CITIFUNDS TRUST I, 485APOS, 485BPOS, 2000-09-12

CITIFUNDS TRUST I
485APOS, 485BPOS, 2000-09-12

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As filed with the Securities and Exchange Commission on September 8, 2000

File Nos. 2-90518
811-4006
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 42

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 43

CITIFUNDS TRUST I*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

388 Greenwich Street, New York, New York 10013
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: [** **]

Robert I. Frenkel
388 Greenwich Street
New York, New York 10013
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
ROGER P. JOSEPH
BINGHAM DANA LLP, 150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110

It is proposed that this filing will become effective on November , 2000
pursuant to paragraph (a) of Rule 485.

---------------------------------
* This filing relates only to the series of the Trust designated as Citi
FORTUNE 500 Index Fund and Citi FORTUNE e-50 Index Fund (formerly referred
to as Citi S&P 500 Index Portfolio and Citi All Markets Index Portfolio,
respectively).

<PAGE>

Explanatory Note

This filing relates only to the series of CitiFunds Trust I designated as
Citi FORTUNE 500 Index Fund and Citi FORTUNE e-50 Index Fund (formerly referred
to as Citi S&P 500 Index Portfolio and Citi All Markets Index Portfolio,
respectively). Each of Citi FORTUNE 500 Index Fund and Citi FORTUNE e-50 Index
Fund offers two classes of shares, the Citi Index shares and the Smith Barney
Index shares (formerly referred to as the Class A shares and Class D shares,
respectively).

PROSPECTUS
NOVEMBER ___, 2000

Citi FORTUNE 500 Index Fund

Citi FORTUNE e-50 Index Fund

Citi FORTUNE 500 Index Shares and
Smith Barney FORTUNE 500 Index Shares
Citi FORTUNE e-50 Index Shares and
Smith Barney FORTUNE e-50 Index Shares

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.

-------------------------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
-------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

THE FUNDS......................................................................
INDEXING...................................................................
CITI FORTUNE 500 INDEX FUND................................................
CITI FORTUNE e-50 INDEX FUND...............................................

YOUR ACCOUNT...................................................................
HOW TO BUY SHARES..........................................................
CITITRADE INVESTING........................................................
HOW THE PRICE OF YOUR SHARES IS CALCULATED.................................
HOW TO SELL SHARES.........................................................
EXCHANGES..................................................................
DIVIDENDS..................................................................
TAX MATTERS................................................................

MANAGEMENT OF THE FUNDS........................................................
MANAGER....................................................................
DISTRIBUTION ARRANGEMENTS..................................................

APPENDIX.......................................................................

<PAGE>

THE FUNDS

INDEXING

The Funds in this Prospectus share the same basic investment strategy. They are
designed to track the performance of a stock market index.

This strategy distinguishes an index fund from an "actively managed" mutual
fund. Instead of choosing investments based on judgment, a portfolio manager
looks to an index to determine which securities the Fund should own. Instead of
trying to outperform the market or segment it tracks, each Fund tries to
provide investment results that match, as closely as possible, the performance
of its Index. And if the securities contained in a Fund's Index are losing
value or are downgraded by investment analysts, the Fund will continue to
purchase and hold those securities, even if the Fund loses money as a result.

The Funds may use replication or sampling techniques to track the performance
of their Indexes. Replication involves a Fund holding each security in its
Index in the same proportion as the security appears in the Index. Sampling
techniques involve investing in a smaller number of securities included in the
Index that are selected to resemble the Index in terms of industry weightings,
market capitalization, price/earnings ratio, dividend yield or other
characteristics. A Fund may also purchase and sell securities in anticipation
of additions or deletions to its Index.

Each of the Funds attempts to achieve, in rising and falling markets, a
correlation of at least [95%] between the total return of its net assets before
fees and expenses and its respective Index. Of course, like most index funds,
there is no guarantee that a Fund will be able to achieve or maintain this
level of correlation. And, like other mutual funds, a Fund will have operating
expenses that affect the Fund's ability to track its Index.

The Funds may use derivatives to track the performance of their Indexes.
Derivatives are financial instruments whose values are derived, at least in
part, from the prices of other securities or specified assets, indexes or
rates. The Funds might use derivatives to simulate full investment in the
Fund's Index while maintaining sufficient liquidity to satisfy redemptions and
operating expenses, to facilitate trading in the securities of companies that
comprise the Index, to reduce transaction costs or to seek higher investment
returns when a contract is priced more attractively than the securities
comprising the Fund's Index.

Because the composition of an Index tends to be comparatively stable, index
funds historically have experienced lower portfolio turnover than actively
managed funds.

<PAGE>

CITISM FORTUNE 500(R) INDEX FUND

THE FUND'S GOAL IS TO PROVIDE INVESTMENT RESULTS THAT, BEFORE FEES AND
EXPENSES, CORRESPOND TO THE PERFORMANCE OF THE FORTUNE 500 INDEX.

THE INDEX

The FORTUNE 500 Index is a capitalization-weighted index that tracks the
price-only and total rate of return performance of a subset of the annual
FORTUNE 500 List of the largest companies in the United States ranked on the
basis of total operating revenue. As of June 19, 2000, the Index consisted of
433 companies representing 438 issues. The number of companies and listed
issues that comprise the Index will vary over time. The Index does not show
actual investment returns or reflect payment of management or brokerage fees,
which would lower the Index's performance. The Index is unmanaged and does not
have to maintain liquidity to meet redemption requests or pay expenses.

PRINCIPAL STRATEGIES

KEY INVESTMENTS. The FORTUNE 500 Index Fund may use replication or sampling
techniques to track the performance of the FORTUNE 500 Index. The Fund invests
at least 80% of its assets in common stocks included in the Index. The Fund
also may enter into repurchase agreements, lend portfolio securities and use
certain types of derivative instruments to help implement its goal.

SELECTION PROCESS. The FORTUNE 500 Index Fund is managed as a "pure" index
Fund. This means that the manager does not evaluate individual companies to
identify attractive investment candidates. Instead, the manager attempts to
mirror the investment performance of the Index as closely as possible by
adjusting the Fund's portfolio daily to match or sample the Index or its
performance. Like most index funds, the Fund does not mirror the Index exactly
because, unlike the Index, the Fund must maintain a portion of its assets in
cash and liquid short-term securities to meet redemption requests and pay the
Fund's expenses. The Fund's returns are likely to be below those of the Index
because of the Fund's short-term investments and its operating expenses.

WHO MAY WANT TO INVEST

The FORTUNE 500 Index Fund may be an appropriate investment if you:

o Are seeking to participate in the long-term growth potential of U.S. large
capitalization stocks
o Are looking for an investment with potentially greater return but higher
risk than a fund investing primarily in fixed income securities
o Are willing to accept the risks of the stock market

PRINCIPAL RISKS

As with any mutual fund, you may lose money if you invest in the Fund. The
Fund's principal risks are:

------------------
Citi is a service mark of Citicorp.

<PAGE>

their relative weightings. Although the manager seeks to replicate the
performance of the Index, the Fund may underperform its Index even before
deducting fees and expenses because the Fund must maintain a portion of its
assets in liquid short-term debt securities which historically have generated
significantly lower returns than common stocks. In addition, expenses and
transaction costs, the size of the Fund and the size and frequency of cash
flows into and out of the Fund, and the differences between how and when the
Fund and its Index are valued can also cause differences in performance. If the
Fund uses a sampling strategy, it may not track its Index perfectly and
differences between the underlying Index and the Fund's portfolio will cause
differences in performance.

MARKET RISK. The Fund is exposed to the risks of investing in common stocks.
The Fund may not perform as well as other investments, if, among other things:
the Index declines or performs poorly relative to other related indexes or
individual securities; an adverse event, such as an unfavorable earnings
report, negatively affects the price of an issuer in the Index; or the
securities issued by companies which comprise the Index fall out of favor with
investors.

DERIVATIVES. Derivatives may be more sensitive than direct securities to
changes in interest rates or sudden market moves. Some derivatives also may be
susceptible to fluctuations in yield or value because of their structure or
contract terms. Even a small investment in derivative contracts can have a big
impact on the Fund's stock market exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
stock prices 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. This may adversely affect the
Fund's ability to track its Index.

Certain derivative contracts present the risk that the other party to the
contract may not perform. Derivatives can also make the Fund less liquid and
harder to value, especially in declining markets.

NON-DIVERSIFICATION. The fund is "non-diversified", which means it may invest a
relatively high percentage of its assets in the securities of a single issuer
or a limited number of issuers. As a result, the Fund may be more sensitive to
a single economic, political or regulatory occurrence than a diversified fund.

MORE ON THE FUND'S INVESTMENTS AND RISKS

MONEY MARKET INSTRUMENTS. The Fund may invest temporarily in money market
instruments. The Fund invests in money market instruments pending investment of
proceeds of the sale of shares of the Fund or settlement of purchases of
securities by the Fund or to maintain liquidity to meet anticipated
redemptions. The Fund's investments in money market instruments will likely
cause the Fund's returns to differ from those of the Index.

SECURITIES LENDING. If the Fund lends its securities to earn income, it will
receive cash or other securities as collateral for the loan, which must be
returned to the borrower at the completion of the loan. The Fund typically
invests cash collateral received in short-term investments. The Fund could lose
money if the lent securities are not returned by the borrower at the
termination of the loan, or if the value of its short-term investment of the
cash collateral declines over the period of the loan.

INVESTMENT STRUCTURE. The FORTUNE 500 Index Fund invests directly in
securities, but may, in the future, invest in securities through one or more
underlying mutual funds, or portfolios.

CHANGE OF INDEX. The Fund may, in the future, track the performance of a
different stock market index. Shareholders will be notified if the Fund tracks
a different index.

FUND PERFORMANCE

Because the Fund does not have a full calendar year of performance, performance
information for the Fund is not included in this prospectus.

<PAGE>

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Citi FORTUNE 500 Index Shares or Smith Barney FORTUNE 500 Index Shares.
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------------
SHAREHOLDER FEES Citi Index Smith Barney
fees paid directly from your investment shares Index shares

ANNUAL OPERATING EXPENSES (% of average net assets)
expenses deducted from Fund assets
--------------------------------------------------------------------------------------
Management fees 0.34% 0.34%
Distribution (12b-1) fees None 0.20%
Other expenses(1) 0.09% 0.09%
Total annual operating expenses 0.43% 0.63%
</TABLE>

(1) Based on estimated expenses for the fiscal year ending December 31, 2000.
Even if actual other expenses exceed this amount, management has agreed
to cap the Fund's other expenses at 0.09%. This cap is voluntary and may
be modified or terminated at any time.

--------------------------------------------------------------------------------
Expenses on a $10,000 investment
--------------------------------------------------------------------------------

This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you reinvest all dividends;

o you then sell all of your shares at the end of those periods;

o your investment has a 5% return each year - the assumption of a 5% return
is required by the SEC for the purpose of this example and is not a
prediction of the Fund's future performance; and

o the Fund's operating expenses as shown in the table remain the same - the
example reflects the cap on operating expenses.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS
-----------------------------------------------------------------
CITI FORTUNE 500 INDEX SHARES $44 $138

SMITH BARNEY FORTUNE 500
INDEX SHARES $64 $202

<PAGE>

MORE ABOUT THE INDEX

The FORTUNE 500 Index is a capitalizationweighted Index that tracks the
price-only and total return performance of an investable subset of the annual
FORTUNE 500 List of the largest companies in the U.S. on the basis of total
operating revenue. The Index was first calculated on a real-time basis by
FORTUNE in December 1999. At $11.4 trillion as of June 19, 2000, the market
capitalization of the Index represents 69.5% of the market valuation of shares
listed on the New York Stock Exchange (the NYSE), the American Stock Exchange
(the AMEX) and The Nasdaq National Market (the Nasdaq), combined.

Index policies and procedures are established by the FORTUNE Index Committee
from time to time and address eligibility standards, stock selection,
Index-calculation methodology, scheduling, and pre-announcement of Index
adjustments, and the specific handling of Index adjustments in the context of
various corporate actions.

The administration of the FORTUNE 500 Index includes dealing with stock
additions, deletions, or corporate actions - including stock splits, rights
offerings, share issuances or repurchases, special cash dividends, stock
dividends, spin-offs, and corporate mergers.

The FORTUNE 500 List, on which the FORTUNE 500 Index is predicated, is compiled
each year based on the latest financial data reported to a government agency
through January 31 of the year in which the FORTUNE 500 List is compiled. Only
domestic, U.S.-based companies that are not majorityowned by another company
qualify for inclusion in the FORTUNE 500 List. The List is compiled on the
basis of the following criteria:

1. Total operating revenue, determined on the basis of a company's latest
fiscal year. Revenues are as reported, including revenues from
discontinued operations when they are published (except when the
divested company's revenues equal 50% or more of the surviving
company's revenues on an annualized basis). The revenues for
commercial banks and savings institutions are interest and noninterest
revenues. Such figures for insurance companies include premium and
annuity income, investment income, and capital gains or losses, but
exclude deposits. Revenue figures for all companies include
consolidated subsidiaries and exclude excise taxes.

2. Companies must file an Annual Report to Shareholders (a Form 10K).
Private companies and cooperatives that produce a Form 10K are
included, while subsidiaries of foreign companies incorporated in the
U.S. are excluded. Mutual insurance companies qualify, as their
statutory reports are deemed equivalent to a Form 10K.

The FORTUNE 500 Index consists of the subset of companies, and their
publicly listed shares, that are selected from the FORTUNE 500 List on the
basis of the following additional guidelines:

1. A company's stock must be traded on the NYSE, AMEX, or Nasdaq.

2. A company's daily closing share price must be equal to or in excess of
$5.00 during a period of 25 consecutive trading days preceding initial
inclusion.

3. A company's shares must evidence a minimum average daily trading
volume of 100,000 shares during a period of 25 consecutive trading
days preceding initial inclusion.

4. A company's shares must have a minimum market capitalization equal to
or in excess of $100 million at the time of inclusion.

Tracking stocks with separate listings are eligible for inclusion in the Index.

<PAGE>

The FORTUNE Index Committee also reserves the authority to periodically modify
any of these eligibility standards or other rules with respect to the FORTUNE
500 Index.

Performance for the FORTUNE 500 Index is not presented because the Index has
been calculated on a real-time basis only since December 1999.

FORTUNE 500 is a trademark of Time Inc., used under license. The FORTUNE 500
Index is licensed for use by SSB Citi Fund Management LLC (SSB Citi) in
connection with the Citi FORTUNE 500 Index Fund. Neither the Fund nor the
shares of the Fund have been passed on by FORTUNE, a division of Time Inc., for
suitability for a particular use. Neither the Fund nor the shares are
sponsored, endorsed, sold or promoted by FORTUNE. FORTUNE makes no
representation or warranty regarding the advisability of investing in the Fund
or the shares. FORTUNE makes no representation or warranty and bears no
liability with respect to the Fund, the shares or the use of the Index. FORTUNE
makes no guarantee or representation or warranty as to the accuracy and/or
completeness of the Index or the data included therein or the results to be
obtained from the use thereof. The Index is determined and calculated by
FORTUNE without regard to SSB Citi, the Fund or the shares.

<PAGE>

CITISM FORTUNE E-50TM INDEX FUND

THE FUND'S GOAL IS TO PROVIDE INVESTMENT RESULTS THAT, BEFORE FEES AND
EXPENSES, CORRESPOND TO THE PERFORMANCE OF THE FORTUNE E-50 INDEX.

THE INDEX

The FORTUNE e-50 Index is a modified capitalization-weighted index that tracks
the price-only and total rate of return performance of 50 U.S. publicly-traded
securities selected from the following sub-sectors of the Internet economy:

o E-companies
o Internet Communications Companies
o Internet Hardware Companies
o Internet Software and Services Companies

The Index includes companies whose principal operations are in the U.S. and
whose shares are traded on the Nasdaq, NYSE or AMEX. Generally, FORTUNE will
only consider stocks to be included in the Index if they have a trading history
of at least six months on these markets but in no event shorter than three
months. To be included in the Index, a company must generate a minimum of 10%
of its total revenues from Internet activities. In selecting stocks for the
Index, FORTUNE considers, among other factors, the largest companies that
operate in the Internet economy based on total revenue, and chooses companies
that, in its opinion, best represent the Internet economy. The number of Index
components and the identification of the four principal Internet sub-sectors
may change over time.

The FORTUNE e-50 Index does not show actual investment returns or reflect
payment of management or brokerage fees, which would lower the Index's
performance. The Index is unmanaged and does not have to maintain liquidity to
meet redemption requests or pay expenses.

PRINCIPAL STRATEGIES

KEY INVESTMENTS. The Fund seeks to achieve its investment goal by investing
substantially all of its assets in the stocks that comprise the FORTUNE e-50
Index and in derivatives based on the performance of the Index or the market
sector represented by the Index. Normally, the Fund invests at least 80% of its
assets in securities of companies included in the Index and in derivatives
based on the performance of the Index or the market sector represented by the
Index.

The Fund's derivatives and investment techniques may include buying and selling
options and futures contracts, entering into swap agreements and purchasing
indexed securities to track the performance of the FORTUNE e-50 Index. The Fund
also may enter into repurchase agreements and lend portfolio securities.

SELECTION PROCESS. The FORTUNE e-50 Index Fund is a "pure" index Fund. This
means that the manager does not evaluate individual companies to identify
attractive investment candidates. Instead, the manager attempts to mirror the
performance of the Index as closely as possible by adjusting the Fund's
portfolio periodically to reflect the companies included in the Index and their
weightings. Like most index funds, the Fund will not mirror the Index exactly

-------------------
Citi is a service mark of Citicorp.

<PAGE>

because, unlike the Index, the Fund must maintain a portion of its assets in
cash and liquid short-term securities to meet redemption requests and pay the
Fund's expenses. The Fund's returns are likely to be below those of the Index
because of the Fund's short-term investments and its operating expenses.

WHO MAY WANT TO INVEST

The Fund may be an appropriate investment if you:
o Are seeking to participate in the long-term growth potential of Internet
stocks
o Are seeking capital appreciation and can tolerate significant short-term
volatility
o Are comfortable with the risks of the stock market
o Currently have exposure to the stock market and can tolerate concentrated
investment in a single market sector.

PRINCIPAL RISKS

As with any mutual fund, you may lose money if you invest in the Fund. The
Fund's principal risks are:

SECTOR INVESTING RISK. The Fund's investment performance will be closely tied
to the performance of the Internet sector. Market conditions, interest rates,
and economic, regulatory or financial developments could significantly affect
the Internet sector and the securities of companies in that sector could react
similarly to these or other developments. Internet companies can be
significantly affected by obsolescence of existing technology, short product
cycles, falling prices and profits, and competition from new market entrants.
The Internet sector may be subject to greater governmental regulation than many
other areas, and changes in governmental policies and the need for regulatory
approvals may have a material adverse effect on the sector. The performance of
the Internet sector may differ in direction and degree from that of the overall
stock market.

NON-DIVERSIFICATION AND CONCENTRATION. The Fund is "non-diversified," which
means it may invest a larger percentage of its assets in one issuer than a
diversified fund. To the extent the Fund concentrates its assets in fewer
issuers, the Fund will be more susceptible to negative events affecting those
issuers. Also, the Fund's investments are concentrated in a particular sector
of the economy. This means that the Fund's investments are not as diversified
as most mutual funds, and far less diversified than the broad securities
markets. The Fund's share price is likely to be more volatile than those of
other mutual funds, and the value of your investment in the Fund may rise or
fall rapidly.

INDEX INVESTING RISK. Because the Fund is managed as an index fund, it will not
ordinarily sell a portfolio security because of the security's poor
performance. The Fund normally buys or sells a portfolio security only to
reflect additions or deletions of stocks that comprise its Index or to adjust
their relative weightings. Although the manager seeks to replicate the
performance of the Index, the Fund may underperform its Index even before
deducting fees and expenses because the Fund must maintain a portion of its
assets in liquid short-term debt securities which historically have generated
significantly lower returns than common stocks. In addition, expenses and
transaction costs, the size of the Fund and the size and frequency of cash
flows into and out of the Fund, and the differences between how and when the
Fund and its Index are valued can also cause differences in performance.

<PAGE>

contract terms. Even a small investment in derivative contracts can have a big
impact on the Fund's stock market exposure. Therefore, using derivatives can
disproportionately increase losses and reduce opportunities for gains when
stock prices 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. This may adversely affect the
Fund's ability to track its Index.

FOREIGN SECURITIES. The Fund may purchase common stocks of the foreign
companies included in the Index, if any. These securities are publicly traded
on the NYSE, AMEX or Nasdaq. The Fund may be exposed to the risks of investing
in foreign securities, which can be affected by currency, political, legal,
regulatory and operational factors.

SMALLER COMPANIES. The Fund's investments may include smaller capitalization
companies whose stocks tend to have more price volatility than larger
companies.

MORE ON THE FUND'S INVESTMENTS AND RISKS

INVESTMENT STRUCTURE. The FORTUNE e-50 Index Fund invests directly in
securities, but may, in the future, invest in securities through one or more
underlying mutual funds, or portfolios.

CHANGE OF INDEX. The Fund may, in the future, track the performance of a
different stock market index. Shareholders will be notified if the Fund tracks
a different index.

FUND PERFORMANCE

Because the Fund is a new fund, performance information for the Fund is not
included in this prospectus.

<PAGE>

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Citi FORTUNE 500 Index Shares or Smith Barney FORTUNE e-50 Index Shares.

------------------------------------------------------------------------------------------------
Fee Table
------------------------------------------------------------------------------------------------
SHAREHOLDER FEES Smith Barney
fees paid directly from your investment Citi Index shares Index shares
------------------------------------------------------------------------------------------------
Redemption fee paid to the Fund, charged only on shares
you sell within 180 days of buying them 0.75% 0.75%
------------------------------------------------------------------------------------------------

ANNUAL OPERATING EXPENSES (% of average net assets)
expenses deducted from Fund assets
------------------------------------------------------------------------------------------------
Management fees 0.50% 0.50%
Distribution (12b-1) fees None 0.20%
Other expenses(1) 0.25% 0.25%
Total annual operating expenses 0.75% 0.95%

</TABLE>

(1) Based on estimated expenses for the fiscal year ending December 31, 2000.
Even if actual other expenses exceed this amount, management has agreed
to cap the Fund's other expenses at 0.25%. This cap is voluntary and may
be modified or terminated at any time.

--------------------------------------------------------------------------------
Expenses on a $10,000 investment
--------------------------------------------------------------------------------

This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you reinvest all dividends;

o you then sell all of your shares at the end of those periods;

o your investment has a 5% return each year - the assumption of a 5% return
is required by the SEC for the purpose of this example and is not a
prediction of the Fund's future performance; and

o the Fund's operating expenses as shown in the table remain the same - the
example does not include voluntary fee caps.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

1 YEAR 3 YEARS
CITI FORTUNE E-50 INDEX SHARES $77 $240

SMITH BARNEY FORTUNE E-50 INDEX SHARES $97 $303

<PAGE>

MORE ABOUT THE INDEX

The FORTUNE e-50 Index currently includes 50 companies selected from the
following subsectors: E-Companies, Internet Communications Companies, Internet
Hardware Companies, and Internet Software and Services Companies. These
companies are listed on the NYSE, AMEX or Nasdaq. The Index was first
calculated on a real-time basis by FORTUNE in December 1999.

