<PAGE>
Rule 497(e) File Nos. 33-5819 and 811-5034
Supplement dated January 4, 1999
to
Prospectuses dated March 2, 1998 for
CitiFunds(SM) New York Tax Free Income Portfolio
and
CitiFunds(SM) National Tax Free Income Portfolio
and
Prospectus dated September 14, 1998 for
CitiFunds(SM) California Tax Free Income Portfolio
Beginning on January 4, 1999, CitiFunds New York Tax Free Income Portfolio,
CitiFunds National Tax Free Income Portfolio and CitiFunds California Tax Free
Income Portfolio will each offer two classes of shares: Class A and Class B.
Shares of each Fund that are outstanding on January 4, 1999 will be classified
as Class A shares. No sales charge will be payable as a result of this
classification. Investors holding Fund shares on that date will be able to
exchange those shares, and any shares acquired through capital appreciation
and the reinvestment of dividends and capital gains distributions on those
shares, into Class A shares of other CitiFunds and mutual funds managed or
advised by Citibank, N.A. without paying a sales charge.
Investors purchasing shares of the Funds on or after January 4, 1999 may
select Class A or Class B shares, with different sales charges and expense
levels. Please determine which class of shares best fits your particular
situation. See "Classes of Shares" below.
EXPENSE SUMMARY
- --------------------------------------------------------------------------------
The following tables summarize estimated shareholder transaction and annual
operating expenses for Class A and Class B shares of the Funds. For more
information on the costs and expenses of each Fund, see "Management" and
"General Information -- Expenses" in each Fund's Prospectus.*
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
- --------------------------------------------------------------------------------
Maximum sales load imposed on purchases
(as a percentage of offering price) 4.50% none
Maximum sales load imposed on reinvested dividends none none
Maximum deferred sales load (as a percentage of
original purchase price or redemption proceeds,
whichever is less) none(1) 4.50%
Redemption fee none none
Exchange fee none none
- --------------------------------------------------------------------------------
(1)Except for purchases of $500,000 or more. See "Class A Shares" below.
<TABLE>
<CAPTION>
CITIFUNDS CITIFUNDS CITIFUNDS
NATIONAL NEW YORK CALIFORNIA
TAX FREE INCOME TAX FREE INCOME TAX FREE INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after fee waivers and
reimbursements)(1)(2) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
12b-1 Fees (including service fees)(3) 0.25% 0.75% 0.25% 0.75% 0.25% 0.75%
Other Expenses (after fee waivers and
reimbursements)(2) 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%
- -----------------------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (after fee
waivers and reimbursements)(2) 0.80% 1.30% 0.80% 1.30% 0.80% 1.30%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* These tables are intended to assist investors in understanding the various
costs and expenses that a shareholder will bear, either directly or
indirectly. The tables show the fees paid to various service providers
after giving effect to expected voluntary partial fee waivers and
reimbursements. There can be no assurance that the fee waivers and
reimbursements reflected in the tables will continue at these levels. The
information in the tables and in the example below for CitiFunds National
Tax Free Income Portfolio and CitiFunds New York Tax Free Income Portfolio
is based on each Fund's expenses for the fiscal year ended December 31,
1997, as revised to reflect current fees. Because CitiFunds California Tax
Free Income Portfolio is newly organized, all amounts in the tables and in
the example below are estimated for the current fiscal year and information
is given in the example below only for one and three year periods.
(1) A combined fee for investment advisory and administrative services.
(2) Absent fee waivers, management fees, other expenses and total fund
operating expenses would be 0.75%, 0.26% and 1.26%, respectively, for Class
A shares of CitiFunds National Tax Free Income Portfolio; 0.75%, 0.26% and
1.76%, respectively, for Class B shares of CitiFunds National Tax Free
Income Portfolio; 0.75%, 0.23% and 1.23%, respectively, for Class A shares
of CitiFunds New York Tax Free Income Portfolio; 0.75%, 0.23% and 1.73%,
respectively, for Class B shares of CitiFunds New York Tax Free Income
Portfolio; 0.50%, 0.83% and 1.58%, respectively, for Class A shares of
CitiFunds California Tax Free Income Portfolio; and 0.50%, 0.83% and 2.08%,
respectively, for Class B shares of CitiFunds California Tax Free Income
Portfolio.
