<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
File Nos. 33-6540
811-5033
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 34
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 35
CITIFUNDS FIXED INCOME TRUST*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
21 MILK STREET, 5TH FLOOR, BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679
PHILIP W. COOLIDGE, 21 MILK STREET, 5TH FLOOR, BOSTON, MASSACHUSETTS 02109
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM DANA LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
It is proposed that this filing will become effective on May 1, 2000,
pursuant to paragraph (b) of Rule 485.
The Premium Portfolios, on behalf of Government Income Portfolio, has also
executed this registration statement.
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* This filing relates solely to shares of the Trust's series CitiFunds
Short-Term U.S. Government Income Portfolio.
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PROSPECTUS
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MAY 1, 2000
CitiFunds(SM) Short-Term
U.S. Government
Income Portfolio
CITIBANK, N.A., INVESTMENT ADVISER
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
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Table of Contents
FUND AT A GLANCE ....................................................... 3
YOUR CITIFUNDS ACCOUNT ................................................. 11
YOUR FUND SHARES .................................................... 11
HOW TO BUY SHARES ................................................... 15
HOW THE PRICE OF YOUR SHARES IS CALCULATED 16
HOW TO SELL SHARES .................................................. 16
REINSTATING RECENTLY SOLD SHARES .................................... 18
EXCHANGES ........................................................... 18
ACCOUNT INQUIRIES ................................................... 19
DIVIDENDS ........................................................... 19
TAX MATTERS ......................................................... 20
MANAGEMENT OF THE FUND ................................................. 22
INVESTMENT ADVISER .................................................. 22
ADVISORY FEES ....................................................... 23
MORE ABOUT THE FUND .................................................... 24
PRINCIPAL INVESTMENT STRATEGIES ..................................... 24
RISKS ............................................................... 28
FINANCIAL HIGHLIGHTS ................................................... A-1
APPENDIX ............................................................... B-1
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FUND AT A GLANCE
----------------
Fund at a Glance
This summary briefly describes CitiFunds Short-Term U.S.
Government Income Portfolio and the principal risks of
investing in it. For more information, see MORE ABOUT THE FUND
on page 24.
CitiFunds(SM) Short-Term
U.S. Government
Income Portfolio
FUND GOAL
The Fund's goals are to generate current income and preserve
the value of its shareholders' investment. Of course, there is
no assurance that the Fund will achieve its goals.
MAIN INVESTMENT STRATEGIES
CitiFunds Short-Term U.S. Government Income Portfolio invests
in securities that are backed by the full faith and credit of
the United States. The Fund invests in U.S. Treasury bills,
notes and bonds, and obligations issued or guaranteed by U.S.
government agencies or instrumentalities, including mortgage-
backed securities guaranteed by the Government National
Mortgage Association (GNMA), as long as the timely payment of
interest and principal are backed by the U.S. government.
The Fund may use derivatives, such as financial futures and
options on futures contracts, in order to protect (or "hedge")
against changes in the prices of securities held or to be
bought, or changes in interest rates, or to manage the
maturity or duration of fixed income securities. The Fund may
also invest in derivatives for non-hedging purposes, to
enhance yields.
The Fund is permitted to invest in bonds with any maturity.
However, the Fund's dollar-weighted average maturity is
normally expected to be three years or less.
Please note that the Fund invests in securities through an
underlying mutual fund.
MAIN RISKS
As with all mutual funds, you may lose money if you invest in
this Fund. The principal risks of investing in the Fund are
described below. See page 28 for more information about risks.
The value of the Fund's shares will change daily as the value
of its underlying securities change. This means that your
shares of the Fund may be worth more or less when you sell
them than when you bought them.
o MARKET RISK. This is the risk that the prices of securities
will rise or fall due to changing economic, political or
market conditions. Some securities held by the Fund may be
quite volatile, meaning that their prices can change
significantly in a short time.
o INTEREST RATE RISK. In general, the prices of debt securities
rise when interest rates fall, and fall when interest rates
rise, although shorter term obligations are usually less
sensitive to interest rate changes. A change in interest rates
could cause the Fund's share price to go down.
o INCOME RISK. If interest rates decline, the amount of income
paid to you by the Fund as dividends may also decline.
o CREDIT RISK. The Fund invests only in securities that are
backed by the full faith and credit of the United States.
These securities are generally thought to have minimal credit
risk.
o PORTFOLIO SELECTION. The success of the Fund's investment
strategy depends in large part on the investment process. The
portfolio managers may fail to pick securities that perform
well because they are unable to predict accurately the
direction of interest rates or to assess other economic
factors. In that case, you may lose money, or your investment
may not do as well as an investment in another fixed income
fund.
o PREPAYMENT AND EXTENSION RISK. The issuers of debt securities
held by the Fund may be able to call a bond or prepay
principal due on the securities, particularly during periods
of declining interest rates. The Fund may not be able to
reinvest that principal at attractive rates, reducing income
to the Fund, and the Fund may lose any premium paid. On the
other hand, rising interest rates may cause prepayments to
occur at slower than expected rates. This effectively
lengthens the maturities of the affected securities, making
them more sensitive to interest rate changes and the Fund's
share price more volatile. Mortgage-backed securities,
including collateralized mortgage obligations (CMOs), are
particularly susceptible to prepayment risk and their prices
may be very volatile.
o DERIVATIVES. The Fund's use of derivatives such as futures and
options on futures contracts, particularly when used for
non-hedging purposes, may be risky. This practice could result
in losses that are not offset by gains on other portfolio
assets, causing the Fund's share price to go down. In
addition, the Fund's ability to use derivatives successfully
depends on Citibank's ability to accurately predict movements
in interest rates and other economic factors and the
availability of liquid markets. If Citibank's predictions are
wrong, or if the derivatives do not work as anticipated, the
Fund could suffer greater losses than if the Fund had not used
derivatives.
Please note that an investment in the Fund is not a deposit of
Citibank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
WHO MAY WANT TO INVEST
You should consider investing in CitiFunds Short-Term U.S.
Government Income Portfolio if:
o You are seeking current income from your investments.
o You are seeking the added protection against credit risk
provided by U.S. government securities.
o Your investment horizon is at least intermediate term --
typically at least three years.
Don't invest in the Fund if:
o Your main objective is growth of principal over time.
o You are not prepared to accept volatility of the Fund's share
price and possible losses.
o You are looking for an aggressive investment that provides the
maximum potential for long-term return.
o Your investment horizon is shorter term, usually less than
three years.
Please keep in mind that an investment in any fixed income
fund is not a complete investment program.
<PAGE>
Fund Performance
The following bar chart and table can help you evaluate the
risks and performance of the Fund.
o The bar chart shows changes in the Fund's performance for the
calendar years indicated. The chart and related information do
not take into account any sales charges that you may be
required to pay. Any sales charges will reduce your return.
o The table compares the Fund's average annual returns for the
periods indicated to those of a broad measure of market
performance. Please remember that, unlike the Fund, the market
index does not include the costs of buying and selling
securities and other Fund expenses or sales charges. The
Fund's returns in the table reflect the maximum sales charge
currently applicable.
o In both the chart and table, the returns shown for the Fund
include returns for periods before January 4, 1999. Prior to
that date, there were no sales charges on the purchase or sale
of Fund shares. The returns for Fund shares in the table, but
not the bar chart, have been adjusted to reflect the maximum
front-end sales charge currently applicable to the Fund
shares.
o The Fund's performance reflects certain fee waivers or
reimbursements. If these are reduced or eliminated, the Fund's
performance may go down.
When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of
how it will perform in the future. For current yield
information, please call 800-625-4554 toll free, or contact
your account representative.
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CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
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ANNUAL TOTAL RETURNS
(WITHOUT SALES CHARGE)
1990 7.90%
1991 13.80%
1992 5.56%
1993 6.06%
1994 (1.72)%
1995 11.48%
1996 3.02%
1997 6.11%
1998 6.33%
1999 2.07%
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FUND'S HIGHEST AND LOWEST RETURNS (WITHOUT SALES CHARGE)
FOR CALENDAR QUARTERS COVERED BY THE BAR CHART
................................................................................
Quarter Ending
................................................................................
Highest 6.47% September 30, 1991
................................................................................
Lowest (1.79)% March 31, 1990
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AVERAGE ANNUAL TOTAL RETURNS (WITH MAXIMUM SALES CHARGE)
AS OF DECEMBER 31, 1999
................................................................................
Life of Fund
Since
1 Year 5 Years 10 Years September 8, 1986
................................................................................
CitiFunds Short-Term U.S.
Government Income Portfolio 0.54% 5.43% 5.82% 5.83%
................................................................................
Lehman 1-3 Year U.S. Gov't. Index 2.97% 6.48% 6.56% *
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*Information regarding performance for this period is not available.
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Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
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CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
................................................................................
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
................................................................................
Maximum Sales Charge (Load) Imposed on Purchases 1.50%
................................................................................
Maximum Deferred Sales Charge (Load) None(1)
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ANNUAL FUND OPERATING EXPENSES
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS(2)
................................................................................
Management Fees 0.35%
................................................................................
Distribution (12b-1) Fees 0.20%
................................................................................
Other Expenses (administrative, shareholder
servicing and other expenses) 0.87%
................................................................................
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.42%
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* Because some of the Fund's expenses were waived or reimbursed,
actual total operating expenses for the prior year were: 0.80%
Fee waivers and reimbursements may be reduced or terminated at any time.
(1) Except for investment of $500,000 or more.
(2) The Fund invests in securities through an underlying mutual fund,
Government Income Portfolio. This table reflects the expenses of the
Fund and Government Income Portfolio.
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual
funds. The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you pay the maximum applicable sales charge;
o you reinvest all dividends;
o you then sell all your shares at the end of those periods;
o your investment has a 5% return each year -- the assumption of a
5% return is required by the SEC for the purpose of this example
and is not a prediction of the Fund's future performance; and
o the Fund's operating expenses as shown in the table without
waivers remain the same.
Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
................................................................................
1 Year 3 Years 5 Years 10 Years
................................................................................
$292 $593 $915 $1,826
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<PAGE>
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YOUR CITIFUNDS ACCOUNT
----------------------
Your CitiFunds Account
YOUR FUND SHARES:
o Front-end load -- there is an initial sales charge of 1.50% or
less
o Lower sales charge rates for larger investments
o Annual Shareholder Servicing fee of up to 0.25%
o Annual distribution/service fee of up to 0.15%
o Annual fee of up to 0.05% for certain advertising costs currently
not being paid
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WHAT ARE DISTRIBUTION/SERVICE FEES?
Shares of the Fund have annual DISTRIBUTION/SERVICE FEES that
are paid under a 12B-1 PLAN. These are fees, also called 12B-1
FEES, that are deducted from Fund assets and are used to
compensate those financial intermediaries such as broker/
dealers that sell fund shares and provide ongoing services to
shareholders and to pay other marketing and advertising
expenses. Because you pay these fees during the whole period
that you own the shares, over time you may pay more than if
you had paid other types of sales charges.
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SALES CHARGES
o Fund shares are sold at net asset value plus a front-end, or
initial, sales charge. The rate you pay goes down as the amount of
your investment in Fund shares goes up. The chart below shows the
rate of sales charge that you pay, depending on the amount that
you purchase.
o The chart below also shows the amount of broker/dealer
compensation that is paid out of the sales charge. This
compensation includes commissions and other fees that financial
intermediaries, called Shareholder Servicing Agents, that sell
shares of the Fund receive. The distributor generally keeps up to
approximately 10% of the sales charge imposed on shares of the
Fund. Financial intermediaries that sell shares of the Fund will
also receive the shareholder servicing fee payable on such shares
at an annual rate equal to up to 0.25% of the average daily net
assets represented by the shares of the Fund sold by them.
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BROKER/
SALES CHARGE SALES CHARGE DEALER
AS A % OF AS A % OF COMMISSION
AMOUNT OF OFFERING YOUR AS A % OF
YOUR INVESTMENT PRICE INVESTMENT OFFERING PRICE
................................................................................
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%
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* A contingent deferred sales charge may apply in certain instances. See below.
o After the initial sales charge is deducted from your investment,
the balance of your investment is invested in the Fund.
o The sales charge may also be waived or reduced in certain
circumstances, as described in "Sales Charge Waivers or
Reductions" below.
o If you invest at least $500,000 in the Fund, you do not pay any
initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) of 1.00% of the purchase price, or
the sale price, whichever is less, if you sell within the first
year. Under certain circumstances, waivers may apply.
PLEASE NOTE: If you owned Fund shares prior to January 4,
1999, you may exchange those shares into Class A shares of
other CitiFunds and other mutual funds managed by Citibank
without paying any sales charge, subject to verification.
Shares subject to the waiver include shares purchased prior to
January 4, 1999, and any shares that represent capital
appreciation or the reinvestment of dividends or capital gains
distributions on those shares.
If you are subject to a CDSC,
o When you sell your shares, the CDSC will be based on either your
original purchase price, or the sale price, whichever is less.
o You will not pay a CDSC on shares acquired through reinvestment of
dividends, capital gain distributions and shares representing
capital appreciation.
o To ensure that you pay the lowest applicable CDSC, the Fund will
always use the Fund shares, if any, without a CDSC to fill your
sell requests.
o You will not pay a CDSC at the time you exchange your Fund shares
for shares of certain CitiFunds -- any payment will be deferred
until your shares are redeemed.
o If you acquired your Fund shares through an exchange from another
fund managed or advised by Citibank, the date of your initial
investment will be used as the basis of the CDSC calculations.
The Fund's 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 are determined by the
distributor and may vary. Citibank may make similar payments
under similar arrangements.
SALES CHARGE WAIVERS OR REDUCTIONS
You may reduce or eliminate your sales charge on shares if you
qualify for certain waivers or elect to participate in certain
programs. These include:
Front-End Loads
o Sales charge elimination for certain eligible purchasers,
including certain tax-exempt organizations, certain employee
benefit plans, certain entities or persons with a qualifying
affiliation or relationship with Citibank, and, under certain
circumstances, investors using the proceeds of a redemption from
another mutual fund for their purchase of shares of the Fund.
Further information about eligible purchasers may be found in the
Appendix to this Prospectus.
o Reduced sales charge plan for qualified groups.
o Right of Accumulation.
o Letter of Intent.
CDSC
o Redemptions made within one year of the death of the shareholder.
o Lump sum or other distributions from IRAs and certain other
retirement accounts.
o Redemptions made under the Fund's Systematic Withdrawal Plan.
You may learn more about the requirements for waiver or
reduction and how the programs work by requesting a copy of
the Fund's Statement of Additional Information, or by
consulting with your account representative.
HOW TO BUY SHARES
Shares of CitiFunds Short-Term U.S. Government Income
Portfolio are offered continuously and purchases may be made
Monday through Friday, except on certain holidays. Shares may
be purchased from the Fund's distributor or a broker-dealer or
financial institution (called a Shareholder Servicing Agent)
that has entered into a sales or shareholder servicing
agreement with the distributor concerning the Fund. The Fund
and the distributor have the right to reject any purchase
order or cease offering Fund shares at any time.
Shares are purchased at net asset value (NAV) the next time it
is calculated after your order is received and accepted by the
Fund's transfer agent. NAV is the value of a single share of
the Fund. The applicable sales charge will be added to the
cost of your shares. The Fund does not impose any minimum
initial or subsequent investment requirements but your
Shareholder Servicing Agent may.
Your Shareholder Servicing Agent will not transmit your
purchase order for Fund shares until it receives the purchase
price in federal or other immediately available funds. If you
pay by check, the Shareholder Servicing Agent transmits the
order when the check clears.
If you hold your shares through a Shareholder Servicing Agent,
your Shareholder Servicing Agent establishes and maintains
your account and is the shareholder of record. If you wish to
transfer your account, you may transfer it to another
financial institution that acts as a Shareholder Servicing
Agent for the Fund or you may set up an account directly with
the Fund's transfer agent.
HOW THE PRICE OF YOUR SHARES IS CALCULATED
The Fund calculates its NAV every day the New York Stock
Exchange is open for trading. This calculation is made at the
close of regular trading on the New York Stock Exchange,
normally 4:00 p.m. Eastern time. On days when the financial
markets in which the Fund invests close early, NAV may be
calculated as of the earlier close of those markets.
The Fund's securities are valued primarily on the basis of
market quotations. When market quotations are not readily
available, the Fund may price securities at fair value. Fair
value is determined in accordance with procedures approved by
the Fund's Board of Trustees. When the Fund uses the fair
value pricing method, a security may be priced higher or lower
than if the Fund had used a market quotation to price the same
security. Short-term obligations (maturing in 60 days or less)
are valued at amortized cost, which is approximately equal to
market value.
HOW TO SELL SHARES
You may sell (redeem) your shares on any business day. The
price will be the NAV the next time it is calculated after
your redemption request in proper form has been received by
the Fund's transfer agent. If your shares are subject to a
CDSC, the applicable charge will be deducted from your sale
proceeds.
You may make redemption requests in writing through the Fund's
transfer agent or, if you hold your shares through a
Shareholder Servicing Agent, through your Agent. If your
account application permits, you may also make redemption
requests by telephone. Each Shareholder Servicing Agent is
responsible for promptly submitting redemption requests to the
Fund's transfer agent. You are responsible for making sure
your redemption request is in proper form.
The Fund has a Systematic Withdrawal Plan which allows you to
automatically withdraw a specific dollar amount from your
account on a regular basis. You must have at least $10,000 in
your account to participate in this program. Under the Plan,
if your shares are subject to a CDSC, you may only withdraw up
to 10% of the value of your account in any year, but you will
not be subject to a CDSC on the shares withdrawn under the
Plan. For more information, please contact the Fund's transfer
agent or, if you hold your shares through a Shareholder
Servicing Agent, your Agent.
When you sell your shares of the Fund that are subject to a
CDSC, they will be redeemed so as to minimize your CDSC.
You will receive your redemption proceeds in federal funds
normally on the third business day after you sell your shares
but in any event within seven days. However, your redemption
proceeds may be delayed for up to ten days if your purchase
was made by check. Your redemption proceeds may also be
delayed, or your right to receive redemption proceeds
suspended, if the New York Stock Exchange is closed (other
than on weekends or holidays) or trading is restricted, or if
an emergency exists. The Fund has the right to pay your
redemption proceeds by giving you securities instead of cash.
In that case, you may incur costs (such as brokerage
commissions) converting the securities into cash. You should
be aware that you may have to pay taxes on your redemption
proceeds.
Your account balance with the Fund may be subject to a $500
minimum. If so, the Fund reserves the right to close your
account if it falls below $500 because of redemptions. You
will have 60 days to make an additional investment. If you do
not increase your balance, the Fund may close your account and
send the proceeds to you. Your shares will be sold at NAV on
the day your account was closed.
REINSTATING RECENTLY SOLD SHARES
For 90 days after you sell your Fund shares, the Fund permits
you to repurchase shares in the Fund, up to the dollar amount
of shares redeemed, without paying any sales charges. To take
advantage of this reinstatement privilege, you must notify
your Shareholder Servicing Agent in writing at the time you
wish to repurchase the shares.
EXCHANGES
You may exchange Fund shares for Class A shares of certain
other CitiFunds. You may also be able to exchange your Fund
shares for shares of certain CitiFunds that offer only a
single class of shares, unless your Fund shares are subject to
a CDSC. You may also acquire Fund shares through an exchange
from another fund managed by Citibank.
You may place exchange orders through the Fund's transfer
agent or, if you hold your shares through a Shareholder
Servicing Agent, your Agent. You may place exchange orders by
telephone if your account application permits. The transfer
agent or your Shareholder Servicing Agent can provide you with
more information, including a prospectus for any fund that may
be acquired through an exchange.
The exchange will be based on the relative NAVs of each fund
the next time they are determined after your order is accepted
by the Fund's transfer agent, subject to any applicable sales
charge. You cannot exchange shares until the Fund has received
payment in federal funds for your shares.
When you exchange your shares of the Fund, you will generally
be required to pay the difference, if any, between the sales
charge payable on the shares to be acquired in the exchange
and the sales charge paid in connection with your original
purchase of Fund shares. However, if your Fund shares were
purchased prior to January 4, 1999, you will not have to pay a
sales charge when you exchange those shares for Class A
shares, subject to confirmation through a check of appropriate
records and documentation.
If your Fund shares are subject to a CDSC, no CDSC is imposed
when you exchange your shares for Class A shares of certain
CitiFunds that are made available for exchange. However, you
may be required to pay a CDSC when you sell those shares.
The exchange privilege may be changed or terminated at any
time. You should be aware that you may have to pay taxes on
your exchange.
ACCOUNT INQUIRIES
Please contact your Shareholder Servicing Agent. If you hold
your shares through the transfer agent, please call
1-800-625-4554.
DIVIDENDS
CitiFunds Short-Term U.S. Government Income Portfolio pays
substantially all of its net income (if any) from dividends to
its shareholders of record as a dividend monthly.
The Fund's net realized short-term and long-term capital
gains, if any, will be distributed to Fund shareholders at
least semi-annually. The Fund may also make additional
distributions to shareholders to the extent necessary to avoid
the application of the 4% non-deductible excise tax on certain
undistributed income and net capital gains of mutual funds.
Unless you choose to receive your dividends in cash, you will
receive them as full and fractional additional Fund shares.
TAX MATTERS
This discussion of federal taxes is very general. You should
consult your own tax adviser about your particular situation,
and the status of your account under state and local law.
