<PAGE>
Pursuant to Rule 497(b) File Nos: 333-41524 811-3158
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. Of course, you may redeem your shares of the CitiSelect Portfolio
or the Smith Barney Fund on any business day.
The Smith Barney Fund is advised by SSB Citi Fund Management LLC ("SSB
Citi"). The CitiSelect Portfolio is advised by Citibank, N.A. ("Citibank").
SSB Citi and Citibank are subsidiaries 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. SSB Citi and Citibank will pay all of the
expenses that are solely and directly related to the reorganization.
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 Trustees of CitiFunds Trust I believe that combining the assets of the
CitiSelect Portfolio with the Smith Barney Fund could result in more efficient
mutual fund operations due to economies of scale. As a result of the
reorganization, CitiSelect shareholders will be part of a larger fund family
offering a wide array of mutual funds, and will be able to exchange their shares
among all of those Smith Barney funds offered by their service agents.
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, BY
TELEPHONE OR BY FACSIMILE AS DESCRIBED IN THE ENCLOSED PROXY VOTING MATERIALS.
For more information, please contact your service agent or call 1-888-347-2456.
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,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
<PAGE>
WE URGE YOU TO VOTE BY ONE OF THE FOLLOWING MEANS TO ENSURE A QUORUM AT THE
MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
VOTE:
By phone: Call toll-free 1-800-597-7836 and follow the automated
instructions. You will need the 14-digit control number located on
your proxy card.
By mail: Simply enclose your executed proxy card in the postage-paid
envelope found within your proxy package.
By internet: Visit https://vote.proxy-direct.com; once there, enter
the 14-digit control number located on your proxy card.
By fax: Simply fax your executed proxy card to 1-888-796-9932.
If you have any questions regarding the meeting agenda or the execution of
your proxy, please call 1-888-347-2456.
<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 TOUCH-TONE
VOTING OVER THE TELEPHONE, BY FACSIMILE 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
six-month period ended March 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 ................................................................ 5
Proposed Transaction .................................................. 5
Comparison of Investment Objectives and Policies ...................... 5
Comparison of Investment Structure of CitiSelect Portfolio and Smith
Barney Fund ......................................................... 7
Investment Advisory Services and Management Fees ...................... 7
Overall Expenses ...................................................... 8
Distribution of Shares and Other Services ............................. 10
Sales Charges, Purchase Policies, Redemption and Exchange Information . 10
Dividends and Other Distributions ..................................... 13
Tax Consequences ...................................................... 14
PRINCIPAL INVESTMENTS, RISK FACTORS AND INVESTMENT RESTRICTIONS ......... 14
Principal Investments and Risk Factors ................................ 14
Fundamental Investment Restrictions ................................... 18
Non-Fundamental Investment Restrictions ............................... 19
THE PROPOSED TRANSACTION ................................................ 19
Description of the Plan ............................................... 19
Reasons for the Proposed Transaction .................................. 20
Description of the Securities to Be Issued ............................ 21
Federal Income Tax Consequences ....................................... 22
Liquidation and Termination of CitiSelect Portfolio ................... 23
Portfolio Securities .................................................. 23
Portfolio Turnover .................................................... 23
Pro Forma Capitalization .............................................. 23
Performance ........................................................... 24
VOTING INFORMATION ...................................................... 24
General Information ................................................... 24
Quorum; Vote Required to Approve Proposal ............................. 24
Outstanding Shareholders .............................................. 25
ADDITIONAL INFORMATION ABOUT THE FUNDS .................................. 26
OTHER MATTERS ........................................................... 26
<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 to the Smith Barney Fund, the CitiSelect Portfolio
will receive a distribution in kind from the applicable Underlying Portfolios of
the investment securities held by the Underlying Portfolios on its behalf (and
associated liabilities), in redemption of its interests in the Underlying
Portfolios, 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 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 or termination and liquidation of the CitiSelect
Portfolio.
If the Plan is approved, CitiSelect shareholders who do not wish to become
shareholders of the Smith Barney Fund must redeem their shares prior to the
Closing Date.
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.
