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Rule 497(e) File Nos. 33-6540 and 811-5033
SUPPLEMENT DATED NOVEMBER 1, 1998 TO
PROSPECTUS DATED MARCH 2, 1998
CITIFUNDS(SM) INTERMEDIATE INCOME PORTFOLIO
Effective November 1, 1998, the Fund will invest in securities through
U.S. Fixed Income Portfolio, a mutual fund which has the same investment
objectives and policies as the Fund. The aggregate management fees payable by
the Fund and the Portfolio to Citibank, N.A. are equal to the management fee
that was payable by the Fund when the Fund invested directly in securities. The
Fund's Trustees believe that the aggregate per share expenses of the Fund and
the Portfolio will be less than or approximately equal to the expenses that the
Fund would incur if it were to continue investing directly in securities.
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Rule 497(e) File Nos. 33-6540 and 811-5033
SUPPLEMENT DATED NOVEMBER 1, 1998 TO
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 2, 1998
CITIFUNDS(SM) INTERMEDIATE INCOME PORTFOLIO
The following sentences are added at the end of the first paragraph on
the first page of the statement of additional information:
The Fund is permitted to invest all or a portion of its assets in one
or more other investment companies. Currently, the Fund invests its
assets in U.S. Fixed Income Portfolio, a series of The Premium
Portfolios. The address of The Premium Portfolios is Elizabethan
Square, George Town, Grand Cayman, British West Indies.
The second paragraph of the section entitled "The Trust" on page 2 of
the statement of additional information is deleted and replaced with the
following:
The Fund is permitted to seek its investment objectives by
investing all or a portion of its assets in one or more investment
companies to the extent not prohibited by the Investment Company Act of
1940, the rules and regulations thereunder and exemptive orders granted
under such Act. Currently, the Fund invests its assets in U.S. Fixed
Income Portfolio (the "Portfolio"). The Portfolio is a series of The
Premium Portfolios (the "Portfolio Trust"), and is an open-end,
diversified management investment company. The Portfolio has the same
investment objectives and policies as the Fund. Because the Fund
invests through the Portfolio, all references in this Statement of
Additional Information to the Fund include the Portfolio, except as
otherwise noted. In addition, references to the Trust include the
Portfolio Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Manager") is the Manager of
the Portfolio. Citibank manages the investments of the Portfolio from
day to day in accordance with the Portfolio's investment objectives and
policies. The selection of investments for the Portfolio, and the way
they are managed, depend on the conditions and trends in the economy
and the financial marketplaces.
The first sentence of the third paragraph of the section entitled "The
Trust" on page 2 of the statement of additional information is replaced with the
following:
The Boards of Trustees of the Trust and the Portfolio Trust provide
broad supervision over the affairs of the Fund and the Portfolio,
respectively.
The following paragraph is added at the end of the section entitled
"Investment Objectives and Policies" on page 2 of the statement of additional
information:
The Trust may withdraw the investment of the Fund from the
Portfolio at any time if the Board of Trustees of the Trust determines
that it is in the best interests of the Fund to do so. Upon any such
withdrawal, the Fund's assets would continue to be invested in
accordance with the investment policies described herein with respect
to the Fund. The policies described above and those described below are
not fundamental and may be changed without shareholder approval.
The first paragraph of the section entitled "Investment Restrictions"
on page 10 of the statement of additional information is replaced with the
following:
The Trust, on behalf of the Fund, and the Portfolio Trust, on
behalf of the Portfolio, have each adopted the following policies which
may not be changed with respect to the Fund or Portfolio without
approval by the holders of a majority of the outstanding voting
securities of the Fund or Portfolio, 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 or Portfolio present
at a meeting at which the holders of more than 50% of the outstanding
voting securities of the Fund or Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities of
the Fund or Portfolio. The term "voting securities" as used in this
paragraph has the same meaning as in the 1940 Act.
The Portfolio may not:
(1) Borrow money, except that as a temporary measure
for extraordinary or emergency purposes it may borrow in an
amount not to exceed 1/3 of the current value of its net
assets, including the amount borrowed; or purchase any
securities at any time at which borrowings exceed 5% of the
total assets of the Portfolio, taken at market value. It is
intended that the Portfolio would borrow money only from banks
and only to accommodate requests for the repurchase of
beneficial interests in the Portfolio while effecting an
orderly liquidation of portfolio securities.
(2) Make loans to other persons except (a) through
the lending of its portfolio securities and provided that any
such loans not exceed 30% of the Portfolio's total assets
(taken at market value), (b) through the use of repurchase
agreements or fixed time deposits or the purchase of
short-term obligations or (c) by purchasing all or a portion
of an issue of debt securities of types commonly distributed
privately to financial institutions. The purchase of
short-term commercial paper or a portion of an issue of debt
securities which is part of an issue to the public shall not
be considered the making of a loan.