TAXABILITY OF DISTRIBUTIONS; FEDERAL INCOME TAXES. You will
normally have to pay federal income taxes on the distributions
you receive from the Fund, whether you take the distributions
in cash or reinvest them in additional shares. Distributions
designated by the Fund as capital gain dividends are taxable
as long-term capital gains. Other distributions are generally
taxable as ordinary income. Some distributions paid in January
may be taxable to you as if they had been paid the previous
December. Each year the Fund will mail you a report of your
distributions for the prior year and how they are treated for
federal tax purposes.
Fund distributions will reduce the Fund's net asset value per
share. As a result, if you buy shares just before the Fund
makes a distribution, you may pay the full price for the
shares and then effectively receive a portion of the purchase
price back as a taxable distribution.
STATE AND LOCAL TAXES. Generally, you will have to pay state
or local taxes on Fund dividends and other distributions,
although distributions derived from interest on U.S.
government obligations may be exempt from certain state and
local taxes.
BACKUP WITHHOLDING. The account application asks each new
investor to certify that the investor's Social Security or
taxpayer identification number is correct and that the
shareholder is not subject to 31% backup withholding for
failing to report income to the IRS. The Fund may be required
to withhold (and pay over to the IRS for your credit) 31% of
certain distributions and proceeds it pays you if you fail to
provide this information or otherwise violate IRS regulations.
FOREIGN SHAREHOLDERS. If you are not a citizen or resident of
the U.S., the Fund will withhold U.S. federal income tax
payments at the rate of 30% (or any lower applicable treaty
rate) on taxable dividends and other payments subject to
withholding taxes. Fund distributions received by non-U.S.
persons also may be subject to tax under the laws of their own
jurisdictions.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange
shares, it is considered a taxable event for you. Depending on
the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or a loss on the transaction.
You are responsible for any tax liabilities generated by your
transaction.
<PAGE>
----------------------
MANAGEMENT OF THE FUND
----------------------
Management of the Fund
INVESTMENT ADVISER
CitiFunds Short-Term U.S. Government Income Portfolio draws on
the strength and experience of Citibank. Citibank is the
investment adviser of the Fund, and subject to policies set by
the Fund's Trustees, Citibank makes investment decisions.
Citibank has been managing money since 1822. With its
affiliates, it currently manages more than $351 billion in
assets worldwide.
Citibank, with headquarters at 153 East 53rd Street, New York,
New York, is a wholly-owned subsidiary of Citigroup Inc.
"CitiFunds" is a service mark of Citicorp.
Citibank and its affiliates, including their directors,
officers or employees, may have banking and investment banking
relationships with the issuers of securities that are held in
the Fund. They may also own the securities of these issuers.
However, in making investment decisions for the Fund, Citibank
does not obtain or use material inside information acquired by
any division, department or affiliate of Citibank in the
course of those relationships. Citibank and its affiliates may
have loans outstanding that are repaid with proceeds of
securities purchased by the Fund.
Denise Guetta, a Vice President of Citibank, has served as
manager of the Fund since April 1997. Ms. Guetta is a Senior
Portfolio Manager responsible for managing institutional
liquidity and short-duration portfolios. Ms. Guetta has over
thirteen years of investment experience. Prior to joining
Citibank in 1996, she was a portfolio manager at Fischer
Francis Trees and Watts, Inc., managing leveraged risk
positions in the U.S. Treasury and Canadian markets.
ADVISORY FEES
For the Fund's fiscal year ended December 31, 1999, Citibank
received management fees totaling 0.35% of the Fund's average
daily net assets.
<PAGE>
-------------------
MORE ABOUT THE FUND
-------------------
More About the Fund
The Fund's goal, principal investments and risks are summarized in
FUND AT A GLANCE. More information on investments, investment
strategies and risks appears below.
PRINCIPAL INVESTMENT STRATEGIES
CitiFunds Short-Term U.S. Government Income Portfolio's principal
investment strategies are described below. The Fund may use other
strategies and invest in other securities that are described in the
Statement of Additional Information. However, the Fund may not use all
of the strategies and techniques or invest in all of the types of
securities described in this Prospectus or in the Statement of
Additional Information. The Fund's goals may be changed without
shareholder approval. Of course, there can be no assurance that the
Fund will achieve its goals.
The Fund invests in debt securities that are backed, as to timely
repayment of principal and interest, by the full faith and credit of
the U.S. Government. These include U.S. Treasury bills, notes and
bonds, and obligations, including mortgage-backed securities, issued
or guaranteed by U.S. government agencies or instrumentalities. The
Fund may also invest in obligations of foreign governments that are
guaranteed by the U.S. government. Even if the U.S. government or one
of its agencies guarantees principal and interest payments, the market
price of the security is not insured and may be volatile.
- --------------------------------------------------------------------------------
WHAT ARE MORTGAGE-BACKED SECURITIES?
Home mortgage loans are typically grouped together into "pools" by
banks and other lending institutions, and interests in these pools are
then sold to investors, allowing the bank or other lending institution
to have more money available to loan to home buyers. When homeowners
make interest and principal payments, these payments are passed on to
the investors in the pool. Interest and principal payments on many
mortgage-backed securities are guaranteed by U.S. government agencies
or instrumentalities. Certain types of mortgage- backed securities are
called collateralized mortgage obligations, or CMOs.
- --------------------------------------------------------------------------------
The Fund may invest up to 80% of its assets in mortgage-backed
securities that are direct pass-through certificates called "GNMAs" or
in collateralized mortgage obligations that are backed by GNMAs. GNMAs
are securities backed by a pool of mortgages guaranteed as to payment
and principal by the Government National Mortgage Association.
The Fund may hold cash pending investment, and may invest in money
market instruments, repurchase agreements and reverse repurchase
agreements for cash management purposes. The Fund may also lend its
portfolio securities or sell its securities short, as long as, in the
case of a short sale, the Fund owns, or has the right to obtain, the
securities being sold short.
DERIVATIVES. The Fund may invest in derivatives including financial
futures and options on futures contracts. The Fund may use derivatives
in order to protect (or "hedge") against declines in the value of
securities held by the Fund or increases in the cost of securities to
be purchased in the future. The Fund may also use derivatives, for
non-hedging purposes, to enhance yields, price sensitivity, and
potential gain.
The derivatives purchased by the Fund are standardized contracts
traded on commodities exchanges or boards of trade. This means that
the exchange or board of trade guarantees counterparty performance.
Derivatives may not be available on terms that make economic sense
(for example, they may be too costly).
DEFENSIVE STRATEGIES. The Fund may, from time to time, take temporary
defensive positions in attempting to respond to adverse market,
political or other conditions. When doing so, the Fund may invest
without limit in money market instruments and other very short-term
instruments. The income on money market and other very short-term
instruments is likely to be less than the income on the debt
obligations generally purchased by the Fund.
INVESTMENT STRUCTURE. The Fund does not invest directly in securities
but instead invests through an underlying mutual fund, Government
Income Portfolio, having the same investment goals and strategies as
the Fund. Government Income Portfolio buys, holds and sells securities
in accordance with these goals and strategies. Unless otherwise
indicated, references to the Fund in this Prospectus include the
underlying fund. The Fund may stop investing in its underlying mutual
fund at any time, and will do so if the Fund's Trustees believe that
to be in the best interests of the Fund's shareholders. The Fund could
then invest in another mutual fund or pooled investment vehicle or
invest directly in securities.
MANAGEMENT STYLE. Managers of mutual funds use different styles when
selecting securities to purchase. In selecting securities to buy for
the Fund, Citibank first establishes the overall duration of the
portfolio and its yield curve position, based upon the portfolio
managers' outlook on the economy, prospects for economic growth and
inflation, and the U.S. government bond market. The portfolio managers
then allocate the portfolio between the two primary sectors of the
U.S. government securities market, U.S. Treasury and agency
obligations, in an attempt to maximize exposure to securities
providing the best relative values. The portfolio managers then choose
individual securities based upon their relative value within their
sector. The portfolio managers use this same approach when deciding
which securities to sell. Securities are sold when the Fund needs cash
to meet redemptions, or when the portfolio managers believe that
better opportunities exist or that the security no longer fits within
the managers' overall strategies for achieving the Fund's goals.
The Fund is actively managed. Although the portfolio managers attempt
to minimize portfolio turnover, from time to time the Fund's annual
portfolio turnover rate may exceed 100%. The sale of securities may
produce capital gains, which, when distributed, are taxable to
investors. Active trading may also increase the amount of commissions
or mark-ups the Fund pays to brokers or dealers when it buys and sells
securities. The "Financial Highlights" section of this Prospectus
shows the Fund's historical portfolio turnover rate.
Citibank may use brokers or dealers for Fund transactions who also
provide brokerage and research services to the Fund or other accounts
over which Citibank or its affiliates exercise investment discretion.
The Fund may "pay up" for brokerage services, meaning that it is
authorized to pay a broker or dealer who provides these brokerage and
research services a commission for executing a portfolio transaction
which is higher than the commission another broker or dealer would
have charged. However, the Fund will "pay up" only if Citibank
determines in good faith that the higher commission is reasonable in
relation to the brokerage and research services provided, viewed in
terms of either the particular transaction or all of the accounts over
which Citibank exercises investment discretion.
RISKS
Investing in a mutual fund involves risk. Before investing, you should
consider the risks you will assume. Certain of these risks are
described below. Please note that there are many other factors that
could adversely affect your investment and that could prevent the Fund
from achieving its goals, which are not described here. More
information about risks appears in the Fund's Statement of Additional
Information.
The value of the Fund's shares will change daily as the value of its
underlying securities changes. This means that your shares of the Fund
may be worth more or less when you sell them than when you bought
them. You may lose money if you invest in this Fund.
Please remember that an investment in the Fund is not a deposit of
Citibank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
MARKET RISK. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions. Some
securities held by the Fund may be quite volatile, meaning that their
prices can change significantly in a short time.
INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise, although
shorter term obligations are usually less sensitive to interest rate
changes. A change in interest rates could cause the Fund's share price
to go down.
INCOME RISK. If interest rates decline, the amount of income paid to
you by the Fund as dividends may also decline.
CREDIT RISK. The Fund invests only in securities that are backed by
the full faith and credit of the United States. These securities are
generally thought to have minimal credit risk.
PORTFOLIO SELECTION. The success of the Fund's investment strategy
depends in large part on the investment process. The portfolio
managers may fail to pick securities that perform well because they
are unable to predict accurately the direction of interest rates or to
assess fundamental changes affecting the credit quality of issuers or
other factors. In that case, you may lose money, or your investment
may not do as well as an investment in another fixed income fund.
PREPAYMENT AND EXTENSION RISK. The issuers of debt securities held by
the Fund may be able to call a bond or prepay principal due on the
securities, particularly during periods of declining interest rates.
The Fund may not be able to reinvest that principal at attractive
rates, reducing income to the Fund, and the Fund may lose any premium
paid. The Fund would also lose the benefit of falling interest rates
on the price of the repaid bond. On the other hand, rising interest
rates may cause prepayments to occur at slower than expected rates.
This effectively lengthens the maturities of the affected securities,
making them more sensitive to interest rate changes and the Fund's
share price more volatile. Securities subject to prepayment risk
generally offer less potential for gains when interest rates decline,
and may offer a greater potential for loss when interest rates rise.
Mortgage-backed securities, including CMOs are particularly
susceptible to prepayment risk and their prices may be more volatile
than a security having no pre-payment option.
DERIVATIVES. The Fund's use of derivatives such as futures and options
on futures contracts, particularly when used for non-hedging purposes,
may be risky. This practice could result in losses that are not offset
by gains on other portfolio assets, causing the Fund's share price to
go down. In addition, the Fund's ability to use derivatives
successfully depends on Citibank's ability to accurately predict
movements in interest rates and other economic factors and the
availability of liquid markets. If Citibank's predictions are wrong,
or if the derivatives do not work as anticipated, the Fund could
suffer greater losses than if the Fund had not used derivatives.
<PAGE>
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<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal periods indicated. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming investment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, whose report, along with the Fund's financial statements, is included in
the annual report which is incorporated by reference in the Statement of
Additional Information and which is available upon request.
<TABLE>
<CAPTION>
CitiFunds Short-Term U.S. Government Income Portfolio
Year Ended December 31,
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
................................................................................................................................
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 9.73 $ 9.61 $ 9.55 $ 9.78 $ 9.28
................................................................................................................................
Income From Operations:
Net investment income 0.473 0.473 0.504 0.516 0.543
Net realized and unrealized gain (loss) (0.276) 0.121 0.064 (0.232) 0.500
................................................................................................................................
Total from operations 0.197 0.594 0.568 0.284 1.043
................................................................................................................................
Less Distributions From:
Net investment income (0.467) (0.474) (0.508) (0.514) (0.543)
................................................................................................................................
Total distributions (0.467) (0.474) (0.508) (0.514) (0.543)
................................................................................................................................
Net Asset Value, end of period $ 9.46 $ 9.73 $ 9.61 $ 9.55 $ 9.78
................................................................................................................................
Total return 2.07% 6.33% 6.11% 3.02% 11.48%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CitiFunds Short-Term U.S. Government Income Portfolio
Year Ended December 31,
----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
...............................................................................................................................
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $31,109 $48,034 $20,237 $26,744 $35,325
Ratio of expenses to average net assets (A) 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment income to
average net assets 5.02% 4.98% 5.20% 5.31% 5.38%
Portfolio turnover (B) 201% 288% 126% 100% 284%
Note: If agents of the Fund for the periods indicated and agents of Government Income Portfolio for the periods indicated had not
voluntarily waived a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios would
have been as follows:
Net investment income per share $0.411 $0.413 $0.442 $0.460 $0.499
RATIOS:
Expenses to average net assets (A) 1.37% 1.42% 1.43% 1.38% 1.23%
Net investment income to average net assets 4.45% 4.36% 4.57% 4.73% 4.95%
(A) Includes the Fund's share of Government Income Portfolio allocated expenses.
(B) The portfolio turnover rates represent the rate of portfolio activity of Government Income Portfolio, the portfolio through
which the Fund invests.
</TABLE>
<PAGE>
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<PAGE>
--------
APPENDIX
--------
Appendix
SHARES OF THE FUND -- ELIGIBLE PURCHASERS
Fund shares may be purchased without a sales charge by the
following eligible purchasers:
[] 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 and retired employees of Citibank and its affiliates,
CFBDS, Inc. and its affiliates, any Shareholder Servicing Agent
and its affiliates and certain other Fund service providers
(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 (qualified plans investing through certain programs
sponsored by Citibank or its affiliates are not subject to this
minimum)
[] accounts associated with Copeland Retirement Programs
[] investors purchasing $500,000 or more of shares of the Fund;
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 on Fund
shares is payable, and if so, the amount of the charge:
o 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
o all investments made during a calendar month will age one
month on the last day of the month and each subsequent month
o any applicable contingent deferred sales charge will be
deferred upon an exchange of Fund shares for certain 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)
o the holding period of 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:
o the redeemed shares were subject to an initial sales charge or
a deferred sales charge (whether or not actually imposed), and
o 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:
o 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
o the redemption is made within 60 days prior to the investment
in the Fund, and
o 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
<PAGE>
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<PAGE>
The Statement of Additional Information (SAI) provides more
details about the Fund and its policies. The SAI is
incorporated by reference into this Prospectus and is legally
part of it.
Additional information about the Fund's investments is
available in the Fund's Annual and Semi-Annual Reports to
Shareholders. In the Fund's Annual Report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance.
The Annual and Semi-Annual Reports for the Fund list its
portfolio holdings and describe its performance.
To obtain free copies of the SAI and the Annual and Semi-
Annual Reports or to make other inquiries, please call toll-
free 1-800-625-4554.
The SAI, reports, and other information about the Fund are
also available on the Edgar Database on the SEC Internet site
at http://www.sec.gov. Information about the Fund (including
the SAI) can also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. You can get information on
the operation of the Public Reference Room by calling the SEC
at 1-202-942-8090. Copies may also be obtained upon payment of
a duplicating fee by electronic request to [email protected],
or by writing to the SEC's Public Reference Section,
Washington, DC 20549-6009.
SEC File Number: 811-5033 CFP/USG 5/00
<PAGE>
Statement of
Additional Information
May 1, 2000
CITIFUNDS(SM) SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
CitiFunds(SM) Short-Term U.S. Government Income Portfolio (the "Fund") is a
series of CitiFunds Fixed Income Trust (the "Trust"). The address and telephone
number of the Trust are 21 Milk Street, Boston, Massachusetts 02109, (617)
423-1679. The Trust invests all of the investable assets of the Fund in
Government Income Portfolio (the "Portfolio"), which is a separate series of The
Premium Portfolios, a trust organized under the laws of the State of New York
(the "Portfolio Trust"). The address of the Portfolio Trust is Elizabethan
Square, George Town, Grand Cayman, British West Indies.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY, AND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS PAGE
- ----------------- ----
1. The Trust ........................................................... 2
2. Investment Objectives and Policies; Special Information Concerning
Investment Structure ................................................ 2
3. Description of Permitted Investments and Investment Practices ....... 3
4. Investment Restrictions ............................................. 11
5. Performance Information ............................................. 13
6. Determination of Net Asset Value; Valuation of Securities ........... 15
7. Additional Information on the Purchase and Sale of Fund Shares and
Shareholder Programs ................................................ 15
8. Management .......................................................... 21
9. Portfolio Transactions .............................................. 28
10. Description of Shares, Voting Rights and Liabilities ................ 29
11. Tax Matters ......................................................... 30
12. Financial Statements ................................................ 32
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Fund's Prospectus, dated May 1, 2000, by which shares of the Fund are offered.
This Statement of Additional Information should be read in conjunction with
the Prospectus. This Statement of Additional Information incorporates by
reference the financial statements described on page 32 hereof. These
financial statements can be found in the Fund's Annual Report to Shareholders.
An investor may obtain copies of the Fund's Prospectus and Annual Report
without charge by calling toll-free 1-800-625-4554.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE TRUST
CitiFunds Fixed Income Trust (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of
the Commonwealth of Massachusetts on June 23, 1986. The Trust was called
Landmark U.S. Government Income Fund until its name was changed to Landmark
Fixed Income Funds effective June 11, 1992. Effective March 2, 1998, the
Trust's name was changed to CitiFunds Fixed Income Trust. This Statement of
Additional Information describes CitiFunds Short-Term U.S. Government Income
Portfolio (the "Fund"), a series of the Trust. Prior to March 2, 1998, the
Fund was called Landmark U.S. Government Income Fund. References in this
Statement of Additional Information to the "Prospectus" are to the Prospectus,
dated May 1, 2000, of the Fund.
The Fund is a diversified fund. 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, as amended (the "1940 Act"), the rules and regulations
thereunder, and exemptive orders granted under the 1940 Act. Currently, the
Fund invests all of its investable assets in Government 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.
Under the 1940 Act, a diversified management investment company must
invest at least 75% of its assets in cash and cash items, U.S. Government
securities, investment company securities and other securities limited as to
any one issuer to not more than 5% of the total assets of the investment
company and not more than 10% of the voting securities of the issuer.
Because the Fund invests through the Portfolio, all references in this
Statement of Additional Information to the Fund include the Portfolio, unless
the context otherwise requires. In addition, references to the Trust include
the Portfolio Trust, unless the context otherwise requires.
Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to the
Portfolio. The Adviser 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 it is managed depend on
the conditions and trends in the economy and the financial marketplaces.
CFBDS, Inc. ("CFBDS"), the administrator of the Fund (the
"Administrator"), and Signature Financial Group (Cayman) Ltd. ("SFG"), the
administrator of the Portfolio (the "Portfolio Administrator"), supervise the
overall administration of the Fund and the Portfolio, respectively. The Boards
of Trustees of the Trust and the Portfolio Trust provide broad supervision
over the affairs of the Fund and the Portfolio, respectively. Shares of the
Fund are continuously sold by CFBDS, the Fund's distributor (the
"Distributor"), only to investors who are customers of a financial
institution, such as a federal or state-chartered bank, trust company, savings
and loan association or savings bank, or a securities broker, that has entered
into a shareholder servicing agreement with the Trust (collectively,
"Shareholder Servicing Agents").
2. INVESTMENT OBJECTIVES AND POLICIES;
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
The investment objectives of the Fund are to generate current income and
preserve the value of its shareholders' investment.
The investment objectives of the Fund may be changed without approval by
the Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that the Fund will achieve its investment objectives.
As noted above, the Fund does not invest directly in securities, but
instead invests all of its investable assets in the Portfolio, which has the
same investment objectives and policies as the Fund. The Portfolio, in turn,
buys, holds and sells securities in accordance with these objectives and
policies. Of course, there can be no assurance that the Fund or the Portfolio
will achieve their objectives. The Trustees of the Fund 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 the assets
of the Fund were invested directly in the types of securities held by the
Portfolio.
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 its investment
objectives and policies, either directly in securities or in another mutual
fund or pooled investment vehicle having the same investment objectives and
policies. If the Fund were to withdraw, the Fund could receive securities from
the Portfolio instead of cash, causing the Fund to incur brokerage, tax and
other charges or leaving it with securities which may or may not be readily
marketable or widely diversified.
