<PAGE>
Rule 497(e) File Nos. 33-6540 and 811-5033
Supplement dated January 4, 1999 to Prospectus dated March 2, 1998
for
CitiFunds(SM) Short-Term
U.S. Government Income Portfolio
Beginning on January 4, 1999, shares of CitiFunds Short-Term U.S. Government
Income Portfolio will be subject to an initial sales charge.
Shares of the Fund that are outstanding on January 4, 1999 will not be subject
to a sales charge as a result of this change. 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.
EXPENSE SUMMARY
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The following tables summarize estimated shareholder transaction and annual
operating expenses for shares of the Fund and the underlying Portfolio in
which the Fund invests. For more information on costs and expenses, see
"Management" -- page 14 of the Prospectus and "General Information --
Expenses" -- page 20 of the Prospectus.*
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C>
Maximum sales load imposed on purchases (as a percentage of offering price) 1.50%
Maximum sales load imposed on reinvested dividends none
Maximum deferred sales load (as a percentage of original purchase price or
redemption proceeds, whichever is less) none(1)
Redemption fee none
Exchange fee none
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</TABLE>
(1)Except for purchases of $500,000 or more. See "Sales Charge" below.
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 0.35%
12b-1 Fees (after fee waivers and reimbursements)(1)(2) 0.00%
Other Expenses
Shareholder Servicing Agent Fees 0.25%
Other Operating Expenses (after fee waivers and reimbursements)(2) 0.20%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses (after fee waivers and reimbursements)(2) 0.80%
- --------------------------------------------------------------------------------
* These tables are intended to assist investors in understanding the various
costs and expenses that a shareholder of the Fund 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 is based on the Fund's
expenses for the fiscal year ended December 31, 1997, as revised to reflect
current fees.
(1) 12b-1 distribution fees are asset-based sales charges. Long-term
shareholders in the Fund 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.
(2) Absent fee waivers, 12b-1 Fees, Other Operating Expenses and Total Fund
Operating Expenses would be 0.20%, 0.50% and 1.30%, respectively. 12b-1 fees
for shares assume a 0.05% fee for electronic print or media advertising
expenses.
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:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- -------------------------------------------------------------------------------
CITIFUNDS SHORT-TERM
U.S. GOVERNMENT INCOME PORTFOLIO $23 $40 $59 $112
- -------------------------------------------------------------------------------
The Example assumes that all dividends are reinvested. Without waivers and
reimbursements, the amounts in the Example would be $31, $65, $101 and $202.
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 the
Fund's future performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
SALES CHARGE. Beginning on January 4, 1999, shares of the Fund will be subject
to a front-end, or initial, sales charge. This sales charge may be reduced or
eliminated in certain circumstances.
o 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 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 "Sales Charge Waivers" and "Sales Charge Reductions" below.
<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 $50,000 1.50% 1.52% 1.35%
$50,000 to less than $250,000 1.00% 1.01% 0.90%
$250,000 to less than $500,000 0.50% 0.50% 0.45%
$500,000 or more none* none* up to 0.45%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*A contingent deferred sales charge may apply in certain instances. See below.
o Fund shares pay distribution and service fees of up to 0.15% of the average
daily net assets represented by such shares. These fees are currently being
waived in full. This fee waiver is voluntary and may be terminated at any
time.
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 shares as shown in the table above. The Distributor
retains approximately 10% of the sales charge imposed on Fund shares.
SALES CHARGE WAIVERS:
o Reinvestment. The sales charge does not apply to shares acquired through the
reinvestment of dividends and capital gains distributions.
o Eligible Purchasers.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 or shareholder servicing
agent
- employees of Citibank and its affiliates, CFBDS, Inc. and its affiliates
or any Shareholder Servicing 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 the 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 the 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 the 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 Fund 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 will be waived under certain circumstances, as described
below; in determining whether a contingent deferred sales charge 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 Fund 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 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 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 representative, 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 the
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
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
Fund and the members
- agree to include sales and other materials related to the Fund 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 Fund
o Right of Accumulation. Eligible investors are permitted to purchase shares of
the 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 more information.
o Letter of Intent. If an investor anticipates purchasing $25,000 or more of
shares of the Fund alone or in combination with 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 more information.
o Reinstatement Privilege. Shareholders who have redeemed Fund 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 shares of the Fund within 90 days after the redemption. To take
advantage of this reinstatement privilege, shareholders must notify their
Shareholder Servicing Agent in writing at the time the privilege is
exercised.
WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGE:
o The contingent deferred sales charge on Fund shares will be waived in
connection with:
- exchanges into Class A shares of 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 the Fund may be exchanged for Class A shares of certain other
CitiFunds, or may be acquired through an exchange of Class A shares of those
funds. Fund shares also may be exchanged for shares of certain CitiFunds that
offer only a single class of shares, unless the Fund shares are subject to a
contingent deferred sales charge. 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 Fund shares that are subject
to a CDSC when they are exchanged for Class A 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 your Shareholder Servicing 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.
