SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Asset Allocation Portfolios on behalf of its series -
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Large Cap Value Portfolio, Intermediate Income Portfolio and Foreign Bond Portfolio
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(Name of Registrant as Specified In Its Charter)
Jennifer H. Hurford
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(Name of Person(s) Filing Proxy Statement)
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Payment of Filing Fee (Check the appropriate box):
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LARGE CAP VALUE PORTFOLIO, INTERMEDIATE INCOME PORTFOLIO
AND FOREIGN BOND PORTFOLIO
Elizabethan Square
George Town, Grand Cayman, BWI
Telephone: (345) 945-1824
NOTICE OF SPECIAL MEETING OF HOLDERS OF BENEFICIAL INTERESTS
To be held April 9, 1999
A Special Meeting of Holders of Beneficial Interests in Large Cap Value
Portfolio, Intermediate Income Portfolio and Foreign Bond Portfolio, will be
held at Citicorp Center, 153 East 53rd Street, 14th Floor, New York, New York,
on Friday, April 9, 1999 at 4:00 p.m., Eastern Time, for the following
purposes:
ITEM 1. To vote on a Sub-Management Agreement between SSBC Fund
Management Inc. (formerly known as Mutual Management Corp.) and
Asset Allocation Portfolios, with respect to Large Cap Value
Portfolio.
ITEM 2. To vote on a Sub-Management Agreement between Salomon
Brothers Asset Management Limited and Asset Allocation
Portfolios, with respect to Foreign Bond Portfolio.
ITEM 3. To vote on the transfer by Intermediate Income Portfolio
of all its assets to U.S. Fixed Income Portfolio in exchange for
an interest in U.S. Fixed Income Portfolio, followed by the
dissolution of Intermediate Income Portfolio.
ITEM 4. To vote on the selection of PricewaterhouseCoopers LLP as
the independent certified public accountants for each Portfolio.
ITEM 5. To transact such other business as may properly come
before the Special Meeting of Holders of Beneficial Interests
and any adjournments thereof.
THE BOARD OF TRUSTEES OF THE PORTFOLIOS RECOMMENDS THAT YOU VOTE IN FAVOR
OF ITEMS 1 THROUGH 4.
Only holders of beneficial interests of record on February 10, 1999 will
be entitled to vote at the Special Meeting of Holders of Beneficial Interests
and at any adjournments thereof.
Philip W. Coolidge, President
March 26, 1999
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YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING
AND RETURNING THE ENCLOSED PROXY, WHICH WILL HElP AVOID THE ADDITIONAL EXPENSE
OF A SECOND SOLICITATION. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE
AND IS PROVIDED FOR YOUR CONVENIENCE.
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LARGE CAP VALUE PORTFOLIO, INTERMEDIATE INCOME PORTFOLIO
AND FOREIGN BOND PORTFOLIO
Elizabethan Square
George Town, Grand Cayman, BWI
Telephone: (345) 945-1824
PROXY STATEMENT
This Proxy Statement and Notice of Special Meeting with accompanying form
of proxy are being furnished in connection with the solicitation of proxies by
the Board of Trustees of Large Cap Value Portfolio, Intermediate Income
Portfolio and Foreign Bond Portfolio, for use at a Special Meeting of Holders
of Beneficial Interests in these Portfolios, or any adjournment thereof, to be
held at Citicorp Center, 153 East 53rd Street, 14th Floor, New York, New York,
on Friday, April 9, 1999 at 4:00 p.m., Eastern Time. The Meeting is being held
to vote on new sub-management agreements for Large Cap Value Portfolio and
Foreign Bond Portfolio, the transfer of assets of Intermediate Income Portfolio
to U.S. Fixed Income Portfolio and certain other matters, as described below
and in the accompanying Notice of Special Meeting.
The close of business on February 10, 1999 has been fixed as the Record
Date for the determination of holders of beneficial interests entitled to
notice of and to vote at the Meeting. $111,502,512 of beneficial interests in
Large Cap Value Portfolio, $185,019,913 of beneficial interests in Intermediate
Income Portfolio, and $227,608,397 of beneficial interests in Foreign Bond
Portfolio were outstanding as of the close of business on the Record Date.
Holders of record at the close of business on the Record Date will be entitled
to vote in the proportion that their beneficial interests in each Portfolio
bear to the total beneficial interests in that Portfolio.
The Portfolios' Annual Report for the fiscal years ended October 31, 1998,
including audited financial statements, has previously been sent to holders of
beneficial interests and is available without charge upon request by calling
the Portfolios at (345) 945-1824.
This Proxy Statement and Notice of Special Meeting with accompanying form
of proxy are being mailed by the Board of Trustees on or about March 26, 1999.
MANNER OF VOTING PROXIES AND VOTE REQUIRED
If the accompanying form of proxy is executed properly and returned,
interests represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. Holders of beneficial interests in each Portfolio
will vote separately with respect to each Item. Only holders of beneficial
interests in the Portfolio in question are being asked to vote on Items 1
through 3. Holders of beneficial interests in each Portfolio are being asked to
vote on Item 4. If no instructions are specified, all beneficial interests in
each Portfolio will be voted FOR proposed Items 1 through 4. If the enclosed
form of proxy is executed and returned, it may nevertheless be revoked prior to
its exercise by a signed writing delivered at the Meeting or filed with the
Secretary of the Portfolios.
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If sufficient votes to approve the proposed Items 1 through 4 are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those interests voted at the
Meeting. When voting on a proposed adjournment, the persons named as proxies
will vote all interests that they are entitled to vote with respect to Items 1
through 4 FOR the proposed adjournment, unless directed to disapprove the Item,
in which case such interests will be voted against the proposed adjournment.
With respect to each Portfolio, the presence in person or by proxy of the
holders of interests representing a majority of the outstanding beneficial
interests in that Portfolio entitled to vote is required to constitute a quorum
at the Meeting for purposes of voting on Items 1 through 4. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions will be treated as interests that are present but which have not
been voted. For this reason, abstentions will have the effect of a "no" vote
for purposes of obtaining the requisite approval of Items 1 through 4.
GENERAL BACKGROUND
PROPOSED SUBADVISERS
Citibank, N.A. is the adviser to the Portfolios and supervises the
subadvisers that manage certain assets of Large Cap Value Portfolio and Foreign
Bond Portfolio. Currently, Large Cap Value Portfolio is subadvised by SSBC Fund
Management Inc. (formerly known as Mutual Management Corp.) and Foreign Bond
Portfolio is subadvised by Salomon Brothers Asset Management Limited.
Intermediate Income Portfolio does not have a subadviser.
Each Portfolio pays a management fee to Citibank. If a subadviser manages
any Portfolio assets, the Portfolio pays that subadviser a fee on those assets,
and that fee is deducted from the management fee paid by the Portfolio to
Citibank. By virtue of its investment in a Portfolio, each investor in that
Portfolio bears its pro rata share of that Portfolio's management fee.