The Portfolio may change its investment objectives and certain of its
investment policies and restrictions without approval by its investors, but
the Portfolio will notify the Fund (which in turn will notify its
shareholders) and its other investors at least 30 days before implementing any
change in its investment objective. A change in investment objectives,
policies or restrictions may cause the Fund to withdraw its investment in the
Portfolio.
Certain investment restrictions of the Portfolio described below under
"Investment Restrictions" are fundamental and cannot be changed without
approval by the investors in the Portfolio. When the Fund is asked to vote on
certain matters concerning the Portfolio, the Fund will either hold a
shareholder meeting and vote in accordance with shareholder instructions or
otherwise vote in accordance with applicable rules and regulations. Of course,
the Fund could be outvoted, or otherwise adversely affected by other investors
in the Portfolio.
The Portfolio may sell interests to investors in addition to the Fund.
These investors may be mutual funds which offer shares to their shareholders
with different costs and expenses than the Fund. Therefore, the investment
return for all investors in funds investing in the Portfolio may not be the
same. These differences in returns are also present in other mutual fund
structures. Information about other holders of interests in the Portfolio is
available from the Fund's distributor, CFBDS.
3. DESCRIPTION OF PERMITTED INVESTMENTS AND INVESTMENT PRACTICES
The Fund may, but need not, invest in all of the investments and utilize
any or all of the investment techniques described below and in the Prospectus.
The selection of investments and the utilization of investment techniques
depend on, among other things, the Adviser's investment strategies for the
Fund, conditions and trends in the economy and financial markets and
investments being available on terms that, in the Adviser's opinion, make
economic sense.
The Prospectus contains a discussion of the principal investment
strategies of the Fund and the principal risks of investing in the Fund. The
following supplements the information contained in the Prospectus concerning
the investment policies and techniques of the Fund. The policies described
herein are not fundamental and may be changed without shareholder approval.
U.S. GOVERNMENT SECURITIES
The Fund invests in debt obligations that are backed, as to the timely
payment of interest and principal, by the full faith and credit of the U.S.
Government.
The debt obligations in which assets of the Fund are invested include (1)
U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: U.S. Treasury bills (maturities of one year
or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities. The Fund may only invest in obligations
issued or guaranteed by U.S. Government agencies if such obligations are
backed, as to the timely payment of interest and principal, by the full faith
and credit of the U.S. Government, e.g., direct pass-through certificates of
the Government National Mortgage Association.
When and if available, U.S. Government obligations may be purchased at a
discount from face value. However, it is not intended that such securities
will be held to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive.
Although U.S. Government obligations which are purchased for the Fund may
be backed, as to the timely payment of interest and principal, by the full
faith and credit of the U.S. Government, shares of the Fund are neither
insured nor guaranteed by the U.S. Government or its agencies, authorities or
instrumentalities.
The Adviser intends to fully manage the investments of the Fund by buying
and selling U.S. Government obligations, and by entering into repurchase
agreements covering such obligations, as well as by holding selected
obligations to maturity. In managing the Fund's investments, the Adviser seeks
to maximize the return for the Fund by taking advantage of market developments
and yield disparities, which may include use of the following strategies:
(1) shortening the average maturity of the Fund's securities in
anticipation of a rise in interest rates so as to minimize depreciation of
principal;
(2) lengthening the average maturity of the Fund's securities in
anticipation of a decline in interest rates so as to maximize appreciation
of principal;
(3) selling one type of U.S. Government obligation (e.g., Treasury
bonds) and buying another (e.g., GNMA direct pass-through certificates)
when disparities arise in the relative values of each; and
(4) changing from one U.S. Government obligation to an essentially
similar U.S. Government obligation when their respective yields are
distorted due to market factors.
These strategies may result in increases or decreases in the Fund's
current income and in the holding for the Fund of obligations which sell at
moderate to substantial premiums or discounts from face value. Moreover, if
the Adviser's expectations of changes in interest rates or its valuation of
the normal yield relationship between two obligations proves to be incorrect,
the Fund's income, net asset value and potential capital gain may be decreased
or its potential capital loss may be increased.
In order to enhance the stability of the value of shares of the Fund by
reducing volatility resulting from changes in interest rates and other market
conditions, the dollar weighted average maturity of the Fund's investment
securities is generally three years or less. The Fund is managed to provide an
income yield that is generally higher than those offered by money market
funds, which have a share price which is more stable than the value of an
investment in the Fund and which have a portfolio of investments with an
average maturity which is shorter than the Fund's securities. It is intended
that the Fund will have a share price that is more stable than the share price
of other fixed income funds that have a longer term investment focus. Debt
securities with longer maturities than those in which the assets of the Fund
are invested generally tend to produce higher yields and are subject to
greater market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities. At the same time, the securities in which
the assets of the Fund are invested tend to produce lower yields and are
subject to lower market fluctuation as a result of changes in interest rates
than debt securities with longer maturities that tend to be purchased by
longer term bond funds than the Fund. However, since available yields vary
over time, no specific level of income can be assured. The income derived from
an investment in the Fund increases or decreases in relation to the income
received by the Fund from its investments, which in any case is reduced by the
Fund's expenses.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. collateralized by securities
in which the Fund may otherwise invest. Repurchase agreements are agreements
by which the Fund purchases a security and simultaneously commits to resell
that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days
(frequently overnight and usually not more than seven days) from the date of
purchase. The resale price reflects the purchase price plus an agreed-upon
market rate of interest which is unrelated to the coupon rate or maturity of
the purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying security, usually U.S. Government or government
agency issues. Under the 1940 Act, repurchase agreements may be considered to
be loans by the buyer. The Fund's risk is limited to the ability of the seller
to pay the agreed-upon amount on the delivery date. If the seller defaults,
the underlying security constitutes collateral for the seller's obligation to
pay although the Fund may incur certain costs in liquidating this collateral
and in certain cases may not be permitted to liquidate this collateral. All
repurchase agreements entered into by the Fund are fully collateralized, with
such collateral being marked to market daily.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements subject to the
Fund's investment restriction on borrowing. Reverse repurchase agreements
involve the sale of securities held by the Fund and the agreement by the Fund
to repurchase the securities at an agreed-upon price, date and interest
payment. When the Fund enters into reverse repurchase transactions, securities
of a dollar amount equal in value to the securities subject to the agreement
will be segregated. The segregation of assets could impair the Fund's ability
to meet its current obligations or impede investment management if a large
portion of the Fund's assets are involved. Reverse repurchase agreements are
considered to be a form of borrowing by the Fund. In the event of the
bankruptcy of the other party to a reverse repurchase agreement, the Fund
could experience delays in recovering the securities sold. To the extent that,
in the meantime, the value of the securities sold has changed, the Fund could
experience a loss.
FUTURES CONTRACTS
A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an
index of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at
a specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for
by the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts in the
United States have been designed by exchanges which have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and
must be executed through a futures commission merchant, or brokerage firm,
which is a member of the relevant contract market. Futures contracts trade on
these markets, and the exchanges, through their clearing organizations,
guarantee that the contracts will be performed as between the clearing members
of the exchange. Futures contracts may also be traded on markets outside the
U.S.
While futures contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are
very seldom made. Generally, a futures contract is terminated by entering into
an offsetting transaction. Brokerage fees will be incurred when the Fund
purchases or sells a futures contract. At the same time such a purchase or
sale is made, the Fund must provide cash or securities as a deposit ("initial
deposit") known as "margin." The initial deposit required will vary, but may
be as low as 1% or less of a contract's face value. Daily thereafter, the
futures contract is valued through a process known as "marking to market," and
the Fund may receive or be required to pay additional "variation margin" as
the futures contract becomes more or less valuable. At the time of delivery of
securities pursuant to such a contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than the specific security that provides the standard for the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was entered into.
The Fund may purchase or sell futures contracts to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity
or duration of the Fund's portfolio in an effort to reduce potential losses or
enhance potential gain, without actually buying or selling debt securities.
For example, if interest rates were expected to increase, the Fund might enter
into futures contracts for the sale of debt securities. Such a sale would have
much the same effect as if the Fund sold bonds that it owned, or as if the
Fund sold longer-term bonds and purchased shorter-term bonds. If interest
rates did increase, the value of the Fund's debt securities would decline, but
the value of the futures contracts would increase, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have.
Similar results could be accomplished by selling bonds, or by selling bonds
with longer maturities and investing in bonds with shorter maturities.
However, by using futures contracts, the Fund avoids having to sell its
securities.
Similarly, when it is expected that interest rates may decline, the Fund
might enter into futures contracts for the purchase of debt securities. Such a
transaction would be intended to have much the same effect as if the Fund
purchased bonds, or as if the Fund sold shorter-term bonds and purchased
longer-term bonds. If interest rates did decline, the value of the futures
contracts would increase.
Although the use of futures for hedging, if correctly used, should tend to
minimize the risk of loss due to a decline in the value of the hedged position
(e.g., if the Fund sells a futures contract to protect against losses in the
debt securities held by the Fund), they do not eliminate the risk of loss and
at the same time the futures contracts limit any potential gain which might
result from an increase in value of a hedged position.
In addition, the ability effectively to hedge all or a portion of the
Fund's investments through transactions in futures contracts depends on the
degree to which movements in the value of the debt securities underlying such
contracts correlate with movements in the value of the Fund's securities. If
the security underlying a futures contract is different than the security
being hedged, they may not move to the same extent or in the same direction.
In that event, the Fund's hedging strategy might not be successful and the
Fund could sustain losses on these hedging transactions which would not be
offset by gains on the Fund's other investments or, alternatively, the gains
on the hedging transaction might not be sufficient to offset losses on the
Fund's other investments. It is also possible that there may be a negative
correlation between the security underlying a futures contract and the
securities being hedged, which could result in losses both on the hedging
transaction and the securities. In these and other instances, the Fund's
overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where the Fund enters into futures transactions
other than for hedging purposes, the effectiveness of its strategy may be
affected by lack of correlation between changes in the value of the futures
contracts and changes in value of the securities which the Fund would
otherwise buy or sell.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between
the cash and futures markets. Second, there is the potential that the
liquidity of the futures market may be lacking. Prior to expiration, a futures
contract may be terminated only by entering into a closing purchase or sale
transaction, which requires a secondary market on the contract market on which
the futures contracts was originally entered into. While the Fund will
establish a futures position only if there appears to be a liquid secondary
market therefor, there can be no assurance that such a market will exist for
any particular futures contract at any specific time. In that event, it may
not be possible to close out a position held by the Fund, which could require
the Fund to purchase or sell the instrument underlying the futures contract or
to meet ongoing variation margin requirements. The inability to close out
futures positions also could have an adverse impact on the ability effectively
to use futures transactions for hedging or other purposes.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. The trading of futures contracts also is subject to the
risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
house or other disruptions of normal trading activity, which could at times
make it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
Investments in futures contracts also entail the risk that if the
Adviser's investment judgment about the general direction of interest rates or
other economic factors is incorrect, the Fund's overall performance may be
poorer than if any such contract had not been entered into. For example, if
the Fund hedged against the possibility of an increase in interest rates which
would adversely affect the price of the Fund's bonds and interest rates
decrease instead, part or all of the benefit of the increased value of the
Fund's bonds which were hedged will be lost because the Fund will have
offsetting losses in its futures positions. Similarly, if the Fund purchases
futures contracts expecting a decrease in interest rates and interest rates
instead increased, the Fund will have losses in its futures positions which
will increase the amount of the losses on the securities in its portfolio
which will also decline in value because of the increase in interest rates. In
addition, in such situations, if the Fund has insufficient cash, the Fund may
have to sell bonds from its investments to meet daily variation margin
requirements, possibly at a time when it may be disadvantageous to do so.
Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on the Fund's strategies involving futures.
CFTC regulations require compliance with certain limitations in order to
assure that the Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Fund from purchasing
or selling futures contracts (other than for bona fide hedging transactions)
if, immediately thereafter, the sum of the amount of initial margin required
to establish the Fund's non-hedging futures positions, together with any
premiums on options on futures contracts (see "Options on Futures Contracts"
below) used for non-hedging purposes, would exceed 5% of the Fund's net
assets.
The Fund will comply with this CFTC requirement, and the Fund currently
intends to adhere to the additional policies described below. First, an amount
of cash or liquid securities will be maintained by the Fund in a segregated
account so that the amount so segregated, plus the applicable margin held on
deposit, will be approximately equal to the amount necessary to satisfy the
Fund's obligations under the futures contract. The second is that the Fund
will not enter into a futures contract if immediately thereafter the amount of
initial margin deposits on all the futures contracts held by the Fund would
exceed approximately 5% of the net assets of the Fund. The third is that the
aggregate market value of the futures contracts held by the Fund not generally
exceed 50% of the market value of the Fund's total assets other than its
futures contracts. For purposes of this third policy, "market value" of a
futures contract is deemed to be the amount obtained by multiplying the number
of units covered by the futures contract times the per unit price of the
securities covered by that contract.
The use of futures contracts potentially exposes the Fund to the effects
of "leveraging," which occurs when futures are used so that the Fund's
exposure to the market is greater than it would have been if the Fund had
invested directly in the underlying securities. "Leveraging" increases the
Fund's potential for both gain and loss. As noted above, the Fund intends to
adhere to certain policies relating to the use of futures contracts, which
should have the effect of limiting the amount of leverage by the Fund.
The use of futures contracts may increase the amount of taxable income of
the Fund and may affect the amount, timing and character of the Fund's income
for tax purposes, as more fully discussed herein in the section entitled "Tax
Matters."
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write options to buy or sell futures contracts
in which the Fund may invest. Such investment strategies may be used for
hedging purposes and for non-hedging purposes, subject to applicable law.
An option on a futures contract provides the holder with the right to
enter into a "long" position in the underlying futures contract, in the case
of a call option, or a "short" position in the underlying futures contract, in
the case of a put option, at a fixed exercise price up to a stated expiration
date or, in the case of certain options, on such date. Upon exercise of the
option by the holder, the contract market clearinghouse establishes a
corresponding short position for the writer of the option, in the case of a
call option, or a corresponding long position in the case of a put option. In
the event that an option is exercised, the parties will be subject to all the
risks associated with the trading of futures contracts, such as payment of
initial and variation margin deposits. In addition, the writer of an option on
a futures contract, unlike the holder, is subject to initial and variation
margin requirements on the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or
sale transaction, subject to the availability of a liquid secondary market,
which is the purchase or sale of an option of the same series (i.e., the same
exercise price and expiration date), as the option previously purchased or
sold. The difference between the premiums paid and received represents the
trader's profits or loss on the transaction.
Options on futures contracts that are written or purchased by the Fund on
U.S. exchanges are traded on the same contract market as the underlying
futures contract, and, like futures contracts, are subject to regulation by
the CFTC and the performance guarantee of the exchange clearinghouse. In
addition, options on futures contracts may be traded on foreign exchanges.
The Fund may cover the writing of call options on futures contracts (a)
through purchases of the underlying futures contract, (b) through ownership of
the instrument, or instruments included in the index underlying the futures
contract, or (c) through the holding of a call on the same futures contract
and in the same principal amount as the call written where the exercise price
of the call held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or securities in a segregated
account. The Fund may cover the writing of put options on futures contracts
(a) through sales of the underlying futures contract, (b) through segregation
of cash or liquid securities in an amount equal to the value of the security
or index underlying the futures contract, (c) through the holding of a put on
the same futures contract and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written or where the exercise price of the put held
is less than the exercise price of the put written if the difference is
maintained by the Fund in cash or liquid securities in a segregated account.
Put and call options on futures contracts may also be covered in such other
manner as may be in accordance with the rules of the exchange on which the
option is traded and applicable laws and regulations. Upon the exercise of a
call option on a futures contract written by the Fund, the Fund will be
required to sell the underlying futures contract which, if the Fund has
covered its obligation through the purchase of such contract, will serve to
liquidate its futures position. Similarly, where a put option on a futures
contract written by the Fund is exercised, the Fund will be required to
purchase the underlying futures contract which, if the Fund has covered its
obligation through the sale of such contract, will close out its futures
position.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities deliverable on exercise of
the futures contract. The Fund will receive an option premium when it writes
the call, and, if the price of the futures contract at expiration of the
option is below the option exercise price, the Fund will retain the full
amount of this option premium, which provides a partial hedge against any
decline that may have occurred in the Fund's security holdings. Similarly, the
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the securities deliverable upon exercise of the
futures contract. If the Fund writes an option on a futures contract and that
option is exercised, the Fund may incur a loss, which loss will be reduced by
the amount of the option premium received, less related transaction costs. The
Fund's ability to hedge effectively through transactions in options on futures
contracts depends on, among other factors, the degree of correlation between
changes in the value of securities held by the Fund and changes in the value
of its futures positions. This correlation cannot be expected to be exact, and
the Fund bears a risk that the value of the futures contract being hedged will
not move in the same amount, or even in the same direction, as the hedging
instrument. Thus it may be possible for the Fund to incur a loss on both the
hedging instrument and the futures contract being hedged.
The Fund may purchase options on futures contracts for hedging purposes
instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of projected changes in interest rates, the Fund could, in lieu of
selling futures contracts, purchase put options thereon. In the event that
such decrease occurs, it may be offset, in whole or part, by a profit on the
option. Conversely, where it is projected that the value of securities to be
acquired by the Fund will increase prior to acquisition, due to a market
advance or changes in interest rates, the Fund could purchase call options on
futures contracts, rather than purchasing the underlying futures contracts.
FURTHER INFORMATION REGARDING DERIVATIVES
Transactions in financial futures and options on futures contracts entered
into for non-hedging purposes involve greater risk and could result in losses
which are not offset by gains on other portfolio assets. Financial futures and
options on futures contracts may be used alone or in combinations in order to
create synthetic exposure to securities in which the Fund otherwise invests.
WHEN-ISSUED SECURITIES
The Fund may purchase securities on a "when-issued" or on a "forward
delivery" basis, meaning that delivery of the securities occurs beyond normal
settlement times. In general, the Fund does not pay for the securities until
received and does not start earning interest until the contractual settlement
date. It is expected that, under normal circumstances, the Fund would take
delivery of such securities but the Fund may sell them before the settlement
date. When the Fund commits to purchase a security on a "when-issued" or on a
"forward delivery" basis, it sets up procedures consistent with Securities and
Exchange Commission ("SEC") policies. Since those policies currently require
that an amount of the Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Fund
expects always to have cash or liquid securities sufficient to cover any
commitments or to limit any potential risk. However, even though the Fund does
not intend to make such purchases for speculative purposes and intends to
adhere to the provisions of SEC policies, purchases of securities on such
bases may involve more risk than other types of purchases. The when-issued
securities are subject to market fluctuation, and no interest accrues on the
security to the purchaser during this period. The payment obligation and the
interest rate that will be received on the securities are each fixed at the
time the purchaser enters into the commitment. Purchasing obligations on a
when-issued basis is a form of leveraging and can involve a risk that the
yields available in the market when the delivery takes place may actually be
higher than those obtained in the transaction itself. In that case, there
could be an unrealized loss at the time of delivery. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when-issued" basis may increase the volatility of its net asset value.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
Fund, in accordance with applicable investment restrictions, may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If the Fund engages in a short sale, the collateral for the short
position is maintained for the Fund by the custodian or qualified sub-
custodian. While the short sale is open, an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities are maintained in a segregated
account for the Fund. These securities constitute the Fund's long position.
The Fund does not engage in short sales against the box for investment
purposes. The Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund (or a security convertible or
exchangeable for such security). In such case, any future losses in the Fund's
long position should be reduced by a gain in the short position. Conversely,
any gain in the long position should be reduced by a loss in the short
position. The extent to which such gains or losses are reduced depends upon
the amount of the security sold short relative to the amount the Fund owns.
There are certain additional transaction costs associated with short sales
against the box, but the Fund endeavors to offset these costs with the income
from the investment of the cash proceeds of short sales.
The Adviser does not expect that more than 40% of the Fund's total assets
would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.
MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS
The Fund may invest in mortgage-backed securities, which are securities
representing interests in pools of mortgage loans, as long as they are backed
by the full faith and credit of the United States Government. Interests in
pools of mortgage-related securities differ from other forms of debt
securities which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by prepayments of principal resulting from the sale,
refinancing or foreclosure of the underlying property, net of fees or costs
which may be incurred. The market value and interest yield of these
instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages.
The Fund may purchase mortgage-backed securities issued or guaranteed by
the Government National Mortgage Association ("GNMA"). Obligations of GNMA are
backed by the full faith and credit of the United States Government. Although
GNMA certificates may offer yields higher than those available from other
types of U.S. Government securities, GNMA certificates may be less effective
than other types of securities as a means of "locking in" attractive long-term
rates because of the prepayment feature. For instance, when interest rates
decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at
a premium to decline in price to its par value which may result in a loss.
A portion of the Fund's assets may be invested in collateralized mortgage
obligations ("CMOs"), which are debt obligations collateralized by mortgage
loans or mortgage pass-through securities (such collateral collectively
hereinafter referred to as "Mortgage Assets"); provided, however, that the
CMOs are backed as to the timely payment of interest and principal by the full
faith and credit of the U.S. Government. The Fund may also invest a portion of
its assets in multi-class pass-through securities which are interests in a
trust composed of Mortgage Assets; provided, however, that the Mortgage Assets
are backed as to the timely payment of interest and principal by the full
faith and credit of the U.S. Government. CMOs (which include multi-class pass-
through securities) may be issued by agencies, authorities or
instrumentalities of the U.S. Government or by private originators of or
investors in mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Payments of principal of and interest on the Mortgage Assets,
and any reinvestment income thereon, provide the funds to pay debt service on
the CMOs or make scheduled distributions on the multi-class pass-through
securities. In a CMO, a series of bonds or certificates is usually issued in
multiple classes with different maturities. Each class of a CMO, often
referred to as a "tranche," is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal
prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in various ways.
