As filed with the Securities and Exchange Commission on July 14, 2000
File Nos. 333-____
811-3158
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
(Exact Name of Registrant as Specified in Charter)
388 Greenwich Street
New York, NY 10013
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Area Code: 800-451-2010
HEATH B. McLENDON
SSB CITI FUND MANAGEMENT LLC
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
(Name and Address of Agent for Service)
WITH COPIES TO
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<CAPTION>
<S> <C> <C> <C>
Robert I. Frenkel, Esq. Christina T. Sydor, Esq. Roger P. Joseph, Esq. Burton M. Leibert, Esq.
SSB Citi Fund SSB Citi Fund Bingham Dana LLP Willkie Farr &
Management LLC Management LLC 150 Federal Street Gallagher
388 Greenwich Street 388 Greenwich Street Boston, MA 02110 787 Seventh Avenue
New York, NY 10013 New York, NY 10013 New York, NY 10019
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: as soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933
Title of Securities Being Registered:
Shares of Common Stock ($.001 par value) of the Registrant
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The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940; accordingly, no fee is payable herewith because of reliance upon
Section 24(f).
It is proposed that this filing will become effective on August 14, 2000
pursuant to Rule 488 under the Securities Act of 1933.
<PAGE>
CITISELECT FOLIO 500 GROWTH PLUS 21 Milk Street,
5th Floor, Boston, Massachusetts 02109
August 16, 2000
Dear Shareholders:
You are being asked to vote on an Agreement and Plan of Reorganization
whereby substantially all of the assets of CitiSelect Folio 500 Growth Plus
(the "CitiSelect Portfolio"), a series of CitiFunds Trust I, will be
transferred in a tax-free reorganization to the Smith Barney Fundamental Value
Fund Inc. (the "Smith Barney Fund"), in exchange for shares of the
corresponding class of the Smith Barney Fund.
If the Agreement and Plan of Reorganization is approved and consummated,
you will no longer be a shareholder of the CitiSelect Portfolio; you will
become a shareholder of the Smith Barney Fund. You will receive shares of the
corresponding class of the Smith Barney Fund with an aggregate net asset value
equal to the aggregate net asset value of your shares in the CitiSelect
Portfolio.
The Smith Barney Fund is advised by SSB Citi Fund Management LLC ("SSB
Citi"). SSB Citi, like Citibank, N.A. ("Citibank"), the adviser of the
CitiSelect Portfolio, is a subsidiary of Citigroup Inc. Citigroup has proposed
the reorganization of the CitiSelect Portfolio into the Smith Barney Fund in
order to eliminate duplication in the mutual fund investment advisory
operations of SSB Citi and Citibank. After carefully studying the merits of the
proposal, the Board of Trustees of CitiFunds Trust I, on behalf of the
CitiSelect Portfolio, has determined that the reorganization of the CitiSelect
Portfolio with the Smith Barney Fund will benefit the shareholders of the
CitiSelect Portfolio.
The Board of Trustees of CitiFunds Trust I believes that the proposal set
forth in the notice of meeting for your fund is important and recommends that
you read the enclosed materials carefully and then vote for the proposal.
PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED
POsTAGE-PAID ENVELOPE. YOU MAY ALSO CAST YOUR VOTE VIA THE INTERNET OR BY
TELEPHONE AS DESCrIBED IN THE ENCLOSED PROXY VOTING MATERIALS. For more
information, please contact your service agent or call 1800-625-4554. If your
account is held with Citicorp Investment Services, please call 1-800-846-5200;
in New York City, you will need to call 212-820-2380.
Respectfully,
Philip W. Coolidge
President
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, OR CAST YOUR VOTE VIA THE INTERNET OR BY TELEPHONE, TO
ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARdLESS OF THE NUMBER
OF SHARES YOU OWN.
<PAGE>
CITISELECT FOLIO 500 GROWTH PLUS
21 Milk Street, 5th Floor
Boston, Massachusetts 02109
Telephone: (617) 423-1679
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders of CitiSelect
Folio 500 Growth Plus (the "CitiSelect Portfolio"), a series of CitiFunds Trust
I, will be held at the offices of SSB Citi Fund Management LLC, 7 World Trade
Center, 4th Floor, Balcony Dining, New York, New York 10048, on Monday, October
2, 2000 at 3:00 p.m., Eastern time, for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and
Plan of Reorganization that provides for and contemplates: (1)
the transfer of substantially all of the assets and liabilities
of the CitiSelect Portfolio to Smith Barney Fundamental Value
Fund Inc. (the "Smith Barney Fund") solely in exchange for
voting shares of the corresponding class of the Smith Barney
Fund; (2) the distribution of the shares to the shareholders of
the CitiSelect Portfolio in liquidation of the CitiSelect
Portfolio; and (3) the termination of the CitiSelect Portfolio.
ITEM 2. To transact such other business as may properly come before the
Special Meeting of Shareholders and any adjournments thereof.
Item 1 is described in the attached Proxy Statement/Prospectus. THE BOARD
OF TRUSTEES OF CITIFUNDS TRUST I RECOMMEnDS THAT YOU VOTE IN FAVOR OF ITEM 1.
Only shareholders of record on August 11, 2000 will be entitled to vote at
the Special Meeting of Shareholders and at any adjournments thereof.
Robert I. Frenkel, Secretary
August 16, 2000
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. YOU ALSO MAY RETURN PROXIES By TOUCHTONE
VOTING OVER THE TELEPHONE OR BY VOTING ON THE INTERNET.
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
August 16, 2000
Relating to the acquisition by
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
388 Greenwich Street
New York, NY 10013
Telephone: (800) 451-2010
of the assets of
CITISELECT FOLIO 500 GROWTH PLUS, a series of
CITIFUNDS TRUST I
21 Milk Street, 5th Floor
Boston, Massachusetts 02109
Telephone: (617) 423-1679
This Proxy Statement/Prospectus is furnished to shareholders of CitiSelect
Folio 500 Growth Plus (the "CitiSelect Portfolio"), a series of CitiFunds Trust
I (the "CitiFunds Trust"), in connection with the solicitation of proxies for a
Special Meeting of Shareholders of the CitiSelect Portfolio at which
shareholders will be asked to consider and approve a proposed Agreement and
Plan of Reorganization (the "Plan") between the CitiFunds Trust, with respect
to its series CitiSelect Portfolio, and Smith Barney Fundamental Value Fund
Inc. (the "Smith Barney Fund").
The Plan provides that substantially all of the assets and liabilities of
the CitiSelect Portfolio will be transferred to the Smith Barney Fund. In
exchange for the transfer of these assets and liabilities, the CitiSelect
Portfolio will receive voting shares of the corresponding class of the Smith
Barney Fund. Shares of the Smith Barney Fund so received will then be
distributed to the shareholders of the CitiSelect Portfolio in complete
liquidation of the CitiSelect Portfolio, and the CitiSelect Portfolio will be
terminated. As a result of these reorganization transactions, each shareholder
of each class of the CitiSelect Portfolio will receive that number of full and
fractional shares of the corresponding class of the Smith Barney Fund having an
aggregate net asset value equal to the aggregate net asset value of the
shareholder's shares of the CitiSelect Portfolio held on the closing date of
the reorganization transaction (the "Reorganization").
The CitiSelect Portfolio and Smith Barney Fund are each open-end
management investment companies. The investment objective of the CitiSelect
Portfolio is as high a total return over time as is consistent with a dominant
emphasis on equity securities and a small allocation to fixed income
securities. The investment objective of the Smith Barney Fund is long-term
capital growth with a secondary emphasis on current income. Both Funds invest
primarily in equity securities. A small portion of the CitiSelect Portfolio's
assets are invested in fixed income securities.
This Proxy Statement/Prospectus, which should be retained for future
reference, sets forth concisely the information about the Smith Barney Fund
that a prospective investor should know before investing. For a more detailed
discussion of the investment objectives, policies, restrictions and risks of
the Smith Barney Fund, see the Prospectus for the Smith Barney Fund, dated
January 28, 2000, as supplemented from time to time, which is included herewith
and incorporated herein by reference. This Proxy Statement/Prospectus is also
accompanied by the Smith Barney Fund's Annual Report to shareholders for the
year ended September 30, 1999 and Semi-annual Report to shareholders for the
<PAGE>
six month period ended January 31, 2000, each of which is incorporated herein
by reference. Additional information is set forth in the Statement of
Additional Information of the Smith Barney Fund, dated January 28, 2000, which
is incorporated herein by reference. The Statement of Additional Information is
on file with the Securities and Exchange Commission and is available without
charge upon request by writing or calling the Smith Barney Fund at the address
or telephone number indicated above.
Additional information is set forth in (a) the Statement of Additional
Information relating to this Proxy Statement/Prospectus, dated August 16, 2000,
(b) the Prospectus and Statement of Additional Information of the CitiSelect
Portfolio, dated March 1, 2000, and (c) the Annual Report for the fiscal year
ended October 31, 1999 and the Semi-Annual Report for the six-month period
ended April 30, 2000 relating to the CitiSelect Portfolio. Each of these
documents is incorporated herein by reference and is on file with the
Securities and Exchange Commission. You may obtain a copy of any of these
documents without charge upon request by writing or calling the CitiSelect
Portfolio at the address or telephone number indicated above.
This Proxy Statement/Prospectus is expected to be first sent to
shareholders on or about August 16, 2000.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CITISELECT PORTFOLIO OR THE
SMITH BARNEY FUND.
<PAGE>
TABLE OF CONTENTS
SYNOPSIS.............................................................
Proposed Transaction..............................................
Comparison of Investment Objectives and Policies..................
Comparison of Investment Structure of
CitiSelect Portfolio and Smith Barney Fund.....................
Investment Advisory Services and Management Fees..................
Overall Expenses..................................................
Distribution of Shares and Other Services.........................
Sales Charges, Purchase Policies,
Redemption and Exchange Information............................
Dividends and Other Distributions.................................
Tax Consequences..................................................
PRINCIPAL INVESTMENTS, RISK FACTORS AND INVESTMENT RESTRICTIONS
Principal Investments and Risk Factors............................
Fundamental Investment Restrictions...............................
THE PROPOSED TRANSACTION.............................................
Description of the Plan...........................................
Reasons for the Proposed Transaction..............................
Description of the Securities to be Issued........................
Federal Income Tax Consequences...................................
Liquidation and Termination of CitiSelect Portfolio...............
Portfolio Securities..............................................
Portfolio Turnover................................................
Pro Forma Capitalization..........................................
Performance.......................................................
VOTING INFORMATION...................................................
General Information...............................................
Quorum; Vote Required to Approve Proposal.........................
Outstanding Shareholders..........................................
ADDITIONAL INFORMATION ABOUT THE FUNDS...............................
OTHER MATTERS........................................................
<PAGE>
SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus regarding the CitiSelect Portfolio and the Smith Barney
Fund (each a "Fund," and collectively, the "Funds") and the proposed
Reorganization. This summary is qualified by reference to the more complete
information contained elsewhere in this Proxy Statement/Prospectus, the
Prospectus of the Smith Barney Fund, the Prospectus of the CitiSelect
Portfolio, and the Plan, the form of which is attached to this Proxy
Statement/Prospectus as Exhibit A. Shareholders of the CitiSelect Portfolio
should read this entire Proxy Statement/Prospectus carefully.
Proposed Transaction
The Board of Trustees of the CitiFunds Trust, on behalf of the CitiSelect
Portfolio, including a majority of the Trustees who are not "interested
persons" of such Fund (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) (the "Non-Interested Trustees"), approved the Plan on
July 13, 2000. The Plan provides that substantially all of the assets and
liabilities of the CitiSelect Portfolio will be transferred to the Smith Barney
Fund. The CitiSelect Portfolio holds its assets through several underlying
investment companies (the "Underlying Portfolios"). As part of the
Reorganization, and prior to the transfer of assets, the CitiSelect Portfolio
will receive a distribution in kind from the applicable Underlying Portfolios
of the investment securities held by the Underlying Portfolio on its behalf (and
associated liabilities), and those investment securities will be the assets
transferred to the Smith Barney Fund.
In exchange for the transfer of those assets and liabilities, the
CitiSelect Portfolio will receive voting shares of the corresponding class of
the Smith Barney Fund. Shares of the Smith Barney Fund so received will then be
distributed to the shareholders of the CitiSelect Portfolio in complete
liquidation of the CitiSelect Portfolio, and the CitiSelect Portfolio will be
terminated. As a result of the Reorganization, each shareholder of each class
of the CitiSelect Portfolio will receive that number of full and fractional
shares of the corresponding class of the Smith Barney Fund having an aggregate
net asset value equal to the aggregate net asset value of the shareholder's
shares of the CitiSelect Portfolio held as of the close of business on the
closing date of the Reorganization (the "Closing Date"). The Closing Date is
expected to be on or after October 6, 2000 or such later date as the parties
may agree in writing.
For the reasons described below under "The Proposed Transaction - Reasons
for the Proposed Transaction," the Board of Trustees of the CitiFunds Trust, on
behalf of the CitiSelect Portfolio, including a majority of the Non-Interested
Trustees, has concluded that the Reorganization is in the best interests of the
CitiSelect Portfolio and its shareholders and that the interests of the
existing shareholders of the CitiSelect Portfolio will not be diluted as a
result of the Reorganization.
Accordingly, the Trustees recommend approval of the Plan. If the Plan is
not approved, the CitiSelect Portfolio will continue in existence unless other
action is taken by the Trustees; such other action may include resubmission of
the Plan to shareholders, maintaining the status quo or termination and
liquidation of the CitiSelect Portfolio.
Comparison of Investment Objectives and Policies
Investment Objectives
The investment objective of the CitiSelect Portfolio is as high a total
return over time as is consistent with a dominant emphasis on equity securities
and a small allocation to fixed income securities.
The investment objective of the Smith Barney Fund is long-term capital
growth with a secondary emphasis on current income.
<PAGE>
Investment Policies
Asset Allocation. The CitiSelect Portfolio is a diversified asset
allocation fund that invests in a mix of equity and debt securities. Citibank,
N.A. ("Citibank"), the Fund's investment manager, generally allocates between
75% and 100% of the Fund's assets to equity securities and up to 25% of the
Fund's assets to fixed income securities. However, cash flows into or out of
the Fund, or changes in market valuations, may produce different results.
Citibank monitors the Fund's asset mix daily and conducts quarterly reviews to
determine whether to rebalance the Fund's investments.
Citibank may further allocate the Fund's equity securities among large cap
securities, small cap securities and international securities, and the Fund's
fixed income securities among U.S. and foreign government and corporate bonds
and between high yield (or junk) bonds and investment grade securities.
Citibank is not required to allocate the Fund's assets among all of these types
of equity and fixed income securities at all times.
The Smith Barney fund is not an asset allocation fund. The Smith Barney
Fund invests primarily in equity securities.
Equity Securities. The CitiSelect Portfolio's equity securities may
include common stocks, preferred stocks, securities convertible into common
stocks and warrants. Citibank may allocate the Fund's equity securities among
large cap issuers, small cap issuers and international issuers. These further
allocations are intended to maximize returns while managing overall volatility.
The Smith Barney Fund's equity securities consist primarily of common
stocks, but the Fund may also invest in preferred stocks, warrants and
securities convertible into common stocks. The Fund generally invests in
securities of large, well-known companies but may also invest a significant
portion of its assets in securities of small to medium-sized companies when SSB
Citi believes smaller companies offer more attractive value opportunities.
Debt Securities. The CitiSelect Portfolio's fixed income securities may
include bonds and short-term notes issued by the U.S. government (or its
agencies and instrumentalities), corporate bonds and short-term notes,
mortgage-backed securities, asset-backed securities and repurchase agreements.
Citibank may allocate the Fund's fixed income securities among U.S. and foreign
government and corporate bonds and between high yield (or junk) bonds and
investment grade securities. These further allocations are intended to maximize
returns while managing overall volatility. The CitiSelect Portfolio does not
anticipate investing more than 25% of its total assets in junk bonds. Junk
bonds may subject the CitiSelect Portfolio to higher risks, as discussed under
"Principal Investments, Risk Factors and Investment Restrictions" below.