(3) Includes fees for distribution and shareholder servicing. Long-term
shareholders in the Funds could pay more in sales charges than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc.
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each
period indicated below:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------------------------------------
CITIFUNDS NATIONAL TAX FREE INCOME PORTFOLIO
<S> <C> <C> <C> <C>
Class A $53 $69 $87 $140
Class B
Assuming redemption at end of period $58 $71 $81 $136
Assuming no redemption $13 $41 $71 $136
- --------------------------------------------------------------------------------------------------------------
CITIFUNDS NEW YORK TAX FREE INCOME PORTFOLIO
Class A $53 $69 $87 $140
Class B
Assuming redemption at end of period $58 $71 $81 $136
Assuming no redemption $13 $41 $71 $136
- --------------------------------------------------------------------------------------------------------------
CITIFUNDS CALIFORNIA TAX FREE INCOME PORTFOLIO
Class A $53 $69 N/A N/A
Class B
Assuming redemption at end of period $58 $71 N/A N/A
Assuming no redemption $13 $41 N/A N/A
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The Example assumes that all dividends are reinvested. Without waivers and
reimbursements, the amounts in the Example would be $57, $83, $111 and $190
for Class A shares of CitiFunds National Tax Free Income Portfolio; $63, $85,
$105 and $183 for Class B shares of CitiFunds National Tax Free Income
Portfolio, assuming redemption at the end of the period ($18, $55, $95 and
$183 assuming no redemption); $57, $82, $110 and $187, for Class A shares of
CitiFunds New York Tax Free Income Portfolio; $63, $84, $104 and $180 for
Class B shares of CitiFunds New York Tax Free Income Portfolio, assuming
redemption at the end of the period ($18, $54, $94 and $180 assuming no
redemption); $60 and $93 for Class A shares of CitiFunds California Tax Free
Income Portfolio; and $66 and $95 for Class B shares of CitiFunds California
Tax Free Income Portfolio, assuming redemption at the end of the period ($21
and $65 assuming no redemption). For Class B shares, where redemption at the
end of the period is assumed, amounts in the Example assume deduction of the
maximum applicable contingent deferred sales charge, and all ten year amounts
in the Example assume conversion to Class A shares approximately eight years
after purchase. The assumption of a 5% annual return is required by the
Securities and Exchange Commission for all mutual funds, and is not a
prediction of any Fund's future performance. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUNDS. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CLASSES OF SHARES. Beginning on January 4, 1999, each Fund will offer two
classes of shares, Class A and Class B. The main features of the classes are
summarized in this paragraph. More detailed information appears below. Please
determine which class of shares best fits your particular circumstances. Class
A shares have a front-end, or initial, sales charge. This sales charge may be
reduced or eliminated in certain circumstances. Class A shares have lower
annual expenses than Class B shares. Class B shares have no front-end sales
charge, but are subject to a deferred sales charge if you sell within five
years of purchase. Class B shares have higher annual expenses than Class A
shares. Class B shares automatically convert into Class A shares after eight
years. Both classes of shares are sold at net asset value for that class. Net
asset value may differ by class because Class B shares have higher expenses.
When you place purchase orders and make redemption requests, please specify
whether you wish to purchase or redeem Class A or Class B shares. If you fail
to specify, purchase orders will be deemed to be for Class A shares, and Class
A shares will be redeemed first.
CLASS A SHARES:
o Class A shares are sold at net asset value plus a front-end, or initial,
sales charge. The percentage sales charge goes down as the amount of your
investment in Class A shares goes up. See the chart below for the percentage
sales charge. After the initial sales charge is deducted from your
investment, the balance of your investment is invested in the Fund.