The administration of the FORTUNE e-50 Index includes dealing with stock
additions, deletions, or corporate actions - including stock splits, rights
offerings, share issuances or repurchases, special cash dividends, stock
dividends, spin-offs, and corporate mergers.

To be eligible for Index inclusion, a company must generate a minimum of 10% of
its total revenues from Internet activities. The number of Index components and
the identification of the four principal Internet subsectors, among other
factors, may change over time, but no such change is currently anticipated.

Issuers must have principal operations in the U.S., and component stocks must
be duly U.S. registered or be subject to the ordinary reporting requirements of
U.S.-registered securities. ADRs, foreign securities, and global shares are
ordinarily ineligible for inclusion.

All Index components must be listed for trading on the NYSE, Amex or Nasdaq.
Generally, FORTUNE will only consider stocks for Index inclusion if they have a
trading history of at least six months on one of these marketplaces. However,
if the trading history of a stock is shorter than six months but no shorter
than three months, FORTUNE may still determine to include the stock in the
Index if it would otherwise meet the initial inclusion requirements. Index
components must meet the following minimum price-level, trading-volume and
market-value requirements. For initial inclusion in the Index, a stock must
have had a minimum $5.00 daily closing price during the 25 days preceding
initial inclusion, a minimum average daily trading volume of 100,000 shares
during the 25 days preceding initial inclusion, and a minimum $100 million
market value during the 25 days preceding initial inclusion.

Selections are made by the FORTUNE Index Committee. Generally, the FORTUNE
Index Committee chooses those companies that it believes best represent the
Internet economy. In making its selection decisions, the FORTUNE Index
Committee considers the largest companies that operate in the Internet economy
based on total revenues as reported in recent filings with the SEC. The FORTUNE
Index Committee may also consider other factors, such as trading on the U.S.
options markets.

Once included in the Index, a component stock will generally remain in the
Index unless it falls below a price level of $5.00 per share, a daily trading
volume of 100,000 shares, and/or a total market capitalization of $100 million
for 25 consecutive trading days, in which case such stock will ordinarily be
removed from the Index.

These stated eligibility requirements notwithstanding, the FORTUNE Index
Committee reserves the authority to add one or more Index-eligible stocks at
any time or to remove one or more component stocks at any time if it believes
such stock(s) no longer provide(s) adequate representation of the Internet
economy or no longer maintain(s) the quality and/or character of the Index. In
the case of a stock removal, the FORTUNE Index Committee may choose to replace
such stock with an Index-eligible stock at any time but is not required to do
so.

<PAGE>

The FORTUNE Index Committee maintains a proprietary list of publicly traded
companies determined to be operating in the Internet economy. This proprietary
list serves as the basis for an information and trading market database, which
is used for ongoing monitoring and screening purposes. Stocks in the database
include current Index component stocks, otherwise-eligible non-Index stocks,
and other stocks in the Internet economy that are not currently eligible for
Index inclusion. From among the otherwise-eligible non-Index stocks, the
FORTUNE Index Committee identifies the leading potential replacement stocks in
each of the four principal Internet subsectors and assigns a priority ranking
for the order in which such stocks would enter the Index as necessary.

Performance for the FORTUNE e-50 Index is not presented because this Index has
been calculated on a real-time basis only since December 1999.

FORTUNE e-50 is a trademark of Time Inc., used under license. The FORTUNE e-50
Index is licensed for use by SSB Citi Fund Management LLC (SSB Citi) in
connection with the Citi FORTUNE e-50 Fund. Neither the Fund nor the shares of
the Fund have been passed on by FORTUNE, a division of Time Inc., for
suitability for a particular use. Neither the Fund nor the shares are
sponsored, endorsed, sold or promoted by FORTUNE. FORTUNE makes no
representation or warranty regarding the advisability of investing in the Fund
or the shares. FORTUNE makes no representation or warranty and bears no
liability with respect to the Fund, the shares or the use of the Index. FORTUNE
makes no guarantee or representation or warranty as to the accuracy and/or
completeness of the Index or the data included therein or the results to be
obtained from the use thereof. The Index is determined and calculated by
FORTUNE without regard to SSB Citi, the Fund or the shares.

<PAGE>

YOUR ACCOUNT

HOW TO BUY SHARES

Shares of the Funds are offered continuously and purchases may be made Monday
through Friday, except on certain holidays. Shares may be purchased from the
Funds' distributor or a broker-dealer, financial intermediary, financial
institution, or the distributor's financial consultants (each called a Service
Agent) that has entered into a sales or service agreement with the distributor
concerning the Funds. Please call 1-800-995-0134 for information. You may also
purchase Citi Index shares directly from a Fund by calling the Fund's
sub-transfer agent at 1-800-995-0134 between the hours of 8:00 a.m. and 4:00
p.m. You may purchase Smith Barney Index shares directly from a Fund, if you
will own or hold your shares through a qualified retirement plan or are another
investor eligible to buy shares directly from the Fund, by writing the transfer
agent. For more information, call the Fund's transfer agent. Please specify
whether you are purchasing Citi Index or Smith Barney Index shares. If you fail
to specify, your order will be rejected.

The Funds do not, but your Service Agent may, impose a minimum initial or
subsequent investment requirement. Your Service agent may charge you an annual
account maintenance fee.

Shares are purchased at net asset value the next time it is calculated after
your order is received in proper form by the Fund. Each Fund has the right to
reject any purchase order or cease offering Fund shares at any time.

To complete a purchase transaction, you must have sufficient funds in your
account. If you transfer funds by check, the funds will not be available in
your account until the check clears.

If you hold your shares through a Service Agent, your Service Agent may
establish and maintain your account and be the shareholder of record. If you
wish to transfer your account, you may transfer it to another financial
institution, or you may set up an account directly with the Fund's sub-transfer
agent.

Each Fund has Systematic Investment Plans which allow you to automatically
invest a specific dollar amount in your account on a periodic basis. For more
information, please contact the Funds' sub-transfer agent or, if you hold your
shares through a Service Agent, your Service Agent. Cititrade customers should
contact a Cititrade account representative at 1-888-663-CITI[2484] for more
information.

CITITRADER INVESTING

Citi Index shares may be purchased through the Cititrade Program by customers
that have established a Cititrade Account. For more detailed information on how
to open a Cititrade Account, please visit the Cititrade website at
www.mycititrade.com, or call a Cititrade account representative at
1-888-663-CITI[2484].

Once you open your Cititrade Account, you will be subject to the general
account requirements of the Cititrade Program, as described in the Cititrade
account application, and will have access to all the electronic financial
services made available from time to time over the Internet by the Cititrade
Program. This prospectus is readily available for viewing and printing on the
Cititrade website. Please note that www.mycititrade.com is an inactive textual
reference only, meaning that the information contained on the website is not
part of this prospectus and is not incorporated herein by reference.

Investors who have established an account with Cititrade may receive
shareholder information about the Fund they invest in electronically, unless

<PAGE>

they otherwise request to receive the information in paper format. Shareholder
information includes prospectuses, financial reports, confirmations, proxy
solicitations and financial statements. Cititrade shareholders may also receive
other Fund-related correspondence through their e-mail account.

You may incur costs imposed by your Internet service provider for on-line
access to shareholder documents and maintaining an e-mail account. The Funds
reserve the right to deliver paper-based documents to investors in certain
circumstances, at no cost to you.

HOW THE PRICE OF YOUR SHARES IS CALCULATED

You may buy, exchange or redeem shares at their net asset value next determined
after receipt of your request in good order. Each Fund's net asset value is the
value of its assets minus its liabilities. Net asset value is calculated
separately for Citi Index and Smith Barney Index shares. Each Fund calculates
its net asset value every day the NYSE is open. This calculation is done when
regular trading closes on the Exchange (normally 4:00 p.m., Eastern time). The
Exchange is closed on certain holidays listed in the Statement of Additional
Information.

When reliable market prices or quotations are not readily available, or when
the value of a security has been materially affected by events occurring after
a foreign exchange closes, a Fund may price those securities at fair value.
Fair value is determined in accordance with procedures approved by the Funds'
Board of Trustees. Each Fund that uses fair value to price securities may value
those securities higher or lower than another Fund using market quotations to
price the same securities.

International markets may be open on days when U.S. markets are closed and the
value of foreign securities owned by a Fund could change on days when you
cannot buy or redeem shares.

HOW TO SELL SHARES

You may sell (redeem) your shares Monday through Friday, except on certain
holidays. You may make redemption requests in writing through the Funds'
transfer agent or, if you hold your shares through a Service Agent, through
your Service Agent. If you own Citi Index shares and your account application
permits, you may also make redemption requests by telephone.

If you own Smith Barney Index shares and you do not have a brokerage account,
you may be eligible to make redemption requests (except for shares held in
retirement plans) in amounts of up to $10,000 per day through the Fund. You
must complete an authorization form to authorize telephone redemptions. Call
the transfer agent at [1800-451-2000] between 9 a.m. and 4 pm Eastern Time),
Monday through Friday to make such a telephone redemption.

Cititrade customers may redeem shares by contacting a Cititrade account
representative at 1888-663-CITI[2484].

All redemption requests must be in proper form, as determined by the transfer
agent. Each Service Agent is responsible for promptly submitting redemption
requests to the Funds' transfer agent. For your protection, the Funds may
request documentation for large redemptions or other unusual activity in your
account. The Funds will try to confirm that any telephone exchange or
redemption request is genuine by recording calls, asking the caller to provide
certain personal identification information for your account, sending you a
written confirmation or requiring other confirmation procedures from time to
time.

Each Fund has a Withdrawal Plan which allows you to automatically withdraw a
specific dollar amount from your account without a redemption fee on a regular
basis. You must have at least $10,000 (or $5,000 in the case of Smith Barney
Index shares held in retirement plans) in your account to participate in this

<PAGE>

program. If you own Smith Barney Index shares and you wish to participate in a
Withdrawal Plan, all of your dividends and distributions must be reinvested.
For more information, please contact the Funds' sub-transfer agent at
1-800-995-0134 if you hold Citi Index shares or, if you hold your shares
through a Service Agent, your Service Agent, otherwise consult the Statement of
Additional Information. Cititrade customers should contact a Cititrade account
representative at 1-888-663-CITI [2484] for more information.

The price of any redemption of Fund shares will be the NAV the next time it is
calculated after your redemption request has been received in proper form by
the Fund. Fund shares are redeemed without a sales charge, but your redemption
may be subject to a redemption fee. As indicated in its fee table, the FORTUNE
e-50 Index Fund charges a redemption fee, payable to the Fund, on the sale or
exchange of any shares that have been held for less than 180 days. In
attempting to minimize this fee, the Fund will first sell any shares in your
account that are not subject to the fee. If you own your shares through a
401(k) plan or an IRA account, you will not be charged a fee when you redeem
your shares, unless otherwise provided by the terms of your plan or account.
The Fund reserves the right to change the redemption fee criteria.

If you own Citi Index shares, your account will be credited with your
redemption proceeds in federal funds normally on the third business day after
you sell your shares but, in any event, within seven days. If you own Smith
Barney Index shares and you have a brokerage account, your redemption proceeds
will be placed in your account within three business days after your request to
redeem shares is received; in all other cases, your redemption proceeds will be
paid by check mailed to your address of record within three business days after
your request to redeem shares is received. Your redemption proceeds may be
delayed for up to ten days in the case of Citi Index shares or fifteen days in
the case of Smith Barney Index shares if your purchase was made by check. Your
redemption proceeds may also be delayed, or your right to receive redemption
proceeds suspended, if the NYSE is closed (other than on weekends or holidays)
or trading is restricted, or if an emergency exists. Each Fund has the right to
pay your redemption proceeds by giving you securities instead of cash. In that
case, you may incur costs (such as brokerage commissions) converting the
securities into cash. Each Fund may suspend telephone transactions. You should
be aware that you may have to pay taxes on your redemption proceeds.

Your account balance with a Fund may be subject to a $500 minimum. If so, the
Fund reserves the right to close your account if it falls below $500 because of
redemptions. You will have 60 days to make an additional investment. If you do
not increase your balance, a Fund may close your account and send the proceeds
to you. Your shares will be sold at NAV on the day your account was closed.

EXCHANGES

Citi Index shares may be exchanged for shares of any other Fund offered in the
no-load family of CitiFunds. Smith Barney Index shares may be exchanged for
Smith Barney Index shares of any other funds provided that you meet the minimum
investment amount required by that fund. If you own Smith Barney Index shares,
you may also exchange shares for shares of other classes if you are
participating in certain fee based advisory programs or employer-sponsored
retirement plans. Please contact your Salomon Smith Barney Financial Consultant
or your dealer representative for more information. If the Fund shares you are
exchanging were held for less than 180 days, your Fund may charge a redemption
fee as set forth in the Fund's fee table. You may place exchange orders through
the transfer agent, in the case of Citi Index shares, or the subtransfer agent,
in the case of Smith Barney Index shares, or, if you hold your shares through a
Service Agent, through your Service Agent. If you own Citi Index shares, you
may place exchange orders by telephone if your account application permits. If
you own Smith Barney Index shares and you do not have a brokerage account, you
may be eligible to exchange shares through the Fund by telephone. You must
complete an authorization form to authorize telephone transfers. The transfer
agent or your Service Agent can provide you with more information.

<PAGE>

Cititrade customers may exchange Fund shares by contacting a Cititrade account
representative at 1-888-663-CITI [2484].

There is no sales charge on Fund shares you get through an exchange.

The exchange privilege may be changed or terminated at any time in the case of
Citi Index shares. If you own Smith Barney Index shares, the Funds may suspend
or terminate your exchange privilege if you engage in an excessive pattern of
exchanges. You should be aware that you may have to pay taxes on your exchange.

SHARE CERTIFICATES

Each of the Funds issues share certificates to investors in the Smith Barney
Index shares upon written request signed by all registered owners made to the
sub-transfer agent.

If you hold share certificates, the transfer agent must receive the
certificates, endorsed for transfer or with signed stock powers, before an
exchange or redemption of the shares will become effective. In addition, if you
hold share certificates you cannot participate in the Withdrawal Plans with
respect to those shares.

DIVIDENDS

Unless you choose to receive your dividends in cash, you will receive them as
full and fractional additional Fund shares of the same class of shares that you
hold.

Each Fund generally pays dividends, if any, and makes capital gains
distributions, if any, once a year, typically in December. Each Fund may pay
additional distributions and dividends at other times if necessary for the Fund
to avoid a federal tax. Each Fund expects distributions to be primarily from
capital gains.

TAX MATTERS

This discussion of taxes is very general. You should consult your own tax
adviser about your particular situation.

TAXATION OF DISTRIBUTIONS: You will normally have to pay federal income taxes
on the distributions you receive from a Fund, whether you take the
distributions in cash or reinvest them in additional shares. Distributions
designated by a Fund as capital gain dividends are taxable as long-term capital
gains. Other distributions are generally taxable as ordinary income. Some
distributions paid in January may be taxable to you as if they had been paid
the previous December. Each year the Funds will make available to you a report
of your distributions for the prior year and how they are treated for federal
tax purposes.

Fund distributions will reduce a Fund's net asset value per share. As a result,
if you buy shares just before a Fund makes a distribution, you may pay the full
price for the shares and then effectively receive a portion of the purchase
price back as a taxable distribution.

BACKUP WITHHOLDING: The account application asks each new investor to certify
that the investor's Social Security or taxpayer identification number is
correct and that the shareholder is not subject to 31% backup withholding for
failing to report income to the IRS. A Fund may be required to withhold (and

<PAGE>

pay over to the IRS for your credit) 31% of certain distributions it pays you
if you fail to provide this information or otherwise violate IRS regulations.

FOREIGN SHAREHOLDERS: Each Fund will withhold U.S. federal income tax payments
at the rate of 30% (or any lower applicable treaty rate) on taxable dividends
and other payments subject to withholding taxes that are made to persons who
are not citizens or residents of the United States. Distributions received from
a Fund by non-U.S. persons also may be subject to tax under the laws of their
own jurisdictions.

TAXATION OF TRANSACTIONS: If you sell your shares of a Fund, or exchange them
for shares of another Fund, it is considered a taxable event. Depending on your
purchase price and the sales price of the shares you sell or exchange, you may
have a gain or loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.

MANAGEMENT OF THE FUNDS

MANAGER

SSB Citi supervises the overall management of each Fund. SSB Citi is
responsible for recommending the hiring, termination or replacement of any
subadviser and for supervising and monitoring the performance of any
subadviser. State Street Bank and Trust Company (State Street), through its
State Street Global Advisors division, serves as the subadviser to the Funds.
As of December 31, 1999, State Street managed approximately $672 billion in
assets. State Street's principal address is Two International Place, Boston,
Massachusetts 02110.

MANAGEMENT FEES. Each Fund pays SSB Citi and the subadviser an aggregate
management fee at the annual rates noted below:

-------------------------------------------------------------------
FEE, AS PERCENTAGE OF
FUND AVERAGE DAILY NET ASSETS

-------------------------------------------------------------------
FORTUNE 500 Index Fund 0.34%
-------------------------------------------------------------------
FORTUNE e-50 Index Fund 0.50%
-------------------------------------------------------------------

DISTRIBUTION ARRANGEMENTS

The Funds offer two classes of shares, Citi Index shares and Smith Barney Index
shares. These classes have different expense levels. The Funds do not charge
any sales loads, deferred sales loads or other fees in connection with the
purchase of Citi Index shares.

The distributor may make payments for distribution and/or shareholder servicing
activities out of its past profits and other available sources. The distributor
may also make payments for marketing, promotional or related expenses to
dealers. The amount of these payments is determined by the distributor and may
be substantial. SSB Citi or an affiliate may make similar payments under
similar arrangements.

<PAGE>

APPENDIX

Neither the Citi FORTUNE 500 Index Fund nor the Citi FORTUNE e-50 Index Fund,
nor the shares of the Funds (the Shares) are sponsored, endorsed, sold or
promoted by FORTUNE. FORTUNE makes no representation or warranty, express or
implied, to the owners of the Fund or any member of the public regarding the
advisability of investing in securities generally or in the Shares particularly
or the ability of either the FORTUNE 500 Index or the FORTUNE e-50 Index to
track general stock market performance. FORTUNE's only relationship to SSB Citi
or the Funds is the licensing of certain trademarks of FORTUNE and the FORTUNE
500 Index and FORTUNE e-50 Index, which are determined, compiled and calculated
by FORTUNE without regard to SSB Citi, the Funds or the Shares. FORTUNE has no
obligation to take the needs of SSB Citi or the owners of the Funds into
consideration in determining, compiling or calculating the FORTUNE 500 Index or
the FORTUNE e-50 Index. FORTUNE is not responsible for and has not participated
in any determination or calculation made with respect to issuance, sale or
redemption of the Shares. FORTUNE has no obligation or liability in connection
with the Funds or the Shares, including but not limited to, the creating,
promoting, marketing, selling, redeeming or managing of the Funds or the
Shares.

FORTUNE DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE FORTUNE
500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED THEREIN. FORTUNE MAKES
NO WARRANTY, EXPRESS OF IMPLIED, AS TO RESULTS TO BE OBTAINED BY SSB CITI,
OWNERS OF THE SHARES OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE FORTUNE 500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED THEREIN
IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. FORTUNE
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT
TO THE FORTUNE 500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FORTUNE HAVE
ANY LIABILITY FOR ANY DAMAGES, INCLUDING BUT NOT LIMITED TO, SPECIAL PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES.

<PAGE>

The Statement of Additional Information (SAI) provides more details about the
Funds and their policies. The SAI is incorporated by reference into this
Prospectus and is legally part of it.

Additional information about a Fund's investments is included in the Fund's
Annual and Semi-Annual Reports to Shareholders, once available. In a Fund's
Annual Report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance.

The Annual and Semi-Annual Reports for a Fund list its portfolio holdings and
describe its performance.

To obtain free copies of the Funds' SAI and the Funds' Annual and Semi-Annual
Reports, when available, or to make other inquiries, please call 1-800-995-0134
toll-free. Cititrade customers should contact a Cititrade account
representative at 1-888-663-CITI [2484].

The SAI is also available from the Securities and Exchange Commission. You can
find it on the EDGAR Database on the SEC Internet site at http://www.sec.gov.
Information about the Funds (including the SAI) can also be reviewed and copied
at the SEC's Public Reference Room in Washington, DC. You can get information
on the operation of the Public Reference Room by calling the SEC at: (202)
942-8090. Copies may also be obtained upon payment of a duplicating fee by
electronic request to [email protected], or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102.

Citi is a service mark of Citicorp. CitiFunds is a registered service mark of
Citicorp.

SEC File Number

Citi FORTUNE 500 Index Fund
Citi FORTUNE e-50 Index Fund 811-4006

<PAGE>
Statement of
Additional Information
November , 2000

CitiSM FORTUNE 500(R) Index Fund
CitiSM FORTUNE e-50(TM) Index Fund

CitiFunds Trust I (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on April 13, 1984. The Trust offers two classes
of shares of Citi FORTUNE 500 Index Fund and Citi FORTUNE e-50 Index Fund
(collectively, the "Funds"), to which this Statement of Additional Information
relates. The address and telephone number of the Trust are 388 Greenwich
Street, New York, New York 10013, (800) 451-2010.

------------------------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE
------------------------------------------------------------------------------

TABLE OF CONTENTS PAGE
1. The Trust ...........................................................__
2. Investment Objectives and Policies ..................................__
3. Description of Index Methodology and
Permitted Investments and Investment Practices ..................__
4. Investment Restrictions .............................................__
5. Performance Information and Advertising .............................__
6. Determination of Net Asset Value; Valuation of Securities ...........__
7. Additional Information on the Purchase and Sale of Fund Shares ......__
8. Management ..........................................................__
9. Portfolio Transactions ..............................................__
10. Description of Shares, Voting Rights and Liabilities ................__
11. Tax Matters ..........................................................__
12. Financial Statements .................................................__
13. Other Information ....................................................__

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectus dated November , 2000, by which Citi Index Shares of the Funds and
Smith Barney Index Shares of the Funds are offered. This Statement of
Additional Information should be read in conjunction with the applicable
Prospectus. Please call 1-800-995-0134 toll free to obtain a Prospectus for the
Citi Index Shares. A Cititrade customer may obtain copies of the Citi Index
Shares' Prospectus without charge on the Cititrade website at
www.mycititrade.com or by calling 1-888-663-CITI[2484]. Please call
1-800-451-2020 toll free to obtain a Prospectus for the Smith Barney Index
Shares.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.