While the Smith Barney Fund invests primarily in equity securities, the
Fund may also invest in debt securities convertible into equity securities that
provide dividend or interest income.
Foreign Securities. The CitiSelect Portfolio may invest without limit in
foreign securities. The Fund emphasizes equity securities included in the MSCI
EAFE Index, which contains securities of companies located in Europe, Australia
and the Far East. The Fund also may invest in emerging market equity
securities.
<PAGE>
The Smith Barney Fund may invest up to 25% of its total assets in foreign
securities, including depositary receipts (see "Principal Investments, Risk
Factors and Investment Restrictions" below for more information on the risks of
foreign securities).
Derivative Securities. Each Fund may invest in derivative securities,
including options on securities and foreign currencies, stock index options,
forward currency contracts, interest rate and foreign currency futures
contracts, stock index futures contracts and options on futures contracts (see
"Principal Investments, Risk Factors and Investment Restrictions" below for
more information on the risks of derivatives). The CitiSelect Portfolio also
may invest in swap agreements, including interest rate and currency swaps,
equity swaps and other types of available swap agreements including caps,
collars and floors. The Smith Barney Fund may invest in interest rate and
currency swaps. The Smith Barney Fund may invest in certain types of derivative
securities only for hedging purposes, and may invest in derivatives to generate
income only in limited cases. The CitiSelect Portfolio may invest in derivative
securities for hedging and non-hedging purposes, to enhance potential gains, to
generate income, and also to manage the maturity or duration of fixed income
securities. Each of the Funds is subject to certain limitations imposed by the
Commodity Futures Trading Commission with respect to their investments in
derivatives.
Security Selection Process
Citibank allocates the CitiSelect Portfolio's equity investments among
different investment styles so that the Fund may benefit from investment cycles
when securities with particular characteristics, or those selected based on a
particular investment style, outperform other securities in the same asset
class. These styles include investing in "growth" stocks (i.e., those issued by
companies with seasoned management teams, track records of above-average
performance and strong earnings growth) and investing in "value" stocks (i.e.,
those that appear undervalued or priced below their true worth). To implement
this strategy, Citibank employs multiple subadvisers with expertise managing
specific types of securities or managing in a particular style.
In selecting equity investments for the Smith Barney Fund, SSB Citi
employs a two-step stock selection process in its search for undervalued stocks
of temporarily out of favor companies. First, the Fund's portfolio manager uses
proprietary models and fundamental research to try to identify stocks that are
underpriced in the market relative to their fundamental value. Next, the
portfolio manager looks for a positive catalyst in the company's near term
outlook that the portfolio manager believes will accelerate earnings or improve
the value of the company's assets. The portfolio manager also emphasizes
companies in those sectors of the economy that the portfolio manager believes
are undervalued relative to other sectors. When evaluating an individual stock,
SSB Citi looks for low market valuations measured by valuation models and
positive changes in earnings prospects.
<PAGE>
Comparison of Investment Structure of CitiSelect Portfolio and Smith Barney Fund
The CitiSelect Portfolio invests in securities indirectly by investing in
several underlying mutual funds or portfolios. Each portfolio invests in a
particular type of security, such as large cap value securities, large cap
growth securities, small cap growth securities, small cap value securities,
international equity securities, high yield debt securities, U.S. fixed income
securities and foreign bonds. Each portfolio is a mutual fund with its own
investment goals and policies. Each portfolio buys, holds and sells securities
in accordance with these goals and policies. Unless otherwise indicated,
references to the CitiSelect Portfolio include its underlying portfolios.
The Smith Barney Fund invests directly in securities. This difference in
investment structure is not expected to affect in any material way CitiSelect
shareholders who receive shares of the Smith Barney Fund in the Reorganization.
Investment Advisory Services and Management Fees
Citibank, N.A., a wholly-owned subsidiary of Citigroup Inc., serves as the
investment manager of the CitiSelect Portfolio. SSB Citi Fund Management LLC
("SSB Citi"), also a wholly-owned subsidiary of Citigroup Inc., serves as the
investment manager of the Smith Barney Fund and will continue to serve as the
investment manager of the Smith Barney Fund after the consummation of the
Reorganization. Citigroup businesses provide a broad range of financial
services and 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 consumer and corporate customers around the
world.
Citibank, N.A. also serves as investment manager of each of the underlying
funds in which the CitiSelect Portfolio invests. Citibank employs the following
subadvisers to manage the following classes of securities:
Class of Securities Subadviser
large cap value securities SSB Citi
(the manager of the Smith Barney Fund)
small cap value securities Franklin Advisory Services LLC
international equity securities Hotchkis and Wiley
high yield debt securities Salomon Brothers Asset Management Inc.
(an affiliate of Citigroup Inc.)
foreign fixed income securities Salomon Brothers Asset Management Limited
(an affiliate of Citigroup Inc.)
The CitiSelect Portfolio pays an aggregate management fee, which is
accrued daily and paid monthly, of 0.75% of the Fund's average daily net assets
on an annualized basis for the Fund's then-current fiscal year. The aggregate
management fee includes fees payable to Citibank for the asset management and
administrative services it provides to the CitiSelect Portfolio and its
underlying funds and fees payable to the subadvisers for their advisory
services to the underlying funds.
The management fee for the Smith Barney Fund is calculated at the annual
rate of 0.55% of the Fund's average daily net assets. The Smith Barney Fund
also pays to SSB Citi a fee for its administrative services in the amount of
<PAGE>
0.20% of its average daily net assets. For a comparison of the total annual
operating expenses of the CitiSelect Portfolio (which includes the expenses of
the underlying funds) and the Smith Barney Fund, please review the expense
tables under "Overall Expenses" below.
John G. Goode, a Managing Director of Salomon Smith Barney Inc., has been
responsible for the day-to-day operations of the Smith Barney Fund since
November 1990 and will continue to be responsible for the day-to-day operations
of the Smith Barney Fund after consummation of the Reorganization. Mr. Goode
has been with Salomon Smith Barney or companies that are now part of Salomon
Smith Barney for the past 16 years.
Overall Expenses
The total annual fund operating expenses as a percentage of average net
assets for the Class A and Class B shares of the Smith Barney Fund are lower
than the total annual fund operating expenses of Class A and Class B shares of
the CitiSelect Portfolio. Further information about the expenses of each class
of the CitiSelect Portfolio and each class of the Smith Barney Fund for the
fiscal years ended October 31, 1999 and September 30, 1999, respectively, and
pro forma expenses following the proposed Reorganization, is outlined in the
tables below.
<PAGE>
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SHAREHOLDER FEES
FEES PAID DIRECTLY FROM CITISELECT SMITH BARNEY PRO FORMA
YOUR INVESTMENT PORTFOLIO FUND SMITH BARNEY
FUND
SHARE CLASS Class A Class B Class A Class B Class A Class B
Maximum Sales Charge (Load)
Imposed on Purchases 5.00% None 5.00% None 5.00% None
Maximum Deferred Sales
Charge (Load) None1 5.00%2 None3 5.00%2 None3 5.00%2
------------------------------------------------------------------------------------------------
ANNUAL FUND
OPERATING EXPENSES(4)
EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS
Management Fees 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Distribution (12b-1) Fees 0.50% 1.00% 0.25% 1.00% 0.25% 1.00%
Other Expenses (administrative,
shareholder servicing and 0.26% 0.26% 0.17% 0.19% 0.17% 0.19%
other expenses)
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.51%* 2.01%* 1.17% 1.94% 1.17% 1.94%
------------------------------------------------------------------------------------------------
</TABLE>
*Because some of CitiSelect Portfolio's expenses were waived or reimbursed
actual total operating expenses with respect to Class A and Class B shares for
the fiscal year ended October 31, 1999 were 1.50% and 2.00%, respectively.
1 Except for investments of $500,000 or more.
2 Class B shares have a contingent deferred sales charge ("CDSC") that is
deducted from your sale proceeds if you sell your Class B shares within five
years of your original purchase of the shares. In the first year after
purchase, the CDSC is 5.00% of the price at which you purchased your shares,
or the price at which you sold your shares, whichever is less, declining to
1.00% in the fifth year after purchase.
3 You may buy Class A shares in amounts of $1,000,000 or more at net asset value
(without an initial sales charge) but if you redeem those shares within 12
months of purchase, you will pay a deferred sales charge of 1.00%.
4 The CitiSelect Portfolio invests in multiple underlying mutual funds. This
table reflects the expenses of the Fund and the underlying funds in which it
invests.
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This example is intended to help you compare the cost of investing in each
of the Funds. The example assumes you invest $10,000 in each Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes your investment has a 5% return each year and
that each Fund's annual operating expenses (before waivers and reimbursements)
remain the same. The expenses of CitiSelect Portfolio's underlying funds are
reflected in the example. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<PAGE>
<TABLE>
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<S> <C> <C> <C> <C>
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1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------------------------------
CITISELECT PORTFOLIO
---------------------------------------------------------------------------------------------
Class A $646 $953 $1,283 $2,211
---------------------------------------------------------------------------------------------
Class B
---------------------------------------------------------------------------------------------
Assuming redemption at end of period $704 $930 $1,183 $2,207
---------------------------------------------------------------------------------------------
Assuming no redemption $204 $630 $1,083 $2,207
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
SMITH BARNEY FUND
---------------------------------------------------------------------------------------------
Class A $613 $853 $1,111 $1,849
---------------------------------------------------------------------------------------------
Class B
---------------------------------------------------------------------------------------------
Assuming redemption at end of period $697 $909 $1,147 $2,065
---------------------------------------------------------------------------------------------
Assuming no redemption $197 $609 $1,047 $2,065
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
PRO FORMA SMITH BARNEY FUND
---------------------------------------------------------------------------------------------
Class A $613 $853 $1,111 $1,849
---------------------------------------------------------------------------------------------
Class B
---------------------------------------------------------------------------------------------
Assuming redemption at end of period $697 $909 $1,147 $2,065
---------------------------------------------------------------------------------------------
Assuming no redemption $197 $609 $1,047 $2,065
---------------------------------------------------------------------------------------------
</TABLE>
Distribution of Shares and Other Services
Distributor
The distributor of the CitiSelect Portfolio is CFBDS, Inc. The distributor
of the Smith Barney Fund is Salomon Smith Barney Inc. A selling group
consisting of Salomon Smith Barney and other broker-dealers sells shares of the
Smith Barney Fund to the public.
Each of the Funds has adopted Rule 12b-1 distribution plans for their
Class A and Class B shares. Under the plans, the Funds pay distribution and
service fees. The distribution and service fees for Class A shares of the Smith
Barney Fund are lower than the distribution and service fees for Class A shares
of the CitiSelect Portfolio. The distribution and service fees for Class B
shares of the CitiSelect Portfolio and the Smith Barney Fund are the same. See
"Overall Expenses" above for a comparison of these fees for the CitiSelect
Portfolio and the Smith Barney Fund.
Other Service Providers
As indicated below, the CitiSelect Portfolio and the Smith Barney Fund
generally have different service providers. Upon completion of the
Reorganization, the Smith Barney Fund will continue to engage its existing
service providers. In all cases, the types of services provided to the Funds
under these service arrangements are substantially similar.
<PAGE>
-------------------------------------------------------------------------------
SERVICE PROVIDER CITISELECT PORTFOLIO SMITH BARNEY FUND
-------------------------------------------------------------------------------
Custodian State Street Bank and Trust PNC Bank National
Company Association
-------------------------------------------------------------------------------
Auditors PricewaterhouseCoopers Deloitte & Touche LLP
LLP
-------------------------------------------------------------------------------
Transfer Agent State Street Bank and Trust Citi Fiduciary Trust
Company Company
-------------------------------------------------------------------------------
Sub-Transfer Agent N/A PFPC Global Fund
Services
-------------------------------------------------------------------------------
Sales Charges, Purchase Policies, Redemption and Exchange Information
Sales Charges
Class A shares of the CitiSelect Portfolio and the Smith Barney Fund are
sold at net asset value plus a front-end sales charge. There will be no sales
load charged to Class A shareholders of the CitiSelect Portfolio on the Class A
shares of the Smith Barney Fund that they receive in the Reorganization. See
"Overall Expenses" for tables comparing sales charges and other expenses of the
Funds.
The front-end sales charge on purchases of less than $25,000 of Class A
shares of the CitiSelect Portfolio is the same as the front-end sales charge on
such purchases of Class A shares of the Smith Barney Fund; with respect to
purchases in larger amounts, the sale charge applicable to Class A shares of
the Smith Barney Fund is higher than that of the CitiSelect Portfolio. You do
not pay an initial sales charge when you buy $500,000 or more of Class A shares
of the CitiSelect Portfolio or $1,000,000 or more of Class A shares of the
Smith Barney Fund, but if you redeem these Class A shares within one year of
purchase you will pay a deferred sales charge of 1%. For purposes of
determining the one-year holding period, a CitiSelect shareholder will be
deemed to have held the shares of the Smith Barney Fund received in the
Reorganization since the date of the original purchase of shares of the
CitiSelect Portfolio.
Class B shares of the CitiSelect Portfolio and the Smith Barney Fund are
sold without a front-end sales charge, but shareholders are charged a
contingent deferred sales charge ("CDSC") when they sell their Class B shares
within five years of purchase. For each of the Funds, the rate of the CDSC goes
down the longer you hold your shares. For purposes of determining the holding
period, a CitiSelect shareholder will be deemed to have held the shares of the
Smith Barney Fund received in the Reorganization since the date of the original
purchase of shares of the CitiSelect Portfolio (or, if the shares of the
CitiSelect Portfolio were received in an exchange from an original purchase,
the earlier date of the earlier purchase). You may compare the CDSC of the
CitiSelect Portfolio and the Smith Barney Fund in the expense tables under
"Overall Expenses" above.
After 8 years, Class B shares of each Fund automatically convert into
Class A shares. For each Fund, Class A shares have lower total annual operating
expenses than Class B shares.
The CitiSelect Portfolio and the Smith Barney Fund have established
policies, including rights of accumulation and letter of intent privileges,
waiving the Class A initial sales charge for certain classes of investors under
certain circumstances. CitiSelect shareholders who wish to make purchases of
Class A shares of the Smith Barney Fund after the Reorganization should review
the Prospectus of the Smith Barney Fund for additional information about these
<PAGE>
waivers. As stated above, the Smith Barney Fund will not impose any initial
sales charge on the Class A shares of the Smith Barney Fund that CitiSelect
shareholders receive in the Reorganization.
The CitiSelect Portfolio and the Smith Barney Fund have established
policies waiving the Class B CDSC for certain classes of investors under
certain circumstances. Upon the consummation of the Reorganization, Class B
shareholders should review the CDSC waiver policies of the Smith Barney Fund to
determine whether a waiver may be applicable when they redeem their Class B
shares of the Smith Barney Fund received in the Reorganization. The CDSC on
Class B shares of the Smith Barney Fund will generally be waived for 12 months
following the death or disability of a shareholder. The CDSC will also be
waived on certain distributions from a retirement plan. You should review the
Prospectus and Statement of Additional Information of the Smith Barney Fund for
a more complete description of the waiver policies that may be applicable.
These policies are generally similar to the waiver policies in effect for the
CitiSelect Portfolio.
Purchase Policies
You may purchase shares of each Fund at their net asset value, plus any
applicable sales charge, next determined after receipt of your purchase request
in good order. You may purchase shares of the CitiSelect Portfolio from the
Fund's distributor or a broker-dealer or financial institution (called a
Service Agent) that has entered into a sales or service agreement with the
distributor concerning the Fund. You may purchase shares of the Smith Barney
Fund from a Salomon Smith Barney Financial Consultant or an investment dealer
in the selling group or a broker that clears through Salomon Smith Barney
(called a dealer representative). Qualified retirement plans and certain other
investors who are clients of the selling group are eligible to buy shares
directly from the Smith Barney Fund by mailing a request to the Smith Barney
Fund's sub-transfer agent.