SSBC Fund Management Inc. and Salomon Brothers Asset Management Limited
may act as subadvisers only for an interim period unless their sub-management
agreements are approved by investors in the appropriate Portfolios.
PROPOSED OPERATIONS
Citibank has proposed that, effective May 1, 1999 (or another date
selected by Citibank), Intermediate Income Portfolio transfer its assets to
U.S. Fixed Income Portfolio, a mutual fund with a similar investment objective,
in exchange for interests in U.S. Fixed Income Portfolio. Intermediate Income
Portfolio will then dissolve, and its investors will receive interests in U.S.
Fixed Income Portfolio. The transfer of assets by Intermediate Income Portfolio
to U.S. Fixed Income Portfolio requires approval by investors in Intermediate
Income Portfolio.
HOLDERS OF BENEFICIAL INTEREST SHOULD NOTE THAT THE CONTRACTUAL LEVEL OF
MANAGEMENT FEES FOR HOLDERS OF BENEFICIAL INTERESTS IN THE PORTFOLIOS WILL NOT
INCREASE AS A RESULT OF ANY OF THESE PROPOSALS.
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ITEM 1. TO VOTE ON A SUB-MANAGEMENT AGREEMENT BETWEEN SSBC FUND
MANAGEMENT INC. AND ASSET ALLOCATION PORTFOLIOS, WITH RESPECT TO
LARGE CAP VALUE PORTFOLIO.
ITEM 2. TO VOTE ON A SUB-MANAGEMENT AGREEMENT BETWEEN SALOMON BROTHERS
ASSET MANAGEMENT LIMITED AND ASSET ALLOCATION PORTFOLIOS, WITH
RESPECT TO FOREIGN BOND PORTFOLIO.
Only investors in Large Cap Value Portfolio are being asked to vote on
Item 1, and only investors in Foreign Bond Portfolio are being asked to vote on
Item 2.
Citibank, N.A. currently manages the assets of Large Cap Value Portfolio
and Foreign Bond Portfolio and provides administrative services to the
Portfolios pursuant to separate Management Agreements with Asset Allocation
Portfolios, each dated May 9, 1997. Subject to the terms of each Management
Agreement, Citibank is responsible for the investment management of the
Portfolios and, subject to the review and approval of the Portfolios' Board of
Trustees, selects appropriate subadvisers to make the investment selections
with respect to the Portfolios consistent with the guidelines and directions
set by Citibank and the Board of Trustees. Citibank then reviews each
subadviser's continued performance.
Miller Anderson & Sherrerd, LLP served as subadviser for Large Cap Value
Portfolio from the Portfolio's inception through January 21, 1999. Since
January 22, 1999, SSBC Fund Management Inc. (SSBC), an affiliate of Citibank,
has managed the assets of Large Cap Value Portfolio that were previously
managed by Miller Anderson.
Pacific Investment Management Company (PIMCO) served as subadviser for
Foreign Bond Portfolio from the Portfolio's inception through February 26,
1999. Since March 1, 1999, Salomon Brothers Asset Management Limited (SBAM),
also an affiliate of Citibank, has managed the assets of Foreign Bond Portfolio
that were previously managed by PIMCO.
SSBC, a Delaware corporation, maintains its principal office at 388
Greenwich Street, New York, New York 10013. SSBC currently manages the large
cap value securities of Large Cap Value Portfolio on an interim basis, with
approval of the Portfolio's Board of Trustees. Approval of investors in the
Portfolio is necessary for SSBC to continue to serve as subadviser. If the
Portfolio's investors approve SSBC's Sub-Management Agreement, SSBC will
continue to be responsible for the daily management of the large cap value
securities of Large Cap Value Portfolio.
SBAM, a limited liability private company formed and domiciled in England
and Wales, maintains its principal office at Victoria Plaza, 111 Buckingham
Palace Road, London, England. SBAM is a U.S. registered investment adviser.
SBAM currently manages the foreign government securities of Foreign Bond
Portfolio on an interim basis, with approval of the Portfolio's Board of
Trustees. Approval of investors in the Portfolio is necessary for SBAM to
continue to serve as subadviser. If the Portfolio's investors approve SBAM's
Sub-Management Agreement, SBAM will continue to be responsible for the daily
management of the foreign government securities of Foreign Bond Portfolio.
The Board of Trustees of Large Cap Value Portfolio and Foreign Bond
Portfolio terminated the Portfolios' Sub-Management Agreements with Miller
Anderson and PIMCO upon Citibank's recommendations. These recommendations were
based on Citibank's evaluation of the services provided by these subadvisers,
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as well as the availability of appropriate asset management capabilities and
resources in its affiliates, SSBC and SBAM.
In accordance with the requirements of the Investment Company Act of 1940,
each Sub-Management Agreement must be approved by the investors in the
Portfolio to which it relates.
THE SUB-MANAGEMENT AGREEMENTS
If the Sub-Management Agreement with SSBC is approved by the required
holders of beneficial interests in Large Cap Value Portfolio, SSBC will
continue to serve as subadviser to Large Cap Value Portfolio. If the
Sub-Management Agreement with SBAM is approved by the required holders of
beneficial interests in Foreign Bond Portfolio, SBAM will continue to serve as
subadviser to Foreign Bond Portfolio. Each Sub-Management Agreement, if
approved by the "vote of a majority of the outstanding voting securities" of
the applicable Portfolio, will continue in effect for a two-year period, and
thereafter from year to year, subject to approval annually in accordance with
the 1940 Act. Each Sub-Management Agreement may be terminated at any time
without the payment of any penalty by the Board of Trustees of the applicable
Portfolio or by the vote of a "majority of the outstanding voting securities"
of the Portfolio or by Citibank. Each Sub-Management Agreement may also be
terminated by the applicable subadviser upon 90 days' advance written notice to
Citibank. Each Sub-Management Agreement will also terminate automatically in
the event of its "assignment" (as defined in the 1940 Act).
Under each Sub-Management Agreement, SSBC or SBAM, as the case may be,
will furnish continuing portfolio management services with respect to the large
cap value or foreign government securities of Large Cap Value Portfolio or
Foreign Bond Portfolio, as applicable, subject always to the provisions of the
1940 Act and to the investment objective, policies, procedures and restrictions
imposed by the then current Registration Statement under the 1940 Act with
respect to the applicable Portfolio. Each subadviser will also provide Citibank
with such investment advice and reports and data as are requested by Citibank.