PLEASE NOTE THAT ALTHOUGH THE FUNDS' INVESTMENT OBJECTIVES ARE SIMILAR,
THERE ARE DIFFERENCES IN THE FUNDS' INVESTMENT POLICIES AND THE MANNER IN
WHICH THE FUNDS SEEK TO ACHIEVE THEIR GOALS. THESE DIFFERENCES ARE DISCUSSED
IN MORE DETAIL BELOW.
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.
To the extent that the Smith Barney Fund invests more of its assets in
equity securities than the CitiSelect Portfolio does, the Smith Barney Fund
would be subject to more of the risks associated with equity investing (see
"Principal Investments, Risk Factors and Investment Restrictions" below for more
information on the risks of investing 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 the
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,
Australasia and the Far East. The Fund also may invest in emerging market equity
securities.
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 its 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.
Upon consummation of the Reorganization, SSB Citi will analyze and evaluate
the portfolio securities of the CitiSelect Portfolio. Based on the Smith Barney
Fund's investment objectives and policies, federal income tax considerations and
the interests of the Smith Barney Fund's shareholders (including the former
CitiSelect shareholders), SSB Citi will determine whether to dispose of or
maintain investments in those securities. For more information, please see "The
Proposed Transaction -- Portfolio Securities" below.
COMPARISON OF INVESTMENT STRUCTURE OF CITISELECT PORTFOLIO AND SMITH BARNEY
FUND
The CitiSelect Portfolio invests in securities indirectly by investing in
the several Underlying Portfolios. Each Underlying 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 Underlying Portfolio is a mutual fund with
its own investment goals and policies. Each Underlying 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, 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 also serves as investment manager of each of the Underlying
Portfolios. 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 Portfolios and fees payable to the subadvisers for their advisory
services to the Underlying Portfolios.
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 0.20% of
its average daily net assets. For a comparison of the total annual operating
expenses of the CitiSelect Portfolio (including the expenses of the Underlying
Portfolios) 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 by 0.34% and 0.07%, respectively. After giving effect
to waivers and reimbursements by the CitiSelect Portfolio's service providers,
which waivers and reimbursements may be terminated at any time, the total annual
operating expenses of the Class A and Class B shares of the Smith Barney Fund
were lower by 0.33% and 0.06%, respectively. 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.
<TABLE>
<CAPTION>
PRO FORMA
CITISELECT SMITH BARNEY SMITH BARNEY
PORTFOLIO FUND FUND
------------------------ ------------------------ ------------------------
SHARE CLASS CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
----------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on
Purchases 5.00% None 5.00% None 5.00% None
Maximum Deferred Sales Charge (Load) None(1) 5.00%(2) None(3) 5.00%(2) None(3) 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 other expenses) 0.26% 0.26% 0.17% 0.19% 0.17% 0.19%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.51%* 2.01%* 1.17% 1.94% 1.17% 1.94%
----------
* 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.
</TABLE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
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. The types of services provided to the Funds under these
service arrangements are generally similar.
<TABLE>
<CAPTION>
SERVICE PROVIDER CITISELECT PORTFOLIO SMITH BARNEY FUND
---------------- -------------------- -----------------
<S> <C> <C>
Custodian State Street Bank and Trust Company PNC Bank National Association
Auditors PricewaterhouseCoopers LLP Deloitte & Touche LLP
Transfer Agent State Street Bank and Trust Company Citi Fiduciary Trust Company
Sub-Transfer Agent N/A PFPC Global Fund Services
</TABLE>
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 sales 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
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 MINIMUM
INITIAL ADDITIONAL
SMITH BARNEY FUND INVESTMENT INVESTMENT
----------------- ---------- ----------
General $1,000 $50
IRAs, Self Employed Retirement Plans, Uniform
Gift to Minor Accounts $ 250 $50
Qualified Retirement Plans (under Section
403(b)(7) or Section 401(a) of the Internal
Revenue Code, including 401(k) plans) $ 25 $25
Simple IRAs $ 1 $ 1
Monthly Systematic Investment Plans $ 25 $25
Quarterly Systematic Investment Plans $ 50 $50
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>
REDEMPTION PROCEDURES
AND POLICIES CITISELECT PORTFOLIO SMITH BARNEY FUND
----------------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
Through an Appropriate To redeem shares, you may contact the Fund's To redeem shares, you may contact a Salomon
Contact Person transfer agent, or if you hold shares Smith Barney Financial Consultant or dealer
through a Service Agent, your Service Agent. representative, or for accounts held
directly with the Smith Barney Fund, the
sub-transfer agent.
