.
<PAGE>18
C. DIVIDEND ACTIVITY
Calculate and process Share dividends and distributions as
instructed by the Fund.
Compute, prepare and mail all necessary reports to Shareholders of
various authorities as requested by the Fund. Report to the Fund
reinvestment plan share purchases and determination of the
reinvestment price.
D. MEETINGS OF SHAREHOLDERS
Cause to be mailed proxy and related material for all meeting of
Shareholders. Tabulate returned proxies (proxies must be adaptable
to mechanical equipment of the Transfer Agent or its agents) and
supply daily reports when sufficient proxies have been received.
Prepare and submit to the Fund an Affidavit of Mailing.
At the time of the meeting, furnish a certified list of
Shareholders, hard copy, microfilm or microfiche and, if requested
by the Fund, Inspection of Election.
E. PERIODIC ACTIVITIES
Cause to be mailed reports, Prospectuses, and any other enclosures
requested by the Fund (material must be adaptable to mechanical
equipment of the Transfer Agent or its agent).