The CitiSelect Portfolio does not impose any minimum initial or subsequent
investment requirements but a Service Agent may. The Smith Barney Fund imposes
initial and additional investment amounts that vary depending on the class of
shares bought and the nature of the investment account. Upon consummation of
the Reorganization, CitiSelect shareholders will be subject to these minimum
amounts if they wish to purchase additional shares of the Smith Barney Fund.
These minimum initial and additional investment amounts are set forth in the
table below:
MINIMUM INITIAL MINIMUM ADDITIONAL
SMITH BARNEY FUND INVESTMENT INVESTMENT
---------------------------------------------------------------------------
General $1,000 $50
---------------------------------------------------------------------------
IRAs, Self Employed Retirement $250 $50
Plans, Uniform Gift to Minor Accounts
---------------------------------------------------------------------------
Qualified Retirement Plans (under $25 $25
Section 403(b)(7) or Section 401(a) of
the Internal Revenue Code, including
401(k) plans)
---------------------------------------------------------------------------
Simple IRAs $1 $1
---------------------------------------------------------------------------
Monthly Systematic Investment Plans $25 $25
---------------------------------------------------------------------------
Quarterly Systematic Investment $50 $50
Plans
---------------------------------------------------------------------------
<PAGE>
Redemptions
Shares of each Fund are redeemable on any business day at a price equal to
the net asset value of the shares the next time it is calculated after receipt
of your redemption request in good order. The table below compares the
redemption procedures and policies of the CitiSelect Portfolio and the Smith
Barney Fund, which are generally similar.
<TABLE>
<CAPTION>
<S> <C> <C>
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REDEMPTION CITISELECT PORTFOLIO SMITH BARNEY FUND
PROCEDURES AND
POLICIES
---------------------------------------------------------------------------------------------
Through an To redeem shares, you may To redeem shares, you may
Appropriate Contact contact the Fund's contact a Salomon Smith
Person transfer agent, or for a Barney Financial Consultant or
shareholder that holds dealer representative, or for
shares through a Service accounts held directly with the
Agent, the Service Agent. Smith Barney Fund, the sub-
transfer agent.
By Mail You may send written For accounts held directly at the
redemption requests to the Fund, you may send written
transfer agent or, if you hold redemption requests to sub-
shares through a Service Agent, transfer agent.
the Service Agent.
By Telephone You may make redemption You may be eligible to redeem
requests by telephone if your shares (except those held in
application permits. retirement plans) in amounts up
to $10,000 per day through the
transfer agent.
---------------------------------------------------------------------------------------------
Systematic You must have at least $10,000 You can arrange for the
Withdrawal Plan in your account to participate in automatic redemption of a
this program. If your shares are portion of your shares on a
subject to a CDSC, you may only monthly or quarterly basis. To
withdraw up to 10% of the value qualify, you must own shares of
of your account in any year, but at least $10,000 ($5,000 for
you will not be subject to a retirement plan accounts) and
CDSC on the shares withdrawn each automatic redemption
under the Plan. You must have must be at least $50. If your
at least $100 withdrawn per shares are subject to a deferred
automatic withdrawal. sales charge, the sales charge
will be waived if your automatic
payments do not exceed 1% per
month of the value of your
shares subject to a deferred
sales charge.
---------------------------------------------------------------------------------------------
Automatic Your account balance with a If your account falls below $500
Redemptions Fund may be subject to a $500 because of redemption of Fund
minimum. If so, the Fund shares, the Fund may ask you to
reserves the right to close your bring your account up to the
account if it falls below $500 minimum requirement. If your
because of redemptions. You account balance is still below
will have 60 days to make an $500 after 60 days, the Fund
<PAGE>
additional investment. may close your account and
send you the redemption
proceeds.
---------------------------------------------------------------------------------------------
</TABLE>
Exchanges
Shareholders of the CitiSelect Portfolio may exchange Fund shares for
shares of the same class of certain other CitiFunds, subject to the limitation
noted below. Similarly, shareholders of the Smith Barney Fund may exchange
shares only for shares of the same class of certain other Smith Barney funds. A
shareholder of the Smith Barney Fund must meet the minimum investment amount
for each Smith Barney fund. The CitiSelect Portfolio does not impose any
similar minimum investment amount for exchanges into the CitiFunds, but a
shareholder's Service Agent may.
When you exchange your Class A shares of the CitiSelect Portfolio, you
generally will be required to pay the difference, if any, between the sales
charge payable on the shares to be acquired in the exchange and the sales
charge paid in connection with your original purchase of Class A shares. The
Class A shares of the Smith Barney Fund issued in connection with the
Reorganization will not be subject to an initial sales charge at the time of
the exchange.
For exchanges for both Funds, your deferred sales charge (if any) will
continue to be measured from the date of your original purchase (which, for
CitiSelect shareholders, will be deemed to be the date of original purchase of
shares of the CitiSelect Portfolio). For both Funds, if you exchange into
another fund that has a higher deferred sales charge, you will be subject to
that charge. If you exchange at any time into a fund with a lower charge, the
sales charge will not be reduced.
Shareholders of the CitiSelect Portfolio may place exchange orders through
the transfer agent or through their Service Agent, and may place exchange
orders by telephone if their account application permits. Shareholders of the
Smith Barney Fund may place exchange orders through Salomon Smith Barney
Financial Consultants or dealer representatives or through the transfer agent
or sub-transfer agent, and may be eligible to exchange shares by telephone.
Until September 11, 2000, CitiSelect shareholders may continue to exchange
their shares of the CitiSelect Portfolio for shares of other CitiFunds, as
described above. On and after that date, CitiSelect shareholders may exchange
their shares of the CitiSelect Portfolio only for shares of certain Smith
Barney funds, and these exchanges will be subject to the minimum investment
amounts pertaining to the applicable Smith Barney fund or funds.
Dividends and Other Distributions
The CitiSelect Portfolio and the Smith Barney Fund have substantially
similar policies relating to dividend and capital gain distributions to
shareholders. For each Fund, capital gain distributions and dividends are
reinvested in additional shares of the same class that you hold, unless you
choose to receive your distributions and dividends in cash. The Funds pay
dividends and distribute capital gains, if any, according to the following
schedule.
<PAGE>
---------------------------------------------------------------------------
INCOME DIVIDEND CAPITAL GAIN
FUND DISTRIBUTIONS DISTRIBUTIONS
---------------------------------------------------------------------------
CitiSelect Portfolio annually (in December) annually (in December)
---------------------------------------------------------------------------
Smith Barney Fund annually (typically in annually (typically in
December) December)
---------------------------------------------------------------------------
On or immediately prior to the Closing Date of the Reorganization, the
CitiSelect Portfolio will distribute (in the form of one or more dividends
and/or other distributions) to its shareholders substantially all of its
investment company taxable income and realized net capital gain, if any, for
the current taxable year through the date of such distribution or dividend.
Unless otherwise requested, such distributions or dividends will be reinvested
in the manner described above. Between the Closing Date and the end of its
current taxable year, it is expected that the Smith Barney Fund will make one
or more similar distributions to its shareholders, including the former
CitiSelect shareholders who receive shares of the Smith Barney Fund in the
Reorganization. Because such a distribution will generally include income and
gains accumulated by the Smith Barney Fund prior to the Closing Date, the
former CitiSelect shareholders receiving such a distribution will effectively
receive a return of a portion of their capital investment in the Smith Barney
Fund in the form of a taxable dividend.
Tax Consequences
The CitiSelect Portfolio and the Smith Barney Fund will each receive an
opinion of Bingham Dana LLP, counsel to the CitiSelect Portfolio, in connection
with the Reorganization, to the effect that, based upon certain facts,
assumptions and representations, (i) the distribution of investmenbt securities
for each Underlying Portfolio in redemption of the CitiSelect Portfolio's
interest in the Underlying Portfolio will not result in the recognition of gain
or loss for federal income tax purposes, and (ii) the transfer of substantially
all of the assets and liabilities of the CitiSelect Portfolio to the Smith
Barney Fund in exchange for voting stock of the Smith Barney Fund, followed by
the distribution of such stock in complete liquidation of the CitiSelect
Portfolio will constitute a reorganization within the meaning of section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Reorganization constitutes such a reorganization, no gain or loss will be
recognized by the CitiSelect Portfolio or its shareholders as a direct result of
the Reorganization. See "The Proposed Transaction--Federal Income Tax
Consequences."
PRINCIPAL INVESTMENTS, RISK FACTORS, AND INVESTMENT RESTRICTIONS
Principal Investments and Risk Factors
The investment objectives and policies and risk factors of the CitiSelect
Portfolio are, in many respects, similar to those of the Smith Barney Fund.
There are, however, certain differences. The following discussion summarizes
some of the more significant similarities and differences in the investment
policies and risk factors of each of the CitiSelect Portfolio and the Smith
Barney Fund and is qualified in its entirety by the Prospectuses and Statements
of Additional Information of each of the CitiSelect Portfolio and the Smith
Barney Fund incorporated herein by reference.
<PAGE>
-------------------------------------------------------------------------------
FUND(S) SUBJECT TO PRINCIPAL INVESTMENT AND ACCOMPANYING RISK FACTOR
RISK
-------------------------------------------------------------------------------
CITISELECT PORTFOLIO ASSET ALLOCATION:
The CitiSelect Portfolio invests in a mix of equity and
fixed income securities (each of these types of
securities is referred to as an asset class). Citibank
may further allocate the Fund's equity securities among
large cap issuers, small cap issuers and international
issuers and its fixed income securities among U.S. and
foreign investment grade and high-yield bonds. The
CitiSelect Portfolio's investment strategy depends
largely on the investment manager's skill in both
identifying the long term performance and relationships
between asset classes and in assessing accurately the
growth potential or credit quality of companies in which
the Fund invests, in predicting accurately the direction
of interest rates or the maturity of certain debt
obligations, and other factors. The investment manager
may not appropriately allocate a Fund's assets between
equity and fixed income securities, or among different
types of equity and fixed income securities.
Citibank may change the Fund's asset allocations from
time to time in response to market conditions and other
factors. No approval by the Trustees of the CitiSelect
Portfolio is required.
-------------------------------------------------------------------------------
BOTH FUNDS MARKET RISK:
The prices of securities will rise or fall due to
changing economic, political or market conditions, or
due to the company's individual situation. Some
securities held by a Fund may be quite volatile, meaning
that their prices can change significantly in a short
time.
-------------------------------------------------------------------------------
CITISELECT PORTFOLIO GROWTH INVESTING:
Growth securities are typically sensitive to market
movements because their market prices tend to reflect
future expectations. When it appears that those
expectations will not be met, the prices of growth
securities typically fall. An investment in growth
securities may underperform certain other stock
investments during periods when growth stocks are out of
favor.
-------------------------------------------------------------------------------
BOTH FUNDS (more so VALUE INVESTING:
the Smith Barney Fund)
Value investing involves selecting stocks that are
inexpensive compared to other companies with similar
earnings or assets. However, value stocks may continue
to be inexpensive for long periods of time, and may
never realize their potential. A security may not
achieve its expected value because the circumstances
causing it to be underpriced may stay the same or
worsen. Value stocks may underperform certain other
<PAGE>
stock investments, such as growth stocks, during periods
when value stocks are out of favor.
Value investing is the Smith Barney Fund's primary
investment strategy. The CitiSelect Portfolio also
invests in growth securities. Because the Smith Barney
Fund employs the value style, it is more likely to
underperform a fund investing more in growth stocks
during periods when value stocks are out of favor.
-------------------------------------------------------------------------------
BOTH FUNDS PORTFOLIO SELECTION:
The success of each Fund's investment strategy depends
in large part on the Fund's portfolio managers. The
portfolio managers may fail to pick securities that
perform well because they are unable to assess
accurately economic factors. In that case, you may lose
money, or your investment may not do as well as an
investment in a mutual fund with a similar investment
strategy.
-------------------------------------------------------------------------------
BOTH FUNDS SMALL CAPITALIZATION ISSUERS:
Both Funds may invest in securities of small
capitalization companies. Investing in small companies
involves additional risks. Compared to large companies,
small companies, and the market for their common stocks,
are likely to:
o Be more sensitive to changes in the economy,
earnings results and investor expectations.
o Have more limited product lines and capital
resources.
o Experience sharper swings in market values.
o Be harder to sell at the times and prices
the Fund thinks appropriate.
-------------------------------------------------------------------------------
BOTH FUNDS INTEREST-RATE RISK:
In general, the prices of debt securities rise when
interest rates fall, and fall when interest rates rise.
Longer-term obligations are usually more sensitive to
interest rate changes. A change in interest rates could
cause a Fund's share price to go down.
-------------------------------------------------------------------------------
BOTH FUNDS CREDIT RISK:
Some issuers may not make payments on debt
securities held by a Fund. Or, an issuer's financial
condition may deteriorate, leading to greater volatility
in the price of the security and making the security
more difficult for the Fund to sell. Lower-quality debt
securities are more susceptible to this risk than
higher-quality debt securities. As noted below, the
CitiSelect Portfolio may invest in lower-quality debt
securities known as "junk bonds." To the extent that the
CitiSelect Portfolio's assets are invested in
<PAGE>
lower-quality debt securities, that Fund may be subject
to greater risk.
-------------------------------------------------------------------------------
CITISELECT PORTFOlIO JUNK BONDS:
The CitiSelect Portfolio may invest in debt securities
of any grade, including junk bonds. Junk bonds are
considered to be speculative investments and involve
greater risks than higher quality securities. The value
of junk bonds will usually fall substantially if the
issuer defaults or goes bankrupt. Even anticipation of
defaults by certain issuers, or the perception of
economic or financial weakness, may cause the market for
junk bonds to fall. The price of a junk bond may
therefore fluctuate drastically due to bad news about
the issuer or the economy in general. Lower quality debt
securities, especially junk bonds, may be less liquid
and may be more difficult for the Fund to value and
sell. The Fund may incur additional expenses if an
issuer defaults and the Fund tries to recover some of
its losses in a bankruptcy or other similar proceeding.
-------------------------------------------------------------------------------
BOTH FUNDS FOREIGN SECURITIES:
Each Fund may invest in foreign securities.
Investing in non-U.S. issuers involves additional
risks compared to investing in the securities of
U.S. issuers. These risks are more pronounced to
the extent a fund invests in issuers in emerging
markets. These risks may include:
o Less information about non-U.S. issuers or
markets may be available because of less
rigorous disclosure and accounting standards or
regulatory practices.
o Many non-U.S. markets are smaller, less
liquid and more volatile than U.S. markets. In
a changing market, the adviser may not be able
to sell the fund's portfolio securities in
amounts and at prices the adviser considers
reasonable.
o The U.S. dollar may appreciate against
non-U.S. currencies or a foreign government may
impose restrictions on currency conversion or
trading.
o The economies of non-U.S. countries may grow
at a slower rate than expected or may
experience a downturn or recession.
o Economic, political and social developments
may adversely affect the securities markets.
o Foreign governmental obligations may involve the risk
of debt moratorium, repudiation or renegotiation and
the fund may be unable to enforce its rights against
the issuers.
<PAGE>
The Smith Barney Fund may invest up to 25% of its assets
in foreign securities. The CitiSelect Portfolio may
invest without limit in foreign securities. To the
extent that the CitiSelect Portfolio invests a greater
portion of its assets in foreign securities, it may be
subject to more risk.
-------------------------------------------------------------------------------
BOTH FUNDS PREPAYMENT AND EXTENSION RISK:
The issuers of debt securities held by the Funds may be
able to call a bond or prepay principal due on the
securities, particularly during periods of declining
interest rates. The Funds may not be able to reinvest
that principal at attractive rates, and the Funds may
lose any premium paid. On the other hand, rising
interest rates may cause prepayments to occur at slower
than expected rates. This makes securities more
sensitive to interest rate changes.
-------------------------------------------------------------------------------
BOTH FUNDS CONVERTIBLE SECURITIES:
Both Funds may invest in convertible securities.
Convertible securities, which are debt securities that
may be converted into stock, are subject to the market
risk of stocks, and, like other debt securities, are
also subject to interest rate risk and the credit risk
of their issuers.