By Mail You may send written redemption requests to For accounts held directly at the Fund, you
the transfer agent or, if you hold shares may send written redemption requests to the
through a Service Agent, the Service Agent. sub-transfer agent.
By Telephone You may make redemption requests by You may be eligible to redeem shares (except
telephone if your application permits. those held in retirement plans) by telephone
in amounts up to $10,000 per day through the
transfer agent.
Systematic Withdrawal Plan You can arrange for automatic withdrawal of You can arrange for the automatic redemption
a specified dollar amount from your account of a portion of your shares on a monthly or
on a regular basis (no more frequently than quarterly basis. To qualify, you must own
monthly). To qualify, you must have at least shares of at least $10,000 ($5,000 for
$10,000 in your account and each withdrawal retirement plan accounts) and each automatic
must be at least $100. If your shares are redemption must be at least $50. If your
subject to a CDSC, you may only withdraw up shares are subject to a CDSC, the sales
to 10% of the value of your account in any charge will be waived if your automatic
year, but you will not be subject to a CDSC payments do not exceed 1% per month of the
on the shares withdrawn under the Plan. You value of your shares subject to a CDSC.
must have at least $100 withdrawn per
automatic withdrawal.
Automatic Redemptions Your account balance with a Fund may be If your account falls below $500 because of
subject to a $500 minimum. If so, the Fund redemption of Fund shares, the Fund may ask
reserves the right to close your account if you to bring your account up to the minimum
it falls below $500 because of redemptions. requirement. If your account balance is
You will have 60 days to make an additional still below $500 after 60 days, the Fund may
investment. 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 the other CitiSelect Portfolios and 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.
CitiSelect shareholders who subsequently exchange the Class A shares of the
Smith Barney Fund received in connection with the Reorganization, however, will
be required to pay the difference, if any, between the sales charge applicable
to the shares to be acquired in the exchange and the sales charge originally
paid. CitiSelect shareholders who purchased Fund shares prior to January 4, 1999
will not have to pay a sales charge when they exchange those shares for shares
of a Smith Barney fund.
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.
<TABLE>
<CAPTION>
INCOME DIVIDEND CAPITAL GAIN
FUND DISTRIBUTIONS DISTRIBUTIONS
---- ------------- -------------
<S> <C> <C>
CitiSelect Portfolio annually (in December) annually (in December)
Smith Barney Fund annually (typically in December) annually (typically in December)
</TABLE>
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 Portfolios and the Smith Barney Fund will each receive an
opinion of Bingham Dana LLP in connection with the Reorganization to the effect
that, based upon certain facts, assumptions and representations, (i) the
distribution of investment securities from 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
shares in complete liquidation of the CitiSelect Portfolios, 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.
<TABLE>
<CAPTION>
FUND(s) SUBJECT TO RISK PRINCIPAL INVESTMENT AND ACCOMPANYING RISK FACTOR
----------------------- -------------------------------------------------
<S> <C>
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.
To the extent that the Smith Barney Fund invests more of its assets in equity securities
than the CitiSelect Portfolio does, the Smith Barney Fund would be subject to more of the
risks associated with equity investing.
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 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
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.
The economies of non-U.S. countries may grow at a slower rate than expected or may
experience a downturn or recession.
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.
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.
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.
</TABLE>
The foregoing describes the principal investments and related risks of each
Fund. Each Fund may invest in additional types of investments and may be 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
ordinary 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) to the extent prohibited by 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 non-fundamental restrictions that may be
changed at any time by that Fund's Board of Directors without shareholder
approval. 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.
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 Portfolios will receive voting shares of the corresponding
class 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 Portfolios in complete liquidation of the
CitiSelect Portfolios, and each 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.
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.