In a common structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of the series
of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
Even if the U.S. government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment because the underlying mortgages are refinanced to
take advantage of the lower rates. The prices of mortgage-backed securities
may not increase as much as prices of other debt obligations when interest
rates decline, and mortgage-backed securities may not be an effective means of
locking in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid. When interest rates
go up, mortgage-backed securities experience lower rates of prepayment. This
has the effect of lengthening the expected maturity of a mortgage-backed
security. This particular risk, referred to as "maturity extension risk," may
effectively convert a security that was considered short or intermediate-term
at the time of purchase into a long-term security. Long-term securities
generally fluctuate more widely in response to changes in interest rates than
short or intermediate-term securities. Thus, rising interest rates would not
only likely decrease the value of the Fund's fixed income securities, but
would also increase the inherent volatility of the Fund by effectively
converting short-term debt instruments into long-term debt instruments. As a
result, prices of mortgage-backed securities may decrease more than prices of
other debt obligations when interest rates go up.
Determinations of average maturity of mortgage-backed securities take into
account expectations of prepayments, which may change in different interest
rate environments. The Fund will not consider it a violation of policy if its
average maturity deviates from its normal range as a result of actual or
expected changes in prepayments.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, the Fund may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks
of the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested
in high quality short-term instruments. Either party has the right to call a
loan at any time on customary industry settlement notice (which will not
usually exceed three business days). During the existence of a loan, the Fund
would continue to receive the equivalent of the interest or dividends paid by
the issuer on the securities loaned and with respect to cash collateral would
also receive compensation based on investment of cash collateral (subject to a
rebate payable to the borrower). Where the borrower provides the Fund with
collateral consisting of U.S. Treasury obligations, the borrower is also
obligated to pay the Fund a fee for use of the borrowed securities. The Fund
would not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of
an important vote to be taken among holders of the securities or of the giving
or withholding of their consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower fail financially.
However, the loans would be made only to entities deemed by the Adviser to be
of good standing. In addition, the Fund could suffer a loss if the borrower
terminates the loan and the Fund is forced to liquidate investments in order
to return the cash collateral to the buyer. The Adviser will make loans only
when, in the judgment of the Adviser, the consideration which can be earned
currently from loans of this type justifies the attendant risk. If the Adviser
determines to make loans, it is not intended that the value of the securities
loaned would exceed 30% of the market value of the Fund's total assets.
RULE 144A SECURITIES
Consistent with applicable investment restrictions, the Fund may purchase
securities that are not registered under the Securities Act of 1933 (the
"Securities Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the Securities Act ("Rule 144A securities").
However, the Fund will not invest more than 15% of its net assets (taken at
market value) in illiquid investments, which include securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless, in the case of
restricted securities, the Board of Trustees determines, based on the trading
markets for the specific Rule 144A security, that it is liquid. The Trustees
have adopted guidelines and, subject to oversight by the Trustees, have
delegated to the Adviser the daily function of determining and monitoring
liquidity of Rule 144A securities.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS
The Fund may invest up to 15% of its net assets in securities for which
there is no readily available market. These illiquid securities may include
privately placed restricted securities for which no institutional market
exists. The absence of a trading market can make it difficult to ascertain a
market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for the Fund to sell them promptly at an acceptable price.
DEFENSIVE STRATEGIES
The Fund may, from time to time, take temporary defensive positions in
attempting to respond to adverse market, political or other conditions. When
doing so, the Fund may invest without limit in money market instruments and
other very short-term instruments, as long as the instruments purchased are
backed by the full faith and credit of the United States. The income on money
market and other very short-term instruments is likely to be less than the
income on the debt obligations generally purchased by the Fund.
4. INVESTMENT RESTRICTIONS
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 the Portfolio without approval by 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.
Neither the Fund nor the Portfolio may:
(1) Borrow money or pledge, mortgage or hypothecate assets of the Fund
or Portfolio, 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 the Fund's or the Portfolio's net assets, including the
amount borrowed, and may pledge, mortgage or hypothecate not more than 1/
3 of such assets to secure such borrowings (it is intended that money
would be borrowed for the Fund or Portfolio only from banks and only to
accommodate requests for the repurchase of shares of the Fund or
beneficial interests in the Portfolio while effecting an orderly
liquidation of portfolio securities), provided that collateral
arrangements with respect to futures contracts, including deposits of
initial and variation margin, are not considered a pledge of assets for
purposes of this restriction.
(2) Purchase any security or evidence of interest therein on margin,
except that such short-term credit may be obtained for the Fund or
Portfolio as may be necessary for the clearance of purchases and sales of
securities and except that deposits of initial and variation margin may be
made for the Fund or Portfolio in connection with the purchase, ownership,
holding or sale of futures contracts.
(3) Write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the writing, purchasing
or selling of puts, calls or combinations thereof with respect to U.S.
Government securities or with respect to futures contracts, or (ii) the
writing, purchase, ownership, holding or sale of futures contracts.
(4) Underwrite securities issued by other persons except insofar as
either the Trust or the Portfolio Trust may technically be deemed an
underwriter under the Securities Act of 1933 in selling a portfolio
security (provided, however, that the Fund may invest all of its assets in
an open-end management investment company with the same investment
objective and policies and substantially the same investment restrictions
as the Fund (a "Qualifying Portfolio")).
(5) Make loans to other persons except (a) through the lending of the
Fund's or Portfolio's securities and provided that any such loans not
exceed 30% of the Fund's or Portfolio's total assets, as the case may be
(taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations, or (c) by purchasing 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 are part of an issue to the
public shall not be considered the making of a loan.
(6) 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 (except futures contracts) in the ordinary course of
business (the Trust and Portfolio Trust reserve the freedom of action to
hold and to sell real estate acquired as a result of the ownership of
securities by the Fund or Portfolio).
(7) Purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer
to be held for the Fund or Portfolio, except that all of the assets of the
Fund may be invested in a Qualifying Portfolio.
(8) Purchase securities of any issuer if such purchase at the time
thereof would cause more than 5% of the assets of the Fund or Portfolio
(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 any political subdivision of the United States or any
state, or any agency or instrumentality of the United States or of any
state or of any political subdivision of any state or the United States);
provided that for purposes of this restriction the issuer of a futures
contract shall not be deemed to be the issuer of the security or
securities underlying such contract; and further provided that all of the
assets of the Fund may be invested in a Qualifying Portfolio.
(9) Make short sales of securities or maintain a short position,
unless at all times when a short position is open the Fund or Portfolio
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless not more than 10% of the net assets of the Fund or Portfolio
(taken at market value), is held as collateral for such sales at any one
time.
(10) Concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of the investment objective of
the Fund or Portfolio 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
and except that all of the assets of the Fund may be invested in a
Qualifying Portfolio.
(11) 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, provided that collateral
arrangements with respect to futures contracts, including deposits of
initial and variation margin, are not considered to be the issuance of a
senior security for purposes of this restriction.
The Trust, with respect to the Fund, and the Portfolio Trust, with respect
to the Portfolio, have each also adopted a policy which is fundamental and
which provides that all of the assets of the Fund or Portfolio will be
invested in obligations that are backed by the full faith and credit of the
U.S. Government except that all of the assets of the Fund may be invested in a
Qualifying Portfolio all of whose assets will be invested in obligations that
are backed by the full faith and credit of the U.S. Government. This policy is
not intended to prohibit the use of futures contracts on fixed income
securities or options on futures contracts by the Fund. Investment Restriction
(9) above applies only to short sales of or short positions in securities, and
does not prevent the writing, purchase, ownership, holding or sale of futures
contracts.
For purposes of restriction (1) above, arrangements with respect to
securities lending are not treated as borrowing.
As an operating policy, the Fund will not invest more than 15% of its net
assets (taken at market value) in securities for which there is no readily
available market. This policy is not fundamental and may be changed without
shareholder approval.
If a percentage restriction on investment or utilization of assets set
forth above or referred to in the Prospectus is adhered to at the time an
investment is made or assets are so utilized, a later change in percentage
resulting from changes in the value of the securities held for the Fund is not
considered a violation of policy. If the value of the Fund's holdings of
illiquid securities at any time exceeds the percentage limitation applicable
at the time of acquisition due to subsequent fluctuations in value or other
reasons, the Board of Trustees will consider what actions, if any, are
appropriate to maintain adequate liquidity.
5. PERFORMANCE INFORMATION
Fund performance may be quoted in advertising, shareholder reports and
other communications in terms of yield, effective yield or total rate of
return. All performance information is historical and is not intended to
indicate future performance. Yields and total rates of return fluctuate in
response to market conditions and other factors, and the value of the Fund's
shares when redeemed may be more or less than their original cost.
The Fund may provide its period, annualized, cumulative and average annual
"total rates of return." The "total rate of return" refers to the change in
the value of an investment in the Fund over a stated period, reflects any
change in net asset value per share and is compounded to include the value of
any shares purchased with any dividends or capital gains declared during such
period. Period total rates of return may be "annualized." An "annualized"
total rate of return assumes that the period total rate of return is generated
over a one-year period. Average annual total return figures represent the
average annual percentage change over the specified period. Cumulative total
return figures are not annualized and represent the aggregate percentage or
dollar value change over a stated period of time.
A total rate of return quotation for the Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. Any annualized
total rate of return quotation is calculated by (x) adding 1 to the period
total rate of return quotation calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result.
Average annual total return is a measure of the Fund's performance over
time. It is determined by taking the Fund's performance over a given period
and expressing it as an average annual rate. The average annual total return
quotation is computed in accordance with a standardized method prescribed by
SEC rules. The average annual total return for a specific period is found by
taking a hypothetical $1,000 initial investment in Fund shares on the first
day of the period, reducing the amount to reflect the maximum sales charge,
and computing the redeemable value of that investment at the end of the
period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
distributions have been reinvested in Fund shares at net asset value on the
reinvestment dates during the period.
Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of a
period, deducting (as applicable) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period.
Average annual and cumulative total returns may also be presented in
advertising and sales literature without the inclusion of sales charges. Total
return calculations that do not include the effect of the sales charge would
be reduced if such charge were included.
The Fund may provide annualized "yield" and "effective yield" quotations.
The "yield" of the Fund refers to the income generated by an investment in the
Fund over a 30-day or one-month period (which period is stated in any such
advertisement or communication). This income is then annualized, that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of
the public offering price on the last day of that period. The "effective
yield" is calculated similarly, but when annualized the income earned by the
investment during that 30-day or one-month period is assumed to be reinvested.
The effective yield is slightly higher than the yield because of the
compounding effect of this assumed reinvestment. A "yield" quotation, unlike a
total rate of return quotation, does not reflect changes in net asset value.
Any fees charged by a shareholder's Shareholder Servicing Agent will reduce
that shareholder's net return on his or her investment.
A current yield quotation for the Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of
the average daily number of shares outstanding during the period that were
entitled to receive dividends and the maximum public offering price per share
on the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
In computing total rates of return and yield quotations, all Fund expenses
are included. However, fees that may be charged directly to a shareholder by
that shareholder's broker dealer, Shareholder Servicing Agent or other
financial intermediaries are not included. Of course, any such fees will
reduce the shareholder's net return on investment.
Any tax equivalent yield quotation of the Fund is calculated as follows:
If the entire current yield quotation for such period is state tax-exempt, the
tax equivalent yield would be the current yield quotation divided by 1 minus a
stated income tax rate or rates. If a portion of the current yield quotation
is not state tax-exempt, the tax equivalent yield would be the sum of (a) that
portion of the yield which is state tax-exempt divided by 1 minus a stated
income tax rate or rates and (b) the portion of the yield which is not state
tax-exempt.
Set forth below is average annual total rate of return information for
shares of the Fund for the periods indicated, assuming that dividends and
capital gains distributions, if any, were reinvested. The return information
relates to periods prior to January 4, 1999, when there were no sales charges
on the purchase or sale of the Fund's shares. Performance for past periods has
therefore been adjusted to reflect the maximum sales charge currently in
effect. Performance results include any applicable fee waivers or expense
subsidies in place during the time period, which may cause the results to be
more favorable than they would otherwise have been.
<TABLE>
<CAPTION>
REDEEMABLE VALUE
AVERAGE ANNUAL OF A HYPOTHETICAL
TOTAL RATE $1,000 INVESTMENT
OF RETURN AT THE END OF THE PERIOD
--------- ------------------------
<S> <C> <C>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
Ten years ended December 31, 1999 ................................... 5.82% $1,760.36
Five years ended December 31, 1999 .................................. 5.43% $1,302.77
One year ended December 31, 1999 .................................... 0.54% $1,005.41
</TABLE>
The annualized yield of shares of the Fund for the 30-day period ended
December 31, 1999 was 4.86%.
Comparative performance information may be used from time to time in
advertising shares of the Fund, including data from Lipper Analytical
Services, Inc. and other industry sources and publications. From time to time
the Fund may compare its performance against inflation with the performance of
other instruments against inflation, such as FDIC-insured bank money market
accounts. In addition, advertising for the Fund may indicate that investors
should consider diversifying their investment portfolios in order to seek
protection of the value of their assets against inflation. From time to time,
advertising materials for the Fund may refer to or discuss current or past
economic or financial conditions, developments and events.
Performance prior to January 4, 1999 used for advertising and sales
purposes will be adjusted to include the sales charges currently in effect.
Shares of the Fund are sold at net asset value plus a current maximum sales
charge of 1.50%. Performance will typically include this maximum sales charge
for the purposes of calculating performance figures. Fund performance may also
be presented in advertising and sales literature without the inclusion of
sales charges.
6. DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES
The net asset value of each share of the Fund is determined each day
during which the New York Stock Exchange (the "Exchange") is open for trading
(a "Business Day"). As of the date of this Statement of Additional
Information, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. This
determination of net asset value is made once each day as of the close of
regular trading on such Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to shares of
the Fund (including its interest in the Portfolio), then subtracting the
liabilities charged to the shares, and then dividing the result by the number
of outstanding shares. The net asset value per share is effective for orders
received and accepted by the Distributor prior to its calculation.
The value of the Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued)
is determined at the same time and on the same days as the net asset value per
share of the Fund is determined. The net asset value of the Fund's investment
in the Portfolio is equal to the Fund's pro rata share of the net assets of
the Portfolio.
Bonds and other fixed income securities (other than short-term obligations
maturing in 60 days or less) held for the Fund are valued on the basis of
valuations furnished by a pricing service, use of which has been approved by
the Board of Trustees of the Trust. In making such valuations, the pricing
service utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Short-term obligations (maturing in 60 days
or less) are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of the Trust. Futures contracts are
normally valued at the settlement price on the exchange on which they are
traded. Securities for which there are no such valuations are valued at fair
value as determined in good faith by or at the direction of the Board of
Trustees of the Trust.
Interest income on long-term obligations held for the Fund is determined
on the basis of interest accrued plus amortization of "original issue
discount" (generally, the difference between issue price and stated redemption
price at maturity) and premiums (generally, the excess of purchase price over
stated redemption price at maturity). Interest income on short-term
obligations is determined on the basis of interest accrued plus amortization
of any premium.
7. ADDITIONAL INFORMATION ON THE PURCHASE AND SALE
OF FUND SHARES AND SHAREHOLDER PROGRAMS
You may purchase your Fund shares at a public offering price equal to the
applicable net asset value per share plus an up-front sales charge imposed at
the time of purchase as set forth in the Prospectus. You may qualify for a
reduced sales charge depending on the amount of your purchase, or the sales
charge may be waived in its entirety, as described below under "Sales Charge
Waivers." Shares of the Fund are also subject to an annual distribution fee of
up to 0.15%, an additional fee of up to 0.05% for expenses incurred in
connection with print or electronic media advertising, and a 0.25% shareholder
servicing agent fee. See "Distributor." Set forth below is an example of the
method of computing the offering price of the shares of the Fund. The example
assumes a purchase on December 31, 1999 of shares of the Fund aggregating less
than $25,000 subject to the schedule of sales charges set forth below:
CITIFUNDS SHORT-TERM U.S.
GOVERNMENT INCOME PORTFOLIO
---------------------------
Net Asset Value per share ........................... $9.46
Per Share Sales Charge -- 1.50% of public offering
price (1.52% of net asset value per share) ........ $0.14
Per Share Offering Price to the Public .............. $9.60
The Fund receives the entire net asset value of all shares of the Fund
that are sold. The Distributor retains the full applicable sales charge from
which it pays the uniform reallowances shown in the table below to shareholder
servicing agents which are broker-dealers. The Distributor keeps the full
applicable sales charge with respect to shares of the Fund sold by shareholder
servicing agents that are not broker-dealers.
The front-end sales charge for shares of the Fund expressed as a
percentage of offering price and net asset value, and the dealer reallowance
expressed as a percentage of the offering price is set forth in the table
below. The Fund has established certain shareholder programs that may permit
you to take advantage of the lower rates available for larger purchases, as
described under "Shareholder Programs" below.
SALES CHARGE SALES CHARGE DEALER REALLOWANCE
AMOUNT OF AS A % OF AS A % OF AS A % OF
INVESTMENT OFFERING PRICE INVESTMENT OFFERING PRICE
- ---------- -------------- ---------- --------------
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%
- ----------
* A contingent deferred sales charge ("CDSC") may apply in certain instances.
See "Sales Charge Waivers" below.
ADDITIONAL DEALER CONCESSIONS
From time to time, the Distributor or Citibank, at its expense, may
provide additional commissions, compensation or promotional incentives
("concessions") to dealers that sell or arrange for the sale of shares of the
Fund. Such concessions provided by the Distributor or Citibank may include
financial assistance to dealers in connection with pre-approved conferences or
seminars, sales or training programs for invited registered representatives
and other employees, payment for travel expenses, including lodging, incurred
by registered representatives and other employees for such seminars or
training programs, seminars for the public, advertising and sales campaigns
regarding the Fund, and/or other dealer-sponsored events. From time to time,
the Distributor or Citibank may make expense reimbursements for special
training of a dealer's registered representatives and other employees in group
meetings or to help pay the expenses of sales contests. Other concessions may
be offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD.
SALES CHARGE WAIVERS
In certain circumstances, the initial sales charge imposed on purchases of
Fund shares, and any CDSC imposed upon sales of Fund shares, are waived.
Waivers are generally instituted in order to promote goodwill with persons or
entities with which Citibank or the Distributor or their affiliates have
business relationships, or because the sales effort, if any, involved in
making such sales is negligible, or, in the case of certain CDSC waivers,
because the circumstances surrounding the sale of Fund shares were not
foreseeable or voluntary. These sales charge waivers may be modified or
discontinued at any time.
FRONT-END SALES CHARGE
o Reinvestment. The sales charge does not apply to Fund shares acquired through
the reinvestment of dividends and capital gains distributions.
o Eligible Purchasers. Shares of the Fund may be purchased without a sales
charge by the following eligible purchasers:
[ ] tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code
[ ] trust accounts for which Citibank 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 or retired 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)
[ ] 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 (qualified
plans investing through certain programs sponsored by Citibank or its
affiliates are not subject to this minimum)
[ ] accounts associated with Copeland Retirement Programs
[ ] investors purchasing $500,000 or more of shares of the Fund; 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 on Fund
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 Fund shares for certain 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 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
CONTINGENT DEFERRED SALES CHARGE:
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:
[ ] 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
[ ] redemptions made under the Fund's Systematic Withdrawal Plan
SHAREHOLDER PROGRAMS
The Fund makes the following programs available to shareholders to enable
them to reduce or eliminate the front-end sales charges on Fund shares, to
exchange Fund shares for shares of other CitiFunds, without, in many cases,
the payment of a sales charge or to provide for the automatic withdrawal of
cash. These programs may be changed or discontinued at any time. For more
information, please contact your Shareholder Servicing Agent.
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
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 other CitiFunds or of
any other mutual fund 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 front-end 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.
[ ] The shareholder or, if the shareholder holds Fund shares through a
Shareholder Servicing Agent, his or her Shareholder Servicing Agent must
inform CFBDS that the letter of intent is in effect each time shares are
purchased.
[ ] 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.
[ ] 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.
[ ] 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.
[ ] 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 a Shareholder Servicing Agent stating that the shares
were paid for by the person signing the letter.
[ ] Neither income dividends nor capital gains distributions taken in
additional shares will apply toward the completion of the letter of
intent.
[ ] 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 shares of the Fund 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 $40,000 and purchases an additional $10,000 of shares of the
Fund, the sales charge for the $10,000 purchase would be at the rate of 1.00%
(the rate applicable to single transactions from $50,000 to less than
$250,000). A shareholder must provide his or her Shareholder Servicing Agent
with information to verify that the quantity sales charge discount is
applicable at the time the investment is made.
SYSTEMATIC WITHDRAWAL PLAN
The Fund's Systematic Withdrawal Plan permits you to have a specified
dollar amount (minimum of $100 per withdrawal) automatically withdrawn from
your account on a regular basis if you have at least $10,000 in your Fund
account at the time of enrollment. You are limited to one withdrawal per month
under the Plan.