Each Sub-Management Agreement provides that the subadviser will be
responsible for the following:
(i) providing Citibank with such investment advice and supervision as
Citibank may from time to time consider necessary for the proper
supervision of such portion of the Portfolio's assets as Citibank may
designate from time to time;
(ii) furnishing continuously an investment program and determining
from time to time what securities shall be purchased, sold or exchanged
and what portion of the assets of the Portfolio allocated by Citibank to
the subadviser will be held uninvested, subject always to the restrictions
of the Portfolio's Declaration of Trust, dated as of December 14, 1995,
and By-laws, as each may be amended and restated from time to time, the
provisions of the 1940 Act and the then-current Registration Statement
with respect to the Portfolio, and subject, further, to the applicable
subadviser notifying Citibank in advance of its intention to purchase any
securities except insofar as the requirement for such notification may be
waived or limited by Citibank;
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(iii) making recommendations to Citibank as to the manner in which
proxies, voting rights, rights to consent to corporate action and any
other rights pertaining to the Portfolio's portfolio securities shall be
exercised; and
(iv) taking, on behalf of the Portfolio, all actions which the
subadviser deems necessary to implement the investment policies of the
Portfolio, and in particular placing all orders for the purchase or sale
of securities for the Portfolio's account with the brokers or dealers
selected by it, and to that end the subadviser is authorized as agent to
give instructions to the custodian and any subcustodian of the Portfolio
as to deliveries of securities and payments of cash for the account of the
Portfolio.
The subadvisers are not liable for any error of judgment or mistake of law
or for any loss suffered by Large Cap Value Portfolio or Foreign Bond
Portfolio, as the case may be, in connection with the matters to which the
applicable Sub-Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of their
obligations and duties, or by reason of reckless disregard of their obligations
and duties under the applicable Agreement.
Holders of beneficial interests should refer to Exhibits A and B attached
hereto for the complete terms of the Sub-Management Agreements with SSBC and
SBAM, respectively. The description of each Sub-Management Agreement set forth
herein is qualified in its entirety by the provisions of the Sub-Management
Agreements as set forth in such Exhibits.
INVESTMENT ADVISORY FEES
Under the SSBC Sub-Management Agreement, Large Cap Value Portfolio pays
SSBC for its services on the basis of the following annual fee schedule:
SSBC FEE SCHEDULE
0.65% on the first $10 million;
0.50% on the next $10 million;
0.40% on the next $10 million; and
0.30% on remaining assets.
Fees are accrued daily and payable monthly and are at the annual rates
specified above of the aggregate assets of Large Cap Value Portfolio allocated
to SSBC. At certain asset levels, fees under the SSBC Sub-Management Agreement
will be higher than those that would have been payable to Miller Anderson;
however, Large Cap Value Portfolio's management fees will remain the same. To
the extent that SSBC's fees are higher than those that would have been payable
to Miller Anderson, the fees payable to Citibank under its Management Agreement
with Large Cap Value Portfolio will go down by the same amount. As a result,
holders of beneficial interests will not be affected by the increase.
The fees payable under the Miller Anderson Sub-Management Agreement were
accrued daily and payable monthly and were equal to the percentages specified
below of the aggregate assets of the Portfolio allocated to Miller Anderson:
FEES PREVIOUSLY PAYABLE TO MILLER ANDERSON
0.625% on the first $25 million;
0.375% on the next $75 million;
0.250% on the next $400 million; and
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0.200% on assets in excess of $500 million.
During Large Cap Value Portfolio's fiscal year ended October 31, 1998,
Miller Anderson received $511,370 in advisory fees from the Portfolio. Had the
proposed fees under the SSBC Sub-Management Agreement been in effect during
this period, Miller Anderson would have received $454,077 in advisory fees from
the Portfolio, or 88.73% of the fees that Miller Anderson actually received
during this period.
Under the SBAM Sub-Management Agreement, Foreign Bond Portfolio pays SBAM
for its services on the basis of the following annual fee schedule:
SBAM FEE SCHEDULE
0.30% on the first $200 million;
0.25% on assets over $200 million.
Fees are accrued daily and payable monthly and are at the annual rates
specified above of the aggregate assets of Foreign Bond Portfolio allocated to
SBAM. Fees under the SBAM Sub-Management Agreement will be lower than those
that would have been payable to PIMCO; however, Foreign Bond Portfolio's
management fees paid by holders of beneficial interests will remain the same.
To the extent that SBAM's fees are lower than those that would have been
payable to PIMCO, Citibank's management fee will increase by the same amount.
As a result, holders of beneficial interests will not be affected by the
decrease.
The fees payable under the PIMCO Sub-Management Agreement were accrued
daily and payable monthly and were equal to the percentages specified below of
the aggregate assets of the Portfolio allocated to PIMCO:
FEES PREVIOUSLY PAYABLE TO PIMCO
0.35% on the first $200 million;
0.30% on remaining assets.
During Foreign Bond Portfolio's fiscal year ended October 31, 1998, PIMCO
received $900,099 in advisory fees from the Portfolio. Had the proposed fees
under the SBAM Sub-Management Agreement been in effect during this period,
PIMCO would have received $766,749 in advisory fees from the Portfolio, or
85.18% of the fees that PIMCO actually received during this period.
INFORMATION REGARDING SSBC FUND MANAGEMENT INC.
The following information regarding SSBC has been provided by SSBC.
SSBC is a wholly-owned subsidiary of Salomon Smith Barney Holdings Inc,
which in turn is a wholly-owned subsidiary of Citigroup Inc. Citigroup
businesses produce a broad range of financial services - asset management,
banking and consumer finance, credit and charge cards, insurance, investments,
investment banking and trading - and use diverse channels to make them
available to consumers and corporate managers to numerous investment companies
having aggregate assets as of the date of this Proxy Statement in excess of
$290 billion. Citigroup's principal business address is 153 East 53rd Street,
New York, New York 10043.
Frances A. Root manages the large cap value securities of Large Cap Value
Portfolio allocated to SSBC. Ms. Root is a Managing Director of SSBC and a
Senior Equity Portfolio Manager. She joined Smith Barney Capital Management in
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1992 as a Vice President and Equity Portfolio Manager and in 1994 became a
Managing Director of SSBC and a Senior Equity Portfolio Manager. Formerly, she
was with Shearson Lehman Advisors as a Vice President and Portfolio Manager for
seven years; and prior to that, with E.F. Hutton & Company, Inc. She is a
Chartered Financial Analyst and a member of The New York Society of Security
Analysts. Ms. Root holds a BA degree from Sweet Briar College.
The following table sets forth certain information concerning the
principal executive officers and directors of SSBC. The address of each of the
following persons is 388 Greenwich Street, New York, New York 10013.
NAME PRINCIPAL OCCUPATION
Heath B. McLendon................. Chairman,President and Chief Executive
Officer of SSBC; Managing Director of
Salomon Smith Barney and Chairman,
President and Chief Executive Officer of
fifty-eight investment companies sponsored
by Salomon Smith Barney
Lewis E. Daidone.................. Director and Senior Vice President of SSBC;
Managing Director of Salomon Smith Barney
and Senior Vice President and Treasurer of
fifty-eight investment companies sponsored
by Salomon Smith Barney
A. George Saks.................... Director of SSBC and Executive Vice
President of Salomon Smith Barney
Michael J. Day.................... Treasurer of SSBC and Managing Director of
Salomon Smith Barney
Christina T. Sydor................ General Counsel and Secretary of SSBC;
Managing Director of Salomon Smith Barney
and Secretary of the fifty-eight
investment companies sponsored by Salomon
Smith Barney
The following table indicates the size of each investment company advised
by SSBC with an investment objective that is similar to the objective for Large
Cap Value Portfolio and the advisory fee rates of these investment companies.