<PAGE>

1. THE TRUST

CitiFunds Trust I (the "Trust") is an open-end management investment
company organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 13, 1984. The Trust was called Landmark Funds I until
its name was changed effective March 2, 1998. This Statement of Additional
Information relates to two funds offered by the Trust - Citi Fortune 500 Index
Fund and Citi Fortune e-50 Index Fund, (collectively, the "Funds"). Each Fund
is "non-diversified," which means it may invest a larger percentage of its
assets in one issuer than a diversified fund.

Each Fund offers two classes of shares, referred to as "Citi Index Shares"
and "Smith Barney Index Shares" as follows: Citi FORTUNE 500 Index Fund - Citi
FORTUNE 500 Index Shares and Smith Barney FORTUNE 500 Index Shares and Citi
FORTUNE e-50 Index Fund - Citi FORTUNE e-50 Index Shares and Smith Barney
FORTUNE e-50 Index Shares.

SSB Citi Fund Management LLC ("SSB Citi" or the "Manager") supervises the
overall management of the Funds and also provides certain administrative
services to each of the Funds. The selection of investments for the Funds and
the way they are managed depend upon the Indexes which they track and the
conditions and trends in the economy and the financial marketplaces.

SSB Citi has delegated the daily management of the Funds to State Street
Bank and Trust Company ("State Street"), which will act as subadviser through
its State Street Global Advisors division.

The Board of Trustees of the Trust provides broad supervision over the
affairs of the Funds. Shares of the Funds are continuously sold by Salomon
Smith Barney Inc., the Funds' distributor ("Salomon Smith Barney" or the
"Distributor").

At the date of this Statement of Additional Information, the Funds, like
most mutual funds, invest directly in securities. In the future, however, one
or more of the Funds may convert to a master/feeder investment structure. In
the master/feeder investment structure, a Fund, instead of investing directly
in securities, would invest in a mutual fund with the same investment goals and
policies as the Fund's. The underlying mutual fund, referred to as a portfolio,
would buy, hold and sell securities in accordance with these policies. Of
course, there could be no assurance that a Fund or its portfolio would achieve
their goals.

If a Fund invests using the master/feeder structure, all references in
this Statement of Additional Information to a Fund include that Fund's
underlying portfolio unless the context otherwise requires.

<PAGE>

2. INVESTMENT OBJECTIVES AND POLICIES

The investment objective (or goal) of each Fund is as follows*:

CITI FORTUNE 500 INDEX FUND - The Fund's goal is to provide investment
results that, before fees and expenses, correspond to the performance of the
FORTUNE 500(R) Index.

CITI FORTUNE E-50 INDEX FUND - The Fund's goal is to provide investment
results that, before fees and expenses, correspond to the performance of the
FORTUNE e-50( Index.

The investment objective of each Fund may be changed by its Trustees
without approval by that Fund's shareholders, but shareholders will be given
written notice at least 30 days before any change is implemented. Of course,
there can be no assurance that any Fund will achieve its investment objective.

Each Fund invests primarily in securities of companies and other issuers
that make up its corresponding Index or uses derivatives or other investment
techniques to match, as closely as possible, the performance of its Index. Each
Fund may also use various investment techniques, such those described in the
Prospectuses and described under "Description of Permitted Investments and
Investment Practices," below.

The Prospectuses contains a discussion of the principal investment
strategies of each Fund and the principal risks of investing in each Fund. The
following supplements the information contained in the Prospectuses concerning
the investment policies and techniques of each Fund.

3. DESCRIPTION OF INDEX METHODOLOGY
AND PERMITTED INVESTMENTS
AND INVESTMENT PRACTICES

FORTUNE 500 INDEX METHODOLOGY

INDEX CALCULATION METHODOLOGY

The FORTUNE 500 Index is a capitalization-weighted Index in which the
representation of each security in the Index is proportional to its
primary-exchange last sale price times the total number of

--------------------
* FORTUNE 500 and FORTUNE e-50 are each trademarks of Time Inc., used
under license. The FORTUNE 500 Index and FORTUNE e-50 Index are licensed for
use by SSB Citi Fund Management LLC ("SSB Citi") in connection with the Citi
FORTUNE 500 Index Fund and the Citi FORTUNE e-50 Index Fund, respectively.
Neither of the Funds nor the shares of the Funds have been passed on by
FORTUNE, a division of Time Inc., for suitability for a particular use. Neither
of the Funds nor their shares are sponsored, endorsed, sold or promoted by
FORTUNE. FORTUNE makes no representation or warranty regarding the advisability
of investing in the Funds or their shares. FORTUNE makes no representation or
warranty and bears no liability with respect to the Funds, their shares or
their use of the Indexes. FORTUNE makes no guarantee or representation or
warranty as to the accuracy and/or completeness of either Index or the data
included therein or the results to be obtained from the use thereof. Each of
the Indexes are determined and calculated by FORTUNE without regard to SSB
Citi, the Funds or their shares.

<PAGE>

shares outstanding, relative to the total market value of the Index. This
means that at any moment in time, the value of the Index equals the aggregate
market value of the total shares outstanding in each of the component
securities making up the Index, evaluated at their respective primary-exchange
last sale price, divided by a scaling factor (i.e., the "Index divisor"). The
Index divisor is adjusted in response to various corporate actions such as
stock splits, rights offerings, share issuances or repurchases, special cash
dividends, stock dividends, spinoffs, and corporate mergers to assure that
there is no discontinuity in the value of the Index that might otherwise be
caused by such a change.

In addition to a priceonly calculation, the FORTUNE 500 Index is also
calculated on a total rate of return basis. This means that the Index reflects
both the impact of price appreciation and cash dividends for any given period.
Daily dividends for all stocks in the Index are reinvested in the Index as of
the exdividend date.

REAL-TIME CALCULATIONS

Real-time values of the FORTUNE 500 Index are calculated by Bridge
Information Systems America, Inc., and the American Stock Exchange ("AMEX")
(Symbol: FFX) every 15 seconds, based upon primary-exchange last sale prices.
The Index was set to a base level of 1000.00 as of the end of trading on
December 31, 1999.

SHARES OUTSTANDING

The total number of shares outstanding used in the FORTUNE 500 Index
calculation generally represents the entire class(es) or series of shares
trading on the New York Stock Exchange (the "NYSE"), AMEX, and The Nasdaq
National Market. Multiple share classes of a given issuer will be evaluated on
a casebycase basis. FORTUNE may determine to take into account only the leading
issue's shares outstanding and prices, or to aggregate shares outstanding
across multiple classes for any given issuer if, in its judgment, such
aggregation is necessary in order to adequately represent the company in the
Index. In such cases, however, FORTUNE will still utilize the prices only of
the leading issue of such company.

The number of shares outstanding will generally be determined regardless
of ownership concentrations by governments, families, individuals, or another
corporation.

Shares outstanding are updated on a quarterly basis (unless there is a
share change equal to or greater than 5% during the quarter) after the close of
trading on the third Friday of each calendar quarter. A component stock's share
weight may be updated more frequently in response to developments that affect
its shares outstanding by 5% or more. These developments may include, but are
not restricted to, secondary share offerings, repurchases, conversions, or
other corporate actions.

Subject to review, share changes of 5% or more during the quarter will
generally be implemented at the close of trading on the eve of the exdate or as
soon as practicable thereafter.

INDEX ADDITIONS

FORTUNE 500 List companies that are not in the Index, but become eligible
during the year, such as private companies effecting an initial public offering
or companies listed on The Nasdaq SmallCap Market that are transferred to The
Nasdaq National Market, are added to the FORTUNE 500 Index as of the close of
trading on the day that the eligibility criteria are satisfied.

<PAGE>

Companies that are removed from the FORTUNE 500 Index during the year due
to material corporate actions or failure to meet one or more of the eligibility
standards generally are not replaced until the next year following annual
reconstitution.

Spin-offs, provided that they are not acquired by a foreign company and
their revenues are at least 50% of their former parent company's revenues from
continuing operations, may, subject to the FORTUNE Index Committee's review, be
eligible for inclusion in the Index as of the close of trading on the effective
date of the corporate action or upon listing on the NYSE, AMEX, or The Nasdaq
National Market. Otherwise, spin-offs are eligible for inclusion in the Index
after their first full fiscal year of operation.

INDEX REMOVALS

Companies will be reevaluated and removed from the FORTUNE 500 Index under
the following conditions:

1. Closing share price falls below $5.00 for 25 consecutive trading days.
2. Average daily trading volume declines below 100,000 shares for 25
consecutive trading days.
3. Total market capitalization falls below $100 million for 25
consecutive trading days.

Securities that cease to trade due to mergers, acquisitions, leveraged
buyouts, bankruptcies, or other developments of a material nature are deleted
as of the close of trading on the effective date of the corporate action.

Suspended stocks will be considered for deletion after an interval of 10
trading days. The price of any stock deleted will be the last available Nasdaq
Stock Market price or last available primaryexchange-listed prices for those
stocks listed on the NYSE or AMEX. Such stocks may be considered for
reinclusion (at the last available price) if requotation occurs within a
reasonable period.

Final decisions regarding additions to and removals from the Index are the
sole responsibility of the FORTUNE Index Committee.

CORPORATE ACTIONS

Shares outstanding and share prices will automatically be adjusted for
stock splits and stock dividends. Corporate actions such as stock splits and
stock dividends do not require an adjustment to the Index divisor and are
automatically processed.

FORTUNE adjusts the components and/or share quantities of the Index in
response to extraordinary corporate actions that require an adjustment to the
Index divisor as such corporate actions occur.

FORTUNE also may make adjustments to the Index components as a result of
periodic reviews, irrespective of the aforementioned corporate actions.

<PAGE>

FORTUNE E-50 INDEX METHODOLOGY

INDEX CALCULATION METHODOLOGY

The FORTUNE e-50 Index is calculated as a modified capitalizationweighted
Index, with the conventional capitalization weights of the component stocks
adjusted by: (1) proprietary Internet Revenue Factors and (2) application of a
periodic Index weight rebalancing as described below.

Internet Revenue Factors. FORTUNE assigns each Index component stock an
Internet Revenue Factor that represents FORTUNE's proprietary estimate of the
current percentage of the company's total revenue that is attributable to its
Internet activities, broadly defined.

Component stocks are assigned to categories on the basis of revenues that
can be either directly attributed to Internet and Internetrelated activities or
that may be imputed by FORTUNE to Internet and Internetrelated activities.
FORTUNE makes that determination on the basis of (1) its own analysis,
research, and investigation, including information that may already reside in
the public domain, such as Securities and Exchange Commission ("SEC") SEC
filings, (2) direct input from leading stock research analysts, and/or (3)
input from senior executives of the companies themselves.

In making its assignment, FORTUNE first classifies the companies' current
Internetrelated revenues as a percent of total company revenues in the range of
10% to 25%, 25% to 50%, 50% to 75%, or 75% to 100%. Internet Revenue Factors
are then assigned on the basis of the following table.

<TABLE>
<CAPTION>
<S> <C> <C>
Revenue categories Internet Revenue Factor
10% - 25% 0.175
25% - 50% 0.375
50% - 75% 0.625
75% - 100% 1.000
</TABLE>

To help ensure that the FORTUNE e-50 Index reflects the fastmoving markets,
FORTUNE reviews Internet Revenue Factors as needed - at least annually, and
more frequently on a case-bycase basis if warranted by business developments in
the Internet sector.

Nonetheless, with respect to such adjustments FORTUNE has adopted a policy
that the Internet Revenue Factor will not be changed from review to review
unless the underlying revenue percentage changes by at least 15%.

The Internet Revenue Factors are then applied to the raw, unadjusted
market capitalizations of each Index component stock, resulting in
revenueadjusted market capitalizations for each Index component. In the context
of multiple share classes of a given issuer, FORTUNE may determine, on a
casebycase basis, to include only the leading issue's shares outstanding and
prices, or to aggregate shares outstanding across multiple classes for any
given issue if in its judgment such aggregation is necessary to adequately
represent the company in the Index. In such cases, however, FORTUNE would only
utilize the prices of the leading issue of such company. The number of shares
outstanding will generally be determined regardless of ownership concentration
by governments, insiders, families, individuals, or other corporations. The
decision to include tracking stocks will be made on the separate standalone
eligibility merits of each potential Index component.

<PAGE>

Index share quantities used in the actual realtime Index calculation are
then determined by applying the following periodic rebalancing methodology to
the revenueadjusted market capitalizations of the Index component stocks.

REBALANCING METHODOLOGY

The FORTUNE e-50 Index is rebalanced on a quarterly basis in accordance
with asset-diversification requirements.

First, each component stock whose Index weight exceeds 10% of the
aggregate Index market capitalization, as of the close of trading on the
Thursday preceding the second Friday in March, June, September, and December,
will be reduced to 8% and the aggregate amount by which such component stocks
have been reduced will be redistributed equally across all remaining component
stocks with smaller Index weights. As necessary, the redistribution will
repeated in order to ensure that no stock, upon rebalancing in this first step,
has an Index weight greater than 8%.

Second, with respect only to the 50% of the aggregate Index market
capitalization accounted for by the lowest-weighted component stocks, each such
component stock whose Index weight exceeds 4.8% of the aggregate Index market
capitalization will be reduced to 4.5% and the aggregate amount by which such
component stocks have been reduced will be redistributed equally across all
remaining component stocks with smaller Index weights. If after this
redistribution the Index weights of any other component stocks exceed 4.5%,
such Index weights will be reduced to 4.5%, and the aggregate amount by which
such component stocks have been reduced will be redistributed equally across
all remaining component stocks with smaller Index weights. The redistribution
will be repeated as necessary in order to ensure the result that no stock upon
rebalancing in this second step has an Index weight greater than 4.5%.

Once the rebalanced Index weight of each component stock is so determined,
such new Index weights will be multiplied by the aggregate Index market
capitalization and divided by the closing price of each component stock in
order to arrive at rebalanced Index share quantities. These rebalanced Index
share quantities will then be made effective in the Index calculation
ordinarily after the close of trading on the third Friday in March, June,
September, and December.

If necessary, this rebalancing procedure may be applied after the third
Friday (i.e., rather than the Thursday preceding the second Friday) in March,
June, September, and December, or more than once prior to the end of March,
June, September, and December, or at other times if FORTUNE determines it to be
necessary to ensure a welldiversified index. Ordinarily, new rebalanced weights
will be determined by applying the above procedures to the current
revenue-adjusted market capitalization of the Index components. However,
FORTUNE may from time to time determine rebalanced weights, if necessary, by
instead applying the above procedures to the current Index share weights. In
such instances, FORTUNE would announce the different basis for rebalancing
prior to its implementation. FORTUNE reserves the right to modify the
rebalancing methodology in the future, but such modification is not currently
anticipated.

Aside from periodic quarterly rebalancings, Index share quantities will be
updated in proportion to changes in total shares outstanding due to corporate
actions such as stock splits, secondary offerings, stock repurchases, etc.
These updates will be made effective according to the schedule of Index
adjustments described below.

<PAGE>

Stock additions to the Index will ordinarily be assigned Index share
quantities determined on the basis that their resulting percentage weight in
the Index is proportionate to the percentage weight of the two component stocks
whose current revenueadjusted market capitalizations are closest (e.g., one
above and one below) to the current revenueadjusted market capitalization of
the stock addition after the close of trading on the eve of the stock addition.

The FORTUNE Index Committee also reserves the authority to periodically
modify any of the eligibility standards to better represent the Internet
economy as it evolves.

REAL-TIME CALCULATIONS

Real-time values of the FORTUNE e-50 Index are calculated by Bridge
Information Systems America, Inc. and the AMEX (Symbol: FEX) every 15 seconds,
based upon primary-exchange last sale prices. The Index was set to a base level
of 1000.00 as of the end of trading on December 31, 1999.

PERMITTED INVESTMENTS AND INVESTMENT PRACTICES

The Funds may, but need not, invest in all of the investments and utilize
all of the investment techniques described below and in the Prospectuses. The
selection of investments and the utilization of investment techniques depend
on, among other things, the Indexes the Funds track, conditions and trends in
the economy and financial markets and investments being available on terms
that, in the portfolio managers' opinion, make economic sense.

ALL FUNDS

BANK OBLIGATIONS

Each of the Funds may invest in bank obligations, including certificates
of deposit, time deposits, bankers' acceptances and other short-term
obligations of domestic banks, foreign subsidiaries of domestic banks, foreign
branches of domestic banks, and domestic and foreign branches of foreign banks,
domestic savings and loan associations and other banking institutions.
Certificates of deposit ("CDs") are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period of
time. Time deposits ("TDs") are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. TDs that
may be held by a Fund will not benefit from insurance from the Bank Insurance
Fund or the Savings Association Insurance Fund administered by the FDIC.
Bankers' acceptances are credit instruments evidencing the obligation of a bank
to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating- or variable-interest
rates.

Domestic commercial banks organized under Federal law are supervised and
examined by the Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by the FDIC.
Domestic banks organized under state law are supervised and examined by state
banking authorities but are members of the Federal Reserve System only if they

<PAGE>

elect to join. In addition, state banks whose CDs may be purchased by a Fund
are insured by the FDIC (although such insurance may not be of material benefit
to the Fund, depending on the principal amount of the CDs of each bank held by
the Fund) and are subject to Federal examination and to a substantial body of
Federal law and regulation. As a result of Federal or state laws and
regulations, domestic branches of domestic banks whose CDs may be purchased by
the Funds generally are required, among other things, to maintain specified
levels of reserves, are limited in the amounts that they can loan to a single
borrower and are subject to other regulation designed to promote financial
soundness. However, not all of such laws and regulations apply to the foreign
branches of domestic banks.

Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic and foreign branches of foreign banks, such as CDs
and TDs, may be general obligations of the parent bank in addition to the
issuing branch, or may be limited by the terms of a specific obligation and
governmental regulation as well as governmental action in the country in which
a foreign bank has its head office. Such obligations are subject to different
risks than are those of domestic banks. These risks include foreign economic
and political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on interest income.
These foreign branches and subsidiaries are not necessarily subject to the same
or similar regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank. A domestic branch of a foreign bank with
assets in excess of $1 billion may be subject to reserve requirements imposed
by the Federal Reserve System or by the state in which the branch is located if
the branch is licensed in that state.

In addition, Federal branches licensed by the Comptroller of the Currency
and branches licensed by certain states ("State Branches") may be required to:
(1) pledge to the regulator by depositing assets with a designated bank within
the state, a certain percentage of their assets as fixed from time to time by
the appropriate regulatory authority; and (2) maintain assets within the state
in an amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies or
branches within the state. The deposits of Federal and State Branches generally
must be insured by the FDIC if such branches take deposits of less than
$100,000.

In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign branches of domestic banks, by foreign subsidiaries of
domestic banks, by foreign branches of foreign banks or by domestic branches of
foreign banks, the portfolio managers carefully evaluate such investments on a
case-by-case basis.

Each Fund may purchase CDs issued by banks, savings and loan associations
and similar thrift institutions with less than $1 billion in assets, which are
members of the FDIC, provided such Fund purchases any such CD in a principal
amount of not more than $100,000, which amount would be fully insured by the
Bank Insurance Fund or the Savings Association Insurance Fund administered by
the FDIC. Interest payments on such a CD are not insured by the FDIC. No Fund
will own more than one such CD per such issuer.

COMMERCIAL PAPER AND SHORT-TERM CORPORATE DEBT INSTRUMENTS

Each Fund may invest in commercial paper (including variable
amount master demand notes), which consists of short-term, unsecured

<PAGE>

promissory notes issued by corporations to finance short-term credit
needs. Commercial paper is usually sold on a discount basis and has a
maturity at the time of issuance not exceeding nine months. Variable
amount master demand notes are demand obligations that permit the
investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a commercial bank
acting as agent for the payee of such notes whereby both parties have
the right to vary the amount of the outstanding indebtedness on the
notes. The portfolio managers monitor on an ongoing basis the ability
of an issuer of a demand instrument to pay principal and interest on
demand.

Each Fund, also may invest in non-convertible corporate debt securities
(e.g., bonds and debentures) with not more than one year remaining to maturity
at the date of settlement. A Fund, will invest only in such corporate bonds and
debentures that are rated at the time of purchase at least "Aa" by Moody's or
"AA" by S&P. Subsequent to its purchase by a Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating
required for purchase by the Fund. The portfolio managers will consider such an
event in determining whether the Fund should continue to hold the obligation.
To the extent the Fund continues to hold such obligations, it may be subject to
additional risk of default.

INVESTMENT COMPANY SECURITIES

Each Fund may invest in securities issued by other open-end, management
investment companies to the extent permitted under the Investment Company Act
of 1940, as amended (the "1940 Act"). As a general matter, under the 1940 Act
investment in such securities is limited to: (i) 3% of the total voting stock
of any one investment company, (ii) 5% of the Fund's net assets with respect to
any one investment company and (iii) 10% of the Fund's net assets with respect
to all such companies in the aggregate. Investments in the securities of other
investment companies generally will involve duplication of advisory fees and
certain other expenses. Each Fund may also purchase interests of
exchange-listed closed-end funds to the extent permitted under the 1940 Act.

RULE 144A SECURITIES

Each Fund may invest in privately issued securities, including those which
may be resold only in accordance with Rule 144A under the Securities Act of
1933 ("Rule 144A Securities"). Rule 144A Securities are restricted securities
that are not publicly traded. Accordingly, the liquidity of the market for
specific Rule 144A Securities may vary. Delay or difficulty in selling such
securities may result in a loss to the Fund. Privately issued or Rule 144A
securities that are determined by the portfolio managers to be "illiquid" are
subject to the Fund's policy of not investing more than 15% of its net assets
in illiquid securities. The portfolio managers, under guidelines approved by
the board of trustees, will evaluate the liquidity characteristics of each Rule
144A Security proposed for purchase by the Fund on a case-by-case basis and
will consider the following factors, among others, in their evaluation: (1) the
frequency of trades and quotes for the Rule 144A Security; (2) the number of
dealers willing to purchase or sell the Rule 144A Security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
Rule 144A Security; and (4) the nature of the Rule 144A Security and the nature
of the marketplace trades (e.g., the time needed to dispose of the Rule 144A
Security, the method of soliciting offers and the mechanics of transfer).

<PAGE>

FLOATING AND VARIABLE-RATE OBLIGATIONS

Each Fund may purchase floating- and variable-rate obligations. A Fund may
purchase floating- and variable-rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of thirteen months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding thirteen months. Variable rate demand notes
include master demand notes that are obligations that permit the Fund to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
ordinarily has a corresponding right after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating-rate demand obligation is based on
a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the Fund's
right to redeem is dependent on the ability of the borrower to pay principal
and interest on demand. Such obligations frequently are not rated by credit
rating agencies and the Fund may invest in obligations, which are not so rated
only if the portfolio managers determine that at the time of investment the
obligations are of comparable quality to the other obligations in which each
Fund may invest. The portfolio managers, on behalf of the Fund, consider on an
ongoing basis the creditworthiness of the issuers of the floating- and
variable-rate demand obligations in the Fund's portfolio. Each Fund will not
invest more than 10% of the value of its total net assets in floating- or
variable-rate demand obligations whose demand feature is not exercisable within
seven days. Such obligations may be treated as liquid, provided an active
secondary market exists.