DISTRIBUTION PLAN. The Fund has adopted a Distribution Plan in accordance with
Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay monthly fees
at an annual rate not to exceed 0.15% of the average daily net assets
represented by shares of the Fund. These fees may be used to make payments to
the Distributor for distribution services and to others as compensation for
the sale of shares of the 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. The Fund also may make
payments to the Distributor and others for providing personal service or the
maintenance of shareholder accounts. Under the Plan, Fund shares may also pay
an additional fee of up to 0.05% of the average daily net assets represented
by such shares in anticipation of, or as reimbursement for, expenses incurred
in connection with print or electronic media advertising in connection with
the sale of shares. The Fund did not pay this fee during its most recent
fiscal year, and does not anticipate paying it during the current fiscal year.
The amounts paid to each recipient pursuant to the Plan may vary based upon
certain factors, including, among other things, the levels of sales of Fund
shares and/or shareholder services provided.
The Distributor provides to the Trustees quarterly a written report of amounts
expended pursuant to the Plan and the purposes for which the expenditures were
made.
During the period they are in effect, the Plan and related Distribution
Agreement obligate the Fund to pay fees to the Distributor 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 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. The Fund will pay the fees to the Distributor and others until the
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.
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
Fund. 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.
CONDENSED FINANCIAL INFORMATION. The information in the following table
supplements the financial information contained in "Condensed Financial
Information" in the Prospectus. The numbers in the table below are unaudited.
For more recent performance information, call 1-800-625-4554.
CITIFUNDS SHORT-TERM
U.S. GOVERNMENT INCOME
PORTFOLIO --
SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $ 9.61
Income from Operations:
Net investment income 0.237
Net realized and unrealized gain (loss) on investments 0.023
- --------------------------------------------------------------------------------
Total from operations 0.260
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.240)
Net realized gain --
- --------------------------------------------------------------------------------
Total distributions (0.240)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $ 9.63
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $23,801
Ratio of expenses to average net assets (A) 0.80%*
Ratio of net investment income to average net assets 5.06%*
Portfolio turnover 159%
Total Return 2.73%**
- --------------------------------------------------------------------------------
Note: If certain agents of the Fund and its underlying portfolio 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 $0.234
RATIOS:
Expenses to average net assets (A) 1.60%*
Net investment income to average net assets 4.26%*
- --------------------------------------------------------------------------------
(A) Includes allocated expenses for the period indicated from the Government
Income Portfolio.
* Annualized
** Not annualized
<PAGE>
Rule 497(e) File Nos. 33-6540 and 811-5033
Supplement dated January 4, 1999
to
Statement of Additional Information dated March 2, 1998
for
CitiFunds(SM) Short-Term
U.S. Government Income Portfolio
SALES CHARGES. Shares of the Fund are sold at net asset value, plus a front-
end, or initial, sales charge that may be reduced on purchases involving
substantial amounts and that may be eliminated in certain circumstances.
PERFORMANCE. Total rates of return for the Fund 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.
LETTER OF INTENT. If an investor anticipates purchasing $25,000 or more of
shares of the Fund alone or in combination with 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 Fund's 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's Shareholder Servicing 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 the 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 Shareholder Servicing 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 Shareholder Servicing
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
Shareholder Servicing 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 Fund 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 $200,000 and purchases an additional $50,000
of shares of the Fund, the sales charge for the additional $50,000 purchase
would be at the rate of 0.50% (the rate applicable to single transactions from
$250,000 to less than $500,000). A shareholder must provide the Shareholder
Servicing Agent with information to verify that the quantity sales charge
discount is applicable at the time the investment is made.
SERVICE FEES. The Fund pays fees for distribution and shareholder servicing
pursuant to a Distribution Plan adopted with respect to shares of the Fund in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended. The Plan provides that the Fund may pay monthly fees at an annual
rate not to exceed 0.15% of the average daily net assets of the Fund. Under
the Plan, shares may also pay an additional fee of up to 0.05% of the average
daily net assets of the Fund in anticipation of, or as reimbursement for,
expenses incurred in connection with print or electronic media advertising in
connection with the sale of shares. The Fund did not pay this fee during its
most recent fiscal year, and does not anticipate paying it during the current
fiscal year.
FINANCIAL STATEMENTS. The financial statements (unaudited) for CitiFunds
Short-Term U.S. Government 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, 1996, 1995 and 1994 and the period June 25,
1993 (commencement of operations) to December 31, 1993), which are included in
the Semi-Annual Report to Shareholders of CitiFunds Short-Term U.S. Government
Income Portfolio, are incorporated herein by reference.