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ANNUAL
NET ASSETS ON MANAGEMENT FEE
DECEMBER 31, 1998 PERCENT OF
FUND (IN THOUSANDS) AVERAGE NET ASSETS
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OPEN-END FUND
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Smith Barney Funds, Inc. $1,227,783 0.60% to $500 million;
Large Cap Value Fund 0.55% next $500 million;
0.50% after $1 billion.
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VARIABLE ANNUITY FUNDS
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Smith Barney Variable $13,779 0.60%
Account Funds
Income and Growth
Portfolio
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Travelers Series Fund, Inc. $464,936 0.65%
Smith Barney Large Cap
Value Portfolio
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INFORMATION REGARDING SALOMON BROTHERS ASSET MANAGEMENT LIMITED
The following information regarding SBAM has been provided by SBAM.
SBAM is a limited liability private company formed and domiciled in
England and Wales. It is a wholly owned subsidiary of Salomon Brothers Europe
Limited, Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB. Salomon
Brothers Europe Limited is owned by two wholly owned subsidiaries of Salomon
Brothers Holding Company Inc (388 Greenwich Street, New York, New York 10013),
Salomon (International) Finance AG (Schipfe 2, P.O. Box 4406, Zurich,
Switzerland) and Salomon International Limited (Victoria Plaza, 111 Buckingham
Palace Road, London SW1W OSB). Salomon Brothers Holding Company Inc is wholly
owned by Salomon Smith Barney Holdings Inc, which in turn is a wholly owned
subsidiary of Citigroup Inc. Citigroup's businesses are described above.
David J. Scott is the portfolio manager. Mr. Scott is a Managing Director,
Portfolio Manager and Investment Policy Committee Member of SBAM. Mr. Scott
joined SBAM in April 1994 as Director and Head of Global Fixed Income
responsible for their global bond products and has been a Portfolio Manager for
SBAM and Salomon Brothers Asset Management Inc since that time. Prior to
joining SBAM, Mr. Scott worked for four years at JP Morgan Investment
Management where he had responsibility for global and non-dollar portfolios;
and prior to that, for Mercury Asset Management. Mr. Scott is a Fellow of the
Institute of Actuaries. He received a B.Sc. in Mathematics and Economics from
Nottingham University.
The following table sets forth certain information concerning the
principal executive officers and directors of SBAM. The address of each of the
following persons is Victoria Plaza, 111 Buckingham Palace Road, London SW1W
OSB, England.
NAME PRINCIPAL OCCUPATION
Vilas V. Gadkari....................... Managing Director and Chief
Investment Officer of SBAM; Managing
Director of Salomon Brothers Asset
Management Inc; Managing Director of
Salomon Smith Barney Inc; and
Managing Director Salomon Brothers
International Limited
David J. Scott......................... Director of SBAM
<PAGE>
David J. Griffiths..................... Economist and Portfolio Manager of
SBAM
Karolos Haggipavlou.................... Portfolio Manager of SBAM
The following table indicates the size of each investment company advised
by SBAM with an investment objective that is similar to the objective for
Foreign Bond Portfolio and the advisory fee rates of these investment
companies.
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ANNUAL
MANAGEMENT FEE
NET ASSETS ON PERCENT OF
FUND DECEMBER 31, 1998 AVERAGE NET ASSETS
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OPEN-END FUNDS
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Salomon Brothers Global $45,046,911 0.375% to $50 million;
Bond Series of the JNL 0.35% next $100 million;
Series Trust 0.30% next $350 million;
0.25% over $500 million.
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Salomon Brothers $117,747,606 0.75%
Investment Series -
Strategic Bond Fund
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Strategic Bond Opportunity $95,200,414 0.35% to $50 million;
Series of the American 0.30% next $150 million;
Growth Series 0.25% next $300 million;
0.10% over $500 million.
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Strategic Bond Trust for $441,725,216 0.35% to $50 million;
the NASL Series 0.30% next $150 million;
0.25% next $300 million;
0.20% over $500 million.
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Strategic Income Fund of $79,754,865 0.35% to $50 million;
the North American Funds 0.30% next $150 million;
Series 0.25% next $300 million;
0.20% over $500 million.
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VARIABLE ANNUITY FUND
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Salomon Brothers Variable $10,390,056 0.75%
Series Fund
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THE EVALUATION BY THE BOARD OF TRUSTEES
At meetings held on February 4 and 5, 1999 the Trustees of Large Cap Value
Portfolio and Foreign Bond Portfolio considered information with respect to
whether each proposed Sub-Management Agreement was in the best interests of the
Portfolios and their respective investors. The Board of Trustees considered,
among other factors, representations by each subadviser regarding the nature
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and quality of services provided or to be provided by the subadviser, and
information regarding fees, expense ratios and performance. In evaluating each
subadviser's ability to provide services to the Portfolios, the Trustees
considered information as to the subadviser's business organization, financial
resources and personnel. The Board of Trustees also considered the conflicts of
interest inherent in Citibank's recommendation that its affiliates be hired as
subadvisers.
The Board of Trustees also considered that under circumstances in which
best price and execution may be obtained from more than one broker or dealer,
each subadviser may, in its discretion, purchase and sell securities through
dealers who provide research, statistical and other information to the
subadviser. Although certain research, market and statistical information from
brokers and dealers can be useful to the Portfolios and subadvisers, each
subadviser has advised that such information is, in its opinion, only
supplementary to the subadviser's own research activities and the information
must still be analyzed, weighed and reviewed by the subadviser. It was noted
that such information may be useful to the subadvisers in providing services to
clients other than the Portfolios. Conversely, it was noted that information
provided to the subadvisers by brokers and dealers through whom other clients
of the subadvisers effect securities transactions may be useful to the
subadvisers in providing services to these Portfolios.
Based upon their review, the Board of Trustees of Large Cap Value
Portfolio and Foreign Bond Portfolio concluded that each of the Sub-Management
Agreements is reasonable, fair and in the best interests of each of the
Portfolios and their respective investors, and that the fees provided in each
of the Sub-Management Agreements are fair and reasonable in light of the usual
and customary charges made by others for services of the same nature and
quality. Accordingly, after consideration of the above factors, and such other
factors and information as they deemed relevant, the Board of Trustees of the
Portfolios, including all of the Independent Trustees, unanimously approved
each of the Sub-Management Agreements and voted to recommend their approval by
the investors in Large Cap Value Portfolio and Foreign Bond Portfolio.