-------------------------------------------------------------------------------
BOTH FUNDS DERIVATIVES:
Both Funds may, but need not, use derivative
contracts, such as futures and options on
securities, securities indices or currencies;
options on these futures; forward currency contracts;
and interest rate or currency swaps for any of the
following purposes:
o To hedge against the economic impact of adverse
changes in the market value of its securities,
because of changes in stock market prices, currency
exchange rates or interest
rates.
o As a substitute for buying or selling
securities.
A derivative contract will obligate or entitle a Fund to
deliver or receive an asset or cash payment based on the
change in value of one or more securities, currencies or
indices.
The Funds' use of derivatives may involve leveraging.
Under leveraging, a relatively small investment may
produce substantial losses or gains for a Fund, well
beyond the Fund's initial investment. Using derivatives
can disproportionately increase losses and reduce
opportunities for gains when stock prices, currency
rates or interest rates are changing. The Fund may not
fully benefit from or may lose money on derivatives if
changes in their value do not correspond accurately to
changes in the value of the Fund's holdings.
<PAGE>
The other parties to certain derivative contracts
present the same types of credit risk as issuers of
fixed income securities. Derivatives can also make a
Fund less liquid and harder to value, especially in
declining markets.
-------------------------------------------------------------------------------
BOTH FUNDS SHORT SALES:
Each Fund may engage in short sales, which are
transactions in which the Fund sells a security it does
not own in anticipation of a decline in the market value
of that security. To complete such a transaction, the
Fund must borrow the security to make delivery to the
buyer. The Fund must later purchase the security in
order to return the security borrowed. If the portfolio
manager has predicted accurately, the price at which the
Fund buys the security will be less than the price at
which the Fund earlier sold the security, creating a
profit for the Fund. However, if the price of the
security goes up during this period, the Fund will be
forced to buy the security for more than its sale price,
causing a loss to the Fund. Losses from short sales may
be unlimited.
The Smith Barney Fund may not engage in short
sales except those "against the box," which
generally involve less risk. The CitiSelect Portfolio is
not subject to this restriction. To the extent that the
CitiSelect Portfolio engages in short sales that are not
"against the box," it may be subject to more risk.
-------------------------------------------------------------------------------
BOTH FUNDS PORTFOLIO TURNOVER:
Each Fund may engage in active and frequent
trading to achieve its principal investment strategies.
Although the portfolio manager of the Funds attempts to
minimize portfolio turnover, from time to time the
Funds' annual portfolio turnover rate may exceed 100%.
Active and frequent trading may result in the
realization and distribution to a Fund of higher capital
gains, which could increase the tax liability for the
Fund's shareholders. Frequent trading also increases
transaction costs, which could detract from a Fund's
performance. For a comparison of the historical
portfolio turnover rates of the Funds, see "The Proposed
Transaction - Portfolio Turnover" below.
-------------------------------------------------------------------------------
BOTH FUNDS DEFENSIVE STRATEGIES:
The Funds may, from time to time, take temporary
defensive positions that are inconsistent with the
Funds' principal investment strategies in attempting to
respond to adverse market, political or other
conditions. When doing so, the Funds may invest without
limit in high-quality money market or other short-term
instruments, and may not be pursuing their investment
goals.
-------------------------------------------------------------------------------
The foregoing describes the principal investments and related risks of
each Fund. Each Fund may invest in additional types of investments and may be
<PAGE>
subject to additional risk factors that are described in the Statement of
Additional Information of that Fund. Certain of these non-principal investments
and related risk factors may differ for each Fund. For example, the CitiSelect
Portfolio may engage in short sales, and invest in private placements (up to
15% of its net assets), junk bonds and swap transactions, whereas the Smith
Barney Fund does not participate in these transactions (except that the Smith
Barney Fund may engage in short sales "against the box," which generally
involve less risk than short sales). The Smith Barney Fund may only invest up
to 25% of its assets in foreign securities, while the CitiSelect Portfolio does
not have a limitation on its investments in foreign securities. For a further
description of these investments and related risks, please consult the
Statement of Additional Information of the applicable Fund.
Fundamental Investment Restrictions
Each Fund has adopted certain fundamental investment limitations that may
not be changed without the affirmative vote of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund. The
fundamental investment restrictions of the Funds are, in general, similar.
These fundamental restrictions limit the amounts that the Funds may borrow and
prohibit the Funds from investing in a manner that would cause it to fail to be
a diversified investment company under the 1940 Act, from investing more than
25% of the Fund's total assets in securities of issuers in the same industry
(with certain exceptions), from lending money (with certain exceptions), from
underwriting securities issued by other persons, from purchasing or selling
real estate (with certain exceptions), or from issuing "senior securities" (as
defined in the 1940 Act). The CitiSelect Portfolio also has fundamental
restrictions prohibiting it from investing in oil, gas or mineral interests and
from purchasing or selling commodities or commodity contracts (with certain
exceptions).
Although these restrictions are similar, the parameters may be different
between the two Funds. For example, the CitiSelect Portfolio may not purchase
any securities at any time at which borrowings exceed 5% of the total assets of
the Fund, taken at market value, but the Smith Barney Fund is not subject to a
similar restriction. In addition, the CitiSelect Portfolio is barred from
issuing senior securities only if prohibited by the 1940 Act from doing so. By
contrast, the Smith Barney Fund is barred from issuing senior securities even
if not expressly prohibited by the 1940 Act, subject to certain exceptions.
Non-Fundamental Investment Restrictions
In addition to the fundamental restrictions described above, the Smith
Barney Fund is subject to certain restrictions that the CitiSelect Portfolio
does not. The Smith Barney Fund may not: (1) purchase securities on margin
(except for such short-term credits as are necessary for the clearance of
purchases and sales of portfolio securities) or sell any securities short
(except "against the box"); (2) write or sell puts, calls, straddles, spreads
or combinations thereof, except as permitted under the Fund's investment
objective and policies; (3) purchase any security if as a result the Fund would
then have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years; (4) make investments for the purpose of exercising control or
management; (5) purchase or retain securities of any company if, to the
knowledge of the trust of which the Fund is a series, any officer or director
of the Fund or SSB Citi owns beneficially more than 1/2 of 1% of the
outstanding securities of such issuer and together they own beneficially more
than 5% of the securities; or (6) purchase warrants if, thereafter, more than
2% of the value of the Fund's net assets would consist of such warrants, but
warrants attached to other securities or acquired in units by the Fund are not
subject to this restriction.
<PAGE>
For additional information, you should consult the Prospectus and
Statement of Additional Information of the Smith Barney Fund.
THE PROPOSED TRANSACTION
Description of the Plan
As described above, the Plan provides that the CitiSelect Portfolio will
receive a distribution of investment securities from the applicable Underlying
Portfolios and that, immediately thereafter, substantially all of the assets
and liabilities of the CitiSelect Portfolio will be transferred to the Smith
Barney Fund. In exchange for the transfer of those assets and liabilities, each
class of the CitiSelect Portfolio will receive voting shares of the
corresponding class of shares of the Smith Barney Fund ("Reorganization
Shares"). Reorganization Shares of the Smith Barney Fund so received will then
be distributed to the shareholders of the CitiSelect Portfolio in complete
liquidation of the CitiSelect Portfolio, and the CitiSelect Portfolio will be
terminated.
As a result of the Reorganization, each shareholder of each class of the
CitiSelect Portfolio will receive that number of full and fractional shares of
the corresponding class of the Smith Barney Fund having an aggregate net asset
value equal to the aggregate net asset value of the shareholder's shares of the
CitiSelect Portfolio held on the Closing Date. The Smith Barney Fund will
establish an account for each CitiSelect shareholder that will reflect the
number and class of shares of the Smith Barney Fund distributed to that
shareholder. The Smith Barney Fund's shares issued in the Reorganization will
be in uncertificated form.
Until the closing of the Reorganization, shareholders of the CitiSelect
Portfolio will, of course, continue to be able to redeem their shares at the
net asset value next determined after receipt by the CitiSelect Portfolio's
transfer agent of a redemption request in proper form. Redemption requests
received by the CitiSelect Portfolio's transfer agent after the closing of the
Reorganization will be treated as requests received for the redemption of
shares of the Smith Barney Fund.
The obligations of the CitiSelect Portfolio and the Smith Barney Fund
under the Plan are subject to various conditions, as stated therein. Among
other things, the Plan requires that all filings be made with, and all
authority be received from, the Securities and Exchange Commission and state
securities commissions as may be necessary in the opinion of counsel to permit
the parties to carry out the transactions contemplated by the Plan. The
CitiSelect Portfolio and the Smith Barney Fund are in the process of making the
necessary filings. The Reorganization is also subject to the receipt of any
necessary exemptive relief or no-action assurances requested from the
Securities and Exchange Commission or its staff with respect to Section 17(a)
of the 1940 Act.
To provide against unforeseen events, the Plan may be terminated or
amended prior to the Closing Date by action of the Trustees or Directors, as
applicable, of either the CitiSelect Portfolio or the Smith Barney Fund,
notwithstanding the approval of the Plan by the shareholders of the CitiSelect
Portfolio. However, no amendment may be made that materially adversely affects
the interests of the CitiSelect shareholders without obtaining the approval of
the shareholders of the CitiSelect Portfolio. The CitiSelect Portfolio and the
Smith Barney Fund may at any time waive compliance with certain of the
covenants and conditions contained in the Plan.
Citibank and SSB Citi will assume and pay all of the expenses that are
solely and directly related to the Reorganization, which are estimated to be
approximately $101,000. Shareholders have no rights of appraisal.
<PAGE>
Reasons for the Proposed Transaction
At a meeting of the Board of Trustees of the CitiFunds Trust held on July
13, 2000, the Trustees of the CitiFunds Trust, including a majority of the
Non-Interested Trustees, on behalf of the CitiSelect Portfolio; considered
materials discussing the potential benefits to the shareholders of the
CitiSelect Portfolio if the CitiSelect Portfolio were to reorganize with and
into the Smith Barney Fund. For the reasons discussed below, the Board of
Trustees of the CitiFunds Trust, including a majority of the Non-Interested
Trustees, has determined that the proposed Reorganization is in the best
interests of the CitiSelect Portfolio and their respective shareholders and
that the interests of the CitiSelect shareholders will not be diluted as a
result of the proposed Reorganization.
The proposed combination of the CitiSelect Portfolio into the Smith Barney
Fund will allow the shareholders of the CitiSelect Portfolio to continue to
participate in a professionally managed portfolio governed by similar
investment objectives and policies. The Trustees of the CitiFund Trust believe
that CitiSelect shareholders will benefit from the proposed Reorganization for
the following reasons:
Economies of Scale; Fees and Expenses
Having determined that the offering of multiple funds with substantially
similar objectives and identical portfolio managers is both repetitious and
confusing, SSB Citi and Citibank believe that the combination of the CitiSelect
Portfolio and the Smith Barney Fund which have substantially similar investment
objectives and policies into a single larger fund may increase economic and
other efficiencies for investors and may ultimately result in a lower total
annual expense ratios. Some of the fixed expenses currently paid by the Smith
Barney Fund, such as accounting, legal and printing costs, would be spread over
a larger asset base upon the combination of the CitiSelect Portfolio and Smith
Barney Fund. Other things being equal, shareholders may be expected to benefit
from economies of scale through lower expense ratios and higher net income
distributions over time. SSB Citi also believes that a larger asset base could
provide portfolio management benefits such as greater diversification.
In addition, shareholders of CitiSelect Portfolio will benefit from the
lower total annual operating expenses of Class A and Class B shares of the
Smith Barney Fund (as determined for each Fund's most recent fiscal year end).
Larger Family of Funds
The Reorganization offers CitiSelect shareholders the opportunity to
become part of a larger and more diverse family of more than 60 mutual funds.
CitiSelect shareholders will be able to exchange their shares among most or all
of those Smith Barney funds. In addition, the Reorganization offers CitiSelect
shareholders the opportunity to invest in a family of funds that has
demonstrated the ability to attract new investors. Successful marketing and
resulting fund growth, in turn, may afford investors the benefits of portfolio
diversification and economies of scale.
Performance Results
While past performance is not necessarily indicative of future results,
the Smith Barney Fund has outperformed the CitiSelect Portfolio in each of the
<PAGE>
last three calendar years. For more information about performance, see "The
Proposed Transaction Performance" below.
Due to a combination of factors, including the benefits described above,
the Board of Trustees of the CitiFunds Trust, on behalf of the CitiSelect
Portfolio, believes that the CitiSelect Portfolio and its shareholders would
benefit from a tax-free reorganization with the Smith Barney Fund. ACCORDINGLY,
IT IS RECOMMENDED THAT THE SHAREHOLDERS OF THE CITISELECT PORTFOLIO APPROVE THE
REORGANIZATION WITH THE SMITH BARNEY FUND.
The Board of Trustees of the CitiFunds Trust, on behalf of the CitiSelect
Portfolio, in recommending the proposed transaction, considered a number of
factors, including the following:
(a) the compatibility of the CitiSelect Portfolio's investment
objectives, policies and restrictions with those of the Smith
Barney Fund;
(b) the benefits to CitiSelect shareholders of becoming shareholders of
a larger fund family with a wide array of mutual funds;
(c) the advisory, distribution, and other servicing arrangements of the
Smith Barney Fund;
(d) the tax-free nature of the Reorganization;
(e) the total lower annual expense ratios of the Smith Barney Fund as
compared to the CitiSelect Portfolio;
(f) the terms and conditions of the Reorganization and that it should
not result in a dilution of CitiSelect shareholder interests;
(g) the level of costs and expenses to the CitiSelect Portfolio of the
proposed Reorganization; and
(h) a variety of alternatives available to the CitiSelect Portfolio
including maintaining the status quo or liquidating the CitiSelect
Portfolio.
Description of the Securities to Be Issued
The CitiSelect Portfolio is a diversified series of the CitiFunds Trust,
which was organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 13, 1984 and is registered with the Securities and
Exchange Commission as an open-end management investment company. The Smith
Barney Fund is a diversified fund, which was incorporated under the laws of the
State of Maryland on May 24, 1995, and is registered with the Securities and
Exchange Commission as an open-end management investment company.
Each Fund currently offers Class A and Class B shares, and the Smith
Barney Fund also offers Class L and Class Y shares. Each Class of shares
represents an identical pro rata interest in the relevant Fund's investment
portfolio. As a result, the Classes of a Fund have the same rights, privileges
and preferences, except with respect to: (a) the designation of each Class; (b)
the amount of the respective sales charges, if any, for each Class; (c) the
distribution and/or service fees borne by each Class; (d) the expenses
allocable exclusively to each Class; (e) voting rights on matters exclusively
<PAGE>
affecting a single Class; (f) the exchange privilege of each Class; and (g) the
conversion feature of the Class B Shares.
Each share of each Class of a Fund represents an interest in that Class of
the Fund that is equal to and proportionate with each other share of that Class
of the Fund. Shareholders are entitled to one vote per share (and a
proportional vote per each fractional share) held on matters on which they are
entitled to vote.
The CitiFunds Trust is not required to hold annual meetings of
shareholders but the CitiFunds Trust will hold special meetings of shareholders
when in the judgment of the Trustees it is necessary or desirable to submit
matters for a shareholder vote. No annual meeting of shareholders of the Smith
Barney Fund will be held unless required by applicable law or as otherwise
determined by the Board of Directors. As permitted by Maryland law, there will
normally be no meetings of shareholders of the Smith Barney Fund for the
purpose of electing directors unless and until such time as less than a
majority of the directors holding office have been elected by shareholders.
Neither Fund is required to hold shareholder meeting annually, although
shareholder meetings may be called for purposes such as electing or removing
Trustees or Directors, as applicable, changing fundamental policies or
approving an investment management contract. Shareholders of the CitiFunds
Trust have, under certain circumstances (e.g., upon the application and
submission of certain specified documents to the Trustees by a specified number
of shareholders), the right to communicate with other shareholders in
connection with requesting a meeting of shareholders for the purpose of
removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. The Directors of
the Smith Barney Fund must promptly call and give notice of a meeting of
shareholders for the purpose of voting upon removal of any Director of the
Smith Barney Fund when requested to do so in writing by shareholders holding
not less than 10% of the shares then outstanding.