If you redeem shares under the Plan that are subject to a CDSC, you are
not subject to any CDSC applicable to the shares redeemed, but the maximum
amount that you can redeem under the Plan in any year is limited to 10% of the
average daily balance in your account.
You may receive your withdrawals by check, or have the monies transferred
directly into your bank account. Or you may direct that payments be made
directly to a third party.
To participate in the Plan, you must complete the appropriate forms
provided by the Transfer Agent or, if you hold Fund shares through a
Shareholder Servicing Agent your Shareholder Servicing Agent.
REINSTATEMENT PRIVILEGE
Shareholders who have redeemed shares of the Fund 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 the Transfer Agent or, if
they hold Fund shares through Shareholder Servicing Agents, their Shareholder
Servicing Agents in writing at the time the privilege is exercised.
EXCHANGE PRIVILEGE
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 of the other Fund are being acquired and the
sales charge for Class A 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. Investors whose
shares were outstanding on January 4, 1999 are 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 the other funds without paying any sales charge.
You must notify the Transfer Agent or, if you hold your shares through a
Shareholder Servicing Agent, your Shareholder Servicing Agent at the time of
exchange if you believe that you qualify for share prices which do not include
the sales charge or which reflect a reduced sales charge, because 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 modified or terminated at any time, and is
available only in those jurisdictions where such exchanges legally may be
made. Before making any exchange, shareholders should contact the Transfer
Agent or, if they hold Fund shares through Shareholder Servicing Agents, their
Shareholder Servicing Agents to obtain more information and prospectuses of
the funds to be acquired through the exchange. An exchange is treated as a
sale of the shares exchanged and could result in taxable gain or loss to the
shareholder making the exchange.
ADDITIONAL PURCHASE AND SALE INFORMATION
If your account is established and maintained by a Shareholder Servicing
Agent, the Shareholder Servicing Agent is the shareholder of record of the
Fund. Each Shareholder Servicing Agent establishes its own terms, conditions
and charges with respect to services it offers to its customers. Charges for
these services may include fixed annual fees and account maintenance fees.
Each Shareholder Servicing Agent has agreed to transmit to its customers who
are shareholders of the Fund appropriate written disclosure of any fees that
it may charge them directly. The effect of any such fees will be to reduce the
net return on the investment of customers of that Shareholder Servicing Agent.
Each Shareholder Servicing Agent is responsible for transmitting promptly
orders of its customers.
Investors may be able to invest in the Fund under one of several tax-
sheltered plans. Such plans include IRAs, Keogh or Corporate Profit-Sharing
and Money-Purchase Plans, 403(b) Custodian Accounts, and certain other
qualified pension and profit-sharing plans. Investors should consult with
their Shareholder Servicing Agent and their tax and retirement advisers.
Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the Transfer Agent or, if they hold
Fund shares through Shareholder Servicing Agents, their Shareholder Servicing
Agents. During periods of drastic economic or market changes or severe weather
or other emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery service,
should be considered. The Fund, the transfer agent and each Shareholder
Servicing Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include recording
of the telephone instructions and verification of a caller's identity by
asking for his or her name, address, telephone, Social Security number, and
account number. If these or other reasonable procedures are not followed, the
Fund, the transfer agent or the Shareholder Servicing Agent may be liable for
any losses to a shareholder due to unauthorized or fraudulent instructions.
Otherwise, the shareholder will bear all risk of loss relating to a redemption
or exchange by telephone.
Subject to compliance with applicable regulations, the Trust and the
Portfolio Trust have each reserved the right to pay the redemption price of
shares of the Fund or beneficial interests in the Portfolio, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trust or the Portfolio Trust may suspend the right of redemption or
postpone the date of payment for shares of the Fund or beneficial interests in
the Portfolio more than seven days during any period when (a) trading in the
markets the Fund or the Portfolio normally utilizes is restricted or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's or the Portfolio's investments or determination of its
net asset value not reasonably practicable; (b) the New York Stock Exchange is
closed (other than customary weekend and holiday closings); or (c) the SEC has
by order permitted such suspension.
A redemption is treated as a sale of the shares redeemed and could result
in taxable gain or loss to the shareholder making the redemption.
8. MANAGEMENT
The Fund is supervised by the Board of Trustees of the Trust, and the
Portfolio is supervised by the Board of Trustees of the Portfolio Trust. In
each case, a majority of the Trustees are not affiliated with Citibank. In
addition, a majority of the disinterested Trustees of the Fund are different
from a majority of the disinterested Trustees of the Portfolio.
The Trustees and officers of the Trust and the Portfolio Trust, their ages
and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Asterisks indicate
that those Trustees and officers are "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio Trust. Unless otherwise indicated
below, the address of each Trustee and officer is 21 Milk Street, Boston,
Massachusetts. The address of the Portfolio Trust is Elizabethan Square,
George Town, Grand Cayman, British West Indies.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE*; 48 - President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
RILEY C. GILLEY; 73 - Vice President and General Counsel, Corporate Property
Investors (November 1988 to December 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.
DIANA R. HARRINGTON; 60 - Professor, Babson College (since September 1994);
Trustee, The Highland Family of Funds (March 1997 to March 1998). Her address
is 120 Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY; 48 - Consultant, Global Research Associates, Inc. (Investment
Research) (since September 1990); Director, Mainstay Institutional Funds
(since December 1990). Her address is P.O. Box 9572, New Haven, Connecticut.
HEATH B. MCLENDON*; 66 - Chairman, President, and Chief Executive Officer of
SSB Citi Fund Management LLC (formerly known as SSBC Fund Management, Inc.
(since March 1996); Managing Director of Salomon Smith Barney (since August
1993); and Chairman, President and Chief Executive Officer of fifty-eight
investment companies sponsored by Salomon Smith Barney. His address is 388
Greenwich Street, New York, New York.
C. OSCAR MORONG, JR.; 65 - Chairman of the Board of Trustees of the Trust;
Managing Director, Morong Capital Management (since February 1993); Director,
Indonesia Fund (1990 to 1999); Trustee, MAS Funds (since 1993). His address is
1385 Outlook Drive West, Mountainside, New Jersey.
E. KIRBY WARREN; 65 - Professor of Management, Graduate School of Business,
Columbia University (1987 to December 1999). His address is Laurel Road, P.O.
Box 146, Tuxedo Park, New York.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV; 57 - Chief Executive Officer, Rocket City Enterprises
(Consulting, Publishing, Internet Services) (since January 2000); President and
Chief Executive Officer, Catalyst, Inc. (Management Consultants) (since June
1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 24 Atlantic Drive, Scarborough,
Maine.
PHILIP W. COOLIDGE*; 48 - President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
MARK T. FINN; 56 - President and Director, Delta Financial, Inc. (since June
1983); Chairman of the Board and Part Owner, FX 500 Ltd. (Commodity Trading
Advisory Firm) (April 1990 to February 1996); General Partner and Shareholder,
Greenwich Ventures LLC (Investment Partnership) (since January 1996);
President, Secretary and Owner, Phoenix Trading Co. (Commodity Trading
Advisory Firm) (since March 1997); Director, Chairman and Owner, Vantage
Consulting Group, Inc. (since October 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
C. OSCAR MORONG, JR.; 65 - Chairman of the Board of Trustees of the Trust;
Managing Director, Morong Capital Management (since February 1993); Director,
Indonesia Fund (1990 to 1999); Trustee, MAS Funds (since 1993). His address is
1385 Outlook Drive West, Mountainside, New Jersey.
WALTER E. ROBB, III; 73 - President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (Corporate Financial Advisors) (since 1978);
President and Treasurer, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds (since 1985). His address is 35 Farm Road, Sherborn,
Massachusetts.
E. KIRBY WARREN; 65 - Professor of Management, Graduate School of Business,
Columbia University (1987 to December 1999). His address is Laurel Road, P.O.
Box 146, Tuxedo Park, New York.
OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE*; 48 - President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
CHRISTINE D DORSEY*; 29 - Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Assistant Vice President, Signature Financial
Group, Inc. (since January 1996); Paralegal and Compliance Officer, various
financial companies (July 1992 to January 1996).
LINWOOD C. DOWNS*; 38 -- Treasurer of the Trust and the Portfolio Trust; Chief
Financial Officer and Senior Vice President, Signature Financial Group;
Treasurer, CFBDS.
TAMIE EBANKS-CUNNINGHAM*; 27 - Assistant Secretary of the Trust and the
Portfolio Trust, Office Manager, Signature Financial Group (Cayman) Ltd.
(since April 1995); Administrator, Cayman Islands Primary School (prior to
April 1995). Her address is P.O. Box 2494, Elizabethan Square, George Town,
Grand Cayman, Cayman Islands, B.W.I.
SUSAN JAKUBOSKI*; 36 - Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman) Ltd.
MOLLY S. MUGLER*; 48 - Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc.; Assistant Secretary, CFBDS.
JULIE J. WYETZNER*; 40 - Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group, Inc.
The Trustees and officers of the Trust and the Portfolio Trust also hold
comparable positions with certain other funds for which CFBDS, SFG or their
affiliates serve as the distributor or administrator.
The Trustees of the Trust received the following remuneration from the
sources indicated below during its fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT ESTIMATED FROM THE TRUST
AGGREGATE BENEFITS ACCRUED ANNUAL AND FUND COMPLEX PAID
COMPENSATION AS PART OF FUND BENEFITS TO
TRUSTEE FROM FUND(1) EXPENSES UPON RETIREMENT TRUSTEES(1)
------- ------------ -------- --------------- -----------
<S> <C> <C> <C> <C>
Philip W. Coolidge None None None None
Riley C. Gilley $1,726 None None $65,250
Diana R. Harrington $1,833 None None $71,250
Susan B. Kerley $1,826 None None $69,750
Heath B. McLendon None None None None
C. Oscar Morong, Jr. $1,910 None None $92,000
E. Kirby Warren $1,776 None None $62,750
William S. Woods, Jr. (2) $1,904 None None $66,000
- ----------
(1) Messrs. Coolidge, Gilley, McLendon, Morong and Warren and Mses. Harrington and Kerley are Trustees of 48, 35,
23, 39, 39, 30, and 30 funds or portfolios, respectively, in the family of open-end registered investment
companies advised or managed by Citibank.
(2) Effective December 31, 1999, Mr. Woods became a Trustee Emeritus of the Trust. Per the terms of the Trust's Trustee
Emeritus Plan, Mr. Woods serves the Board of Trustees in an advisory capacity. As a Trustee Emeritus, Mr. Woods is
paid 50% of the annual retainer fee and meeting fees otherwise applicable to Trustees, together with reasonable
out-of-pocket expenses for each meeting attended.
</TABLE>
As of April 12, 2000, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund. The following shareholders owned of
record 5% or more of the Fund's outstanding voting securities on April 12,
2000: Class A shares: Fiserv Securities Inc., Attn: Mutual Funds Dept., One
Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103-7042 -
93.10%.
The Declaration of Trust of each of the Trust and the Portfolio Trust
provides that the Trust or the Portfolio Trust, as the case may be, will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust or the Portfolio Trust, as the case may be, unless, as
to liability to the Trust, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices, or unless with respect to any other matter it is finally adjudicated
that they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trust or the Portfolio Trust, as the
case may be. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees of the Trust or the Portfolio Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ADVISER
Citibank manages the assets of the Portfolio pursuant to an investment
advisory agreement (the "Advisory Agreement"). Subject to such policies as the
Board of Trustees of the Portfolio Trust, may determine, the Adviser manages
the securities of the Portfolio and makes investment decisions for the
Portfolio. The Adviser 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
Advisory Agreement will continue in effect 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 Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose
of voting on the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others. The Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Portfolio Trust, when
authorized either by a vote of a majority of the outstanding voting securities
of the Portfolio or by a vote of a majority of the Board of Trustees of the
Portfolio Trust, as appropriate, or by the Adviser on not more than 60 days'
nor less than 30 days' written notice, and will automatically terminate in the
event of its assignment. The Advisory Agreement provides that neither the
Adviser nor its personnel shall be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or
omission in the execution and management of the Portfolio, except for willful
misfeasance, bad faith or gross negligence or reckless disregard of its or
their obligations and duties under the Advisory Agreement.
For its services under the Advisory Agreement with respect to the
Portfolio, Citibank receives fees, which are computed daily and paid monthly,
at an annual rate equal to 0.35% of the Portfolio's average daily net assets
on an annualized basis for the Portfolio's then-current fiscal year. Citibank
may reimburse the Portfolio or waive all or a portion of its advisory fees.
For the fiscal years ended December 31, 1997, 1998 and 1999, the fees paid to
Citibank under the Advisory Agreement, were $196,529 (of which $5,466 was
voluntarily waived), $235,934 and $228,067, respectively.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), CFBDS and SFG provide the Trust and the Portfolio
Trust, respectively, with general office facilities and CFBDS and SFG
supervise the overall administration of the Trust or 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 the
Portfolio Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trust or the Portfolio
Trust with applicable laws and regulations; and arranging for the maintenance
of books and records of the Trust or the Portfolio Trust. The Administrator
and the Portfolio Administrator provide persons satisfactory to the Board of
Trustees of the Trust or the Portfolio Trust to serve as Trustees and officers
of the Trust and the Portfolio Trust, respectively. Such Trustees and
officers, as well as certain other employees and Trustees of the Trust and the
Portfolio Trust, may be directors, officers or employees of CFBDS, SFG or
their affiliates.
The fees payable to the Administrator and the Portfolio Administrator,
respectively, under the Administrative Services Agreements are 0.25% of the
average daily net assets of the Fund, and 0.05% of the average daily net
assets of the Portfolio, accrued daily and paid monthly, in each case on an
annualized basis for the Fund's or the Portfolio's then-current fiscal year.
However, each of the Administrator and the Portfolio Administrator has
voluntarily agreed to waive a portion of the fees payable as necessary to
maintain the projected rate of total operating expenses. For the fiscal years
ended December 31, 1997, 1998 and 1999, the fees payable to CFBDS from the
Fund under the Administrative Services Agreement were $58,254 (all of which
was voluntarily waived), $72,730 (all of which was voluntarily waived) and
$97,993 (all of which was voluntarily waived), respectively. For the fiscal
years ended December 31, 1997, 1998 and 1999, the fees payable to SFG from the
Portfolio under the Administrative Services Agreement with the Portfolio Trust
were $28,076 (of which $27,174 was voluntarily waived), $33,706 (all of which
was voluntarily waived) and $32,582 (all of which was voluntarily waived),
respectively.
The Administrative Services Agreements with the Trust and the Portfolio
Trust provide that CFBDS or SFG, as the case may be, may render administrative
services to others. These Administrative Services Agreements continue in
effect as to the Fund or the Portfolio, as applicable, if such continuance is
specifically approved at least annually by the Trust's or the Portfolio
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund or the Portfolio and, in either case, by a majority of
the Trustees of the Trust or Portfolio Trust who are not parties to the
applicable Administrative Services Agreement or interested persons of any such
party. The Administrative Services Agreements with the Trust and the Portfolio
Trust terminate automatically if they are assigned and may be terminated by
the Trust or the Portfolio Trust without penalty by vote of a majority of the
outstanding voting securities of the Fund or Portfolio, as applicable, or by
either party thereto on not more than 60 days' nor less than 30 days' written
notice. The Administrative Services Agreements with the Trust and the
Portfolio Trust also provide that CFBDS, SFG and their personnel shall not be
liable for any error of judgment or mistake of law or for any act or omission
in the administration or management of the Trust or the Portfolio Trust,
except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Administrative Services Agreements.
CFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to sub-administrative services agreements, Citibank performs such
sub-administrative duties for the Trust and the Portfolio Trust as from time
to time are agreed upon by Citibank and, respectively, CFBDS or SFG.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining the Trust's or the Portfolio
Trust's organization, participation in the preparation of documents required
for compliance by the Trust or the Portfolio Trust with applicable laws and
regulations, the preparation of certain documents in connection with meetings
of Trustees and shareholders, and other functions which would otherwise be
performed by the Administrator. For performing such sub-administrative
services, Citibank receives compensation as from time to time is agreed upon
by Citibank and, respectively, CFBDS or SFG, not in excess of the amount paid
to CFBDS or SFG for its respective services under the Administrative Services
Agreements with the Trust and the Portfolio Trust. All such compensation is
paid by CFBDS or SFG.
DISTRIBUTOR
CFBDS, 21 Milk Street, Boston, MA 02109, serves as the Distributor of the
Fund's shares pursuant to a Distribution Agreement with the Trust (the
"Distribution Agreement"). In those states where CFBDS is not a registered
broker-dealer, shares of the Fund are sold through Signature Broker-Dealer
Services, Inc., as dealer. Under the Distribution Agreement, CFBDS is
obligated to use its best efforts to sell shares of the Fund.
Either party may terminate the Distribution Agreement on not less than 30
days' nor more than 60 days' written notice to the other party. Unless
otherwise terminated, the Distribution Agreement will continue in effect from
year to year upon annual approval by the Trust's Board of Trustees, by vote of
a majority of the Board of Trustees of the Trust who are not parties to the
Distribution Agreement or interested persons of any party to the Distribution
Agreement, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.
The Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to shares of the
Fund after concluding that there is a reasonable likelihood that the
Distribution Plan will benefit the Fund and its shareholders. The Distribution
Plan provides that the Fund may pay a distribution fee to the Distributor at
an annual rate not to exceed 0.15% of the Fund's average daily net assets. The
Distributor receives the distribution fees for its services under the
Distribution Agreement in connection with the distribution of the Fund's
shares (exclusive of any advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund). The Distributor may use all
or any portion of such distribution fee to pay for expenses of printing
prospectuses and reports used for sales purposes, expenses of the preparation
and printing of sales literature, commissions to dealers who sell shares of
the Fund and other distribution-related expenses. The Distribution Plan
permits the Fund to pay the Distributor an additional fee (not to exceed 0.05%
of the average daily net assets of the Fund) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of shares.
The Distribution Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the operation of the Distribution Plan or in
any agreement related to the Plan (for purposes of this paragraph "Qualified
Trustees"). The Distribution Plan requires that the Trust and the Distributor
provide to the Board of Trustees, and the Board of Trustees review, at least
quarterly, a written report of the amounts expended (and the purposes
therefor) under the Distribution Plan. The Distribution Plan further provides
that the selection and nomination of the Qualified Trustees is committed to
the discretion of the Qualified Trustees then in office who are not interested
Trustees of the Trust. The Distribution Plan may be terminated at any time by
a vote of a majority of the Trust's Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The Distribution
Plan may not be amended to increase materially the amount of the Fund's
permitted expenses thereunder without the approval of a majority of the
outstanding securities of the Fund and may not be materially amended in any
case without a vote of a majority of both the Trustees and Qualified Trustees.
The Distributor will preserve copies of any plan, agreement or report made
pursuant to the Distribution Plan for a period of not less than six years from
the date of the Plan, and for the first two years the Distributor will
preserve such copies in an easily accessible place.
As contemplated by the Distribution Plan, CFBDS acts as the agent of the
Trust in connection with the offering of shares of the Fund pursuant to the
Distribution Agreement. After the prospectuses and periodic reports of the
Fund have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Fund to prospective
investors. For the fiscal years ended December 31, 1997, 1998 and 1999, the
fees payable to the Distributor by the Fund under the Distribution Agreement
were $34,953 (all of which was voluntarily waived), $43,638 (all of which was
voluntarily waived) and $58,796 (all of which was voluntarily waived),
respectively, no portion of which was applicable to reimbursement for expenses
incurred in connection with print or electronic media advertising.
The Distributor may enter into agreements with Shareholder Servicing
Agents and may pay compensation to such Shareholder Servicing Agents for
accounts for which the Shareholder Servicing Agents are holders of record. 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 are determined by the
Distributor and may vary. Citibank may make similar payments under similar
arrangements.
CODE OF ETHICS
The Trust, the Portfolio Trust, the Adviser and the Distributor each have
adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act. Each code
of ethics permits personnel subject to such code to invest in securities,
including securities that may be purchased or held by the Fund. However, the
codes of ethics contain provisions and requirements designed to identify and
address certain conflicts of interest between personal investment activities
and the interests of the Fund. Of course, there can be no assurance that the
codes of ethics will be effective in identifying and addressing all conflicts
of interest relating to personal securities transactions.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has adopted an administrative services plan (the "Administrative
Services Plan") after having concluded that there is a reasonable likelihood
that the Administrative Services Plan will benefit the Fund and its
shareholders. The Administrative Services Plan provides that the Trust may
obtain the services of an administrator, a transfer agent, a custodian and one
or more Shareholder Servicing Agents, and may enter into agreements providing
for the payment of fees for such services. Under the Trust's Administrative
Services Plan, the total of the fees paid from the Fund to the Trust's
Administrator and Shareholder Servicing Agents may not exceed 0.65% of the
Fund's average daily net assets on an annualized basis for the Fund's then-
current fiscal year. Any distribution fees (other than any fee concerning
electronic or other media advertising) payable under the Distribution Plan are
included in this expense limitation. Within this overall limitation,
individual fees may vary. Distribution fees may be used to offset the Fund's
marketing costs, such as preparation of sales literature, advertising, and
printing and distributing prospectuses and other shareholder materials to
prospective investors, and to pay costs related to distribution activities,
including employee salaries, bonuses and other overhead expenses.