VOTE REQUIRED
Approval of each Sub-Management Agreement will require the approval of "a
majority of the outstanding voting securities" of Large Cap Value Portfolio or
Foreign Bond Portfolio, as applicable, present in person or represented by
proxy at a meeting of the investors in that Portfolio. A "majority of the
outstanding voting securities" requires approval by the holders of 67% or more
of the issuer's voting securities which are present at the meeting if the
holders of more than 50% of such securities are present in person or by proxy,
or more than 50% of the issuer's voting securities, whichever is less.
In the event that a Sub-Management Agreement does not receive the
requisite approval, Citibank would (a) manage all of the assets of the
applicable Portfolio itself, (b) negotiate a new investment subadvisory
agreement with a different advisory organization, or (c) make other appropriate
arrangements, in the case of alternative (b) or (c), subject to approval in
accordance with the 1940 Act.
THE BOARD OF TRUSTEES OF THE PORTFOLIOS UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF BENEFICIAL INTERESTS IN LARGE CAP VALUE PORTFOLIO VOTE FOR APPROVAL
OF THE SUB-MANAGEMENT AGREEMENT WITH SSBC AND THAT THE HOLDERS OF BENEFICIAL
INTERESTS IN FOREIGN BOND PORTFOLIO VOTE FOR APPROVAL OF THE SUB-MANAGEMENT
AGREEMENT WITH SBAM.
<PAGE>
ITEM 3. TO VOTE ON THE TRANSFER BY INTERMEDIATE INCOME PORTFOLIO OF
ALL ITS ASSETS TO U.S. FIXED INCOME PORTFOLIO IN EXCHANGE FOR AN
INTEREST IN U.S. FIXED INCOME PORTFOLIO, FOLLOWED BY THE
DISSOLUTION OF INTERMEDIATE INCOME PORTFOLIO.
Only investors in Intermediate Income Portfolio are being asked to vote on
Item 3.
It is intended that proxies submitted by holders of beneficial interests
in Intermediate Income Portfolio not limited to the contrary will be voted in
favor of the Portfolio transferring all of its assets to U.S. Fixed Income
Portfolio, a mutual fund with a similar investment objective, in exchange for
an interest in U.S. Fixed Income Portfolio, followed by the dissolution of
Intermediate Income Portfolio. U.S. Fixed Income Portfolio invests in a broader
range of investment grade securities, including a broader range of
mortgage-backed securities, than does Intermediate Income Portfolio. When
interest rates go down, investments in mortgage-backed securities may be
adversely affected by prepayment of mortgages. When interest rates go up,
mortgages may experience lower rates of prepayment, which lengthens the
expected maturity of a mortgage-backed security.
Intermediate Income Portfolio's Declaration of Trust currently requires
that investors in that Portfolio approve sales, transfers or exchanges of all
or substantially all of the assets of the Portfolio, including the transfer of
the Portfolio's assets to U.S. Fixed Income Portfolio.
In the event that the proposal in Item 3 does not receive the requisite
investor approval, the Trustees will consider possible alternatives, which
might include resubmission of the proposal for approval by holders of
beneficial interests in Intermediate Income Portfolio.
VOTE REQUIRED
Approval of the transfer of assets of Intermediate Income Portfolio will
require the approval of "a majority interests vote" of Intermediate Income
Portfolio present or represented by proxy at a meeting of the investors in that
Portfolio. "A majority interests vote" requires approval by the holders of 67%
or more of the Portfolio's beneficial interests which are present or
represented at the meeting if the holders of more than 50% of such interests
are present or represented by proxy, or more than 50% of the Portfolio's
beneficial interests, whichever is less.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
BENEFICIAL INTERESTS IN INTERMEDIATE INCOME PORTFOLIO VOTE FOR APPRoVAL OF THE
TRANSFER OF ASSETS OF INTERMEDIATE INCOME PORTFOLIO TO U.S. FIXED INCOME
PORTFOLIO.
ITEM 4. TO VOTE ON THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR EACH PORTFOLIO.
It is intended that proxies cast by each Portfolio's holders of beneficial
interests not limited to the contrary will be voted in favor of ratifying the
selection, by a majority of the Trustees of that Portfolio who are not
"interested persons" (as that term is defined in the 1940 Act) of the
Portfolio, of PricewaterhouseCoopers LLP under Section 32(a) of the 1940 Act as
<PAGE>
independent public accountants, to certify every financial statement of that
Portfolio required by any law or regulation to be certified by independent
public accountants and filed with the Securities and Exchange Commission in
respect of all or any part of the fiscal year of the Portfolio ending October
31, 1999. PricewaterhouseCoopers LLP has no direct or material indirect
interest in any Portfolio.
PricewaterhouseCoopers LLP (formerly known as "Price Waterhouse") has
served as each Portfolio's independent certified public accountants since their
commencement of operations, providing audit services and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.
Representatives of PricewaterhouseCoopers LLP are not expected to be
present at the Meeting.
VOTE REQUIRED
Approval of this proposal with respect to a Portfolio will require
approval by the holders of a majority of the outstanding beneficial interests
in that Portfolio which are present at the Meeting in person or by proxy.
THE BOARD OF TRUSTEES OF THE PORTFOLIOS UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF BENEFICIAL INTERESTS IN EACH PORTFOLIO VOTE FOR APPROVAL OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT CERTIFIED PUBLIC AcCOUNTANTS FOR THAT
PORTFOLIO.
ITEM 5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE SPECIAL MEETING OF HOLDERS OF BENEFICIAL INTERESTS AND ANY
ADJOURNMENTS THEREOF.
The management of the Portfolios knows of no other business to be
presented at the Meeting. If any additional matters should be properly
presented, it is intended that the enclosed proxy (if not limited to the
contrary) will be voted in accordance with the judgment of the persons named in
the enclosed form of proxy.
INTERESTS OF CERTAIN PERSONS
As of the Record Date, the Trustees and officers of the Portfolios,
individually and as a group, owned beneficially or had the right to vote less
than 1% of the outstanding interests in any of the Portfolios or shares of any
of the funds investing in the Portfolios.
As of the Record Date, to the best knowledge of the Portfolios, the
following entities beneficially owned the outstanding beneficial interests in
the Portfolios:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE INTERMEDIATE INCOME FOREIGN BOND
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
NAME OF BENEFICIAL Beneficial Percentage Beneficial Percentage Beneficial Percentage
OWNER Ownership Interest Ownership Interest Ownership Interest
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
CitiSelect(R)Folio 200 $12,633,596 11.33% $47,494,734 25.67% $38,139,387 16.76%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect Ltd Folio
200 $5,800,075 5.20% $19,919,917 10.77% $16,027,202 7.04%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect(R)Folio 300 $31,502,601 28.25% $78,814,648 42.60% $63,563,244 27.93%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect Ltd Folio
300 $7,430,075 6.66% $18,712,882 10.11% $14,845,938 6.52%
- ----------------------------------------------------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
CitiSelect(R)Folio 400 $35,321,001 31.68% $18,289,211 9.88% $72,614,691 31.90%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect Ltd Folio
400 $3,501,434 3.14% $1,788,521 0.97% $7,040,996 3.09%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect(R)Folio 500 $14,172,204 12.71% N/A N/A $14,108,299 6.20%
- ----------------------------------------------------------------------------------------------------------------
CitiSelect Ltd Folio
500 $1,141,526 1.02% N/A N/A $1,268,640 0.56%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The address of each of CitiSelect Folio 200, CitiSelect Folio 300,
CitiSelect Folio 400 and CitiSelect Folio 500 is 21 Milk Street, Boston
Massachusetts 02109. The address of each of CitiSelect Ltd Folio 200,
CitiSelect Ltd Folio 300, CitiSelect Ltd Folio 400 and CitiSelect Ltd Folio
500, is c/o Maples and Calder, P.O. Box 309, Ugland House, George Town, Grand
Cayman, Cayman Islands, BWI.