Federal Income Tax Consequences
The Reorganization is conditioned upon the receipt by each of the Smith
Barney Fund and the CitiSelect Portfolio of an opinion from Bingham Dana LLP,
substantially to the effect that, based upon certain facts, assumptions and
representations of the parties, for federal income tax purposes: (i) the
distribution of investment securities from each Underlying Portfolio in
redemption of the CitiSelect Portfolio's interest in the Portfolio will not
result in the recognition of gain or loss, (ii) the transfer to the Smith Barney
Fund of all or substantially all of the assets of the CitiSelect Portfolio in
exchange solely for Reorganization Shares and the assumption by the Smith Barney
Fund of all of the liabilities of the CitiSelect Portfolio, followed by the
distribution of such Reorganization Shares to the shareholders of the CitiSelect
Portfolio in exchange for their shares of the CitiSelect Portfolio in complete
liquidation of the CitiSelect Portfolio, will constitute a "reorganization"
within the meaning of Section 368(a)(1) of the Code, and the Smith Barney Fund
and the CitiSelect Portfolio will each be "a party to a reorganization" within
the meaning of Section 368(b) of the Code; (iii) no gain or loss will be
recognized by the CitiSelect Portfolio upon the transfer of the CitiSelect
Portfolio's assets to the Smith Barney Fund solely in exchange for the
Reorganization Shares and the assumption by the Smith Barney Fund of liabilities
of the CitiSelect Portfolio or upon the distribution (whether actual or
constructive) of the Reorganization Shares to the CitiSelect Portfolio's
shareholders in exchange for their shares of the CitiSelect Portfolio; (iv) the
basis of the assets of the CitiSelect Portfolio in the hands of the Smith Barney
Fund will be the same as the basis of such assets in the hands of the CitiSelect
Portfolio immediately prior to the transfer; (v) the holding period of the
assets of the CitiSelect Portfolio in the hands of the Smith Barney Fund will
include the period during which such assets were held by the CitiSelect
Portfolio; (vi) no gain or loss will be recognized by the Smith Barney Fund upon
the receipt of the assets of the CitiSelect Portfolio
<PAGE>
solely in exchange for Reorganization Shares and the assumption by the Smith
Barney Fund of all of the liabilities of the CitiSelect Portfolio; (vii) no gain
or loss will be recognized by the shareholders of the CitiSelect Portfolio upon
the receipt of Reorganization Shares solely in exchange for their shares of the
CitiSelect Portfolio as part of the transaction; (viii) the basis of
Reorganization Shares received by the shareholders of the CitiSelect Portfolio
will be, in the aggregate, the same as the basis, in the aggregate, of the
shares of the CitiSelect Portfolio exchanged therefor; and (ix) the holding
period of Reorganization Shares received by the shareholders of the CitiSelect
Portfolio will include the holding period during which the shares of the
CitiSelect Portfolio exchanged therefor were held, provided that at the time of
the exchange the shares of the CitiSelect Portfolio were held as capital assets
in the hands of the shareholders of the CitiSelect Portfolio.
As described above, although the CitiSelect Portfolio will, immediately
prior to the Closing Date, distribute substantially all of its investment
company taxable income and net realized capital gain to its shareholders as one
or more taxable dividends, the Smith Barney Fund will not make such a
distribution immediately prior to the Closing Date. As a result, when the Smith
Barney Fund subsequently makes a similar distribution or distributions to its
shareholders, including the former CitiSelect shareholders who receive
Reorganization Shares of the Smith Barney Fund, those former CitiSelect
shareholders will effectively be receiving a return of a portion of their
capital investment in the Smith Barney Fund (on which they may have already paid
taxes) in the form of a taxable dividend.
While the Smith Barney Fund is not aware of any adverse state or local tax
consequences of the proposed Reorganization, they have not requested any ruling
or opinion with respect to such consequences and shareholders may wish to
consult their own tax adviser with respect to such matters.
Liquidation and Termination of CitiSelect Portfolio
If the Reorganization is effected, the CitiSelect Portfolio will be
liquidated and terminated, and the Fund's outstanding shares will be cancelled.
Portfolio Securities
If the Reorganization is effected, the CitiSelect Portfolio will redeem
its interest in its underlying funds and will receive its proportionate share
of the portfolio securities of these underlying funds. The CitiSelect Portfolio
will then transfer these portfolio securities to the Smith Barney Fund. If the
Reorganization is effected, SSB Citi will analyze and evaluate the portfolio
securities of the CitiSelect Portfolio being transferred to the Smith Barney
Fund. Consistent with the Smith Barney Fund's investment objectives and
policies, any restrictions imposed by the Code and the best interests of the
Smith Barney Fund's shareholders (including former shareholders of the
CitiSelect Portfolio), SSB Citi will determine whether to maintain an
investment in these portfolio securities. Subject to market conditions, the
disposition of portfolio securities may result in a capital gain or loss. The
actual tax consequences of any disposition of portfolio securities will vary
depending upon the specific securities being sold.
Portfolio Turnover
The turnover rates of the underlying funds of the CitiSelect Portfolio
have ranged from 26% to 646% for its fiscal year ended October 31, 1999. The
portfolio turnover rate for the Smith Barney Fund for its fiscal year ended
September 30, 1999 was 43%. For a discussion of the risks relating to portfolio
turnover, see "Principal Investments and Risk Factors."
Pro Forma Capitalization
Because the CitiSelect Portfolio will be combined in the Reorganization
with the Smith Barney Fund, the total capitalization of the Smith Barney Fund
after such Reorganization is expected to be greater than the current
capitalization of the CitiSelect Portfolio. The following table sets forth as
<PAGE>
of June 30, 2000 the capitalization of each of the CitiSelect Portfolio and the
Smith Barney Fund. If the Reorganization is consummated, the capitalization of
the CitiSelect Portfolio and the Smith Barney Fund is likely to be different at
the effective time of their Reorganization as a result of daily share purchase
and redemption activity. Due to the net asset value of the CitiFund being less
than ten percent of the Smith Barney Fund's value, pro forma financial
statements are not required to be and have not been prepared for inclusion in
the Statement of Additional Information filed in connection with the
Reorganization.
SHARES NET ASSET VALUE
TOTAL NET ASSETS OUTSTANDING PER SHARE
---------------------------------------------------------------------------
CITISELECT PORTFOLIO
Class A $45,021,575 3,837,299 $11.73
Class B $307,666 26,474 $11.62
SMITH BARNEY FUND
Class A $950,667,275 62,648,785 $15.17
Class B $1,202,830,631 80,833,784 $14.88
PRO FORMA SMITH
BARNEY FUND
Class A $995,688,850 65,616,588 $15.17
Class B $1,203,138,297 80,854,460 $14.88
---------------------------------------------------------------------------
Performance
Performance shown below is as of December 31, 1999 and based on historical
earnings and is not predictive of future performance. Performance reflects
reinvestment of dividends and other earnings, but does not reflect any
applicable sales charges.
The information below is for the Class A shares of the respective Funds.
The total returns for the Class B shares of each Fund would be lower than the
returns of the Class A shares of such Fund, because Class B shares have a
higher total annual expense ratio. The sales charges applicable to the Class A
(front-end load) and Class B (CDSC) shares of the Smith Barney Fund are the
same as those applicable to the CitiSelect Portfolio. For more information
about the applicable sales charges and other Fund expenses, please refer to
"Overall Expenses" above.
The Smith Barney Fund has outperformed the CitiSelect Portfolio in each of
the last three calendar years. The following table shows the total returns of
Class A shares of each Fund for the calendar years indicated.
CITISELECT PORTFOLIO SMITH BARNEY FUND
---------------------- -------------------
Year Ended:
12/31/99 11.55% 30.87%
12/31/98 1.59% 15.81%
12/31/97 11.99% 15.27%
Best Quarter 13.92% (12/98) 18.45% (12/98)
Worst Quarter (17.57)% (9/98) (19.09)% (9/90)
<PAGE>
VOTING INFORMATION
General Information
The Board of Trustees of the CitiFunds Trust, on behalf of the CitiSelect
Portfolio, is furnishing this combined Proxy Statement/Prospectus in connection
with the solicitation of proxies for a Special Meeting of Shareholders of the
CitiSelect Portfolio at which shareholders will be asked to consider and
approve the proposed Plan. It is expected that the solicitation of proxies will
be primarily by mail. Officers and service contractors of the CitiSelect
Portfolio and Smith Barney Fund may also solicit proxies by telephone or
otherwise. Georgeson Shareholder Communications, Inc. has been retained to
assist in the solicitation of proxies, at a cost of approximately $10,000.
Shareholders may vote (1) by mail, by marking, signing, dating and returning
the enclosed proxy ballot(s) in the enclosed postage-paid envelope, (2) by
touch-tone voting over the telephone, or (3) by voting via the internet. Any
shareholder of the CitiSelect Portfolio giving a proxy has the power to revoke
it by submitting a written notice of revocation to the CitiSelect Portfolio or
by attending the Special Meeting and voting in person. All properly executed
proxies received in time for the Special Meeting will be voted as specified in
the proxy or, if no specification is made, in favor of the proposals referred
to in the Proxy Statement.
In cases where CitiSelect shareholders have purchased their shares through
Service Agents, these Service Agents are the shareholders of record of the
CitiSelect Portfolio. At the Special Meeting, a Service Agent may vote any
shares of which it is the holder of record and for which it does not receive
voting instructions proportionately in accordance with the instructions it
receives for all other shares of which that Service Agent is the holder of
record.
Quorum; Vote Required to Approve Proposal
The holders of a majority of the outstanding shares entitled to vote of
the CitiSelect Portfolio present in person or by proxy shall constitute a
quorum at any meeting of shareholders for the transaction of business by the
CitiSelect Portfolio. If the necessary quorum to transact business or the vote
required to approve the Plan is not obtained at the Special Meeting, the
persons named as proxies may propose one or more adjournments of the Special
Meeting in accordance with applicable law to permit further solicitation of
proxies. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the CitiSelect Portfolio's shares present in
person or by proxy at the Special Meeting. The persons named as proxies will
vote in favor of such adjournment those proxies that they are entitled to vote
in favor of that proposal and will vote against any such adjournment those
proxies to be voted against that proposal.
For purposes of determining the presence of a quorum for transacting
business at the Special Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but that have not been voted. Broker
non-votes are proxies received by the CitiSelect Portfolio from brokers or
nominees when the broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter. Accordingly, shareholders are urged to forward
their voting instructions promptly.
The Plan must be approved by the vote of (a) 67% or more of the voting
securities of the Fund present at the Special Meeting, if the holders of more
than 50% of the outstanding voting securities of the CitiSelect Portfolio are
present or represented by proxy; or (b) more than 50% of the outstanding voting
<PAGE>
securities of the CitiSelect Portfolio, whichever is less. Abstentions and
broker non-votes will have the effect of a "no" vote on the proposal to approve
the Plan.
Outstanding Shareholders
Holders of record of the shares of the CitiSelect Portfolio at the close
of business on August 11, 2000 (the "Record Date"), as to any matter on which
they are entitled to vote, will be entitled to one vote per share on all
business of the Special Meeting. As of August 11, 2000, there were _________
outstanding Class A shares and _________ outstanding Class B shares entitled to
vote.
The table below shows the name, address and share ownership of each person
known to the CitiSelect Portfolio to own 5% or more of any class of shares of
the CitiSelect Portfolio as of _________ __, 2000. The table also indicates the
percentage of the CitiSelect Portfolio's shares to be owned by such persons
upon consummation of the Reorganization on the basis of present holdings and
commitments. The type of ownership of each person listed below is record
ownership.
PRO FORMA
PERCENTAGE
PERCENTAGE OWNERSHIP
NAME AND ADDRESS OWNERSHIP POST-REORGANIZATION
------------------------------------------------------------
The table below shows the name, address and share ownership of each person
known to the Smith Barney Fund to own 5% or more of any class of shares of the
Smith Barney Fund as of _________ __, 2000. The table also indicates the
percentage of the Smith Barney Fund's shares to be owned by such persons upon
consummation of the Reorganization on the basis of present holdings and
commitments. The type of ownership of each person listed below is record
ownership.
PRO FORMA
PERCENTAGE
PERCENTAGE OWNERSHIP
NAME AND ADDRESS OWNERSHIP POST-REORGANIZATION
------------------------------------------------------------
[**If any shareholder beneficially owns more than 25% of the voting
securities of a Fund, note that the shareholder may be presumed to control that
Fund.**]
As of _________ __, 2000, the officers and Trustees of the CitiFunds Trust
as a group owned less than 1% of any class of the CitiSelect Portfolio's
outstanding shares. As of _________ __, 2000, the officers and Directors of the
Smith Barney Fund as a group owned less than 1% of any class of the Smith
Barney Fund's outstanding shares.
<PAGE>
ADDITIONAL INFORMATION ABOUT THE FUNDS
As noted above, additional information about the CitiSelect Portfolio, the
Smith Barney Fund and the Reorganization has been filed with the Securities and
Exchange Commission and may be obtained without charge by writing or calling
the CitiSelect Portfolio, 21 Milk Street, 5th Floor, Boston, Massachusetts
02109, telephone number (617) 423-1679, or the Smith Barney Fund, 388 Greenwich
Street, New York, New York 10013, telephone number (800) 451-2010. Information
included in this Proxy Statement/Prospectus concerning the CitiSelect Portfolio
was provided by the CitiFunds Trust, on behalf of the CitiSelect Portfolio, and
information concerning the Smith Barney Fund was provided by the Smith Barney
Fund.
Each Fund files reports, proxy materials and other information about the
applicable Fund with the Securities and Exchange Commission. Such reports,
proxy material and other information can be inspected and copied at the Public
Reference Room maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549 at prescribed rates or without charge from the Commission at
[email protected].
<PAGE>
OTHER MATTERS
No Trustee is aware of any matters that will be presented for action at
the Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest
of the CitiSelect Portfolio.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. YOU MAY ALSO CAST YOUR VOTE
VIA THE INTERNET OR BY TELEPHONE.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____ day of ___________________, 2000, between CitiFundsSM Trust I, a
Massachusetts business trust with its principal place of business at 21 Milk
Street, Boston, Massachusetts 02109 (the "CitiFund Trust"), on behalf of its
series, CitiSelect Folio 500 Growth Plus (the "CitiSelect Portfolio"), and
Smith Barney Fundamental Value Fund Inc., a Maryland corporation with its
principal place of business at 388 Greenwich Street, New York, New York 10013
(the "Smith Barney Fund," and together with the CitiSelect Portfolio, the
"Funds"), and, solely for purposes of Section 10.2 below, Citibank, N.A., a
national banking association ("Citibank"), and SSB Citi Fund Management LLC, a
Delaware limited liability company ("SSB Citi").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), with respect to the
CitiSelect Portfolio and the Smith Barney Fund, with which the CitiSelect
Portfolio will reorganize, as provided herein. The reorganization will consist
of the transfer of substantially all of the assets of the CitiSelect Portfolio
to the Smith Barney Fund in exchange solely for voting shares of the
corresponding classes of shares of beneficial interest ($0.001 par value per
share) of the Smith Barney Fund (the "Smith Barney Fund Shares"), the
assumption by the Smith Barney Fund of all of the liabilities of the CitiSelect
Portfolio and the distribution of the Smith Barney Fund Shares to the
shareholders of the CitiSelect Portfolio in complete liquidation of the
CitiSelect Portfolio as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement (collectively, the "Reorganization").