ILLIQUID SECURITIES

Each Fund may invest up to 15% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with its investment objective. Such securities may
include securities that are not readily marketable, such as privately issued
securities and other securities that are subject to legal or contractual
restrictions on resale, floating- and variable-rate demand obligations as to
which the Fund cannot exercise a demand feature on not more than seven days'
notice and as to which there is no secondary market and repurchase agreements
providing for settlement more than seven days after notice.

FOREIGN SECURITIES

To the extent included in the Fund's Index, a Fund may invest in foreign
securities, including common stocks, preferred stocks, warrants, convertible
securities and other securities of issuers organized under the laws of
countries other than the United States. Such securities also include equity
interests in foreign investment funds or trusts, real estate investment trust
securities and any other equity or equity-related investment whether
denominated in foreign currencies or U.S. dollars.

<PAGE>

To the extent included in the Fund's Index, each Fund may invest in
foreign securities through ADRs, Canadian Depository Receipts ("CDRs"),
European Depository Receipts ("EDRs"), International Depository Receipts
("IDRs") and Global Depository Receipts ("GDRs") or other similar securities
convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs (sponsored or unsponsored) are receipts typically
issued by a U.S. bank or trust company and traded on a U.S. stock exchange, and
CDRs are receipts typically issued by a Canadian bank or trust company that
evidence ownership of underlying foreign securities. Issuers of unsponsored
ADRs are not contractually obligated to disclose material information in the
U.S. and, therefore, such information may not correlate to the market value of
the unsponsored ADR. EDRs and IDRs are receipts typically issued by European
banks and trust companies, and GDRs are receipts issued by either a U.S. or
non-U.S. banking institution, that evidence ownership of the underlying foreign
securities. Generally, ADRs in registered form are designed for use in US.
securities markets and EDRs and IDRs in bearer form are designed primarily for
use in Europe.

For temporary defensive purposes, each Fund may invest in fixed income
securities of non-U.S. governmental and private issuers. Such investments may
include bonds, notes, debentures and other similar debt securities, including
convertible securities.

Investments in foreign obligations involve certain considerations that are
not typically associated with investing in domestic securities. There may be
less publicly available information about a foreign issuer than about a
domestic issuer. Foreign issuers also are not generally subject to the same
accounting auditing and financial reporting standards or governmental
supervision as domestic issuers. In addition, with respect to certain foreign
countries, taxes may be withheld at the source under foreign tax laws, and
there is a possibility of expropriation or confiscatory taxation, political,
social and monetary instability or diplomatic developments that could adversely
affect investments in, the liquidity of, and the ability to enforce contractual
obligations with respect to, securities of issuers located in those countries.

From time to time, investments in other investment companies may be the
most effective available means by which a Fund may invest in securities of
issuers in certain countries. Investment in such investment companies may
involve the payment of management expenses and, in connection with some
purchases, sales loads, and payment of substantial premiums above the value of
such companies' portfolio securities. At the same time, the Fund would continue
to pay its own management fees and other expenses.

Investment income on certain foreign securities in which the Funds may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which a Fund would be subject.

To the extent included in the Fund's Index, a Fund may invest in
securities of non-U.S. issuers that impose restrictions on transfer within the
United States or to United States persons. Although securities subject to such
transfer restrictions may be marketable abroad, they may be less liquid than
securities of non-U.S. issuers of the same class that are not subject to such
restrictions.

<PAGE>

REPURCHASE AGREEMENTS

Each Fund may engage in a repurchase agreement with respect to any
security in which it is authorized to invest, although the underlying security
may mature in more than thirteen months. A Fund may enter into repurchase
agreements wherein the seller of a security to the Fund agrees to repurchase
that security from the Fund at a mutually agreed-upon time and price that
involves the acquisition by the Fund of an underlying debt instrument, subject
to the seller's obligation to repurchase, and the Fund's obligation to resell,
the instrument at a fixed price usually not more than one week after its
purchase. The Fund's custodian has custody of, and holds in a segregated
account, securities acquired as collateral by the Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of the SEC to be
loans by the Funds. The Funds may enter into repurchase agreements only with
respect to securities of the type in which they may invest, including
government securities and mortgage-related securities, regardless of their
remaining maturities, and require that additional securities be deposited with
the custodian if the value of the securities purchased should decrease below
resale price. The portfolio managers monitor on an ongoing basis the value of
the collateral to assure that it always equals or exceeds the repurchase price.
Certain costs may be incurred by a Fund in connection with the sale of the
underlying securities if the seller does not repurchase them in accordance with
the repurchase agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the securities, disposition of the securities by
a Fund may be delayed or limited. While it does not presently appear possible
to eliminate all risks from these transactions (particularly the possibility of
a decline in the market value of the underlying securities, as well as delay
and costs to the Funds in connection with insolvency proceedings), it is the
policy of the each Fund to limit repurchase agreements to selected creditworthy
securities dealers or domestic banks or other recognized financial
institutions. Each Fund considers on an ongoing basis the creditworthiness of
the institutions with which it enters into repurchase agreements.

REVERSE REPURCHASE AGREEMENTS

Each Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund and the agreement by
the Fund to repurchase the securities at an agreed-upon price, date and
interest payment. When a Fund enters into reverse repurchase transactions,
securities of a dollar amount equal in value to the securities subject to the
agreement will be segregated. The segregation of assets could impair the Fund's
ability to meet its current obligations or impede investment management if a
large portion of the Fund's assets are involved. Reverse repurchase agreements
are considered to be a form of borrowing by the Fund. In the event of the
bankruptcy of the other party to a reverse repurchase agreement, a Fund could
experience delays in recovering the securities sold. To the extent that, in the
meantime, the value of the securities sold has changed, the Fund could
experience a loss.

SECURITIES LOANS

Each Fund may lend securities from its portfolio to brokers, dealers and
financial institutions (but not individuals) if cash, U.S. Government
securities or other high quality debt obligations equal to at least 100% of the
current market value of the securities loaned (including accrued interest
thereon) plus the interest payable to the Fund with respect to the loan is

<PAGE>

maintained with the Fund. In determining whether or not to lend a security to a
particular broker, dealer or financial institution, the portfolio managers
consider all relevant facts and circumstances, including the size,
creditworthiness and reputation of the broker, dealer, or financial
institution. Any loans of portfolio securities are fully collateralized based
on values that are marked to market daily. No Fund will enter into any
portfolio security lending arrangements having a duration longer than one year.
Any securities that a Fund receives as collateral do not become part of its
portfolio at the time of the loan and, in the event of a default by the
borrower, the Fund will, if permitted by law, dispose of such collateral except
for such part thereof that is a security in which the Fund is permitted to
invest. During the time securities are on loan, the borrower will pay the Fund
any accrued income on those securities, and the Fund may invest the cash
collateral and earn income or receive an agreed-upon fee from a borrower that
has delivered cash-equivalent collateral. No Fund will lend securities having a
value that exceeds one-third of the current value of its total assets. Loans of
securities by a Fund are subject to termination at the Fund's or the borrower's
option. Each Fund may pay reasonable administrative and custodial fees in
connection with a securities loan and may pay a negotiated portion of the
interest or fee earned with respect to the collateral to the borrower or the
placing broker. Borrowers and placing brokers are not permitted to be
affiliated, directly or indirectly, with the Fund, the Manager, or the
Subadviser.

FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY TRANSACTIONS

Each Fund may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward-commitment
basis involve a risk of loss if the value of the security to be purchased
declines, or the value of the security to be sold increases, before the
settlement date. Although the Funds will generally purchase securities with the
intention of acquiring them, a Fund may dispose of securities purchased on a
when-issued, delayed-delivery or a forward-commitment basis before settlement
when deemed appropriate by the Manager or the subadviser. Securities purchased
on a when-issued or forward-commitment basis may expose the Fund to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward-commitment basis can involve
the additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself.

Each Fund will segregate cash, U.S. Government obligations or other
high-quality debt instruments in an amount at least equal in value to the
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, the Fund will segregate additional liquid assets on a daily
basis so that the value of the segregated assets is equal to the amount of such
commitments.

SHORT SALES

The Funds may seek to hedge investments or realize additional gains
through short sales. Short sales are transactions in which a 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, a Fund must borrow the security
to make delivery to the buyer. A Fund then is obligated to replace the security

<PAGE>

borrowed by purchasing it at the market price at or prior to the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by a Fund. Until the security is replaced, a Fund is
required to repay the lender any dividends or interest that accrue during the
period of the loan. To borrow the security, a Fund also may be required to pay
a premium, which would increase the cost of the security sold. A portion of the
net proceeds of the short sale may be retained by the broker (or by the Fund's
custodian in a special custody account), to the extent necessary to meet margin
requirements, until the short position is closed out. A Fund will also incur
transaction costs in effecting short sales.

A Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which a
Fund replaces the borrowed security. A Fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of the premiums,
dividends, interest or expenses a Fund may be required to pay in connection
with a short sale. An increase in the value of a security sold short by a Fund
over the price at which it was sold short will result in a loss to the Fund,
and there can be no assurance that a Fund will be able to close out the
position at any particular time or at an acceptable price. Thus a Fund's losses
on short sales are potentially unlimited. The Funds may also engage in short
sales of non-U.S. currencies as described under "Foreign Currency Exchange
Transactions" below.

EURO CONVERSION

Certain European countries have joined the European Economic and Monetary
Union (EMU). Each EMU participant's currency began a conversion into a single
European currency, called the euro, on January 1, 1999, to be completed by July
1, 2002. The consequences of the euro conversion for foreign exchange rates,
interest rates and the value of European securities held by the Funds, to the
extent such securities are held in the Funds' Indexes, are presently unclear.
European financial markets, and therefore, the Funds, could be adversely
affected if the euro conversion does not continue as planned or if a
participating country chooses to withdraw from the EMU. The Funds could also be
adversely affected if the computing, accounting and trading systems used by its
service providers are not capable of processing transactions related to the
euro. These issues may negatively affect the operations of the companies in
which the Funds invest as well.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS

To the extent included in a Fund's Index, a Fund may invest in foreign
securities which involve currency risks. The U.S. dollar value of a foreign
security tends to decrease when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and tends to increase
when the value of the U.S. dollar falls against such currency. To attempt to
minimize risks to a Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies, the Fund may engage in foreign currency
transactions on a spot (i.e., cash) basis and may purchase or sell forward
foreign currency exchange contracts ("forward contracts"). A forward contract
is an obligation to purchase or sell a specific currency for an agreed price at
a future date that is individually negotiated and privately traded by currency
traders and their customers. A Fund may also purchase and sell foreign currency
futures contracts (see "Futures Contracts" below).

Forward contracts establish an exchange rate at a future date. These
contracts are transferable in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward contracts
eliminate fluctuations in the prices of a Fund's portfolio securities or in
foreign exchange rates, or prevent loss if the prices of these securities
should decline.

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Each Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security (a
"transaction hedge"). In addition, when the portfolio managers believe that a
foreign currency may suffer a substantial decline against the U.S. dollar, a
Fund may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency, or when the portfolio managers believe
that the U.S. dollar may suffer a substantial decline against the foreign
currency, the Fund may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount (a "position hedge').

Each Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the portfolio
managers believe that the U.S. dollar value of the currency to be sold pursuant
to the forward contract will fall whenever there is a decline in the U.S.
dollar value of the currency in which the portfolio securities are denominated
(a "cross-hedge").

Foreign currency hedging transactions are an attempt to protect the Fund
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures.

The cost to a Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or commissions are
involved. Currency exchange dealers may, however, realize a profit on the
difference (the "spread") between the prices at which they are buying and
selling various currencies. The portfolio managers consider on an ongoing basis
the creditworthiness of the institutions with which a Fund enters into foreign
currency transactions. The use of forward currency exchange contracts does not
eliminate fluctuations in the underlying prices of the securities, but it does
establish a rate of exchange that can be achieved in the future. If a
devaluation generally is anticipated, a Fund may not be able to contract to
sell the currency at a price above the devaluation level it anticipates.

Forward contracts are traded over-the-counter and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves
certain risks beyond those associated with transactions in the futures and
options contracts described herein.

At the maturity of a forward contract, a Fund will either deliver the
non-U.S. currency or terminate its contractual obligation to deliver the
non-U.S. currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the non-U.S. currency. If a Fund engages in an offsetting transaction, the Fund

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will incur a gain or a loss (as described below) to the extent that there has
been movement in forward contract prices. If a Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
non-U.S. currency. Should forward prices decline during the period between the
date a Fund enters into a forward contract for the sale of the non-U.S.
currency and the date it enters into an offsetting contract for the purchase of
such currency, the Fund will realize a gain to the extent the selling price of
the currency exceeds the purchase price of the currency. Should forward prices
increase, the Fund will suffer a loss to the extent that the purchase price of
the currency exceeds the selling price of the currency.

Where a Fund enters into a forward contract with respect to securities it
holds denominated in the non-U.S. currency, it is impossible to forecast with
precision the market value of Fund securities at the expiration of the
contract. Accordingly, it may be necessary for a Fund to purchase additional
non-U.S. currency on the spot market if the market value of the security is
less than the amount of non-U.S. currency the Fund is obligated to deliver and
if a decision is made to sell the security and make delivery of such currency.
Conversely, it may be necessary to sell on the spot market some of the non-U.S.
currency received upon the sale of the security if its market value exceeds the
amount of such currency the Fund is obligated to deliver.

The Funds may also engage in short sales of non-U.S. currencies in which a
Fund would sell a currency that it did not own in anticipation of a fall in the
value of that currency relative to U.S. dollars or another foreign currency. In
order for the Fund to deliver the currency sold short, it would be required to
purchase the currency. If the expected decline occurs, the Fund would gain the
difference between the price at which it sold the currency, and the price it
paid for the currency. However, if the price of the currency increases, the
Fund would suffer a loss to the extent that the purchase price of the currency
exceeds the price of the currency it sold short. A Fund's losses on such short
sales are potentially unlimited.

Each Fund has established procedures consistent with policies of the SEC
concerning forward contracts and short sales. Those policies currently require
that an amount of a Fund's assets equal to the amount of the purchase be held
aside or segregated to be used to pay for the commitment or that the Fund
otherwise covers its position in accordance with applicable regulations and
policies.

The Funds may purchase put options on a currency in an attempt to protect
against currency-rate fluctuations. When a Fund purchases a put option on a
currency, the Fund will have the right to sell the currency for a fixed amount
in U.S. dollars, or other currency. Conversely, where a rise in the value of
one currency is projected against another, the Fund may purchase call options
on the currency, giving it the right to purchase the currency for a fixed
amount of U.S. dollars or another currency. Each Fund may purchase put or call
options on currencies, even if the Fund does not currently hold or intend to
purchase securities denominated in such currencies.

The benefit to the Fund from purchases of currency options will be reduced
by the amount of the premium and related transaction costs. In addition, where
currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options.

The Funds may write options on currencies for hedging purposes or
otherwise in an attempt to achieve their investment objectives. For example,
where a Fund anticipates a decline in the U.S. dollar value of a foreign
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the

<PAGE>

expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund may be offset by the
amount of the premium received. If the expected decline does not occur, the
Fund may be required to sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a foreign security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, a Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of the
premium. However, the writing of a currency option will constitute only a
partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on currencies, a Fund also may be required to forgo all or a portion of
the benefits which might otherwise have been obtained from favorable movements
in exchange rates. A Fund could also write put options on a currency, even if
it does not own, or intend to purchase, any securities denominated in that
currency. In that case, if the expected increase does not occur, the Fund would
be required to purchase the currency at a price that is greater than the
current exchange rate for the currency, and the losses in this case could
exceed the amount of premium received for writing the options, and could be
unlimited.

Options on foreign currencies are traded on U.S. or foreign exchanges or
in the over-the-counter market. Each of the Funds may enter into transactions
in options on foreign currencies that are traded in the over-the-counter
market. These transactions are not afforded the protections provided to traders
on organized exchanges or those regulated by the CFTC. In particular,
over-the-counter options are not cleared and guaranteed by a clearing
corporation, thereby increasing the risk of counterparty default. In addition,
there may not be a liquid market on these options, which may prevent a Fund
from liquidating open positions at a profit prior to exercise or expiration, or
to limit losses in the event of adverse market conditions.

The purchase and sale of foreign currency options are subject to the risks
of the availability of a liquid secondary market and counterparty risk, as
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible interventions by governmental authorities and the effects of other
political and economic events. In addition, the value of a Fund's positions in
foreign currency options could be adversely affected by (1) other complex
foreign political and economic factors, (2) lesser availability of data on
which to make trading decisions than in the United States, (3) delays in the
Fund's ability to act upon economic events occurring in foreign markets during
non-business hours in the United States or at the Manager's or Subadviser's
place of business, and (4) imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States.

In addition, because foreign currency transactions occurring in the
interbank market generally involve substantially larger amounts than those that
may be involved in the use of foreign currency options, the Funds may be
disadvantaged by having to deal in an odd-lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.

There is no systematic reporting of last-sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively

<PAGE>

smaller transactions (less than $1 million) where rates may be less favorable.
The interbank market in foreign currencies is a global, around-the-clock
market. To the extent that the U.S. options markets, or other markets used by
the portfolio managers are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that may not be reflected in the U.S. or other markets
used by the Funds.

Put and call options on non-U.S. currencies written by a Fund will be
covered by segregation of cash and liquid securities in an amount sufficient to
discharge the Fund's obligations with respect to the option, by acquisition of
the non-U.S. currency or of a right to acquire such currency (in the case of a
call option) or the acquisition of a right to dispose of the currency (in the
case of a put option), or in such other manner as may be in accordance with the
requirements of any exchange on which, or the counterparty with which, the
option is traded and applicable laws and regulations.

The Funds may engage in proxy hedges and cross hedges. For example, in a
proxy hedge, a Fund, having purchased a security, would sell a currency whose
value is believed to be closely linked to the currency in which the security is
denominated. Interest rates prevailing in the country whose currency was sold
might be expected to be closer to those in the U.S. and lower than those of
securities denominated in the currency of the original holding. This type of
hedging entails greater risk than a direct hedge because it is dependent on a
stable relationship between the two currencies paired as proxies and the
relationships can be very unstable at times. A Fund may enter into a cross
hedge if a particular currency is expected to decrease against another
currency. For example, the Fund would sell the currency expected to decrease
and purchase a currency which is expected to increase against the currency sold
in an attempt to protect against declines in value of the Fund's holdings
denominated in the currency sold.

Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
traded in currencies other than the U.S. dollar. Because the securities
underlying ADRs are traded primarily in non-U.S. currencies, changes in
currency exchange rates will affect the value of these receipts. For example, a
decline in the U.S. dollar value of another currency in which securities are
primarily traded will reduce the U.S. dollar value of such securities, even if
their value in the other non-U.S. currency remains constant, and thus will
reduce the value of the receipts covering such securities. A Fund may employ
any of the above described foreign currency hedging techniques to protect the
value of its assets invested in depositary receipts.

Each of the Funds may also purchase and sell foreign currency futures
contracts as more fully discussed under "Futures Contracts" below, and engage
in currency swaps and other similar transactions as more fully discussed under
"Swaps and Related Transactions" below.

Of course, a Fund is not required to enter into the transactions described
above and does not do so unless deemed appropriate by the portfolio managers.
It should be realized that under certain circumstances, the Funds may not be
able to hedge against a decline in the value of a currency, even if the
portfolio managers deem it appropriate to try to do so, because doing so would

<PAGE>

be too costly. It should also be realized that transactions entered into to
protect the value of a Fund's securities against a decline in the value of a
currency (even when successful) do not eliminate fluctuations in the underlying
prices of the securities. Additionally, although hedging transactions may tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, they also tend to limit any potential gain which might result should
the value of such currency increase.

Furthermore, the Funds' use of foreign currency exchange transactions may
involve leveraging. Leveraging adds increased risks to a Fund, because the
Fund's losses may be out of proportion to the amount invested in the
instrument--a relatively small investment may lead to much greater losses.

OPTIONS

Each of the Funds may write call and put options and purchase call and put
options on securities for hedging and nonhedging purposes. Call and put options
written by a Fund will be covered in the manner set forth below, or the Fund
will segregate cash or liquid securities equal to the value of the securities
underlying the option.

A call option written by a Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if a Fund
holds a call on the same security and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise
price of the call written if the difference is maintained by a Fund in cash or
liquid securities in a segregated account. A put option written by a Fund is
"covered" if the Fund maintains cash or liquid securities with a value equal to
the exercise price in a segregated account or else holds a put on the same
security and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written or where the exercise price of the put held is less than the exercise
price of the put written if the difference is maintained by the Fund in cash or
liquid securities in a segregated account. Put and call options written by a
Fund may also be covered in such other manner as may be in accordance with the
requirements of the exchange on which, or the counterparty with which, the
option is traded, and applicable laws and regulations. Even if the Fund's
obligation is covered, it is subject to the risk of the full change in value of
the underlying security from the time the option is written until exercise.
Covering an option does not protect the Fund from risk of loss.

When a Fund writes a call option, the Fund, in return for a fee, or
"premium," agrees to sell a security at the exercise price, if the holder
exercises the right to purchase prior to the expiration date of the call
option. If the Fund holds the security in question, the Fund gives up some or
all of the opportunity to profit from the increase in the market price of the
security during the life of the option. The Fund retains the risk of loss
should the price of the security decline. If the option expires unexercised,
the Fund realizes a gain equal to the premium, which may be offset by a decline
in price of the underlying security. If the option is exercised, the Fund
realizes a gain or loss equal to the difference between the Fund's cost for the
underlying security and the proceeds of sale (exercise price minus commissions)
plus the amount of the premium.

A Fund may terminate a call option it has written before it expires by
entering into a closing purchase transaction. A Fund may enter into closing
purchase transactions in order to free itself to sell the underlying security
or to write another call on the security, realize a profit on a previously
written call option, or protect a security from being called in an unexpected
market rise. Any profits from closing a purchase transaction may be offset by a

<PAGE>

decline in the value of the underlying security. Conversely, because increases
in the market price of a call option will generally reflect increases in the
market price of the underlying security, if the Fund holds the underlying
security any loss resulting from a closing purchase transaction is likely to be
offset in whole or in part by unrealized appreciation of the underlying
security. If the Fund does not hold the underlying security, the Fund's loss
could be unlimited.

A Fund may write put options in an attempt to enhance its current return.
Such option transactions may also be used as a limited form of hedging against
an increase in the price of securities that a Fund plans to purchase. A put
option written by the Fund gives the holder the right to sell, and, in return
for a premium, obligates the Fund to buy, a security at the exercise price at
any time before the expiration date.