The sales charge may also be reduced or eliminated in certain circumstances,
as described in "Class A Shares -- Sales Charge Waivers" and "-- Sales Charge
Reductions" below. If you qualify to purchase Class A shares without a sales
load, you should purchase Class A shares rather than Class B shares because
Class A shares pay lower fees.
<TABLE>
<CAPTION>
BROKER/DEALER
SALES CHARGE SALES CHARGE COMMISSION
AMOUNT OF AS A % OF AS A % OF AS A % OF
YOUR INVESTMENT OFFERING PRICE YOUR INVESTMENT OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 4.50% 4.71% 4.05%
$25,000 to less than $50,000 4.00% 4.17% 3.60%
$50,000 to less than $100,000 3.50% 3.63% 3.15%
$100,000 to less than $250,000 2.50% 2.56% 2.25%
$250,000 to less than $500,000 1.50% 1.52% 1.35%
$500,000 or more none* none* up to 1.00%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*A contingent deferred sales charge may apply in certain instances. See below.
o Class A shares pay service fees of 0.25% of the average daily net assets
represented by the Class A shares.
o Purchases of $500,000 or more are not subject to an initial sales charge, but
are subject to a 1% contingent deferred sales charge in the event of certain
redemptions within 12 months following purchase. See below.
o The Distributor will pay commissions to brokers, dealers and other
institutions that sell Class A shares of the Funds as shown in the table
above. The Distributor retains approximately 10% of the sales charge imposed
on Class A shares. Entities that sell Class A shares will also receive the
service fee payable under the Class A Service Plan at an annual rate equal to
0.25% of the average daily net assets represented by the Class A shares sold
by them.
CLASS A SHARES -- SALES CHARGE WAIVERS:
o Reinvestment. The sales charge does not apply to Class A shares acquired
through the reinvestment of dividends and capital gains distributions.
o Eligible Purchasers. Class A shares may be purchased without a sales charge
by:
- tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code
- trust accounts for which Citibank, N.A or any subsidiary or affiliate of
Citibank acts as trustee and exercises discretionary investment management
authority
- accounts for which Citibank or any subsidiary or affiliate of Citibank
performs investment advisory services or charges fees for acting as
custodian
- directors or trustees (and their immediate families), and retired
directors or trustees (and their immediate families), of any investment
company for which Citibank or any subsidiary or affiliate of Citibank
serves as the investment adviser or as a service agent
- employees of Citibank and its affiliates, CFBDS, Inc. and its affiliates
or any Service Agent and its affiliates (including immediate families of
any of the foregoing), and retired employees of Citibank and its
affiliates or CFBDS and its affiliates (including immediate families of
any of the foregoing)
- investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates
- investors participating in a rewards program that offers Fund shares as an
investment option based on an investor's balances in selected Citigroup
Inc. products and services
- employees of members of the National Association of Securities Dealers,
Inc., provided that such sales are made upon the assurance of the
purchaser that the purchase is made for investment purposes and that the
securities will not be resold except through redemption or repurchase
- separate accounts used to fund certain unregistered variable annuity
contracts
- direct rollovers by plan participants from a 401(k) plan offered to
Citigroup employees
- shareholder accounts established through a reorganization or similar form
of business combination approved by a Fund's Board of Trustees or by the
Board of Trustees of any other CitiFund or mutual fund managed or advised
by Citibank (all of such funds being referred to herein as CitiFunds) the
terms of which entitle those shareholders to purchase shares of a Fund or
any other CitiFund at net asset value without a sales charge
- employee benefit plans qualified under Section 401(k) of the Internal
Revenue Code with accounts outstanding on January 4, 1999
- employee benefit plans qualified under Section 401 of the Internal Revenue
Code, including salary reduction plans qualified under Section 401(k) of
the Code, subject to minimum requirements as may be established by CFBDS
with respect to the amount of purchase; currently, the amount invested by
the qualified plan in a Fund or in any combination of CitiFunds must total
a minimum of $1 million
- accounts associated with Copeland Retirement Programs
- investors purchasing $500,000 or more of Class A shares; however, a
contingent deferred sales charge will be imposed on the investments in the
event of certain share redemptions within 12 months following the share
purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (not including reinvested dividends and capital gains