ADDITIONAL INFORMATION
Each Portfolio is a series of Asset Allocation Portfolios (known as the
"Trust"), a diversified, open-end registered investment company organized as a
New York trust under a Declaration of Trust dated as of December 14, 1995. The
Portfolios were designated as separate series of the Trust on August 8, 1997.
The mailing address of the Trust is Elizabethan Square, George Town, Grand
Cayman, BWI.
The cost of soliciting proxies in the accompanying form, which is expected
to be about $25,000, will be borne by Citibank. In addition to solicitation by
mail, proxies may be solicited by the Board of Trustees, officers, and regular
employees and agents of the Portfolios without compensation therefor.
The Portfolios' placement agent is CFBDS, Inc., 21 Milk Street, Boston,
Massachusetts 02109. State Street Bank and Trust Company acts as custodian for
each Portfolio. The principal business address of State Street is 225 Franklin
Street, Boston, Massachusetts 02110. State Street Cayman Trust Company, Ltd.
provides transfer agency services to each Portfolio. The principal business
address of State Street Cayman Trust Company, Ltd. is P.O. Box 2508 GT, Grand
Cayman, BWI. Citibank provides administrative services to the Portfolios
pursuant to Management Agreements.
SUBMISSION OF CERTAIN PROPOSALS
The Trust is a trust formed under the laws of the State of New York, and
as such is not required to hold annual meetings of holders of beneficial
interests, although special meetings may be called for the Portfolios, or for
the Trust as a whole, for purposes such as electing Trustees or removing
Trustees, changing fundamental policies, or approving an advisory contract.
Proposals of holders of beneficial interests to be
<PAGE>
presented at any subsequent meeting of holders of beneficial interests must be
received by the Trust at the Trust's office within a reasonable time before the
proxy solicitation is made.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
Philip W. Coolidge, President
March 26, 1999
<PAGE>
EXHIBIT A
SUB-MANAGEMENT AGREEMENT
ASSET ALLOCATION PORTFOLIOS
Large Cap Value Portfolio
SUB-MANAGEMENT AGREEMENT, dated January 22, 1999, by and between Asset
Allocation Portfolios (the "Trust"), and Mutual Management Corp., a Delaware
corporation (the "Subadviser").*
WITNESSETH:
WHEREAS, Citibank, N.A. (the "Adviser") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as Large Cap Value Portfolio (the "Portfolio"), and
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Adviser has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Portfolio, and the
Subadviser is willing to provide such investment advisory services for the
Portfolio on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Adviser (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to the Portfolio for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to provide an
investment program with respect to the Portfolio for the compensation provided
by this Agreement.
2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser may
from time to time consider necessary for the proper management of such portion
of the Portfolio's investment assets as the Adviser may designate from time to
time. Notwithstanding any provision of this Agreement, the Adviser shall retain
all rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment advisory activities relating to the Trust. The Subadviser
shall furnish continuously an investment program and shall determine from time
- --------
*As of February 23, 1999 Mutual Management Corp. changed its name to
SSBC Fund Management Inc.
<PAGE>
to time what securities shall be purchased, sold or exchanged and what portion
of the assets of the Portfolio allocated by the Adviser to the Subadviser shall
be held uninvested, subject always to the restrictions of the Trust's
Declaration of Trust, dated as of December 14, 1995, and By-laws, as each may
be amended from time to time (respectively, the "Declaration" and the
"By-Laws"), the provisions of the 1940 Act, and the then-current Registration
Statement of the Trust with respect to the Portfolio, and subject, further, to
the Subadviser notifying the Adviser in advance of the Subadviser's intention
to purchase any securities except insofar as the requirement for such
notification may be waived or limited by the Adviser, it being understood that
the Subadviser shall be responsible for compliance with any restrictions
imposed in writing by the Adviser from time to time in order to facilitate
compliance with the above-mentioned restrictions and such other restrictions as
the Adviser may determine. Further, the Adviser or the Trustees of the Trust
may at any time, upon written notice to the Subadviser, suspend or restrict the
right of the Subadviser to determine what securities shall be purchased or sold
on behalf of the Portfolio and what portion, if any, of the assets of the
Portfolio allocated by the Adviser to the Subadviser shall be held uninvested.
The Subadviser shall also, as requested, make recommendations to the Adviser as
to the manner in which proxies, voting rights, rights to consent to corporate
action and any other rights pertaining to the Portfolio's portfolio securities
shall be exercised. Should the Board of Trustees of the Trust or the Adviser at
any time, however, make any definite determination as to investment policy
applicable to the Portfolio and notify the Subadviser thereof in writing, the
Subadviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination
has been revoked.
The Subadviser shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Subadviser is authorized as the agent of the Trust to
give instructions to the custodian and any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
The Subadviser will advise the Adviser on the same day it gives any such
instructions. In connection with the selection of such brokers or dealers and
the placing of such orders, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Subadviser or its affiliates exercise investment discretion. The
Subadviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which the Subadviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. In making purchases or sales of securities or other
property for the account of the Portfolio, the Subadviser may deal with itself
or with the Trustees of the Trust or the Trust's underwriter or distributor to
the extent such actions are permitted by the 1940 Act. The Board of Trustees of
the Trust, in its discretion, may instruct the Subadviser to effect all or a
portion of its securities transactions with one or more brokers and/or dealers
selected by the Board of Trustees, if it determines that the use of such
brokers and/or dealers is in the best interest of the Trust.
3. Allocation of Charges and Expenses. The Subadviser shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 2 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the
Portfolio all of its own expenses allocable to the Portfolio including, without
limitation, organization costs of the Portfolio; compensation of Trustees who
<PAGE>
are not "interested persons" of the Trust; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, registrar or dividend disbursing agent of the
Trust; expenses of issuing and redeeming beneficial interests and servicing
investor accounts; expenses of preparing, typesetting, printing and mailing
investor reports, notices, proxy statements and reports to governmental
officers and commissions and to investors in the Portfolio; expenses connected
with the execution, recording and settlement of security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of the
Portfolio (including but not limited to the fees of independent pricing
services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Portfolio
may be a party and the legal obligation which the Trust may have to indemnify
its Trustees and officers with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets of
the Portfolio an investment subadvisory fee, accrued daily and paid monthly, at
an annual rate equal to the percentages specified below of the aggregate assets
of the Portfolio allocated to the Subadviser:
0.65% on the first $10 million;
0.50% on the next $10 million;
0.40% on the next $10 million; and
0.30% on remaining assets.