In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, a Fund may also
receive a return on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the
risk that it may be required to purchase the underlying security for an
exercise price higher than its then current market value, resulting in a loss
to the Fund, unless the security later appreciates in value. A Fund may
terminate a put option it has written before it expires by a closing purchase
transaction. Any loss from this transaction may be partially or entirely offset
by the premium received on the terminated option.

Each of the Funds may purchase options for hedging purposes or to increase
the Fund's return. When put options are purchased as a hedge against a decline
in the value of portfolio securities, the put options may be purchased at or
about the same time that the Fund purchases the underlying security or at a
later time. If such decline occurs, the put options will permit a Fund to sell
the securities at the exercise price, or to close out the options at a profit.
By using put options in this way, the Fund will reduce any profit it might
otherwise have realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs. Similarly, when put options
are used for non-hedging purposes, the Fund may make a profit when the price of
the underlying security or instrument falls below the strike price. If the
price of the underlying security or instrument does not fall sufficiently, the
options may expire unexercised and the Fund would lose the premiums it paid for
the option. If the price of the underlying security or instrument falls
sufficiently and the option is exercised, the amount of any resulting profit
will be offset by the amount of premium paid.

Each of the Funds may purchase call options to hedge against an increase
in the price of securities that the Fund anticipates purchasing in the future.
If such increase occurs, the call option will permit the Fund to purchase the
securities at the exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund and the premium would be lost.

Call options may also be purchased in order to increase a Fund's return at
a time when the call is expected to increase in value due to anticipated
appreciation of the underlying security. Prior to its expiration, a call option
may be sold by a Fund in closing sale transactions, which are sales by the
Fund, prior to the exercise of options that it has purchased, of options of the

<PAGE>

same series. Profit or loss from the sale will depend upon whether the amount
received is more or less than the premium paid for the option plus the related
transaction costs. The purchase of call options on securities that a Fund owns,
when a Fund is substantially fully invested, is a form of leverage, up to the
amount of the premium and related transaction costs, and involves risks of loss
and of increased volatility.

Each of the Funds may write (sell) call and put options and purchase call
and put options on securities indexes. The delivery requirements of options on
securities indexes differ from options on securities. Unlike a securities
option, which contemplates the right to take or make delivery of securities at
a specified price, an option on a securities index gives the holder the right
to receive a cash "exercise settlement amount" equal to (1) the amount, if any,
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise, multiplied by (2) a fixed "index multiplier."
Receipt of this cash amount will depend upon the closing level of the
securities index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the
option. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position
in securities index options prior to expiration by entering into a closing
transaction on an exchange or it may allow the option to expire unexercised.

Each of the Funds may cover call options on securities indexes by owning
securities whose price changes, in the opinion of the portfolio managers, are
expected to be similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities without additional cash
consideration (or for additional cash consideration held in a segregated
account) upon conversion or exchange of other securities in its portfolio.
Where a Fund covers a call option on a securities index through ownership of
securities, such securities may not match the composition of the index and, in
that event, the Fund will not be fully covered and could be subject to risk of
loss in the event of adverse changes in the value of the index. A Fund may also
cover call options on securities indexes by holding a call on the same index
and in the same principal amount as the call written where the exercise price
of the call held (a) is equal to or less than the exercise price of the call
written or (b) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or liquid securities in a
segregated account. A Fund may cover put options on securities indexes by
maintaining cash or liquid securities with a value equal to the exercise price
in a segregated account or by holding a put on the same securities index and in
the same principal amount as the put written where the exercise price of the
put held is equal to or greater than the exercise price of the put written or
where the exercise price of the put held is less than the exercise price of the
put written if the difference is maintained by the Fund in cash or liquid
securities in a segregated account. Put and call options on securities indexes
may also be covered in such other manner as may be in accordance with the rules
of the exchange on which, or the counterparty with which, the option is traded,
and applicable laws and regulations. Investors should be aware that although a
Fund will only write call or put options on securities indexes that are
covered, covering an option does not protect the Fund from risk of loss.

A Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised
or is closed out at a profit. If the value of an index on which a Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset

<PAGE>

all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation
in the Fund's stock investments. By writing a put option, a Fund assumes the
risk of a decline in the index. To the extent that the price changes of
securities owned by a Fund correlate with changes in the value of the index,
writing covered put options on indexes will increase the Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.

Each of the Funds may purchase put options on securities indexes when the
portfolio managers believe that there may be a decline in the prices of the
securities covered by the index. The Fund will realize a gain if the put option
appreciates in excess of the premium paid for the option. If the option does
not increase in value, the Fund's loss will be limited to the premium paid for
the option plus related transaction costs.

A Fund may purchase call options on securities indexes to take advantage
of an anticipated broad market advance, or an advance in an industry or market
segment. A Fund will bear the risk of losing all or a portion of the premium
paid if the value of the index does not rise. The purchase of call options on
securities indexes when a Fund is substantially fully invested is a form of
leverage, up to the amount of the premium and related transaction costs, and
involves risks of loss and of increased volatility.

Securities index options are subject to position and exercise limits and
other regulations imposed by the exchange on which they are traded. The ability
of a Fund to engage in closing purchase transactions with respect to securities
index options depends on the existence of a liquid secondary market. However,
no such secondary market may exist, or the market may cease to exist at some
future date, for some options. No assurance can be given that a closing
purchase transaction can be effected when the portfolio managers desire that a
Fund engage in such a transaction.

Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular security, whether a Fund
realizes a gain or loss from purchasing or writing options on an index depends
upon movements in the level of prices in the market generally or, in the case
of certain indexes, in an industry or market segment, rather than movements in
the price of a particular security. As a result, successful use by a Fund of
options on securities indexes is subject to the portfolio managers' ability to
predict correctly movements in the direction of the market generally or of a
particular industry. This ability contemplates different skills and techniques
from those used in predicting changes in the price of individual securities.
When a Fund purchases or writes securities index options as a hedging
technique, the Fund's success will depend upon the extent to which price
movements in the portion of a securities portfolio being hedged correlate with
price movements of the securities index selected.

A Fund's purchase or sale of securities index options in an attempt to
enhance performance involves speculation and may be very risky and cause
losses, which, in the case of call options written, are potentially unlimited.

The Funds may purchase over-the-counter ("OTC") or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation assures that all transactions are properly executed, the
responsibility for performing all transactions with respect to OTC options
rests solely with the writer and the holder of those options. A listed call

<PAGE>

option writer, for example, is obligated to deliver the underlying stock to the
clearing organization if the option is exercised, and the clearing organization
is then obligated to pay the writer the exercise price of the option. If a Fund
were to purchase a dealer option, however, it would rely on the dealer from
whom it purchased the option to perform if the option were exercised. If the
dealer fails to honor the exercise of the option by the Fund, the Fund would
lose the premium it paid for the option and the expected benefit of the
transaction.

Listed options may have a liquid market while dealer options have none.
Consequently, a Fund will generally be able to realize the value of a dealer
option it has purchased only by exercising it or reselling it to the dealer who
issued it. Similarly, when a Fund writes a dealer option, it generally will be
able to close out the option prior to the expiration only by entering into a
closing purchase transaction with the dealer to which the Fund originally sold
the option. Although the Funds will seek to enter into dealer options only with
dealers who will agree to and that are expected to be capable of entering into
closing transactions with the Funds, there can be no assurance that a Fund will
be able to liquidate a dealer option at a favorable price at any time prior to
expiration. The inability to enter into a closing transaction may result in
material losses to a Fund. Until a Fund, as an OTC call option writer, is able
to effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair a Fund's ability to sell
portfolio securities or, with respect to currency options, currencies at a time
when such sale might be advantageous. In the event of insolvency of the other
party, the Fund may be unable to liquidate a dealer option.

Each of the Funds may purchase and write options on foreign currencies as
more fully described in "Foreign Currency Exchange Transactions" above. Each of
the Funds may also purchase or write call options on futures contracts as more
fully described in "Options on Futures Contracts" below.

The Funds' use of options may involve leveraging. Leveraging adds
increased risks to a Fund, because the Fund's losses may be out of proportion
to the amount invested in the instrument--a relatively small investment may
lead to much greater losses.

FUTURES CONTRACTS

Each of the Funds may enter into futures contracts, including stock index
futures contracts, and, in the case of a Fund that tracks an index including
foreign securities, foreign currency futures contracts. Such investment
strategies may be used for hedging purposes and for nonhedging purposes,
subject to applicable law.

A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an
index of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at
a specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for by
the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts in the
United States have been designed by exchanges that have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and
must be executed through a futures commission merchant, or brokerage firm,
which is a member of the relevant contract market. Futures contracts trade on
these markets, and the exchanges, through their clearing organizations,
guarantee that the contracts will be performed as between the clearing members
of the exchange. Futures contracts may also be traded on markets outside the
U.S.

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Although futures on individual equity securities are not available in
United States markets, futures contracts on individual equity securities may be
available in foreign markets, and may be purchased or sold by the Funds.

The Funds may buy and sell stock index futures contracts to attempt to
increase investment return, to gain stock market exposure while holding cash
available for investments and redemptions, or to protect against a decline in
the stock market.

A stock index futures contract is a contract to buy or sell units of a
stock index at a specified future date at the price agreed upon when the
contract is made. A unit is the current value of the stock index.

The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index (the "S&P 100
Index") is composed of 100 selected common stocks, most of which are listed on
the NYSE. The S&P 100 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 100 Index, contracts are
to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180,
one contract would be worth $18,000 (100 units x $180). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the
contract. For example, if a Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4) reduced by transaction costs. If the Fund enters
into a futures contract to sell 100 units of the stock index at a specified
future date at a contract price of $180 and the S&P 100 Index is at $182 on
that future date, the Fund will lose $200 (100 units x loss of $2) increased by
transaction costs.

Positions in index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures.

A Fund may purchase and sell foreign currency futures contracts to attempt
to protect its current or intended foreign investments from fluctuations in
currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the cost of
foreign-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant. A
Fund may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. In the event such decline
occurs, the resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the futures
contracts. A Fund may also sell futures contracts in a foreign currency even if
it does not hold securities denominated in such currency, if it anticipates a
decline in the value of such currency.

Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts
on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. Where the Fund purchases futures contracts under

<PAGE>

such circumstances, however, and the prices of securities to be acquired
instead decline, the Fund will sustain losses on its futures position which
could reduce or eliminate the benefits of the reduced cost of portfolio
securities to be acquired. The Fund could also purchase futures contracts on a
currency if it expected the currency to rise in value, even if the Fund did not
anticipate purchasing securities denominated in that currency.

A currency futures contract sale creates an obligation by the Fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of
an amount of currency at a specified future time at a specified price. Although
the terms of currency futures contracts specify actual delivery or receipt, in
most instances the contracts are closed out before the settlement date without
the making or taking of delivery of the currency. Closing out of a currency
futures contract is effected by entering into an offsetting purchase or sale
transaction.

In connection with transactions in foreign currency futures, a Fund will
be required to deposit as "initial margin" an amount of cash or short-term
government securities equal to from 5% to 8% of the contract amount.
Thereafter, subsequent payments (referred to as "variation margin") are made to
and from the broker to reflect changes in the value of the futures contract.

Although the use of futures for hedging, if correctly used, may minimize
the risk of loss due to a decline in the value of the hedged position (e.g., if
a Fund sells a futures contract to protect against losses in the debt
securities held by the Fund), they do not eliminate the risk of loss and at the
same time the futures contract limits any potential gain which might result
from an increase in value of a hedged position. Futures markets can be highly
volatile and transactions of this type carry a high risk of loss. Moreover, a
relatively small adverse market movement with respect to these transactions may
result not only in loss of the original investment but also in unquantifiable
further loss exceeding any margin deposited.

In addition, the ability effectively to hedge all or a portion of a Fund's
investments through transactions in futures contracts depends on the degree to
which movements in the value of the securities underlying such contracts
correlate with movements in the value of the Fund's securities. If the values
of the securities being hedged do not move in the same direction as the
underlying securities, the Fund's hedging strategy might not be successful and
the Fund could sustain losses on these hedging transactions which would not be
offset by gains on the Fund's other investments or, alternatively, the gains on
the hedging transaction might not be sufficient to offset losses on the Fund's
other investments. It is also possible that there may be a negative correlation
between the security underlying a futures contract and the securities being
hedged, which could result in losses both on the hedging transaction and the
securities. In these and other instances, the Fund's overall return could be
less than if the hedging transactions had not been undertaken. Similarly, even
where a Fund enters into futures transactions other than for hedging purposes,
the effectiveness of its strategy may be affected by lack of correlation
between changes in the value of the futures contracts and changes in value of
the underlying securities, currencies or indexes.

The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. This could require a Fund to post additional
cash or cash equivalents as the value of the position fluctuates. Further,

<PAGE>

rather than meeting additional variation margin requirements, investors may
close out futures contracts through offsetting transactions which could distort
the normal relationship between the cash and futures markets. Second, there is
the potential that the liquidity of the futures market may be lacking. Prior to
expiration, a futures contract may be terminated only by entering into a
closing purchase or sale transaction, which requires a secondary market on the
contract market on which the futures contract was originally entered into.
While a Fund will establish a futures position only if there appears to be a
liquid secondary market therefor, there can be no assurance that a liquid
secondary market will exist for any particular futures contract at any specific
time. In that event, it may not be possible to close out a position held by the
Fund, which could require the Fund to purchase or sell the instrument
underlying the futures contract or to meet ongoing variation margin
requirements. The inability to close out futures positions also could have an
adverse impact on the ability effectively to use futures transactions for
hedging or other purposes.

The effective use of futures strategies depends on, among other things,
the Fund's ability to terminate futures positions at times when the portfolio
managers deem it desirable to do so. Although no Fund will enter into a futures
position unless the portfolio managers believe that a liquid secondary market
exists for such futures contract, there is no assurance that the Fund will be
able to effect closing transactions at any particular time or at an acceptable
price. Each Fund generally expects that its futures transactions will be
conducted on recognized U.S. and foreign securities and commodity exchanges.

The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract during
a single trading day and prohibit trading beyond such limits once they have
been reached. The trading of futures contracts also is subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal trading activity, which could at times make it
difficult or impossible to liquidate existing positions or to recover excess
variation margin payments. Each contract market on which futures contracts are
traded has established a number of limitations governing the maximum number of
positions which may be held by a trader, whether acting alone or in concert
with others. The portfolio managers do not believe that these trading and
position limits will have an adverse impact on the hedging strategies regarding
the Funds' investments.

Investments in futures contracts also entail the risk that if the
portfolio managers' investment judgment about the general direction of equity
markets or other economic factors is incorrect, the Fund's overall performance
may be poorer than if any such contract had not been entered into.

Regulations of the CFTC require that each Fund enter into transactions in
futures contracts for hedging purposes only, in order to assure that it is not
deemed to be a "commodity pool" under such regulations. In particular, CFTC
regulations require that all short futures positions be entered into for the
purpose of hedging the value of investment securities held by a Fund, and that
all long futures positions either constitute bona fide hedging transactions, as
defined in such regulations, or have a total value not in excess of an amount
determined by reference to certain cash and securities positions maintained for
the Fund, and accrued profits on such positions. In addition, no Fund may
purchase or sell such instruments if, immediately thereafter, the sum of the
amount of initial margin deposits on its existing futures positions and
premiums paid for options on futures contracts would exceed 5% of the market
value of the Fund's total assets. The Funds' ability to engage in the hedging
transactions described herein may be limited by the additional policies and
concerns of various Federal and state regulatory agencies.

<PAGE>

In addition, an amount of cash or liquid securities will be maintained by
each Fund in a segregated account so that the amount so segregated, plus the
applicable margin held on deposit, will be approximately equal to the amount
necessary to satisfy the Fund's obligations under the futures contract, or a
Fund will otherwise "cover" its positions in accordance with applicable
policies and regulations.

The portfolio managers use a variety of internal risk management
procedures to ensure that derivatives use is consistent with the each Fund's
investment objective, does not expose the Fund to undue risk and is closely
monitored. These procedures include providing periodic reports to the board of
trustees concerning the use of derivatives.

OPTIONS ON FUTURES CONTRACTS

Each of the Funds may purchase and write options to buy or sell futures
contracts in which the Fund may invest. Such investment strategies may be used
for hedging purposes and for non-hedging purposes, subject to applicable law.

An option on a futures contract provides the holder with the right to
enter into a "long" position in the underlying futures contract, in the case of
a call option, or a "short" position in the underlying futures contract, in the
case of a put option, at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Upon exercise of the option
by the holder, the contract market clearinghouse establishes a corresponding
short position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of initial and variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.

A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's
profits or loss on the transaction.

Options on futures contracts that are written or purchased by a Fund on
U.S. exchanges are traded on the same contract market as the underlying futures
contract, and, like futures contracts, are subject to regulation by the CFTC
and the performance guarantee of the exchange clearinghouse. In addition,
options on futures contracts may be traded on foreign exchanges.

Each of the Funds may cover the writing of call options on futures
contracts (a) through purchases of the underlying futures contract, (b) through
ownership of the instrument, or instruments included in the index underlying
the futures contract, or (c) through the holding of a call on the same futures
contract and in the same principal amount as the call written where the

<PAGE>

exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or securities in a
segregated account. A Fund may cover the writing of put options on futures
contracts (a) through sales of the underlying futures contract, (b) through
segregation of cash or liquid securities in an amount equal to the value of the
security or index underlying the futures contract, (c) through the holding of a
put on the same futures contract and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than
the exercise price of the put written or where the exercise price of the put
held is less than the exercise price of the put written if the difference is
maintained by a Fund in cash or liquid securities in a segregated account. Put
and call options on futures contracts may also be covered in such other manner
as may be in accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations. Upon the exercise of a call option
on a futures contract written by a Fund, the Fund will be required to sell the
underlying futures contract which, if the Fund has covered its obligation
through the purchase of such contract, will serve to liquidate its futures
position. Similarly, where a put option on a futures contract written by a Fund
is exercised, the Fund will be required to purchase the underlying futures
contract which, if the Fund has covered its obligation through the sale of such
contract, will close out its futures position.

The writing of a call option on a futures contract may be used as a
partial hedge against declining prices of the securities deliverable on
exercise of the futures contract. A Fund will receive an option premium when it
writes the call, and, if the price of the futures contract at expiration of the
option is below the option exercise price, the Fund will retain the full amount
of this option premium, which provides a partial hedge against any decline that
may have occurred in the Fund's security holdings. Similarly, the writing of a
put option on a futures contract may be used as a partial hedge against
increasing prices of the securities deliverable upon exercise of the futures
contract. If a Fund writes an option on a futures contract and that option is
exercised, the Fund may incur a loss, which loss will be reduced by the amount
of the option premium received, less related transaction costs. A Fund's
ability to hedge effectively through transactions in options on futures
contracts depends on, among other factors, the degree of correlation between
changes in the value of securities held by the Fund and changes in the value of
its futures positions. This correlation cannot be expected to be exact, and the
Fund bears a risk that the value of the futures contract being hedged will not
move in the same amount, or even in the same direction, as the hedging
instrument. Thus it may be possible for a Fund to incur a loss on both the
hedging instrument and the futures contract being hedged.

Each of the Funds may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline or changes in interest or
exchange rates, a Fund could, in lieu of selling futures contracts, purchase
put options thereon. In the event that such decrease occurs, it may be offset,
in whole or part, by a profit on the option. Conversely, where it is projected
that the value of securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts.

Each of the Funds may also purchase options on futures contracts for
non-hedging purposes, in order to take advantage of projected market advances
or declines or changes in interest rates or exchange rates. For example, a Fund
can buy a call option on a bond futures contract when the portfolio managers
believe that the underlying futures contract will rise. If prices do rise, the

<PAGE>

Fund could exercise the option and acquire the underlying futures contract at
the strike price or the Fund could offset the long call position with a sale
and realize a profit. Or, a Fund can sell a call option if the portfolio
managers believe that futures prices will decline. If prices decline, the call
will likely not be exercised and the Fund would profit. However, if the
underlying futures contract should rise, the buyer of the option would likely
exercise the call against the Fund and acquire the underlying futures position
at the strike price; the Fund's loss in this case could be unlimited.

The Funds' use of options on futures contracts may involve leveraging.
Leveraging adds increased risks to a Fund, because the Fund's losses may be out
of proportion to the amount invested in the instrument--a relatively small
investment may lead to much greater losses.

INDEXED SECURITIES

Indexed securities include commercial paper, certificates of deposit, and
other fixed-income securities whose values at maturity or coupon interest rates
are determined by reference to the returns of a specified index. Indexed
securities can be affected by stock and bond prices as well as changes in
interest rates and the creditworthiness of their issuers and may not track
their corresponding index as accurately as direct investments in that index.

CONVERTIBLE SECURITIES

Each Fund may invest in convertible securities. A convertible security is
a fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of
common stock or other equity securities of the same or a different issuer.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to similar non-convertible securities.
While providing a fixed-income stream (generally higher in yield than the
income derivable from common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible
security's underlying common stock.

In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security)
or its "conversion value" (i.e., its value upon conversion into its underlying
stock). As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

U.S. GOVERNMENT SECURITIES

Each Fund may invest in various types of U.S. Government obligations. U.S.
Government obligations include securities issued or guaranteed as to principal
and interest by the U.S. Government its agencies or instrumentalities. Payment
of principal and interest on U.S. Government obligations (i) may be backed by
the full faith and credit of the United States (as with U.S. Treasury

<PAGE>

obligations and Government National Mortgage Association ("GNMA") certificates)
or (ii) may be backed solely by the issuing or guaranteeing agency or
instrumentality itself (as with Federal National Mortgage Association ("FNMA")
notes). In the latter case, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate repayment,
which agency or instrumentality may be privately owned. There can be no
assurance that the U.S. Government would provide financial support to its
agencies or instrumentalities where it is not obligated to do so. As a general
matter, the value of debt instruments, including U.S. Government obligations,
declines when market interest rates increase and rises when market interest
rates decrease. Certain types of U.S. Government obligations are subject to
fluctuations in yield or value due to their structure or contract terms.

SWAPS AND RELATED TRANSACTIONS

Each Fund may enter into currency swaps, equity swaps and other types of
available swap agreements, such as caps, collars and floors, for the purpose of
attempting to obtain a particular desired return at a lower cost to the Fund
than if the Fund had invested directly in an instrument that yielded that
desired return. An equity swap is an agreement to exchange cash flows on a
principal amount based on changes in the values of the reference index. A
currency swap is an agreement to exchange cash flows on a principal amount
based on changes in the values of the currency exchange rates. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty.