distributions) or the total cost of the shares; the contingent deferred
sales charge on Class A shares will be waived under the same circumstances
as the contingent deferred sales charge on Class B shares will be waived;
in determining whether a contingent deferred sales charge on Class A
shares is payable, and if so, the amount of the charge:
/\ it is assumed that shares not subject to the contingent deferred sales
charge are the first redeemed followed by other shares held for the
longest period of time
/\ all investments made during a calendar month will age one month on the
last day of the month and each subsequent month
/\ any applicable contingent deferred sales charge will be deferred upon
an exchange of Class A shares for Class A shares of another CitiFund
and deducted from the redemption proceeds when the exchanged shares
are subsequently redeemed (assuming the contingent deferred sales
charge is then payable)
/\ the holding period of Class A shares so acquired through an exchange
will be aggregated with the period during which the original Class A
shares were held
- subject to appropriate documentation, investors where the amount invested
represents redemption proceeds from a mutual fund (other than a CitiFund),
if:
/\ the redeemed shares were subject to an initial sales charge or a
deferred sales charge (whether or not actually imposed), and
/\ the redemption has occurred no more than 60 days prior to the purchase
of Class A shares of the Fund
- an investor who has a business relationship with an investment consultant
or other registered representative who joined a broker-dealer which has a
sales agreement with CFBDS from another investment firm within six months
prior to the date of purchase by the investor, if:
/\ the investor redeems shares of another mutual fund sold through the
investment firm that previously employed that investment consultant or
other registered representati ve, and either paid an initial sales
charge or was at some time subject to, but did not actually pay, a
deferred sales charge or redemption fee with respect to the redemption
proceeds,
/\ the redemption is made within 60 days prior to the investment in a
Fund, and
/\ the net asset value of the shares of the Fund sold to that investor
without a sales charge does not exceed the proceeds of the redemption
CLASS A SHARES -- SALES CHARGE REDUCTIONS:
o Reduced Sales Charge Plan. A qualified group may purchase shares as a single
purchaser under the reduced sales charge plan. The purchases by the group are
lumped together and the sales charge is based on the lump sum. A qualified
group must:
- have been in existence for more than six months
- have a purpose other than acquiring Fund shares at a discount
- satisfy uniform criteria that enable CFBDS to realize economies of scale
in its costs of distributing shares
- have more than ten members
- be available to arrange for group meetings between representatives of the
Funds and the members
- agree to include sales and other materials related to the Funds in its
publications and mailings to members at reduced or no cost to the
Distributor
- seek to arrange for payroll deduction or other bulk transmission of
investments to the Funds
o Right of Accumulation. Eligible investors are permitted to purchase Class A
shares of a Fund at the public offering price applicable to the total of:
- the dollar amount then being purchased, plus
- an amount equal to the then-current net asset value or cost (whichever is
higher) of the purchaser's combined holdings in certain CitiFunds and
certain other mutual funds managed or advised by Citibank
See the Statement of Additional Information for the applicable Fund for more
information.
o Letter of Intent. If an investor anticipates purchasing $25,000 or more of
Class A shares of a Fund alone or in combination with Class B shares of the
Fund or any of the classes of certain other CitiFunds and certain other
mutual funds managed or advised by Citibank within a 13-month period, by
completing a letter of intent the investor may obtain the shares at the same
reduced sales charge as though the total quantity were invested in one lump
sum, subject to granting a power of attorney to redeem shares if the intended
purchases are not completed. See the Statement of Additional Information for
the applicable Fund for more information.
o Reinstatement Privilege. Shareholders who have redeemed Class A shares may
reinstate their Fund account without a sales charge up to the dollar amount
redeemed (with a credit for any contingent deferred sales charge paid) by
purchasing Class A shares of the same Fund within 90 days after the
redemption. To take advantage of this reinstatement privilege, shareholders
must notify the Transfer Agent or, if they are customers of a Service Agent,
their Service Agent in writing at the time the privilege is exercised.