(3) Purchase securities of any issuer if such
purchase at the time thereof would cause with respect to 75%
of the total assets of the Portfolio more than 10% of the
voting securities of such issuer to be held by the Portfolio;
provided that, for purposes of this restriction, the issuer of
an option or futures contract shall not be deemed to be the
issuer of the security or securities underlying such contract;
and provided further that the Portfolio may invest all or any
portion of its assets 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.
(4) Purchase securities of any issuer if such
purchase at the time thereof would cause as to 75% of the
Portfolio's total assets more than 5% of the Portfolio's
assets (taken at market value) to be invested in the
securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any
state or political subdivision thereof, or any political
subdivision of any such state, or any agency or
instrumentality of the United States or of any state or of any
political subdivision of any state); provided that, for
purposes of this restriction, the issuer of an option or
futures contract shall not be deemed to be the issuer of the
security or securities underlying such contract; and provided
further that the Portfolio may invest all or any portion of
its assets in 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.
(5) Concentrate its investments in any particular
industry, but if it is deemed appropriate for the achievement
of the Portfolio's investment objective, 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.
(6) Underwrite securities issued by other persons,
except that all or any portion of the assets of the Portfolio
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 Portfolio may technically
be deemed an underwriter under the Securities Act in selling a
security.
(7) 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 the Portfolio from purchasing or selling futures
contracts or options thereon, and the Portfolio reserves the
freedom of action to hold and to sell real estate acquired as
a result of the ownership of securities by the Portfolio).
(8) 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.
The following information is added after the section entitled
"Management - Trustees of the Trust" on page 14 of the statement of additional
information:
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV; 55- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June
1991 to June 1992); President and Director, Elliott J. Berv &
Associates (Management Consultants) (since May 1984). His address is 15
Stowaway Drive, Cumberland Foreside, Maine.
PHILIP W. COOLIDGE*; 47- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial
Group, Inc. and CFBDS.
MARK T. FINN; 55- President and Director, Delta Financial, Inc. (since
June 1983); Chairman of the Board and Chief Executive Officer, FX 500
Ltd. (Commodity Trading Advisory Firm) (since April 1990); Director,
Vantage Consulting Group, Inc. (since October 1988). His address is
3500 Pacific Avenue, P.O. Box 539, Virginia Beach, Virginia.
C. OSCAR MORONG, JR.; 63- Managing Director, Morong Capital Management
(since February 1993); Senior Vice President and Investment Manager,
CREF Investments, Teachers Insurance & Annuity Association (retired,
January 1993); Director, Indonesia Fund; Trustee, MAS Funds (since
1993). His address is 1385 Outlook Drive, West, Mountainside, New
Jersey.
WALTER E. ROBB, III; 72- President, Benchmark Consulting Group, Inc.
(since 1991); Principal, Robb Associates (Corporate Financial Advisors)
(since 1978); President, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment
companies in the MFS Family of Funds. His address is 35 Farm Road,
Sherborn, Massachusetts.
E. KIRBY WARREN; 64- Professor of Management, Graduate School of
Business, Columbia University (since 1987). Samuel Bronfman Professor
of Democratic Business Enterprise (1978 to 1987). His address is
Columbia University, Graduate School of Business, 725 Uris Hall, New
York, New York.
The name of the section entitled "Officers of the Trust" on page 14 of
the statement of additional information is hereby changed to "Officers of the
Trust and the Portfolio Trust."
The section entitled "Management - Manager" on pages 15 and 16 of the
statement of additional information is deleted and replaced with the following:
MANAGER
Citibank serves as the manager of the Portfolio and provides
certain administrative services to the Trust and the Portfolio Trust
pursuant to separate management agreements (the "Management
Agreements"). Subject to policies as the Board of Trustees of the
Portfolio Trust may determine, Citibank manages the securities of the
Portfolio and makes investment decisions for the Portfolio. The
Management Agreement with the Portfolio Trust provides that Citibank
may delegate the daily management of the securities of the Portfolio to
one or more subadvisers. Citibank furnishes at its own expense all
services, facilities and personnel necessary in connection with
managing the Portfolio's investments and effecting securities
transactions for the Portfolio. The Management Agreement with respect
to the Portfolio will continue in effect until August 7, 2000, and
thereafter as long as such continuance is specifically approved at
least annually by the Board of Trustees of the Portfolio Trust or by a
vote of a majority of the outstanding voting securities of the
Portfolio, and, in either case, by a majority of the Trustees of the
Portfolio 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. The Management Agreement
with the Trust will respect to the Fund will continue in effect until
August 8, 1999 and thereafter as long as 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 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.
Citibank provides the Trust and the Portfolio Trust with
general office facilities and supervises the overall administration of
the Trust and the Portfolio Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the Trust's or Portfolio
Trust's independent contractors and agents; the preparation and filing
of all documents required for compliance by the Trust or Portfolio
Trust with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust or Portfolio Trust.