<PAGE>
Rule 497(e) File Nos. 33-6540 and 811-5033
Supplement dated January 4, 1999 to Prospectus dated March 2, 1998
for
CitiFunds(SM) Intermediate Income Portfolio
Beginning on January 4, 1999, CitiFunds Intermediate Income Portfolio will
offer two classes of shares: Class A and Class B.
Shares 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 Fund 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 Fund. For more
information on costs and expenses, see "Management" -- page 13 of the
Prospectus and "General Information -- Expenses" -- page 18 of the
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.
CLASS A CLASS B
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Management Fees (after fee waivers and
reimbursements)(1)(2) 0.28% 0.28%
12b-1 Fees (including service fees)(3) 0.25% 0.75%
Other Expenses (after fee waivers and
reimbursements)(2) 0.37% 0.37%
- --------------------------------------------------------------------------------
Total Fund Operating Expenses (after fee
waivers and reimbursements)(2) 0.90% 1.40%
- --------------------------------------------------------------------------------
* 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 is based on the Fund's expenses for the fiscal year
ended December 31, 1997, as revised to reflect current fees.
(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 0.70%, 0.37% and 1.32%, respectively, for Class A shares,
and 0.70%, 0.37% and 1.82%, respectively, for Class B shares.
(3) Includes fees for distribution and shareholder servicing. Long-term
shareholders in the Fund 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:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
Class A $54 $72 $93 $151
Class B
Assuming redemption at end of period $59 $74 $87 $147
Assuming no redemption $14 $44 $77 $147
- --------------------------------------------------------------------------------
The Example assumes that all dividends are reinvested. Without waivers and
reimbursements, the amounts in the Example would be $58, $85, $114 and $197
for Class A shares, and $63, $87, $109 and $190 for Class B shares, assuming
redemption at the end of the period ($18, $57, $99 and $190 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 the
Fund's future performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
CLASSES OF SHARES. Beginning on January 4, 1999, the 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 Fund 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 the 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 the 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 the 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 the
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
Fund and the members
- agree to include sales and other materials related to the Fund 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 Fund
o Right of Accumulation. Eligible investors are permitted to purchase Class A
shares 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 more information.
o Letter of Intent. If an investor anticipates purchasing $25,000 or more of
Class A shares of the 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
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 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 a combined distribution and service fee 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 The 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 the 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, the 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 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 the 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,
your 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 Fund maintains 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 Plan, the 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 Plan, the
Fund may pay monthly a combined distribution and service fee of up to 0.75% of
the average daily net assets represented by the Class B shares. 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 the 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. The 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 the 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 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. The Fund 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 the 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
Fund. 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 Prospectus. The numbers in the table below are unaudited.
For more recent performance information, call 1-800-625-4554.
CITIFUNDS INTERMEDIATE INCOME
PORTFOLIO
SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $ 9.72
- --------------------------------------------------------------------------------
Income from Operations:
Net investment income 0.271
Net realized and unrealized gain on investments 0.116
- --------------------------------------------------------------------------------
Total from operations 0.387
- --------------------------------------------------------------------------------
Less Dividends From:
Net investment income (0.267)
Net realized gain on investments --
- --------------------------------------------------------------------------------
Total from distributions (0.267)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $ 9.84
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $45,988
Ratio of expenses to average net assets 0.91%*
Ratio of expenses to average net assets
after fees paid indirectly 0.90%*
Ratio of net investment income to average net assets 5.50%*
Portfolio turnover 78%
Total Return 4.03%**
- --------------------------------------------------------------------------------
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 $0.250
RATIOS:
Expenses to average net assets 1.32%*
Net investment income to average net assets 5.08%*
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
ADDITIONAL UPDATED INFORMATION ABOUT THE FUND
INVESTMENT STRUCTURE. The Fund invests 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 invested directly in securities.
<PAGE>
Rule 497(e) File Nos. 33-6540 and 811-5033
Supplement dated January 4, 1999 to Prospectus dated March 2, 1998
for
CitiFunds(SM) Intermediate Income Portfolio
SALES CHARGES. Shares of the 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 the Fund 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 the 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 the 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 Fund's 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 the 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 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 Fund pays fees for distribution and shareholder servicing
pursuant to a Service Plan adopted with respect to each class of shares of the
Fund 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 the
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 the Fund may pay monthly a
combined distribution and service fee of up to 0.75% of the average daily net
assets represented by the Class B shares.
FINANCIAL STATEMENTS. The financial statements (unaudited) for CitiFunds
Intermediate 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, 1996, 1995 and 1994 and for the period June 25, 1993
(commencement of operations) to December 31, 1993) which are included in the
Semi-Annual Report to Shareholders of CitiFunds Intermediate Income Portfolio,
are incorporated herein by reference.