CLASS B SHARES:
o Class B shares are sold at net asset value without a front-end sales charge,
but they are subject to a contingent deferred sales charge.
o Class B shares pay combined distribution and service fees of up to 0.75% of
the average daily net assets represented by the Class B shares.
o Class B shares have a contingent deferred sales charge (CDSC). This sales
charge goes down the longer you hold your Class B shares. See the chart below
for the amount of the sales charge. The sales charge is deducted from your
redemption proceeds if you redeem your Class B shares within five years of
purchasing them.
REDEMPTION DURING CDSC ON SHARES BEING SOLD
- --------------------------------------------------------------------------------
1st year since purchase 4.50%
2nd year since purchase 4.00%
3rd year since purchase 3.00%
4th year since purchase 2.00%
5th year since purchase 1.00%
6th year (or later) since purchase None
- --------------------------------------------------------------------------------
o The CDSC is based on the original purchase price or the current market value
of the shares being sold, whichever is less.
o There is no CDSC on Class B shares representing capital appreciation or on
Class B shares acquired through reinvestment of dividends or capital gains
distributions.
o Each Fund will assume that a redemption of Class B shares is made:
- first, of Class B shares representing capital appreciation
- next, of shares representing the reinvestment of dividends and capital
gains distributions
- finally of other shares held by the investor for the longest period of
time
o The holding period of Class B shares of a Fund acquired through an exchange
with another CitiFund will be calculated from the date that the Class B
shares were initially acquired in the other CitiFund, and Class B shares
being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gains distribution reinvestments in the
other fund. When determining the amount of the CDSC, each Fund will use the
CDSC schedule of any fund from which you have exchanged shares that would
result in you paying the highest CDSC.
o Class B shares automatically convert to Class A shares of the same Fund
approximately eight years after issuance, together with a pro rata portion of
all Class B shares representing dividends and other distributions paid in
additional Class B shares. Shares are converted based on the relative net
asset values per share of the two classes on the first business day of the
month in which the eighth anniversary of the issuance of the Class B shares
occurs. Because the net asset value of a Class A share may be higher than
that of a Class B share, you may receive fewer Class A shares than the number
of Class B shares converted, but the dollar value will be the same.
o Commissions will be paid to brokers, dealers and other institutions that sell
Class B shares in the amount of 4.00% of the purchase price of Class B shares
sold by these entities. These commissions are not paid on exchanges from
other CitiFunds or on sales of Class B shares to investors exempt from the
CDSC. Entities that sell Class B shares will also receive a portion of the
service fee payable under the Class B Service Plan at an annual rate equal to
0.25% of the average daily net assets represented by the Class B shares sold
by them.
CLASS B SHARES -- CDSC ELIMINATION:
o Reinvestment. There is no CDSC on shares representing capital appreciation or
on shares acquired through reinvestment of dividends or capital gains
distributions.
o Waivers. The CDSC will be waived in connection with:
- exchanges into certain CitiFunds
- a total or partial redemption made within one year of the death of the
shareholder; this waiver is available where the deceased shareholder is
either the sole shareholder or owns the shares with his or her spouse as a
joint tenant with right of survivorship, and applies only to redemption of
shares held at the time of death
- a lump sum or other distribution in the case of an Individual Retirement
Account (IRA), a self-employed individual retirement plan (Keogh Plan) or
a custodian account under Section 403(b) of the Internal Revenue Code, in
each case following attainment of age 59 1/2
- a total or partial redemption resulting from any distribution following
retirement in the case of a tax-qualified retirement plan
- a redemption resulting from a tax-free return of an excess contribution to
an IRA
EXCHANGES
o Shares of each Fund may be exchanged for shares of the same class of certain
other CitiFunds, or may be acquired through an exchange of shares of the same
class of those funds. Class A shares also may be exchanged for shares of
certain CitiFunds that offer only a single class of shares, unless the Class
A shares are subject to a contingent deferred sales charge. Class B shares
may not be exchanged for shares of CitiFunds that offer only a single class
of shares. No initial sales charge is imposed on shares being acquired
through an exchange unless Class A shares are being acquired and the sales
charge for Class A shares of the fund being exchanged into is greater than
the current sales charge of the Fund (in which case an initial sales charge
will be imposed at a rate equal to the difference). No contingent deferred
sales charge is imposed on Class B shares when they are exchanged for Class B
shares of certain other CitiFunds.