The Administrative Services Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Trustees and a majority of the Trustees who are not "interested persons" of
the Trust and who have no direct or indirect financial interest in the
operation of the Administrative Services Plan or in any agreement related to
such Plan (for purposes of this paragraph "Qualified Trustees"). The
Administrative Services Plan requires that the Trust provide to its Board of
Trustees and the Board of Trustees review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the
Administrative Services Plan. The Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees of
the Trust or by a vote of a majority of the outstanding voting securities of
the Fund. The Administrative Services Plan may not be amended to increase
materially the amount of permitted expenses thereunder without the approval of
a majority of the outstanding voting securities of the Fund. The
Administrative Services Plan with respect to the Fund may not be materially
amended in any case without a vote of the majority of both the Trustees and
the Qualified Trustees.
The Trust has entered into a shareholder servicing agreement (a
"Shareholder Servicing Agreement") with each Shareholder Servicing Agent
pursuant to which such Shareholder Servicing Agent provides shareholder
services, including answering customer inquiries, assisting in processing
purchase, exchange and redemption transactions and furnishing Fund
communications to shareholders. Some Shareholder Servicing Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund, such as requiring a minimum initial investment or
charging their customers a direct fee for their services. Each Shareholder
Servicing Agent has agreed to transmit to its customers who are shareholders
of the Fund appropriate prior written disclosure of any fees that it may
charge them directly and to provide written notice at least 30 days prior to
imposition of any transaction fees. Shareholder Servicing Agents that sell
shares of the Fund receive a shareholder servicing fee payable on such shares
at an annual rate equal to 0.25% of the average daily net assets represented
by such shares. For the fiscal years ended December 31, 1997, 1998 and 1999,
the aggregate fees paid to Shareholder Servicing Agents under the Shareholder
Servicing Agreements for the Fund, were $58,254, $72,730 and $97,993,
respectively.
The Trust has also entered into a Transfer Agency and Service Agreement
with State Street Bank and Trust Company ("State Street") pursuant to which
State Street acts as transfer agent for the Fund. The Trust has entered into a
Custodian Agreement and a Fund Accounting Agreement with State Street pursuant
to which custodial and fund accounting services, respectively, are provided
for the Fund. Among other things, State Street calculates the daily net asset
value for the Fund. Securities may be held by a sub-custodian bank approved by
the Trustees.
The Portfolio Trust has also adopted an administrative services plan (the
"Portfolio Administrative Plan"), which provides that the Portfolio Trust may
obtain the services of an administrator, a transfer agent and a custodian and
may enter into agreements providing for the payment of fees for such services.
Under the Portfolio Administrative Plan, the administrative services fee
payable to the Portfolio Administrator from the Portfolio may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for its
then-current fiscal year.
The Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Portfolio Administrative
Plan or in any agreement related to such Plan (for purposes of this paragraph
"Qualified Trustees"). The Portfolio Administrative Plan requires that the
Portfolio Trust provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Portfolio Administrative Plan. The Portfolio
Administrative Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Portfolio Trust and may not be materially
amended in any case without a vote of the majority of both the Portfolio
Trust's Trustees and the Portfolio Trust's Qualified Trustees.
State Street acts as transfer agent and dividend disbursing agent for the
Fund. 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 Trust.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of State Street
Cayman is P.O. Box 2508 GT, Grand Cayman, British West Indies.
AUDITORS
PricewaterhouseCoopers LLP are the independent accountants for the Fund,
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 LLP
are the chartered accountants for the Portfolio Trust. The address of
PricewaterhouseCoopers LLP is Suite 3000, Box 82, Royal Trust Towers, Toronto
Dominion Center, Toronto, Ontario, Canada M5X 1G8.
COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, serves as counsel
for the Fund.
9. PORTFOLIO TRANSACTIONS
The Trust trades securities for the Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objectives. Changes in the Fund's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. The amount of brokerage
commissions and realization of taxable capital gains will tend to increase as
the level of Portfolio activity increases. Specific decisions to purchase or
sell securities for the Fund are made by a portfolio manager who is an
employee of the Adviser and who is appointed and supervised by its senior
officers. The portfolio manager may serve other clients of the Adviser in a
similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability
of execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of the Fund and other clients of the
Adviser on the basis of their professional capability, the value and quality
of their brokerage services, and the level of their brokerage commissions. In
the case of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown),
the Adviser normally seeks to deal directly with the primary market makers,
unless in its opinion, best execution is available elsewhere. In the case of
securities purchased from underwriters, the cost of such securities generally
includes a fixed underwriting commission or concession. From time to time,
soliciting dealer fees are available to the Adviser on the tender of the
Fund's securities in so-called tender or exchange offers. Such soliciting
dealer fees are in effect recaptured for the Fund by the Adviser. At present
no other recapture arrangements are in effect.
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which Citibank or its affiliates exercise investment discretion.
Citibank is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Citibank
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which Citibank and its
affiliates have with respect to accounts over which they exercise investment
discretion. The Trustees of the Trust periodically review the commissions paid
by the Fund to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
The investment advisory fee that the Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain such services
independently.
In certain instances there may be securities that are suitable as an
investment for the Fund as well as for one or more of the Adviser's other
clients. Investment decisions for the Fund and for the Adviser's other clients
are made with a view to achieving their respective investment objectives. It
may develop that a particular security is bought or sold for only one client
even though it might be held by, or bought or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling the same security. Some simultaneous transactions
are inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect
the price of or the size of the position obtainable in a security for the
Fund. When purchases or sales of the same security for the Fund and for other
portfolios managed by the Adviser occur contemporaneously, the purchase or
sale orders may be aggregated in order to obtain any price advantages
available to large volume purchases or sales.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Portfolio
paid no brokerage commissions.
10. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trust to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value) of each series and to divide or combine the shares of any series into a
greater or lesser number of shares of that series without thereby changing the
proportionate beneficial interests in that series and to divide such shares
into classes. The Trust has reserved the right to create and issue additional
series and classes of shares. Each share of each class of each series
represents an equal proportionate interest in the series with each other share
of that class. Shares of each series participate equally in the earnings,
dividends and distribution of net assets of the particular series upon
liquidation or dissolution (except for any differences among classes of shares
in a series). Shares of each series are entitled to vote separately to approve
advisory agreements or changes in investment policy, but shares of all series
may vote together in the election or selection of Trustees and accountants for
the Trust. In matters affecting only a particular series or class, only shares
of that series or class are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust
would not be able to elect any Trustee. The Trust is not required to hold, and
has no present intention of holding, annual meetings of shareholders but the
Trust will hold special meetings of shareholders when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified number of shareholders), the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each series affected by the amendment. (See "Investment Restrictions.") At any
meeting of shareholders of any series, a Shareholder Servicing Agent may vote
any shares of which it is the holder of record and for which it does not
receive voting instructions proportionately in accordance with the
instructions it receives for all other shares of which that Shareholder
Servicing Agent is the holder of record. Shares have no preference,
preemptive, conversion or similar rights. Shares, when issued, are fully paid
and non-assessable, except as set forth below.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's (or the
affected series') outstanding shares would be sufficient. The Trust or any
series of the Trust, as the case may be, may be terminated (i) by a vote of a
majority of the outstanding voting securities of the Trust or the affected
series or (ii) by the Trustees by written notice to the shareholders of the
Trust or the affected series. If not so terminated, the Trust will continue
indefinitely.
If shares are held through a Shareholder Servicing Agent, the Shareholder
Servicing Agent establishes and maintains the holder's account, and is the
shareholder of record for the Fund. The Fund's transfer agent maintains a
share register for shareholders of record. Share certificates are not issued.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business
trust may, under certain circumstances, be held personally liable as partners
for its obligations and liabilities. However, the Declaration of Trust of the
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of Trust property for any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust of the Trust also
provides that the Trust may maintain appropriate insurance (e.g., fidelity
bonding and errors and omissions insurance) for the protection of the Trust,
its shareholders, Trustees, officers, employees and agents covering possible
tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, but nothing in the Declaration of Trust of the Trust
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Portfolio is a series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolio (e.g., other investment
companies (including the Fund), insurance company separate accounts and common
and commingled trust funds) are each liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
It is not expected that the liabilities of the Portfolio would ever exceed its
assets.
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 interests 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.
11. TAX MATTERS
TAXATION OF THE FUND AND PORTFOLIO
The Fund has elected to be treated, and intends to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition of the Fund's
portfolio assets. Provided all such requirements are met and all of the Fund's
net investment income and net realized capital gains are distributed to
shareholders in accordance with the timing requirements imposed by the Code,
no federal income or excise taxes generally will be required to be paid by the
Fund. If the Fund should fail to qualify as a "regulated investment company"
for any year, the Fund would incur a regular corporate federal income tax upon
its taxable income and Fund distributions would generally be taxable as
ordinary dividend income to shareholders. The Portfolio Trust believes the
Portfolio also will not be required to pay any federal income taxes.
TAXATION OF SHAREHOLDERS
TAXATION OF DISTRIBUTIONS; FEDERAL. Shareholders of the Fund will
generally have to pay federal income taxes on the dividends and capital gain
distributions they receive from the Fund. Dividends from ordinary income and
any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes, whether the
distributions are made in cash or in additional shares. Because the Fund
expects to earn primarily interest income, it is expected that no Fund
dividends will qualify for the dividends received deduction for corporations.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), whether made in cash or in
additional shares, are taxable to shareholders as long-term capital gains
without regard to the length of time the shareholders have held their shares.
Any Fund dividend that is declared in October, November or December of any
calendar year, that is payable to shareholders of record in such a month, and
that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the dividend is declared.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
TAXATION OF DISTRIBUTIONS; STATE. Although shareholders of the Fund
generally will have to pay state and local taxes on the dividends and capital
gain distributions they receive from the Fund, distributions of the Fund that
are derived from interest on obligations of the U.S. Government and certain of
its agencies and instrumentalities (but not generally from capital gains
realized upon the dispositions of such obligations) may be exempt from state
and local taxes. Shareholders are urged to consult their tax advisers
regarding the possible exclusion of such portion of their dividends for state
and local income tax purposes.
SPECIAL CONSIDERATIONS FOR NON-U.S. PERSONS. The Fund will withhold tax
payments at the rate of 30% (or any lower rate permitted under an applicable
treaty) on taxable dividends and other payments subject to withholding taxes
that are made to persons who are not citizens or residents of the United
States. Distributions received from the Fund by non-U.S. persons also may be
subject to tax under the laws of their own jurisdiction.
BACKUP WITHHOLDING. The account application asks each new shareholder to
certify that the shareholder's Social Security or taxpayer identification
number is correct and that the shareholder is not subject to 31% backup
withholding for failing to report income to the IRS. If a shareholder fails to
provide this information, or otherwise violates IRS regulations, the Fund may
be required to withhold tax at the rate of 31% on certain distributions and
redemption proceeds paid to that shareholder. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
DISPOSITION OF SHARES. In general, any gain or loss realized upon a
taxable disposition of shares of the Fund by a shareholder that holds such
shares as a capital asset will be treated as a long-term capital gain or loss if
the shares have been held for more than twelve months and otherwise as a
short-term capital gain or loss. However, any loss realized upon a redemption of
shares in the Fund held for six months or less will be treated as a long- term
capital loss to the extent of any distributions of net capital gain made with
respect to those shares. Any loss realized upon a disposition of shares may also
be disallowed under rules relating to wash sales. Gain may be increased (or loss
reduced) upon a redemption shares held for 90 days or less followed by any
purchase (including purchases by exchange or by reinvestment) without payment of
a sales charge which would otherwise apply because of any sales charge paid on
the original purchase of the shares.
EFFECTS OF CERTAIN INVESTMENTS. The Fund's and the Portfolio's
transactions in options, short sales "against the box," futures contracts and
forward contracts will be subject to special tax rules that may affect the
amount, timing, and character of Fund or Portfolio income and distributions to
shareholders. For example, certain positions held by the Fund or the Portfolio
on the last business day of each taxable year will be marked to market (i.e.,
treated as if closed out) on that day, and any gain or loss associated with
the positions will be treated as 60% long-term and 40% short-term capital gain
or loss. Certain positions held by the Fund or the Portfolio that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute straddles, and may be subject to special tax rules
that would cause deferral of Fund or Portfolio losses, adjustments in the
holding periods of securities held by the Fund or the Portfolio and conversion
of short-term into long-term capital losses. Certain tax elections exist for
straddles which may alter the effects of these rules. The Fund and the
Portfolio each intend to limit its investment activities in options, futures
contracts and forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
12. FINANCIAL STATEMENTS
The audited financial statements of the Fund (Statement of Assets and
Liabilities at December 31, 1999, Statement of Operations for the year ended
December 31, 1999, Statement of Changes in Net Assets for the years in the
two-year period ended December 31, 1999 and Financial Highlights for each of
the years in the five-year period ended December 31, 1999, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders of the Fund, are incorporated by reference into
this Statement of Additional Information and have been so incorporated in
reliance upon the report of PricewaterhouseCoopers LLP, on behalf of the Fund.
The audited financial statements of the Portfolio (Portfolio of
Investments at December 31, 1999, Statement of Assets and Liabilities at
December 31, 1999, Statement of Operations for the year ended December 31,
1999, Statement of Changes in Net Assets for the years in the two-year period
ended December 31, 1999 and Financial Highlights for each of the years in the
five-year period ended December 31, 1999, Notes to Financial Statements and
Independent Auditors' Report), each of which is included in the Annual Report
to Shareholders of the Fund, are incorporated by reference into this Statement
of Additional Information and have been so incorporated in reliance upon the
report of PricewaterhouseCoopers LLP, chartered accountants, on behalf of the
Portfolio.
Copies of the Annual Report to Shareholders of the Fund accompany this
Statement of Additional Information.
<PAGE>
PART C
Item 23. Exhibits.
* a(1) Declaration of Trust of Registrant
* and **** a(2) Amendments to Registrant's Declaration of Trust
* b(1) Amended and Restated By-Laws of Registrant
* b(2) Amendments to Amended and Restated By-Laws of
Registrant
* e Amended and Restated Distribution Agreement between
the Registrant and CFBDS, Inc. ("CFBDS"), as
distributor with respect to shares of CitiFunds
Short-Term U.S. Government Income Portfolio
* g Custodian Contract between the Registrant and State
Street Bank and Trust Company ("State Street"), as
custodian
*** h(1) Amended and Restated Administrative Services Plan of
the Registrant with respect to CitiFunds Short-Term
U.S. Government Income Portfolio
*** h(2) Administrative Services Agreement between the
Registrant and CFBDS, as administrator with respect to
CitiFunds Short-Term U.S. Government Income Portfolio
*** h(3) Sub-Administrative Services Agreement between
Citibank, N.A. and CFBDS with respect to CitiFunds
Short-Term U.S. Government Income Portfolio
***** h(4)(i) Form of Shareholder Servicing Agreement between the
Registrant and Citibank, N.A., as shareholder servicing
agent for CitiFunds Short-Term U.S. Government Income
Portfolio
***** h(4)(ii) Form of Shareholder Servicing Agreement between the
Registrant and a federal savings bank, as shareholder
servicing agent for CitiFunds Short-Term U.S.
Government Income Portfolio
***** h(4)(iii) Form of Shareholder Servicing Agreement between the
Registrant and CFBDS, as shareholder servicing agent
for CitiFunds Short-Term U.S. Government Income
Portfolio
** h(4)(iv) Form of Shareholder Servicing Agreement between the
Registrant and a national banking association or
subsidiary thereof or state chartered banking
association, as shareholder servicing agent for
CitiFunds Short-Term U.S. Government Income Portfolio
* h(5) Transfer Agency and Service Agreement between the
Registrant and State Street, as transfer agent
* h(6) Accounting Services Agreement between the Registrant
and State Street, as Fund accounting agent
*** i Opinion and consent of counsel
j Independent auditors' consent
* m Amended and Restated Distribution Plan of the
Registrant for shares of CitiFunds Short-Term U.S.
Government Income Portfolio
*and ****** p(1) Powers of Attorney for the Registrant
*** and
******* p(2) Powers of Attorney for The Premium Portfolios
q(1) Code of Ethics for the Registrant
q(2) Code of Ethics for CFBDS
- ---------------------
* Incorporated herein by reference to Post-Effective Amendment No. 24 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on February 20,
1998.
** Incorporated herein by reference to Post-Effective Amendment No. 25 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on June 29, 1998.
*** Incorporated herein by reference to Post-Effective Amendment No. 27 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on December 16,
1998.
**** Incorporated herein by reference to Post-Effective Amendment No. 28 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on December 21,
1998
***** Incorporated herein by reference to Post-Effective Amendment No. 29 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on February 16,
1999.
****** Incorporated herein by reference to Post-Effective Amendment No. 31 to
the Registrant's Registration Statement on Form N-1A (file No. 33-6540)
as filed with the Securities and Exchange Commission on April 16, 1999.
******* Incorporated herein by reference to Post-Effective Amendment No. 32 to
the Registrant's Registration Statement on Form N-1A (File No. 33-6540)
as filed with the Securities and Exchange Commission on February 28,
2000.
Item 24. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 25. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to Post-Effective Amendment No. 24 to its
Registration Statement on Form N-1A; (b) Section 6 of the Distribution Agreement
between the Registrant and CFBDS, filed as an Exhibit to Post-Effective
Amendment No. 24 to the Registrant's Registration Statement on Form N-1A; and
(c) the undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and around
the world. Citibank is a wholly-owned subsidiary of Citicorp, which is, in turn,
a wholly-owned subsidiary of Citigroup Inc. Citibank also serves as investment
adviser to the following registered investment companies (or series thereof):
Asset Allocation Portfolios (Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio and Foreign Bond Portfolio), The Premium
Portfolios (U.S. Fixed Income Portfolio, High Yield Portfolio, Balanced
Portfolio, Large Cap Growth Portfolio, International Equity Portfolio,
Government Income Portfolio and Small Cap Growth Portfolio), Tax Free Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves Portfolio,
CitiFunds(SM) Tax Free Income Trust (CitiFunds(SM) New York Tax Free Income
Portfolio, CitiFunds(SM) National Tax Free Income Portfolio and CitiFunds(SM)
California Tax Free Income Portfolio), CitiFunds(SM) Multi-State Tax Free Trust
(CitiFunds(SM) California Tax Free Reserves, CitiFunds(SM) New York Tax Free
Reserves and CitiFunds(SM) Connecticut Tax Free Reserves), CitiFunds(SM)
Institutional Trust (CitiFunds(SM) Institutional Cash Reserves) and Variable
Annuity Portfolios (CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R) VIP
Folio 300 Balanced, CitiSelect(R) VIP Folio 400 Growth, CitiSelect(R) VIP Folio
500 Growth Plus and CitiFunds(SM) Small Cap Growth VIP Portfolio). Citibank and
its affiliates manage assets in excess of $327 billion worldwide. The principal
place of business of Citibank is located at 399 Park Avenue, New York, New York
10043.
Victor J. Menezes is the Chairman and a Director of Citibank. William R.
Rhodes and H. Onno Ruding are Vice Chairmen and Directors of Citibank. The other
Directors of Citibank are Paul J. Collins, Vice Chairman of Citigroup Inc. and
Robert I. Lipp, Chairman and Chief Executive Officer of The Travelers Insurance
Group Inc. and of Travelers Property Casualty Corp.
The following persons have the affiliations indicated:
Paul J. Collins Director, Kimberly-Clark Corporation
Director, Nokia Corporation
Robert I. Lipp Chairman, Chief Executive Officer and
President, Travelers Property Casualty Corp.
William R. Rhodes Director, Private Export Funding
Corporation
Director, Conoco, Inc.
H. Onno Ruding Supervisory Director, Amsterdamsch Trustees
Cantoor B.V.
Director, Pechiney S.A.
Advisory Director, Unilever NV and Unilever PLC
Director, Corning Incorporated
Item 27. Principal Underwriters.