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE CITISELECT PORTFOLIO TO THE SMITH BARNEY FUND
IN EXCHANGE FOR SMITH BARNEY FUND SHARES, THE ASSUMPTION OF ALL
CITISELECT PORTFOLIO LIABILITIES AND THE LIQUIDATION OF THE CITISELECT
PORTFOLIO
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the CitiFund
Trust, on behalf of the CitiSelect Portfolio, agrees to transfer to the Smith
Barney Fund substantially all of the CitiSelect Portfolio's assets as set forth
in section 1.2, and the Smith Barney Fund agrees in exchange therefor (i) to
deliver to the CitiSelect Portfolio that number of full and fractional Class A
and Class B Smith Barney Fund Shares determined by dividing the value of the
CitiSelect Portfolio's net assets allocated to each class, computed in the
manner and as of the time and date set forth in section 2.1, by the net asset
value of one Smith Barney Fund Share of the applicable class, computed in the
manner and as of the time and date set forth in section 2.2; and (ii) to assume
all of the liabilities of the CitiSelect Portfolio, as set forth in section
1.3. Such transactions shall take place at the closing provided for in section
3.1 (the "Closing").
1.2. The assets of the CitiSelect Portfolio to be acquired by the Smith
Barney Fund (collectively, "Assets") shall consist of all property and assets
of every kind and nature of the CitiSelect Portfolio, including, without
limitation, all cash, cash equivalents, securities, commodities, futures,
<PAGE>
claims (whether absolute or contingent, known or unknown), receivables
(including dividend, interest and other receivables), good will and other
intangible property, any deferred or prepaid expenses, and all interests,
rights, privileges and powers, other than cash in an amount necessary to pay
dividends and distributions as provided in section 1.4 hereof and the
CitiSelect Portfolio's rights under this Agreement.
1.3. The Smith Barney Fund shall assume all liabilities of the
CitiSelect Portfolio, whether accrued or contingent, existing at the Valuation
Time as defined in section 2.1. The CitiSelect Portfolio will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date as defined in section 3.1, other than those liabilities and obligations
which would otherwise be discharged at a later date in the ordinary course of
business.
1.4. On or as soon as practicable prior to the Closing Date, the
CitiSelect Portfolio will declare and pay to its shareholders of record one or
more dividends and/or other distributions so that it will have distributed
substantially all of its investment company taxable income (computed without
regard to any deduction for dividends paid) and realized net capital gain, if
any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of its assets provided for in
section 1.1, the CitiSelect Portfolio will distribute to its shareholders of
record (the "CitiSelect Shareholders"), determined as of the Valuation Time as
defined in section 2.1, on a pro rata basis, the Smith Barney Fund Shares
received by the CitiSelect Portfolio pursuant to section 1.1 and will
completely liquidate. Such distribution and liquidation will be accomplished by
the transfer of the Smith Barney Fund Shares then credited to the account of
the CitiSelect Portfolio on the books of the Smith Barney Fund to open accounts
on the share records of the Smith Barney Fund in the names of the CitiSelect
Shareholders. The aggregate net asset value of each class of Smith Barney Fund
Shares to be so credited to CitiSelect Shareholders shall be equal to the
aggregate net asset value of the corresponding class of shares of CitiSelect
Portfolio (the "CitiSelect Shares") owned by such shareholders as of the
Valuation Time. All issued and outstanding shares of the CitiSelect Portfolio
will simultaneously be cancelled on the books of the CitiSelect Portfolio. The
Smith Barney Fund will not issue certificates representing Smith Barney Fund
Shares in connection with such exchange.
1.6. Ownership of Smith Barney Fund Shares will be shown on the Smith
Barney Fund's books. Shares of the Smith Barney Fund will be issued in the
manner described in the Smith Barney Fund's then-current prospectus and
statement of additional information.
1.7. Any reporting responsibility of the CitiSelect Portfolio,
including, without limitation, the responsibility for filing of regulatory
reports, tax returns or other documents with the Securities and Exchange
Commission (the "Commission"), any state securities commission, and any
federal, state or local tax authorities or any other relevant regulatory
authority, is and shall remain the responsibility of the CitiSelect Portfolio.
1.8. All books and records of the CitiSelect Portfolio, including all
books and records required to be maintained under the Investment Company Act of
1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
shall be available to the Smith Barney Fund from and after the Closing Date and
shall be turned over to the Smith Barney Fund as soon as practicable following
the Closing Date.
2. VALUATION
2.1. The value of the net assets of each class of the CitiSelect
Portfolio shall be computed as of the close of regular trading on the New York
Stock Exchange, Inc. ("NYSE") on the Closing Date (such time and date also
<PAGE>
being hereinafter called the "Valuation Time"), after the declaration and
payment of any dividends and/or other distributions on that date, using the
valuation procedures described in the Smith Barney Fund's then-current
prospectus and statement of additional information.
2.2. The net asset value of a Class A Smith Barney Fund Share shall be
the net asset value of a Class A share of the Smith Barney Fund computed as of
the Valuation Time using the valuation procedures set forth in the Smith Barney
Fund's then-current prospectus and statement of additional information. The net
asset value of a Class B Smith Barney Fund Share shall be the net asset value
of a Class B share of the Smith Barney Fund computed as of the Valuation Time
using the valuation procedures set forth in the Smith Barney Fund's
then-current prospectus and statement of additional information.
2.3. The number of Class A and Class B Smith Barney Fund Shares to be
issued (including fractional shares, if any) in exchange for the Assets of the
CitiSelect Portfolio, less the value of the liabilities of the CitiSelect
Portfolio assumed, shall be determined by dividing the value of the Assets
allocated to each class of the CitiSelect Portfolio less the value of the
liabilities allocated to that class of the CitiSelect Portfolio as determined
in accordance with section 2.1, by the net asset value of a Smith Barney Fund
Share of the corresponding class determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's investment adviser in accordance with its regular
practice and the requirements of the 1940 Act, and shall be subject to
confirmation by each Fund's Board of Trustees or Directors, as the case may be,
and independent accountants.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the Reorganization contemplated by this Agreement
shall be ____________, 2000, or such earlier or later date as the parties may
agree in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously as of 4:00 P.M., Eastern time, on
the Closing Date, unless otherwise agreed to by the parties. The Closing shall
be held at the [**New York offices of Bingham Dana LLP**] or at such other
place and time as the parties may agree.
3.2. The CitiFund Trust shall furnish to the Smith Barney Fund a
statement of the CitiSelect Portfolio's net assets, together with a list of
portfolio holdings with values as determined in section 2.1, all as of the
Valuation Time, certified by the CitiFund Trust's President (or any Vice
President) and Treasurer (or any Assistant Treasurer).
3.3. State Street Bank and Trust Company ("State Street"), as custodian
for the CitiSelect Portfolio, shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets of the CitiSelect Portfolio have
been delivered in proper form to PNC Bank, National Association ("PNC Bank"),
custodian for the Smith Barney Fund, prior to or on the Closing Date and (b)
all necessary taxes in connection with the delivery of such Assets, including
all applicable federal and state stock transfer stamps, if any, have been paid
or provision for payment has been made. The CitiSelect Portfolio's portfolio
securities represented by a certificate or other written instrument shall be
presented by State Street to PNC Bank for examination no later than five
business days preceding the Closing Date and transferred and delivered by the
CitiSelect Portfolio as of the Closing Date for the account of the Smith Barney
Fund duly endorsed in proper form for transfer in such condition as to
constitute good delivery thereof. The CitiSelect Portfolio's portfolio
<PAGE>
securities and instruments deposited with a securities depository, as defined
in Rule 17f4 under the 1940 Act, shall be delivered as of the Closing Date by
book entry in accordance with the customary practices of such depositories and
State Street. The cash to be transferred by the CitiSelect Portfolio shall be
delivered by wire transfer of federal funds on the Closing Date.
3.4. State Street, as transfer agent of the CitiSelect Portfolio, on
behalf of the CitiSelect Portfolio, shall deliver at the Closing a certificate
of an authorized officer stating that its records contain the names and
addresses of the CitiSelect Shareholders and the number and percentage
ownership (to three decimal places) of outstanding CitiSelect Shares of each
class owned by each such shareholder immediately prior to the Closing. The
Smith Barney Fund shall issue and deliver a confirmation evidencing the Smith
Barney Fund Shares of each class to be credited on the Closing Date to the
CitiSelect Portfolio or provide evidence satisfactory to the CitiSelect
Portfolio that such Smith Barney Fund Shares have been credited to the
CitiSelect Portfolio's account on the books of the Smith Barney Fund.
3.5. In the event that immediately prior to the Valuation Time (a) the
NYSE or another primary trading market for portfolio securities of the Smith
Barney Fund or the CitiSelect Portfolio shall be closed to trading or trading
thereupon shall be restricted, or (b) trading or the reporting of trading on
the NYSE or elsewhere shall be disrupted so that, in the judgment of the Board
of Trustees of the CitiFund Trust or the Board of Directors of the Smith Barney
Fund, accurate appraisal of the value of the net assets with respect to the
Smith Barney Fund Shares or the CitiSelect Shares is impracticable, the Closing
Date shall be postponed until the first business day after the day when trading
shall have been fully resumed and reporting shall have been restored.
3.6. At the Closing, each party shall deliver to the other such bills
of sale, checks, assumption agreements, assignments, share certificates, if
any, receipts or other documents as such other party or its counsel may
reasonably request to effect the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. The CitiFund Trust, on behalf of itself and the CitiSelect
Portfolio, represents and warrants to the Smith Barney Fund as follows:
(a) The CitiFund Trust is a business trust duly established and
validly existing under the laws of the Commonwealth of Massachusetts
with power under its Declaration of Trust to own all of its properties
and assets and to carry on its business as it is now being conducted.
The CitiSelect Portfolio has been duly established as a series of the
CitiFund Trust;
(b) The CitiFund Trust is registered with the Commission as an
openend management investment company under the 1940 Act, and such
registration is in full force and effect;
(c) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by the
CitiFund Trust, on behalf of the CitiSelect Portfolio, of the
transactions contemplated herein, except such as may be required under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act, and state
securities laws;
(d) Other than with respect to contracts entered into in
connection with the portfolio management of the CitiSelect Portfolio
which shall terminate on or prior to the Closing Date, the CitiSelect
<PAGE>
Portfolio is not, and the execution, delivery and performance of this
Agreement by the CitiFund Trust on behalf of the CitiSelect Portfolio
will not result, in violation of Massachusetts law or of the CitiFund
Trust's Declaration of Trust or By-Laws, or of any material agreement,
indenture, instrument, contract, lease or other undertaking known to
counsel to which the CitiSelect Portfolio is a party or by which it is
bound, and the execution, delivery and performance of this Agreement by
the CitiFund Trust on behalf of the CitiSelect Portfolio will not
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the CitiSelect Portfolio is a party or by
which it is bound;
(e) To the CitiFund Trust's knowledge, there is no material
litigation or administrative proceeding or investigation of or before
any court or governmental body presently pending or threatened against
the CitiSelect Portfolio or any properties or assets held by it. The
CitiFund Trust knows of no facts which might form the basis for the
institution of such proceedings or which would materially and adversely
affect its business or the business of the CitiSelect Portfolio, and is
not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects its or the CitiSelect Portfolio's business or its or
the CitiSelect Portfolio's ability to consummate the transactions
herein contemplated;
(f) The financial statements of the CitiSelect Portfolio at and
for the year ended October 31, 1999 have been audited by
PricewaterhouseCoopers LLP, independent certified public accountants,
and are in accordance with generally accepted accounting principles
("GAAP") consistently applied. The financial statements of the
CitiSelect Portfolio at and for the six-month period ended April 30,
2000, which are unaudited, are in accordance with GAAP consistently
applied. All of such statements (copies of which have been furnished to
the Smith Barney Fund) present fairly, in all material respects, the
financial position, results of operations, changes in net assets and
financial highlights of the CitiSelect Portfolio as of the dates
thereof in accordance with GAAP, and there are no known contingent
liabilities of the CitiSelect Portfolio required to be reflected on a
statement of assets and liabilities (including the notes thereto) in
accordance with GAAP as of such dates not disclosed therein;
(g) Since April 30, 2000, there has not been any material
adverse change in the CitiSelect Portfolio's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the CitiSelect
Portfolio of indebtedness maturing more than one year from the date
such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Smith Barney Fund. For purposes of this
subsection (g), a decline in net asset value per share of the
CitiSelect Portfolio due to declines in market values of securities in
the CitiSelect Portfolio's portfolio, the discharge of CitiSelect
Portfolio liabilities, or the redemption of CitiSelect Shares by
CitiSelect Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and
other tax returns and reports of the CitiSelect Portfolio required by
law to have been filed by such dates (including any extensions) have or
shall have been filed and are or will be correct in all material
respects, and all federal and other taxes shown as due or required to
be shown as due on said returns and reports shall have been paid or
<PAGE>
provision shall have been made for the payment thereof, and, to the
best of the CitiFund Trust's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the CitiSelect
Portfolio has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected to be
treated as such, and has been eligible to and has computed its federal
income tax under Section 852 of the Code. At Closing, the CitiSelect
Portfolio will have distributed all of its investment company taxable
income and net capital gain (as defined in the Code) that has accrued
up to the Closing Date;
(j) All issued and outstanding shares of the CitiSelect
Portfolio (i) have been offered and sold in every state and the
District of Columbia in compliance in all material respects with
applicable registration requirements of the 1933 Act and state
securities laws, (ii) are, and on the Closing Date will be, duly and
validly issued and outstanding, fully paid and non-assessable, and (iii)
will be held at the time of the Closing by the persons and in the
amounts set forth in the records of the CitiSelect Portfolio's transfer
agent, as provided in section 3.3. There are no outstanding options,
warrants or other rights to subscribe for or purchase any CitiSelect
Shares, nor is there outstanding any security convertible into any
CitiSelect Portfolio Share;
(k) At the Closing Date, the CitiFund Trust, on behalf of the
CitiSelect Portfolio, will have good and marketable title to the
CitiSelect Portfolio's Assets and full right, power and authority to
sell, assign, transfer and deliver such Assets hereunder free of any
liens or other encumbrances, except those liens or encumbrances as to
which the Smith Barney Fund has received notice at or prior to the
Closing, and upon delivery and payment for such Assets, the Smith
Barney Fund will acquire good and marketable title thereto, subject to
no restrictions on the full transfer thereof, except those restrictions
as to which the Smith Barney Fund has received notice and necessary
documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Trustees of the CitiFund Trust,
and, subject to the approval of the CitiSelect Shareholders, this
Agreement constitutes a valid and binding obligation of the CitiFund
Trust, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general principles of equity;
(m) The information to be furnished by the CitiFund Trust for
use in applications for orders, registration statements or proxy
materials or for use in any other document filed or to be filed with
any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be
necessary or appropriate in connection with the transactions
contemplated hereby, shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(n) The current prospectus and statement of additional
information of the CitiSelect Portfolio conform in all material
respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations of the Commission thereunder, and do
not include any untrue statement of a material fact or omit to state
<PAGE>
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not materially misleading; and
(o) The proxy statement of the CitiSelect Portfolio to be
included in the Registration Statement referred to in section 5.6 (the
"Proxy Statement"), insofar as it relates to the CitiSelect Portfolio,
will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements are made, not materially misleading;
provided, however, that the representations and warranties in this
section shall not apply to statements in or omissions from the Proxy
Statement and the Registration Statement made in reliance upon and in
conformity with information that was furnished or should have been
furnished by the Smith Barney Fund for use therein.