If you are exchanging into a fund that imposes a sales charge, you may
qualify for share prices which do not include the sales charge or which
reflect a reduced sales charge, if the Fund shares you are exchanging were:
(a) purchased with a sales charge, (b) acquired through a previous exchange
from shares purchased with a sales charge, (c) outstanding as of January 4,
1999 or (d) acquired through capital appreciation or the reinvestment of
dividends and capital gains distributions on those shares. To qualify for
this sales charge waiver or reduced sales charge, at the time of exchange you
must notify the Transfer Agent, or if you are a customer of a Service Agent,
the Service Agent. Any such qualification may be subject to confirmation,
through a check of appropriate records and documentation, of your existing
share balances and any sales charges paid on prior share purchases.
This exchange privilege may be changed or terminated at any time with at
least 60 days' notice, when notice is required by applicable rules and
regulations.
SERVICE PLANS. The Funds maintain separate Service Plans, which have been
adopted in accordance with Rule 12b-1 under the 1940 Act, for Class A and
Class B shares. Under the Class A Service Plans, each Fund may pay monthly
fees at an annual rate not to exceed 0.25% of the average daily net assets
represented by Class A shares of the Fund. Under the Class B Service Plans,
each Fund may pay a combined monthly distribution and service fee at an annual
rate not to exceed 0.75% of the average daily net assets represented by Class
B shares of the Fund. These fees may be used to make payments to the
Distributor for distribution services and to Service Agents and others as
compensation for the sale of shares of the applicable class of each Fund, for
advertising, marketing or other promotional activity, and for preparation,
printing and distribution of prospectuses, statements of additional
information and reports for recipients other than regulators and existing
shareholders. Each Fund also may make payments to the Distributor, Service
Agents and others for providing personal service or the maintenance of
shareholder accounts.
The amounts paid to each Service Agent and other recipient may vary based upon
certain factors, including, among other things, the levels of sales of Fund
shares and/or shareholder services provided by the Service Agent. Service
Agents and others may receive different compensation for sales of Class A and
Class B shares.
The Distributor provides to the Trustees quarterly a written report of amounts
expended pursuant to the Service Plans and the purposes for which the
expenditures were made.
During the period they are in effect, the Service Plans and related
Distribution Agreements obligate each Fund 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 these entities'
expenses exceed the fees provided for under the Service Plans, the Funds 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. The Funds will pay the
fees to the Distributor, Service Agents and others until the Service Plans or
Distribution Agreements are terminated or not renewed. In that event, the
Distributor's or Service Agent's expenses in excess of fees received or
accrued through the termination date will be the Distributor's or Service
Agent's sole responsibility and not obligations of any Fund.
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 vary. Citibank may make similar payments under similar
arrangements.
From time to time, the Distributor or Citibank may provide additional
promotional bonuses, incentives or payments to dealers that sell shares of the
Funds. These may include payments for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and their guests to locations within and outside the United States for
meetings or seminars of a business nature. In some instances, these bonuses,
incentives or payments may be offered only to dealers who have sold or may
sell significant amounts of shares. Certain dealers may not sell all classes
of shares.
<PAGE>
CONDENSED FINANCIAL INFORMATION. The information in the following table
supplements the financial information contained in "Condensed Financial
Information" in the prospectuses for CitiFunds National Tax Free Income
Portfolio and CitiFunds New York Tax Free Income Portfolio. The numbers in the
table below are unaudited. For more current performance information, call
1-800-625-4554.