Each Fund may also enter into index swaps in pursuit of its investment
objective. Index swaps involve the exchange by a Fund with another party of
cash flows based upon the performance of an index of securities or a portion of
an index of securities that usually include dividends or income. In each case,
the exchange commitments can involve payments to be made in the same currency
or in different currencies. The Funds will usually enter into swaps on a net
basis. In so doing, the two payment streams are netted out, with the Funds
receiving or paying, as the case may be, only the net amount of the two
payments. If a Fund enters into a swap, it will maintain a segregated account
on a gross basis, unless the contract provides for a segregated account on a
net basis. If there is a default by the other party to such a transaction, the
Fund will have contractual remedies pursuant to the agreements related to the
transaction.

The use of index swaps is a highly specialized activity that involves
investment techniques and risks different from those associated with ordinary
portfolio security transactions. There is no limit, except as provided below,
on the amount of swap transactions that may be entered into by the Fund. These
transactions generally do not involve the delivery of securities or other
underlying assets or principal. Accordingly, the risk of loss with respect to
swaps generally is limited to the net amount of payments that the Fund is
contractually obligated to make.

The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific equity, currency or other factor that
determines the amount of payments to be made under the arrangement. If the
portfolio managers are incorrect in their forecasts of such factors, the
investment performance of the Fund would be less than what it would have been
if these investment techniques had not been used. If a swap agreement calls for
payments by the Fund, the Fund must be prepared to make such payments when due.
No Fund will enter into any swap unless the portfolio managers deem the
counterparty to be creditworthy. If the counterparty's creditworthiness
declined, the value of the swap agreement would be likely to decline,
potentially resulting in losses. If the counterparty defaults, the Fund's risk
of loss consists of the net amount of payments that the Fund is contractually
entitled to receive. Each Fund anticipates that it will be able to eliminate or
reduce its exposure under these arrangements by assignment or other disposition
or by entering into an offsetting agreement with the same or another
counterparty.

<PAGE>

A Fund will maintain liquid assets with its custodian or otherwise cover
its current obligations under swap transactions in accordance with current
regulations and policies applicable to the Fund.

Swap agreements are subject to each Fund's overall limit that not more
than 15% of its net assets may be invested in illiquid securities.

Engaging in swap and related transactions may involve leveraging.
Leveraging adds increased risks to a Fund, because the Fund's losses may be out
of proportion to the amount invested in the instrument--a relatively small
investment may lead to much greater losses.

INDEX-RELATED SECURITIES

Each Fund may invest in certain types of derivative securities that enable
investors to purchase or sell shares in a portfolio of securities that seeks to
track the performance of an underlying index or a portion of an Index. Such
index-related securities include among others DIAMONDS (interests in a
portfolio of securities that seeks to track the performance of the Dow Jones
Industrial Average), SPDRs or Standard & Poor's Depositary Receipts (interests
in a portfolio of securities that seeks to track the performance of the S&P 500
Index), WEBS or World Equity Benchmark Shares (interests in a portfolio of
securities that seeks to track the performance of a benchmark index of a
particular foreign country's stocks), and the Nasdaq-100 Trust (interests in a
portfolio of securities of the largest and most actively traded non-financial
companies listed on the Nasdaq). Such securities are similar to index mutual
funds, but they are traded on various stock exchanges or secondary markets. The
value of these securities is dependent upon the performance of the underlying
index on which they are based. Thus, these securities are subject to the same
risks as their underlying indexes as well as the securities that make up those
indexes. For example, if the securities comprising an index that an
index-related security seeks to track perform poorly, the index-related
security will lose value.

ADDITIONAL DISCLOSURE REGARDING DERIVATIVES

In some cases, the derivatives purchased by the Funds are standardized
contracts traded on commodities exchanges or boards of trade in the U.S. or in
foreign countries. This means that the exchange or board of trade guarantees
counterparty performance. Over-the-counter derivatives, which may be traded in
the U.S. and in foreign countries, are not guaranteed. The securities
underlying options and futures contracts traded by a Fund may include domestic
as well as foreign securities. Investors should recognize that transactions
involving foreign securities or foreign currencies, and transactions entered
into in foreign countries may involve considerations and risks not typically
associated with investing in U.S. markets.

Transactions in options, futures contracts, options on futures contracts
and forward contracts entered into for non-hedging purposes involve greater
risk and could result in losses which are not offset by gains on other
portfolio assets. For example, a Fund may sell futures contracts on an index of
securities in order to profit from any anticipated decline in the value of the
securities comprising the underlying index. In such instances, any losses on
the futures transactions will not be offset by gains on any portfolio
securities comprising such index, as might occur in connection with a hedging
transaction.

The use of certain derivatives, such as futures, forward contracts, and
written options may involve leverage for the Funds because they create an
obligation, or indebtedness, to someone other than the Funds' shareholders and
enable a Fund to participate in gains and losses on an amount that exceeds its
initial investment. If a Fund writes a stock put option, for example, it makes

<PAGE>

no initial investment, but instead receives a premium in an amount equal to a
fraction of the price of the underlying stock. In return, the Fund is obligated
to purchase the underlying stock at a fixed price, thereby being subject to
losses on the full stock price.

Likewise, if a Fund purchases a futures contract, it makes an initial
margin payment that is typically a small percentage of the contract's price.
However, because of the purchase, the Fund will participate in gains or losses
on the full contract price.

Other types of derivatives provide the economic equivalent of leverage
because they display heightened price sensitivity to market fluctuations, such
as changes in stock prices or interest rates. These derivatives magnify a
Fund's gain or loss from an investment in much the same way that incurring
indebtedness does. For example, if a Fund purchases a stock call option, the
Fund pays a premium in an amount equal to a fraction of the stock price, and in
return, the Fund participates in gains on the full stock price. If there were
no gains, the Fund generally would lose the entire initial premium.

Options, futures contracts, options on futures contracts, forward
contracts and swaps may be used alone or in combinations in order to create
synthetic exposure to securities in which a Fund otherwise invests.

The Funds may take advantage of opportunities in the area of options and
futures contracts and options on futures contracts and any other derivative
investments which are not presently contemplated for use by the Funds or which
are not currently available but which may be developed, to the extent such
opportunities are both consistent with a Fund's investment objective and
legally permissible for the Fund.

The use of derivatives may increase the amount of taxable income of a Fund
and may affect the amount, timing and character of a Fund's income for tax
purposes, as more fully discussed herein in the section entitled "Tax Matters."

ADDITIONAL INFORMATION

At times, a substantial portion of a Fund's assets may be invested in
securities as to which a Fund, by itself or together with other funds and
accounts managed by SSB Citi and its affiliates, holds all or a major portion.
Although SSB Citi generally considers such securities to be liquid because of
the availability of an institutional market for such securities, it is possible
that, under adverse market or economic conditions or in the event of adverse
changes in the financial condition of the issuer, a Fund could find it more
difficult to sell these securities when SSB Citi believes it advisable to do so
or may be able to sell the securities only at prices lower than if they were
more widely held. Under these circumstances, it may also be more difficult to
determine the fair value of such securities for purposes of computing a Fund's
net asset value. In order to enforce its rights in the event of a default under
such securities, a Fund may be required to participate in various legal
proceedings or take possession of and manage assets securing the issuer's
obligations on such securities. This could increase the Fund's operating
expenses and adversely affect a Fund's net asset value. In addition, a Fund's
intention to qualify as a "regulated investment company" under the Internal
Revenue Code may limit the extent to which the Fund may exercise its rights by
taking possession of such assets.

<PAGE>

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 and other
short-term instruments, and may not be pursuing their investment goals.

4. INVESTMENT RESTRICTIONS

The Trust, on behalf of the Funds, has adopted the following policies
which may not be changed with respect to any Fund without approval by holders
of a majority of the outstanding voting securities of that Fund, which as used
in this Statement of Additional Information means the vote of the lesser of (i)
67% or more of the outstanding voting securities of the Fund present at a
meeting at which the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy, or (ii) more than
50% of the outstanding voting securities of the Fund. The term "voting
securities" as used in this paragraph has the same meaning as in the 1940 Act.

None of the Funds may:

(1) Borrow money, if such borrowing is specifically prohibited
by the 1940 Act or the rules and regulations promulgated
thereunder.

(2) Make loans to other persons if such loans are specifically
prohibited by the 1940 Act or the rules and regulations
promulgated thereunder.

(3) Underwrite securities issued by other persons, except that
all or any portion of the assets of the Fund may be invested in
one or more investment companies, to the extent not prohibited
by the 1940 Act, the rules and regulations thereunder, and
exemptive orders granted under such Act, and except insofar as
the Fund may technically be deemed an underwriter under the
Securities Act in selling a security.

(4) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of
business (the foregoing shall not be deemed to preclude any
Fund from purchasing or selling futures contracts or options
thereon, and each Fund reserves the freedom of action to hold
and to sell real estate acquired as a result of the ownership
of securities by the Fund).

(5) Issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the
1940 Act or the rules and regulations promulgated thereunder.

In addition, Citi FORTUNE 500 Index Fund may not:

Concentrate its investments in any particular industry, but if
it is deemed appropriate for the achievement of the Fund's

<PAGE>

investment objectives, up to 25% of its assets, at market value
at the time of each investment, may be invested in any one
industry, except that positions in futures contracts shall not
be subject to this restriction.

The Citi FORTUNE e-50 Index Fund may not:

Purchase or sell the securities of any issuer, if, as a result
of such purchase or sale, less than 25% of the total assets of
the Fund would be invested in the securities of issuers
principally engaged in the Internet sector, provided that the
Fund may invest without limit in short-term corporate and
government bonds and notes and money market instruments for
temporary defensive purposes.

The Funds reserve the right to change their names from time to
time.

For purposes of restriction (1) above, covered mortgage dollar rolls and
arrangements with respect to securities lending are not treated as borrowing.
For purposes of restriction (4) above, the Funds may purchase and sell
securities issued by companies that invest or deal in real estate or real
estate investment trusts.

If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in this Registration Statement is adhered
to at the time an investment is made or assets are so utilized, a later change
in percentage resulting from changes in the value of the securities or a later
change in the rating of the securities held for the Fund will not be considered
a violation of policy.

5. PERFORMANCE INFORMATION AND ADVERTISING

Fund performance may be quoted in advertising, shareholder reports and
other communications in terms of total rate of return. All performance
information is historical and is not intended to indicate future performance.
Total rates of return fluctuate in response to market conditions and other
factors, and the value of a Fund's shares when redeemed may be worth more or
less than their original cost.

Each Fund may provide its period, annualized, cumulative and average
annual "total rates of return". The "total rate of return" refers to the change
in the value of an investment in the Fund over a stated period, reflects any
change in net asset value per share and is compounded to include the value of
any shares purchased with any dividends or capital gains declared during such
period. Period total rates of return may be "annualized". An "annualized" total
rate of return assumes that the period rate of return is generated over a
one-year period. Average annual total return figures represent the average
annual percentage change over the specified period. Cumulative total return
figures are not annualized and represent the aggregate percentage or dollar
value changes over a stated period of time.

A total rate of return quotation for a Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such period
and with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of

<PAGE>

such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting
1 from the result.

Average annual total return is a measure of a Fund's performance over
time. It is determined by taking a Fund's performance over a given period and
expressing it as an average annual rate. The average annual total return
quotation is computed in accordance with a standardized method prescribed by
SEC rules. The average annual total return for a specific period is found by
taking a hypothetical $1,000 initial investment in Fund shares on the first day
of the period, reducing the amount to reflect the maximum sales charge, and
computing the redeemable value of the investment at the end of the period. The
redeemable value is then divided by the initial investment, and its quotient is
taken to the Nth root (N representing the number of years in the period) and is
subtracted from the result, which is then expressed as a percentage. The
calculation assumes that all income and capital gains distributions have been
reinvested in Fund shares at net asset value on the reinvestment dates during
the period.

Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of a
period, deducting (as applicable) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by each Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period.

Each Fund may provide annualized "yield" quotations. The "yield" of a Fund
refers to the income generated by an investment in the Fund over a 30-day or
one-month period (which period is stated in any such advertisement or
communication). This income is then annualized; that is, the amount of income
generated by the investment over that period is assumed to be generated each
month over a one year period and is shown as a percentage of the maximum public
offering price on the last day of that period. A "yield" quotation, unlike a
total rate of return quotation, does not reflect changes in net asset value.

Any current yield quotation for a Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a) raising
to the sixth power the sum of 1 plus the quotient obtained by dividing the
Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the public offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result
by 2.

In computing total rates of return and yield quotations, all Fund expenses
are included. However, fees that may be charged directly to a shareholder by
other financial intermediaries are not included. Of course, any such fees will
reduce the shareholder's net return on investment.

Historical data on the Indexes may be used to promote the applicable Fund.
The historical Index data presented from time to time is not intended to
suggest that an investor would have achieved comparable results by investing in
any one equity security or in managed portfolios of equity securities, such as
the Funds, during the periods shown.

<PAGE>

The Funds are newly-offered and do not have performance information as of
the date of this Statement of Additional Information.

6. DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES

The net asset value per share of each Fund is determined for each class on
each day during which the NSYE is open for trading ("Business Day"). As of the
date of this Statement of Additional Information, the Exchange is open for
trading every weekday except for the following holidays (or the days on which
they are observed): New Year's Day, Martin Luther King Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. This determination of net asset value is made once each day
as of the close of regular trading on the Exchange by adding the market value
of all securities and other assets attributable to a class, then subtracting
the liabilities attributable to that class, and then dividing the result by the
number of outstanding shares of the class. The net asset value per share is
effective for orders received and accepted by the transfer agent prior to its
calculation.

For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates or if there are no market rates, at
fair value, at the time of valuation. Equity securities are valued at the last
sale price on the exchange on which they are primarily traded or on the NASDAQ
system for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. Securities listed on a foreign
exchange are valued at the last quoted price available before the time when net
assets are valued. Bonds and other fixed income securities (other than
short-term obligations) are valued on the basis of valuations furnished by a
pricing service, use of which has been approved by the Board of Trustees of the
Trust. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. In
certain instances, securities are valued on the basis of valuations received
from a single dealer, which is usually an established market maker in the
security. In these instances, additional dealer valuations are obtained
monthly. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of the Trust. Futures contracts are normally valued at the settlement
price on the exchange on which they are traded. Securities for which there are
no such valuations are valued at fair value as determined in good faith by or
at the direction of the Board of Trustees of the Trust.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
Exchange. Trading may also take place on days on which the Exchange is closed
and on which it is not possible to purchase or redeem shares of the Funds. If
events materially affecting the value of foreign securities occur between the
time when the exchange on which they are traded closes and the time when a
Fund's net asset value is calculated, such securities may be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees of the Trust.

Interest income on long-term obligations held for a Fund is determined on
the basis of interest accrued plus amortization of "original issue discount"

<PAGE>

(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued plus amortization of premiums.

7. ADDITIONAL INFORMATION ON THE PURCHASE AND SALE
OF FUND SHARES

The Funds offer two classes of shares, Citi Index Shares and Smith Barney
Index Shares. Both Citi Index Shares and Smith Barney Index Shares of the Funds
are sold at net asset value without an initial sales charge. There are no
deferred sales charges when you sell your shares. However, as indicated in the
Funds' Prospectuses, each Fund charges a redemption fee payable to the Fund, on
the sale or exchange of any shares that have been held for less than 180 days.

Citi Index Shares may be purchased from the Distributor or a broker-dealer
financial intermediary, financial institution, or the Distributor's financial
consultants (each called a "Service Agent") that has entered into a sales or
service agreement with the Distributor concerning the Funds. Shares may be
purchased through the Cititrade Program by customers that have established a
Cititrade Account. For more detailed information on how to open a Cititrade
Account, please visit the Cititrade website at www.mycititrade.com or call a
Cititrade account representative at 1-888-663-CITI [2484].

Smith Barney Index Shares may be purchased from a Service Agent or from a
Fund, but only if the investor is investing through certain qualified plans or
certain dealer representatives. Service Agents may charge their customers an
annual account maintenance fee in connection with a brokerage account through
which an investor purchases or holds Smith Barney Index Shares. Smith Barney
Index Shares held directly at the sub-transfer agent are not subject to a
maintenance fee.

The Funds do not, but your Service Agent may, impose a minimum initial or
subsequent investment requirement with respect to Citi Index Shares. Investors
may open a Smith Barney Index Shares account in a Fund by making an initial
investment of at least $1,000 for each account, or $250 for an IRA or a
Self-Employed Retirement Plan, in Smith Barney Index Shares of a Fund.
Subsequent investments of at least $50 may be made for Smith Barney Index
Shares. For shareholders purchasing Smith Barney Index Shares of the Fund
through the Systematic Investment Plan on a monthly basis, the minimum initial
investment requirement and subsequent investment requirement for Smith Barney
Index Shares is $25. For shareholders purchasing Smith Barney Index Shares of a
Fund through the Systematic Investment Plan on a quarterly basis, the minimum
initial investment required and the subsequent investment requirement is $50.
There are no minimum investment requirements for Smith Barney Index Shares for
employees of Citigroup, Inc. and its subsidiaries, including Salomon Smith
Barney, unitholders who invest distributions from a Unit Investment Trust
sponsored by Salomon Smith Barney, and Directors/Trustees of any of the Smith
Barney mutual funds, and their spouses and children. A Fund reserves the right
to waive or change minimums.

Citi Index Shares are not subject to a distribution and service fee. Smith
Barney Index Shares of the Funds may pay a distribution and service fee of up
to 0.20% of the average daily net assets represented by these shares.

During periods of drastic economic or market changes or severe weather or
other emergencies, shareholders may experience difficulties implementing a

<PAGE>

telephone or Internet exchange or redemption. In such an event, another method
of instruction, if available, should be considered. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These procedures may include recording of the telephone
instructions and verification of a shareholder's identity by asking for the
shareholder's name, address, telephone number, Social Security number, account
number, or password identification number. If these or other reasonable
procedures are not followed, the Funds or their transfer agent may be liable
for any losses to a shareholder due to unauthorized or fraudulent instructions.
Otherwise, the shareholders will bear all risk of loss relating to a redemption
or exchange by telephone.

Systematic Withdrawal Plan. The Citi Index Shares' Systematic Withdrawal
Plan permits you to have a specified dollar amount (minimum of $100 per
withdrawal) automatically withdrawn from your account without a redemption fee
on a regular basis if you have at least $10,000 in your Fund account at the
time of enrollment. You are limited to one withdrawal per month under the Plan.
You may receive your withdrawals by check, or have the monies transferred
directly into your bank account. Or you may direct that payments be made
directly to a third party. To participate in the Plan, you must complete the
appropriate forms provided by the sub-transfer agent or, if you hold your
shares through a Service Agent, by your Service Agent. Cititrade customers
should contact a Cititrade account representative at 1-888-663-CITI[2484] for
more information.

The Smith Barney Index Shares' Withdrawal Plan is available to
shareholders of a Fund who own Smith Barney Index Shares of the Fund with a
value of at least $10,000 and who wish to receive specific amounts of cash
monthly or quarterly. Withdrawals of at least $50 may be made without a
redemption fee under the Withdrawal Plan by redeeming as many Smith Barney
Index Shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. As it generally would not be advantageous to a shareholder to make
additional investments in Smith Barney Index Shares at the same time he or she
is participating in the Withdrawal Plan, purchases by such shareholders in
amounts of less than $5,000 ordinarily will not be permitted.

Smith Barney Index shareholders who wish to participate in the Withdrawal
Plan and who hold their shares in certificate form must deposit their share
certificates with the sub-transfer agent as agent for Withdrawal Plan members.
All dividends and distributions on shares in the Withdrawal Plan are reinvested
automatically at net asset value in additional Smith Barney Index Shares of the
Fund involved. A shareholder who purchases shares directly through the
sub-transfer agent may continue to do so and applications for participation in
the Withdrawal Plan must be received by the sub-transfer agent no later than
the eighth day of the month to be eligible for participation beginning with
that month's withdrawal. For additional information, shareholders should
contact their Service Agent.

To the extent withdrawals exceed dividends, distributions and appreciation
of a shareholder's investment in a Fund, continued withdrawal payments will
reduce the shareholder's investment, and may ultimately exhaust it. Withdrawal
payments should not be considered as income from investment in a Fund.

Systematic Investment Plan. Citi Index and Smith Barney Index Shareholders
may make additions to their accounts at any time by purchasing shares through a
service known as the Systematic Investment Plan. Under the Systematic
Investment Plan, your Service Agent or the sub-transfer agent is authorized
through preauthorized transfers of at least $25 on a monthly basis or at least

<PAGE>

$50 on a quarterly basis to charge the shareholder's account held with a bank
or other financial institution on a monthly or quarterly basis as indicated by
the shareholder, to provide for systematic additions to the shareholder's Fund
account. A shareholder who has insufficient funds to complete the transfer will
be charged a fee of up to $25 by your Service Agent or the sub-transfer agent.
The Systematic Investment Plan also authorizes the Funds to apply cash held in
a Smith Barney Index shareholder's brokerage account or redeem the
shareholder's shares of a Smith Barney money market fund to make additions to
the account. For Cititrade customers, the Systematic Investment Plan authorizes
the Funds to apply cash held in a Citi Index shareholder's Cititrade Account to
make additions to the account. For additional information, please contact the
Funds' sub-transfer agent, or if you hold your shares through a Service Agent,
your Service Agent.

You may be able to invest in the Funds under one of several tax-sheltered
plans. Such plans include IRAs, Keogh or Corporate Profit-Sharing and
Money-Purchase Plans, 403(b) Custodian Accounts, and certain other qualified
pension and profit-sharing plans. You should consult with the Transfer Agent
and your tax and retirement advisers. If you own your shares through a 401(k)
plan or an IRA account, you will not be charged the otherwise applicable
redemption fee when you redeem Citi Index Shares or Smith Barney Index Shares,
unless otherwise provided by the terms of your plan or account. In addition, no
redemption fee will be charged on the redemption or exchange of Smith Barney
Index Shares through accounts reflected on the records of the transfer agent as
omnibus accounts approved by Salomon Smith Barney.

Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption price of shares of the Funds either totally or
partially, by a distribution in kind of securities (instead of cash). The
securities so distributed would be valued at the same amount as that assigned
to them in calculating the net asset value for the shares being sold. If a
holder of shares received a distribution in kind, such holder could incur
brokerage or other charges in converting the securities to cash.

The Trust may suspend the right of redemption or postpone the date of
payment for shares of a Fund more than seven days during any period when (a)
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's investments or determination of its net asset value not
reasonably practicable; (b) the New York AMEX is closed (other than customary
weekend and holiday closings); or (c) the SEC has by order permitted such
suspension.

There are no conversion, preemptive or other subscription rights.

ADDITIONAL DEALER CONCESSIONS

From time to time, the Funds' Distributor or SSB Citi, at its expense, may
provide additional commissions, compensation or promotional incentives
("concessions") to dealers that sell or arrange for the sale of shares of the
Funds. Such concessions provided by the Funds' Distributor or SSB Citi may
include financial assistance to dealers in connection with pre-approved
conferences or seminars, sales or training programs for invited registered
representatives and other employees, payment for travel expenses, including
lodging, incurred by registered representatives and other employees for such
seminars or training programs, seminars for the public, advertising and sales
campaigns regarding the Funds, and/or other dealer-sponsored events. From time

<PAGE>

to time, the Funds' Distributor or SSB Citi may make expense reimbursements for
special training of a dealer's registered representatives and other employees
in group meetings or to help pay the expenses of sales contests. Other
concessions may be offered to the extent not prohibited by state laws or any
self-regulatory agency, such as the NASD.

