[Federal Register Volume 60, Number 80 (Wednesday, April 26, 1995)]
[Notices]
[Pages 20547-20548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10183]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21022/812-9550]
Smith Barney Muni Funds, et al.; Notice of Application
April 19, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: Smith Barney Muni Funds (the ``Trust''), Smith Barney
Income Trust (the ``Income Trust''), Smith Barney Mutual Funds
Management Inc. (``SBMFM'') and Smith Barney Inc. (``Smith Barney'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) for an
exemption from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order to allow Smith
Barney Intermediate Maturity California Municipals Fund (the
``Intermediate Maturity Fund''), a series of the Income Trust, to
acquire substantially all of the assets of the California Limited Term
Portfolio (the ``Limited Term Portfolio''), a series of the Trust.
Because of certain affiliations, the two series may not rely on rule
17a-8 under the Act.
FILING DATE: The application was filed on March 24, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on May 15, 1995,
and should be accompanied by proof of service on applicants, in the
form of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549.
Applicants, 388 Greenwich Street, 22nd Floor, New York, New York 10013.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Staff Attorney, at (202) 942-0574, or Robert A.
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicants' Representations
1. The Limited Term Portfolio is a series of the Trust and the
Intermediate Maturity Fund is a series of the Income Trust. The Trust
and the Income Trust each are registered under the Act as open-end
management investment companies and are organized as Massachusetts
business trusts. The Limited Term Portfolio and the Intermediate
Maturity Fund are referred to herein as the ``Funds.''
2. SBMFM serves as investment adviser to the Intermediate Maturity
Fund and the Limited Term Portfolio. Smith Barney is the Funds'
distributor and, as of February 13, 1995, owned 12.22% of the
outstanding shares of the Limited Term Portfolio. SBMFM and Smith
Barney are each a wholly-owned subsidiary of Smith Barney Holdings,
Inc. (``Holdings'').
3. Each Fund offers three classes of shares, Class A, Class C and
Class Y shares. Class A shares of each Fund are sold with an initial
sales charge of 2.00% of the net asset value of the shares. Class C
shares of each Fund are sold without an initial sales charge but are
subject to a contingent deferred sales charge (``CDSC'') of 1.00%
payable upon certain redemptions. Class Y shares of each Fund are sold
without an initial sales charge or CDSC and are available only to
investors investing a minimum of $5.0 million. Class A and Class C
shares of each Fund are sold subject to substantially similar 12b-1
distribution plans. [[Page 20548]]
4. The investment objectives, policies and restrictions of the
Limited Term Portfolio and the Intermediate Maturity Fund are
substantially similar. The Limited Term Portfolio seeks to pay its
shareholders as high a level of income exempt from federal taxes and
California personal income taxes by investing primarily in obligations
issued by the State of California and its political subdivisions,
agencies and instrumentalities. The Intermediate Maturity Fund seeks to
provide its shareholders with as high a level of income exempt from
federal income taxes and California personal income taxes by investing
an investment-grade obligations issued by the State of California and
its political subdivisions, agencies and public authorities.
5. The Intermediate Maturity Fund proposes to acquire all or
substantially all of the assets and certain liabilities of the Limited
Term Portfolio in exchange for shares of the Intermediate Maturity Fund
pursuant to an agreement and plan of reorganization (``Reorganization
Agreement''). Under the Reorganization Agreement, the number of shares
of each class of the Intermediate Maturity Fund to be issued to the
Limited Term Portfolio will be determined on the basis of the Funds'
relative net asset values per their respective classes of shares. The
Limited Term Portfolio then will liquidate and distribute such shares
of the Intermediate Maturity Fund pro rata to its shareholders. Class
A, Class C and Class Y shareholders of the Limited Term Portfolio would
receive Class A, Class C and Class Y shares, respectively, of the
Intermediate Maturity Fund.
6. The proposed reorganization was unanimously approved by the
boards of trustees of the Trust and the Income Trust, including a
majority of the trustees who are not interested persons, on December 1,
1994 and December 20, 1994, respectively. In approving the proposed
reorganization, each board found that participation in the
reorganization is in the best interests of the relevant Fund and that
the interest of existing Fund shareholders will not be diluted as a
result of the reorganization. Each board based its decision to approve
the reorganization on a number of factors, including: (a) The terms and
conditions of the reorganization; (b) the fact that the reorganization
will be effected as a tax-free reorganization; (c) the costs of the
reorganization to the Funds; (d) the compatibility of the objectives,
policies and restrictions of the two Funds; (e) the savings in expenses
borne by shareholders expected to be realized by the reorganization;
and (f) the potential benefits to the Funds' affiliates, including
SBMFM, Smith Barney and Holdings.
7. Applicants contemplate that the Reorganization Agreement will be
submitted for approval by the shareholders of the Limited Term
Portfolio at a meeting scheduled to be held on or about June 23, 1995,
and that a prospectus/proxy statement will be sent to shareholders of
the Limited Term Portfolio in May 1995. Assuming that the required
shareholder vote is obtained at the shareholders' meeting, the closing
date is expected to be held shortly thereafter.
8. Smith Barney will bear any expenses incurred in connection with
the reorganization, except that each Fund will be liable for any fees
and expenses of its own custodian and transfer agent incurred in
connection with the reorganization and the Limited Term Portfolio will
be liable for all fees and expenses incurred relating to its
liquidation and termination.
Applicants' Legal Analysis
1. Section 17(a), in pertinent part, prohibits an affiliated person
of a registered investment company, acting as principal, from selling
to or purchasing from such registered company, any security or other
property. Section 17(b) provides that the SEC may exempt a transaction
from section 17(a) if evidence establishes that the terms of the
proposed transaction, including the consideration to be paid, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, and that the proposed transaction is consistent with
the policy of the registered investment company concerned and with the
general purposes of the Act.
2. Rule 17a-8 under the Act exempts from section 17(a) mergers,
consolidations, or purchases or sales of substantially all the assets
involving registered investment companies that may be affiliated
persons solely by reason of having a common investment adviser, common
directors/trustees and/or common officers provided that certain
conditions are satisfied. SBMFM is the investment adviser to both the
Intermediate Maturity Fund and the Limited Term Portfolio, and Smith
Barney is the distributor to both of the Funds. However, Smith Barney
also is an ``affiliated person'' of the Limited Term Portfolio because
it beneficially owns 5% or more of the shares of the Limited Term
Portfolio; therefore, applicants may not rely on rule 17a-8.
3. Applicants believe that the terms of the proposed reorganization
satisfy the standards set forth in section 17(b). The boards of the
Trust and the Income Trust have reviewed the terms of the
reorganization as set forth in the Reorganization Agreement, including
the consideration to be paid or received, and have found that
participation in the reorganization is in the best interests of each
Fund and that the interests of the existing shareholders of each Fund
will not be diluted as a result of the reorganization. The investment
objectives of the Funds, moreover, are essentially the same.
Accordingly, the proposed reorganization will be consistent with the
policies of each Fund.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-10183 Filed 4-25-95; 8:45 am]
BILLING CODE 8010-01-M