4.2. The Smith Barney Fund represents and warrants to the CitiFund
Trust and the CitiSelect Portfolio as follows:
(a) The Smith Barney Fund is a corporation duly established and
validly existing under the laws of the State of Maryland with power
under its Articles of Incorporation to own all of its properties and
assets and to carry on its business as it is now being conducted;
(b) The Smith Barney Fund is registered with the Commission as
an openend management investment company under the 1940 Act, and such
registration is in full force and effect;
(c) No consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by the Smith
Barney Fund of the transactions contemplated herein, except such as may
be required under the 1933 Act, the 1934 Act, the 1940 Act, and state
securities laws;
(d) The Smith Barney Fund is not, and the execution, delivery
and performance of this Agreement by the Smith Barney Fund will not
result, in violation of Maryland law or of the Smith Barney Fund's
Articles of Incorporation or By-Laws, or of any material agreement,
indenture, instrument, contract, lease or other undertaking known to
counsel to which the Smith Barney Fund is a party or by which it is
bound, and the execution, delivery and performance of this Agreement by
the Smith Barney Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the
Smith Barney Fund is a party or by which it is bound;
(e) To the Smith Barney Fund's knowledge, there is no material
litigation or administrative proceeding or investigation of or before
any court or governmental body presently pending or threatened against
the Smith Barney Fund or any properties or assets held by it. The Smith
Barney Fund knows of no facts which might form the basis for the
institution of such proceedings or which would materially and adversely
affect its business, and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body
which materially and adversely affects its business or its ability to
consummate the transactions herein contemplated;
<PAGE>
(f) The financial statements of the Smith Barney Fund at and for
the year ended September 30, 1999 have been audited by Deloitte &
Touche LLP, independent certified public accountants, and are in
accordance with GAAP consistently applied. The financial statements of
the Smith Barney Fund at and for the six-month period ended March 31,
2000, which are unaudited, are in accordance with GAAP consistently
applied. All such statements (copies of which have been furnished to
the CitiSelect Portfolio) present fairly, in all material respects, the
financial position, results of operations, changes in net assets and
financial highlights of the Smith Barney Fund as of such date in
accordance with GAAP, and there are no known contingent liabilities of
the Smith Barney Fund required to be reflected on a statement of assets
and liabilities (including the notes thereto) in accordance with GAAP
as of such date not disclosed therein;
(g) Since March 31, 2000, there has not been any material
adverse change in the Smith Barney Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by the Smith Barney Fund of
indebtedness maturing more than one year from the date such
indebtedness was incurred except as otherwise disclosed to and accepted
in writing by the CitiSelect Portfolio. For purposes of this subsection
(g), a decline in net asset value per share of the Smith Barney Fund
due to declines in market values of securities in the Smith Barney
Fund's portfolio, the discharge of Smith Barney Fund liabilities, or
the redemption of Smith Barney Fund Shares by Smith Barney Fund
Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and
other tax returns and reports of the Smith Barney Fund required by law
to have been filed by such dates (including any extensions) have or
shall have been filed and are or will be correct in all material
respects, and all federal and other taxes shown as due or required to
be shown as due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof, and, to the
best of the Smith Barney Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such
returns;
(i) For each taxable year of its operation, the Smith Barney
Fund has met the requirements of Subchapter M of the Code for
qualification as a regulated investment company and has elected to be
treated as such, has been eligible to and has computed its federal
income tax under Section 852 of the Code, and will do so for the
taxable year including the Closing Date. At Closing, the Smith Barney
Fund will have distributed all of its investment company taxable income
and net capital gain (as defined in the Code) that has accrued up to
the Closing Date;
(j) All issued and outstanding shares of the Smith Barney Fund
(i) have been offered and sold in every state and the District of
Columbia in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws,
and (ii) are, and on the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable. There are no outstanding
options, warrants or other rights to subscribe for or purchase any
Smith Barney Fund Shares, nor is there outstanding any security
convertible into any Smith Barney Fund Share. The Smith Barney Fund
Shares to be issued and delivered to the CitiSelect Portfolio for the
account of the CitiSelect Shareholders pursuant to the terms of this
Agreement, at the Closing Date, will have been duly authorized and,
when so issued and delivered, will be duly and validly issued and
outstanding Smith Barney Fund Shares, and will be fully paid and
non-assessable;
<PAGE>
(k) At the Closing Date, the Smith Barney Fund will have good
and marketable title to the Smith Barney Fund's assets, free of any
liens or other encumbrances, except those liens or encumbrances as to
which the CitiFund Trust, on behalf of the CitiSelect Portfolio, has
received notice at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement
will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Directors of the Smith Barney Fund,
and this Agreement will constitute a valid and binding obligation of
the Smith Barney Fund, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or
affecting creditors' rights and to general principles of equity;
(m) The information to be furnished by the Smith Barney Fund for
use in applications for orders, registration statements or proxy
materials or for use in any other document filed or to be filed with
any federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.), which may be
necessary or appropriate in connection with the transactions
contemplated hereby, shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(n) The current prospectus and statement of additional
information of the Smith Barney Fund conform in all material respects
to the applicable requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder, and do not include
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading; and
(o) The Proxy Statement, insofar as it relates to the Smith
Barney Fund, and the Registration Statement will, on the effective date
of the Registration Statement and on the Closing Date, not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were
made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to
statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with
information that was furnished or should have been furnished by the
CitiFund Trust for use therein.
5. COVENANTS
5.1. Each Fund covenants to operate its business in the ordinary course
between the date hereof and the Closing Date, it being understood that (a) such
ordinary course of business will include (i) the declaration and payment of
customary dividends and other distributions and (ii) such changes as are
contemplated by the Funds' normal operations; and (b) each Fund shall retain
exclusive control of the composition of its portfolio until the Closing Date.
5.2. Upon reasonable notice, the Smith Barney Fund's officers and
agents shall have reasonable access to the CitiSelect Portfolio's books and
<PAGE>
records necessary to maintain current knowledge of the CitiSelect Portfolio and
to ensure that the representations and warranties made by the CitiSelect
Portfolio are accurate.
5.3. The CitiFund Trust and the CitiSelect Portfolio covenant to call a
meeting of the shareholders of the CitiSelect Portfolio to consider and act
upon this Agreement and to take all other reasonable action necessary to obtain
approval of the transactions contemplated herein. Such meeting shall be
scheduled for no later than ______________, 2000 (or such other date as the
parties may agree to in writing).
5.4. The CitiFund Trust and the CitiSelect Portfolio covenant that the
Smith Barney Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof other than in accordance with the
terms of this Agreement.
5.5. Subject to the provisions of this Agreement, the parties hereto
will each take, or cause to be taken, all actions, and do or cause to be done,
all things reasonably necessary, proper, and/or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6. The Smith Barney Fund will file a Registration Statement on Form
N14 (the "Registration Statement") under the 1933 Act, and the CitiFund Trust
will file the Proxy Statement contained therein, in connection with the meeting
of CitiSelect Shareholders to consider approval of this Agreement and the
transactions contemplated herein, with the Commission as promptly as
practicable. The CitiFund Trust and the CitiSelect Portfolio will provide the
Smith Barney Fund with information relating to it that is required by the 1933
Act, the 1934 Act and the 1940 Act to be included in the Registration
Statement, including the Proxy Statement.
5.7. Each of the CitiFund Trust and the CitiSelect Portfolio covenants
that it will, from time to time, as and when reasonably requested by the Smith
Barney Fund, execute and deliver or cause to be executed and delivered all such
assignments and other instruments, and will take or cause to be taken such
further action, as the Smith Barney Fund may reasonably deem necessary or
desirable in order to vest in and confirm the Smith Barney Fund's title to and
possession of the Assets and otherwise to carry out the intent and purpose of
this Agreement.
5.8. The Smith Barney Fund covenants that it will, from time to time,
as and when reasonably requested by the CitiFund Trust, execute and deliver or
cause to be executed and delivered all such assignments, assumption agreements,
releases and other instruments, and will take or cause to be taken such further
action, as the CitiFund Trust may reasonably deem necessary or desirable in
order to (i) vest and confirm to the CitiFund Trust's title to and possession
of all Smith Barney Fund Shares to be transferred to the CitiSelect Portfolio
pursuant to this Agreement and (ii) assume the assumed liabilities of the
CitiSelect Portfolio.
5.9. The CitiFund Trust and each Fund covenant to use all reasonable
efforts to obtain the approvals and authorizations required by the 1933 Act,
the 1940 Act and such of the state securities laws as it deems appropriate in
order to consummate the transactions contemplated herein and, in the case of
the Smith Barney Fund, to continue its operations after the Closing Date.
5.10. As soon as reasonably practicable after the Closing, the
CitiSelect Portfolio shall make a liquidating distribution to its shareholders
consisting of the Smith Barney Fund Shares received at the Closing.
<PAGE>
5.11. Each of the Smith Barney Fund and the CitiSelect Portfolio shall
use its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to effect the transactions contemplated by this Agreement
as promptly as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE CITIFUND TRUST
The obligations of the CitiFund Trust and the CitiSelect Portfolio to
consummate the transactions provided for herein shall be subject, at the
CitiFund Trust's election, to the performance by the Smith Barney Fund of all
the obligations to be performed by them hereunder on or before the Closing
Date, and, in addition thereto, the following further conditions:
6.1. All representations and warranties of the Smith Barney Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same force and
effect as if made on and as of the Closing Date; and there shall be (i) no
pending or threatened litigation brought by any person against the Smith Barney
Fund, the CitiFund Trust or the CitiSelect Portfolio, or the advisers,
trustees, directors or officers of any of the foregoing, arising out of this
Agreement and (ii) no facts known to the CitiFund Trust, the CitiSelect
Portfolio or the Smith Barney Fund which any of such persons reasonably
believes might result in such litigation.
6.2. The Smith Barney Fund shall have delivered to the CitiFund Trust
on the Closing Date a certificate executed in its name by its President or a
Vice President, in a form reasonably satisfactory to the CitiFund Trust and
dated as of the Closing Date, to the effect that the representations and
warranties of the Smith Barney Fund made in this Agreement are true and correct
on and as of the Closing Date and as to such other matters as the CitiFund
Trust shall reasonably request.
6.3. The CitiFund Trust shall have received on the Closing Date an
opinion of Willkie Farr & Gallagher, in a form reasonably satisfactory to the
CitiFund Trust, and dated as of the Closing Date, to the effect that:
(a) the Smith Barney Fund has been duly organized and is a
validly existing corporation;
(b) the Smith Barney Fund has the power as a Maryland
corporation to carry on its business as presently conducted in
accordance with the description thereof in the Smith Barney Fund's
registration statement under the 1940 Act;
(c) the Agreement has been duly authorized, executed and
delivered by the Smith Barney Fund, and constitutes a valid and legally
binding obligation of the Smith Barney Fund, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshaling, or other laws and
rules of law affecting the enforcement generally of creditors' rights
and remedies (including such as may deny giving effect to waivers of
debtors' or guarantors' rights), and considerations of public policy;
(d) the execution and delivery of the Agreement did not, and the
exchange of the CitiSelect Portfolio's assets for Smith Barney Fund
Shares pursuant to the Agreement will not, violate the Smith Barney
Fund's Articles of Incorporation or By-laws; and
<PAGE>
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by
the Smith Barney Fund under the Federal laws of the United States or
the laws of the State of Maryland for the exchange of the CitiSelect
Portfolio's assets for Smith Barney Fund Shares pursuant to the
Agreement have been obtained or made.
Such opinion may state that it is solely for the benefit of the CitiFund Trust,
its Trustees and its officers, and counsel may rely as to matters governed by
the laws of the State of Maryland on an opinion of Maryland counsel. Such
opinion also shall include such other matters incident to the transaction
contemplated hereby as the CitiFund Trust may reasonably request.
6.4. The Smith Barney Fund shall have performed all of the covenants
and complied with all of the provisions required by this Agreement to be
performed or complied with by them on or before the Closing Date.
6.5. The Smith Barney Fund shall have executed and delivered an
assumption agreement in form reasonably satisfactory to the CitiFund Trust
pursuant to which the Smith Barney Fund will assume all of the liabilities of
the CitiSelect Portfolio existing at the Valuation Time.
6.6. An endorsement to the CitiFund Trust's existing errors and omissions,
and directors and officers liability insurance policy, or other evidence of
insurance, satisfactory in all respects to the CitiFund Trust's Board of
Trustees shall have been obtained at no cost to the CitiFund Trust or the
CitiSelect Portfolio and shall be in full force and effect.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SMITH BARNEY FUND
The obligations of the Smith Barney Fund to consummate the transactions
provided for herein shall be subject, at the Smith Barney Fund's election, to
the performance by the CitiFund Trust and the CitiSelect Portfolio of all of
the obligations to be performed by them hereunder on or before the Closing Date
and, in addition thereto, the following further conditions:
7.1. All representations and warranties of the CitiFund Trust, on
behalf of itself and the CitiSelect Portfolio, contained in this Agreement
shall be true and correct in all material respects as of the date hereof and as
of the Closing Date, with the same force and effect as if made on and as of the
Closing Date; and there shall be (i) no pending or threatened litigation
brought by any person against the CitiFund Trust, the CitiSelect Portfolio or
the Smith Barney Fund, or the advisers, trustees, directors or officers of any
of the foregoing, arising out of this Agreement and (ii) no facts known to the
Smith Barney Fund, the CitiFund Trust or the CitiSelect Portfolio which any of
such persons reasonably believes might result in such litigation.
7.2. The CitiFund Trust shall have delivered to the Smith Barney Fund
the statements of net assets described in section 3.2.
7.3. The CitiFund Trust shall have delivered to the Smith Barney Fund
on the Closing Date a certificate executed in its name by its President or a
Vice President, in a form reasonably satisfactory to the Smith Barney Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of the CitiFund Trust and the CitiSelect Portfolio made in this
Agreement are true and correct on and as of the Closing Date and as to such
other matters as the Smith Barney Fund shall reasonably request.
<PAGE>
7.4. The Smith Barney Fund shall have received on the Closing Date an
opinion of Bingham Dana LLP, in a form reasonably satisfactory to the Smith
Barney Fund, and dated as of the Closing Date, to the effect that:
(a) the CitiFund Trust has been duly established as a voluntary
association with transferable shares of beneficial interest commonly
referred to as a Massachusetts business trust, and is existing under
the laws of the Commonwealth of Massachusetts, and the CitiSelect
Portfolio has been duly designated as a series of the CitiFund Trust;
(b) the CitiFund Trust, with respect to the CitiSelect
Portfolio, has the power as a Massachusetts business trust to carry on
its business as presently conducted in accordance with the description
thereof in the CitiFund Trust's registration statement under the 1940
Act;
(c) the Agreement has been duly authorized, executed and
delivered by the CitiFund Trust, and constitutes a valid and legally
binding obligation of the CitiFund Trust, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, marshaling, or other laws and
rules of law affecting the enforcement generally of creditors' rights
and remedies (including such as may deny giving effect to waivers of
debtors' or guarantors' rights), and considerations of public policy;
(d) the execution and delivery of the Agreement did not, and the
exchange of the CitiSelect Portfolio's assets for Smith Barney Fund
Shares pursuant to the Agreement will not, violate the CitiFund Trust's
Declaration of Trust or By-laws; and
(e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by
the CitiFund Trust under the Federal laws of the United States or the
laws of the Commonwealth of Massachusetts for the exchange of the
CitiSelect Portfolio's assets for Smith Barney Fund Shares pursuant to
the Agreement have been obtained or made.
Such opinion may state that it is solely for the benefit of the Smith Barney
Fund, its Directors and its officers. Such opinion also shall include such
other matters incident to the transaction contemplated hereby as the Smith
Barney Fund may reasonably request.
7.5. The CitiFund Trust and the CitiSelect Portfolio shall have
performed all of the covenants and complied with all of the provisions required
by this Agreement to be performed or complied with by them on or before the
Closing Date.
8. FURTHER CONDITIONS PRECEDENT
If any of the conditions set forth below have not been met on or before
the Closing Date, either party to this Agreement shall, at its option, not be
required to consummate the Reorganization of the Funds contemplated by this
Agreement.
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the CitiSelect Portfolio in accordance with the provisions of the CitiFund
Trust's Declaration of Trust and By-Laws, applicable Massachusetts law and the
<PAGE>
1940 Act, and certified copies of the resolutions evidencing such approval
shall have been delivered to the Smith Barney Fund. Notwithstanding anything
herein to the contrary, neither party may waive the condition set forth in this
section 8.1.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to either party's knowledge threatened before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
material damages or other relief in connection with, this Agreement or the
transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Smith Barney Fund or the CitiFund Trust and the CitiSelect Portfolio to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the Smith Barney Fund or the CitiSelect
Portfolio.
8.4. The Registration Statement shall have become effective under the
1933 Act and applicable Blue Sky provisions, and no stop orders suspending the
effectiveness thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the 1933 Act.