<TABLE>
<CAPTION>
CITIFUNDS NATIONAL TAX FREE INCOME CITIFUNDS NEW YORK TAX FREE
PORTFOLIO INCOME PORTFOLIO
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
(UNAUDITED) (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $10.92 $11.42
- -----------------------------------------------------------------------------------------------------------------------
Income from Operations:
Net investment income 0.277 0.256
Net realized and unrealized gain on investments 0.233 0.067
- -----------------------------------------------------------------------------------------------------------------------
Total from operations 0.510 0.323
- -----------------------------------------------------------------------------------------------------------------------
Less Dividends From:
Net investment income (0.270) (0.273)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $11.16 $11.47
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $33,477 $205,572
Ratio of expenses to average net assets 0.01%* 0.80%*
Ratio of expenses to average net assets after fees paid
indirectly 0% 0.80%*
Ratio of net investment income to average net assets 4.78%* 4.61%*
Portfolio turnover 13% 6%
Total Return 4.72%** 2.86%**
- -----------------------------------------------------------------------------------------------------------------------
Note: If certain agents of the Fund had not voluntarily agreed to waive all or
a portion of their fees for the periods indicated and expenses were not
reduced for fees paid indirectly, the net investment income per share and the
ratios would have been as follows:
- ------------------------------------------------------------------------------
Net investment income per share $0.143 $0.238
RATIOS:
Expenses to average net assets 2.31%* 1.13%*
Net investment income to average net assets 2.47%* 4.28%*
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
ADDITIONAL UPDATED INFORMATION ABOUT THE FUNDS
DIVIDENDS AND DISTRIBUTIONS. Substantially all of each Fund's net income from
dividends and interest, if any, is declared daily and paid to its shareholders
of record as a dividend monthly, on or about the last day of each month. Net
capital gains, if any, are distributed annually.
<PAGE>
Rule 497(e) File Nos. 33-5819 and 811-5034
Supplement dated January 4, 1999
to
Statement of Additional Information dated March 2, 1998
for
CitiFunds(SM) New York Tax Free Income Portfolio
and
CitiFunds(SM) National Tax Free Income Portfolio
and
Statement of Additional Information dated September 14, 1998
for
CitiFunds(SM) California Tax Free Income Portfolio
SALES CHARGES. Shares of each Fund are sold at net asset value, plus, in the
case of Class A shares, a front-end, or initial, sales charge that may be
reduced on purchases involving substantial amounts and that may be eliminated
in certain circumstances. A contingent deferred sales charge is imposed on
redemptions of certain Class B shares made within five years of purchase.
PERFORMANCE. Total rates of return for each of the Funds may be calculated on
investments at various sales charge levels or at net asset value. Any
performance data which is based on a reduced sales charge or net asset value
would be reduced if the maximum sales charge were taken into account.
DETERMINATION OF NET ASSET VALUE. Net asset value is calculated separately for
each class. Per share net asset value of the classes of each Fund's shares can
be expected to differ because the Class B shares bear higher expenses than
Class A shares.
LETTER OF INTENT. If an investor anticipates purchasing $25,000 or more of
Class A shares of a Fund alone or in combination with Class B shares of the
Fund or any of the classes of certain other CitiFunds and certain other mutual
funds managed or advised by Citibank (all of such funds being referred to
herein as CitiFunds) within a 13-month period, the investor may obtain the
shares at the same reduced sales charge as though the total quantity were
invested in one lump sum by completing a letter of intent on the terms
described below. Subject to acceptance by CFBDS, Inc., the Funds' distributor,
and the conditions mentioned below, each purchase will be made at a public
offering price applicable to a single transaction of the dollar amount
specified in the letter of intent.
o The shareholder or, if the shareholder is a customer of a Service Agent, his
or her Service Agent must inform CFBDS that the letter of intent is in effect
each time shares are purchased.
o The shareholder makes no commitment to purchase additional shares, but if his
or her purchases within 13 months plus the value of shares credited toward
completion of the letter of intent do not total the sum specified, an
increased sales charge will apply as described below.