Trustees, officers, and investors in the Trust or Portfolio Trust are
or may be or may become interested in Citibank, as directors, officers,
employees, or otherwise and directors, officers and employees of
Citibank are or may become similarly interested in the Trust or
Portfolio Trust.
Each Management Agreement provides that Citibank 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 Portfolio Trust or the Trust, as the case may be, when
authorized either by a vote of a majority of the outstanding voting
securities of the Portfolio or Fund or by a vote of a majority of the
Board of Trustees of the Portfolio Trust or the Trust, or by Citibank
on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The
Management Agreement with the Portfolio Trust provides that neither
Citibank nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of my investment or for any
act or omission in the execution of security transactions for the
Portfolio, 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 Portfolio Trust. The Management
Agreement with the Trust provides that neither Citibank 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 Prospectus contains a description of the fees payable to
Citibank for services under each of the Management Agreements. Citibank
may reimburse the Fund or Portfolio or waive all or a portion of its
management fees.
For the fiscal years ended December 31, 1995, 1996 and 1997,
the fees payable from the Fund to Citibank under a prior investment
advisory agreement with the Trust were $171,213 (of which $115,475 was
voluntarily waived), $162,525 (of which $80,994 was voluntarily waived)
and $137,525 (of which $82,010 was voluntarily waived), respectively.
For the fiscal years ended December 31, 1995, 1996 and 1997,
the fees payable from the Fund to CFBDS under a prior administrative
services agreement with the Trust were $97,836 (of which $38,337 was
voluntarily waived), $116,090 (of which $72,966 was voluntarily waived)
and $98,232 (of which $75,116 was voluntarily waived), respectively.
Pursuant to separate sub-administrative services agreements
with Citibank, CFBDS and Signature Financial Group (Cayman) Ltd.
("SFG") perform such sub-administrative duties for the Trust and the
Portfolio Trust, respectively, as from time to time are agreed upon by
Citibank, CFBDS and SFG, as appropriate. For performing such
sub-administrative services, CFBDS and SFG receive compensation as from
time to time is agreed upon by Citibank, not in excess of the amount
paid to Citibank for its services under the Management Agreements with
the Trust and the Portfolio Trust, respectively. All such compensation
is paid by Citibank.
The following paragraph is added at the end of the section entitled
"Transfer Agent and Custodian" on page 17 of the statement of additional
information:
The Portfolio Trust, on behalf of the Portfolio, has entered
into a Custodian Agreement with State Street pursuant to which State
Street acts as custodian for the Portfolio. The Portfolio Trust, on
behalf of the Portfolio, also has entered into a Fund Accounting
Agreement with State Street Cayman Trust Company, Ltd. ("State Street
Cayman") pursuant to which State Street Cayman provides fund accounting
services for the Portfolio. State Street Cayman also provides transfer
agency services to the Portfolio. The principal business address of
State Street Cayman is P.O. Box 2508 GT, Grand Cayman, British West
Indies.
The section entitled "Auditors" on page 17 of the statement of
additional information is deleted and replaced with the following:
AUDITORS
PricewaterhouseCoopers LLP are the independent accountants for
the Trust, providing audit services and assistance and consultation
with respect to the preparation of filings with the SEC. The address of
PricewaterhouseCoopers LLP is 160 Federal Street, Boston, Massachusetts
02110.
PricewaterhouseCoopers are the chartered accountants for the
Portfolio Trust. The address of PricewaterhouseCoopers is Suite 3000,
Box 82, Royal Trust Towers, Toronto Dominion Center, Toronto, Ontario,
Canada M5K 1G8.
The following paragraph is added at the end of the section entitled
"Description of Shares, Voting Rights and Liabilities on page 19 of the
statement of additional information:
The Portfolio is a series of The Premium Portfolios. The
Portfolio Trust is organized as a trust under the laws of the state of
New York. Each investor in the Portfolio, including the Fund, may add
to or withdraw from its investment in the Portfolio on each Business
Day. As of the close of regular trading on each Business Day, the value
of each investor's beneficial interest in the Portfolio is determined
by multiplying the net asset value of the Portfolio by the percentage,
effective for that day, that represents that investor's share of the
aggregate beneficial interest in the Portfolio. Any additions or
withdrawals that are to be effected on that day are then effected. The
investor's percentage of the aggregate beneficial interests in the
Portfolio is then recomputed as the percentage equal to the fraction
(i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or
minus, as the case may be, the amount of any additions to or
withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset
value of the Portfolio as of the close of regular trading on such day
plus or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in the Portfolio by all
investors in the Portfolio. The percentage so determined is then
applied to determine the value of the investor's interest in the
Portfolio as of the close of regular trading on the next following
Business Day.
The following sentence is added at the end of the first paragraph of
the section entitled "Certain Additional Tax Matters" on page 19 of the
statement of additional information:
The Portfolio Trust believes the Portfolio also will not be required to
pay any U.S. federal income or excise taxes on its income.