If the Subadviser serves as investment subadviser for less than the whole
of any period specified in this Section 4, the compensation to the Subadviser
shall be prorated.
5. Covenants of the Subadviser. The Subadviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter or distributor, if any, as principals in making purchases or sales
of securities or other property for the account of the Portfolio, except as
permitted by the 1940 Act, will not take a long or short position in beneficial
interests of the Portfolio except as permitted by the Declaration, and will
comply with all other provisions of the Declaration and By-Laws and the
then-current Registration Statement applicable to the Portfolio relative to the
Subadviser and its directors and officers.
6. Limitation of Liability of the Subadviser. The Subadviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of securities
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Section 6,
the term "Subadviser" shall include directors, officers, partners and employees
of the Subadviser as well as the Subadviser itself. The Adviser is expressly
made a third party beneficiary of this Agreement, and may enforce any
obligations of the Subadviser under this Agreement and recover directly from
the Subadviser for any liability the Subadviser may have hereunder.
7. Activities of the Subadviser. The services of the Subadviser to the
Portfolio are not to be deemed to be exclusive, the Subadviser being free to
render investment advisory and/or other services to others, including accounts
or investment management companies with similar or identical investment
objectives to the Portfolio. It is understood that Trustees, officers, and
investors of the Trust or the Adviser are or may be or may become interested in
the Subadviser, as directors, officers, partners, employees, or otherwise and
<PAGE>
that directors, officers, partners and employees of the Subadviser are or may
become similarly interested in the Trust or the Adviser and that the Subadviser
may be or may become interested in the Trust as an investor or otherwise.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain in
force until January 22, 2001, on which date it will terminate unless its
continuance after January 22, 2001 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser or of the Subadviser at a
meeting specifically called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Trust or by "vote of a majority of the
outstanding voting securities" of the Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Portfolio, or (iii) the Adviser, in each case on not
more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement may be terminated at any time without the payment of any penalty
by the Subadviser on not less than 90 days' written notice to the Adviser. This
Agreement shall automatically terminate in the event of its "assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; that any
liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the Portfolio; and that no other series of the Trust shall be liable with
respect to this Agreement or in connection with the transactions contemplated
herein.
The undersigned officer of the Trust has executed this Agreement not
individually but in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any of
the Trustees, officers or holders of beneficial interests in the Trust
individually.
9. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act or any rules or regulations of the
Securities and Exchange Commission thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
ASSET ALLOCATION PORTFOLIOS MUTUAL MANAGEMENT
on behalf of Large Cap Value Portfolio CORP.
By: By:
Title: Title:
The foregoing is acknowledged:
Citibank, N.A.
By:
Title:
<PAGE>
EXHIBIT B
SUB-MANAGEMENT AGREEMENT
ASSET ALLOCATION PORTFOLIOS
Foreign Bond Portfolio
SUB-MANAGEMENT AGREEMENT, dated March 1, 1999, by and between Asset
Allocation Portfolios (the "Trust"), and Salomon Brothers Asset Management
Limited, a British limited liability private corporation (the "Subadviser").
W I T N E S S E T H:
WHEREAS, Citibank, N.A. (the "Adviser") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as Foreign Bond Portfolio (the "Portfolio"), and
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder, the "1940 Act"), and
WHEREAS, the Adviser has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Portfolio, and the
Subadviser is willing to provide such investment advisory services for the
Portfolio on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Adviser (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to the Portfolio for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to provide an
investment program with respect to the Portfolio for the compensation provided
by this Agreement.
2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser may
from time to time consider necessary for the proper management of such portion
of the Portfolio's investment assets as the Adviser may designate from time to
time. Notwithstanding any provision of this Agreement, the Adviser shall retain
all rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment advisory activities relating to the Trust. The Subadviser
shall furnish continuously an investment program and shall determine from time
to time what securities shall be purchased, sold or exchanged and what portion
of the assets of the Portfolio allocated by the Adviser to the Subadviser shall
be held uninvested, subject always to the restrictions of the Trust's
Declaration of Trust, dated as of December 14, 1995, and By-laws, as each may
be amended from time to time (respectively, the "Declaration" and the
"By-Laws"), the provisions of the 1940 Act, and the then-current Registration
Statement of the Trust with respect to the Portfolio, and subject, further, to
the Subadviser notifying the Adviser in advance of the Subadviser's intention
to purchase any securities except insofar as the requirement for such
<PAGE>
notification may be waived or limited by the Adviser, it being understood that
the Subadviser shall be responsible for compliance with any restrictions
imposed in writing by the Adviser from time to time in order to facilitate
compliance with the above-mentioned restrictions and such other restrictions as
the Adviser may determine. Further, the Adviser or the Trustees of the Trust
may at any time, upon written notice to the Subadviser, suspend or restrict the
right of the Subadviser to determine what securities shall be purchased or sold
on behalf of the Portfolio and what portion, if any, of the assets of the
Portfolio allocated by the Adviser to the Subadviser shall be held uninvested.
The Subadviser shall also, as requested, make recommendations to the Adviser as
to the manner in which proxies, voting rights, rights to consent to corporate
action and any other rights pertaining to the Portfolio's portfolio securities
shall be exercised. Should the Board of Trustees of the Trust or the Adviser at
any time, however, make any definite determination as to investment policy
applicable to the Portfolio and notify the Subadviser thereof in writing, the
Subadviser shall be bound by such determination for the period, if any,
specified in such notice or until similarly notified that such determination
has been revoked.
The Subadviser shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end the Subadviser is authorized as the agent of the Trust to
give instructions to the custodian and any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
The Subadviser will advise the Adviser on the same day it gives any such
instructions. In connection with the selection of such brokers or dealers and
the placing of such orders, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Portfolio and/or the other accounts
over which the Subadviser or its affiliates exercise investment discretion. The
Subadviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which the Subadviser and
its affiliates have with respect to accounts over which they exercise
investment discretion. In making purchases or sales of securities or other
property for the account of the Portfolio, the Subadviser may deal with itself
or with the Trustees of the Trust or the Trust's underwriter or distributor to
the extent such actions are permitted by the 1940 Act. The Board of Trustees of
the Trust, in its discretion, may instruct the Subadviser to effect all or a
portion of its securities transactions with one or more brokers and/or dealers
selected by the Board of Trustees, if it determines that the use of such
brokers and/or dealers is in the best interest of the Trust.