o A purchase not originally made pursuant to a letter of intent may be included
under a subsequent letter of intent executed within 90 days of the purchase
if CFBDS is informed in writing of this intent within the 90-day period.
o The value of shares of a Fund presently held, at cost or maximum offering
price (whichever is higher), on the date of the first purchase under the
letter of intent, may be included as a credit toward the completion of the
letter, but the reduced sales charge applicable to the amount covered by the
letter is applied only to new purchases.
o Instructions for issuance of shares in the name of a person other than the
person signing the letter of intent must be accompanied by a written
statement from the Transfer Agent or a Service Agent stating that the shares
were paid for by the person signing the letter.
o Neither income dividends nor capital gains distributions taken in additional
shares will apply toward the completion of the letter of intent.
o The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the letter of intent are deducted from
the total purchases made under the letter of intent.
If the investment specified in the letter of intent is not completed (either
prior to or by the end of the 13-month period), the Transfer Agent will
redeem, within 20 days of the expiration of the letter of intent, an
appropriate number of the shares in order to realize the difference between
the reduced sales charge that would apply if the investment under the letter
of intent had been completed and the sales charge that would normally apply to
the number of shares actually purchased. By completing and signing the letter
of intent, the shareholder irrevocably grants a power of attorney to the
Transfer Agent to redeem any or all shares purchased under the letter of
intent, with full power of substitution.
RIGHT OF ACCUMULATION. A shareholder qualifies for cumulative quantity
discounts on the purchase of Class A shares when his or her new investment,
together with the current offering price value of all holdings of that
shareholder in the CitiFunds, reaches a discount level. For example, if a Fund
shareholder owns shares valued at $50,000 and purchases an additional $50,000
of Class A shares of the Fund, the sales charge for the additional $50,000
purchase would be at the rate of 2.50% (the rate applicable to single
transactions from $100,000 to less than $250,000). A shareholder must provide
the Transfer Agent with information to verify that the quantity sales charge
discount is applicable at the time the investment is made.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares in the same Fund approximately eight
years after the date of issuance, together with a pro rata portion of all
Class B shares representing dividends and other distributions paid in
additional Class B shares. The conversion will be effected at the relative net
asset values per share of the two classes on the first business day of the
month in which the eighth anniversary of the issuance of the Class B shares
occurs. If a shareholder effects one or more exchanges among Class B shares of
the CitiFunds during the eight-year period, the holding periods for the shares
so exchanged will be counted toward the eight-year period. Because the per
share net asset value of the Class A shares may be higher than that of the
Class B shares at the time of conversion, a shareholder may receive fewer
Class A shares than the number of Class B shares converted, although the
dollar value will be the same.
SERVICE FEES. The Funds pay fees for distribution and shareholder servicing
pursuant to a Service Plan adopted with respect to each class of shares of the
Funds in accordance with Rule 12b-1 under the Investment Company Act of 1940,
as amended. The Service Plan with respect to Class A shares provides that each
Fund may pay monthly fees at an annual rate not to exceed 0.25% of the average
daily net assets represented by Class A shares of the Fund. The Service Plan
with respect to Class B shares provides that each Fund may pay a combined
monthly distribution and service fee at an annual rate not to exceed 0.75% of
the average daily net assets represented by Class B shares of the Fund.
FINANCIAL STATEMENTS. The financial statements (unaudited) for CitiFunds
National Tax Free Income Portfolio and CitiFunds New York Tax Free Income
Portfolio (Portfolio of Investments at June 30, 1998, Statement of Assets and
Liabilities at June 30, 1998, Statement of Operations for the six months ended
June 30, 1998, Statement of Changes in Net Assets for the six months ended
June 30, 1998 and the year ended December 31, 1997, and Financial Highlights
for the six months ended June 30, 1998, the years ended December 31, 1997 and
1996, and the period from August 17, 1995 (commencement of operations) to
December 31, 1995), which are included in the Semi-Annual Reports to
Shareholders of CitiFunds National Tax Free Income Portfolio and CitiFunds New
York Tax Free Income Portfolio, are incorporated herein by reference.