8.5. The CitiFund Trust and the Smith Barney Fund shall have received
an order from the Commission exempting the Reorganizations from the provisions
of Section 17(a) of the 1940 Act or a "no-action" letter from the staff of the
Commission to the effect that the staff will not recommend that the Commission
take enforcement action under Section 17(a) of the 1940 Act if the parties
hereto proceed with the transactions described herein.
8.6. The parties shall have received an opinion of Bingham Dana LLP
addressed to the CitiFund Trust, the CitiSelect Portfolio and the Smith Barney
Fund substantially to the effect that, based upon certain facts, assumptions
and representations, for Federal income tax purposes: (i) the transfer to the
Smith Barney Fund of all or substantially all of the assets of the CitiSelect
Portfolio in exchange solely for Smith Barney Fund Shares and the assumption by
the Smith Barney Fund of all of the liabilities of the CitiSelect Portfolio,
followed by the distribution of the Smith Barney Fund Shares to CitiSelect
Shareholders in exchange for their shares of the CitiSelect Portfolio in
complete liquidation of the CitiSelect Portfolio, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Smith Barney Fund and the CitiSelect Portfolio will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by the CitiSelect Portfolio upon the transfer of the
CitiSelect Portfolio's assets to the Smith Barney Fund solely in exchange for
the Smith Barney Fund Shares and the assumption by the Smith Barney Fund of
liabilities of the CitiSelect Portfolio or upon the distribution (whether
actual or constructive) of the Smith Barney Fund Shares to the CitiSelect
Shareholders in exchange for their shares of the CitiSelect Portfolio; (iii)
the basis of the assets of the CitiSelect Portfolio in the hands of the Smith
Barney Fund will be the same as the basis of such assets in the hands of the
CitiSelect Portfolio immediately prior to the transfer; (iv) the holding period
of the assets of the CitiSelect Portfolio in the hands of the Smith Barney Fund
will include the period during which such assets were held by the CitiSelect
<PAGE>
Portfolio; (v) no gain or loss will be recognized by the Smith Barney Fund upon
the receipt of the assets of the CitiSelect Portfolio solely in exchange for
Smith Barney Fund Shares and the assumption by the Smith Barney Fund of all of
the liabilities of the CitiSelect Portfolio; (vi) no gain or loss will be
recognized by the shareholders of the CitiSelect Portfolio upon the receipt of
Smith Barney Fund Shares solely in exchange for their shares of the CitiSelect
Portfolio as part of the transaction; (vii) the basis of Smith Barney Fund
Shares received by the shareholders of the CitiSelect Portfolio will be, in the
aggregate, the same as the basis, in the aggregate, of the shares of the
CitiSelect Portfolio exchanged therefor; and (viii) the holding period of Smith
Barney Fund Shares received by the shareholders of the CitiSelect Portfolio
will include the holding period during which the shares of the CitiSelect
Portfolio exchanged therefor were held, provided that at the time of the
exchange the shares of the CitiSelect Portfolio were held as capital assets in
the hands of the shareholders of the CitiSelect Portfolio. The delivery of such
opinion is conditioned upon receipt by Bingham Dana LLP of representations it
shall request of each Fund. Notwithstanding anything herein to the contrary,
neither party may waive the condition set forth in this section 8.6.
9. INDEMNIFICATION
9.1. The Smith Barney Fund agrees to indemnify and hold harmless the
CitiFund Trust, its Trustees and its officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which any such indemnified party may become subject, insofar
as any such loss, claim, damage, liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the Smith Barney Fund of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
9.2. The CitiFund Trust agrees to indemnify and hold harmless the Smith
Barney Fund, its Directors and its officers from and against any and all
losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which any such indemnified party may become subject, insofar
as any such loss, claim, damage, liability or expense (or actions with respect
thereto) arises out of or is based on any breach by the CitiFund Trust or the
CitiSelect Portfolio of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. The Smith Barney Fund and the CitiFund Trust each represents and
warrants to the other that it has no obligations to pay any brokers or finders
fees in connection with the transactions provided for herein.
10.2. Expenses of the Reorganization will be borne equally by Citibank
and SSB Citi.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The parties agree that neither party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this
section 11.2, the representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall not survive the consummation of the transactions contemplated
hereunder.
The covenants to be performed after the Closing and the obligations of
the CitiFunds Trust, on behalf of the CitiSelect Portfolio, and the Smith
Barney Fund, in sections 11.1 and 11.2 shall survive the Closing.
<PAGE>
12. TERMINATION
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
(ii) by either party if the Closing shall not have occurred on or before
[**January 1, 2001**], unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and
intentional misrepresentation herein or in connection herewith. In the event of
any such termination, this Agreement shall become void and there shall be no
liability hereunder on the part of any party or their respective trustees,
directors or officers, except for any such material breach or intentional
misrepresentation, as to each of which all remedies at law or in equity of the
party adversely affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
CitiFund Trust and the Smith Barney Fund; provided, however, that following the
meeting of CitiSelect Shareholders called by the CitiSelect Portfolio pursuant
to section 5.3 of this Agreement, no such amendment may have the effect of
reducing the number of the Smith Barney Fund Shares to be issued to the
shareholders of the CitiSelect Portfolio under this Agreement to the detriment
of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
CitiFund Trust or the CitiSelect Portfolio, c/o CitiFunds Trust I, 21 Milk
Street, 5th Floor, Boston, Massachusetts 02109, with a copy to Bingham Dana
LLP, 150 Federal Street, Boston, Massachusetts 02110, Attention: Roger P.
Joseph, Esq., or to Smith Barney Fundamental Value Fund Inc., 388 Greenwich
Street, New York, New York 10013, with a copy to Willkie Farr & Gallagher, 787
Seventh Avenue, New York, N.Y. 10019-6099, Attn.: Burton M. Leibert, Esq., or
to any other address that the CitiFund Trust or the Smith Barney Fund shall
have last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation (including the shareholders of any Fund) any rights or
remedies under or by reason of this Agreement, other than the parties hereto
<PAGE>
and their successor and permitted assigns. Nothing in this section is intended
to limit the rights of shareholders of the CitiFund Trust to maintain
derivative actions with respect to this Agreement, subject to and in accordance
with applicable law.
15.4. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of the Commonwealth of Massachusetts, without
regard to its principles of conflicts of laws.
15.5 The CitiFund Trust is a business trust organized under
Massachusetts law and under a Declaration of Trust, to which reference is
hereby made and a copy of which, with amendments, is on file with the Secretary
of the Commonwealth of Massachusetts and elsewhere as required by law. It is
expressly acknowledged and agreed that the obligations of CitiFunds Trust I
entered into the name or on behalf of the CitiFund Trust by any of its
Trustees, officers, employees or agents are not made individually, but in such
capacities, that the CitiFund Trust's obligations under this Agreement bind
only that portion of the trust estate consisting of assets of the CitiSelect
Portfolio and not any Trustee, officer, employee, agent or shareholder
individually, and that any liability of the CitiFund Trust under this Agreement
or in connection with the transactions contemplated herein shall be discharged
only out of the assets of the CitiSelect Portfolio.
[Signatures follow]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its President or Vice President and attested by its
Secretary or Assistant Secretary.
Attest: CITIFUNDS TRUST I
on behalf of CitiSelect Folio 500 Growth Plus
By:________________________________________
Name:
Title:
Attest: SMITH BARNEY FUNDAMENTAL VALUE
FUND INC.
By:________________________________________
Name:
Title:
Solely for purposes of Section 10.2:
CITIBANK, N.A.
By:_________________________________
Name:
Title:
SSB CITI FUND MANAGEMENT LLC
By:_________________________________
Name:
Title:
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE ACQUISITION BY
SMITH BARNEY FUNDAMENTAL VALUE FUND INC.
(the "Smith Barney fund")
388 Greenwich Street
New York, New York 10013
(800) 451-2010
OF THE ASSETS OF
CITISELECT FOLIO 500 GROWTH PLUS
(THE "CITISELECT PORTFOLIO"),
A SERIES OF CITIFUNDS TRUST I ("CITIFUNDS TRUST").
21 Milk Street
5th Floor
Boston, Massachusetts 02109
(617) 423-1679
Dated: August 16, 2000
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus, dated August 16, 2000, relating to the above-referenced
matter may be obtained without charge by calling or writing the Smith Barney
Fund at the telephone number or address set forth above. This Statement of
Additional Information should be read in conjunction with the Proxy
Statement/Prospectus. Each of the following documents accompanies this
Statement of Additional Information and is incorporated herein by reference:
1. Statement of Additional Information for the Smith Barney Fund, dated
January 28, 2000.
2. Statement of Additional Information for the CitiSelect Portfolio,
dated March 1, 2000.
3. Annual Report of the Smith Barney Fund for the year ended September
30, 1999 and Semi-Annual Report of the Smith Barney Fund for the
six-month period ended March 31, 2000.
4. Annual Report of the CitiSelect Portfolio for the year ended October
31, 1999 and Semi-Annual Report of the CitiSelect Portfolio for the
six-month period ended April 30, 2000.
<PAGE>
GENERAL INFORMATION
This Statement of Additional Information relates to the proposed transfer
of substantially all of the assets and liabilities of the CitiSelect Portfolio
to Smith Barney Fund in exchange for shares of the corresponding class of the
Smith Barney Fund (the "Reorganization"). The shares issued by the Smith Barney
Fund will have an aggregate net asset value equal to the aggregate net asset
value of the shares of the CitiSelect Portfolio that were outstanding
immediately before the effective time of the Reorganization.
After the transfer of substantially all of its assets and liabilities in
exchange for the Smith Barney Fund shares, the CitiSelect Portfolio will
distribute such shares to its shareholders in liquidation of the CitiSelect
Portfolio. Each shareholder owning shares of the CitiSelect Portfolio at the
effective time of the Reorganization will receive shares of the corresponding
class from the Smith Barney Fund of equal value, and will receive any unpaid
dividends or distributions that were declared before the effective time of the
Reorganization on shares of the CitiSelect Portfolio. The Smith Barney Fund
will establish an account for each former shareholder of the CitiSelect
Portfolio reflecting the appropriate number of shares distributed to such
shareholder. These accounts will be substantially identical to the accounts
maintained by the CitiSelect Portfolio for each shareholder. Upon completion of
the Reorganization with respect to the CitiSelect Portfolio, all outstanding
shares of the CitiSelect Portfolio will have been redeemed and cancelled in
exchange for shares distributed by the Smith Barney Fund, and the CitiSelect
Portfolio will wind up its affairs and be terminated as a series of the
CitiFunds Trust under Massachusetts law.
For further information about the transaction, see the Combined Proxy
Statement/Prospectus.
<PAGE>
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The response to this item is incorporated by reference to section 9 of the
Agreement and Plan of Reorganization and Post-Effective Amendment No. 5 to the
Registrant Statement filed on Form N-1A with the SEC as File Nos. 2-71469 and
811-3158 (the "Registration Statement").
ITEM 16. EXHIBITS
(1)(a) Registrant's Articles of Incorporation dated May 13, 1994 are
incorporated by reference to post-effective amendment no. 27 to
the Registration Statement as filed with the SEC on May 26, 1995
("Post-Effective Amendment No. 27").
(1)(b) Registrant's Articles of Amendment dated May 24, 1995 are
incorporated by reference to post-effective amendment no. 28 to
the Registration Statement as filed with the SEC on February 1,
1996 ("Post-Effective Amendment No. 28").
(1)(c) Registrant's Articles of Amendment dated June 11, 1998 are
incorporated by reference to post-effective amendment no. 31 to
the Registration Statement as filed with the SEC on November 24,
1998 ("Post-Effective Amendment No. 31").
(2) Registrant's By-Laws are incorporated by reference to
Post-Effective Amendment No. 27.
(3) Not Applicable
(4) Form of Agreement and Plan of Reorganization is attached as
Exhibit A to the Proxy Statement/Prospectus filed herewith.
(5) Not Applicable.
(7) Form of Distribution Agreement between the Registrant and
Salomon Smith Barney Inc. is filed herewith.
(9) Custodian Agreement between the Registrant and PNC Bank, National
Association is incorporated by reference to Post-Effective
Amendment No. 27.
(10)(a) Services and Distribution Plan pursuant to Rule 12b-1 is
incorporated by reference to Post-Effective Amendment No.
27.
(10)(b) Amended and Restated Shareholder Services and Distribution Plan
pursuant to Rule 12b-1 is incorporated by reference to
Post-Effective Amendment No. 31.
(10)(c) Form of Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-Effective
Amendment No. 28.
<PAGE>
(10)(d) Amended Rule 18f-3(d) Multiple Class Plan of the
Registrant is incorporated by reference to Post-Effective
Amendment No. 31.
(11) Opinion and Consent of Willkie Farr & Gallagher is filed
herewith.
(12) Opinion of Bingham Dana LLP supporting the tax matters and
consequences to shareholders discussed in the prospectus to be
filed by amendment.
(13)(a) Form of Transfer Agency Agreement between the Registrant
and The Transfer Agent is incorporated by reference to
Post-Effective Amendment No. 28.
(13)(b) Form of Consent to Assignment between the Registrant and
The Shareholder Services Group, Inc. is incorporated by
reference to Post-Effective Amendment No. 27.
(13)(c) Form of Administration Agreement between the Fund and
Smith Barney Mutual Funds Management Inc. is incorporated
by reference to Post-Effective Amendment No. 27.
(14) Consent of Independent Public Accountants is filed herewith.
(15) Not Applicable.
(16) Not Applicable.
(17)(a) Form of proxy card is filed herewith.
(17)(b) Annual Report of the CitiSelect Portfolio (File Nos.
2-90518 and 811-4006) filed on December 29, 1999.
(17)(c) Semi-Annual Report of the CitiSelect Portfolio (File Nos.
2-90518 and 811-4006) filed on June 23, 2000.
(17)(d) Prospectus and statement of additional information of the
CitiSelect Portfolio (File Nos. 2-90518 and 811-4006) filed on
March 30, 2000.
(17)(e) Annual Report of Registrant, dated September 30, 1999, is
incorporated herein by reference.
(17)(f) Semi-Annual Report of Registrant, March 31, 2000, is incorporated
herein by reference.
(17)(g) Prospectus and statement of additional information of
Registrant, dated January 28, 2000, are incorporated
herein by reference.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is a part of this registration statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
<PAGE>
[17 C.F.R. 230.145c], the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, this Registration Statement has been signed on behalf of the Registrant
in the City of New York and the State of New York on the 13th day of July,
2000.
SMITH BARNEY FUNDAMENTAL VALUE
FUND INC.
By: /s/ Heath B. McLendon
---------------------------
Heath B. McLendon
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form N-14 has been signed below by the following persons in the
capacity on the date indicated.
/s/ Heath B. McLendon Chairman of the Board July 13, 2000
----------------------- (Chief Executive
Heath B. McLendon Officer)
/s/ Lewis E. Daidone Senior Vice President and July 13, 2000
----------------------- Treasurer (Chief Financial
Lewis E. Daidone and Accounting Officer)
/s/ Lloyd J. Andrews* Director July 13, 2000
-----------------------
Lloyd J. Andrews
/s/ Robert M. Frayn, Jr.* Director July 13, 2000
-----------------------
Robert M. Frayn, Jr.
/s/ Leon P. Gardner* Director July 13, 2000
-----------------------
Leon P. Gardner
/s/ David E. Maryatt* Director July 13, 2000
-----------------------
David E. Maryatt
/s/ Frederick O. Paulsell* Director July 13, 2000
-----------------------
Frederick O. Paulsell
/s/ Jerry A. Viscione* Director July 13, 2000
-----------------------
Jerry A. Viscione
/s/ Julie W. Weston* Director July 13, 2000
-----------------------
Julie W. Weston
*By: /s/ Heath B. McLendon
----------------------
Heath B. McLendon
Executed by Heath B. McLendon on behalf of those indicated, pursuant to
Powers of Attorney.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(7)(a) Form of Distribution Agreement between the Registrant and
Salomon Smith Barney Inc. is filed herewith.
(11) Opinion and Consent of Willkie Farr & Gallagher
(14) Consent of Independent Public Accountants
(17)(a) Form of proxy card