(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM)
International Growth Portfolio, CitiFunds(SM) U.S. Treasury Reserves,
CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury Reserves,
CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional U.S. Treasury
Reserves, CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM)
Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves, CitiFunds(SM)
Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free Reserves,
CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York Tax Free
Reserves, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Short-Term
U.S. Government Income Portfolio, CitiFunds(SM) New York Tax Free Income
Portfolio, CitiFunds(SM) National Tax Free Income Portfolio, CitiFunds(SM)
California Tax Free Income Portfolio, CitiFunds(SM) Small Cap Value Portfolio,
CitiFunds(SM) Growth & Income Portfolio, CitiFunds(SM) Large Cap Growth
Portfolio, CitiFunds(SM) Small Cap Growth Portfolio, CitiFunds(SM) Balanced
Portfolio, CitiSelect(R) Folio 100 Income, CitiSelect(R) Folio 200 Conservative,
CitiSelect(R) Folio 300 Balanced, CitiSelect(R) Folio 400 Growth, CitiSelect(R)
Folio 500 Growth Plus, CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R)
VIP Folio 300 Balanced, CitiSelect(R) VIP Folio 400 Growth, CitiSelect(R) VIP
Folio 500 Growth Plus and CitiFunds(SM) Small Cap Growth VIP Portfolio. CFBDS is
also the placement agent for Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio, Foreign Bond Portfolio, Intermediate Income
Portfolio, Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income
Portfolio, Large Cap Growth Portfolio, Small Cap Growth Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio. CFBDS also serves as the distributor for the following funds: The
Travelers Fund U for Variable Annuities, The Travelers Fund VA for Variable
Annuities, The Travelers Fund BD for Variable Annuities, The Travelers Fund BD
II for Variable Annuities, The Travelers Fund BD III for Variable Annuities, The
Travelers Fund BD IV for Variable Annuities, The Travelers Fund ABD for Variable
Annuities, The Travelers Fund ABD II for Variable Annuities, The Travelers
Separate Account PF for Variable Annuities, The Travelers Separate Account PF II
for Variable Annuities, The Travelers Separate Account QP for Variable
Annuities, The Travelers Separate Account TM for Variable Annuities, The
Travelers Separate Account TM II for Variable Annuities, The Travelers Separate
Account Five for Variable Annuities, The Travelers Separate Account Six for
Variable Annuities, The Travelers Separate Account Seven for Variable Annuities,
The Travelers Separate Account Eight for Variable Annuities, The Travelers Fund
UL for Variable Annuities, The Travelers Fund UL II for Variable Annuities, The
Travelers Variable Life Insurance Separate Account One, The Travelers Variable
Life Insurance Separate Account Two, The Travelers Variable Life Insurance
Separate Account Three, The Travelers Variable Life Insurance Separate Account
Four, The Travelers Separate Account MGA, The Travelers Separate Account MGA II,
The Travelers Growth and Income Stock Account for Variable Annuities, The
Travelers Quality Bond Account for Variable Annuities, The Travelers Money
Market Account for Variable Annuities, The Travelers Timed Growth and Income
Stock Account for Variable Annuities, The Travelers Timed Short-Term Bond
Account for Variable Annuities, The Travelers Timed Aggressive Stock Account for
Variable Annuities, The Travelers Timed Bond Account for Variable Annuities,
Small Cap Fund, Government Fund, Growth Fund, Growth and Income Fund,
International Equity Fund, Mid Cap Fund, Municipal Bond Fund, Select Small Cap
Portfolio, Select Government Portfolio, Select Growth Portfolio, Select Growth
and Income Portfolio, Select Mid Cap Portfolio, Balanced Investments, Emerging
Markets Equity Investments, Government Money Investments, High Yield
Investments, Intermediate Fixed Income Investments, International Equity
Investments, International Fixed Income Investments, Large Capitalization Growth
Investments, Large Capitalization Value Equity Investments, Long-Term Bond
Investments, Mortgage Backed Investments, Municipal Bond Investments, S&P Index
Investments, Small Capitalization Growth Investments, Small Capitalization Value
Equity Investments, Multi-Sector Fixed Income Investments, Multi-Strategy Market
Neutral Investments, Appreciation Portfolio, Diversified Strategic Income
Portfolio, Emerging Growth Portfolio, Equity Income Portfolio, Equity Index
Portfolio, Growth & Income Portfolio, Intermediate High Grade Portfolio,
International Equity Portfolio, Money Market Portfolio, Total Return Portfolio,
Smith Barney Adjustable Rate Government Income Fund, Smith Barney Aggressive
Growth Fund Inc., Smith Barney Appreciation Fund Inc., Smith Barney Arizona
Municipals Fund Inc., Smith Barney California Municipals Fund Inc., Balanced
Portfolio, Conservative Portfolio, Growth Portfolio, High Growth Portfolio,
Income Portfolio, Global Portfolio, Select Balanced Portfolio, Select
Conservative Portfolio, Select Growth Portfolio, Select High Growth Portfolio,
Select Income Portfolio, Concert Social Awareness Fund, Smith Barney Large Cap
Blend Fund, Smith Barney Fundamental Value Fund Inc., Large Cap Value Fund,
Short-Term High Grade Bond Fund, U.S. Government Securities Fund, Smith Barney
Balanced Fund, Smith Barney Convertible Fund, Smith Barney Diversified Strategic
Income Fund, Smith Barney Exchange Reserve Fund, Smith Barney High Income Fund,
Smith Barney Municipal High Income Fund, Smith Barney Premium Total Return Fund,
Smith Barney Total Return Bond Fund, Cash Portfolio, Government Portfolio,
Municipal Portfolio, Concert Peachtree Growth Fund, Smith Barney Contrarian
Fund, Smith Barney Government Securities Fund, Smith Barney Hansberger Global
Small Cap Value Fund, Smith Barney Hansberger Global Value Fund, Smith Barney
Investment Grade Bond Fund, Smith Barney Premier Selections Fund, Smith Barney
Small Cap Value Fund, Smith Barney Small Cap Growth Fund, Smith Barney
Intermediate Maturity California Municipals Fund, Smith Barney Intermediate
Maturity New York Municipals Fund, Smith Barney Large Capitalization Growth
Fund, Smith Barney S&P 500 Index Fund, Smith Barney Mid Cap Blend Fund, Smith
Barney EAFE Index Fund, Smith Barney US 5000 Index Fund, Smith Barney Managed
Governments Fund Inc., Smith Barney Managed Municipals Fund Inc., Smith Barney
Massachusetts Municipals Fund, Cash Portfolio, Government Portfolio, Retirement
Portfolio, California Money Market Portfolio, Florida Portfolio, Georgia
Portfolio, Limited Term Portfolio, National Portfolio, Massachusetts Money
Market Portfolio, New York Money Market Portfolio, New York Portfolio,
Pennsylvania Portfolio, Smith Barney Municipal Money Market Fund, Inc., Smith
Barney Natural Resources Fund Inc., Smith Barney Financial Services Fund, Smith
Barney Health Sciences Fund, Smith Barney Technology Fund, Smith Barney New
Jersey Municipals Fund Inc., Smith Barney Oregon Municipals Fund, Zeros Plus
Emerging Growth Series 2000, Smith Barney Security and Growth Fund, Smith Barney
Small Cap Blend Fund, Inc., Smith Barney Telecommunications Income Fund, Income
and Growth Portfolio, Reserve Account Portfolio, U.S. Government/High Quality
Securities Portfolio, Emerging Markets Portfolio, European Portfolio, Global
Government Bond Portfolio, International Equity Portfolio, Pacific Portfolio,
AIM Capital Appreciation Portfolio, Smith Aggressive Growth Portfolio, Smith Mid
Cap Portfolio, Alliance Growth Portfolio, INVESCO Global Strategic Income
Portfolio, MFS Total Return Portfolio, Putnam Diversified Income Portfolio,
Smith Barney High Income Portfolio, Smith Barney Large Cap Value Portfolio,
Smith Barney International Equity Portfolio, Smith Barney Large Capitalization
Growth Portfolio, Smith Barney Money Market Portfolio, Smith Barney Pacific
Basin Portfolio, Travelers Managed Income Portfolio, Van Kampen Enterprise
Portfolio, Centurion U.S. Equity Fund, Centurion International Equity Fund,
Centurion U.S. Contra Fund, Centurion International Contra Fund, Global
High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp
Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government
Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I.
Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio,
Fidelity VIP Equity Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity
VIP II Contrafund Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World
Government Series, MFS Money Market Series, MFS Bond Series, MFS Total Return
Series, MFS Research Series, MFS Emerging Growth Series, Salomon Brothers
Institutional Money Market Fund, Salomon Brothers Cash Management Fund, Salomon
Brothers New York Municipal Money Market Fund, Salomon Brothers National
Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund,
Salomon Brothers High Yield Bond Fund, Salomon Brothers International Equity
Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers Large Cap Growth
Fund, Salomon Brothers Balanced Fund, Salomon Brothers Asia Growth Fund, Salomon
Brothers Capital Fund Inc, Salomon Brothers Investors Value Fund Inc, Salomon
Brothers Opportunity Fund Inc, Salomon Brothers Institutional High Yield Bond
Fund, Salomon Brothers Institutional Emerging Markets Debt Fund, Salomon
Brothers Variable Investors Fund, Salomon Brothers Variable Capital Fund,
Salomon Brothers Variable Total Return Fund, Salomon Brothers Variable High
Yield Bond Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon Brothers
Variable U.S. Government Income Fund, Salomon Brothers Variable Asia Growth
Fund, and Salomon Brothers Variable Small Cap Fund.
(b) The information required by this Item 27 with respect to each director
and officer of CFBDS is incorporated by reference to Schedule A of Form BD filed
by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
CFBDS, Inc. 21 Milk Street, 5th Floor
(administrator and distributor) Boston, MA 02109
State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent, custodian and fund North Quincy, MA 02171
accounting agent)
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
SHAREHOLDER SERVICING AGENTS
Citibank, N.A. 450 West 33rd Street
New York, NY 10001
Citibank, N.A. - Citigold Citicorp Mortgage Inc. - Citigold
15851 Clayton Road
Ballwin, MO 63011
Citibank, N.A. - The Citibank 153 East 53rd Street
Private Bank New York, NY 10043
Citibank, N.A. - Citibank Global 153 East 53rd Street
Asset Management New York, NY 10043
Citibank, N.A. - North American 111 Wall Street
Investor Services New York, NY 10094
Citicorp Investment Services One Court Square
Long Island City, NY 11120
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 28th day of April, 2000.
CITIFUNDS FIXED INCOME TRUST
By: Philip W. Coolidge
------------------------------
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on April 28, 2000.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive
- ---------------------------- Officer and Trustee
Philip W. Coolidge
Linwood C. Downs Principal Financial Officer and
- ---------------------------- Principal Accounting Officer
Linwood C. Downs
Riley C. Gilley* Trustee
- ----------------------------
Riley C. Gilley
Diana R. Harrington* Trustee
- ----------------------------
Diana R. Harrington
Susan B. Kerley* Trustee
- ----------------------------
Susan B. Kerley
Heath B. McLendon* Trustee
- ----------------------------
Heath B. McLendon
C. Oscar Morong, Jr.* Trustee
- ----------------------------
C. Oscar Morong, Jr.
E. Kirby Warren* Trustee
- ----------------------------
E. Kirby Warren
*By: Philip W. Coolidge
------------------------
Philip W. Coolidge
Executed by Philip W. Coolidge
on behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
SIGNATURES
The Premium Portfolios has duly caused this Post-Effective Amendment to
the Registration Statement on Form N-1A of CitiFunds Fixed Income Trust to be
signed on its behalf by the undersigned, thereunto duly authorized, in Grand
Cayman, Cayman Islands, on the 28th day of April, 2000.
THE PREMIUM PORTFOLIOS
on behalf of Government Income Portfolio
By: Susan Jakuboski
------------------------------
Susan Jakuboski,
Assistant Secretary of
The Premium Portfolios
This Post-Effective Amendment to the Registration Statement on Form N-1A
of CitiFunds Fixed Income Trust has been signed by the following persons in the
capacities indicated on April 28, 2000.
Signature Title
--------- -----
Philip W. Coolidge* President, Principal Executive
- ---------------------------- Officer and Trustee
Philip W. Coolidge
Linwood C. Downs* Principal Financial Officer and
- ---------------------------- Principal Accounting Officer
Linwood C. Downs
Elliott J. Berv* Trustee
- ----------------------------
Elliott J. Berv
Mark T. Finn* Trustee
- ----------------------------
Mark T. Finn
C. Oscar Morong, Jr.* Trustee
- ----------------------------
C. Oscar Morong, Jr.
Walter E. Robb, III* Trustee
- ----------------------------
Walter E. Robb, III
E. Kirby Warren* Trustee
- ----------------------------
E. Kirby Warren
*By: Susan Jakuboski
------------------------
Susan Jakuboski
Executed by Susan
Jakuboski on behalf
of those indicated as
attorney in fact.
<PAGE>
EXHIBIT INDEX
Exhibit
No.: Description:
------- ------------
j Independent auditors' consent
q(1) Code of Ethics for the Registrant
q(2) Code of Ethics for CFBDS
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 34 to the registration statement on Form N-1A ("Registration
Statement") of CitiFunds Fixed Income Trust of our report dated February 18,
2000, relating to the financial statements and financial highlights which
appears in the December 31, 1999 Annual Report of CitiFunds Short-Term U. S.
Government Income Portfolio, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Financial Highlights" in the Prospectus and under the headings
"Auditors" and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 27, 2000
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 34
to the registration statement on Form N-1A ("Registration Statement") of
CitiFunds Fixed Income Trust of our report dated February 18, 2000, relating to
the financial statements and financial highlights of Government Income Portfolio
which appears in the December 31, 1999 Annual Report of CitiFunds Short-Term
U. S. Government Income Portfolio, which are also incorporated by reference into
the Registration Statement. We also consent to the references to us under the
headings "Auditors" and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
April 27, 2000
<PAGE>
Exhibit q(1)
AMENDED AND RESTATED
CODE OF ETHICS
FEBRUARY 4, 2000
This Amended and Restated Code of Ethics has been duly adopted by the
Board of Trustees, including a majority of the Disinterested Trustees (as
defined below in this Code of Ethics), of each investment company listed in
Appendix I hereto (each, an "Investment Company" and collectively, the
"Investment Companies"), pursuant to Rule 17j-1 under the Investment Company Act
of 1940, as amended (the "1940 Act").
I. RULES APPLICABLE TO ACCESS PERSONS
A. Definitions
1. "Access Person" means
(i) any trustee, officer or Advisory Person (as defined below) of
any Investment Company or investment adviser thereof, or
(ii) any director or officer of a principal underwriter of an
Investment Company who, in the ordinary course of his or her
business, makes, participates in or obtains information
regarding the purchase or sale of securities for the
Investment Company for which the principal underwriter so acts
or whose functions or duties as part of the ordinary course of
his or her business relate to the making of any recommendation
to such Investment Company regarding the purchase or sale of
securities, or
(iii) notwithstanding the provisions of clause (i) above, where the
investment adviser is primarily engaged in a business or
businesses other than advising registered investment companies
or other advisory clients (as determined in accordance with
Rule 17j-1 under the 1940 Act), any director, officer or
Advisory Person of the investment adviser who, with respect to
any Investment Company, makes any recommendation, participates
in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination
of which recommendation shall be made to any Investment
Company, or who, in connection with his or her duties, obtains
any information concerning securities recommendations being
made by such investment adviser to any Investment Company.
2. An "Advisory Person" is any employee of an Investment Company or of
the Investment Company's investment adviser (or of any company in a control
relationship to the Investment Company or its investment adviser) who, in
connection with his or her regular functions or duties, makes, participates in
or obtains information regarding the purchase or sale of securities by an
Investment Company or whose functions relate to any recommendations with respect
to such purchases or sales, and any natural person in a control relationship
with the Investment Company or adviser who obtains information regarding the
purchase or sale of securities by the Investment Company.
3. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a)(exclusive of Section (a)(1) of such Rule) of the
Securities Exchange Act of 1934, as amended, but without regard to any provision
in such Rule limiting its application only to equity securities.
4. "Control" shall have the meaning set forth in Section 2(a)(9) of the
1940 Act.
5. "Disinterested Trustee" of an Investment Company means a Trustee who
is not an "interested person" of that Investment Company within the meaning of
Section 2(a)(19) of the 1940 Act. An "interested person" of an Investment
Company includes any person who is a trustee, director, officer, employee or
owner of 5% or more of the outstanding stock of the investment adviser or
principal underwriter, if any, of such Investment Company. Affiliates of brokers
or dealers are also "interested persons" of such Investment Company, except as
provided in Rule 2a19-1 under the 1940 Act.
6. "Portfolio Manager" means the person or persons who have or share
direct responsibility and authority to make investment decisions affecting an
Investment Company.
7. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security or the purchase or sale of a
future or index on a security or option thereon.
8. "Review Officer" means, with respect to an Investment Company, the
Secretary of such Investment Company or such other person as may be designated
by the Board of Trustees of such Investment Company, except that with respect to
Advisory Persons who are employees of the investment adviser of an Investment
Company, Review Officer shall mean such person or persons as such investment
adviser shall designate from time to time.
9. "Security" shall have the meaning as set forth in Section 2(a)(36)
of the 1940 Act, except that it shall not include:
(i) direct obligations of the Government of the United States;
(ii) bankers acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments (meaning
instruments having a maturity at issuance of less than 366
days and that are rated in one of the two highest rating
categories by a Nationally Recognized Statistical Rating
Organization), including repurchase agreements; and
(iii) shares of registered open-end investment companies.
10. A security is "being considered for purchase or sale" when, among
other circumstances, the assigned analyst or Portfolio Manager is seriously
considering a change in the rating of the security.
11. Nothwithstanding any other provision hereof, the terms Access
Person, Advisory Person and Portfolio Manager shall not include any person who
is subject to provisions of a code of ethics adopted by an investment adviser or
principal underwriter of an Investment Company in compliance with Rule 17j-1
under the 1940 Act and approved by the Board of Trustees of each Investment
Company, so long as the investment adviser or principal underwriter complies
with Section V of this Code.
B. Statement of General Principles on Personal Investment Activities
Personal investment activities engaged in by an Access Person shall be
subject to the following general principles:
1. No personal investment activities shall conflict with the duty to
place the interests of the Investment Company before any personal interests;
2. All personal investment activities shall be conducted consistent
with the requirements and standards set forth in this Code and in such a manner
as to avoid any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility; and
3. No Access Person shall, directly or indirectly, otherwise take
inappropriate advantage of his or her position with the Investment Company.
C. Avoiding Conflicts of Interest
Without limiting the foregoing Section I-B, no Access Person shall
enter into or engage in a security transaction or business activity or
relationship which may result in any financial or other conflict of interest
between such person and an Investment Company and each such person shall at all
times and in all matters endeavor to place the interests of the Investment
Company before his or her personal interests.
D. Prohibited Activities
1. Blackout Periods: No Access Person shall purchase or sell, directly
or indirectly, any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership:
a. and which to his or her knowledge at the time of such purchase or
sale is being considered for purchase or sale, or is to be purchased
or sold, by the Investment Company; or
b. on a day during which, to his or her knowledge, the Investment
Company has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn.
No Portfolio Manager of an Investment Company shall purchase or sell,
directly or indirectly, any security in which he or she has, or by reason of
such transaction acquires, any direct or indirect Beneficial Ownership within
seven (7) calendar days before or after that Investment Company trades in that
security.
2. Interested Transactions: No Access Person shall recommend any
securities transactions by the Investment Company without having disclosed his
or her interest, if any, in such securities or the issuer thereof, including
without limitation:
a. any direct or indirect Beneficial Ownership of any securities of
such issuer;
b. any contemplated transaction by such person in such securities;
c. any position with such issuer or its affiliates; and
d. any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has
a significant interest.
3. Initial Public Offerings: No Advisory Person shall acquire any
securities in an initial public offering for his or her personal account.
4. Private Placements: No Advisory Person shall acquire, directly or
indirectly, Beneficial Ownership of any securities in a private placement
without the prior approval of the Review Officer, who has been provided by such
Advisory Person with full details of the proposed transaction (including written
certification that the investment opportunity did not arise by virtue of the
Advisory Person's activities on behalf of the Investment Company) and has
concluded after consultation with other investment advisory personnel of the
Investment Company that the Investment Company has no foreseeable interest in
purchasing such securities.
5. Short-Term Trading Profits: No Advisory Person shall profit from the
purchase and sale, or sale and purchase, of the same (or equivalent) securities
of which such Advisory Person has Beneficial Ownership within sixty (60)
calendar days. Any profit so realized shall, unless the Investment Company's
Board approves otherwise, be paid over to the Investment Company or to a
charitable organization of the Advisory Person's choosing.
6. Gifts: No Advisory Person shall receive any gift or other things of
more than de minimis value from any person or entity that does business with or
on behalf of the Investment Company; provided, however, that the foregoing shall
not prohibit receipt of:
a. an occasional breakfast, luncheon, dinner or reception, ticket
to a sporting event or the theater, or comparable entertainment,
attended in the company of the giver of the entertainment in
question, that is not so frequent, costly or extensive as to raise
any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party in
conjunction with a bona fide business meeting;
c. a promotional item, such as a mug, pen or other article
bearing the logo or advertising of any such person or entity,
having a value not in excess of $100; or
d. a gift approved in writing by the Review Officer.
7. Service as a Director: No Advisory Person shall serve on the board
of directors of any publicly traded company without prior authorization from the
Review Officer based upon a determination that such board service would be
consistent with the interests of the Investment Company and its shareholders.
E. Exempted Transactions
The prohibitions of Sections I-D(1) and I-D(5) above shall not apply
to:
1. purchases or sales effected in any account over which such person
has no direct or indirect influence or control;
2. purchases or sales which are nonvolitional on the part of the person
or an Investment Company;
3. purchases which are part of an automatic dividend reinvestment plan;
4. purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired;
5. purchases and sales previously approved in writing by the Review
Officer (a) as only remotely potentially harmful to an Investment Company
because they would be very unlikely to affect a highly institutional market or
because they clearly are not economically related to the securities to be
purchased or sold or held by an Investment Company or client or (b) as not
representing any danger of the abuses proscribed by Rule 17j-1 under the 1940
Act;
6. purchases or sales of securities which are not eligible for purchase
or sale by an Investment Company.
II. COMPLIANCE PROCEDURES
A. Preclearance
An Advisory Person may directly or indirectly, acquire or dispose of
Beneficial Ownership of a security only if (1) such purchase or sale has been
approved by the Review Officer, (2) the approved transaction is completed within
two (2) business days of the day approval is received and (3) the Review Officer
has not rescinded such approval prior to execution of the transaction. The
requirements of this Section II-A shall not apply to transactions described in
Sections I-E(1), (2) and (3). The fact that preclearance of a transaction is
obtained pursuant to this Section II-A does not render the other prohibitions,
restrictions and provisions of this Code inapplicable to the transaction.