3. Allocation of Charges and Expenses. The Subadviser shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 2 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the
Portfolio all of its own expenses allocable to the Portfolio including, without
limitation, organization costs of the Portfolio; compensation of Trustees who
are not "interested persons" of the Trust; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, registrar or dividend disbursing agent of the
Trust; expenses of issuing and redeeming beneficial interests and servicing
investor accounts; expenses of preparing, typesetting, printing and mailing
investor reports, notices, proxy statements and reports to governmental
officers and commissions and to investors in the Portfolio; expenses connected
with the execution, recording and settlement of security transactions;
<PAGE>
insurance premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of the
Portfolio (including but not limited to the fees of independent pricing
services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Portfolio
may be a party and the legal obligation which the Trust may have to indemnify
its Trustees and officers with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets of
the Portfolio an investment subadvisory fee, accrued daily and paid monthly, at
an annual rate equal to the percentages specified below of the aggregate assets
of the Portfolio allocated to the Subadviser:
0.30% on the first $200 million;
0.25% on assets over $200 million
If the Subadviser serves as investment subadviser for less than the whole
of any period specified in this Section 4, the compensation to the Subadviser
shall be prorated.
5. Covenants of the Subadviser. The Subadviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter or distributor, if any, as principals in making purchases or sales
of securities or other property for the account of the Portfolio, except as
permitted by the 1940 Act, will not take a long or short position in beneficial
interests of the Portfolio except as permitted by the Declaration, and will
comply with all other provisions of the Declaration and By-Laws and the
then-current Registration Statement applicable to the Portfolio relative to the
Subadviser and its directors and officers.
6. Limitation of Liability of the Subadviser. The Subadviser shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of securities
transactions for the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. As used in this Section 6,
the term "Subadviser" shall include directors, officers, partners and employees
of the Subadviser as well as the Subadviser itself. The Adviser is expressly
made a third party beneficiary of this Agreement, and may enforce any
obligations of the Subadviser under this Agreement and recover directly from
the Subadviser for any liability the Subadviser may have hereunder.
7. Activities of the Subadviser. The services of the Subadviser to the
Portfolio are not to be deemed to be exclusive, the Subadviser being free to
render investment advisory and/or other services to others, including accounts
or investment management companies with similar or identical investment
objectives to the Portfolio. It is understood that Trustees, officers, and
investors of the Trust or the Adviser are or may be or may become interested in
the Subadviser, as directors, officers, partners, employees, or otherwise and
that directors, officers, partners and employees of the Subadviser are or may
become similarly interested in the Trust or the Adviser and that the Subadviser
may be or may become interested in the Trust as an investor or otherwise.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain in
force until March 1, 2001, on which date it will terminate unless its
continuance after March 1, 2001 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser or of the Subadviser at a
meeting specifically called for the purpose of voting on such approval, and (b)
by the Board of Trustees of the Trust or by "vote of a majority of the
outstanding voting securities" of the Portfolio.
<PAGE>
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Portfolio, or (iii) the Adviser, in each case on not
more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement may be terminated at any time without the payment of any penalty
by the Subadviser on not less than 90 days' written notice to the Adviser. This
Agreement shall automatically terminate in the event of its "assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; that any
liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the Portfolio; and that no other series of the Trust shall be liable with
respect to this Agreement or in connection with the transactions contemplated
herein.
The undersigned officer of the Trust has executed this Agreement not
individually but in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any of
the Trustees, officers or holders of beneficial interests in the Trust
individually.
9. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act or any rules or regulations of the
Securities and Exchange Commission thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
ASSET ALLOCATION PORTFOLIOS SALOMON BROTHERS ASSET
on behalf of Foreign Bond Portfolio MANAGEMENT LIMITED
By: By:
Title: Title:
The foregoing is acknowledged:
Citibank, N.A.
By:
Title:
<PAGE>
PROXY CARD PROXY CARD
LARGE CAP VALUE PORTFOLIO,
INTERMEDIATE INCOME PORTFOLIO
AND FOREIGN BOND PORTFOLIO
A PROXY FOR A SPECIAL MEETING
OF HOLDERS OF BENEFICIAL INTERESTS TO BE HELD APRIL 9, 1999
The undersigned, revoking all Proxies heretofore given, hereby appoints
each of Susan Jakuboski and Christine A. Drapeau, or any one of them, as
Proxies of the undersigned with full power of substitution, to vote on behalf
of all of the undersigned all beneficial interests in Large Cap Value
Portfolio, Intermediate Income Portfolio and Foreign Bond Portfolio which the
undersigned is entitled to vote at the Special Meeting of Holders of Beneficial
Interests in the Portfolios to be held at Citicorp Center, 153 East 53rd
Street, 14th Floor, New York, New York, on Friday, April 9, 1999 at 4:00 p.m.,
Eastern Time, and at any adjournment thereof, as fully as the undersigned would
be entitled to vote if personally present, as follows:
PROXY SOLICITED ON BEHALF OF THE PORTFOLIOS' BOARD OF TRUSTEES.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
1. A Sub-Management Agreement between SSBC Fund Management Inc. (formerly
known as Mutual Management Corp.) and Asset Allocation Portfolios, with
respect to Large Cap Value Portfolio.
The undersigned votes its beneficial interests in Large Cap Value
Portfolio, if any:
______FOR ______AGAINST ______ABSTAIN
2. A Sub-Management Agreement between Salomon Brothers Asset Management
Limited and Asset Allocation Portfolios, with respect to Foreign Bond
Portfolio.
The undersigned votes its beneficial interests in Foreign Bond Portfolio,
if any:
______FOR ______AGAINST ______ABSTAIN
3. The transfer by Intermediate Income Portfolio of all of its assets to
U.S. Fixed Income Portfolio in exchange for an interest in U.S. Fixed
Income Portfolio, followed by the dissolution of Intermediate Income
Portfolio.
The undersigned votes its beneficial interests in Intermediate Income
Portfolio, if any:
______FOR ______AGAINST ______ABSTAIN
4. The selection of PricewaterhouseCoopers LLP as the independent certified
public accountants for each Portfolio.
The undersigned votes its beneficial interests in Large Cap Value
Portfolio, if any:
______FOR ______AGAINST ______ABSTAIN
The undersigned votes its beneficial interests in Intermediate Income
Portfolio, if any:
______FOR ______AGAINST ______ABSTAIN
The undersigned votes its beneficial interests in Foreign Bond Portfolio,
if any:
______FOR ______AGAINST ______ABSTAIN
THE BENEFICIAL INTERESTS REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR
ANY PROPOSALS FOR WHICH NO CHOICE IS INDICATED.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Date:______________
____________________________________
Signature
____________________________________
Signature of joint owner, if any
NOTE: PLEASE SIGN EXACTLY AS YoUR NAME(S) APPEAR ON THIS CARD
When signing as attorney, executor, administrator, trustee, guardian or as
custodian for a minor, please sign your name and give your full title as such.
If signing on behalf of a corporation, please sign the full corporate name and
your name and indicate your title. If you are a partner signing for a
partnership, please sign the partnership name and your name. Joint owners
should each sign this proxy. Please sign, date and return in the enclosed
envelope.