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. The Trustees of the CitiFund Trust believe that the CitiSelect
shareholders will benefit from the proposed Reorganization for the following
reasons:
ECONOMIES OF SCALE; FEES AND EXPENSES
SSB Citi and Citibank believe that the combination of funds which have
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 ratio. 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 the 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 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 13, 1994, 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 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 meetings 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 Underlying Portfolio
will not result in the recognition of gain or loss by the CitiSelect Portfolio,
(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) 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, which will
be determined by reference to the basis of the CitiSelect Portfolio in its
interests in the Underlying Portfolios; (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 and the
period during which such assets were held by the Underlying Portfolios; (vi) 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 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 and the CitiSelect Portfolio are 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 Portfolios and will receive its proportionate share
of the portfolio securities of the Underlying Portfolios. 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 Portfolios 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 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 CitiSelect Portfolio 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.
NET ASSET
TOTAL SHARES VALUE
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.
YEAR ENDED: CITISELECT PORTFOLIO SMITH BARNEY FUND
----------- -------------------- -----------------
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)
When you consider the performance of the Funds, please note that differences
in performance may be attributable in part to the markets and types of
securities in which each Fund invests. For example, the CitiSelect Portfolio is
a diversified asset allocation fund that invests in both foreign and domestic
markets and in large cap and small cap equity, as well as fixed income,
securities. In recent years, investments in some of these markets and types of
securities have not performed as well as investments in U.S. large cap equity
securities.
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.
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 or via facsimile, (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, except as
prohibited by law, 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
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 3,618,283.621 outstanding
Class A shares and 25,157.166 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 August 11, 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 POST-
NAME AND ADDRESS OWNERSHIP REORGANIZATION
---------------- --------- --------------
Class A
Fiserv Securities, Inc. 96.19% 3.83%
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, Pa. 19103-7084
Class B
Fiserv Securities, Inc. 99.90% 0.02%
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, Pa. 19103-7084
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 August 11, 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 POST-
NAME AND ADDRESS OWNERSHIP REORGANIZATION
---------------- --------- --------------
Class Y
Smith Barney Concert Series, Inc.*
Balanced Portfolio 61.39% 61.39%
PNC Bank, N.A.
Attn: Beverly Timson
200 Stevens Drive North, Suite 440
Lester, PA 19113-1522
(Maryland corporation)
Smith Barney Concert Series, Inc.*
Select Balanced Portfolio 27.36% 27.36%
PNC Bank, N.A.
Attn: Beverly Timson
200 Stevens Drive North, Suite 440
Lester, PA 19113-1522
(Maryland corporation)
Smith Barney Concert Series, Inc.
Conservative Portfolio 7.84% 7.84%
PNC Bank, N.A.
Attn: Beverly Timson
200 Stevens Drive North, Suite 440
Lester, PA 19113-1522
* Shareholders beneficially owning more than 25% of the voting securities of a
Fund may be presummed to control that Fund.
As of August 11, 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 August 11, 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.
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].
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, BY TELEPHONE OR BY FACSIMILE.
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this day of , 2000, between CitiFunds(SM) 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,
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 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 October 6, 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 offices of Bingham Dana LLP, 399 Park Avenue, New York, New
York, 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
securities and instruments deposited with a securities depository, as defined
in Rule 17f-4 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 open- end
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 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 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 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
open-end 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;
(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;
(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 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 October 2, 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 N-14
(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 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.
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
(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.
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
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 distribution of
investment securities from the underlying mutual funds (the "Underlying
Portfolios") in which the CitiSelect Portfolio invests all of its investable
assets in redemption of the CitiSelect Portfolio's interests in the Underlying
Portfolios will not result in the recognition of gain or loss by the CitiSelect
Portfolio; (ii) 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) 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 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; (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, which will
be determined by reference to the basis of the CitiSelect Portfolio in its
interests in the Underlying Portfolios; (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 and the
period during which such assets were held by the Underlying Portfolios; (vi) 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; (vii) 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; (viii) 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 (ix) 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
each of the CitiFunds Trust, on behalf of the CitiSelect Portfolio, and the
Smith Barney Fund in sections 9.1 and 9.2 shall survive the Closing.
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 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 in 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.
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
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>
Pursuant to Rule 497(b) File Nos: 333-41524 811-3158
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 (THE "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.
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 the 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.
Due to the net asset value of the CitiSelect Portfolio 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 this Statement
of Additional Information.
FOR FURTHER INFORMATION ABOUT THE TRANSACTION, SEE THE COMBINED PROXY
STATEMENT/PROSPECTUS.