8. MANAGEMENT

Each Fund is supervised by the Board of Trustees of the Trust. In each
case, a majority of the Trustees are not affiliated with SSB Citi.

The Trustees and officers of the Trust and their principal occupations
during the past five years are set forth below. Their titles may have varied
during that period. Asterisks indicate that those Trustees and officers are
"interested persons" (as defined in the 1940 Act) of the Funds. Unless
otherwise indicated below, the address of each Trustee and officer of the Trust
is 388 Greenwich Street, New York, New York 10013.

TRUSTEES OF THE TRUST

ELLIOTT J. BERV (age 57) - President and Chief Executive Officer, Catalyst,
Inc. (Management Consultants) (since June 1992); President and Director,
Elliott J. Berv & Associates (Management Consultants) (since May 1984).

DONALD M. CARLTON (age 62) -- President and Chief Executive of Radian
International L.L.C. (chemical engineering). Director of National Instruments
Corp. and Central and Southwest Corporation. Formerly Director of The Hartford
Steam Boiler Inspection and Insurance Company (insurance/engineering services).
His address is c/o Radian International L.L.C., 8501 Mopac Blvd., Building No.
6, Austin, Texas 78759.

A. BENTON COCANOUGHER (age 61) -- Dean of College of Business Administration
and Graduate School of Business of Texas A & M University; Director of
Randall's Food Markets, Inc.; Director of First American Bank; and Director of
First American Savings Bank. His address is c/o Texas A & M University, 601
Blocker Bldg., College Station, Texas 77843-4113.

MARK T. FINN (age 57) -- President and Director, Delta Financial, Inc. (since
June, 1983); Chairman of the Board and part Owner, FX 500 Ltd. (Commodity
Trading Advisory Firm) (April, 1990 to February, 1996); General Partner and
shareholder, Greenwich Ventures LLC (Investment Partnership) (since January,
1996); President, Secretary and Owner, Phoenix Trading Co. (Commodity Trading
Advisory Firm) (since March, 1997); Director, Chairman and Owner, Vantage
Consulting Group, Inc. (since October, 1988).

RILEY C. GILLEY (age 74) -- Vice President and General Counsel, Corporate
Property Investors (November 1988 to December 1991); Partner, Breed, Abbott &
Morgan (Attorneys) (retired, December 1987).

STEPHEN RANDOLPH GROSS (age 52) -- Managing Partner of Gross, Collins & Cress,
P.C. (accounting firm); Director of Charter Bank & Trust. His address is 2625
Cumberland Parkway, Suite 400, Atlanta, Georgia 30339.

<PAGE>

DIANA R. HARRINGTON (age 60) -- Professor, Babson College (since September
1993); Trustee, the Highland Family of Funds (March 1997 to March 1998).

SUSAN B. KERLEY (age 49) -- President, Global Research Associates, Inc.
(Investment Research) (since September 1990); Trustee, Mainstay Institutional
Funds (since December 1990).

HEATH B. MCLENDON* (age 66) - Chairman, President, and Chief Executive Officer
of SSB Citi (since March 1996); Managing Director of Salomon Smith Barney
(since August 1993); President of Travelers Investment Adviser, Inc. ("TIA");
Chairman or Co-Chairman of the Board of seventy-one investment companies
associated with Salomon Smith Barney. His address is 7 World Trade Center, New
York, New York 10048.

ALAN G. MERTEN (age 58) -- President of George Mason University. Director of
Comshare, Inc. (information technology), and Tompkins County Trust Company,
Ithaca, New York: formerly The Anne and Elmer Lindseth Dean of Johnson Graduate
School of Management of Cornell University. His address is c/o George Mason
University, 4400 University Drive, Fairfax, Virginia 22030-4444.

C. OSCAR MORONG, JR. (age 65) - Chairman of the Board of the Trust; Managing
Director, Morong Capital Management (since February 1993); Director, Indonesia
Fund (1990 to 1999); Director, MAS Funds (since 1993).

R. RICHARDSON PETTIT (age 57) -- Duncan Professor of Finance of the University
of Houston; formerly Hanson Distinguished Professor of Business of the
University of Washington. His address is c/o Department of Finance, College of
Business, University of Houston, 4800 Calhoun, Houston, Texas 77204-6283.

WALTER E. ROBB, III (age 74) -- President, Benchmark Consulting Group, Inc.
(since 1991); Principal, Robb Associates (Corporate Financial Advisors) (since
1978); President and Treasurer, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds (since 1985).

E. KIRBY WARREN (age 66) -- Professor of Management, Graduate School of
Business, Columbia University (1987 to December 1999).

OFFICERS OF THE TRUST

HEATH B. McLENDON* (age 66). President of the Trust; Chairman, President, and
Chief Executive Officer of SSB Citi (since March 1996); Managing Director of
Salomon Smith Barney (since August 1993); President of Travelers Investment
Adviser, Inc. ("TIA"); Chairman or Co-Chairman of the Board of seventy-one
investment companies associated with Salomon Smith Barney. His address is 7
World Trade Center, New York, New York 10048.

LEWIS E. DAIDONE* (age 42) -- Senior Vice President and Treasurer of the Trust;
Managing Director of Salomon Smith Barney; Chief Financial Officer of the Smith
Barney mutual funds; Treasurer and Senior Vice President or Executive Vice
President of sixty-one investment companies associated with Citigroup; Director
and Senior Vice President of SSB Citi and TIA. His address is 125 Broad Street,
New York, New York 10004.

<PAGE>

IRVING DAVID* (age 39) - Controller of the Trust; Director of Salomon Smith
Barney; formerly Assistant Treasurer of First Investment Management Company.
Controller or Assistant Treasurer of fifty-three investment companies
associated with Citigroup. His address is 125 Broad Street, New York, New York
10004.

FRANCES GUGGINO* (age 42) - Assistant Controller of the Trust; Vice President
of Citibank, N.A. since February, 1991.

PAUL BROOK* (age 46) - Assistant Controller of the Trust; Director of Salomon
Smith Barney; Controller or Assistant Treasurer of forty-three investment
companies associated with Citigroup; from 1997-1998 Managing Director of AMT
Capital Services Inc.; prior to 1997 Partner with Ernst & Young LLP. His
address is 125 Broad Street, New York, New York 10004.

ANTHONY PACE* (age 35); Assistant Treasurer of the Trust. Mr. Pace is Vice
President - Mutual Fund Administration for Salomon Smith Barney Inc. Since
1986, when he joined the company as a Fund Accountant, Mr. Pace has been
responsible for accounts payable, financial reporting and performance of mutual
funds and other investment products.

MARIANNE MOTLEY* (age 41) -- Assistant Treasurer of the Trust. Ms. Motley is
Director - Mutual Fund Administration for Salomon Smith Barney Inc. Since 1994,
when she joined the company as a Vice President, Ms. Motley has been
responsible for accounts payable, financial reporting and performance of mutual
funds and other investment products.

ROBERT I. FRENKEL, ESQ.* (age 45) -- Secretary of the Trust Mr. Frenkel is a
Managing Director and General Counsel - Global Mutual Funds for SSB Citi Asset
Management Group. Since 1994, when he joined Citibank as a Vice President and
Division Counsel, he has been responsible for legal affairs relating to mutual
funds and other investment products.

THOMAS C. MANDIA, ESQ.* (age 38) -- Assistant Secretary of the Trust. Mr.
Mandia is a Vice President and Associate General Counsel for SSB Citi Asset
Management Group. Since 1992, he has been responsible for legal affairs
relating to mutual funds and other investment products.

ROSEMARY D. EMMENS, ESQ.* (age 30) -- Assistant Secretary of the Trust. Ms.
Emmens has been a Vice President and Associate General Counsel of SSB Citi
Asset Management Group since 1998, where she has been responsible for legal
affairs relating to mutual funds and other investment products. Before joining
Citibank, Ms. Emmens was Counsel at The Dreyfus Corporation since 1995.

HARRIS GOLDBLAT, ESQ.* (age 30) -- Assistant Secretary of the Trust. Mr.
Goldblat has been Associate General Counsel at SSB Citi Asset Management Group
since April 2000, where he has been responsible for legal affairs relating to
mutual funds and other investment products. From June 1997 to March 2000, he
was an associate at the law firm of Stroock & Stroock & Lavan LLP, New York
City, and from September 1996 to May 1997, he was an associate at the law firm
of Sills Cummis Radin Tischman Epstein & Gross, Newark, NJ. From August 1995 to
September 1996, Mr. Goldblat served as a law clerk to the Honorable James M.
Havey, P.J.A.D., in New Jersey.

The Trustees and officers of the Trust also hold comparable positions with
certain other funds for which Salomon Smith Barney or its affiliates serve as
the distributor or administrator.

<PAGE>

The Trustees of the Trust received the following remuneration from the
sources indicated for the periods set forth below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Pension or Total
Retirement Compensation
Benefits Estimated from Trust
Aggregate Accrued as Annual and Fund
Compensation Part of Fund Benefits Upon Complex Paid
Trustee (1) from Trust(2) Expenses(2) Retirement(2) to Trustees

-------------------------------------------------------------------------------------------------------
Elliott J. Berv N/A N/A None $69,500 (3)
-------------------------------------------------------------------------------------------------------
Donald M. Carlton N/A N/A N/A $56,000 (3)
-------------------------------------------------------------------------------------------------------
A. Benton Cocanougher N/A N/A N/A $57,000 (3)
-------------------------------------------------------------------------------------------------------
Mark T. Finn N/A N/A None $63,250 (3)
-------------------------------------------------------------------------------------------------------
Riley C. Gilley $2,007 None None $65,250 (2)
-------------------------------------------------------------------------------------------------------
Stephen Randolph Gross N/A N/A N/A $59,000 (3)
-------------------------------------------------------------------------------------------------------
Diana R. Harrington $2,600 None None $71,250 (2)
-------------------------------------------------------------------------------------------------------
Susan B. Kerley $2,562 None None $69,750 (2)
-------------------------------------------------------------------------------------------------------
Alan G. Merten N/A N/A N/A $56,000 (3)
-------------------------------------------------------------------------------------------------------
Heath B. McLendon None None None None (2)
-------------------------------------------------------------------------------------------------------
C. Oscar Morong, Jr. $3,053 None None $92,000 (2)
-------------------------------------------------------------------------------------------------------
R. Richardson Pettit N/A N/A N/A $59,000 (3)
-------------------------------------------------------------------------------------------------------
E. Kirby Warren $2,293 None None $62,750 (2)
-------------------------------------------------------------------------------------------------------
</TABLE>

-------------------------
(1) Messrs. Berv, Carlton, Cocanougher, Finn, Gilley, Gross, Merten, McLendon,
Morong, Pettit and Warren and Mses. Harrington and Kerley are trustees of 33,
14, 14, 32, 43, 14, 14, 31, 47, 14, 47, 38 and 38 funds, respectively, of the
family of open-end registered investment companies advised or managed by SSB
Citi, Citibank, N.A, or their affiliates.

(2) For the fiscal year ended October 31, 1999.

(3) For the calendar year ended December 31, 1999. Messrs. Berv, Carlton,
Cocanougher, Finn, Gross, Merten, and Pettit became Trustees of the Trust
effective September 1, 2000, and therefore did not receive compensation from
the Trust for the fiscal year ended October 31, 1999.

As of the date of this Statement of Additional Information, there are no
shareholders of the Funds.

The Declaration of Trust of the Trust provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust unless, as to liability to the Trust or its
shareholders, it is finally adjudicated that they engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in their offices, or unless with respect to any other matter it is
finally adjudicated that they did not act in good faith in the reasonable
belief that their actions were in the best interests of the Trust. In the case

<PAGE>

of settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trust,
or in a written opinion of independent counsel, that such officers or Trustees
have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.

MANAGERS

SSB Citi provides certain administrative services to the Funds pursuant to
separate management agreements (the "Management Agreements"). SSB Citi is a
wholly owned subsidiary of Salomon Smith Barney Holdings Inc., which in turn,
is a wholly-owned subsidiary of Citigroup Inc. Unless otherwise terminated,
each Management Agreement with the Trust will continue in effect indefinitely
as long as after the first two years such continuance is specifically approved
at least annually by the Board of Trustees of the Trust or by a vote of a
majority of the outstanding voting securities of the applicable Fund, and, in
either case, by a majority of the Trustees of the Trust who are not parties to
the Management Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Management Agreement.

SSB Citi provides the Funds with general office facilities and supervises
the overall administration of the Funds, including, among other
responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the Funds' independent contractors
and agents; the preparation and filing of all documents required for compliance
by the Funds with applicable laws and regulations; and arranging for the
maintenance of books and records of the Funds. Trustees, officers, and
investors in the Trust are or may be or may become interested in SSB Citi, as
directors, officers, employees, or otherwise and directors, officers and
employees of SSB Citi are or may become similarly interested in the Trust.

Each Management Agreement provides that SSB Citi may render services to
others. Each Management Agreement is terminable without penalty on not more
than 60 days' nor less than 30 days' written notice by the Trust, when
authorized either by a vote of a majority of the outstanding voting securities
of the applicable Fund or by a vote of a majority of the Board of Trustees of
the Trust, or by SSB Citi on not more than 60 days' nor less than 30 days'
written notice, and will automatically terminate in the event of its
assignment. Each Management Agreement with the Trust provides that neither SSB
Citi nor its personnel shall be liable for any error of judgment or mistake of
law or for any omission in the administration or management of the Trust or the
performance of its duties under the Management Agreement, except for willful
misfeasance, bad faith or gross negligence or reckless disregard of its or
their obligations and duties under the Management Agreement with the Trust.

The Funds pay the following aggregate management fees, which are accrued
daily and paid monthly and are based on each Fund's average daily net assets on
an annualized basis for the Fund's then-current fiscal year:

------------------------------------------------------------
Citi Fortune 500 Index Fund 0.34%
------------------------------------------------------------
Citi Fortune e-50 Index Fund 0.50%
------------------------------------------------------------

State Street, through its State Street Global Advisors division, serves as
the Subadviser to each Fund. State Street is a wholly owned subsidiary of State
Street Corporation, a publicly held bank holding company. As of December 31,
1999, State Street managed approximately $672 billion in assets. State Street's
principal address is Two International Place, Boston, Massachusetts 02110.

<PAGE>

It is the responsibility of the Subadviser to make the day-to-day
investment decisions for the Funds, and to place the purchase and sales orders
for securities transactions concerning those assets, subject in all cases to
the general supervision of SSB Citi. The Subadviser furnishes at its own
expense all services, facilities and personnel necessary in connection with
managing the assets of the Funds and effecting securities transactions
concerning those assets.

Each of the Submanagement Agreements will continue in effect indefinitely
as long as after the first two years such continuance is specifically approved
at least annually by the Board of Trustees of the Trust as to that Fund or by a
vote of a majority of the outstanding voting securities of that Fund, and, in
either case, by a majority of the Trustees of the Trust who are not parties to
the Submanagement Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Submanagement Agreement.

Each Submanagement Agreement provides that the Subadviser may render
services to others. Each Submanagement Agreement is terminable as to any Fund
without penalty on not more than 60 days' nor less than 30 days' written notice
by the applicable Fund, when authorized either by a vote of a majority of the
outstanding voting securities of the applicable Fund or by a vote of a majority
of the Board of Trustees of the Trust, or by SSB Citi on not more than 60 days'
nor less than 30 days' written notice, and will automatically terminate in the
event of its assignment. Each Submanagement Agreement may be terminated by the
Subadviser on not less than 90 days' written notice. Each Submanagement
Agreement provides that neither the Subadviser nor its personnel shall be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the execution of security
transactions for any Fund, except for willful misfeasance, bad faith or gross
negligence or reckless disregard of its or their obligations and duties under
the Submanagement Agreement.

The Funds pay a management fee to the Subadviser at the annual rates equal
to the percentages specified below of the aggregate assets of each Fund. SSB
Citi retains the aggregate management fee specified above in excess of amounts
payable to the Subadviser. SSB Citi pays the Subadviser's fee with respect to a
Fund to the extent it exceeds the aggregate management fee specified above.

------------------------------------------------------------
Citi Fortune 500 Index Fund ____%
------------------------------------------------------------
Citi Fortune e-50 Index Fund ____%
------------------------------------------------------------

After the first year, the Funds pay a minimum annual management fee to the
Subadviser in the amount of $_________, payable only to the extent greater than
the amount calculated pursuant to the percentages above.

DISTRIBUTOR

Salomon Smith Barney, 388 Greenwich Street, New York, New York 10013,
serves as the Distributor of each Fund's shares pursuant to Distribution
Agreements with the Trust with respect to each class of shares of the Funds
(the "Distribution Agreements"). Under the Distribution Agreements, Salomon
Smith Barney is obligated to use its best efforts to sell shares of the Funds.

The Distribution Agreements are terminable with or without cause, without
penalty, on 60 days' notice by the Board of Trustees of the Trust or by vote of
holders of a majority of the relevant Fund's outstanding voting securities, or

<PAGE>

on 90 days' notice by Salomon Smith Barney. Unless otherwise terminated, each
Distribution Agreement shall continue for successive annual periods so long as
such continuance is specifically approved at least annually by (a) the Trust's
Board of Trustees, or (b) by a vote of a majority (as defined in the 1940 Act)
of the relevant Fund's outstanding voting securities, provided that in either
event the continuance is also approved by a majority of the Board members of
the Trust who are not interested persons (as defined in the 1940 Act) of any
party to the Distribution Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. The Distribution Agreements will
terminate automatically in the event of their assignment, as defined in the
1940 Act and the rules and regulations thereunder.

The Smith Barney Index Shares of the Funds have adopted a Service Plan
(the "Service Plan") in accordance with Rule 12b-1 under the 1940 Act. Under
the Plan, the Smith Barney Index Shares of a Fund may pay the Distributor, a
broker-dealer or financial institution that has entered into a service
agreement with the Distributor concerning the Smith Barney Index Shares of the
Funds or others a monthly distribution and service fee at an annual rate not to
exceed 0.20% of the average daily net assets represented by the Smith Barney
Index Shares of a Fund.

The Service Plan permits the Funds to pay fees to the Distributor, Service
Agents and others as compensation for their services, not as reimbursement for
specific expenses incurred. Thus, even if their expenses exceed the fees
provided for by the Plan, the Fund will not be obligated to pay more than those
fees and, if their expenses are less than the fees paid to them, they will
realize a profit. Smith Barney Index Shares of each Fund will pay the fees to
the Distributor, and others until the Service Plan or Distribution Agreement is
terminated or not renewed. In that event, the Distributor's or other
recipient's expenses in excess of fees received or accrued through the
termination date will be the Distributor's or other recipient's sole
responsibility and not obligations of the Fund. In their annual consideration
of the continuation of the Service Plan for the Smith Barney Index Shares of
each Fund, the Trustees will review the Service Plan and the expenses for each
Fund separately.

The Service Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trustees who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation of the
Service Plan or in any agreement related to the Plan (for purposes of this
paragraph "Qualified Trustees"). The Service Plan requires that the Trust and
the Distributor provide to the Board of Trustees, and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Service Plan. The Service Plan further provides
that the selection and nomination of the Qualified Trustees is committed to the
discretion of such Qualified Trustees then in office. The Service Plan may be
terminated with respect to the Smith Barney Index Shares of any Fund at any
time by a vote of a majority of the Trust's Qualified Trustees or by a vote of
a majority of the outstanding voting securities representing the Smith Barney
Index Shares of that Fund. The Service Plan may not be amended to increase
materially the amount of a Fund's permitted expenses thereunder without the
approval of a majority of the outstanding securities representing the Smith
Barney Index Shares of that Fund and may not be materially amended in any case
without a vote of a majority of both the Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to the Service Plan for a period of not less than six years, and for the first
two years the Distributor will preserve such copies in an easily accessible
place.

<PAGE>

CODE OF ETHICS

The Trust, the Manager, the Subadviser and the Distributor each have
adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act. Each code
of ethics permits personnel subject to such code to invest in securities,
including securities that may be purchased or held by a Fund. However, the
codes of ethics contain provisions and requirements designed to identify and
address certain conflicts of interest between personal investment activities
and the interests of the Funds. Of course, there can be no assurance that the
codes of ethics will be effective in identifying and addressing all conflicts
of interest relating to personal securities transactions.

EXPENSES

In addition to amounts payable under the Management Agreements,
Submanagement Agreements and the Service Plan, each Fund is responsible for its
own expenses, including, among other things, the costs of securities
transactions, the compensation of Trustees that are not affiliated with SSB
Citi or the Distributor, government fees, taxes, accounting and legal fees,
expenses of communication with shareholders, interest expense, and insurance
premiums. The Prospectuses for the Funds contain more information about the
expenses of each Fund.

TRANSFER AGENT AND CUSTODIAN

The Trust has entered into a Transfer Agency and Service Agreement with
Citi Fiduciary Trust Company ("Citi Fiduciary") pursuant to which Citi
Fiduciary acts as transfer agent for each Fund. Under the Transfer Agency and
Service Agreement, Citi Fiduciary maintains the shareholder account records for
the Funds, handles certain communications between shareholders and the Funds
and distributes dividends and distributions payable by the Funds. For these
services, Citi Fiduciary receives a monthly fee computed on the basis of the
number of shareholder accounts it maintains for a Fund during the month and is
reimbursed for out-of-pocket expenses. The principal business address of Citi
Fiduciary is 388 Greenwich Street, New York, New York 10013.

Boston Financial Data Services ("BFDS" or "sub-transfer agent"), P.O. Box
9083, Boston, Massachusetts 02205-9083, serves as the Funds' sub-transfer
agent. Under the sub-transfer agency agreement, the sub-transfer agent
maintains the shareholder account records for the Funds, handles certain
communications between shareholders and the Funds, and distributes dividends
and distributions payable by the Funds. For these services, the sub-transfer
agent receives a monthly fee computed on the basis of the number of shareholder
accounts it maintains for the Funds during the month, and is reimbursed for
out-of-pocket expenses.

The Trust has entered into a Custodian Agreement and a Fund Accounting
Agreement with State Street Bank and Trust Company ("State Street"), pursuant
to which custodial and fund accounting services, respectively, are provided for
each Fund. Among other things, State Street calculates the daily net asset
value for the Funds. Securities may be held by a sub-custodian bank approved by
the Trustees. The principal business address of State Street is 225 Franklin
Street, Boston, Massachusetts 02110.

AUDITORS

[**__________________**] have been selected to serve as auditors of the
Funds and to render opinions on the Funds' financial statements.