B. Reporting
1. Except as otherwise provided in paragraph 2 of this Section II-B,
each Access Person of an Investment Company must report to the Review Officer as
follows:
a. Initial Holdings Reports. Not later than 10 days after the person
becomes an Access Person, the following information:
o the title, number of shares and principal amount of each security in
which the Access Person had any direct or indirect beneficial
ownership when the person became an Access Person;
o the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the
person became an Access Person; and
o the date that the report is submitted by the Access Person.
b. Quarterly Transaction Reports. Not later than 10 days after the end
of each calendar quarter, the following information:
(i) With respect to any transaction during the quarter in
a security in which the Access Person had any direct
or indirect beneficial ownership:
o the date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each security
involved;
o the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
o the price of the security at which the transaction was
effected;
o the name of the broker, dealer or bank with or through which
the transaction was effected; and
o the date that the report is submitted by the Access Person.
(ii) With respect to any account established by the Access Person
in which any securities were held during the quarter for the
direct or indirect benefit of the Access Person:
o the name of the broker, dealer or bank with whom the Access
Person established the account;
o the date that the account was established; and
o the date that the report is submitted by the Access Person.
In the event that no reportable transactions occurred during the
quarter, the report should so state, and should be returned signed and
dated.
c. Annual Holdings Reports. Not later than January 31 of each year, the
following information (which information must be current as of the
immediately preceding December 31):
o the title, number of shares and principal amount of each
security in which the Access Person had any dirtect or
indirect beneficial ownership;
o the name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
o the date on which the report is submitted by the Access
Person.
d. Brokerage Statements. Copies of all of such person's brokerage
statements shall be furnished to the Review Officer on a quarterly
basis.
2. The following are exceptions to the reporting requirements outlined
in Section II-B(1):
a. An Access Person need not make any report required under
Section II-B (1)(a)-(c) with respect to transactions effected
for, and securities held in, any account over which the person
has no direct influence or control, including such an account
in which the person has any beneficial ownership.
b. A Disinterested Trustee who would be required to make the
reports required under Section II-B(1) solely by reason of
being a trustee of an Investment Company need not file with or
deliver to the Review Officer:
(i) an initial holdings report or an annual holdings
report; or
(ii) a quarterly transaction report unless the
Disinterested Trustee knew or, in the
ordinary course of fulfilling his or her
official duties as a Trustee of the
Investment Company, should have known, that
during the 15-day period immediately before
or after the Trustee's transaction in a
security, the Investment Company purchased
or sold the security or the security was
being considered for purchase or sale by the
Investment Company or a series thereof; or
(iii) copies of his or her brokerage statements.
c. An Access Person need not make a quarterly transaction report
under Section II-B(1) if the report would duplicate
information contained in broker trade confirmations or account
statements received by the Review Officer with respect to the
person in the time period required under Section II-B(1), if
all of the information required under Section II-B(1) is
contained in the broker trade confirmations or account
statements or in the records of the Investment Company.
3. Any report delivered pursuant to Section II-B may contain a
statement that the report shall not be construed as an admission by the person
making such report that he or she has any direct or indirect beneficial
ownership in the securities to which the report relates.
4. Each Access Person must certify annually (no later than January 31
of each year) that he or she has read and understands this Code of Ethics and
has complied with its provisions. Such certificates and reports are to be
given to the Review Officer.
C. Review
The Review Officer shall review all of the reports delivered under
Section II-B to determine whether a violation of this Code of Ethics may have
occurred. In reviewing transactions, the Review Officer shall take into account
the exemptions allowed under Section I-E above. Before making a determination
that a violation has been committed by a Trustee, the Review Officer shall give
such person an opportunity to supply additional information regarding the
transaction in question.
III. REVIEW BY THE BOARD OF TRUSTEES
The Review Officer of each Investment Company, each Investment
Company's investment adviser or advisers and each Investment Company's principal
underwriter shall furnish a written report to the Board of Trustees of each
Investment Company, at least annually, that:
A. describes any issues arising under the Code of Ethics or
procedures of such entity since the last report to the Board
of Trustees, including, but not limited to, information about
material violations of its Code of Ethics or procedures and
sanctions imposed in response to the material violations;
B. describes any recommended changes to the Code or procedures;
and
C. certifies that the Investment Company, investment adviser or
principal underwriter, as applicable, has adopted procedures
reasonably necessary to prevent its Access Persons from
violating its Code of Ethics.
The first such report pursuant to this Code shall be delivered to the
Board of Trustees not later than September, 1, 2000.
IV. SANCTIONS
A. Sanctions for Violations by Access Persons
If the Review Officer determines that an Access Person (other than a
Disinterested Trustee) has violated this Code, he or she shall so advise the
respective Board of Trustees and such persons may be subject to sanctions,
including, inter alia, a letter of censure or suspension or termination of the
employment of the violator. As provided in Section I-D(5) above, any financial
profits realized by an Advisory Person through the prohibited personal trading
activities described in such Section may be required to be disgorged. All
violations of the Code and any sanctions imposed as a result thereof shall be
reported to the respective Board of Trustees at least quarterly.
B. Sanctions for Violations by Disinterested Trustees
If the Review Officer determines that any Disinterested Trustee has
violated this Code, he or she shall so advise the President of an Investment
Company and also the Disinterested Trustees (other than the person whose
transaction is at issue) and shall provide such persons with the report, the
record of pertinent actual or contemplated portfolio transactions of an
Investment Company and any additional information supplied by such person. The
Disinterested Trustees, at their option, shall either impose such sanctions as
they deem appropriate or refer the matter to the full Board of Trustees of an
Investment Company, which shall impose such sanctions as it deems appropriate.
V. Other Codes of Ethics
Each investment adviser and principal underwriter of an Investment
Company shall:
1. submit to the Board of Trustees of each Investment Company
a copy of the Code of Ethics adopted by such person pursuant to Rule 17j-1,
which Code of Ethics shall comply with the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing or be accompanied by a
statement explaining any difference and supplying the rationale therefor;
2. promptly report to the Board of Trustees of each Investment
Company in writing any material amendments to such Code of Ethics;
3. promptly furnish to the Board of Trustees of each
Investment Company, upon request, copies of any reports made pursuant to such
Code of Ethics by any person who would be an Access Person or Portfolio Manager
hereunder if such person were not subject to such other Code of Ethics; and
4. immediately furnish to the Board of Trustees of each
Investment Company all material information regarding any violation of such Code
of Ethics by any person who would be an Access Person or Portfolio Manager
hereunder if such person were not subject to such other Code of Ethics.
VI. MISCELLANEOUS
A. Access Persons
The Review Officer of each Investment Company will identify all Access
Persons who are under a duty to make reports to the Investment Company and will
inform such persons of such duty. Any failure by the Review Officer to notify
any person of his or her duties under this Code shall not relieve such person of
his or her obligations hereunder.
B. Records
The administrator or any sub-administrator of an Investment Company
shall maintain records in the manner and to the extent set forth below, which
records may be maintained on microfilm under the conditions described in Rule
31a-2(f) under the 1940 Act, and shall be available for examination by
representatives of the Securities and Exchange Commission:
1. a copy of this Code and any other code which is, or at any time
within the past five years has been, in effect shall be preserved in an easily
accessible place;
2. a record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily accessible place for a
period of not less than five years following the end of the fiscal year in which
the violation occurs;
3. a copy of each report made pursuant to this Code shall be preserved
for a period of not less than five years from the end of the fiscal year in
which it is made, the first two years in an easily accessible place;
4. a list of all persons who are required, or within the past five
years have been required, to make reports pursuant to this Code shall be
maintained in an easily accessible place;
5. copy of each report required under Section II shall be preserved for
a period of not less than five years from the end of the fiscal year in which it
is made, the first two years in an early accessible place; and
6. record of any decision, and the reasons supporting the decision, to
approve the acquisition by Advisory Persons of securities under Section I-D(3)
or (4) shall be preserved for a period of not less than five years from the end
of the fiscal year in which the approval is granted.
C. Confidentiality
All reports of securities transactions and any other information filed
pursuant to this Code shall be treated as confidential, except that the same may
be disclosed to the Board of Trustees of the Investment Companies, to any
regulatory or self-regulatory authority or agency upon its request, or as
required by law or court or administrative order.
D. Interpretation of Provisions
The Board of Trustees of an Investment Company may from time to time
adopt such interpretations of this Code as it deems appropriate.
<PAGE>
Appendix I
CITIFUNDS TRUST I
CITIFUNDS TRUST II
CITIFUNDS TRUST III
CITIFUNDS FIXED INCOME TRUST
CITIFUNDS PREMIUM TRUST
CITIFUNDS MULTI-STATE TAX FREE TRUST
CITIFUNDS INSTITUTIONAL TRUST
CITIFUNDS TAX FREE INCOME TRUST
CITIFUNDS TAX FREE RESERVES
CITIFUNDS INTERNATIONAL TRUST
CASH RESERVES PORTFOLIO
TAX FREE RESERVES PORTFOLIO
U.S. TREASURY RESERVES PORTFOLIO
THE PREMIUM PORTFOLIOS
ASSET ALLOCATION PORTFOLIOS
VARIABLE ANNUITY PORTFOLIOS
VAP MASTER PORTFOLIOS
<PAGE>
Exhibit q(2)
CODE OF ETHICS FOR
SIGNATURE BROKER-DEALER SERVICES, INC.
Signature Broker-Dealer Services, Inc. and its affiliates (collectively
"SBDS"), have each adopted this Code of Ethics (the "Code") to specify and
prohibit certain types of personal securities transactions deemed to create a
conflict of interest and to establish reporting requirements and preventive
procedures pursuant to the provisions of Rule 17j-1(c)(1) under the Investment
Company Act of 1940 (the "1940 Act").
I. DEFINITIONS
A. An "Access Person" means any employee, Director or officer of
SBDS who, in the ordinary course of his or her business, makes,
participates in or obtains information regarding the purchase or
sale of Covered Securities for a Fund for which SBDS acts as
distributor or whose functions or duties as a part of the
ordinary course of his or her business relate to the making of
any recommendation to such Fund regarding the purchase or sale of
securities or who serves as an officer or Trustee/Director for
any such Fund All Access Persons of SBDS shall be advised they
are considered such by the Review Officer.
B. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a) (exclusive of Section (a)(1) of such
Rule) of the Securities Exchange Act of 1934, a copy of which is
attached hereto.
C. "Control" shall have the same meaning as set forth in Section
2(a)(9) of the 1940 Act.
D. "Covered Security" means a security as defined in section
2(a)(36) of the Act, except that it does not include:
1. Direct obligations of the Government of the United States;
2. Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
3. Shares issued by open-end Funds.
E. A "Covered Security Held or to be Acquired by a Fund" means:
1. Any Covered Security which, within the most recent 15 days:
(a) Is or has been held by the Fund; or
(b) Is being or has been considered by the Fund or its
investment adviser for purchase by the Fund; and
2. Any option to purchase or sell, and any security convertible
into or exchangeable for, a Covered Security described in (i)
of this section.
F. "Fund" means an investment company registered under the 1940 Act.
G. "Holdings Reports" are reports filed by Access Persons and
contain the following information:
1. the title, number of shares and principal amount of each
Covered Security in which the Access Person has any direct or
indirect beneficial ownership; and
2. the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
3. the date the report is submitted by the Access Person.
H. The "Review Officer" is the person designated by SBDS' Board of
Directors to monitor the overall compliance with this Code.
Included in the duties of the Review Officer is the review of all
initial and annual Holdings Reports and quarterly transaction
reports and the maintenance of the list of Access Persons. In the
absence of any such designation, the Review Officer shall be the
General Counsel of SBDS or Molly S. Mugler.
I. "Purchase or sale of a Covered Security" includes, among other
things, the writing of an option to purchase or sell a Covered
Security
II. STATEMENT OF GENERAL PRINCIPLES
The following general fiduciary principles shall govern the personal
investment activities of all Access Persons.
Each Access Person shall:
A. at all times, place the interests of Funds SBDS distributes
before his or her personal interests;
B. conduct all personal securities transactions in a manner
consistent with this Code, so as to avoid any actual or potential
conflicts of interest, or an abuse of position of trust and
responsibility; and
C. not take any inappropriate advantage of his or her position with
SBDS with respect to any Fund SBDS distributes.
It is unlawful for any affiliated person of or principal underwriter for a
Fund, or any affiliated person of a principal underwriter for a Fund, in
connection with the purchase or sale, directly or indirectly, by the person
of a Covered Security Held or to be Acquired by the Fund: (1) To employ any
device, scheme or artifice to defraud the Fund; (2) To make any untrue
statement of a material fact to the Fund or omit to state a material fact
necessary in order to make the statements made to the Fund, in light of the
circumstances under which they are made, not misleading; (3) To engage in
any act, practice or course of business that operates or would operate as a
fraud or deceit on the Fund; or (4) To engage in any manipulative practice
with respect to the Fund.
III. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES.
A. BLACKOUT PERIODS
No Access Person shall purchase or sell, directly or indirectly,
any Covered Security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
on a day during which he or she knows or should have known a Fund
has a pending "buy" and "sell" order in that same security until
that order is executed or withdrawn.
B. EXEMPTED TRANSACTIONS
The prohibitions of Section III shall not apply to:
1. purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control;
2. purchases or sales that are non-volitional on the part of the
Access Person, including mergers, recapitalizations or similar
transactions;
3. purchases which are part of an automatic dividend reinvestment
plan;
4. purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired; and
5. purchases and sales that receive prior approval in writing by
the Review Officer as (a) only remotely potentially harmful to
a Fund because they would be very unlikely to affect a highly
institutional market, (b) clearly not economically related to
the securities to be purchased or sold or held by a Fund or
client, and (c) not representing any danger of the abuses
proscribed by Rule 17j-1, but only if in each case the
prospective purchaser has identified to the Review Officer all
factors of which he or she is aware which are potentially
relevant to a conflict of interest analysis, including the
existence of any substantial economic relationship between his
or her transaction and securities held or to be held by a
Fund.
IV. COMPLIANCE PROCEDURES
A. REPORTING
1. Quarterly Transaction Reports
(a) Coverage of Quarterly Transaction Reports: Each Access
Person shall, unless otherwise exempted, file with the
Review Officer confidential quarterly reports containing
the information required in section (b) below, with
respect to all transactions during the preceding quarter
in any Covered Securities in which such person has, or by
reason of such transaction acquires, any direct or
indirect beneficial ownership. All such Access Persons
shall file reports, even when no transactions have been
effected, representing that no transactions subject to
reporting requirements were effected.
(b) Filing of Quarterly Transaction Reports: Every report
shall be made no later than 10 days after the end of the
calendar quarter in which the transaction to which the
report relates was effected, and shall contain the
following information:
(i) the date of the transaction, the title, the interest
rate and maturity (if applicable), the number of
shares, and the principal amount of each Covered
Security involved;
(ii) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or
through whom the transaction was effected;
(v) the date that the report is submitted by the Access
Person; and
(vi) with respect to any account established by the
Access Person in which securities were held during
the quarter for the direct or indirect benefit of
the Access Person, the name of the broker, dealer or
bank with whom the Access Person established the
account, the date the account was established and
the date the report is submitted by the Access
Person.
(c) Broker Confirmations/Account Statements: An Access Persons
may direct his or her brokers to supply the Review Officer
on a timely basis, duplicate copies of confirmations of
all personal transactions in Covered Securities. An Access
Person need not make a quarterly transaction report if the
report would duplicate information contained in duplicate
information contained in broker trade confirmations or
account statements received by the Review Officer in the
time period required if all the information required is
contained in the broker trade confirmations or account
statements or in the records of the Review Officer.
2. Initial Holdings Reports: All persons who become Access
Persons must file an initial Holdings Report with the Review
Officer within ten days after that person becomes an Access
Person. The information contained in the initial Holdings
Report must be current as of the date the person became and
Access Person.
3. Annual Holdings Reports: All Access Persons, unless exempted,
must file an annual Holdings Report by the later of September
1 of each year or such earlier time as requested by the Review
Officer. The information contained in the annual Holdings
Report must be current as of a date no more than 30 days
before the report is submitted.
4. Exceptions from Reporting Requirements: No Access Person shall
be required to report transactions effected for any account
over which such Access Person has no direct or indirect
influence or control (except that such an Access Person must
file a written certification stating that he or she has no
direct or indirect influence or control over the account in
question).
B. Review
The Review Officer shall be responsible for reviewing
transactions. Before making a determination that a violation has
been committed by an Access Person, the Review Officer shall give
such person an opportunity to supply additional information
regarding the transaction in question.
V. REVIEW BY THE PRESIDENT
At least annually, the Review Officer shall report to the President
regarding:
A. All existing procedures concerning Access Persons' personal
trading activities and any procedural changes made during the
past year;
B. Any recommended changes to the Code or procedures; and
C. A summary of any violations which occurred during the past year
with respect to which significant remedial action was taken.
VI. SANCTIONS FOR VIOLATIONS BY ACCESS PERSONS
If the Review Officer determines that a violation of this Code has
occurred, he or she shall so advise the President who may advise the
Board of Directors and the President or the Board may impose such
sanctions as he or she or it deems appropriate, including, inter alia,
disgorgement of profits, censure, suspension or termination of the
employment of the violator. All material violations of the Code and any
sanctions imposed as a result thereto shall be reported periodically to
the Board of Directors.
VII. MISCELLANEOUS
A. ACCESS PERSONS
The Review Officer will identify all Access Persons who are under
a duty to make reports to SBDS and will inform such persons of
such duty. Any failure by the Review Officer to notify any person
of his or her duties under this Code shall not relieve such
person of his or her obligations hereunder.
B. RECORDS
SBDS shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under
the conditions described in Rule 31a-2(f) under the 1940 Act, and
shall be available for examination by representatives of the
Securities and Exchange Commission ("SEC"):
1. a copy of this Code and any other code which is, or at any
time within the past five years has been, in effect shall be
preserved in an easily accessible place;
2. a record of any violation of this Code and of any action taken
as a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs;
3. a copy of each report made pursuant to this Code shall be
preserved for a period of not less than five years from the
end of the fiscal year in which it is made, the first two
years in an easily accessible place; and
4. a list of all persons who are required, or within the past
five years have been required, to make reports pursuant to
this Code shall be maintained in an easily accessible place.
C. CONFIDENTIALITY
All reports of Covered Securities transactions and any other
information filed pursuant to this Code shall be treated as
confidential, except to the extent required by law.
D. INTERPRETATION OF PROVISIONS
The Board of Directors of SBDS may from time to time adopt such
interpretations of this Code as it deems appropriate.
SFG293b
<PAGE>
SFG293c
SIGNATURE BROKER-DEALER SERVICES, INC. AND ITS AFFILIATES
TRANSACTIONS REPORT
To: Molly S. Mugler, Senior Legal Counsel
From:
(Your Name)
This Transaction Report (the "Report") is submitted pursuant to the
Code of Ethics (the "Code") of Signature Broker-Dealer Services, Inc. and its
affiliates ("SBDS") and supplies (below) information with respect to
transactions in any security in which I may be deemed to have, or by reason of
such transaction acquire, any direct or indirect beneficial ownership interest
(whether or not such security is a security held or to be acquired by an
investment company administered or distributed by SBDS) for the calendar quarter
ended ______.
Unless the context otherwise requires, all terms used in the Report
shall have the same meaning as set forth in the Code. For purposes of the
Report, beneficial ownership shall be interpreted subject to the provisions of
the Code and Rule 16a-1(a) (exclusive of Section (a)(1) of such Rule) of the
Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nature of
Transaction
(Whether Name of the
Purchase, Principal Broker, Dealer
Sale, or Amount of Price at Or Bank with
Other Type of Securities Which the Whom the Nature of
Name of Title of Date of Disposition Acquired or Transaction Transaction Ownership of
Fund Securities Transaction Or Acquisition Disposed of Was Effected Was Effected Securities*
- ---- ---------- ----------- -------------- ----------- ------------ ------------ -----------
<CAPTION>
<S> <C> <C>
Name of Covered Securities Account Established in Last Quarter Date Account was Established
- ---------------------------------- --------------------------- ----------------------------
</TABLE>
I HEREBY CERTIFY THAT I (1) HAVE READ AND UNDERSTAND THE CODE OF SBDS,
(2) RECOGNIZE THAT I AM SUBJECT TO THE CODE, (3) HAVE DISCLOSED ALL SECURITIES
HOLDINGS AS REQUIRED, AND (4) THAT TO THE BEST OF MY KNOWLEDGE THE INFORMATION
FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
NAME (Print) _____________________________ DATE ____________________
SIGNATURE _________________________________________________
* If appropriate, you may disclaim beneficial ownership of any security listed
in this report.
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE BROKER-DEALER SERVICES, INC.
ACCESS PERSONS AS OF MARCH 31, 2000
DATE BECAME
NAME ACCESS PERSON REASON DESIGNATED AS ACCESS PERSON
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MOLLY S. MUGLER PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
PHILIP W. COOLIDGE PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
CHRISTINE D. DORSEY PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
JAMES E. HOOLAHAN PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
LINWOOD C. DOWNS PRE-2000 OFFICER OF CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
SUSAN JAKUBOSKI PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