<PAGE>

COUNSEL

Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, is
counsel for each Fund.

9. PORTFOLIO TRANSACTIONS

SSB Citi and/or the Subadviser trade securities for a Fund if they believe
that a transaction net of costs (including custodian charges) will help achieve
the Fund's investment objective. Changes in the Fund's investments are made
without regard to the length of time a security has been held, or whether a
sale would result in the recognition of a profit or loss. Therefore, the rate
of turnover is not a limiting factor when changes are appropriate. Specific
decisions to purchase or sell securities for each Fund are made by one or more
portfolio managers who are employees of SSB Citi or the Subadviser and who are
appointed and supervised by senior officers of SSB Citi or by the Subadviser.
The portfolio managers may serve other clients in a similar capacity.

In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to a Fund and/or the other
accounts over which SSB Citi, the Subadviser or their affiliates exercise
investment discretion. SSB Citi and the Subadviser are authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if SSB Citi or the Subadviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which SSB Citi, the Subadviser and their
affiliates have with respect to accounts over which they exercise investment
discretion.

The management fee that each Fund pays to SSB Citi or the Subadviser will
not be reduced as a consequence of SSB Citi's or the Subadviser's receipt of
brokerage and research services. While such services are not expected to reduce
the expenses of SSB Citi or the Subadviser, SSB Citi or the Subadviser would,
through the use of the services, avoid the additional expenses which would be
incurred if it should attempt to develop comparable information through its own
staff or obtain such services independently.

It is possible that certain of the research services received primarily
will benefit one or more other accounts for which SSB Citi or the Subadviser
exercises investment discretion. Conversely, a Fund may be the primary
beneficiary of services received as a result of portfolio transactions effected
for other accounts.

In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of SSB Citi's or the
Subadviser's other clients. Investment decisions for each Fund and for SSB
Citi's or the Subadviser's clients are made with a view to achieving their
respective investment objectives. It may develop that a particular security is
bought or sold for only one client even though it might be held by, or bought

<PAGE>

or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more clients are selling the same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the same
security is suitable for the investment objectives of more than one client.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed to be equitable to each. It is recognized that in some cases this
system could adversely affect the price of or the size of the position
obtainable in a security for a Fund. When purchases or sales of the same
security for a Fund and for other portfolios managed by SSB Citi or the
Subadviser occur contemporaneously, the purchase or sale orders may be
aggregated in order to obtain any price advantages available to large volume
purchases or sales.

Because the Funds are newly-offered, they have not paid brokerage
commissions as of the date of this Statement of Additional Information.

10. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust's Declaration of Trust permits the Trust to issue an unlimited
number of full and fractional shares of beneficial interest (without par value)
of each series, to divide or combine the shares of any series into a greater or
lesser number of shares of that series without thereby changing the
proportionate beneficial interests in that series and to divide such shares
into classes. The Trust has reserved the right to create and issue additional
series and classes of shares. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series
upon liquidation or dissolution (except for any differences between classes of
shares of a series). Shares of each series are entitled to vote separately to
approve management agreements or changes in investment policy, and shares of a
class are entitled to vote separately to approve any distribution or service
arrangements relating to that class, but shares of all series may vote together
in the election or selection of Trustees and accountants for the Trust. In
matters affecting only a particular Fund, only shares of that particular Fund
are entitled to vote.

Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust
would not be able to elect any Trustee. The Trust is not required to hold, and
has no present intention of holding, annual meetings of shareholders but the
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.
Shareholders 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. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of each
series affected by the amendment. (See "Investment Restrictions.")

The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,

<PAGE>

the approval by vote of the holders of a majority of the Trust's or the
affected series outstanding shares would be sufficient. The Trust or any series
of the Trust, as the case may be, may be terminated (i) by a vote of a majority
of the outstanding voting securities of the Trust or the affected series or
(ii) by the Trustees by written notice to the shareholders of the Trust or the
affected series. If not so terminated, the Trust will continue indefinitely.

The Funds' transfer agent and/or sub-transfer agent maintains a share
register for shareholders of record. Share certificates are not issued.

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust of the Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides for indemnification and reimbursement of expenses out
of Trust property for any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust of the Trust also provides
that the Trust may maintain appropriate insurance (e.g., fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.

The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, but nothing in the Declaration of Trust of the Trust protects a Trustee
against any liability to which he or she would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office.

11. TAX MATTERS

TAXATION OF THE FUNDS

FEDERAL TAXES. Each Fund is treated as a separate entity for federal
income tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code"). Each Fund has elected to be treated, and intends to qualify each year,
as a "regulated investment company" under Subchapter M of the Code by meeting
all applicable requirements of Subchapter M, including requirements as to the
nature of the Fund's gross income, the amount of Fund distributions, and the
composition of the Fund's portfolio assets. Provided all such requirements are
met, no U.S. federal income or excise taxes generally will be required to be
paid by the Funds. If a Fund should fail to qualify as a "regulated investment
company" for any year, the Fund would incur a regular corporate federal income
tax upon its taxable income and Fund distributions would generally be taxable
as ordinary income to shareholders.

FOREIGN TAXES. Investment income and gains received by a Fund from
non-U.S. securities may be subject to non-U.S. taxes. The U.S. has entered into
tax treaties with many other countries that may entitle a Fund to a reduced
rate of tax or an exemption from tax on such income. Each Fund intends to
qualify for treaty reduced rates where applicable. It is not possible, however,

<PAGE>

to determine a Fund's effective rate of non-U.S. tax in advance since the
amount of the Fund's assets to be invested within various countries is not
known. It is not expected that any Fund which incurs foreign income taxes will
be able to pass through to shareholders foreign tax credits with respect to
such foreign taxes.

TAXATION OF SHAREHOLDERS

TAXATION OF DISTRIBUTIONS. Shareholders of a Fund will generally have to
pay federal income taxes and any state or local taxes on the dividends and
capital gain distributions they receive from the Fund. Dividends from ordinary
income and any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes, whether the
distributions are made in cash or in additional shares. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses), whether made in cash or in additional shares, are
taxable to shareholders as long-term capital gains without regard to the length
of time the shareholders have held their shares. Any Fund dividend that is
declared in October, November, or December of any calendar year, that is
payable to shareholders of record in such a month, and that is paid the
following January, will be treated as if received by the shareholders on
December 31 of the year in which the dividend is declared.

Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.

DIVIDENDS-RECEIVED DEDUCTION. The portion of each Fund's ordinary income
dividends attributable to dividends received in respect of equity securities of
U.S. issuers is normally eligible for the dividends received deduction for
corporations subject to U.S. federal income taxes. Availability of the
deduction for particular shareholders is subject to certain limitations, and
deducted amounts may be subject to the alternative minimum tax and result in
certain basis adjustments.

TAX TREATMENT FOR NON-U.S. PERSONS. The Funds will withhold tax payments
at a rate of 30% (or any lower applicable tax treaty rate) on taxable dividends
and other payments subject to withholding taxes that are made to persons who
are not citizens or residents of the United States. Distributions received from
the Funds by non-U.S. persons also may be subject to tax under the laws of
their own jurisdiction.

BACKUP WITHHOLDING. The account application asks each new shareholder to
certify that the shareholder's Social Security or taxpayer identification
number is correct and that the shareholder is not subject to 31% backup
withholding for failing to report income to the IRS. The Funds may be required
to withhold (and pay over to the IRS for the shareholder's credit) 31% of
certain distributions and redemption proceeds paid to shareholders who fail to
provide this information or who otherwise violate IRS regulations.

DISPOSITION OF SHARES. In general, any gain or loss realized upon a
taxable disposition of shares of a Fund by a shareholder that holds such shares
as a capital asset will be treated as a long-term capital gain or loss if the
shares have been held for more than twelve months and otherwise as a short-term
capital gain or loss. However, any loss realized upon a disposition of shares

<PAGE>

in a Fund held for six months or less will be treated as a long-term capital
loss to the extent of any distributions of net capital gain made with respect
to those shares. Any loss realized upon a disposition of shares may also be
disallowed under rules relating to wash sales.

EFFECTS OF CERTAIN INVESTMENTS AND TRANSACTIONS

CERTAIN DEBT INVESTMENTS. Any investment by a Fund in zero coupon bonds,
deferred interest bonds, payment-in-kind bonds, certain stripped securities,
and certain securities purchased at a market discount will cause the Fund to
recognize income prior to the receipt of cash payments with respect to those
securities. In order to distribute this income and avoid a tax on the Fund, the
Fund may be required to liquidate portfolio securities that it might otherwise
have continued to hold, potentially resulting in additional taxable gain or
loss to the Fund. An investment by a Fund in residual interests of a CMO that
has elected to be treated as a real estate mortgage investment conduit, or
"REMIC," can create complex tax problems, especially if the Fund has state or
local governments or other tax-exempt organizations as shareholders.

OPTIONS, ETC. Each Fund's transactions in options, futures and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund income and distributions to shareholders. For
example, certain positions held by each Fund on the last business day of each
taxable year will be marked to market (i.e., treated as if closed out) on that
day, and any gain or loss associated with the positions will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by a
Fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles," and may be subject to
special tax rules that would cause deferral of Fund losses, adjustments in the
holding periods of Fund securities, and conversion of short-term into long-term
capital losses. Certain tax elections exist for straddles that may alter the
effects of these rules. Each Fund intends to limit its activities in options,
futures and forward contracts to the extent necessary to meet the requirements
of Subchapter M of the Code.

FOREIGN INVESTMENTS. The Funds may make non-U.S. investments. Special tax
considerations apply with respect to such investments. Foreign exchange gains
and losses realized by a Fund will generally be treated as ordinary income and
loss. Use of non-U.S. currencies for non-hedging purposes and investment by a
Fund in certain "passive foreign investment companies" may have to be limited
in order to avoid a tax on a Fund. A Fund may elect to mark to market any
investments in "passive foreign investment companies" on the last day of each
taxable year. This election may cause the Fund to recognize ordinary income
prior to the receipt of cash payments with respect to those investments; in
order to distribute this income and avoid a tax on the Fund, the Fund may be
required to liquidate portfolio securities that it might otherwise have
continued to hold potentially resulting in additional taxable gain or loss to
the Fund.

12. FINANCIAL STATEMENTS

The Funds are newly-offered and have not issued financial statements as of
the date of this Statement of Additional Information.

13. OTHER INFORMATION

Neither the Citi FORTUNE 500 Index Fund nor the Citi FORTUNE e-50 Index
Fund, nor the shares of the Funds (the "Shares") are sponsored, endorsed, sold
or promoted by FORTUNE. FORTUNE makes no representation or warranty, express or
implied, to the owners of the Fund or any member of the public regarding the
advisability of investing in securities generally or in the Shares particularly

<PAGE>

or the ability of either the FORTUNE 500 Index or the FORTUNE e-50 Index to
track general stock market performance. FORTUNE's only relationship to SSB Citi
or the Funds is the licensing of certain trademarks of FORTUNE and the FORTUNE
500 Index and FORTUNE e-50 Index, which are determined, compiled and calculated
by FORTUNE without regard to SSB Citi, the Funds or the Shares. FORTUNE has no
obligation to take the needs of SSB Citi or the owners of the Funds into
consideration in determining, compiling or calculating the FORTUNE 500 Index or
the FORTUNE e-50 Index. FORTUNE is not responsible for and has not participated
in any determination or calculation made with respect to issuance, sale or
redemption of the Shares. FORTUNE has no obligation or liability in connection
with the Funds or the Shares, including but not limited to, the creating,
promoting, marketing, selling, redeeming or managing of the Funds or the
Shares.

FORTUNE DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
FORTUNE 500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED THEREIN.
FORTUNE MAKES NO WARRANTY, EXPRESS OF IMPLIED, AS TO RESULTS TO BE OBTAINED BY
SSB CITI, OWNERS OF THE SHARES OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE FORTUNE 500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED
THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE.
FORTUNE MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE FORTUNE 500 INDEX OR THE FORTUNE E-50 INDEX OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL FORTUNE HAVE
ANY LIABILITY FOR ANY DAMAGES, INCLUDING BUT NOT LIMITED TO, SPECIAL PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED
OF THE POSSIBILITY OF SUCH DAMAGES.

<PAGE>

PART C

Item 23. Exhibits.
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* a(1) Amended and Restated Declaration of Trust of the Registrant
**, ***,*******, ******** a(2) Amendments to the Amended and Restated Declaration of Trust of the
Registrant
*********, a(3) Forms of Amendments to the Amended and Restated Declaration of
*********** Trust of the Registrant
and herewith
*** b(1) Amended and Restated By-Laws of the Registrant
*** b(2) Amendments to the Amended and Restated By-Laws of the Registrant
********* b(3) Form of Amendment to the Amended and Restated By-Laws of the
Registrant
d(1) Form of Management Agreement
between the Registrant and SSB
CitiFund Management LLC ("SSBCH"),
as manager to Citi FORTUNE 500
Index Fund and Citi FORTUNE e-50
Index Fund (collectively, the
"Funds")
d(2) Form of Sub-Management Agreement between the Registrant and State
Street Global Advisers, as sub-manager to the Funds
********** e(1) Form of Distribution Agreement between the Registrant and Salomon
and herewith Smith Barney, Inc. (the "Distributor"), as distributor with respect
to the Citi Index shares of the Funds
********** e(2) Form of Distribution Agreement between the Registrant and
and herewith Distributor with respect to the Smith Barney Index shares of the
Funds
*** g(1) Custodian Contract between the Registrant and State Street Bank and
Trust Company ("State Street"), as custodian
********** and g(2) Form of Letter Agreement adding the Funds to the Custodian Contract
*********** between the Registrant and State Street
********** h(1) Transfer Agency Agreement with Citi Fiduciary Trust Company, as
transfer agent
********** and h(2) Form of Letter Agreement adding the Funds to the Transfer Agency
*********** and Servicing Agreement with Citi Fiduciary Trust Company, as
transfer agent
********** i Opinion and consent of counsel
*********** m Form of Service Plan of the Registrant with respect to the Class A
shares of the Funds
***** o Multiple Class Plan of the Registrant
********* p(1) Code of Ethics for the Registrant and SSB Citi
********* p(2) Code of Ethics for Distributor
and herewith
**** and q(1) Powers of Attorney for the Registrant
******
</TABLE>
---------------------------

<PAGE>

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* Incorporated herein by reference to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on December 31, 1996.
** Incorporated herein by reference to Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on April 18, 1997.
*** Incorporated herein by reference to Post-Effective Amendment No. 26 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on December 30, 1997.
**** Incorporated herein by reference to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on February 24, 1998.
***** Incorporated herein by reference to Post-Effective Amendment No. 31 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on February 12, 1999.
****** Incorporated herein by reference to Post-Effective Amendment No. 35 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on April 16, 1999.
******* Incorporated herein by reference to Post-Effective Amendment No. 37 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on December 29, 1999.
******** Incorporated herein by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on February 28, 2000.
********* Incorporated herein by reference to Post-Effective Amendment No. 39 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on June 2, 2000.
********** Incorporated herein by reference to Post-Effective Amendment No. 40 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on June 16, 2000.
*********** Incorporated herein by reference to Post-Effective Amendment No. 41 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518) as filed with
the Securities and Exchange Commission on June 30, 2000.
</TABLE>

Item 24. Persons Controlled by or under Common Control with Registrant.

Not applicable.

Item 25. Indemnification.

Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 20 to
its Registration Statement on Form N-1A; (b) Section 4 of the Distribution
Agreements between the Registrant and Salomon Smith Barney, filed as Exhibits
hereto; and (c) the undertaking of the Registrant regarding indemnification set
forth in its Registration Statement on Form N-1A.

The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.

<PAGE>

Item 26. Business and Other Connections of Investment Adviser.

Manager - SSB Citi Fund Management LLC (successor to SSBC Fund
Management Inc.) ("SSB Citi") (formerly known as Mutual Management Corp.)

SSB Citi was incorporated in December 1968 under the laws of the State
of Delaware and converted to a Delaware limited liability company in 1999. SSB
Citi is a wholly owned subsidiary of Salomon Smith Barney Holdings Inc.,
formerly known as Smith Barney Holdings Inc., which in turn is a wholly owned
subsidiary of Citigroup Inc. ("Citigroup"). SSB Citi is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "1940 Act").

The list required by this Item 26 of officers and directors of SSB
Citi together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by SSB Citi pursuant to the Investment Advisers Act of 1940 Act
(the "Advisers Act") (SEC File No. 801-8314).

Item 27. Principal Underwriters

(a) Salomon Smith Barney, Inc., the Registrant's distributor, is also
the distributor for CitiFunds(SM) International Growth & Income Portfolio,
CitiFunds(SM) U.S. Treasury Reserves, CitiFunds(SM) Cash Reserves,
CitiFunds(SM) Premium U.S. Treasury Reserves, CitiFunds(SM) Premium Liquid
Reserves, CitiFunds(SM) Institutional U.S. Treasury Reserves, CitiFunds(SM)
Institutional Liquid Reserves, CitiFunds(SM) Institutional Cash Reserves,
CitiFunds(SM) Tax Free Reserves, CitiFunds(SM) Institutional Tax Free Reserves,
CitiFunds(SM) California Tax Free Reserves, CitiFunds(SM) Connecticut Tax Free
Reserves, CitiFunds(SM) New York Tax Free Reserves, CitiFunds(SM) Intermediate
Income Portfolio, CitiFunds(SM) Short-Term U.S. Government Income Portfolio,
CitiFunds(SM) New York Tax Free Income Portfolio, CitiFunds(SM) National Tax
Free Income Portfolio, CitiFunds(SM) California Tax Free Income Portfolio,
CitiFunds (SM) Growth & Income Portfolio, CitiFunds(SM) Small Cap Value
Portfolio, CitiFunds(SM) Balanced Portfolio, CitiSelect(R) Folio 100 Income,
CitiSelect(R) Folio 200 Conservative, CitiSelect(R) Folio 300 Balanced,
CitiSelect(R) Folio 400 Growth, CitiSelect(R) Folio 500 Growth Plus, Citi(SM)
Nasdaq-100 Index Fund, Citi(SM) Small Cap Index Fund, Citi(SM) U.S. 1000 Index
Fund, Citi(SM) Global Titans Index Fund, Citi(SM) Financial Services Index
Fund, Citi(SM) Health Science Index Fund, Citi(SM) Technology Index Fund,
Citi(SM) U.S. Bond Index Fund, Citi(SM) International Index Portfolio,
CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R) VIP Folio 300 Balanced,
CitiSelect(R) VIP Folio 400 Growth, CitiSelect(R) VIP Folio 500 Growth Plus and
CitiFunds(SM) Small Cap Growth VIP Portfolio. CFBDS is also the placement agent
for Large Cap Growth Portfolio, Small Cap Growth Portfolio, High Yield
Portfolio, U.S. Fixed Income Portfolio, Government Income Portfolio,
International Equity Portfolio, Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Tax Free Reserves
Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio.

Salomon Smith Barney, Inc. is also the distributor for the following
Smith Barney funds: Smith Barney Diversified Large Cap Growth Fund, Smith
Barney Small Cap Growth Opportunities, Smith Barney International Large Cap
Fund, Consulting Group Capital Markets Funds, Concert Investment Series,
Greenwich Street Series Fund, Smith Barney Adjustable Rate Government Income

<PAGE>

Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation Fund
Inc., Smith Barney Arizona Municipals Fund Inc., Smith Barney California
Municipals Fund Inc., Smith Barney Concert Allocation Series Inc., Smith Barney
Equity Funds, Smith Barney Fundamental Value Fund Inc., Smith Barney Funds,
Inc., Smith Barney Income Funds, Smith Barney Institutional Cash Management
Fund, Inc., Smith Barney Investment Trust, Smith Barney Managed Governments
Fund Inc., Smith Barney Managed Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Smith Barney Money Funds, Inc., Smith Barney
Muni Funds, Smith Barney Municipal Money Market Fund, Inc., Smith Barney New
Jersey Municipals Fund Inc., Smith Barney Oregon Municipals Fund Inc., Smith
Barney Principal Return Fund, Smith Barney Sector Series Inc., Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications Trust, Smith Barney
Variable Account Funds, Smith Barney World Funds, Inc., Travelers Series Fund
Inc., and various series of unit investment trusts.

(b) The information required by this Item 27 with respect to each
director, officer and partner of Salomon Smith Barney is incorporated by
reference to Schedule A of FORM BD filed by Salomon Smith Barney pursuant to
the Securities Exchange Act of 1934 (SEC File No. 812-8510).

Item 28. Location of Accounts and Records.

The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:

NAME ADDRESS

Salomon Smith Barney, Inc. 388 Greenwich Street
(distributor) New York, New York 10013

State Street Bank and Trust Company 1776 Heritage Drive
(custodian and fund accounting agent) North Quincy, MA 02171

Citi Fiduciary Trust Company 388 Greenwich Street
(transfer agent) New York, New York 10013

SSB Citi Fund Management LLC 388 Greenwich Street
(manager) New York, New York 10013

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and the State of New York on
the 12th day of September, 2000.

CITIFUNDS TRUST I

By:
/s/ Heath B. McLendon
----------------------------------------

Heath B. McLendon
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on September 12, 2000.

Signature Title

President, Trustee
/s/ Heath B. McLendon
---------------------------
Heath B. McLendon

Senior Vice President, Treasurer
/s/ Lewis E. Daidone
----------------------------
Lewis E. Daidone

Trustee
/s/ Philip W. Coolidge*
----------------------------
Philip W. Coolidge

Trustee
/s/ Riley C. Gilley*
----------------------------
Riley C. Gilley

Trustee
/s/ Diana R. Harrington *
----------------------------
Diana R. Harrington

<PAGE>

Trustee
/s/ Susan B. Kerley*
----------------------------
Susan B. Kerley

Trustee
/s/ C. Oscar Morong, Jr.*
----------------------------
C. Oscar Morong, Jr.

Trustee
/s/ E. Kirby Warren*
----------------------------
E. Kirby Warren

*By: /s/Robert I. Frenkel
----------------------------

Executed by Robert I./ Frenkel
on behalf of those indicated
pursuant to Powers of Attorney.

<PAGE>

EXHIBIT INDEX

Exhibit
No.: Description:
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a(3) Form of Amendments to Registrant's Declaration of Trust
d(1) Form of Management Agreement between the Registrant and SSB Citi
Fund Management LLC, as manager of Citi FORTUNE 500 Index Fund
and Citi FORTUNE e-50 Index Fund (collectively, the "Funds")
d(2) Form of Sub-Management Agreement between the Registrant and State
Street Global Advisers, as sub-manager of the Funds
e(1) Form of Distribution Agreement between the Registrant and Salomon
Smith Barney Inc. (the "Distributor"), as the Distributor with
respect to the Citi Index Shares of the Funds
e(2) Form of Distribution Agreement between the Registrant and the
Distributor, as the Distributor with respect to the Smith Barney
Index shares of the Fund
p(2) Code of Ethics of the Distributor

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